As required by the federal Health Care Reform law (the Patient Protection and Affordable Care Act), the Delaware General Assembly passed amendments to the state’s insurance code requiring health insurance carriers providing coverage in Delaware to cover certain immunizations and preventive services without requiring enrollees to pay copayments, coinsurance or deductibles. Governor Markell signed the bill into law on September 23rd, and it applies to policies issuing or renewing after June 30, 2011. A complete list of the immunizations and services covered under the new law can be found at http://www.healthcare.gov/news/factsheets/2010/07/preventive-services-list.html
While the Delaware insurance code previously mandated coverage for many of these services, such as mammograms and colonoscopies at certain ages, it did not prevent insurers from imposing co-pays or other charges on individuals receiving them.
Thursday, September 29, 2011
Friday, September 23, 2011
Fraud Investigations Aiming for the Top: Government Scrutiny of Health Care Executives
In his testimony before a House of Representatives subcommittee, Chief Counsel for the HHS-OIG Lewis Morris expressed the Federal Government’s frustration with repeat offenders and indicated a new strategy for fighting fraud and abuse among health care enterprises:
“We are concerned that the providers that engage in health care fraud may consider civil penalties and criminal fines a cost of doing business. . . . One way to address this problem is to attempt to alter the cost-benefit calculus of the corporate executives who run these companies. By excluding the individuals who are responsible for the fraud, either directly or because of their positions of responsibility in the company that engaged in fraud, we can influence corporate behavior without putting patient access to care at risk.
HHS, the Justice Department, and the Food and Drug Administration have been independently shifting their target to individual executives in health care fraud investigations and prosecutions. Executives at drug companies, medical device companies, nursing homes, and other health care groups now have more to worry about than the hefty fines their companies are forced to pay; these executives could face criminal charges even if they were not involved in the scheme and exclusion from the Federal programs.
Morris continued, saying that “when there is evidence that an executive knew or should have known of the underlying misconduct of the organization, OIG will operate with a presumption in favor of exclusion of that executive.” To be sure, exclusion from the federal programs is a career ender, as the enterprise would no longer be able to bill the federal programs with the excluded executive at the helm. The authority the OIG points to for this power is under section 1128(b) of the Social Security Act, which allows OIG to hold responsible individuals accountable for the misconduct of their organization. It is only recently, however, that OIG has been focusing on using this power on the top executives of these organizations. It used to be that only executives who had been charged and entered pleas were excluded. Last year, however, the inspector general excluded the owner/executive of drug manufacturer Ethex Corporation even though the Justice Department did not charge him.
But this theory was recently tested and HHS retreated. Howard Solomon, chief executive of drug company Forest Laboratories, received notice from HHS-OIG that he would be excluded from the Federal programs. Solomon received the letter because a Forest subsidiary pleaded guilty to marketing violations in 2010 and agreed to a $313 million settlement, but Solomon was not personally charged and there was never any alleged wrongdoing on his part. According to a press release from Forest, the “only basis given in the letter notifying Mr. Solomon of the potential action is that he is ‘associated with’ Forest.” Ultimately, after protest from the business community, HHS retreated from its exclusion letter.
Despite HHS backing down against Solomon and Forest, the climate of investigations and prosecutions against executives is still heating up. As Morris said in a May Associated Press interview, “[t]he behavior of a company starts at the top." In the ever growing culture of compliance coming out of Washington, it is more important than ever for executives to become involved in their organization’s ongoing compliance efforts, and to hold subordinates accountable for running a compliant organization.
“We are concerned that the providers that engage in health care fraud may consider civil penalties and criminal fines a cost of doing business. . . . One way to address this problem is to attempt to alter the cost-benefit calculus of the corporate executives who run these companies. By excluding the individuals who are responsible for the fraud, either directly or because of their positions of responsibility in the company that engaged in fraud, we can influence corporate behavior without putting patient access to care at risk.
