Repaying Medicaid Overpayments – New Procedures and Requirements

A significant change in how the State of Indiana (the “State”) recoups alleged overpayment of Medicaid funds from providers takes effect on July 1, 2011.  The new law, which was part of the Budget Bill (HEA 1001), will dramatically change the procedure for all Medicaid providers when contesting a recoupment attempt by the State for allegedly overpaid Medicaid funds.  The statute, codified at IC 12-15-13-3.5 and -4, addresses the new recoupment procedures for non-institutional providers and institutional providers and will be administered by the Family and Social Services Administration through the Office of Medicaid Policy and Planning.
The Current Law (soon to be expiring)

Under current law, which is only effective through the end of June 2011, when a Medicaid provider is notified by the State that an overpayment may have occurred, the provider has three options when contesting the notice of overpayment.  The provider can:

• Pay the money back within 60 days with interest;
• Pay the money back within 60 days and request a hearing; or
• Not pay the money back and request a hearing.

If the provider chose the third option and lost the appeal the provider is required pay interest on the amount from the date of the notice of overpayment.  Many providers chose to exercise their rights under this third option.

The New Law

As applied to Indiana’s comprehensive care facilities, the new Medicaid overpayment statute provides a preliminary administrative reconsideration process during which the State and facility discuss draft audit findings that may lead to the State issuing a final recalculated Medicaid rate in order to recoup alleged overpayments from the facility.  It is critical that facilities take action at each step in the new process to protect their rights.  Failure to act may result in waiver or surrender of appeal rights.

Under the new law, a facility that receives draft audit findings from the State can provide comments to the State and then the State will issue a preliminary recalculated rate for the facility.  Once the facility receives this preliminary recalculated rate, the facility has 45 days to request administrative reconsideration of the preliminary rate.  A facility that receives a preliminary recalculated rate must request administrative reconsideration or the facility will not be permitted to appeal the final determination of the State.

Once the State and the facility conclude the reconsideration hearing, and if the State believes an overpayment has occurred, the State will notify the facility in writing that the State believes an overpayment has occurred and is issuing a final recalculated Medicaid rate.  The final recalculated Medicaid rate will be implemented retroactively upon the next payment cycle.

If a facility disagrees with the final recalculated rate the facility may file an appeal with the State no later than 60 days after issuance of the notice of final recalculated Medicaid rate.  If, after the appeal and hearings, the State determines that no overpayment has been made, then the State must pay back to the facility the amount of the overpayment, any interest paid by the facility to the State, and interest on the overpayment amount and interest paid by the provider.

Conclusion

With this significant change to the procedure that the State must utilize to recoup alleged overpayment to providers, there are bound to be problems that occur.  It is possible that this new statute, with the reconsideration process, will provide for a more transparent approach to settling alleged overpayments of Medicaid funds.  However, the reconsideration process in the new law is not yet tested and all Medicaid providers should take great care in handling each step of the process, which will help in any subsequent appeal pursued by a provider.

Please contact Zach Cattell at zcattell@ihca.org or 317-616-9001 with comments, questions or for more information.

ISDH Online Survey Report System Now Live

The Indiana State Department of Health (ISDH) Survey Report System is now operational. The Survey Report System is first being introduced to comprehensive care facilities (nursing homes) and residential care facilities (licensed assisted living). The system will later be expanded to other health care facilities, agencies, and centers.

The ISDH Survey Report System will be used by the ISDH to send health care facilities the "Survey Report Form 2567" along with survey letters and documents issued by the ISDH as part of the licensing and certification process. Here are some of the things that the system will accomplish.

- The system will eliminate the need for mailing surveys and documents.

- The system will enable the health care facility to immediately view and print survey reports and survey related documents through the online system.

- The system will allow health care facilities to complete and submit the Plan of Correction (POC) online and upload supporting documents as part of the Plan of Correction.

- The survey report with its plan of correction will be posted online on the ISDH Consumer Report.

- The online system increases the efficiency of the survey process allowing for quicker responses.

The ISDH Survey Report System was implemented on March 1, 2011. All future surveys for comprehensive care facilities (nursing homes) and residential care facilities (licensed assisted living) will utilize the new system. Upon entry into the facility, surveyors will confirm email addresses and provide facilities with access information. All survey reports and survey-related documents will be posted to the Survey Report System and facilities must submit their plan of correction, if required, through the system.

The ISDH created a Survey Report System User's Manual. The User's Manual is designed to assist health care facilities in utilizing the Survey Report System. The Manual provides a step by step explanation of the system using screenshots.

Facilities will access the ISDH Survey Report System through the ISDH State Health Gateway. Instructions for accessing the State Health Gateway are included in the User's Manual and will be provided to facilities when surveyors begin a survey. The system will require a username and password which will be provided to the facilities by surveyors at the time of the facility's first survey after implementation of the system.

In ISDH LTC Newsletter Issue # 11-04, the ISDH requested facilities to complete a registration form providing the ISDH with the facility email address that they wish to use for this system. Any facilities that have not yet completed the registration form are encouraged to do so. The online registration form is found at www.in.gov/isdh/25053.htm.

