HEADLINES
Tuesday, July 19, 2011

• Proposed physician recruitment arrangement with noncompete clause
• OIG finds DME arrangements have potential for abuse, okays vaccine program
• CMS proposes rules for release and use of Medicare claims data
• State Medicaid plans prepare for nonpayment of provider-preventable conditions

• Suits and Scrubs Avoiding Orange Jumpsuits 

by Allan P. DeKaye, MBA, FHFMA, and Gregory J. Naclerio, JD., Contributing Editors

Endorsed by the Health Care Compliance Association and written by HCCA board members and other experienced compliance practitioners, the Health Care Compliance Professional’s Manual provides expert insights on legislative and regulatory matters, offers guidance on applying the laws and regulations, and spells out practical compliance solutions that professionals can put to work immediately. The following chapters have been revised for Report 29 to provide the most current information related to these subject areas:

• “Human Research Protections in Clinical Research,” written and updated by Thomas Bechert, director at Huron Consulting Group.
• “Identification and Management of Financial Conflicts of Interest in Clinical Research,” updated by Stuart Horowitz, managing director at Huron Consulting Group.
• “Research Misconduct and the Public Health Service,” updated by Lynn Smith, manager at Huron Consulting Group.
• “Clinical Research Billing and the National Coverage Decision,” written and updated by Lisa Guidry, managing director at Huron Consulting Group.
• “A Compliance Officer’s Guide to the Stark Law and Regulations,” written and updated by Kim H. Roeder and Sara Kay Wheeler, partners, King and Spalding LLP.

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A proposed arrangement between a hospital and practice plan and a pediatric orthopedic surgeon (physician) meets the requirements of the physician recruitment exception and the noncompete provision in the proposed arrangement meets the criteria set forth in the regulations because it does not impose practice restrictions that unreasonably restrict the physician’s ability to practice medicine in the hospital’s geographic area, according to a recently issued CMS advisory opinion.

Details of the proposed arrangement. The proposed arrangement will be entered into to induce the physician to relocate to the hospital’s geographic service area to meet the hospital’s certified and documented community need for pediatric orthopedic surgery services. The hospital included a noncompete provision in the proposed arrangement that would restrict the surgeon from establishing, operating, or providing professional medical services at any medical office, clinic, or other health care facility at any location within a 25-mile radius of the hospital for a period of one year following the earlier of the termination or expiration of the proposed arrangement. The physician would be restricted from practicing at five hospitals located within the 25-mile radius, but would not be restricted from practicing at one hospital within the hospital’s geographic service area, but outside the 25-mile radius from the hospital or three other hospitals located 35 – 60 miles from the hospital.

Analysis. CMS found that the noncompete clause in this proposed arrangement did not unreasonably restrict the physician’s ability to practice medicine in the geographic area served by the hospital because (1) the time period restriction of one year was reasonable; (2) the distance requirement of 25 miles was reasonable based on the geographic area served by the physician; (3) even with the time period and distance restrictions, the physician would be permitted to practice at certain hospitals within and outside of the hospital’s geographic area within the one year time period; and (4) the hospital certified that the noncompete provision complies with applicable state and local laws.

CMS Advisory Opinion, CMS AO-2011-01, May 2011, Health Care Compliance Reporter, ¶350,277

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New rules that would allow the release and use of Medicare claims data to measure provider and supplier performance have been proposed by CMS. The Proposed rule would implement section 10332 of the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148), which, effective January 1, 2012, will require that standardized extracts of Medicare claims data under Parts A, B, and D be made available to “qualified entities” for the sole purpose of evaluating the performance of providers of services and suppliers and generating specified public reports. This disclosure of claims data by CMS is permitted under the Health Insurance Portability and Accountability Act (HIPAA) Privacy Rule as a disclosure “required by law.”

Qualified entities. To be eligible to apply to receive data as a qualified entity, an applicant would be required to demonstrate expertise and at least three-years’ experience in the following three areas: (1) organizational and governance criteria; (2) the ability to combine Medicare claims data with claims data from other sources; and (3) documentation of rigorous data privacy and security policies. A qualified entity would be required to submit to CMS a list of all measures it intends to calculate and report, the geographic areas it intends to serve, and the methods of creating and disseminating reports.

Monitoring qualified entities. CMS would monitor and assess the performance of qualified entities, and the qualified entities would be required to provide annual reports to CMS. Qualified entities would be required to inform CMS of inappropriate disclosures or uses of beneficiary identifiable data pursuant to the requirements in the Data Use Agreement. If it were determined that the qualified entity is in violation of any of the requirements of the program, CMS would be allowed to: (1) provide a warning notice; (2) request a corrective action plan; (3) place the qualified entity on a special monitoring plan; or (4) terminate the qualified entity.

