Health Lawyers Weekly:
June 05, 2009 Vol. VII Issue 22
California Court Rules In Favor Of Blue Shield In Case Alleging Health Plan Engaged In Postclaims Underwriting
A California superior court judge has issued a directed verdict in favor of Blue Shield of California in an action alleging the health plan improperly rescinded a subscriber’s health insurance policy.
The case involved Cindy and Steve Hailey, who filed the action against Blue Shield after it informed the Haileys that their health insurance coverage had been retroactively canceled. The policy cancellation came after Steve was hospitalized following an automobile accident that resulted in substantial medical bills, including the ongoing need for physical therapy and nursing care.
According to a report in the L.A. Times, the judge granted Blue Shield a directed verdict in the case after the Haileys stipulated that they had willfully omitted and willfully misrepresented material information to obtain insurance coverage.
Blue Shield General Counsel Seth Jacobs in a statement called the directed verdict “a complete vindication.”
“It means that our underwriting procedures were fair and complete, our application was clear, and we acted in good faith,” Jacobs said.
The case previously had been reviewed by a California appeals court after the trial court granted summary judgment to Blue Shield on the ground that the Haileys’ misrepresentations and omissions on their application justified rescission.
The California Court of Appeal, Fourth Appellate District, reversed, saying a health services plan must show a willful misrepresentation or omission or that it made reasonable efforts to ensure a subscriber’s application was accurate and complete as part of the precontract underwriting process in order to lawfully rescind the contract later. See Hailey v. California Physicians’ Serv., No. G035579 (Cal. Ct. App. Dec. 24, 2007).
The appeals court found these issues were still in dispute and the Haileys should be allowed to proceed with their action.
Blue Shield still faces a separate civil enforcement action filed by the L.A. City Attorney’s Office alleging illegal rescission practices.
The complaint, filed in Los Angeles Superior Court, claims Blue Shield of California engaged in unlawful, unfair, and fraudulent business practices and false and deceptive advertising in violation of state law.Specifically, the complaint alleges Blue Shield used intentionally misleading application forms and performed little to no meaningful review of the accuracy of applicants' responses.
California Insurance Commissioner Issues Regulations Aimed At Stopping Illegal Rescissions
California Insurance Commissioner Steve Poizner unveiled June 3 regulations that take aim at so-called post-claim rescissions by health insurers, a practice that has drawn increasing scrutiny from state regulators.
Poizner said the regulations make clear to insurance companies that underwriting should be completed before they accept a policyholder, not after a policyholder becomes sick and starts submitting claims.
“These regulations deliver a dose of preventive medicine for rescissions,” said Poizner in a press release. “Coupled with our previous enforcement actions, we now have powerful and continuing legal standards in place that will protect consumers from the ills of unlawful rescissions and force insurers to honor commitments to policyholders."
Poizner noted that the California Department of Insurance already has reached settlement agreements with the state’s three largest health insurance companies—Health Net, Blue Cross, and Blue Shield—that establish requirements to ensure they do not illegally rescind policies.
According to Poizner, those settlements represent 85% of the market, while the newly issued regulations will cover the remaining 15% by preventing improper rescissions.
The regulations, among other things, set clear and rigorous standards that insurers must meet before issuing a health insurance policy, including completing the underwriting process; require insurers to ask clear and unambiguous health history questions to avoid confusing applicants; encourage the use of personal health records where available instead of potentially confusing health history questionnaires to underwrite applicants; and provide fair due process protections for consumers who are being investigated for possible rescission.
A bill that would address post-claim rescissions by healthcare service plans and health insurers also is pending the California legislature.
In August 2008, the state legislature passed a similar measure, AB 1945, that was vetoed by California Governor Arnold Schwarzenegger citing concerns about the “fragile” individual insurance market.
California Assembly Member Hector De La Torre re-introduced the measure, now AB 2, in December 2008.
Under the bill, both healthcare service plans licensed by the Department of Managed Health Care and health insurers regulated by the California Department of Insurance would be required to complete medical underwriting prior to issuing a contract or policy.
The bill also would establish an independent review process for the review of plans’ and insurers’ decisions to cancel or rescind plan contracts or policies.
View the new regulations.
Clinical Trials Abroad: Abdullahi v. Pfizer
By Joseph P. McMenamin and Christian Michael Kennedy, McGuireWoods LLP
U.S. pharmaceutical companies are increasingly conducting clinical trials abroad. Data generated through research conducted in foreign countries may be offered to support applications to the Food and Drug Administration (FDA) for approval to market new drugs in the U.S. 21 C.F.R. § 314.106(b)(1).
FDA grants approval through one of two routes: either through an IND controlled by federal regulations regardless of location, or under ICH (International Conference on Harmonization) Guideline E6 “Good Clinical Practices” to “help ensure data quality and integrity.” 21 C.F.R. § 312.120 (October 27, 2008).
A study relied upon must be documented to be “credible and accurate” and trials must be properly conducted. Among other requirements, the data generated must have arisen in studies of humans who have given proper consent. See, 21 C.F.R. §§ 50.20, 50.23, 50.25, 50.27, 312.20, 312.120 (2008); 45 C.F.R. §§ 46.111, 46.116-117 (2008).
The practice of conducting clinical trials abroad reflects a desire to bring the benefits of modern medicines to nations where they might otherwise be hard to obtain. There are other benefits as well: the cost of conducting studies in foreign nations is often lower than it is in the U.S.; individuals with particular disorders that are not already under treatment, or with manifestations of disease not often seen in the U.S., may be easier to find, especially in Third World nations; and the regulatory climate there may be more conducive to performance of scientific research.
As a result, trials can often be more readily completed elsewhere than they can be at home. Sometimes, however, controversy arises in connection with this practice. Recently, case law has moved in the direction of permitting foreign nationals to seek damages in tort against domestic defendants for harms allegedly related to performance of clinical trials abroad.
In Abdullahi v. Pfizer, No. 05-4863 and 05-6768-c, 2009 WL 214649 (2d Cir. 2009), plaintiffs alleged that when the defendant tested Trovan (trovofloxacin, a fluoroquinolone antibiotic) for use against bacterial meningitis in Nigeria, eleven children died unnecessarily. The plaintiffs claimed that by recruiting children for testing, and failing to disclose that Trovan had been linked to life-threatening side effects in animal studies, the defendant violated a customary international law norm prohibiting involuntary medical experimentation on humans. Because Pfizer allegedly developed Trovan in Connecticut, plaintiffs also claimed violations of that state’s Unfair Trade Practice Act and Products Liability Act.
The Southern District of New York dismissed the case for lack of subject matter jurisdiction under the Alien Tort Statute (ATS), 28 U.S.C. § 1350. That statute, which dates from the 18th Century, gives U.S. courts original jurisdiction over “any civil action by any alien for a tort only, committed in violation of the law of nations or a treaty of the United States.”
For a cause of action to lie, the norm violated must be (1) defined with a specificity comparable to that of the original 18th Century paradigm, such as piracy; (2) based upon a norm of international character accepted by the civilized world; and (3) one that states universally abide by, or accede to, out of a sense of legal obligation and mutual concern. Sosa v. Alvarez-Machain, 542 U.S. 692, 724-32 (2004).
The court agreed that “non-consensual medical experimentation violates the law of nations and, therefore, the laws of the U.S.,” but plaintiffs had “failed to identify a source of international law that ‘provides a proper predicate for jurisdiction under the ATS.’” The district court concluded that because no single source recognizing the norm was legally binding in the U.S. and created a private right of action, it could not infer such a right under the ATS.
