Category: Physicians Practice

More and more frequently, I am being asked by clients in private practice, “What are the pitfalls of physician ownership and operation of a compounding pharmacy?” A “compounding pharmacy” is a type of ancillary medical provider, similar to an imaging center or a lab, which is thought to be desirable because of the potential to supplement physician income.   

Each state maintains its own unique set of rules and laws which must be considered. Often, a state law may permit a physician to compound medication in the office for a patient’s immediate needs, but require a licensed pharmacist to dispense prescribed compounded pharmaceuticals outside of the office setting.  There are also a number of FDA and Stark Law implications, as well as AMA Ethics Opinions which must be considered. It is impossible to cover all these rules in one blog. The following considerations are universal to physicians in each state.

AMA Ethics Opinions
Originally, the AMA took the position that physician ownership of any pharmacy constituted prohibited “fee- splitting.” Many states passed statutes along the same lines. Eventually, the AMA realized the real problem was not so much the “ownership,” but the “referral” of a physician’s own patients which was troublesome.  Thus, AMA Ethics Opinion 8.06 replaced the “fee splitting” opinion. Under 8.06(3) Physicians may own or operate a pharmacy, [note: check state law for licensing rules details] “but generally may not refer their patients to the pharmacy” unless exceptional circumstances under Opinion 8.032 (conflict of interest) exist.

Stark Law
Stark Law and its close cousin, the Anti-Kickback Statute, have their origins in the AMA rules. In fact, most of the trouble one can encounter at the federal level could be avoided by simply following the AMA’s main rule: “Don’t refer your own patients.” Problems multiply where a number of physicians seek to invest in a single compounding pharmacy. Many have been told that investing in a management company can safely avoid Stark Law issues. All I can tell you is “hire an experienced Stark lawyer” before you do anything which could be considered abusive of a state or federal program.

FDA Rules
In the absence of special rules, each compounded prescription would need to be approved by the FDA, which would be prohibitively expensive. Further, the requirement of a uniform label as to proper dosage would completely defeat the purpose of compounding. The trouble isn’t whether the drug itself is accepted as an “effective treatment,” but instead, “how much of it” would be “safe and effective” for a particular patient’s body weight, or tumor size. Therefore, it is important that the FDA remain flexible with compounding. On the other hand, left unchecked, compounding pharmacies could abuse the FDA’s leniency as an end-around the approval process entirely. A compounder could stockpile wholesale quantities under the guise of compounding, which could be unsafe, and would be unfair to retail manufacturers who must pay up to $800 million for studies and approval.  

The court in the case of Medical Center Pharmacy v. Mukasey, 536 F.3d 383 (5^th Cir. 2008) writes an excellent treatment of the history of the FDA’s efforts relating to the problem of compounding pharmacies. Originally the FDA banned advertising of compounding pharmacies, but this was rejected by the United States Supreme court in Thompson v. Western States Medical Center, 535 U.S. 357 (2002.)

On April 12, 2013, the Congressional Research Service wrote a report entitled “Federal Authority to Regulate the Compounding of Human Drugs,” which covers the basics in greater detail. As the name implies the CRS works for Congress as its research agency.

In conclusion, there are many, many issues for which you, as a physician, are ultimately responsible. This is true regardless of assurances that the same model has “worked like a charm for others, without any problems.” Always consult independent legal counsel to represent your interests.

Read Article on Physicians Practice

News earlier this week that the Obama administration has delayed the rollout of a plan intended to give small businesses multiple health plan options starting in 2014 is almost universally met with a simple question: “What are they talking about now?”  

Small businesses and those who work for them have always been at a disadvantage. It is more difficult to find affordable plans for smaller businesses, due to a lack of purchasing power. As a result, small businesses have always paid much higher premiums. This often has limited the number of small businesses offering insurance to workers. One purpose of Affordable Care Act is to level the playing field by offering small businesses (25 or fewer employees) large incentives through tax credits.

Starting Jan. 1, 2014, small companies with up to 100 workers will be able to buy coverage through new health insurance marketplaces called exchanges. These exchanges will likely be subsidized by the government, meaning, workers may obtain below-market prices for health insurance.  As originally envisioned, employees would have been the ones to pick their plans. But now, for the first year, the employer will choose for the entire company.

There are also provisions for tax credits for individuals purchasing coverage. Individuals in the private health market have not only been forced to pay higher premiums, their coverage usually comes with more requirements and fewer protections. Under the ACA, individuals will have the ability to shop for insurance through exchanges, where they will be able to buy at prices everyone else on the exchange pays. If a person’s income is low enough, he will qualify for a government subsidy, which lowers the cost even further.

