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May 30, 2018May 30, 2018 by Duane Morris

CMS Retreats on Jurisdiction for Medicare Provider Reimbursement Appeals of Self-Disallowed Items, But How Far?

On April 23, 2018, the Administrator of the Centers for Medicare and Medicaid Services (“CMS”) adopted a new ruling conceding the jurisdiction of the Provider Reimbursement Review Board (“PRRB”) in certain circumstances over costs or items “self-disallowed” by the provider. In Ruling No. CMS-1727-R (the “Ruling”), the Administrator announced that the PRRB has jurisdiction over a provider’s appeal regarding Medicare payment for an item that the provider did not include in its cost report when the following circumstances exist:

The appeal is pending on or after April 23, 2018, or was initiated on or after that date; and
The cost reporting period under appeal ended on or after December 31, 2008, and began before January 1, 2016; and
The provider had a good faith belief that the item was not allowable under Medicare regulations or payment policy.

This Ruling represents a retreat from regulations adopted in 2008, which required that in order to appeal an item to the PRRB, a provider must either claim Medicare payment for the item in its cost report or include the item as a protested amount in the cost report. CMS took the position that a provider could not be “dissatisfied” with the Medicare contractor’s determination of Medicare reimbursement, as required by the statute for a PRRB appeal, if the contractor made no determination on the item because it was not included in the cost report, even if reimbursement was prohibited under Medicare policy. The Ruling indicates that CMS is retreating from this position because of the 2016 decision of the U.S. District Court for the District of Columbia in Banner Heart Hospital v. Burwell, which held that the PRRB had jurisdiction over the hospitals’ challenge to Medicare outlier payment regulations despite the hospitals’ failure to claim protested amounts related to their challenge. The district court found that a cost report claim for additional outlier payments would have been futile because the Medicare contractor had no authority or discretion under the outlier payment regulations to make payment as sought by the hospitals. The Ruling states that CMS has decided to apply the holding in Banner Heart in similar administrative appeals.

The Ruling does not entirely do away with the requirement of including an item in the cost report in order to pursue Medicare reimbursement for it in a subsequent appeal. First, the Ruling applies only if the cost reporting period under appeal began before January 1, 2016. This end date is not coincidental—for periods beginning on or after January 1, 2016, CMS has simply shifted the requirement that an item be included in the cost report from being a prerequisite for PRRB jurisdiction to being a so-called “general substantive requirement” for Medicare payment. Second, the Ruling applies only where the provider had a good faith belief that the item was not allowable. The Ruling indicates that “a provider would rarely be able to demonstrate a good faith belief that an item is not allowable when that item is actually allowable under a Medicare payment regulation or other policy.”

Unfortunately, the Ruling may muddy the waters regarding the use of protested amounts in the Medicare cost report. The Ruling acknowledges that providers sometimes claim items through protested amounts “out of concern that a cost report claim for reimbursement of an item deemed non-allowable might raise program integrity questions.” Notwithstanding the Ruling, “a provider still may elect to self-disallow a specific item deemed non-allowable by filing the pertinent parts of its cost report under protest.” But the Ruling then states as follows:

“However, if the PRRB… were to determine that, despite the provider’s self-disallowance of the specific item under appeal, the Medicare contractor actually had the authority or discretion to make payment for the specific item at issue in the manner sought by the provider on appeal and the provider did not demonstrate a good faith belief that such item is not allowable, then the [PRRB] shall apply the Third implementation step for this Ruling.”

Under the third implementation step, the provider’s appeal of the item is to be dismissed for failure to meet the “dissatisfaction” requirement for jurisdiction. One problem with this statement is that providers sometimes claim items as protested amounts where the Medicare contractor has disallowed the item in previous cost report audits for lack of sufficient documentation. The adequacy of documentation to support reimbursement is one area where the Medicare contractor would seem to have discretion to allow payment. Why would CMS want to discourage providers from taking a cautious approach in claiming items in the cost report that have been disallowed in previous audits?

Christopher L. Crosswhite practices in the area of healthcare law, concentrating on Medicare and Medicaid law and regulations, Medicare reimbursement controversies and appeals, and healthcare fraud and abuse provisions.

