President Obama Appoints New Head of CMS

Identity Theft “Red Flags” Rule Treating Doctors Like Banks Is Delayed Once Again

(July 5, 2010): The Federal Trade Commission (FTC) has agreed to once again delay enforcement of its illogical and onerous “Red Flags” rule with respect to physicians. 

The “Red Flags” rule arises under the Fair and Accurate Credit Transactions Act of 2003 and requires “financial institutions” and “other creditors” to develop written plans to detect identify theft in their day-to-day operations.  Under the FTC’s interpretation of the rule, physicians who permit patients to pay after they have rendered medical service are transformed into “creditors.”

Extension of the rule to physicians has been delayed several times as the extent of the burden on health care providers has become clear.  As recently as May 28, the FTC made note of the concerns:

 “At the request of several Members of Congress, the [FTC] is further delaying enforcement of the ‘Red Flags’ Rule through December 21, 2010, while Congress considers legislation that would affect the scope of entities covered by the Rule….The Commission urges Congress to act quickly to pass legislation that will resolve any questions as to which entities are covered by the Rule and obviate the need for further enforcement delays.”

The June 25^th agreement arises in connection with a suit filed against the FTC last month by the American Medical Association (AMA) and others seeking to prevent enforcement of the “Red Flags” rule and alleging that the FTC overreached its bounds in seeking to enforce the rule against physicians.   A similar complaint by the American Bar Association (ABA) is currently making its way through the appeals process after the U.S. District Court for the District of Columbia enjoined enforcement of the rule against lawyers.  Until a ruling is issued in the ABA case, the AMA case will be held in abeyance and physicians will be safe from the “Red Flags” rule.

Should you have any questions regarding these issues, don’t hesitate to contact us.  For a complementary consultation, you may call Robert W. Liles or one of our other attorneys at 1 (800) 475-1906.

GAO Testimony Recommends Stronger Contractor Oversight to Prevent Medicare Fraud, Abuse, and Waste

(June 23, 2010): In her June 15, 2010 testimony before Congress, GAO Health Care Director Kathleen M. King made clear that the Centers for Medicare & Medicaid Services (CMS) continue to face substantial challenges to preventing Medicare and Medicaid fraud, waste, and abuse.  Among the most significant of these challenges is lack of adequate oversight of the myriad contractors CMS relies on to process, pay, and audit the millions of daily Medicare claims.

King raised specific concerns about the national recovery audit contracting program’s failure to provide adequate post-payment review of large categories of claims.  Recall that recovery audit contractors (RACs) are private bounty hunters. 

“Because RACs are paid on a contingent fee based on the dollar value of the improper payments identified, during the demonstration RACs focused on claims from inpatient hospital stays, which are generally more costly services.” 

Therefore, GAO recommends that CMS direct othercontractors to focus on items and services known to have high levels of improper payments, such as home health and durable medical equipment.   What was it that RACs were supposed to be doing again?  Recall too that experience has shown that both ZPICs and PSCs do not necessarily strictly adhere to medical review standards established by CMS.  Instead, we have seen these contractors apply their own unwritten standards, often denying claims based on conjecture and speculation.

Finally, King’s testimony suggests that the RAC program alone does not resolve known improper payment vulnerabilities.  Where RACs have identified vulnerabilities, CMS still lacks policies and procedures to ensure that it “promptly (1) evaluates findings of RAC audits, (2) decides on the appropriate response and a time frame for taking action based on established criteria, and (3) acts to correct the vulnerabilities identified.”  GAO’s recommendations in this respect seem to fall under the category of “This isn’t happening now?” 

Should you have any questions regarding these issues, don’t hesitate to contact us.  For a complementary consultation, you may call Robert W. Liles or one of our other attorneys at 1 (800) 475-1906.

Counsel for HHS-OIG Discusses the Impact of Health Care Reform on Enforcement with Congress

(June 22, 2010):  In his testimony last week before the Health and Oversight Subcommittees of the House Committee on Ways and Means, Lewis Morris, Chief Counsel to the Inspector General (OIG) of Health and Human Services (HHS), emphasized the increasing speed and intensity of HHS-OIG’s multi-pronged health care fraud enforcement efforts.  Morris’ testimony reinforces the need for Medicare providers and suppliers to aggressively prepare for a knock on the door from HHS-OIG or one of its many enforcement partners.

Morris highlighted numerous new enforcement tools available under the Patient Protection and Affordable Care Act (PPACA), paying particular attention to innovations in data access and use.  These measures include consolidating and sharing data across agencies, as well as deploying new technology that allows “investigators to complete in a matter of days analysis that used to take months with traditional investigative tools.” 