Under the ACA, if a person’s income is at or below 133 percent of the federal poverty level, he or she will qualify for Medicaid. But the Supreme Court opinion upholding ACA struck down the provision allowing the federal government to force states to adopt this provision. For example, a person in Alabama is disqualified from Medicaid if he has a job and earns over 25 percent of the poverty level (about $5,000 a year.) Under the ACA this person should be able to qualify for subsidized insurance through an exchange.

This should be great news for physicians, because of the reduced number of uninsured persons. It remains to be seen whether the benefits paid to physicians will approximate current reimbursement rates for commercial health insurance benefits, or if the rates will more closely resemble those paid by Medicaid.

Read Article on Physicians Practice

This week, I feel fortunate to interview a colleague, physician and attorney Raymund King. Based in Dallas, King is one of the few attorneys in the country with practical experience setting up physician-owned accountable care organizations (ACOs) on behalf of physicians.  After practicing medicine for 10 years as an otolaryngologist (ear, nose, and throat doctor), he became a healthcare attorney almost 14 years ago.  You will want to hear what he has to say.

Martin Merritt: I can imagine you are very busy, with all the attention focused upon ACOs.

Raymund King: It has been a busy year. What I am discovering is that doctors are being heavily recruited to join hospital-owned or healthcare system-owned ACOs. Unfortunately, not all ACOs are created equally, and many physicians will need to read the fine print before signing the dotted line.

MM: Can you elaborate?

RK: An ACO is a group of doctors, hospitals, and/or other health care providers, who voluntarily participate in a program of at least three years in duration designed to coordinate high quality care to their Medicare patients. Ideally, the goal of coordinated care is to ensure that patients, especially the chronically ill, get the right care at the right time, while avoiding unnecessary duplication of services and preventing medical errors. When an ACO succeeds, both in delivering high quality care and spending healthcare dollars more wisely, it will share in the savings it achieves for the Medicare program.

Perhaps the most commonly touted program that is currently available is called the Medicare Shared Savings Program (MSSP). There were two other prior programs (the Pioneer ACO Model and the Advance Payment Initiative) that are no longer available. The government sets a national benchmark that represents the amount
of healthcare dollars allocated per patient per year. The regulations require a minimum of 5,000 Medicare patients covered in order to qualify as an ACO. If the national benchmark for your region is, for example, $10,000 per patient, then an ACO with 5,000 patients represents a total of $50 million.

In an MSSP, the government looks at what dollars are spent per patient at the end of the year, and if the amount is less than the national benchmark, that amount is called the “shared savings.” In our previous example, if the ACO spends $40 million in one year to treat 5,000 covered lives, then the difference between our example national benchmark and the amount spent is $10 million. The $10 million constitutes the shared savings, which is split 50/50 with the U.S. government. In the third year of participation, however, the government may require the ACO to participate in the losses incurred by the ACO if it spends more than the benchmark for that region.

An ACO is either owned by a hospital/healthcare system, or it is owned by a group of physicians. In the system-owned ACO, the 50 percent portion of shared savings goes to the system. In the physician-owned ACO, however, the 50 percent portion of shared savings goes to the physicians. That is primarily why I have been busy forming physician-owned ACOs.

CMS is not involved in the details of how the money is distributed among the shareholders or members of the ACO, nor does CMS ensure that distribution is fair based upon the work done, or even if the amount paid is distributed in a sustainable way. As a healthcare corporate business lawyer, therein lies a tremendous opportunity to design a sustainable business model for healthcare.

MM: Can a physician participate in more than one ACO?

RK: Primary-care doctors (which include internal medicine, pediatrics, and geriatrics) may join only one ACO. However, specialists may join as many ACOs as they want. An ACO can only participate in one governmental shared-savings program at a time. It is very important to read the fine print in the ACO participation agreement as well as the operating or shareholders agreements, as I have seen many restrictive clauses buried in these documents that create restrictions above and beyond any that are in the regulations.  For example, I have seen ACOs attempt to limit contractually the specialist physician’s ability to participate in more than one ACO.

MM: You say there are also concerns with how the beneficiaries are counted?

RK: Absolutely. The ACO must provide for 5,000 beneficiaries to be recognized. However, CMS only counts the physician with the “plurality of visits” with the patient. A specialist physician with 3,500 patients may find that only 350 are actually recognized by CMS, because the primary-care physician has been credited with the lion’s share of the patients.