April 27, 2018July 7, 2021 by Duane Morris

PA Supreme Court Significantly Narrows Application of State’s Peer Review Protection Act

By Lisa Clark and Samantha Dalmass

On March 27, 2018, the Pennsylvania Supreme Court held in a 4-3 decision that the Pennsylvania Peer Review Protection Act (“PRPA”) would not prevent the disclosure of certain physician performance review files in an ongoing medical malpractice lawsuit despite arguments that the files in question were precisely the kind of peer review documents that the PRPA was intended to protect. This controversial decision limits the protection available to healthcare providers under the narrow PRPA evidentiary privilege and may significantly affect the manner in which Pennsylvania hospitals conduct peer review activities.

The underlying lawsuit was brought in 2012 after plaintiff Eleanor Reginelli suffered a heart attack several days after being treated by Dr. Marcellus Boggs in the emergency room at Monongahela Valley Hospital (“MVH”) for gastric discomfort. The plaintiff alleged that Dr. Boggs failed to diagnose and properly treat an underlying and emergent heart condition before discharging her from MVH. She and her husband filed a four-count complaint in 2012, asserting claims against Dr. Boggs, MVH and UPMC Emergency Medicine, Inc. (“ERMI”), which provides staffing and administrative services for the MVH emergency room.

Dr. Boggs and the other physicians in the MVH emergency department, including Dr. Brenda Walther, were members of the medical staff at MVH and employed by ERMI. Dr. Walther served as the director of the MVH emergency department and supervised the ERMI-employed emergency department physicians working at MVH. When she was deposed during the discovery phase, Dr. Walther revealed that she had prepared and maintained a performance file on Dr. Boggs as part of her regular practice of reviewing randomly selected charts associated with ERMI-employed emergency department physicians. The Reginellis responded by filing discovery requests directed at MVH, seeking production of the complete performance review file for Dr. Boggs.

MVH opposed the motion to compel and argued that the requested items fell squarely under the protection of the PRPA because they had been created and used for the purpose of reviewing the services rendered in the MVH emergency room. This argument was subsequently rejected by the trial court, and the plaintiffs’ motion to compel was granted. At this point, ERMI and Dr. Boggs entered the discovery proceedings and filed a motion for a protective order, asserting entitlement to claim protection under the PRPA for the peer review work performed by an ERMI employee. ERMI argued that the performance file on Dr. Boggs fell outside of the peer review responsibilities that ERMI performed for MVH and that Dr. Walther had created and maintained the file solely on ERMI’s behalf. However, this was not consistent with the motion for reconsideration filed by MVH in which the hospital alleged that Dr. Walther conducted the peer review work on behalf of both ERMI and MVH. Then, before the trial court could rule on the motions filed by MVH and ERMI, both entities appealed the trial court’s decision to compel production to the Superior Court.

The relationship between ERMI and MVH and the inconsistent claims regarding the performance review files were critical on appeal, and the Superior Court upheld the trial court decision that neither ERMI nor MVH were entitled to the evidentiary privilege. The lower court found that ERMI was acting as an independent contractor and, therefore, did not qualify as an entity enumerated in the PRPA as protected by peer review privilege. It also held that MVH could not claim privilege based on the finding that MVH had neither generated nor maintained the performance file for Dr. Boggs.

Both ERMI and MVH appealed the decision, but in the 26-page opinion written by Justice Donahue, the Pennsylvania Supreme Court held that neither entity was in a position to claim the PRPA’s evidentiary privilege.

The Pennsylvania Supreme Court first considered whether ERMI could claim entitlement to protections under the PRPA. The PRPA defines “peer review” as the “procedure for evaluation by professional health care providers of the quality and efficiency of services ordered or performed by other professional health care providers.” The court’s analysis hinged on whether ERMI could hold itself out as a “professional health care provider,” which is defined under the PRPA as “individuals or organizations who are approved, licensed or otherwise regulated to practice or operate in the health care field under the laws of the Commonwealth of Pennsylvania.” There are 12 types of entities enumerated in the statutory definition, including hospitals and physicians. The court said that although it described itself as a “physician organization comprised of hundreds of individual emergency medical physicians… that exists specifically to provide emergency medical services,” ERMI could not claim to be any of the 12 listed entities set forth in the statutory definition. The court said ERMI was not a “professional health care provider” because it was not approved, licensed or otherwise regulated to practice or operate in the healthcare field in Pennsylvania, and it did not become one merely because one of the professional healthcare providers it employed conducted an evaluation of another.

