the rap sheet - reed smith

Critical AccessHospital All-InclusivePayment Method: Allor Nothing MeansNothing for MostLeslye A. Herrmann, Esquire von Briesen & Roper, SCMilwaukee, Wisconsin

I. Introduction

In the Balanced Budget Act of1997 (Public Law 105-33),Congress created critical accesshospitals (CAH) under theMedicare Rural HospitalFlexibility Program to providelow-volume, rural hospitals anopportunity to receive reason-able, cost-based reimbursementfor inpatient and outpatient serv-ices. Social Security Act § 1820;42 U.S.C. § 1395i-4. To qualifyas a CAH, a facility must be acurrent participating Medicarehospital, a hospital that ceasedoperations on or afterNovember 29, 1989, or a healthclinic or health center that pre-viously operated as a hospitalbefore being downsized to ahealth clinic or health center.The facility must be located in arural area that is at least a thir-ty-five mile drive from anotherhospital (or at least a fifteen-mile drive in areas of mountainsor poor roads). The hospital islimited to fifteen acute carebeds, is subject to relaxedstaffing requirements and gener-ally is required to transfer inpa-tients to a regular hospital with-in ninety-six hours. To partici-pate and be paid as a CAH, afacility must be certified by theCenters for Medicare and

Medicaid Services (CMS). 42 C.F.R. § 485.610.

Medicare pays a CAH for inpa-tient services based on the rea-sonable cost of providing theservices, as determined underapplicable Medicare principlesof cost reimbursement. Prior tothe Medicare, Medicaid andSCHIP Balanced BudgetRefinement Act of 1999 (BBRA)(Public Law 106-113), Medicarealso paid for outpatient servicesusing only the cost reimburse-ment method. BBRA providedan alternative: for cost reportingperiods beginning on or afterOctober 1, 2000, a CAH wouldbe paid under the standardmethod for outpatient services,unless it elects to receive a cost-based facility payment plus afee schedule payment for “pro-fessional services otherwiseincluded within outpatient criti-cal access hospital services.”BBRA § 403(d)(2). The BBRA’sall-inclusive method did notresult in different paymentamounts, but merely created adifferent billing method, whereprofessional and facility chargeswould be paid together.

In Section 202 of the Medicare,Medicaid & SCHIP Benefits andImprovement Act of 2000(BIPA) (Public Law 106-554),Congress revised the all-inclu-sive method, adding a signifi-cant financial benefit for CAHelecting the option. BIPA addeda provision stating that a CAHselecting the all-inclusive optionwould receive 115% of the feeschedule amount for profession-

al services. BIPA § 202; SocialSecurity Act § 1834(g)(2)(b); 42U.S.C. § 1395(m)(g)(2)(B). Theall-inclusive method wouldresult in increased payments foritems and services billed andperformed on or after July 1,2001. BIPA § 202(b).

This article reviews the evolu-tion of CMS policy and guid-ance implementing BIPASection 202. Because CMS hasinterpreted the statute to meanthat CAH must bill for all pro-fessional services furnished to itsoutpatients in order to be eligi-ble for the all-inclusive method,that election—and the attendant15% supplemental payment forprofessional fees—is unavailableto many CAH. CMS policy alsodelayed implementation of theelective payment method; elect-ing CAH could not obtain theextra 15% until the start of thefirst cost reporting period begin-ning on or after October 1,2001, notwithstanding the statu-tory mandate that servicesbilled and performed on orafter July 1 would be eligible.

II. CMS Implementationof BIPA § 202

CMS has interpreted the all-inclusive method several timessince its creation by theBBRA. Regulations and manu-als developed before BIPAestablished a system whereCAH would elect the all-inclu-sive method at least 60 daysbefore the start of each affect-ed cost reporting period. The

A Publication of the American Health Lawyers Association Regulation,Accreditation, and Payment Practice Group

TABLE OF CONTENTS

Critical Access HospitalsAll-Inclusive Payment Method: All or NothingMeans Nothing for MostLeslye Herrmann, Esq. . . . . . . . . . . .1

Payment Suspensions and WithholdsJudith Waltz, Esq.Elizabeth Elson, Esq. . . . . . . . . . . . .4

Medicare Payment for DrugsGordon Schatz, Esq.Gail Daubert, RN, JD . . . . . . . . . . .8

CMS Recognizes the Exis-tence of the Dedicated Hos-pital Emergency Department(and What That Means for EMTALA Obligations)Jennifer Stiller, Esq. . . . . . . . . . . . .11

URAC: Promoting HealthQuality Through AccreditationDavid Korsh, JD, MA . . . . . . . . . . .15

Year-In-Review:Case Law SummaryEric Zimmerman, Esq. . . . . . . . . .20JCAHO SummaryJeffrey Moore, Esq. . . . . . . . . . . . .20Regulatory SummaryLester Perling, Esq. . . . . . . . . . . . .22

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The RAP Sheet © 2002 is published by theAmerican Health Lawyers Association. Allrights reserved. No part of this publicationmay be reproduced in any form except byprior written permission from the publisher.Printed in the United States of America.“Thispublication is designed to provide accurate and authorita-tive information in regard to the subject matter covered. Itis provided with the understanding that the publisher isnot engaged in rendering legal or other professional serv-ices. If legal advice or other expert assistance is required,the services of a competent professional person should besought.”

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The RAP Sheet

election would remain in affectfor all of that period. Further,the election “applies to allservices furnished to outpa-tients during that period.” 42C.F.R. § 413.70(b)(3); and seeMedicare IntermediaryManual § 3610.22; HospitalManual § 415.22.

CMS also interpreted the all-inclusive method to require thatelecting CAH bill for both facili-ty and professional services on aUB-92 hospital bill. This billingmethod was a significant changefor both CMS and the CAH;typically, professional servicesare included only on the CMS-1500 bill-type. Perhaps becauseof the difficulties inherent indesigning the new billing sys-tem, the elective method wasnever implemented prior to theadoption of BIPA. Notwith-standing BBRA’s effective dateof October 1, 2000, CMSannounced in December that“the Elective Method cannot beimplemented until furthernotice. The revised billinginstructions and systemschanges that are needed are notin place.” Trans. A-00-97, Dec.19, 2000, eff. Oct. 1, 2000.CMS’ action pre-dated the finalpassage of BIPA by two days.

After BIPA, interest in the elec-tive method increased dramati-cally because of the significantfinancial benefit of the election.Hospital Manual § 415.22 wasrevised to include discussion ofhow the professional servicesshould be billed on the UB-92(on a separate line, using theappropriate HCFA CommonProcedural Coding System(HCPCS) code). The HospitalManual stated that the statutepermitted the all-inclusive

method to be elected for costreporting periods beginning onor after July 1, 2001, but theeffective date of the election guid-ance was not until October 1. SeeTrans. No. 772, May 16, 2001,eff. Oct. 1, 2001.

An interim final rule with com-ment period memorialized BIPAstatutory changes in the regula-tions. 66 Fed. Reg. 32172 (June13, 2001). Commenters respond-ed to the rule, raising severalissues regarding the all-inclusivemethod. CAH were concernedabout when the method wouldbe implemented, so they couldget the full benefit of thestatute; about how the all-inclu-sive method would work for cer-tified registered nurse anes-thetists (CRNAs) where theCAH qualified for pass throughpayments for CRNA costs;about whether the 115% pay-ment would be available for“clinic visits”; and sought confir-mation that CAH could bill forprofessional services under theelective method, even wheresome practitioners would notreassign their right to bill to theCAH, and would therefore bebilling directly.

CMS responded to comments inits inpatient final rule. 66 Fed.Reg. 39828, 39927-8 (Aug. 1,2001). With regard to the CRNAservices, where a CAH choosesto claim the reasonable costs ofcompensating CRNAs for reim-bursement on the cost report, noprofessional bill may be submit-ted for those CRNA services,and the CAH cannot receive the115% fee schedule payment forthose services. Regarding “clinicvisits,” the 115% payment is avail-able to the extent that those vis-its are part of the medical andother services furnished by the

CAH on an outpatient basis. Ifthe CAH provides a CAH facili-ty service, then any attendantprofessional service will be paidat 115% of the fee schedulewhere the CAH elects the all-inclusive method.

Regarding reassignment, CMSstated, “reassignment would beneeded to help ensure thatthere is not duplicate billing forthose services.” Could reassign-ment be obtained on a practi-tioner-by-practitioner basis? No,the optional payment methodapplies to “all outpatient CAHservices furnished to outpatientsof the CAH during that peri-od.” A CAH must itself bill forall professional services provid-ed to outpatients at the CAH inorder to be eligible for the all-inclusive elective method, andthe extra 15% payment for pro-fessional services.

In response to commenters’concerns that BIPA made the115% available as of July 1, butCMS was not planning to makeit available until October 1 (orlater for providers whose costreporting years started afterthat), CMS stated, “We will con-tinue to explore all feasibleapproaches to ensuring that pay-ment is made in accordancewith statutory requirements.”

A subsequent transmittal includ-ed more explanation of how theprofessional services should bebilled and paid, and further stat-ed, “If you choose the all-inclu-sive method of reimbursementfor outpatient services, theimplementation date isNovember 5, 2001. You maycontinue to bill as you aredoing (facility claims to the fis-cal intermediaries, professionalclaims to your carrier), or youmay choose to hold these types

of claims until November 5,2001. If you continue to bill asyou are, adjustments will bemade where appropriate.”Trans. No. 778, Oct. 10, 2001,eff. Nov. 5, 2001 (revisingHospital Manual § 415.22).

Most recently, CMS included inits inpatient proposed rule anoption for fiscal intermediaries(FI) to allow CAH to make theirwritten election less that 60 daysbefore the start of the cost-reporting period. CMSexplained that CAH were con-cerned that 60 days is too longbefore the start of the cost-reporting period to allow suffi-cient flexibility; on the otherhand, FI differ on how muchtime is needed to process theelections. CMS appears to bebalancing the interests of CAHand the FI, by proposing toallow each FI to set the duedate for the written notification,so long as the date is between14 and 60 days before the startof each affected cost-reportingperiod. 67 Fed. Reg. 31403,31492 (May 9, 2002).

III. BIPA’s 115% Profes-sional Fee PaymentUnavailable to ManyCAH

Since the BBRA was passed in1999, CMS has had a statutorymandate to implement an all-inclusive billing method forCAH by October 1, 2000.When BIPA was passedadding the 115% professionalfee payment to the all-inclusivemethod, CMS had (two daysearlier) declared that it wouldnot be implementing the sys-tem by the BBRA effectivedate. CMS’ action effectivelymade the BIPA 115% paymentunavailable to CAH untilOctober 1, 2001 at the earliest,

2 Regulation,Accreditation, and Payment Practice Group

Continued from page 1

rather than BIPA’s July 1 effec-tive date.

While the three-month delay inreceiving the extra 15% feeschedule payment was a disap-pointment to CAH, the declara-tion that CAH could not obtainreassignment on a practitioner-by-practitioner basis came as ashock to many providers. CMSpublished this interpretationAugust 1, which was the sameday that many CAH made theirall-inclusive election for theOctober 1 cost reporting period.Some CAH, unaware of the pol-icy, elected to receive paymentunder the all-inclusive methodwithout having obtained theright to bill for all professionalswho provide outpatient servicesfrom within the CAH. Otherschose not to make the election,fearing they would not be ableto comply with the strict reas-signment requirement.

CMS’ “all or nothing” interpre-tation does not take intoaccount how most CAH oper-ate. While rural hospitals oftenbill for professionals who pro-vide outpatient services on aregular basis, there are usuallysome independent physicianswho also provide services atthe CAH on an occasionalbasis, and bill for those servicesthemselves. The professionalssometimes provide services atseveral locations; they prefernot to have multiple reassign-ments in place. Some may evenrefuse to reassign their right tobill. (Note that reassigning theright to bill for Medicare alone[since only Medicare paymentsare at issue here] is not accept-able under current guidance.See Medicare Carrier Manual§ 3060.2A.) Under the CMSinterpretation, even one physi-

cian who refuses to reassign theright to bill can prevent theCAH from electing the all-inclusive method and obtainingthe extra 15% payment feeschedule payment for all of theother professional services pro-vided there. CMS’ interpreta-tion thus makes an electionunder BIPA § 202 virtuallyunattainable for many CAH.

