United States: OIG Releases 2005 Work Plan And 2004 Redbook

Action: On October 12, 2004, the OIG issued its Work Plan for 2005, revealing areas targeted for audit and investigation in the coming year. On the same day, the OIG released the 2004 Redbook, which contains recommendations for further cost savings in federally funded health care programs.

The United States Department of Health and Human Services ("HHS"), Office of Inspector General ("OIG"), released two highly anticipated reports on October 12, 2004: its Work Plan for Fiscal Year 2005, and the 2004 Redbook. (Both of these reports can be accessed in their entirety on the OIG's website at www.oig.hhs.gov/publications.html.) The Work Plan details project areas targeted by the OIG for audit, evaluation and investigation during federal fiscal year 2005. Many of these target areas reflect recent investigations and settlements with health care entities. Other items in the 2005 Work Plan reflect support for initiatives already identified for potential enforcement focus, such as those involving power wheelchairs. The 2004 Redbook also identifies significant OIG cost-savings recommendations from previous semi-annual reports that have not yet been fully implemented.

The areas targeted and recommendations for OIG review in these two reports cover a wide range of health care providers and suppliers, and many health care programs including hospitals, physicians, nursing homes, durable medical equipment suppliers, independent diagnostic testing facilities, dialysis facilities, managed care organizations, drugs, clinical trials, and other topics. Because these reports highlight the OIG's current priorities, providers and suppliers participating in federally funded health care programs are encouraged to review them for relevance to their current operations. The reports should also be viewed as a roadmap for potential future enforcement activity.

The 2005 Work Plan identifies the comprehensive financial and performance audits of HHS programs and operations that the OIG will perform. The audits are intended to: (1) determine whether HHS. objectives are being achieved and which program features need to be performed more efficiently; and (2) to identify systemic weaknesses that give rise to fraud, waste and abuse. As in years past, the OIG's 2005 Work Plan is divided into sections based upon programs and provider or supplier type. The areas noted are a combination of new topic areas for this year, as well as those areas from previous Work Plans that continue to attract the OIG's attention. Briefly summarized below are several areas from various sections of the 2005 Work Plan that are likely to have a significant impact on the health care community.

Coronary Artery Stents. The OIG will review the medical necessity and documentation of inpatient and outpatient Medicare claims involving arterial stent implantation, and to assess whether beneficiaries who received stent implants during surgery involving multiple surgical procedures should have received the implant in a separate procedure.

Rebates Paid to Hospitals. The OIG will visit several large vendors to determine the amount of rebates that the vendors paid to hospitals in a given year. The OIG will then determine whether hospitals are properly identifying rebates and other purchase credits as separate line items in their Medicare cost reports.

Diagnosis Related Group (.DRG.) Coding. The OIG will use the results of a recently completed DRG review by quality improvement organizations ("QIOs") in order to identify hospitals that exhibit aberrant coding patterns. In addition, capitalizing on a similar successful strategy in recovering Medicare overpayments, the OIG will conduct a review of Medicaid outpatient claims submitted by hospitals to determine whether Medicaid overpayments have resulted from laboratory, and other services, that were provided within three days of a hospital admission and were related to the admission.

Educational Payments. The OIG will conduct the following new audits of educational payments made to hospitals to determine their appropriateness: the inclusion of dental and podiatry residents in hospitals. counts of full-time equivalent residents for purposes of direct and indirect graduate medical education payments (the Balanced Budget Act of 1997 excluded dental and podiatry residents from the caps on the number of residents that hospitals are permitted to count); alternative payment arrangements for residents training at non-hospital sites when the hospital incurs all or substantially all of the costs of the training program; and payments to hospitals for provideroperated nursing and allied health education programs (which Medicare currently reimburses to hospitals on a reasonable cost basis).

Inpatient Rehabilitation Facility Payments. The OIG will review payments to inpatient rehabilitation facilities ("IRFs") under the IRF prospective payment system to evaluate IRFs. compliance with Medicare laws and regulations concerning admission standards and interrupted stays. The OIG will also review outlier payments to IRFs, and attempt to determine the accuracy of Medicare payments for inpatient stays when the IRF has not entered and transmitted the admission and discharge assessments within the applicable time limits.

Disproportionate Share Hospital (.DSH.) Payments. At CMS. request, the OIG will review state calculations of Medicaid DSH payments to verify that such payments comply with the approved state plans and do not exceed statutory limits (based upon uncompensated care costs). In addition, the OIG will conduct a review to determine whether states appropriately determine hospitals. eligibility for such payments.

Medical Necessity of Inpatient Psychiatric Stays. The OIG will conduct audits to determine the extent of any improper Medicare payments for inpatient psychiatric stays due to medical necessity or coverage issues, and will assess whether adequate controls (to detect any such improper payments) are in place.

