Med Law Blog : Pennsylvania Health Care Lawyers & Attorneys : Tucker Arensberg Law Firm : Employee Benefits, HIPAA & HIT in Pittsburgh, PA

CMS and the OIG are concerned with the potential for erroneous payments for either unjustified or medically unnecessary services in the independent diagnostic testing facilities (IDTF), which concern is initially based upon an audit performed for fiscal year 2001 by the OIG (A-03-03-00002). Therefore, in the August 22, 2006 Proposed Regulations, a link to which was posted here in yesterday's MedLAw Blog post,  the Department of Health and Human Services (HHS) is proposing to subject IDTFs to standards similar to Durable Medical Equipment, Prosthetics, Orthotics and Supplies (DMEPOS) as promulgated at 42 CFR 424.57 on October 11, 2000. IDTF would be required to meet the following standards as of January 1, 2007 and any new or re-enrolling IDTF would be required to certify compliance with those standards at the time of application, which standards are as follows:

1.         Operate its business and compliance with all applicable federal, state and local licensure and regulatory requirements with regard to the health and safety of patients;

2.         Provide complete and accurate information on Medicare participation enrollment applications;

3.         Maintain a physical facility with space and equipment appropriate for the services designated on the enrollment application;

4.         Have all applicable testing equipment available at the physical site, excluding portable equipment;

5.         Maintain a primary business telephone, listed under the name of the business and located at the physical site which numbers must be available through directory assistance;

6.         Maintain comprehensive liability insurance of at least $300,000 or 20% of its average annual Medicare billings, whichever is greater, obtain from an insurance company not owned by a relative;

7.         Agree not to directly solicit patients, which would include but not be limited to solicitation through telephone, computer or in-person contacts and agree not to accept patients unless referred for diagnostic testing by an attending physician (or non-physician practitioners in accordance with § 410.32 (a)(3);

8.         Answer beneficiary questions and respond to complaints with appropriate documentation;

9.         Openly post the standards for review by the public and by patients;

10.       Disclose to the government any person having ownership, financial or control interest or any other legal interest in the supplier at the time of enrollment or within 30 days of any change;

11.       Have its testing equipment calibrated per equipment instructions in compliance with applicable national standards;

12.       Have technical staff on duty with the appropriate credentials to perform designated testing along with maintain appropriate licensure or documentation for such individuals;

13.       Have proper medical storage along with retrieval of medical records upon request from CMS or designated contractors; and

14.       Permit CMS, and any agents or contractors, to conduct unannounced on-time inspections to confirm compliance with each standard.

In addition to the compliance standards, the physician supervision standard of  42 CFR § 410.33 (b)(1) would be revised to limit physicians who provide supervision to no more than three IDTF sites.

The discussion of these revisions are contained on pages 49060 through 49062 of the Proposed Rules and the proposed regulation is 42 CFR § 410.33 contained on page 49080 of the August 22, 2006 Proposed Rules.

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The Department of Health and Human Services (HHS) and the Centers for Medicare and Medicaid Services issued the 2007 Proposed Physician Fee Schedule in the August 22, 2006 Federal Register: http://www.cms.hhs.gov/quarterlyproviderUpdates/downloads/cms1321p.pdf.  In addition to the fee schedule reductions arising out of the proposed revisions to the work relative value units (RVUs) as proposed in the Federal Register on June 29, 2006, as reported in the Med Law Blog at that time, the new proposed physician fee schedule also incorporates the 5.1% reduction which would be mandated by the Sustainable Growth Rate (SGR) parameters currently in place. Congress has legislatively overridden the mandatory reductions for the past several years, and there are proposals not only to do so again this year but to reform the Medicare payment system using Pay For Performing (P4P) or quality incentives.

The combined impact of the SGR reductions and the work RVU reductions by specialty are projected in Table 7 of the Proposed Rules, August 22, 2006 Federal Register at page 49070.

In addition to the reimbursement changes, the Proposed Rules also make significant revisions to the participation requirements for Independent Diagnostic Testing Facilities, and proposed changes to the Stark II definition of “centralized billing” and clarifications of the Reassignment Rules, both of which will be the subject of separate MedLaw Blog posts in the next few days. 