After holding that EMRI could not claim the evidentiary privilege because it did not qualify as a “professional health care provider,” the court addressed whether the PRPA was available to MVH. Although MVH clearly met the statutory definition of “professional health care provider,” the court declined to afford it protection under the PRPA on the grounds that Dr. Walther had not been established as member of the hospital’s peer review committee and the PRPA’s evidentiary privilege is reserved only for the proceedings and documents of a review committee. MVH had previously stated that Dr. Walther acted as a “separate” peer review committee for the ERMI-supplied emergency department physicians, which led the court to conclude that Dr. Walther had conducted peer review activities as an individual. Based on the majority’s interpretation of the PRPA, individuals conducting peer review may qualify as a “review organization” but not as a “review committee” engaging in peer review.

Notably, the court further explained that the PRPA does not extend its grant of the evidentiary privilege to the category of review organization enumerated in the second sentence of the statutory definition of “review organization.” This category includes “any hospital board, committee or individual reviewing the professional qualifications or activities of its medical staff or applicants for admission hereto.” The court expressly identified credentials review as falling outside the scope of peer review privilege under the PRPA.

The court then addressed the argument that the performance files were entitled to peer review protection because the hospital had contracted with ERMI to perform its peer review activities. MVH pointed out that this type of relationship was very common, and hospitals would struggle to survive if they were not able to contract with outside entities like ERMI to fulfill peer review responsibilities. MVH argued that ERMI was contractually bound to perform peer review activities on its behalf. However, the court found this argument lacked merit because it was inconsistent with earlier arguments made by ERMI and unverifiable since neither MVH nor ERMI had thought to include the emergency services contract in the record. Although the Court recognized that no statutory provision exists to preclude a hospital from entering into a contact with a staffing and administrative services entity to conduct peer review services for the hospital’s peer review committee, it refused to consider the issue without conclusive documentary evidence.

In a dissenting opinion, Justice Wecht found the conclusions made by the lower courts and the majority to be at odds with the intent of the legislature in creating the peer review privilege. The dissent found that ERMI did, in fact, qualify as a professional healthcare provider and went on to say that “the majority’s contrary interpretation guts the privilege, given that such contractual staffing and administrative agreements are commonplace.” Justice Wecht also expresses concern about the destabilizing effect of the majority’s reliance on “less than clear” statutory definitions.

This decision has significant implications for healthcare providers in Pennsylvania, especially hospitals and physician groups that contract with outside entities to perform peer review activities. The Supreme Court left the question open as to whether such relationships are permitted and whether the PRPA would apply to peer review documents produced by an outside peer review entity on a provider’s behalf. Therefore, hospitals should carefully evaluate any contracts related to peer review services to make sure that the provisions clearly spell out that such services are performed on the hospital’s behalf. Hospitals may also want to evaluate policies and procedures relating to credentials review as the majority opinion seems to have eliminated the evidentiary privilege for such review activities, finding them to be outside of the scope of peer review protection.

Lisa Clark is a partner in Duane Morris’ Healthcare Law practice with specific focuses in health information technology, regulatory compliance and reimbursement matters for hospitals, physicians and other healthcare providers; software developers and investors in HIT and healthcare products and services; and subcontractors and vendors providing services to the healthcare industry.

Samantha Dalmass is a law clerk at Duane Morris, currently pursuing her J.D. and a Master of Public Health at Drexel University.

February 8, 2018February 9, 2018 by Duane Morris

False Claims Act Enforcement Activity Continues

By Susan V. Kayser

New U.S. Department of Justice (DOJ) statistics released in January 2018 show that False Claims Act (FCA) whistleblowers who are not joined by the DOJ in their lawsuits reaped $898 million in proceeds in 2017, far greater than the $425 million initially reported by the DOJ. However, in a coincidental turn of events, just hours after the new statistics were released a Florida federal court judge overturned a $350 million FCA verdict against a nursing home operator, Salus Rehabilitation, LLC. Accordingly, the DOJ statistics will likely be revised again to reflect 2017 proceeds of $548 million for whistleblowers.