MM: What can physicians do to protect themselves?

RK: Physicians need to understand that all ACOs are not created equal. Are they being offered ownership interest, or merely a right to work for the ACO? Is the management agreement structured to fairly compensate the ones doing the work? Large chains, be they insurance or hospital, are known for being top-heavy in administrative costs. As I mentioned, physicians must ensure that they read the entire agreement to ensure they are not limiting their rights beyond what is required in regulations.

MM: Any final thoughts?

Yes. When the Affordable Care Act described the formation and goals behind the ACO, the legislators likely did not contemplate extensively the morass of existing healthcare and non-healthcare regulations that would likely create serious issues in the formation, operation, and administration of an ACO. Some very important laws to consider are the Stark Law, the Anti-Kickback Law, and the Sherman Antitrust Act, which are all very relevant and may easily be violated by an ACO. Indeed, if the ACO is not cognizant of these potential legal landmines, the physician participants may be in for a rude awakening.

Read Article on Physicians Practice

Much has been written about curtailing fraud, waste, and abuse in Medicare cases. Let’s take a closer look at what these terms actually mean.

What is Fraud?

 If I simply “take” your property without permission, that could be stealing or it could be a mistake. Whether or not I have committed a civil or criminal wrong depends upon my subjective state of mind and whether or not there is a statute against my behavior. If in taking your property, I am simply mistaken in thinking I have a right, I may have to give the property back, but usually will not be punished for the act. On the other hand, if I knowingly take your property without right, then I have committed and act for which society says I can be civilly or criminally punished.

Fraud in the healthcare context is generally defined as “an intentional deception, or intentional misrepresentation, that a person makes in order to gain a benefit to which the person is not entitled.”

What is Waste?

The second way to get into trouble is “waste,” which has only recently been inserted into the discussion. Waste is “the careless, inefficient, or unnecessary use of public resources.” For example, waste can occur when public money is spent on unnecessary program administration.

Unlike fraud and abuse, “waste” would not seem to necessarily involve “rule breaking.” Because waste is a fairly new designation, and therefore there are few regulations imposing fines, the solution is for the government to threaten to simply strike a wasteful provider from the list of approved providers. While “waste” isn’t “fraud,” the government may simply refuse to pay for anything deemed “wasteful,” such as hospital acquired infections.

What is Abuse?

The third way to get in trouble with the government is “abuse.” Abuse is any practice that is inconsistent with sound fiscal, business, or medical practices and results in unnecessary program cost. For example, abuse can include reimbursement for services that are not medically necessary, or that do not meet professionally recognized standards. Unlike fraud, abuse can occur when there is no intentional deception or intentional misrepresentation.

Whether a practice is “fraudulent,” “abusive,” or merely “wasteful,” goes hand in hand with the question: Will a pattern of conduct result in paying back the money received, criminal action, or simply civil money penalties? The answer isn’t entirely simple to provide. A practice or “scheme,” whether malum in se, or malum prohibitum, is normally occasioned within a continuum, or range of mental states – from innocence, to negligence, gross negligence, conscious indifference, willful ignorance, knowing, or intent to defraud. Because the potential penalty is (by definition) punitive, normally at a minimum, a “knowing” violation is required.

It is up to the government to decide which charge, or allegation to bring, based upon the strength of the evidence.  It is up to the jury to decide if the charge or allegation is true. In practice, “fraud or abuse” is usually prosecuted as a crime for behaviors which are fairly close to “stealing.” See, Hooper, Patrick, Health Care Fraud And Abuse, Los Angeles: ABA Health Law Section, pp. 197-251 (2001) “Abuse,” is more or less synonymous with “medically unethical”. . . but without the intent to defraud or steal.

Next week we shall look as some specific examples of fraud, waste, and abuse.

Read Article on Physicians Practice

There are three ways a person can pay for health services: 1.) out of pocket; 2.) private health plans; and 3.) government health plans. Physicians normally earn a living either providing professional services for the care and treatment of patients, or through investment and/or ownership of what are termed “ancillary services.”

Physician-owned pharmacies, imaging centers, and diagnostic laboratories, for example, would be considered “ancillary services.” Although the rules relating to ancillary services are maddeningly complex, there are certain general concepts which must be understood. First, you must never accept a “finder’s fee” for referring a patient to anyone, regardless of ownership. Patients have a right to expect the referral is based upon medical necessity and to the best provider, not the “highest bidder.” That said, let’s examine rules that apply to the referral of a patient for ancillary services, where you also own some interest.

