The Medicare Payment Advisory Commission (“MedPAC”) held its monthly public meetings in Washington, D.C., on November 1-2, 2018. The purpose of this and other MedPAC public meetings is for the commissioners to analyze existing challenges and issues within the Medicare program and to provide future policy recommendations to Congress. MedPAC issues these recommendations in two annual reports, one in March and another in June. These meetings offer a comprehensive perspective on the current state of Medicare as well as future outlooks for the program.

As thought leaders in healthcare law, Epstein Becker Green monitors MedPAC developments to determine how regulations and policies will impact the health care marketplace. Here are our five biggest takeaways from the November meeting:

  1. MedPAC Reviewed Mandate Related to Long-Term Care Hospitals and Presented Initial Findings Using Data Through 2016

In response to a congressional mandate due in June 2019, the Commission reviewed operational changes made by Long-term Care Hospitals (LTCHs) in response to policy changes and performance trends, patterns of post-hospital discharge to other post-acute care and hospice providers, and LTCH quality data since the implementation of the new dual-payment rate structure.  For operational changes, the degree of change that occurred varied from facility to facility.  It was reported that some LTCHs either changed their admission patterns to admit only patients who met criteria, continued to take beneficiaries who do not meet the criteria, or halted admitting cases that did not meet criteria.  It was also reported that some LTCHs made efforts to contract with private payors, including Medicare Advantage plans, in order to expand the mix of patients and payors.  Additionally, facilities examined increased their capabilities adding bariatric and ICU beds as well as telemetry services.  However, these changes often led to a decline in occupancy and closures.  Over 40 facilities closed (roughly 10% of the industry) – most located in an area with other LTCHs.

In terms of discharges, the share of cases that met the criteria for the new dual-payment rate structure increased from 50% to 64% over the last few years.  This was attributed to some facilities having the capacity to change their admission patterns and take a higher share of cases that meet the criteria.  Finally, LTCH quality data showed that measures of unadjusted direct acute-care hospital re-admissions, in-LTCH mortality, and 30-day mortality remained stable since 2015.  Whereas 30-day mortality and re-admissions have remained at similar rates, the rate for in-LTCH mortality has increased.  However, the Commission could not conclude whether these changes in quality were the result of implementing the dual-payment rate structure.

  1. MedPAC Discusses Ways CMS Could Improve the Use of Functional Assessment in the Medicare Program

MedPAC staff examined the pros and cons of the use of functional assessment in the Medicare program to improve functional assessment usage in the Medicare Program.  MedPAC highlighted that patient assessment data does not always reflect the actual care needs of patients.  Concerns relative to function data reported by Inpatient Rehabilitation Facilities (IRFs), Home Health Agencies, Skilled Nursing Facilities (SNFs), and Long-term Care Hospitals (LTCH) were expressed in regards to payment incentives received by these entities.  When reporting rules changed relative to financial incentives, the mentioned entities changed the amount of therapy they offered and how they coded therapy modalities.  MedPAC believed that if providers were making these changes based on financial incentives, the recording of disability would likely increase since payments are tied to functional status.  Thus, the Commission suggested that CMS could help improve the accuracy of these provider-reported data or collect information about patient function by (1) improving monitoring of provider-reported assessment and penalize providers found misreporting; (2) requiring hospitals to complete discharge assessments to patients referred to post-acute care; and (3) gathering patient-reported outcomes (PROs).

  1. Promoting greater Medicare-Medicaid integration in dual-eligible special-needs plans

MedPAC presented potential policies that would promote greater Medicare-Medicaid integration in dual-eligible special needs plans (“D-SNPs”) to improve care coordination and health outcomes.  Under the existing structure, D-SNPs only enroll dual eligible beneficiaries compared to regular plans which open up to all beneficiaries in their service area.  D-SNPs are required to follow an evidence-based model of care and must take steps to integrate Medicaid coverage by forming contracts with states that meet certain minimum standards.  However, there are D-SNPs that require higher standards for integration that are known as fully integrated D-SNPs, or FIDE SNPs, which enables such plans to receive higher Medicare payments.  Under the FIDE SNP framework, the plan must have a capitated Medicaid contract, which includes acute and primary care services along with services like nursing home care.  Currently, the challenge has been the low levels of integration as most plans either do not provide Medicaid services or provide a limited subset, such as Medicare cost sharing.  Factors that have limited Medicaid integration in D-SNPs include the large number of D-SNP enrollees that are partial-benefit dual eligible as well as misaligned enrollment.