The ruling in the Salus Rehabilitation case is itself worthy of attention. The Salus whistleblower alleged record-keeping violations and a scheme to boost Medicare and Medicaid reimbursement by exaggerating the medical needs of nursing home residents. Overriding a jury verdict, U.S. District Court Judge Steven D. Merryday ruled that a whistleblower’s allegations that the provider defrauded Medicaid were not sufficient to sustain a hefty FCA judgment. He wrote “… the evidence and the history of this action establish that the federal and state governments regard the disputed practices with leniency or tolerance or indifference or perhaps with resignation to the colossal difficulty of precise, pervasive, ponderous, and permanent record-keeping in the pertinent clinical environment.”

In making his ruling, Judge Merryday relied heavily on Universal Health Services v. Escobar, a 2016 U.S. Supreme Court ruling that established a set of requirements that must be met before a FCA judgment can be brought against a provider. Among the requirements are that the government and whistleblowers must show the government would not have paid the underlying claims if it knew of the regulatory violations alleged. The Escobar decision found that continued government reimbursement after fraud allegations are made is strong evidence that the allegations are not material. Judge Merryday noted that in the Salus case the government continued to pay for services rendered and stated that the whistleblower did not provide enough evidence to prove that Medicaid reimbursement would have stopped even if the government were aware of paperwork problems at the Salus facility. Clearly, the Salus decision is a victory for providers.

February 7, 2018February 7, 2018 by Duane Morris

New York Times Critical of Nursing Home Arrangements with Related Companies

By Susan V. Kayser

The New York Times reported on January 2, 2018, that according to financial disclosures to Medicare, nursing home contracts with related companies accounted for $11 billion of nursing home spending in 2015. According to the report, this amounts to a tenth of nursing home costs. The basis of the Times report was an analysis undertaken by Kaiser Health News. The Times article, which focused on care problems encountered by a family at a New York nursing home, was critical of related-company arrangements, saying that they allow nursing home owners to arrange contracts where the nursing homes pay more than they might in a competitive market. Further, the article said, owners can “siphon off” profits that are not recorded on the nursing home’s books. The Times report stated that the Kaiser Health News analysis found that nursing homes doing business with related companies (1) employ, on average, 8 percent fewer nurses and aides; (2) were 9 percent more likely to have hurt residents or immediate jeopardy findings; (3) had 53 substantiated complaints for every 1,000 beds, compared with 32 per 1,000 beds where no related party arrangements were in place; and (4) were fined 22 percent more often for serious health violations and penalties at an average of $24,441, a rate 7 percent higher than homes with no related-party arrangements. The Kaiser analysis also found that for-profit nursing homes use related company arrangements more frequently than nonprofit corporations.

February 7, 2018February 7, 2018 by Duane Morris

New SAMHSA Rule Allows Disclosure of Patient Substance Use for Payment, Healthcare Operations

By Lisa W. Clark and Erin M. Duffy

On January 3, 2018, the Substance Abuse and Mental Health Services Administration (SAMHSA) finalized revisions to the Confidentiality of Substance Use Disorder Patient Records regulations, found in 42 CFR Part 2. The new final rule implements the changes proposed a year ago by SAMHSA in its supplemental notice of proposed rulemaking (SNPRM), which was issued alongside the first major changes to the federal regulations governing Part 2 covered data since 1987. After receiving public comment on the SNPRM, SAMHSA has finalized provisions relating to the disclosure of patient-identifying substance use information for payment and healthcare-related purposes and the disclosure of patient-identifying substance use information for the purposes of carrying out a Medicaid, Medicare or Children’s Health Insurance Program (CHIP) audit or evaluation. The new final rule also permits lawful holders to issue an abbreviated notice of the prohibition on redisclosure to accommodate electronic health record systems with standard character limitations on free text fields.

Read the full story on the Duane Morris LLP website.

April 14, 2017 by Duane Morris

Healthcare Fraud Takedowns

As a former federal prosecutor in Chicago, I am well acquainted with the phrase “takedowns.” For the unwary, a subject-area “takedown” is a practice used by federal prosecutors to send a message to a given industry. Prosecutors investigate and prepare to charge cases in a given industry sector and then release the charges nationally on the same day along with a press release. The idea is that such public “takedowns” serve as a deterrent to future criminal activity in the industry. For example, almost every April 15th, prosecutors across the country release charges in dozens of tax-fraud cases.

Recently, this practice has expanded into the healthcare industry. See more on the The Department of Health and Human Services Office of Inspector General website. In June 2016, there was the largest healthcare fraud takedown in DOJ history – prosecutors charged more than 300 defendants in 36 federal judicial districts (and this does not even include civil fraud investigations).

