Home Care Law Blog

Program Integrity Issues in the Final CY 2010 Home Health PPS Rule

Robert Markette — Thu, 12 Nov 2009 06:23:43 -0800

Earlier this year, CMS proposed a number of changes in the Home Health PPS Proposed Rule that were aimed at program integrity. In the Final rule, CMS announces that it will be finalizing two of those rules, one related to CHOWs and one related to deactivation of billing privileges.

As of January 1, 2010, a home health agency that has been in existence for less than three years cannot have its provider agreement transferred as part of a CHOW. Instead, the new owners will need to reapply as Medicare providers and undergo an accreditation survey or a state survey. This means you cannot start up a Medicare home health agency with the idea of later selling it as a "turn-key" agency, unless you operate it for at least thirty six months from the "effective date of enrollment in Medicare."

The regulations specifically states that this prohibition on transfers applies to stock or asset sales. That is an interesting change, because prior to this statement, no one considered a stock sale a CHOW. The definition of CHOW specifically excludes stock sales. It seems that this may create a conflict within CMS's own regulations.

The comments to the rule state CMS' belief that the rule applies not only to CHOW's submitted after January 1, 2010, but also to CHOW's pending on January 1, 2010. Of course, court's generally frown upon retroactive applications of the law such as that. Applying this rule to CHOW's that are pending on January 1, 2010 creates a huge number of problems for providers, because it effectively eliminates the benefit of the bargain the parties struck. A bargain that everyone understood to be acceptable at the time of the closing. Now, CMS comes along months after the deal closed and says you can't do that. It will be interesting to see how that plays out, because I imaging a number of companies will challenge CMS on this issue.

One other point, this rule change does not mean you cannot sell your agency during that first thirty-six months. It means that the agency will be worth less to a potential buyer, because you cannot transfer the provider agreement through the CHOW process.

Another change CMS made was to require home health agencies whose billing privileges have been deactivated due to inactivity to undergo a state survey or an accreditation survey before the privileges are reactivated. This means that if you have not billed Medicare in the previous twelve months, you will need to undergo a survey before you can bill. This may delay billing for Medicare services significantly. If you are a low volume Medicare provider, you need to be certain that you are providing some Medicare services at all times (or at least a few times a year). If you do not, you should avoid taking a new Medicare case until you have undergone the resurvey. (Otherwise you will find you are providing services for free.)

CMS had made some other proposals in the rule, including a prohibition on HHAs sharing, leasing, or co-locating with other providers. CMS has withdrawn all of its proposals related to this prohibition. CMS received a large volume of comments in opposition to these proposals that pointed out the many legitimate practices the rule would have outlawed. CMS will continue to look at this issue, as they continue to suspect these arrangements are abusive.

Some thoughts on the CY 2010 Home Health PPS Rate Final Rule

Robert Markette — Wed, 11 Nov 2009 06:40:52 -0800

In the final rule, CMS is revising the market basket update down from 2.2% to 2.0%. This is based on further recalculation using additional data. The best quote is when CMS says that market basket increase is not designed to "account for changes in total costs", but to "measure input price pressures." So hey, quit complaining about costs, CMS has adequately measured your input price pressures. (And these guys want to run the entire health care system?) The bottom line is that you get a 2.0% market basket increase, but several other cuts. At lest the physicians got hit harder. (I know, Congress will ride to the docs rescue, but I'm not bitter about that. (Just in case the sarcasm didn't travel through the internet, that was sarcastic.)

The standard sixty day episode payment rate will be $2,312.94 for CY 2010.

If you do not submit required quality data, that amount will go down to $2,267.59.