MedPAC proposed a couple of changes that could assist in achieving greater integration.  First, it was proposed that there should be a limit on the ability of partial dual beneficiaries to enroll in D-SNPs.  Secondly, the Commission proposed requiring D-SNPs to follow an aligned enrollment practice where beneficiaries cannot enroll in a D-SNP unless they were enrolled in a Managed Long Term Services and Supports (“MLTSS”) plan offered by the same parent company.  The goal is that this policy would ensure that all D-SNP enrollees are receiving both Medicare and Medicaid benefits from the same parent company while laying the foundation for integration into other areas, such as developing a single care coordination process overseeing all Medicare and Medicaid service needs.

  1. MedPAC Reviews Its Recommendations for Improving the Medicare Advantage Quality Bonus Program and Provides Potential Next Steps

MedPAC led off its presentation by summarizing the Medicare Advantage (“MA”) quality bonus program, which has been implemented since 2012. This program pays bonuses to MA plans based on their overall “star rating,” which tracks and weighs forty-six quality measures. MA plan contracts greater than or equal to a 4-star rating receive the bonus, which ultimately increases a plan’s ability to receive rebate dollars (and therefore attract beneficiaries by reducing enrollee premiums and/or offering coverage to a greater variety of services). Overall star ratings and the breakdown of MA plans’ individual quality measures are publicly reported and can be accessed via Medicare’s Health Plan Finder. MedPAC then expressed its concern for the effectiveness of these star ratings and resulting bonus payments. Notably, these star ratings are awarded at the MA contract level, meaning that the star rating often applies to a vast geographical region. Indeed, according to MedPAC, “about 40 percent of enrollees of MA [Health Maintenance Organizations] and local [Preferred Provider Organizations] are in contracts that include enrollees from non-contiguous states.” Moreover, MedPAC stated that boosted star ratings are the result of health care “consolidations,” where the acquired MA contract inherits the star rating of the “surviving” MA contract. These factors have led to “unwarranted bonus payments” and decreased reliance on star rating as an indicator for plan quality in the enrollee’s region.

In its March 2018 report to Congress, MedPAC recommended two courses of action to address these flaws: (1) freeze quality reporting units at pre-consolidation so these plans do not inherit the ratings of their acquirer and (2) require quality reporting at local market level instead of the large MA contract level. In the meeting, MedPAC stated that the Bipartisan Budget Act of 2018 partly addressed the first recommendation—the act requires an average of quality results for consolidated contracts effective in year 2020.[1]

MedPAC then provided its current recommendations for improving the MA quality bonus program. MedPAC advocated for (1) restructuring the MA bonus evaluation system to remove the current seventeen “process measures”[2] and (2) implementing a “claims-based” outcome measures based on MA claims and encounters, which would, according to MedPAC, improve accuracy and uniformity, align more closely with fee-for-service quality results, and lessen reporting burdens. MedPAC also presented “cliff” and “plateau” issues with the bonus cutoff[3] and offered the potential solution of “a continuous scale for bonus payments” similar to its hospital value incentive program (“HVIP”).[4] MedPAC also presented this solution to address the “tournament model” of the current star system.[5] Finally, MedPAC proposed solutions to various issues with the quality measures (e.g., uneven measure adjustments, narrow differences in measure results, etc.). MedPAC plans to further discuss how to move the MA quality bonus program towards budget neutrality.

  1. MedPAC Reviews Medicare Advantage Encounter Data and Introduces Proposed Policy Options for the Program

In 2012, CMS started to collect “encounter data”[6] from MA plans, mainly for purposes of risk adjustment. MedPAC stated that it has access to this encounter data for 2012–2014 (and “preliminary files” for 2015) for six provider types/settings.[7] For each of these settings, MedPAC validated encounter data by comparing it with other data sources of MA utilization. MedPAC uncovered three broad categories of MA encounter data issues in its review: (1) MA plans “are not successfully submitting encounters for all settings,”[8] (2) “about 1 % of encounter data records attribute enrollees to the wrong plan,”[9] and (3) there were substantial differences in encounter data from other data sources used for comparison. MedPAC focused its discussion on addressing this third issue.

MedPAC compared encounter data with four other MA utilization sources that originate from provider reports (including hospitals, home health agencies, skilled nursing facilities, and dialysis facilities). Encounter data was not consistent with these reports. In 2015, the percentage of MA enrollees reported in encounter data were consistent with the following reports:

  • 90% encounter data consistency with data reported by hospitals (for inpatient stays)
  • 89% consistency with data reported by dialysis facilities (for having dialysis services)
  • 49% consistency with data reported by skilled nursing facilities (for skilled nursing stays)
  • 47% consistency with data reported by home health agencies (for home health services)

These results, combined with MA plans’ lack of encounter data submissions, demonstrate a need for CMS to better assess encounter data completeness and ensure consistency and ability to utilize this data for risk adjustment. MedPAC then gave three policy options to incentivize MA plans to submit complete encounter data: (1) to expand the performance metric framework (e.g., to include specific information about missing encounter data); (2) to apply payment withholds proportional to degree of incomplete encounter data submissions; and (3) to collect encounter data through Medicare Administrative Contractors (which already process fee-for-service claims for all Part A and B services). By enforcing complete encounter data through these methods, MedPAC hopes to learn more about how care is provided to MA enrollees and ensure Medicare benefits are properly administered.

