april 2012 health law update

FEDERAL UPDATEOIG Approves GPO Indirectly Owned By Health Care System

The United States Department of Health & Human Services Office of Inspector General (OIG) recently issued an advisory opinion approving a proposed group purchasing organization (GPO) arrangement (Advisory Opinion 12-01). Under the proposed arrangement, the GPO would be formed as a division of an existing limited liability company, which is itself a wholly-owned subsidiary of the governing arm of a national health system. The purposes of the GPO would be to, among other things, utilize the purchasing power of the participants to obtain discounts and realize efficiencies from suppliers based on collective bargaining power.

The OIG concluded that, although the arrangement does not fit within the Discount Safe Harbor or the GPO Safe Harbor, it nonetheless posed little risk of fraud and abuse because of the following:

• The various reporting and notice requirements for distributing excess administrative fees

• Each participant, including an affiliated organization, would constitute a separate legal entity

• The parent organization health system and its subsidiaries would continue to direct their purchasing volume through other, independent GPOs offering better cost values than the proposed GPO

• The GPO was structured to allow other non-affiliated participants to purchase from the GPO.

For additional information, contact:

Joseph M. Gorrell | 973.403.3112 | [email protected] Kevin M. Lastorino | 973.403.3129 | [email protected]

OIG OKs Arrangement to Operate Website Displaying Provider Coupons and Ads

The United States Department of Health & Human Services Office of Inspector General (OIG) recently issued an advisory opinion (Advisory Opinion 12-02) approving an arrangement for operation of a website that would display coupons and advertising from health care providers, suppliers and other entities.

Under the proposed arrangement, a corporation would operate a website that includes coupons for health care items and services and advertising on behalf of individuals and entities operating in the health care industry. The company would contract with physicians and other health care providers and suppliers, who would also be subject to “terms of use” as a condition of participation in the website. The terms of use would specify requirements related to permissible coupons, including a prohibition on offering “free service” coupons. Only coupons for a reduced price or a percentage reduction on a designated item or specific service would be permitted. Coupons could not provide discounts directed only at patient cost-sharing amounts; providers would be required to give the same discount to third-party payors as offered to patients. The company would also sell banner, pop-up and other advertising on the website to individual and institutional providers, as well as drug companies, pharmacies and other entities.

Although the OIG found that selling advertising space on a website to health care providers and suppliers that may bill federal health care programs, and posting coupons for health care items and services, are two activities that implicate the federal anti-kickback statute, it determined that it would not impose sanctions because:

• The company offering the website is not a health care provider or supplier

• Payments from providers and advertisers to the company are not dependent on customer use of the coupons or obtaining services from the providers

In This Issue:

Two New OIG Advisory Opinions

OIG Report Criticizes IDTFs

OIG: CMS Must Implement Regulations Governing Sanctions for Home Health Agency Medicare Violations

Urgent Update Concerning One-Room ASCs

Brach Eichler in the News

HIPAA Corner

April 2012

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• The website is publicly accessible; no registration is required for use

• There is little risk of overutilization or medically unnecessary care, because the coupons involve no up-front investment by users

• The coupons would be for a reduced price or percentage reduction that would benefit patients and payors alike

• The company would give providers and customers information necessary to facilitate their compliance with the anti-kickback discount safe harbor.


Carol Grelecki | 973.403.3140 | [email protected] Debra C. Lienhardt | 973.364.5203 | [email protected]

OIG Issues Report: Questionable Billing for Medicare IDTF Services

The United States Department of Health & Human Services Office of Inspector General (OIG) issued a report and recommendations last month regarding questionable Medicare billing practices by Independent Diagnostic Testing Facilities (IDTFs), a type of provider that offers diagnostic services and is independent of physicians’ offices or hospitals. (OEI-09-09-00380, March 14, 2012.)

The OIG conducted a four-part review of such IDTF claims among geographic areas — specifically, Core Based Statistical Areas (CBSAs). The OIG found that (1) twenty high-utilization CBSAs accounted for 10.5% of Medicare Part B payments for IDTF services despite having only 2.2% of the total population of beneficiaries; (2) almost four times more beneficiaries in high utilization CBSAs received IDTF services than beneficiaries in all other CBSAs; (3) 9% of the IDTFs that served beneficiaries in high-utilization CBSAs provided 90.1% of IDTF services; and (4) high-utilization CBSAs had twice as many claims with at least two questionable characteristics as all other CBSAs.

As a result, the OIG recommended that Centers for Medicare & Medicaid Services (CMS) monitor IDTF claims for questionable characteristics, take appropriate action when IDTFs submit a high number of questionable claims and assess whether to impose a temporary moratorium on new IDTF enrollments in CBSAs with high concentrations of IDTFs.


John D. Fanburg | 973.403.3107 | [email protected] C. Lienhardt | 973.364.5203 | [email protected]

OIG Criticizes CMS for Failure to Publish Regulations Governing HHA Sanctions: Urges Action

The United States Department of Health & Human Services Office of Inspector General (OIG) recently issued a report criticizing Centers for Medicare & Medicaid Services (CMS) for not properly fulfilling its obligation to regulate noncompliant home health agencies. (0E1-06-11-00401, March 02, 2012.) Under the Omnibus Budget Reconciliation Act of 1987 (OBRA), CMS was directed to implement intermediate sanctions for home health agencies out of compliance with Medicare conditions of participation. Intermediate sanctions include civil monetary penalties, payment suspension and appointment of temporary management.