In the final rule, CMS announces it will finalize a number of its proposed changes. The biggest change is to CMS' outlier policy. CMS states in the final rule that it intends to go forward, as of January 1, 2010, with it policy to cap outlier payments at 10% of the agency's total year to date home health payments. The cap will be implemented on a rolling basis. In other words, as claims come in, any outlier payments will be checked against the year to date total. If an outlier payment would put the agency in the position of exceeding the 10% cap, CMS will not remit the amount. It is important to note that when a claim is submitted that would exceed the cap, only the outlier portion of the payment is withheld, not the entire claim. CMS is also decreasing the FDL ration to 0.67. This is being done for several reasons. First, CMS is attempting to reduce the outlier pool to 2.5% from 5%. This would allow CMS to put the 2.5% back into regular home health claims reimbursement which would allow CMS to raise rates slightly.

The other factor is combating fraud. CMS feels that outlier payments are a source of abuse and implementing this cap will reduce the likely hood of fraud. CMS states in the comments that "suspect fraudulent outlier practices" are continuing to increase, which makes this effort even more important.

CMS also discusses its ongoing monitoring of the case mix. According to CMS, if they were to adjust payments to reflect "case mix creep", they would need to increase the 2.75% reduction for this year and next year to 3.51%, although later they state that the number is actually 6.89%. They are attributing more than 13% of the increase in home health payments to upcoding and documentation issues, as opposed to increased acuity of patients, etc. If upcoding is that rampant, CMS does not need a rate reduction, they need a fraud investigation. Upcoding of 13% of claims is fraud and a very wide scale and it seems quite implausible. It seems more likely that CMS' model is flawed, especially when they state that the variables in their model have not change much. In other words, our model of reality is correct, reality itself is wrong. Luckily, CMS has decided not to engage in any additional "adjustments" (beyond the already scheduled -2.75% adjustment) at this time, but given what CMS says in this final rule, the industry ought to be concerned that a future, negative, adjustment is on its way. What the industry needs is some information (or its own model) to contrast against CMS.

CMS announces it will move forward with OASIS-C and the 2% reduction for failure to submit quality data, but that the new process measures will not be reported on home health compare until October 2010 at the earliest. They also announce that the Home health Care Quality Data through CAHPS survey will continue to move forward, but not until CY 2012. CMS will implement the survey on a voluntary basis in beginning in October 2009. CMS does make a few other changes to this program. First, only Medicare or Medicaid beneficiaries are eligible to take the survey. Second, V-Codes may be submitted if ICD-9 codes are not available. Finally, the change to CY 2012 means providers will need to do a test run in the third quarter of 2010 and being collecting data in the fourth quarter of 2010.

CMS will continue to use the hospital wage data to calculate the home health wage index.

CMS is also going forward with its proposed changes to the COPs regarding skilled services, etc.

There is also a great deal of discussion in the final rule regarding CMS' proposals related to MEdicare integrity and home health. I will address those separately in a post tomorrow.

HHS posts CY 2010 Home Health PPS Rate Update Final Rule.

Robert Markette — Tue, 10 Nov 2009 06:28:13 -0800

You can download it here. I have not had a chance to read it yet. I just wanted to make sure you knew it was out.

More fraud enforcement on its way

Robert Markette — Mon, 09 Nov 2009 06:02:54 -0800

Just in case the HEAT initiative, FERA, and the myriad of other government health care fraud efforts were not enough, last week Senator Leahy and the Senate Judiciary Committee proposed new legislation aimed at health care fraud. The Health Care Fraud Enforcement Act of 2009 was introduce last week by Senator Ted Kaufman and co-sponsored by five other members of the Senate Judiciary Committee.

This bill is designed to give the government even more tools to fight health care fraud. The bill increases the criminal penalties for most health care fraud offenses. If passed, it would also make it clear that claims submitted that arise out of a violation of the Anti-Kickback Statute are violations of the False Claims Act.

The intent of this amendment is to make it possible to sue entities, under the False Claims Act, who pay kickbacks, even if they do not submit the claim for payment themselves. However, the amendment simply says that "a claim for items or services that are provided in violation of [the Anti-Kicback Statute] is a violation of the false claims act." In most cases, an Anti-Kickback Statute violation is actionable under the False Claims Act. It seems that this is an unnecessary addition. It might also make the innocent third party who submits the bill liable under the False Claims Act even if they were not a party to the kickback. This seems unlikely, because they would not meet the intent requirement under the Anti-Kickback Statute or other criminal statutes, because they would not know about the "downstream conduct."

