In This Issue
CMS Requires Certain Hospitals to Disclose Physician
Financial Relationships Under Stark Law
Proposed Regulation Would Give Secretary of HHS Authority
to Review and Reverse DAB Decisions in Provider Appeals from Final
Agency Decisions
Honoring Military Service: FMLA Expansion Provides
New Protections for the Families of Servicemembers
Changes Coming for 457 Deferred Compensation Plans
Important Websites
Poyner & Spruill Welcomes Jessica Lewis it our Health
Care Team
CMS Requires Certain Hospitals to Disclose Physician
Financial Relationships Under Stark Law
by
Wilson Hayman
The Centers for Medicare &
Medicaid Services (CMS) is conducting a mandatory review of physician
investment and compensation arrangements at 500 hospitals to determine
whether they are in compliance with the Stark law governing physician
self-referrals. The selected hospitals are required to report
information to CMS about physician investment, ownership and
compensation arrangements on a new Disclosure of Financial Relationships
Report (DFRR) within 60 days of the letter from CMS. A hospital’s late
response can lead to civil monetary penalties of up to $10,000 per day.
The accuracy of a hospital’s DFRR must be certified by the hospital’s
CEO, CFO or comparable officer. This requirement should remind all
Medicare-participating hospitals, whether or not they are required by
CMS at this stage to submit a DFRR, of the need to track and ensure the
legality of financial relationships with physicians.
Background
The
Stark II law authorizes the Secretary of HHS to require hospitals and
other entities furnishing more than 20 Medicare-reimbursed services
during a calendar year to provide the Secretary or OIG with information
concerning the hospital’s reportable financial relationships between a
physician (or his or her immediate family member) and the entity. This
information includes the covered services provided by the hospital and
the names and unique physician identification numbers of all physicians
with a financial interest in the entity. The term “financial interest”
in this context includes ownership, investment or compensation
arrangements. Although CMS indicated in the proposed Stark II
regulations issued in January 1998 that it intended to require annual
reports from hospitals of financial relationships with referring
physicians, the final rules issued in 2004 merely required hospitals to
furnish such information upon request.
The
Deficit Reduction Act of 2005 required CMS to consider the issue of
annual disclosure of information concerning physician ownership and
investment interest in specialty hospitals. Consequently, CMS in 2006
sent a survey to approximately 450 specialty and general acute care
hospitals to obtain a more complete picture of the proportionality of
physician investment in specialty hospitals. Because CMS did not receive
sufficient information from this voluntary survey, it has made the new
DFRR mandatory and will use it to analyze investment and compensation
arrangements for compliance with the Stark law and regulations. In this
phase, CMS will target the 290 hospitals that did not respond to the
2006 survey, as well as 210 additional hospitals selected from across
the country.
Although the DFRR was to be sent out to these 500 hospitals in September
of 2007, a hospital’s failure to receive such a request last year does
not protect it from scrutiny in the future. CMS has stated that it will
use the information collected in this process to design a regular
financial disclosure process applicable to all Medicare-participating
hospitals in the future. While CMS estimated that completion of the DFRR
will take approximately six hours by hospital accounting personnel,
industry groups including the American Hospital Association cite this as
extremely low and unrealistic in light of the large amount of
information being requested.
Information Solicited by
DFRR Through eight worksheets to be completed, the mandatory DFRR
solicits a wide range of information. The first six worksheets pertain
only to hospitals with physician ownership or investment and therefore
apply only to specialty hospitals or other closely held entities with
physician ownership. On the other hand, the two final worksheets apply
to any hospital, including nonprofit, municipally owned or any other
type of hospital with one or more compensation arrangements with
physicians unless an exception applies. The required information
includes the following:
-
The general
characteristics of the hospital, including a copy of the hospital’s
independently audited financial statements, if available, or other
financial statements.
