Legal Insights and Perspectives for the Healthcare Industry

The recently passed FY 2020 Appropriations Act increases funding for US healthcare agencies and programs over FY 2019 levels. The new law limits reauthorization of expiring healthcare extenders to five months, delays a scheduled reduction in Medicaid Disproportionate Share Hospital payments, enhances federal funding for healthcare research, and permanently repeals certain Affordable Care Act (ACA) taxes.

Law clerk Ariel Seiersen contributed to this article.

Continuing to look for ways to reduce the Medicare administrative law judge (ALJ) appeals backlog, CMS has explored enhancing the role of Qualified Independent Contractors (QICs) to resolve disputed claims earlier in the appeals process. Its main pilot in this area is the Telephone and Reopening Process Demonstration (Demonstration), which affords certain providers the ability to present their case to a representative of the QIC and have a live discussion about the merits of the appeal. While initially limited to durable medical equipment claims, CMS expanded the Demonstration to home health and hospice claims within the Part A East QIC jurisdiction. Following the expansion, C2C Innovative Solutions—the Part A East QIC—began offering telephone discussions and reopenings to hospice and home health providers within Medicare Administrative Contractor (MAC) jurisdictions J6 and J15, covering Alaska, American Samoa, Arizona, California, Colorado, Delaware, District of Columbia, Guam, Hawaii, Idaho, Iowa, Kansas, Maryland, Michigan, Minnesota, Missouri, Montana, Nebraska, Nevada, New Jersey, New York, Northern Mariana Islands, North Dakota, Oregon, Pennsylvania, Puerto Rico, South Dakota, US Virgin Islands, Utah, Virginia, Washington, West Virginia, Wisconsin, and Wyoming. The Demonstration may provide home health and hospice companies with an effective new tool in the Medicare appeals process to help manage very long delays in the ALJ appeals process.

The US Department of Health and Human Services (HHS) Office of General Counsel (OGC) offered the healthcare industry the benefit of its legal analysis of the recent US Supreme Court opinion in Azar v. Allina Health Services (Allina) with respect to its impact on Medicare payment rules, sharing its Memorandum to the Principal Deputy Administrator & Director of the Center for Medicare dated October 31, 2019 (OGC Memo) with the public. The OGC recognized at the outset the primary directive of the decision –“The Supreme Court made clear that Congress has imposed more stringent procedural requirements for certain Medicare rules than the framework that otherwise would apply under the Administrative Procedure Act (APA).”

The OGC then offered its advice as to the legal implications associated with that directive. If HHS or CMS “issued guidance that, under Allina, should have been promulgated through notice-and-comment rulemaking, the Department's ability to bring enforcement actions predicated on violations of those payment policies is restricted.” This concept works in concert with elements of the Department of Justice's Brand memorandum, which was also referenced in the OGC Memo. The OGC Memo then attempted to draw a distinction between guidance documents that do not require notice-and-comment rulemaking versus those that do. According to the OGC Memo, the principal inquiry in distinguishing between the two is the closeness of the guidance to the relative statutory or regulatory terms.

The Open Payments program established by the Physician Payments Sunshine Act (Sunshine Act) requires manufacturers of covered drugs, medical devices, biologicals, and medical supplies (applicable manufacturers) to report annually to the Centers for Medicare and Medicaid Services (CMS) certain payments and other transfers of value made in the previous calendar year to “covered recipients,” which currently are defined as US-licensed physicians and teaching hospitals. Applicable manufacturers and Group Purchasing Organizations also must report any ownership or investment interests held by physicians or members of their immediate family. CMS makes this information available to the public on the agency’s Open Payments webpage and refreshes it annually.

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.

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 > >

The CMS draft guidance for state survey agency directors on hospital co-location arrangements offers insight into how CMS will evaluate hospitals that partner with other providers under the Medicare conditions of participation, or CoPs. Co-location occurs when two hospitals or a hospital and another healthcare entity are located on the same campus or in the same building and share space, staff, or services. Areas that CMS will review when surveying co-located facilities include staffing, contracted services, distinct and shared spaces, and emergency services.

In an unanticipated but welcome move, CMS is soliciting comments on the draft guidance by July 2. Stakeholders should be sure to use this opportunity to raise their compliance concerns associated with the proposed rules governing shared space and staffing arrangements under the Medicare program.

Read the full LawFlash for more details on the draft guidance.

In CMS’s continuing effort to take “a strategic approach to protecting taxpayer dollars and reducing regulation to put patients over paperwork,” Administrator Seema Verma recently highlighted changes to the Recovery Audit Program that are intended to make the program more provider friendly. Recovery Audit Contractors (RACs) review payments made to healthcare providers under Medicare Fee-for-Service plans. RACs have been controversial among providers due to concerns about their accuracy. In addition, although they are charged with identifying both overpayments and underpayments, unlike UPICs and MACs, RACs receive a percentage of the overpayments they recover, which historically has caused some disgruntled providers to characterize RACs as “bounty hunters” that are less concerned with program integrity than with their own bottom lines. Administrator Verma acknowledges that CMS has received many complaints in the past from providers that have found the audits to be time consuming and expensive.

In an opinion of significant importance to the administration of the Medicare program, the US Supreme Court issued a 7–1 decision requiring the Centers for Medicare & Medicaid Services (CMS) to follow notice and comment rulemaking when adopting a “statement of policy” that establishes or changes a “substantive legal standard.” The near unanimous Court[1] upheld the DC Circuit Court’s decision in Allina Health Services v. Price, 863 F.3d 937, 939 (DC Cir. 2017), which highlighted an important distinction between Medicare Act and Administrative Procedure Act (APA) rulemaking requirements.

The APA establishes a statutory exemption from notice and comment rulemaking procedures in the case of “interpretive rules, general statements of policy . . . or agency . . . practice.” 5 USC § 553(b)(A) (emphasis added). CMS relied on an assumption that this “interpretive rule exception” applied to the policy it adopted in order to include Medicare Part C patient days in the Medicare fraction of the payment formula used to calculate the qualification for, and amount of, the Medicare disproportionate share hospital (DSH) payment adjustment. The policy resulted in the reduction of Medicare DSH payments for hospitals until 2013, when the agency furnished notice and comment. Like the DC Circuit, the Supreme Court rejected the government’s argument that the Medicare Act rulemaking requirement in 42 USC § 1395hh(a)(2) implicitly incorporated a similar interpretive rule exception permitting such a policy.

Healthcare partners Al Shay and Howard Young and associate Jake Harper recently contributed to the Health Care Compliance Legal Issues Manual, a publication by the American Health Lawyers Association (AHLA).

The latest edition of AHLA’s Health Care Compliance Legal Issues Manual gives readers an up-to-date look at issues critical to healthcare compliance, including tips for conducting internal investigations; audit basics; overviews of the False Claims Act, Stark Law, and Anti-Kickback Statute; healthcare privacy; and more.