In a two-to-one decision, however, the Second Circuit reversed the district court and consolidated the cases and remanded them on the basis that the trial judge had inadequately inquired whether the law recognized “a norm of customary international law prohibiting medical experimentation on non-consenting human subjects.” It wrote,
Sosa makes clear that the critical inquiry is whether the variety of sources that we are required to consult establish a customary international law norm that is sufficiently specific, universally accepted, and obligatory for courts to recognize a cause of action to enforce the norm. Nothing in Sosa suggests that this inquiry can be halted if some of the sources of international law giving rise to the norm are found not to be binding or not to explicitly authorize a cause of action.
2009 WL 214649 at *18.
Additionally, Pfizer faces civil and criminal lawsuits filed in Nigeria by Nigerian state and federal authorities. Recent press reports suggest that Pfizer has reached a monetary settlement with the Nigerian government. While the terms are not disclosed, the reports suggests the settlement was approximately $75 million. That settlement is independent of the ongoing civil action in the Southern District of New York revived by the Second Circuit’s opinion in Abdullahi.
This case certainly does not mean that pharmaceutical companies should abandon clinical trials in foreign lands. It does, however, raise concerns about liability exposure not previously established in tort in the U.S., independent of exposure to the host countries’ legal system.
Companies considering trials abroad may wish to factor in the court’s reasoning in Abdullahi as they contemplate their risk exposure, and analyze whether a non-IND study complies with Guideline E-6 “Good Clinical Practices” from the International Conference on Harmonization.
CMS Issues Revised LTCH PPS Rule That Will Cut Payments By $43 Million
The Centers for Medicare and Medicaid Services (CMS) issued June 3 an interim final rule (74 Fed. Reg. 26546) containing revisions to the fiscal year (FY) 2009 Medicare severity long term care diagnosis-related group (MS-LTC-DRG) relative weights for payment under the long term care hospital (LTCH) prospective payment system (PPS).
According to CMS, it is issuing the revised rule “due to the misapplication of our established methodology in the calculation of the budget neutrality factor.”
The rule will result in an aggregate decrease in FY 2009 LTCH PPS payments of approximately $43 million.
The rule also noted that for the 26 rural LTCHs for which data is available, the provisions of the interim final rule are expected to result in a decrease in estimated aggregate LTCH PPS payments in FY 2009 of about $1.6 million.
The rule is effective upon publication for the remainder of FY 2009, CMS said.
Also on June 3, CMS published a proposed rule (74 Fed. Reg. 26546) for rate year 2010 MS-LTC-DRG relative weights and high-cost outlier fixed-loss amount. The supplemental proposed rule is based on the revised FY 2009 MS–LTC–DRG relative weights.
Comments on the interim final rule are due by June 29 and comments on the proposed rule are due June 30.
View 74 Fed. Reg. 26546 and 74 Fed. Reg. 26600.
CMS Says DMEPOS Competitive Bidding Program To Open In Fall 2009
The Centers for Medicare and Medicaid Services (CMS) said May 29 that the Round One rebid of the Medicare competitive biding program for durable medical equipment, prosthetics, orthotics and supplies (DMEPOS) will open in the fall of this year.
CMS also indicated that “pre-bidding” efforts to ramp up suppliers on preparing for the Round One rebid will soon be underway. Bidding registration is expected to begin this summer.
CMS said a more detailed timeline would follow a June 4 meeting of the DMEPOS Competitive Bidding Program Advisory and Oversight Committee.
According to CMS, it has made a number of process improvements for the Round One Rebid, such as upgrading the online bid submission system and providing early bidder education.
The Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) temporarily delayed the competitive bidding program for DMEPOS, which initially began July 1, 2008 in ten bidding areas.
CMS issued an interim final rule with comment period on January 16, 2009 to incorporate into existing regulations specific statutory requirements contained in MIPPA related to the competitive bidding program.
The Obama administration initially delayed the interim final rule, but in April announced that it would begin to move forward with the DMEPOS competitive bidding program.
According to a CMS press release issued this week, Round One of the competitive bidding process resulted in average savings of 26% compared to prices Medicare would have paid under the existing DMEPOS fee schedule in 2008.
Read CMS’ press release.
Eleventh Circuit Affirms Conviction, Sentence Of Dermatologist For Medicare Billing Fraud
The Eleventh Circuit affirmed May 27 the conviction of a dermatologist for Medicare billing fraud and upheld the 78-month sentence imposed by the district court, finding it properly calculated the Medicare loss amount.
The appeals court did vacate the court’s forfeiture money judgment due to a miscalculation conceded by the government.
The criminal case involved dermatologist Dr. Marsha Lynn Hoffman-Vaile, who practiced in Florida.
Her fiscal intermediary initially flagged her Medicare billing patterns as “aberrant” in 1999. According to investigators, Hoffman-Vaile had a high number of billings under code 14300, which is used in unusual or complicated cases.
In May 2002, Department of Health and Human Services Office of Inspector General agents raided Hoffman-Vaile’s office and seized over 3,000 files. Investigators said about 300 files were missing. Hoffman-Vaile later produced 185 of the missing files, but most of these lacked photographs.
Hoffman-Vaile was later indicted by a grand jury on 44 counts of healthcare fraud, 44 counts of filing false claims, and one count of obstruction of justice.
The jury convicted her on all charges and the district court sentenced her to 78 months of imprisonment, fined her $12,500, and ordered her to pay $504,068 in restitution and forfeit $707,161 to the government.
The district court found the amount of loss was $732,473, which was the total amount Hoffman-Vaile billed to Medicare. The district court determined there were 168 victims, including Medicare, private insurance companies, and patients.
Hoffman-Vaile appealed her conviction and sentence.
Affirming the conviction, the Eleventh Circuit held the court did not err in admitting reports prepared by the fiscal intermediary about its investigation of Hoffman-Vaile's billing practices, the opinions of the intermediary’s employees about her billing practices, and certain expert testimony.
The appeals court also upheld the district court’s calculation of the loss amount based on the amount she billed Medicare rather than the amount she received in reimbursement.
Hoffman-Vaile argued she was paid only 80% of the amount she billed to Medicare for each procedure she performed and therefore the remainder should not have been included in the loss calculation.
The appeals court disagreed, however, saying Hoffman-Vaile intended to receive the full amount that she billed Medicare as part of her fraud and knew, or reasonably should have known, that she would receive the other 20% from private insurers or patients.
“The private insurance companies and patients are victims of Dr. Hoffman-Vaile’s fraud and any loss that they suffered is included in the loss calculation,” the appeals court said.
The appeals court also found the district court did not have to offset the value of the surgeries she performed against the amount of loss, but even if this was an error it was harmless as it would not have altered her sentencing range.
Similarly, the appeals court rejected Hoffman-Vaile’s argument that the forfeiture amount should not include the losses to private insurance companies and patients to whom she also was ordered to pay restitution.
The appeals court noted that restitution and forfeiture serve different goals, with the former focused on the victim and the latter focused on the defendant.
The appeals court did find the district court miscalculated the forfeiture amount and vacated to allow a correction from $705,161 to $695,742.
United States v. Hoffman-Vaile, No. 07-12629 (11th Cir. May 27, 2009).
FDA Forms Transparency Task Force
The Food and Drug Administration (FDA) announced June 2 the formation of a transparency task force in an effort to make information on its activities and decisions more publicly available.
The task force will seek public input on issues related to transparency and recommend ways that the agency can better explain its operations.
"Our administration is committed to making government open and transparent," Department of Health and Human Services Secretary Kathleen Sebelius said. "The Transparency Task Force will give the American people a seat at the table and make the FDA more open and accountable."
The task force also will identify problems and barriers, both internal and external, to providing useful and understandable information about FDA activities and decision-making to the public and recommend changes to the FDA’s current operations, including internal policies and guidance, to improve the agency’s ability to provide information to the public in a timely and effective manner, among other things.
View more information.
