Advisory Opinion regarding Placement Agency Fees

On January 13, 2014, the Department of Health and Human Services (“HHS”), Office of Inspector General (“OIG), issued an advisory opinion regarding contracts under which a placement agency is paid for referring new residents to senior residential communities, and whether such contracts would result in sanctions or civil monetary penalties due to the imposition of the Federal anti-kickback statute. (“AKS”).

The Parent Company, that requested the advisory opinion, owns and controls the following subsidiaries: (1) eleven senior residential communities (“Communities”), (2) two skilled nursing facilities (“SNFs”), and (3) a management company (referred to collectively as “Affiliated Entities”).  The Communities provide nursing services, medication assistance,  and daily living services to their residents.   Patients at the Communities pay the costs of services received with personal resources or private payors.  The State Medicaid program (Elderly Waiver Program) pays for the services of only a small percentage of the residents in three of the Communities.   Except for the Elderly Waiver Program, the SNFs are the only Affiliated Entities that provide Federal funded health care services. 


The Placement Agency at issue in this advisory opinion, is an independent placement agency for senior housing that provides information and advice about housing and care options to seniors and their families and caregivers.    The Placement Agency contracts with two of the Communities to promote their available housing and places new residents with them.   When the Placement Agency places a new resident in a Community, the Placement Agency receives a fee calculated as a percentage of the new resident’s charges for the resident’s first or first two months (“Placement Fee”).  


The AKS makes it a criminal offense to knowingly and willfully offer, pay, solicit, or receive any remuneration to induce or reward referrals of items or services reimbursable by a Federal health care program.[1]  When the AKS is violated, criminal liability can be attributed to both parties to the transaction, involving fines, penalties, imprisonment, and/or exclusion.  The OIG determined that the Placement Fee is remuneration that implicates the AKS, as the residents may in the future receive Federally reimbursed services from one of the Affiliated Entities.  However, the core issue is whether the remuneration is likely to be an improper payment to generate Federal health care program business for the Parent Company or its Affiliated Entities.  The OIG points out that percentage compensation arrangements, such as the Placement Fee at issue, are inherently problematic under AKS, as they relate to the volume and value of business generated between the parties.   However, the OIG concludes that the facts and circumstances of this arrangement adequately reduce the risk that the remuneration provided could be an improper payment for referrals or the generation of Federal health care program business, as follows:


1.     The Placement Fee takes into account only the initial rent and services provided by the Community and paid by the new resident. The Fee does not include any charges to Federal health care programs.

2.     The Placement Agency Contracts prohibit placement and acceptance of potential residents who are known to rely, in whole or in part, on state of Federal funding sources.

3.     The Placement Agency refers potential residents for housing and services that are not payable by Federal health care programs.  Residents of the Communities do not have access to services provided by the SNF staffs and no participants in the Elderly Waiver Program were referred by the Placement Agency.  Whether a resident originally placed by the Placement Agency will receive Federally payable services provided by an Affiliated Entity at some point in the future, due to a change in circumstances, is substantially speculative and outside the control of the Placement Agency.

4.     The Parent Company certified that Affiliated Entities do not track referrals or common residents among the Affiliated Entities.

Based on these factors, the OIG concluded the risk is minimal that one purpose of the arrangement is to generate Federal health care program business.  In addition, although the arrangement could potentially generate prohibited remuneration under AKS if the requisite intent to induce or reward referrals of Federal health care program business were present, the OIG will not impose administrative sanctions in connection with the arrangement.


[1] Social Security Act §1128B(b).

March 1, 2014 Deadline for Reporting HIPAA Breaches

HIPAA Covered Entities that encountered a breach incident during the year 2013 affecting the unsecured protected health information (“PHI”) of less than 500 individuals have an impending reporting requirement.