The registration is solely to ensure that the ISDH has the email address that the facility wishes to use for survey notifications. The ISDH needs every nursing home to provide the facility email address to which they wish survey document notifications to be sent. A facility may, but is not required to, select a second email address for notifications to be sent. Some facilities may want to use the second email notification address for their corporate office or owners. At the time of entry into a facility, surveyors will confirm these email addresses and provide the facility with the username and password needed to access the system.

If the Indiana comprehensive care facility (nursing home) and residential care facility (licensed assisted living) has not already done so, the facility should complete the following action items:

1. Review the Survey Report System User's Manual.
2. Identify (or create) a facility email address for ISDH survey notifications.
3. Determine an additional office or individual entity that the facility would like to receive ISDH survey notifications.
4. Complete the online registration form at www.in.gov/isdh/25053.htm providing the ISDH with information needed to register your facility into the Survey Report System.

Recently, at least one facility experienced a problem receiving their survey report. The survey system had a glitch that resulted in the facility not receiving their survey report until days before their plan of correction was required. A quick response and resolution was required to avoid a negative outcome for the facility.

Should your facility experience any problems or if you have any questions, please contact any one of the following attorneys who have significant experience in handling licensure and survey issues for LTC facilities:

Lori McLaughlin at lmclaughlin@kdlegal.com or (219) 227-6075

Randall R. Fearnow at rfearnow@kdlegal.com or (317) 238-6279

David E. Jose at Djose@kdlegal.com or (317) 238-6211

Melinda R. Shapiro at mshapiro@kdlegal.com or (317) 238-6226

Susan E. Ziel at sziel@kdlegal.com or (317) 238-6244

AHCA Hosts Webinar on ACOs and Post-Acute Care Providers

CMS recently published its proposed rules for accountable care organizations (ACO) in accordance with the Federal health reform legislation which is often referred to as the Affordable Care Act. Under the Act, CMS' has introduced the ACO model in furtherance of its "triple aim" of better care for individuals, better health for populations and lower growth in health care expenditures.

Although most ACO discussions typically concern hospitals and physicians, post-acute care providers are also another important part of the health care continuum that will likely be impacted. On May 18th, in order to broaden these discussions, the American Health Care Association (AHCA) hosted an informative webinar on May 18th which reviewed the proposed ACO rules and the impact and related roles that post acute care providers will have under this proposed model of care.

To request additional information regarding the impact that ACOs will likely have on post acute care providers please contact Susan E. Ziel at sziel@kdlegal.com or (317) 238-6244. For a copy of the AHCA materials, click here.

OIG Cites Improper Use of Anti-Psychotic Drugs in Nursing Facilities

Health and Human Services' Office of Inspector General (OIG) published a report on May 4, 2011 which concerns the improper use of anti-psychotic drugs in long term care. The OIG's review of medical records for elderly nursing home residents during a six-month period revealed that 14% of the 2.1 million elderly nursing home residents had at least one claim for anti-psychotic medications. Of those 14%, the OIG cited that approximately 22% were not administered in compliance with CMS standards. The OIG also questioned at least 50% of these claims to be erroneous, either because the medications were not medically necessary or because their use was associated with off-label uses.

The OIG report communicated numerous recommendations to CMS in order to (1) ensure accurate coverage and reimbursement decisions; (2) improve survey and certification procedures to prevent and detect unnecessary anti-psychotic drug use; and (3) correct all erroneous claims and related payments identified in the OIG report.

According to CMS data, more than 20% of nursing facility residents have a psychiatric diagnosis and as many as one-third of patients admitted to nursing facilities were already taking these medications prior to admission. All of these factors reflect the importance of facility standards and related safeguards governing the care of residents who require anti-psychotic medications as part of their treatment regimen.
To access a copy of the OIG report, go to http://oig.hhs.gov/oei/reports/oei-07-08-00150.asp.

If you would like additional information, please contact Susan E. Ziel at sziel@kdlegal.com or (317) 238-6244.

Regulatory Committee Continues Evaluation of the Health Facility Administrators

The Regulatory Occupations Evaluation Committee (ROEC) met again on May 25, 2011 to continue its evaluation of the Health Facility Administrators Board (HFAB), which issues professional licenses to Indiana Health Facility and Residential Care Administrators. ROEC was formed due to a law passed by the Indiana General Assembly in 2010 that required an evaluation of the need for and function of every professional licensing agency administered by the State of Indiana.

At the most recent ROEC meeting, the committee discussed what the committee’s final report to the Indiana Legislature should contain. Though no agreement was reached on the content of the final report, the following concepts were discussed to be included in the final report:

• Recommend that all license types should be retained as personal accountability is maintained by licensure and there is the potential for consumer harm without licensure

• Recommend that a study of the AIT program be conducted to examine barriers that may exist that reduce the number of available candidates for licensure and evaluate consistency of curriculum for AIT programs

• Recommend that all licensed administrators be required by law to report change of employment to the licensure board (for purposes of obtaining additional data about high turnover, which may correlate to poor performance)

• Recommend that the HFA/RCA licensure program be transferred from the Indiana Professional Licensing Agency (IPLA) to the Indiana State Department of Health (ISDH)

The above recommendations are not yet final and ROEC will meet again next month to hear testimony from the ISDH about the fourth potential recommendation that would move the licensure program from the IPLA to the ISDH. The IHCA will continue to keep a close watch on the ROEC’s progress.

