1. June 2012
In This Issue:
New OIG Opinion on Anesthesia/ASC Arrangements
CMS: Independence at Home Demonstration Project
CMS: Increasing Payment for Primary Care
Strike Force Take-Down Unparalleled
Brach Eichler in the News
HIPAA Corner
FEDERAL UPDATE they cannot do directly; that is, to receive compensation in the form of a
portion of the [anesthesia group’s] revenues, in return for the referrals.”
OIG Disapproves of Proposed Anesthesiology For additional information, contact:
Arrangements with ASCs John D. Fanburg | 973.403.3107 | jfanburg@bracheichler.com
Mark E. Manigan | 973.403.3132 | mmanigan@bracheichler.com
The United States Department of Health & Human Services Office
of Inspector General (OIG) recently issued Advisory Opinion
No. 12-06 addressing anesthesiology arrangements with ambulatory
surgical centers (“ASCs”). The advisory opinion was in response
OIG Approves Supermarket and Pharmacy
to an anesthesiology group’s request for clarification concerning Rewards Program
two possible contractual scenarios.
The United States Department of Health & Human Services
In Proposed Arrangement A, the anesthesiology group would Office of Inspector General (OIG) issued Advisory Opinion No.
enter into an arrangement with an ASC to bill and collect for 12-05 relating to a rewards program contemplated by an organization
the provision of anesthesia services for patients of the ASC. The operating supermarkets and pharmacies. Under the proposal, the
anesthesia group would enter into a management agreement organization would provide customers a discount of 10 cents per
pursuant to which the anesthesia group would pay the ASC a gallon on gasoline purchases when they spend $50 in the supermarket
management fee for providing pre-operative nursing assessments or pharmacy on “allowable purchases.” The out-of-pocket costs
and assistance with transferring billing documentation to the (including deductibles and co-payments on federally reimbursable
anesthesia group’s billing office. The management fee would be in prescription items) would be eligible to earn the gasoline discounts.
the form of a “per patient” fee for non-Medicare patients, which the
group certified was set at fair market value. The OIG determined that the arrangement would not violate the
federal civil monetary penalty law (CMP) or anti-kickback statute.
The OIG advised that arrangements that “carve out” Medicare
business/patients may be disguised revenues related to non-Medicare With respect to the CMP, the OIG noted that many customers
business. As a result, the OIG determined that there is risk that the would receive discounts in excess of the CMP’s existing exception
anesthesia group would be paying the management fees with regard for nominal incentives valued at up to $10 per item or $50 per year.
to non-Medicare patients to induce the ASC’s referral of all of its However, a new exception under the Affordable Care Act (6402(d)(2)
patients, including Medicare patients. (B)) allows for rewards offered by retailers. The OIG found that
the arrangement satisfied the new exception because (1) the reward
In Proposed Arrangement B, the physician-owners of the ASCs would consist of a coupon or rebate from the retailer; (2) the rewards
would form a separate corporate entity for the sole purpose of billing were offered on equal terms regardless of health insurance status;
ASC patients for the provision of anesthesia services. The entity and (3) the rewards were not tied to the provision of other items or
would engage the anesthesia group as an independent contractor services reimbursed by federal health care programs.
to provide the following services: recruiting, credentialing and
scheduling anesthesia personnel; ordering and maintaining supplies The OIG found minimal risk of fraud and abuse under the anti-
and equipment; assisting the entity in selecting and working with a kickback statute because customers would not be required to
billing company; monitoring and overseeing regulatory compliance; purchase prescription items or other federally-reimbursable
providing financial reports; implementing quality assurance products, they would not receive an incentive for transferring
programs; and providing logistics services. their prescriptions to the organization’s pharmacies and the
arrangement was unlikely to result in overutilization or otherwise
The OIG declined to approve the arrangement, and expressed increase costs to federal health care programs.
concern that the arrangement is a suspect contractual joint venture,
exposing the group to potential violation of the anti-kickback For additional information, contact:
statute. Citing its 2003 Advisory Bulletin concerning contractual Kevin M. Lastorino | 973.403.3129 | klastorino@bracheichler.com
joint ventures, the OIG determined that the proposed arrangement is
Carol Grelecki | 973.403.3140 | cgrelecki@bracheichler.com
“designed to permit the ASC’s physician-owners to do indirectly what
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2. BRACH EICHLER
CMS Announces First Round of Participants for calendar years (CYs) 2013 and 2014
Independence at Home Demonstration Project • rants states more than $11 billion in federal funds over two
G
years to support Medicaid primary care delivery systems
On April 26, 2012, the Centers for Medicare Medicaid Services • pplies to primary care services delivered by physicians
A
(CMS) announced that it has selected the 16 initial health care specializing in family medicine, general internal medicine
providers to take part in a demonstration project, created by the or pediatric medicine, and related subspecialists
Affordable Care Act, allowing Medicare patients with chronic
conditions to receive care at home. The project, called “Independence • rovides guidance on identification of eligible primary care
P
at Home,” with a start date of June 1 and an end date of May 31, 2015, services and providers, implementation of increased payments
is intended to test a service delivery model using physician and nurse and payment of vaccine administration fees under the Vaccine
practitioner-directed primary care teams to provide services to certain for Children program.
