Health Care Lawyer Blog

You know the drill – you call your health care insurer to see if a certain procedure or drug is covered by your plan. After the friendly representative assures you it is, you go ahead and order the drug or procedure. However, a few weeks later you receive a hefty invoice for the allegedly “covered” procedure, leaving you in a nasty game of “He said, she said” and endless calls to your insurance company.

Relief from such scenarios may be on the way. Last week, the Departments of Health and Human Services (HHS), Labor, and the Treasury issued new regulations designed to help consumers appeal coverage decisions made by health plans and insurance companies, and to help boost the availability of resources to do so. The appeals regulations, which were issued pursuant to the Patient Protection and Affordable Care Act (PPACA), includes $30 million in Consumer Assistance Program grant funding to help states establish consumer assistance offices or strengthen existing ones. Consumers who live in the State of Michigan, for example, can appeal denied claims through the Office of Financial and Insurance Regulation.

While many insurance plans already include a mechanism by which consumers can appeal coverage denials, under PPACA such provisions are now mandatory. Additionally, for the first time patients will have the right to appeal coverage decisions to an outside, independent decisions-maker. Specifically, consumers in states who lack such outside determination laws will not have access to a Federal external review program.

For more information on the appeals regulations, check out the HHS Fact Sheet or contact Mercedes Varasteh Dordeski.

Under the Fair Labor Standards Act (FLSA), outside sales employees are generally exempt from overtime pay. However, employers bear the burden of proving that employees fall within FLSA exemptions that are construed narrowly against employers. A recent case out of the 2nd Circuit, In re Novartis Wage and Hour Litigation, 2nd Cir., No. 09-0437 (July 2010), considered whether outside pharmaceutical representatives fell within that exemption.

Novartis Pharmaceuticals Corp. researches, manufactures, markets and sells pharmaceuticals. However, under federal regulations, it cannot sell its drugs directly to patients. Novartis instead sells its products to wholesalers, who sells them to pharmacies. Physicians write prescriptions that permit patients to purchase the drugs from pharmacies.

Where an employee promotes a pharmaceutical product to a physician, but cannot lawfully transfer any quantity of the drug in exchange for anything of value, cannot lawfully take an order for its purchase and cannot lawfully obtain from the physician a binding commitment to prescribe it, the employee does not make a sale under the Fair Labor Standards Act (FLSA), according to the 2nd U.S. Circuit Court of Appeals, and therefore cannot be deemed exempt as an outside salesperson.

In making its decision, the District Court reasoned that patients were unable to obtain Novartis’ drugs without a prescription; therefore, physicians were the appropriate targets of the reps’ sales efforts and so they “made sales in the sense that sales are made in the pharmaceutical industry.”

While acknowledging that the physician is “an essential step in the path that leads to the ultimate sale of a Novartis product,” the 2nd Circuit viewed what occurred between physicians and reps as less than a “sale,” thereby disqualifying reps as outside salespeople within the meaning of the FLSA.

For additional information about overtime pay and general employment inquiries, contact FHWN attorney Melinda Balian.

Dozens of unscrupulous health care providers across the county were rounded up today in what federal officials are referring to as the country’s largest Medicare fraud crackdown. Individuals from five states, including several Metro Detroit residents, were involved in the estimated $251 million fraud scheme. Those arrested in the Metro Detroit cases are alleged to be responsible for $35 million in Medicare fraud, while others were arrested in Miami, Houston, New York City, and Baton Rouge.

Despite the timing of the bust, based on news reports it does not appear that the fraudulent schemes are connected. Some charges involve home health care companies billing Medicare for equipment or treatment that patients did not need, or never even received. In Brooklyn, New York, eight individuals were charged with operating a $72 million scam where a clinic owner paid patients in exchange for using their Medicare numbers and submitting bogus claims for physical therapy. Other claims involved HIV infusion fraud. The metro Detroit cases involved several home health companies accused of billing for unnecessary services, and paying kickbacks in order to recruit patients.