IV. Conclusion

In 2000, BIPA enhanced reim-bursement for CAH electingpayment for outpatient servicesunder the all-inclusive method.Since that time, CMS has inter-preted this provision so thatmany CAH are unable toreceive the intended reimburse-ment for professional servicesfurnished on or after July 1,2001. Clarification of the elec-tive method is needed in lightof its underlying purpose ofproviding financial assistance toCAH through increasedMedicare reimbursement forprofessional services.

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Dinetia M. Newman, Chair Phelps Dunbar LLP

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Lester J. Perling,Vice ChairBroad & Cassel

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Phone: (954) 764-7060Fax: (954) 761-8135

E-mail: [email protected]

Andrew D. Ruskin,Vice Chair and EditorVinson & Elkins LLP

1455 Pennsylvania Ave. NWWashington, D.C. 20004Phone: (202) 639-6525

Fax: (202) 639-6604E-mail: [email protected]

Eric P. Zimmerman,Vice ChairMcDermott Will & Emery

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Washington, DC 20005-3005Phone: (202) 756-8148

Fax: (202) 756-8087E-mail: [email protected]

2002-03

Regulation, Accreditation,and Payment

Practice Group Leadership

Payment Suspensionsand WithholdsJudith A. Waltz, Esquire1

Elizabeth S. Elson, Esquire2

Foley & LardnerSan Francisco, California

I. Introduction

The suspension of payments toproviders and suppliers ofhealthcare services is perhapsthe most powerful tool that theMedicare program has toaddress suspected programfraud and abuse. Perhaps mostimportantly, it can be utilizedbefore more traditional enforce-ment measures (such as theassessment of an overpayment,or an exclusion from programparticipation) are available.While the suspension processmight be characterized as one-sided, draconian, and generallycontrary to basic principles ofdue process, courts have gener-ally upheld the government’ssuspension determinations evenwhen the provider or supplierhas been able to demonstrateirreparable harm. Given thepotential power of this tool,however, the government hasdemonstrated almost surprisingrestraint in its use.

A suspension is defined in theMedicare regulations as a with-holding of payment by an inter-mediary or carrier from aprovider or supplier of anapproved Medicare paymentamount before a determinationof the overpayment amountexists.3 A suspension may beimposed by the Centers forMedicare and MedicaidServices (CMS) (the componentof the Department of Healthand Human Services (DHHS)assigned responsibility for theday-to-day operations of theMedicare program), a fiscal

intermediary, or a carrier if theyhave reliable information thatan overpayment or fraud orwillful misrepresentation exists,or that payments to be mademay not be correct.4 The sus-pension can be imposed againstpart or all of the Medicare pay-ments due to a provider or sup-plier, and may also be imposedagainst interim payments. Whenpayments are suspended, theintermediary or carrier will con-tinue to process and creditclaims notwithstanding the sus-pension, resulting in the accu-mulation of a “suspense”account, much like an escrow.The regulations further providethat an intermediary’s or carri-er’s determination to impose asuspension, offset, or recoup-ment is not an appealable deter-mination, notwithstanding anobjection from a provider orsupplier.5

II. Reasons for aPayment Suspension

A suspension may be imposedwhen there is reliable informa-tion that an overpayment exists.Such a situation may arise whenseveral claims have been identi-fied on post-pay review as non-covered or miscoded, theprovider has billed this servicemany times before, and it is sus-pected that additional non-cov-ered or miscoded claims havebeen paid.6 A suspension mayalso be imposed when there isreliable information that pay-ments to be made prospectivelymay not be correct. An exampleof this situation is when the inter-mediary or carrier believes thata provider may be submittingnon-covered or miscoded claims,but the contractor lacks theresources to perform manualpre-pay review on all the claims.7

Additionally, suspensions maybe imposed when there hasbeen a failure to furnish infor-mation in accordance with § 1815(a) of the Social SecurityAct (42 U.S.C. § 1395g) (forPart A) or § 1833(e) (42 U.S.C.§ 1395l) (for Part B). This situa-tion generally arises when aprovider or supplier fails toprovide information requestedby the intermediary or carrierthat is necessary to determinethe amounts due the provideror supplier; for example, a fail-ure to respond to a request formedical charts to supportclaims. The broad language ofthese statutory provisions, how-ever, suggests that suspensionsmay also be available in other,as yet to be determined, situa-tions such as a provider’srefusal to provide reports ofconfidential or privileged inves-tigations, or consultant reports,which the government mightdeem necessary to justify con-tinued payments.

Suspensions may also bepremised upon suspected fraudor misrepresentation. Examplesof fraud include upcoding ofdiagnosis related groups(DRGs), violations of the physi-cian self-referral prohibitions,and forged signatures onCertificates of Medical Necessity(CMNs) and treatment plans.Under applicable manual provi-sions, credible allegations orcomplaints of such practices arecause for suspension.8 Fraudsuspensions may also resultwhen a provider is identified asengaging in practices describedin a Health Care FinancingAdministration (HCFA) (nowCMS) Fraud Alert. Additionally,an intermediary or carrier mayrecommend a suspension in thefollowing situations: a provider

has pled guilty or been convict-ed of federal healthcare pro-gram fraud or private healthfraud and is still billingMedicare for services;federal/state law enforcementhas subpoenaed the records ofor executed a search warrant ata healthcare provider billingMedicare; a provider has beenindicted by a federal grand juryfor fraud, theft, embezzlement,breach of fiduciary duty, orother misconduct related to ahealthcare program; or aprovider presents a pattern ofevidence of known false docu-mentation or statements sent tothe intermediary or carrier,such as false treatment plans orfalse statements on providerapplication forms.9

A suspension of payments to aprovider or supplier may thuseliminate (or at least significant-ly reduce) the individual’s orentity’s cash flow at the sametime as he/she/it exercises well-established constitutional rightsto protest the government’sallegations in another forum. Itremains to be seen whetherthese manual provisions willwithstand scrutiny as a reason-able interpretation of the regulations.

A law enforcement entity, suchas the DHHS Office ofInspector General (OIG),Federal Bureau of Investigation,or Department of Justice (DOJ),may also request that an inter-mediary or carrier impose afraud suspension. In order toimpose a suspension subject tothe request of such an outsideagency, the intermediary or car-rier must forward the writtenrequest to a CMS RegionalOffice for its review and deter-mination.10 This underscores an


important point: that it is CMS,not law enforcement agencies oreven the DHHS OIG, whichhas the Secretary’s delegatedauthority for determining theamount and timing of paymentsto Medicare providers and sup-pliers. The purpose and focusof the suspension is to protectthe Medicare program, not topunish those who are suspectedto have engaged in fraudulentor abusive behavior.

Finally, unfiled cost reports resultin an immediate suspension ofpayments.11 Payments will not beresumed until the provider files acost report that the intermediarydeems acceptable.

III. Process of Imposing aPayment Suspension

The initiation, modification, orremoval of a suspension requiresthe explicit prior approval of theHCFA (now CMS) RegionalOffice.12 The intermediary orcarrier must notify the provideror supplier of its intention to sus-pend payments in whole or inpart and must provide the rea-sons for making the suspen-sion.13 The provider should beadvised in the notice of the fol-lowing: (1) that a suspensionaction will be imposed, (2) that asuspension is not appealable, (3) when the suspension willbegin, (4) which items or servic-es will be affected, (5) how longthe suspension is expected to bein effect, (6) the reason for sus-pending payment, and (7) thatthe provider has the opportunityto submit a rebuttal statementwithin fifteen days of notification.

In circumstances in which theintermediary or carrier providesprior notice that payments willbe suspended, the provider orsupplier is usually given at least

fifteen days notice. Prior noticeis not required when the suspen-sion is due to a provider’s/sup-plier’s failure to furnish informa-tion requested by the intermedi-ary or carrier; when CMS, theintermediary, or the carrierdetermines that the MedicareTrust Funds would be harmedby giving prior notice; or whenfraud or misrepresentation issuspected.14 When prior noticeis not given, the notice shouldbe sent to the provider/supplierno later than fifteen days afterthe suspension is imposed.15

If prior notice is required, theintermediary or carrier mustgive the provider or supplier anopportunity for rebuttal.16 Therebuttal is a statement (includ-ing any pertinent information)as to why the suspension shouldnot be put into effect on thedate specified. The rebuttalshould include information suchas the following: reasons whythe suspected overpayment maybe unfounded; injury to thebusiness/community if the sus-pension is imposed; financialinformation; suggestions as tolimitations for the suspension topartial payments, particularcodes, or specified amounts.

The opportunity for rebuttal mustbe given before the suspensiontakes effect (in cases where priornotice is required). The provideror supplier generally has at leastfifteen days from the date of thenotice to submit its rebuttal. Theintermediary or carrier may forgood cause impose a shorter orlonger time period for rebuttal.17

Intermedi-aries and carriers aredirected to forward providerrebuttals to the CMS RegionalOffice as soon as possible. TheRegional Office then consultswith the DHHS Office of

General Counsel and advises theintermediary or carrier before itresponds to the rebuttal.18

The response to the provider’sor supplier’s rebuttal statementis due within fifteen days of thereceipt of the statement. Imple-mentation of the suspension isnot delayed beyond the datespecified in the notice in orderto review the statement.19 Theintermediary or carrier mustnotify the provider or supplierin writing of its determinationin response to the rebuttalstatement. Again, because thedetermination made inresponse to the rebuttal state-ment is not an initial determi-nation, it is not appealable.20

IV. Duration of aSuspension

A suspension is usually limitedto 180 days, starting with thedate the suspension begins.21

An intermediary or carrier, orin cases of fraud or misrepre-sentation, the OIG or a lawenforcement agency, mayrequest a one-time only exten-sion of up to 180 additionaldays if it is unable to concludeits examination of the informa-tion or investigation. WhenCMS receives such a request,it notifies the provider/supplierof the requested extension anddetermines whether to extendthe suspension or to releasethe funds in the suspenseaccount to the provider/suppli-er. The time limits for suspen-sions do not apply if the casehas been referred to, or isbeing considered by, the OIGfor administrative action (e.g.,civil money penalties). Thisexception does not apply topending criminal investigationsby the OIG.22

CMS may grant an extensionin addition to the second 180days if the DOJ submits a writ-ten request to CMS seekingthe continuation of the suspen-sion based on an ongoinginvestigation and anticipatedfiling of a criminal and/or civilaction.23 The DOJ requestmust include: (1) identificationof the entity under suspension;(2) the amount of time neededfor continued suspension inorder to implement the crimi-nal and/or civil proceedings;and (3) a statement of whyand/or how the criminaland/or civil proceedings maybe affected if the requestedextension is not granted.

V. Lifting of aSuspension

Suspended payments are firstapplied to reduce or eliminateany overpayments, includinginterest, determined by theintermediary, carrier, or CMS.The suspended payments arethen applied to reduce anyother obligations to CMS orDHHS. Unless there is a legalrequirement that the excess bepaid to another entity, theexcess will be released to theprovider or supplier.24

Intermediaries and carriersshould recommend to CMSthat a suspension be lifted if:(1) no overpayment is identi-fied; (2) the amount of the sus-pected overpayment has beenidentified and is no longeraccruing; and (3) the amount inthe suspense account exceedsthe amount of the suspendedoverpayment.25 If the basis forthe suspension was fraud orwillful misrepresentation, thesuspension should be terminat-ed when there is sufficient evi-

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Continued on page 6

dence that the fraudulent activi-ty has ceased. If the basis forsuspension was that paymentsto be made were not correct,the suspension should be termi-nated when there is certaintythat the payments to be madewill be correct. Finally, if thebasis for suspension was a fail-ure to furnish records or a costreport, the suspension should beterminated when the provider/supplier has submitted all therequested records and the inter-mediary or carrier believes theprovider/supplier will complywith future requests for records.