Pursuant to HIPAA's breach notification requirements (45 C.F.R. 164.408), all Covered Entities are required to complete an online notification form to report these breach incidents to Health and Human Services' Office of Civil Rights ("OCR") by March 1, 2014. If more than one breach incident involving less than 500 individuals occurred in 2013, a separate form must be completed for each breach incident. The form will request certain information regarding the breach incident, including the following:
  • A brief description of what happened, including dates of breach and discovery
  • Approximate number of individuals affected by the breach
  • Description of the types of PHI involved in the breach
  • Location of the breach information (laptop, computer, email, etc.)
  • Brief description of the steps taken in response to the breach
  • Safeguards in place prior to the breach
  • Contact procedures, including, name and contact information for covered entity, and if the breach involves a business associate, the name and contact information for the business associate
In 2013, the definition of “breach” was revised to mean “the acquisition, access, use or disclosure of protected health information in a manner not permitted under subpart E [of the HIPAA Regulation] which compromises the security or privacy of the protected health information.”  Such acquisition, access, use or disclosure is presumed to be a breach unless the Covered Entity or business associate demonstrates that there is low probability that the PHI has been compromised based on a risk assessment into the nature and extent of PHI involved, the unauthorized person who used the PHI or to whom the disclosure was made, whether the PHI was actually acquired or viewed, and the extent to which the risk to the PHI has been mitigated.  The new definition then excludes certain  unintentional acquisitions, access, or use of PHI, inadvertent disclosures, and good faith disclosures.

The online notification form that is to be completed by the Covered Entity is available on the OCR website by clicking here.

For more information on HIPAA breaches and reporting such please contact Meghan McNab at mmcnab@kdlegal.com or Susan Ziel at sziel@kdlegal.com.

CMS Final Rule on HCBS

On January 10, 2014, the Centers for Medicare and Medicaid Services (“CMS”) issued a final rule regarding home and community based services (“HCBS”) (“Final Rule”).   

Specifically, the Final Rule discusses HCBS under §1915(i) of the Social Security Act (“the Act”), and describes the Medicaid optional state plan benefit to furnish HCBS and draw federal matching funds, without the State having to obtain a waiver.   Also significant, the Final Rule defines community-based settings as locations where individuals have full access to greater community, opportunities to seek employment and control personal resources, along with additional rights. Individuals must have privacy in their sleeping or living quarters, units that have lockable entrance doors and the choice of whether to have a roommate, among others.  However, the Final Rule disqualifies homes that are deemed too close to a nursing home, because the home is likely to be operated in a similar manner to the nursing home (the home is located in a building that is also a publicly or privately operated facility that provides inpatient institutional treatment, or in a building on the grounds of, or immediately adjacent to a setting that has the effect of isolating individuals)

The Final Rule also:

                   Provides a 5-year demonstration project/waiver for States that provide medical assistance for individuals dually eligible for Medicaid and Medicare benefits. 
                   Provides payment reassignment provisions because State Medicaid programs are often the primary or only payment for HCBS providers.
                  Amends Medicaid regulations to provide HCBS requirements for the Community First Choice State plan option (under §1915(k) of the Act)
                   Provides a few other changes to waivers under §1915(c) of the Act.

·                  Allows States to combine the existing three waiver targeting groups identified in 42 CFR §441.301
·                  Implements requirements regarding person-centered services plans
·                  Clarifies timing of State amendments to current HCBS waiver programs and services rates
·                   Provides additional strategies to ensure state compliance with §1915(c) of the Act
·                   Establishes HCBS requirements and provides a transition/phase-in period for current §1915(c) waivers to demonstrate compliance.


For questions regarding this Final Rule of HCBS, please contact Meghan McNab at mmcnab@kdlegal.com or Kristen Gentry at kgentry@kdlegal.com.

Final Rule Allowing Patient Access to CLIA Test Reports

On February 6, 2014, the Centers for Medicare and Medicaid Services (“CMS”) published a Final Rule to amend the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) Privacy Rule to allow patients to access test reports directly from laboratories. The Final Rule also made a corresponding amendment to the Clinical Laboratory Improvement Amendments of 1988 (“CLIA”) regulations authorizing laboratories to provide patients with such information.

A laboratory is considered a covered entity and therefore subject to HIPAA if the laboratory conducts one or more covered transactions electronically.  This may include transmitting health care claims or equivalent encounter information to a health plan, requesting prior authorization from a health plan, or sending an eligibility inquiry to a health plan.   The HIPAA Privacy Rule allows patients certain rights to access, inspect and copy their protected health information (“PHI”) maintained by a covered entity.  However, until this amendment, CLIA-certified laboratories and CLIA-exempt laboratories were excepted from the provision that required covered entities to provide patients with requested PHI.  Specifically, the patient’s right of access under 45 CFR §164.524 did not apply to: PHI maintained by a covered entity that was: (1) subject to CLIA to the extent the provision of access to the individual would be prohibit by law; or (2) exempt from CLIA.   These exemptions included test reports and other PHI only at CLIA and CLIA-exempt laboratories.  If another type of covered entity (such as a hospital or physician) held these test reports or other PHI, the individual could then request access from this other covered entity. 

