OIG Issues 2007 Work Plan

Effective Date: January 1, 2007.

On September 25, 2006 the United States Department of Health and Human Services ("HHS") Office of the Inspector General ("OIG") released its Work Plan for Fiscal Year 2007 ("Work Plan"). The Work Plan details project areas targeted by the OIG for audit, evaluation, and investigation during the federal fiscal year 2007. The Work Plan can be accessed in its entirety on the OIG’s website at http://oig.hhs.gov/reading/publications. html.

This Work Plan has been described as one of the most detailed Work Plans issued by the OIG and covers virtually all categories of health care providers and suppliers as well as an expanded focus on Medicare Part D administration and Medicare and Medicaid reimbursement for drugs and clinical trials.

Following previous Work Plans, the OIG’s 2007 Work Plan is organized into different sections based upon programs and provider or supplier type. Areas noted are a combination of new topics for this year as well as certain areas from previous Work Plans that continue to attract the OIG’s attention. Some of these respond to obligations mandated in the Deficit Reduction Act of 2005 ("DRA") and other areas reflect recent investigations of, and settlements with, health care entities. Providers and suppliers participating in federally-funded health care programs as well as other stakeholders, such as pharmaceutical and device manufacturers, are encouraged to carefully review the Work Plan in its entirety to identify those areas relevant to their operations. The Work Plan is also a roadmap to future government enforcement activity.

Briefly summarized below are various sections of the 2007 Work Plan which are likely to have a significant impact on the health care community.

"Supplemental Payments." The OIG remains concerned about what it deems "supplemental payments" to hospitals. This was a major component of the OIG’s Supplemental Compliance Program Guidance for Hospitals. Some of these projects relating to supplemental payments include:

Adjustments for Graduate Medical Education Permits. This item was in the 2006 Work Plan and continues to reflect an OIG interest. Specifically, the OIG will make further inquiries into adjustments for direct and indirect graduate medical education (DME and IME) where appropriate, as these represent significant dollars to teaching hospitals.

Nursing and Allied Health Education Permits. Reimbursement for these educational programs is made on a pass-through basis to hospitals. Consequently, the OIG plans to determine the propriety of audit adjustments to provider-operated educational programs.

Inpatients Hospital Payments for New Technology. The OIG will review payments made to hospitals for new services and new technologies. The OIG will examine the costs associated with the new services and technologies, and may undertake a review of whether or not the technology is "new," though that is not clear from the description of the project.

Organ Procurement Organizations. The OIG continues to be concerned about organ procurement costs. The agency will review controls and cost containment procedures used by organ procurement organizations to acquire organs for transplant.

Hospital Classification. Hospital classification greatly impacts the amount of reimbursement Medicare makes to hospitals, similar to the impact of classification choices for other providers. Since the Balanced Budget Act of 1997, the Medicare program has moved away from cost reimbursement to prospective payment systems ("PPS") for most hospitals. In addition, the program has expanded cost reimbursement opportunities for rural and critical access hospitals ("CAHs"). The OIG will undertake several reviews related to these classifications:

Inpatient Rehabilitation Facility Classification Criteria. The DRA changed the criteria by which a hospital can be classified as a rehabilitation hospital under the Medicare program. The OIG will review regulatory requirements applicable to admissions to inpatient rehabilitation facilities ("IRFs").

Medicare-Dependent Hospital Program. The DRA permits payments to Medicare dependent hospitals ("MDHs") based on their FY 2002 rates, payments for which began on October 1, 2006, to provide payments in excess of PPS rates. The OIG will evaluate the underlying 2002 base year costs for a number of MDHs.

Inpatient Rehabilitation Facility Compliance with Medicare Requirements. The OIG will continue its reviews into rehabilitation PPS payments, to include: whether IRF admissions meet Medicare requirements; discharge and transfer compliance; and a review of IRF outlier claims.

