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Final Change of Ownership (CHOW) Rules for Home Health Agencies 


Providers will face increased fraud and abuse enforcement under the PPACA.  The PPACA makes a first year allocation of $95 Million to fraud enforcement, with a total of $250 Million over the first 5 years.  The PPACA also includes new tools for the government to use in enforcing fraud and abuse against the health care system.

Here are some of the new fraud and abuse related provisions in the PPACA.

Stark Law and Physician-Owned Hospitals.

As of December 31, 2010, the exception to the Stark Law that permitted some physician-owned hospital will be removed and no new physician-owned hospitals will be permitted.  Additionally, existing physician-owned hospitals will be precluded from expanding many aspects of the physical facility including beds, procedure rooms and operating rooms.  Additionally, the percentage of physician ownership in existing hospitals cannot be increased after December 31.  Any pending or contemplated physician ownership transactions in hospitals will need to be completed by the end of 2010.

Mandatory Compliance Plans Under PPACA.

Formal compliance programs, while a very good idea, have not been mandatory up until this point.  The PPACA will make compliance plans mandatory for certain providers.  The Secretary of HHS is given the authority to designate the types of providers that will be required to have compliance programs in place as a condition of their certification.  The breadth of this requirement is up the HHS and it is not clear how broadly this power will be exercised.

Changes To The Anti-Kickback Statute.

The PPACA clarifies the intent standard that must be met in order to obtain a conviction under the Anti-Kickback Statute. The statute requires that violations be knowing and willful before a conviction can be obtained.  There has been confusion regarding the exact requirements of the knowing and willful standard.  Some federal courts have interpreted the standard as requiring proof that the defendant had specific knowledge that the activity violated the anti-kickback statute and that there was a specific intent to violate the law.  This interpretation made it very difficult to obtain a conviction under the Anti-kickback Statute.

The PPACA clarifies the knowledge standard under the Anti-Kickback Statute.  The new law provides that a person need not have actual knowledge that the alleged activity violates the Anti-Kickback Statute or that there be a specific intent to commit a violation of the Anti-Kickback Statute.  This definition will make it much easier for the government to bring prosecutions under the statute because it will take away much of the uncertainty that had been created over the scienter requirement that must be proved.

The PPACA also clarifies that a violation of the Anti-Kickback Statute is a basis for Anti-kickback violations as the basis for False Claims Act (FCA) suits.  Arrangements that violate the Anti-Kickback Statute are now clearly made subject to suits under the False Claims Act.

Self Disclosure Protocols Under The Stark Law.

Section 6409 of the Act requires self-referral disclosure protocols to be developed and posted on the CMS website within six months.  The instructions are required to include the procedures for self-disclosures, the affect of self-disclosure on Corporate Integrity Agreements, and information regarding possible reductions in penalties for self-disclosure of Stark Law violations.  HHS is also required to make reports to Congress regarding the operation of the the self-disclosure program.

This is a significant development because providers have been in a state of uncertainty regarding possible self-disclosure under the Stark Law.  HHS has gone back and forth on this issue over the past few years with the most recent pronouncement stating that Stark Only violations could not be subject to the existing self-disclosure protocols that are in existence for other types of improper activity.  This program should provide some degree of clarity on both the procedures and implications of self disclosing Stark Law violations.

The PPACA also gives CMS explicit authority to settle Stark violations for less than the full amount of payments made by Medicare during the pendency of the Stark Law violation.  CMS has previously been reluctant to compromise Stark Law claims.

Patient Notifications For Certain In-Office Ancillary Services.

The PPACA amends the “in-office ancillary service” exception to the Federal Stark Law to require referring physicians to provide enhanced patient notification in certain instances.  Even when a physician is making a referral that meets the “in-office” ancillary service exception, the new notification must be provided to patients in writing when they are making referrals for MRI, CT or PET services.  The HHS is authorized to expand this list of in-office ancillary services to which the new patient notification applies.  A strange quirk in the law appears to require the notification to be made for all services provided after January 1, 2010.  It is not clear how it is possible to retroactively comply, but providers should begin providing the notification immediately.

The new notification must be in writing and must be provided at the time that the referral is made.  The notice must inform the patient that the services that are being referred can be obtained from other sources not associated with the referring physician or the practice.  A list of alternative providers must also be provided to the patient at the time that the referral is made.

60 day Overpayment Return.

The PPACA contained a “report and return” requirement for overpayments.  Under the new law, providers are legally obligated to report and return overpayments within 60 days of discovering the overpayment. The 60-day period begins when the knowledge of the overpayment is obtained.  The consequences of missing the 60 day return deadline is that the failure to report and return is an automatic violation of the False Claims Act.   The report and return law goes into affect immediately upon the PPACA being signed into law.  Thus, any overpayments that are known by providers prior to the enactment of the law must be reported and returned within 60 days of the date that the PPACA was signed into law.

Payment suspension Power Where There is a Credible Allegation of Fraud.

The PPACA gives HHS new powers to withhold payments to a provider where there is a credible allegation of fraud.  This is a very significant new power because the suspension of payments could have the effect of putting the provider out of business before there is a finding of actual fraud in a judicial proceeding.  HHS will be permitted to cut off payments when there is only a “credible allegation” of fraud.  The PPACA requires the HHS to promulgate regulations defining when there is a “credible allegation of fraud.”  Providers need to keep an eye on the regulatory proceedings that define the scope of HHS new power to terminate payments.

National Coordination of Anti-Fraud Activities.

The PPACA requires the HHS secretary to establish a national health care fraud and abuse data collection program.  The program will create a central data point for reporting of all actions taken against health care providers.  Information will also be submitted to the National Practitioner Data Bank (NPDB).

There is also a great deal more coordination required between the states.  Each state is required to terminate a provider from their Medicaid Program if the provider is terminated from Medicare of from the Medicaid program in another state.

These are the primary aspects of the new PPACA relating to increased fraud enforcement.  Overall, these changes to the law and the new funding of anti-fraud control programs indicates increased activity in the health care fraud area over upcoming years.  This is not a surprising development to those who followed the debate leading up to the passage of the health reform law.

Providers should take this time to review their operations and compliance programs to assure that they are in compliance with the new laws.  These changes should be communicated throughout the organization as part of the educational component of the organization’s compliance program.

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