If the intermediary or carriersuspects that a provider/supplierwill continue to submit improp-er claims after a suspension islifted, it may implement otheractions as necessary, such as apre-payment review or anothersuspension. If the intermediaryor carrier believes there are pastperiods of time that may con-tain overpayments, a new sus-pension may be considered.Finally, if the intermediary orcarrier believes that, during aperiod in which the provider isunder suspension with respectto a particular service, there isreason to initiate a suspensionfor a different service, a newsuspension of payment must beinitiated.26

VI. Offset or Recoup-ment of Funds inSuspense Account

If the intermediary, carrier, orCMS has determined that an off-set (defined in 42 C.F.R. § 405.370 as the recovery byMedicare of a non-Medicare debtby reducing present or futureMedicare payments and applyingthe amount to the indebtedness)

or recoupment (defined in 42C.F.R. § 405.370 as the recoveryby Medicare of any outstandingMedicare debt by reducing futureMedicare payments and applyingthe amount withheld to theindebtedness) is appropriate, theintermediary or carrier will notifythe provider/supplier of its inten-tion to offset or recoup paymentsin whole or in part and the rea-sons for the offset or recoupment.The provider or supplier will thenbe given an opportunity for rebut-tal in accordance with 42 C.F.R.§ 405.374. The rebuttal of the off-set or recoupment is distinguish-able from an appeal of the over-payment itself.

VII. Challenges to theDecision to ImposeSuspension, Recoup-ment, or Offset

Suspensions of payments are notappealable through the adminis-trative process because they donot represent a final determina-tion. The question therefore aris-es as to how a provider or sup-plier who believes there hasbeen an abuse of discretion inthe decision to impose the sus-pension, recoupment, or offsetshould handle the situation. Amajor impediment for theprovider or supplier is the deci-sion in Illinois Council for LongTerm Care v. Shalala, 529 U.S. 1(2000), which essentially eliminat-ed all jurisdictional bases forMedicare disputes, except 42U.S.C. § 405(h), which requiresthe exhaustion of administrativeremedies.27 An overpaymentdetermination, as opposed to asuspension of payments, doesrepresent a final determination,and thus there is an administra-tive process that must beexhausted before a court hasjurisdiction. Unfortunately for the

provider or supplier, such admin-istrative review may come toolate for it to continue in businessafter its cash flow has disap-peared due to the suspension ofpayments.

Because of the difficulty estab-lishing jurisdiction in the courts,providers and suppliers general-ly have little success in obtain-ing temporary restraining orderspreventing the imposition of asuspension of payment. Manycourts consider the likelihood ofsuccess on the merits as one fac-tor in support of a grant ofinjunctive relief; there is clearlylittle chance for providers/suppli-ers to achieve a victory on themerits absent jurisdiction.Additionally, even if there werejurisdiction, several circuits holdthat, if the issue is one thatwould be remedied by the pay-ment of money, the harm is notirreparable and therefore injunc-tive relief is not appropriate. If aprovider or supplier does get tocourt, the court must balancethe interests of the provider’s/supplier’s ability to stay in busi-ness versus the protection of thefederal healthcare programagainst fraud or abuse. Timingis also critical in attempts toobtain a temporary restrainingorder, as providers/suppliersmust act quickly to make thebest arguments about the needto preserve the status quo.

The best option for a provider orsupplier facing a suspension ofpayments may be to declarebankruptcy (assuming, of course,that a bankruptcy filing is appro-priate in other respects).28 Onereason bankruptcy may be aviable option is that there arepotential alternative theories ofjurisdiction in bankruptcy cases,as 42 U.S.C. § 405(h) does not

specifically exclude the statutesthat establish bankruptcy courtjurisdiction.29 Courts havereached conflicting decisions asto whether bankruptcy jurisdic-tion can be availed to addressthis sort of issue. The possiblebases for bankruptcy court juris-diction include 28 U.S.C. § 157and 28 U.S.C. § 1334. There isan argument in bankruptcy courtthat a suspension of paymentsviolates the automatic staybecause it seeks control of assetsof the estate. Additionally, somecircuits do not require theexhaustion of administrativeremedies in appropriate situa-tions. Finally, bankruptcy courtsalso tend to be more sympathet-ic to the issues relating to thepreservation of the estate andthe desire not to assist one credi-tor in recovering more than itsshare of the remaining assets,which frequently are not suffi-cient to allow full recovery toevery creditor.

Providers and suppliers inbankruptcy actions must movequickly because a temporaryrestraining order in bankruptcy,like restraining order actionsout of bankruptcy, may bepremised upon preservation ofthe status quo. Thus, the bestarguments for the restrainingorders to preclude the govern-ment from imposing a suspen-sion are made before the sus-pension goes into effect.

VIII. Conclusion

The suspension process movesquickly and poses substantialrisks to the continued opera-tions of providers and suppliers.Counsel for providers and sup-pliers must be poised to assisttheir clients in submitting theappropriate information to rebuta proposed suspension, recoup-



ment, or offset, and must beprepared to consider alterna-tives, such as bankruptcy.

1 Judy Waltz is a partner in the SanFrancisco office of Foley & Lardner.Her e-mail address is [email protected].

2 Elizabeth Elson is an associate inthe Los Angeles office of Foley &Lardner. Her e-mail address is [email protected].

3 42 C.F.R. § 405.370.

4 42 C.F.R. §§ 405.372,405.371(a)(1).

5 42 C.F.R. § 405.375(c).

6 Provider Integrity Manual (PIM)9.1.2.

7 Id.

8 PIM 9.1.1.

9 Id.

10 Id.

11 42 C.F.R. § 405.371(c).

12 PIM 9.2.1.

13 42 C.F.R. § 405.372(a)(1).

14 PIM 9.2.2.1 also recommends thatno prior notice be given if: (a) adelay in imposing the suspensionwill cause the overpayment to rise atan accelerated rate (i.e., dumping ofclaims); (b) there is reason to believethat the provider may flee the inter-mediary’s or carrier’s jurisdictionbefore the overpayment can berecovered; and (c) the intermediaryor carrier has first-hand knowledgeof a risk that the provider will ceaseor severely curtail operations or oth-erwise seriously jeopardize the abili-ty to repay.

15 PIM 9.2.2.1. However, this noticeperiod may be shortened for cause.PIM 9.2.2.3.

16 42 C.F.R. §§ 405.372(b),405.374.

17 42 C.F.R. § 405.374.

18 PIM 9.2.2.5.

19 42 C.F.R. § 405.375(a).

20 42 C.F.R. § 405.375(c).

21 42 C.F.R. § 405.372(d).

22 PIM 9.2.4B.

23 42 C.F.R. § 405.372(d).

24 42 C.F.R. § 405.372(e).

25 PIM 9.2.5.

26 PIM 9.2.7.

27 The only possible exception isthat the Court did not address man-damus jurisdiction.

28 See Samuel R. Maizel and JudithA. Waltz, “Injunctive Relief inHealth Care Insolvencies,” 24 CAL.BANKR. J. 215 (1998).

29 It should be noted, however,that prior versions of § 405(h) didpreclude bankruptcy court jurisdic-tion (as part of § 24 of the JudicialCode), and the omission wasarguably inadvertent or related to aproblem with codification ratherthan an intent to allow bankruptcycourt jurisdiction. E.g., In re St.John’s Home Health Agency, Inc., 173B.R. 238, 242 (Bankr. S.D. Fla.1994).

healthlawyers.org 7

The RAP Sheet

Endnotes

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Appropriate payment for drugs3 has been a major challenge forfederal and state payors for over a decade. During this time, vari-ous methods of payment have evolved to balance cost controls withrecognition of new and beneficial drug therapies. Several recentstudies indicate that Medicare Part B payment amounts are signifi-cantly higher than the providers’ actual acquisition costs for somedrugs. Congress is considering two proposals and the Centers forMedicare & Medicaid Services (CMS) may act to restructure thecurrent Medicare payment method for drugs, which is based on95% of the average wholesale price (AWP).

To better understand where the Medicare payment changes may beheaded, this article first looks at prior methods to pay for Part Bdrugs, summarizes the current 95% of AWP method, and thenlooks ahead to options Congress is considering. Lastly, this articlesuggests recommendations to improve the appropriateness ofMedicare payment methodologies for drugs.

I. Past Methods of Payment for Drugs

In the past decade, CMS has implemented several different meth-ods of payment for Part B physician-administered drugs.

Starting January 1, 1992, CMS based payment for drugs on the lowerof the estimated acquisition cost or the national AWP, whichever wasless. 56 Fed. Reg. 59507 (Nov. 25, 1991), 42 C.F.R. § 405.517. If thedrug had multiple sources, the carrier would determine the medianof the average wholesale generic prices. Carriers could conduct sur-veys of actual invoice prices paid by the providers furnishing thedrugs. Indirect costs such as inventory, waste, and spoilage could beconsidered. This applied for drugs not paid on a cost or prospectivebasis. Separate payment methods were set for ESRD related drugs.42 CFR § 413.170(c)(7).

As a practical matter, Medicare contractors determined drug pay-ment levels in processing claims. Some carriers conducted surveysto determine acquisition costs and others paid on the basis ofinvoices. Before initiating this approach, CMS (then HCFA) hadproposed 85% of AWP.

II. Current Method of Medicare Payment

Congress created a new methodology for Medicare payment forPart B covered drugs based on the lower of the billed charge or95% of AWP. 42 U.S.C. § 1395(o)(1). This change in payment waseffective in 1998 and remains the basis for payment today.

In paying claims, Medicare contractors use the published AWPs todetermine the Medicare payment amount. The actual methodologyused to calculate the Medicare payment, however, differs depend-ing upon, among other things, the practice setting (e.g., physician

office or hospital outpatient setting). See Program Memorandum,Transmittal No. A-02-026 (Mar. 28, 2002)(describing how Medicarecalculates payment for drugs administered in the hospital outpatientsetting in accordance with the pass-through payment provisions thatwere part of the Balanced Budget Refinement Act of 1999).

A. Average Wholesale Price

The AWP is assumed to represent the average price at whichwholesalers sell drugs to their customers. The term AWP, however,is not defined in any law or regulation and there is no formula thatmanufacturers must use to calculate the AWP for a drug. For themost part, AWP has been based on prices reported by drug manu-facturers and published in compendia such as the Drug Topics RedBook (Red Book).

B. Criticisms of AWP

The federal government and CMS now feel that the AWP methodof payment is flawed and that the AWP is neither an average price,nor what wholesalers charge. A few Congressmen claim AWP is anacronym for “Ain’t What’s Paid.” See, e.g., Medicare DrugReimbursements: A Broken System for Patients and Taxpayers, JointHearing Before the Subcomm. on Health and Subcomm. onOversight and Investigations of the Comm. on Energy andCommerce, 107th Cong.1st Sess. 3 (statement of James Greenwood,Chairman, Subcomm. on Oversight) [hereinafter H.R. Doc. No.107-65 (2001)] at www.energycommerce.house.gov/107/hearings/09212001/hearings 371/hearings.htm.

Critics have likened AWPs for drugs to “sticker prices” for cars.This is because manufacturers and wholesalers often give providerscompetitive discounts that reduce the actual price that providerspay for the drugs.

It is, however, important to note that one reason discounts are notreflected in the published AWP is because the discounts vary fromprovider to provider depending upon the terms and conditions of aparticular agreement and the negotiated price.

In the fall of 2000, CMS sought to reduce payments for selecteddrugs suggesting carriers use wholesaler catalogue prices for thirty-two drugs and fourteen oncology drugs. See ProgramMemorandum, Transmittal No. AB-00-86 (Sept. 8, 2000).

III. Proposals for Reform—Considerations

A. Average Sales Price

The House Energy and Commerce Committee is working on a pro-posal that would base Medicare payment for drugs on the averagesales price (ASP). Under this proposal, the manufacturer would be


Medicare Payment for DrugsGordon B. Schatz, Esquire1

Gail Daubert, RN, JD2

Reed Smith LLPWashington, DC

required to report the ASP to the government. The ASP wouldreflect manufacturer provided rebates, charge-backs, and other dis-counts and would be calculated based on sales to hospitals, man-aged care plans, and physicians. Proponents stress that, because theASP would take into account such discounts, it would more accu-rately reflect the providers’ actual acquisition costs.

B. Competitive Bidding

The House Ways and Means Committee is drafting a proposal tohave Medicare pay for drugs using a competitive bidding system.As proposed, a wholesaler or group purchasing organization (GPO)would negotiate a discount price from the drug manufacturer andthen submit bids to CMS for Part B covered drugs. CMS wouldconsider the bids and set the Part B payment amount based on theaverage of all the bid prices. Figure 1 illustrates how the competi-tive bidding system might be implemented.

