Pennsylvania Workers Compensation Prescription Drug Reimbursement Restrictions

On October 27, 2014, the Governor signed Pennsylvania General Assembly enacted House Bill 1846, which limits both the authority and the reimbursement of physicians and providers other than pharmacies for prescription drugs.  It provides as follows:

  • Physicians dispensing prescription drugs from their offices shall receive no more than 110% of the original average wholesale price (AWP) for such prescriptions.
  • No outpatient provider, other than a pharmacy, may receive reimbursement for greater than an initial 7 day supply of any controlled substance or any substance containing Hydrocodone for a workers compensation related service.
  • No outpatient provider, other than a pharmacy, may receive reimbursement for anything more than an initial 30 day supply of any other prescription drug.
  • No provider other than a pharmacy may receive any reimbursement for OTC drugs.

The statute also requires the cost savings for these limitations on prescription drug costs to be passed through to employers by requiring, with an 18 months of enactment, that the Pennsylvania Compensation Rating Bureau shall calculate the savings achieved through implementation of these provisions and use those savings for an immediate reduction in rates for 2016 workers compensation insurance.

The effective date will be, ironically for physicians, December 25, 2014.


District Court Approves Government’s Use of Sampling and Extrapolation to Prove False Claims Act Liability

In United States ex rel. Martin et al. v. Life Care Centers of American, Inc., the Court held that the government could extrapolate from a random sample in order to impose False Claims Act (FCA) liability against Life Care Centers of American Inc. (Life Care) for a substantially larger universe of claims.

In order to prove FCA liability, the government sought to use a random sample of 400 admissions from 82 Life Care facilities spread over approximately 6 year period and then extrapolate the resulting error rate to a sample universe of more than 50,000 patient admissions, comprising more than 150,000 claims. Life Care moved for partial summary judgment on the basis that the government could not satisfy its burden of proof based on statistical sampling and extrapolation.

The Court rejected Life Care’s arguments and denied its motion for summary judgment. The Court held that the general purpose of statistical sampling is to “provide a means of determining the likelihood that a large sample shares characteristics of a smaller sample”, noting that statistical sampling has “become commonplace in certain types of litigation,” and is generally accepted by courts. In the FCA context, the court held that “in view of the enormous logistical problems of [enforcement of government programs], statistical sampling is the only feasible method available.”

Pennsylvania Superior Court Rejects Peer Review Confidential for “Business Records”

In Kates v. Doylestown Hospital, the Pennsylvania Superior Court, in a non-precedential decision, held back the Pennsylvania Peer Review Protection Act does not provide confidentiality protection for certain records, stating:

Peer review necessarily involves evaluating the quality of care provided by medical professionals or evaluating the qualifications of medical care providers. 0045cept for those portions that we held could be redacted, the documents/communications at issue were not used or made for the determination of staff privileges or for credentialing purposes. These documents/communications were not used exclusively for quality assurance purposes by the Stroke Committee and are not incorporated exclusively within a physician’s credentialing file. See Dodson, supra. Furthermore, Doylestown Hospital cannot point to a definitive action initiating the peer review process prior to the time these documents were created. See Mazzucca [v. Methodist Hospital], 47 D. & C. 3d [55], 60 [(Phila.Cty. 1985)]. Quite simply, the emails, agenda and minutes we ordered discoverable are non-peer review business records and communications that are neither used, nor generated by the Stroke Committee for peer review purposes.

Face-to-Face Medicare Reimbursement Requirements for Home Health Certification

CMS has announced its concern regarding the level of compliance for documenting the face-to-face elements necessary for home health care certification.

Attached is an educational piece published by Novitas Solutions on its Part B website.

It lists the qualification criteria for home health benefits:

  • Be confined to a home;
  • Under the care of a physician;
  • Receiving services under a plan of care established and periodically reviewed by a physician;
  • Be in need of skilled nursing care on an intermittent basis or physical therapy or speech-language pathology; or
  • Have a continuing need for occupational therapy.

The article then proceeds to list the major documentation errors:

  • The encounter was related to the primary reason for home care;
  • How the patient’s condition supports the patient’s homebound status; or
  • How the patient’s condition supports the need for skilled services.

Finally, the article provides examples of appropriate documentation, which are contained in the article itself.

Hospital Recovers Income Guarantee Payments from Suspended Physician

It should come as no surprise there are cases in which hospitals seek to and actually do recover income guarantee payments made to physicians whom, either through termination of employment or loss of hospital privileges, fail to fulfill the repayment requirements existing in most of those contractual arrangements.