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[1] MedPAC expressed concern that various “consolidation strategies” may still result in unwarranted higher star ratings and accompanying bonus payments.

[2] MedPAC asserted that these administrative measures could effectively be monitored by compliance activities.

[3] Currently, the 4-star requirement for bonus acquisition causes two distinct issues. Contracts with a overall rating of less than 3.75 stars (which is rounded to 4 stars) do not receive any bonus payments (i.e., the “cliff”), and contracts with an overall rating above 4 stars receive “the same benchmark increase” as those with 4-star ratings (i.e., the “plateau”) and there are minimal incentives to reaching star rating above a 4.

[4] A recent blog post discussed MedPAC’s review of its new HVIP in the September meetings.

[5] Under this tournament model, 5-star plans exist despite decreases in overall quality. MedPAC also suggested the establishment of pre-set objectives to promote improvement.

[6] Health care providers generate this “encounter data,” which includes detailed documentation of diagnosed clinical conditions and items and services furnished to treat these conditions.

[7] The six provider types/settings MedPAC referred to are “physician/supplier Part B,” inpatient hospital, outpatient hospital skilled nursing facility, home health, and durable medical equipment.

[8] According to MedPAC, only 80% of MA contracts have “at least one encounter record for each of the six settings.”

[9] MedPAC asserts that this issue may be corrected by changing data processing.

The Centers for Medicare & Medicaid Services (CMS) issued a final rule on November 1, 2018 that updates physician fee schedule (PFS) payments for calendar year (CY) 2019 and finalizes several policies. The final rule includes amendments to the regulations promulgated under Section 216 of the Protecting Access to Medicare Act of 2014 (“PAMA”) intended to increase the number of clinical laboratories that qualify as an “applicable laboratory” for reporting purposes; specifically (1) removal of payments received from Medicare Advantage (MA) Plans for determining applicable laboratory status and (2) the use of the Form CMS-1450 14x Type of Bill (TOB) to define an applicable laboratory.

Before the start of the next data collection period (starting January 1, 2019) clinical laboratories will need to determine how these amendment may have impacted their applicable laboratory status.  Epstein Becker Green is working with our clients to provide counsel how to comply with these amendments and determine how to record and report its billing data to CMS.

Medicare Advantage (MA) Plan Payments. The first amendment is simple and straight forward.  CMS has removed MA Plan payments to laboratories from the calculation of total Medicare revenues.  The change would remove such Medicare revenue from the denominator of the fraction that is used to determine whether a laboratory received more than 50 percent of its revenues from PFS and Clinical Laboratory Fee Schedule (CLFS) services.  CMS explained that it was not logical to consider MA Plan payments in calculating Medicare revenues received by a laboratory, while also requiring the applicable laboratory to report such payments as an MA Plan is defined as a private payor under PAMA (42 C.F.R. § 414.502).  As such, laboratories that furnish Medicare services to a significant number of beneficiaries enrolled in MA plans may now meet the majority of Medicare revenues threshold criterion, and therefore, qualify as an applicable laboratory.

CMS 1450 14X Type of Bill (TOB).   This amendment is more complicated. The definition of an “applicable laboratory” now includes clinical laboratories that receive at least $12,500 of Medicare revenues from the CLFS for claims submitted using the CMS 1450 14X bill type, which is used by some hospital outreach laboratories to bill for laboratory services provided to non-patients.  CMS has essentially created a de facto entity (“hospital outreach laboratory”) that meets the definition of an applicable laboratory based on how the hospital laboratory bills Medicare Part B for a sub-set of test services.

The problem is that the 14X bill type is a billing mechanism for claim submission to Medicare Party B and is not used by all private payors. This poses the question of how a hospital laboratory will correctly identify and collect applicable information associated solely with this de facto entity (hospital outreach laboratory). CMS does not adequately address in the final rule how the term “non-patient” is defined for purposes of determining private payor rates that the hospital laboratory must report.  CMS needs to provide clarity in sub-regulatory guidance and provider education materials on this issue.

Interestingly, in its response to the proposed rule, the American Hospital Association included data that showed hospital outpatient claims reported using 14X bill type was only 12.20%, whereas the percentage of hospital outpatient claims billed using the 13X bill type represents was 87.37% of all hospital outpatient claims.