Inpatient Rehabilitation Payments – Late Assessments. Under the IRF PPS, admission and discharge assessments must be entered and transmitted to the CMS National Assessment Collection Database within defined time limits or payment is reduced. The OIG is concerned that patient assessments may be entered late and will examine how the fiscal intermediaries make payment adjustments for late assessments and confirm that payments are accurate.

Inpatient Psychiatric Facilities. The Psychiatric ("Psych") PPS program is still new to both providers and the government. The OIG will review payments, generally, under the Psych PPS program, with particular attention to outlier payments and payments for interrupted stays.

Long Term-Care Hospital Payments, Admissions and Classification. The OIG has established three initiatives concerning long-term care hospitals ("LTCHs") with particular attention to early discharges to home and interrupted stays. The OIG is concerned that exclusive relationships between an acute-care hospital and an LTCH may mean that these LTCHs are "effectively functioning" as units of the acutecare hospitals. This attention to less formal affiliations or relationships appears to be an expansion beyond the strict question of whether the hospitals meet the requirements of the regulations. Lastly, the OIG will evaluate whether the average length of stay ("ALOS") criterion (ALOS of greater than 25 days) is, in fact, being met by organizations currently classified as LTCHs.

Critical Access Hospitals. Critical access hospitals remain one of the few remaining cost-reimbursed providers. Recent changes to CAHs classification requirements encouraged many small hospitals to convert from PPS to CAHs status. The OIG will review CAHs cost reports to evaluate compliance with cost reporting rules with particular attention to administrative costs and other costs incurred by CAHs before and after conversion to CAHs status. Some smaller PPS hospitals may not have been as diligent about cost reporting when there was no reimbursement impact. These facilities may have significant differences in reported costs after the transition to CAHs which may raise questions with the OIG, fiscal intermediaries and others.

Outpatient PPS. The OIG has a number of initiatives to evaluate payments under the Medicare outpatient PPS. These initiatives include:

Outpatient Outlier and Other Charge-Related Issues. This initiative evaluates both hospital "supplemental payments" (as discussed above) and compliance with the outpatient PPS regulations.

Outpatient Department Payments. This investigation will focus on typical requirements of outpatient PPS, with particular attention to multiple procedures, repeat procedures, and global surgeries.

Unbundling of Hospital Outpatient Services. The OIG will examine the extent to which hospitals and other providers submit multiple claims for separate payments for services that should have been bundled into an outpatient PPS (ambulatory payment classification or "APC").

"Inpatient Only" Services Performed in an Outpatient Setting. Services on the "inpatient only" list are denied when rendered in an outpatient setting. This review will determine whether these denials are occurring and, if they are, if beneficiaries are being charged by providers for denied inpatient claims.

Other Hospital Reviews. Other hospital compliance issues arising in the Work Plan include:

Inpatient PPS Wage Indices. The OIG continues to be concerned that the wages of a single hospital significantly influence the wage index for an entire metropolitan statistical area. Therefore, it will determine whether hospital and Medicare controls are adequate to ensure the accuracy of the hospital wage date used for calculating wage indices for inpatient PPS.

Rebates Paid to Hospitals. Large vendors will be approached by the OIG in order to trace the rebates paid by the vendors to specific hospitals and determine whether hospitals are properly identifying purchase credit rebates on their cost reports.

Medical Appropriateness and Coding of Diagnosis Related Group Services. Statistical modeling, no doubt, will determine whether providers are exhibiting "high or unusual patterns" for selected diagnosis related groups. These outlier providers will be reviewed for medical necessity and potential abuse through upcoding.

Inappropriate Payments for Diagnostic X-rays in Hospital Emergency Departments. The Work Plan seeks to identify situations in which emergency room physicians are billing for interpretations separately and not bundling them within the emergency department service.

