PROVIDERS
Court Finds Employer Liable for Overpayments Under Medicare Secondary Payer Statute
The United States Court of Appeals for the Federal Circuit recently ruled that employers that sponsor or contribute to group health plans may be liable to the government for Medicare overpayments under the Medicare Secondary Payer (“MSP”) statute. Telecare Corp. v. Leavitt, U.S. Court of Appeals for the Federal Circuit, No. 04-1389, May 25, 2005.
In the case, Telecare, a company that provides services to individuals suffering from mental illness, sponsored a prepaid health care plan for its employees through Kaiser Foundation Health Plan. One employee incurred medical expenses that were covered under both the Telecare-sponsored plan and Medicare. Medicare initially paid the expenses, but then demanded that Telecare repay the government for the expenses, invoking the MSP statute.
In its analysis, the Court noted in the years since the MSP statute was passed, Congress has amended it on several occasions, and with those amendments, broadened the application of the repayment provisions beyond beneficiaries and health care providers to other entities that are required or responsible, either directly or indirectly, to make payment for the same services under a primary health plan. As a result of the Medicare Prescription Drug Improvement and Modernization Act of 2003 (“MMA”), the text of the statute now specifically includes employers that sponsor or contribute to group health plans health plans as those from whom the government may seek repayment.
OIG Advises Against Provision of Blood Collection Supplies and Collection Fee
In an Advisory Opinion posted June 13, 2005, the Office of Inspector General (“OIG”) commented on a proposed arrangement in which a laboratory sought to accommodate physician requests concerning patient blood tests. The laboratory indicated that physicians requested that, instead of referring patients to the laboratory’s physical premises for a blood draw and subsequent test, the physicians be able to draw the blood samples during patient visits, have the laboratory pick the specimen up in the physicians’ offices and then run the requested test. Specifically, the physicians requested that the laboratory provide free blood collection supplies and pay the physicians a per patient amount for the physicians’ services in collecting the blood specimens. While the specific fee per patient had not been determined, it was estimated to be from $3-$6 per patient draw. The laboratory represented that it was seeking to enter into the proposed arrangement because competing laboratories were paying referring physicians to perform blood draws.
In its analysis, the OIG considered the application of the personal services safe harbor, but ruled that it was inapplicable because the safe harbor requires that the aggregate compensation for the services be set in advance. The use of per-patient payment does not qualify as aggregate compensation set in advance. The OIG then engaged in the case-by-case analysis required when an arrangement implicates the anti-kickback statute but fails to qualify for safe harbor protection. The OIG noted that the provision of free blood collection supplies and payments for blood draw (that may exceed what the lab receives for those services and supplies from Medicare) clearly implicates the statute and that there was substantial risk that the supplies and blood draw fees were intended to induce referrals.
The OIG also noted that the fact that competitors were offering remuneration for blood draws supports an inference that the physicians were soliciting the remuneration in exchange for referrals to the laboratory. The OIG noted that the competitor arrangements may similarly run afoul of the anti-kickback statute.
With no safeguards built in to limit or reduce the risk of the referrals to the laboratory in exchange for the blood draw fees, the OIG concluded that it could seek to impose sanctions on the laboratory if it proceeded with the arrangement. In a departure from its typical refusal to comment on the application of other fraud and abuse statutes, the OIG also noted that the laboratory’s submission of collection claims to Medicare for blood draws performed by referring physicians would implicate the Federal False Claims Act and the Civil Monetary Penalties Law, because Medicare only pays the person or entity that actually extracts the blood from the patient.
Department of Justice Limits Application of HIPAA Criminal Penalties
In a memorandum opinion dated June 1, 2005, the Department of Justice interpreted the criminal penalties associated with violation of the HIPAA Administrative Simplification provisions to be limited in scope to “covered entities,” which are health plans, health care clearinghouses, health care providers and Medicare Part D prescription drug card sponsors. In interpreting the statue, the DOJ noted that while the statute appears broad in providing for punishment of a “person,” the remainder of the provision requires the knowing violation of “this part.” The phrase “this part” refers to the Administrative Simplification provisions of HIPAA, which applies only to covered entities.
While it limited the scope of application of the criminal penalties under the HIPAA Administrative Simplification to covered entities, the DOJ provided some guidance as to other theories of criminal liability for those who are not “covered entities,” such as employees or others who contract with covered entities. Those theories included aiding and abetting liability or conspiracy liability. It also noted that state laws may provide additional theories of criminal liability.
In light of the DOJ’s opinion, covered entities must again evaluate their current HIPAA practices as they relate to employees and contractors to ensure that those practices appropriately protect the covered entity.
HOSPITALS
Minnesota Hospitals Sign Uninsured Billing Agreement with Attorney General
Four health systems and 35 hospitals throughout the state of Minnesota have voluntarily entered into agreements with the Minnesota Attorney General under which the hospitals agree to bill uninsured patients no more than the hospital bills their largest insurer.
The agreements have a term of two years, and apply to both uninsured patients and to care that is not covered by insurance. The agreements state that the hospital will not charge a patient whose annual household income is less than $125,000 for any uninsured treatment in an amount greater than what the provider would be reimbursed for that service or treatment from the insurance company from which the hospital received the most revenue for its services in the previous calendar year.
In addition, the hospitals agree to a number of debt collection standards. Among others, the hospitals agree that prior to filing any lawsuit against a patient or referring an account to a debt collection agency or attorney, the hospitals must ensure that the patient owes the debt, all insurance companies have been billed, and the patient has been offered a payment plan and any free or discounted care for which the patient may be eligible under the hospital’s charity care policy. The same steps must be taken prior to garnishing any patient’s wages or bank account.
FOR PHARMACEUTICAL MANUFACTURERS
Drug Companies Failing to Complete Postmarketing Study Obligations Required by the FDA’s Accelerated Approval Process
In 1992, the FDA established an accelerated approval process that allows expedited approval of a drug based on limited and incomplete, but promising, safety and efficacy data, on the condition that the manufacturer conduct further safety and efficacy studies. It now appears that those postmarketing studies are not being performed in a timely manner, with a full 50% of the study commitments not even initiated as of March 2005. In these cases, the manufacturers have been marketing the products for an average of one year and 10 months and up to six years and nine months without initiating the required studies. If a company does not complete a required postmarketing study, the FDA has authority to withdraw the product from the market through an expedited process.
Often patients and physicians are not aware of which drugs have been approved under the accelerated approval process, and thus require additional postmarketing study on safety and effectiveness. This requirement is not currently being placed on labels, but rather is available on the FDA website.
The need to balance access to potentially life-saving drugs with patient safety has led to suggestions that the FDA seek enforcement authority other than withdrawal of a drug when a company fails to complete a postmarketing study. A recent report suggested that the FDA seek authority to impose fines and enhanced penalties for harm that results to a patient from a drug for which a postmarketing study was required but not completed in a timely manner.