Compliance Update

1. Compliance Update Amy Nordeng, JD Robert J. Saner, Esq.Senior Counsel MGMA Washington CounselMGMA Government Affairs Powers, Pyles, Sutter & Verville, P.C.

2. Agenda • Centers for Medicare & Medicaid Services (CMS) Policy Changes • Recovery Audit Contractor (RAC) Update • Stark Law Update • Office of Inspector General (OIG) Activities

3. CMS Policy Changes

4. Physician Payments Sunshine Act • Created by the Affordable Care Act – Section 6002 • Goal: to increase transparency in the relationship between physicians, teaching hospitals, pharmaceutical and medical device manufacturers and group purchasing organizations by requiring public reporting of relationships • Also referred to by the Centers for Medicare & Medicaid Services (CMS) as: • National Physicians Payment Transparency Program • OPEN PAYMENTS

5. Physician Payments Sunshine Act • Reporting requirements: • “applicable manufacturers” of drugs, devices, biological or medical supplies must annually report to CMS certain payments and other transfers of value made to “covered recipients” (physicians or teaching hospitals) • “applicable manufacturers” and “applicable group purchasing organizations” (GPOs) must annually report to CMS certain ownership interests held by physicians and their immediate family members • “applicable GPOs” must annually report payments to physician owners and investors • Requirement is NOT on physicians BUT is important to understand • Recording began Aug. 1

6. Physician Payments Sunshine Act • Payments from drug & device manufacturers to physicians and from GPOs to physicians owners must be reported by manufacturers to CMS • Payments over $10 (or $100 aggregate during calendar year) must be reported

7. Lunch Example

8. Physician Payments Sunshine Act Information from Aug. 1 – Dec. 31 will be published on a public website beginning Sept. 2014 Manufacturers report information to CMS Physicians will be given 45 days (plus additional 15 days for disputes that remain unresolved) CMS website (“OPEN PAYMENTS”) and mobile device app Visit www.mgma.com/sunshine or mgma.com/open-payments for more information and a member benefit webinar and summary

9. Overpayments • The ACA has required providers to report and repay Medicare and Medicaid overpayments within 60 days after they are identified. • The proposed rule clarifies details concerning a provider’s obligation to report and return overpayments pursuant to ACA • Overpayments must be reported if they are identified within 10 years of being received • A provider will have “identified” an overpayment if s/he has actual knowledge of its existence or acts in reckless disregard or deliberate ignorance of its existence • A provider has 60 days to report and return an overpayment if, after reasonable inquiry, the provider determines an overpayment exists

10. Overpayments (cont.) • However, even without a final regulation, providers are subject to the statutory requirements now • MGMA analysis of 60 Day Overpayment Rule 2014 proposed fee schedule proposal – based on American Taxpayer Relief Act of 2012 (ATRA) • CMS proposal: a provider is without fault and recovery of overpayments to be against equity and good conscience for overpayments discovered five years after it is paid • Prior to ATRA, three years

11. Medicare Ordering/Referring Edits Phase 2: effective May 1 – claims not meeting criteria will be denied • UPDATE: On 4/30 CMS announced a further delay due to technical difficulties • Applies to ordered/referred items and services billed by Medicare Part B suppliers (DMEPOS, clinical lab and imaging services, home health claims) • Ordering/referring providers must be eligible to order or refer in Medicare, legal name & NPI must be listed on the claim, and they must have an enrollment record in Medicare • Medicare Ordering and Referring file: check ordering/referring providers • Currently CMS is issuing warnings for claims that fail to meet the requirements • Key Phase 2 details outlined in this MLN Matters article on ordering/referring • New member resource: MGMA and AMA Ordering/Referring Factsheet

12. Enrollment/Incentive Program Proposal CMS could deny Medicare enrollment if the enrolling provider, supplier or owner has an existing Medicare debt CMS could revoke Medicare billing privileges if provider or supplier has a pattern or practice of submitting claims for services that fail to meet Medicare requirements. Would increase incentives for individuals providing specific info about Medicare fraud. When at least $100 of Medicare funds is recovered, reward would be up to an individual 15% of the final amount collected up to $9.9 million. CMS submitted comments

13. DME Face-to-Face Requirements Physician must document that the physician, PA, NP or CNS has had a face-to-face encounter examination with a beneficiary in the 6 months prior to the written order for certain items of DME The face-to-face encounter must support the need for each covered item of DME ordered through a needs assessment, evaluation or treatment Affected codes include those that currently require a written order prior to delivery, cost more than $1000, or are particularly susceptible to fraud, waste and abuse. Includes face-to-face through telemedicine

