The International Law Firm of Fulbright & Jaworski - Health Care
Lori-Ann S. Bellan, Thomas E. Dowdell, Mark Faccenda, Lara E. Parkin, India Brim, John E. Kelly and Peter Leininger
November 16, 2009
U.S. House of Representatives Approves Health Care Reform Legislation
On November 7, 2009, the U.S. House of Representatives passed by a vote of 220-215 H.R. 3962, the Affordable Health Care for America Act. H.R. 3962 is based on H.R. 3200, America’s Affordable Health Choices Act of 2009, which was reported separately on October 14, 2009 by three House Committees--Education and Labor, Energy and Commerce, and Ways and Means.
Private Health Insurance Provisions. The private health insurance provisions of H.R. 3962 are included in Division A. The goal of these provisions is to reduce the number of uninsured, restructure the private health insurance market, establish minimum standards for health benefits, and provide financial assistance to certain individuals and small employers. The legislation would require individuals to maintain health insurance and employers to either provide insurance or pay a payroll assessment, with certain exceptions. The bill would implement certain market reforms such as modified community rating and guaranteed issue and renewal. Both the individual and employer mandates would be linked to acceptable health insurance coverage, which would meet mandated minimum standards and incorporate the market reforms included in the bill. Acceptable coverage would include (i) coverage under a qualified health benefits plan, which could be offered either through the Health Insurance Exchange (“HIE”) or new employer plans; (ii) grandfathered employment based plans; (iii) grandfathered nongroup plans; and (iv) other coverage, such as Medicare and Medicaid. The HIE would offer private plans and a public option. Through the HIE Individuals could qualify for subsidies toward their premium costs, deductibles, and copayments. Individuals could purchase the public option or private health insurance through the HIE only if they are not enrolled in Medicare, Medicaid, or employer coverage as a full-time employee. The Secretary of Health and Human Services would establish the public plan, would offer three different cost-sharing options, and would vary premiums geographically. The Secretary would negotiate payment rates for providers and suppliers. The bill would prohibit rescission of health insurance coverage without clear and convincing evidence of fraud and limit preexisting condition exclusions. The legislation would impose a surtax on the income of individuals who do not obtain health care coverage and on employers (other than small business employers) who fail to satisfy health coverage participation requirements, a 5.4 percent on individuals whose adjusted gross incomes exceed $500,000 ($1 million for married couples filing joint returns), and a 2.5 percent excise tax on medical devices.
Medicare Program Provisions. Generally, the Congressional Budget Office (“CBO”) estimates that H.R. 3962 would result in a net decrease in Medicare program spending of approximately $460.8 billion between 2010 to 2019, such reductions representing a partial offset for other increases in proposed federal insurance program costs. The following are notable H.R. 3962, Division B provisions that would change Medicare reimbursement and related program modifications.
Provisions Related to Changes in Reimbursement Under the Medicare Program
- H.R. 3962 would adjust annual payments under Medicare Part A to reduce payments to providers with excessive comparative readmission rates for certain conditions for a savings of $9.3 billion over ten years. Update factors for certain providers would include a productivity adjustment modeled on the 10-year moving average of annual economy-wide private nonfarm business multi-factor productivity.
- H.R. 3962 includes a FY 2017 reduction in hospital Medicaid Disproportionate Share Hospital (“DSH”) payments in anticipation of an 8% reduction in uninsured individuals by 2014. However, hospitals with higher levels of uncompensated care at that time would be eligible for expanded DSH reimbursement.
- H.R. 3962 is notable for its non-inclusion of language revising the sustainable growth rate (“SGR”) formula used in the calculation of payments under the Physician Fee Schedule. Language proposing to eliminate the Calendar Year 2010 physician fee reduction and replace the current SGR formula is contained in a separate bill entitled the Medicare Physician Payment Reform Act of 2009 (H.R. 3961). H.R. 3961 would create a reimbursement model that grows at the rate of GDP plus 1% for most physician services and GDP plus 2% for certain primary and preventive care services. Spending related to H.R. 3961 would be restricted by budget neutrality provisions going forward.
- H.R. 3962, Section 1113, would delay the phase-out of the hospice budget neutrality adjustment factor through October 1, 2010.
