A case currently pending in the federal courts may have a significant impact on the federal government’s ability to use the False Claims Act as an enforcement tool.  One of the central issues in the case of U.S. ex rel. Martin v. Life Care Centers of America, Inc. involves the ability of the government to use statistical sampling to estimate damages in False Claims Act cases.

The case against Life Care Centers of America, Inc. (“Life Care”) alleges that Life Care routinely provided a generic care program rather than tailoring individualized programs to the specific needs of patients.  Allegedly, this resulted in Life Care billing for more days of rehabilitation than were necessary for patients receiving its care.  The government claims that overbillings resulted in False Claims to federal health care programs.

The government’s case alleged that Life Care utilized higher levels of Resource Utilization Groups (“RUG”) than were appropriate across its patient population.  The government alleged that Life Care utilized a number of practices to pressure providers to increase the level of service and corresponding RUG classification in order to increase the reimbursement that it claimed under government health programs.

The central issue now pending in the case involves the extent to which the government can use statistical sampling techniques to determine liability in False Claim Act cases.  The government’s case involves a systematic practice by Life Care with a potential impact on a very large population of claims.  Obviously, this would make it very difficult for the government to prove damages if each claim had to be individually addressed.  Use of statistical sampling in a case of this magnitude is crucial to the government’s case.

Statistical sampling involves analysis of a statistically valid random sample of cases.  Chosen cases are audited to determine the rate and amount of overpayment or damages.  The results from the audit of the sample are then extrapolated to the entire population of potential claims to estimate the total obligation.  The use of statistical sampling is common in the health care industry.  However, the courts have not provided a conclusive decision on the extent of its use for estimating damages in the context of fraud prosecutions.

The issue of statistical sampling in this case is currently before the U.S. Supreme Court who is determining whether it will hear argument on the case.

We will keep our readers posted on the outcome of this important case.

CMS Recognizes Hardship Exemption From Meaningful Use Standards

The American Recovery and Reinvestment Act of 2009 mandates a reduction in payments to eligible Medicare providers who have not met meaningful use standards for electronic health record technology.  Payment adjustments begin October 1, 2014, for hospitals and January 1, 2015, for Medicare eligible professionals.

CMS has created a hardship exception that permits providers to request an exemption from the payment adjustments in certain circumstances.  The hardship exemption lasts for one payment year.  A provider can be granted up to five years worth of hardship exceptions but must reapply on a yearly basis.

In order to be granted a hardship exception, providers must prove that special circumstances pose a significant barrier to their achieving meaningful use.  A few of the circumstances where hardship may be considered include the following:

• Being located in an area without sufficient internet access or with other insurmountable infrastructure barriers.

• Professionals who are new to the practice and who have not had time to become meaningful users can apply for a two-year limited exception to the payment adjustment rules.

• Certain other unforeseen circumstances such as natural disasters or other unforeseeable impediments to meeting standards.

Recently, CMS added a new potential hardship for providers who are faced with EHR vendor issues.  In order to be eligible for the vendor exemption, a provider must demonstrate that circumstances are beyond its control and must explicitly outline these circumstances and indicate how they significantly impaired the ability to meet meaningful use standards.

The standards applied to receive a hardship exemption are fairly narrow and can be difficult to meet.  However, providers who see potential significant impediments to their implementation of meaningful use should begin to consider the possibility of applying for hardship exemption.  If the hardship exemption is going to be based upon EHR vendor difficulties, the implementation difficulty should be clearly documented.  At the time of application for a hardship exemption, the complete circumstances involved in the vendor relationship will need to be described to CMS.

If you have any further questions regarding electronic health record information or other health law questions, please contact John Fisher, II of our health law practice.

OIG Outlook 2014 – OIG Releases New Video

The Office of Inspector General has released a new video along with several supporting documents entitled “OIG Outlook 2014.”  In the video, the OIG discusses their top priorities for 2014 and upcoming projects that are included in the 2014 OIG annual work plan.  Providers with an interest in compliance issues should review the OIG video as it provides some useful insight that can be used in developing and enhancing organizational compliance programs.  The video is available at the following URL:  http://oig.hhs.gov/newsroom/outlook/index.asp.

CMS Issues Further Delays And Implementation Of The Two-Midnight Rule

In late January, the Center for Medicare/Medicaid Services announced that it will delay implementation of regulations pertaining to the two-midnight rule.  CMS announcements state that Medicare administrative contractors will not audit for compliance with the rule until October 1, 2014.

The two-midnight rule provides that an admission does not qualify for per diem reimbursement where a physician admits a patient with an expectation that treatment will require a stay of covering at least two nights.  CMS indicates that this policy merely clarifies its longstanding consideration of when admission meets criteria to be covered as an inpatient rather than as an observation or outpatient.