They typical hospital guarantee arrangement provides advances to physicians to pay expenses and salary for some period of time, coupled with an agreement both to repay any excess amounts provided by the hospital and to forgive those amounts if the physician completes some guaranteed community service requirements.

In Alzadon v. Highlands Hospital Corporation, the physician lost both his hospital privileges and was disciplined by the Kentucky Board of Medical Licensure.

In this case, the trial court entered summary judgment on behalf of the hospital, and the Appellate Court agreed with the lower court that there were no genuine issues of material facts regarding the contract, the termination of the physician’s privileges, or the alleged obstruction by the hospital of the physician’s performance of the agreement. The physician had alleged that the hospital engaged in bad faith and interfered with this employment, but that argument was rejected by the courts.

OIG Rejects Specialty Pharmacy Request to Pay “Per-Fill” Payents to Retail Pharmacies

In OIG Advisory Opinion 14-06, the Office of Inspector General (OIG) concluded that payment by a specialty pharmacy to a retail pharmacy on a “per-fill” basis for services provided by the retail pharmacy could violate the Anti Kickback Statute and Civil Money Penalty provisions.

The specialty pharmacy, as the requestor, proposed to pay retail pharmacies a “fair market value” “per-fill” payment for services provided to patients by the retail pharmacy for specialty prescriptions that the retail pharmacy could not fill but instead referred to the specialty pharmacy. Those services would include recording patient specific medication history, gathering patient and prescriber demographic information, counseling patients on appropriate use of medications, informing patients about specialty drug access, obtaining patient consent to forward the prescription to the specialty pharmacy, transferring the prescription information, and providing ongoing assessments for subsequent refills. In other words, the retail pharmacy would basically be providing information that it would provide anyway.

The OIG concluded that the “proposed arrangement could potentially generate prohibited remuneration under the Anti Kickback Statute and the OIG could potentially impose administrative sanctions”. They also stated in the Opinion:

There is a significant risk that the per-fill fees would represent compensation for the local pharmacies generating business, including federal healthcare program business, rather than solely compensation for bona fide commercially reasonable services.

This seems like the type of request submitted by someone who is looking for a negative response in order to justify its refusal to pay these “per-fill” fees. It is hard to imagine the OIG condoning any proposed practice that would specifically pay a fixed fee, fair market value or otherwise, only for patients that were referred to the specialty pharmacy.


Hospital Network Reports Large HIPAA Breach


Community Health Systems announced today, August 18th, that hackers broke into its computers and stole data on 4.5 million patients.  The information included names, Social Security numbers, physical addresses, birthdays and telephone numbers.  More information on the breach is available at


OIG Finds Privacy and Security Risks with ONC EHR Certification Process

It is ironic to learn the Office of Inspector General (OIG) believes the Office of the National Coordinator for Health Information Technology (ONC) essentially has an insufficient compliance program to maintain the privacy and security of the protected health information (PHI) hosted by electronic health records (EHR).

In an August 2014 report (A-06-11-00063), OIG concluded that the process ONC uses to certify EHR is not sufficient to ensure the privacy and security of the EHR PHI.

I have attached a link to the OIG report and included regarding the findings and recommendations of the OIG.


ONC’s oversight of the ATCBs did not fully ensure that test procedures and standards could adequately secure and protect electronic patient information contained in EHRs. Specifically, ONC did not ensure that the ATCBs:

  • developed procedures to periodically evaluate whether certified EHRs continued to meet Federal standards and
  • developed a training program to ensure that their personnel were competent to test and certify EHRs and to secure proprietary or sensitive EHR information.

The ATCBs’ standards and procedures for testing and certifying EHRs met all NIST test procedure requirements that ONC approved. However, those NIST test procedures were not sufficient to ensure that EHRs would adequately secure and protect patient health information; in particular, the procedures allowed ATCBs to certify EHRs that demonstrated the use of a single-character password during testing. In addition, the NIST test procedures did not address common security issues, such as, but not limited to, password complexity and/or logging emergency access or user privilege changes.


To ensure that each patient’s health information in EHRs is secure and protected, we recommend that ONC require the ATCBs to:

  • develop procedures to periodically evaluate whether certified EHRs continue to meet Federal standards and
  • develop a training program to ensure that their personnel are competent to test and certify EHRs and to secure proprietary or sensitive EHR information.

We also recommend that ONC work with NIST to strengthen EHR test procedure requirements so that ATCBs can ensure during testing that EHR vendors incorporate a baseline set of security and privacy features into the development of EHRs to address common security issues.