- H.R. 3962, Section 1123, would establish additional 5% incentive payments for physicians practicing in counties ranked in the bottom 5% in per capita spending for Medicare Part A and Part B services.
- H.R. 3962, Section 1124, would extend bonus payments related to the physician quality reporting initiative (“PQRI”) program and modify reporting to integrate electronic health record (“EHR”) initiatives and provide feedback related to data submission.
- H.R. 3962, Section 1131, would provide an annual productivity adjustment modeled on the 10-year moving average of annual economy-wide private nonfarm business multi-factor for hospital outpatient department services, ambulance services, ambulatory surgical center services, and clinical laboratory services starting in CY 2010.
- H.R. 3962, Section 1146, would increase the utilization rate from 50% to 75% for calculating payments for advanced diagnostic imaging equipment. Section 1146 also would reduce reimbursement for the technical component of additional imaging services.
- H.R. 3962, Section 1147, would exempt certain suppliers of durable medical equipment, prosthetics, orthotics, and supplies (“DMEPOS”) from the requirement that each obtain surety bonds valued at $50,000, including those DMEPOS suppliers having been issued a provider number for at least five years, and not receiving an adverse action.
- H.R. 3962, Section 1151, would reduce IPPS reimbursements associated with preventable inpatient readmissions for certain high-volume and/or high value conditions within a to-be-specified time period from the date of discharge after October 1, 2011. Similar reductions in reimbursement would apply to providers including SNFs, IRFs, HHAs, and LTCHs in 2011 and CAHs in 2012. Potential applicability to physician reimbursement would be established by a report commissioned by the legislation and due a year from enactment.
- H.R. 3962, Section 1152, seeks to expand upon a three-year demonstration project featuring bundled payments for hospital and physician services for certain orthopedic and cardiovascular conditions among five participant hospitals and related physician groups. Section 1152 would also require the establishment of a pilot program including post-acute services and such other services the U.S. Department of Health and Human Services (“HHS”) determines to be appropriate.
- H.R. 3962, Section 1157, commissions an Institute of Medicine (“IOM”) study, due one year from enactment, on the accuracy and effectiveness of geographic adjustment factors established under Medicare physician fee schedule and IPPS reimbursement. Likewise, Section 1158 would reconcile inconsistencies and inefficiencies related to inequitable variances in geographic adjustments. Payments adjusted pursuant to this proposal prior to 2014 would not be below that which applied in the payment system for the prior year. Payments beyond 2014 would not be permitted to be implemented in a way that would otherwise increase Medicare expenditures. Section 1159 contemplates a second IOM study related to geographic variation and growth in volume and intensity of services in per capita health care spending aimed at promoting the efficient delivery of high quality, evidence-based, patient-centered care.
- H.R. 3962, Section 1161, would modify the calculation of Medicare Advantage (“MA”) benchmarks by reducing them to the level of per capita spending in original Medicare and increasing them for qualifying MA plans based on plan quality. This provision would phase-in MA benchmarks starting in 2011 with the intention of equaling per capita fee for service spending in each county by 2013.
- H.R. 3962, Section 1181, would gradually eliminate the Medicare Part D coverage gap, or “doughnut hole,” to be eliminated entirely by 2019. Drug manufacturers would be required to provide rebates for drugs dispensed to certain Part D enrollees for the purpose of funding the coverage gap elimination.
- H.R. 3962, Section 1186, would require governmental negotiation of prescription drug prices related to the Medicare Part D program, but would still allow prescription drug plans to obtain discounts or price reductions below those negotiated by HHS. The legislation would continue to prohibit the creation of a Part D formulary.
- Changes to Medicare Part D are expected to result in estimated savings of $50 billion over a ten-year period.
Provisions Related to Prevention of Fraud and Abuse, Physician Self-Referral
- H.R. 3962, Section 1156, would place limitations on the expansion of hospitals (including rural providers) having physician ownership. Hospitals with a provider agreement in operation on January 1, 2009 and satisfying certain other reporting requirements would be granted continued exception from the ban on physician self-referral. Other requirements under Section 1156 include the maintenance of physician ownership percentage and a limitation on an expansion in operating rooms, procedure rooms, or beds, each effective as of the date of enactment.
- H.R. 3962, Section 1601, seeks to increase funding allocated to the Health Care Fraud and Abuse Control account (“HCFAC”), which funds activities to fight health care fraud by $100 million annually beginning with FY 2011.