Although CMS issued a Notice of Proposed Rulemaking in 1991 in response to OBRA, it never followed through with implementation and withdrew the notice in 2000. Without regulations to implement intermediate sanctions, CMS is left to pursue the only other alternative penalty: termination from Medicare. However, as the OIG noted, CMS has rarely used the termination process and, instead, enforcement has been lackluster. Thus, OIG urged CMS to make intermediate sanctions a high priority, and to complete implementation.


Todd C. Brower | 973.403.3103 | [email protected] M. Dornfeld | 973.403.3136 | [email protected]

STATE UPDATE

Urgent Update Concerning One-Room ASCs

The New Jersey Department of Health and Senior Services has recently taken the position that one-room surgery centers set up as general business corporations (i.e., “Inc.’s”) require ASC licensure even if all other criteria for licensure exemption are met (that is, even if the facility in question is limited to one operating room, owned only by physicians, and used only by its physician owners or employees). The department’s position is based on Board of Medical Examiner rules that do not include “Inc.’s” as permissible structures for physician practices. The department argues that if the entity is not set up as a physician practice, it cannot qualify for the exemption.

Upon discovering that a one-room surgery center is set up as an “Inc.,” the department will send a “cease and desist” letter requiring the facility to close and warn that failure to close could subject the center to civil penalties up to $1,000 per day.

We have successfully assisted a number of one-room ASCs that were set up as “Inc.’s” and received “cease and desist” letters to obtain appropriate corporate designation and avoid penalties. We have been able to do it in a manner that reduces exposure to

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reimbursement recoupment claims from insurance companies as much as possible. We have also assisted our clients in changing the corporate designation with Centers for Medicare & Medicaid Services.


Mark E. Manigan | 973.403.3132 | [email protected] John D. Fanburg | 973.403.3107 | [email protected]

Changes to Deficit Reduction Act Certification Require Monthly Exclusion Database Checks

In October 2010, various state agencies including the Office of the State Comptroller, Medicaid Fraud Division, published a newsletter governing various background checks that must be completed by providers and HMOs. The newsletter advised providers that they must search various databases concerning licensure and exclusions on a monthly basis to ensure employees, contractors or subcontractors are not excluded, unlicensed or uncertified.

Although the newsletter is dated almost 18 months ago and does not carry the force of law, its burdensome requirements did not raise concern until recently, with the mailing by the New Jersey Office of State Comptroller of the annual form entitled “Certification of Compliance with Section 6032 of the Federal Deficit Reduction Act.” (The act requires, among other things, that health care providers and health care organizations that receive more than $5 million in annual Medicaid funds have compliance policies that inform their contractors that furnish Medicaid health care items or services and their employees about federal and state anti-fraud and false claims laws and whistleblower protections.) This year, the State Comptroller is requiring certification that the provider or facility has a plan in place to complete monthly exclusion checks as required by the newsletter. The New Jersey Hospital Association, agreeing with several of its members, has been in discussions with the State Comptroller’s office regarding the validity of the newsletter’s overly burdensome requirements, especially in light of the fact the that requirements were issued through a newsletter and not the rulemaking procedure. We will continue to monitor this matter and keep you informed.


Carol Grelecki | 973.403.3140 | [email protected] Kevin M. Lastorino | 973.403.3129 | [email protected]

House Calls to Pharmacy Protocols

While physician house calls may largely be a thing of the past, patients may not have to go to their doctor’s office either when it comes to pharmaceutical tinkering. Under new rules recently proposed, pharmacists will be able to dole out—manage and make

changes to or discontinue drug or device therapy—in collaboration with physicians. Having proposed these rules before, the State Board of Medical Examiners (BME), together with the Board of Pharmacy (BOP), have made some changes and have taken another crack at moving this along.

The BME and BOP advocate that jointly developed protocols by a physician and pharmacist will help manage a patient’s medication-related issues and enhance overall well-being. Under the proposed new rules, before a physician can refer his patient to a collaborating pharmacist, the physician must have an existing, on-going relationship with the patient for at least a year, examined the patient at least four times or assumed responsibility for providing management and care of the patient’s condition after conducting a comprehensive medical history and physical. The joint protocol would give the pharmacist the ability to identify and manage medication-related problems, make medication changes, order and perform certain tests, and interpret laboratory tests in direct consultation with a physician. Note, however, that payors may decline to cover tests ordered by non-physicians. The rules also provide that the collaborative practice agreement will specify the functions and responsibilities, including the scope of practice and authority, to be exercised by the pharmacist.

The proposed rules also contain training and certification requirements for pharmacists participating in joint protocols. The BME and BOP are presently soliciting comments to the proposed rules, which are due on May 18, 2012.