-
Any direct ownership interest in the hospital by any person, any
indirect ownership by an entity, and the percentage of ownership
interest and type of stock held. In the case of an investing entity,
the form must also identify each investor or owner of the entity and
the percentage of his or her ownership in the entity. Any individual
investor, either a direct or indirect owner, must be identified as a
physician or physician’s immediate family member if applicable. A
separate worksheet must be completed for each physician owner or
immediate family member with his or her Social Security number or
Medicare National Provider Identifier (NPI) and certain other
information.
-
Any payments made to the hospital by direct or indirect physician
owners of the hospital, including without limitation initial
investments, assessments, capital calls and loan guarantees, as well
as the date, type and amount of payment. In cases of indirect
ownership, the individuals who make up the investing entity must
also be identified, as well as their status (such as a physician or
an immediate family member). Any guarantee or other agreement that
reduces or limits the physician’s risk of loss or liability must
also be reported.
-
The following compensation arrangements between a hospital and
physicians must be reported: all rentals of office space or
equipment to or from the hospital and the physician; personal
service arrangements; physician recruitment payments; a copy of each
such agreement must be produced (but only one copy of a uniform
personal services agreement needs to be supplied); isolated
transactions such as a physician’s sale of property or practice; any
compensation to a physician unrelated to a designated health service
under Stark; any other payments by a physician to the hospital for
items or services; charitable donations by a physician; nonmonetary
compensation to physicians in the form of items or services
exceeding $300 per physician per calendar year; incidental benefits
valued at $25 or more per occurrence granted to medical staff
members; any higher return paid on a physician’s invested capital
than is warranted by the amount invested; loans or loan guarantees
made by either the hospital or physician on behalf of the other; and
any initial investments, capital calls or other payments made by the
hospital on behalf of a physician.
-
Financial relationships permitted by Stark that apparently need not
be reported on the DFRR are those relating to physician employment
agreements, risk-sharing compensation agreements, compliance
training, obstetrical malpractice insurance subsidies, professional
courtesy, retention payments and community-wide health information
systems.
The DFRR represents a
significant change in CMS’s enforcement policy under the Stark law and
increases the risk of scrutiny for both hospitals and physicians. It
creates potentially new liabilities based on a hospital’s late
submission of the DFRR and incomplete or inaccurate statements. If a
hospital has not yet done so, it should examine all contracts or
investment arrangements with physicians and evaluate its contract
management systems to ensure compliance with Stark II requirements. If a
hospital’s compliance plan does not already require collecting and
reviewing this information through a legal audit of its physician
agreements, then the hospital is strongly urged to do so in anticipation
of CMS’s future adoption of an industry-wide mandatory disclosure
program for hospitals.
Wilson Hayman may be reached at 919.783.1140 or
whayman@poyners.com.
Top
Proposed Regulation Would Give Secretary of HHS Authority
to Review and Reverse DAB Decisions in Provider Appeals from Final Agency
Decisions
By
Chris Brewer
and Ken
Burgess
A
December 28, 2007, proposed regulation published in the Federal Register
would drastically alter the current system of appeals from certain final
agency decisions by allowing the Secretary of the U.S. Department of
Health and Human Services (HHS) to review and reverse decisions issued
by the federal Departmental Appeals Board (DAB). The impact of the
proposed rule, if adopted, could be enormous for affected health care
providers unhappy with the results of a final agency decision by
removing one of the few due process safeguards available to providers
that want to challenge decisions of the agency and the Centers for
Medicaid & Medicare Services (CMS). The Proposed Rule seeks to impose
uniform, sweeping changes to nearly all current Medicare administrative
appeals processes under the DAB’s jurisdiction; however, the Proposed
Rule would have different and far-reaching implications for each unique
category of administrative appeal. Many national and state provider
organizations have expressed opposition to the draft regulation.
