Health Care Law Reform : Health Care Lawyer & Attorney : McDermott Will & Emery Law Firm : Managed Care, Product Regulations

The Facts

The health reform proposal pending before the Senate Finance Committee includes many significant fraud and abuse changes that would affect hospitals, physicians, group purchasing organizations (GPOs) and device manufacturers, among others. Following are some of the more significant changes:

• “Physician Payment Sunshine” provisions would require drug and device manufacturers to report payments to physicians, physician groups and hospitals with residency training programs. The proposal pre-empts state law covering the same types of payments, but does not pre-empt state laws that cover other types of payments, payors or payees. Also, manufacturers and “related group purchasing organizations” would be required to report annually information regarding physician ownership in the manufacturer or GPO.
• Manufacturers that currently are required to maintain records of samples distributed to practitioners under the Prescription Drug Marketing Act would be required to report such information to the U.S. Department of Health and Human Services.
• Physicians making referrals for high-tech imaging services furnished within their office would be required to provide information about other sources of the service, unrelated to the physician’s group practice.
• Providers and suppliers would be required to implement a compliance program as a condition of Medicare or Medicaid participation.
• The anti-kickback statute would be amended to provide that a person need not have actual knowledge of the law or specific intent to violate that law to establish that a violation occurred.
• The process for providers to voluntarily disclose violations of the physician self-referral law (Stark Law) would be re-established. 

What’s at Stake

The health sector should expect that increased fraud and abuse scrutiny and enforcement will be included in any health reform package passed by Congress. While most of the proposals reflect increased scrutiny for providers, the proposal for a Stark Law self-disclosure protocol could be a significant positive development for providers that are looking for a pathway to deal with so-called “technical” Stark Law violations, where there is no fraudulent or abusive conduct, yet the statutory damages are significant.

Steps to Consider

Providers that are subject to the Stark Law should closely monitor the proposals for a self-disclosure protocol in the health reform package and in a stand-alone bill introduced by Rep. McDermott (H.R. 3556).

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The Facts
The health care reform plan put forth September 16, 2009, by Senator Max Baucus (D-MT), Chair of the Senate Finance Committee, contains revenue raising proposals, along with savings from Medicare and Medicaid, that together would finance the expected $774 billion cost of reform over 10 years. Following are highlights of the revenue raising provisions in the Baucus plan: 

• Impose an excise tax of 35 percent on insurance companies and plan administrators for health insurance plans above the threshold of $8,000 for individual coverage and $21,000 for family coverage, to raise $214.9 billion over 10 years.
• Limit the amount of contributions to health flexible spending accounts to $2,000 per year, to raise $16.5 billion over 10 years.
• Eliminate the deduction for the subsidy for employers who maintain prescription drug plans for their Medicare Part D eligible retirees, to raise $4 billion over 10 years.
• Conform the definition of qualified medical expenses for health savings, health flexible spending accounts and health reimbursement arrangements to the definition used for the itemized deduction, to raise $5.4 billion over 10 years.
• Increase the penalty for distributions from health savings accounts prior to age 65 not used for qualified medical expenses from 10 to 20 percent raises $1.3 billion over 10 years.
• Require information reporting for businesses that pay corporate providers of property and services any amount over $600, raises $17.1 billion over 10 years.  
• Impose non-deductible annual flat fees on pharmaceutical manufacturers and importers, health insurance providers, clinical labs and medical device manufacturers based upon relative market share, to raise $93.2 billion over 10 years.

What’s at Stake

• Insurance coverage limits may be reduced to avoid the 35 percent excise tax. 
• The costs of pharmaceutical drugs, insurance lab work and medical testing fees could increase as a result of any new fees imposed on these companies. 

Steps to Consider

• Affected entities should carefully evaluate the impact of the proposed new taxes and fees. 
• In addition to the revenue raisers included in the Chairman’s mark, additional revenue raisers will likely be offered during Finance Committee consideration of the legislation as any amendments offered must included offsets to pay for the cost of the amendment. 
• The financing mechanisms selected by the Finance Committee merit serious review. The mechanism contained in the House health reform bill (an income tax surcharge on families with incomes above $350,000 and individuals with incomes about $280,000) will likely be significantly scaled back, giving more prominence to the Finance Committee’s proposals. 

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The Facts

Senate Finance Committee Chairman Max Baucus (D-MT) put forth his much-anticipated Framework for Comprehensive Health Reform on September 8, 2009. The Framework outlines a plan for consideration by the Finance Committee’s “Gang of Six” bipartisan negotiators and includes policies that reflect the work of the committee throughout the summer. In addition to other areas of health reform, the Framework includes policies specific to both “transparency and program integrity” and “fraud, waste and abuse”:

• New enrollment process for providers and suppliers, including an application fee
• Data matching and data sharing across federal health care programs
• Increased civil monetary penalties
• Increased authority to suspend payment during credible investigations of fraud
• New procedures to disclose and repay overpayments
• Limitations on physician-owned hospitals
• Requirements for drug, device and biologic manufacturers to report any payments or transfers of value, with limited exceptions, made to a physician or teaching hospital
• Requirements for drug manufacturers and authorized drug distributors to report the type and amount of drug samples requested and distributed to practitioners 

Additional details about these provisions will be contained in the Chairman’s Mark of the bill, which will be made available prior to committee markup, which is expected later this month. Importantly, similar provisions are contained in the House health reform bill, America’s Affordable Health Choices Act of 2009. The Senate Health, Education, Labor and Pensions Committee (HELP) bill also includes provisions related to fraud and abuse enforcement.

What’s at Stake

Each health reform proposal to date includes provisions designed to prevent or deter fraud and abuse. Furthermore, reducing the rising cost of health care is a goal shared by lawmakers on both sides of the aisle, and reduction in fraud, waste and abuse is generally viewed as an area of significant savings. The health sector should expect that increased fraud and abuse scrutiny and enforcement will be included in any health reform package passed by Congress.

Steps to Consider

Evaluate the impact of fraud and abuse proposals in pending legislation. Assess how current compliance programs, policies and procedures will need to be updated to address requirements common to health reform proposals.

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