Up, Up and Away: Penalties and CMPs to be Adjusted for Inflation

As part of the recent bipartisan budget deal, the Federal Civil Penalties Inflation Adjustment Improvements Act of 2015 (the “Improvements Act”) requires that all federal agencies make inflation-based adjustments to all civil monetary penalties (CMPs) within their jurisdictions beginning no later than August 1, 2016. In the health care context, the legislation means that the penalties available to the government under the Civil Monetary Penalties Law (CMPL), as well as the False Claims Act (FCA), must be adjusted for inflation and increased.

heap of dollars with stethoscopeFor health care providers, penalties for false claims are often staggering because each problem claim submitted constitutes a separate and distinct violation that can be subject to treble damages and per claim penalties between $5,000 and $10,000. While The Department of Justice has had the ability to increase penalties by making cost of living adjustments every four years since 1999, an adjustment has only been made once, which increased the penalties to $5,500 and $11,000 per claim. With the per claim assessment tool, penalties as much as $237 million for 21,730 false claims have been upheld. The new law, however, requires that agencies catch up their penalties for cost-of living through adjustments to be made by August 1, 2016. Thereafter, the new law permits agencies to adjust penalties for inflation every year thereafter without going through the rule-making process.

The adjustments to the Civil Monetary Penalties that may be issued by the Office of Inspector General must now be adjusted for inflation; these CMPs have never been adjusted. Under the formula, penalties must be adjusted by the Consumer Price Index for each year since the penalty was established. Some of the penalties that the OIG may assess can be as large as $50,000. When adjusted under the formula, these penalties are likely to increase tremendously. And, the new law requires that penalties be adjusted every year going forward too. Once caught up, the new law requires reassessment every year.

For health care providers that are currently under investigation for false claims or other matters with the potential assessment of CMPs, efforts to settle these cases and investigations should proceed with all haste so that the matters can be settled before the penalties are increased by August 2016.   These higher penalties will most likely mean that health care providers will be even less likely to challenge allegations of false claims through litigation because of the risk of even higher penalties. Likewise, this may also increase the likelihood that healthcare providers use the Self-Disclosure protocol to limit potential liability.

Lisa Hinkle Lisa English Hinkle is a Member of McBrayer, McGinnis, Leslie & Kirkland, PLLC.  Ms. Hinkle concentrates her practice area in health care law and is located in the firm’s Lexington office.  She can be reached at lhinkle@mmlk.com or at (859) 231-8780. 

This article is intended as a summary of federal and state law and does not constitute legal advice.

Lexington Approves Local Minimum Wage Ordinance

Lexington2Per the Bluegrass Hospitality Association:

“As you have probably already heard, the local minimum wage ordinance was approved by Council (9 to 6) at last night’s meeting.

The ordinance will increase minimum wage in Fayette County to the following on the below dates:

July 1, 2016                  $8.20

July 1, 2017                  $9.15

July 1, 2018                  $10.10

There was over two hours of public comment prior to the almost 9:00 PM vote.  As expected, there were passionate pleas and points both in support and against.

Several Council Members spoke prior to the vote.  The consensus is that raising the minimum wage does not ultimately solve the underlying issues long-term.  As such, Council will continue to work on programs to address long-term solutions to better wages like education, housing, transportation, childcare, etc.”

For more information on the vote itself:


For more information on how this vote will affect your healthcare practice, contact the attorneys at McBrayer.

Tidbits and Takeaways from OIG’s 2016 Work Plan

The Office of Inspector General for Health and Human Services (“OIG”) recently issued its 2016 Work Plan, which sets the agenda for its auditing and investigation in the year ahead. The broad mandate of the OIG is to eliminate fraud, waste and abuse. With the requested FY 2016 budget of $417 million, the OIG will continue its fraud-fighting efforts and heighten it focus on reducing waste in HHS programs. Waste includes not only fraud, but also unnecessary services, inefficient delivery of care or service, poor quality of care or services, inflated prices, excess administrative costs, or mismanagement of grant or contract funds. With a 2015 track record of $3 billion in recoveries; 4,112 provider exclusions from participation in federal health care programs; 925 criminal actions and 682 civil and administrative enforcement actions and a return on investment of $8 for every $1 spent, the OIG is a force to be avoided. The yearly work plan provides a list of priorities for the office, and in turn gives providers insight into areas of concern in practice. The following areas are on OIG’s radar for the coming year:

Auditor Looking At Document


While not a new focus, the OIG will review data from cost reports to identify salary amounts in operating costs for reasonable remuneration for managerial, administrative, and professional services. While Medicare does not provide any specific limits on salary amounts, amounts paid must be reasonable.

