Facility Policies Can Become a Basis for Assessing Civil Monetary Penalties

From Williams Mullen Law Firm 
07.15.2016Facility Policies Can Become a Basis for Assessing Civil Monetary PenaltiesBy: Martin A. Donlan, Jr. & James T. Bailey

In Brenham Nursing & Rehab. Ctr. v. U.S. Dep't of Health & Human Servs., No. 15-60272, 2016 WL 454320 (5th Cir. Feb. 4, 2016), the United States Court of Appeals for the Fifth Circuit upheld a Final Agency Decision of the United States Department of Health and Human Services (DHHS) affirming a civil monetary penalty (CMP) for noncompliance with Medicare participation requirements.  Skilled nursing facility providers across the country should take note of this decision, as the controlling factor upon which the CMP was upheld was the facility’s failure to comply with its own policies.

This case illustrates an ominous and growing trend: state surveyors are using a facility’s policies, not state or federal regulations or federal manual provisions, to assess CMPs.                                                                                                                          

In Brenham, two certified nurse assistants (CNAs) discovered that a cognitively impaired 101 year-old resident had extensive bruising covering much of her body. The CNAs reported the bruising to the charge nurse, who informed the Director of Nursing (DON) and completed an incident report. The DON summarily concluded that the bruising was caused by a Hoyer Lift and did not report or investigate the incident further. 

State surveyors who inspected the facility discovered the resident’s bruising and reported that the facility was noncompliant at an “immediate jeopardy” level. The surveyors cited 42 CFR § 483.13(c), which requires facilities to develop and implement written policies and procedures that prohibit mistreatment, neglect and abuse of residents. That regulation also requires reporting of such incidents, including injuries of unknown origin, followed by a thorough investigation.

Brenham argued that 42 CFR § 483.13(c) merely required the facility to report alleged violations involving mistreatment, neglect or abuse, including injuries from an unknown source.[1] In its brief, it asserted that it reached “the reasonable and professional conclusion that the bruising incident did not meet the guidelines for reporting accidents and incidents” because there was no evidence of the requisite abuse or neglect, and there was no injury of unknown origin. DHHS argued that 42 CFR § 483.13(c) mandates that a facility develop and implement written policies and procedures to prevent the mistreatment, neglect and abuse of its residents. In concluding that this regulation was violated, DHHS states that Brenham failed to implement its anti-abuse policies.[2]

The Court’s decision turned on two internal policies that surveyors claimed the facility did not follow.  First, the Court found that its “Accident and Incidents” policy requires Brenham to immediately report and investigate suspected neglect or abuse, including “injuries of an unknown source.” Second, the Court found that “Facility Abuse” policy required the facility “to develop and implement a systematic process to investigate allegations of abuse, neglect and/or exploitation so that such events can be accurately and timely investigated and reported to the proper authorities.”[3]

The Court affirmed the DHHS Departmental Appeals Board’s (DAB) conclusion that Brenham was obligated to report and investigate the resident’s bruising as potentially linked to abuse and neglect because the bruising was an injury of unknown origin. Importantly, the DON’s summary conclusion that the bruising was caused by a Hoyer Lift and did not need to be reported was rejected as a defense, citing as “undisputed evidence:  (1) though Resident 4's bloodwork indicated her blood cell counts were slightly low, Brenham's management ruled out a hematological disorder as a possible cause; (2) CNA Q told surveyors that Brenham's DON instructed her to corroborate the Hoyer Lift causation theory, but CNA Q and CNA R nevertheless denied transferring Resident 4 with a Hoyer Lift; (3) LPN B told surveyors that Hoyer Lift equipment was not present in Resident 4's room; (4) Resident 4's care plan did "not address transfers at all, much less call for use of a Hoyer Lift;" and (5) both Resident 4's physician and Brenham's medical director opined that the bruising should have been reported. Thus, Brenham violated its own policy by not reporting the incident to state officials and not implementing a “systematic process to investigate” the bruising, which would have led to a different causation conclusion.

