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FOR PROVIDERS
OIG Issues 2006 Work Plan 

The OIG released its Work Plan for fiscal year 2006. The areas discussed in the Work Plan reflect what the OIG believes to be the vulnerabilities of Department of Health and Human Services' (HHS) programs and activities. The Work Plan is also intended to promote and improve efficiency and effectiveness in HHS programs. The Work Plan covers almost every aspect of health care service, as well as Medicare and Medicaid reimbursement and Medicare Part D. The Work Plan is divided into four sections: (1) CMS; (2) the seven major public health agencies including the Agency for Health Care Research & Quality, Centers for Disease Control and Prevention, Food and Drug Administration, Health Resources and Services Administration, Indian Health Service, National Institutes of Health, and Substance Abuse and Mental Health Services Administration; (3) Administration for Children & Families and Administration on Aging; and (4) projects that cut across HHS programs. The introduction to the Work Plan also noted HHS efforts to oversee programs providing relief to the areas and individuals affected by Hurricanes Katrina and Rita.

The Work Plan covers several areas pertinent to providers of every type, including, but not limited to, the following:

Hospitals

  • Adjustments for Graduate Medical Education - The OIG will follow up on numerous graduate medical education audit to ensure those audits were properly reflected in Medicare reimbursements.
  • Unbundling of Hospital Billings - The OIG will determine the extent to which hospitals are submitted claims that should be bundled into outpatient services, to prevent violations of Sections 9342(c) and (g) of the Omnibus Reconciliation Act of 1986.
  • Payments for Observation Services v. Inpatient Admissions - In relation to dialysis services, the OIG will be determining whether payments were made for inpatient admissions when the physicians' order stated the need for observation status.
  • Other Inpatient Payment Issues - The OIG will also be reviewing inpatient psychiatric stays, inpatient rehabilitation stays, inpatient services in an outpatient setting, and consecutive hospital stays for appropriateness of payment and billing.

Physicians and Health Care Professionals

  • Billing Service Companies - The OIG will identify and review the relationships between billing companies and the physicians/Medicare providers who use their services. They will also determine the impact of these arrangements on physicians' billings.
  • Cardiography and Echocardiography Services - The OIG will review Medicare payments for these services to determine whether billing was done appropriately for the technical and professional components, ensuring that the modifier 26 was used when required.
  • Initial Preventive Physical Examination - The OIG will evaluate the impact of the initial preventive physical examination, including an EKG, on Medicare payments and physician billing practices.
  • Long Distance Claims - The OIG will review Medicare claims for encounters where a significant distance separated the practice setting and the beneficiary's location. The examination will be to confirm that services were provided and accurately reported.

Pharmaceutical Manufacturers

  • Effectiveness of Average Sales Price Cost Controls - The Medicare Modernization Act introduced drug reimbursements based on manufacturers' average sales prices. The OIG will be taking a closer look because evidence indicates that the reported average sales price for certain drugs have been rising. Manufacturers' methodologies for computing average sales price will also be evaluated.
  • Part B Drugs - The OIG will conduct studies to determine widely available market prices for Part B drugs, which will then be compared to average sales price The OIG will also compare reported average manufacturer prices to average sales price. Under the Competitive Acquisition Program, the OIG will examine what systems CMS has in place to prevent duplicate payments for Part B drugs.
  • Integrity of Research Involving Human Subjects - The OIG will continue to review whether research involving humans is being conducted consistent with applicable laws, regulations and policies.

Skilled Nursing Facilities

  • Payments for Day of Discharge - The day of discharge is not considered a day of billable services for skilled nursing facilities (SNFs). The OIG will determine if Medicare is paying SNFs for services on the day of discharge.
  • Consecutive Inpatient Stays, Rehabilitation and Infusion Therapy Services - These various charges will be examined to determine if care was medically reasonable and necessary.

Medicare Part D

  • Due to the recent launch of the Medicare Part D program, many areas of Medicare Part D administration are covered in the OIG Work Plan including: integrity safeguards for Medicare drug plan applicants, beneficiary awareness of the low-income subsidy, beneficiaries true out-of-pocket costs for prescription drug coverage, prescription drug plan and marketing materials, auto-enrollment of dual eligibles, access in rural areas, and avoiding duplicate payments under Medicare Parts B and D.

The OIG Work Plan also covers many other areas affecting health care providers, including fraud and abuse, home health, managed care, bioterrorism preparedness, FDA activities, oversight of organ procurement, tribal governments third party collections and more. Read the full 2006 OIG Work Plan (PDF).

FOR PHARMACEUTICAL MANUFACTURERS:
FDA Issues CGMP Advice for Early Clinical Research

On January 12, 2006, the Food and Drug Administration (FDA) issued guidance documents containing specific approaches for researchers who are planning to conduct very early clinical studies. Guidance documents also addressed appropriate safety testing and the safe production of small amounts of drugs. The FDA press release stated that guidance was provided to "improve the process for bringing safe and effective drugs for potentially serious and life-threatening diseases, such as cancer, heart disease and neurological disorders, to the market."

One of the FDA guidance documents, Exploratory IND Studies and INDs - Approaches to Complying with CGMP During Phase 1, is intended to allow U.S. medical researchers to improve assessment of the potential advances discovered in their laboratories. As acting FDA Commissioner Dr. Andrew von Eschenbach explained, "[t]he initiative we are here to discuss is one of many we at FDA are implementing that will remove some of the hurdles from the earliest phases of drug testing and medical development in people, so that researchers can more rapidly establish whether or not a new compound truly has a real clinical benefit for people."