Patient out-of-pocket (where the patient is solely responsible and pays out of pocket for an ancillary service) rules are least restrictive, but they are important. Generally, the AMA Code of Medical Ethics sets the standard. Historically, the AMA took a conservative and restrictive stance on the ability of physicians to earn income from ancillary services. This view was formed in the days when physicians were paid full value for professional services. The modern reality is the government deliberately employs “cost shifting,” (underpaying with the expectation the physician will make up the losses somewhere else). In cases strictly involving patient out-of-pocket payments (no government or private insurance involvement) the potential for a conflict of interest is still present where a physician refers a patient to an outside facility which the physician also owns. AMA Ethics opinion 8.032 states:

“Physicians should disclose their investment interest to their patients when making a referral, provide a list of effective alternative facilities if they are available, inform their patients that they have free choice to obtain the medical services elsewhere, and assure their patients that they will not be treated differently if they do not choose the physician-owned facility.”

Private health plans (including “self-funded” health plans) have the second- least restrictive set of rules. These private-pay restrictions may mirror Stark Law or the Anti-kickback Statute, and will either be set forth in a provider agreement, or in a claims processing manual; compliance with which the physician may be asked to certify. It is therefore important to know the contents of any contracts or manual provisions with which you may be required to certify agreement or compliance. Private insurance companies possess a greater awareness of AMA Ethics provisions than the average patient. With increasing regularity, private insurance companies have demonstrated a willingness to resort to ethics complaints before state medical board in an effort to recoup what they consider to be overpayments. With private insurance, the greater concern of an adverse event comes where the physician has promised to behave in one manner, but experience shows, the provider did something differently.

Government regulations are the most restrictive. Stark Law and the Anti-kickback Statute provide very detailed “safe harbor” rules which must be followed. For example, Stark Law may require the physician to not only notify the patient of ownership, but provide the names of five different alternative ancillary service providers of a Designated Health Service from which the patient may choose. The five main government rules and regulations are Stark Law, the Anti-kickback Statute, the False Claims Act, the Civil Monetary Penalties Statute, and the Exclusionary Statutes. Stark Law and the Anti-kickback Statute are based loosely upon AMA Ethics Opinions 6.02-04 (fee splitting) and 8.032 (conflicts of interest.) The False Claims Act also contains “whistleblower” provisions which aid the government in finding out about secret relationships which may violate Stark Law or the Anti-kickback Statute.

Finally, a number of states have adopted statutes which must be considered. The Texas Illegal Remuneration Act mirrors the federal anti-kickback prohibition but expands it to cover items and services reimbursed by any insurance payer (including self-funded payers), rather than just state- and federally funded health plans.

Today, more than ever, physicians are being presented with opportunities to invest in ancillary service providers. Even a small, minority stake in one of these may disqualify you from the ability to refer patients to the facility, and subject you to massive fines and possible criminal prosecution. Even the best business lawyers know very little about Stark Law. Before signing any agreement, find a healthcare lawyer through your state bar association to help you.

Read Article on Physicians Practice

The term “scapegoat” can be found as far back as Leviticus, and the Pharmakós of ancient Greece. The abuse heaped upon physicians over Medicare shortfalls calls to mind the moment in the Oscar-winning “Good Will Hunting,” when the teacher played by Robin Williams’ reassures Matt Damon’s character about years of abuse, “It’s not your fault.”

This is the one message I would like to convey to physicians: the Medicare crisis isn’t your fault. It isn’t Stark Law violations or failure to properly chart or code. It isn’t physician-owned surgery centers. The fact is, Medicare has always been unsustainable. This fact simply can’t be swept under the rug any longer.

Congress, who brought us the “bridge to nowhere” has always been known for stupid spending decisions. The Medicare program on the other hand, was an altogether different animal. Congress didn’t promise to fund one bridge, one time. Medicare’s promise was to provide medical care for everyone over the age of 65, funded out of the U.S. Treasury, throughout the rest of time. Medicare is failing for several of reasons:

Globalization
The rate of medical inflation is often compared to the overall rate of inflation to illustrate that fees charged by the medical profession are out of control. But there are two numbers here. In a robust economy, the cost of everything else should have increased along with medical innovation. But it didn’t.  In 1965, we earned eight times more than workers in other countries, because we were the only ones able to manufacture anything. Europe, Japan, and much of Asia during WWII had been blown back to the Stone Age. Eventually, these countries would find their footing, and this would lead to natural overall deflation. But in healthcare, we still are the only innovators.