Because the Final Rule amended the CLIA regulations to allow laboratories to provide patients with test reports, CMS also revised the HIPAA Privacy Rule in order to avoid a conflict with the CLIA requirements.  Therefore, the Final Rule removed the exceptions for CLIA and CLIA-exempt laboratories from the right of access regulation, allowing individuals to access test reports and other PHI directly from HIPAA-covered laboratories.   The Final Rule requires that laboratories subject to HIPAA must be compliant by October 6, 2014.


Because the regulation gives individuals a greater ability to access their health information and records, it seeks to empower individuals to take a more active role in managing their health and health care.  For more questions regarding HIPAA and patient’s access to health information please contact Meghan McNab at mmcnab@kdlegal.com or Susan Ziel at sziel@kdlegal.com.

OIG’s 2014 Work Plan efforts that will focus on Nursing Homes

The U.S. Department of Health and Human Services, Office of Inspector General (“OIG”) recently released its Work Plan for Fiscal Year (FY) 2014 which summarizes the reviews and activities that the OIG plans to pursue during FY 2014.  These reviews and activities relate to areas the OIG has identified as most in need of attention.  Some of these activities are new and some are ongoing from past years.   The Work Plan covers various categories of programs.  For nursing homes, which is the concentration of this article, most of the focus areas are in relation to the Medicare program, as discussed below, but important Medicaid and state survey issues are also under review. 

Medicare

A new focus area for 2014 is Medicare Part A billing by skilled nursing facilities (“SNFs”).  The OIG added this focus area based on the OIG’s belief that SNFs increasingly billed for the highest level of therapy even though the beneficiaries’ characteristics remained mostly unchanged.  In addition, the OIG contends SNFs billed one- quarter of all 2009 claims in error, which allegedly caused $1.5 billion in inappropriate Medicare payments.  As a consequence, in 2014 the OIG will review SNF billing practices in selected years  and describe how SNFs billing practices have varied between those years. 

The Medicare focus areas that are not new in 2014, but will continue from past years include:

(1)   Questionable billing patterns for Part B services during nursing home stays.  The OIG will conduct a series of studies to examine several broad categories of services, such as foot care, provided to nursing home residents during stays not paid under Part A.  The OIG is continuing to focus on this area under the explicit direction of Congress to monitor Part B billing for abuse during non-Part A stays.

(2)   State agency verification of deficiency corrections.  The OIG will seek to determine whether State survey agencies verified correction plans for deficiencies identified during nursing home recertification surveys.

(3)   Program for national background checks for long-term-care employees.  The OIG will review the procedures implemented by participating States for long-term-care facilities to conduct background checks on prospective employees and providers who would have direct access to patients.  The review is also supposed to assess the costs of conducting background checks.  The Affordable Care Act mandated this review and the OIG is expected to issue a summary of its findings in FY 2017.

(4)   Hospitalizations of nursing home residents for manageable and preventable conditions.  The OIG will attempt to determine the extent to which Medicare beneficiaries residing in nursing homes are hospitalized as a result of conditions thought to be manageable or preventable in the nursing home.  The OIG views hospitalizations of nursing home residents as a preventable cost to Medicare and an indication of quality-of-care problems on the part of the nursing home.

Other

Some assisted living facilities provide services to home and community based (HCBS) waiver recipients.  Although Medicaid covers the cost of HCBS, it does not cover room and board costs.  The OIG will continue to focus on room and board costs associated with HCBS waiver program payments to determine whether selected states claimed Federal reimbursement for unallowable room and board costs associated with services provided under the HCBS waiver programs. 

Many states, Indiana included, impose state health-care related taxes on Medicaid nursing home providers to finance a portion of the state’s Medicaid spending.   The OIG will continue to focus on and review these taxes imposed on Medicaid providers to determine whether the taxes comply with applicable Federal requirements. 

By reviewing the focus areas identified in the Work Plan, providers can determine where to focus their compliance program efforts.  If you have any questions regarding the Work Plan and nursing homes please contact Randall Fearnow at rfearnow@kdlegal.com or Meghan McNab at mmcnab@kdlegal.com.