In 2014, CMS created narrow exceptions for circumstances when hospitals function as independent laboratories and instructed hospitals to use the 14X TOB to obtain separate payment only in the following circumstances: (1) non-patient (referred specimen), (2) hospital collects a specimen and furnishes only the outpatient labs on a given date of service; or (3) hospital conducts outpatient lab tests that are clinically unrelated to other hospital outpatient services furnished for the same day. “Unrelated” means the laboratory test is ordered by a different practitioner than the one who ordered the outpatient services and for a different diagnosis.  However, CMS permits hospitals to bill under 13X TOB in circumstances (2) and (3) above when non-referred laboratory tests are eligible for separate payment.  Most hospitals likely opt to bill under 13X TOB when eligible as those revenues are not taxed as income, as compared to revenues under a 14X TOB which are taxable income as an unrelated business expense.

Ironically, CMS has argued in a federal lawsuit and proposed rules that Congress did not intend hospital outreach laboratories to qualify as applicable laboratories.  Moreover, CMS has repeatedly argued in a federal lawsuit and the final rule that there is no reason to believe that increasing the level of participation would result in a measurable cost difference under the Medicare Part B CLFS payment rate.  In the final rule, however, CMS states “[w]e believe that we will only know the impact of the data on CLFS rates by collecting data from hospital outreach laboratories. . . . [h]owever, if it becomes apparent that data from hospital outreach laboratories do not result in a significant change in the weighted median of private payor rates, we will revisit the use of the CMS-1450 14x TOB through future rulemaking.”   Ultimately, CMS suggests that these amendments were actually made to placate stakeholder concerns regarding the number of applicable laboratories reporting applicable information from the initial data reporting period.

The Department of Justice (DOJ) announced this week that it has entered into a settlement agreement with Davita Medical Holdings (Davita) for $270 million dollars to resolve certain False Claims Act liability related to Medicare Advantage risk adjustment payments.

As the settlement agreement describes, Davita acquired HealthCare Partners (HCP), a large California based independent physician association in 2012. HCP, subsequently Davita Medical Group (or Davita), operated as a medical service organization (MSO) who contracted with Medicare Advantage Organizations (MAOs) to provide services and manage the care of its beneficiaries. Davita would provide beneficiary diagnostic information to its MAOs which would be used by the Centers for Medicare and Medicaid (CMS) to calculate the MAO’s risk adjusted capitated payments under the program’s risk adjustment payment methodology. Payments would then be made by MAOs to DaVita under the terms of its risk sharing arrangements.

The settlement resolved allegations raised in the qui tam action filed in District Court for the Central District of California, United States ex rel. Swoben v. Secure Horizons, et al., by James Swoben, a former employee of a MAO that contracted with HCP. Swoben alleged that HCP hired coding companies to perform “one-way” retrospective reviews of member records, whereby the MAO would submit additional diagnosis codes to CMS but not validate previously submitted codes.

The settlement further resolves allegations related to incorrect coding guidance, unsupported but un-retraced codes identified during audits, in-home assessments, incorrect diagnosis mapping to appropriate ICD-9 codes in its electronic medical record, and acute condition codes in the primary care setting.  In its press release, the DOJ emphasized that the failure by Davita to delete unsupported or undocumented diagnosis codes caused the MAOs to retain payments from CMS that they were otherwise not entitled.

Importantly, Davita as downstream provider to MAOs, did not directly submit claims to the Centers for Medicare and Medicaid. Accordingly, this settlement is extremely significant to downstream entities such as MSOs, IPAs, physician practices and risk adjustment vendors who can themselves potentially be subject to “causes to be submitted” and other theories under the FCA.

Epstein Becker Green’s Jason Christ, Teresa Mason and Tom Hutchinson served as counsel and advisor to the Member Representative of the former owners of HCP. Epstein Becker Green was actively involved in co-defending this matter.

A variety of traditional and non-traditional investors are starting to capitalize on the stability of the Medicare Advantage Program and expansion of the Medicare Advantage Health Plan Market.  These companies are leveraging sophisticated technological interfaces, data, and telemedicine to help improve the patient experience and to maximize the Triple Aim.

Why Medicare Advantage?

Medicare Advantage plans are offered by private insurance companies subject to certain standards established by the Centers for Medicare & Medicaid Services (“CMS”).  While the Medicare Advantage health plans are responsible for meeting specified levels of benefits and service standards and receive premium funding from the government, they have a high degree of autonomy on how they administer the plans to cover enrolled Medicare beneficiaries.  Medicare Advantage funding is risk adjusted for the health status of the enrollee and as a result, effective Medicare Advantage plans (“MA Plans”) are highly dependent upon real time data sharing.