This case serves as a clear reminder that facilities must not only have and effectuate their internal policies, but they must write those policies in a manner that is clear and not susceptible of requiring more than state and federal regulations require. Here, the DON’s summary conclusion did not evidence a systematic process of investigation and made it easier to find that the federal requirement “to investigate thoroughly” was violated.      

We expect this decision to be followed broadly. As such, it may be prudent for skilled nursing facility operators to review their policies to be certain that they are properly tailored to ensure that the facility is capable of following them.
 

[1] Brenham Nursing & Rehab. Ctr. Petitioner, v. U.S. Dep't of Health & Human Servs., Respondent, 2015 WL 5471575 (C.A.5),  22.
[2] Brenham Nursing & Rehab. Ctr., Petitioner, Appellant, v. U.S. Dep't of Health & Human Servs., Respondent, Appellee, 2015 WL 6470932 (C.A.5), 37.
[3] Brenham Nursing & Rehab. Ctr. v. U.S. Dep't of Health & Human Servs., No. 15-60272, 2016 WL 454320, at *3 (5th Cir. Feb. 4, 2016).

CMS Contractor for Pepper Reports produce Peer Reports (Somewhat like the old Comparative Billing Reports)

Very useful to see if you should be expecting targeted Medical Review:

TMF Health Quality Institute has developed peer group charts for the skilled nursing facility (SNF) PEPPER target areas; they are available for three categories:

·         Location

·         Ownership type

·         Size (number of episodes)

For each target area, the charts display the target area percent that is at the 80th, 50th and 20th percentile for each peer group category for episodes ending in fiscal year 2015 (October 1, 2014 through September 30, 2015). SNFs can compare their Q4FY15 target area percent (from their PEPPER) for the target area to the peer group subcategory they consider is most similar to their facility. A document describing the methodology used to develop the peer groups and a listing of all SNFs and their peer group classification are also available on the "Data" page of PEPPERresources.org on the "SNF" tab. These resources will be updated annually.

TMF is committed to providing statistics that support providers' efforts to identify and prevent improper Medicare payments. To provide feedback on PEPPER, please use thePEPPER Feedback Form. To request assistance please visit the Help Desk atwww.PEPPERresources.org.

The PEPPER Team

Providers now May be Subject to False Claims Act Liability based on Subjective Government Materiality Standard

This is from my business attorney, Peter Mellette, P.C. in Williamsburg VA:

CLIENT ADVISORY: “YOU DON’T KNOW WHAT YOU DON’T KNOW”: PROVIDERS NOW MAY BE SUBJECT TO FALSE CLAIMS ACT LIABILITY BASED ON A SUBJECTIVE GOVERNMENT MATERIALITY STANDARD

June 23rd, 2016

The unanimous June 16, 2016 Supreme Court decision in Universal Health Services, Inc. v. United States and Massachusetts, ex. rel. Julio Escobar and Carmen Correa (“Escobar”) significantly expands provider exposure to liability under the False Claims Act (“FCA”). Prior to Escobar, Federal circuit courts disagreed as to whether providers could face FCA liability under the “implied certification theory.” Under that theory, the Federal government argues that by submitting a claim for reimbursement to a Federal health care program a provider implies that it has complied with Federal rules as a precondition to receiving payment. Thus, failures to disclose violations of regulations affecting eligibility to receive payment from a government program constitute false claims and subject a provider to penalties.  

Under Escobar, the Supreme Court has largely accepted the government’s theory that providers may be held liable for false claims for violating “material” regulations if they do not disclose such violations when submitting claims. Practically, given the acceptance of the implied certification theory and the subjectivity in determining which violations are “material,” the Federal government now likely has broader power to recover funds through FCA litigation and settlements.

