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PROVIDER ALERT – EXERCISE CAUTION WITH ASSIGNMENT ACCOUNTS

Medicare payments are distributed directly to physicians who render services, unless those physicians’ payments are reassigned to third parties. Reassignment allows third parties to bill and receive payment for services that the physicians rendered. This practice is the primary mechanism by which physicians retain third-party billing agents.  As of 2009, at least 77% of practitioners had entered at least one reassignment arrangement.

In February 2012, the Office of the Inspector General (OIG) issued an alert to physicians who reassign payments to third parties. The OIG Alert states that physicians may be personally liable if the billing entities to which they reassign Medicare payments submit false or inaccurate claims for their services. It is noteworthy that the Medicare reassignment rules apply not only to the billing agents but also to physician practices, Independent Diagnostic Testing Facilities (IDTFs), Durable Medical Equipment (DME) providers and other healthcare providers who enter into reassignment arrangements.

The OIG Alert illustrates a physician’s potential liability under the False Claims Act (FCA) by highlighting recent settlements with eight physicians who had allegedly false claims submitted for their services on their behalf. The physicians had reassigned their Medicare billing rights to physical medicine companies that subsequently submitted false claims under the physicians' provider numbers. OIG warned that “physicians who reassign their right to bill the Medicare program and receive Medicare payments by executing the CMS- 855R application may be liable for false claims submitted by entities to which they reassigned their Medicare benefits.”

Accordingly, physicians are encouraged to use “heightened scrutiny” prior to reassigning Medicare payments to third parties. Because physicians have unrestricted access to the claims submitted by an entity that are billed under their provider number, they have the ability to monitor and ensure that submitted claims properly reflect the services provided. 

The OIG Alert demonstrates the importance of conducting due diligence on any entity to which Medicare payments are reassigned, and monitoring whether reassignment billing complies with applicable laws, regulations, and billing requirements. Accordingly, FLB’s Healthcare Team suggests that any practitioner reassigning Medicare payments to a third party should have an agreement in place that provides the following:

  • a provision giving the practitioner the right to enter the billing entity’s premises in order to examine billing records;
  • a provision giving the practitioner the right to terminate the reassignment arrangement immediately in the event that false or inaccurate billing is discovered;
  • a provision requiring the third party billing entity to submit records for periodic independent medical billing/utilization review; and
  • a provision requiring the third party billing entity to adhere to a Compliance Plan regarding billing practices to minimize the risk of false or inaccurate billing.

The OIG Alert is available online.

CMS TO ALLOW ONE GOVERNING BODY TO OVERSEE MULTIPLE HOSPITALS

On October 24, 2011, and in response to an executive order issued by President Obama in early 2011, the Centers for Medicare & Medicaid Services (CMS) published a proposed rule, Reform of Hospital and Critical Access Hospitals Conditions of Participation, which is intended to “modify, streamline, or repeal” certain Conditions of Participation (CoPs) which CMS has found to impose unnecessary burdens on hospitals.

Among the proposed revisions, CMS intends to increase flexibility for health systems by allowing one governing body to oversee multiple hospitals:

Based on our experience with hospitals and the input provided by stakeholders through anecdotal evidence, we believe that hospitals in a multi-hospital system (defined here as those having more than on CMS Certification Number (CCN)) can be effectively governed by a single governing body.  Thus we propose to revise and clarify the governing body requirement to reflect current hospital organizational structure whereby multi-hospital systems have integrated their governing body functions to oversee care in a more efficient and effective manner. 

76 Fed. Reg. at 65,893.

We anticipate that, if adopted, CMS’s proposed amendment should clarify the manner in which decision-making is documented by medical staff committees and hospital boards.  As part of its deeming authority, The Joint Commission (TJC) has interpreted CMS’s current regulations to require multiple hospitals within a health network to keep “repeat” minutes where a single governing body acts as a decision-maker for multiple hospitals that share a common medical staff.  If the proposed amendment is adopted, TJC should also recognize greater flexibility in its accreditation process and accept one set of a governing body’s meeting minutes related to multiple hospitals.  CMS anticipates that the final rule will be published in 2012.

CMS ANNOUNCES ITS PROPOSALS FOR STAGE 2 MEANINGFUL USE REQUIREMENTS

In August 2011, we reported on the Medicare and Medicaid Electronic Health Records (EHR) incentive program, which provides certain reimbursements to participating physicians for the implementation of EHR technology in their practices.  To be eligible, among other criteria, physicians must demonstrate “meaningful use” of the EHR technology over a multiple stage implementation process. 

On February 23, 2012, CMS announced its proposed requirements for the second stage of the EHR implementation process.  Stage 1 focused on the transfer of data and the ability to share information.  As part of its announcements regarding Stage 2, CMS announced that Stage 1 has been extended for an additional year.  With regard to Stage 2, the goal is to provide online access for patients to their health information and an electronic exchange between providers.  Providers who fail to achieve the technological requirements of Stage 2 may see Medicare payment adjustments in 2015.  These proposals are currently in the comment period.

PENNSYLVANIA SUPREME COURT HOLDS THAT IMAGING EQUIPMENT IS SUBJECT TO SALES TAX

On December 21, 2011, the Pennsylvania Supreme Court, reversed two prior decisions of the Commonwealth Court and held that the acquisition and installation of MRI and PET/CT systems are subject to Pennsylvania sales tax.

