CMS Announces “Next Generation” ACO Model

The Centers for Medicare and Medicaid Services (CMS) recently announced the creation of the Next Generation Accountable Care Organization (ACO) model (see

The new model builds on lessons learned from the earlier Pioneer Model and Medicare Shared Savings Program (MSSP) ACOs.  As with the earlier ACOs, the new model aims to improve quality and coordination of care.  The new model is also part of a larger, ongoing effort to shift Medicare reimbursement away from traditional fee-for-service payment models to alternative and value-based payment models.  Next Generation ACOs will take on greater risk than ACOs did under the earlier models, but will also have the potential to reap greater rewards.

CMS touts its new model as “one that sets predictable financial targets, enables providers and beneficiaries greater opportunities to coordinate care, and aims to attain the highest quality standards of care.” (  The Next Generation model provides several new “benefit enhancement” tools to further these goals.   While patients will be free to visit doctors outside the ACO, the model seeks to encourage patient participation by providing a reward of up to $50 per year to patients who obtain a majority of their care from ACO-participating providers.  Beneficiaries will also have greater ability to confirm their ACO participation and to communicate with their providers.  The new model will increase the availability of home visits, telemedicine services and skilled nursing facilities.  Finally, CMS envisions increased communication and collaboration between CMS and ACOs themselves.

Next Generation ACOs will be measured against new, prospectively determined benchmarks, a change from the current ACO models for which benchmarks are finalized at the end of the performance year.   The new model also provides a choice between two risk arrangements for assessing the ACO’s share of savings or losses.  Four payment systems will be available to the Next Generation ACOs:  traditional fee-for-service; fee-for-service with an additional monthly, per-beneficiary infrastructure payment; population-based; and capitation. 

Letters of Intent for the first round of Next Generation ACO applications are due by May 1, 2015; and the applications themselves are due by June 1, 2015.  A second round of applications will take place during Spring of 2016.

Proposed Bills Would Address Hitches in New Jersey’s Medical Marijuana Program

On March 16, 2015, a panel of the New Jersey General Assembly approved a package of three bills designed to improve the operation of New Jersey’s medical marijuana program for patients with severe illnesses who rely on the program for medical relief.  These bills will now be subject to consideration by the entire General Assembly.

ACR-224 would require the Department of Health (“DOH”) within thirty days to revise certain regulations governing New Jersey’s medical marijuana program.  The proponents believe that the regulations have placed an undue burden on patients seeking medical marijuana therapy and are inconsistent with the legislative intent underlying the New Jersey Compassionate Use Medical Marijuana Act (“Compassionate Use Act”).  Continue reading Proposed Bills Would Address Hitches in New Jersey’s Medical Marijuana Program

Bipartisan Senate Bill Would Resolve Federal Law Conflict With State Laws Legalizing Medical Marijuana

A Senate Bill introduced on March 10, 2015 would amend federal law that conflicts with state laws legalizing medical marijuana.  The Compassionate Access, Research Expansion and Respect States (CARERS) Act, S.683, was introduced by a bipartisan trio of senators:  Senator Corey Booker (D-N.J.), Senator Rand Paul (R-Ky.) and Senator Kirsten Gillibrand (D-N.Y.).

The centerpiece of the CARERS Act is a reclassification of marijuana as less dangerous drug under federal law, with acknowledged therapeutic purposes.  Under the federal Controlled Substances Act (CSA), marijuana is presently categorized as a Schedule I drug along with other substances like heroin, LSD, and peyote, which are deemed to have the highest potential for abuse and “no currently accepted medical use in treatment in the United States.”  21 U.S.C. § 812(b)(1)(B).  The legislation would reclassify marijuana as a Schedule II drug, which would be an acknowledgement under federal law that marijuana “has a currently accepted medical use in treatment in the United States or a currently accepted medical use with severe restrictions.”  21 U.S.C. § 812(b)(2)(B).  Also, the CARERS Act would amend the CSA to allow states to establish their own medical marijuana policies, so that patients, medical providers, and others participating in state medical marijuana programs will not be in violation of federal law and subject to potential federal prosecution. Continue reading Bipartisan Senate Bill Would Resolve Federal Law Conflict With State Laws Legalizing Medical Marijuana

CMS Advises That Payment Codes on Home Health Claims Will Be Matched Against OASIS

CMS recently issued Transmittal SE1504 entitled “Payment Codes on Home Health Claims Will Be Matched Against Patient Assessments”.

