ESRD Regulatory Update By: John C. West and Darryl T. Landahl

1. ESRD Regulatory UpdateBy: John C. West and Darryl T. Landahl Brownstein Hyatt Farber Schreck, LLP

2. Firm Overview Brownstein Hyatt Farber Schreck is a unique law firm. Walk in any of our offices and you’ll immediately recognize a different type of energy. Complacency doesn’t have a place here. Flexibility and inspiration do. Our culture and enthusiasm allow our attorneys, legislative consultants and legal staff to stay ahead of our clients’ needs and provide them with the resources they require to meet their business objectives. Brownstein’s Health Law Group represents industry leading clients who are dominant players in the national health care arena, providing daily counsel on a wide array of regulatory, compliance, licensing and contracting issues. Our attorneys are recognized as leaders in the field of health care law, and include former in-house legal counsel to national health care entities which gives them the ability to understand the impact of health care regulation on the day-to-day operations of the business, and address effective implementation strategies. Brownstein Hyatt Farber Schreck, LLP

3. Health Care Reform - Update • Overpayments • Compliance Plan Requirements • Accountable Care Organizations Brownstein Hyatt Farber Schreck, LLP

4. Overpayments • Fraud Enforcement and Recovery Act (2009) specifies that retention of “overpayments” can create False Claims Act liability • “Reverse False Claim” • Accountable Care Act (2010) creates 60-day obligation to report and return overpayments • Provider must also provide notification of the reason for the overpayment • Failure can result in FCA liability, Medicare and Medicaid program exclusion, and Civil Monetary Penalties Brownstein Hyatt Farber Schreck, LLP

5. Compliance Plan Requirements • End to “voluntary” compliance programs • DHHS must establish compliance program requirements • Solicited comments in February 2011 • Indicated it would use elements from U.S. Sentencing Guidelines • Similar to elements of voluntary and MA/PDP compliance programs • Implementation date according to provider type, depending in part on voluntary implementation Brownstein Hyatt Farber Schreck, LLP

6. Accountable Care Organizations • “Medicare Shared Savings Program” • Proposed Rules published April 7, 2011 (76 FR 67802) • Interim Final Regulations published November 2, 2011 (76 FR 67802) • IFRs addressed participation concerns in Proposed Rules Brownstein Hyatt Farber Schreck, LLP

7. ACOs – ESRD Specific Issues • CMS rejected industry recommendation to establish ESRD-specific ACOs • Dialysis facilities cannot independently form an ACO • Dialysis facilities can collaborate with or join otherwise acceptable ACOs • CMS rejected recommendation that dialysis patients be excluded from ACO assignment Brownstein Hyatt Farber Schreck, LLP

8. ACO Fraud and Abuse Waivers • ACA authorizes waiver of certain fraud and abuse laws (e.g. Stark, Anti-Kickback) • Proposed rule published April 7, 2011 (76 FR 19655) • Interim Final Rule published November 2, 2011 (76 FR 67992) • IFR creates waivers far broader than initial waivers Brownstein Hyatt Farber Schreck, LLP

9. Waiver – ACO Preparticipation • Expansive waiver for start-up arrangements predating an ACO's MSSP participation • Applies to Stark, Anti-Kickback Statute and the Gainsharing Civil Monetary Penalty Brownstein Hyatt Farber Schreck, LLP

10. Waiver – ACO Participation • Covers all aspects of an ACO arrangement • Applies to Stark, Anti-Kickback Statute and Gainsharing CMP Brownstein Hyatt Farber Schreck, LLP

11. Waiver - Shared Savings Distribution • Covers shared savings distributions to ACO participants • May fall within the ACO participation waiver • Applies to Stark, Anti-Kickback Statute and Gainsharing CMP Brownstein Hyatt Farber Schreck, LLP

12. Waiver - Compliance with Stark Law • Extends Stark protection for Stark-implicated arrangements to Anti-Kickback Statute and Gainsharing CMP • Departure from historic OIG position that Anti-Kickback Statute and Stark are separate Brownstein Hyatt Farber Schreck, LLP

13. Waiver - Patient Incentives • Allows beneficiary inducements to encourage preventive care and compliance with treatment regimens • Does not allow waiver of copays or deductibles • Applies to Anti-Kickback Statute and Gainsharing CMP Brownstein Hyatt Farber Schreck, LLP