To read the full text of this blog post, please visit the Duane Morris White-Collar Criminal Law Blog.

October 3, 2016 by Duane Morris

CMS Arbitration Rules

By Susan V. Kayser

CMS has released the final version of a broad-based proposed rule update that will take effect November 28, 2016. One of the most notable provisions is a prohibition on including a mandatory arbitration provision in a nursing home admission agreement. Long a bone of contention, with strong advocacy efforts on each side of the question of whether such mandatory clauses should be allowed, it remains to be seen whether the rule will be challenged in court. Those against mandatory arbitration say it deprives individuals of their day in court; those in favor say there are benefits, including less expensive and quicker resolution of claims.

Only admissions agreements of future residents will be affected by the new rule. Providers should note too that arbitration clauses are not banned altogether. In a blog post on September 28, 2016, Acting CMS Administrator Andy Slavitt stated “[f]acilities and residents will still be able to use arbitration on a voluntary basis at the time a dispute arises.” He went on to say that “[e]ven then, these agreements will need to be clearly explained to residents, including the understanding that these arbitration agreements are voluntary, and that these agreements should not prevent or discourage residents and families from talking to authorities about quality of care concerns.”

The new rule includes a number of other new or modified provisions, which according to CMS were designed to set higher standards for quality and safety in long-term care facilities and protect and empower residents, with a focus on preventing abuse and neglect in facilities.

August 22, 2016 by Duane Morris

Duane Morris’ Michael E. Clark to Present at ABA’s Third Medical Device & Healthcare Technology Compliance Institute

Duane Morris special counsel Michael E. Clark will serve as program chair and moderate the panel discussion, “Yates Memorandum: The New Normal?” during the American Bar Association’s (ABA) Third Medical Device & Healthcare Technology Compliance Institute, to be held on October 13–14, 2016, in Washington, D.C. Mr. Clark’s presentation will take place on Thursday, October 13, at 9:00 a.m.

The session will feature a discussion of the Department of Justice’s new policy to prosecute corporate executives with a focus on the ethical considerations of representing corporations and executives. There will be an emphasis on ethical considerations, including scope of representation, client identification and duties. CLE Ethics Credit is available.

For more information, please visit the event listing on the Duane Morris website.

June 27, 2016September 12, 2018 by Duane Morris

SCOTUS Strikes Down Texas Statute in Whole Woman’s Health v. Hellerstedt

In a 5-3 decision today, the Supreme Court of the United States in Whole Woman’s Health v. Hellerstedt, No. 15-275, slip op. (June 27, 2016) reversed a decision of the Fifth Circuit and overturned as unconstitutional a Texas law that (1) required abortion providers to have “active admitting privileges” at a hospital within 30 miles of the location at which they provide abortions and (2) required abortion facilities to meet standards adopted for ambulatory surgery centers. The Court wrote that each of the requirements “places a substantial obstacle in the path of women seeking a previability abortion, each constitutes an undue burden on abortion access, and each violates the Federal Constitution.” A team of Duane Morris attorneys, including Philip H. Lebowitz, Erin M. Duffy, Katharyn I. Christian McGee, Alison Taylor Rosenblum, and Erica Fruiterman, filed an amicus curiae brief on behalf of medical staff professionals in support of petitioners Whole Woman’s Health et al. In its decision, the Supreme Court cited Duane Morris’ amicus brief, noting, “Other amicus briefs filed here set forth without dispute other common prerequisites to obtaining admitting privileges that have nothing to do with ability to perform medical procedures.” The brief was one of only a handful of amici curiae briefs cited in the decision out of a total of 41 such briefs filed on behalf of petitioners.

March 29, 2016March 30, 2016 by Duane Morris

Hackers Unleash “Ransom” Attack on Health System, Forcing It to Shut Down Computer Systems

By Duane Morris partner Lisa W. Clark

On March 28 MedStar Health, the largest health system in the Washington, D.C. area, shut down its computer systems, including its electronic health records, on account of an apparent “ransom” attack in which the hackers infected its system with a virus. From media reports, it appears that the hackers demanded an unknown sum to stop the malware attack. The FBI is already involved. This incident, following February’s successful ransom attack on Hollywood Presbyterian Medical Center, reinforces the need for strong data security protection as well, as an incident response plan that includes law enforcement.