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JCAHO MS.1.20 (i.e. the proposed medical staff by-laws standards to be adopted by the Joint Commission for the Accreditation of Healthcare Organizations) has been generating significant controversy since amendments were first proposed in January of 2004, which amendments would have required approval of both the medical staff and the hospital governing board to adopt and amend the medical staff by-laws. Enforcement of these accreditation standards would prohibit unilateral amendment of medical staff by-laws by a hospital or its governing board, which created significant controversy among hospitals and their governing board because of the perceived “veto” power and granted to the medical staff. Although medical staff leadership welcomed this approach, said leadership has never felt nearly as threatened about this standard as the hospitals have because medical staff leadership have never expected unilateral amendment opportunities.

The latest iteration of MS.1.20 was recently posted on the JCAHO website (http://www.jointcommission.org/Standards/FieldReviews/fr_ms120.htm). The proposed standards are available for review and comment through October 27, 2006. Significant among the performance standards are the following:

“A.2. Medical staff by-laws are adopted and amended by the medical staff and approved by the governing body.”

“A.4. The governing body acts in accordance with the medical staff by-laws, rules and regulations, and policies that are adopted by the medical staff and approved by the governing body.”

A.7. to A.11. The medical staff by-laws or rules and regulations and policies adopted by the organized medical staff and approved by the governing body delineate the structure of the medical staff, both practitioners who are eligible for membership in the organized medical staff, most practitioners who are eligible to vote on the medical staff by-laws and their amendments, and the organized medical staff officers and the methods for their selection and removal.

These accreditation guidelines will also be interesting when viewed in relation to the issue of whether medical staff by-laws create enforceable contracts, because of the standards which are applied. Even in those states which have decided that medical staff by-laws in and of themselves do not create contracts with medical staff members, the general opinion has been the adoption of medical staff by-laws nevertheless creates an obligation or requiring the hospital to act in accordance with the by-laws, regulations and policies which it has adopted.

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An adverse peer review report to the National Practitioner Data Bank is a threat frequently used by hospitals to leverage physicians into otherwise unacceptable peer review compromises. Once the report has been made to the Data Bank, the alleged adverse peer review of action is public knowledge and significantly jeopardizes physicians’ continued practice opportunities. Although the Data Bank allows physicians to submit a dispute and has a process to contest the report filed by the hospital, that process is cumbersome and does not provide much recourse for physicians who disagree with the ultimate decision by the Secretary of Health and Human Services.

The United States District Court for the District of Nebraska has provided a breath of fresh air and potential recourse to this process. In Costa v. Leavitt (2006 U.S. Dist. LEXIS 51675), the District Court ordered the Secretary of Health and Human Services “to remove the National Practitioner Data Bank the adverse action report filed on April 6, 2005, by Gothenburg Memorial Hospital.” In this case, the hospital was in the process of denying a physician’s application for reappointment, with the credentials committee making an adverse recommendation what the by-laws requiring approval of that recommendation before final action, when the physician withdrew his application for reappointment. The hospital submitted a report which stated:

“Dr. Costa’s competence and professionalism are under review at the Gothenburg Memorial Hospital at the time he withdrew his medical staff application for reappointment and surrendered his privileges. The medical staff had concerns regarding recent obstetrical cases in which Dr. Costa was the primary physician, as well as concerns regarding his professionalism to nursing and administrative staff. Dr. Costa surrendered his privileges one and one-half hours after the medical staff unanimously voted to reject his application for reappointment and prior to that recommendation being forwarded to the board of directors for further action.”

The physician disputed this report with the National Practitioner Data Bank, utilizing the dispute mechanism provided by the regulations. The Secretary of the Department of Health and Human Services ultimately determined that the hospital report was accurate. The District Court concluded that the evidence did not support the Secretary’s determination and ordered the Secretary to remove that report.