The Exploratory IND Studies guidance allows for very early exploratory scientific studies in humans before the start of phase 1 standard studies. These early studies use small amounts of drugs and therefore represent fewer potential risks for the people involved. The guidance from the FDA can be used during the early studies and includes recommendations on safety testing, manufacturing, and clinical approaches.

Additional phase 1 approaches are outlined in the draft FDA guidance, INDs - Approaches to Complying with CGMP During Phase 1. According to the FDA press release, this new guidance and the accompanying regulation "formally recognizes specific standards for the manufacture of small amounts of drug product for phase 1 studies and formulating an approach to CGMP compliance that is appropriate for the particular stage of drug development."

These guidance documents, along with the direct final rule, "Current Good Manufacturing Practice Regulation and Investigational New Drugs," are part of the FDA's Critical Path Initiative, which was announced in March 2004. 
 
SERONO LABS Pleads Guilty to Criminal Charges Related to Drug Marketing, Excluded from Federal Health Care Programs for Five Years

The U.S. subsidiary of Swiss corporation SERONO, S.A. pleaded guilty and was sentenced in federal court in December on criminal charges in connection with illegal schemes to promote, market and sell Serostim, a drug used to treat AIDS wasting. This guilty plea comes two months after SERONO agreed to pay $704 million to resolve criminal and civil charges, as reported in the November 2005 issue of Vital Signs. Over $136 million of the $704 million is for a criminal fine, and whistleblowers will receive over $50 million from the over $567 million civil settlement. The investigation was the result of a False Claims Act suit resulting from a former employee's concerns about the illegal marketing practices of the company.

The U.S. subsidiary, SERONO LABORATORIES, INC., pleaded guilty to two counts of criminal conspiracy and will be excluded from all federal health care programs for at least five years. The first count related to a conspiracy with RJL Sciences, Inc. to introduce computer software packages to use in calculating body cell mass and diagnosing AIDS wasting. FDA approval had not been obtained for these uses before the software was distributed, and this software increased the market for Serostim. SERONO LABS employees also induced doctors to prescribe Serostim and to get Medicaid agencies to reimburse for the drug. RJL and its president also pled guilty to their roles in the conspiracy.

The second count of conspiracy involved illegal payments to physicians to increase Serostim prescriptions. From March 1999 through December 1999, SERONO LABS offered a free trip to Cannes, France in return for up to 30 new prescriptions of Serostim. The 30 prescriptions resulted in approximately $6.3 million in sales. Four former SERONO marketing executives were also indicted in June 2005 in relation to this scheme.

As part of the plea agreement, SERONO is required to notify AIDS advocacy groups and physicians who prescribe Serostim of the guilty plea and the outcome of this case. SERONO and all other U.S. subsidiaries are also subject to a strict Corporate Integrity Agreement (CIA) for five years. The terms of the CIA indicate that the promotion of off-label uses will continue to be a factor in evaluating future health care fraud cases.

FOR HOSPITALS AND PHYSICANS
West Virginia Hospital Files Antitrust Suit Against Heart Surgeons

In December 2005, a Charleston, West Virginia hospital filed an antitrust suit in federal court against a group of seven heart surgeons. Charleston Area Medical Center (CAMC) filed a complaint alleging that the surgeons are part of a group plan to fix prices and block trade, in violation of the Sherman Antitrust Act. CAMC claims that the surgeons are refusing to be on call until they are paid more, and until they are paid for days they are required to be within minutes of the hospital for on call purposes. The documents filed in the U.S. District Court in Charleston also requested that the court order the surgeons to report to the trauma center when necessary.

The surgeons argue that CAMC is using the pay issue to direct attention away from its understaffed and ill-equipped trauma unit. Karen Miller, an attorney representing the surgeons, indicates that the surgeons only desire to be treated like other specialty physicians. Surgeons in other specialties are reportedly paid for being on call, with neurosurgeons receiving up to $3,000 per day for every day they are on call.

CAMC's petition argues that it is the surgeons, not the hospital, that are trying to divert attention. The heart surgeons all directly compete but, in almost identical documents, they have refused to be on call for trauma cases until CAMC accepts their demand for pay.

If true, the actions of the heart surgeons will add to West Virginia's growing medical antitrust history, which includes the walkout of over 25 physicians in 2003 and other issues related to a shortage of doctors and medical malpractice crises. 

FOR HOSPITALS 
New Jersey Health Care System to Pay More Than $3.8 Million Related to Medicare Upcoding

In a December 6, 2005 news release, the U.S. Attorney for the District of New Jersey announced that St. Barnabas Health Care System (St. Barnabas) has agreed to pay $3,877,694 to settle claims that it wrongfully submitted claims to Medicare that "reflected a higher level of service than was actually performed." The settlement covers claims from January 1, 1992 through December 31, 1999.

Under the settlement agreement, St. Barnabas does not admit wrongdoing, and the government will not release the details of what percentage of the payment represented penalties. According to a spokeswoman for St. Barnabas, the health care system fully cooperated in the government's investigation. A statement released by St. Barnabas stated that many of the issues occurred "prior to the time those hospitals became part" of the St. Barnabas system.

A large number of the claims investigated involved same-day stays that were billed as overnight stays. "HHS believed that certain patients were there for 'same-day' surgery or other medical procedures or had symptoms or conditions that did not reasonably warrant inpatient admission and billing under the applicable Medicare regulations," said assistant U.S. Attorney John Silbermann. In addition to billing for inpatient services, St. Barnabas also submitted claims with pneumonia treatment codes that reflected a higher level of care than was provided.

Silbermann noted that Medicare overbilling is often discovered when "intermediary" insurance companies see patterns on claims and ultimately forward those claims to Medicare. He also mentioned discoveries from hot line tips and watchdog groups who monitor national trends.