CMS National Provider Call Covers Important Open Payment Program Requirements

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On July 22, 2014, the Centers for Medicare & Medicaid Services (“CMS”) conducted an a National Provider Call to provide updated information for physicians and teaching hospitals regarding the steps necessary to register online, using the Open Payment Program portal, for the purpose of reviewing and disputing, if necessary, any data reported by applicable manufacturers and group purchasing organizations in accordance with Section 6002 of the Affordable Care Act and related regulations (also known as the “Sunshine Act”). 

For those persons not able to participate in the Call, the handout materials and a recording are available for review online here.  For additional information regarding these important Open Payment Program requirements, contact Susan Ziel at

OIG Proposed Expansion of Civil Monetary Penalties and Exclusion Authority

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Recently, the Department of Health and Human Services, Office of Inspector General (the “OIG”) proposed an exclusion rule to amend the existing regulations (the “Exclusion Rule”) and a separate rule to expand the Civil Monetary Penalties (“CMP”), in which the OIG would be authorized to seek additional CMPs for specified violations, including submitting false or fraudulent claims or Anti-Kickback Statute (“AKS”) violations (the “CMP Rule”). This article provides a summary of the major provisions implicated for each proposed rule as well as details of several comments submitted on the rules.

Proposed Exclusion Authority Rule
The proposed Exclusion Rule would significantly expand the exclusion regulations to persons or entities that receive funds from federal health care programs. The Exclusion Rule provides for the following three new permissive exclusions:
·         Conviction of an offense in connection with obstruction of an audit;

·         Failure to supply payment information, including when ordering, referring for furnishing, or certifying the need for items or services; and

·         Making, or causing to be made, any false statement, omission, or misrepresentation of a material fact in applications to participate as a provider of services or supplier under a Federal health care program.
The Exclusion Rule further provides details for when and how the CMPs are applied, the method for calculating such payments, and the liability guidelines under the OIG.
Proposed Civil Monetary Penalties Update  
The proposed CMP Rule would codify five new penalties, assessments, and exclusions, as stated below:
·         Timely access to records not granted to the OIG;

·         Ordering or prescribing covered services while excluded from a Federal program;

·         Making false statements, omissions, or misrepresentations in an enrollment application;

·         Failure to report and return overpayments; and

·         Making or using a false record or statement that is material to a false or fraudulent claim.
These proposed changes further the government’s focus under the Affordable Care Act to strengthen fraud and abuse regulations and increase funding to deter fraud. For example, the proposed rule provides that CMPs may be assessed ranging from $10,000 per improper claim to $50,000 for each improper violation of the AKS. Further, the CMP Rule defaults to a penalty of $10,000 for each day for not timely reporting and returning an identified overpayment.
Organizations need to ensure that their compliance processes are in place for the finalization of these rules.  This includes adequately assessing processes and procedures to ensure your organization can effectively monitor any issues covered under these rules.
For additional information related to compliance concerns or these proposed rules, please feel free to contact Susan E. Ziel at (317) 238-6244  or Alex T. Krouse at (574) 485-2003.


Important Medicare Signature Policy Update

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The Centers for Medicare & Medicaid Services (CMS) has published educational materials to assist ordering and referring providers with their Medicare signature obligations.  These materials discuss certain services that must be authenticated by the provider and the methods that may be used.  Whereas handwritten signatures are required in certain circumstances, others may only require a fax or electronic signature.  To make sure your Medicare signature compliance efforts are up-to-date, consult the CMS website here or contact Susan Ziel at for additional information.     

CMS Issues Advanced Copy of Manual Used as Guidance for Surveyors of Long Term Care Facilities

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On July 3, 2014, the Centers for Medicare and Medicaid Services issued a Survey and Certification letter containing and advanced copy of the State Operations Manual, Appendix PP, reflecting revised Interpretive Guidelines and, where appropriate, Investigative Protocols related to F-Tags used in surveying long term care facilities.  The revisions relate to Survey and Certification policy memos issued from October 2003 through May 2014.

Among the 20 F-Tags with updated guidelines is F-371(Sanitary Conditions) dating to a May 2014 memo regarding preparation of eggs. Click here to access the advance copy of the updated manual. It is effective immediately, but the final version — to be published online — might differ slightly, according to CMS.

To learn more about these requirements or if you have questions, please contact Lori McLaughlin at

Stay Up-To-Date on State Data Breach Laws

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The Health Insurance Portability and Accountability Act (“HIPAA”), as amended by the Health Information Technology for Economic and Clinical Health (HITECH) Act, continues to establish federal requirements that protect the privacy and security of individually identifiable health information or “PHI” that is created or received and maintained by HIPAA covered entities and their business associates. 