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Following is the text from the payment delay reminder issued by HGSAdministrators (now Highmark Medicare Services):

A brief hold will be placed on Medicare payments for all claims during the last 9 days of the Federal fiscal year (September 22 through September 30, 2006).   These payment delays are mandated by Section 5203 of the Deficit Reduction Act of 2005. No interest will be accrued and no late penalties will be paid to an entity or individual by reason of this one-time hold on payments. All claims held during this time will be paid on October 2, 2006.

This policy only applies to claims subject to payment. It does not apply to full denials, no-pay claims, and other non-claim payments such as periodic interim payments, home health requests for anticipated payments, and cost report settlements.

Please note that payments will not be staggered and no advance payments will be allowed during this 9-day hold.

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MEDICARE FACT SHEET

For Immediate release

CMS Office of Media Affairs August 1, 2006

Physician Self-Referral Exceptions for Electronic Prescribing and Electronic Health Records Technology

BACKGROUND: Section 1877 of the Social Security Act (the Act), commonly referred to as the "Stark" law, prohibits a physician from making referrals for certain "designated health services" (DHS) payable by Medicare to an entity with which the physician (or an immediate family member of the physician) has a financial relationship, unless an exception applies. Section 1877 of the Act also prohibits the entity from submitting claims to Medicare or anyone else for Medicare DHS that are furnished as a result of a prohibited referral. Violations of the statute are punishable by denial of payment for all DHS claims, refund of amounts collected for DHS claims, and civil money penalties for knowing violations of the prohibition.

The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) amended the Act to establish a prescription drug benefit in the Medicare program. As part of the new benefit, the Congress directed the Secretary to establish standards for electronic prescribing with the objective of improving patient safety, quality of care, and efficiency in the delivery of care. Because the donation of electronic prescribing technology may create a financial relationship that is subject to the physician self-referral prohibition, the MMA directed the Secretary, in consultation with the Attorney General, to create an exception to the physician self-referral prohibition to permit certain entities to provide non-monetary assistance to physicians to encourage their use of electronic prescribing technology. This final rule (CMS-1303-F) sets forth the terms and conditions of the MMA-mandated physician self-referral electronic prescribing exception and also sets forth the conditions for a new regulatory exception for arrangements involving the donation of electronic health records software or information technology and training services. The MMA mandated a similar safe harbor under the anti-kickback statute for donations of electronic prescribing technology made to physicians and certain other entities. The HHS Office of Inspector General (OIG) is simultaneously issuing a final rule regarding the MMA-mandated anti-kickback statute safe harbor for certain electronic prescribing arrangements, as well as a safe harbor for the donation of electronic health records software or information technology and training services. Information about the OIG regulations can be found on the OIG website at www.oig.hhs.gov.

Exception for Electronic Prescribing Arrangements

To qualify for the physician self-referral exception regarding donations of electronic prescribing technology and training services, the following criteria must be satisfied, as fully set forth at 42 CFR § 411.357(v):

§     

Stark Exception Fact Sheet- E-prescribing and EHR                                                                      Page 2 of 5

8/2/2006

The items and services must consist of hardware, software, or information technology and training services that are necessary and used solely to receive and transmit electronic prescription information;

§      The items and services must be provided by a hospital to a physician who is a member of its medical staff; by a group practice to a physician who is a member of the group; or by a prescription drug plan sponsor or Medicare Advantage organization to a prescribing physician; and

§      The items and services are provided as part of, or are used to access, an electronic prescription drug program that meets applicable standards under Medicare Part D at the time the items and services are provided.

§      The donor (or any person on the donor's behalf) does not take any action to limit or restrict the use or compatibility of the items or services with other electronic prescribing or electronic health records systems;

§      For items or services that are of the type that can be used for any patient without regard to payor status, the donor does not restrict, or take any action to limit, the physician's right or ability to use the items or services for any patient;

§      Neither the physician nor the physician's practice (including employees and staff members) makes the receipt of items or services, or the amount or nature of the items or services, a condition of doing business with the donor.