Medicare beneficiaries in their homes. In its press release, CMS states The temporary increase in payment for primary care services
that the participants of this demonstration project “will test whether will be paid entirely by the federal government, with no state
delivering primary care services in the home can improve the quality matching of payment required. In particular, states will receive
of care and reduce costs for patients living with chronic illnesses.” 100% federal financial participation for the difference between
Up to 50 health care providers will ultimately be chosen to participate the Medicaid state plan payment amount as of July 1, 2009, and the
in the project, each of which must serve at least 200 Medicare Medicare rates in effect in CYs 2013 and 2014 or, if greater,
fee-for-service beneficiaries with multiple chronic conditions and the payment rate that would be applicable using the CY 2009
functional limitations. Medicare conversion factor. The proposed regulations also note
For additional information, contact:
that, “[a]s we move towards CY 2014 and the expansion of Medicaid
eligibility, it is critical that a sufficient number of primary care
Todd C. Brower | 973.403.3103 | tbrower@bracheichler.com physicians participate in the [Medicaid] program,” and these rate
Carol Grelecki | 973.403.3140 | cgrelecki@bracheichler.com increases “will encourage primary care physicians to participate in
Medicaid by increasing payment rates.”
For additional information, contact:
Medicare Health Outcome Survey Open
Joseph M. Gorrell | 973.403.3112 | jgorrell@bracheichler.com
for Comments
Debra C. Lienhardt | 973.364.5203 | dlienhardt@bracheichler.com
On April 27, 2012, the Centers for Medicare Medicaid Services
(CMS) published a notice in the Federal Register that it is seeking
to revise the Medicare Health Outcome Survey (HOS) to better CMS Issues Rules Easing Regulations for
identify possible fraud.
Hospitals and Health Care Providers
By way of background, the HOS is the first patient-reported
outcomes measure used in Medicare managed care. The goal On May 16, 2012, the Centers for Medicare Medicaid Services
of the HOS program is to gather valid, reliable and clinically published two final rules in the Federal Register, to eliminate rules
meaningful health status data in the Medicare Advantage (MA) that the U.S. Department of Health Human Services (HHS) has
program for use in quality improvement activities, pay for determined are unnecessary, obsolete or burdensome on American
performance, program oversight, public reporting and improving hospitals and health care providers.
health. All managed care organizations with MA contracts must The first rule revises Medicare Conditions of Participation (CoPs)
participate. Additional information regarding the survey can be for hospitals and is anticipated to save $940 million per year. The
found at http://cms.gov/HOS. revisions include:
For additional information, contact: • llowing a single governing body for multiple hospitals in
A
a multi-hospital system
Kevin M. Lastorino | 973.403.3129 | klastorino@bracheichler.com
• roadening the concept of “medical staff” to allow hospitals
B
Debra C. Lienhardt | 973.364.5203 | dlienhardt@bracheichler.com
to include other practitioners, such as advance practice nurses,
physician assistants and pharmacists, on a hospital’s medical staff
CMS Issues Proposed Rule on Increasing • llowing hospitals to have an optional program for patients
A
to self-administer certain medications
Payment for Primary Care
• Allowing hospitals to use standing orders, order sets and protocols
On May 9, 2012, the Centers for Medicare Medicaid Services • liminating the requirement for authentication of verbal orders
E
(CMS) issued a proposed rule that seeks to increase Medicaid within 48 hours and instead require that authentication occur in
payments for certain primary care services. Among other changes, compliance with state laws
the proposed rule:
• liminating the requirement that hospitals maintain an infection
E
• mplements the Affordable Care Act’s requirement that
I control log
Medicaid reimburse primary care physicians for services CMS
• liminating the requirement of a single director of outpatient
E
designates as “primary care services” at Medicare rates instead
services position.
of state-established Medicaid rates (which often are lower) in
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3. BRACH EICHLER
The second rule, the “Medicare Regulatory Reform” rule, seeks to clarify waiver, disclosure and payment issues for out-of-network
to promote efficiency by eliminating duplicative, overlapping and (OON) benefits. While a laudable goal, the bill instead creates
outdated regulatory requirements for health care providers. HHS more problems than it seeks to resolve. Under the bill, if a provider
anticipates savings of $200 million in the first year this rule is in furnishes OON services, the provider must make at least three
effect. Provisions of the rule include: documented good faith attempts to collect before waiving the patient’s
• liminating outdated ambulatory surgical center infection control
E financial responsibility. Waiver would then be permissible only if due
programs (a new CoP dedicated to infection control makes this to a medical or financial hardship, only if waivers are not routinely
requirement duplicative) given, and only if the patient’s insurer is notified. This is generally
consistent with current case law and regulatory guidance in New Jersey.
