Locke Lord QuickStudy: Recent Health Care Updates

Locke Lord LLP
February 6, 2015
CMS to Update the EHR Incentive Program
On January 29, the Centers for Medicare & Medicaid Services (CMS) announced its plan to propose changes to the Electronic Health Record Incentive Program (EHR Incentive Program).  According to CMS, the rule will address provider concerns and reflect developments in the industry since the initial inception of the program.  Specific proposed changes include, switching the reporting period from the fiscal year to the calendar year, and shortening the reporting period from one year to 90 days.  CMS will release the proposed rule this spring.

HHS Announces Timeline for Medicare Payment Reform
On January 26, the U.S. Department of Health and Human Services (HHS) announced the timeline to transition doctors and hospitals into a new Medicare payment system as part of HHS’ ongoing effort to move away from the current fee-for-service model and toward a payment system based on outcomes and efficiency.  Specifically, HHS plans to tie 85 percent of Medicare payments to an outcome measure by the end of 2016, and 90 percent by the end of 2018.  In addition, HHS plans to link 30 percent of Medicare payments to alternative payment models (such as Accountable Care Organizations (ACOs)) by the end of 2016, and 50 percent by the end of 2018.  Currently, only 80 percent of payments are linked to outcome measures and 20 percent to alternative payment arrangements.  HHS has not specified how it will meet these targets.

OIG Issues Favorable Advisory Opinion Regarding Patient Assistance Program 
On January 5, HHS Office of the Inspector General (OIG)  issued a favorable advisory opinion regarding a non-profit, tax-exempt, charitable organization’s (Requestor’s) proposal to provide assistance with copayment obligations to financially needy patients, including Medicare and Medicaid beneficiaries, diagnosed with Crohn’s disease or ulcerative colitis (the Proposed Arrangement). 

Under the Proposed Arrangement, Requestor would work with another 501(c)(3) charitable organization to administer the program.  Patients would learn about the Proposed Arrangement through a variety of sources, including their existing relationships with Requestor or the administrator, physicians, health care entities, and patient support groups.  Patients would be required to select their health care provider, practitioner, or supplier, and have a treatment regimen in place before applying for assistance.  Requestor would assess a patient’s financial eligibility for copayment assistance based on the federal poverty guidelines and use a preset sliding scale to determine the amount awarded to the patient.  The funds would be provided on a first-come, first-served basis for a specified period of time (up to one year), after which patients could reapply.  Requestor also certified that eligibility determinations would not be based in whole or in part on the interest of any person or entity who contributes to Requestor’s grant program funds (a Donor) or an affiliate of a Donor.

To fund the program, Requestor would solicit donations from its regular donor sources, including individuals, foundations, and corporations (including pharmaceutical manufacturers).  All donations would be in the form of cash or cash equivalents. Donors would be able to change or discontinue their contributions to Requestor at any time. Donors could either provide unrestricted donations or earmark their contributions for the support of patients with a particular disease (e.g., Crohn’s); however, Requestor would have absolute, independent and autonomous discretion to use the donations.

OIG scrutinized two aspects of the Proposed Arrangement:  the Donor contributions to Requestor (under the Federal anti-kickback statute or (AKS)) and Requestor’s assistance to patients (under the civil monetary penalties provision prohibiting inducements to beneficiaries).

Donor Contributions:  Consistent with previous guidance, OIG concluded that the Donor contributions would not result in an AKS violation because the Proposed Arrangement presents minimal risk of fraud and abuse.  This is because, for the following reasons, the Donor contributions are unlikely to influence direct or indirect referrals by Requestor:

  • No Donor (or Donor affiliate) would exert direct or indirect control over Requestor or its program;
  • Before applying for assistance, each patient already would have selected his or her health care providers and have a treatment regimen in place; and
  • Requestor would not provide Donors with any data that would facilitate a Donor in correlating the amount or frequency of its donation with the amount of frequency of the use of its drugs or services.

OIG also noted that earmarked donations should not, as a general matter, significantly raise the risk of abuse because no Donor or Donor affiliate directly or indirectly influenced which diseases would be selected for the Proposed Arrangement. 

Assistance to Patients:  OIG concluded that Requestor’s proposed provision of financial assistance is unlikely to influence a beneficiary’s selection of a particular provider – and therefore presents a low risk of fraud and abuse – because:

  • Requestor’s determination of a patient’s qualification for assistance would be based solely on the beneficiary’s financial need, without considering the identity of any of his or her health care providers, suppliers or drugs; and
  • Requestor would assist all eligible, financially needy patients on a first-come, first-served basis, to the extent funding is available. 

HIPAA Settlement Following Breach Caused by Malware
In December 2014, Anchorage Community Mental Health Services (ACMHS) entered into a settlement with the HHS Office of Civil Rights (OCR) to resolve potential HIPAA Security Rule violations. Under the resolution agreement, ACMHS will pay $150,000.00 and execute a two-year corrective action plan (CAP). 

In 2012, ACMHS self-reported to OCR a breach of unsecure electronic protected health information (ePHI) due to malware.  The breach affected 2,743 patients.  OCR’s investigation revealed that although ACMHS had adopted the required Security Rule policies and procedures in 2005, it had not followed them.  

The ACMHS settlement underscores the importance of updating and following adopted policies and procedures; it is not sufficient to simply have them in place. 

For more information on the matters discussed in this Locke Lord QuickStudy, please contact the author:

David S. Szabo  |  617-239-0414  |