The statute also adds the Anti-Kickback Statute to the definition of federal health care fraud offenses. This expands the scope of remedies available to the government when prosecuting these offenses. The remedies now include: making the proceeds of the offense subject to forfeiture, making obstruction of these offenses a crime, include these offenses as specified unlawful activity for purposes of money laundering, and authorize the use of administrative subpoenas for the production of documents or authentication testimony. This may be the change with the largest impact, because of the resulting availability of forfeiture.

Given that there are more criminals getting into health care fraud and that this trend appears to be in part due to the much milder sentences for health care fraud, taking steps to increase health care fraud penalties seems like a good step to combat this problem. Clearly incorporating the Anti-Kickback Statute into the false claims act does not seem like such a great idea, because it most likely will not reach the parties the Senators wanted to reach. Furthermore, the False Claims Act already has a very wide reach and, under current case law, often reaches anti-kickback violations. Adding this language to the anti-kickback statute may not change anything. It might, however, lead to unintended consequences that make it even harder for law abiding providers to operate. For example, they may become liable under the False Claims Act for recklessly disregarding "downstream" conduct.

HHS Posts Interim Final HIPAA Enforcement Rule

Robert Markette — Wed, 04 Nov 2009 07:28:16 -0800

As you may recall, the HITech Act made a number of changes to HIPAA, including beefing up the enforcement sections. Late last week, HHS published its interim final Enforcement Rule that incorporates the increased civil penalties from the HITech Act.

One of the less clear areas of the HITech Act was the penalties. The way the statute was worded, made it sound like the high end of the penalties was basically the same for all violations, which makes little sense. HHS acknowledged this problem in the comments to the rule and has proposed the following solution. The violations will be subject to the following ranges per violation:

Did not know -- $100 - $50,000

Reasonable cause -- $1,000 - $50,000

Willful Neglect - corrected -- $10,000 - $50,000

Willful Neglect not corrected -- $50,000

All categories will be subject to an overall cap of $1.5 million for all such violations of an identical provision in a year. This provides for some very broad penalty ranges on the bottom end, which still does not make a lot of sense, but at least you can understand the scheme. I do think that the notion that you can be penalized up to $50,000 for a violation at the lowest end and at the highest end is fundamentally flawed. I think HHS should have structured it so that each tier ends at a level below the next tier, although I understand that they felt the statute tied their hands. It will be interesting to see how penalties under these ranges play out.

The rule also amends the affirmative defenses to remove the defense that the entity did not know and by exercising reasonable diligence would not have known as well as expanding the we fixed it in time defense to all violations not due to willful neglect.

Finally, the interim rule defines a few terms. The terms reasonable cause, reasonable diligence, and willful neglect are all defined in the rule. These terms are part of the new penalty provisions and come into play in determining into which tier a violation falls.

FTC extends the Red Flags Rule Deadline again.

Robert Markette — Mon, 02 Nov 2009 05:42:49 -0800

Well, I checked a number of times of Friday for an announcement regarding the Red Flags rule. When I left for the day, I assumed the deadline would not be extended, which, given the legislation pending in Congress, really surprised me.

Well, when I came into the office this morning, I found that the FTC did extend the deadline for enforcement. It is now June 1, 2010. You can read the FTC's press release here.

Basically, the FTC is extending the deadline, because Congress has asked it to do so. Although, the press release notes that the U.S. District Court for the District of Columbia ruled on Friday that the Red Flags Rule does not apply to attorneys. That case could be interesting, because it may have broader application, because there has always been an argument that the FTC's definition of Creditor was over broad. That argument was one I felt most home care and hospice providers probably would not make, because it was cheaper to comply than to litigate with the FTC. Especially give the FTC's recent pronouncements on compliance for entities who "know their customers."

If you have not implemented a Red Flags Rule compliance program, you now have until June 1, 2010. I would recommend that if you do not have a program in place, you might wait until closer to June 1, 2010 to see what happens with the court case (I bet the FTC will appeal) and what the final legislation from Congress looks like. These two factors may radically change how you address the Red Flags Rule.

