Tis the Season to be Giving – OIG Increases “Nominal Gifts” Limit

The Office of the Inspector General (OIG) announced this Holiday season that it is increasing the monetary value of gifts falling under the nominal value exception to Medicare’s Civil Money Penalty Law.  Under section 1128A(a)(5) of the Social Security Act [42 U.S.C. §1320a-7(a)], a person who offers or transfers to a Medicare or Medicaid beneficiary any remuneration that the person knows or should know is likely to influence the beneficiary’s selection of a particular provider, practitioner, or supplier of Medicare or Medicaid payable items or services may be liable for civil monetary penalties (CMPs) of up to $10,000 for each wrongful act. “Remuneration” includes waivers of copayments and deductible amounts (or any part thereof) and transfers of items or services for other than fair market value[1].

However, as the OIG explained in its December 7, 2016 “Policy Statement Regarding Gifts of Nominal Value to Medicare and Medicaid Beneficiaries,” Congress intended to permit inexpensive gifts of nominal value.  The OIG has previously interpreted “inexpensive” and “nominal value” to mean a retail value of no more than $10 per item or $50 in the aggregate per patient on an annual basis, noting that it would periodically review these limits and adjust them according to inflation, if appropriate.[2]

The OIG now believes that the figures from 2000 should be adjusted. Thus, as of December 7, 2016, the OIG has modified its interpretation of “nominal value” to mean having a retail value of no more than $15 per item or $75 in the aggregate per patient on an annual basis.  The items may not be in the form of cash or cash equivalents. If a gift has a value at or below these thresholds, then the gift need not fit into an exception to section 1128A(a)(5).  Happy Holidays from the OIG.

[1] See section 1128A(i)(6) of the Act.

[2] See, e.g., 65 FR 24400, 24411 (Apr. 26, 2000).

OIG Expresses Concerns about Medicare Skilled Nursing Therapy Billing

Calling for a reevaluation of the Medicare payment system for skilled nursing facilities (SNFs), the Department of Health and Human Services’ (HHS) Office of Inspector General (OIG) recently issued a report expressing concerns about Medicare payment for therapy services. The OIG found that Medicare payments for therapy “greatly exceed” SNFs’ therapy costs. The difference between Medicare therapy payments and facility costs for therapy averaged 29 percent—twice as high as the 14 percent overall Medicare margin for SNF payments in 2012. The OIG stated that Medicare payments for therapy rose faster than therapy costs between 2002 and 2010. According to the OIG, one factor leading to the increased payments was that SNFs increasingly billed for the highest level of therapy even though beneficiary characteristics remained largely unchanged. The OIG report also notes that SNFs used strategies to optimize revenues, such as providing the minimum number of therapy minutes for the higher levels of therapy. Finally, the OIG found that increases in SNF billing resulted in $1.1 billion in Medicare payments in 2012 and 2013.

As a result of this and prior OIG reports, the OIG called for the Centers for Medicare and Medicaid Services (CMS) to reevaluate the Medicare SNF payment system. The OIG recommended that CMS take the following actions: (1) evaluate the extent that Medicare therapy payment rates should be reduced; (2) change the method used to pay for therapy; (3) adjust Medicare payments to eliminate any increases that are not related to beneficiary characteristics; and (4) strengthen oversight of SNF billing. CMS agreed with all of the OIG’s recommendations. Accordingly, it is possible.

OIG’s Advisory Opinion Concludes that Free Introductory Visits by Home Health Provider Are Not Prohibited Remuneration

A home health care provider’s policy of offering free introductory visits to patients who had already selected it as their home health care provider does not generate prohibited remuneration under the federal antikickback statute, the Office of Inspector General (OIG) of the Department of Health and Human Services (HHS) concluded in a recent advisory opinion. (OIG Advisory Opinion No. 15-12.) The home health agency requesting the advisory opinion (requestor) stated that a physician or a health care professional provides a list of home health providers to a patient who needs home health services. The requestor has no involvement in the patient’s selection process, nor does it offer or pay any remuneration to the physician or other referral source. After a patient chooses the requestor as his or her home health agency, an employee of the requestor (liaison) contacts the patient by telephone to see if he or she would like to have an introductory visit with the liaison. The purpose of the introductory visit is to facilitate the patient’s transition to home health services and to increase compliance with the treatment plan. The liaison does not provide any diagnostic or therapeutic service reimbursed by any federal health care program during the introductory visit and the services provided during the introductory visit do not require clinical training.

The OIG concluded that the introductory visits were not remuneration because they did not provide any actual or expected economic benefit to patients. Although the services may have some “intrinsic value” to patients, the OIG concluded that the “intangible worth to patients” created by the introductory visits do not implicate the federal antikickback statute or the Civil Monetary Penalty law.