FDA Lacks Comprehensive IT Modernization Plan, GAO Says
The Food and Drug Administration (FDA) should develop a comprehensive information technology (IT) strategic plan, the Government Accountability Office (GAO) said in a June 2 report.
In response to previously identified limitations in its IT capabilities, the agency is pursuing numerous modernization projects, many of which are in early stages, GAO noted. However, until FDA develops a comprehensive plan, the risk is increased that the agency’s IT modernization may not adequately meet its urgent mission needs, GAO said.
A comprehensive IT strategic plan to coordinate and manage ongoing modernization initiatives would provide a clearer picture of what the organization seeks to accomplish, identify the strategies it will use to achieve desired results, establish results oriented goals and performance measures that permit it to determine whether it is succeeding, and describe interdependencies within and across projects so that these can be understood and managed, the report said.
Two of the agency’s high-level planning documents—the Strategic Action Plan and its IT plan for FDA’s user fee program for drugs and biological products—include some, but not all, of these elements, GAO said.
The report also found FDA has made mixed progress in establishing important IT management capabilities that will be essential in helping ensure a successful modernization.
The report also said significant work remains on enterprise architecture. Although FDA officials report putting in place some elements for managing the agency’s architecture efforts, it does not yet have an architecture that can be used to efficiently and effectively guide and constrain its modernization efforts, the report said.
“Without an effective enterprise architecture and strategic human capital management, FDA has less assurance that it will be able to modernize effectively and will have the appropriate IT staff to effectively implement and support its modernization efforts,” GAO said.
Accordingly, GAO recommended that FDA prioritize and accelerate development of its enterprise architecture to ensure that its information systems projects appropriately support its plans for the future.
GAO also recommended that the agency develop a skills inventory, needs assessment, gap analysis, and plan for filling skills gaps as part of a strategic approach to IT human capital planning.
Read the report, Information Technology: FDA Needs to Establish Key Plans and Processes for Guiding Systems and Modernization Efforts (GAO-09-523).
FDA Needs Plan For Protecting Privacy, Security Of Electronic Health Data Used For Postmarket Surveillance
The Food and Drug Administration (FDA) should develop a plan with specific milestones for addressing privacy and security challenges in implementing a post-market risk identification and analysis system using electronic health data, the Government Accountability Office (GAO) said in a study posted June 1.
The FDA launched its Sentinel Initiative in May 2008. The Food and Drug Administration Amendments Act of 2007 (FDAAA) mandated that the FDA establish a system to leverage regularly collected electronic health data to enhance postmarket surveillance of medical products approved by the agency.
As mandated by the FDAAA, GAO undertook a study of the Sentinel Initiative and briefed congressional committees on its findings in March of this year.
While the FDA has developed a preliminary design of the Sentinel process for making medical product safety-related inquiries, GAO said, “key decisions such as developing a governance model for oversight and enforcement of relevant policies, establishing an architecture, and setting privacy and security policies have not yet been made.”
GAO cited a number of significant privacy and security challenges that likely would arise in a system that relies on sensitive electronic health data, including ensuring de-identified information is not re-identified and that partners with varying interests and business missions use personal health information only for specified purposes.
“If these challenges are not adequately addressed, the privacy and security of personal health information could be compromised,” GAO concluded.
Although GAO recommended no further legislative action, it said FDA should develop a plan for addressing the privacy security challenges associated with the Sentinel system.
FDA agreed with GAO’s recommendation, but raised concerns that the report “contained inaccuracies that seriously misrepresent the program and would lead readers to believe that their protected health information was at risk.”
Read Privacy and Security: Food and Drug Administration Faces Challenges in Establishing Protections for Its Postmarket Risk Analysis System (GAO-09-355).
FTC Settles Price-Fixing Allegations Against San Francisco IPA
The Federal Trade Commission (FTC) announced June 4 a proposed consent order settling allegations that Alta Bates Medical Group, Inc. engaged in illegal price fixing and unlawful concerted refusal to deal.
According to the FTC complaint, since at least 2001 the 600-physician IPA orchestrated collective negotiations for fee-for-service contracts, noting Alta Bates dealt with insurers without consulting individual physician members about the prices they would independently accept and transferred offers to individual members only after the group had approved the negotiated prices.
The complaint also alleged Alta Bates attempted to limit Kaiser’s product offerings to consumers. While this effort was ultimately unsuccessful, it was intended to impede competition in the provision of physician services in and around Berkeley and Oakland, FTC said.
The FTC found no activity to justify Alta Bates’ conduct, such as clinical or financial integration of the member physicians’ practices to create efficiencies.
The proposed consent order would prohibit the San Francisco Bay area IPA from collectively negotiating fee-for-service reimbursements and engaging in other anticompetitive conduct.
The complaint did not challenge Alta Bates’ negotiation of group contracts with insurers on a capitated basis.
View more information.
Grassley Questions CMS Use Of QIO Audit Contractor
In a June 3 letter to the Centers for Medicare and Medicaid Services (CMS), Senate Finance Committee Ranking Member Charles Grassley (R-IA) questioned the agency’s use of the Defense Contract Audit Agency (DCAA) to perform quality improvement organization (QIO) financial audits.
According to Grassley, a 2008 Government Accountability Office (GAO) report found DCAA not in compliance with Generally Accepted Government Auditing Standards (GAGAS).
In light of that finding, Grassley expressed concern “with the use of DCAA to conduct the financial audits of the QIO’s and of any other recipient of taxpayer funds through HHS.”
Grassley requested that CMS provide a copy of any contracts or other agreements between CMS and DCAA, asked the agency how much DCAA is paid annually, and asked CMS what procedures are in place to ensure that DCAA is abiding by GAGAS guidelines and that it produces a quality and accurate work product.
Read the letter.
Healthcare Groups Detail Plans To Curb Costs, Improve Quality And Access
A group of healthcare stakeholders outlined June 1 a series of collective and individual steps to help achieve the Administration’s goal of decreasing by 1.5 percentage points the annual healthcare spending growth rate over the next decade, which could total estimated savings of $2 trillion or more.
The Advanced Medical Technology Association (AdvaMed), American Medical Association (AMA), America’s Health Insurance Plans (AHIP), Pharmaceutical Research and Manufacturers of America (PhRMA), American Hospital Association (AHA), and Service Employees International Union (SEIU) in early May pledged to work toward health reform.
In their latest letter to President Obama, the groups said, following a number of meetings and multiple conference calls, they had each identified changes in their respective sectors aimed at reducing costs, strengthening quality, and improving access to care.
The letter cited cost estimates derived from existing literature that employing new tools to address utilization of care and improve quality and safety could produce savings between $150 -180 billion, while efforts to better manage chronic care could mean savings of $350 -$850 billion.
In addition, the groups said, lowering the cost of doing business and streamlining administrative processes could generate savings between $500 - $700 billion.
“Some of these proposals can be achieved under current law. The success of others will depend upon good public policy,” the letter said.
Each group went on to detail through a series of attachments specific initiatives they are undertaking to help realize healthcare reform goals.
For example, AdvaMed said it supported comparative effectiveness research and establishing payment systems that reward quality and efficiency.
AdvaMed said it was helping to develop quality metrics that assure appropriateness of care, particularly in areas where concerns exist about overuse.
AHIP proposed a comprehensive overhaul of administrative processes to standardize and automate five key functions—claims submissions, eligibility, claims status, payment, and remittance.
“The move to fully automating and standardizing administrative transactions will be a watershed event, allowing physicians, hospitals, and other health care providers to reduce their administrative costs substantially,” AHIP said.
AHIP indicated it would soon begin pilot testing in Ohio and New Jersey web portals that will allow physicians to conduct business with insurers throughout a region or state at one website.
AHA outlined immediate cost-savings initiatives, longer term initiatives, and opportunities for cross-stakeholder initiatives.