Overview of Appeals System
The
DAB provides impartial, independent review of disputed decisions in a
wide range of Department programs under more than 60 statutory
provisions. The DAB generally issues the final decision for the
Department, which may then be appealed to federal court. The DAB
resolves disputes with a wide variety of outside parties such as state
agencies, Head Start grantees, universities, nursing homes, hospitals,
doctors, and Medicare beneficiaries.
Disputes reviewed by the DAB include:
-
adjudicatory civil money penalties (CMPs) and exclusions imposed
under a wide range of fraud and abuse authorities;
-
appeals in provider and supplier participation, enrollment and
enforcement cases brought by the CMS;
-
final review of ALJ decisions under 42 C.F.R. Part 498 (e.g.,
initial determinations concerning participation in the Medicare and
Medicaid programs, the imposition of sanctions on certain providers
including skilled nursing facilities, the imposition of enforcement
remedies on laboratories under both Medicare and the Clinical
Laboratories Improvement Amendments of 1988);
-
appellate review authority concerning Medicare Local Coverage
Determinations; original jurisdiction over National Coverage
Determinations; and
-
the imposition of CMPs by CMS for violations of the HIPAA
portability and health information privacy requirements.
Under the current system, providers that wish to challenge survey
findings may file an appeal with the DAB, a division of HHS. The DAB
consists of both the individual administrative law judges (ALJs) who
initially hear provider appeals and appeals panels of three DAB members
who sit as an appeals court of sorts to review ALJ decisions with which
either the provider or CMS is unhappy. Following an initial decision by
an ALJ, either the provider or CMS may appeal that decision to the DAB
appellate panel. Currently, providers unhappy with a decision of the
appeals panel may further appeal the decision to the U.S. District Court
in their jurisdiction. CMS, however, does not have the power to appeal
decisions of the DAB with which it disagrees.
As
such, a decision of an ALJ which is not appealed to the DAB by either
CMS or the provider becomes the final agency decision of HHS. If either
the provider or CMS appeals the ALJ’s decision to the DAB, then the DAB
decision becomes the final agency decision of HHS unless the provider
further appeals to federal court. While the DAB is far from perfect, it
is generally viewed as an unbiased quasi-judicial body that sometimes
rules in favor of HHS and sometimes in favor of providers. Appeals
before the DAB are difficult to win, but with the right set of facts and
a well-prepared case, providers at least have a fighting chance to
correct erroneous decisions by the agency and CMS.
Change Proposed
In
the proposed regulation, the Secretary complains about two problems that
the regulation would address: 1) currently the ALJs and DAB must follow
applicable statutes and regulations governing appeals but are not
expressly required to follow the Secretary’s published interpretations
of those authorities or other “informal guidance” published by the
Secretary; and 2) the Secretary currently has no authority to review
decisions of the DAB with which he disagrees. The proposed regulation
would address those issues by 1) requiring the ALJs and DAB to follow
both applicable statutes and regulations and published interpretations
of those authorities and other informal guidance published by the
Secretary; and 2) allowing the Secretary to review and affirm, reverse
or remand decisions of the ALJs or DAB with which he disagrees.
The
rule affects all decisions on provider and supplier enrollment and
certification, sanctions imposed by the Office of Inspector General in
fraud and abuse matters, sanctions issued under the Clinical Laboratory
Improvement Act, certain sanctions imposed under HIPAA, and nursing
facility survey decisions, among others. The regulation, if adopted,
would not affect final decisions already issued by the DAB, but would
apply to any “pending litigation.” Thus, many provider appeals that are
not fully decided would fall under the regulation and would be subject
to review by the Secretary.
