February 2015
In This Issue:
OIG May Add New Anti-Kickback Safe Harbors
Final IRS 501(r) Rule Impacts Charitable Hospitals
NJ Insurance Companies Must Encrypt Personal Data
Brach Eichler in the News
HIPAA Corner
FEDERAL UPDATE
CMS Announced New Accountable Care Organizations
The Centers for Medicare & Medicaid Services (CMS) announced that
there are 89 new Accountable Care Organization (ACO) participants as of
January 1, 2015.
ACOs are groups of doctors, hospitals and other health care providers who
come together to provide coordinated high-quality care to Medicare patients.
According to CMS, coordinated care helps patients get proper care, while
aiming to avoid unnecessary duplication of services and preventing medical
errors. Currently, ACOs enjoy certain federal fraud and abuse waivers,
assuming that the requirements under the Medicare Shared Savings
Program are met.
The following six new ACOs will serve New Jersey:
• Capital Health Accountable Care Organization, LLC
• Chrysalis Medical Services, LLC
• Inspira Care Connect, LLC
• NewYork Quality Care
• Orange Accountable Care of New York
The lawsuit seeks declaratory, injunctive and mandamus relief to compel the
Secretary of DHHS to reopen and review the unfavorable decisions issued to
class members.
For more information, contact:
Lani M. Dornfeld | 973.403.3136 | [email protected]
Keith J. Roberts | 973.364.5201 | [email protected]
OIG Seeking Suggestions for New Anti-Kickback Safe Harbors
The U.S. Department of Health & Human Services, Office of Inspector
General (OIG) recently published a request for public comment on
suggestions for new safe harbor provisions for the federal anti-kickback
law. Suggestions for new safe harbors will be judged based on the potential
safe harbors’ effects on patient access to health care; quality of services;
patient choice of provider; costs to federal health care programs; provider
competition; potential for health care service overutilization; and medically
underserved areas and populations. The OIG will also consider potential
financial benefits to health care providers and other professionals that may
affect decisions on ordering health care services or making referrals to
particular providers.
• Quality Health Alliance-ACO LLC.
For more information, contact:
For more information, contact:
Riza I. Dagli | 973.403.3103 | [email protected]
John D. Fanburg | 973.403.3107 | [email protected]
Carol Grelecki | 973.403.3140 | [email protected]
Kevin M. Lastorino | 973.403.3129 | [email protected]
Class Action Filed to Stop Home Health Coverage Denials
The Center for Medicare Advocacy (CMA) recently filed a class action lawsuit
against the Secretary of the U.S. Department of Health & Human Services
(DHHS) to stop Medicare contractors from denying Medicare coverage following decisions from administrative law judges that the parties were eligible
for care. CMA is a national, non-partisan, education and advocacy organization that works to ensure that older adults and persons with disabilities have
fair access to Medicare and quality health care. The suit alleges that DHHS
has been ignoring its own rules in issuing the coverage denials.
CMA claims in its lawsuit that Medicare contractors and appellate reviewers
are required to give great weight to a prior favorable appellate decision
finding Medicare beneficiaries to be “homebound.” The suit is on behalf of
patients who have received one or more favorable appellate decisions finding
that they are homebound, but have been subsequently denied Medicare
coverage because of their alleged non-homebound status.
OIG Proposed Regulation on Gainsharing Looks to Lower Health Care Costs
The U.S. Department of Health & Human Services, Office of Inspector
General (OIG) published a proposed rule that would amend certain safe
harbors to the federal anti-kickback statute and the civil monetary penalty
(CMP) rules under the authority of the OIG. As part of the proposed rule,
the OIG also proposed to add a gainsharing CMP to the regulations. The proposed gainsharing regulation is seen as potentially reducing health care costs
while improving quality of care by a number of health care commentators.
The prohibition on gainsharing, codified in Section 1128A(b)(1) of the
Social Security Act, prohibits hospitals from knowingly making payments
to a physician as an inducement to reduce or limit services provided to an
individual who is eligible for Medicare or Medicaid benefits and who is
under the direct care of the physician. Critics view the law as overly broad
by not allowing hospitals to offer appropriate incentives to physicians to
control the cost of care and the items and services they order in the hospital
setting. The proposed gainsharing regulation is seen by a number of health
care commentators as potentially reducing health care costs while improving
quality of care.