The Moral Hazard
A “moral hazard,” in insurance parlance, exists any time the presence of insurance creates the motive for the beneficiary to use the benefits. This is a fatal defect in any insurance program. Congress figured spending would increase, but underestimated “how much.” Spending doubled, then tripled, and it simply kept going up. This is to say, how much we usedskyrocketed, as opposed to the actual price of each unit.

The Medical Arms Race
If utilization weren’t enough of a problem, costs per visit also skyrocketed. Simply put, a free market that should have controlled pricesdidn’t.  As Maggie Mahar explained in “Money Driven Medicine (Harper –Collins, 2006), when the customer isn’t paying the bill, he naturally has no incentive to choose the least expensive facility. Instead, patients are driven by amenities or the facility which most resembles a five-star hotel.  Hospitals and physicians had to buy the newest gadget, even though old one worked just fine.

Advertising

“Are you tired after working a shift? You may have work shift disorder.” “Does your back hurt after lifting things. You may have ankylosing spondylitis.” “Do you want a free scooter? They are available at little or no cost to you.” Much has been written about the efforts of Madison Avenue to convince Americans they are sick. “Ask your doctor” if there is a pill for you, hides the fact that many patients will not only ask their doctor, they will keep asking until someone gives them a prescription. See, Payer, Lynn, “Disease Mongers,” John Wiley & Sons, 1992

None of these reasons has anything to do with Stark Law violations or unethical behavior. Scapegoating occurs because it is easier to cast blame, that to explain what is really going on.

Read Article on Physicians Practice

“The most sweeping changes to the HIPAA Privacy and Security Rules since they were first implemented.”

That’s how HHS Office for Civil Rights (OCR) Director Leon Rodriguez described the recent HIPAA “Omnibus” Rule. But at 163 three-column pages, reading the rule and associated commentary that was published on January 25 is a daunting task.  So I asked San Diego health lawyer, Martha Ann (Marty) Knutson to share her knowledge accumulated over two decades as a trial lawyer, general counsel and healthcare compliance officer.

MM: What are the most salient points you take out of the New HIPAA Rules ?

MK: First is the definition of “business associates.”

Figuring out who is a HIPAA “business associate” (BA) is a particularly challenging because the “rules” exist partly in the regulation text and partly in the voluminous commentaries and other materials that the OCR has produced to explain the concept – which it created in the first place. For example, this time OCR added a word – “maintains” – to the definition of who is a BA. This addition was apparently in response to an argument from record storage companies that they were not BAs but “mere conduits” of information similar to FedEx or the Postal Service; not actually “creating, receiving, or transmitting” protected health information (PHI). But the “conduit” concept is nowhere in the regulation – only in OCR interpretations of it.

The basic characteristics of BA status have survived the rule-making: (a) a non-employee; (b) performing work on “on behalf” of a covered entity; and (c) where the “function or activity” involves “creating, receiving, maintaining, or transmitting.” Potential BAs that perform a substantial part of their work within a physician office, for example a contracted physical therapist, may be treated as “workforce” and simply trained rather than signing a formal “business associate” agreement.

Typical BAs in a physician office practice include: the answering service, any vendors involved in creating or maintaining the practice’s medical records, the billing service, practice management consultants, and attorneys (if they need access to PHI). The rule imposes additional responsibilities on physicians for the missteps of their BA contractors; it’s not enough to simply have a BA contract. Physicians are expected to use “reasonable diligence” in selecting and monitoring the actions of their “agents.”  Physicians can also expect some push back from potential BAs because the rule now makes BAs and their subcontractors directly responsible for compliance.

But many other vendors and businesses still are not BAs: including the cleaning service, the copy repairperson, couriers, and banks. Physicians need to use “reasonable diligence” in limiting the PHI that any of these individuals may encounter, but do not need to enter into written BA agreements with them.

MM: What about changes to Notices of Privacy Practices (NPP)?

MK:  The rule requires that certain statements be added into the practice NPP related to, as applicable, marketing, fundraising, psychotherapy notes, a new right to limit disclosures related to services that the patient pays for in full, and notifications of privacy breaches. Physicians must post the revised NPP in their office and make copies available there, but need not mail a copy of the revised notice to each patient.

MM: I understand there are new marketing limitations?