OIG’s 2014 Work Plan: Focus on Hospitals

The U.S. Department of Health and Human Services, Office of Inspector General (“OIG”) recently released its Fiscal Year (FY) 2014 Work Plan.  The Work Plan summarizes the activities in which the OIG plans to focus its efforts during the applicable FY.  Many of the OIG focus areas are ongoing and actively pursued; however the Work Plan covers various new focus areas specific to hospitals.   

Hospital Policies and Practices

The Work Plan includes several new areas of focus that hospitals should be mindful of.  These include the following:

·         New Inpatient Admission Criteria:  The OIG intends to analyze the impact of the “Two-Midnight” rule.  This is a significant area for hospitals as it represents a substantial change in the way hospitals have been accustomed to billing for both inpatient and outpatient services.  Although this Rule has been delayed, Recovery Audit Contractors and Medicare Audit Contractors will still carry out prepayment reviews of hospital admissions between March 31 and September 30 of 2014.

·         Medicare Costs Associated with Defective Medical Devices:  The OIG intends to review claims to identify any costs resulting from additional utilization of medical services associated with defective medical devices.  For example, a provider may utilize a medical device but if such device becomes defective, there may be additional ancillary costs associated with the replacement.

·         Analysis of Salaries Included in Hospital Cost Reports:  The OIG will review data from cost reports to identify salary amounts included in operating costs reported to and reimbursed by Medicare.  Although Medicare does not provide any specific limits, this appears to be addressing executive compensation concerns.  Hospitals should understand that this represents a significant shift towards further scrutiny of executive salaries.

·         Comparison of Provider-Based and Free-Standing Clinics: As mentioned below, provider-based status has been a significant issue for the OIG over the past few years.  Provider-based facilities receive higher payments for services when compared with freestanding facilities.  Therefore, the OIG is reviewing the impact of provider-based status as compared to freestanding facilities.  This focus area could mean potential changes to both provider-based status qualifications and reimbursement for services at such facilities.

The Work Plan includes several areas of focus which have been included in previous years’ plans.  These areas include the following:

·         Reconciliation of Outlier Payments: Outliers are additional payments that Medicare provides to hospitals for beneficiaries who incur unusually high costs.  Consistently, these payments have exceeded the amount intended to be paid.  As a result of reconciliations, hospitals may see an increase in the number of Medicare contractors investigating outlier payments.

·         Impact of Provider­-Based Status:  The OIG continues to review and determine the impact of provider-based status.  This is important as many hospitals allow subordinate facilities to bill as part of the main provider to increase Medicare reimbursement.  Specific requirements must be met to qualify for provider-based status; however the continued scrutiny by the OIG may require hospitals to prepare for any changes to these provision.

·         Critical Access Hospitals – Payment for Swing Bed Services:  The review and comparison of swing-bed services at critical access hospitals to the care received at skilled nursing facilities will continue for the purpose of determining whether Medicare could achieve cost savings.

·         Critical Access Hospitals Beneficiary Costs for Outpatient Services:  The OIG continues to review and determine the costs to Medicare beneficiaries for outpatient services received at critical access hospitals.  Currently, beneficiaries who receive outpatient services pay coinsurance amounts that are computed based upon the hospital’s submitted charge, rather than the costs of the services.

·         Long Term Care Hospitals Billing Patterns:  The OIG intends to identify readmission patterns in long term care hospitals.  The primary concern is that CMS may not have the ability to detect readmissions and appropriately pay the readmissions as interrupted stays instead of as higher paying new admissions.

Billing and Payments 

The OIG has stepped up focus on billing requirements including specifically mentioning the requirement of adequate and supporting documentation within the medical record.  New focus areas related to billing and payment issues for hospitals are as follows:

·         Outpatient Evaluation and Management Services:  The OIG intends to review Medicare outpatient payments made to hospitals for evaluation and management services related to clinic visits billed at the new-patient rate to determine whether they were appropriate.  A “new” patient or “established” patient is an individual who has been seen as a registered inpatient or outpatient of the hospital within the past three (3) years.  Therefore, hospitals should ensure that their policies and billing practices are in line with these requirements.

·         Nationwide Review of Cardiac Catheterization and Heart Biopsies:  The OIG will review payments for right heart catheterizations and heart biopsies during the same operative session to determine if billing requirements have been met.  At times these have been billed separately even though the services would already be included in payments for heart biopsies.  The OIG noted that a bill must be completed accurately, reflecting the necessity of compliant documentation.