Please contact Zach Cattell at zcattell@ihca.org or 317-616-9001 with any questions or comments.

Regulatory Committee Continues Evaluation of the Health Facility Administrators

The Regulatory Occupations Evaluation Committee (ROEC) met on April 20, 2011 to continue its evaluation of the Health Facility Administrators Board (HFAB), which issues professional licenses to Indiana Health Facility and Residential Care Administrators. ROEC was formed due to a law passed by the Indiana General Assembly in 2010 that required an evaluation of the need for and function of every professional licensing agency administered by the State of Indiana.

At the most recent ROEC meeting, the committee received testimony and recommendations from the Chair of the HFAB, Shelly Rauch who also is a licensed administrator. After discussing with the ROEC members the process by which the HFAB evaluates administrator's performance via CEU audits and examination of Immediate Jeopardy/Sub-standard Quality Care findings from state and federal facility surveys, Mrs. Rauch made several recommendations to the ROEC to improve the HFAB's oversight of Indiana's administrators. The recommendations included:

• Designate a compliance officer to the HFAB who would identify and act upon issues identified in state and federal facility surveys 
• Create a compliance fund, funded by an add-on to the HFA licensure fee, in order to provide the HFAB additional resources to provide education, licensee retraining and to fund the recommended compliance officer 
•  The HFAB is only allocated $15,143 per year to operate even though it generates nearly $80,000 in licensure fees each year
• Require all administrators to report any change of employment to the HFAB in order to monitor excessive employment changes which may indicate poor performance. 
• Study the regulatory structure regarding the Administrator in Training program to remove barriers of entry into the profession.

After receiving the recommendations, the ROEC members engaged in limited discussion, most of which focused upon the link between state and federal facility surveys and administrator performance. Several questions were asked regarding the role of the Indiana State Department of Health in evaluating administrators and whether that department should be more involved.

The next step in the ROEC's evaluation of the HFAB will the writing of a report containing final recommendations of the ROEC as to what changes, if any, should be made to the HFAB in order to further protect Indiana consumers. This final report will be forwarded by the ROEC to the legislature's Health Finance Commission for their review during the summer of 2011.

OIG Releases Unfavorable Opinion on Proposed LTC Pharmacy Joint Venture

The Department of Health & Human Services Office of Inspector General [OIG] issued Advisory Opinion 11-3 on April 7, 2011, concerning formation of a new long-term care pharmacy. OIG concluded that the Proposed Arrangement, described below, could potentially generate prohibited remuneration under the Anti-Kickback Statute, and OIG could impose administrative sanctions on the Requestor, depending on the parties' intent.

Requestor is an existing long-term care pharmacy that provides pharmaceutical products and services primarily to various LTC facilities [LTC Facilities]. Under the Proposed Arrangement, one of Requestor's employees, a pharmacist serving as Requestor's director of business integration and a consultant pharmacist to LTC Facilities, would form a new long-term care pharmacy [Newco] that he would co-own with one or more owners of the LTC Facilities. Dividends or distributions would be paid in proportion to ownership.

Newco would engage in the exact same business as the Requestor. Under the Proposed Arrangement, Newco and the Requestor would enter into a management agreement under which the Requestor would provide all personnel and day-to-day services necessary for Newco to serve its LTC Facility customers. Newco would not have any employees, and would store its entire inventory either with its LTC Facility customers or at the Requestor's facility. The Requestor would make all decisions associated with Newco's operations and Newco's agreements with LTC Facility customers. In exchange for these services, Newco would pay Requestor a management fee based on fair market value. The pharmaceutical products and services that Newco would provide to its LTC Facility customers would include items and services covered and reimbursed by Federal health care programs.

OIG cited its longstanding concerns about certain problematic joint venture arrangements between those in a position to refer business, such as the LTC Facilities here, and those furnishing items or services for which Medicare or Medicaid pays, especially when all or most of the business of the joint venture is derived from one or more of the joint venturers. OIG noted that the Proposed Arrangement is very similar to suspect joint venture arrangements described in its Special Advisory Bulletin "Contractual Joint Ventures", in which a health care provider in one line of business contracts out substantially the entire operation of a related line of business to an existing provider of the related service, and in return receives the profits of the business as remuneration for its federal program referrals. The financial risk of the Proposed Arrangement is minimal, because LTC Facility owners would control the amount of business they refer to Newco.

OIG concluded that it was unable to exclude the possibility that the Proposed Arrangement is designed to permit the Requestor to do indirectly what it cannot do directly - to pay the LTC Facility owners a share of the profits from their pharmaceutical products and services referrals. There is a significant risk that the Proposed Arrangement would be an improper joint venture that would be used as a vehicle to reward the LTC Facility owners for their referrals.

If you would like additional information, please contact Susan E. Ziel at sziel@kdlegal.com or (317) 238-6244 or Anne O'Brien at aobrien@kdlegal.com or (312) 423-9310.