Proposed rule, 76 FR 33566, June 8, 2011, Health Care Compliance Reporter, ¶730,133

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Pursuant to the Patient Protection and Affordable Care Act (P.L. 111-148) §2702, state Medicaid plans must provide for nonpayment for two types of provider-preventable conditions (PPCs): (1) health care acquired conditions (HCAC) for which Medicare payment to inpatient hospitals is denied under the inpatient prospective payment system (see Final rule, 75 FR 50042), except for deep vein thrombosis or pulmonary embolism related to hip or knee replacement surgery; and (2) other provider preventable conditions (OPPC).

OPPCs may occur in any setting and must include at least the three procedures excluded by National Coverage Determinations: (1) procedures performed on the wrong patient; (2) wrong procedure performed on a patient; and (3) procedure performed on the wrong body part.

A state plan may provide for denial of payment for additional OPPCs if, after review of the medical literature by qualified professionals, the agency finds that the condition is reasonably preventable by adherence to evidence-based guidelines, has negative consequences for the patient and results in increased cost that can reasonably be isolated and is auditable. No reduction in payment may be made if the OPPC existed before the patient began treatment with the provider. Payment reductions also may not impair beneficiaries’ access to care.

State plans must require providers to report OPPCs through the claims system whether or not they bill for the increased costs; they also must require managed care organizations to impose the same reporting requirement on their providers.

States must submit proposed amendments to their plans by September 30, 2011, to comply with these requirements; however, enforcement will be delayed until July 1, 2012.

Final rule, 76 FR 32816, June 6, 2011, Health Care Compliance Reporter, ¶700,306

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Suits and Scrubs Avoiding Orange Jumpsuits

by Allan P. DeKaye, MBA, FHFMA, and Gregory J. Naclerio, JD., Contributing Editors

When setting aside the fraud and abuse attributable to organized crime and individuals who perpetrate schemes that divert millions of dollars in federal Medicare and Medicaid away from intended recipients, we are left with a puzzling question: why are providers of care often lumped into these two categories of criminals—when they are expected to be fulfilling the mission and vision of providing for the community good?

To answer this question, the authors have selected and examined several situations and cases to illustrate that bad behavior was avoidable, and the ensuing penalties were preventable.

Although many will argue that tort reform is needed to stem the tide of medical malpractice settlements, the system for identifying, prosecuting, and adjudicating clinical mistakes works despite the complaints. Unraveling the often hidden trail associated with complex provider arrangements and delivery mechanisms, however, allows these situations to remain uncovered for potentially longer periods, unlike the more obvious and deleterious effects of a botched surgery, until investigators and prosecutors uncover "the smoking gun".

Prosecutors have been quick to note that given the high compensation levels of many hospital and other health care chief executive officers (CEOs) and physicians or clinical leaders that personal and corporate greed is very much a motive that clouds decision-making judgment or promotes outright criminal behavior. In his 2009 article, in addition to outright fraudulent activities or other criminal enterprises, DeKaye identified ego, misguided altruism, and loophole exploitation as among the contributing underlying causes and rationales for poor executive judgment and relates these symptoms to various cases. Naclerio provides a behind-the-scenes examination of judgmental errors on the parts of selected defendants and how they could have been remedied by proper review and oversight. When taken together, these two perspectives are intended to keep the "suits" and "scrubs" out of orange jumpsuits.

To avoid possible prosecution and exclusion for your health care entity and yourself, the old maxim that "if it sounds too good to be true, it probably is too good to be true," may be relevant to some of the deals presented to senior management. In the current economy, many businesses, including health care institutions, are suffering losses to the bottom line and experiencing cash flow problems. While consumers may be hesitant to make discretionary purchases, health care is not discretionary. Health care is, in economic terms, "inelastic" (i.e., people will purchase goods and services no matter the price). For example, take gas prices; we complain about the price but still purchase it at $4 a gallon because we need it. The same may be said for needing an MRI or CT scan. Moreover, when most health care costs are paid by commercial insurers or the Medicaid or Medicare programs, consumers are becoming less concerned and don’t seem to worry about paying the full bill; however, this isn’t always the case when the patient is uninsured. Thus, health care institutions, ranging from hospitals and nursing homes to large physician practices, are seeking ways to attract new business by expanding current product lines or establishing new programs. Some aggressive individuals see the "need" of these institutions and prey upon them for their own economic benefit. Some of these "deals," while sounding very good for the bottom line sometimes place the institutions and their senior managers in peril.

Part I of this two-part article provided an overview of the issues regarding criminal behavior in health care; described the government’s role in enforcement, including descriptions of the relevant laws; and gave case examples to illustrate the authors’ viewpoint. Part II will discuss how to avoid risks and how to uncover problem situations in their early stages.

Allan P. DeKaye, MBA, FHFMA, is President and Chief Executive Officer of DEKAYE Consulting, Inc. Gregory J. Naclerio, JD, is a Martindale Hubbell AV pre-eminent rated partner at Ruskin Moscou Faltischek, PC.

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