§      Neither the eligibility of a physician for the items and services, nor the amount or nature of the items or services, is determined in a manner that takes into account the volume or value of referrals or other business generated between the parties;

§      The arrangement is in writing, is signed by the parties, specifies the items and services being provided, identifies the cost to the donor of the items and services, and covers all of the electronic prescribing items and services to be provided by the donor. This requirement will be met if all separate agreements between the donor and the physician (and the donor and any family members of the physician) incorporate each other by reference or if they cross-reference a master list of agreements that is maintained and

§      updated centrally and is available for review by the Secretary upon request. The master list should be maintained in a manner that preserves the historical record of agreements.

§      The donor does not have actual knowledge of, and does not act in reckless disregard or deliberate ignorance of, the fact that the physician possesses or has obtained items or services equivalent to those provided by the donor.

Exception for Electronic Health Records Arrangements

To qualify for the physician self-referral exception regarding donations of electronic health records software or information technology and training services, the arrangement is required to satisfy the following criteria, as fully set forth at 42 CFR § 411.357(w):

§      The software and training services must be necessary and used predominantly to create, maintain, transmit, or receive electronic health records;

§      The items and services are provided to a physician by a hospital or other entity that furnishes designated health care services;

§      The software is interoperable (as defined at §411.351) at the time it is provided to the physician. For purposes of the exception, "interoperable" means that the software is able to (i) communicate and exchange data accurately, effectively, securely, and consistently with different information technology systems, software applications, and networks, in various settings, and (ii) exchange data

Stark Exception Fact Sheet- E-prescribing and EHR                                                                      Page 3 of 5

8/2/2006

 such that the clinical or operational purpose and meaning of the data are preserved and unaltered. Software is deemed to be interoperable if a certifying body recognized by the Secretary has certified the software no more than 12 months prior to the date it is provided to the physician.

§      The donor (or any person on the donor's behalf) does not take any action to limit or restrict the use, compatibility, or interoperability of the items or services with other electronic prescribing or electronic health records systems;

§      Before receipt of the items and services, the physician pays 15 percent of the donor's cost for the items and services. The donor (or any party related to the donor) does not finance the physician's payment or loan funds to be used by the physician to pay for the items and services.

§      Neither the physician nor the physician's practice (including employees and staff members) makes the receipt of items or services, or the amount or nature of the items or services, a condition of doing business with the donor.

§      Neither the eligibility of a physician for the items and services, nor the amount or nature of the items and services, is determined in a manner that directly takes into account the

§      volume or value of referrals or other business generated between the parties. For purposes of this requirement, the determination is deemed not to directly take into account the volume or value of referrals or other business generated between the parties if any one of the following conditions is met:

(i)                  The determination is based on the total number of prescriptions written by the physician (but not the volume or value of prescriptions dispensed or paid by the donor or billed to the program);

(ii)                The determination is based on the size of the physician's medical practice (for example, total patients, total patient encounters, or total relative value units);

(iii)               The determination is based on the total number of hours that the physician practices medicine;

(iv)              The determination is based on the physician's overall use of automated technology in his or her medical practice (without specific reference to the use of technology in connection with referrals made to the donor);

(v)                The determination is based on whether the physician is a member of the donor's medical staff, if the donor has a formal medical staff;

(vi)              The determination is based on the level of uncompensated care provided by the physician; or

(vii)             The determination is made in any reasonable and verifiable manner that does not directly take into account the volume or value of referrals or other business generated between the parties.

§      The arrangement is in writing; is signed by the parties; specifies the items and services being provided, the cost to the donor of the items and services, and the amount of the physician's contribution; and covers all of the electronic health records items and services to be provided by the donor. This requirement will be met if all separate agreements between the donor and the physician (and the donor and any family members of the physician) incorporate each other by reference or if they cross-reference a master list of agreements that is maintained and updated centrally and is available for review by the Secretary upon request. The master list should be maintained in a manner that preserves the historical record of agreements.

