Category: HHS

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Medicare Claims Appeals: D.C. Circuit Reverses and Remands in Case Seeking Relief From Processing Delays

Summary of AHA v. Price, 2017 U.S. App. LEXIS 14887 (D.C. Cir. Aug. 11, 2017)

 

On August 11, 2017, the D.C. Circuit reversed the district court and held that the district court abused its discretion by ordering the Secretary of HHS to clear the backlog of administrative appeals of denied Medicare reimbursement claims within four years, because it failed to seriously test the Secretary’s assertion that this result was impossible. The underlying action demanded relief to address the Secretary’s inability to keep up with “an unexpected and dramatic uptick in appeals [that] produced a jam in the process” starting in fiscal year 2011.

In the initial proceedings, a group of hospitals sought a judicial order compelling the Secretary to provide relief from what they considered to be unreasonable delays in resolving Medicare claims appeals at the administrative appeals level.  The federal district court for the District of Columbia granted the Secretary’s motion to dismiss for lack of jurisdiction, but the D.C. Circuit reversed. The Circuit Court remanded the case back to the district court, with instructions to consider the merits of appeal, i.e., whether relief should be granted and if so the form of the relief.

The Four-Year Plan to Reduce the Backlog

In addressing the merits of plaintiffs’ allegations on remand, the district court adopted the hospitals’ so-called four-year plan and ordered the Secretary to reduce the current backlog of cases pending at the Administrative Law Judge level by 30% by the end of 2017; 60% by the end of  2018; 90% by the end of 2019; and 100% by the end of 2020.  The Secretary then appealed the district court’s order to the D.C. Circuit.  On appeal the Secretary argued that it would be impossible to comply with the timetable, because the only means of meeting the timetable would be to pay claims through mass settlements regardless of their merits, which (according to the Secretary) would be in violation of the Medicare statute.

Without finding whether in fact the Secretary would be unable to lawfully comply with the district court’s order, the D.C. Circuit held that because the Secretary represented that lawful compliance with the district court’s order was impossible, the district court committed reversible error by ordering the Secretary to comply with the timetable without first finding that lawful compliance was indeed possible. The Circuit Court also held that it was an error for the district court not to evaluate the Secretary’s assertion that the timetable would increase, not decrease, the number of backlogged appeals, because the timetable would generate an incentive for claimants to file additional appeals and hold out for big payouts.

The Case is Remanded to District Court to Determine Feasibility of Compliance Timetable

The D.C. Circuit therefore remanded the case again to the district court and ordered the district court to determine whether the Secretary’s compliance with the timetable is impossible. However, the Circuit Court noted that the Secretary will bears a “heavy burden to demonstrate the existence of an impossibility.” The Court further noted that if the district court finds on remand that the Secretary failed to carry his burden of demonstrating impossibility, it could potentially reissue its order without modification.

What Does this Decision Mean for Hospitals?

Many Medicare coverage appeals involve a hospital appealing the denial of a short stay on the basis that admission was not medically necessary, and that the patient could be treated as an outpatient. However, because CMS does not allow hospitals to rebill under Part B (except during the one year period following discharge, which in the majority of cases will have expired long before the RAC reopens and denies the inpatient claim), hospitals  believe that they have no choice but to appeal. It is important to keep in mind that although the D.C. Circuit faulted the district court for not considering the issue of whether the Secretary could legally comply with the prescribed timetable, the fact that the Secretary will bear the burden of proof on this issue may mean that the district court may end up issuing the same type of relief as it did before.

We will be following this case as the district court determines whether the Secretary’s compliance with the timetable is legally possible and will follow up once a decision is rendered.

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Rand Corporation Issues Report on U.S. Blood System

blood system

“A robust, sustainable blood system is a crucial component of every health care system.”  That is how Rand Corporation’s recently issued comprehensive report entitled “Toward a Sustainable Blood Supply in the United States” (the “Report”) begins.  Issued as a result of research sponsored by the U.S. Department of Health and Human Services (“HHS”), the Report explores the challenges faced by the U.S. blood system and offers policy alternatives designed to ensure that such system remains sustainable.