Oversight of Specialty Hospitals. Continuing the analysis of the impact specialty hospitals have on the acute-care hospital marketplace, the OIG will undertake an investigation that appears to focus on compliance with the conditions of participation by specialty hospitals. The particular item addressed in the Work Plan is staffing requirements, but it is reasonable to assume that other conditions of participation may be subject to scrutiny.

Medicaid Hospital Outlier Payments. Medicaid program outlier payments may have vulnerabilities similar to Medicare program outliers depending on how a state computes its outlier payments. The OIG will determine whether Medicaid state agencies’ methods of computing inpatient hospital cost outlier payments result in reasonable payments.

Medicaid Disproportionate Share Hospital Payments. This project will evaluate state Medicaid program calculations of disproportionate share hospital ("DSH") payments with particular attention to whether payments to an individual hospital have exceeded that hospital’s "uncompensated care costs." A related review will ascertain whether states are appropriately determining eligibility for Medicaid DSH payments made to specific hospitals.

Home Health Outlier Payments. Home health agencies ("HHAs"), too, have migrated to a prospective payment system from cost reimbursement and, like hospitals, have relief for outliers. The OIG will investigate whether HHA outliers "cluster" in certain home health resource groups or geographical areas. The OIG is also concerned that the current outlier methodology may be inequitable for some HHAs.

Cyclical Noncompliance in Medicare Home Health Agencies. Patterns of survey deficiencies in HHAs will be reviewed with particular attention to "cyclical noncompliance with certification standards" and whether such repeat offenders have been appropriately sanctioned by CMS.

Accuracy of Data on the Home Health Compare Website. Medicare’s Home Health Compare Website provides public information about survey compliance in home health agencies. The OIG will review whether the data on the website are correct.

Skilled Nursing Facility Consolidated Billing. Consolidated billing is a component of the skilled nursing facility ("SNF") PPS program, requiring that the SNF submit bills for many of the procedures ancillary providers render, which, prior to SNF PPS, were billed separately by the outside vendors. This project will evaluate whether duplicate billings are taking place under the SNF PPS program.

Imaging and Laboratory Services in Nursing Homes. The other side of the concern regarding consolidated billing under SNF PPS is whether there are excessive separate bills for imaging and laboratory services that are paid under the Medicare program. The OIG will focus on the extent and nature of any medically unnecessary or excessive billing for imaging and laboratory services provided to nursing home residents.

Inappropriate Psychotherapy Services in SNFs. A 2001 OIG report expressed a concern that 50% of group psychotherapy services in SNFs were inappropriate. Lately the government’s concern has been that patients that are medically or psychology infirmed may not receive any benefits from psychotherapy services in SNFs. The OIG will review the extent to which psychotherapy services are provided and medically necessary for SNF residents.

Hospice Agencies Hospice Payments to SNFs. The OIG continues its work to determine whether dually eligible patients in SNFs receive proper services. Because there are two separate providers offering services to the same individual, and the services are often similar, the OIG is concerned that one of the providers may not be providing enough services to merit the reimbursement received.

Hospice Plans of Care and Appropriate Payments. This new project will focus on whether assessments were completed, and if plans of care correctly incorporate the assessments for hospice patients. This project will involve medical record reviews to determine whether the services billed reflect the services rendered.

The OIG has a variety of initiatives to review Part B reimbursement for physicians and other practitioners. Many of these focus on a physician’s provision of ancillary services, including:

Pathology Services. The focus will be on pathology laboratory services performed in physician offices. Reflecting a concern that CMS raised in the proposed 2007 Fee Schedule rule, the OIG will review relationships among outside pathology companies and physician pathology laboratories.

Cardiography and Echocardiography Services. Technical and professional bills for cardiography and echocardiography require compliance with current rules as well as use of modifier -26 for the provision of separate interpretations. The OIG will review Medicare payments for these services to determine whether physicians billed appropriately for the professional and technical components of the services.

Physical and Occupational Therapy Services. This study will focus on whether physical therapy and occupational therapy services were reasonable and medically necessary, including adequate documentation and physician certifications.