For additional information contact:

Keith J. Roberts | 973.364.5201 | [email protected] M. Gorrell | 973.403.3112 | [email protected]

Brach Eichler In The News

John D. Fanburg and Joseph M. Gorrell were named New Jersey Super Lawyers 2012, a list consisting of only 5% of the lawyers in the state. In addition, Mark Manigan and Isai Senthil were named New Jersey Rising Stars 2012. No more than 2.5% of the lawyers in the state are named to the Rising Stars list, which consists of attorneys who are 40 or under, or have been practicing law for under 10 years.

For the second straight year, Mark Manigan was named to NJBIZ’s “Power 50 Healthcare.” According to NJBIZ, Manigan “continues to grow, as does his influence on health care policy making. The advocate remains respected on both sides of the aisle.”

Conor Murphy recently joined the firm’s Health Care Practice Group.

John D. Fanburg will present a “Legislative and Regulatory Update” at the New Jersey State Society of Anesthesiologists 53rd Annual Spring Meeting on April 21.

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Members Todd C. Brower | 973.403.3103 | [email protected] Lani M. Dornfeld | 973.403.3136 | [email protected] D. Fanburg, Chair | 973.403.3107 | [email protected] Joseph M. Gorrell | 973.403.3112 | [email protected]

Carol Grelecki | 973.403.3140 | [email protected] M. Lastorino | 973.403.3129 | [email protected] C. Lienhardt | 973.364.5203 | [email protected] E. Manigan | 973.403.3132 | [email protected] J. Roberts | 973.364.5201 | [email protected]

You have the option of receiving your Health Law Updates via e-mail if you prefer, or you may continue to receive them in hard copy.If you would like to receive them electronically, please provide your e-mail address to [email protected]. Thank you.

Health Care Practice Group | 101 Eisenhower Parkway, Roseland, NJ 07068 | 973.228.5700

Counsel Richard B. Robins | 973.403.3147 | [email protected]

Associates Lindsay P. Cambron | 973.364.5232 | [email protected] Jenny Carroll | 973.364.5223 | [email protected] T. Cohen | 973.403.3144 | [email protected] Ehrenkranz | 973.364.5234 | [email protected] M. Jennings | 973.364.5204 | [email protected]

Leonard Lipsky | 973.364.5218 | [email protected] F. Murphy | 973.364.5214 | [email protected] Senthil | 973.403.3150 | [email protected] J. Yun | 973.364.5229 | [email protected]

Attorney Advertising: This publication is designed to provide Brach Eichler, L.L.C. clients and contacts with information they can use to more effectively manage their businesses. The contents of this publication are for informational purposes only. Neither this publication nor the lawyers who authored it are rendering legal or other professional advice or opinions on specific facts or matters. Brach Eichler, L.L.C. assumes no liability in connection with the use of this publication.

On April 30, Brach Eichler will sponsor “What You Don’t Know about the Board of Medical Examiners Can Hurt You: Regulations You Need to Know to Protect Your License,” at Brach Eichler’s offices at 101 Eisenhower Parkway, Roseland. The program will be moderated by John D. Fanburg, and speakers will include Brach Eichler’s Todd C. Brower, Joseph M. Gorrell, Carol Grelecki and Keith J. Roberts, as well as Dr. Gregory Rokosz, Senior Vice President for Medical and Academic Affairs, Saint Barnabas Medical Center and former President, New Jersey State Board of Medical Examiners. For more information, contact Alan Levine at [email protected] or 973-364-8389.

Keith Roberts will be a speaker at “PIP Issues for Practitioners,” on July 20.

HIPAA CORNERDepartment of Health and Human Services Settles With Blue Cross Blue Shield for $1.5 million

In mid-March, the Department of Health and Human Services’ (HHS) Office for Civil Rights (OCR) announced it had reached an agreement with Blue Cross Blue Shield of Tennessee (BCBST) settling potential violations of HIPAA. As part of the settlement agreement, BCBST agreed to pay the government

$1.5 million and to implement a corrective action plan to review and revise its HIPAA compliance program, conduct regular trainings for employees and perform monitor reviews to ensure compliance. This is the first enforcement action resulting from a breach report required by the Health Information Technology for Economic and Clinical Health (HITECH) Act Breach Notification Rule.

OCR’s investigation followed BCBST’s November 2009 report that over 50 unencrypted hard drives were stolen from a leased facility in Tennessee. The computer drives contained the protected health information of over 1 million individuals, including names, Social Security numbers, diagnosis codes, dates of birth and health plan identification numbers. The government’s investigation revealed that BCBST did not maintain or implement adequate safeguards to protect information at the leased facility.

The HITECH Act breach notification rule requires that covered entities notify the Secretary of HHS and affected individuals of any breach of unsecured protected health information. If the breach affects more than 500 individuals, notification must be provided to the media. Breaches affecting fewer than 500 individuals must be reported to the Secretary on an annual basis. Since the BCBST breach involved more than 500 individuals, BCBST was required to immediately report to the OCR.


Todd C. Brower | 973.403.3103 | [email protected] Lani M. Dornfeld | 973.403.3136 | [email protected]

april 2012 health law update

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