Areas of focus from previous years which also appear in the OIG's 2005 Work Plan include:

• Outpatient cardiac rehabilitation services provided .incident-to. the services of a physician.

• Hospitals. reporting of organ acquisition costs.

• Inpatient and outpatient outlier payments under the Medicare and Medicaid programs.

• Medicare payments to acute care hospitals for discharged patients who are admitted to one of several post-acute care settings (raising issues of discharge versus transfer).

• Medicare payments to long-term care hospitals ("LTCHs") when there has been an early discharge to home or an interrupted stay, and claims for outlier payments.

• Whether Medicare beneficiaries are being inappropriately referred to LTCHs when they could be cared for in a skilled nursing facility.

Billing Service Companies. The OIG will evaluate relationships among billing companies and the physicians, and other Medicare providers who use billing companies to identify the various types of arrangements that exist and to determine the impact of those relationships on physicians. billings.

Coding of Evaluation and Management Services. In a new review of physician coding, the OIG will determine the accuracy of physicians. coding of evaluation and management services and assess the adequacy of contractors to identify physicians with aberrant coding patterns. In prior work, the OIG found that a significant number of evaluation and management services were incorrectly coded, resulting in large overpayments.

"Long Distance" Physician Claims. A review of Medicare claims for face-to-face physician services provided to Medicare beneficiaries where the practice setting is far from the beneficiary's home will be conducted, to ensure that services were actually provided and accurately reported.

Provider-Based Entities. The OIG will conduct a review of entities that have been designated as .provider based. in order to determine their compliance with regulatory requirements for receiving this designation. Medicare payment for services furnished by a provider-based entity may be substantially higher than the payment for services in a freestanding entity. This new project is being launched in response to previous OIG findings that hospitals frequently own physician practices, but Medicare intermediaries are frequently unaware whether the practices are providerbased.

The following project areas pertaining to physicians and health professionals will continue to attract the OIG's focus in 2005:

• Claims submitted by physicians for care plan oversight.

• The extent of services, if any, ordered by physicians who have been excluded from participation in federal health care programs.

• Appropriate use of modifier 25 (for separately identifiable procedures billed in addition to an evaluation and management service provided by the physician on the same day).

• Medical necessity reviews of the following types of services: therapy provided by physical and occupational therapists; wound care; and mental health services provided in physicians. offices.

The OIG will determine the appropriateness of Medicare payments for certain DME items, such as power wheelchairs and therapeutic footwear, to assess whether: (1) these items were medically necessary; (2) the supplier's documentation supports the claim; and (3) that the beneficiary actually received the item for which payment was made. In addition, the OIG will compare Medicare payment rates for certain medical equipment and supplies, including wheelchairs, enteral nutrition, and oxygen equipment and supplies, with the payment rates of other federal and state health programs, as well as wholesale and retail prices.

Average Sales Price. The OIG will conduct several studies related to the computation of the Average Sales Price ("ASP") for various drugs; measure drug manufacturers. methodologies for computing the ASP; and assess the adequacy of CMS's system for collecting and maintaining ASP data.

Non-ESRD Epoetin Alfa. The OIG will conduct a review to determine whether Epoetin Alfa was appropriately reimbursed for beneficiaries who have not been diagnosed with End Stage Renal Disease ("ESRD"); and whether Epoetin Alfa was medically necessary for these beneficiaries, administered in the proper manner, and provided according to an FDA approved indication.

Medicaid Drug Rebates. The OIG will assess CMS's oversight of drug manufacturers. reporting of the Average Manufacturer Price ("AMP") and the best price, to ensure that state Medicaid programs do not overpay for prescription drugs. The OIG will continue to evaluate the adequacy of states. systems to calculate and collect Medicaid Drug Rebates.

340B Drug Rebate Program. The OIG will follow up on the price discrepancies discovered in its 2004 evaluation of the 340B Drug Discount Program by exploring potential reasons for price discrepancies within the Department, and provide information to pharmaceutical manufacturers, wholesalers, and covered entities to independently resolve discrepancies.

FDA Oversight of Off-Label Drug Promotion. OIG plans to assess the FDA's oversight and review of allowable promotion of off-label drug uses by drug manufacturers; a task which is particularly challenging for the FDA, since it generally does not have access to internal information on drug manufacturers . marketing practices and materials, and cannot systematically monitor manufacturers. compliance.

Prescription Drug Cards. There will be a review of the processes and controls for the prescription drug discount card program, which became effective in June, 2004. In particular, the OIG will review whether adequate controls are in place to minimize or eliminate fraud, waste and abuse with respect to transitional assistance payments provided to Medicare beneficiaries whose incomes fall within certain ranges of the poverty level; and an assessment of the level of beneficiary understanding of the prescription drug discount card program.

