I N T HIS I SSUE HEALTH LAW PERSPECTIVES. What Medicare Providers Should Know About the OIG Work Plan for Fiscal Year 2008.

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1 Celebrating 20 YEARS of excellence HEALTH LAW PERSPECTIVES Newsletter Volume 10, No. 1 What Medicare Providers Should Know About the OIG Work Plan for Fiscal Year 2008 By Abigail Wong January 2008 On October 1, 2007, the Office of Inspector General ( OIG ) in the Department of Health and Human Services published its Work Plan, which outlines the OIG s predicted areas of focus for the coming year. The purpose of the Work Plan is, among other things, to put the health care community on notice of the ways in which the OIG believes that the Department of Health and Human Services programs, primarily Medicare and Medicaid, are vulnerable to fraud, waste and abuse. In this regard, the Work Plan offers a guideline to Medicare providers with respect to their own compliance efforts. Many of the items identified in the 2008 Work Plan have historically been areas of focus for the OIG, such as Medicare disproportionate share hospital ( DSH ) payments and the rules restricting Medicare participating physicians from reassigning benefits. Other items included in the Work Plan, such as the never events, represent new concerns for the OIG. What follows is a summary of the sections of the Work Plan that are most relevant to Medicare providers. Medicare Hospitals Inpatient Prospective Payment System Wage Indices CMS depends upon accurately reported wage data in order to calculate wage indices for the Inpatient Prospective Payment System. The OIG will examine whether Medicare hospitals have properly reported wage data and whether hospital wage indices should be used for other provider types. Inpatient Hospital Payments for New Technologies A Medicare hospital can receive payment for services and technologies that qualify as new under 42 C.F.R , and are shown to be otherwise inadequately reimbursed under the diagnosis-related group (DRG) system. The OIG will examine whether claims for new technologies were appropriately submitted and reimbursed. Medicare Disproportionate Share Payments A disproportionate share hospital (DSH) is an acute care facility that receives additional Medicare payments because it serves a disproportionately high number of low-income Medicare and Medicaid patients. The OIG will review whether DSH payments were properly made. The OIG will also examine the calculation methodology, the hospitals classifications, and the total amount of uncompensated care costs incurred by DSHs. Compliance with Medicare s Transfer Policy A Medicare hospital receives the full DRG payment when it discharges a patient, but receives a graduated per diem rate that is capped at the full DRG rate when it transfers a patient to another facility. The OIG will examine the coding of discharge claims to determine whether the claims should have been coded as transfers. Oversight of the Joint Commission Hospital Accreditation Process Hospitals accredited by the Joint Commission are deemed to have met the Medicare Conditions of I N T HIS I SSUE OIG Work Plan Medicare Highlights Legislative Wrap-up

2 Participation. The OIG will evaluate the extent and adequacy of CMS s policies and procedures regarding the Joint Commission s accreditation process. Other Medicare Hospital Issues The OIG also plans to begin reviewing inpatient capital payments, inpatient psychiatric facility emergency department adjustments, provider bad debts, payments for diagnostic x-rays performed in hospital emergency departments, and Medicare secondary payer issues. The OIG will continue its work reviewing payments to Medicare-dependent hospitals, audit adjustments made by fiscal intermediaries for graduate medical education, payments to organ procurement organizations, and indicators of patient care and safety in physician-owned specialty hospitals. Long Term Care Hospitals Long Term Care Hospital (LTCH) Payments for Interrupted Stays An interrupted stay occurs when a beneficiary is discharged from a LTCH to a certain type of a facility, and then readmitted to the LTCH within a specific period of time. The OIG will determine whether interrupted stay payments to LTCHs were appropriate. LTCH Short Stay Outliers A patient whose stay is well below the average for his or her diagnosis-related group is deemed a short stay outlier. The OIG will review the distribution and payment amounts for short stay outliers, as well as cases that marginally exceeded the short stay threshold. Beneficiaries Who Are Transferred to Onsite Providers and Readmitted to LTCHs Special payment provisions apply when more than five percent of a LTCH s Medicare inpatients are transferred to a colocated provider and then directly readmitted to the LTCH. The OIG will determine whether the special payment provisions were correctly