One
of the more troubling aspects of the proposed regulation is the
requirement for the DAB to follow the “published guidance” of the
Secretary on the interpretation of applicable statutes and regulations,
to the extent such guidance is not in conflict with the Department’s
governing statutes and regulations. The proposed rule identifies
“published guidance” as including any guidance that has been “publicly
disseminated” by the Secretary, such as manual provisions, State
Medicaid Agency Director Letters or information posted on the CMS
website. Published guidance would not include statements included in
briefs filed by CMS in appeal litigation, but the Secretary would
require in the rule that the ALJs and DAB defer to arguments about the
meaning of applicable statutes and regulations by giving weight to
statements made by CMS counsel in provider appeal briefs, unless those
statements conflict with published guidance of the Secretary or other
agency statements of position. As applied to nursing facilities, for
example, this would give CMS counsel defending a state survey agency
decision an enormous advantage in survey appeals with providers by
equating their litigation arguments with HHS policy, unless the provider
could persuade the ALJ or DAB that such arguments conflict with guidance
already issued by the Secretary.
Provider Concerns
The
proposed rule would allow the Secretary to simply overrule ALJ or DAB
decisions with which the Department disagrees by claiming those
decisions are contrary to the Secretary’s interpretation of governing
statutes and regulations. Appeals by health care providers are already
difficult to win, given the paucity of due process protections for
providers in the current system. This proposed regulation would
essentially turn ALJ and DAB decisions from final agency decisions to
“recommended” or “proposed” decisions subject to being overturned by the
Secretary. The rule proposes no limits to the Secretary’s discretion in
choosing when and how often to review and reverse or remand ALJ or DAB
decisions. If the Secretary remands a decision to the ALJ or DAB, then
the ALJ or DAB would be required to follow the Secretary’s statement of
policy or interpretation of the law, and would simply be limited to
applying the facts of the case according to the Secretary’s
interpretation. It is not difficult to imagine the Secretary issuing ad
hoc policy through his ability to reverse ALJ or DAB decisions with
which he or his subordinate agency, CMS, simply disagrees.
The
proposed regulation stresses that providers unhappy with the Secretary’s
decision on an appeal could still appeal to federal court. Providers can
already appeal to federal court, so that reassurance is little comfort
to providers, particularly given that the vast majority of such appeals
in federal court are decided in favor of the Secretary. This is largely
due to the lack of understanding of the complex world of health care
regulatory and compliance issues by federal judges and a policy inherent
in federal law that gives great deference to the Secretary in complex
technical matters. The Secretary suggests in the proposed regulation
that his review authority would be used sparingly, but few providers or
their attorneys take much comfort in this assertion. Most provider
counsel believe the concerns expressed by the Secretary would be more
appropriately addressed by affording the Secretary the same opportunity
providers have had since adoption of appeals regulations for providers –
the chance to appeal to federal court.
Under the proposed regulation, the Secretary would have authority to
decide which final agency decisions to review and neither CMS nor the
provider would have the right to request such review by the Secretary.
Neither party would have the right to offer additional evidence or file
briefs supporting its position with the Secretary, although the
Secretary would in his discretion have the authority to request
additional briefing. The Secretary would have 30 days following an ALJ
or DAB decision to decide whether to review a decision, and an
additional 45 days to render the Department’s final decision. However,
that latter time period could be extended without limitation in the
discretion of the Secretary.
Chris Brewer may be
reached at 919.783. 2891 or
cbrewer@poynerspruill.com.
Ken
Burgess may be reached at 919.783.2917 or
kburgess@poynerspruill.com.
Top
HR News
Honoring Military
Service: FMLA Expansion Provides New Protections for the Families of
Servicemembers
By
Kevin Ceglowski
On
January 28, 2008, President Bush signed the 2008 Defense Authorization
Act (H.R. 4986), which became effective immediately and expanded the
Family and Medical Leave Act (FMLA). This new law allows eligible
employees to take FMLA leave for exigencies related to active duty
military service or to care for family members injured while serving in
the armed forces.
Servicemember Family Leave
The
FMLA expansion provides new protections for employees in two areas.