HHS, the Justice Department, and the Food and Drug Administration have been independently shifting their target to individual executives in health care fraud investigations and prosecutions. Executives at drug companies, medical device companies, nursing homes, and other health care groups now have more to worry about than the hefty fines their companies are forced to pay; these executives could face criminal charges even if they were not involved in the scheme and exclusion from the Federal programs.
Morris continued, saying that “when there is evidence that an executive knew or should have known of the underlying misconduct of the organization, OIG will operate with a presumption in favor of exclusion of that executive.” To be sure, exclusion from the federal programs is a career ender, as the enterprise would no longer be able to bill the federal programs with the excluded executive at the helm. The authority the OIG points to for this power is under section 1128(b) of the Social Security Act, which allows OIG to hold responsible individuals accountable for the misconduct of their organization. It is only recently, however, that OIG has been focusing on using this power on the top executives of these organizations. It used to be that only executives who had been charged and entered pleas were excluded. Last year, however, the inspector general excluded the owner/executive of drug manufacturer Ethex Corporation even though the Justice Department did not charge him.
But this theory was recently tested and HHS retreated. Howard Solomon, chief executive of drug company Forest Laboratories, received notice from HHS-OIG that he would be excluded from the Federal programs. Solomon received the letter because a Forest subsidiary pleaded guilty to marketing violations in 2010 and agreed to a $313 million settlement, but Solomon was not personally charged and there was never any alleged wrongdoing on his part. According to a press release from Forest, the “only basis given in the letter notifying Mr. Solomon of the potential action is that he is ‘associated with’ Forest.” Ultimately, after protest from the business community, HHS retreated from its exclusion letter.
Despite HHS backing down against Solomon and Forest, the climate of investigations and prosecutions against executives is still heating up. As Morris said in a May Associated Press interview, “[t]he behavior of a company starts at the top." In the ever growing culture of compliance coming out of Washington, it is more important than ever for executives to become involved in their organization’s ongoing compliance efforts, and to hold subordinates accountable for running a compliant organization.
Health Care Practices Must Inform Employees of Labor Rights
On August 30, 2011, the National Labor Relations Board (NLRB) issued a final rule that will require all private employers, including health care practices, covered by the National Labor Relations Act (NLRA) to notify employees of their rights under the Act. This notification’s substance is included on a poster provided by the NLRB, which informs employees of their rights, among others, to join a union and collectively bargain. The poster may be downloaded and printed in either black-and-white or color, and must be posted in the workplace. In addition to physically posting the notice, if personnel rules are customarily posted on the Internet or an intranet site, the notification must also be posted there. Translated versions must be posted where at least 20% of employees are not proficient in English. A failure to post this notice will be deemed an unfair labor practice under the NLRA. The rule goes into effect on November 14, 2011.
Friday, September 16, 2011
Feds Deny Delaware Insurance Commissioner’s Application for Medical Loss Ratio Adjustment
In a September 9th letter the Centers for Medicare & Medicaid Services denied Delaware Insurance Commissioner Stewart’s application for an adjustment to the 80 percent medical loss ratio (“MLR”) standard applicable to the individual health insurance market in Delaware beginning in 2011 as a result of the federal health care reform legislation, the Patient Protection and Affordable Care Act (the “Act”). Section 1001 of the Act required issuers in the individual market to spend at least 80 percent of premium dollars on reimbursement for clinical services and activities that improve health care quality for enrollees. Beginning in 2011, if an issuer does not meet the 80 percent standard, it is required to provide rebates to enrollees.
The Act permits states to apply for adjustments to the 80 percent standard if applying that standard may destabilize the market for individual health insurance coverage in the state. Commissioner Stewart applied for an adjustment of the standard to 65 percent, 70 percent and 75 percent for the reporting years 2011, 2012 and 2013, respectively. Of the three largest issuers of individual health insurance coverage in the state, Blue Cross Blue Shield, Golden Rule, and Aetna, Blue Cross Blue Shield already meets the 80 percent standard but Golden Rule and Aetna do not and, according to media reports, threatened to pull out of the individual insurance market in Delaware if an adjustment was not obtained. Golden Rule and Aetna had not, however, provided the required 180-day notice of withdrawal from the Delaware individual market of the time of CMS’s decision. Some individual consumers and small business owners voiced objections to Commissioner Stewart’s application arguing it was a concession to the insurance companies and not in the best interest of Delaware consumers.