applied. LTCHs Discharging Beneficiaries to Colocated or Satellite Providers Special payment provisions also apply to reduce payments to LTCHs when the LTCH s discharged Medicare inpatient population admitted from a colocated hospital exceeds regulatory thresholds. The OIG will examine whether the special payment provisions were applied appropriately to LTCHs and LTCH satellites. Medicare-Certified Home Health Agencies Cyclical Noncompliance in Medicare Home Health Agencies (HHAs) Every 36 months, CMS must survey the quality of care furnished by each HHA using indicators of medical, nursing, and rehabilitative care. The OIG will compare how compliant and non-compliant HHAs perform on these indicators, and determine whether CMS properly sanctions non-compliant HHAs. Accuracy of Data to the Home Health Compare Web Site The OIG will also determine whether the Home Health Compare Website maintains accurate and comprehensive information on HHAs, and will evaluate how CMS corrects information deficiencies in the database. Medicare Skilled Nursing Facilities (SNFs) SNF Consolidated Billing Medicare suppliers submitting Part B claims for services provided during a Part A covered SNF stay must receive payment from the SNF, not from Medicare. The OIG will continue identifying overpayments in this area, and will also evaluate the effectiveness of CMS s claims-processing software in preventing such overpayments. Oversight of Medicare SNF Cost Reports The OIG will also evaluate whether the cost reports submitted by SNFs meet the requirements set forth in the Provider Reimbursement Manual, and will examine how CMS monitors compliance with SNF cost report requirements. Accuracy of Coding for Medicare SNF Resource Utilization Group Claims As part of its ongoing work in the SNF area, the OIG will review the utilization of Resource Utilization Groups (RUGs) on SNF claims to determine whether the RUGs were properly used and supported by medical records. Part B Services in Nursing Homes The OIG will continue studying Part B services provided to beneficiaries in SNFs in an effort to determine patterns of billing. The OIG will be looking at a variety of Part B services, including durable medical equipment (DME) and enteral nutrition therapy. Medicare Hospice Care Hospice Care for Nursing Home Residents Between 2001 and 2004, Medicare hospice spending increased from $3.5 billion to $7 billion, mostly due to services provided in nursing homes. In order to evaluate the appropriateness of hospice 2 Health Law Perspectives

3 payments in a nursing home setting, the OIG will conduct a medical records review to assess whether the services received by nursing home hospice patients are consistent with their plans of care. Medicare Physicians and Other Health Professionals Place of Service Errors Physicians are reimbursed at a lower rate for services provided in ambulatory surgical centers and hospital outpatient departments, and at a higher rate for services provided in non-facility settings, like physicians offices. The OIG will review claims for services provided in ambulatory surgery centers and hospital outpatient departments in order to assess whether the physician properly coded the place of service. Assignment Rules by Medicare Providers: No Balance Billing Under the Social Security Act, providers who accept a beneficiary s assignment of payment must accept the Medicare allowed amount as payment in full, and cannot bill the beneficiary for any remaining balance. The OIG will evaluate the extent to which providers may be violating this rule. Physician Reassignment of Benefits Under limited circumstances, a provider can reassign its benefits to another entity with which it has a certain contractual relationship. However, OIG investigations have revealed situations where one provider fraudulently requests reassignments on behalf of another provider. The OIG will review a national sample of Medicare physicians to evaluate how frequently there are reassignments of benefits, and how often legitimate physicians are aware of reassignments requested on their behalf. Other Health Provider Issues The OIG also plans to begin reviewing payments for psychiatric services, claims under Medicare Parts A and B for services rendered by clinical social workers in certain settings, Part B claims for selected physician services, claims for polysomnography (sleep study) services, billing patterns in geographic areas with high utilization of ultrasound services, and billing patterns in areas with a high density of independent diagnostic testing facilities (IDTFs). The OIG will continue to review Medicare claims for nonphysician services rendered incident to the professional services of physicians, financial relationships between the parties involved in Magnetic Resonance Imaging (MRI) services, payments for interventional pain management procedures, and payments for