The proposals include numerous items, but I would like to highlight the following:

1.  Proposed changes to the Independent Diagnostic Testing Facility (IDTF
     enrollment requirements;

2. Significant clarification and proposed changes to the Purchased Diagnostic Testing or Anti
     markup Rules;

3.  A new Stark exemption for incentive payment and shared saving programs (gainsharing); and

4.  Proposed revisions to the Physician and Non-Physician Practitioner Enrollment Requirements.

Over the next several weeks, I will be posting articles on the Medlaw Blog regarding each of these.

By ANNA WILDE MATHEWS
July 7, 2008

Before Congress took the July 4th week off, a partisan standoff in the Senate blocked a bill that would prevent a cut in doctors' Medicare fees. When members return to Capitol Hill this week, the question for Democrats and Republicans will be: Who will blink to get it done?

Both parties want to avoid the 11% drop-off in physician payments. Already, lawmakers have missed the July 1 deadline for the automatic cut to go into effect, but the Bush administration said it won't process claims at the new, lower rate for the first 10 business days of July.

The clash -- and the holdup -- center mostly on how to pay for the bill. Its cost, about $20 billion over five years, reflects a package of other tweaks in addition to the doctors' money. To fund them, the bill relies largely on trimming outlays for the private insurers' version of Medicare, known as Medicare Advantage plans.

The White House has threatened to veto the bill, largely over new limits it would impose on one particular type of Medicare Advantage plan known as private fee-for-service. Such plans are offered by companies including Humana Inc., WellPoint Inc. and UnitedHealth Group Inc.

Despite the veto threat, the House passed the bill last month, 355-59. But in the week before Congress's holiday recess, it fell one vote short of the 60 needed to move forward in the Senate.

Senate Democrats have vowed to bring the bill up again this week. So the spotlight will be on a handful of Republican senators who could potentially switch votes. The American Medical Association, which backs the bill and says many of its members would be reluctant to see new Medicare patients if the cut remains in effect, ran ads last week targeting 10 Republican senators in their home states.

They include Pennsylvania Sen. Arlen Specter, New Hampshire Sen. John Sununu and Mississippi Sen. Roger Wicker. Texas Sen. John Cornyn, who, like Sens. Sununu and Wicker, is up for reelection this fall, saw the political arm of the Texas Medical Association withdraw its endorsement of him. "I think they don't understand the fury out there," said AMA President Nancy Nielsen. "It's galvanized doctors."

On the other side, America's Health Insurance Plans, the main lobbying group for the industry, ran its own ads, defending the Medicare Advantage plans. "What we'd like to see is the physician-fee issue addressed without the significant reliance all the bills propose placing on Medicare Advantage beneficiaries," said Karen Ignagni, chief executive of the group.

Even if the bill wins 60 votes in the Senate this week, it would not be enough to overcome a veto if the White House refuses to back down. That would throw the issue back to Congress with even less time left on the clock before the cuts take full effect. Democrats would then face more pressure to accept a compromise measure, likely more narrowly crafted, that does not go after the private fee-for-service plans.

Write to Anna Wilde Mathews at anna.mathews@wsj.com

On June 30, 2008, the Centers for Medicare and Medicaid Services (CMS) posted at the Office of Federal Register its Proposed 2009 Medicare Physician Fee Schedule rule. The rule is scheduled to be published in the July 7, 2008, edition of the Federal Register, but was placed on display at the Office of Federal Register.

As with any proposed physician fee schedule update, this proposed rule is full of interesting and significant changes to Medicare Part B payment policies, including pieces impacting the Stark Law and the purchased diagnostic test (PDT) rule. In particular, the proposed rule:

• Includes annual updates to relative value units (RVUs) used to calculate physician payment.
• Proposes to create a new series of HCPCS codes for follow-up inpatient telehealth consultations.
• Proposes changes to the methodology used to calculate the Average Sales Price (ASP) of certain covered Part B drugs effective April 1, 2008, and proposes changes to the Competitive Acquisition Program (CAP) for Part B drugs.
• Proposes changes to the IDTF enrollment requirements including: (1) proposed requirements that physician and nonphysician practitioner entities enroll and meet certain IDTF requirements; (2) proposed requirements that mobile entities furnishing diagnostic tests bill directly for the mobile diagnostic services that they furnish, regardless of where the services are performed; and (3) proposed limits regarding how long an IDTF can submit claims for services furnished prior to any effective date of IDTF revocation.
• Includes significant clarification and proposed changes to the PDT or anti-markup rule including: (1) changes that would conform aspects of this payment limitation rule to the federal physician self-referral or Stark law by modifying the current definition of "office of the billing physician" to include diagnostic services furnished in the same building (even if furnished on different floors of the building provided applicable supervision requirements can be met); (2) changes that would clarify that physician supervision—not the employment relationship of the technician—is the key factor for application of the payment rule provisions; (3) changes that would exempt diagnostic services furnished by certain multi-specialty practices in locations where only some of the ordering physicians of the physician organization work; and (4) a proposed exemption for certain non-compliant relationships where an ordering physician in a physician organization does not have any owners who have a right to receive profit distributions.
• CMS solicits numerous comments regarding these proposed changes including: (1) alternatives to the proposals it offers; (2) whether the term "net charge" should include any overhead or other costs of the billing physician when the PDT applies; and (3) whether the effective date of the PDT clarifications should be extended beyond January 1, 2009. CMS does not, however, back away from its view in the final 2008 Medicare Physician Fee Schedule that the PDT rule will apply in situations that could qualify under the "centralized building" component of the in-office ancillary services exception under the Stark law.
• Proposes a new and permanent Stark exemption for certain incentive payment and shared savings programs offered by hospitals.
• Proposes revisions to the physician and non-physician practitioner enrollment requirements.
• Proposes revisions to the appeals process rules where CMS or a contractor determines that a provider or supplier fails to meet the requirements for Medicare billing privileges.
• Proposes to change the DMEPOS supplier standards to prohibit payment to a supplier for furnishing a CPAP device to a beneficiary if the supplier also "directly or indirectly" provided the diagnostic sleep study or furnished the sleep test device used in the study.
• Proposes changes to the Physician Quality Reporting Initiative (PQRI) reporting requirements.

Comments on this proposed rule are due by August 29, 2008, with the final rule expected in November for implementation effective as of
January 1, 2009.

*We would like to thank Barry Alexander (Nelson, Mullins, Riley & Scarborough, LLP Raleigh, North Carolina) and Alex M. Hendler (Washington, DC) for providing this email alert.

Q1.      Will claims containing services paid under the MPFS be held that contain both June and July dates of service?

A1.      Yes, your local contractor will hold the entire claim for 10 business days.

Q2.      Will claims be held that contain both services paid under the MPFS and services paid under a separate fee schedule?

A2.      Yes, claims that contain both services paid and not paid under the MPFS will be held. For example, a claim with a July date containing an Evaluation and Management code and a drug code would be held.

Q3.      Does the holding of claims paid under the MPFS also include anesthesia and purchased diagnostic services?

A3.      Yes, contractors will hold all claims with dates of service July 1, 2008, and after that contain services paid under the MPFS, including anesthesia and purchased diagnostic services.

In continuing coverage from previous editions of Health and Life Sciences Law Daily, the New York Times (6/27, Pear) reports that physicians now "face a 10 percent cut in Medicare payments next week, following the Senate's failure on Thursday to take up legislation that would have averted the cuts." By a vote of 58 to 40 on Thursday, "Republican senators blocked" the bill, which "would cancel the 10 percent cut scheduled to occur on Tuesday and would increase Medicare payments to doctors by 1.1 percent in January." Dr. Nancy H. Nielsen, president of the American Medical Association, warned that "the cuts would force many doctors to 'limit the number of new Medicare patients they treat.'"

 For questions regarding this article please contact:
Joni Landy at 412-594-3945 or jlandy@tuckerlaw.com
David Sawyer at 412-594-5642 or dsawyer@tuckerlaw.com

Expect the current elected officials to enact the reprieve for the next 6 months and pass this problem on to the new administration.

House Clears Medicare Package

The House, with a lopsided 355-59 vote Tuesday, set up a complicated endgame for Medicare legislation that is expected to play out in the next few days.

The bill would prevent a July 1 cut of 10.6% in Medicare fees paid to doctors. The White House has threatened a veto, largely because the bill would add restrictions on some private insurers' versions of the government benefit for the elderly. The Senate is expected to move quickly to a vote on the House measure.

The maneuvers have been watched closely by Richard Bringewatt, who is fighting for the survival of a new type of private Medicare plan that targeted the chronically ill, a population that often gets inadequate care from the fragmented health system.

Five years ago, Mr. Bringewatt, who now heads the Special Needs Plan Alliance representing some 30 insurers, helped to persuade Congress to establish the plans, which cover more than 1.1 million people.

The issue is enmeshed in the Medicare legislation. Earlier, the Senate had fallen short of the 60 votes needed to move forward with a bill similar to the one that passed the House, but Tuesday's strong bipartisan support in the House, where it got 129 Republican votes, has given it new momentum. On a parallel track in the Senate, lawmakers have also been crafting a compromise version aimed at avoiding a White House veto.

In the Senate, one sticking point has been the special-needs plans. Congress limited the plans' expansion this year as it sought to define who -- and what ailments -- qualify for one type of plan targeting the chronically ill. The Bush administration wants Congress to renew the plans without restricting them only to the sickest patients.