For immediate cost-savings, AHA said it would launch a Hospitals in Pursuit of Excellence campaign intended to facilitate performance improvements and help disseminate known best practices among the nation’s hospitals.
AHA said the campaign would include efforts to reduce certain common infections and adverse drug events.
Long term initiatives, AHA noted, include improving care coordination, implementing health information technology, promoting efficient resource utilization, and reducing supply costs.
AHA also said the hospital community was committed to collaborating with other healthcare stakeholders to achieve healthcare reform.
The AMA noted it was actively engaged in efforts to reduce hospital readmissions and unnecessary utilization related to maternity care, including induction of labor and cesarean sections, certain treatments for coronary artery disease, and the overuse of antibiotics to treat infections such as sinusitis.
PhRMA outlined efforts to reduce overuse, misuse, and underuse of medication.
PhRMA highlighted expanded use of medication therapy management and developing an abbreviated regulatory approval pathway for biosimilars as key steps to improve quality and lower costs.
The group also indicated it supports well-designed comparative clinical effectiveness research and releasing Medicare Part D data to facilitate research on effective care.
SEIU acknowledged that a more efficient delivery system will require realigning the healthcare workforce.
SEIU said its specific initiatives are directed at the primary and long term care sectors, including expanding home and community based services, using community health teams for Medicare and Medicaid chronic care and prevention, and post-acute payment reform.
Read the letter and proposals.
House Panel Clears Bill Banning “Pay-For-Delay” Payments To Stall Generic Entry
By a 16-10 vote, the House Energy and Commerce Subcommittee on Commerce, Trade and Consumer Protection approved legislation (H.R. 1706) that would ban so-called “pay-to-delay” payments as part of patent settlements between brand and generic drug companies.
Subcommittee Chairman Bobby Rush (D-IL) introduced the bill along with Committee Chairman Henry Waxman (D-CA) to ban the practice of “exclusion” or “reverse” payments in which a brand-name company pays or provides value to the generic company to abandon a patent challenge if the generic company agrees to delay marketing its generic drug.
According to Rush, “the intent of Hatch Waxman is being undermined by these uncompetitive legal settlements and consumers are losing out on the considerable savings from generic drugs.”
Rush emphasized the bill does not ban all settlements in drug patent cases, but rather prohibits the brand-name manufacturer from giving something of value to the generic manufacturer to delay generic entry on the market.
During markup, the subcommittee rejected by a 9-16 margin an amendment that would require the Federal Trade Commission (FTC) to consider a number of factors before taking any enforcement action relating to a patent settlement agreement between a brand name and generic drug manufacturer.
The factors included the length of time remaining on the patent compared to the agreed upon entry date of the generic drug, the form and amount of consideration received by the generic manufacturer in light of the fair market value of any consideration received by the brand-name drug maker, and whether the agreement is pro-competitive or in the public interest.
In March 31 testimony before the Subcommittee, FTC Commissioner J. Thomas Rosch argued in favor of the bill, saying it could “provide a comprehensive solution to a problem that is prevalent, extremely costly, and subverts the goals of the Hatch-Waxman Act.”
However, Diane E. Bieri, Executive Vice President and General Counsel for the Pharmaceutical Research and Manufacturers of America, told the panel that a “case by case” approach in analyzing patent settlements instead of an across-the-board ban “serves the best interests of patients, health care, and competition.”
Bieri said blanket prohibitions on certain types of settlements could divert valuable resources from research and development to expensive litigation.
IRS Posts FAQs And Tips For Completing Governance Portion Of Form 990
The Internal Revenue Service (IRS) has posted a series of 11 frequently asked questions (FAQs) and tips to help charities complete Form 990, Part VI—Governance, Management, and Disclosure.
For example, the FAQs explain that Part VI seeks information about an organization’s members and local units “to provide a more complete and accurate picture about where governance authority is vested” and “to obtain information about whether and how the organization exercises supervision and control over its chapters, branches, and affiliates to ensure that their activities are consistent with those of the organization.”
Another FAQ emphasizes that organizations must use the three-part definition contained in the instructions to determine whether a particular voting member of their governing body is independent for purposes of Form 990 reporting.
The FAQs also indicate that in general the filing organization need not provide governance information regarding any related organizations such as a joint venture, for-profit subsidiary, parent, or brother-sister exempt organization. The FAQs note, however, that Appendix E provides information on how Part VI must be completed in the case of a group return. Part VI also includes questions related to compensation from transactions with related organizations for purposes of determining governing board members' independence and whether the organization’s policies and practices extend to local affiliates.
View the FAQs and Tips.
Health Lawyers thanks Michael W. Peregrine, McDermott Will & Emery for alerting us to this development.
Medicare Part D Paid $75 Million For Drugs Used During SNF Stays
Medicare Part D paid for 1.2 million drugs, amounting to $75 million, for beneficiaries staying in skilled nursing facilities (SNFs) in 2006, the Department of Health and Human Services Office of Inspector General (OIG) found in a recent report.
According to the OIG, the majority of these Part D payments were likely inappropriate because drugs used during SNF stays or to facilitate discharge from such a facility are covered under Part A.
Specifically, the OIG noted 60% ($41.3 million) were dispensed by long term care pharmacies and were most likely for use in the SNF. The remaining 40% of the drugs were dispensed by retail pharmacies and may have been inappropriate as well.
While Part D payments were widespread among SNFs and pharmacies, OIG noted that a small number of SNFs and pharmacies were responsible for a large percentage of the Part D payments.
OIG recommended that the Centers for Medicare and Medicaid Services (CMS) provide additional guidance about when Parts A and D can pay for drugs for beneficiaries preparing for discharge, implement retrospective reviews of Part D payments for beneficiaries with SNF stays, and follow up with those SNFs and pharmacies accounting for a large percentage of the Part D payments.
CMS concurred with OIG’s recommendations and noted it already had taken steps to educate providers about appropriate Part A and Part D coverage of drugs dispensed to beneficiaries during Part D stays.
CMS did raise some concerns that the report may have inflated the number of erroneous Part D payments by failing to consider that some SNF beneficiaries could have been filling prescriptions for use after their discharge.
OIG acknowledged that circumstances could exist where drugs could be billed to Part D if they are not for use in the SNF or to facilitate a beneficiary’s discharge. OIG said it modified language in the report to address CMS’ concerns.
View the report, Medicare Part D Payments for Beneficiaries in Part A Skilled Nursing Facility Stays in 2006 (OEI-02-07-00230).
Ninth Circuit Finds State Statutes Regulating Optometrists Do Not Violate Dormant Commerce Clause
California statutes that prohibit optometrists from offering prescription eyewear at the same location in which eye examinations are provided do not violate the dormant Commerce Clause, the Ninth Circuit held May 28.
In reversing the district court, the appeals court disagreed that the laws were intended as economic protectionism and instead found their objective was to protect California's optometric profession from being taken over by large business interests.
The appeals court further concluded the laws did not discriminate against out-of-state providers, but remanded to the district court to determine if the burden the laws place on interstate commerce outweighs their benefits.
The National Association of Optometrists and Opticians, LensCrafters, Inc., and Eye Care Centers of America, Inc. challenged the statutes as violating the dormant Commerce Clause.
The district court agreed with plaintiffs and held unconstitutional Cal. Bus. & Prof. Code §§ 655, 2556, and 3103, and two companion regulations, 16 Cal. Code of Regs., tit. 16 §§ 1399.251 and 1514.
The laws at issue prohibit optical companies from offering prescription eyewear at the same location in which eye examinations are provided, and from advertising that eyewear and eye examinations are available in the same location
Defendants, California's Attorney General and the state Department of Consumer Affairs, appealed the district court's holding.