Figure 1

C. Analysis/Concerns with Proposals

The Competitive Bidding Proposal assumes that, because Medicareis one of the largest payers of healthcare services in the UnitedStates, CMS should be able to negotiate a better price for drugsmuch like the Department of Veteran Affairs (VA) has done. TheVA starts by acquiring verifiable price data based on actual marketprices. Then, the VA leverages its purchasing power to negotiatebetter prices and establish its Federal Supply Schedule (FSS) pricesfor drugs. The VA uses competitive bidding to obtain prices evenlower than the FSS prices for some drugs.

In order for Medicare to use a competitive bidding system, CMSmust obtain bids from multiple wholesalers and GPOs for every(450 at last count) Part B covered drug. The current proposal doesnot explain how CMS would set a price for a drug if multiple bids

were not obtainable. In addition, the competitive bidding systemwould apparently require that there be an additional middleman,i.e., the contract entity (GPO or wholesaler). This may ultimatelypreclude or reconfigure direct sales by manufacturers to providers.

Conversely, the ASP proposal seems to eliminate the middlemanby holding manufacturers responsible for reporting discountedprices and rebates directly to the government. To obtain accurateinformation and track discounts and rebates, the manufacturerwould need to sell directly to providers.

Thus, the ASP is likely to raise serious problems, particularly formanufacturers that currently only sell to wholesalers. It is unclearhow these manufacturers would collect, analyze, and report on dis-counts and rebates provided by wholesalers. In addition to creatingmany administrative problems for manufacturers, it may raise con-cerns about price-fixing, and possibly antitrust violations.

IV. Recommendations and Conclusion

Any Medicare drug payment reform should reflect (1) the diversityof drugs, (2) the need to update pricing over time, and (3) reason-able opportunity to participate in payment determinations. Changesto the payment system should accommodate and distinguish singlesource, multi-source, and generic drugs. The payment methodologyshould also take into account drugs with high inventory, waste,spoilage, regulatory compliance and administration costs. Ratherthan eliminating AWP-based reimbursement and mandating a new“one-size-fits all” system, Congress and CMS should consider fixingthe AWP and implementing complementary alternative methods ofpayment that take into account ASP and competitive bidding.Medicaid rebate methods and the Department of Veterans Affairshave some of these components.

A GAO report published in September 2001 indicated that, whileMedicare Part B covers about 450 drugs, the bulk (82%) ofMedicare spending was attributable to thirty-five drugs. See GAOReport September 2001. Thus, rather than changing the entire pay-ment system, Congress should consider authorizing CMS to usealternative methods to establish payment amounts for, say, the topforty drugs, returning to prior CMS efforts. The top forty drugsbilled are likely to be widely distributed by many wholesalers andavailable through GPOs. In which case, competitive bidding orASP would work. For the rest of the drugs, Medicare paymentcould be based on either

1. Government surveys of actual acquisition costs (invoice pricereported by the end user) plus a 10% add-on to cover addition-al drug-related costs, such as waste, storage, and handlingexpenses, or

2. The existing AWP price system but modified to limit the permis-sible difference between actual selling price and published AWP.

healthlawyers.org 9

The RAP Sheet

Manufacturer Contract entity negotiates discountsfrom manufacturer tomarket best prices todoctors

Contract entity sumitsbid to CMS for Part Bcovered drugs

CMS Considers bids and pays doctors fordrugs based on average of all bid prices.

CMS also pays docotrs the practiceexpense for administering the drug

Doctors buy drugthrough contract entityand seek best discount

Physician administersdrug to patient

1

2

3

4 5

PBM Pharmacy

WholesalerGPO

CMS

Continued on page 10

Any system needs a method of input by affected parties and rea-sonable opportunities for updating. These procedural protectionshave become hallmarks of the DRG, RBRVS, HOPPS, and otherMedicare prospective payment systems. Under any of the aboveproposals, CMS or the contractors should on a yearly basis publishpayment amounts and give interested parties an opportunity tocomment. There may even be a place for consideration of a drug’sclinical value and relative benefits in setting/updating payment lev-els. CMS could establish a “DRUG PAYMENT ADVISORYBOARD” to hear comments and make decisions on payment fordrugs. In sum, Medicare needs to implement a payment policy toachieve savings while at the same time providing adequate reim-bursement to providers. This will ensure that beneficiaries haveaccess to these drugs and the pricing can be updated through anefficient process. As Congress moves ahead with legislative expan-sion of drug coverage, a more rational drug payment methodologywill be critical to management of an expanded benefit.

1 Mr. Schatz is a partner and head of Reed Smith’s Health Care Group([email protected]).

2 Ms. Daubert is an associate in Reed Smith’s Health Care Group([email protected]).

3 This article focuses on Medicare Part B covered drugs including injecta-bles, biologicals, chemotherapy and radiopharmaceuticals.



Endnotes

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CMS Recognizes theExistence of theDedicated HospitalEmergency Depart-ment (and What ThatMeans for EMTALAObligations)Jennifer A. Stiller, Esquire1

Law Offices of Jennifer A. StillerHaverford, Pennsylvania

I. Introduction

Although the Emergency MedicalTreatment and Labor Act(EMTALA) has been with ussince 1986, hospitals have increas-ingly struggled with how to meettheir obligations under it as thecourts and the Centers forMedicare and Medicaid Services(CMS, formerly the Health CareFinancing Administration) havegrafted additional requirementsonto what started as an apparent-ly simple anti-dumping statute.Now, for the first time since theadoption of the outpatientprospective payment system regu-lations in April 2000, CMS hassignaled a willingness to backdown on some of its more expan-sive regulatory interpretations.

The proposed regulations pub-lished on May 9, 20022 strive tobalance the government’s inter-est in enforcing the statute’srequirements and protectingpatients with the practicalities ofproviding emergency services inan era of overcrowded emer-gency rooms and medical spe-cialists who are increasinglyunwilling to take call. CMS hasindicated that it expects to final-ize the proposed rules on orbefore August 30, 2002.

Under the statute, EMTALAobligations begin when an indi-vidual “comes to the emergencydepartment” of a Medicare-par-ticipating hospital that has such a

department, seeking examinationor treatment for a medical condi-tion.3 In recent court decisionsand regulations, this languagehas been interpreted as applyingthe full panoply of EMTALAobligations (e.g., screening byqualified medical personnel todetermine whether a medicalemergency exists, and, if so,treatment of the emergency med-ical condition (EMC) until thepatient is stabilized or appropri-ately transferred), to other loca-tions on the hospital’s campus,4

off-campus hospital departmentsof whatever nature,5 hospital-owned ambulances,6 and evennon-hospital owned ambulancesthat have been in touch with ahospital’s emergency departmentby telephone or telemetry.7

The most significant change ofapproach manifested in the pro-posed rules, is CMS’ explicitrecognition that there is a differ-ence between a hospital depart-ment dedicated to providingemergency services and otherhospital facilities. By differentiat-ing between what the phrase“comes to the emergency depart-ment” means in the context ofsuch a dedicated departmentversus other hospital locations,CMS would limit somewhat thecircumstances where an EMTA-LA obligation is triggered, thusbringing hospitals’ obligationsunder the statute more in linewith Congress’ original intent.This fundamental shift in thegovernment’s approach is accom-plished through six proposedregulatory changes:

1. Addition of a new definition,“Dedicated emergencydepartment” in 42 C.F.R. § 489.24(b).

2. Revision of the definition of“Comes to the emergencydepartment” in the samesection.

3. Repeal of 42 C.F.R. § 489.24(i), the 2000 regula-tion that expanded theapplicability of EMTALA toall off-campus departments.

4. Addition of a new paragraph42 C.F.R. § 482.12(f)(3) tothe conditions of participa-tion, addressing the hospi-tal’s obligations with regardto emergencies at off-campusdepartments.

5. Addition of new 42 C.F.R.§ 489.24(d)(2), specifyingEMTALA obligations toinpatients.

6. Preamble language clarify-ing that EMTALA does notapply to regularly sched-uled outpatients who devel-op emergency medical conditions.

This article focuses on theeffects on EMTALA enforce-ment of the proposed regula-tions that spring from this newCMS approach to the statutoryphrase “comes to the emer-gency department.”

Other changes in the proposedrules not covered here in detailare:

• Revision of the regulationdescribing the applicabilityof EMTALA to hospital-owned ambulances to specifythat its obligations do notapply if such an ambulanceis operating under communi-ty-wide EMS protocols thatdirect it to transport thepatient to a hospital otherthan the one that owns theambulance;8

• The imposition of a new spe-cific obligation on hospitalsonce a patient enrolled in aMedicare+Choice organiza-tion has been stabilized, torequest preapproval of anyadditional necessary hospitalcare;9

• “Clarifications” of hospitals’obligations with regard toon-call physicians that aregenerally not considered byhospitals and physicians tohave shed much light on thematter.10

In addition, the proposed ruleswould incorporate a number ofpreviously published regulatoryinterpretations into the formalregulations, while the preamblelanguage invites public com-ments on numerous points.

II. Dedicated EmergencyDepartment

The new concept of “dedicat-ed emergency department”(DED) starts with a proposeddefinition:

Dedicated emergency depart-ment means a speciallyequipped and staffed areaof the hospital that is used asignificant portion of thetime for the initial evalua-tion and treatment of outpa-tients for emergency med-ical conditions, as defined inthis section, and that islocated—

(1) On the main hospitalcampus; or

(2) Off the main hospitalcampus and is treated byMedicare under Sec.413.65(b) of this chapter as adepartment of the hospital.

healthlawyers.org 11


The RAP Sheet

Changes to the HospitalInpatient Prospective PaymentSystems, 67 Fed. Reg. at 31506.Note that the proposed defini-tion would encompass units ofthe hospital, such as labor anddelivery departments and psy-chiatric units, that are held outto the public as an appropriateplace to come for medical serv-ices on an urgent, nonappoint-ment basis.11

For off-campus sites that qualifyas hospital departments underthe provider-based status rules,only those that meet this defini-tion must meet EMTALArequirements. However, underthe proposed rules, the obliga-tions of such off-campus DEDswould be more stringent thanthose previously included in 42C.F.R. § 489.24(i)(2)(i), whichwith the rest of subsection (i)would be repealed.

With regard to off-campusdepartments that do not meetthis definition, CMS has specifi-cally stated in the preamble thata hospital has no EMTALAobligation with respect to

patients presenting at suchdepartments, and that, if a per-son comes to such a departmentfor emergency care, “it wouldbe appropriate for the depart-ment to call an emergency med-ical service (EMS) if it is inca-pable of treating the patient,and to furnish whatever assis-tance it can to the individualwhile awaiting the arrival ofEMS personnel.”12 Stating thatthe “primary purpose” of 42C.F.R. § 489.24(i) was todescribe EMTALA obligationsapplicable to off-campus depart-ments that do not routinely pro-vide emergency care,13 CMS isproposing to repeal that sectionentirely. To clarify that CMSexpects hospitals to have proto-cols in place to deal with med-ical emergencies at off-campusfacilities not equipped to pro-vide emergency care, the pro-posed rules include a new para-graph 42 C.F.R. § 482.12(f)(3),requiring the hospital’s govern-ing body to assure that themedical staff has written policiesand procedures “with respect tothe off-campus department(s) forappraisal of emergencies andreferral when appropriate.”14

It is apparent from the pream-ble that the definition of “dedi-cated emergency department” isstill in flux. CMS is specificallysoliciting public comment onwhether “significant portion ofthe time” should be definedmore objectively (e.g., in termsof some minimum number orminimum percentage of patientsseen for an EMC), and whether,instead, the definition should bechanged to specify that the facil-ity is used “regularly” for theevaluation and treatment ofEMCs—and if so, how “regular-ly” should be defined. Howthese points are resolved should

be particularly significant fordetermining whether and towhat extent EMTALA appliesto labor and delivery depart-ments, psychiatric units, andwalk-in urgent care centers.