MK: Third-party funded marketing for products and services can no longer be directed to patients without their prior written authorization. This prohibition does not include face-to-face communications / recommendations or distribution of promotional gifts (even if subsidized) of “nominal” value. Physicians can market their own facilities and services – without prior authorization – to their patients, even when the communication is funded by a third party, but acknowledging that assistance would be prohibited without a prior authorization from the patient.

MM: What about copies of the EHR?

MK: One challenging part of the rule is its creation of a patient right to receive a “machine readable” copy of portions of the EHR related to him / her. Although physicians can charge the actual costs of responding to such a request, standard “retrieval” costs are prohibited. Now would be a good time to figure out practically how to do this, because the response time has been narrowed to 30 days (and some state laws require even faster responses.)

MM: When do the new rules take effect?

MK:  The “effective date” of the rule is March 26, 2013 but OCR has also granted a six-month period for physicians to get into compliance with the new requirements, so the “compliance date” is September 22, 2013.  Some existing BA agreements may also qualify for a “grandfathering” period for up to 12 months past that.

Read Article on Physicians Practice

On December 17, 2012 CMS published “Medicare Fee-For-Service Recovery Audit Myths.”  Try as I might, more eloquent words cannot better describe my thoughts, than the two-word colloquium preferred by my 13-year-old: “Defensive much?”

The “myths” sought to be debunked are (in no particular order):

1. RACs deny every claim that they review.

2. Every RAC denial is overturned on appeal

3. RACs have non-clinicians conduct review of medical records

4. RACs create their own policies and are not bound by CMS regulations

5. RACs can review as many claims as they want from a provider

6. RACs don’t have physicians on staff

7. RACs do not tell anyone what they are reviewing

8. RACs outsource all the medical review to staff in India and the Philippines.

Twenty-five years of trial experience have taught me many lessons about the art of persuasion. Chief among these is a simple rule: “Hostile” audiences will usually disregard the “negation” of any declarative statement. (“We are [not] out to get you,” will generally only serve to validate an unreceptive audience’s suspicion.)  I could only ponder what might motivate CMS to produce this “RAC Apologist’s Manifesto.” Unlike John Adams’ explanation for his defense of the British soldiers accused of the Boston Massacre (“somebody had to do it,”) I can’t begin to imagine what CMS hoped to accomplish. 

CMS’ argument, (RAC auditors aren’t incompetent buffoons,) not only begs to mind the obverse inference, acceptance of the premise ignores Office of the Inspector General’s (OIG’s) Regional Inspector General Ann Maxwell’s congressional testimony six months prior which directly criticized Medicaid Auditors misidentification in all but 25 of 113,378 files reviewed (auditors were wrong in 113,353 out of 113,378 cases)-because the auditors don’t know what they are doing.

The years have also taught me an additional lesson: It is a good idea to spend less time marveling how clumsily an overwhelming enemy wields its sword, when time could be better spent “getting out of the way of the strike’s thrust.”  

So I called my friend, Mary Pat Whaley, a coding expert with Manage My Practice, LLC, based in Durham, N.C., who agreed to share some of her insights.

MM: What can physicians do to minimize the chances of an unfavorable audit?

MW: There are a number of things physicians can do immediately to reduce risk of adverse audits:

First:Clear up the confusion over midlevel providers (MLPs)

Most practices use nurse practitioners or physician assistants to provide care to patients.
Few are sure, however, of the rules surrounding billing for MLPs. There’s a good reason for this; most payers, including Medicare, have individual guidelines for reimbursing MLPs.

Second:At least annually, internally audit your coding/billing department,
your billing service or third-party vendor.

Maybe you’ve had turnover in your coding or billing department, or maybe you wonder if your billing service is doing everything exactly right. If you have coders (in-house or third-party) assigning/abstracting codes from your medical records, they should be audited annually to make sure you are protected. Top-notch coders and billers will welcome an opportunity to have their work audited, and if your coders, billers, billing service, or third-party vendors are defensive about an audit, it should make you wonder why. The good news is that one of the best risk management strategies you can have is a solid coding and billing compliance plan, and an important part of the plan is the annual audit. You will find it difficult to protect yourself against compliance issues if you do not perform annual monitoring and auditing as required by the OIG.

Third: Do not assume either newly hired physicians, or seasoned veterans understand and are properly trained as to CMS’ current expectations.