14. Recovery Audit Contractor Update

15. Recovery Audit Contractors (RACs) Purpose: Identify and recoup overpayments and refund underpayments in federal healthcare programs • RAC corrections: $93.9M (2010), $939.4M (2011), $2.401B (2012), $1.437B (2013 – 1st 2 quarters) • 43.4% of appealed claims decided in provider’s favor • Subject to scrutiny • Congress • HHS Office of Inspector General • Government Accountability Office

16. Recovery Audit Contractors (RACs) • New statement of work • CMS is adding a 5th RAC for DME and Home Health/Hospice • RACs must perform prepay review per the prepayment review demonstration • Support CMS at all levels of appeals, including “taking party status” at the ALJ level • Share methods, algorithms and edits used to find errors with CMS and the MACs • Expanded need to engage in provider outreach

17. Recovery Audit Contractors (RACs) Semi-automated audits – additional documentation request (ADR) limits? Contract transition – additional documentation requests will decline/cease (Nov. 15?) New UPICs (Unified Program Integrity Contractor) – Medicare and Medicaid program integrity audits

18. Top Physician RAC Issues Co-surgery not billed with modifier 62 – resulting in payment errors because of failure to appropriately apply the co-surgeon modifier, used when two or more surgeons of different specialties contribute to one operative session and each separately submit claims to Medicare. Preadmission diagnostic testing - “(S)ervices were being reimbursed in addition to reimbursement of the Inpatient Prospective Payment System (IPPS) Hospital for services provided during the defined temporal window as a source of overpayments. Dose versus Units Billed - Bevacizumab (HCPCS J9035) and Rituximab (HCPCS J9310) - “(E) rrors associated with units of a medication being administered versus units of the medication billed. It was found that improper payments exist due to excessive units being billed”

19. Top Physician RAC Issues (cont.) Untimed codes—Excessive units – “No matter how long the evaluation or service, providers can bill only one unit of untimed codes for a patient per date of service with some exceptions.” (automated) Technical Component of Radiology – “Radiology suppliers that render non-physician outpatient services during inpatient stays are required to bill the PPS hospitals, not the Medicare carriers, for those services.” (automated) Not a New Patient – Incorrect Coding – “New patient Evaluation and Management (E/M) services for the same beneficiary within a 3-year period should not be billed to Medicare.” (complex)

20. Top Physician RAC Issues (cont.) • Evaluation and Management (E/M) Billing During the Global Surgery Period – “Providers are incorrectly billing E/M services provided by the surgeon the day before, the day of, and up to 90 days after major surgery, and 0–10 days after minor surgery.” (automated) • Physician Pharmaceutical Injectables – Incorrect Procedure Codes and/or Number of Units Billed – “Claims were paid for pharmaceutical injectables with an incorrectly billed number of units.” (automated) • General issues include: • Place of service • Duplicate claims • Medically unnecessary setting • Check the list of approved issues with your Regional RAC

21. RAC Prepayment Review • Began 8/27/12 in 11 states • 7 states with fraud and error-prone providers • (FL, CA, MI, TX, NY, LA, IL) • 4 states with high volumes of inpatient stays • (PA, OH, NC, MO)

22. Recovery Audit Contractors (RACs) MGMA Advocacy and Resources • RAC Appeals Navigator • MGMA RAC Resource Center • Monitoring member RAC experiences through RACWatch@mgma.com

23. Stark Law Update

24. Stark Law Developments • In-Office Ancillary Services exception still under attack • Proposed extension of EHR subsidy exception • Recent litigation • Recent settlements under CMS Voluntary Self-Disclosure Protocol

25. Elements of the Stark Law The Stark law prohibits: A physician... from referring a Medicare patient... for a “designated health service”... to an entity... with which the physician or immediate family member... has a financial relationship... unless an exception applies

26. In-Office Ancillary Services (“IOAS”) • H.R. 2914 introduced August 2013 by Rep. Jackie Speier (D-CA) • Eliminates IOAS exception for “specified non-ancillary services” including: • Anatomic pathology, including both TC and PC • Radiation therapy • Advanced diagnostic imaging (MRI, CT and PET) • Physical therapy • Follows critical reports from GAO, and a growing drumbeat of pressure from CMS, MedPAC, and certain affected specialties • **iiiii

