OMPP changes to Indiana Medicaid Eligibility

The Office of Medicaid Policy and Planning (“OMPP”) recently released a bulletin summarizing the changes to Indiana Medicaid eligibility, as required by the Patient Protection and Affordable Care Act (“ACA”).   This memorandum summarizes the key changes and effective dates for Medicaid eligibility.
Starting in October 2013, Indiana Medicaid will begin using the Indiana Application for Health Coverage for all Indiana Medicaid programs, which can be completed through the Internet, by mail, or over the telephone.  However, the Healthy Indiana Plan (“HIP”) will not use this new health coverage application, and instead will continue using the separate, unique HIP application.  Applications for food stamps (“SNAP”) and cash assistance (“TANF”) will also be separate from applications for health coverage.
Effective January 1, 2014, OMPP revised the aid categories for children, the overall aid categories, and the eligibility criteria, all which are summarized here.  Beginning January 1, 2014, Indiana Medicaid is required to use the Modified Adjusted Gross Income (“MAGI”) method to determine income eligibility.  However, Indiana has chosen to begin applying this new methodology to applications received in October, and individuals submitting applications before January 1, 2014, will have their income eligibility calculated using both the current income determination rules and the new MAGI rules.  If the individual is eligible based on the current income determination rules, the individual will be enrolled upon determination.  If the individual is eligible based on the new MAGI rules, the individual will be enrolled effective January 1, 2014.  For individuals that are currently Indiana Medicaid members, the MAGI rules will be applied at the member’s annual redetermination.  This MAGI method will be used to determine income eligibility for the following aid categories: (i) Ages 0 to 1; (ii) Ages 1 to 5; (iii) Ages 6 to 18; (iv) MCHIP; (v) SCHIP; (vi) Former Foster Children, (vii) Parents/Caretakers; (viii) Pregnancy; (ix) HIP; (x) Family Planning Eligibility Program; and (xi) Inpatient Psychiatric Facility.  All other aid categories will continue to use the current, non-MAGI eligibility rules.  The key aspect of MAGI is that it counts all taxable income for determining Medicaid eligibility, and asset or resource tests are no longer considered.
OMPP is also announcing, as recently approved by the Centers for Medicare and Medicaid Services, that effective January 1, 2014, the income eligibility threshold for HIP will be reduced from 200% of the federal poverty limit (“FPL”) to 100% FPL.  Individuals with income above 100% FPL may seek coverage through the Health Insurance Marketplace, and may be eligible for subsidies, such as a tax credit or cost sharing reduction.
Also effective January 1, 2014, Indiana Medicaid will implement a Hospital Presumptive Eligibility (HPE) program that will allow acute-care hospitals to enroll with Indiana Medicaid as Qualified Providers (“QPs”).  QPs are authorized to enroll qualified individuals into presumptively eligible aid categories, such as: (i) Children; (ii) Parents/Caretakers; (iii) Family Planning; (iv) Former Foster Care Children; and (v) Pregnant Women.
Other changes effective January 1, 2014 are that: (1) Hoosier Healthwise Package B (Pregnancy Coverage) will be used only for the Hospital Presumptive Eligibility (HPE) program; and (2) individuals eligible for aid category MA 14: Former Foster Children will no longer be enrolled in Care Select, but rather will be eligible for Hoosier Healthwise Package A.
For questions regarding Medicaid eligibility please contact Kristen Gentry at kgentry@kdlegal.com or Meghan McNab at mmcnab@kdlegal.com.

FDA Finalizes Rule on Unique Device Identification System

On Sept. 24, 2013, U.S. Food and Drug Administration (FDA) issued its final rule on its Unique Device Identification System (UDI) after months of commentary from stakeholders. Principal changes in the final rule include new exceptions, compliance deadline extensions, exception request procedures and the phasing out of FDA legacy codes.
If you would like more information, please contact Laura Tepich at ltepich@kdlegal.com.

Bipartisan Compounding Pharmacy Legislation Announced: “Drug Quality and Security Act”

On September 25, 2013, a bipartisan group of House and Senate members reached agreement on legislation to help ensure the safety of compounded drugs by giving the Food and Drug Administration greater authority to regulate companies that compound sterile drugs and ship them across state lines.
The legislation would draw a distinction between traditional compounding pharmacies and those such as NECC which ship sterile products across state lines. These larger organizations, to be known as "outsourcing facilities," would be regulated by the FDA but be exempt from the full spectrum of regulations that apply to traditional pharmaceutical companies. An outsourcing facility is free to choose whether it will (i) be state licensed as a pharmacy or not; and (ii) obtain prescriptions for identified individual patients and/or prescribe for unlimited office use. A potentially-critical prohibition, however, is applied to outsourcing facilities, in that will only be permitted to compound from bulk API, as opposed to commercially available drugs, that appear on an affirmative, finite list to be established by HHS.
For full text of the Drug Quality and Security Act, please click here.
For more information, please click here.
The act passed the House on September 28, 2013, but has not yet received a Senate vote.