- H.R. 3962, Section 1611, would create a $50,000 civil monetary penalty for knowingly making or causing to be made any false statement, omission, or misrepresentation on an application, agreement, bid, or contract to participate in a federal health program.
- H.R. 3962, Section 1612, would impose a $50,000 civil monetary penalty for certain conduct related to the presentation of false or fraudulent claims to a federal agency beginning January 2010. Persons who knowingly make, use, or cause to be made a false record or statement material to a false claim would be subject to the penalty.
- H.R. 3962, Section 1615, would create a $50,000 civil monetary penalty for the knowing order or prescription of items and services by persons excluded from federal health care programs.
- H.R. 3962, Section 1618, would expand HHS Office of Inspector General (“OIG”) authority to exclude entities or individuals from participation in federal health programs for convictions related to the obstruction of a health care fraud investigation beginning in 2010.
- H.R. 3962, Section 1621, would require the Secretary to develop a Self-Referral Disclosure Protocol (“SRDP”), not more than 6 months after health care reform is enacted, to enable health care providers of services and suppliers to disclose an actual or potential violation of the federal Stark Law. It appears that this might be in response to the OIG’s March 24, 2009 Open Letter to Health Care Providers pursuant to which the OIG stated that it would “no longer accept disclosure of a matter that involves only liability under the physician self-referral law in the absence of a colorable anti-kickback statute violation.” In addition, the OIG also stated that it would not settle any anti-kickback violations through its self-disclosure protocol for less than $50,000. OIG’s Open Letter may be found here.
- Under Section 1621, the SRDP must include (1) direction to providers and suppliers specifying the person, official, or office to whom such disclosures shall be made, and (2) instruction on the implication of the SRDP on Corporate Integrity Agreements and Corporate Compliance Agreements. The Secretary must post information regarding how to disclose potential or actual violations pursuant to an SRDP on CMS’s website. HR 3962 also would authorize the Secretary to reduce the potential amount “due and owing” for all Stark Law violations for amounts that are less than the prescribed sanctions reflected in the Stark Law. In establishing the amounts for violations, the Secretary may consider the following factors: (1) the nature and extent of the improper or illegal practice; (2) the timeliness of such self-disclosure; (3) the cooperation in providing additional information related to the disclosure; and (4) such other factors the Secretary considers appropriate.
- The Secretary would be required to submit a report to Congress, no later than 18 months after the date on which the Secretary establishes the SRDP protocol, on the implementation of such protocol. The report must include: (1) the number of health care providers of services and suppliers making disclosures pursuant to an SRDP; (2) the amounts collected pursuant to the SRDP; (3) the types of violations reported under the SRDP; and (4) such other information as may be necessary to evaluate the impact of the protocol.
- In furtherance of its mission to eliminate fraud, waste and abuse, Congress would require providers and suppliers to adopt compliance programs. Under Section 1635, the Secretary may not enroll or renew the enrollment of a provider or supplier (other than a physician or a skilled nursing facility) that fails to establish a compliance program which contains the core elements of a compliance program. The core elements of a compliance program would be established by the Secretary in consultation with the OIG and could include written policies and procedures, standards of conduct, a designated compliance officer, a compliance committee, effective training and education for the organization’s employees and contractors regarding fraud, waste and abuse, and a confidential reporting mechanism for compliance questions and/or violations such as a hotline, etc. Providers and suppliers would have to certify to the existence of such a compliance program in a manner to be determined by the Secretary.
- The Secretary would have to determine a timeline for the establishment of the core elements of a compliance program. In addition, Section 1635 provides that the Secretary may conduct a pilot program on a particular category of providers or suppliers required to adopt a compliance program that the Secretary determines to be at high risk for waste, fraud, and abuse (other than physicians and skilled nursing facilities).
Medicaid and Children’s Health Insurance Program (“CHIP”) Provisions. If enacted as passed in the House, H.R. 3962 would make numerous changes to Medicaid benefits and administration. Following is a description of some of the notable changes to the Medicaid program proposed by H.R. 3962.