BRACH EICHLER
The regulation proposed by the OIG will essentially codify the statutory
language. However, the OIG solicited comments (the deadline was
December 2, 2014) on including a definition in the new regulation of the
term “reduce or limit services” in order to limit the broad nature of the
statute. By doing this, the OIG hopes to align the new regulation with the
p ublic policy goal of reducing health care costs while improving quality of
care, such as through programs like the Medicare Shared Savings program,
which promotes evidence-based medicine and patient engagement through
accountable care organizations. Specifically, the OIG solicited comments
on the following: (1) should the prohibition on payments to reduce or
limit services include payments to limit “items” used in providing services,
(2) should a hospital’s decision to standardize certain items (e.g., surgical
instruments, medical devices or drugs) be deemed to constitute reducing or
limiting care, (3) should a hospital’s decision to rely on protocols based on
objective quality metrics for certain procedures ever be deemed to constitute
reducing or limiting care, (4) should a hospital desiring to standardize items
or processes as part of a gainsharing program be required to establish certain
thresholds based on historical experience or clinical protocols, beyond
which participating physicians could not share in cost savings, and (5) if the
regulation defines “reduce or limit services,” should the regulation include a
requirement that the hospital and/or physician participating in a gainsharing
program notify potentially affected patients about the program.
For more information, contact:
Joseph M. Gorrell | 973.403.3112 | [email protected]
Carol Grelecki | 973.403.3140 | [email protected]
OIG Opinion Signals Greater Scrutiny of
Patient Assistance Programs
The U.S. Department of Health & Human Services, Office of Inspector
General (OIG) recently published an advisory opinion approving a charitable
Patient Assistance Program (PAP), funded in part by donations from pharmaceutical manufacturers, that helps low-income patients meet their copayment
obligations for drugs treating Crohn’s disease and ulcerative colitis. Notably,
the opinion emphasizes enhanced scrutiny of “improperly narrow” PAPs.
Consistent with previous guidance, the OIG warned that industry-funded
PAPs could be used by manufacturers to subsidize the purchase of their own
products, improperly steering drug selection and potentially raising Medicare
costs in the process. The opinion cautioned that even PAPs operated by bona
fide, independent charities can be problematic if, for example, a PAP provides
assistance for only a narrowly defined disease or only a subset of available
drug products.
In seeking the OIG’s opinion, the requestor described the proposed program
with the following parameters: (1) the requestor is an independent, nonprofit,
tax-exempt charitable organization; (2) no donor, or immediate family
members, directors, officers, employees or persons otherwise affiliated
with donors, would be eligible to serve on the requestor’s board; (3) before
applying for assistance, each patient already would have selected his or her
health care providers, practitioners or suppliers, and already would have a
treatment regimen in place; (4) all patients would remain free to change their
health care providers, practitioners, suppliers, drugs or insurance plan; (5) the
requestor would not refer patients to, recommend or arrange for the use of
any particular practitioner, provider, supplier, drug or plan; (6) the requestor
would not provide donors with any data on the frequency of the use of its
drugs or services; and (7) no individual patient information, nor any data
related to the identity, amount or nature of drugs or services subsidized under
the proposed program, would be conveyed to any donor.
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The OIG determined the proposed program presented minimal risk that
a donor contribution would influence direct or indirect referrals by the
requestor. However, in its conclusion, the OIG suggested it will apply more
nuanced factors in determining whether industry contributions to a PAP run
afoul of the federal anti-kickback statute.
For more information, contact:
Debra C. Lienhardt | 973.364.5203 | [email protected]
John D. Fanburg | 973.403.3107 | [email protected]
Requirements Eased for Charitable Hospitals in
IRS’s Final 501(r) Regulation
The final Internal Revenue Code section 501(r) rule, effective
December 29, 2014, finalizes two sets of proposed regulations concerning
Affordable Care Act provisions requiring charitable hospitals to conduct
community health needs assessments and provide notification to patients
regarding financial assistance policies.