In this Transmittal, CMS advises that, beginning on April 1, 2015, Medicare systems will compare the Health Insurance Prospective Payment System (HIPPS) code on a Medicare home health claim to the HIPPS code generated by the corresponding Outcomes and Assessment Information Set (OASIS) assessment before the claim is paid. If the HIPPS code from the OASIS assessment differs, Medicare will use the OASIS-calculated HIPPS code for payment.  As of now, if no corresponding OASIS assessment is found, the claim will still process normally.

Submission of an OASIS assessment for all home health episodes of care is a condition of payment according to CMS. CMS advises that if the OASIS is not found during medical review of a claim, the claim is denied. Claims that don’t match may be automatically selected for Medical Review. Additionally, it is important to note that eventually CMS will use this new claims matching process to deny claims and enforce the condition of payment.

A copy of the transmittal can be found here –>

For more information on Home health claims, home health reimbursement and Medicare, please feel free to contact Ari J. Markenson at or 212.692.1012.

CMS Updates 5 Star Ratings System for Nursing Homes with New Measures

As of February 20, 2015, the Centers for Medicare & Medicaid Services (CMS) has revised its 5 Star Rating System for nursing homes. The changes to the system involve adding two new nursing home quality measures for antipsychotic use into the Quality Measure Rating, Increasing the number of points necessary to earn a Quality Measure Star Rating of two or more stars and changing the scoring method for the Staffing star rating.

The two new quality measures relate to the use of antipsychotics for short-stay residents without certain diagnoses and the continued use of antipsychotics for long-stay residents with the same conditions. According to CMS, they added these QA measures to address concerns that antipsychotics often are prescribed for diagnoses that do not require them.

CMS also changed the way facilities can earn a four star rating for Staffing to require that the facility must now scores four stars on both its registered nurse and staffing metrics to get such a rating.

CMS advised that these changes will likely result in many (a third or more) nursing homes seeing a lower rating than they have seen in prior years. Nursing homes can take a look at their current rating by going to –

For more information on CMS’ star rating system, nursing homes, skilled nursing facility and Medicare, please feel free to contact Ari J. Markenson at or 212.692.1012.

Consultants’ Communications Privileged from Discovery

In healthcare, companies often hire consultants to review billing and coding, privacy and security and a host of other technical issues that regular staff does not have the time or expertise to pursue.  A recent discovery ruling in federal court in the Eastern District of Pennsylvania holds that communications with such outside consultants are privileged from discovery if they are made for the purpose of assisting the company in securing legal advice or making legal decisions.

In Smith v. Unilife Corporation, a whistleblower brought an action under Sarbanes-Oxley and Dodd-Frank alleging shareholder fraud and failure to comply with certain FDA requirements.  The plaintiff sought discovery of two non-lawyer consultants regarding drafts of the company’s SEC Form 10-K filing.  The Court’s decision to deny the plaintiff’s motion to compel was based on the “functional equivalent” doctrine, a principle already adopted in the 8th, 9th and D.C. Circuits, but not yet in the 3rd Circuit.

Continue reading Consultants’ Communications Privileged from Discovery

Civil RICO Actions on the Rise to Combat Healthcare Insurance Fraud

Over the past several years, insurance carriers have aggressively pursued civil suits against doctors and other medical providers in an effort to fight healthcare insurance fraud. Besides theories of liability based upon common law claims such as fraud and unjust enrichment, insurers have more frequently asserted claims under the federal Racketeer Influenced and Corrupt Organizations Act, a.k.a. RICO, as well as its state law analogues, as tools in their litigation arsenal.  Thirty-three states, as well as Puerto Rico and the U.S. Virgin Islands, have state civil RICO statutes.

Civil RICO claims entail demanding proof of the defendants’ operation of an criminal enterprise intended to harm another and engaged in a pattern of racketeering activities, which are statutorily-defined and typically involve a list of specific criminal acts. Notwithstanding its arduous proof requirements, civil RICO claims provide a substantial incentive for success:  an award of three times actual damages as well as recovery of attorneys’ fees and expenses.

A suit filed this month in New York federal court by the GEICO insurance companies, Gov’t Employees Ins. Co. v. Bakst, No.: 15-cv-537 (E.D.N.Y., filed Feb. 4, 2015), illustrates the expanding use of civil RICO claims by insurers against doctors and other medical providers.