Anyone who is not already a hos-pital inpatient or outpatient,15

who comes to a DED seekingexamination or treatment for amedical condition, must receivean EMTALA screening.16

However, the extent of thescreening may vary; all that isnecessary is to provide screen-ing services necessary to deter-mine with reasonable clinicalconfidence that no EMCexists.17 The preamble specifi-cally discusses situations wherea patient returns to the DED fora follow-up procedure, such asremoval of sutures, and states,

Where a request is madefor medical care that clear-ly is unlikely to involve anemergency condition, anindividual’s statement thathe or she is not seekingemergency care, togetherwith brief questioning byqualified medical person-nel, would be sufficient toestablish that there is noemergency condition andthe hospital’s EMTALAobligation would therebybe satisfied.18

III. Person who Comes toa Part of the Hospitalthat is not a DED

When an individual presents atthe main campus of a hospital,but not at the DED, attemptingto gain access to the hospital forexamination or treatment of acondition that may be anEMC, EMTALA obligationsmay be triggered by either:

• An actual request by or onbehalf of the individual,based on their belief thatthere is an emergency; or

• Where no explicit request ismade, but a prudent layper-son would believe, based onthe individual’s appearanceor behavior, that the indi-vidual needs emergencymedical examination ortreatment.

The hospital need not maintainemergency medical screeningcapabilities in every possiblelocation, but when such a situa-tion arises, its personnel maycall ED staff to transport theindividual to the DED for fur-ther screening and any neces-sary stabilizing treatment.19

“Care required to be providedunder EMTALA,” CMS notes,“should be provided in themost appropriate setting asdetermined by the hospital.”20

When a patient is at the hospitalfor a regularly-scheduled outpa-tient appointment, and developssymptoms of an EMC, there isno EMTALA obligation.21 Thepreamble notes that, in such cir-cumstances, the hospital wouldstill have obligations to provideappropriate medical interven-tion under the conditions of par-ticipation and that it could alsobe found liable under state lawif it does not respond appropri-ately.22 As with the situationwhere there is an EMTALAobligation arising in a non-DEDarea of the hospital, CMS sug-gests that an appropriateresponse would be for ED staffto come to where the patient isand transport him to the DED.Even though these two situa-tions may be handled the same,there is a benefit to hospitals inthe differential treatment



2002-03 Practice GroupBoard Liaison

Joel M. Hamme, Esq.Powers Pyles Sutter & Verville PC

12th Floor1875 Eye Street NW


E-Mail: [email protected]

between regularly-scheduledoutpatients and emergency walk-ins who come to a hospital loca-tion other than the DED; byexplicitly stating that EMTALAdoes not apply to the former sit-uation, CMS may have made iteasier for a hospital to have afederal malpractice lawsuit aris-ing out of it dismissed at themotion stage.

IV. Hospital Inpatients

In 1999, in deciding Roberts v.Galen of Virginia, Inc.,23 theU.S. Supreme Court avoidedruling on the question ofwhether EMTALA obligationscould apply to the transfer of aninpatient. During oral argumentin that case, the SolicitorGeneral advised the Court thatthe Department of Health andHuman Services (DHHS) was inthe process of developing a reg-ulation that would clarify itsposition on the issue. The pro-posed rules include an effort tofulfill that promise.

Consistent with its long-expressed concern that hospi-tals not be permitted to circum-vent EMTALA by admittingindividuals with emergencymedical conditions to otherdepartments of the hospital andthen discharging them prior tostabilization,24 CMS has takena two-pronged approach in theproposed regulations. Forpatients admitted to the hospi-tal as inpatients for an elective(non-emergency) diagnosis ortreatment, CMS flatly statesthat EMTALA does not apply:“If such an inpatient has anabrupt deterioration of his orher medical condition afteradmission, the hospital mustcomply with the conditions ofparticipation for hospitalsunder part 482 of this chapter

and is not required to complywith the special responsibilitiesof this section.”25

For patients admitted throughthe DED after having beenfound to have an emergencymedical condition, EMTALAcontinues to apply until thepatient has been stabilized “andthis period of stability is docu-mented by relevant clinical datain the medical record.26 Oncethis point has been reached, thehospital is deemed to have ful-filled its EMTALA obliga-tions.27 Similarly, if the patientis stable for a transfer of a typethat is usually undertaken withrespect to patients having thesame medical conditions, thereare no further EMTALA obliga-tions, regardless of whether ornot the patient is in fact trans-ferred.28

Once such a patient has beenstabilized, if she subsequentlyhas an apparent decline in hermedical condition (either due tothe injury or illness that createdthe emergency for which sheinitially came to the DED or forany other reason), the EMTA-LA obligation does not reviveand no new EMTALA obliga-tion is created.29

Although the approach takenby CMS in the proposed rulesshould be helpful to hospitalslocated in most federal circuits,it remains unclear how the fed-eral courts will view this issue,which had already led to a splitin the circuits, with one decisionsquarely supportive of theapproach CMS has nowtaken,30 two arising out of factpatterns not addressed by theproposed rules (both apparently,but not obviously, reaching dif-ferent results from those CMSsuggests),31 and a fourth (decid-

ed only a week after the noticeof proposed rulemaking waspublished), with a flatly contra-dictory outcome.32

V. Conclusions

CMS’ proposed addition of theconcept of a dedicated emer-gency department to theEMTALA regulations is a valu-able first step toward rationaliz-ing a body of law that hasacquired requirements and con-sequences far beyond those thatCongress had in mind when itlegislated against hospitalsdumping patients by refusing totreat those with negative “walletbiopsies.” Of crucial importanceas comments are consideredand the regulations are finalizedwill be the definition of the keyterm—how much of the relevantdepartment’s activities aredevoted to emergency services,and whether a bright line testwill be provided that wouldmake it easy to determinewhether or not a particulardepartment is or is not a DED.

By eliminating EMTALA as anissue in off-campus departmentsthat are not engaged in the pro-vision of significant amounts ofemergency services (such as,e.g., a physical therapy depart-ment), CMS would both elimi-nate a burdensome regulationand clear the way for appropri-ate treatment of any emergencythat does arise in such a setting.

Similarly, the handling of walk-in patients in areas of the hospi-tal other than a DED (whetherthey are confused people in anemergency situation or sched-uled outpatients) makes sense inlight of the statute as well aslongstanding—and sensible—hos-pital practice.

CMS’ effort to clarify the situa-tion of persons admitted as elec-tive inpatients is helpful andappropriate, but does not go farenough toward resolvingambiguous situations such as theone that gave rise to the Lopez-Soto case. The agency’s positionas to the continued applicabilityof EMTALA once the patienthas been screened, found tohave an emergency, and admit-ted as an inpatient is more prob-lematic, particularly in light ofBryan. Although one can respectCMS’ concern that its regulationsnot be used to create a situationwhere a hospital could avoid itsstabilization obligation by asham admission followed by aninappropriate discharge, onemay also wonder whether thisdegree of caution is really neces-sary in light of the conditions ofparticipation requirements soably summarized in the pream-ble.33 Finally, the agency’s fail-ure to address the central ques-tion articulated by the courts inaddressing the inpatient issue—whether the requirements of thethree first subsections of 42U.S.C. § 1395dd are to be readconjunctively (i.e., as if separatedby ands) or disjunctively (as ifseparated by ors)—may render itsinterpretations of the statute onthis issue less persuasive to thecourts than it might otherwisebe, and thus less than reassuringto the provider community thatwe have heard the last of confu-sion surrounding the applicabili-ty of EMTALA to inpatients.

1 Jennifer A. Stiller practices healthlaw through The Law Offices ofJennifer A. Stiller in Haverford, PA.She is a member of the Board of


Endnotes


The RAP Sheet

Directors of AHLA. Opinionsexpressed in this article are those ofthe author only.

2 Changes to the Hospital InpatientProspective Payment Systems andFiscal Year 2003 Rates, 67 Fed.Reg., 31,404, 31,469-79 and 31,505-07 (proposed May 9, 2002).

3 42 U.S.C. § 1395dd(a) (2002).

4 42 C.F.R. § 489.24(b) (2001) (def-inition of “Comes to the emer-gency department”).

5 Id.

6 Id.

7 Id.; Arrington v. Wong, 237 F.3d1066, 1074 (9th Cir. 2001).

8 Proposed revised § 489.24(b)(3),definition of “Comes to the emer-gency department,” Changes to theHospital Inpatient ProspectivePayment Systems , 67 Fed. Reg. at31,506; Changes to the HospitalInpatient Prospective PaymentSystems, 67 Fed. Reg. at 31,479.

9 See proposed § 489.24(d)(6),Changes to the Hospital InpatientProspective Payment Systems, 67Fed. Reg. at 31,507.

10 Changes to the HospitalInpatient Prospective PaymentSystems, 67 Fed. Reg. at 31,478-79;proposed new § 489.24(j), Changesto the Hospital InpatientProspective Payment Systems, 67Fed. Reg. at 31,507.

11 Changes to the HospitalInpatient Prospective PaymentSystems, 67 Fed. Reg. at 31,472.

12 Changes to the HospitalInpatient Prospective PaymentSystems, at 67 Fed. Reg. 31,477.

13 Id.


15 See proposed § 489.24(a) anddefinitions in proposed § 489.24(b)of “patient” and “comes to the

emergency department,” Changesto the Hospital InpatientProspective Payment Systems, 67Fed. Reg. at 31,506. Applicabilityof EMTALA to regular hospitalinpatients and outpatients under theproposed rules is discussed in §§ IIand III below.


17 Proposed new 42 C.F.R. § 489.24(c), Changes to theHospital Inpatient ProspectivePayment Systems, 67 Fed. Reg. at31,507; see also Changes to theHospital Inpatient ProspectivePayment Systems , 67 Fed. Reg. at31,473. This would codify a provi-sion now contained in the StateOperations Manual (at page V-19)as well as widely established caselaw; see Slabik v. Sorrentino, 891 F.Supp. 235 (E.D. Pa. 1995), aff’dwithout opinion, 82 F.3d 406 (3dCir. 1996); Jackson v. East BayHospital, 246 F.3d 1248, 1256 (9th

Cir. 2001); Marshall v. EastCarroll Parish Hosp. Serv. Dist., 134F.3d 319, 322 (5th Cir. 1998);Correa v. Hospital San Francisco, 69F.3d 1184, 1192 (1st Cir. 1995),quoted in Reynolds v. MaineGeneralHealth, 218 F.3d 78, 81-82 (1st Cir.2000). Accord, Phillips v. HillcrestMed. Center , 244 F.3d 790 (10th

Cir. March 26, 2001), cert. denied—U.S.—, 122 S. Ct. 1811 (March 4,2002); Holcomb v. Monahan, 30F.3d 116 (11th Cir. 1994).



20 Id.

21 See proposed § 489.24(a) anddefinitions in proposed § 489.24(b)of “patient” and “comes to theemergency department,” Changesto the Hospital InpatientProspective Payment Systems , 67Fed. Reg. at 31,506. See also

Changes to the Hospital InpatientProspective Payment Systems , 67Fed. Reg. at 31,474.


23 525 U.S. 249 (1999).

24 See State Operations Manual attag A-407 (page V-25).

25 Proposed § 489.24(d)(2)(iii),Changes to the Hospital InpatientProspective Payment Systems, 67Fed. Reg. at 31,507.

26 Proposed § 489.24(d)(2)(ii),Changes to the Hospital InpatientProspective Payment Systems, 67Fed. Reg. at 31,507.

27 Id.

28 Id.

29 Id. CMS cautions, however, thatthe hospital must provide appropri-ate treatment and/or discharge forsuch a patient, as required underthe conditions of participation. SeeChanges to the Hospital InpatientProspective Payment Systems, 67Fed. Reg. at 31,476, 31,479.

30 James v. Sunrise Hospital, 86F.3d 885 (9th Cir. 1996)(EMTALAdoes not apply to inpatient whodeveloped an EMC while in thehospital).

31 Lopez-Soto v. Hawayek, 175 F.3d170 (1st Cir. 1999)(EMTALA held toapply to hospital where infant in res-piratory distress was born, whereinappropriate transfer to another hos-pital with a neonatal intensive careunit was alleged); Bryan v. Rectors &Visitors of the Univ. of Va., 95 F.3d349 (4th Cir. 1996)(EMTALA heldnot to apply when patient transferredto tertiary care hospital on emer-gency basis died 20 days after admis-sion due to a “Do Not Resuscitate”order entered against family’s wishesafter 12 days of treatment).

32 Harry v. Marchant, 291 F.3d767 (11th Cir May 16, 2002) (enbanc) (EMTALA not applicablewhere decedent who had

remained in the emergencydepartment for several hoursbefore being admitted to theICU).