questionably frequent chiropractic treatments. Medicare Medical Equipment and Supplies Durable Medical Equipment Payments for Beneficiaries Receiving Home Health Services Medicare will pay for durable medical equipment such as wheelchairs, prosthetics, and orthotics, if such equipment is medically necessary. Due to the questionable DME claims filed in the past, the OIG will continue its work reviewing the medical necessity of DME claims for beneficiaries receiving home health services. Medicare Payments for DME Claims With Modifiers For certain DME items, suppliers must bill using modifiers, which signify that the supplier has the appropriate medical documentation to support its claims, and is willing to provide the documentation upon request. Several DME regional carriers reported that suppliers lacked the required documentation, rendering the suppliers claims invalid. The OIG will evaluate the claims submitted with modifiers to determine whether payments to those DME suppliers were proper. Medicare Payment for Power Wheelchairs The OIG plans to review claims for power wheelchairs to ascertain whether the beneficiaries received the required face-to-face examination. The OIG will also study invoices showing suppliers purchase prices for power wheelchairs, in order to calculate the difference between the suppliers purchase price and the Medicare reimbursement rate set forth in the fee schedule. Other DME Issues The OIG will begin reviewing claims for pressure-reducing support surfaces, as well as Part B claims for home blood glucose test strips and lancets. In addition, for a variety of DME items, the OIG will determine whether the medical provider sufficiently documented the need for the item, whether the items were medically necessary, and whether the beneficiaries received the items. The OIG will also continue to evaluate whether CMS mistakenly paid suspended or excluded DME suppliers. Medicare Part B Drug Reimbursement Drug Prices: ASP, WAMP, AMP The OIG plans to review how pharmaceutical manufacturers calculate the Average Sales Price (ASP) for different drugs in order to determine whether the manufacturers have complied with the Medicare Modernization Act. The OIG will also compare the ASP with the Widely Available Market Health Law Perspectives 3

4 Price (WAMP) and the Average Manufacturer Price (AMP), in order to determine whether the ASP exceeds the WAMP or AMP by more than 5 percent. Other Medicare Part B Issues The OIG will evaluate prescribing patterns for Part B drugs with high reimbursement levels, in order to determine whether those drugs are being billed at excessively high doses. The OIG will also study inhalation drug claims in order to determine whether beneficiaries received a more expensive brand-name drug, instead of a less expensive generic drug. Medicare Part D The Work Plan identifies nearly thirty areas of focus within the Medicare Part D program. Several of those areas are summarized below. Duplicate Claims The OIG will evaluate how CMS prevents duplicate Part D claims for the same Medicare beneficiary. The OIG will also evaluate whether payments for Part D drugs were duplicated under Parts A or B. Specifically, they will review whether CMS sufficiently coordinates Parts B and D to prevent duplicate payments, and whether payments for Part D drugs are erroneously made for patients covered under a Part A SNF stay. Comparing Drug Prices The OIG will compare Part D payment rates to Medicaid reimbursement rates and to Part B average sales prices for the drugs covered under both Parts D and B. Other Medicare Services Therapy Services Provided by Comprehensive Outpatient Rehabilitation Facilities (CORFs) Prior OIG surveys identified significant overpayments for physical therapy, speech therapy pathology, and occupational therapy services provided by CORFs. The OIG plans to evaluate whether payments for these services met the relevant Medicare guidelines, including the requirements of medical necessity, sufficient documentation, and reasonableness. Laboratory Services Rendered During an Inpatient Stay Lab services provided to hospital inpatients are typically reimbursed as part of the hospitals Part A payment. The OIG will evaluate whether Part B payments were appropriately made for certain inpatient laboratory services. Miscellaneous Medicare Services In addition, the OIG will also evaluate the revised ambulatory surgical center payment system, the use of ambulance services to transport end stage renal disease patients, and the pricing variances between the Medicare rate and the federal, state, and private plan rates for clinical laboratory tests. The OIG will continue its work reviewing payments for emergency health services furnished to undocumented individuals, payments for inpatient renal dialysis services, and Part B payments for mental health and psychotherapy services rendered to SNF