Under the two-midnight rule, services that are not considered to be medically necessary unless the two midnight inpatients stay rule are met.  This does not mean that there is no coverage at all.  It is possible that the service would be paid as an observation stay or as an outpatient service.  MACs will continue to perform reviews of 10-25 selected clients per hospital per admission dates between March 31 and September 30.  However, the reviews will be considered “probe and educate” reviews and will not lead to administrative sanctions.  However, providers should be completely ready and implement with the rule by October 1, 2014 date that CMS states it will use as a more formal implementation date.

OIG 2014 Annual Work Plan Contains Several New Items

The Office of Inspector General has issued its revised 2014 annual work plan.  The work plan contains several new items that have not been part of previous work plans that were previously released by the Office of Inspector General.

We will be summarizing specific new items in the work plan over a series of blog posts.

Some of the new items include:

• Outpatient evaluation and management services billed at the new patient rate;
• Indirect medical education payments;
• Bone marrow or system cell transplants;
• Oversight of hospital privileging;
• Medicare Part A billing by skilled nursing facilities;
• Billing patters for Part B services during nursing home stays;
• Hospice in assisted living facilities;
• Power mobility device add on payment for face-to-face examination;
• Portfolio report on Part B payments for chiropractic services;
• Outpatient evaluation and management services billed at the new patient rate;
• New inpatient admission criteria policies and practices;

There are many additional new items contained in the 2014 work plan.  Providers should examine the 2014 work plan to determine what, if any, new items may pertain to their compliance programs and practices.

Excluded Party List Searches

OIG Advisory Further Defines Provider Obligations 

In our compliance legal practice, questions often arise about an employers’ obligations to screen employees to determine whether they have been excluded from federal health care programs.  The significance of hiring or entering a contract with a party who has been excluded from participation cannot be overstated.  Providers can be subject to civil monetary penalties for even employing or contracting with excluded parties.  Reimbursement is also denied of based on services performed or ordered by an excluded party.  The financial implications of erroneously hiring an excluded individual can be astronomical; particularly if the excluded party is permitted to work without detection for a long period of time.

In order to prevent this potential exposure, employers need to actively monitor the Office of Inspector General’s exclusion database.  Employers and contractors should operate a systematic program to screen all employees and contractors before hire.  Exclusion and other background searches should be operationalized into your hiring process and into your regularly performed compliance activities.

Even after hire, periodic searches should be performed on all employees and contractors.  Past wisdom advised checking each employee at least annually.  Current practice is to check for exclusion on a monthly basis.  More frequent screening is supported by an updated Special Advisory Opinion that was released by the OIG in May of 2013.  The OIG Special Advisory stresses the need for providers to perform frequent searches and to fully document the searches and any investigation that is necessitated by the results.

External contractors are often used by larger providers to conduct and report on periodic exclusion screenings.  Provider should be aware that contracting out screening functions does not exclude them from primary responsibility.  In other words, if something is missed, it is the provider’s “neck on the block,” not the screening company’s, at least in the eyes of the OIG.

Look for further posts on the healthlaw-blog covering excluded parties.  If you have any questions about these issues, contact health care and compliance attorney John H. Fisher, II through the contact information provided on the blog or through our law firm website.  You can also visit our compliance blog at certifiedcompliancelawyer.com for more information specific to compliance program development and operation.

Record Recovery for Health Care Fraud and Abuse

The U.S. Department of Justice (DOJ) and the U.S. Department of Health and Human Services (HHS) recently released its annual Health Care Fraud and Abuse Control Program (HCFAC) report. This report indicates that in the last three years for every dollar spent on health care related fraud and abuse investigations through HCFAC and other government programs, the government recovered $8.10. This is a record high for the 17-year old program.  HCFAC focuses on eliminating fraud, waste, and abuse in the health care industry.

A few notes on the report’s numbers:

•      The federal government recovered a record-breaking $4.3 billion in fiscal year 2013 alone.
•      Over the last five years, the federal government recovered $19.2 billion—this is more than double the previous five-year period.
•      In fiscal year 2013, the DOJ and HHS strike force team filed 137 cases, charged 345 individuals with crimes, secured 234 guilty pleas, and achieved 46 convictions.
•      Defendants sentenced in fiscal year 2013 served an average of 52 months in prison.
•      Centers for Medicare and Medicaid Services (CMS) have banned 225,000 individuals and entities from billing Medicare between March 2011 and September 2013.