14. Waiver - Considerations • Failure to meet an AKS waiver does not necessarily equate to illegal conduct • Other Stark and AKS protections may apply to ACOs • Waivers apply uniformly to ACOs, ACO participants and ACO providers/suppliers • Waivers apply to activities "reasonably related to the purposes of the Shared Savings Program" Brownstein Hyatt Farber Schreck, LLP

15. 2012 OIG Workplan – ESRD Specific Topics • CMS Oversight • Assess CMS oversight of dialysis facilities • How CMS holds accountable state survey and certification agencies that conduct on-site inspections and initiate corrective actions • Bundled Payment Review • Review Medicare pricing and use related to ESRD services under new rule • Review whether payments made correctly under rule • Payments for ESRD-only Beneficiaries • Review claims to determine extent beneficiaries obtain benefits after coverage should have ended • Preliminary analysis identified those receiving benefits beyond allowed time frame, including transplant patients Brownstein Hyatt Farber Schreck, LLP

16. 2012 Fee Schedule - Background • Pursuant to Medicare Improvements for Patients and Providers Act of 2008 (MIPPA), CMS developed a bundled PPS for renal dialysis services • Effective January 1, 2011 • Medicare makes a single prospectively determined payment for all renal dialysis services during a session, including ESRD drugs and other previously separately payable items and services • Various payment adjustments, including patient case-mix, geographic wage differences, low patient volume, home dialysis training, and high-cost patients (outlie) • Elect either fully bundled or blended payment through 2014 Brownstein Hyatt Farber Schreck, LLP

17. 2012 Fee Schedule - Changes • Rate Increase – 2.1% • Outlier Payment • Elimination of list of specific drugs for outlier payment (regulation instead identifies outlier payments drugs) • Exclusion of certain clotting drugs • Inclusion of certain anemia management drugs Brownstein Hyatt Farber Schreck, LLP

18. 2012 Fee Schedule – Changes (continued) • Elimination of 50 percent rule • Certain combinations of lab tests were considered paid as part of composite rate • Depended on whether 50% of more of the tests in the panel were composite rate tests • All panel laboratory tests are excluded from the definition of ESRD outlier services and the outlier computation • Improvements to Quality Incentive Program • Payment reduction for failure to meet quality of care measurements • Revision to scoring methodologies for PYs 2013 and 2014 Brownstein Hyatt Farber Schreck, LLP

19. Litigation Update • Bio-Medical Applications of Tennessee, Inc. v. Southwest Areas Health and Welfare Fund, 656 F.3d 277 (September 2, 2011) • ERISA group health plan was liable to plan participant’s assignee (a dialysis provider) under private cause of action provision of Medicare Secondary Payer Act where it terminated plan participant's coverage for end-stage renal disease due to her Medicare entitlement. • Fresenius Medical Care Holding, Inc. v. Francois, 2011 WL 2118942 (May 27, 2011) • Federal Stark law does not preempt the Florida self-referral statute, which prohibits Florida doctors from referring patients for lab work to entities in which they hold an ownership interest. • Conflict with Stark exemption for referral of clinical lab services for end-stage renal disease patients. 42 C.F.R. §411.351 Brownstein Hyatt Farber Schreck, LLP

20. Litigation Update • U.S. ex rel. Gonzalez v. Fresenius Medical Care North America, 748 F.Supp.2d 95 (2010) • Former Fresenius employee qui tam action under False Claims Act for submission of false claims to Medicare by allowing non-physicians to make patient care decisions • Brought claim for relation by “whistleblower” under Federal Claims Act • U.S. ex rel. Williams v. Renal Care Group, 2011 WL 2118231 (May 26, 2011) • Action under the False Claims Act based on Renal Care Group’s control of a dialysis supplier which Renal Care Group created to receive higher payments • Proof of disclosure to Medicare’s lawyer did not bar liability • Knowledge by government officials does not exonerate liability • Government scrutiny of controlled supplier Brownstein Hyatt Farber Schreck, LLP

21. Questions Brownstein Hyatt Farber Schreck, LLP

22. Contact Information • www.bhfs.com • John C. West • 602.382.4070 • jwest@bhfs.com • Darryl T. Landahl • 602.382.4071 • dlandahl@bhfs.com Brownstein Hyatt Farber Schreck, LLP