Disfavored no more

Recent developments show that Medicare Advantage has more bipartisan support than the ACA Marketplace and is less susceptible to political intrigues.  However, this was not always the case. Not too long ago, Medicare Advantage was considered a “privatization of Medicare” and insurance companies were accused of making a profit off of the Medicare Program.  In February 2013, federal officials announced a 2.2% cut to Medicare Advantage reimbursement.  The political attacks on Medicare Advantage were not well received by the Medicare Advantage enrolled seniors who vocally began to defend their beleaguered program.  The patients began a campaign of communication to members of Congress, touting the benefits of engaged Medicare Advantage healthcare providers and health related initiatives such as fitness and nutrition counseling.  This caught the skeptics between a rock and a hard place.  Some Congressional Democrats have noted that they support killing the program but cannot because senior constituents love it.  After significant grassroots lobbying, coalition building, and industry efforts, the proposed 2.2% reduction was transformed into a minor increase by April 2013.  This turnaround was primarily due to patient and provider advocacy with thousands of seniors participating in letter writing campaigns to protect their Medicare Advantage Program.  Medicare Advantage went from a political pariah to a bipartisan tolerated program within a few years.

Medicare Advantage is here to stay

Fast forward to 2018, Medicare Advantage is marketed as an innovative health care option that will provide more choices and lower premiums.  The Trump Administration is providing greater flexibility to companies offering benefits in Medicare Advantage plans.  Medicare Advantage is expanding beyond the retiree states of Florida, Arizona, and California with significant inroads in all fifty states.  The growth has caught the eye of innovative healthcare investors and market consolidation has produced larger plans with stronger infrastructure including captive staff-model delivery systems.  Medicare Advantage continues to grow with 33% of Medicare eligible beneficiaries currently enrolled in MA Plans.  Significant opportunities exist for companies which already possess sophisticated data analytics and coordinated care systems.  Notably, one such player, Clover Health, announced on August 27, 2018 that it is also launching Medicare Advantage plans in six new markets in 2019.  Clover Health is a San Francisco based startup that uses data analytics and artificial intelligence to deliver health care.  Currently, Clover Health provides services for 30,000 seniors and others eligible for Medicare in parts of Georgia, New Jersey, Pennsylvania and Texas.  Only time will tell how successful starts ups such as Clover Health will be in the Medicare Advantage marketplace.  However, this investment is one indicator that despite the rhetoric around health care in America, Medicare Advantage is here to stay.

The Centers for Medicare and Medicaid Services (“CMS”) issued on April 2, 2018, an advanced copy of the final rule title “Medicare Program; Contract Year 2019 Policy and Technical Changes to the Medicare Advantage, Medicare Cost Plan, Medicare Fee-for-Service, the Medicare Prescription Drug Benefit Programs, and the PACE Program” (“Final Rule”). This Final Rule will be published in the April 16, 2018 issue of the Federal Register.

This Final Rule implements provisions of the proposed rule that CMS released titled “Medicare Program; Contract Year 2019 Policy and Technical Changes to the Medicare Advantage, Medicare Cost Plan, Medicare Fee-for-Service, the Medicare Prescription Drug Benefit Programs, and the PACE Program” (“Proposed Rule”), which was published in the Federal Register on November 28, 2017.

Upon review of over 1,600 comments, CMS finalized many of the provisions as proposed or with minor revisions, deferred addressing some proposals until a later date, or opted not to finalize some provisions as proposed in the Proposed Rule.

We have summarized major provisions of the Proposed Rule in a three part Client Alert which EBG published earlier this year. For the provisions summarized in our Client Alert, the following chart reflects CMS’s actions in the Final Rule:

Provision CMS Action
Part 1 Client Alert: Negotiated Prices
Request for Information Regarding the Application of Manufacturer Rebates and Pharmacy Price Concessions to Drug Prices at the Point of Sale

 

Not Finalized

 

CMS is not finalizing any proposal at this time. Any new requirements would be addressed through future rulemaking.

Part 2 Client Alert: Beneficiary Cost, Access, and Protection
Part D Tiering Exceptions Finalized as proposed
Expedited Substitutions of Certain Generics and Other Midyear Formulary Changes Finalized with minor revisions
Treatment of Follow-On Biological Products as Generics for Non-Low Income Subsidy (“LIS”) Catastrophic and LIS Cost Sharing Not Finalized

 

CMS is not finalizing its proposed revision to the definition of generic drug. Instead, CMS is finalizing a different approach by modifying language at 42 § 423.782(a)(2)(iii)(A) and § 423.782(b)(2), to achieve the same desired goal of setting the copay amounts for biosimilars and interchangeable products to those of generics.