The OIG will also focus on outpatient and inpatient stays under the two-midnight rule to see whether physicians are using the correct criteria when deciding whether to admit beneficiaries as inpatients or treat them as outpatients.

The OIG will also review claims for certain Medicare Severity Diagnosis Related Group assignments that require mechanical ventilation to determine whether the DRG have been appropriately billed. The review will include claims for beneficiaries who received over 96 hours of ventilator care.

Nursing Homes

Because of successful recovery of Medicare payments for therapy in nursing homes, the OIG has announced a new focus on the documentation requirements specified in 42 CFR Section 483.20 to insure that SNF care is reasonable and necessary. These documentation requirements include (1) physician order at the time of admission; (2) comprehensive assessment; and (3) a comprehensive plan of care prepared by the interdisciplinary team that includes the attending physician, RN, and other appropriate staff. Nursing home compliance staff should focus on reviewing documentation to assure compliance.[1]


Once again, the OIG will review the use of general inpatient care level of the Medicare hospice benefit, to assess whether this level of care is medically necessary. The OIG sill also focus on beneficiary plans of care to determine whether they meet the key requirements.

Home Health Services

Carried over from the 2015 work plan is a focus on whether home health prospective payment system claims met required standards. Earlier reports determined that at least one in four home health agencies had questionable billings, and newly-enrolled agencies have a record of greater fraud, waste, and abuse. OIG claims that nearly $1 billion of improper or fraudulent payments relating to the home health benefit have been made since 2010.

Medicaid payments for adult day care services will also face continued scrutiny, as prior OIG work shows that payments are not always in compliance with regulation.

Equipment and Supplies

Orthotic braces seem to be a prime target for OIG in 2016, with no less than two new listings in the 2016 work plan. First, OIG will be reviewing Medicare Part B payments to ensure that payments made to suppliers were medically-necessary and provided in accordance with Medicare requirements. OIG will also be looking that the reasonableness of the Medicare fee schedule as compared to amounts paid by non-Medicare payers, implying that OIG believes Medicare is getting a raw deal.

Other Providers

Chiropractic services are once again on the hot seat, as the CMS has determined that chiropractic maintenance therapy is not considered medically reasonable and therefore non-compensable. Medicare Part B does pay for chiropractic services in a very, very limited set of circumstances, and prior OIG reports documented inappropriate payments for treatments that fall outside those regulations.

OIG will also turn once again to sleep disorder clinics, due to high utilization of sleep-testing procedures billed to Medicare. The concern is that beneficiaries are being tested in the same manner multiple times when prior test results are still valid and further testing is unnecessary.

Ambulatory Surgery Centers are also new on the list and targeted for quality due to the low rates of certification surveys conducted by state agencies and poor oversight by CMS.

Prescription Drugs

OIG is changing its focus on prescription drugs under the 340B program, looking to find ways to bring cost savings through 340B discounts back to Medicare. Eligible health care providers are able to purchase prescription drugs at discounted prices under the 340B program, but those providers can then bill Medicare and other insurers for the full price of the drug.

Under Medicare Part D, OIG will also begin to focus on inappropriate drug pairs – drugs that should not be prescribed alongside other drugs due to the potential for severe interactions, among other things.

Managed Care Plans

Medicare Part D (Part D) plan sponsors will be subject to a number of OIG inquiries under the new Work Plan. Among these, OIG will work to determine whether Part D sponsors comply with Medicare requirements for reporting direct and indirect remunerations and, pursuant to an Affordable Care Act (ACA) mandate, review the extent to which plan drug formularies include drugs frequently used by dual-eligible members. The OIG will also review price increases for brand-name drugs under Part D compared to inflation.

As to the Medicaid program, OIG plans a variety of new and reworked investigatory activities. OIG will review state oversight of and coordination with managed care organizations’ drug utilization review programs, particularly for inappropriate dispensing of opiates.