§      The donor does not have actual knowledge of, and does not act in reckless

Stark Exception Fact Sheet- E-prescribing and EHR                                                                      Page 4 of 5

8/2/2006

 disregard or deliberate ignorance of, the fact that the physician possesses or has obtained items or services equivalent to those provided by the donor;

§      For items or services that are of a type that can be used for any patient without regard to payor status, the donor does not restrict, or take any action to limit, the physician's right or ability to use the items or services for any patient;

§      The items and services do not include staffing of physician offices and are not used primarily to conduct personal business or business unrelated to the physician's medical practice;

§      The electronic health records software contains electronic prescribing capability, either through an electronic prescribing component or the ability to interface with the physician's existing electronic prescribing system, that meets the applicable standards under Medicare Part D at the time the items and services are provided;

§      The arrangement does not violate the anti-kickback statute or any Federal or State law or regulation governing billing or claims submission; and

§      The transfer of the items or services occurs on or before December 31, 2013.

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The Pennsylvania Legislature enacted the Health Savings Account Act (the "HSA Act") 72 P.S. §§3402b.1-3402b.6, on July 14, 2005, to be effective sixty days thereafter. As enacted, Section 4 of the HSA Act did not provide an exclusion from Pennsylvania tax for contributions by employers and employees to health savings account plans. Accordingly, there were not deductions allowed from taxable income for contributions to health savings accounts for Pennsylvania purposes under the HSA Act. Under Section 4 of the HSA Act, the following items were excluded from Pennsylvania tax:

            (1)        any income of a health savings account;

(2)        any amount paid or distributed out of a health savings account that is used exclusively to pay the qualified medical expenses of the account beneficiary; and

(3)        any amount paid or distributed out of a health savings account that is used exclusively to reimburse an account beneficiary for qualified medical expenses.

                                    72 P.S. §3402b.4(a)

The following items were included in the income of the account beneficiary and subject to Pennsylvania tax:

(1)        any amount paid or distributed out of a health savings account that is used for any purpose other than to pay the qualified medical expenses of the account beneficiary;

(2)        any excess contribution distribution that has not previously been included in the account beneficiary's income; and

(3)        any amount of the account beneficiary's income attributable to an excess contribution distribution

                                    72 P.S. §3402b.4(b)

On February 14, 2005, an amendment to the HSA Act was proposed in House Bill 2125, so that the Pennsylvania Act could follow the health savings account provisions set forth in Section 223 of the Internal Revenue Code. In addition, although the HSA Act contained no tax exclusion or deduction for contributions made to a health savings account, the Pennsylvania Department of Revenue issued a tax bulletin (PIT-06-005) on April 12, 2006, in which it indicated that: (1) payments made by an employer for a nondiscriminatory health plan are excluded from compensation and accordingly, not subject to withholding tax and (2) payments directed by an employee to a health savings account under the employer's federally qualified cafeteria plan and maintained as a qualified benefit of that plan are excluded from compensation and therefore not subject to withholding tax.

By amendment dated June 21, 2006, for tax years beginning after December 31, 2005 and effective immediately, the entirety of Section 4 of the HSA Act has been repealed, and Pennsylvania has adopted law that conforms to the federal tax treatment of health savings accounts so that the definition of income now includes the following language of Section 303(a)(6) of the Pennsylvania Tax Reform Code of 1971 (72 P.S. §7303(a)(6)), as amended:

Interest derived from obligations which are not statutorily free from state or local taxation under any other act of the General Assembly of the Commonwealth of Pennsylvania or under the laws of the United States and any amount paid under contract of life insurance of endowment or annuity contract, which is includible in gross income for federal income tax purposes and any amount paid out of the Archer Medical Savings Account or Health Savings Account that is includible in the gross income of an account beneficiary for federal income tax purposes.

Accordingly, effective immediately an applying to tax years beginning after December 31, 2005, where contributions to and income and distributions from qualified health savings accounts are deductible for purposes of Section 223 of the Internal Revenue Code, they shall, under 72 P.S. §303(a)(6), above, not be included in taxable income for Pennsylvania purposes. Under both federal and Pennsylvania law, distributions that are not used for qualified medical expenses will be taxable as interest income.

For more information , contact Jamie Aul at 412.594.3923.

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