According to LensCrafters, optometrists and ophthalmologists can set up a practice where patients can get an eye examination and also buy prescription eyewear (“one-stop shopping"), but under California law, opticians cannot also do this.
LensCrafters asserts that opticians are largely out-of-state businesses, whereas optometrists and ophthalmologists are largely in-state individuals or firms, thus the statutes have a discriminatory effect on out-of-state businesses in violation of the dormant Commerce Clause, which prohibits state actions limiting interstate commerce.
After determining that the dormant Commerce Clause applies to the case, the appeals court considered whether the challenged California laws discriminate against out-of-state entities.
The appeals court first looked at whether the law had a discriminatory purpose. Here, the appeals court disagreed with the lower court that the laws were intended as economic protectionism favoring California businesses.
Instead, the appeals court found the objective was to protect California's optometric profession from being taken over by large business interests.
“This is in line with the wording of the challenged statutes and regulations, which are directed at preventing any sort of relationship of optometrists and ophthalmologists, who are health care providers, with the commercial interests of opticians who do not have health care responsibilities,” the appeals court said.
The court next turned to whether the laws have a discriminatory effect on interstate commerce. Here, California treats out-of-state opticians, such as LensCrafters, the same as in-state opticians, the appeals court noted.
Although the challenged laws treat opticians differently from optometrists and ophthalmologists, such distinctions are not prohibited because opticians are not similarly situated to optometrists and ophthalmologists, the appeals court explained.
The appeals court highlighted that through the challenged laws, “California has sought to protect optometrists and ophthalmologists as health care professionals from being affected by subtle pressures from commercial interests."
The appeals court rejected LensCrafters' argument that competition in the same market renders opticians similarly situated to optometrists and ophthalmologists, pointing to several ways in which the state treats the providers differently.
The appeals court also noted its holding that the state statutes do not violate the dormant Commerce Clause is in accord with a Sixth Circuit case involving virtually identical facts. See LensCrafters v. Robinson, 403 F.3d 798 (6th Cir. 2005).
Next, the appeals court explained that even though not discriminatory, the laws may still be invalidated if the burden they place on interstate commerce outweighs their benefits under the balancing test set forth in Pike v. Bruce Church, Inc., 397 U.S. 137 (1970).
Noting that LensCrafters bears the burden of proof in establishing the excessive burden in relation to the local benefits, the appeals court remanded to the lower court to apply the Pike balancing test.
National Ass’n of Optometrists and Opticians v. Brown, No. 07-15050 (9th Cir. May 28, 2009).
Obama Letter To Senate Leaders Articulates Vision For Healthcare Reform
After his June 2 meeting with key Senate Democrats on healthcare reform, President Barack Obama released a letter he sent to Senators Edward Kennedy (D-MA), Chairman of the Senate Health, Education, Labor, and Pensions Committee, and Max Baucus (D-MT), Chairman of the Senate Finance Committee, spelling out what he would like to see in forthcoming reform legislation.
Obama urged the creation of a health insurance exchange, which he described as “a market where Americans can one-stop shop for a health care plan, compare benefits and prices, and choose the plan that's best for them . . . .”
The letter also reiterated Obama’s support for a public plan option, which has been the subject of much debate in Congress and among stakeholders.
“I strongly believe that Americans should have the choice of a public health insurance option operating alongside private plans. This will give them a better range of choices, make the health care market more competitive, and keep insurance companies honest,” the letter said.
Obama said he was “open” to the Senators’ ideas on shared responsibility for required health insurance, which would make all Americans responsible for having health insurance coverage, but would ask that employers share in the cost.
However, if the legislation takes this direction, Obama pushed for “a hardship waiver to exempt Americans who cannot afford” to buy insurance.
Obama also noted that, while he believes that “employers have a responsibility to support health insurance for their employees, small businesses face a number of special challenges in affording health benefits and should be exempted.”
The letter emphasized Obama’s commitment to fully offset the cost of healthcare reform “by reducing Medicare and Medicaid spending by another $200 to $300 billion over the next 10 years, and by enacting appropriate proposals to generate additional revenues.”
Obama also indicated a willingness to allow the Medicare Payment Advisory Commission (MedPAC) more authority. Under this approach, MedPAC's recommendations on cost reductions would be adopted unless opposed by a joint resolution of the Congress.
Read the letter.
OIG Issues Compendium of Unimplemented Regulations
The Department of Health and Human Services (HHS) Office of Inspector General (OIG) issued May 29 its annual compendium of unimplemented regulations. The compendium includes past monetary and nonmonetary recommendations that have not been implemented as well as new recommendations.
Among the list of “priority” unimplemented recommendations that OIG believes represent the most significant opportunities to positively impact HHS’ programs are those concerning oversight over Medicare Part D; Medicare, Medicaid, and State Children's Health Insurance Program integrity; quality of care; and oversight of food, drugs, and medical devices.
New monetary recommendations for the Centers for Medicare and Medicaid Services (CMS) include ensuring accurate Medicare Part D sponsor bids and prospective payments, identifying duplicate Medicare and Medicaid home health payments, and extending additional rebate payment provisions to generic drugs.
OIG stated that by extending rebate provisions to generic drugs CMS would have received an additional $966 million in rebates for the top 200 generic drugs from 1992 to 2004.
New nonmonetary recommendations include ensuring that Part D drugs are available to dual-eligible nursing home residents, implementing safeguards to detect fraud and abuse in Medicare prescriptions drug plans, and increasing the percentage of abbreviated new drug applications reviewed within 180 days.
Read the report.
OIG Says HHS Properly Calculated FMAP Adjustments Resulting From Stimulus Bill
The Department of Health and Human Services (HHS) Office of Inspector General (OIG) found in its first audit report of HHS funds provided under the American Recovery and Reinvestment Act (ARRA) that the agency had properly calculated temporary increases in the Federal Medical Assistance Percentage (FMAP) for the first two quarters of fiscal year 2009.
HHS published a notice in the April 21 Federal Register (74 Fed. Reg. 18235) setting forth the revised FMAPs as required under ARRA, which provides states with an across-the-board 6.2 percentage point bump in their FMAPs as well as the potential for an additional increase based on their unemployment rates.
ARRA set aside $87 billion in federal funds for state Medicaid programs through increases in FMAP.
“We will continue to monitor HHS Recovery Act funds closely so that taxpayers can be assured that their monies are being expended appropriately,” said HHS Inspector General Daniel R. Levinson. “We must help minimize the risks in distributing these substantial funds and maximize the opportunities to prevent waste or abuse before it happens.”
Read the audit report, Review of the Calculations of Temporary Increases in Federal Medical Assistance Percentages Under the American Recovery and Reinvestment Act (A-09-09-00075).
Physicians Not Entitled To Attorney’s Fees Under HCQIA Because Underlying Claims Were Not Frivolous, U.S. Court In Tennessee Says
Defendant physicians are not entitled to attorney’s fees under the Health Care Quality Improvement Act (HCQIA), the U.S. District Court for the Eastern District of Tennessee held May 27, because the plaintiff’s challenge to defendants’ immunity under HCQIA, although ultimately unsuccessful, was not frivolous.
The lengthy litigation began after Dr. Alexander Stratienko, a physician at Erlanger Hospital in Chattanooga, Tennessee, was involved in a physical altercation at the hospital with another physician, Dr. Stephen Monroe.
Before the altercation, Stratienko had questioned Monroe’s qualifications to serve on a committee that credentialed physicians to place carotid stents. Monroe confronted Stratienko who said he moved Monroe aside so he could exit the room they were in.
Following this incident, the Chattanooga-Hamilton County Hospital Authority, which owns and operates the hospital, suspended Stratienko’s privileges for 30 days.
Stratienko sought and obtained a temporary restraining order (TRO) in state court prohibiting the Hospital Authority from suspending his hospital privileges pending the outcome of the lawsuit. The TRO eventually led to a preliminary injunction.