·         Payments for Patients Diagnosed with Kwashiorkor: Kwashiorkor is a form of severe protein malnutrition that affects children living in specific areas and is not typically found in the United States.  Nevertheless, the OIG intends to review Medicare payments made to hospitals for claims that include this diagnosis.  Above all, the OIG intends to scrutinize whether such diagnosis is adequately supported by documentation in the medical record.

·         Bone Marrow or Stem Cell Transplants:  Transplantations are covered under Medicare only for specific diagnoses.  The OIG will evaluate whether procedures codes are accompanied with the diagnosis codes to meet specific coverage criteria.

·         Indirect Medical Education Payments:  Teaching hospitals with residents receive additional payments for each Medicare discharge to reflect the higher indirect patient care costs; however such payments are calculated using the hospital’s ratio of resident full-time equivalents to available beds.  The OIG intends to determine if payments have been made in accordance with Federal regulations and guidelines.  Teaching hospitals must ensure that the applicable requirements are being met, reducing the likelihood that the hospital is receiving excess reimbursement.

The Work Plan includes several areas of focus under billing and payments which have been included in previous years’ plans.  These areas include the following:

·         Inpatient Claims for Mechanical Ventilation:  The OIG continues to review Medicare payments for inpatient hospital claims with certain Medicare Severity Diagnosis Related Group assignments that require mechanical ventilation.  A patient though, is required to receive 96 hours or more of mechanical ventilation.  The OIG will be reviewing this requirement to see whether improper payments occurred.

·         Selected Inpatient and Outpatient Billing Requirements:  Generally, the OIG will focus on billing requirements and recommended recovery of overpayments to determine hospital compliance.  This will include surveys or interviews with hospital leadership and compliance officers to ensure compliance programs are being enforced.

·         Duplicate Graduate Medical Education Payments:  No intern or resident may be counted as more than one full time equivalent employee in the methodology for receiving reimbursement of graduate medical education costs.  The OIG will continue to review data to determine whether hospitals received duplicate or excessive graduate medical education payments.

·         Outpatient Dental Claims: Dental services are generally excluded from Medicare coverage, however the OIG will continue to review payments to hospitals to determine whether such payments were made in accordance with Medicare requirements.

Quality of Care and Safety

With respect to quality of care and safety in hospitals, the OIG has issued new focus areas related to oversight of pharmaceutical compounding and hospital privileging.  The following focus areas should be on the radar of hospitals for this FY:

·         Oversight of Pharmaceutical Compounding:  Most hospitals compound drugs on-site, or create a prescription drug tailored to the individual patient.  Medicare is responsible for the safety of this process and the OIG intends to assess such pharmacy services in hospitals for any potential oversight issues.

·         Oversight of Hospital Privileging:  The OIG intends to determine how hospitals assess medical staff candidates prior to granting initial privileges.  The OIG notes that the hospital’s governing body must ensure that physicians and other licensed independent practitioners are accountable.  Their belief is that strengthened privileging programs will yield significant contributions to patient safety.

·         Hurricane Sandy Emergency Preparedness Case Study:  The OIG intends to assess the hospital preparedness and response during Hurricane Sandy.  The OIG notes that CMS’s Conditions of Participation require hospitals to develop and maintain an environment that ensures the safety and well-being of patients during disasters.  Hospitals should note this case study is limited to the counties affected, but the increased focus on emergency preparedness may be a more widespread issue further into the future.

The Work Plan includes areas of focus under quality of care and safety which have been included in previous years’ plans.  These areas include the following:

·         Participation in Projects with Quality Improvement Organizations:  CMS is required to enter into contracts with quality improvement organizations and the OIG intends to determine the extent and nature of participation in the quality improvement projects.

·         Inpatient Rehabilitation Adverse Events:  The OIG intends to continue focus on adverse and temporary harm events for Medicare beneficiaries receiving post-acute care in inpatient rehabilitation facilities.  This review will also include an analysis of prevention and the associated costs to Medicare.

By reviewing the focus areas identified in the Work Plan, hospitals can determine where to focus their compliance program efforts.  If you have any questions regarding the Work Plan or any issues that may impact your organization please contact Bob Wade at bwade@kdlegal.com or Alex Krouse at akrouse@kdlegal.com.