According to United States Attorney Barbara McQuade and Detroit FBI chief Andrew Arena, economically depressed areas like metro Detroit are “hot spots” for Medicare fraud. Areas such as Miami, which houses a significant elderly population, are also common areas for fraud schemes to unfold.

Individuals who believe their employer may be improperly billing Medicare and Medicaid, or who have questions about potential health fraud cases, should contact an experienced health care attorney.

Today's post was authored by FHWN attorney Maro E. Bush.

The Centers for Medicare and Medicaid Services (CMS) and Health and Human Services Office of the National Coordinator for Health Information Technology recently issued their much-anticipated final meaningful-use information technology regulations that hospitals and physicians must follow to tap into some $27.3 billion in financial incentives under the HITECH act.

In its final meaningful rule published on Tuesday, the CMS abandoned its original all-or-nothing approach to offering incentives for electronic health record (“EHR”) adoption. Healthcare providers now have various ways of reporting objectives to demonstrate meaningful use of EHRs. Additionally, some objectives that are deemed too difficult to achieve by the original 2011 deadline will be delayed a year.

One of the major changes in the final rule requires providers to meet a “core” group of objectives, including electronic prescribing, maintaining an active medication list and providing patients with an electronic copy of their health information upon request. In its proposed meaningful use rule published in January, CMS had required providers to meet 25 measures and hospitals to meet 23 measures in order to demonstrate they were meaningfully using EHR. However, critics of the rule argued that meeting the objectives would impose a heavy burden on providers. Under the final rule, physicians must meet 15 of the core requirements, and hospitals must meet 14. Providers must also choose and meet an additional 10 measures from a “menu set” of procedures, but may defer up to five of them until the next implementation stage.

CMS anticipates that the new approach will allow providers and hospitals to implement the basic elements of meaningful EHR use while qualifying for incentive payments. Through meaningful EHR use, CMS aims to improve the quality, safety and efficiency of healthcare services; reduce healthcare disparities; engage patients and their families; improve the coordination of care; improve population and public health; and ensure the privacy and security of personal medical information.

Physicians and other health care providers who want to learn more about implementing EHR systems and qualifying for incentive payments should contact Maro E. Bush or Mercedes Varasteh Dordeski.

The Department of Health and Human Services ("HHS") has issued proposed rules intended to strengthen the privacy and security of personally identifiable health information as required by the Health Information Technology and Economic Clinical Health Act ("HITECH"). This proposed rule strengthens the privacy and security of health information, and is an integral piece of the administration's efforts to broaden the use of health information technology in health care today.

As previously discussed on the Health Care Lawyer Blog, HITECH requires business associates of HIPAA-covered entities to fully comply with the HIPAA privacy rule. Business associates must also now comply with certain portions of the HIPAA Security Rule and report breaches of unsecured PHI to HHS. As described in the notice of proposed rulemaking, HHS intends to require business associates to enter into written agreements requiring subcontractors who create or receive personally identifiable health information to safeguard the privacy and security of such information. Importantly, the requirements applicable to business associates with respect to subcontractors mirror the requirements imposed on covered entities with respect to business associates.

As an example, if a home health care agency (covered entity) hires an attorney to perform a reimbursement audit, the attorney would be a business associate. If the attorney retains a copy center to help with photocopying voluminous patient files, the copy center would be a subcontractor of the business associate. Therefore, the attorney must enter into a written agreement with the copy center requiring the copy center safeguard the privacy and security of the information, in the same way that the attorney must protect the information.

In addition, the proposed regulations also set forth the conditions under which the sale of protected health information without patient authorization is prohibited and limitations on the use and disclosure of protected health information for marketing and fundraising.

HHS has also launched a website at www.hhs.gov/healthprivacy/index.html that will keep consumers informed about what HHS is doing to protect the privacy of their health information.

Starting July 1, the federal government will begin financing “high-risk” insurance pools, which are aimed at providing coverage for uninsured individuals with pre-existing or chronic conditions.

Under PPACA, the government has set aside $5 billion for states to set up the high-risk pools for individuals who have been insured for six-months or longer. The pools are intended to be a stopgap to extend coverage until state insurance exchanges begin operating in 2014. (Under PPACA, insurance exchanges will be required to cover individuals with pre-existing conditions.)