OIG Issue Fraud Alert on Physician Compensation Arrangements

The Office of Inspector General (OIG) at the Department of Health and Humans Services (HHS) recently issued a fraud alert for physicians who enter into compensation arrangements. Every physician should review carefully the terms and conditions of compensation arrangements, such as medical directorships, to ensure that they reflect fair market value for bona fide services provided by the physician. The OIG cautioned that a compensation arrangement may violate the anti-kickback statute if even one purpose of the arrangement is to compensate a physician for past or future referrals of federal health care program business.

The fraud alert highlighted the OIG’s recent settlements with 12 individual physicians. According to the OIG, the compensation paid to these physicians under medical directorship arrangements violated the anti-kickback statute for several reasons, including the following:

  • The payments took into account the volume or value of the physicians’ referrals rather than the fair market value for the services;
  • The physicians did not actually provide the services; and
  • Some of the physicians entered into arrangements where an affiliated health care entity paid the salaries of the physicians’ front office staff which relieved the physicians of a financial burden resulting in improper remuneration to the physicians.

Given the OIG’s recent focus on physician compensation arrangements, physicians should proactively review their agreements to ensure that they meet anti-kickback statute requirements, including any applicable safe harbors.

Dealing with Medicaid/Medi-Cal Temporary Suspensions in California – Tips Based on Our Firm’s Experience

I have written a good deal about Medicaid temporary suspensions in the past. Well, my new colleague at Gordon & Rees, Knicole Emanuel (whose blog I have followed for years), recently pointed out that a recent federal OIG audit of California pediatric dentists participating in the state’s “Denti-Cal” (i.e., Medicaid for dentists) program found that 335 of those dentists – or about 8% of the pediatric dentists providing Medicaid services – were engaging in “questionable” billing practices. The formal OIG report is located here. The California state Medicaid agency – the Department of Health Care Services (DHCS) – has vowed to step up monitoring and take action “if needed.”

Uh-oh. We’ve been down this road before with DHCS. For those who don’t click through, in the summer of 2013, a joint investigation by CNN and the Center for Investigative Reporting “uncovered” a widespread pattern of suspicious Drug Medi-Cal (DMC) billing activity in the substance abuse treatment industry in Los Angeles County. The response by DHCS and its investigators and auditors – whether warranted or not – was draconian. I’ve heard estimates that a third of the DMC providers in LA County that were investigated were “temporarily” suspended by fall 2014. As is often the case with temporary suspensions, most of these providers essentially were forced to shut down. In my experience, the DMC providers with a sufficient source of DMC revenue to wait out the temporary suspensions survived; the ones without non-DMC revenue did not.

Knicole has a number of good tips and suggestions concerning the Medicaid audit and investigation process generally (and she should! She has a ton of experience doing this sort of work). I thought I’d chime in as well. In the past few years, our firm represented a number of California providers that were the target of a temporary suspension by DHCS.  All were in the context of the DMC crackdown alluded to above. Based on that experience, I have several California- and DHCS-specific tips to offer.