The OIG Fiscal Year 2014 Work Plan and Home Health Agencies

In the Office of Inspector General (OIG) Fiscal Year 2014 Work Plan, there are several provisions with respect to home health agencies and compliance.   

Billing Issues

One area of focus includes home health agency billing practices, as a prior OIG report found that a quarter of all home health agencies had “questionable billing.”  In addition, the OIG noted that the Centers for Medicare & Medicaid Services (“CMS) designated newly-enrolled home health agencies as “high-risk providers” related to a history of fraud, waste, and abuse.  The OIG also cited a figure that since 2010, “nearly $1 billion in improper Medicare payments and fraud has been identified relating to the home health benefit.” 

Background Checks and Health Screening

Another area of concern with respect to home health agencies, includes whether the agencies are conducting exclusion or criminal background checks on applicants and employees.  From a May 8, 2013 Special Advisory Bulletin on the effect of exclusion from participation in federal health care programs, we recommend at a minimum that home health agencies are checking the List of Excluded Individuals and Entities (LEIE) upon hire, and at least annually thereafter.

In addition, the OIG noted that Medicaid home health agencies are also required to screen their workers for such vaccinations as hepatitis and influenza, and compliance with this requirement will also be reviewed.

Conditions of Participation

Finally, the 2014 work plan is going to address whether billing providers have met the Conditions of Participation for home health agencies, including that the services are provided at the patient’s place of residence, and on a physician’s orders as part of a written plan of care, reviewed by a physician every 60 days.   Further, the care provided must require only intermittent, and not full-time skilled nursing care. 

Temporary Moratoria

The fiscal year 2014 work plan is reflective of CMS’ recent efforts with respect to alleged fraud by home health agencies.  In July 2013, CMS issued temporary moratoria on the enrollment of home health agencies in two major metropolitan areas:  the Chicagoland area, and the Miami, Florida area.  On January 30, 2014, CMS announced that in addition to these two geographical areas, it has also extended the moratoria to four other metropolitan areas:  Fort Lauderdale, Florida, Detroit, Michigan, Dallas, Texas, and Houston, Texas.  The moratoria are in effect for a six-month period, which may be extended by CMS by issuing another notice in the Federal Register. 

The OIG and CMS’s concerns regarding fraud and abuse are reminders to home health agencies to revisit their compliance efforts, and ensure that the agencies are meeting all requirements under both federal and state laws. 

If you have any questions regarding either the OIG work plan, general compliance with federal and state regulations, or the temporary moratoria, please contact either Charles MacKelvie (cmackelvie@kdlegal.com) or Jaya White (jwhite@kdlegal.com).

Provider Services FY 2014 OIG Work Plan

The U.S. Department of Health and Human Services, Office of Inspector General (“OIG”) recently released its Fiscal Year (FY) 2014 Work Plan.  The Work Plan summarizes the activities in which the OIG plans to focus its efforts during the applicable FY.  Many of the sections applicable to medical equipment, ASLs, chiropractors, and physicians are set forth below.Frequently Replaced Supplies - Supplier Compliance With Medical Necessity, Frequency, and Other Requirements

The OIG will review claims for frequently replaced medical equipment supplies to determine whether medical necessity, frequency, and other Medicare requirements are met.  Prior OIG work found that suppliers automatically shipped continuous positive airway pressure system and respiratory-assist device supplies when no physician orders for refills were in effect.  Such claims are deemed improper.  For supplies and accessories used periodically, orders or certificates of medical necessity must specify the type of supplies needed and the frequency with which they must be replaced, used, or consumed.
Beneficiaries or their caregivers must specifically request refills of repetitive services and/or supplies before suppliers dispense them.  Suppliers should not initiate refills of orders, and suppliers should not automatically dispense a quantity of supplies on a predetermined regular basis.  Medicare does not pay for items or services that are “not reasonable and necessary."Ambulatory Surgical Centers - Payment System
Beginning January 1, 2008, a change in Federal law required the Secretary to implement a revised payment system for payment of surgical services furnished in ASCs.  Accordingly, CMS implemented a revised ASC payment system modeled on the Outpatient Prospective Payment System. The OIG will review the appropriateness of Medicare’s methodology for setting ambulatory surgical center (ASC) payment rates under the revised payment system.  The OIG will also determine whether a payment disparity exists between the ASC and hospital outpatient department payment rates for similar surgical procedures provided in both settings.  Rural Health Clinics - Compliance With Location Requirements
The Balanced Budget Act of 1997 (BBA) authorized CMS to remove from the Rural Health Clinic (RHC) program clinics that do not meet location requirements.  In 2005, OIG recommended that CMS promulgate regulations to implement the BBA.  However, CMS has yet to promulgate the final regulations.  As a result, RHCs that no longer meet eligibility requirements continue to receive enhanced Medicare reimbursement.  The OIG will determine the extent to which RHCs do not meet basic location requirements and the extent to which Medicare reimbursements to such clinics are occurring.  Anesthesia Services - Payments For Personally Performed Services