He further praised the enhanced accountability measures contained in PPACA, such as HHS-OIG’s ability to impose civil monetary penalties for “failing to grant [upon reasonable request] timely access to HHS-OIG for investigations, audits, or evaluations.”  Notably, PPACA Section 6408 provides for a penalty of $15,000 for each day for failure to grant access.

Morris’ testimony also reminded the health care community that:

• PPACA allows the HHS Secretary to suspend payments to providers or suppliers based on credible evidence of fraud.  At the same time, it expands the types of conduct constituting Federal health care fraud offenses under Title 18.
• HHS-OIG has improved access to information from entities directly or indirectly involved in providing medical items or services payable by any Federal program.

Perhaps most significantly:

• Medicare and Medicaid program integrity contractors (i.e., ZPICs and PSCs) are required to provide performance statistics, “including the number and amount of overpayments recovered, number of fraud referrals, and the return on investment of such activities.” (emphasis added).

 While not surprising, it is nonetheless disconcerting that ZPICs and PSCs are essentially being “graded” based on the “amount of overpayments recovered,” along with the number of enforcement actions handled and referred to law enforcement.  Based on these performance measures, is there any real difference between ZPICs and RACs?  While RACs may be compensated directly based on the amount of overpayments collected (and ZPICs are not), it is crystal clear that the government’s expectations of ZPICs are quite similar.  Now, more than ever before, it is essential that providers implement effective compliance measures to cover their practices and clinics.

Should you have any questions regarding these issues, don’t hesitate to contact us.  For a complementary consultation, you may call Robert W. Liles or one of our other attorneys at 1 (800) 475-1906.

President Obama Publicizes Measures to Fight Health Care Fraud. . . Again. . .

(June 8, 2010):  For those of you who missed the first two dozen pronouncements (okay, perhaps a little exaggerated, but still . . . we the message when Congress made it a False Claims Act violation to hold onto a mere overpayment for more than 60 days), President Barack Obama has again expressed his concern about health care fraud in a national Town Hall video teleconference with Senior Citizens across the country.  He took this opportunity to further publicize his “national campaign to combat fraud and misinformation” regarding the Medicare program and the Affordable Care Act.

As President Obama reiterated, the current Administration is committed to fighting health care fraud.  To that end, the following steps have been taken:

The President has directed HHS to cut the improper payment rate, which tracks fraud, waste and abuse in the Medicare Fee for Services program, in half by 2012.

 The Administration has helped support a renewed partnership between the Federal government and state Attorneys General. Secretary Kathleen Sebelius and Attorney General Eric Holder today sent a letter to state Attorneys General urging them to vigorously prosecute criminals who seek to steal from seniors and taxpayers and pledged the support of federal officials for state efforts.

 A nationwide series of anti-fraud summits hosted by the Departments of Justice and Health and Human Services will bring federal, state and local officials together with representatives from the private sector to discuss tactics to fight fraud. The first summit will be held in Miami with additional summits in Los Angeles, Las Vegas, Detroit, Boston, New York, and Philadelphia.

 A redoubling of efforts by U.S. Attorneys nationwide to coordinate with state and local law enforcement to prevent and prosecute fraud. Today, Attorney General Holder called on U.S. Attorneys to hold regular forums with local officials to discuss how to better crack down on criminals who commit fraud.

 Notably, the current administration’s focus on health care fraud enforcement is reminiscent of the major initiatives rolled out during the President Clinton’s terms in office.  As you may recall, Attorney General Reno named “Health Care Fraud” as the Department of Justice’s “#1” white collar priority.  While many voters tend to associate Republicans with “pro-law enforcement” and “anti-fraud” measures, the Democrats have clearly led in the area of health care fraud enforcement.  While the government’s review of Medicare billings have been broad-based, health care providers in Florida, Louisana, Texas and Tennessee appear to be expecially hard hit.  Medicare claims have been (and are continuing to be) audited by  ZPICs and PSCs througout the South.  Regrettably, in many cases we have found that the contractors’ audit findings have been severely flawed, failing to properly the LCD’s provisions, missing key information in the medical records submitted by the health care provider for review and asserting conclusions that are unsupported by any evidence in the case.    As a result, providers have been forced to appeal the ZPIC / PSC denial decisions through the administrative appeals system, a time-consuming and expensive process.

In any event, the message is quite clear – the current administration has been, and will continue to be, extremely aggressive in its efforts to identify and pursue both alleged overpayments and instances of health care fraud.  Unfortunately, with recent changes to the False Claims Act and the Federal Anti-Kickback Statute, incidents that might have otherwise qualified as a mere overpayment may be viewed quite differently today by Federal prosecutors. Health care providers should diligently work to ensure that their operations, coding and billing activities fully comply with statutory and regulatory requirements.

Should you have any questions regarding these issues, don’t hesitate to contact us.  For a complementary consultation, you may call Robert W. Liles or one of our other attorneys at 1 (800) 475-1906.

