For Providers
- CMS Publishes Final Inherent Reasonableness Rule
- $32.5 Million Settlement of Whistleblower Suit Based on Performance of Unnecessary Procedures
- FTC Finds Physicians Engaged in Unlawful Horizontal Price Fixing
For Federal Grant Recipients
FOR PROVIDERS
CMS Publishes Final Inherent Reasonableness Rule
On December 23, 2005, CMS published a final rule for establishing realistic and equitable payment for Medicare Part B services when existing payment amounts are inherently unreasonable because they are either grossly excessive or grossly deficient. The rule will become effective February 13, 2006. Under the final rule, CMS or the Part B carrier may determine that application of standard payment rules will result in grossly deficient or excessive payments. A number of factors are considered in determining whether a payment is grossly deficient or grossly excessive, including, but not limited to: market conditions that make suppliers of the items or services scarce; Medicare and Medicaid are the sole or primary sources of payment for a category of items or services; the payment amounts do not reflect changing technology; the payment amounts in a particular locality are grossly higher or lower than payment amounts in other comparable localities for the same items or services; the payments amounts are grossly higher or lower than acquisition or production costs; increases in payment amounts that cannot be explained by inflation or changes in technology; payment amounts are grossly higher or lower payments made for the same category of items or services by other purchasers in the same locality; and new technology exists which is not reflected in the current payment allowances. The rule does not specify what data may be used in determining f inherent reasonableness; instead, the rule contains a number of steps to be completed to ensure the use of valid and reliable data in making an inherent reasonableness determination.
The rule states that payments can be considered grossly excessive or deficient only when the overall payment adjustment is 15% or more. If CMS or a carrier determines that the standard payment rules will result in a grossly deficient or grossly excessive payment, CMS or the carrier may establish special payment limits that are realistic and equitable. The limit is either an upper limit to correct a grossly excessive payment amount or a lower limit to correct a grossly deficient payment amount. Any payment limit established may not vary more than 15% from the payment amount established for the preceding year.
At present, the rule does not contain procedures for requesting that CMS or a carrier adjust payment amounts.
$32.5 Million Settlement of Whistleblower Suit Based on Performance of Unnecessary Procedures
Four physicians have agreed to a $32.5 million settlement in connection with allegations that they performed unnecessary cardiac surgeries at Redding Medical Center from 1995 through 2002. The settlement was in addition to the $54 million Tenet Healthcare Corporation (which owned Redding) had already agreed to pay to settle False Claims allegations. With the settlement, Tenet agreed to pay an additional $5.5 million. Of the total settlement, the whistleblowers will share over $9.8 million.
In addition, two of the physicians agreed to never perform any heart procedures on Medicare, Medi-Cal or TRICARE patients. The terms of the settlement preserve the right of the Medical Board of California and the United States Department of Health and Human Services to revoke the physicians' licenses, and exclude the physicians from participation in the Medicare program. As part of the settlement, the U.S. Attorney's Office will not initiate criminal proceedings against any of the physicians.
FTC Finds Physicians Engaged in Unlawful Horizontal Price Fixing
The Federal Trade Commission recently upheld an administrative law judge's finding that North Texas Specialty Physicians (NTSP), an organization of independent physicians and physician groups, engaged in unlawful horizontal price fixing. NTSP had several hundred members, representing 26 medical specialties, as well as primary care. One of NTSP's main functions was to negotiate and review payor contracts on behalf of its members. The conduct at issue in the FTC's order was activities related to non-risk, fee-for-service contracts. In negotiating these contracts for its members, NTSP would enter into Physician Participation Agreements (PPAs) with each physician, which granted NTSP the right to receive all payor offers and imposed a duty on the physician to forward all payor offers to NTSP. The PPAs stated that each time NTSP received a payor offer, it was to forward the fee reimbursement and other economic provisions of the offer to the member physicians. If more than 50% of the members accepted the provisions, NTSP would proceed to negotiate a contract. NTSP also conducted annual polling of physicians to determine minimum reimbursement rates for use in negotiation with HMOs and PPOs. NTSP used the polls to calculate the average minimum acceptable fees, and then used those minimums to establish its minimum contract pricing and reported the averages to its members.
The FTC found that NTSP engaged in unlawful horizontal price fixing by negotiating agreements among its physicians on price and other terms, refusal to deal with payors except on collectively agreed-upon terms, and refusal to submit payor offers to its member physician unless the terms complied with the NTSP minimum-fee standards. The Commission rejected the argument that NTSP was a single entity incapable of conspiring with itself. The Commission issued a cease and desist order related to the unlawful price fixing activities, imposed an additional requirement that for a period of 3 years from the date of the order, NTSP must notify the FTC in writing 60 days prior to entering into any arrangement with a payor in which NTSP served as a messenger or agent on behalf of physicians, as well as a requirement that NTSP allow payors to terminate existing contracts without penalty.
FOR FEDERAL GRANT RECIPIENTS
OIG Publishes Draft Compliance Guidance for Grant Recipients
The OIG published Draft Compliance Program Guidance for Recipients of Public Health Service (PHS) Research Awards, outlining the agency's views on the fundamental principles of compliance programs for colleges and universities and other recipients of PHS awards for biomedical and behavioral research, and the specific elements that award recipients should consider in developing and implementing an effective compliance program. 70 Fed. Reg. 71312.
The OIG highlighted the following risk areas for recipients of National Institutes of Health and other PHS agency research awards: (1) time and effort reporting; (2) properly allocating charges of award projects; and (3) reporting financial support from other sources. Although not exhaustive of potential risk areas, the agency clearly intended to suggest that training, auditing, and other compliance resources focus on these three aspects of research award reporting and management.
The guidance on the structural aspects of compliance programs largely reflected past OIG guidance, with one exception. The agency noted that research award recipients, more so than other entities subject to laws that OIG enforces, should clearly establish and delineate the responsibilities of all persons involved with federally-supported research. Other typical compliance program features noted are: (1) written policies and procedures; (2) designation of a compliance officer and compliance committee; (3) training and education; (4) effective lines of communication; (5) internal monitoring and auditing; (6) enforcing standards through well-publicized guidelines; and (7) responding promptly to detected problems and undertaking corrective action.