Ohio Health Lawyer & Attorney : Jayne Juvan : Benesch Friedlander Law Firm : Serving Columbus, Cleveland, Cincinnati, Toledo, Akron, Dayton, Parma, Youngstown, Canton, and Lorain OH

On February 8, 2005, President Bush signed into law the Deficit Reduction Act (the "DRA").  Among the most noteworthy provisions included in the DRA is a provision that requires employee education about the False Claims Act ("FCA") and applicable laws that protect, and even reward, employees who act as whistleblowers. The DRA specifically requires entities that receive or make annual payments of at least $5,000,000 pursuant to any state Medicaid program to establish written policies for employees that explain the provisions of the FCA, any state false claims laws and the applicable administrative remedies. The policies must also include a description of whistleblower protections and an explanation of internal policies that aim to prevent fraud and abuse. An employer must include a discussion of these matters in the employer's employee handbook. Entities that fail to comply risk exclusion from the Medicaid program.

Despite the fact that the deadline for compliance has passed, many in the industry have complained that the law included far too many ambiguities.  In response, the Centers for Medicare and Medicaid Services has issued answers to frequently asked questions.  The sixteen page guidance document covers many issues, including providing a more clear definition of the term "entity" and describing whether health systems with subsidiaries having less than $5,000,000 in payments but that exceed this amount collectively must have in place the required policies.

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Last week, I visited Orlando, Florida for the American Health Lawyers Association Long Term Care in the Law Conference.  This week's Health Law Recap will focus on a few themes and trends identified at the Conference. 

• Shift in Long Term Care Reimbursement.  Leslie Norwalk, the Acting Administrator for the Centers for Medicare and Medicaid Services (CMS), focused on the increased pressure on the federal government resulting from the health financing crisis.  In response, federal reimbursement for long term care will shift in favor of home health agencies and away from skilled nursing facility care.
• Employee Education About False Claims Act.  Many attorneys expressed to representatives of CMS that there continues to be substantial and noteworthy ambiguities in connection with the Deficit Reduction Act employee education requirements.  One attorney noted that the requirement applies to an entity that has less than 5 million dollars in Medicaid payments if the entity is affiliated with other entities that receive 5 million or more in such payments.  Representatives for CMS have promised that further clarification will follow shortly.
• Plaintiffs' Lawyers Use Web Sites, E-Mail Addresses to Pierce the Corporate Veil.  There has been a strong trend for parent companies who acquire nursing home facilities to form separate subsidiaries to act as holding companies and operating companies for each nursing facility acquired.  One prominent defense attorney noted that plaintiffs' lawyers have begun to cite to web sites and e-mail addresses to build a case for veil piercing.  The lawyer cautioned that employees in each separate company should have different e-mail addresses. For example, if the parent company is named "Health Care Solutions, Inc.," one subsidiary is named "Brecksville Health Care Solutions, Inc."  and the other is "Madison Health Care Solutions, Inc.," the employees at the parent and both subs should not have their e-mail address as "employeename@healthcaresolutions.com."  Instead, the following e-mail addresses would help to show that the three entities are separate legal entities:
  • Parent Company:  employeename@healthcaresolutions.com
  • Brecksville Health Care Solutions, Inc:  employeename@brecksvillehealthcare.com
  • Madison Health Care Solutions, Inc:  employeename@madisonhealthcare.com

In addition, the attorney noted that legal counsel should review a company's web site and that the web site should clearly state that each facility is owned by a separate legal entity.

• Medicaid Fraud Enforcement Is on the Rise.  Many representatives of the federal government emphasized that, in the upcoming years, the government will have increased budgets to implement Medicaid fraud controls and pursue Medicaid fraud investigations.  In the past, Medicaid has not received the same scrutiny as have other federal health care programs. 