33 Changes to the HospitalInpatient Prospective PaymentSystems , 67 Fed. Reg. at 31,479.



We would like to thankthe following individu-als for their continuedassistance to the RAP

Practice GroupLeadership

FY2002 Student WritingCompetition Representative

and Writer on the Year-In-Review

Jolee Bollinger, Esq.Baptist Health System

Birmingham, AL

Web Site ModeratorScott McBride, Esq.

Vinson & Elkins LLPHouston, TX

Listserve ModeratorBernard Ham, Esq.

Alston & Bird LLPAtlanta, GA

Teleconference OrganizerKenneth Marcus, Esq.

Kenneth R Marcus PCWest Bloomfield, MI

I. About URAC

Formally chartered in February 1990 as the Utilization ReviewAccreditation Commission, Inc. URAC is a 501(c)(3) non-profit,charitable organization. Talks between the American ManagedCare Review Association (AMCRA), a precursor of the AmericanAssociation of Health Plans (AAHP), and the American MedicalAssociation (AMA) led to the formation of URAC. Originally,URAC only developed standards for the nascent utilization reviewindustry.

Soon after URAC’s inception, the sponsors realized the need for abroad-based consensus approach and decided to seek broader rep-resentation on the Board of Directors. At that point, URACreached out to include a wide range of “stakeholders” interested inour healthcare system, including consumers, employers and busi-ness groups, healthcare providers, managed care companies, regula-tors, workers’ compensation carriers, and others.

In 1995, URAC acquired the American Accreditation Program,Inc. (AAPI). AAPI had designed standards specifically for the pre-ferred provider organization (PPO) industry. While working on awider range of accreditation programs and standards, URAC assim-ilated elements of the AAPI accreditation standards into its ownnetwork standards.

Today, URAC offers fourteen accreditation programs covering thespectrum of health, managed care, and workers’ compensationofferings. URAC has accredited over 500 organizations at morethan 2,000 sites in all fifty states, the District of Columbia, PuertoRico, and Canada. The companies accredited by URAC providehealthcare services to tens of millions of Americans. With URAC’snew Health Web Site Accreditation program, unveiled in late 2001,URAC has the potential to help protect on-line consumers of healthinformation throughout the world.

A. Governance

URAC has a diverse and dynamic governing structure. Sixteenorganizations sit on the Board of Directors. Member organizationsrepresent many of the stakeholders, creating a solid foundation fora broad-based consensus approach to developing high qualityaccreditation programs. The current Board members are:

• American Association of Health Plans

• American Association of Preferred Provider Organizations

• American College of Physicians/American Society of InternalMedicine

• American Health Quality Association

• American Hospital Association

• American Insurance Association

• American Medical Association

• American Nurses Association

• American Psychiatric Association

• Blue Cross Blue Shield Association

• Employers’ Managed Health Care Association

• Health Insurance Association of America

• International Union, UAW

• National Association of Insurance Commissioners

• National Association of Manufacturers

• Washington Business Group on Health

B. State and Federal “Recognition” of URAC’s Accreditation Programsand Standards

At present, twenty-nine states and the District of Columbia havefound URAC’s accreditation standards helpful in meeting regulato-ry requirements for healthcare organizations. This “recognition”comes through statutes, regulations, agency publications, contracts,or in other forms. Most of these state recognitions of URAC’saccreditation standards and programs involve what remains themost widely known of the accreditation programs—HealthUtilization Management Standards. But, increasingly, state legisla-tors and regulators have incorporated other accreditation standardsin their regulatory processes.

At the federal level, the Office of Personnel Management (OPM)has “recognized” URAC’s accreditation of HMOs and PPOs forpurposes of the Federal Employees Health Benefits (FEHB)Program. The OPM Web site www.opm.gov/insure/health/about/quality.htm notes: “Accreditation is the most widely acceptedway to measure and evaluate health plan performance. It is a rigor-ous and comprehensive evaluation by independent organizationsthat assess the quality of the key systems and processes that man-aged care use.” URAC is in the process of accrediting theDepartment of Veterans Affairs’ regional telephone call centers.These centers provide healthcare advice and information services.

Later this year, URAC will submit an application for “deemed” sta-tus from the Centers for Medicare and Medicaid Services. This isfor purposes of accrediting Medicare+Choice organizations. In addi-tion, URAC has been working with the Agency for Healthcare


The RAP SheetURAC: Promoting Health Quality Through Accreditation

David I. Korsh, JD, MA Associate General Counsel

URACWashington, DC


Research and Quality (AHRQ), OPM, and other agencies on anumber of quality-related issues, including standards for accreditinghealth Web sites, addressing “credentialling” concerns, and measur-ing quality improvement for PPOs.

C. URAC Research and Publications

For a relatively small organization, URAC has assumed a leader-ship role in certain research areas. For example, URAC has devot-ed considerable attention to PPO operations and quality improve-ment activities. Toward that end, URAC led a collaborative effortto produce the first national conference on PPO performance meas-urement—“PPO Performance Measurement: Agenda for theFuture”—held on March 15-16, 2001. Co-sponsors included theConsumer Coalition for Quality Health Care, the Joint Commissionon Accreditation of Healthcare Organizations (JCAHO), andNational Committee for Quality Assurance (NCQA), with fundingfrom AHRQ. The conference brought together various stakehold-ers to discuss the state of PPO performance reporting and developa research agenda for the future. Independent health servicesresearchers have produced a number of papers on PPO perform-ance measurement issues as a result of that conference. The peer-reviewed journal, Medical Care Research and Review, publish thismaterial in a special issue. In addition, URAC has published,specifically relating to PPOs, “The State of PPO PerformanceMeasurement: Case Study Report” (2000), Rise to Prominence: ThePPO Story (2000), in conjunction with the American Association ofPreferred Provider Organizations, and The PPO Guide (1999).

In addition, URAC has undertaken research in the workers’ com-pensation arena. For these and other projects, URAC has receivedfunding from the Robert Wood Johnson Foundation, theCommonwealth Fund, the Agency for Healthcare Research andQuality, and the California HealthCare Foundation.

D. The URAC Standards Development Process

Striving for consensus, URAC develops accreditation standardsthrough a committee process that encourages broad-based inputfrom literally hundreds of volunteers, representing a wide range ofstakeholders. In addition, URAC actively solicits public commentduring the standards development process and tests the standardsbefore they are submitted to the URAC Board of Directors for finalapproval. URAC’s Health Standards Committee reflects the broadinterests of stakeholders in our health system.

The committee meets on a regular basis to discuss changes in themarketplace, consider legal and regulatory developments, and cre-ate new accreditation standards or revise existing standards. Asappropriate, URAC will add interested parties to the HealthStandards Committee, which ensures an objective, inclusive, anddynamic process. Depending on the standards under development,URAC may turn to advisory or ad hoc committees with particular

knowledge or expertise to supplement the Health StandardsCommittee’s efforts. For example, in developing the CaseManagement Organization Standards, URAC included nationally-known experts in case management, behavioral and mental health,other medical specialties, workers’ compensation, etc. After com-pleting a draft of new or revised standards, URAC holds a “publiccomment” period (generally sixty days). URAC conducts “beta”tests for new and substantially revised accreditation modules.

E. The URAC Accreditation Process

URAC takes a consultative, collaborative, educational approach toaccreditation. During the application process, URAC offers cus-tomer service and support to assist applicants. URAC encouragesnew applicants to attend a relevant standards workshop where theylearn everything they need to know about obtaining accreditationas well as its value for their organizations. URAC accreditationrequires applicants to submit policies, procedures, and other infor-mation to URAC and to allow an onsite review by URAC. OnceURAC receives an application, the Accreditation Departmentassigns a primary reviewer. That reviewer coordinates all aspects ofthe review until completion. The primary reviewer is responsiblefor ensuring that the document review, onsite review, and summaryreports are completed in a timely manner. Applicants who havecompleted a post-accreditation survey have ranked the URACaccreditation process highly, citing positive interactions with URACstaff and the timeliness of the procedure.

URAC accreditation standards are made to be rigorous and mean-ingful. As a result, many first-time applicants have to make changesin their operations to demonstrate compliance with URAC stan-dards. However, as the essence of the URAC mission remainsunchanged despite the proliferation of accreditation programs nowoffered, this organization:

• Emphasizes a proactive, educational approach to the accredita-tion process;

• Carefully listens to applicants concerns and respond in a timelyfashion;

• Discloses accreditation application fees initially and in writing;

• Strives to keep accreditation fees reasonable;

• Ensures the confidentiality of the accreditation process;

• Consults with applicants before, during, and after the accredita-tion process regarding issues that need to be addressed andactions that should be taken;

• Processes accreditation decisions through two committees ofexperts (the Accreditation and Executive Committees) to ensureimpartiality;

• Offers an appeal process to applicants or accredited companiesthat want to challenge an accreditation decision; and



• Promotes the value of URAC accreditation to consumers,employers, purchasers, regulators, and others.

F. URAC Accreditation Programs

URAC is the only national accreditation organization that offershigh-quality standards for the myriad of healthcare entities intoday’s complex healthcare delivery system. URAC has designed aunique “modular” approach to accreditation to account for thenumerous activities performed by different types of healthcareorganizations.

At present, URAC offers fourteen accreditation programs. Theyare:

• Case Management Organization Standards

• Claims Processing Standards

• Core Standards

• Credential Verification Organization (CVO) Standards

• Disease Management Standards

• External Review Organization Standards

• Health Call Center Standards

• Health Network Standards

• Health Plan Standards

• Health Provider Credentialing Standards

• Health Utilization Management Standards

• Health Web Site Standards

• Workers’ Compensation Network Standards

• Workers’ Compensation Utilization Management Standards

As the health and managed care industries evolve and diversify,URAC will continue to respond to changes in the marketplace byrevising its existing standards and developing new accreditationprograms. For each program, URAC addresses important opera-tional and quality benchmarks.

G. URAC’s Modular Accreditation System and Core Standards

URAC’s “modular” accreditation system allows for a diverse rangeof healthcare organizations to apply for URAC accreditation.URAC adapted this approach to the needs of a continuously evolv-ing healthcare system. Each module is a set of standards estab-lished for a particular healthcare function. The modular approachrequires any applicant to demonstrate compliance with a commonset of standards (Core Standards). An applicant may opt to addone or more of URAC’s other modules, depending on businesslines and functions.

The Core Standards address areas that any high-quality healthcareprogram should include. URAC’s goal is ensuring that healthcareorganizations have in place the basic structures and processes thatpromote quality. The standards are flexible enough to adapt to a

variety of organizational models. URAC built the Core Standardsupon such principles as: protection of patient and provider rights;consumer protection and/or patient safety; appropriate staff qualifi-cations, licensing, training, and management; clinical oversight; reg-ulatory compliance; oversight of delegated activities; and an empha-sis on quality management and improvement. Those companiesthat operate services outside of the scope of URAC’s existingaccreditation programs, such as pharmacy benefit managers(PBMs), health education companies, healthcare software compa-nies, etc. may pursue a stand-alone accreditation. URAC combinesthe following modules with the Core Standards to create accredita-tion programs that are tailored to the different functions that com-pose today’s healthcare marketplace.

H. Case Management Standards

URAC is the only national accreditation organization to offeraccreditation for case management programs. These standardsestablish a set of guidelines and protocols aimed specifically at therapidly evolving field of case management, particularly in health-care and workers’ compensation settings. URAC assesses such ele-ments as appropriate case management service, adequate staffingby trained case managers, and information systems designed to pre-serve patient confidentiality and promote clear communicationamong health professionals. The standards apply to organizations,not individuals, that provide: case management services in conjunc-tion with a health benefit plan, stand-alone case management, andcase management in conjunction with a range of managed careservices, such as utilization management and disease management.

URAC specifically designed the Case Management OrganizationStandards for organizations that provide telephonic and/or on-sitecase management services in conjunction with a privately or publicly-funded benefits program. There are many models of case manage-ment. URAC focused on building a collaborative, patient-focusedapproach to managing the patient’s care, while promoting quality out-comes. This accreditation program addresses: staff structure andorganization, including minimum qualifications of those conductingcase management; staff management and development, such as pro-fessional competency in case management; information management,including policies for records and information management retention;oversight of delegated functions; the case management process; orga-nizational ethics, including issues of potential conflict-of-interest,patient safety, and patient rights while in the case managementprocess; and complaints, where an organization must demonstrate aprocess to address and resolve patient and provider complaints aboutthe case management program or contracted providers.