CMS, which has previously granted adjustment requests from five states and denied such a request from one state, North Dakota, denied Delaware’s request because the evidence presented did not establish that application of the 80 percent MLR standard would destabilize the Delaware individual market. Among other things, CMS found that Golden Rule and Aetna would remain “substantially profitable” even if they had to pay rebates as a result of not meeting the 80 percent MLR standard.
The Act permits states to apply for adjustments to the 80 percent standard if applying that standard may destabilize the market for individual health insurance coverage in the state. Commissioner Stewart applied for an adjustment of the standard to 65 percent, 70 percent and 75 percent for the reporting years 2011, 2012 and 2013, respectively. Of the three largest issuers of individual health insurance coverage in the state, Blue Cross Blue Shield, Golden Rule, and Aetna, Blue Cross Blue Shield already meets the 80 percent standard but Golden Rule and Aetna do not and, according to media reports, threatened to pull out of the individual insurance market in Delaware if an adjustment was not obtained. Golden Rule and Aetna had not, however, provided the required 180-day notice of withdrawal from the Delaware individual market of the time of CMS’s decision. Some individual consumers and small business owners voiced objections to Commissioner Stewart’s application arguing it was a concession to the insurance companies and not in the best interest of Delaware consumers.
CMS, which has previously granted adjustment requests from five states and denied such a request from one state, North Dakota, denied Delaware’s request because the evidence presented did not establish that application of the 80 percent MLR standard would destabilize the Delaware individual market. Among other things, CMS found that Golden Rule and Aetna would remain “substantially profitable” even if they had to pay rebates as a result of not meeting the 80 percent MLR standard.
Wednesday, September 7, 2011
Third Circuit Adopts Implied False Certification Liability under False Claims Act
“Men must turn square corners when they deal with the government.”
While Justice Holmes penned the above quote in a different context, it was recently invoked by the United States Court of Appeals for the Third Circuit in its decision to adopt the implied false certification theory for liability under the False Claims Act (“FCA”). In United States ex rel Wilkins v. United Health Group, the Third Circuit joined the Second, Sixth, Ninth, Tenth, Eleventh, and District of Columbia Circuits in recognizing that healthcare providers can be liable under the FCA if the provider makes a claim for payment without disclosing that it violated regulations that affect its eligibility for payment. For Delaware providers, this means compliance with federal health laws has taken on a new dimension of exposure and they must be more careful than ever in submitting claims to the federal programs.
By way of review, in order to establish a prima facie violation under the FCA, the Government or a relator—a qui tam plaintiff—must prove: (1) that the provider presented or caused to be presented a claim for payment; (2) that was false or fraudulent; (3) that the provider knew to be false or fraudulent. The Courts have identified two categories of false or fraudulent claims under the FCA: (1) factually false and (2) legally false.
A factually false claim is one that misrepresents the items or services provided. A legally false claim is where the “false certification” theory originates, where a provider knowingly and falsely certifies that it has complied with a statute or regulation that is a condition of government payment. In Wilkins, the Third Circuit has now adopted a further distinction, and yet another avenue for FCA liability: (1) express false certifications and (2) implied false certifications.
An express false certification is where the provider falsely certifies that it is in compliance with the regulations that are prerequisites to payment in connection with the claim, such as a certification that the provider holds the requisite license to provide the services. Alternatively, the implied false certification rests on the idea that the mere act of submitting a claim, without any words of certification at all, implies compliance with the preconditions to payment. The Third Circuit noted that it must be proven that had the Government been aware of the provider’s violations of the Medicare laws and regulations, it would not have paid the claim. To state this condition another way, under the implied false certification theory, it must be shown that compliance with the regulation allegedly violated was a condition of payment, and not simply a condition of participation in the federal programs.