Part B Mental Health Services. Vulnerabilities from the provision of Part B mental health services in physician offices will be reviewed. This is a continuation of the OIG’s longstanding interest into other ancillary providers offering services in a physician’s office.

Advanced Imaging Services. MRI, PET, and CT scans offered within physician offices remain a key growth area for the provision of ancillary services by physicians. The OIG will review "the appropriateness of imaging services provided in physician offices." It will also study billing patterns in certain geographic areas and practice settings. This broad ranging review is already underway.

Evaluation of "Incident To" Services. The OIG will determine whether "incident to" rules are being followed. In addition, the Work Plan indicates that quality of care may be impacted by inappropriate "incident to" billing, and this will be a focus of the study.

Place of Service Errors. Medicare regulations provide for different levels of payments to physicians depending on where the service is performed with higher payments for physician office services. The OIG will study the correct use of service codes, including those services performed in Ambulatory Surgery Centers and hospital outpatient departments.

Review of E&M Services During Global Surgery Periods. This ongoing study reviews whether physician services evaluation and management ("E&M") are unbundled, and should have been billed or included within a global surgical fee.

Long Distance Physician Claim Associated with Home Health and SNF Services. This study builds on prior concerns about physicians ordering or billing for services without being physically present with the beneficiary. This project will evaluate physician billing of "long distance" services to Medicare beneficiaries, home health agencies and SNFs.

Psychiatric Services Provided in an Inpatient Setting. The OIG is concerned that group therapy sessions are effectively unbundled and billed as individual sessions at a generally higher reimbursement rate.

Physician Assistant Reimbursement Under Medicaid. The OIG will study whether Medicaid is making inappropriate payments for physician assistant services. This study focuses on the interplay between state law "scope of practice" requirements for physician assistants and Medicaid billing regulations.

Medicare Part B Drug Reimbursement

The Work Plan has continued reviews of Part B drug reimbursement as called for by Congress in the Medicare Modernization Act of 2003 (the "2003 Act"). This includes:

Computation of Average Sales Price. Beginning in 2005, Medicare generally pays for Part B drugs based on the average sales price ("ASP") methodology as mandated by the 2003 Act. As a result, Congress has directed the OIG to evaluate drug manufacturers’ methodologies for computing the ASP.

Review of Part B Drug Reimbursement Methodology. In connection with the ASP methodology, the OIG will also review whether the federal government would benefit if CMS reimbursed multi-source Part B drugs based on the ASP for individual National Drug Codes. Currently, CMS calculates the reimbursement amount for a Healthcare Common Procedure Coding System ("HCPCS") code, which is often composed of multiple National Drug Codes, by weighting the reported ASP’s amount based on the amount of each National Drug Code sold during the quarter. For multisource drugs, the inclusion of higher priced brand name drugs in the weighted average may inadvertently increase the amount of federal reimbursement. The OIG will also analyze the top ten multi-source drugs purchased by a sample of oncology practices during the first quarter of 2005 to illustrate the reimbursement differences between the ASP of individual National Drug Codes within a HCPCS and the weighted average ASP for HCPCS.

Monitoring of Part B Drug Prices: Comparing Average Sales Price to Widely Available Market Prices and Average Sales Prices to Average Manufacturer Prices. In these two separate reviews, the OIG will conduct studies, including market studies, to determine widely available market prices and average manufacturer prices for Part B drugs and comparing them to the ASP.

Duplicate Payments for Part B Drugs Under the Competitive Acquisition Program. The competitive acquisition program is an alternative to the ASP methodology and was also created by Congress in the 2003 Act. The OIG will determine if there are duplicate payments to physicians for Part B drugs purchased from vendors selected through the competitive bidding process and those directly reimbursed under the ASP system.

