Physician Supervision Requirements under CMS Regulations - False Claims Act Cases on the Rise

Written By Melony Anderson
In 2013, the Department of Justice collected over $3.8 billion in qui tam and non-qui tam settlements and judgments under the False Claims Act (“FCA”).  Of the total amount collected, $2.7 billion, or 70% were in cases in which the Department of Health and Human Services (“HHS”) was the primary client agency.  In comparison, cases from the Department of Defense represented just 1% of the total collections.  Surprisingly, the total numbers for 2013 were actually slightly lower than 2012 numbers.  In 2012, total collections were $4.9 billion, with HHS cases representing $3.1 billion, or 63%. 

Notwithstanding the slight decrease in total judgments and settlements, it is clear that one type of case under the FCA is beginning to account for an increasing portion of the total:  cases where the government has alleged that the services were not properly supervised by a physician or a qualified non-physician provider (“NPP”), such as a licensed physical therapist.  

CMS regulations define three types of physician supervision: 

·        General supervision:  the physician or NPP must be available by telephone. 

·        Direct supervision:  the physician or NPP must be “immediately available” and “interruptible” throughout the performance of the procedure.  The physician or NPP does not need to be present in the room.  CMS will not explicitly define “immediate” but has said that the requirement is not met where the physician or NPP is “so physically far away…from the location where…outpatient services are being furnished that he or she could not intervene right away.” 

·        Personal supervision:  the physician or NPP must be in the room during the procedure.    

In order to bill Medicare or Medicaid for certain services, the service must have been appropriately supervised under these definitions.  The government takes the position that services billed but not properly supervised are not “reasonable and necessary” and are, therefore, false claims.  For example, MRIs with contrast require direct supervision.  Although the supervising physician need not be in the room during the treatment, the physician must be “immediately available” somewhere on the premises.  What is more, it is not enough that any physician or NPP is immediately available – the supervising physician or NPP must have within his or her State scope of practice and hospital privileges the ability to perform the service or procedure.   

The following recent settlements provide some insight into the types of services where the government is paying close attention: 

·        A Florida hospital and doctor group settled with the government for $3.5 million.  The allegations in that case were that the group billed Medicare, Medicaid and TRICARE for radiation oncology services (which require direct supervision) that were performed without the necessary supervision.  In particular, the government alleged that the services were often performed while the defendant doctors were on vacation or were working at another radiation oncology clinic.  

·        In April 2013, a North Carolina neurologist and his practice paid $2 million to resolve allegations under the False Claims Act that the neurologist had improperly billed for intravenous immunoglobulin therapy services, which require direct supervision.  The government alleged that the services had been performed by registered nurses when the neurologist was not present in the office suite.  There were no allegations that any patients had been harmed; what is more, in many instances there were other physicians on site and the neurologist himself was, in his words, “no more than 8 seconds away” from the office suite. 

·        A Georgia-based collection of companies settled a False Claims Act case for $1.2 million in April 2013.  The allegations in that case were that the companies had billed for contrast MRI procedures where only clerical staff and technicians were onsite.   

It is worth noting that most, if not all, of the major settlements involved physician supervision over services that require direct supervision, rather than general or personal.  This is perhaps not surprising:  general and personal supervision are clearly and understandably defined, whereas CMS has declined to provide specific time or distance limits that would meet the definition of “immediate” and “interruptible” for direct supervision.  

Direct supervision is required for most outpatient services.  The following is a non-exclusive list of services that require direct supervision:  

·        Diagnostic services furnished to outpatients, including drugs and biologicals required in the performance of those services (for example, MRIs with contrast);

·        IV therapy services, such as chemotherapy

·        Physical and occupational therapy (a licensed therapist must provide direct supervision)

·        Pulmonary, cardiac and intensive cardiac rehabilitation;

·        Glaucoma screening examinations; and

·        Services and supplies provided “incident to” a physician’s services in a non-institutional setting (such as a physician’s office)     

Understanding the level of supervision that a particular service or treatment requires is extremely important, particularly for health care providers who bill for services that they do not perform themselves.  The consequences for billing for services where the requisite level of supervision was not present could be dire and could include not only significant financial liability, but exclusion from federally funded healthcare programs. 

CMS Issues Proposed Rule on Reporting and Returning Overpayments

One of the provisions of the Affordable Care Act (“ACA”) that has gotten a great deal of attention is Section 6402(a), which requires a person who receives an overpayment to report and return the funds within 60 days after the overpayment is identified (or the date any corresponding cost report is due, if applicable.) The provision is significant because the failure to report and return overpayments creates False Claims Act liability, exposure to Civil Monetary Penalties, and potentially exclusion from participation in the federal programs.

On February 16, 2012, CMS released a proposed rule (77 Federal Register 9179) to implement the requirements of Section 6402(a), and if finalized in its current form it will guide providers on what is required when information indicating a potential overpayment comes to light. While the ACA already creates the obligation to report and return overpayments, the proposed rule imposes additional burdens in an attempt to clarify and define key terms of the statute.

The most significant burden in the proposed rule is a new ten-year look-back period, which would require providers to report and return any overpayment that is identified within ten years from when it was received. CMS stated in the preamble to the rule that the ten-year period was chosen to “further our interest in ensuring that overpayments are timely returned to the Medicare Trust Fund.”