“Any Willing Pharmacy” Standard Terms and Conditions and Better Definitions of Pharmacy Types Finalized with minor revisions
Elimination of Meaningful Difference Requirement Finalized as proposed
Medicare Medical Loss Ratio Finalized with minor revisions
Part 3 Client Alert: Implementation of Comprehensive Addiction and Recovery Act of 2016 (“CARA”)
Drug Management Program for At-Risk Beneficiaries-
1. Identification of “At-Risk Beneficiaries” Finalized with minor revisions
2. Requirements of Drug Management Programs:
  • Written policies and procedures
Finalized with minor revisions
  • Case management/clinical contact/prescriber verification
Finalized with minor revisions
  • Limitations on Access to Coverage for Frequently Abused Drugs
Finalized with minor revisions
  • Requirements for Limiting Access to Coverage for Frequently Abused Drugs
Finalized with minor revisions
  • Beneficiary Notices
Finalized with minor revisions
  • Provisions Specific to Limitations on Access to Coverage of Frequently Abused Drugs to Selected Pharmacies and Prescribers
Finalized  with minor revisions
  • Drug Management Program Appeals
Finalized with minor revisions
  • Termination of a Beneficiary’s Potential At-Risk or At-Risk Status
Finalized with minor revisions
  • Data Disclosure and Sharing of Information for Subsequent Sponsor Enrollments
Finalized with minor revisions
Special Enrollment Period Limitations for At-Risk Dually-Eligible or Low-Income Subsidy-Eligible Beneficiaries Finalized with minor revisions
Part D Opioid Drug Utilization Review Policy and Overutilization Monitoring System Finalized as proposed[1]

The Final Rule will be effective for Medicare Advantage and Part D plans for the 2019 contract year. For additional information about the issues discussed above, please contact one of the authors or the Epstein Becker Green attorney who regularly handles your legal matters.

[1] Additional policies for plan year 2019 related to opioid drug utilization review controls were included in the Final Call Letter issued on April 2, 2018, available at https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Downloads/Announcement2019.pdf.

This is part 2 of 7 in the Medicare Secondary Payer Compliance series. All titles in this series can be viewed below. Subscribe to our blog to receive these future updates. Prior installments of this series can be accessed using the links provided.

Over the past three years, enforcement trends have focused attention on this often-overlooked area of law and highlighted why providers and suppliers need to know more about it. In this post, we will discuss Medicare conditional payment and subsequent repayment requirements.

As a general rule, Medicare will make a conditional payment to a beneficiary if there is a delay in payment by the primary payer to keep the beneficiary from experiencing a gap in coverage.[1] Medicare may then pursue reimbursement of conditional payments from:

  • A beneficiary or other party, if both a primary and conditional payment were received;
  • A primary payer, if a conditional payment was made pursuant to liability insurance settlements, disputed claims under group health plans, workers’ compensation plans, or no-fault insurance; and
  • The beneficiary or provider, if the filing of an improper claim resulted in a conditional payment, unless the claim was a result of false information provided by the beneficiary and the provider complied with certain regulatory procedures.

These conditional payments must be reimbursed to Medicare within 60 days of receipt of payment. If a primary payer or provider fails to pay back the conditional payments, CMS may recover double the amount of the Medicare primary payment.[2]

Both beneficiaries and their fiduciary agents, such as attorneys, can be sued for recovery of improper conditional payments. In one recent case, a Medicare Advantage (MA) plan operated by Humana made a conditional payment to a beneficiary injured in a motor vehicle accident.[3] The beneficiary sued several insurance companies for payment, resulting in a settlement and the disbursement of settlement funds to the beneficiary’s attorney. Humana issued a demand letter to the beneficiary seeking reimbursement for its conditional payment, which it alleged was partly contained in the settlement amount. When the beneficiary failed to pay, Humana commenced a lawsuit against both the beneficiary and the beneficiary’s counsel to recover the funds. On a motion to dismiss by the beneficiary’s attorneys, the court ruled that the MSP allowed the MA plan to pursue recovery of conditional payments and double damages against beneficiary’s counsel, as “plain language fails to limit the parties against whom suit may be maintained” and that there is a private right of action that a MA can use to recover conditional payments pursuant to 42 USC §1395y(b)(3)(A).[4]

The take-away from this decision is that all parties involved in the medical treatment and payment process of a Medicare beneficiary, including payers, providers, the beneficiaries, and their counsel, as well as fiduciaries, should be conscious that payment obligations do not end once Medicare has cut a check. Counsel may also want to be aware of Medicare conditional payment obligations in settlement negotiations. For example, in an unpublished opinion, the Third Circuit affirmed a District Court’s ruling that the estate of David Trostle had not exhausted administrative review procedures and therefore the court lacked subject matter jurisdiction. The action was brought after Trostle received the wrong prescription from a pharmacy, causing him to fall gravely ill. While hospitalized, Trostle received a conditional payment, stopping Trostle from experiencing a gap in insurance coverage. As a result of the conditional payment, CMS asserted a lien against any potential recovery Trostle possibly would receive in order to recoup the funds disbursed in the conditional payment. CMS stated that the lien was for $1,212 and reserved the right to adjust the amount if necessary. Trostle’s actual medical costs paid by CMS for a sixty-six day hospital stay was nearly $100,000. Trostle settled the tort claim against the pharmacy which allegedly caused the injury, receiving $225,000 in July of 2014. After Trostle informed CMS of the settlement amount, CMS revised the lien amount substantially upward to $53,295. Trostle challenged the $53,295 lien, arguing that CMS induced Trostle to rely upon the $1,212 lien, a much lower number, when negotiating the settlement.