The Report describes in detail the component parts and coordinated activities of the multiple stakeholders in the blood system, including the following: (1) voluntary donors of blood and its components; (2) nonprofit blood centers that collect, test, process, store, and distribute blood; (3) suppliers of equipment, goods, and services to blood centers; (4) hospitals and other providers who utilize blood in patient care delivery; (5) government and commercial payers who pay the hospitals and other providers for health care services involving blood; and (5) the government oversight and regulatory agencies (the Food and Drug Administration, the Centers for Disease Control and Prevention, the U.S. Biovigilance Network and the National Institutes of Health).

The Report identifies a number of challenges the blood system is facing.  It points out that there has been a marked decrease in demand for blood in the last 10 years resulting largely from changes in clinical practice and the increased focus by hospitals on cost control and blood management programs.  Provider consolidations have also resulted in stronger bargaining power for providers, which has decreased the prices paid for blood.  At the same time, new pathogens, such as the Zika virus, (which has limited  the ability of some to donate blood in certain areas thereby reducing collections) and technological innovation necessary to test for the presence of pathogens in blood have added costs to the processing and testing of blood.  Having sufficient blood available in times of emergencies or other significant disruptions is also an area of concern.  These various challenges have meant that the financial status of blood centers has reached the point where many lose money on blood operations and all are facing pressure on their margins.

The Report further explores the current payment system for blood.  The blood centers’ activities in collecting, testing, storing and distributing blood are reimbursed indirectly.  It generally is the hospital that is reimbursed for its use of blood on patients as part of the diagnostic related group (“DRG”) or through commercial payments from managed care plans.  Payments are intended to cover the cost the hospital incurs in acquiring and using blood.  The blood centers generally are not paid directly by payors and the negotiations between hospitals and blood centers may or may not reimburse blood centers fairly for the costs incurred by the blood centers.  The Report discusses alternative methods to reimburse blood centers.  Among the alternatives discussed are:

  • a DRG pass-through specifically for blood;
  • direct payment to blood centers (as opposed to hospitals and providers);
  • a supplemental payment for blood technology either made to hospitals or directly to blood centers;
  • federal grants to support the blood supply (for such things as ensuring capacity for emergencies or for developing tests for new pathogens); and
  • a disproportionate blood share model similar to the Medicare or Medicaid DSH program.

Despite the challenges discussed in the Report, the Report concludes that the U.S. blood system currently operates effectively and efficiently.  The pressures facing the blood system, however, create risks for future sustainability.  The Report explores an alternative whereby the U.S. government plays a more active role to ensure sustainability in addressing these pressures. To do so, the Report suggests that the U.S. government could (1) collect data and monitor the system; (2) adjust  how blood use is reimbursed; and/or (3) pay directly for certain technologies or features to help ensure surge capacity or pay for certain pathogen specific tests.

Finally, the Report provides seven recommendations to HHS:

i. Collect data on blood use and financial arrangements.

ii. Develop and disseminate a vision of appropriate levels of surge capacity and emergency response plans.

iii. Pay blood centers for maintaining surge capacity.

iv. Build relationships with brokers and other entities to form a blood “safety net.”

v. Build and implement a value framework for technology.

vi. Pay directly for new technologies where there is no private business case for adoption.

vii. Implement emergency use authorization and contingency planning for key supplies and inputs.

* * *

The Report provides a comprehensive analysis of the U.S. blood system. As the Report states, “a robust sustainable blood system is a crucial component to every healthcare system.”  While the system functions well currently, there are growing pressures on the system.  The Report is valuable in that it proactively identifies the challenges the system faces and provides steps that should be considered to ensure long-term sustainability and avoid a future crisis.