Waste, Fraud and Abuse
- Health Care Acquired Conditions
The Deficit Reduction Act of 2005 (“DRA”) required the Secretary to initiate a hospital-acquired condition (“HAC”) program for Medicare to eliminate payment for certain conditions acquired during a hospital stay. In addition, the Secretary issued national coverage determinations to preclude Medicare from paying for certain serious preventable medical care errors. H.R. 3962 would require State Plans to deny hospital payments for HACs as well as for certain serious preventable medical care errors, determined as non-covered by Medicare.
- Require Providers and Suppliers to Adopt Programs to Reduce Waste, Fraud and Abuse
Under H.R. 3962, states would be required to ensure that Medicaid providers and suppliers (except physicians and nursing facilities) implement compliance programs. States would be required to enforce determinations by the Secretary of a significant risk of fraud by a category of providers and carry out enforcement activities as directed by the Secretary.
H.R. 3962 would give states additional time to investigate fraud and recover overpayments from providers. When fraud is alleged, the bill would extend the period of time under which states must repay overpayments to the federal government from 60 days to one year.
- Termination of Provider Participation under Medicaid and CHIP
Under H.R. 3962, if the Secretary terminates a provider under the permissive exclusion provisions of the Medicare regulations, the states would be required to terminate federal financial participation for such providers under Medicaid and CHIP, effective for services provided on or after January 1, 2011. H.R. 3962 would also require states to exclude from Medicaid and CHIP, individuals or entities if such providers own, control or manage entities that (1) have unpaid overpayments under Medicaid or CHIP; (2) are suspended, terminated or excluded from participation in Medicaid; or (3) are affiliated with an individual or entity that has been suspended, terminated or excluded from Medicaid or CHIP.
- Billing Agents, Clearinghouses, or Other Alternate Payees Required to Register Under Medicaid
H.R. 3962 would require Medicaid billing agents, clearinghouses, or other alternate payees that submit claims on behalf of health care providers to register with the state and the Secretary of Health and Human Services in a form and manner that is consistent with the Medicare process for the enrollment of providers of services and supplies. Entities that fail to register would be denied federal financial participation.
- Mandatory State Use of National Correct Coding Initiative
H.R. 3962 would require that Medicaid claims submitted for federal reimbursement on or after October 1, 2010 would incorporate methodologies compatible with Medicare’s National Correct Coding Initiative. By September 1, 2010, the Secretary would be required to indentify Correct Coding Initiative methodologies that are compatible with claims filed under Medicaid, notify states of these methodologies, make recommendations to states regarding the incorporation of these methodologies in Medicaid claims processing systems, and report to Congress regarding the notice given to states.
New Mandatory Medicaid Benefits
- Required Coverage of Preventative Services
Effective July 1, 2010, H.R. 3962 would require State Plans to cover certain preventative services that are either recommended by the Task Force on Clinical Preventative Services (also established by H.R. 3962) or vaccines recommended by the Centers for Disease Control, and determined to be appropriate for Medicaid beneficiaries by the Secretary of Health and Human Services. H.R. 3962 would prohibit cost sharing for these services.
- Mandatory Coverage of Podiatrists and Optometrists
H.R. 3962 would modify the definition of mandatory “physician services” to include podiatrists effective January 1, 2010. Also, 90 days after the enactment of the bill, H.R. 3962 would make services provided by optometrists a mandatory Medicaid benefit.
- Coverage of Federally Qualified Health Services (“FQHCs”)
Services provided by FQHCs are generally a mandatory health benefit under Medicaid. For purposes of Medicaid, H.R. 3962 would modify the definition of FQHCs to include school-based clinics (“SBHC”) that receive grants under a new SBHC grant program to be established by the Secretary under another provision of H.R. 3962.
- Tobacco Cessation
When prescription drug manufacturers enter into rebate agreements with the Secretary, State Plans must cover all drug products offered for sale by these manufacturers, except for drugs in certain excluded categories. Currently, State Plans may cover tobacco cessation counseling services, including tobacco cessation drugs, for pregnant women as an optional benefit. Tobacco cessation drugs are otherwise excluded from Medicaid coverage. Under H.R. 3962, smoking cessation products would be removed from the list of excluded drugs, requiring State Plans to cover smoking cessation drugs when these are covered by rebate agreements.