The federal district court subsequently granted summary judgment and dismissed Stratienko’s federal and state constitutional claims and federal antitrust claims against several hospital defendants and remanded the remaining state law claims to state court. The court found the defendants were immune from liability under HCQIA.
Monroe and three other physicians moved for attorney's fees under the relevant provision in HCQIA.
Under Section 11113 of the HCQIA, attorney’s fees may be awarded if "(1) the defendants are among the persons covered by the HCQIA, (2) the standards set forth in § 11112(a) were followed, (3) the defendants substantially prevailed, and (4) the plaintiff's claim or conduct during the litigation was frivolous, unreasonable, without foundation, or in bad faith."
The court noted that while the parties disagreed on whether the first two elements were satisfied here, it need not reach those issues because it found the fourth element dispositive.
In finding that plaintiff’s claims were not frivolous, the court explained that, while plaintiff's claim ultimately was legally insufficient, “he had a legitimate factual basis, based on the speed at which the suspension took place and the procedures that were followed, to believe the HCQIA's peer review requirements were not met and the individual Defendants were not immune.”
The court also rejected Monroe’s argument that plaintiff’s aggressive conduct in demanding copious discovery warranted attorney’s fees.
“While Plaintiff undeniably pursued discovery aggressively, the Court cannot conclude his discovery approach was unreasonable or in bad faith where the magistrate judge overseeing discovery saw no violations justifying sanctions,” the court said.
The court found no merit in Monroe’s argument that Stratienko’s filing the lawsuit before administrative review was complete was evidence of bad faith.
According to the court, HCQIA “does not mandate that aggrieved parties wait for that process to end before attempting to vindicate their rights in court.”
Turning next to defendant’s claim for attorney's fees under 42 U.S.C. § 1988, the court similarly found plaintiff’s constitutional claims were not frivolous as Stratienko had a sufficient basis under Section 1983 to allege violations.
Stratienko v. Chattanooga-Hamilton County Hosp. Auth., No. 1-07-CV-258 (E.D. Tenn. May 27, 2009).
Senator Gregg Offers Healthcare Reform Proposal, Includes Caps On Tax Exclusion For Employer-Sponsored Health Insurance
Senator Judd Gregg (R-NH) outlined June 2 a healthcare reform proposal that includes an individual mandate, subsidies for low-income individuals to purchase coverage, and caps the tax exclusion for employer-sponsored health insurance.
According to a summary, the “centerpiece of this proposal is to give every American access to affordable, low-premium major medical private-market health insurance plan that insurers will be required to offer in every state-regulated health insurance market.”
Under the proposal, all Americans over 18 would be required to have health insurance, and insurers would be required to offer coverage to all applicants regardless of health status.
The proposal would provide direct subsidies to low-income individuals for premiums and deductibles on a sliding scale up to 300% of the federal poverty level, the summary indicated.
The proposal also would require states “to create points of entry for low-income families and individuals to enroll in a health insurance plan and access applicable subsidies.”
Gregg’s plan would limit the tax exclusion for employer-sponsored health insurance premiums and health spending from flexible spending accounts and health saving accounts. According to the summary, contributions in excess of $11,500 annually for family coverage or $5,000 a year for individual coverage would be included in employees’ taxable income.
The proposal also would provide a deduction for the cost of premiums and deductibles for health insurance purchased in the individual market.
In addition, the proposal would require “first dollar coverage for preventive benefits and disease management with minimal co-payments for related office visits.”
Meanwhile, Senate Health, Education, Labor and Pensions Committee Chairman Edward Kennedy (D-MA) circulated a briefing paper setting the groundwork for healthcare reform legislation expected to be unveiled shortly by the Committee.
The briefing paper, dated May 21, includes insurance market reforms, an individual and employer mandate, and a public plan option.
According to the paper, legislation should require guaranteed issue and renewal coverage from health insurers, and also eliminate medical underwriting or pre-existing condition requirements.
The paper also outlines a plan to create a new “American Health Benefit Exchange” to provide consumers with “clear and understandable health insurance choices guaranteed to provide high quality and more affordable options.”
States also could establish their own Exchanges if they opted to do so, the paper said.
The paper also calls for a public choice option “[t]o ensure that fiscal discipline and full accountability are built into this new structure.” View more information about Gregg’s proposal.
Seventh Circuit Says Healthcare Liability Insurer Had No Duty To Defend Nursing Home In FCA Action
The Seventh Circuit held May 20 that a healthcare liability insurer had no duty to defend a nursing home in an underlying lawsuit brought by two former employees alleging it submitted false claims to Medicare and Medicaid for substandard care.
Vanessa Abshner and Lynda Mitchell (relators) sued their former employer Momence Meadows Nursing Center, Inc. and its owner and operator under the federal False Claims Act (FCA) and the Illinois Whistle-blower Reward and Protection Act (IWRPA).
In their whistleblower action, relators alleged Momence had submitted false claims to Medicare and Medicaid because the services billed for failed to meet “professionally recognized standards of health care,” as certified on the nursing home’s annual cost reports.
The complaint alleged, specifically, that Momence failed to maintain minimum staffing levels for nurse and nurse assistants, failed to ensure its residents received their medications as prescribed by their physicians, failed to ensure residents received adequate nutrition and assistance with meals, and failed to provide residents with clean and dry beds, clothes, and regular baths.
The complaint also detailed numerous resident injuries allegedly caused by the substandard care.
Relators sought treble damages under the FCA and the IWRPA for false claims, and damages under the respective statutes’ anti-retaliation provisions.
Health Care Industry Liability Insurance Program (Healthcap) sought a court declaration that it had no duty to defend or indemnify Momence in the lawsuit under the general and professional liability coverage it had issued to the nursing home.
A federal magistrate judge held Healthcap had no duty to defend Momence and the issue of indemnification was not ripe for consideration because Momence had not yet incurred any liability in the underlying action.
Momence appealed. The Seventh Circuit affirmed the magistrate’s decision.
Momence argued the magistrate judge’s decision was “inherently inconsistent” because it found no duty to defend, but left open the possibility of indemnification.
According to the appeals court, the duty to defend subsumes the duty to indemnify. Thus, the sole issue was whether the lower court properly found no duty to defend.
Momence contended relators’ claims involved allegations that specific patients were injured by the supposed improper care and therefore fell under its general and professional liability coverage.
But the appeals court disagreed, noting the statutory damages sought by relators stemmed not from the injuries suffered by residents but from the allegedly false claims submitted to Medicare and Medicaid for the inadequate care.
“Under the FCA and the IWRPA, the plaintiffs do not have to show that any damages resulted from the shoddy care,” the appeals court observed.
Rather, “all the plaintiffs need to show is that Momence billed the government for services and a level of care that it knew it was not providing,” the appeals court said.
Momence also argued relators’ claims for emotional distress under the statutes’ anti-retaliation provisions counted as “bodily injuries” under the policy.
Even if this was the case, the policy’s employment-related practices exclusion foreclosed coverage for “any claim” arising out of the termination of an individual’s employment.
Health Care Indus. Liability Ins. Program v. Momence Meadows Nursing Center, Inc., No. 08-1997 (7th Cir. May 20, 2009).
Access To Inpatient Beds Cited As Main Reason For Crowding In Hospital EDs, GAO Reports
Patients visiting hospital emergency departments (EDs) continue to face crowded conditions and longer than recommended wait times, according to a new report issued by the Government Accountability Office (GAO).
One of the main reasons for ED crowding, according to GAO’s literature review and interviews with officials, was the lack of readily available inpatient beds.
According to the report, competition between hospital admissions from the ED and scheduled admissions—for example, elective surgeries—is among the barriers to accessing inpatient beds.