The OIG also will review state payments to Medicaid managed care plans to ascertain if plans are being properly compensated. Previous reviews have found that CMS oversight of state rate setting was in need of improvement and that states were not adequately verifying and auditing plan-reported data used to set rates. Issues surrounding medical loss ratios and payments for services to deceased beneficiaries similarly will be investigated.

Medicaid managed care plans’ efforts to identify fraud and abuse will be an additional area of review. Specifically, the OIG will review whether plans are identifying and addressing potential fraud and abuse and how states oversee the plans’ efforts. Medicaid MCOs must have mechanisms in place to detect and address fraudulent activity of providers and demonstrate that it is policing accordingly.

Beware the Consequences

While the above includes only a portion of the OIG’s ambitions for 2016, the work plan gives providers a heads up about targeted areas, which should precipitate review of these problem areas for providers and managed care plans. The bottom line is that the OIG is continually investigating and has an arsenal of tools that includes access to Medicare and Medicaid payment data. Providers should be vigilant about not just fraud and abuse, but also waste and wary of how waste could easily become overpayments and potential False Claims Act and Stark Law violations. For more information on the 2016 OIG work plan or assistance with compliance with healthcare regulatory law, please contact the attorneys at McBrayer.

Lisa Hinkle

Lisa English Hinkle is a Member of McBrayer, McGinnis, Leslie & Kirkland, PLLC.  Ms. Hinkle concentrates her practice area in health care law and is located in the firm’s Lexington office.  She can be reached at lhinkle@mmlk.com or at (859) 231-8780. 

This article is intended as a summary of federal and state law and does not constitute legal advice.


[1] See 42 CFR §483.20 for more details on required documentation.

KBML Issues Guidance to Help Physicians Get the Most out of MOST

The Kentucky Board of Medical Licensure (“KBML”) issued a recent opinion regarding the Medical Orders for Scope of Treatment (“MOST”) form. The stated purpose of the opinion is to “encourage and promote clarification of a patient’s treatment preferences into medical orders for care; and…encourage and promote transfer of information among healthcare professionals in a reliable and consistent format.” These goals coincide with the broader focus by both the healthcare industry and government at both federal and state levels in improving the continuum of care of patients through patient-centered care and information sharing. The MOST form, in particular, also evinces a focus on patient preference for end-of-life care.

Male doctor explaining prescriptions to senior woman in clinic

The MOST form is similar to advance directives in that it provides instructions to caregivers on what level of treatment is desired should certain events, including incapacity, occur. These forms are used primarily for patients with advanced chronic progressive illness or those who have a life expectancy of less than a year.

The KBML opinion provides guidance on counseling patients in completing a MOST form, making a few important points of note:

  1. The patient or patient representative must understand the patient’s current medical condition and prognosis, as well as the various treatment options available. The physician signing the form is responsible for this, and the physician must sign the document her or himself for it to be valid and be treated as an order by EMS.
  2. The patient must give informed consent before a MOST form is issued.
  3. The MOST form should be reviewed yearly at a minimum, as well as when other significant events occur, such as admittance to or discharge from a healthcare facility.
  4. If a section of the MOST form is not completed, is will be interpreted as a preference for full treatment.
  5. If the patient has a living will or other advance medical directive, the MOST form will need to be certified in accordance with such a directive. If there is a conflict, the living will will control, and the patient should be made aware of this.
  6. The MOST form may be revoked by the patient, the patient’s surrogate or a responsible party, and the physician should not interfere with the right of the patient to do so.

Also this opinion does not have the force of law and provides its points as “acceptable and prevailing medical practice,” it is instructive to providers when dealing with the sensitive issue of end-of-life care. The most crucial recurring theme in the guidance is the concept of informed consent. Providers should take special note that thorough consultation and counseling of patients with regard to a MOST form is of the utmost importance. For more assistance with interpreting the new KBML guidance on MOST forms or other end-of-life patient care issues, contact the attorneys of McBrayer.

Molly LewisMolly Nicol Lewis  is an Associate of McBrayer, McGinnis, Leslie & Kirkland, PLLC.  Ms. Lewis concentrates her practice in healthcare law and is located in the firm’s Lexington office. She can be reached at mlewis@mmlk.com or at (859) 231-8780. 

 This article is intended as a summary of state and federal law and does not constitute legal advice.