Part I: The Fiduciary Duties of Officers and Directors of Insolvent Corporations

(April 23, 2010):  Many health care providers are in a fight for financial survival.  Ever-decreasing reimbursement costs, coupled with increasing costs and expanding contractor audits of Medicare billings have put many providers out of business.  As a Firm, we do what we can to defend health care providers who are being subjected to subjective audits, many times years after the services were rendered.  Unfortunately, sometimes we are called in too late to assist.  We were recently contacted by a company on the verge of insolvency.  David P. Parker, a corporate attorney here, was asked to address the fidcuciary duties of Officers and Directors.  Over the next few days, Mr. Parker will be posting several articles examing the  fiduciary duties of Officers and Directors of insolvent corporations and corporations operating in the so called “Zone of Insolvency.”

Part I:  The Fiduciary Duties of Officers and Directors of Insolvent Corporations

In the United States, corporations are creatures of state law, and the fiduciary duties of a corporation’s directors are defined by its state of incorporation. Many U.S. corporations are incorporated in the state of Delaware, which has a strong tradition of well-developed corporate jurisprudence.   There may, however, be differences between Delaware law and the laws of other states within the United States.  In general, Directors of solvent corporations have two basic “fiduciary” duties, the duty of care and the duty of loyalty, owed to the corporation itself and the shareholders. Directors must act in good faith, with the care of a prudent person, and in the best interest of the corporation. Directors must also refrain from self-dealing, usurping corporate opportunities and receiving improper personal benefits.  Decisions made by a Director on an informed basis, in good faith and in the honest belief that the action was taken in the best interest of the corporation will be protected by the “business judgment rule.”  Generally, officers owe the same fiduciary duties as directors.

 It has long been settled that under ordinary (i.e., solvent) circumstances, shareholders typically have only a derivative (and not direct) right to sue for breach of the fiduciary duties of directors. If they do bring suit against directors, they must do so on behalf of the corporation, and any proceeds of those suits are for the benefit of the corporation.

 The Delaware Supreme Court in Catholic Educ. Programming Found., Inc. v. Gheewalla opined that upon insolvency, creditors (who have, after all, taken the place of shareholders as the de facto owners) may likewise bring only derivative – and not direct – suits on behalf of the corporation against directors

The Next “Patient” You See May be an Undercover Physician Auditing Your Practice.

(April 11, 2010): As the American Medical Association (AMA) recently reported on March 22^nd, health care providers may find themselves subjected to “Secret Shopper” audits by fellow providers hired by the government conduct reviews and investigations.

In a speech he made March 10^th, President Obama expressed interest in a proposal by Senator Tom Coburn, M.D. (R-OK) to have physicians and other health professionals go undercover and pose as patients to root out fraud. Apparently, President Obama included it among with several other Republican proposals which were considered when the recently passed Health Care Reform Bill was enacted.  Dr. Coburn tried to amend the Senate health reform bill with a provision that would direct the Department of Health and Human Services to establish a demonstration project for undercover investigations.  While a number of demonstration projects were ultimately included in the legislation, it isn’t clear if this is one of them.

Not surprisingly, the AMA has dismissed the idea of paying physicians to pretend to be patients in an effort to smoke out criminal activity.  As the AMA responded:

“The AMA has zero tolerance for health fraud, but there’s no evidence that the undercover-patient tactic would be effective or efficient in finding fraud. . . We are partnering with HHS and the Justice Dept. to address fraud, and we strongly recommend the government target areas where fraud occurs most, instead of wasting physician time that could be better spent caring for real patients.” (AMA President J. James Rohack, M.D.)

Notably, “Secret Shopper” audits and investigations are nothing new.  Both HHS and DOJ have used individuals posing as patients or employees in investigations for as long as health care fraud has been prosecuted by the government.

From a compliance standpoint, this could present a number of additional risks, not normally encountered in a standard billing and coding audit.  This could implicate a variety of E/M related issues.  Moreover, this may raise quality of care issues not otherwise covered in a routine audit.

The unknown issue at this point is whether HHS-OIG and / or  CMS may try and expand the use of “Secret Shoppers” beyond the traditional boundaries of law enforcement.  Currently, although ZPICs, PSCs and MICs may show up at a provider’s door seeking copies of documentation and answers to questions, they readily identify themselves when they arrive.  Our client’s have expressed concern about ZPICs and RACs using a variation of the “Secret Shopper” scenario in yet another attempt to identify possible subjects for audit.

Should you have any questions regarding these issues, don’t hesitate to contact us.  For a complementary consultation, you may call Robert W. Liles or one of our other attorneys at 1 (800) 475-1906.

Medicare Audits: Is There an Unintended Aspect to RAC Behavior That May Benefit Some Providers? Are RACs Looking the Other Way When They Run Across Evidence of Fraud?