Continue reading Civil RICO Actions on the Rise to Combat Healthcare Insurance Fraud

HHS Moves to Limit In-Office Ancillary Services Exception

The Department of Health and Human Services (“HHS”) is once again targeting the In-Office Ancillary Services Exception (“IOASE”) to the federal Stark Law, in an attempt to produce cost savings in the U.S. healthcare system. The IOASE provides a limited exception to the Stark Law that allows physicians to refer patients to receive specified ancillary services in the physicians’ own offices. Such permitted services currently include certain diagnostic imaging, radiation therapy and supplies, clinical laboratory services, outpatient prescription drugs, and physical, occupation and speech therapy. In order to qualify for the Stark Law exception, the services must be furnished in accordance with strict guidelines related to, inter alia, billing, group practice organization and ownership, office hours, and the identity of the individuals actually providing the services.

Lawmakers and administration officials have long attempted to impose further restrictions on the use of the IOASE. Most recently, HHS indicated its desire to limit the IOASE through its Fiscal Year 2016 proposed budget.   Arguing that some ancillary services are “rarely furnished on the same day as the related physician office visit” and that the IOASE has caused “overutilization and rapid growth” of these services, HHS has proposed tightening the list of services covered by the IOASE to eliminate permitted self-referrals for therapy services, advanced imaging, radiation therapy and anatomic pathology services unless they are offered at “clinically integrated” practices that demonstrate cost containment. The budget proposal claims that this change will save six billion dollars over ten years.

While the current political climate in Washington leaves the fate of HHS’s proposed budget far from certain, physicians must once again be on the alert for increased limitations on their ability to provide in-office ancillary services.

Virtual Credit Card Payments

Paying for Health Care by Virtual Credit Card
On January 30, 2015, several healthcare organizations sent a group letter to CMS protesting the use of virtual credit cards by health plans to pay providers. In a virtual credit card payment (a nonstandard type of electronic funds transfer EFT), a health plan or its payment vendor issues single-use credit card information to a provider via mail, fax or email; the payment is “virtual” in that there is not a physical credit card. Providers then manually enter the virtual credit card number into their point-of-sale (POS) processing terminal, and the card processing network authorizes the payment. Virtual credit card programs are generally rolled out as an opt-out function and providers can end up being enrolled without their knowledge or consent.
The letter states that “While the process described above may sound benign and similar to provider processing of patient credit cards, virtual credit card payments can have a significant negative financial impact on a provider. Interchange fees of up to five percent are imposed on virtual credit card payments; these fees essentially reduce the contracted fee rate that has been negotiated with the health plan for a particular service or services. Unfortunately, many providers are unaware of these fees when accepting virtual credit card payments. Yet while providers are losing income from this payment method, health plans and intermediaries can profit from virtual credit cards, as they often receive cash-back incentives from credit card companies.”

The letter recommended that CMS provide the following direction to the health care industry regarding virtual credit card and Automated Clearing House ACH EFT payments:
• Require that a provider explicitly opt-in to virtual credit card payments prior to the issuance of any payments via this method;
• Require that prior to opting in to virtual credit card payments, the provider must receive a complete disclosure of all fees associated with this payment option;
• Require that virtual credit card programs provide clear and hassle-free instructions to providers on how to opt-out of these payments, should they later decide to choose another payment method;
• Prohibit health plans from requiring acceptance of virtual credit card payments as part of their provider contracts;
• Clarify the definition of “excessive fees” in the context of ACH EFT payments to prohibit health plans and their vendors from charging fees for ACH EFT payments in excess of the nominal charge assessed by the providers’ financial institution; and
• Require that any services designed to supplement the standard ACH EFT process be independently selected at the provider’s discretion and be unambiguously separate from ACH EFT enrollment forms.
Providers need to examine the impact of virtual credit cards on their practices and consider the merits of opting in or opting out.

Health System Integration and Antitrust Laws on Collision Course

Health systems attempting to fulfill the mandate of integrating hospitals and physicians may find themselves accused of going too far.  Although the Affordable Care Act, shared savings, gainsharing and other alternative payment methodologies have made integration of physicians, hospitals and other providers an operational goal, success in reaching that goal may be challenged by private antitrust actions.

In a recent Florida federal court decision, the antitrust complaint of “several of Southern Brevard County’s physicians and physicians practice groups” was held to have stated a monopolization claim against Health First, Inc. and three of its wholly-owned subsidiaries —  an insurer, a hospital and a physician practice group.  Essentially, by fully integrating its business, and incentivizing in-network referrals and managed care pricing, Health First became vulnerable to claims of tying, exclusive dealing, price discrimination and monopolization.

Continue reading Health System Integration and Antitrust Laws on Collision Course