The final rule eases a previously-proposed requirement that hospitals include
plain language summaries of their financial assistance policies on each billing
statement issued to patients. Under the final rule, charitable hospitals only
will be required to include in billing statements a conspicuous written notice
advising patients about the availability of financial assistance accompanied by
contact information for additional information.
The rule also permits hospital organizations consisting of multiple hospital
facilities to submit one joint community health needs assessment report for all
its hospital facilities, to the extent that the hospitals define their communities
to be the same.
The final rule provides further guidance to hospitals possessing 501(c)(3)
status concerning compliance with numerous consumer protection provisions
contained in the Affordable Care Act. The IRS advised that “willful or
egregious” failures to comply with these requirements could result in
revocation of tax-exempt status. However, if a failure to comply is neither
willful nor egregious, a hospital may be permitted to correct the deficiency,
but would still be assessed an excise tax.
For more information, contact:
Kevin M. Lastorino | 973.403.3129 | [email protected]
Lani M. Dornfeld | 973.403.3136 | [email protected]
STATE UPDATE
Medical Director Considered in
“Position of Trust” for Sentencing
On December 31, 2014, the U.S. Court of Appeals for the Third Circuit,
on an appeal from the sentencing of a New Jersey District Court, held in
United States v. Babaria that a physician medical director of an MRI facility
that is an authorized Medicare and Medicaid provider was properly sentenced
for violations of the federal anti-kickback statute, both on a two-level and
a four-level upward adjustment in offense level, based on his abuse of a
“position of trust” and the scope of the abuse, respectively.
The case may serve as a warning to physicians occupying medical director or
similar positions. First, the fact that there was no evidence that the physician
falsified patient records, billed Medicare or Medicaid for testing that was not
medically necessary, or otherwise compromised patient care, had no affect on
BRACH EICHLER
the Third Circuit’s decision to affirm the lower court’s sentencing. Second,
although the court found that the mere possession of a medical license does
not necessitate a finding that a physician occupies a “position of trust,” the
court did find that if a physician “obtains his minimally-supervised position
by virtue of his professional training and license and then takes advantage
of the discretion granted to him in a way which significantly facilitates the
[crime], [the court] can rightly say that he has abused a position of trust.”
For more information, contact:
Joseph M. Gorrell | 973.403.3112 | [email protected]
Riza I. Dagli | 973.403.3103 | [email protected]
Appellate Court Clarifies Exceptions to
Affidavit of Merit Rule for Negligence Cases
In Hill International v. Atlantic City Board of Education, an appeals court
in New Jersey recently clarified exceptions to rules requiring plaintiffs to
submit affidavits of merit in connection with lawsuits filed against licensed
professionals, affidavits which generally must be made by another professional
and filed in malpractice cases to establish that the complaint has merit. In the
context of a dispute over whether an engineer who signed an affidavit of merit
(the affiant) was qualified to opine about the defendant architect’s conduct,
the court held that, “minor variations in the scope or terms of the respective
licenses held by the affiant that do not bear upon material issues in the case
will not disqualify the affiant, so long as both professionals are licensed
within the same category of professionals.” As an example, the court stated
that although nurses and physicians may both be trained and authorized to
take blood pressure readings, a plaintiff could not file a malpractice action
against a physician for negligently taking blood, supported by an affidavit
of merit from a nurse. However, the court reiterated that a perfect match of
credentials within the same license is not always required. For physicians,
this means that a patient may file a malpractice lawsuit with an affidavit of
merit from a physician who does not share the same specialty as the defendant
physician, so long as enough areas of their practice of medicine overlap.
Additionally, the court explained that New Jersey’s 1995 Affidavit of Merit
Statute requiring an affidavit from a “like-licensed” person in the same
profession and area of expertise may be relaxed when the lawsuit claims only
involve vicarious or agency liability (instead of direct malpractice), and do
not implicate the standards of care in the defendant’s profession. The panel
of judges deciding the Hill International case did not provide parameters for
just who can provide affidavits of merit in such cases, and instead left the
adjudication of these details to future litigants.