• etiring older versions of e-prescribing truncations for Medicare
R
Part D and adopting the newer versions to be in compliance with However, the bill also indicates that, if an OON provider furnishes
current e-prescribing standards services in an in-network licensed facility, the provider cannot bill
the patient beyond the patient’s in-network co-payment, co-insurance
• imiting mandatory compliance with the Life Safety Code to End
L
or deductible. In essence, the OON provider would receive payment
Stage Renal Disease Facilities located adjacent to “high hazardous”
as if he was in-network. Moreover, it is unclear whether the OON
occupancies and those facilities that do not have a readily available
provider who is paid based on in-network rates would have any
exit to the outside
contractual protections or rights against the insurer. Indeed, there
• emoving outdated personnel qualifications for physical and
R would be no signed contract between the OON provider and the
occupational therapists in the current Medicaid regulations. insurer. Additionally, it is unclear whether an OON provider can be
forced to accept in-network rates that he never negotiated or agreed
For additional information, contact:
to. Furthermore, it is unclear whether the OON provider can bill,
Lani M. Dornfeld | 973.403.3136 | ldornfeld@bracheichler.com if at all, the in-network facility or the insurer for the difference
Keith J. Roberts | 973.364.5201 | kroberts@bracheichler.com between the in-network and OON rates.
If enacted, the bill would also lead to providers having less
leverage in contract negotiations with insurers.
Strike Force Take-Down Unparalleled The bill is being watched closely by physicians, ambulatory
surgery centers and hospitals, all of which have voiced opposition.
A seven-city sweep last month resulted in the arrest of 107 defendants
in the largest take-down since the establishment of the Medicare For additional information, contact:
Strike Force. Medicare fraud schemes are alleged to have resulted in Mark E. Manigan | 973.403.3132 | mmanigan@bracheichler.com
payments of over $452 million due to false billing. Payments have also John D. Fanburg | 973.403.3107 | jfanburg@bracheichler.com
been halted to more than 52 health care providers suspected of fraud
before payments were made. More than 500 law enforcement agents
participated in the take-down. Christie Vetoes Bill to Create Health Care Exchanges
The strike force is a joint effort by the Department of Health and
Tied to Health Care Reform Law
Human Services and the Office of Inspector General, designed to
work together and weed out Medicare fraud. The defendants include New Jersey Governor Christie recently vetoed a bill (A-2171) that would
physicians, nurses and health care company owners, charged with
have set up a statewide health insurance exchange in New Jersey as
crimes ranging from money laundering to anti-kickback violations.
required by the Affordable Care Act (ACA), stating that it would be
Other charges include false billing for services that were either never
provided or not deemed medically necessary. Various services were imprudent to create an exchange until the U.S. Supreme Court has
involved in the schemes, including home health care, mental health, ruled on the constitutionality of the ACA. Governor Christie is the
psychotherapy, physical and occupational therapy, durable medical second governor this year to veto a health insurance exchange bill.
equipment and ambulance services. Charges were brought against
For additional information, contact:
defendants in Miami, Baton Rouge, Houston, Los Angeles, Detroit,
Tampa and Chicago. Joseph M. Gorrell | 973.403.3112 | jgorrell@bracheichler.com
Todd C. Brower | 973.403.3103 | tbrower@bracheichler.com
For additional information, contact:
Keith J. Roberts | 973.364.5201 | kroberts@bracheichler.com
Joseph M. Gorrell | 973.403.3112 │jgorrell@bracheichler.com
Brach Eichler In The News
John Fanburg presented a webinar, “What’s Happening in the New
STATE UPDATE Jersey Medical Practice Acquisition Market?” for the Medical Society
of New Jersey on April 25.
Health Care Disclosure and Transparency
Act Appears Murky On June 14, Brach Eichler hosted the 4th annual NJ ASC Review,
held at Ocean Place in Long Branch.
On May 10, 2012, a bill was introduced in the New Jersey legislature
entitled the Health Care Disclosure and Transparency Act (A.2751) continued on page 4
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4. BRACH EICHLER
On June 14, Todd C. Brower and Lani M. Dornfeld presented Schwarzenegger, without authorization. Soon thereafter, UCLA
“Hot Button Areas in Compliance and How to Implement an terminated the defendant after a formal internal grievance hearing.