At the state level, laws have been similarly adopted to protect the privacy and security certain personal information, including but not limited to social security and other government issued numbers, that may be created or received and maintained by health care providers and other persons or entities in the normal course of business.  Specifically, Indiana’s laws can be found here, Illinois’ laws can be found here, and Minnesota’s laws can be found here and here.
As a sign of the times, Florida recently amended its state laws to expand its definition of  personal information and to reduce the time period within which breach notification obligations must be completed in the event of an unauthorized access to any such personal information.  To view a copy of the amended Florida state law, go here. Given the increasing number of data breach events across the country, we fully expect other states to follow Florida’s lead in amending their state laws accordingly. 
If you are a HIPAA covered entity or business associate and your PHI includes any personal information that is protected by applicable state laws, please contact Susan Ziel at if you need assistance updating your PHI privacy and security policies and procedures, including incorporating these various state requirements.

Understanding the Medicare Ramifications of the Change of Ownership (“CHOW”) Rules

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Many people do not understand the rules governing change of ownership for health care providers. This article will clarify a number of misconceptions.

What is  a CHOW?
There are generally two ways to sell a business: an asset sale or the sale of all of the company’s stock/membership interests. When an entity sells its stock/membership interest, the entity continues to exist but has new stockholders/ members. The terms of an asset sale defines exactly what is being sold, such as selling a house.
It is easier to begin by defining what is not a CHOW. A CHOW is not a stock/ membership transfer, even when the Provider’s stockholder/members completely change. Transfer of corporate stock/membership interests or the merger of another corporation into the provider corporation does not constitute a CHOW.[1] The purchase of 100% of a corporation’s stock/membership interest does not implicate the regulation governing CHOWs, as it is not considered a change of ownership for Medicare purposes.[2] 
The short answer to pinpointing a CHOW is that a CHOW typically occurs when a Medicare Provider has been purchased or leased by another healthcare provider. However, determining when a CHOW has occurred is complicated because the regulation, 42 C.F.R. § 489.18, delineates CHOWs by the type of entity at issue.[3] A CHOW occurs when 1) in a partnership when a partner is removed, added, or substituted, “…unless the partners expressly agree otherwise;”[4] 2) in an unincorporated sole proprietorship when there is a “transfer of title and property to another party;”[5] 3) in a corporation when there is a “merger of the provider corporation into another corporation,  or the consolidation of two or more corporations, resulting in the creation of a new corporation;”[6] or 4) “the lease of all or part of a provider facility constitutes a CHOW of the leased portion.”[7] The Provider agreement is automatically “assigned to the lessee only to the extent of the leased portion of the facility.”[8]
The Effect of a CHOW on a Healthcare Transaction and Implications of Rejecting or Accepting Provider Agreement.

A provider which is contemplating or negotiating a CHOW must notify Centers for Medicare and Medicaid Services (“CMS”). [9] A CHOW must be reported to CMS within 30 days of the change by both the buyer and the seller.[10] This is accomplished by submitting Form CMS 855A or Form CMS 855B. The default rule under 42 C.F.R. § 489.18 is that CMS automatically assigns the existing Medicare provider agreement to the new owner.[11] Automatic assignment allows for the uninterrupted participation of the acquired provider, which translates into uninterrupted Medicare payments.[12] Because of the automatic assignment, the provider is generally not required to undergo a survey by the accrediting organization which normally follows CHOW acquisitions.[13]  

However, the CMS Regional Office has the discretion to direct the State Survey Agency to conduct a survey in individual cases where there is a cause for concern.[14] The new owner must notify the Accreditation Organization of the acquisition.[15] The risks associated with automatic assignment is that the buyer will be subject to all applicable statutes, regulations, and terms and conditions under which the assigned agreement originally issued. This includes, but is not limited to, overpayments that the selling entity incurred pre-acquisition. The liabilities for automatic assignment under 42 C.F.R. § 489.18 include:

 (d) Conditions that apply to assigned agreements. . .

“(1) Any existing Plan of Correction.

  (2) Compliance with applicable health and safety standards.

  (3) Compliance with the ownership and financial interest disclosure requirements of part   420, subpart C, of this chapter.

  (4) Compliance with civil rights requirements set forth in 45 CFR Parts 80, 84, and 90.”