(March 13, 2010): When debating the the fundamental unfairness of the RAC program — one interesting point was heavily discussed.  As recently reported, CMS is now “training” RACs to identify and report evidence of fraud that may be identified as they conduct medical reviews.   The government’s recent interest in making sure that they properly trained likely stems from the fact that they reported a mere handful of possible fraud case to the government, despite the fact that the program is far from new at this point.  The reason for their hesitation is clear — it’s either a mere overpayment (and they can keep part of the recovery) or it’s something more serious, possibly requiring referral to HHS-OIG or DOJ.  Keep in mind, RACs are a private enterprise seeking to make money.  While no one is questioning that they mean well and want to be good corporate citizens, the fact remains that a fraud referral very well may mean that they don’t recovery for an otherwise good case.  In the RAC context, the term “improper payments” does not mean fraud. Honest billing errors, poor documentation, or even the lack of a doctor’s signature on a visit note could prompt Medicare or a RAC to claim that a provider had been overpaid and to demand reimbursement. Providers accused of fraud, by contrast, are suspected of intentionally overbilling the government. If convicted, they not only have to return the money but could be subject to jail time for the worst offenses.

RACs are supposed to alert the appropriate authorities when they encounter fraud. However, RACs have no incentive to do so.  Remember RACs are bounty hunters.  RACs do not get paid for telling the government that they have uncovered fraud.  Think about this, because Medicare prohibits RACs to continue reviewing billings from a provider suspected of fraud, the RAC can actually lose money by making fraud allegations.

Naturally, RACs referred only two cases of suspected Medicare fraud during from 2005 to 2008.  Although a new report from the Department of Health and Human Services indicates that RACs are being trained on fraud detection and where to refer fraud cases, the financial deterrent is still there.

Just a thought . . .

Should you have any questions regarding these issues, don’t hesitate to contact us.  For a complementary consultation, you may call Robert W. Liles or one of our other attorneys at 1 (800) 475-1906.

You’ve Got to be Kidding. . . the Government Wants More “Bounty Hunters” Conducting Medicare Audits?

(March 12, 2010): Yesterday, the White House announced that President Obama  intends to back additional bipartisan plans to stamp out waste in government-run medical programs for the elderly and needy.  The White House said this new effort to root out improper payments in the Medicare and Medicaid programs could double taxpayer savings over the next three years to at least $2 billion.

“We cannot afford nor should we tolerate this waste of taxpayer dollars,” the White House said.   The government believes that approximately $54 billion was lost through improper Medicare and Medicaid payments in 2009. Medicare is the government-run program covering elderly Americans and Medicaid is for the country’s poorest.

President Obama is seeking to crack down on waste and fraud as his administration strives to secure an overhaul of the $2.5 trillion healthcare system to contain costs and expand coverage to tens of millions of more Americans.  The action endorses Republican-backed proposals on alleged health care wrongdoers.

Similar to the current RAC reimbursement scheme, the proposed new plan will offer private auditors a share of the money that they recoup in order to encourage them to work harder to uncover improper payments under Medicare and Medicaid.   President Obama is also expected to back bipartisan legislation to expand the ability of government agencies to undertake these so-called payment recapture audits by providing more funds.  No additional information on how this will impact CMS was given.

As many health care providers will readily attest, over the past year, it appears that there has been a marked increase in PSC and ZPIC audits, almost all of which are accompanied by demands for extrapolated damages.  Once again, this points to the importance of self-assessment and an effective compliance strategy.  Asked to comment on this new “risk” to health care providers, Robert W. Liles, Managing Partner at Liles Parker, Attorneys and Counselors at Law, responded:

”Our firm has represented a number of health care providers around the country.  We have aggressively fought to have improper claims denial overturned.  This new risk will increase the likelihood that providers who have not been subjected to RAC audits in the past may now find themselves being examined by RAC-like auditors in the future.  Coupled with existing PSC and ZPIC audits, sole practitioners, small practice groups and clinics will find their coding and billing practice under the spotlight.  Unfortunately, based on recent cases we have handled, it appears that PSCs and ZPICs are increasingly imposing their own views regarding what is required, well beyond the four corners of CMS-authorized provisions set out under LCDs and LMRPs covering the services at issue.  Fortunately, when faced with the facts, ALJs have applied a reasonable approach and most of the claims at issue have been found to be payable.  We recommend that health care providers carefully review their documentation practices to lessen the likelihood that ZPICs, PSCs, RACs and these new third-party reviewers can successfully argue that the claims don’t qualify for coverage.”

Should you have any questions regarding these issues, don’t hesitate to contact us.  For a complementary consultation, you may call Robert W. Liles or one of our other attorneys at 1 (800) 475-1906.

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