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CMS Revokes Billing Privileges for Competitive Bid Supplier

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The Centers for Medicare and Medicaid Services (CMS) has demonstrated that it will not hesitate to use one of its most crippling administrative enforcement tools—the revocation of Medicare billing privileges—against one of its largest suppliers, as is evident in its case against Arriva Medical, LLC. Medicare billing privileges may be revoked for any one (or more) of several grounds laid out in the regulations at 42 C.F.R. § 424.535. In this case, CMS relied upon 42 C.F.R. § 424.535(a)(8), “abuse of billing privileges,” and specifically subsection (i)(A), regarding the submission of a claim for an item or service that could not have been furnished to a specific individual on the date of service because the beneficiary was deceased.

A revocation of billing privileges precludes payment for any claims submitted after the effective date of the revocation, and is accompanied by a ban on re-enrollment. A revocation has much the same impact as an exclusion imposed by the Department of Health and Human Services (HHS) Office of Inspector General (OIG), i.e., no Medicare payment, and in some cases revocations have been imposed after OIG declined to exclude an individual or entity.1 A Medicare revocation can also result in similar actions under Medicaid.

Arriva provides diabetic testing supplies under Medicare’s competitive bidding program, and describes itself as the nation’s largest supplier of home-delivered diabetic testing supplies.2 In October 2016, Arriva was notified by CMS that its billing privileges would be revoked, effective November 4, 2016, with a three year ban on reenrollment, due to the submission of Medicare claims for deceased beneficiaries. On December 6, 2016, Arriva was notified that its competitive bidding contract would be terminated effective January 20, 2017, based upon its lack of Medicare billing privileges.

Arriva filed for administrative review of the revocation of its billing privileges, an appeal that as of this writing is pending with the Departmental Appeals Board (DAB), and filed for a temporary restraining order and injunctive relief in light of the upcoming deadline for termination of its competitive bid contract. In its filing, Arriva alleged that the revocation was based upon 211 claims (0.003%) for supplies shipped to beneficiaries after they had died, out of approximately 5.8 million claims over a five-year period.3 Arriva further noted that CMS found concerns with the supporting claims documentation for 47 of those 211 beneficiaries. However, Arriva argued that any errors in billing for these claims after the beneficiary died were primarily the result of Medicare system flaws, and the revocation itself was related to the backlog of claims appeals before the Office of Medicare Hearings and Appeals.

Defendants (HHS) responded by filing an Opposition to Plaintiff’s First Application for Temporary Restraining Order (TRO) and Preliminary Injunction and Motion to Dismiss Plaintiff’s Complaint (Defendants’ Opposition), in which it was reported that CMS had advised Arriva that CMS was willing to defer the termination of the competitive bidding contract until such time as the DAB rendered the final agency decision on the revocation. Defendants’ Opposition notes that several courts have addressed revocation actions imposed by CMS, including allegations of imminent and irreparable harm, and have dismissed the complaints for lack of jurisdiction. Here, HHS again argued that administrative exhaustion is required before revocation disputes can be heard by a court. Moreover, HHS argued that a post-deprivation avenue for appeal did not violate the supplier’s due process rights, with a lengthy discussion of case law on this issue. Defendants’ Opposition also includes a lengthy discussion of Defendants’ view on the standard for granting a TRO, including arguments that the case law does not support a finding of “irreparable harm” for health care entities even against allegations that they might have to shut down as a result of the challenged action.

By minute order entered on January 4, 2017, the request for a TRO was denied, with the court setting a schedule for plaintiff to file a renewed motion for preliminary injunction and for defendant to file an opposition to that motion as well as a motion to dismiss. The hearing on both motions is currently scheduled for February 8, 2017.

This case should be closely watched for its evaluation of CMS’ revocation authorities.

Originally, this post was an alert sent to the American Health Lawyers Association’s (AHLA) Regulation, Accreditation, and Payment Practice Group Members. It appears here with permission. For more information, visit AHLA’s website.


