Hospitals and Health Systems Attorneys | Frier Levitt

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Hospitals and Health Systems
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Hospitals and health systems operate in a regulatory environment that has grown increasingly complex, involving heavy scrutiny from various federal and state regulatory bodies. Additionally, these providers encounter unique business challenges as they continue to focus on moving toward an environment of value-based care, leveraging the powers of horizontal and vertical integration to do so. The following is a listing of just some of the issues and ideas confronting hospital and health systems in the current environment:

Fraud and Abuse

Stark and Anti-Kickback Laws

The Stark and Anti-Kickback Laws are federal laws prevent medical providers from paying or receiving kickbacks, remuneration, or anything of value in exchange for referrals of patients who will receive treatment paid for by government healthcare programs such as Medicare and Medicaid, including prohibiting referrals for self-referred services. In addition to these broad prohibitions, both the Stark and Anti-Kickback Laws contain various exceptions or safe harbors that allow certain arrangements that would otherwise be prohibited under these laws. In additional to the federal Stark and Anti-Kickbacks Laws, most states have their own similar laws that address referrals from non-Federal government payers.

The increasing complexity of relationships between different service providers, the move toward an increase in affiliations and integration, and the numerous updates and additional guidance the government provides regarding the Stark and Anti-Kickback laws all create additional areas of risk and opportunities that healthcare providers need to monitor closely to ensure compliance.

Proactive Compliance Reviews

All large organizations billing government payers are expected to have a proactive review process in place. These self-audits can be beneficial to an organization by identifying any potential compliance concerns proactively, rather than awaiting a review from the government or a patient or employee complaint that can lead to increased scrutiny. The identification of an issue often leads to further questions that an organization must address, including potential refunding of payments and self-disclosures to governmental and private payers. Proactive compliance reviews may also lead to the avoidance of costly Qui Tam litigation, in which a hospital employee “blows the whistle” on the hospital system.

CMS/OIG/DOJ Self-Disclosures

The federal government has continued to emphasize the importance of self-disclosures with an organization’s compliance program. Self-disclosures can be made to various government agencies, including the Center for Medicare and Medicaid Services (CMS), the U.S. Department of Health and Human Services’ Office of Inspector General (OIG) and the U.S. Department of Justice (DOJ) depending on the scope and size of the issue to self-disclose.

Hospital and Health System Pharmacy Matters

Pharmacy Compliance- Drug Diversion

Hospitals and Health Systems online icons next to doctor on computerThe nationwide opioid epidemic has led to increasing concerns around the controls organizations such as hospitals and healthcare systems have instituted to monitor the appropriate security around their controlled substance inventory and dispensing practices. The U.S. Drug Enforcement Administration (DEA) has extremely stringent self-reporting requirements in the event that any controlled substances within an organization cannot be appropriately counted for, and these required self-reports can lead to site visits and other follow-up from the DEA. Organizations that dispense controlled substances must carefully review all aspects of their supply chain, from the original purchase to the administration to patients, to be sure that the appropriate controls are in place to prevent any misappropriation of controlled substances within the organization.

Pharmacy- Integrated Delivery Network

An Integrated Delivery Network (IDN) is a set a healthcare providers operating together, typically as part of a regional hospital system to provide a full scope of services. The trend in health systems developing their own in-house specialty pharmacy as part of their IDN is years old and provides benefits that touch on both patient care as well as financial.

Over the last several years, with the increased importance and prevalence of specialty medications in the healthcare continuum, many IDN specialty pharmacies are positioned to perform well. However, this growth opportunity is not without a unique set of challenges and legal issues specific to specialty pharmacies. Some of these challenges include: Reimbursement Challenges and Pharmacy Benefit Manager (PBM) imposed “DIR” Fees; Pharma-Pharmacy Relationships; Specialty Network Access; specialty pharmacy Accreditation; and Automation, Remote Dispensing and Telepharmacy.

