HOSPITAL WOUNDS

In 2010, as the administration touted the benefits of ACA, the hospital industry agreed to accept a $155 Billion decrease in Medicare payments to be effective over a decade.  Apparently, the calculus involved was that the increase in the number of insured patients under ACA would increase hospital volume for paying patients, even if at a substantially lower rate.  Since hospitals already provide a large amount of ‘free’ care for non-insured payments, the industry must have believed that this would be an acceptable trade-off.

However, when the Supreme Court ruled in 2012 that states could opt out of ACA, this meant that for hospitals located in states that have not elected to expand their Medicaid programs to cover uninsured citizens, one of the underlying assumptions in the hospitals deal collapsed.  The result – many hospitals are laying off employees wherever possible to deal with the present sequester based, and future ACA based cuts in reimbursement levels.  While bills are pending in Congress to delay the ACA cuts to Medicaid and Medicare payments, and to reinstate funds for rural hospitals that expired in December 2012, it is unclear whether such legislation will be successful.

Expect more layoffs like Sound Shore Health Systems’ layoff of 2,000, Denver Health’s layoff of 300 jobs, Vanderbilt University Medical Center’s layoff of more than 300, etc.  Current cost structures simply do not match up well with expected reimbursement levels.

ADVENTURES IN INSURANCE FRAUD

A friend in 2012 purchased a new insurance policy, and was given a list of providers participating in the plan/HMO/PPO.  Six months later when she tried to seek medical care, not one primary physician listed in the plan’s brochures was willing to take a new patient.  After many phone calls to the plan’s headquarters, the plan conceded it could not provide in network primary care.

Query one – is it fraud when a plan sells insurance with the knowledge that the providers listed for the plan are not and will not be available for plan members?

Query two – has any state insurance commissioner ever taken any action for such fraud?

MARGINS

WellPoint recently revealed its latest results of revenues of $71 Billion (yes, a “B”) and an operating margin of nearly 25%.  With most hospitals struggling to a 2-4% operating margin, one wonders if hospitals will begin forming their own insurance plan/HMO/PPOs in order to survive.

GUILTY OF FRAUD – WHAT DO YOU HAVE TO PAY BACK?

On June 28^th, the Eleventh Court of Appeals gave guidance on DME Fraud Sentencing and Reimbursement Requirements.

According to the Court, restitution should not be punitive, but rather it should ensure victims are made whole for losses.

In this case the defendant owned two DME companies.  The defendant directed his companies to conduct pulse oximetry testing, and falsely reported to Medicare that the tests were made using independent laboratories as required for reimbursement of portable oxygen costs.  The defendant was convicted of ten felonies, and the Court spent substantial time discussing the appropriate jail sentence for the defendant.

The Court also discussed how to calculate the restitution amount.  The Appeals Court found that restitution should be determined by deducting the value of medically necessary oxygen that was actually provided.  The Court noted no reason for distinguishing this type of case from the Kick-Back context, where it had previously determined the proper measure of restitution is not based on the full value of the goods or services billed, but rather net of goods and services actually received.

“[F]ailing to offset the amounts paid for those goods for the restitution amount would be inconsistent with the purpose of the restitution because it would give a windfall to victims who received goods they actually needed in the form of both the goods and what they paid for them…” the Appeals Court commented.  Here the lower court had found that 80 – 90% of the goods and services provided to patients were medically necessary.

It has been curious in these cases when courts or juries have ignored actual value given in basing restitution on the gross amount paid by a third-party payor or Medicaid.  Hopefully, this will begin a trend of having consistent sentencing and restitution guidelines for both Kick-Back and fraudulent billing cases.

This newsletter is edited by Paul Wallace of Jones • Wallace, LLC, a member of the American Bar Association Healthcare Law Section and the American Health Lawyers Association who has been representing physicians and healthcare practices for over 25 years.  Mr. Wallace assists physicians in health practices in contract items, federal legal compliance, creation of practice entities, estate and wealth planning and similar issues.  Please feel free to call if you have any questions about this newsletter or any other matter at (812) 402-1600 or pwallace@joneswallace.com.