Implications of Rejecting an Existing Provider Agreement.
On the other hand, a Provider Agreement can be rejected by indicating on the 855 application that the new owner is rejecting the automatic assignment.[16] This generally precludes successor liability, as discussed above.[17] The voluntary termination is effective as of the date the acquisition is completed.[18] However, voluntary termination of the existing Provider Agreement means that there will be no Medicare payments for services to beneficiaries on or after the acquisition date, until a new Provider number is obtained.[19] There is one exception to this rule, that provides for continuation, up to thirty days, of payments for hospitals or critical access hospital inpatients, home health agency or hospice patients, or skilled nursing facility residents who were admitted prior to the acquisition date.[20] When a new owner rejects the Provider Agreement, the facility is considered an initial applicant under the Medicare Program and must apply for a new Provider number.[21] The new owner must complete the 855 enrollment process, satisfy any other applicable Federal Medicare participation requirements, and undergo an unannounced full survey of their compliance with applicable Medicare requirements.[22] Further, the Accrediting Organization must conduct a full initial accreditation survey after the acquisition date, even if the sold facility had prior Medicare accreditation.[23] The survey will not be conducted until the new facility is fully operational.[24] The effective date for Medicare participation for an entity that rejects the previous Provider Agreement is the date when the last applicable Federal requirement has been met.[25]
When a buyer rejects assignment of the Provider Agreement, the buyer cannot bill Medicare until it obtains a new Medicare provider number from CMS. The process of applying for a new Medicare provider number generally takes eighteen months or more, which is detailed more fully above. In addition, there is a moratorium to obtain a new Medicare number for home health agencies in six geographical areas which have had high incidents of fraudulent activities. New providers wishing to obtain a new Provider Number will not be able to operate Medicare home health agencies in these areas until the moratorium is lifted.
Clarifying Rules for Hospital Acquisition.
Due to hospitals incorrectly applying the rules in the past, CMS issued clarifying rules for hospital-acquisition combination scenarios.[26] If  an existing hospital acquires another facility to use as another hospital campus, then that existing hospital can begin to bill for services provided on the newly acquired campus without interruption.[27] The Provider Agreement related to the new facility is not terminated, rather it is subsumed into the prior existing hospital’s provider agreement.[28] However, if the existing hospital rejects assignment of the acquired hospital’s provider agreement, then the new campus is not eligible for Medicare payments until it has completed a process analogous to an initial applicant for Medicare enrollment.[29] 

There are benefits and risks to automatic acceptance of a Provider Agreement. CMS has provided a huge incentive to healthcare providers to encourage automatic acceptance, but it comes with consequences and potential traps for the unwary. The decision whether to accept or reject the Provider Agreement must be carefully weighed in each individual case.
For more information on these CHOWs, please contact Charles MacKelvie at

[1] 42 C.F.R. § 489.18 (1994).
[2] See Id.
[3] See Id.
[4] Id.
[5] Id.
[6] Id.
[7] Id.
[8] Id.
[9] CMS is the entity that runs Medicare in the United States.
[10] 42 C.F.R. § 424.516 (2012).
[11] See 42 C.F.R. § 489.18 (1994).
[12] Centers for Medicare & Medicaid Services, Acquisitions of Providers/Suppliers with Rejection of Automatic Assignment of the Medicare Provider Agreement: Implications for Timing of Surveys and Participation Effective Date (hereinafter CMS Memo).
[13] Id.
[14] Id.
[15] Id.
[16] CMS Memo.
[17] Id.
[18] Id.
[19] Id.
[20] Id.
[21] United States v. Vernon Home Health, Inc., 21 F.3d 693 (5th Cir. 1994). 
[22] CMS Memo.
[23] Id.
[24] Id.
[25] Id.
[26] Id.
[27] Id.
[28] Id.
[29] Id.

Physicians Beware: Government Increasing Enforcement on Physician-Laboratory Relationships

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The Federal government is focusing on further enforcement related to physician-laboratory relationships. The Office of Inspector General (the “OIG”) has become aware of various laboratory arrangements that may implicate the Anti-Kickback Statute. These relationships can become suspect when a laboratory offers or gives anything of value with the intent to induce referrals. The OIG addressed these concerns in one of its Special Fraud Alert articles. Primarily, the government has identified these arrangements as possibly violating the Anti-Kickback Statute.

As discussed in a previous article, the Anti-Kickback Statute is violated when remuneration is exchanged with the intent to induce or reward referrals. Both parties can be criminally liable and convicted of a felony punishable by a maximum fine of $25,000, imprisonment up to five years, or both. Laboratories that pay referring physicians for services may be suspect under the Anti-Kickback Statute because the payment could be for inducing the physician’s Federal health care program referrals.

There are two specific arrangements the OIG identified as involving transfers of value from laboratories to physicians that can present a substantial risk of fraud and abuse under the Anti-Kickback Statute.

1.     Arrangements under which the laboratories are providing remuneration to physicians to collect, process, and package patients’ blood specimens.  These arrangements are referred to as Specimen Processing Arrangements.

2.     The government has also become aware of arrangements under which laboratories are collecting data on the demographics or other attributes of patients who have undergone certain tests performed by the offering laboratories. These arrangements are referred to as Registry Payment Arrangements.
The OIG is increasing enforcement regarding payment arrangements between laboratories and physicians, especially with respect to these two arrangements.  If you or your organization are involved in similar arrangements and have questions regarding the Anti-Kickback Statute risk, or have any other compliance concerns, please contact Alex T. Krouse at (574) 485-2003 or Susan E. Ziel at (612) 564-1927.