First, eligible employees may take up to 26 weeks of leave in a single
12-month period to care for family members injured during military
service. A “spouse, son, daughter, parent, or next of kin” may take this
leave to care for a member of the armed forces, including the National
Guard or Reserves, suffering from a serious injury or illness. “Serious
injury or illness” means an injury or illness incurred on active duty in
the armed forces that may render the servicemember medically unfit to
perform the duties of his or her office, grade, rank, or rating. Under
the new law, when this “Servicemember Family Leave” is used, the total
amount of FMLA leave taken in any 12-month period may not exceed 26
weeks.
Active Duty Leave
The
FMLA expansion also provides a new basis for an employee to take 12
weeks of FMLA leave. An employee may take FMLA leave for “any qualifying
exigency” arising out of the fact that the spouse, son, daughter, or
parent of the employee is on active duty or has been notified of an
impending call to active duty in the armed forces. The Department of
Labor (DOL) has not yet issued regulations defining these qualifying
exigencies. When the need for Active Duty Leave is foreseeable, the
employee is required to provide the employer with reasonable and
practicable notice.
Many
provisions of the existing FMLA laws also apply to these new areas. Both
the Servicemember Family Leave and Active Duty Leave may be taken
intermittently or on a reduced leave schedule. As with other types of
FMLA leave, an employer may require its employees to use available paid
time off concurrently with FMLA leave. Employers may require a
certification of need for Active Duty FMLA leave. The DOL has not yet
defined what such a certification would consist of. An employer may also
require a certification from a health care provider for Servicemember
Family Leave.
Although the new FMLA law is effective immediately, the specific
requirements for employers will not be clear until the DOL issues new
regulations. In the meantime, employers should be aware of leave
requests that might qualify as Active Duty Leave or Servicemember Family
Leave.
If
you have questions about whether a particular request qualifies, you
should contact counsel for additional advice. If you have any questions
about the new FMLA law and your company’s compliance with its
provisions, or questions about the FMLA or employment law generally,
please contact
Kevin Ceglowski at
kceglowski@poynerspruill.com or 919.783.2853 or
Susie
Gibbons at 919.783.2813 or
sgibbons@poynerspruill.com.
Changes Coming for 457 Deferred Compensation
Plans
By
Gene
Griggs
Many
tax-exempt and governmental health care organizations use Code Section
457 deferred compensation plans as part of the financial package to
attract and retain executives. Internal Revenue Service Notice 2007-62
announces the IRS’s intention to issue guidance that will require
sponsors of 457 plans to evaluate and make changes to these plans. In
general, the IRS guidance will apply the principles developed in the
Code Section 409A regulations to similar provisions under Code Section
457.
The
Notice indicates the upcoming guidance will focus on two areas that are
central to the design of many health care organizations’ 457 plans: (1)
the exemption from Code Section 457(f) for bona fide severance pay plans
provided under Code Section 457(e)(11), and (2) the definition of
“substantial risk of forfeiture” under Code Section 457(f)(3)(B). In
fact, the Notice gives a preview of the new rules, which provides
sponsors an opportunity to begin reviewing their plans and developing
compliance strategies.
The
IRS anticipates the new rules will provide that an arrangement will be
an exempt bona fide severance pay plan only if all the following
requirements are satisfied.
-
The benefit is payable only upon
involuntary severance from employment.
-
The amount payable does not exceed two
times the employee’s annual rate of pay, up to compensation limit
under Code Section 401(a)(17) (the 2008 cap is $230,000, so $460,000
is the maximum).
-
The arrangement provides payments must be completed by the end of
the employee’s second tax year following the year in which the
employee separates from service.
The
guidance likely will include exceptions from the requirement that
benefits be paid only upon involuntary severance from employment for
window programs, collectively bargained separation pay plans, and
certain reimbursement or in-kind benefit arrangements, similar to the
exceptions provided under the Code Section 409A regulations.