Under the facts of Wilkins, the relators first alleged that United Health personnel violated Medicare marketing regulations. The Third Circuit affirmed the District Court and dismissed that count of the complaint because compliance with the Medicare marketing regulations is not a condition of payment. However, the relators also alleged that United Health’s subsidiaries violated the Anti-Kickback Statute (“AKS”), also forming the basis of FCA liability. The Third Circuit found that the relators stated a claim in this regard, because Medicare regulations require Medicare Advantage and Prescription Drug Plan providers to enter into agreements with CMS, affirmatively agreeing to comply with the AKS. Therefore, the Court reasoned that “[t]o plead a claim for relief under an implied certification theory, appellants were required to allege, as they did, that appellees submitted claims for payment to the Government at a time that they knowingly violated a law, rule, or regulation which was a condition for receiving payment from the Government.
Delaware healthcare providers must be more vigilant than ever in submitting claims to the Government under federal health care programs. To steer clear of potential FCA liability, Delaware health care providers must be in compliance with all the federal health care laws that they agreed to follow when entering into contracts with CMS; when dealing with Government, always turn square corners.
While Justice Holmes penned the above quote in a different context, it was recently invoked by the United States Court of Appeals for the Third Circuit in its decision to adopt the implied false certification theory for liability under the False Claims Act (“FCA”). In United States ex rel Wilkins v. United Health Group, the Third Circuit joined the Second, Sixth, Ninth, Tenth, Eleventh, and District of Columbia Circuits in recognizing that healthcare providers can be liable under the FCA if the provider makes a claim for payment without disclosing that it violated regulations that affect its eligibility for payment. For Delaware providers, this means compliance with federal health laws has taken on a new dimension of exposure and they must be more careful than ever in submitting claims to the federal programs.
By way of review, in order to establish a prima facie violation under the FCA, the Government or a relator—a qui tam plaintiff—must prove: (1) that the provider presented or caused to be presented a claim for payment; (2) that was false or fraudulent; (3) that the provider knew to be false or fraudulent. The Courts have identified two categories of false or fraudulent claims under the FCA: (1) factually false and (2) legally false.
A factually false claim is one that misrepresents the items or services provided. A legally false claim is where the “false certification” theory originates, where a provider knowingly and falsely certifies that it has complied with a statute or regulation that is a condition of government payment. In Wilkins, the Third Circuit has now adopted a further distinction, and yet another avenue for FCA liability: (1) express false certifications and (2) implied false certifications.
An express false certification is where the provider falsely certifies that it is in compliance with the regulations that are prerequisites to payment in connection with the claim, such as a certification that the provider holds the requisite license to provide the services. Alternatively, the implied false certification rests on the idea that the mere act of submitting a claim, without any words of certification at all, implies compliance with the preconditions to payment. The Third Circuit noted that it must be proven that had the Government been aware of the provider’s violations of the Medicare laws and regulations, it would not have paid the claim. To state this condition another way, under the implied false certification theory, it must be shown that compliance with the regulation allegedly violated was a condition of payment, and not simply a condition of participation in the federal programs.
Under the facts of Wilkins, the relators first alleged that United Health personnel violated Medicare marketing regulations. The Third Circuit affirmed the District Court and dismissed that count of the complaint because compliance with the Medicare marketing regulations is not a condition of payment. However, the relators also alleged that United Health’s subsidiaries violated the Anti-Kickback Statute (“AKS”), also forming the basis of FCA liability. The Third Circuit found that the relators stated a claim in this regard, because Medicare regulations require Medicare Advantage and Prescription Drug Plan providers to enter into agreements with CMS, affirmatively agreeing to comply with the AKS. Therefore, the Court reasoned that “[t]o plead a claim for relief under an implied certification theory, appellants were required to allege, as they did, that appellees submitted claims for payment to the Government at a time that they knowingly violated a law, rule, or regulation which was a condition for receiving payment from the Government.
Delaware healthcare providers must be more vigilant than ever in submitting claims to the Government under federal health care programs. To steer clear of potential FCA liability, Delaware health care providers must be in compliance with all the federal health care laws that they agreed to follow when entering into contracts with CMS; when dealing with Government, always turn square corners.
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