For more information, contact:
Keith J. Roberts | 973.364.5201 | [email protected]
Mark Manigan | 973.403.3132 | [email protected]
New Jersey Law Requires Health Insurance Companies
to Encrypt Personal Information
On January 9, 2015, Governor Christie signed into law Senate Bill S562 that
requires health insurance companies in New Jersey to encrypt personal
information. The information must be secured by encryption or protected
by any other method or technology rendering the information unreadable,
undecipherable or otherwise unusable by an unauthorized person.
Compliance with the new law requires more than a password protection
computer program.
The bill was introduced after several laptops containing policyholder
information were stolen from Horizon Blue Cross Blue Shield of New
Jersey, Barnabas Health Medical Group and Inspira Medical Center. The
information on the laptops was protected only by user passwords.
For more information, contact:
Lani M. Dornfeld | 973.403.3136 | [email protected]
Debra C. Lienhardt | 973.364.5203 | [email protected]
Legislative Update
A1922, approved by the Assembly Health & Senior Services Committee
on January 12th, would require commercial and Medicaid managed care
organizations to engage a private accounting firm to conduct an annual audit
of its provider network to ensure network adequacy under state and federal
law. Should the audit reveal non-compliance, the Commissioner of Banking
and Insurance would be required to assess a civil penalty of between $500
and $10,000 for each instance in which the carrier failed to maintain an
adequate network. The bill is now before the Assembly for full consideration.
S2596 (A3951), previously passed by the Assembly and approved by the
Senate Transportation Committee on January 13th, would exempt from
“Angelie’s Law” vehicles owned or leased by various entities licensed by the
Department of Human Services or the Department of Health and used to
transport between 8–15 people. Angelie’s Law (P.L.2014, c.244) establishes
a Bill of Rights for customers of certain autobuses, prohibits a vehicle
owner from permitting operation by an individual without a commercial
driver license, and requires a police officer to obtain a blood sample from
the operator when the vehicle is involved in an accident resulting in death
or injury. The bill awaits a full vote by the Senate before heading to the
Governor’s desk.
A3949, referred to the Assembly Appropriations Committee on January 15th,
would require an employer to pay a health care worker or first responder
regular compensation for any period of time that such individual is placed
in isolation or quarantine and is unable to work. The bill further prohibits
employers from taking any adverse action against a health care worker or
first responder who is not actively performing all duties due to the isolation
and quarantine and precludes employers from requiring a worker to use sick,
personal or other leave for the duration of the isolation or quarantine.
A4087, introduced in the Assembly on January 13th, would permit a
pharmacy, chain pharmacy distribution center or pharmacy member of
an affiliated group to return to a wholesale distributer or pharmaceutical
manufacturer certain prescription drugs if the drug is no more than six
months past its expiration date. Provided the drug is not adulterated,
misbranded or counterfeit, the manufacturer or distributer would be
required to provide a full credit or reimbursement.
A3248 (S2459), approved by the Assembly Health & Senior Services
Committee on January 12th, would establish a Task Force on Chronic
Obstructive Pulmonary Disease within the Department of Health. The
purpose of the task force would be to conduct an investigation on and
study strategies to promote public awareness about the importance of early
diagnosis and treatment, prevention and disease management. The bill awaits
a vote by the full Assembly.
A3922 (S2578), passed by the Senate and referred to the Assembly Regulated
Professions Committee on January 12th, would codify current regulations
permitting certified optometrists to continue to prescribe hydrocodone
drugs notwithstanding the DEA’s rescheduling of such drugs from Schedule
III to Schedule II. Under current New Jersey law, optometrists may only
prescribe Schedule III, IV and V controlled dangerous substances. This bill
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BRACH EICHLER
would permit optometrists to continue to prescribe, administer and dispense
hydrocodone, but would not otherwise expand the scope of optometrist
prescribing authority.
For more information, contact:
John D. Fanburg | 973.403.3107 | [email protected]
Mark Manigan | 973.403.3132 | [email protected]
Brach Eichler In The News
Lani M. Dornfeld was recently quoted in NJ Biz, in an article entitled
“House Calls: Latest trend in health care sounds a bit like a blast from the past.”
