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. 2 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 3 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] Attorney Advertising: This publication is designed to provide Brach Eichler, LLC clients and contacts with information they can use to more effectively manage their businesses. The contents of this publication are for informational purposes only. Neither this publication nor the lawyers who authored it are rendering legal or other professional advice or opinions on specific facts or matters. Brach Eichler, LLC assumes no liability in connection with the use of this publication. Health Care Practice Group | 101 Eisenhower Parkway, Roseland, NJ 07068 | 973.228.5700 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] You have the option of receiving your Health Law Updates via e-mail if you prefer, or you may continue to receive them in hard copy. If you would like to receive them electronically, please provide your e-mail address to [email protected]. Thank you. 4
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