Legal Insights and Perspectives for the Healthcare Industry

We hope you were able to join us for last month's Fast Break on the Physician Fee Schedule proposed rule. If not, you missed a great session featuring Eric Knickrehm discussing the important changes the proposed rule would have on Medicare Part B. 

Eric provided an overview of the most important aspects of the proposed rule, which was published on August 4, 2019. A number of these changes highlight CMS's increasing emphasis on preventive and low acuity care. For instance, CMS has continued to incentivize Transitional Care Management services and Chronic Care Management services to ensure that patients who were either recently hospitalized or are very likely to be hospitalized have effective care management to avoid further hospitalization.

The US Court of Appeals for the Eleventh Circuit has issued its much awaited decision in United States v. Aseracare, and for those who question how mere differences clinical opinion can ever support punitive False Claims Act (FCA) liability, the opinion is especially informative. The decision is significant for hospice providers and all healthcare providers that have battled government enforcers on its theory that evidence of subjective lack of medical necessity is fraud for the last decade. The decisions should be a bellwether for the US Department of Justice (DOJ), as well as an opportunity for DOJ to revisit its enforcement initiatives related to medical necessity, which have gone off the rails in recent years with the pursuit of cases that do not reasonably suggest fraud has actually occurred.

Rejecting DOJ’s signature theory of liability that falsity may be established by mere clinical disagreement divined from a cold retroactive review of the record, the court held that the trial court was right to grant a new trial to Aseracare based on erroneous jury instructions that allowed mere clinical disagreement to be the only evidence of falsity to find punitive FCA liability against the national hospice provider. The district court had granted a new trial on the basis that the instructions were wrong and the Eleventh Circuit agreed. The court further held that the summary judgment subsequently granted to Aseracare should be vacated and reconsidered to give the government an opportunity to present other falsity evidence related to the sample claims, if the government has such actual evidence to be considered. So, procedurally, the case stays alive, but is on thin ice at best.

The court noted that the trial record was devoid of any evidence that physicians had lied regarding their certifications of eligibility or that hospice services were not provided to the patient, and pointed out that much of the evidence showed Aseracare’s compliance with Medicare’s hospice regulatory scheme. The opinion noted that CMS and the Medicare contractor at trial supported the view that the Medicare hospice benefit was structured to consider good-faith, subjective clinical opinions based on the common sense reality that death is an inexact science, and that two physicians could hold different views of a patient’s prognosis and eligibility. Even the government’s expert changed his mind on patient eligibility over time—an incredible situation given that his testimony was the sole evidence to support the jury’s verdict and punitive liability in excess of $200 million.

There are many gems in this well-reasoned and scholarly opinion, the first at the appellate level to consider the government's FCA theory. Some key takeaways for practitioners include the following:

  1. To properly state a claim alleging hospice fraud under the FCA, the government must show facts surrounding a physician’s certification of eligibility that are inconsistent with the proper exercise of a physician’s clinical judgment. Mere differences of reasonable opinion concerning a patient’s likely longevity are not sufficient to allege FCA liability.
  2. Falsity evidence must be linked to the government’s actual samples of false claims. General anecdotal information of business practices untethered to the proffered false claims is not evidence of falsity for FCA purposes.

DOJ’s medical necessity initiatives over the last several years have focused on hospice and therapy providers, virtually all with the same playbook: cold record retrospective review, often by a nurse reviewer, to allege falsity based on alleged inadequate documentation conclusions as to clinical eligibility. There is often no evidence of actual fraud or material noncompliance. Often, the physicians who certify eligibility are not even interviewed regarding their certifications before catastrophic punitive liability is asserted. DOJ’s theory of liability does not require actually developing evidence of falsity, only evidence of clinical disagreement. Many of these investigation matters are founded on clinical disagreement, lightly sprinkled with general anecdotal complaints regarding business practices, or with C-suite emails that look bad but had no influence on the physician’s certification or were even known to the clinicians caring for the patient.

This opinion powerfully reasons why the government’s approach is inconsistent with the FCA statute and the Medicare hospice benefit regulatory scheme. Its reasoning applies with equal vigor to the medical necessity fraud initiative DOJ has developed over the years against other healthcare providers. The opinion also highlights the danger of not developing the right evidence to show fraud and relying on evidentiary shortcuts to assert liability under a highly punitive statute.

Finally, the opinion lays bare the reality that government enforcement practices sometimes ignore the regulations and rationale for the regulatory scheme at issue in order to fashion a more pliable account of how regulations are intended to work—even if that account is contrary to what has been legislated by Congress and implemented by the regulatory agency. In Aseracare, the government enforcers ignored the regulatory scheme as explained by its own Medicare agency witnesses to assert punitive liability under the FCA. This has a chilling and negative effect on all hospice providers, which is the exact opposite of what is right for the patients and their families who need this important benefit.

