United States: Health Care Compliance And Enforcement Update – Regulatory And Legislative Developments

Last Updated: April 2 2012

CMS Releases Its Final Rule Regarding the Implementation of Medicaid Recovery Audit Contractor ("RAC") Programs

In September 2011, CMS issued a final rule requiring state Medicaid agencies to implement a RAC program. RAC programs are designed to identify and recover improper payments by reviewing claims on a post-payment basis (looking back up to three years from the date the claim was paid). RAC programs review a limited number of claims (the maximum varies by provider type), and providers are notified of overpayment findings within 60 days. The program is funded from contingency fees obtained from the recovered funds. Implementation of the Medicaid RAC program was required by January 1, 2012. Over the next five years, the Medicaid program is projected to

save $2.1 billion, of which $900 million would be returned to the states. CMS recently released answers to FAQs and created a Medicaid RACs At-a-Glance web site that will contain information from each state. Medicare's already-implemented RAC program for Part A and Part B recovered $797 million in FY 2011, according to a CMS quarterly report.

OIG Advises Connecticut and Iowa that Their False Claims Laws Meet the Requirements to Receive an Additional Share in Recovery

On November 15, 2011, the Connecticut false claims law became the first state law to meet or exceed the provisions of the federal FCA as recently amended. On December 29, 2011, Iowa also received notice that its amended false claims act met the requirements enumerated under Section 1909 of the Social Security Act. The Deficit Reduction Act of 2005 provided a financial incentive to states to pass their own false claims acts by giving an additional share of recovery to states with laws that meet or exceed the provisions of the federal law. Since then, several federal laws (the Fraud Enforcement and Recovery Act ("FERA") of 2009, the Patient Protection and Affordable Care Act ("PPACA") of 2010, and the Dodd-Frank Wall Street Reform and Consumer Protection Act) have strengthened the federal FCA, and states must now meet these stricter provisions. States that were previously eligible for the increased share will have a two-year grace period during which their false claims laws will be deemed "Section 1909 compliant." After the grace period, a state will no longer qualify for an increased share unless it has amended its law and received a new approval from OIG. States that were not previously approved will have their laws reviewed in relation to the FCA, as amended by the FERA, the PPACA, and the Dodd-Frank Act.

Senate Considers "Medical Device Patient Safety Act"

On December 15, 2011, Senators Grassley (R-Iowa), Blumenthal (D-Conn.), and Kohl (D-Wis.) introduced a bill designed to improve the medical device recall process as well as the procedures for post-market surveillance and data collection. The legislation would require the FDA to assess systematically the information submitted during a device recall and the information submitted to the Secretary regarding the correction or removal of a device. The purpose would be to identify strategies for mitigating the health risks presented by defective or unsafe devices, develop criteria to assess whether the recall was performed effectively, and release the reason for ending the recall. The bill would also allow the FDA to impose on devices cleared through the 510(k) clearance process certain post-market evaluations currently imposed on pre-market approval devices, such as data collection, labeling information, and post-market studies. The FDA would have the authority to rescind clearance if the device company did not perform the post-market evaluations as required.

CMS Releases Proposed Rule for Physician Payments "Sunshine" Act

On December 14, 2011, CMS released its proposed rule to implement the "Transparency Reports and Reporting of Physician Ownership or Investment Interests" provision of the Affordable Care Act of 2010. This provision requires that manufacturers of drugs, devices, biologicals, or medical supplies report annually to the Secretary of HHS the "payments or other transfers of value" that they make to physicians and teaching hospitals. The provision also requires manufacturers and group purchasing organizations ("GPOs") to report the ownership or investment interests held by physicians or their immediate family members. Manufacturers and GPOs are required to report the information in an electronic format by March 31, 2013 (the date identified in the original legislation), and on the 90th day of each calendar year thereafter, and they will be subject to civil monetary penalties for failing to comply. The proposed rule seeks comments on the definitions of the various terms used in the rule, including manufacturer, common ownership, drug, device, biological, medical supply, etc. The proposed rule does exclude several types of payments from the reporting requirements, including, among others: transfers of value less than $10, product samples that are not intended to be sold, education materials that are intended for patient use, discounts and rebates, etc. Comments are due by February 17, 2012. CMS proposed that manufacturers and GPOs do not need to begin data collection until final regulations are issued and recognized that the first report (due on March 31, 2013) would contain information for a partial year.

House Holds Hearings on Bill to Simplify Criminal Code

On December 13, 2011, the House Judiciary Committee's Subcommittee on Crime, Terrorism, and Homeland Security held a hearing on H.R. 1823 (Criminal Code Modernization and Simplification Act of 2011), a bill that would revise and reorganize the federal criminal code. The bill seeks to incorporate all major federal crimes into a single title with uniform definitions, including definitions for the terms "health care benefit program" and "federal health care offense." The sections that deal specifically with health care offenses include "theft or embezzlement in connection with health care" (Sec. 655), "false statements relating to health care matters" (Sec. 792), and "health care fraud" (Sec. 806). In addition, several other sections may have a bearing on health care-related offenses. The bill provides that, as a general rule, the punishment of attempts and conspiracies will be on the same basis as punishment for the completed offense.

CMS Issues Final Rule for Medicare Accountable Care Organizations ("ACO")

After receiving more than 1,200 formal comments regarding the proposed ACO regulations, CMS published a final rule under Section 3022 of the PPACA for a shared savings program that "promotes accountability for a patient population, coordinates items and services under [Medicare] Parts A and B, and encourages investment in infrastructure and redesigned care processes for high quality and efficient service delivery." The final rule reflects the continued focus and intention of CMS to encourage significant participation within the provider community to engage in the formation of ACOs and shared savings programs. Notably, the Final Rule incorporates revisions to elements of the proposed regulations that were perceived by the provider community as impediments to establishing integrated care delivery models. The revisions include the following highlights: (i) eliminates the requirement that one-sided shared savings programs must transition to a two-sided risk model; (ii) permits the preliminary prospective assignment of beneficiaries with final reconciliations following each performance year; (iii) reduces the number of quality measures and domains (including retained electronic health records as a quality measure rather than a condition of participation); (iv) permits sharing of the "first dollar" savings for all models; (v) provides increased flexibility for start dates and defined "performance years" including certain interim payment options; and (vi) permits organizations unfamiliar with risk to develop experience with population-management prior to transitioning to risk-based models.

With the publication of the final rule, CMS and OIG also jointly released an interim final rule addressing applicable waivers for certain health care fraud and abuse laws related to ACO and shared savings program arrangements that might otherwise foreclose integrated delivery models. Providers considering a Medicare or commercial ACO or shared risk model should review available guidance carefully and discuss proposed arrangements with counsel as appropriate.

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