PROVIDERS
Procedures Added to ASC Approved List

Effective as of July 5, 2005, Medicare will pay for 65 additional procedures in the Ambulatory Surgical Center setting. An interim final rule published May 4, 2005 by the Centers for Medicare and Medicaid Services adds new CPT codes to the list of procedures that Medicare will pay for when performed in an ASC. Among the CPT codes added to the approved list are: (1) 29873 – knee arthroscopy/surgery; (2) bronchoscopy procedures represented by codes 31636, 31637, and 31638; and (3) ocular reconstruction, transplant procedures represented by codes 65780, 65781, and 65782.

Although the agency had previously proposed to delete a significant number of procedures from the ASC-approved list, CMS decided to delete only 5 codes from the approved list. 

In addition, CMS reminded interested parties that the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 mandates that CMS develop a revised payment system for ASC services by January 1, 2008. CMS has not proposed a revised payment methodology, nor did the May 4 rulemaking give any indication of the agency’s thinking regarding the new payment system. CMS did point out that the criteria for coverage in the ASC setting will be reviewed as part of the new payment system.

Manager Excluded From Federal Programs for Offense Having No Connection with Public Programs

An administrative manager was excluded from participation in federal health care programs despite never billing, or receiving funds from, a government health program. Fryman v. The Inspector General, Civil Remedies Div., Dec. No. CR1261 (2004).

The manager assisted another individual in defrauding her employer, an outpatient chemotherapy treatment provider. The employee was also the principal operator of a pharmaceutical supply company, and was prohibited from selling supplies to the chemotherapy center under the center’s conflict-of-interest policies. The manager arranged to deceive the chemotherapy center into believing that the supplies came from the manager’s company when, in fact, the supplies came from the prohibited supply company. The manager pled guilty to a felony charge of mail fraud.

Even though the fraud did not involve any Medicare, Medicaid, or any other public health care programs, the Departmental Appeals Board of the Department of Health and Human Services upheld the exclusion, ruling that under federal regulations, a connection to federal programs is not required to exclude an individual. Exclusion requires only a conviction for fraud, theft, or other specified conduct “in connection with the delivery of a health care item or service.” 42 C.F.R. § 1001.101(c).

This case is a useful reminder that avoiding federal health care programs often does not avoid penalties under federal health care fraud and abuse laws.

2006 Regulatory Agenda Published

On May 16, the Department of Health and Human Services published its semi-annual regulatory agenda, a detailed listing of every rulemaking activity under development or review. Much of the CMS activity involves implementing the numerous actions mandated by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003. However, among the myriad of other priorities, the following are a few of the noteworthy:

  • CMS appears ready to propose that nuclear medicine services be included as a “designated health service” under the Stark statute. This proposal will likely be made along with the update and policy changes in the calendar year 2006 physician fee schedule rule published in July 2005.
  • A final rule to require all providers enrolled in Medicare to re-enroll periodically continues to be on the CMS agenda, and is currently planned for a final rule in April 2006.
  • A final rule allowing application of the inherent reasonableness standard to Medicare payment rates is now planned for a final rule in December 2006.
  • FDA plans to promulgate rules designed to reduce medical errors by amending the format and content of labeling on drugs and biological products, as well as amending the expedited and periodic safety reporting rules.
  • FDA plans to amend the current good manufacturing practices standards for blood establishments.
  • FDA will promulgate a rule requiring all IRBs to register with the agency.

Public Disclosure Leads to Dismissal of Qui Tam Case

An emergency medicine physician group won a qui tam lawsuit on summary judgment because the allegations in the complaint were previously disclosed in General Accounting Office (“GAO”) reports and news media. U.S. v. Emergency Medical Associates of Illinois, Inc., Case No. 00-C-1046 (N.D. Ill. 2005). 

The qui tam plaintiff alleged that the physician group billed for services of senior residents that were within the scope of their residency programs. Defendants asserted that the allegations were publicly disclosed in a GAO report and various news sources, and that plaintiff was therefore unable to bring the qui tam actions. 

Plaintiff pointed out that the GAO report and news stories did not name defendant individually. However, the court concluded that the critical elements of the alleged scheme were publicly disclosed, and “whether Defendant’s were specifically named in these disclosures is irrelevant.” 

HOSPITALS
MS Proposes Inpatient Hospital Payment for Fiscal Year 2006

The Centers for Medicare and Medicaid Services proposed on May 4, 2005 a fiscal year 2006 hospital inpatient operating rate increase of 3.2% for hospitals that report performance data to CMS regarding ten quality measures. Hospitals that fail to submit the quality data will receive an operating rate increase of 2.8%

CMS has also proposed to expand significantly its postacute care transfer policy. Under this policy, a discharge of a patient from an inpatient hospital into certain postacute care setting (such as skilled nursing facilities, home health services, or other hospitals) is considered a transfer, and the and the transferring hospital is paid a per diem for each day of the inpatient stay, rather than the full DRG rate. The postacute care transfer policy currently applies to 30 DRGs. 

The CMS proposal would expand the policy to apply to any DRG that meets the following criteria: (1) the DRG has at least 2,000 postacute care transfer cases; (2) at least 20% of the cases in the DRG are discharged to postacute care; (3) of the discharges to postacute care, at least 10% occur prior to the geometric mean length of stay for the DRG; (4) the DRG has a geometric mean length of stay of at least 3.0 days; and (5) if a DRG has a pair DRG based on the presence of comorbidity or complication, both of the DRGs are included if either one meets the first three criteria outlined above. CMS indicates that 223 DRGs would meet the criteria and fall under the proposed policy. 

CMS also proposes to change its calculation of the “Initial Residency Period” to be based on the period of board eligibility for the specialty when a resident matches simultaneously for a base clinical year and a specialty.

In addition, CMS published a final payment rule for long-term care hospitals that would increase payment for those hospitals by the same 3.4%.

CMS proposes a host of other payment updates and policy changes.