OIG Alert Shows Increased Concern over Data Blocking

In a report to Congress last April, the Office of the National Coordinator for Health Technology addressed the growing issue of data blocking. Data blocking occurs when some person or entity knowingly and unreasonably interferes with the exchange or use of electronic health information (“EHI”), and this happens due to business incentives that cause those persons or entities to want to control and limit availability to that information. For instance, if one ACO has the capability to send EHI of a patient safely and securely to another ACO treating that patient through a certified health IT system, but instead faxes that patient’s information, it has engaged in data blocking. It has made it more difficult, inefficient and expensive for the rival ACO to treat that patient. In essence, data blocking prevents the exact purpose of the HITECH Act and provisions of the Affordable Care Act which were designed to increase interoperability of electronic health information systems and facilitate the exchange of information. These broad concerns over data blocking found footing in a recent Office of Inspector General (“OIG”) Alert stressing that data blocking can run afoul of the Federal Anti-Kickback Statute.

The Anti-Kickback Statute (“AKS”) prevents persons and entities from providing or receiving anything of value in an effort to induce or reward referrals of business that will ultimately bill a Federal health program. There are certain safe harbors, however, that exempt specific types of transactions from these prohibitions. For instance, one exception allows for one entity to provide interoperable electronic health record (“EHR”) software, technology or training to an existing or potential referring provider for the purpose of promoting the adoption of such systems and increasing the quality of patient care. A hospital, therefore, can provide software or hardware to a referring provider without implicating the AKS, provided the transaction meets certain criteria. It’s these criteria that are the sticking point for OIG.

Senior female doctor using a tablet computer in her officeThese criteria prevent the donor of the software or equipment from taking any action to limit the “use, compatibility or interoperability of the items or services with other electronic prescribing or [EHR] systems.”[1] The donated items must not be artificially restricted in some way (technologically, or by the imposition of excessive fees, etc.) from interfacing with the systems of other providers that potentially compete with the donor. In other words, donors can’t have their EHR cake and eat it too. They may donate equipment and software, but the recipient must be able to use it freely and operably with other systems that it is designed to be compatible with in its unrestricted form. By restricting the operability of such a system on donation and engaging in data blocking, the donor effectively falls outside of the AKS safe harbor into a potential AKS violation.

This polite reminder from the OIG may have hospitals thinking twice about updating the EHR systems of referring providers when free-riding competitors can receive just as much use of them as the donors, but this is exactly what the AKS safe harbor is meant to encourage. Entities should review any EHR system donation arrangements with providers to ensure that they remain squarely within the AKS safe harbors. The attorneys of McBrayer can assist entities and providers alike in these evaluations to avoid any potential AKS liability. Contact us today.

[1] 42 CFR § 1001.952(y)(3)

Chris ShaughnessyChristopher J. Shaughnessy is an attorney at McBrayer, McGinnis, Leslie & Kirkland, PLLC.  Mr. Shaughnessy concentrates his practice area in health care law and is located in the firm’s Lexington office.  He can be reached at cshaughnessy@mmlk.com or at (859) 231-8780. 

This article is intended as a summary of federal and state law activities and does not constitute legal advice.

OIG Targets Questionable Billing Practices for Ambulance Services

The Office of the Inspector General (“OIG”) pulled no punches in a recent report on Medicare Part B billing for ambulance transports. The September release presented a case for increased scrutiny, pointing out that Medicare has historically been vulnerable to fraud where ambulance transports are concerned. For instance, a 2006 OIG report determined that 25% of billed ambulance transports did not meet Medicare requirements in Calendar Year 2002. That year, Medicare paid almost $3 billion for ambulance services, and improper payments accounted for an estimated $402 million of that total. As 2012 saw Medicare pay $5.8 billion for ambulance services, the OIG took an even closer look at this category of claims.

The OIG found that $207.5 million out of a total $2.86 billion paid by Medicare for ambulance services in the first half of 2012 were a result of questionable billing practices. Specifically, the OIG found that Medicare paid $24 million for ambulance transports that did not justify Medicare payment and $30 million for transports during which the purported beneficiary did not actually receive Medicare-covered care at either the origin or the destination of the trip. The study also determined that more than 1 in 5 ambulance suppliers implemented questionable billing practices, and more than half of all questionable ambulance transports occurred in just four metropolitan areas – Philadelphia, Los Angeles, New York and Houston. CMS actually imposed a moratorium on new supplier enrollment in Houston and Philadelphia in 2013 and 2014, respectively, in an attempt to stem questionable ambulance transports in those areas.