Effective Compliance Plan” at the Annual Home Care Association
In 2008, the United States Attorney’s Office for the Central District
Meeting in Atlantic City.
of California charged Zhou with a misdemeanor violation of
Brach Eichler is a sponsor of the New Jersey Healthcare Real Estate HIPAA’s prohibition against “knowingly” obtaining individually
Summit, June 27 at the Newark Club. Alan Hammer will moderate
identifiable health information in violation of HIPAA. Zhou moved
the keynote panel discussion featuring industry leaders like Barry
Ostrowsky, President CEO of Barnabas Health System, and to dismiss the charge on the basis that the word “knowingly” in
Barry Rabner, President CEO of Princeton HealthCare System. HIPAA required that he have knowledge that it was illegal to obtain
such protected health information. However, a federal magistrate
Jonathan Bick authored an article in the April 30 New Jersey Law
Journal, Health Care Law, entitled Applying Technology to the judge denied the motion. Zhou entered a conditional guilty plea,
Business of Health Care. reserving his right to appeal the denial of his motion to dismiss.
On appeal, Zhou claimed that the use of the word “knowingly” in
HIPAA CORNER the statute means that an individual could not be prosecuted for
violating the statute unless he knew his actions were illegal. The
Ninth Circuit Court Finds that Knowledge Not Ninth Circuit rejected Zhou’s interpretation and held that, “as
Required for HIPAA Criminal Liability used in the statute, the term ‘knowingly’ applies only to the act of
On May 10, 2012, the United States Court of Appeals for the Ninth obtaining the health information,” and did not require an individual
Circuit held, in United States v. Zhou, No. 10-50231 (9th Cir. May to know that his actions may have violated HIPAA. The Court’s
10, 2012), that HIPAA’s criminal misdemeanor provision, which upholding of the denial of the motion to dismiss made effective
penalizes the unauthorized access of patient health information, does Zhou’s guilty plea, with a sentence of four months in prison and a fine
not require a defendant to know that his or her actions were illegal of approximately $2,100.
under the statute. Although not binding outside of the Ninth Circuit, this recent
By way of background, in October of 2003, the defendant, Huping decision is significant because it emphasizes how easily individuals
Zhou, a research assistant at the University of California at Los who do no more than access health information out of curiosity
Angeles (UCLA) Health System, received a notice of UCLA’s intent can be found criminally liable.
to dismiss him for poor performance. On that same evening, Zhou For additional information, contact:
allegedly accessed the patient records of co-workers and well-
Todd C. Brower | 973.403.3103 | tbrower@bracheichler.com
known actors, including Tom Hanks, Drew Barrymore and Arnold Lani M. Dornfeld | 973.403.3136 | ldornfeld@bracheichler.com
Attorney Advertising: This publication is designed to provide Brach Eichler, L.L.C. clients and contacts with information they
can use to more effectively manage their businesses. The contents of this publication are for informational purposes only.
Neither this publication nor the lawyers who authored it are rendering legal or other professional advice or opinions on
specific facts or matters. Brach Eichler, L.L.C. assumes no liability in connection with the use of this publication.
Health Care Practice Group | 101 Eisenhower Parkway, Roseland, NJ 07068 | 973.228.5700
Members
Todd C. Brower | 973.403.3103 | tbrower@bracheichler.com Carol Grelecki | 973.403.3140 | cgrelecki@bracheichler.com
Lani M. Dornfeld | 973.403.3136 | ldornfeld@bracheichler.com Kevin M. Lastorino | 973.403.3129 | klastorino@bracheichler.com
John D. Fanburg, Chair | 973.403.3107 | jfanburg@bracheichler.com Debra C. Lienhardt | 973.364.5203 | dlienhardt@bracheichler.com
Joseph M. Gorrell | 973.403.3112 | jgorrell@bracheichler.com Mark E. Manigan | 973.403.3132 | mmanigan@bracheichler.com
Keith J. Roberts | 973.364.5201 | kroberts@bracheichler.com
Counsel
Richard B. Robins | 973.403.3147 | rrobins@bracheichler.com
Associates
Lindsay P. Cambron | 973.364.5232 | lcambron@bracheichler.com Colleen McClafferty | 973.364.5210 | cmcclafferty@bracheichler.com
Jenny Carroll | 973.364.5223 | jcarroll@bracheichler.com Conor F. Murphy | 973.364.5214 | cmurphy@bracheichler.com
Jordan T. Cohen | 973.403.3144 | jcohen@bracheichler.com Isai Senthil | 973.403.3150 | isenthil@bracheichler.com
Chad Ehrenkranz | 973.364.5234 | cehrenkranz@bracheichler.com Edward J. Yun | 973.364.5229 | eyun@bracheichler.com
Rita M. Jennings | 973.364.5204 | rjennings@bracheichler.com
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