patients during Part A stays. Medicare Contractor Operations Medicare Appeals Process: Qualified Independent Contractor (QIC) Reconsiderations The OIG will continue evaluating whether CMS is providing proper oversight of the QICs, based on whether the QICs fulfill legal requirements related to decision timeframes and reviewer qualifications. Recovery Audit Contractors (RACs): Reducing Medicare Improper Payments RACs contract with CMS to identify underpayments and collect overpayments. Under certain circumstances, RACs may also receive a portion of assessed overpayments. The OIG will evaluate CMS oversight of the RACs to assess whether they are meeting the contractual standards set forth in the RAC Task Orders. Never Events General Medicare Issues The OIG will study incidences of never events for Medicare beneficiaries, including the extent to which the Medicare program has paid for services related to medical errors falling within the previously identified never events. The OIG will review the administrative process that the Medicare program currently has in place to detect such events and to deny or recover payments for services furnished in connection with such events. Reviewing the Entire OIG Work Plan Medicare providers should review the OIG Work Plan to determine whether their services fall within any of the focus areas identified in the Plan. To view the entire Work Plan, visit: and select Current Fiscal Year. 4 Health Law Perspectives

5 California Legislative Highlights 2007 The table below provides a summary of significant health care-related bills that went through the legislative process in California during For each bill, the table provides the specific bill number, the bill s sponsor in the legislature, the general subject matter of the bill, a brief synopsis of what the bill does, as well as the current status of the bill. Bills that were signed, have been enacted and are now California law. AB 8 Nunez (D) Healthcare Reform Creates the Cooperative Health Insurance Purchasing Program as a statewide purchasing pool for health care coverage by employers, among others. AB 381 Galgiani (D) Medi Cal: Provider Reimbursement AB 398 Feuer (D) Long Term Health Care Facilities: Information AB543 Plescia Surgical Centers: Licensure AB 632 Salas (D) Health Care Facilities: Whistleblower Protection AB 1226 Hayashi (D) Medi Cal: Provider Enrollment AB 1296 Torrico (D) Public Employee Health Benefits: Disclosures AB 1324 Applies a provision of existing law that prohibits a provider under the Medi Cal program from submitting a reimbursement request that contains a beneficiary's social security number to the submission of a request by a provider for beneficiary eligibility. Deletes the limitation on this prohibition to instances in which a request is submitted for payment. Exempts a licensed hospital, long term health care facility, a primary health clinic, emergency medical transportation, or a hospital based physician. Vetoed Requires the Department of Public Health to establish and maintain a consumer information Vetoed service system regarding long term health care facilities. Revises the information the system is required to contain. Requires each skilled nursing facility and intermediate care facility to post the profile that is included within the system. Requires any person, firm, association, partnership, or corporation desiring a license for a Vetoed surgical clinic to meet prescribed operational, staffing, and procedural standards. Prohibits a health facility from discriminating or retaliating against any patient, employee, a member of the facility's medical staff, or other health care worker of the facility because the person has presented a grievance, complaint, or has initiated, participated, or cooperated in an investigation or administrative proceeding relating to the quality of care, services or conditions of the facility. Provides legal remedies for the persons discriminated against. Provides that a physician and surgeon practicing in an individual physician practice and enrolled and in good standing in the Medi Cal program who is changing locations of that practice within the same county is eligible to continue enrollment at the new location by filing a change of location form, in lieu of submitting a complete application package. Provides a procedure for the expedited enrollment in the program. Provides notification requirements for preferred provider status or change of locations. Requires a health benefit plan or contractor, or an entity offering services relating to the administration of health benefit plans to members and annuitants, to disclose to the Board of Administration of the Public Employees' Retirement System the cost, utilization, actual claim payments, and contract allowance amounts for services rendered by participating hospitals, with specified restrictions and disclosure limitations. Deems