The OIG will review Medicare Part B claims for personally performed anesthesia services to determine whether they were supported in accordance with Medicare requirements.  The OIG will also determine whether Medicare payments for anesthesiologist services reported on a claim with the “AA” service code modifier met Medicare requirements.  Physicians report the appropriate anesthesia modifier code to denote whether the service was personally performed or medically directed.  Reporting an incorrect modifier on the claim as if services were personally performed when they were not can result in Medicare’s paying a higher amount.  The service code “AA” modifier is used for anesthesia services personally performed by an anesthesiologist, whereas the QK modifier limits payment to 50 percent of the Medicare-allowed amount for personally performed services claimed with the AA modifier.  Payments to any service provider are precluded unless the provider has furnished the information necessary to determine the amounts due.
Chiropractic Services

The OIG will compile the results of prior OIG audits, evaluations, and investigations of chiropractic services paid by Medicare to identify trends in payment, compliance, and fraud vulnerabilities and offer recommendations to improve detected vulnerabilities.  Prior OIG work identified inappropriate payments for chiropractic services that were medically unnecessary, were not documented in accordance with Medicare requirements, or were fraudulent.  Medicare will not pay for items or services that are “not  reasonable and necessary for the diagnosis and treatment of illness or injury or to improve the functioning of a malformed body member.”  Part B will pay only for a chiropractor’s manual manipulation of the spine to correct a subluxation if there is a neuro-musculoskeletal condition for which such manipulation is appropriate treatment.  Similarly, chiropractic maintenance therapy is also not considered to be medically reasonable or necessary and is therefore not payable.  This planned portfolio document will offer new recommendations to improve Medicare chiropractic vulnerabilities detected in prior OIG work.
Diagnostic Radiology - Medical Necessity Of High-Cost Tests

The OIG will review Medicare payments for high-cost diagnostic radiology tests to determine whether they were medically necessary and the extent to which utilization has increased for these tests.  Medicare will not pay for items or services that are not “reasonable and necessary.”
Electrodiagnostic Testing - Questionable Billing

The OIG will review Medicare claims data to identify questionable billing for electrodiagnostic testing and determine the extent to which Medicare utilization rates differ by provider specialty, diagnosis, and geographic area for these services.  Electrodiagnostic testing, which assists in the diagnosis and treatment of nerve or muscle damage, includes the needle electromyogram and the nerve conduction test.  Coverage for diagnostic testing is provided by the Social Security Act.  The use of electrodiagnostic testing for inappropriate financial gain could pose a growing vulnerability to Medicare.
Evaluation And Management Services - Inappropriate Payments

The OIG will determine the extent to which selected payments for Evaluation and Management (E/M) services were inappropriate.  The OIG will also review multiple E/M services associated with the same providers and beneficiaries to determine the extent to which electronic or paper medical records had documentation vulnerabilities.  Medicare contractors have noted an increased frequency of medical records with identical documentation across services.  Medicare requires providers to select the billing code for the service on the basis of the content of the service and to have documentation to support the level of service reported.
Imaging Services - Payments For Practice Expenses

The OIG will review Medicare Part B payments for imaging services to determine whether they reflect the expenses incurred and whether the utilization rates reflect industry practices.  For selected imaging services, the OIG will focus on the practice expense components, including the equipment utilization rate.  Practice expenses are those such as office rent, wages, and equipment.  Physicians are paid for services pursuant to the Medicare physician fee schedule, which covers the major categories of costs, including the physician professional cost component, malpractice costs, and practice expenses.
Laboratory Tests - Billing Characteristics And Questionable Billing