27. IOAS (cont.) • Bill would authorize CMS to exclude other services “not usually provided and completed” during the office visit in which they were ordered • These self-referrals are now being characterized as “abusive” and “volume drivers” • Revisionist history of what Congress did/intended in 1989 and 1992 • Prospects are uncertain, but worrisome

28. EHR Subsidies - Proposed Extension • Current Stark law exception (and companion kickback law safe harbor) for donated EHR equipment and training, adopted in 2006, was scheduled to “sunset” at the end of 2013 • On April 10, 2013, CMS and OIG proposed a three year extension—until December 31, 2016 See Vol. 78 FR 21308 et seq • Two other changes proposed: • Eliminate requirement for donated EHR to include E-prescribing features • Technical change to provision deeming EHR to be interoperable

29. Recent Litigation Under Stark • Tuomey Healthcare case—from bad to worse! • Long-running litigation resulted in a May 2013 jury verdict in Federal District court in South Carolina • Jury found Stark law violations totaling $39 Million • Judge now assessing potential FCA and other damages, estimated at as much as $357 Million • Facts: • 19 physicians entered into 10 year contracts as part-time employees of hospital • Agreed to refer all outpatient procedures to H or its facilities • H billed professional fees associated with those procedures • Compensated MDs on base annual salaries, plus 80% of professional collections, plus additional incentive

30. Tuomey Healthcare (cont.) • Facts continued: • Resulted in compensation exceeding 100% of cash collections for professional services, and annual losses by H on the employment contracts • Jury concluded that: • Compensation exceeded FMV, the contracts were not commercially reasonable, and the arrangement took into account the volume or value of referrals to H • Therefore, Stark exception for bona fide employees did not protect the contracts Note: Tuomey was a whistleblower case. The WB was a physician who turned down the deal 19 other physicians accepted

31. Stark Litigation (cont.) • Diagnostic Physicians Group (DPG) case • Pending in Federal District Court for the Southern District of Alabama • Originally a whistleblower suit but Justice Department joined the suit in July • Hospital-owned clinic and diagnostic center is staffed by DPG, PC under contract • Clinic bills both pro fees and ancillaries and splits collections 58% to hospital and 42% to DPG • DPG alleged to have compensated its physicians in part based on each MD’s share of prior year ancillary referrals with other adjustments allegedly designed to mask` the relationship to ordering patterns.

32. Stark Voluntary Disclosure • Increasing use of the CMS Voluntary Self-Referral Disclosure Protocol (“SRDP”) • CMS publishes brief summaries of select settlements, including the $$ amount of the settlement • 20 published in the 12 months ended July 2013—more than double rate for 2012 • All 20 were disclosed by hospitals, presumably because the hospitals were the entities billing Medicare for the designated health services involved

33. Stark Voluntary Disclosure (cont.) • Settlements ranged from under $1K to almost $600K—most were less than $200K • Still no published settlements on core MGMA issues, e.g. IOAS or group practice comp formula • Most appear to be technical non-compliance with Stark compensation exceptions: • Leases • Medical director contracts • On-call coverage agreements

34. Stark Voluntary Disclosure (cont.) • Biggest 2013 Stark settlement was with DOJ, not CMS • Intermountain Healthcare agreed to pay $25.5 Million for both Stark violations and related FCA penalties • Large $$ more a reflection of large health system—22 hospitals,185 clinic locations, 33,000 health care personnel--than more egregious behavior. Settlement covered 10 years and: • 37 physician employment arrangements that allegedly took into account referrals • 18 non-compliant physician office leases • 154 other physician financial relationships with no written contracts

35. Office of Inspector General Activities

36. Office of Inspector General (OIG) Updated Special Advisory Bulletin on the Effect of Exclusion from the Participation in Federal Health Care Programs Special Fraud Alert on Physician-owned Distributorships Recent OIG Advisory Opinions Update to OIG’s Voluntary Self Disclosure Protocol

37. OIG: Effect of Exclusion • OIG can exclude individuals from Medicare, Medicaid and other federal healthcare due to fraud and abuse • Excluded individuals: • Cannot provide, direct , prescribe or order patient care • Cannot own more than 5% of an entity • Cannot provide administrative or management services payable by federal healthcare programs • Cannot provide HIT services and support, strategic planning, billing and accounting, staff training and HR unless services are wholly unrelated to federal healthcare programs • Regularly check OIG’s List of Excluded Individuals/Entities (LEIE) • Fines up to $10,000 per claim