  • Under California Welfare & Institutions Code Section 14043.36(a), in addition to payment suspensions, providers will be temporarily suspended from participating in the Medi-Cal program altogether, and their NPI numbers will be deactivated, while they are under investigation. This is automatic. It doesn’t matter how much (or little) evidence of fraud there is, or what that evidence is – if the matter is referred to the California Department of Justice, the referred provider’s NPI is suspended, and its ability to treat Medi-Cal patients is stopped until the investigation is resolved. Oh, and these investigations can last a long time, especially in cases involving industry-wide crackdowns, where dozens (or more) of providers are being investigated simultaneously.
  • The audits are oftentimes hectic and incomplete. It’s not uncommon for auditors to be there for less than two hours. That 90 minute visit then becomes the entirety of the basis for a finding of credible evidence of fraud. Any evidence of compliance – or at least non-fraudulent activity – produced later is typically considered suspect.
  • In this regard, audited providers should always have staff members accompany and assist the auditors. Never let the auditors pull documents for themselves. Staff should repeatedly ask if the auditors have found everything they need, and offer assistance in finding any “missing” documents. I have seen more than one instance in which the auditors left to their own devices with a provider’s files couldn’t find documents, refused to ask for help in locating them, and then concluded that the documents didn’t exist – which, of course, became Exhibit 1 in support of the finding of credible evidence of fraud. Even if the provider finds and produces the “missing” documents after-the-fact, DHCS often will view them as fabricated.
  • Staff members of an audited provider should do whatever they can to identify and copy the documents reviewed by auditors immediately after (or even during) the audit. In my experience, half of the battle in defending a temporary suspension is trying to recreate what the auditors looked at.
  • Doublecheck the copies made by auditors. Again, I can’t stress this enough. If auditors overlook a document (say the back side of a two-sided document), and then subsequently can’t find it when they go back through their copies, they’re going to assume that the document didn’t exist. Don’t give them that opportunity.
  • Audits will almost always be unannounced. That means it is crucial now to go through your files and make sure they are as squeaky clean as possible. Providers will not have notice and lead time to do so before the auditors arrive. Providers should consult their attorneys if they are worried in this regard – many attorneys provide billing compliance self-audit services, and spending that money now may well save a provider many times the cost in future legal fees if a temporary suspension can be avoided.
  • Providers should prepare their staff in advance if they think they might be audited. I’ve heard of instances of DHCS investigators pounding on the door and demanding to be admitted in a fairly confrontational manner. I’ve even heard rumors of some investigators being armed, though I have to stress that this is all second- or third-hand, so I cannot confirm whether it actually happened.  In any event, the process can feel like a stressful police ambush. That can be scary for office staff – and scared staff members oftentimes look like they’re trying to hide something, plus they can be distracted and confused.
  • If a provider does receive notice that payments and NPIs are being suspended (usually with fifteen days notice), the absolute best chance to resolve the matter quickly and efficiently will come up front at the meet-and-confer stage. This is a meeting with DHCS auditors, program people, and the staff who are ultimately responsible for the decision to suspend. It will occur quickly, often within a month or two of the suspension. This is the provider’s first and best opportunity to plead its side of the case. It is crucial to consult with your lawyer and – ideally – be represented in the meeting. Providers can come across defiant and defensive if they try to go it alone – which isn’t surprising, of course, because they have been accused of fraud and even had their livelihoods threatened! That isn’t what DHCS wants to hear. DHCS wants to hear the provider acknowledge any mistakes, and it wants to hear how the provider is going to fix them.
  • If the matter is not resolved at the meet-and-confer stage, it’s going to go to administrative briefing. Pursuant to California Welfare and Institutions Code Section 14043.65, there is no in person hearing – the entire appeal is decided on the papers. It is crucial for a provider to put the most persuasive and polished brief on record – not only because it gives you a better chance to win at the administrative stage, but also because if you lose there, it is going to be the record of your defense on judicial appeal or even in further informal settlement discussions.

I know that some of this might be frightening. My first thought after putting pen to paper on this post was to that scene in Empire Strikes Back, when Luke tells Yoda he isn’t afraid, and Yoda tells him ominously “you will be.” But there is a reason for my sturm und drang. As Knicole says, state Medicaid agencies have a good bit of leverage in these overpayment and fraud and abuse investigations, and in my opinion, DHCS falls towards the very top end of that list. This isn’t a time for providers to put their heads in the sand and figure that they’ll deal with any problems with DHCS later down the line if and when something happens. By that point, it very well might be too late – or at the very least, the providers will have missed the best chance (or even the second best chance) to prevent or resolve any problems cheaply and quickly.

Recent Compliance Guidance Issued for Health Care Governing Boards

In cooperation with several industry associations, the Office of Inspector General (OIG) at the Department of Health and Human Services (HHS) recently issued guidance to help governing boards of health care organizations perform their compliance duties. The guidance was developed through collaboration between the Association of Healthcare Internal Auditors, the American Health Lawyers Association, the Health Care Compliance Association, and the OIG. The compliance guidance repeats some guidance for other industry groups, such as a compliance program is not a “one size fits all” program. However, the guidance also contains information that is particularly applicable to governing boards.

The guidance addresses the following issues relating to a governing board’s oversight and review of compliance functions: (1) roles of, and relationships between, the organization’s audit, compliance, and legal departments; (2) mechanism and process for reporting within the organization; (3) identifying regulatory risk; and (4) encouraging enterprise-wide accountability for achieving compliance goals and objectives.

The guidance offers some suggestions specific to governing boards about compliance, including the following.

  • The guidance states that boards should develop a formal plan to stay current with the regulatory landscape so that the board can ask more pertinent questions and make informed decisions. The plan may involve periodic updates from staff or review of materials provided by staff or outside educational programs.
  • The guidance states that a board can raise its expertise level about regulatory and compliance matters by adding to the board or consulting with a regulatory, compliance, or legal professional.
  • There should be a process to ensure appropriate access to information, which can be set out in a formal charter document or other documents.
  • The guidance recommends that boards evaluate and discuss how management works together to address risk.
  • The guidance states that the board should set and enforce reporting to the board compliance-related information in a format that satisfies the interests or concerns of board members.

The board may want to consider scheduling regular executive sessions to discuss compliance and quality functions to encourage open communication.