information confidential, subject to evidentiary trade secret protections. De La Torre (D) Health Care Coverage: Amends existing law that provides a health care service plan or insurer that authorizes a Treatment Authorization specific treatment by a health care provider cannot rescind authorization after the provider renders the service in good faith pursuant to the authorization. Specifies that a health insurer is precluded from rescinding its authorization for any reason, including subsequent rescission, cancellation, or modification of the contract or subsequent determination that it did not make an accurate eligibility determination. SB 211 Cox (R) Seismic Safety: Application Filing Fees SB 275 Cedillo (D) Health Facilities: Patient Transporting Amends the Alfred E. Alquist Hospital Facilities Seismic Safety Act to authorize postponement of the application filing fee's payment if specified requirements are met. Includes a requirement that the construction or alteration has been proposed as a result of any event that has been declared to be a disaster by the Governor. Requires that regulations establishing seismic safety standards for hospital equipment anchorages include standards for architectural, mechanical, and electrical supports. Prohibits a general acute care hospital, acute psychiatric hospital, or special hospital from causing a patient to be transported to a location other than the residence of the patient without the consent of the patient, except when a patient is lawfully transferred to another health facility. Makes a violation subject to civil penalties. Provides civil penalties to be used for transitional housing and mental health counseling for the homeless. Vetoed Health Law Perspectives 5

6 SB 306 Ducheny (D) Health Facilities: Seismic Safety SB 350 Runner G (R) Hospitals: Discount Payment and Charity Care Policies SB 474 Kuehl (D) Medi Cal: Hospital Demonstration Project SB 916 Yee (D) Acute Psychiatric Hospitals: Patient Detention/Release Authorizes phased submission and review agreements. Requires the Office of Statewide Health Planning and Development to prepare and provide a report that details how a specified field review and approval process of health facilities and design will be implemented without undue delay. Authorizes certain hospital owners who do not have financial capacity to bring certain buildings into seismic compliance by a specified date, to replace those buildings by filing a declaration to that effect and a fee. Relates to existing law that requires each hospital to maintain a written policy regarding discount payments for financially qualified patients, as well as a written charity care policy, and defines high medical costs for purposes of determination patient eligibility and hospital interest free extended payment plans. Provides limits for these plans. Provides payment plan extension procedures. Prohibits adverse consumer reporting or an action against a patient until the plan is declared inoperative. (AB 774 Cleanup bill). Modifies the formula for calculating a hospital's adjusted baseline funding amount under the Medi Cal Hospital/Uninsured Care Demonstration Project Act. Requires the Department of Health Care Services to identify and account for federal safety net care pool funds received under a specified health care coverage initiative program, and requires a specified amount of these funds to be deposited in the South Los Angeles Medical Services Preservation Fund. Relates to the distressed hospital fund. Exempts a licensed acute psychiatric hospital that is not a specified mental health facility designated by the county, or a licensed general acute care hospital that is not a mental health facility designated by the county, from civil or criminal liability for detaining a person under certain conditions. Increases the maximum period of detention. Imposes additional conditions when detention is from more than 8 but less than 24 hours. Relates to immunity provisions for conduct of the person after release. Copyright 2008 by Hooper, Lundy & Bookman, Inc. Reproduction with attribution is permitted. To request addition to or removal from our mailing list contact Baron Kishimoto at Hooper, Lundy & Bookman, Inc., 1875 Century Park East, Suite 1600, Los Angeles, CA 90067, phone (310) Health Law Perspectives is produced monthly, 10 times per year and is provided as an educational service only to assist readers in recognizing potential problems in their health care matters. It does not attempt to offer solutions to individual problems but rather to provide information about current developments in California and federal health care law. Readers in need of legal assistance should retain the services of competent counsel. PRESORTED FIRST-CLASS MAIL U.S. POSTAGE PAID NASHVILLE, TN PERMIT Century Park East, Suite 1600 Los Angeles, California Health Law Perspectives