The pools will have no restrictions based on pre-existing conditions, and will offer low deductibles and co-payments, and a ban on annual or lifetime limits.

While the pools will be funded by government subsidies, individuals will still have to pay premiums – specifically, PPACA requires that premiums for the “high-risk” coverage must be the same as the standard rate for a healthy adult in that state.

Under the law, each state can decide whether it wants to run the new high-risk pool itself, or whether it wants to have the federal government run the program instead. Michigan, for example, intends to run the new pool itself with the $140 million it will receive from the government. According to the Michigan Office of Financial and Insurance Regulation, patients can enroll in the new plan in September, with coverage slated to start in October. (Click here for additional information on Michigan's plan.)

However, there is some debate over whether the $5 billion set-aside will be sufficient to fund the high-risk pools until 2014. Since PPACA gives the Secretary of Health and Human Services discretion to adjust the state awards in anticipation of a projected deficits, states may be left with the unflattering option of either shouldering the burden, or un-insuring its residents.

For more information on state insurance pools, visit the National Association of Insurance Commissioners website, which has a directory of state insurance departments. Individuals interested in signing up for the high-risk pools should contact their corresponding state agency.

The Inspector General’s Office for the Department of Health and Human Services (HHS OIG) has recovered approximately $3.1 billion in health care funding that would have otherwise been lost to fraud or abuse during the first half of FY 2010, according to the latest Semi-Annual Report to Congress.

The report, which reviews the period from October 2009 to March 2010, discloses that HHS OIG has recovered $667.7 million in audit receivables and $2.5 billion in investigative receivables. These numbers represent a significant increase from the previous fiscal year, as detailed below.

FY 2009 (First Half) - $274.8M in audit receivables, $2.2B in investigative
FY 2009 (Second Half) - $217.2M in audit, $1.8B in investigative
FY 2010 (First Half) - $667.3M in audit, $2.5B in investigative

While the Patient Protection and Affordable Care Act (PPACA) allocates $250 million in increased funding to combat fraud and abuse over the next decade, the latest OIG report covers the period before PPACA’s enactment. Therefore, the new figures are a hopeful sign that OIG recovery effects are becoming increasingly effective.

While warnings about heightened penalties for HIPAA violations proliferated following last year’s passage of the Health Information Technology for Economic and Clinical Health Act (HITECH), one California physician apparently failed to take notice.

Huping Zhou, a licensed cardiothoracic surgeon who was previously working at the UCLA School of Medicine as a researcher, was sentenced in late April to four months of jail after pleading guilty to improperly accessing patient medical records. Zhou’s sentence marks the first incarceration for security breaches under the heighted HITECH penalties.

In light of the enhanced penalties, health care providers should make sure that all employees understand HIPAA rules and regulations, and are aware that any unauthorized access to patient files constitutes a HIPAA violation. While “file snooping” is most prevalent when the patient is a celebrity, employees may also be tempted to peek at files for their neighbor, child’s teacher, or other acquaintances. While employees may believe they are permitted to view such records, access to protected health information must be for treatment, payment, or health care operations. Therefore, perusing a patient’s file out of curiosity is not an authorized access and can land a practice in hot water.

The American Medical Association advises practices to conduct credit checks and other background searches on potential employees prior to hiring and instatement. For example, if a practice treats many celebrities, the practice should be wary of hiring an employee who has a lot of debt or a low credit score, as the employee may be tempted to sell the information to tabloids or newspapers.

The U.S. Senate acted on Friday to pass the so-called “doc fix”, which will prevent a 21 percent reduction in Medicare payments from taking effect – but did not act in time to spare physicians from receiving reduced payments for claims already processed for this month.

The legislation, which was extracted from H.R. 4213, was approved without a roll-call vote after leaders of both parties agreed to pull it out of the flailing legislation. The doc fix passage came after urging from medical societies such as the American Medical Association, which claimed the proposed cuts had resulted in a record number of physicians denying new Medicare patients.