Save the Date for the 2015 NJ ASC Conference! This year’s conference will be
held June 17–18 at Borgata in Atlantic City. Visit our event website for details:
http://www.bracheichler.com/?p=6840.
Keith J. Roberts was the moderator for the annual No Fault/PIP College at
the NJ ICLE Law Center in New Brunswick. The program was attended by
over 125 lawyers, a panel presentation included trends in insurance fraud
litigation, and developments in the area of No Fault insurance. Keith gave
an ethics presentation and was joined by the panel in a discussion about
certain NJ Rules of Professional conduct. Keith was joined on the panel by
Mark Manigan, who gave a presentation about ambulatory surgical centers
and recent Medicare rule amendments affecting reimbursements.
HIPAA CORNER
Tennessee Case Emphasizes Importance of
Fully Compliant HIPAA Authorizations
A recent case in the Tennessee Court of Appeals, entitled Hamilton et al.
v. Abercrombie Radiological Consultants, Inc. et al., Tenn. Ct. App., No.
E2014-00433-COA-R3-CV, highlights the importance of fully-compliant
HIPAA authorizations. In this medical malpractice case, the plaintiff failed
to complete the expiration date on its HIPAA authorization (for release of
medical records) in accordance with federal law. The defendants argued
that the plaintiff’s lawsuit should be dismissed because it did not provide a
federally-compliant HIPAA authorization as required under Tennessee law.
In Tennessee, a plaintiff bringing a medical malpractice case must file a presuit notice letter on the defendant and provide the defendant with a HIPAA
authorization to obtain the plaintiff’s medical records.
The trial court agreed with the defendant’s argument, but the court of appeals
reversed and held that, although the authorization did not fully comply
with the federal standards, the Tennessee statute required only substantial
compliance. Thus, the plaintiff’s action should not be dismissed. Although
the plaintiff ultimately prevailed in the case, the motion to dismiss could
have been avoided entirely if the plaintiff supplied a federally-compliant
authorization. Further, the result may be different in New Jersey and other
states that do not have a statute identical to Tennessee’s statute. Additionally,
the case demonstrates that even slight non-compliance, such as a missing
date, could be grounds for a provider to deny access to medical records until
receipt of a fully-compliant authorization.
For more information, contact:
Lani M. Dornfeld | 973.403.3136 | [email protected]
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Members
Riza I. Dagli | 973.403.3103 | rdagli @ bracheichler.com
Kevin M. Lastorino | 973.403.3129 | klastorino @ bracheichler.com
Lani M. Dornfeld | 973.403.3136 | ldornfeld @ bracheichler.com
Debra C. Lienhardt | 973.364.5203 | dlienhardt @ bracheichler.com
John D. Fanburg, Chair | 973.403.3107 | jfanburg @ bracheichler.com
Mark Manigan | 973.403.3132 | mmanigan @ bracheichler.com
Joseph M. Gorrell | 973.403.3112 | jgorrell @ bracheichler.com
Keith J. Roberts | 973.364.5201 | kroberts @ bracheichler.com
Carol Grelecki | 973.403.3140 | cgrelecki @ bracheichler.com
Counsel
Richard B. Robins | 973.403.3147 | rrobins @ bracheichler.com
Edward J. Yun | 973.364.5229 | eyun @ bracheichler.com
Associates
Colleen Buontempo | 973.364.5210 | [email protected]
Lindsay P. Cambron | 973.364.5232 | [email protected]
Shannon Carroll | 973.403.3126 | [email protected]
Michele L. Gipp | 973.403.3124 | [email protected]
Lauren D. Goldberg | 973.364.5228 | [email protected]
Ed Hilzenrath | 973.403.3114 | [email protected]
Rita M. Jennings | 973.364.5204 | [email protected]
Justin C. Linder | 973.403.3106 | [email protected]
Conor F. Murphy | 973.364.5214 | [email protected]
Robert A. Paster | 973.403.3144 | [email protected]
Peter Valenzano | 973.403.3135 | [email protected]
Jonathan J. Walzman | 973.403.3120 | [email protected]
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