Defocused shot of ambulance on a city street

The OIG suggested that additional moratoria on ambulance supplier enrollment may be warranted, as well as a requirement that suppliers provide the National Provider Identifier (“NPI”) of the physician on a claim when the transport requires physician certification. The report also recommended that CMS implement new claims processing edits to prevent inappropriate billing and increase monitoring of ambulance billing. Additionally, the OIG called upon CMS to investigate the questionable billing discovered in its report to determine which claims were inappropriately billed and paid.

Improper billing practices damage the Medicare program and can result in False Claims Act violations if identified overpayments for non-covered ambulance transports are not returned to Medicare in a timely fashion. For every instance of fraudulent billing or a failure to repay an overpayment within 60 days of discovery, a False Claims Act violation incurs a civil penalty of at least $5,500 and triple the damages that the government sustains because of the false claim. Your McBrayer health care attorney can ensure that your Medicare billing practices are in compliance with applicable law, so please contact us today.

Anne-Tyler MorganAnne-Tyler Morgan is an Associate of McBrayer, McGinnis, Leslie & Kirkland, PLLC.  Ms. Morgan concentrates her practice in healthcare law and is located in the firm’s Lexington office. She can be reached at atmorgan@mmlk.com or at (859) 231-8780. 

This article is intended as a summary of federal and state law and does not constitute legal advice.

The ICD-10 switchover: It’s here – are you prepared?

The day of reckoning is upon us – October 1st has now come and gone, and there was no other delay of ICD-10 implementation (the earliest proposed date of implementation was October 1, 2011, which was pushed back to October 1, 2013, then October 1, 2014, then the final deadline of October 1st of 2015 – there are only so many times one can press the “Snooze” button on ICD-10 implementation, apparently). The implementation of ICD-10 is in full swing, and healthcare entities that were unprepared will be feeling a significant impact if they have not begun the process. The importance of ICD-10 readiness cannot be understated, and healthcare entities that have yet to work on Phase 1 of implantation should understand that it isn’t too late to get ready for the change.

Bill from the doctor concepts of rising medical costThe switchover to ICD-10 is far more than a mere change in coding. This switch will affect nearly every part of a healthcare practice, and the Centers for Medicare and Medicaid Services will not grant tardy providers an extension on this deadline. A practice that is not ready to submit claims under the new coding will likely see claims rejected, so preparation is paramount.

So, where to begin? There are plenty of paths to ICD-10 readiness, but the majority of them break down into a few simple areas. First, have you confirmed that all of your vendors and vendor systems are ready to make the switch? If the vendors and systems are not ready, implementation of ICD-10 may require replacing noncompliant systems, which will have even more impact on the entity’s bottom line.

After that, are all of your billing personnel and staff responsible for coding trained and prepared for the change? Have you identified all the clinicians who will be affected by the change and trained them to make the switch? Training on the new system may be the most crucial piece of the switchover puzzle, and every level of the organization, from senior management down, must become aware of how the switchover will affect them and learn to adapt to the new system.

The final question is whether you reserved the funds to carry over your entity through any issues with the revenue cycle that occur as a result. While larger hospitals and healthcare systems may be ready for the rollout, the most vulnerable entities are smaller practices such as physicians groups which may not have the cash reserves on hand to weather a break in cash flow due to the ICD-10 switch.

The switchover to ICD-10 may be complex and will likely cause headaches, but it should bring with it more efficiency in submitting claims with added specificity in diagnosis. It’s never too late to prepare for the change, and the Healthcare Practice Group at McBrayer can help your organization assess and implement changes under ICD-10. Hurry, though – time is running out…

Gina M. Riddell, MPA, is a Research and Compliance Analyst of McBrayer, McGinnis, Leslie & Kirkland, PLLC. Ms. Riddell concentrates her practice in healthcare law and is located in the firm’s Lexington office. She can be reached at griddell@mmlk.com  or at (859) 231-8780.

This article is intended as a summary of federal and state law and does not constitute legal advice.