The debate has implications for how care is provided to the most vulnerable senior citizens -- a big concern for insurers, health-care providers and federal budgeters alike as the baby-boom generation ages.

In the Senate, lawmakers from both parties want to extend the special-needs plans through 2010. The Democrats' bill, introduced by Senate Finance Committee Chairman Max Baucus of Montana would limit chronic-care plans to those with "complex, chronic conditions," a position the Bush administration opposes. Sen. Charles Grassley, the committee's top Republican, has proposed limiting the plans' expansion for another year while trying to find a middle ground.

EMPLOYEE BENEFITS LAW ALERT

June 25, 2008

EFFECTIVE IMMEDIATELY - NEW LAW PROVIDES NEW EMPLOYEE BENEFIT
PLAN RIGHTS TO MEMBERS OF THE MILITARY AND THEIR SURVIVORS

Effective immediately, a new federal law, called the Heroes Earnings Assistance and Relief Tax Act of 2008 (HEART Act), requires action to be taken by sponsors of qualified retirement plans and permits action to be taken by sponsors of Cafeteria Plans (or Section 125 Plans) with a health flexible spending arrangement.  Two of the changes made by the HEART Act are summarized below. 

• Qualified Retirement Plans - The HEART Act requires sponsors to amend their qualified retirement plans to provide additional benefits to survivors of participants who die while performing qualified military service.   For example, if a retirement plan provides that a participant will become fully vested upon his or her death while actively employed by the sponsor, then the retirement plan must now provide that the participant's benefit will become fully vested if he or she dies while performing qualified military service.  The effect is that the participant's survivors will receive a bigger benefit than they would have before the HEART Act was passed.  How the change affects a retirement plan will differ for each retirement plan.  Amendments to the formal retirement plan document and corresponding summary plan description will be required.
  
• Cafeteria Plans / Flexible Spending Arrangements - The HEART Act permits (but does not require) sponsors of Cafeteria Plans with a health flexible spending arrangement to allow participants who are called to active duty to take distributions of the unused balance in their health flexible spending arrangements.  Ordinarily, the use-it or lose-it rule requires participants to forfeit the unused balances of their health flexible spending arrangements if they do not incur eligible medical expenses during the year.  Now, participants called to active duty may take a distribution of their unused balance to avoid forever losing the contributions.     

Since the HEART Act is effective immediately, it is important that you consult with the professional responsible for your qualified retirement plans and flexible spending arrangements. You also may contact David Sawyer (412.594.5642 or dsawyer@tuckerlaw.com) or Joni Landy (412.594.3945 or jlandy@tuckerlaw.com) for more information on how the HEART Act impacts your employee benefit plans and for assistance in revising the qualified retirement plans and flexible spending arrangements sponsored by your company. 

******

Employee Benefits Law Group: The  Employee Benefits Law Group at Tucker Arensberg, P.C. has a diverse client base of private and public employers.  We are dedicated to working with our clients to resolve complicated legal issues in a practical, common-sense and cost-efficient manner.  In doing so, we routinely work with our clients to design, establish, implement, administer, and terminate many different types of employee benefit plans. Refer to http://www.tuckerlaw.com/practice/employee.html for more information on the Employee Benefits Law Group.

A properly designed retirement program can increase a physician's retirement plan benefit by more than $80,000 while decreasing the practice's contribution to the non-physician and even non-owner physician employees by $20,000. If this $100,000 plus difference catches your attention, read the rest of the article! Our examples illustrate how similarly situated physicians can have dramatically different retirement plan benefits.

Examples

Dr. John is a 55 year old physician who makes approximately $350,000 and is the sole owner of his practice. Dr. John has one 36 year old physician working for him and has 4 staff employees.   In 2007, Dr. John had a commonly-used profit sharing plan with a 401(k) feature for his practice. He wanted to put as much money away as allowed by law on a pre-tax basis for his retirement. (For 2007, the defined contribution limit was $45,000.) For Dr. John to receive the maximum personal benefit under the profit sharing plan in 2007, Dr. John’s practice had to make a total employer contribution of $55,883. The portion of the employer contribution Dr. John received was $29,500, which was equal to roughly 53% of the total employer contribution. (Dr. John could have contributed another $20,500 as a 401(k) contribution, consisting of a $5,000 catch-up contribution that is permitted because he was over 50 in 2007.) [1]

Dr. Jane is also a 55 year old physician who makes approximately $350,000 and is the sole owner of her practice. Dr. Jane also has one 36 year old physician working for her and 4 staff employees. Like Dr. John, Dr. Jane wanted to put as much money away as allowed by law on a pre-tax basis for her retirement in 2007. However, unlike Dr. John, Dr. Jane’s share of her physician group’s total contribution to the retirement plan was 87.8%! Dr. Jane was able to accomplish this by adopting a special kind of profit sharing plan with a 401(k) feature and by adopting a second kind of retirement plan called a “cash balance plan”.   Contributions to the two plans for all employees totaled $141,168, of which $124,000 was allocated to Dr. Jane’s accounts under the two plans. (Dr. Jane also could have contributed another $20,500 as a 401(k) contribution, consisting of a $5,000 catch-up contribution that is permitted because she was over 50 in 2007). 