Moments after the Senate acted, however, the Centers for Medicare and Medicaid Services (CMS) announced that it would begin processing claims it received for the month of June at the lower rate. The House will not be able to act on the legislation until next week, and CMS was unable to delay processing claims any longer due to regulatory mandates. Therefore, physicians who had submitted claims for June will have to re-submit claims if they want to receive the increased reimbursement.

The bill will postpone the 21 percent cuts until Nov. 30, while Congress will attempt to develop a long-time solution for cutting costs without encouraging doctors to turn away Medicare patients.

The U.S. Senate left for a long weekend Friday without tying up one major loose end – the so called “doc fix” which would prevent a 21 percent cut in Medicare reimbursement to physicians.

House Bill 4213, which would give physicians a 19-month reprieve before the pay cuts went into effect, was passed by the U.S. House of Representatives in May but has not yet been approved by the Senate. The repeatedly delayed cut technically took effect June 1, 2010, but the Centers for Medicaid and Medicaid Services again announced that contractors would not process claims for services delivered on the first 10 business days of the month. However, this “grace period” ends June 15. Therefore, unless the Senate swiftly passes the Bill and President Obama approves, physicians will see a significant reduction in Medicare pay rates.

AMA President J. James Rohack has lambasted the Senate for its failure to act, claiming that seniors are being hurt by the cuts in that physicians are being forced to limit the number of Medicare patients they can treat. According to Rohack, one in five physicians say they are already limiting the number of Medicare patients in their practice due to reduced payment rates, and the resulting impact on seniors' health care will be dramatic.

A recent Advisory Opinion issued by the Health and Human Services Office of Inspector General (OIG) set out that a proposed arrangement by a continuing care retirement community (CCRC) to provide gift cards to individuals who referred seniors to the CCRC would not violate the federal Anti-Kickback Statute.

The underlying facts of Advisory Opinion 10-05 are as follows: Requestor operated several CCRCs, which provided the following services to seniors:
- Independent living
- Assisted living
- Skilled nursing services

The Requestor proposed an arrangement whereby current CCRC residents or employees would receive a gift card (the amount of which was redacted from the Opinion) if they recommend a prospective resident to the independent living community only. To qualify for the gift card, the current resident/employee must submit the prospective resident’s contact info; the prospective resident much be eligible for services; and the prospective resident must tour the community within 90 days.

If the prospective resident moves into the community within 12 months of the tour, the resident will receive a one-time credit (if an employee made the referral, he/she would receive a check).

Continue reading "Anti-Kickback Law Not Triggered By Referrals by Non-Physicians for Independent Living Services" »

As author Erich Segal once famously said, “Love means never having to say you’re sorry.” However, as many Michigan physicians can attest, so does the fear of medical malpractice suits.

This may change if a proposed law currently pending in the Michigan legislature passes. Dubbed the “I’m Sorry” law, the bill seeks to amend the Michigan revised judicature act and disallow the use of apologies, condolences or expressions of sympathy as evidence of an admission of liability in medical malpractice cases.

Generally, physicians often refrain from apologizing for errors (either made by themselves or by hospitals) out of fear of being sued for medical malpractice. However, according to the bill’s sponsor Jim Marleau (R-Lake Orion), such practices often lead to more civil suits. In an interview with the Detroit Free Press, Marleau cited to the physician apology policy currently used at the University of Michigan hospitals. The policy permits physicians to convey apologies or condolences to families, and since it was launched in 2004, U-M hospitals have actually seen a 40 percent decline in malpractice lawsuits.

Marleau explained that when physicians fail to express sympathy or admit that something went wrong, patients and families are often spurred to file suit out of frustration for a lack of information, or to make sure that the problem doesn’t happen again. This in turns leads to increased medical costs.

A similar proposal was introduced in the Michigan legislature before but failed to pass. Marleau hopes that the bill will have a better chance of passage this time given the current attention on health care reform. In fact, Michigan is one of only 15 states without legal protection for physicians who want to apologize to patients or families.

The full text of the bill (H.B. 6073) is available here.