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September 2011 Health Law Update

September 30, 2011

RAC Audits Extended to Medicaid Program

The Medicare Recovery Audit Contractor program was established by The Tax Relief and Health Care Act of 2006 to prevent improper Medicare payments in all 50 states.  The program has been a success in preventing waste.  This year alone, approximately $668 million has been recovered by the program. Because of the success of the program, the Department of Health and Human Services issued a final rule on September 13, 2011 establishing the RAC program for Medicaid.  According to HHS, the rule is intended to provide "guidance to States related to Federal/State funding of State start-up, operation and maintenance costs of Medicaid Recovery Audit Contractors (Medicaid RACs) and the payment methodology for State payments to Medicaid RACs." The rule also "directs States to assure that adequate appeal processes are in place for providers to dispute adverse determinations made by Medicaid RACs."  The rule becomes effective January 2, 2012.

Attorney General Holder Announces Major Health Care Fraud Takedown

On September 7, 2011, Attorney General Eric Holder announced that the Medicare Fraud task force, HEAT (a joint effort between the U.S. Department of Justice (DOJ) and the U.S. Department of Health and Human Services (HHS) created in May of 2009), indicted 91 defendants for almost $300 billion in false Medicare billings. According to Attorney General Holder, the indictments handed down against doctors, nurses and health care company owners and executives involve violations of anti-kickback statutes, money laundering, and billing for services that were not medically necessary or were not provided.  This is the highest dollar amount targeted in one single takedown since the HEAT task force was created.  According to the announcement, to date, HEAT's Strike Force operations have charged over 1,140 defendants who have allegedly falsely billed $2.9 billion. Medicare Strike Force teams are now in 9 cities across the country using sophisticated methods to detect Medicare Fraud.

Affordable Care Act Update

Earlier this summer, the U.S. Department of Health and Human Services (HHS) issued an interim final rule that began the process of correcting inefficient health care practices under the Affordable Health Care Act of 2010.  According to a study published in the June 2010 Health Affairs, physicians spend 12% of their patient revenue to cover the administrative costs of third party billing.  The recently enacted rule specifically targets this inefficient billing system by putting in place operating rules for electronic health care transactions that will enable providers to more easily determine whether a patient is eligible for coverage, and the status of a health care claim submitted to an insurer.  These rules will further provide more information concerning the patient and his/her coverage to the physician's office, which will serve to eliminate the need for multiple interactions (telephone calls, postage, paperwork, etc.) between the provider and the health plans.  This, in turn, will allow physicians and their staff to spend more time on patient care.  The interim final rule issued on June 30 requires compliance by health plans, health care clearinghouses, and certain health care providers by January 1, 2013.  According to HHS these rules will save an estimated $12 billion for physicians, other health providers, and health insurance companies by reducing transaction costs over the next 10 years.

HHS indicates there are more rules, under the Affordable Care Act, soon to be implemented to continue its efforts to reduce health care costs. The rules include:

  • Standards and operating rules for electronic funds transfer and remittance advice;
  • A standard unique identifier for health plans;
  • A standard for claims attachments; and
  • Requirements that health plans certify compliance with all HIPAA standards and operating rules. 


Texas Teaching Hospital and California Medical Billing Services Company Settle Federal and State False Claims Charges

It was announced in early September 2011 that Texas Southwestern Medical Center at Dallas settled False Claims Act and Texas Medicare Fraud Prevention Act charges with both federal and state governments for $1.4 million.  Without admitting liability the Medical Center settled charges that it fraudulently up-coded Medicare and Medicaid claims for surgeries that were performed by residents supposedly under the supervision of physicians.  The investigation allegedly uncovered several such surgeries between 2004 and 2007 where no physician was present during the critical portion of the surgeries.  Authorities began investigating upon the filing of a whistleblower lawsuit by the former chairman of the Burns, Trauma and Critical Care Division of the Medical Center.

Also in early September 2011 the Department of Justice announced that a California medical billing service, Janzen, Johnston & Rockwell Emergency Management Services, settled allegations for $4.6 million that it had submitted false claims to Medicare and Louisiana's Medicaid programs between 2000 and 2007.  The government alleged that JJ&R overinflated claims it made on behalf of ER physicians by using a coding formula that generated claims for a higher level of evaluation than the physicians provided. Also, JJ&R added charges to the claims for minor services when those services were never provided. 

Medicare Sustainable Growth Rate (SGR) Suspended

The Medicare Sustainable Growth Rate (SGR) is a formula currently used by the Centers for Medicare and Medicaid Services (CMS) to determine adjustments for physician reimbursement.  The SGR was implemented by the Balanced Budget Act of 1997 to amend Section 1848(f) of the Social Security Act. For the past few years the SGR reached levels that, if implemented, would require severe cuts to physician reimbursement under Medicare.  Such cuts, physicians' groups argue, could likely lead physicians to turn away new Medicare patients and could deter physician practices from investing in new technology. In response, Congress and President Obama, in 2010, signed legislation that stopped the cuts to physician reimbursement.  The Medicare and Medicaid Extenders Act of 2010 prevented a 25% decrease in Medicare reimbursements from taking effect on January 1, 2011, and extended the delay until January 1, 2012. This is certainly in line with the trend over the past several years.  The CBO recently announced projections to reduce the deficit from $6.7 trillion to $3.5 trillion for 2012-2021.  The projections assume that "spending for Medicare will be constrained by ... the sustainable growth rate. "  Approximately $300 billion in the CBO's projected reductions over that time comes from SGR cuts, including physician fee reductions that could reach almost 30%.  Physicians and physician groups should be aware that in this climate of cost recovery and spending reduction, physician reimbursement cuts remain a viable option.

Upcoming News & Events

  • Kevin E. Raphael, Esq. authored a book chapter entitled "The Expanding Scope of, and Strategies for, Health Care Litigation in the Fraud, Abuse, and Waste Arena" which was published in Health Care Litigation Strategies.
  • Kevin E. Raphael, Esq. authored the article "Crimes and Misdemeanors: The Intersection of Health Care Law and Ethics" for the Pennsylvania Bar Association Quarterly, published in July.
  • Tyler J. Smith, Esq. will be a presenter at the Symbion Healthcare Clinical Leadership Conference in Nashville, TN on October 11, 2011. Mr. Smith will focus his presentation on risk management, patient safety and adverse event reporting.
  • Kevin E. Raphael, Esq. will be presenting "Defending Against Civil Fraud Actions by Insurance Companies: Emerging Theories of Defense" at PBI's Health Law Institute on March 13 & 14, 2012.
  • Kevin E. Raphael, Esq. authored a book chapter entitled "Investigations" for Medicare and Medicaid Fraud and Abuse in June 2011.