Summary of Examples

• In 2007, Dr. John’s practice contributed $55,883 to its retirement plan where Dr. John received a personal benefit of only $29,500, i.e., 53% of the practice’s total contribution.
• In 2007, Dr. Jane’s practice contributed $141,168 to its two retirement plans where Dr. Jane received $124,000, e.g., (87.8% of the practice’s total contribution.
• Dr. Jane’s practice contributed a total of $85,285 more to its two retirement plans, and Dr. Jane received $94,500 more contributions to her retirement plan accounts.

Under the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 (FDPCA), the initial written notice to the consumer regarding a debt owned must contain certain information. At issue in this case was 15 U.S.C. § 1692g(a)(3), which states there must be "a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector." (emphasis added).

The court in Galuska v. Collectors Training Institute of Illinois, Inc., found that the language used in the collection notice at issue ("Unless you notify this office within thirty (30) day after the receipt of this notice that you dispute the validity of the debt, or any portion thereof, this debt will be assumed to be valid.") was not in compliance with the requirements of the FDPCA.

It must be made clear to the consumer who would assume the debt to be valid. Use of the words "we" "our" "us" or "this office" were not specific enough to specify to the least sophisticated debtor who exactly would assume the debt to be valid.

The court found that the failure to include "by the debt collector" or its equivalent (i.e. the name of the company or individual, or other specifically identifying information) is sufficient to allege a claim for which relief may be granted.

Danielle Hodnicki
412-594-5605
dhodnicki@tuckerlaw.com

The Supreme Court of Kansas ruled on May 16, 2008 affirmed in the case of Kansas Heart Hospital, LLC and Cardiac Health of Wichita vs. Badr Idbeis, M.D. and 13 other shareholder defendants, that the Kansas Heart Hospital, LLC and Cardiac Health of Wichita were justified in forcing a mandatory redemption of the other physician's ownership interest due to investment in a competing medical facility.

Medical industry commentators were quick to compare this case to the Baptist Health case in which a hospital system is imposing non-competition or loyalty provisions as a condition for obtaining staff membership and clinical privileges, i.e. economic credentialing.

Note that the cases, although perhaps similar in impact, are quite different from a legal prospective.  The Kansas Heart Hospital case involves a determination by the Kansas Court regarding the applicability of a very technical provision of corporate law regarding the difference between redemption provisions and corporate by-laws and repurchase provisions in corporate agreements involving private shareholders.  The Court basically enforced the provisions of the corporate agreements voluntarily entered into by the physicians. 

Baptist Health is quite a different story.  It involves an attempt by a hospital to enforce economic credentialing by-law provisions which allow physicians to practice within its facilities only if they do not have competing investments.  That case involves the application of fraud and abuse rules and the community responsibilities of non-profit heath care facilities.  The Baptist Heart case has not yet been finally resolved.

A copy of the Kansas Heart Opinion appears at the link below.

www.medlawblog.com/Kansas Heart Hospital.rtf

The U.S. District Court for the Eastern District of Tennessee concluded that a hospital's affirmative defenses pursuant to the Healthcare Quality Improvement Act (HCQIA) were not sufficient to independently establish federal jurisdiction, and therefore approved a physician's motion to remand the state court case that had been removed to federal court by the hospital defendant. 

You can view an analysis of the case by Bart Lee, Esquire (www.medlawblog.com/Breach of Contract.doc) and a copy of the opinion.  www.medlawblog.com/Opinion.pdf

The Joint Commission announced the suspension of the planned July 2009 implementation date for the revised MS1.20 Medical Staff Standards.  The Implementation Task Force has recommended a full field review and anticipates both changes to the existing proposals and a delayed implementation date.  The full text of the news release is available at the link below.

http://www.jointcommission.org/NewsRoom/NewsReleases/nr_06_03_08.htm

The American Health Law Association has just published its revised Peer Review Hearing Guide Book.  Mike Cassidy is one of five co-authors, the others being Patricia Hofstra, Steven Schnier, Ann O'Connell and Al Adelman, the last two of whom were co-editors.

Mike was also reappointed as the Chair of the American Health Lawyers Association Medical Staff Credentialing and Peer Review ("MSCPR") practice group.