Many physicians come out of residency with little or no coding or documentation experience. Often, veteran physicians with a great deal of practical experience are not current on CMS’ ever-expanding expectations. New physicians and all new hires, regardless of practical experience, should have initial education on coding and documentation and should be audited when they have been seeing patients for four to six weeks.

Fourth: Proper training and regular outside auditing is an excellent defense against the dual hazards of over- and undercoding.

I find that many of my clients are so fearful of the consequences of “overcoding,” they needlessly sell themselves short. The truth is, “overcoding” and “undercoding”  are like navigating between “Scylla and Charybdis.” Overcoding certainly carries the danger of a devastating audit, but conversely, your practice cannot survive if you are not charging appropriately for what you do. This is where an outside coding consultant can help.

…While no amount of diligence or experience can guarantee a clean bill of health, it is important to realize the RAC audit program is so new, many RAC auditors are learning as they go. An experienced independent coding consultant with years of experience may be able to explain with greater certainty and conviction exactly what CMS manuals require.

Read Article on Physicians Practice

Editor’s Note: This is the first in a five-part series on modifications to HIPAA recently unveiled by HHS on January 17, 2013.

For non-lawyers and lawyers alike, scrolling through over 500 pages of regulations can be daunting to say the least (See the most recent modifications to HIPAA rules by the federal government, released on January 17, 2012). Because of the sheer magnitude, subtleties may easily be overlooked. One must approach the reading and possible interpretation like that of a contract. Reading the HITECH Act/HIPAA Final Rules requires physicians to consider not only a single item, but also other items in the same text, court opinions, and related laws to get the full picture.

Typically, courts look to the “four corners” of the document when determining the meaning of a particular provision. Depending on the state law, extrinsic evidence may be considered. Crucially, when a court, attorney, or sophisticated business person reads a contract, they look for internal definitions, as well as to other portions of the document to determine a meaning. Hence, merely looking at one segment of the entire document may not give the full picture. As a result, the parties to the contract may end up litigating over the particular terms.

Likewise, the reading of the recent HITECH Act/HIPAA Final Rules [78 Fed. Reg. 5566 (Jan. 25, 2013)], which include the application of various provisions set forth in the HITECH Act, should be approached in a similar manner. When reading laws and regulations for their meaning, one should always consider the doctrine of in pari materia.

Literally translated, the Latin phrase in pari materia means “on the same subject.” Black’s Law Dictionary 807 (8th ed. 2004). The doctrine of in pari materia is a rule of statutory construction providing “that statutes that are in pari materia may be construed together, so that inconsistencies in one statute may be resolved by looking at another statute on the same subject.” Id. The Texas Court of Criminal Appeals has recently described the doctrine of in pari materia:

It is a settled rule of statutory interpretation that statutes that deal with the same general subject, have the same general purpose, or relate to the same person or thing or class of persons or things, are considered to be in pari materia though they contain no reference to one another, and though they were passed at different times or at different sessions of the legislature.
(Azeez v. State, 248 S.W.3d 182, 191 (Tex. Crim. App. 2008)).

The doctrine of in pari materia, unlike the “four-corners” approach to reviewing a contract, should be considered in two ways: 1.) reading different parts of the same law or regulation to determine a meaning; and 2.) reading two separate but related laws or regulations. A common example would be reading the Stark Laws in tandem with the Antikickback Laws. (Martin Merritt, Compliance Tips for Your Medical Practice ). But, there is one caveat. In contract law, a person may argue that the contract is a “contract of adhesion” — that is, a contract is so imbalanced in favor of one party over the other that it was not fairly bargained for. A common example is provisions that are buried, slanted, or print that is so small that a reasonable person would not consider it. Often, the opposing party is not in a position to bargain. In relation to the HITECH Act/HIPAA Final Rules, the government and the making of laws and regulations diverges. In reality, the government did consult those potentially impacted when it called for comments in accordance with the Administrative Procedure Act (P.L. 79-404, 60 Stat. 237).

Let’s apply an example from the HITECH Act/HIPAA Final Rules. Section 164.308 has been interpreted to mean that both the interim final rule and final rule imposed administrative safeguards compliance on business associates and their subcontractors. And, business associates and not covered entities are responsible for business associate subcontractor compliance. Reading this alone can be interpreted to mean that the actions of a business associate’s subcontractor will have no impact on the covered entities liability.