The OIG will review billing characteristics for Part B clinical laboratory tests and identify questionable billing.  Medicare’s payments for lab services in 2008 represented an increase of 92% over payments in 1998.  In 2010, Medicare paid about $8.2 billion for lab tests, accounting for 3% of all Medicare Part B payments.  Much of the growth in lab spending has resulted from the increased volume of ordered services.  Part B covers most lab tests and pays 100% of allowable charges; Medicare beneficiaries do not pay copayments or deductibles for lab tests.  Medicare should pay only for those lab tests that are ordered by a physician or qualified nonphysician practitioner who is treating a beneficiary. 
Ophthalmologists-Questionable Billing

The OIG will review Medicare claims data to identify inappropriate payments and questionable billing for ophthalmological services during 2012.  The OIG will also determine the geographic locations of providers exhibiting questionable billing for ophthalmological services in 2012.  In 2010, Medicare allowed over $6.8 billion for services provided by ophthalmologists.
Physicians - Place-Of-Service Coding Errors

The OIG will review physicians’ coding on Medicare Part B claims for services performed in ASCs and hospital outpatient departments to determine whether they properly coded the places of service.  Prior OIG reviews determined that physicians did not always correctly code nonfacility places of service on Part B claims submitted to and paid by Medicare contractors.  Federal regulations provide for different levels of payments to physicians depending on where services are performed.  Medicare pays a physician a higher amount when a service is performed in a nonfacility setting, such as a physician’s office, than it does when the service is performed in a hospital outpatient department or, with certain exceptions, in an ASC.
Sleep-Disorder Clinics - High Utilization Of Sleep-Testing Procedures

The OIG will examine Medicare payments to physicians, hospital outpatient departments, and independent diagnostic testing facilities for sleep-testing procedures to assess the appropriateness of Medicare payments for high utilization sleep-testing procedures and determine whether they were in accordance with Medicare requirements.  An OIG analysis of CY 2010 Medicare payments for CPT Codes 95810 and 95811, which totaled approximately $415 million, showed high utilization associated with these sleep-testing procedures.  Medicare will not pay for items or services that are not “reasonable and necessary.”  Diagnostic testing that is duplicative of previous testing done by the attending physician to the extent the results are still pertinent is not covered because it is not reasonable and necessary under 1862(a)(1)(A) of the Act.
Security Of Portable Devices Containing Personal Health Information

The OIG will review security controls implemented by Medicare and Medicaid contractors and at hospitals to prevent the loss of Protected Health Information (PHI) stored on portable devices and media, such as laptops, jump drives, backup tapes, and equipment considered for disposal.  Recent breaches related to Federal computers, including one involving a CMS contractor, have heightened concerns about protecting sensitive information.  The OIG will assess and test contractors’ and hospitals’ policies and procedures for electronic health information protections, access, storage, and transport.  OMB recommended that all Federal departments and agencies take action to protect sensitive information by following the National Institute of Standards and Technology’s Special Publications 800-53 and 800-53A. 
Controls Over Networked Medical Devices At Hospitals

The OIG will determine whether hospitals’ security controls over networked medical devices are sufficient to effectively protect associated electronically protected health information (ePHI) and ensure beneficiary safety.  Computerized medical devices, such as dialysis machines, radiology systems, and medication dispensing systems that are integrated with EMRs and the larger health network pose a growing threat to the security and privacy of personal health information.  Such medical devices use hardware, software, and networks to monitor a patient’s medical status and transmit and receive related data using wired or wireless communications.  To participate in the Medicare program, providers such as hospitals are required to secure medical records and patient information, including ePHI.  Medical device manufacturers provide Manufacturer Disclosure Statement for Medical Device Security (MDS2) forms to assist health care providers in assessing the vulnerability and risks associated with ePHI that is transmitted or maintained by a medical device.
Accuracy Of The Physician Compare Web Site

The OIG will review CMS’s efforts to ensure that the Physician Compare Web site contains accurate information on health care providers.  CMS was required by law to create the Physician Compare Web site, which is intended to help Medicare beneficiaries make informed choices about their health care by providing them with information about health care providers.  CMS repurposed its Provider Enrollment, Chain, and Ownership System (PECOS) as its data source for provider information on Physician Compare.  However, prior OIG work found that the provider information in PECOS was often inaccurate and, at times, incomplete.
By reviewing the focus areas identified in the Work Plan, providers can determine where to focus their compliance program efforts.  If you have any questions regarding the Work Plan, or any issues that may impact your organization, please contact Thomas Hutchinson at thutchinson@kdlegal.com.