38. Special Fraud Alert on “PODs” • March 2013 fraud alert targets physician-owned distributorships for implantable devices http://oig.hhs.gov/fraud/docs/alertsandbulletins/2013/POD_Special_Fraud_Alert.pdf • Consistent with OIG’s long-standing concerns over physician joint ventures • PODs are “inherently suspect” under the kickback law because of degree of control physicians have over hospital and ASC purchasing practices • Highlighted risk factors: • Ownership structured to reflect expected ordering patterns

39. Fraud Alert on PODs (cont.) • Risk factors: • Profit distributions not proportional to ownership • Owners pressure facilities to buy from POD • JV pressures owners to leverage facilities • Mandatory buy/sell when owner is no longer in a position to generate business for POD • POD is a shell—no employees, facility or inventory; just a pass-through, with mark-up, from manufacturers or other distributors • Lack of oversight over distribution functions • Owners fail to disclose ownership to hospitals and ASCs

40. Recent OIG Advisory Opinions Hospital Provided Electronic “Interface”--Favorable Hospital pays for platform facilitating test orders and transmitting test results back to ordering physician Available to all community physicians without charge Not useable by physicians for other purposes OIG says it provides no independent value to the physicians, thus not remuneration for purposes of kickback law. Adv. Op 12-20

41. Recent OIG Advisory Opinions (cont.) Cath Lab Co-Management Fee--Favorable Hospital pays cardiology group a co-management fee with both fixed and incentive components One incentive component is based on hospital cost savings e.g. “gainsharing,” but OIG was satisfied that arrangement had sufficient safeguards to ensure against underutilization, poor quality, patient “cherry picking” and other risks Special facts: both hospital cath labs and cardiology group had effective monopolies in the region. Thus payment of the fees was not likely an inducement to refer. Adv. Op. 12-22

42. Recent OIG Advisory Opinions (cont.) Hospital Readmission Reduction Program—Favorable Hospital contracts with drug company subsidiary (“Vendor”) to help reduce readmissions on selected discharges Vendor provides a menu of services to discharged patients to maximize compliance with discharge plans, including medication management Patient participation is voluntary Fees for Vendor’s services are either fixed or hourly

43. Recent OIG Advisory Opinions (cont.) • Vendor’s employees have no role in prescribing medications, and services are the same regardless of whether patient is on meds supplied by Vendor’s parent company • Sales force for Vendor is organizationally removed from parent’s pharma sales force Question: Would a referring medical group get the same favorable opinion if it sold similar post-discharge services to the hospital?? Adv. Op. 13-10

44. OIG’s Updated Voluntary Self- Disclosure Protocol • Voluntary disclosure of potential kickback and/or False Claims Act violations go to OIG • May include Stark issues, but Stark-only cases go to CMS • As with the Stark SRDP, most disclosures come from hospitals, not groups, but virtually all involve hospital-physician financial relationships • April 2013 update to the OIG’s SDP http://oig.hhs.gov/compliance/self-disclosure-info/files/Provider-Self-Disclosure-Protocol.pdf

45. Updated OIG SDP (cont.) • Updated protocol: • Provides more detailed requirements by type of disclosure--billing errors, excluded individuals, and kickback law • Provides clearer guidance on minimum settlement amounts: • $50,000 for kickback related issues • $10,000 for others • Provides clearer guidance on damage calculations: • Default position is 1.5 X single damages • Damages for excluded individuals who are not billers based on amounts paid to excluded individuals (salary and benefits) • Remuneration-based approach for kickback law issues—what was the value to the referring physician of the non-compliant relationship as opposed to how much did the hospital collect from services referred by the physician.

46. Updated OIG SDP (cont.) OIG now offers online disclosure through its website at: https://forms.oig.hhs.gov/selfdisclosure/Self-Disc-Form-protocol.aspx Not sure disclosing potential violations of Federal law online is a great idea—might want to check with your legal counsel before sitting down at the computer!!

47. Things to come Final rule on overpayments Final rule extending CMS’s authority to deny enrollment or revoke privileges and provide incentive rewards for reporting fraud (up to $9.9M) Compliance programs Physician “sunshine” reports Face-to-face requirement for DME orders (Oct. 1)

48. Questions?