New Optional Medicaid Benefits
- Translation or Interpretation Services
Medicaid law currently provides states with a 75% matching rate for language translation and interpretation services associated with services received by children of families for whom English is not the primary language. Effective January 1, 2010, H.R. 3962 would provide the states with a 75% matching rate for translation and interpretation services for other Medicaid beneficiaries, in addition to children.
- Optional Coverage for Free-Standing Birth Center Services
There is currently no statutory authority to provide facility Medicaid payments to freestanding birth centers. H.R. 3962 would define the term “freestanding birth center” as a health facility that is not a hospital and where childbirth is planned to occur away from the pregnant woman’s residence. Effective on the date of enactment, H.R. 3962 would allow State Plans to cover freestanding birth center services and other ambulatory services offered by a freestanding birth center that are otherwise covered under the State Plan.
- Optional Therapeutic Foster Care Services and Adult Day Care Services
Therapeutic foster care and adult day care services are not specifically addressed in current Medicaid law. These services are often covered as Medicaid rehabilitative services, although there has been some controversy regarding how these services should be covered and whether they should be covered at all. H.R. 3962 clarifies that States may provide therapeutic foster care. The bill also clarifies that the Secretary would be prohibited from denying reimbursement for adult day care services under a State Plan approved before 1995. The Secretary would also be precluded from withdrawing federal approval for rehabilitative services under a State Medicaid Plan.
Payments to States
- Disproportional Share Hospital Payments
H.R. 3962 would require the Secretary to report to Congress by January 1, 2016 regarding the extent to which there is a continued role for DSH payments. In preparing the report, the Secretary would be required to consult with community-based health networks serving low-income beneficiaries. Specifically, the report must address (1) appropriate targeting of DSH funds within states; (2) distribution of DSH funds among states; and (3) a methodology for reducing DSH allotments. The Secretary would be required to coordinate this report with a similar report required for Medicare DSH. Total reductions in DSH allotments would equal $1.5 billion in 2017, $2.5 billion in 2018 and $6 billion in 2019. Effective July 1, 2010, H.R. 3962 would also change the definition of a DSH hospital by requiring a DSH hospital to (1) provide services to beneficiaries without discrimination based on race, color, national origin, creed, source of payment, status as a Medicaid beneficiary, or any other ground unrelated to the beneficiary’s need for services and the availability of services in the hospital; and (2) make arrangements for, and accept, Medicaid reimbursement for services provided to Medicaid beneficiaries.
- Graduate Medical Education
Most states make payments to help cover the costs associated with graduate medical education (“GME”) in teaching hospitals. In May 2007, CMS proposed to eliminate federal reimbursement for GME under Medicaid. Subsequent federal legislation placed a moratorium on further action on this rule. H.R. 3962 would explicitly authorize GME payments under Medicaid, regardless of whether the GME occurred in or outside of the hospital. States would be required to provide the Secretary with an annual report on GME payments, including (1) the institutions and programs eligible for receiving the funding; (2) the manner in which payments are calculated; (3) the types and fields of education being supported; (4) the workforce or other goals to which funding is applied; (5) state progress in meeting workforce or other funding goals; and (6) other information as requested by the Secretary.
- Extension of the American Recovery and Reinvestment Act Increase in the Federal Medical Assistance Percentage
The federal medical assistance percentage (“FMAP”) is the rate at which states are reimbursed for most Medicaid services. For a recession adjustment period, the first quarter of 2009 through the first quarter of 2011, the American Recover and Reinvestment Act (“ARRA”) increased FMAP rates across the board by 6.2%. Under the ARRA, qualified states also receive an additional unemployment-related increase. H.R. 3962 would extend the recession adjustment period through the third quarter of 2011.
Payments to Providers
- Reimbursement Rates for Primary Care Services
H.R. 3962 would require states to set Medicaid payment rates for primary care services (evaluation and management or E & M services) relative to 2010 Medicare payment rates. For 2010, Medicaid payments to physicians and other health care professionals would equal 80% of the adjusted Medicare E & M service payments. In 2011, the Medicaid rate would equal 90% of the updated 2010 Medicare rate. For 2012 and subsequent years, the Medicaid payment would equal 100% of the Medicare rate. Effective January 1, 2010 until 2015, the federal government would subsidize the portion of such payments by which the new rates exceed payment rates in effect as of June 16, 2009.