The report cited a number of other factors for ED crowding, including patients’ lack of access to primary care services and a shortage of available on-call specialists.
GAO also noted wait times in the ED have continued to increase and in some cases exceed national standards. For example, GAO said, the average wait time to see a physician for emergent patients—who should be seen in one to 14 minutes—was 37 minutes in 2006.
A GAO report in 2003 about crowding in hospital EDs found two out of every three metropolitan hospitals reported going on ambulance diversion—where hospitals request ambulances go to other presumably less crowded hospitals.
Based on national data, GAO said in its latest report that one-fourth of hospitals reported going on diversion at least once in 2006.
The Department of Health and Human Services (HHS) said the report showed ED wait times continue to increase and frequently exceed national standards.
HHS did raise, however, several limitations to the report, including that GAO’s literature review did not include articles published before 2003 nor studies conducted by other countries.
HHS also commented that the indicators of crowding GAO used—i.e., ambulance diversion, wait times, and patient boarding—also had limitations.
“As we noted both in our 2003 report and in this report, these indicators have limitations but, in the absence of a widely accepted standard measure of crowding they are used by researchers to point to situations in which crowding is likely to occur," GAO said.
Read the report, Hospital Emergency Departments: Crowding Continues to Occur, and Some Patients Wait Longer than Recommended Time Frames (GAO-09-347).
Barbara Ramentol, the owner of a pharmacy in the Miami area, pled guilty to executing a scheme occurring over a two-and-a-half year period that defrauded the Medicare program by causing the pharmacy to submit fraudulent claims for durable medical equipment (DME), medications, and other healthcare items and services that were never provided to Medicare beneficiaries, announced U.S. Attorney for the Southern District of Florida R. Alexander Acosta on May 28. According to court documents, Ramentol caused her pharmacy to submit approximately $5.7 million in fraudulent claims to Medicare, and laundered the proceeds of this scheme by writing tens of thousands of dollars in checks to various entities. Read Acosta’s press release
Queens Medical Center (QMC), in Honolulu, Hawaii, paid the federal government and the state Medicaid program a total of $2.5 million to settle two whistleblower lawsuits brought by former QMC pharmacy technicians alleging that QMC overbilled the Medicare and Medicaid programs, as well as TRICARE, over a three-year period, announced U.S. Attorney for the District of Hawaii Edward H. Kubo, Jr. on May 28. According to the allegations in the lawsuits, QMC submitted false bills for pharmaceuticals dispensed at the hospital, and billed federal programs for services provided by residents without the level of supervision required by federal rules. In addition to the financial settlement, QMC agreed to enter into a corporate integrity agreement with the U.S. Department of Health and Human Services’ Office of Inspector General (OIG). Read Kubo’s press release
U.S. Attorney for the Southern District of Indiana Timothy M. Morrison announced June 3 that James M. Moore, the operator of a medical transportation business in Salem, Indiana, was charged with defrauding the state Medicaid program out of approximately $348,000 over a four-and-a-half year period. According to court documents, Moore knowingly billed the Medicaid program for transporting Medicaid recipients who were able to walk (ambulatory) as if they were unable to walk (non-ambulatory), thereby doubling his reimbursement for the transportation services provided. Read Morrison’s press release
George Williams, the owner and operator of Quick Response Medical Professionals, P.C. (QRMP), as well as several QRMP employees and other individuals, were indicted on charges of unlawfully distributing millions in prescription drug controlled substances such as Oxycontin and billing Medicare for the drugs, announced U.S. Attorney for the Eastern District of Michigan Terence Berg on June 4. According to the indictment, the scheme occurred over a two-year period, and involved recruiting “patients” for doctor visits for which they were paid $220 per visit to obtain prescriptions for drugs with a high street value. The prescriptions would then be given to QRMP employees, who would eventually fill the prescriptions at cooperating pharmacies and then sell the drugs illegally on the street market. QRMP employees allegedly would also bill Medicare for the unnecessary doctors’ visit and unnecessary medical tests. During 2008, Medicare was billed over $800,000, and paid over $480,000 to QRMP. In addition to criminal prosecution, the indictment seeks forfeiture of proceeds obtained from the alleged scheme. Read Berg’s press release
Acting U.S. Attorney for the District of New Hampshire Michael J. Gunnison announced May 27 that Mento Nnana Kaluanya, a resident of Houston, Texas, was indicted on charges of healthcare fraud in connection with a DME business that he operation from a storefront in Derry, New Hampshire. According to the indictment, after Kaluanya singed a Medicare provider agreement for his New Hampshire-based DME business, he routinely submitted fraudulent claims to Medicare to obtain reimbursement for DME that was not prescribed by a physician or medically necessary. In addition, Kaluanya allegedly submitted numerous claims for DME based upon documents containing forged physician signatures. Over a two-year period, Kaluanya’s company received more that $1.5 million in payments from Medicare as a result of the scheme. Read Gunnison’s press release
Tyesha Bradwell, a former health technician at a Veterans Affairs Department outpatient clinic in Tallahassee, Florida, was arrested on charges of defrauding the state Medicaid program out of more than $6,000, announced Florida Attorney General Bill McCollum on June 4. According to a press release, state investigators discovered that Bradwell was billing the Medicaid program for respite care services she never provided, and also was billing the program for providing care on Sundays when the specific recipient was with her guardian. Read McCollum’s press release
Jorge Alonso, a co-owner of a HIV/AIDS infusion-therapy clinic in Miami, Florida was arrested on charges of defrauding the state Medicaid program out of more than $44,000, Florida Attorney General Bill McCollum also announced June 3. An investigation launched by the state revealed that Alonso and others were paying Medicaid recipients for the use of their recipient numbers so that the clinic could order the infusion treatment and bill the Medicaid program. Investigators also found that Alonso directed clinic employees to falsify patient records and daily sign-in sheets, according to McCollum. Read McCollum’s press release
New York Attorney General Andrew M. Cuomo announced June 1 that Ronald Kehinde, the operators of a home health aide training school in the Bronx, was arrested on charges of stealing more than $50,000 from the state Medicaid program through a scheme that involved issuing phony certifications to health aides. Kehinde was charged with grand larceny for operating an almost identical home health aide training scam in 2007, for which he was barred from participating in the state’s Medicaid program. Nonetheless, Kehinde was able to set up a second training program by submitting a fraudulent application to the state Department of Health (DOH). According to the allegations, investigators found students in the training program did not have to complete the requisite hours of training required by the state to obtain a home health aide certificate. In addition, Kehinde allegedly stole money from students by charging them more than the DOH allows such programs to charge applicants. Read Cuomo’s press release.
U.S. Court In Puerto Rico Dismisses EMTALA Claim Of Patient Left Unattended In ER
The U.S. District Court for the District of Puerto Rico held May 28 that a plaintiff who was left unattended for long periods of time after coming to the emergency room did not state a claim under the Emergency Medical Treatment and Labor Act (EMTALA) because she was eventually admitted to the hospital, thereby ending the hospital's duties under EMTALA.
After dismissing the plaintiff’s EMTALA claims, the court also declined to exercise supplemental jurisdiction over her state law claims and dismissed those claims without prejudice.
Plaintiff Nora Vazquez-Rivera, who was sixteen weeks pregnant, presented to the emergency room at Hospital Episcopal San Lucas (hospital) complaining of vaginal bleeding and severe abdominal pain.
A sonogram was performed and plaintiff was told that the baby looked fine. No other diagnostic tests were performed nor was any attempt made to stop the bleeding.
After being left unattended for several hours without receiving any further treatment, plaintiff was told she would be admitted to the maternity ward under the care of her regular obstetrician, Dr. Maryrose Concepcion-Giron.
However, plaintiff was never evaluated by Concepcion-Giron and was left unattended until the next morning when she suffered a miscarriage.