The
IRS further anticipates the new rules will provide that a number of
popular features included in many 457(f) plans will no longer be
considered as subjecting the benefits to a substantial risk of
forfeiture. These features include:
-
Covenants not to compete,
-
Rolling vesting provisions by which the
employer and employee mutually agree to delay the vesting date by
written election of the employee one year or more before vesting
otherwise would occur, and
-
Employee deferral programs that defer receipt of salary on a
tax-deferred and forfeitable basis.
These
features are viewed by the IRS as contrary to the principles under the
Code Section 409A regulations that compensation is subject to a
substantial risk of forfeiture only if the entitlement to the amount is
conditioned on the performance of future services or the occurrence of a
condition that is related to the purpose of the compensation and the
possibility of forfeiture is substantial. The IRS does not view merely
refraining from the performance of services, the addition of a risk of
forfeiture after the right to compensation arises, or the extension of a
period during which compensation is subject to a risk of forfeiture as a
valid or substantial risk of forfeiture.
These
new rules are expected to apply on a prospective basis. Until further
guidance is issued, taxpayers may rely on the definition of a bona fide
severance pay plan and the rules regarding a substantial risk of
forfeiture described in the Notice. Furthermore, the Notice provides
that no inference should be made from the anticipated guidance described
in the Notice on these matters regarding the current compliance status
of plans under Code Section 457.
Gene Griggs is a member of
our Employee Benefits Team. You may contact Gene at 704.342.5320 or
ggriggs@poynerspruill.com.
Top
Important Websites
By
Bill Shenton
Included in this web site segment are a few
links to recent developments that came to our attention at press time.
CMS has issued a new document that gives
health care organizations a heads-up on what to expect in a HIPAA
Security Compliance Audit:
http://www.cms.hhs.gov/Enforcement/Downloads/InformationRequestforComplianceReviews.pdf
The
Office of Civil Rights has published a proposed rule pertaining to the
confidentiality of patient safety data collected under the Patient
Safety and Quality Improvement Act of 2005:
http://a257.g.akamaitech.net/7/257/2422/01jan20081800/edocket.access.gpo.gov/2008/pdf/E8-2375.pdf
And
for more information on the confidentiality of the data compiled by
Patient Safety Organizations, go to:
http://www.hhs.gov/ocr/psqia/
Office of Inspector General solicits comments on revisions to the
Compliance Guidance for nursing facilities:
http://oig.hhs.gov/08/CPG_Nursing_Facility_Solicitation.pdf
Institute of Medicine report on evidence-based medicine:
http://www.rwjf.org/pr/product.jsp?id=25351&c=EMC-CA140
Bill Shenton is a member
of our Health Care Team. You may contact Bill at 919.783.2947 or
wshenton@poynerspruill.com. Top
Poyner & Spruill
Welcomes Jessica Lewis to the Health Care Team
Poyner & Spruill is pleased to announce the
newest member of our Health Care Section,
Jessica M. Lewis. Jessica is a
lawyer, a registered nurse and a former captain in the U.S. Army.
She
joins us from the law firm of Young Moore and Henderson, where she
concentrated her practice on medical malpractice defense litigation and
health law. At Poyner & Spruill, she will work on a broad range of cases
and issues for our health care clients.
Jessica earned her Bachelor of Science degree in Nursing from the
University of North Carolina at Chapel Hill in May 1998. Upon
graduation, she received a commission in the United States Army. From
1998 to 2002, she served on active duty as a medical-surgical and
surgical critical care nurse in the Army Nurse Corps, rising to the rank
of captain. Jessica received her law degree from the University of North
Carolina at Chapel Hill in 2005.
Jessica enjoys traveling, having grown up in a number of different
places, including Izmir, Turkey, as a self-described “army brat.”
According to Jessica, she also attempts to enjoy running. We are
extremely excited to have this bright and accomplished young attorney
join our growing health care practice, and we know you’ll enjoy working
with her. Jessica may be reached at jlewis@poynerspruill.com or
919.783.2941. Top |