- Assuring Adequate Payment Levels for Services
Currently, State Plans must safeguard against unnecessary utilization of services and assure that payments are consistent with efficiency, economy and quality of care, while sufficient to enlist enough providers so that care and services are available to the same extent that care and services are available to the general population. Effective with enactment, H.R. 3962 would require states to submit an annual State Medicaid Plan Amendment (“SPA”) that details payment rates for the year and other data that would assist in determining whether states are in compliance with this requirement. If the Secretary disapproves the state’s SPA, the state would be required to submit a revised SPA that complies with this requirement.
- Nursing Facility Supplemental Payment Program
H.R. 3962 would appropriate to the Secretary $6 billion to reimburse dually-certified (Medicare and Medicaid) Nursing Facilities for costs that may not be adequately covered under Medicare and Medicaid prospective payment systems. The funds would be available to reimburse facilities for underpayments that occurred in cost reporting periods ending during a year (beginning no earlier than 2010) that is covered by the latest available Medicare cost report.
Senate Health Care Reform Legislation. The U.S. Senate is expected to begin floor debate on its health care reform legislation within the next two weeks. Senator Majority Harry Reid (D-Nevada) reportedly has merged the bills reported out of the Senate Education and Labor and Finance Committees into draft legislation and sent such legislation to the Congressional Budget Office for a cost estimate.
Lori-Ann Bellan, Tom Dowdell, Mark Faccenda, and Lara Parkin contributed to this description of the House-passed federal health care reform legislation.
CMS Announces 2010 Open Enrollment for Medicare Prescription Drug Plans
The Centers for Medicare & Medicaid Services (“CMS”) announced that the annual Open Enrollment period for Medicare prescription drug and health care coverage will begin on November 15 and last through December 31, 2009. During Open Enrollment, Medicare beneficiaries may choose another health and/or drug plan or view other plans to ensure that they have the best coverage for their individual needs. In addition, those beneficiaries who are not currently enrolled in a drug or health plan may opt into such programs during this time. Starting on November 15, Medicare beneficiaries may go online or contact Medicare toll-free in order to make changes to their current plans. CMS encourages all beneficiaries to review plans in order to see how the cost and coverage terms compare for various plans available in their area. Further, CMS urges beneficiaries to also review their Medicare handbook to find a listing of available plans. For those Medicare beneficiaries who are unable to pay for the costs of their prescription medications, Medicare offers a program for those beneficiaries which will allow them to pay no more than $2.50 for each generic drug and no more than $6.30 for each brand name drug. This program may also help pay for the costs of premiums and other out-of-pocket costs. For more information, click here. India Brim
CMS Outlines Top Fraud Areas and Future Goals
According to a letter from the acting administrator for CMS, Charlene Frizzera, to House Republicans, the top three sectors for Medicare fraud are durable medical equipment, home health agencies, and infusion therapy clinics. This letter was in response to repeated requests from the House Committee on Energy and Commerce for more information on how CMS tracks fraud and abuse. CMS provided information on a number of recent successful anti-fraud efforts including demonstration programs involving the above sectors that resulted in suppliers having billing privileges revoked, law enforcement referrals, and a savings of more than $254 million. For more information, please see the letter from Charlene Frizzera here. John Kelly
DOJ Officials Outline Enforcement and Prevention Initiatives to Tackle Fraud
The Department of Justice (“DOJ”) will continue to focus its attention on health care fraud—stepping up not just its enforcement efforts but also programs aimed at preventing fraud in the first place, Tony West, head of the Civil Division at DOJ, said during the Tenth Annual Pharmaceutical Regulatory and Compliance Congress and Best Practices Forum held in Washington, DC on November 12, 2009. The DOJ's effort to attack the health care fraud problem will include using the False Claims Act to pursue a variety of deceptive acts, investigating and prosecuting the unlawful marketing and distribution of misbranded and adulterated drugs, pursuing cases involving kickbacks to providers, and investigating inflated drug pricing. West told the conference attendees, “external estimates project the amount of fraud in the health care sector to be anywhere between 3 and 10 percent of total spending, and this fraud affects both public and private insurers alike.” West provided that while his department will pursue fraud aggressively, it is “not interested in criminalizing clerical errors or good-faith math mistakes.” But, he