While the court found it could not assess the claim since Trostle had failed to exhaust all administrative review procedures, and therefore did not reach this issue, the facts of this case demonstrate a potential area of unknown for counsel, beneficiaries, and other fiduciaries who may attempt to secure settlements from NGHP’s without full knowledge of how conditional payments function.[5]

Andrew Kuder, a Law Clerk (not admitted to the practice of law) in the firm’s Newark office, contributed significantly to the preparation of this post.

[1] 42 USC § 1395y(b)(2)(B); 42 CFR §§ 411.21 & 411.24.

[2] 42 CFR § 411.24(c)

[3] Humana Ins. Co. v. Paris Blank LLP, 187 F. Supp. 3d 676 (E.D. Va. 2016).

[4] Id. at 681.

[5] Trostle v. Ctrs. for Medicare & Medicaid Servs., No. 16-4062, 2017 U.S. App. LEXIS 19431 (3d Cir. Oct. 5, 2017).

The Centers for Medicare and Medicaid Services’ (“CMS”) recently announced its intent to expand what may be considered “supplemental benefits,” broadening the scope of items and services that could be offered to Medicare Advantage (“MA”) plan enrollees over and above the benefits covered under original Medicare. However, in articulating the standards for covering this broadened group of items and services, CMS proposed a new requirement that could greatly limit enrollees’ ability to access all types of supplemental benefits and increase the already substantial burden on MA participating providers; CMS now proposes to require that the supplemental benefits be ordered by a licensed provider.

Under current CMS guidance, supplemental benefits may not be a Part A or Part B covered service, must be primarily health related in that “the primary purpose of the item or service is to prevent, cure or diminish an illness or injury,” and the plan sponsor must incur a non-zero cost for the benefit. Medicare Managed Care Manual, Ch. 4, Sec. 30.1. Within the draft 2019 Call Letter, released on February 1, 2018, CMS proposes to expand the scope of items and services considered “primarily health related” to now include items and services to help maintain health status and not only those that “prevent, cure or diminish illness or injury.” According to CMS, under its new interpretation, in order for a service or item to be primarily health related “it must diagnose, prevent, or treat an illness or injury, compensate for physical impairments, act to ameliorate the functional psychological impact of injuries or health conditions, or reduce avoidable emergency and healthcare utilization.” Current CMS guidance explicitly excludes from being a supplemental benefit those items or services which are solely for daily maintenance purposes.  CMS’s broadened definition follows medical and health care research studies which have shown the value of certain ‘maintenance’ items and services in diminishing the effects of injuries or health conditions and decreasing avoidable emergency and health care services.

While broadening the scope of items and services eligible to be considered supplemental benefits, CMS concurrently proposes to add a more stringent standard to an enrollee’s receipt of such benefits. “Supplemental benefits under this broader interpretation must be medically appropriate and ordered by a licensed provider as part of a care plan if not directly provided by one.” Although current guidance specifies medical necessity as a standard for supplemental benefits that extend the coverage of original Medicare, there is no requirement that supplemental benefits be ordered by a licensed provider. Depending upon the nature of the supplemental benefit, such a rule could prevent an enrollee from accessing certain benefits. For example, plan sponsors may provide acupuncture or other alternative therapies as supplemental benefits, but enrollees would only be able to access such services if their provider accepts the value of such services and agrees that they are medically necessary. Given that many in traditional medicine do not support the use of alternative therapies, it is likely that at least some enrollees will be unable to access these benefits under this newly proposed standard.  Also, requiring a provider to review and order other types of supplemental benefits would likely create a paperwork burden with no benefit, including, for example, with respect to a supplemental transportation benefit, fitness benefit or over-the-counter drug benefit.

Although CMS should be applauded for seeking to expand the definition of “health related” in identifying eligible supplemental benefits, its proposal to require that such benefits be ordered by a provider as part of a treatment plan will decrease plan flexibility and increase burden for providers and enrollees alike, with minimal benefit.

CMS is accepting comments on the draft Call Letter through 6pm EST, Monday March 5, 2018.

2016 is poised to be a major year in network adequacy developments across public and private insurance markets.  Changes are ahead in the Medicare and Medicaid managed care programs, the Exchange markets and the state-regulated group and individual markets, including state-run Exchanges.  The developing standards and enforcement will vary significantly across these markets.