Prior Application of the Implied Certification Theory to FCA Liability  

Federal appellate courts previously took three diverging approaches to the government’s implied certification theory cases. The first group rejected the theory completely, finding that only express falsehoods in seeking payment violated the FCA, i.e., a provider had to make a false statement or sign a statement that it has complied with the regulations and statutes to violate the FCA. A second group of federal appellate courts accepted the implied certification theory but only found providers liable for violations of statutes or regulations for which compliance was a “condition of payment.” A third group of federal appellate courts held that no condition of payment was required to find liability under the implied certification theory and that providers could face FCA liability for a violation of any applicable statute, regulation, or contract provision.

The Escobar Case and Its Bad Allegations

Arbour Counseling Services (“Arbour”), a subsidiary of Universal Health Services, Inc. (“UHS”), provided Yarushka Rivera with mental health services for five years. Arbour received payment for Rivera’s care through Massachusetts’ Medicaid program and was subject to all compliance requirements under that program.  In May 2009, a “purported” doctor at Arbour prescribed Rivera a drug for bipolar disorder that caused her to have seizures. After continuing to take the drug under the health provider’s direction, Rivera suffered a seizure that resulted in her death. 

Subsequent to Rivera’s death, an Arbour counselor revealed to Rivera’s parents that few of the staff at Arbour were actually licensed to provide mental health services and that there was little to no supervision of these medical providers. Specifically, the practitioner who prescribed the medication to Rivera represented that she was a psychiatrist when in fact she was a nurse who lacked authority to prescribe absent supervision. In sum, 23 of Arbour’s employees reportedly lacked the appropriate licenses and qualifications to provide mental health services, and Arbour had allegedly aided its employees in obtaining National Provider Identification (NPI) numbers that did not match their qualifications or actual licenses. 

Rivera’s parents initially filed complaints with various Massachusetts agencies alleging Medicaid fraud against Arbour, as its ostensibly unlicensed professionals submitted reimbursement claims for services provided that did not comply with Massachusetts Medicaid regulations. Arbour was the subject of a corrective action plan, and two employees entered consent agreements with their licensing boards. Finding state remedies insufficient, Rivera’s parents subsequently filed a Federal qui tam action alleging FCA violations against UHS. A district court initially dismissed the case because it found that none of the alleged violations of the state Medicaid rules violated a “condition of payment”.  However, taking Rivera’s allegations as true, the First Circuit Court of Appeals reversed, holding that the FCA liability should simply be based upon whether the provider knowingly misrepresented compliance with a material precondition of payment in submitting the claim—in this case, failing to employ appropriately licensed professionals and to adequately supervise staff.

UHS appealed the First Circuit’s decision to the US Supreme Court. The Supreme Court granted UHS a review to resolve the question of whether providers could be liable under the implied certification theory and whether the violation had to be of a condition of payment or if all violations of statutory, regulatory or contractual provisions could potentially result in FCA liability. The Supreme Court held in Escobar that the implied false certification theory can be a basis for FCA liability when two conditions are satisfied:

• The claim must make “specific representations about the services provided” for which the claim is being requested and may not be a simple request for payment; and
• Noncompliance must be with provisions that are material and therefore failure to disclose noncompliance must be considered “misleading” or “half-truths” perpetrated on the government to induce payment to the provider.

The Supreme Court remanded the case back to the lower court for additional fact finding on these matters.

Materiality remains Murky under the Implied Certification Theory 

The Court’s FCA materiality standard is murky at best. The Court stated that a requirement may not be considered “material” merely because it is labelled a “condition of payment” or because the government would have the option to refuse to reimburse the provider if it knew of the provider’s noncompliance. Instead, proof of the materiality of a statutory, regulatory, or contractual requirement exists if the government has consistently refused to pay claims in the “mine run of cases” based on noncompliance with a particular requirement. The Court also stated that noncompliance with a requirement that is a condition of payment could still be considered a factor in determining whether the requirement is material but that this condition alone is not dispositive of materiality.