The proposed rule defines an “overpayment” just as the ACA: any funds received or retained under the Medicare program to which the person, after applicable reconciliation, is not entitled. This includes, but is not limited to, payments for non-covered services. An overpayment will be considered “identified” if the provider has actual knowledge of the existence of the overpayment or acts in “reckless disregard” or “deliberate ignorance” of the overpayment. “Reckless disregard” and “deliberate indifference” essentially mean that a provider cannot ignore information brought to his/her attention that a potential overpayment exists. The provider is thus required to make a “reasonable inquiry” to confirm whether or not an overpayment exists.

The definition of “identified” and the lack of guidance regarding “reasonable inquiry” introduce significant uncertainty. What is a “reasonable inquiry”? The preamble to the proposed rule seems to state that this means self-audits, compliance checks, or other research and suggests that such inquiry must be taken with “all deliberate speed.” When considered alongside the proposed ten-year look-back period, it is unclear whether CMS intends to obligate providers who recognize a problem to consider whether this same problem has occurred over the course of the last ten years with regard to similar claims. Is that enough information to trigger the obligation to investigate with all deliberate speed? If it is, this rule places a significant burden on providers to engage in extensive retrospective audits and generates substantial difficulties where information regarding ten-year-old claims may not be readily available.

The proposed rule contains other provisions, such as an explanation of the impact of the Anti-Kickback Statute and how the sixty-day reporting period is tolled when a provider submits a self-disclosure to either the OIG (Self-Disclosure Protocol) or to CMS (Self-Referral Disclosure Protocol).

Again, this rule is not final. The health care industry has an opportunity to comment and potentially impact the final rule’s requirements. Comments are due on April 16, 2012.

The proposed rule can be found at: http://www.regulations.gov/#!documentDetail;D=CMS_FRDOC_0001-0905

Health Care Fraud: Newest Numbers and Enforcement Actions

The U.S. Justice Department recently announced that it recovered more than $3 billion in settlements and judgments in civil health care and war-related fraud cases in the last fiscal year. The vast majority of the $3 billion—$2.8 billion—was recovered under the whistleblower provisions of the False Claims Act (FCA). Additionally, of the $3 billion, $2.4 billion involved health care fraud, most of which was attributed to the Medicare and Medicaid programs. Since January 2009, the Department has recovered $8.7 billion ($6.6 billion attributable to federal health care dollars), which is the largest three year total in the Department’s history.

The record setting recoveries under the whistleblower provisions of the FCA paralleled a sharp increase in the number of whistleblower lawsuits filed, which, after staying in the 300s to low 400s range for last decade, hit an all-time high at 638 in the last fiscal year. The Patient Protection and Affordable Care (PPACA) has added additional incentives for whistleblowers to report fraud in this manner.

But the federal government has not lost focus on private health insurance fraud, and the goverment recently reached a plea agreement with a Texas doctor who pleaded guilty to defrauding private insurers. The government pursued the case under federal mail fraud and conspiracy laws, and the doctor was sentenced to seventy months and sixty months of incarceration, respectively, and ordered to pay $3,821,082in restitution.

This case serves as a reminder that even though the primary focus has been recovering federal health care dollars—which has been viewed by many as a great success—private health insurance fraud is not beyond the scrutiny of federal prosecutors.

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.

The Office of Inspector General sets its sights on hospice care in nursing homes

On September 8, 2009, the Office of Inspector General posted an eye-catching report on Medicare hospice care in nursing facilities. The OIG found that 82 percent of hospice claims for beneficiaries in nursing facilities did not meet at least one Medicare coverage requirement. The Medicare hospice benefit allows a beneficiary with a terminal illness to forgo curative treatment for the illness and instead receive palliative care. Medicare paid approximately $1.8 billion for these claims.

We have long subscribed to the belief that predicting where the government will focus its investigative resources is as simple as determining where the government feels it has the best chances of recovering overpayments. Based on the results of this report, we anticipate the government will be even more focused on monitoring compliance with hospice coverage requirements. According to the OIG report, studies suggest that the use of hospice care has grown most rapidly in nursing facilities. Skilled nursing homes, hospice care providers and the doctors who certify terminal illness requirements should read the report (http://www.oig.hhs.gov/oei/reports/oei-02-06-00223.pdf) and monitor their compliance with Medicare coverage requirements.

The report identifies several ways that hospice and skilled nursing providers frequently fail to meet Medicare coverage requirements. Eighty-one percent of claims did not meet at least one Medicare coverage requirement pertaining to election statements, plans of care, services, or certifications of terminal illness. In thirty-one percent of claims, hospices provided fewer services than outlined in beneficiaries' plans of care. Significant to the physicians who certify compliance, four percent of claims did not meet certification of terminal illness requirements.

Reports like the one issued by the OIG this week signal the existence of a well-stocked pond to folks who like to fish for False Claims Act cases. Government investigators and whistleblowers are likely to cast their lines in these waters. It is a good time for health care providers engaged in hospice care to carefully review their compliance with hospice coverage requirements and take the steps necessary to ensure compliance.