said, “we will pursue companies that establish inflated drug prices and market the spread..., and those companies that knowingly fail to report their true best price for a drug in order to reduce rebates owed to Medicaid. ” Likewise, he said, “the Civil Division will investigate kickbacks paid to physicians, wholesalers, or pharmacies to induce drug or device purchases.” Moreover, he said, “In those cases where the facts and law allow us to pursue criminal cases against individuals responsible for illegal conduct, we will do so.” The DOJ, partnering with CMS, HHS OIG, the FBI, and U.S. Attorney's Offices nationwide, plans to commit substantial resources to continuing the work of the Medicare Fraud Strike Force ("MSFS"), including expansion in the near future to new cities. Presently, the MSFS operates in Miami, Houston, Los Angeles, and Detroit. Furthermore, the DOJ plans to extend beyond just stepped-up enforcement; it intends to expand public education and increased compliance training for providers with the hope that the public can help law enforcement prevent health care fraud before it happens. John Kelly
Medicare Payment Advisory Commission Discusses Aligning Medical Education with Health System Needs
At a November 5, 2009 public meeting, the Medicare Payment Advisory Commission (“MedPAC”) discussed the issue of aligning medical education with health system needs. MedPAC staff members studying the issue described that because most current Medicare direct graduate medical education (“DGME”) and indirect medical education (“IME”) payments are made to teaching hospitals, this practice inherently discourages residency training programs outside the hospital setting and does not necessarily direct payment to the accredited entity that is accountable for the quality of the educational experience. In addition, current Medicare DGME and IME payments are linked to inpatient admissions, which results in a concentration of financial support to hospitals with high Medicare utilization and is arguably inconsistent with the goal of preventing avoidable hospital admissions through improved ambulatory care. The Department of Veterans Affairs financial support for graduate medical education was analyzed. Commission members decided that further work on the issues was needed and that they will continue the discussion at MedPAC's meeting in March 2010. Tom Dowdell
Pharmaceutical Companies Receive FCPA Warning
Pharmaceutical companies received a warning last week that the Department of Justice (“DOJ”) is turning its Foreign Corrupt Practices Act (“FCPA”) focus to the pharmaceutical industry. With over 120 ongoing FCPA investigations and new resources being allocated by the DOJ and Securities and Exchange Commission (“SEC”) to FCPA enforcement, enforcement activity is likely to increase. On November 12, 2009, at the 10th Annual Pharmaceutical Regulatory and Compliance Congress and Best Practices Forum, Assistant Attorney General Lanny Breuer cautioned that the level of government involvement in health care systems outside of the United States makes the environment ripe for bribery, corruption, and FCPA violations. He indicated that the DOJ’s increased scrutiny of the pharmaceutical industry “will mean investigation and, if warranted, prosecution of corporations . . . but also it will involve investigation and prosecution of senior executives.” According to Assistant Attorney General Breuer, no individual is above the law and a “M.D. degree is not going to be a shield.” John Kelly
Federal Court Dismisses Antitrust Claim Against California Children’s Hospital
On November 5, 2009, the United States District Court for the Eastern District of California dismissed a claim brought under the Sherman Act against Children’s Hospital of Central California. The plaintiffs, two neonatologists and the medical group they owned, alleged that the hospital conspired with an affiliated medical group to prohibit neonatologists who would not agree to practice exclusively at the hospital from providing neonatology services in the region. The plaintiffs brought claims under Section 1 of the Sherman Act, which prohibits “every contract, combination…or conspiracy in restraint of trade or commerce among the several States…” and Section 2 of the Sherman Act, which makes it an offense for any person to “monopolize, or attempt to monopolize…any part of the trade or commerce among the several States….” The hospital moved to dismiss the lawsuit, arguing that Section 1 of the Sherman Act only applies to conspiracies and that it could not conspire with its own affiliated medical group. The District Court dismissed the claim under Section 1, concluding that “a company cannot conspire with itself,” and that plaintiff failed to plead sufficient facts to establish that the hospital and the medical group were two distinct entities (for the purposes of the Sherman Act) capable of conspiring with one another. The Court, however, allowed the claim under Section 2 to proceed, reasoning that the restrictions in that section “reach both concerted and unilateral behavior.” To read the Court’s opinion, click here. Peter Leininger
Lori-Ann S. Bellan
Thomas E. Dowdell
Lara E. Parkin
John E. Kelly