The Court’s materiality standard in Escobar is subjective and material provisions will not be easily identifiable for providers. In each FCA case, the materiality of a regulation and a provider’s knowledge that it is violating that regulation will be a fact-specific inquiry. With minimal case law developed to instruct them, lower courts will likely differ on whether the government rightfully considers a regulation material and providers have little to no instruction on the liabilities they face. The first providers sued under this standard may suffer as sacrificial lambs, as they will have little to no government or judicial guidance on potential culpability under the new standard. Even after the new standards are applied, each case is likely to have fact-specific nuances that may be distinguished in subsequent cases by the government and the courts. Further, the availability of case law on the matter all assumes that these claims will go to trial, which is unlikely given the cost and time necessary to litigate FCA cases. Providers accused of violating the FCA are likely to be bullied into accepting settlements, even on meritless claims, to avoid the costs of litigation.

Avoiding FCA Liability

Providers should always have effective programs and policies in place to maintain compliance with all requirements under government programs, but they should pay particular attention to how compliance efforts affect the care provided to patients. The Court appears to have taken a tough stance in Escobar due to the egregious facts pled in the case of a death of a 17 year old patient due to untrained, unlicensed, and unsupervised medical professionals. Regulatory noncompliance resulting in patient harm is not the only scenario that could lead to liability, but it is certainly a scenario that may attract negative attention.  It is possible that in cases where the care provided or outcome would have been the same whether or not the provider complied with the requirement, the government may be less likely to find the noncompliance material.

Should you or your organization have any questions regarding FCA liability for your organization under the implied certification theory and new materiality standard, please contact Peter Mellette (Peter@mellettepc.com), Nathan Mortier (Nathan@mellettepc.com), Harrison Gibbs (Harrison@mellettepc.com), or Nicole Fisher (Nicole@mellettepc.com), or call Mellette PC at (757) 259-9200.

This Client Advisory is for general educational purposes only. It is not intended to provide legal advice specific to any situation you may have. Individuals desiring legal advice should consult legal counsel for up to date and fact specific advice

VHCA announcement of FY17 Virginia Medicaid Rates

With the start of the Commonwealth’s new fiscal year (FY) on July 1, new Medicaid reimbursement rates for dates of service on or after July 1 will begin.  For FY 2017, rates were increased for inflation at 0.51% relative to FY 2016 rates.  FY 2017 also represents the final year of the transition from cost-based rates to price-based, with price-based now representing 75% of the blended rate.

For FY 2018, which will begin July 1, 2017, rates will be fully price-based and will be rebased.  As previously reported, the two year (2017 and 2018) impact of the inflationary adjustments contained in the 2016 Appropriations Act represents  approximately $34 million in additional Medicaid funding for nursing center care.

From NARA on Manual Medical Review

Update on CMS Targeted Manual Medical Review Process

June 6, 2016

NARA has received an update on the implementation of CMS' plans for implementing the targeted manual medical review (MMR) provisions established by Congress in MACRA.  CMS has met, discussed and reviewed a great deal of information from the previous process before implementing the new process.  They acknowledge some providers treat an abundance of chronically ill patients who often exceed the cap due to their conditions and they want to prevent providers of this nature from constantly receiving ADRs which are almost always denied and then overturned.  Following are some items of importance to you:

• The Supplemental Medicare Review Contractor ("SMRC"), Strategic Health Solutions will examine providers who furnish "a lot" of minutes/hours of therapy per day at the patient level as well as providers of service who have a "high" percentage of patients that exceed the $3,700 threshold.  According to CMS, the SMRC is permitted to define what "a lot" and "high" percentage means; however, they have an understanding on how therapy is provided in all settings.  These definitions could evolve over time as the SMRC improves and assesses its data. 
• A different analysis of claims and minutes will be used between individual providers and large groups, for example, if a solo provider is billing 16 hours a day, 365 days a year, this is would be a red flag. 
• The SMRC has been directed to compare like providers such as SNF to SNF, private practice to private practice, etc.
• The review contractor will send one ADR for 40 claims per provider.  Providers should only expect one request with the possibility of additional requests if the provider appears to have significant compliance issues.
• The SMRC has 45 days to review the claims and medical records and issue a determination to the provider which will address all 40 claims under review, some of which may be denied and others approved.  Procedurally, the provider may engage the SMRC in a discussion period to provide additional details that may overturn the initial determination in the provider's favor.  Any denials not resolved during the discussion period will be turned over to the applicable Medicare Administrative Contractor (MAC) for recoupment at which time the provider may appeal the SMRC's determination.
• The SMRC has updated its website and it now includes a sample ADR letter for reference.  https://strategichs.com/smrc/current-smrc-projects/.