Dr. Luis A. Acosta-Garcia then performed a surgical procedure called a curettage to remove the remains of the placenta from her uterus.
Acosta-Garcia did not remove all of the remains and plaintiff had to undergo another surgery, complications of which rendered her sterile.
Plaintiff and her husband sued the hospital, Concepcion-Giron, and Acosta-Garcia (collectively, defendants), claiming violations of EMTALA. Defendants moved to dismiss.
The court first found plaintiffs were unable to state a claim for failure to provide an appropriate screening under EMTALA.
Noting that faulty screening, by itself, does not constitute an EMTALA violation, the court explained that the plaintiffs “do not allege that the Hospital refused to screen Plaintiff Vazquez or that the screening that the Hospital provided to Plaintiff was inconsistent with regular screening procedures for similarly-situated patients” as required to state a claim under EMTALA.
The court next found plaintiffs also failed to state a claim under EMTALA’s stabilization provisions.
The court explained that plaintiff was neither transferred nor discharged from the hospital during the period of time that plaintiffs alleged an EMTALA violation.
Rather, plaintiff was eventually admitted to the maternity ward, “thereby terminating the Hospital's potential liability under EMTALA,” the court found.
In so holding, the court relied on “persuasive authority” from the Eleventh Circuit holding that there is no duty imposed on participating hospitals by EMTALA's stabilization requirement to provide treatment to individuals outside of the context of a transfer or discharge. See Harry v. Marchant, 291 F.3d 767 (11th Cir. 2002).
Vazquez-Rivera v. Hospital Episcopal San Lucas, Inc., No. 08-2223 (JP) (D.P.R. May 28, 2009).
U.S. Court In Texas Says Government Sufficiently Alleged Fraud Scheme To Bill Medicare/Medicaid For Orthotics Not Supplied By Licensed Podiatrist
A federal court in Texas rejected May 26 defendants’ motion for a bill of particulars, finding the government’s indictment on Medicare/Medicaid fraud charges adequately put defendants on notice of the charges against them.
The U.S. District Court for the Southern District of Texas also refused to dismiss the indictment for failure to allege a scheme to defraud.
According to the court, the government had adequately alleged that defendants were able to bill Medicare/Medicaid for services rendered by an unlicensed individual because they represented to state and federal authorities that they were providing the services of an onsite licensed orthotist for the sole purpose of charging federal healthcare programs.
Marguerite Garcia owned Orthopedic Specialists D.M.E., Inc., a supplier of durable medical equipment for Medicare/Medicaid. Her husband, Eli Garcia, was employed by Orthopedic Specialists to provide orthotics and prosthetic goods to customers and bill Medicare and Medicaid.
Mr. Garcia was not a state-licensed podiatrist, orthotist, or prosthetist. Since September 1999, Texas law requires any person practicing orthotics and/or prosthetist to be licensed and any facilities, like Orthopedic Specialists, to be accredited.
Because Mr. Garcia was not state-licensed, Orthopedic Specialists lost its accreditation and Medicare revoked its supplier number.
According to the indictment, the Garcias then entered into a scheme with defendant John Martinez and his brother who were both licensed orthotists. They agreed to be onsite licensed practitioners for Orthopedic Specialists so that the Garcias could obtain accreditation and have their Medicare supplier number reinstated.
The government alleged the Martinez brothers lent their names and licenses to Orthopedic Specialists with the understanding that Mr. Garcia would perform the services of an orthotist and bill Medicare and Medicaid accordingly.
The government contended defendants’ billing statements used codes reflecting that therapeutic shoes and inserts for diabetic patients were provided as having been “fitted and furnished” by a licensed professional.
Defendants moved for a bill of particulars arguing the government failed to state with specificity what false and fraudulent representations were made to promote the alleged scheme.
According to defendants, Mr. Garcia was authorized to sell “off-the-shell” orthotics and in fact delivered the billed for goods and services.
But the court disagreed, noting the very definition of “custom molded” or “extra-depth” shoes for diabetic patients required fitting by a podiatrist or qualified individual.
Here, the government adequately put defendants on notice of the charges by alleging a scheme to defraud Medicare/Medicaid by billing for services provided by a non-licensed individual.
Moreover, the court noted, a bill of particulars was not warranted because defendants had received open discovery from the government.
On similar grounds, the court denied defendants’ motion to dismiss, emphasizing the government’s allegations that the codes used on the bills to Medicare/Medicaid reflected that specialized services were provided and not merely the sale of an off-the-shelf orthotic item.
Finally, the court rejected defendant Martinez's motion to dismiss the indictment on the ground that the laws rendering his conduct in violation of federal law were unconstitutionally vague.
According to the court, the indictment was sufficiently straightforward and Martinez could argue to the jury the degree to which the regulations failed to provide notice as to the “precise degree of alteration that is allowed without a licensed practitioner’s involvement.”
United States v. Garcia, No. C-09-236 (S.D. Tex. May 26, 2009).
White House Report Says Healthcare Reform Will Benefit Economy
President Obama’s Council of Economic Advisors released June 2 a report that analyzed the economic impacts of healthcare reform and concluded successful healthcare reform would have major benefits for the U.S. economy.
According to the report, slowing the annual growth rate of healthcare costs by 1.5% would increase real gross domestic product (GDP), relative to the no-reform baseline, by over 2% in 2020 and nearly 8% in 2030.
Accordingly, income in 2020 for a typical family of four would be approximately $2,600 higher than it would have been without reform, the report said.
Long-time health reform champion Senator Edward Kennedy (D-MA) said the "report emphasizes the major economic benefit to the nation that will also be achieved if we make health care a basic right for all."
"We can’t afford to miss this chance to give the American people, at long last, the health care they deserve," Kennedy added.
Health reform also would slow increases in the federal budget deficit and lower the unemployment rate, according to the report.
The report argued that reform is needed to help the economy and the ailing system is evidenced by the wide disparities seen in Medicare spending across states.
“These large variations in spending suggest that up to 30 percent of health care costs (or about 5 percent of GDP) could be saved without compromising health outcomes,” the report said.
The report makes the case for a two-prong approach to health reform: slowing the rate of growth of healthcare costs and increasing insurance coverage.
According to the report, a slow-down in healthcare cost growth would increase the standard of living “by freeing up resources that can be used to produce other desired goods and services.”
In addition, the report noted that when healthcare costs are rising more slowly, “the economy can operate at a lower level of unemployment without triggering inflation.”
Expansion of health insurance coverage would likewise have a positive economic impact, the report argued. Specifically, better coverage would increase the economic well-being of the uninsured by substantially more than the costs of insuring them.
According to the report, its findings suggest that the economic benefits of expanded coverage would be over $180 billion a year, “perhaps in the range of $200 to $250 billion.”
Even after subtracting the net cost of providing coverage of about $125 billion per year, the report said, a large gain from covering the uninsured remains at between $75 billion and $125 billion per year, or about two-thirds of a percent of GDP.
Expanded insurance coverage would also increase labor supply and improve the functioning of the labor market, the report said.
The report concluded that, “[w]hile there is no guarantee that the policy process will generate this degree of change, the benefits of achieving successful reform would be substantial to American households, businesses, and the economy as a whole.”
In comments made June 2 before a meeting with Senate Democrats, President Obama called healthcare reform "a necessity" and said the period of time between now and the Senate's August recess "is going to be the make-or-break period" for reform.
Stressing the importance of both cost control and increased coverage, Obama advocated reforming "the underlying system" by "promoting best practices, not just the most expensive practices."
Obama said that, at his meeting with the senators, they would work on figuring out how to create reimbursement incentives, getting physicians to work together effectively, and prevention and wellness initiatives to drive down costs.
Read the report, The Economic Case for Health Care Reform.
View Obama's remarks.