Red Flags Rule Deadline Approaches

Robert Markette — Fri, 30 Oct 2009 09:39:39 -0700

With November 1 just around the corner, I thought it was a good idea to remind everyone that the Red Flags Rule deadline is November 1 (although since that falls on a Sunday, it is effectively November 2). This deadline has not yet been extended (as of the moment I posted this).

Earlier this week I mentioned legislation that had been passed by the House of Representatives in response to the "overreaching" by the FTC. According to this article, that legislation has stalled in the Senate. This legislation would have only exempted out entities with fewer than twenty employees, which would not have helped most home health or hospice providers. However, the legislation did create an "opt out" avenue that would have allowed certain businesses to petition for an exemption. The article speculates that the FTC might extend the deadline to give the Senate a chance to act, but that is not at all certain.

It appears that by the time this legislation passes, the compliance deadline will have passed. At that point, most providers will probably not bother considering whether to apply for an exemption, because they will have already put their policies and procedures into place.

If you haven't started your red flags compliance effort yet, now is a really good time to start implementing policies and procedures.

OIG's FY 2008 HCFAC Report

Robert Markette — Thu, 29 Oct 2009 06:09:22 -0700

I meant to get to this last week, but things have been a little busy around here. Anyways, OIG recently released the FY 2008 Health Care Fraud and Abuse Control Program Report ("HCFAC Report"). There is a lot of great information in the report and it is worth a read each year, if for no other reason to see what OIG is looking at and pursuing.

As with every HCFAC report, the report starts with a summary of amounts deposited and approrpriated to the MEdicare trust fund as well as payments to private persons during the prior year. According to this summary, in FY2008, relators received $157,281,122 from False Claims Act litigation. The report states that the government recovered approximately $1 Billion in judgments and settlements against providers. For comparison, the government had $1.8 billion in recoveries in FY 2007.

In addition, the government opened 957 new health care fraud investigations involving 1,641 defendants. During the year there were 1600 fraud investigations pending involving 2,580 potential defendants and 502 charges were filed involving 797 defendants. During the year, 588 defendants were convicted of health care fraud related crimes. On top of that, the civil attorneys at DOJ opened 843 new civil health care fraud investigations and had 1,311 matters pending. These numbers are slightly higher than last year, but considering the amount of coverage of health care fraud in the news, I was expecting larger numbers.

The report details specific cases around the country, but there is not a lot of home health or hospice fraud reported. The only hospice case mentioned was really a pharmacy case - doubling billing for hospice patient's pharmaceuticals.

Of course, the report provides a lot of detail on convictions arising out of the DME fraud prosecutions in Florida. Even though this is a fraud and abuse control report, the most interesting thing for home health and hospice providers has to do with OIG' concerns about CMS's oversight (or lack thereof) related to home health deficiencies.

CMS is concerned about patterns it sees in home health surveys. CMS reviewed the deficiency history of 5,000 home health agencies and noticed that 15% of the agencies were cited for the same deficiency on three consecutive surveys. OIG believes that CMS could provide more oversight to home health agencies. (In other words, CMS could do more to stop this trend.) HHS reiterated its recommendation that CMS use survey data to identify these kinds of patterns. OIG further recommends that CMS implement intermediate sanctions to deal with agencies with this kind of pattern.

Given that recommendation, now is a good time to review your own survey history and look for those kinds of patterns. If the same issues are coming up over and over again, you should begin looking at ways to fix it. Obviously, whatever you put into your plan of correction is either not being followed (more education? discipline employees?) or it is being followed, but it is not achieving the desired results. Better for you to fix the problem than to have it come up on another survey, especially if CMS decides that this is the year they are going to follow OIG's recommendation.