If you would like more information, please contact Laura Tepich at ltepich@kdlegal.com.

Tuomey Healthcare Systems to pay almost $278 million for False Claims Act and Stark Law violations


On September 20, 2013, Judge Seymour for the District of South Carolina ordered Tuomey Healthcare Systems (“THS”) to pay almost $278 million as a penalty for entering into prohibited contractual relationships in contravention of Stark Law and the False Claims Act. The full text of the opinion can be found here.

This case, originally filed in 2005, originated as a qui tam (whistleblower) lawsuit filed by a THS physician, Dr. Michael Drakeford. Stark Law prohibits, among other things, a physician who has a “financial relationship” with an entity—such as a hospital—from making a “referral” to that hospital for the furnishing of certain “designated health services” for which payment otherwise may be made by the United States under the Medicare program.

Dr. Drakeford, and later the U.S. government, alleged in the complaint that THS unlawfully entered into compensation contracts with 19 specialist physicians on its medical staff that required the physicians to perform all of their outpatient surgeries at THS’ outpatient surgery center.

In its amended complaint, the government alleged that because THS performed the billing for the services provided at the outpatient surgery center, that each claim THS submitted to Medicare and Medicaid as a result of the prohibited contractual relationships which included both the professional fee and the facility fee or technical component, amounted to a false claim. The Government also alleged that THS made false statements on its certificates of cost reports by stating that it was entitled to payment of its claims for services that were provided in violation of Stark Law.

This case went before a jury twice. The first time, the jury found THS guilty of violating the Stark Law, but not the False Claims Act. In July 2010, on a post-trial motion, the District Court entered a $45 million judgment against THS based on the jury’s finding that THS violated the Stark Law. The District Court also set aside the FCA verdict and granted the government’s motion for a new trial on the issue of the FCA violation. THS appealed the District Court’s judgment to the Fourth Circuit Court of Appeals, who overturned the District Court’s judgment on procedural grounds on March 30, 2013. Specifically, the Fourth Circuit found that THS’ Seventh Amendment right to a jury trial had been violated, and thus vacated the District Court’s judgment and remanded the matter for further proceedings.

In April 2013, a new jury found THS violated both Stark Law and the FCA. The District Court subsequently entered judgment against THS in an amount just shy of $278 million. THS has since filed a notice of appeal. Unless overturned on appeal, THS must pay $237.5 million for the Stark and FCA violations, more than its total revenue last year.

If you would like more information, please contact Laura Tepich at ltepich@kdlegal.com.

3 Tips for Developing Compliant Pay for Performance Models


According to a report from the Catalyst for Payment Reform only 11 percent of payments to doctors and hospitals are value based.  The report explains that nearly half of those value based programs are based on performance incentives and the other half are based on financial risk if goals are not met.  In the era of accountable care, hospitals are undoubtedly looking to alternative compensation plans to align the interests of practitioners and the hospitals.  Nevertheless, aligning the interests of quality of care and patient satisfaction can be difficult given the many laws affecting how hospitals can implement new payment models.

In particular, hospitals should pay special attention to the Stark Law, the Anti-Kickback Statute, and the Civil Monetary Penalties Statute when implementing pay for performance models.  Here are 3 tips to remember when implementing performance based payment models:

  1. Any Incentive Payments Must be Consistent with Fair Market Value and Commercially Reasonable.
Under the Stark Law, physician compensation arrangements must fit within an applicable exception.  Those exceptions include personal services, employment, and fair market value.  To satisfy all of these, any compensation paid under these exceptions must be fair market value and commercially reasonable.

  1. Reducing Costs Should Never be Based on Limiting Services, But May be Based on Overall Financial Improvement of the Organization.
The Civil Monetary Penalties Statute prohibits hospitals from making payments to physicians to induce the reduction of services.  During a time in which reduction in costs is essential and reduction in readmissions is necessary, hospitals must ensure that many metrics used do not have the possibility of inducing physicians to limit services.

  1. The Purpose of a Pay for Performance Model Should be to Improve Quality of Care.
The Anti-Kickback Statute prohibits payments to physicians if the purpose of the arrangement is to induce referrals.  There are multiple reasons for implementing a pay for performance model; however any of those reasons should never include the purpose to include referrals.  Otherwise, such a purpose would violate the Anti-Kickback Statute.

Health care reform is incentivizing hospitals to increase quality and reduce costs, but the legal barriers still remain the same.  If your hospital is planning to implement a model based on quality and reduction of costs, such a model must adhere to these laws.

If you have any questions regarding the implementation of pay for performance models, or questions related to these fraud and abuse laws, please feel free to contact Robert A. Wade at (574) 485-2002 or Alex T. Krouse at (574) 485-2003.