I. Credentials Verification Organization Standards

URAC’s Credentials Verification Organization (CVO) Standards isthe only accreditation program of its kind. URAC designed the stan-dards exclusively for CVOs, which are defined as service organiza-


The RAP Sheet


tions that gather data and verify the credentials of healthcare practi-tioners. The data collected and verified is then sent to a purchaser,such as a health plan or health network, which reviews the data, usu-ally by a peer committee, to determine provider participation.

J. Disease Management Standards

URAC plans to apply its Disease Management Standards to alltypes of organizations providing disease management services forindividuals with chronic illnesses, including health plans, stand-alone disease management organizations, and medical managementorganizations. The standards promote evidence-based practice, col-laborative relationships with providers, consumer education, andshared-decision making with consumers. URAC accreditation helpsensure that critical disease management program elements, includ-ing consumer assessments, interventions, and outcomes measure-ments, are based on the scientific evidence, and that program per-formance is monitored and reported to ensure effective outcomes.

K. External Review Organization Standards

URAC is the only national accreditation organization to offer astand-alone external review (or independent review) accreditation.The National Association of Independent Review Organizations hasissued a position statement urging state and federal recognition ofthe URAC standards to promote consistency and fairness for bothpatients and employers. URAC’s standards require that such organ-izations be free from conflicts of interest, establish qualifications fordoctors that review cases, address medical necessity and experi-mental treatment issues, establish minimum periods for standardand expedited reviews, and further define any remaining appealsprocesses. These standards allow patients and physicians to trustthat the independent review process is fair and impartial.

L. Health Call Center Standards

The only program of its kind, URAC’s Health Call CenterStandards apply to organizations providing telephone triage andhealth information services (often referred to as “nurse advicelines”) to the public, whether conducted in a hospital, community,or managed care setting. The standards assure that only registerednurses, doctors, or other appropriately licensed professionals per-form clinical triage and other health information functions in amanner that is timely, confidential, and includes only medicallyappropriate care and treatment advice. The standards also addresselectronic forms of triage and health information activities.

M. Health Network Standards

Using the Health Network Standards, URAC has become the coun-try’s premier accreditation body for PPOs, having accredited nearly100 PPOs since the start of this accreditation program in 1995. Bycontrast, NCQA and JCAHO combined have accredited less thanten PPOs. The URAC Health Network standards are the first set of

quality benchmarks to be applied on a national scale for PPOs.The standards provide a comprehensive assessment of PPO-basednetworks covering network management, quality management andimprovement, provider credentialling, and member protection.URAC has accredited many types of healthcare networks, includingspecialty networks, such as behavioral health, chiropractic, skillednursing, home care, physician-hospital, and radiology organizations.URAC remains the leading accrediting body for PPOs, behavioralhealth, chiropractic, and complementary and alternative medicinenetworks.

N. Health Plan Standards

URAC’s Health Plan Standards apply to health maintenance organ-izations (HMOs), health plans, and fully integrated PPOs that pro-vide a full range of healthcare services. The URAC Health PlanStandards provide a comprehensive assessment of health plan per-formance, encompassing elements found in the Health NetworkStandards, and including additional requirements, such as the cre-dentialling of ancillary practitioners and mandating member accessto customer service assistance. While URAC accepts HEDIS meas-ures as meeting the URAC Health Plan performance improvementrequirements, URAC will also give consideration to other qualityimprovement activities by health plans in addition, or as an alterna-tive to, HEDIS measures.

O. Health Provider Credentialling Standards

URAC established the Health Provider Credentialling Standards fornetworks to help ensure that participating physicians and otherproviders are qualified and licensed. This accreditation programincludes examination of the policies, procedures, and practices ofnetworks to ensure that networks check the education, training, lia-bility record, work history, and practice history of the providerapplicants. These standards cover any organization that uses a net-work of providers or delegates credentialling to another agency.The primary difference between these standards and the CVOStandards is Health Provider Credentialling Standards ensure thatmanaged care organizations (MCOs), health plans, health networks,hospitals, and others who conduct the collection and verification ofcredentialling criteria maintain the data and present it to peers toapprove providers to their respective panels for participation. CVOscollect data only, which is purchased by MCOs, health plans,health networks, hospitals, and others to make their decisionsregarding provider participation on their respective panels.

P. Health Utilization Management Standards

URAC offers the country’s oldest and most recognized accredita-tion program for health utilization management. Indeed, URACcreated the standards that transformed the industry. By establishingconsistency in utilization management processes and serving as thebasis for many states’ utilization review laws and regulations, thesestandards ensure that appropriately trained clinical personnel con-duct and oversee the utilization review process, that a reasonable



and timely appeals process is in place, and that organizations basemedical decisions on valid clinical criteria. The Health UtilizationManagement Standards apply to all organizations conducting uti-lization management activities, including pre-certification and con-current review.

Q. Health Web Site Standards

The Health Web Site Standards validate URAC’s history ofexpanding into new arenas of accreditation as the healthcare deliv-ery system evolves. Once again, URAC has assumed a leadershiprole in creating innovative accreditation programs that benefithealthcare consumers. URAC is the only accreditation organizationto have undertaken the task of creating a health web site accredita-tion program. The standards call for a rigorous review of both on-line and behind-the-scenes health Web site operations, enablingconsumers to be assured of the quality of a site bearing the URACHealth Web Site seal. The standards address important issues suchas privacy and security, disclosure, editorial policies, linking, andquality oversight.

R. Workers’ Compensation Network Standards

A specialized version of the URAC Health Network Standards, theWorkers’ Compensation Network Standards, provide a comprehen-sive assessment of workers’ compensation networks. While manyelements of this accreditation are consistent with those of theURAC Health Network standards—covering network managementissues, quality management and improvement, provider creden-tialling, and member protection—the Workers’ CompensationNetwork Standards also address elements unique to this specialtyand include an occupational health provider selection plan anddocumentation of fair and clear methods for providers and workersto appeal decisions.

S. Workers’ Compensation Utilization Management

The Workers’ Compensation Utilization Management program isthe only accreditation program to address the unique characteristicsof workers’ compensation utilization management and ensures quali-ty oversight for this fast growing area of managed care. Similar tothe Health Utilization Management Standards, these standards con-tain modifications that reflect the unique aspects of the workers’compensation environment and injured workers.

II. Conclusion

The healthcare marketplace is a dynamic one and URAC continuesto keep pace. URAC’s accreditation standards and programs helpensure that healthcare organizations have the necessary structuresand processes to deliver quality health services and protect con-sumers’ and patients’ interests. For more information about URAC,please look at the Web site (www.urac.org).


The RAP Sheet

If you would like to be considered as a speaker for the programlisted below, please complete this form and attach the infor-

mation requested. If you would like to submit topic suggestions,please fill out sections I and II only. All forms and supportingdocumentation should be submitted to Anne H. Hoover,Director of Programs, American Health Lawyers Association,1025 Connecticut Avenue, NW, Suite 600, Washington, DC20036-5405 or fax it to her attention at (202) 833-1105. If selected as a speaker, the information you provide will be usedin the program brochure. Please be sure the spelling is correctand all relevant titles, information about degrees and credentialsare included.

j Institute on Medicare and Medicaid Payment Issues April 2–4, 2003—Proposals due September 9, 2002

Name: Title:

Firm/Organization:

Street Address:

City, State, ZIP+4:

Phone: j Direct Dial j General Office

Fax: E-Mail:Please note: If you wish to submit a proposal with a co-presenter, the co-presenter must also sub-mit the materials requested above. The Association does not encourage co-presentations unlessthe speakers will offer differing perspectives (i.e., private practitioner and enforcement official orin-house and outside counsel).

Topic:

On an attached sheet, please provide the following:

(a) a short paragraph describing the audience for whom your ses-sion is intended and why the subject area is of importance; and

(b) a list of 4 to 6 bullet points that describes the specific issuesyou plan to cover. (Please note that sessions are one hour inlength.)

Please attach a resumé or curriculum vitae that includes a list ofprevious presentations.

Call for Speakers & Workshop Topics

I. Presenter

II. Workshop Topic

I. Case Law SummaryEric P. Zimmerman, Esquire

McDermott Will & EmeryWashington, DC

U.S. Court in Tennessee Declines to DismissAmbulance Providers’ Suit Charging DHHS SecretaryUnlawfully Failed to Implement National AmbulanceFee Schedule

Plaintiffs, providers of ambulance services in Tennessee, broughtsuit against the federal government seeking an injunction and writof mandamus requiring the Secretary of the Department of Healthand Human Services (DHHS) to implement a national fee schedulefor certain ambulance services, which the Secretary was required toimplement effective for services furnished on and after January 1,2000 pursuant to the Balanced Budget Act of 1997. The Secretarymoved to dismiss, arguing that the court lacked subject matter juris-diction under § 405(h) of the Social Security Act, which precludesjurisdiction under 28 U.S.C. §§ 1331 or 1346 to recover on anyclaim arising under Medicare. The U.S. District Court for theWestern District of Tennessee denied the motion to dismiss, findingthe substantive basis for the plaintiff’s claims was not the Medicarestatute, but rather the Secretary’s duty under the Balanced BudgetAct of 1997, and, as such, § 405(h) did not preclude federal ques-tion or federal defendant jurisdiction. Quality Care Ambulance Serv.,Inc. v. United States, No. 01-2550-D A (W.D. Tenn. Feb. 28, 2002).

U.S. Court in Louisiana Says It Lacks Jurisdictionover Challenge to DHHS Secretary’s Procedures forCalculating Medicare Overpayments BecauseProvider Had Not Received Final Decision fromSecretary

Plaintiff, a provider of home healthcare services, sued the DHHSSecretary, alleging that the Secretary’s procedures for calculatingMedicare overpayments violated plaintiff’s Fifth Amendment dueprocess rights, and that the Secretary’s refusal to allow plaintiff toenter into an extended repayment plan was arbitrary and capri-cious. The Secretary moved for dismissal based on lack of subjectmatter jurisdiction, arguing that plaintiff had not yet received a finaldecision on the overpayment issue. The U.S. District Court for theEastern District of Louisiana granted the Secretary’s motion, find-ing on the question of the Secretary’s procedures for calculatingMedicare overpayments that the plaintiff had not yet received afinal determination from the Secretary. According to the court,plaintiff had not met one of two elements required under Matthewsv. Eldridge: (1) the non-waivable requirement of presentment of theclaim for benefits to the Secretary; and (2) the waivable require-ment of exhaustion of administrative remedies. Matthews v. Eldridge424 U.S. 319, 328 (1976). The court concluded that plaintiff met thefirst requirement, but not the second, and refused to waive the

requirement that plaintiff first exhaust its remedies. On the questionof the Secretary’s procedures for determining eligibility for anextended repayment schedule, the court held that the Secretaryhad discretionary authority to determine whether to offer or deny arequest for an extended repayment schedule. Reliable Home HealthCare v. Thompson, No. 01-2343, 2002 WL 22025 (E.D. La. Jan. 4,2002).

First Circuit Says Hospital’s Action ChallengingDHHS’ Dismissal of Medicare GeographicReclassification Request Was Barred from JudicialReview

Plaintiff brought suit against the DHHS Secretary challenging theSecretary’s dismissal of a request for geographic reclassification asnot timely filed. Plaintiff argued that it did not file a timely requestfor geographic reclassification because final wage data published bythe Secretary led plaintiff to conclude that it would not qualify forreclassification. Plaintiff filed a request for geographic reclassifica-tion after the application deadline when a later published correc-tion to the wage data led plaintiff to conclude that it would qualify.Defendants moved for dismissal on the ground that plaintiff’s claimlacked subject matter jurisdiction. The district court granted themotion. Plaintiff appealed. On appeal, the First Circuit affirmed,holding that the district court properly dismissed the action for lackof subject matter jurisdiction because the provisions of theMedicare Act pertaining to geographic reclassification bar judicialreview of the Health Care Financing Administration (now theCenters for Medicare and Medicaid Services) Administrator’s geo-graphic reclassification decisions. Jordan Hosp. v. Shalala, No. 01-1614, 2002 WL 15712(1st Cir. Jan. 10, 2002).