Nursing Homes The OIG continues to focus on quality of care issues in nursing facilities, and an assessment of whether the skilled nursing facility (SNF) prospective payment system has adversely affected Medicare beneficiaries. access to care. The OIG will evaluate states. and SNFs. compliance with federal nurse aide registry requirements, and analyze whether imaging, laboratory, rehabilitation and infusion therapy services provided to Medicare beneficiaries in SNFs were medically necessary and adequately supported.

In addition, as a result of changes incorporated in the SNF prospective payment system in 2004 (to correct for historical payment deficiencies), SNFs will receive an additional $6.9 billion in Medicare payments over the ensuing 10 years. The OIG will review how SNFs plan to utilize these additional funds, and whether the additional funds result in improved patient care.

The OIG will conduct an assessment of laboratories. compliance with the Clinical Laboratory Improvement Amendments of 1988 (.CLIA.) to participate in proficiency testing. Proficiency testing is a condition of participation whereby laboratories are graded for their accuracy in analyzing clinical specimens, and is one of the primary mechanisms for ensuring quality testing.

The OIG will review the medical necessity of services delivered by independent diagnostic testing facilities ("IDTFs"), to determine whether: (1) individual facilities met all necessary Medicare approval requirements to provide services; (2) the designated level of physician supervision was properly provided; and (3) the nonphysician personnel who performed the diagnostic tests were appropriately licensed.

The OIG will determine whether CORFs provided and billed physical therapy, speech language pathology, and occupational therapy services in accordance with Medicare eligibility and payment requirements. In addition, the OIG will assess whether these services were reasonable and necessary for the beneficiary's condition, and whether the CORFs maintained sufficient documentation.

The OIG will review Medicare payments for ambulance services to determine if they complied with the national fee schedule for ambulance services, that is being phased in over the five years that began April 1, 2002. The OIG will also review payments to ambulance suppliers during the first year of the implementation of the ambulance fee schedule to determine if payments exceeded levels that would have been paid if the ambulance fee schedule had not been in effect.

The OIG will evaluate CMS. oversight of dialysis facilities by measuring the time between ESRD facilities surveys and evaluating state agency investigations of complaints, especially for facilities showing indications of possible poor quality of care.

The OIG will determine whether MCOs have adhered to Medicare+ Choice prompt payment requirements for noncontracting providers; and to ensure that MCOs do not engage in discriminatory marketing activities, such as selectively enrolling beneficiaries, soliciting enrollment door-to-door, and using providers to distribute or receipt for plan materials.

Clinical Trial Data Bank. The OIG will assess the drug industry's compliance with statutory requirements to furnish information of clinical trials involving life-threatening or serious conditions to the clinical trials data bank maintained by the National Library of Medicine. Because prior reviews found problems with the FDA's ability to monitor postmarket study commitments, the OIG will also determine the extent to which the FDA has improved its monitoring of postmarketing study commitments agreed to by the pharmaceutical companies and whether they complete postmarket study commitments in a timely manner.

Review of Adverse Event Reports by Institutional Review Boards. Federal regulations require clinical investigators to report to Institutional Review Boards ("IRBs") .any unanticipated problems involving risks to human subjects or others.. The OIG will assess the extent to which IRBs receive useful information in, and have adequate processes for, reviewing adverse event reports; and factor adverse event reports into their decisions to recommend changes to a clinical trial.

Financial Disclosure Requirements for Clinical Investigators. FDA regulations require clinical investigators who conduct studies in support of a product to disclose their financial interest. The OIG will, therefore, assess the nature of financial interests disclosed by clinical investigators to the FDA; the extent to which drug, biologic, and device applicants monitor their clinical investigators for conflicting financial interests; and the extent to which the FDA monitors the financial interests disclosed by clinical investigators.

The 2004 Redbook contains all of the OIG's significant cost-saving recommendations from past Work Plans that have yet to be fully implemented because they require legislative, regulatory, and/or procedural actions. Each recommendation details the type of action required and the projected cost savings. As in past years, the 2004 Redbook is divided into two sections: (1) those recommendations made since the last Redbook was published, and (2) previously published but as yet unimplemented recommendations (generally with updated savings estimates). The report suggests that full implementation of the recommendations could produce substantial savings for HHS.

All health care providers and suppliers participating in federal health care programs should review these two reports to determine their own compliance with the targeted areas and the recommendations. If you would like more information regarding the 2005 Work Plan or the 2004 Redbook, please contact Judy Waltz or George Kenny in our San Francisco office, Dick Prebil in our Chicago office, Charles Oppenheim or Rob Sevell in our Los Angeles office, Maria Gonzalez Knavel in our Milwaukee office, George Root or Diane Racicot in our San Diego office, Mike Scarano in our San Diego/Del Mar office, Lena Robins in our Washington, DC office, or the member of the firm who normally handles your legal matters.

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