The Work Plan contains several new projects related to the new Medicare prescription drug benefits, also known as Part D. The Part Drelated projects for 2007 include:

Comparisons of Part D Drug Pricing. The OIG will conduct pricing comparisons for Medicare Part D drugs, contrasting prescription drug prices under Part D with the same drug prices covered under Part B.

Drug Access Through Prior Authorization and Exceptions. The OIG will examine controls that CMS has implemented to ensure that Part D prescription drugs plans implement prior authorization and formulary exceptions processes. The study will also examine how policies and processes compare across prescription drug plans.

Monitoring of Drug Prices of Medicare Part D Plans. The OIG will examine changes and trends in Part D prescription drug prices. This includes the extent to which drug plans’ prices fluctuate over time to include price variations during the open enrollment period, compared to patterns when the enrollment period closed. The OIG will also assess whether plans show consistent pricing trends and patterns and how these patterns and trends compare across plans.

Coordination and Oversight of Medicare Parts B and D to Avoid Duplicate Payments. Overlap between Medicare Parts B and D has long been an area of ongoing confusion for many providers and Part D plans. Drugs for which payment is available under Part B continue to be covered by Part B and should not also be reimbursed under Part D. The OIG will determine whether there is sufficient coordination and oversight of Parts B and D to prevent duplicative payments for drugs.

Tracking Beneficiaries True Outof- Pocket Costs for Part D Prescription Drug Coverage. Tracking beneficiaries true out-of-pocket ("TrOOP") costs when they are in the coverage gap (also known as the "doughnut hole") is a significant compliance concern for many Part D plans. The OIG will focus on CMS’s oversight of the calculation of beneficiaries TrOOP expenses that qualify for catastrophic coverage.

Medicare Part D Drug Benefit Payments. CMS has established new policies and procedures and new computerized payment systems under Part D. The OIG will sample Part D beneficiaries’ claim files to determine whether controls have been implemented and are working to ensure that: (1) benefits are paid on behalf of eligible beneficiaries; and (2) Medicare and beneficiaries are paid appropriate amounts for drug coverage.

Laboratory Services Rendered During an Inpatient Stay. This study will review unallowable charges for laboratories that were rendered in hospital settings during an inpatient stay.

Therapy Services Provided by a Comprehensive Outpatient Rehabilitation Facility ("CORF"). Earlier studies by the OIG questioned therapy services provided in rehabilitation facilities and SNFs. The prior work focused on the provision of services that are not reasonable and necessary, or lacked documentation. This project focuses on therapy in CORFs.

Emergency Health Services for Undocumented Aliens. Viewed as one of the most pressing public policy issues for improving access to care, the government will investigate whether the appropriations under the 2003 Act for emergency health services provided to undocumented aliens were appropriately distributed to the states and providers.

Assisted Living Facilities. The OIG is undertaking a study on how state Medicaid payments for home care services may be improperly diverted to assisted living facility ("ALF") residents. Some states have experimented with providing Medicaid payments for home care services to ALF residents. The OIG is concerned about third-party healthcare providers submitting bills for services that are also included within the ALF’s Medicaid rate.

Restraint and Seclusion in Children’s Psychiatric Residential Treatment Facilities. CMS has been aggressive in its promotion of policies and regulations designed to diminish or eliminate the use of restraint and seclusion in various settings. This OIG investigation into compliance with restraint and seclusion rules for psychiatric residential treatment facilities for children, represents another initiative in which the OIG is investigating quality of care issues.

Medicaid Managed Care and Early and Periodic Screening, Diagnostic, and Treatment ("EPSDT"). This project will determine whether transitions from Medicaid fee-forservice to Medicaid managed care in a state may be reducing access to EPSDT of mental health services, particularly for children. There have been well documented access problems in the traditional Medicaid programs for EPSDT, and the OIG may be justified in its concern that Medicaid managed care plans exacerbate the problem.

Over-prescribing of OxyContin and Other Prescription Drugs. This work in progress seeks to identify beneficiaries who may have received excessive amounts of OxyContin and other pain medications that have high "street value." This is a different review for the OIG, as it would appear to be well within the realm of traditional law enforcement, rather than specialized HHS investigatory work.