Now, read Sections164.314 (breach reporting requirements), 160.300 (imposition of direct monetary penalties on business associates), and 160.402 (explanation of the agency relationship between covered entities, business associates and subcontractors) in relation to 164.308. Moreover, when a recent United States District Court opinion (United States ex rel. Spray v. CVS Caremark Corp., 2:09-cv-04672 (E.D.PA Dec. 20, 2012)) is considered that upheld the nexus in liability between a covered entity and a subcontractor in relation to Medicare Part D claims submissions and the False Claims Act, covered entities can suffer consequences for not doing adequate due diligence and requesting substantiated assurances on a business associate’s subcontractor compliance.

Therefore, physicians should pay close attention not only to the correlation between the various provisions contained within the HITECH Act/HIPAA Final Rules but, also, current case law and other law. In doing so, along with coordinating with counsel, physicians may mitigate both their immediate and long-term liability risk.

Read Article on Physicians Practice

The long-awaited “Sunshine Act” regulations for physicians are out.  Included in Section 6002 of the Affordable Care Act, the Sunshine Act has been a part of federal law since March 23, 2010. It took three years for CMS to formulate a final 285-page rule, effective 60 days from publication in the Federal Register, currently set for publication February 8, 2013.

This final rule will require applicable manufacturers of drugs, devices, biologicals, or medical supplies covered by Medicare, Medicaid, or the Children’s Health Insurance Program (CHIP) to report annually to the HHS secretary certain payments or transfers of value provided to physicians or teaching hospitals (“covered recipients”).

Although “transparency” is the stated purpose, the title implies something more. “Sunlight (not simple transparency) is the “best disinfectant.” The phrase was made famous by U.S. Supreme Court Justice Louis Brandeis in a 1913 Harper’s Weekly article, “What Publicity Can Do.” Congress intended to put an end to a rotten practice, not merely make it more transparent.

“Disclosure brings about accountability, and accountability will strengthen the credibility of medical research, the marketing of ideas and, ultimately, the practice of medicine,” Sen. Chuck Grassley (R-Iowa), who co-authored the legislation, said in a statement. “The lack of transparency regarding payments made by the pharmaceutical and medical device community to physicians has created a culture that this law should begin to change substantially.”

This “culture” has to do with the way pharmaceutical and device manufacturers went about their business, which was detailed earlier this year in Practice Notes:

• Stark Law and Gifts Sent to Your Medical Practice

• Stark Law and Pharmaceutical Company Kickbacks

• Stark Law, the AKS, and AMA Ethical Opinions on Drugs and Devices

• When It is Legally Acceptable to Accept Gifts at Your Medical Practice

Agency rules have the same force as statutes, but because federal agencies do not hold hearings; the public is permitted to comment on the first draft. An agency will respond to public comments in the final rule (explaining why the comments, if any, were either included or rejected.) This public participation adds a considerable amount of length to the 285-page final Sunshine Act rule. Distilled to its bare bones:

1. Starting Aug. 1, 2013, drug and device companies will be required to gather data about payments, gifts, and other transfers of value given to physicians and teaching hospitals, including shares or ownership in a company. 

2. Manufacturers and group purchasing organizations will be responsible to report the data including physician ownership and investment interests to CMS by March 31, 2014. 

3. Payments to a “covered recipient” means: 1.) a physician, other than a physician who is an employee of an applicable manufacturer; or 2.) a teaching hospital.

4. Payment includes: consulting fees, compensation for services other than consulting, honoraria, gifts, entertainment, food, travel (including the specified destinations), education, research, charitable contribution, royalty or license, current or prospective ownership or investment interest, direct compensation for serving as faculty or as a speaker for a medical education program, grants, any other nature of the payment, or other transfer of value.

5. There is a de minimis provision of $10 per gift, or annual aggregate of $100 which do not need to be reported.

6. Discounts and rebates need not be reported.

7. Product samples are excluded from reporting.

8. Penalties for failure to report are $1,000 to $10,000 per payment which is not reported with an annual limit of $150,000, unless the payment is “knowingly” omitted, in which case the penalty shall be at least $10,000 with an annual limit of $1,000,000.

The over-all effect of the Sunshine Act on physician practices is simple. Under Stark Law a physician may not refer patients for designated health services (DHSs) including prescription drugs and devices, where the physician or a close family member has an ownership, or financial relationship. Under the Anti-Kickback Statute, a physician may not prescribe drugs or devices if the physician has been paid in cash or in kind, if one purpose of the payment was to influence referrals.

The Sunshine Act will make it much more difficult to conceal such payments by an industry which has had a storied history of such payments.

Read Article on Physicians Practice