II. JCAHOJeffrey Moore, EsquirePhelps & Dunbar LLP

Tupelo, Minnesota

Annual Financial Audit Requirements for BehavioralHealthcare Entities Provide More Flexibility

Effective January 1, 2002, requirements regarding annual financialevaluations for behavioral healthcare organizations were put intoplace. The revised LD.1.5.3 in the Comprehensive AccreditationManuel for Behavioral Health Care (CAMBHC) no longer requiresthe entities to perform a full annual financial audit. Instead, theentities must establish a process for annually evaluating their finan-cial ability to provide services. This change was made because ofconcerns that the previous requirement created a financial burdenon some entities without providing a significant benefit. See Jan.2002 Perspectives p.3.

JCAHO Revises Safety and Error Standards for LongTerm Care Organizations

On January 1, 2003, new and revised standards and intent state-ments for resident safety and medical/healthcare error reduction


Year-In-Review

will go into effect for long term care accreditation. The key issuesaddressed in the new standards include: (1) the obligation of man-agement to create an environment that promotes risk and erroridentification; (2) proactive systems review and development as anerror prevention strategy; (3) the need to inform the resident andhis/her family of unexpected outcomes of care; and (4) requests forinput from residents on items that could reduce error and enhancesafety. See Jan. 2002 Perspectives p.5.

Revised EC Standards for Design Criteria andUtilities Maintenance

On January 1, 2002, several revisions of the Management of theEnvironment of Care standards became effective. Revisions to stan-dard EC.3.2.1 apply to ambulatory, behavioral, hospital, and longterm care programs. The revised standard references the 2001 edi-tion of Guidelines for Design and Construction of Hospitals andHealth Care Facilities, published by the American Institute ofArchitects and the Facilities Guidelines Institute, while the previousstandard referenced the 1996 edition of the same. Specific changesin the new text include increased emphasis on infection control pro-visions and a provision for disaster planning, including require-ments that all hospitals with emergency departments be preparedfor patients presenting with nuclear, biological, or chemical expo-sure. In addition, a change in EC.1.7 allows for a flexible preventa-tive maintenance program similar to that offered for medical equip-ment to be utilized for critical components of utility systems. Thisallows for maintenance based on time interval, hours of run time,or of a corrective (repair/replace if defective) nature. This changewill be available for ambulatory, assisted living, behavioral, homecare, inpatient hospice only, hospitals and long term care. See Jan.2002 Perspectives p.6.

New and Revised Credentialling and PrivilegingStandards for Long Term Care and SubacutePrograms

Beginning January 1, 2003, new and revised credentialling andprivileging standards will go into effect for long term care andsubacute programs. These changes will create a single set of cre-dentialling and privileging standards that apply to all long termcare organizations. Previously, subacute programs were more rig-orous in their reauthorization. The changes will require these pro-grams to query the National Practitioner Data Bank. Furthermore,the changes require a time limit on credentials verification organi-zation (CVO) licensure information. This change mandates thatlicensure information obtained from a CVO during reauthoriza-tion be less than one year old for licensed independent practition-ers who do not have an active commission to an accredited hospi-tal’s medical staff. These changes are reflected in HR.6.1 andHR.6.1.3 - HR.6.1.8 and in the revised Intent of HR.6 - HR.6.1.2in the Comprehensive Accreditation Manuel for Long Term Care(CAMLTC). See Feb. 2002 Perspectives p.5.

Standards Revision for Opioid Addiction Treatmentand Detox Programs

Revisions to the intent statements specifically for opioid addictiontreatment and detoxification programs that are surveyed under thebehavioral healthcare accreditation program have gone into imme-diate effect. These revisions, appearing in Appendix B of theCAMBHC, regulate the number and quantity of take-home (unsu-pervised) doses that can be prescribed. In addition, IM.7.2.20 hasbeen completely revised and now requires that “[e]ach clinicalrecord contains every dose of medication administered and anyadverse drug reaction”. See Mar. 2002 Perspective p.4.

Licensed Independent Practitioners May DelegateRestraint Orders and Evaluations in Hospitals andBehavioral Healthcare Institutions

Effective July 1, 2002, licensed independent practitioners (LIP) candelegate the writing of restraint or seclusion orders and/or the in-person evaluation of patients in restraint or seclusion to physicianassistants and advanced practice nurses, if permitted by law and bythe hospital. When such delegation is allowed, the safety and quali-ty of patient care will be ensured by required supervision of thephysician assistant or advance practice nurse by the LIP and therequirement of standard TX.7.1.5 ordering that all frequent or con-tinuous use of restraint or seclusion be examined by clinical man-agement. In addition, a change to TX.3.5 in the CAMBHC givesphysicians in behavioral healthcare settings the same ability to del-egate this authority. This provision is effective immediately. See May2002 Perspectives p.6 for hospitals; July 2002 Perspectives p.4 forbehavioral healthcare institutions.

Safety and Error Reduction Standards Approved forBehavioral Healthcare

New and revised standards and intent statements on the safety ofindividuals served and care errors/events for behavioral healthcareentities will become effective January 1, 2003. Not all of these stan-dards will apply to all of the diverse settings in behavioral health-care. Instead, application will be determined based on the compre-hensiveness of the treatment, care or service the entity provides,and the amount and type of risk or control for which the entity isresponsible. See May 2002 Perspectives p.9.

Changes to the Outcomes of Care That HospitalsNeed to Communicate to Patients and Their Families

Beginning July 1, 2002, a revision in the intent statement of RI.1.2.2in the Comprehensive Accreditation Manuel for Hospitals (CAMH) willclarify what hospitals need to communicate to patients and theirfamilies about outcomes of care. The standard was designed toaddress two issues: (1) patients are informed of outcomes of care;and (2) patients are informed of unanticipated outcomes of care.The previous version of the intent statement focused only on unan-ticipated outcomes while the new intent statement requires a review


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of all outcomes of care that are important for making healthcaredecisions. The intent statement regarding unanticipated outcomeswas revised to clarify, at a minimum, what should be addressedabout unanticipated outcomes. In addition, a revision to the intentstatement of LD.5.1 allows for organizations to include “near miss-es” in their definition of a sentinel event, defining a “near miss” asany process variation that did not affect the outcome but for whicha recurrence carries a significant chance of a serious adverse out-come. See June 2002 Perspectives p.4.

JCAHO Approves Changes to Support CommunityEmergency Management Planning Among Long TermCare Providers

The Joint Commission on Accreditation of HealthcareOrganizations (JCAHO) has revised EC.1.4 for long term careorganizations supporting the sharing of information and resourcesas part of emergency management planning. This sharing will helpease the burden of potential emergencies on individual healthcareproviders in a community. A recent study by JCAHO on theresponse to recent national disasters has shown the need for coop-erative planning among healthcare providers in a community. Thiscooperation will help long-term care providers prepare for potentialissues, such as the influx of patients from hospitals, and allow themto plan for more short term care of acute patients than they wouldnormally encounter. See June 2002 Perspectives p.5.

Expectations for Managed Care Processes MoreClearly Defined

JCAHO has answered the call by healthcare networks to moreclearly define the expectations regarding managed care processes.Effective January 1, 2003, revisions and changes in theComprehensive Accreditation Manual for Health Care Networks(CAMHCN) will go into effect, providing more detail and specificityabout many issues important to public and purchaser decision-mak-ing. These issues include distribution of enrollment and eligibilityinformation, time frames for access to routine care, the availabilityand extent of preventative health services, time frames for access toemergency medical services, and the accessibility of customer serv-ice. See July 2002 Perspectives p.10.

III. Regulatory SummaryLester Perling, Esquire

Broad & CasselTampa, Florida

CMS Revises Carrier Manual Provisions Relating toPhysician Assistant Qualifications

On March 12, 2002, the Centers for Medicare and MedicaidServices (CMS) published Transmittal Number 1744 revisingCarrier Manual, Part 3, Section 2156, as it relates to requirementsfor physician assistants (PA). Medicare rules limit payments for PA

services to the employer of the PA. Historically, PAs could not ownthe employer in whole or in part. The revision permits the PA tohave an ownership interest in the employer entity as long as it is“properly formed, authorized and licensed under State laws andregulations, [that] permits PA ownership in such corporation or enti-ty as a stockholder or member.” PAs are not permitted to organizeas a sole proprietorship or partnership in order to bill the Medicareprogram. The other announced change is that ambulatory surgerycenters are no longer precluded from employing PAs.

CMS Issues Quarterly Updates

Effective April 22, 2002, CMS will begin issuing a quarterly updateof all changes to Medicare instructions that affect providers. CMSstates that “the Quarterly Provider Update will be a single source ofnational Medicare provider information.” Each issue will includethe full text of regulations published the previous quarter andadvance notice of regulations to be published the next quarter. Theupdate will also include the full text of any instructions to be imple-mented beginning the following quarter. The update will be organ-ized by provider type and will contain hyperlinks to the documentsreferenced. The updates can be accessed athttp://www.cms.hhs.gov/providerupdate.

CMS Publishes Proposed Rule Addressing a PPS forLong Term Care Hospitals

On March 22, 2002, CMS published a proposed rule that wouldestablish a prospective payment system (PPS) for Medicare pay-ment of in-patient medical services provided by long term care hos-pitals (LTCHs). 67 Fed. Reg. 13416 (Mar. 22, 2002). This paymentsystem would replace the cost-based system under which LTCHsare currently paid. LTCHs have been excluded from the PPSimplemented for acute in-patient hospitals. Under the proposedrule, the LTCH’s fiscal intermediary would assign dischargedpatients to a proposed long term care diagnosis related group(LTC-DRG), subject to comment by the LTCH. LTCHs will bepaid based on discharges and the payment would encompass in-patient operating and capital related costs, but not bad debts;approved educational activities; blood clotting factors; anesthesiaservices furnished by hospital employed, non-physician anesthetistsor obtained under arrangement; and the cost of photocopying andmailing medical records requested by a PRO. LTCHs would beprohibited from charging beneficiaries in excess of the applicableco-payment and deductible. CMS is proposing a five-year transition,beginning with the cost reporting period starting on or afterOctober 1, 2002. The proposed rule establishes several “specialcases” that have shorter stays than the average and receive lessthan the full course of treatment. These discharges would be paidat less than the normal amount. Payments may be increased basedon various factors, including area wage adjustments, geographicreclassifications, disproportionate share of low-income patients,direct teaching costs, and high-cost outliers.




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Upcoming Practice Group-sponsoredTeleconferences

The Practice Groups are making plans for some teleconferencesthat you won't want to miss so mark your calendars now andlook for upcoming registration information.

Lessons for Healthcare from Enron: A Best PracticesTeleconferenceThursday August 1 and Thursday August 8, 20021:00-3:00 pm (Eastern) both daysSponsored by the Tax and Finance; Hospitals and Health Systems; and Healthcare Liability and Litigation Practice Groups

The Application of Nonprofit Corporate Law to HealthcareOrganizationsThursday, September 12, 20021:00-2:30 pm (Eastern)Based on the recently issued monograph of the same title by Michael Peregrine and James Schwartz

Legislative and Regulatory UpdateThursday, September 18, 20021:00-2:30 pm (Eastern)Sponsored by Regulation, Accreditation, and Payment PracticeGroup

Latest Litigation in Survey/CertFriday, September 27, 20021:00-3:00 pm (Eastern) Sponsored by the Long Term Care Practice Group

Prompt Payment IssuesOctober 2002 Sponsored by the HMOs and Health Plans Practice Group

HIPAANovember 2002 Sponsored by the HMOs and Health Plans Practice Group

Medical Malpractice CrisisFall 2002 Sponsored by the Physician Organizations and HealthcareLiability and Litigation Practice Groups

Tax Exemption Issues in ComplianceFall 2002 Sponsored by the Tax and Finance Practice Group

For more information on these teleconferences, go to:www.healthlawyers.org/teleconferences.cfm

1025 Connecticut Ave, NW, Suite 600Washington, DC 20036-5405Phone: (202) 833-1100Fax: (202) 833-1105www.healthlawyers.org

Mark your Calendar!Thursday, April 3, 2003

Mid-Year Luncheon Meeting for Regulation, Accreditation,and Payment Practice Group at the Institute on Medicare

and Medicaid Payment Issues in Baltimore, Maryland.If you have suggestions for a program format, topic, or speaker, please contact

Dinetia Newman at (662) 842-7907 or [email protected]

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