We invite you to join us in Houston on September 12 for our Second Cup of Coffee breakfast series covering the latest legal developments in digital health and healthcare innovation. In Siri Goes to Medical School – The Rise of AI in Healthcare, partners Susan Feigin Harris, Michele Buenafe, and Andrew Ray will discuss what is happening in the world of artificial intelligence and healthcare, including recent developments, legal trends, and FDA regulatory hurdles.

If you are interested in registering, please contact Stefani Cornwall. Space is limited—reserve your spot now!

In a superheated month of steamy weather and ovenlike temperatures, Health Law Scan turned up the cool with a bracing array of au courant blog posts in August. Beginning with an overview of the Centers for Medicare and Medicaid Service’s (CMS’s) proposed price transparency program, we analyzed more than a dozen key proposals in the outpatient prospective payment and ambulatory surgical center payment systems 2020 rule and previewed a Fast Break webinar on updates to the physician fee schedule rule. As August dragged to a sweltering conclusion, we lowered the thermostat with cool posts on the National Labor Relation Board’s very busy year in labor law, what healthcare employers need to know about the “public charge” rule, proposed patent eligibility reforms impacting medical device innovation, and a Fast Break webinar on False Claims Act “hardball.” A favorite among readers, this month’s Tele-Tuesday series featured the Federal Communications Commission’s focus on telehealth development in its Rural Health Care Program. So if you’ve been a little warm under the collar, trickling sweat, glistening ineloquently, or just plain baking in the sun, we’ve got the perfect antidote to a thermally challenged day right here.

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A final rule released by the US Department of Homeland Security will make it more difficult for foreign nationals who use public benefits to adjust or extend their immigration status in the United States based on their likelihood of becoming a “public charge” in the future. The rule also expands the list of programs that can lead to a public charge determination to those that provide healthcare and social services to vulnerable populations including Medicaid, SSI, SNAP, TANF, and federal housing benefits.

In this LawFlash, our US labor/management relations team tracks new developments at the National Labor Relations Board (NLRB) as 2019 progresses. These include three significant proposed changes affecting union election procedures that demonstrate just how fully the NLRB has embraced rulemaking for addressing significant areas of labor law. Also addressed are a number of highly consequential decisions affecting employers, including those in the healthcare industry.

Please join us for our August 22 webinar, Fast Break: Physician Fee Schedule Update. The 2020 Medicare Physician Fee Schedule proposed rule includes a number of significant proposals that would incorporate several coding changes, implement new statutory requirements related to the treatment of substance abuse disorders, and further reduce administrative burden on practitioners. Eric Knickrehm will lead us through a discussion of these issues and more.

Register for the webinar now.

The Fast Break series, hosted by Jake-Harper, features 45-minute healthcare-focused webinars that explore important developments, trends, and hot topics in the healthcare industry in an easy-to-digest format.

Proposed reforms to patent subject matter eligibility in the United States are once again making headlines. With advancements in medical device technologies and the increasing integration of software, patent eligibility considerations implicate a growing realm of medical devices. In a recent LawFlash, we address a draft bill in the US Congress that could broaden the range of patent eligible subject matter with implications for stronger commercialization of medical device technologies in the United States. We also discuss two recent letters to the US Senate that crystalize the growing debate over expanding patent eligibility with possible effects on medical device innovation, affordability, and availability.

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We address more than a dozen key proposals from the CMS outpatient prospective payment system (OPPS) and ambulatory surgical center payment systems proposed rule in a recent LawFlash. Chief among them is the agency’s bold new proposal for a broad price transparency program. Other notable proposals include continuing payment reductions for 340B drugs and grandfathered off-campus provider-based departments, both the subject of pending litigation in federal court. CMS is soliciting public input on a multitude of proposals from this rule, and comments are due September 27, 2019. Hospitals will want to carefully assess these changes and consider submitting comments before these proposals become final rules.

Read the full LawFlash > >

We hosted a very informative Fast Break session last week on complex FCA issues. If you weren't able to join, the session was led by Katie McDermott and Matt Hogan, who are both authorities in False Claims Act (FCA) litigation. Understanding the complex dynamics for dealing with both the US Department of Justice (DOJ) and qui tam relators, Katie and Matt led us through the minute details of relator litigation, declined qui tams, and partial interventions, just to name a few things.

Among the overarching issues we discussed, coming on the heels of the US Supreme Court’s Cochise decision, is the Court’s seemingly renewed interest in the FCA and the possibility of statutory amendments to the FCA to balance out many of the, as Katie termed it, “procedural inequities” that now exist when a healthcare organization is an FCA defendant. Katie and Matt also discussed recent DOJ pronouncements about their FCA enforcement procedures and priorities, highlighting that the FCA remains the most significant overarching risk area for healthcare stakeholders.