Improper Pediatric Dental Medicaid Payments. The OIG is studying inappropriate expenditures for dental services in the Medicaid population. This potential abuse may come as some surprise in places, such as Massachusetts, where the Medicaid program has been found to have a vast shortage of participating practitioners willing to render pediatric dental services.

General Administration Medicare Secondary Payer ("MSP"). MSP rules, long a source of great confusion and frustration for providers and employers alike, are the subject of various reviews including one that will evaluate procedures for identifying and resolving credit balances where both Medicare and commercial insurer payments have exceeded allowable provider charges.

Contractual Arrangements with Suppliers. Based on CMS’ concerns regarding reassignment and the Purchased Diagnostic Test Rule, the OIG is evaluating contractual arrangements in which one supplier (a laboratory or DME company) operates a service on behalf of a physician practice or a hospital. The OIG has issued fraud alerts on contractual joint ventures, and CMS has recently proposed amendments to the Stark Law, designed, at least in part, to address what the government perceives as abusive relationships.

Hurricane Katrina Responses. The OIG has at least nine projects under way to investigate whether the payments appropriated for Hurricane Katrina-related services were appropriately spent. The OIG will determine whether the money was appropriately distributed.

Flu Pandemic Preparedness. At least three projects will review flu preparedness grants, flu registry systems, and testing of influenza preparedness plans.

Reflecting the growing attention to federally-funded research involving both the Food and Drug Administration ("FDA") and National Institutes of Health ("NIH"), a battery of new and ongoing OIG projects focuses on these areas.

FDA Accountability for Human Subject Files. The OIG will review three studies involving human subjects to determine whether documentation of compliance with federal human subjects protection regulations are maintained.

Adverse Event Reporting for Medical Devices. Manufacturers and user facility must comply with mandatory federal reporting requirements for certain adverse events associated with medical devices. The OIG is concerned whether these reports are being furnished to the FDA, and what happens to the reports once they are furnished.

FDA Financial Disclosure Requirements for Clinical Investigators. Potential conflicts of interest for clinical investigators remains of great interest in the provider community. This study will review disclosures of financial interest by clinical investigators to the FDA.

Level of Commitment/Time and Effort Reporting. Though appropriately acknowledging that commitment, time and effort reporting is extremely difficult and complex in an academic setting, the OIG observes a "growing number of settlements" under the False Claims Act and intends to continue various reviews in this area.

Compensation of Graduate Students Involved in NIH-Funded Research. Graduate student researchers sometimes receive tuition remission as part of their compensation. The OIG is concerned that if such tuition remission is charged to NIH grants, that it may be inconsistent with NIH guidelines. Congress has requested that the OIG determine whether tuition remission is consistent with NIH guidelines due to concerns that some research universities may provide compensation that exceeds NIH guidelines.

NIH Monitoring of Extramural Conflicts of Interest. NIH’s ability to monitor conflicts of interest affecting extramural guarantees is the subject of one project in progress.

Bioterrorism. The OIG will conduct several reviews related to grants made to states as well as state and local government preparedness towards bioterrorism response.

All health care providers and suppliers participating in federal health care programs and other stakeholders should review the 2007 Work Plan to determine their own compliance in the targeted areas.

If you have questions about the information contained in the 2007 OIG Work Plan, or compliance issues generally, please contact Larry Vernaglia in our Boston office, Lena Robins in our Washington, DC office, Kevin Egan or Fred Entin in our Chicago office, Chris Rossman in our Detroit office, Charles Oppenheim in our Los Angeles office, Maria Gonzalez Knavel in our Milwaukee office, Rob Slavkin in our Orlando office, Mike Scarano in our San Diego/Del Mar office, Judith Waltz in our San Francisco office, or the member of the firm who normally handles your legal matters.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.