Issues of immediacy in the new health care reform legislation

BY Mary M. Bearden
Timothy L.
Webster Brown &
Fortunato, P.C.

The new health care reform legislation, a/k/a the Patient Protection and Affordable Care Act or the PPACA, covers such a wide array of topics that it is virtually impossible for the national media or professional publications to provide comprehensive reports on all the changes made by the statute. Nationally, much of the focus has been on health insurance reform provisions, while publications directed at physician audiences have devoted most of their attention to the Medicare payment changes, particularly the physician fee schedule update, and also to particular physician-specific provisions such as the changes to the Stark law restrictions on physician ownership of hospitals. Somewhat less attention has been given to the provisions of Title VI of the statute, entitled “Transparency and Program Integrity.” Some of the provisions of that title increase the penalties for certain provider activities, and others will have a significant effect on practice operations for some physicians.

The most dramatic change in the program integrity title concerns the reporting and return of Medicare and Medicaid overpayments. Any non-cost reporting provider who has received a Medicare or Medicaid overpayment is required to report and return the overpayment to CMS, the state Medicaid agency, or a contractor within 60 days after the date on which the overpayment is identified. (For costreporting providers, the deadline is calculated with reference to the due date of the cost report.) The report must include an explanation of the reason for the overpayment. Severe penalties may be imposed for failing to return an overpayment before the 60-day deadline.

Under the PPACA, retaining an overpayment after the deadline not only subjects the provider to civil monetary penalties under the Medicare statute, but also constitutes a violation of the civil False Claims Act (FCA), with penalties of up to $11,000 for each claim included in the overpayment, plus three times the amount of the overpayment. The total potential penalties under the FCA can be so high that many providers, when facing possible FCA liability, have concluded they could not risk challenging the government’s position, and had no choice but to enter into settlements with the government.

This change marks a major expansion of the scope of the FCA in health care cases. Previously, to prove a violation, the government had to establish that the provider either had an intent to defraud the government, or knowingly made or used a false statement or record to obtain payment of a claim. Under the PPACA, the government will only have to prove that the provider knew of the overpayment and did not return the funds within the statutory 60- day period.

The PPACA also makes changes to the Medicare-Medicaid anti-kickback statute and thereby resolves two questions about the statute. First, the new law states that a claim that includes items or services provided as a result of a kickback violation is a false claim within the meaning of the FCA. The government has long taken the position that a kickback violation brings claims within the FCA, and now that interpretation is no longer open to question. Second, the Act provides that the government is not required to prove that a person had specific knowledge of the anti-kickback statute to be convicted of violating the statute. This provision finally closes the coffin on the 1995 decision of the Ninth Circuit Court of Appeals in the Hanlester Network v. Shalala case, in which the Court held that the antikickback statute is not violated unless the defendants “(1) know that § 1128B prohibits offering or paying remuneration to induce referrals, and (2) engage in prohibited conduct with the specific intent to disobey the law.” Other courts have generally not followed the reasoning of the Ninth Circuit, but the decision has continued to be a thorn in the side of federal prosecutors until now.

Another section of the PPACA provides for a major expansion of the Recovery Audit Contractor, or RAC, program. The RAC program has been criticized by many provider organizations, including the American Medical Association, which described it as “a bounty hunter-like program.” Recovery Audit Contractors are private companies that enter into contracts with the federal government to identify improper Medicare payments. The RACs are paid a percentage of the funds recovered by the government through their audits. It is this feature of the program that has been most criticized, because it creates financial incentives for contractors to classify payments as improper.

The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 created the RAC program as a demonstration project. When Congress made the program permanent in 2006, it was limited to fee-for-service Medicare. Under the PPACA, the RAC audit program will be expanded to include Medicare Advantage plans under Part C and prescription drug plans under Part D. State Medicaid programs will also be required to enter into contracts with RACs by the end of 2010.

Over the last few years, the Medicare program has steadily increased the level of documentation it requires from ancillary providers, particularly durable medical equipment suppliers and home health agencies, to support their claims. In some cases required documentation includes information from the medical records of ordering or certifying physicians, and ancillary providers have complained that it is unfair to penalize them for failing to obtain this documentation while imposing no penalties on physicians who fail to provide it. The new statute includes a provision authorizing the revocation of a physician’s Medicare enrollment if he or she fails to maintain documentation relating to orders for DME, certifications for home health services, and referral and orders for other items designated by the Medicare program, and provide access to the documentation to CMS on request.

A related provision expands the list of services for which Medicare requires a faceto- face encounter before an order is written. Before an order is written for any item of durable medical equipment for a Medicare beneficiary, the beneficiary will be required to have a face-to-face encounter with a physician, a physician assistant, a nurse practitioner, or a clinical nurse specialist. A certification for home health services will require a face-to-face encounter with the physician or with a nurse practitioner, clinical nurse specialist, certified nursemidwife or physician assistant. In the case of home health services, the face-to-face requirement will apply to certifications under Medicaid as well as Medicare. Telemedicine encounters will be considered face-to-face encounters under these provisions.

The PPACA shortens the period during which claims to Medicare may be submitted. Previously, physicians and other providers paid under Part B were required to submit claims no later than the end of the calendar year following the year in which services were furnished. Under the new law, these claims will have to be submitted no later than one year after the date of service. For hospitals and other Part A providers, the claims submission period is reduced from three years to one year.

The enrollment and reenrollment processes for Medicare and Medicaid providers will take on new complexities under the PPACA. The new law requires the Secretary of Health and Human Services to establish screening procedures that must include licensure checks and may also include criminal background checks, unannounced site visits, and other screening processes. HHS is also required to establish a provisional period of up to one year during which some new providers will be subject to increased oversight, including prepayment review and payment caps. The statute also authorizes imposition of a temporary moratorium on enrollment of new Medicare, Medicaid and CHIP providers, or particular categories of providers, if the Secretary determines that a moratorium is necessary to combat fraud and abuse.

At a date to be determined, compliance programs will become mandatory for all providers in the Medicare, Medicaid and CHIP programs. Providers will be required to implement compliance programs meeting standards that will be established in consultation with the Office of Inspector General.

These are just a few of the many provisions of the PPACA with which providers will be dealing in coming years. These and other provisions will probably be subjected to amendment and fine-tuning, and possibly to major revision, in the next few Congressional sessions. Providers across the health care landscape will be challenged to keep their balance on shifting ground.