 

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 According to 42 C.F.R. section 423.504(b)(4)(vi), prescription drug plan sponsors approved to provide Part D benefits must have compliance plans that articulate (1) commitment to comply with applicable laws; (2) designation of a compliance officer and committee; (3) effective training and education of employees and agents; (4) effective lines of communication between the compliance officer and the employees and agents; (5) the enforcement of standards through publicized disciplinary guidelines; (6) procedures for audits and internal monitoring; (7) the procedures for ensuring prompt response to detect offenses and development of corrective action; and (8) a comprehensive plan to prevent and detect fraud and abuse, which includes procedures to voluntarily self report fraud or misconduct.  The OIG undertook a review of stand-alone prescription drug plan sponsors' compliance plans to determine compliance with these eight elements, along with the seventeen requirements set forth in CMS's Prescription Drug Benefit Manual. 

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The Centers for Medicare & Medicaid Services ("CMS") will host a briefing about the requirement mandated by the Deficit Reduction Act of 2005 that certain employers educate their employees about the False Claims Act.  The briefing will take place on Thursday, January 11, 2007, at 1:00 p.m. EST.  The call will last ninety minutes.  To participate on the call, dial 1-888-677-1819 and enter the password "provider."  You will also need to reference the call leader's name, Aaron Wesolowski.

Guidance on the DRA's section 6032 mandate was issued to State Medicaid Directors on December 13, 2006.

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Recently, the moratorium prohibiting Medicare payments for services rendered pursuant to a referral to specialty hospitals in which the referring physician has a financial interest expired. Responding to the lifting of the ban, the Department of Health and Human Services ("HHS") released a strategic and implenting plan that called for revisions to payment schedules and increased transparency to address concerns raised by critics that specialty hospitals focus more on the profitability of patients than on providing high quality care. Specialty hospitals provide care for patients with cardiac conditions, orthopedic conditions or patients in need of surgical procedures.

The Medicare Prescription Drug, Improvement and Modernization Act of 2003 created the moratorium. Though the moratorium was originally scheduled to last for eighteen months, upon expiration, CMS announced a new policy that prohibited regional offices and contractors from enrolling these hospitals in the Medicare program. Subsequently, the Deficit Reduction Act of 2005 extended the moratorium for an additional six months.

The lifting of the moratorium is not a complete victory for physicians. The plan released by HHS calls for improvements to the accuracy of the hospital payment system and increased transparency. Discussing the plan, Mark B. McClellan, quoted in a CMS press release, stated, "We are bringing transparency to physician investments in hospitals, to help ensure that investment and compensation are appropriate, and to make sure that any such financial arrangements are disclosed to patients." CMS believes that the implementation of major changes to the current hospital inpatient prospective system and the ambulatory surgical center payment systems will eliminate improper incentives. Additionally, the plan calls for increased disclosure of physician investments and compensation arrangements.

Before physicians enter into this type of an arrangement, they should contact an experienced health care attorney to ensure that the proposed arrangement does not violate any state or federal fraud and abuse laws.

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Effective January 1, 2007, Health Care Providers Must Arm Employees with False Claims Act Education

On February 8, 2005, President Bush, strengthening his commitment to reducing the national debt, signed into law the Deficit Reduction Act (the "DRA"). In addition to cutbacks to other federally funded programs, the DRA aims to reduce Medicare and Medicaid expenditures and to recoup losses and overpayments made to health care providers. Among the most noteworthy provisions included in the DRA is a provision that requires employee education about the False Claims Act ("FCA") and applicable laws that protect, and even reward, employees who blow the whistle on their employers for violating these laws. The DRA specifically requires entities that receive or make annual payments of at least $5,000,000 pursuant to any state Medicaid program to establish written policies for employees that explain the provisions of the FCA, any state false claims laws and the applicable administrative remedies. The policies must also include a description of whistleblower protections and an explanation of internal policies that aim to prevent fraud and abuse. An employer must include a discussion of these matters in the employer's employee handbook. Entities that fail to comply by January 1, 2007 risk exclusion from the Medicaid program.

Essentially, these provisions constitute a recognition by the federal government that employees often play key roles in federal FCA investigations. These provisions increase the likelihood that employees lurking within, armed with full knowledge of their rights (and the millions of dollars they may recover if successful), will bring qui tam actions. Despite the fact that health care providers covered by these provisions may be hesitant to comply, they have no choice, as exclusion from the Medicaid program would be devastating.

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