The Commonwealth Court previously opined that the acquisition and installation of such equipment was akin to a “construction contract” relating to real estate structures as distinguished from the sale of tangible personal property.  In the consolidated matters of Northeastern Pennsylvania Imaging Center v. Pennsylvania/Medical Associates of the Lehigh Valley, PC v. Commonwealth of Pennsylvania, the Supreme Court disagreed. 

In reaching its decision, the Supreme Court relied upon a thirty year old case, and considered whether the equipment involved could be relocated or whether it became a permanent part of the real estate structure.

Applying this test to MRI and CT systems, the Supreme Court concluded that, although some of the equipment was bolted to the floor, the equipment could become obsolete and be periodically replaced.

“In the end, these machines are nothing more than cameras—they may be big, bulky and complex, but they are just devices that take pictures, the evolution, if you will, of the x-ray machine,” wrote Justice J. Michael Eakin in the majority opinion. “While their size makes them cumbersome, size does not make them part of the building.” 

Since the court concluded the equipment was not intended to be permanently affixed to the real estate, the acquisition and installation of the equipment constituted a “sales activity” subject to sales tax.

In one of two dissenting opinions, Justice Max Baer disagreed with the comparison to cameras, stating:

"Due to the extensive structural building modifications required for installation and removal of the imaging systems, including exterior wall removal, [and] the bolting of the components of the systems into the concrete sub-floor, I would affirm the Commonwealth Court's holding that the imaging systems became a part of the real estate pursuant to a construction contract," and are not subject to sales tax.

Given the significant costs of such equipment, the economic impact of the Supreme Court’s ruling on such acquisitions could be tens of thousands or even hundreds of thousands of dollars in sales tax.

PA'S JOINT AND SEVERAL LIABILITY EXPLAINED

On June 28, 2011, Governor Corbett signed the Pennsylvania Fair Share Act, a major piece of tort reform legislation.  The Pennsylvania Fair Share Act amended the Pennsylvania Statutes to limit joint liability in tort cases, including medical malpractice.  Before this Act went into effect, defendants found liable in a tort case were jointly liable; that is, if multiple defendants were found liable to a plaintiff for negligence, one defendant could potentially be forced to pay 100% of a verdict, regardless of share of fault, if the co-defendants lacked sufficient financial resources to pay the portion attributed to them. 

Under the amended 42 Pa.C.S.A. § 7102, a defendant found less than 60% liable will be liable only for the share of liability attributable to that defendant, rather than jointly with all liable parties.  A defendant found 60% or more liable will remain jointly liable for the entire amount of liability.  As previously, a co-defendant that pays more than its proportional share is entitled to seek contribution from under-paying liable parties.  Joint liability is also preserved in cases of intentional torts, intentional misrepresentations, and certain environmental and Liquor Code violations.

HIPAA COMPLIANCE REQUIREMENTS UPDATED

On January 1, 2012, the Health Insurance Portability and Accountability Act (HIPAA) and the American Recovery and Reinvestment Act (ARRA) demanded another change from Covered Entities and Business Associates involved in transaction processing. As of the new year, the healthcare industry is required to conduct HIPAA electronic transactions (including, but not limited to, eligibility, claims submissions, claims status, remittance advice, referral authorizations), using an “upgraded” version for transactions, the HIPAA 5010. United States Department of Health and Human Services (HHS) will no longer accept 4010 transactions.

Healthcare entities that fail to comply with the new standards may experience rejected claims and cash flow disruptions.  More concerning, however, is the new audit system unveiled by HHS.  HHS is taking the opportunity of the new compliance date to unroll a beta audit procedure; it has already scheduled approximately one hundred fifty audits for early 2012. HHS anticipates that it will be auditing Business Associates, as well as Covered Entities, as early as mid-2012.  According to published results, more than eighty percent of the healthcare industry was not prepared for compliance in January.

Here are the basic steps to assist your entity with compliance:

  • Impact Analysis.  Conduct an internal audit to determine the impact the change to 5010 will have on your business practices and systems.
  • Vendor Contact. Contact your vendors for installation of upgrades to your system. Timing will be dependent on your vendor’s product availability and scheduling.
  • Installation and Internal Testing of Vendor Upgrades.  Undergo installation of upgrades from your vendor. Once the upgrades are completed, you will need to conduct internal testing of your system to ensure you can effective compliance with the 5010 system. Allow extra time to resolve any issues that may arise.
  • Internal Testing and Staff Training.  You will need to have your staff trained for 5010 implementation.
  • Payers, Billing Service, and Clearinghouse Contact.  Contact your clearinghouses, billing service, and payers for preliminary information on when they expect their upgrades to be completed and ready to accept the 5010 transactions.
  • External Testing. Contact your clearinghouses, billing service, and payers to conduct external testing with them. Testing with your trading partners (e.g., clearinghouses and payers) will ensure that you can send and receive the transactions properly.
  • 5010 Conversion.  After you have completed external testing with some or all of your trading partners, you may switch to using only the 5010 transactions. You are allowed to begin using the 5010 transactions prior to the compliance date, as long as you and the other organization are in agreement with the early conversion.

CONTACT US

Joseph A. Bubba, 610-797-9000 x306

Deirdre Kamber Todd, 610-797-9000 x383

Steven T. Boell, 610-797-9000 x330

Susan A. Royster, 610-797-9000 x372

John P. Rice, 610-797-9000 x359

Jonathan L. Foley, 610-797-9000 x325