Health Care Reform and Bundled Payments

Robert Markette — Tue, 27 Oct 2009 06:04:05 -0700

USA Today had an article yesterday on Medicare's bundled payment pilot project. For those of you who missed this, Medicare is testing a project where the hospital receives a bundled payment for all the hospital and physician services related to certain procedures. The hospital is then responsible for disbursing these funds amongst the providers. The hope is that moving away from a fee for service model will improve efficiency and reduce costs.

The article details the 4.4% savings Medicare is realizing in this program. It also mentions how CMS is offering payments to Medicare beneficiaries to choose the hospitals that re involved in the bundling. Although it is not clear if these payments will impact beneficiary choice, CMS is hoping to drive more patients to the bundling hospitals to increase savings.

This system is great if you are the hospital, but the non-hospital physicians and other providers, such as home health agencies, are concerned how this will impact them. This system gives the "bundling" hospitals a great deal of control, especially when patients are being encouraged to use them. For home health agencies, the question becomes what happens to the HHAs in a bundling hospital's area?

Will you simply lose out to the hospital's HHA? If the hospital controls the money, the incentives to keep the patients are even stronger. (Yes, I know, the COPs require patient choice. ;) ) An area of greater concern is what will the hospital pay HHAs who receive post op bundled patients? (Currently, bundled services include joint replacements, just the kind of patient who might need post op home care.)

The hospitals have all agreed to take significant cuts as part of this program. I would imagine the HHAs who take these patients will be expected to take similar cuts as well. This could very well be presented as a take it or leave it offer. The hospital is in control and can simply look for agencies willing to take the reduced amounts being offered.

-- One other point as an aside, bundling presumes that additional savings can be had from "incentivizing" efficiency. While there maybe greater efficiencies to be had in the hospital realm, home health is a very different animal and there is not as much savings to be had from efficiency. HHAs are not likely to realize savings, as the hospitals did, by negotiating lower prices on equipment and supplies (surgical supplies are more expensive then HHA supplies) or by being more efficient with the surgical equipment during surgeries. BEcause there are far fewer efficiencies to be gained in the HHA realm, bundling may not be the best way for Medicare to save. Besides, recent studies have shown as currently constituted, HHA services provide a cost savings to Medicare, without "bundling", but I digress.

This is an area that HHAs should be keeping a close eye on, as it will likely follow in the wake of the heavy cuts called from under health care reform. Putting hospitals in control of the reimbursement in this way stands to significantly change the way HHAs and hospitals relate and if history is any indicator, this will not likely be good for home health.

Congress Acting on Red Flags Rule

Robert Markette — Mon, 26 Oct 2009 06:06:06 -0700

The House of Representatives passed an interesting bill last week. It would limit the application of the Red Flags Rule, by excluding certain small businesses. The bills sponsors felt that the FTC had over reached with the regulations it passed and that the Rules needed to be dialed back. The sponsors stated that requiring small businesses to comply with the Red Flags Rule was not necessary, because the risks were lower than for large corporations with thousands of customers. They also felt that the costs associated with compliance were unduly burdensome for small businesses.

The bill itself specifically excludes health care practices, law firms, and accounting practices with fewer than twenty employees from complying with the rule. The statute also gives the FTC the authority to create a process allowing certain other businesses to apply for exclusions. A business may apply for an exclusion if it 1) knows all of its customers or clients individually; 2) only performs services in and around the residences of its customers; and 3) the business has not experienced identity theft and identity theft is unusual for businesses of this type. This sounds a lot like home care and hospice.

This bill must still pass the Senate, but if it does, small business will have a reprieve. If you have more than 20 employees, you may still have a way out, by applying for an exclusion. Of course, we will have to wait and see what the FTC's regulations on applying for an exclusion look like. However, the statute makes it seem very likely that providers in the homecare and hospice industry would have a good chance of obtaining an exclusion.

One other point, reading the sponsor's comments, he specifically thanks the FTC for delaying implementation of the Red Flag Rule until Congress could act on this issue. It is not clear if he is referring to the extension of the deadline to November 1, or if he is indicating the FTC will further delay enforcement of the Red Flags Rule. With November 1 fast approaching, we will keep watching the FTC website and let you know.