CMS does not want to penalize providers who are providing proper services the proper way; however, it is difficult to identify who these providers are with their limited resources.  The change in this process is intended to do more targeted reviews on providers who are providing services up to the threshold or providing inappropriate services beyond the threshold.  Claim reviews will begin with dates starting July 15, 2015 – the SMRC has already begun sending out requests.  Latesha Walker is the contact person for questions providers have about the process.  NARA is already working with Latesha to provide feedback from NARA Members about the process and identifying chronically ill patients.

CMS recognized that there were inconsistencies when the manual medical review was initially rolled out.  The selection of a single contractor should provide consistency in communication and reviews.  There would be a mix of nurses and therapists on staff conducting reviews.  CMS has indicated the ultimate goal of the targeted review process is to turn up legitimate issues and not bother providers who are not posing an issue to CMS.  Providers should, however, focus on ensuring that high dollar claims are properly documented because they may be audited.

NARA will continue to keep you posted on any updates regarding the targeted medical manual review process.

www.naranet.org 

CMS entirely re-writes rules for medical review of a SNF chart

SUBJECT: Medical Review of Skilled Nursing Facility Prospective Payment System (SNF PPS) Bills I. SUMMARY OF CHANGES: The purpose of this Change Request (CR) is to update chapter 6.1, Medical Review of Skilled Nursing Facility Prospective Payment System (SNF PPS) Bills. EFFECTIVE DATE: June 28, 2016 *Unless otherwise specified, the effective date is the date of service.  IMPLEMENTATION DATE: June 28, 2016 www.cms.gov/Regulations-and-Guidance/Guidance/... 6.1 - Medical Review of Skilled Nursing Facility Prospective Payment System (SNF PPS) Bills 6.1.1 - Skilled Nursing Facility Qualifying Inpatient Stay 6.1.2 – Types of SNF PPS Review 6.1.3 – Bill Review Requirements 6.1.4 – Bill Review Process 6.1.5 - Workload

CMS OFFERS SNF TRAINING IN ATLANTA GEORGIA FOR QRP

FROM MDS 3.0 Website:  https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/Spotlight.html

Subject: SAVE THE DATE for the Upcoming Skilled Nursing Facilities (SNF) Quality Reporting Program (QRP) Provider Training on June 21 and 22, 2016

The Centers for Medicare & Medicaid Services (CMS) will be hosting a 2-day training event for the Skilled Nursing Facilities (SNF) Quality Reporting Program (QRP) on Tuesday June 21, and Wednesday, June 22, 2016, at the Omni Atlanta Hotel at CNN Center. The address is 100 CNN Center, Atlanta, GA 30303-2762.
This important training is open to all SNF providers, associations, and organizations. The objective of this train-the-trainer event is to provide SNFs with an overview of the requirements under the IMPACT Act and the QRP including:

• Information about the Quality Measures included in the SNF QRP
• Guidance on coding the Minimum Data Set (MDS)--Resident Assessment Instrument (RAI) to comply with the QRP requirements
• Data collection and submission requirements for the fiscal year 2018 Annual Percentage Update (APU) and subsequent years

Information about how to register and discounted hotel room rates will be coming shortly. Please mark your calendars.

If you have questions or need additional information, please email the PAC Training mailbox at PACTraining@econometrica.com