Attorney General Eric Holder states that, “With these extraordinary recoveries, and the record-high rate of return on investment we’ve achieved on our comprehensive health care fraud enforcement efforts, we’re sending a strong message to those who would take advantage of their fellow citizens, target vulnerable populations, and commit fraud on federal health care programs,” said Attorney General Eric Holder.

The return on investigation investment suggests that the federal government’s interest in investigating and prosecuting health care fraud and abuse is substantial. In short, health care compliance is more important than ever.

RAT-STATS and Statistical Estimation of Overpayments

RAT-STATS is a free software that is offered by the federal government to assist health care providers with statistical sampling.  Statistical sampling models can be used by health care providers to statistically estimate required overpayments based upon a statistically valid sample.  The RAT-STATS package was developed by the Office of Inspector General to assist providers with random sampling.

The RAT-STATS software suite helps make the random sampling process much easier for providers.  Generally, the RAT-STATS can be used to run a small number of claims in an initial probe audit.  The probe audit will suggest whether problems might exist with a defined, randomly selected parameter of claims.  The sample size estimator function will provide sample sizes for complete audits that can statistically extrapolate findings to estimate overpayments within a range of statistical accuracy.

If used properly, RAT-STATS can assist providers in the performance of defined area audits.  Based on identified problems, RAT-STATS can suggest the scope of further, more statistically reliable audit samples.  Based on the results of more complete audit, RAT-STATS can help estimate overpayments.

RAT-STATS is only a tool to help with statistical projection.  Judgment is required in the identification of risk areas that may require monitoring and auditing.  RAT-STATS can be a useful tool for providers to effectuate their compliance efforts.

The U.S. Department of Justice (DOJ) and the U.S. Department of Health and Human Services (HHS) recently released its annual Health Care Fraud and Abuse Control Program (HCFAC) reports report indicates that in the last three years for every dollar spent on health care related fraud and abuse investigations through HCFAC and other government programs, the government recovered $8.10. This is a record high for the 17-year old HFAC program. The HFAC program focuses on eliminating fraud, waste, and abuse in the health care industry.

A few notes on the report’s numbers:

• The federal government recovered a record-breaking $4.3 billion in fiscal year 2013 alone.
• Over the last five years, the federal government recovered $19.2 billion—this is more than double the previous five-year period.
• In fiscal year 2013, the DOJ and HHS strike force team filed 137 cases, charged 345 individuals with crimes, secured 234 guilty pleas, and achieved 46 convictions.
• Defendants sentenced in fiscal year 2013 served an average of 52 months in prison.
• Centers for Medicare and Medicaid Services (CMS) have banned 225,000 individuals and entities from billing Medicare between March 2011 and September 2013.

Attorney General Eric Holder states that, “With these extraordinary recoveries, and the record-high rate of return on investment we’ve achieved on our comprehensive health care fraud enforcement efforts, we’re sending a strong message to those who would take advantage of their fellow citizens, target vulnerable populations, and commit fraud on federal health care programs,” said Attorney General Eric Holder.

The return on investigation investment suggests that the federal government’s interest in investigating and prosecuting health care fraud and abuse is substantial. In short, health care compliance is more important than ever.

The U.S. Department of Justice (DOJ) and the U.S. Department of Health and Human Services (HHS) recently released its annual Health Care Fraud and Abuse Control Program (HCFAC) report.  This report indicates that in the last three years for every dollar spent on health care related fraud and abuse investigations through HCFAC and other government programs, the government recovered $8.10. This is a record high for the 17-year old HFAC program. The HFAC program focuses on eliminating fraud, waste, and abuse in the health care industry.

A few notes on the report’s numbers:

• The federal government recovered a record-breaking $4.3 billion in fiscal year 2013 alone.
• Over the last five years, the federal government recovered $19.2 billion—this is more than double the previous five-year period.
• In fiscal year 2013, the DOJ and HHS strike force team filed 137 cases, charged 345 individuals with crimes, secured 234 guilty pleas, and achieved 46 convictions.
• Defendants sentenced in fiscal year 2013 served an average of 52 months in prison.
• Centers for Medicare and Medicaid Services (CMS) have banned 225,000 individuals and entities from billing Medicare between March 2011 and September 2013.

Attorney General Eric Holder states that, “With these extraordinary recoveries, and the record-high rate of return on investment we’ve achieved on our comprehensive health care fraud enforcement efforts, we’re sending a strong message to those who would take advantage of their fellow citizens, target vulnerable populations, and commit fraud on federal health care programs,” said Attorney General Eric Holder.

The return on investigation investment suggests that the federal government’s interest in investigating and prosecuting health care fraud and abuse is substantial. In short, health care compliance is more important than ever.