Through 2014 and 2015, major news stories discussed concerns over the growing use of narrow provider networks by issuers on the Affordable Care Act’s insurance exchanges (“Exchanges”).  Others reported on enrollees’ frustration with receipt of unexpected charges from out-of-network practitioners when receiving treatment at in-network facilities (often referred to as “surprise bills”).  As a result, calls for improved network adequacy and transparency mounted.  A September 2014 HHS Office of Inspector General (OIG) report was critical of variation in state oversight of the Medicaid managed care market.  An August 2015 Government Accountability Office (GAO) report called for greater CMS network oversight in the Medicare Advantage market.  In response, a series of proposed rules and other changes have accumulated –

Medicare Advantage (MA) – In April 2015, CMS announced in a Call Letter that it will impose more stringent network adequacy requirements in the application process for MA plans.  To address surprise provider terminations, CMS will require 90 days notice of any significant mid-year changes.  Additionally, plans must establish and maintain a process to keep provider directories current in real-time.  CMS intends to monitor compliance and is considering a CY2017 requirement for standardized electronic submission for inclusion in a nationwide provider database.  CMS has also expressed its intent to review network adequacy as part of its regular program audits, as a pilot in 2016 and as a standard feature in 2017.

Medicaid Managed Care – In May 2015, CMS released the first proposed rule to make comprehensive changes to its Medicaid managed care rules in 12 years, including new quantitative network adequacy standards.  Once finalized, states would be required to establish time and distance standards for specific provider types, including primary care (adult and pediatric), OB/GYN, behavioral health, specialists (adult and pediatric), hospital, pharmacy, pediatric dental, and any “additional provider types when it promotes the objectives of the Medicaid program for the provider type to be subject to such time and distance standards.”[1]  Interestingly, CMS suggested in its proposed rule that states look to MA and state commercial standards as models.

Federal Exchanges – In December 2015, CMS, through its Center for Consumer Information and Insurance Oversight (CCIIO), released a proposed rule that featured more prescriptive network adequacy standards for Qualified Health Plans (QHPs) offered on the federal Exchange.  Where CCIIO is satisfied that a state uses “an acceptable quantifiable metric,” it will defer to their review of QHPs.  In other states, a default federal standard would apply.  Starting in 2017, CMS expects to take a similar approach as to MA and apply time and distance standards, with an emphasis on high-utilization specialties.  While CMS says it will not “prohibit certification of plans with narrow networks or otherwise impede innovation in plan design,”[2] it intends to set a floor with the federal Exchange default standards and it seeks greater network transparency.  Toward that end, ratings on QHP network coverage may be a future feature of HealthCare.gov.

State Regulated Group and Individual Markets – In November 2015, the National Association of Insurance Commissioners (NAIC) released a long-awaited network adequacy model act with more detailed requirements than federal and many state standards.  While the act would not impose quantitative standards such as provider number and type requirements, it does include reimbursement parity provisions for emergency and out-of-network facility-based providers.

Looking Ahead

With legislative sessions underway in all but four states this year, there are several important developments to watch for in 2016.  Some states will adopt the NAIC model act, in whole or in part, or use the act as a baseline from which to tailor its own standards.  Other states will decline to adopt it, leaving existing standards intact that range from minimal to highly detailed and prescriptive.  With increasing pressure from CMS across markets, some states may seek to aggressively increase the specificity of their network adequacy standards, adding number and type requirements or legislating that their insurance commissioners do so through an administrative process.  Some states may consider aligning standards across markets to ensure regulatory uniformity.  While there is nothing in the model act that suggests states increase oversight and enforcement activities, CMS is clearly increasing its own oversight and is pushing states to set a floor for state level access standards.  Changes to the landscape will come better into focus as CMS releases its final rules for all of the above proposed changes.

 

[1] 80 Fed. Reg. at 31145.

[2] 80 Fed. Reg. at 75550.

by Pamela D. Tyner, Amy Lerman, and Lesley R. Yeung

The Recovery Audit Contractor (“RAC”) program is a national program aimed at identifying Medicare program overpayments and underpayments through a review of individual Medicare claims by contractors paid on a contingency fee basis. Over the next year, the RAC program will expand its reach beyond the current focus on fee-for-service payments under Medicare Parts A and B to include Medicare Part C (Medicare Advantage) and Part D (Prescription Drug Benefit) as well as state Medicaid programs. As Medicaid RAC programs get underway in the states, and private insurers offering coverage under Medicare Part C and D prepare for new, yet still undefined, RAC efforts, it is more important than ever for providers to make sure that their processes for documentation, billing, and coding are accurate and comprehensive.

Read the full alert here