1 For a discussion of the difference between exclusions and revocations, see Desfosses v. Noridian Healthcare Solutions, LLC, 2015 WL 1196018 (Mar. 16, 2015).

2 Complaint for Declaratory and Injunctive Relief, Arriva Medical, LLC v United States Department of Health and Human Services, Case No. 1:16-cv-02521-JEB (D.D.C.).

3Id.

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Obamacare in the Cross Hairs — but Procedural Hurdles Loom

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President-elect Trump and congressional Republicans have promised to “repeal and replace” the Affordable Care Act (ACA), but there is deep division regarding which provisions will be rescinded and around the details of the replacement and the length of any transition period.

Last week the U.S. House and U.S. Senate took the first steps toward achieving repeal by passing a budget resolution with reconciliation instructions related to ACA repeal. The reconciliation process allows the Senate to bypass a filibuster and pass legislation with a simple majority. However, only budget-impacted provisions of the ACA can be repealed this way. Further, this year’s budget resolution stipulates that changes must save $1 billion over a ten-year period to be enacted through reconciliation.   While the budget resolution calls for committees to develop language to achieve this by January 27, it may take much longer given the complexity around repeal and replace.

The policy stakes are extremely high, not only because millions of Americans stand to lose coverage if the exchanges and Medicaid expansion are eliminated with no replacement, but also because developing a newly designed system which will inevitably pit health care stakeholders against one another creates significant political ramifications.

While the situation remains fluid, there are a few issues we are watching in the first few weeks of a Trump presidency.

Rolling Back Regulations

Congressional Republicans can also use the appropriations process to de-fund certain parts of the ACA, and President-elect Trump may modify portions of the law by Executive Order. This would jeopardize regulatory actions taken by President Obama, including pilot programs created by the ACA and developed within the Center for Medicare and Medicaid Innovation, which Republicans have accused of exceeding its authority. Other health-related regulations, particularly those finalized in the weeks following the election, may also be on the chopping block.

Carryover of ACA Provisions

While the GOP targets what it believes to be the ACA’s most onerous provisions, many popular insurance reforms — including the prohibition on denials of coverage for pre-existing conditions — are likely to survive. President-elect Trump has voiced support for maintaining some of these so-called insurance reforms, but some Republicans argue that their elimination would give insurers more flexibility in setting prices. Keeping those requirements intact without a coverage mandate would cause severe market disruption.

HHS Confirmation

Mr. Trump’s pick of Representative Tom Price (R-GA) faced severe scrutiny during a courtesy hearing before the Senate Health, Education, Labor and Pensions Committee on January 18. He must clear the Senate Finance Committee, which he will face on January 24, before proceeding to a vote on the Senate floor to secure his confirmation.

Rep. Lamar Alexander (R-TN), chairman of the Senath Health, Education, Labor and Pensions Committee, indicated the Senate  wouldn’t officially confirm Price until mid to late February, so it is unlikely there will be significant legislative movement until March.

Other “Must Pass” Health Care Legislation

While there is a strong impetus to address the ACA, it is not the only game in town. Key health priorities include reauthorizing the Children’s Health Insurance Program (CHIP), set to expire this year. CHIP enjoys bi-partisan support and no one wants to risk getting caught in the political blowback if it is allowed to lapse. While CHIP was not part of the ACA, its reauthorization could get tied up with ACA-related measures, either attached as amendments or following in subsequent bills.

Uncertainty Surrounding Drug Prices

Contrary to what Wall Street and the pharmaceutical industry believed would happen in the wake of the presidential election, President-elect Trump said last week that drug companies were “getting away with murder,” and that the United States — the largest buyer of drugs in the world — doesn’t “bid properly, and we’re going to save billions of dollars.”

The statements roiled markets and stand in stark contrast to the historical position of his party, which has been a reliable ally of the pharmaceutical industry. We will be watching closely to see how he and majority leadership will reconcile their views on drug pricing, if at all.

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