Pharmacy Purchasing and Drug Supply Chain issues:

IDN pharmacies face specific challenges operating in the specialty pharmacy space:

  • Reimbursement Challenges and Direct and Indirect Remuneration (“DIR”) Fees:  DIR fees render many specialty medication reimbursements below water. Fortunately, Frier Levitt can help IDN pharmacies leverage their positions as part of a hospital system and utilize many protections available under State and Federal law, including appeal processes to challenge underwater reimbursement
  • Pharma-Pharmacy Relationships: In the specialty pharmacy industry, there is a vast array of different forms of pharmacy-manufacturer arrangements, including direct purchasing agreements, limited distribution drug access, hub arrangements, data purchasing agreements and patient support programs. IDN specialty pharmacies must carefully examine and structure these agreements to comport with applicable healthcare and life sciences regulations, as well as PBM requirements.
  • Specialty Pharmacy Network Access: In order to dispense specialty drugs the IDN pharmacy must be “in network” with a PBM. IDN pharmacies may dispense both retail and specialty medications in significant volumes. This presents issues when designating a pharmacy’s class of trade as either retail or specialty, making decisions regarding network participation and evaluating contract terms such as reimbursement rates and DIR fees. Notwithstanding the broad cross section of the population IDN pharmacies serve, IDN specialty pharmacies are often excluded from specialty pharmacy networks by PBMs, resulting in leakage of high-revenue prescriptions to competitor, PBM-owned pharmacies. Fortunately, many State and Federal “any willing provider” requirements can be leveraged by IDN specialty pharmacies to gain access to restricted networks.
  • Accreditation: Specialty pharmacy accreditation is becoming more and more important for payor network access, as well as access to limited distribution drugs.  With their strong emphasis on policies, protocols and procedures, IDN specialty pharmacies are uniquely qualified to obtain applicable specialty accreditations, including URAC, ACHC and JCHAO. However, with a broader array of providers under the same corporate umbrella, IDN specialty pharmacies must take steps to ensure compliance with accreditation standards and avoid interruptions in accreditation.
  • Automation, Remote Dispensing and Telepharmacy: IDNs are well versed in addressing the changing needs of their patients, including service the 24 hours a day service window of associated hospital providers. While it is necessary for the hospital to be open 24 hours a day, it is often not practical to keep the pharmacy itself open 24 hours a day, which may create patient access to medication hurdles.  Remote automated dispensing systems and telepharmacy can be one way to overcome this hurdle, offering patients access to medications when the pharmacy may not necessarily be “open,” or potentially freeing up the pharmacist’s time to conduct more clinical interventions rather than spending the majority of his or her time dispensing. However, there are numerous legal issues related to remote dispensing and telepharmacy ranging from State specific laws regulating the use of this technology to payor reimbursement issues that all must be carefully navigated before jumping into this investment.

340 B Programs

The 340B Drug Discount Program, which is administered and monitored by the Office of Pharmacy Affairs under the Health Resources and Services Administration (HRSA), requires drug manufacturers to provide outpatient drugs to eligible healthcare organizations and covered entities at significantly reduced prices.

340B healthcare organizations and covered entities may elect to provide outpatient drugs as a service of their own, commonly referred to as an in-house pharmacy. Additionally, many 340B eligible healthcare organizations and covered entities elect to dispense 340B drugs to patients through contract pharmacy services, an arrangement in which the 340B covered entity signs a contract with a pharmacy to provide pharmacy services. These pharmacies may include independent pharmacies, community retail pharmacies, chain based pharmacies, and specialty pharmacies.

Frier Levitt assists pharmacies with 340B matters, including:

  • Becoming a 340B In-House or Contract Pharmacy, including eligibility and compliance with on-going requirements, such as 340B database compliance, recertification, drug diversion, duplicate discounts, and program audit preparation
  • Service Agreements between Contract Pharmacy and Covered Entities with an emphasis on regulatory compliance with Federal and State Laws and tailored to evolving PBM reimbursements
  • Vendor agreements related to 340B operations of In-House and Contract Pharmacies
  • PBM and third party payor audits pertaining to the Pharmacy’s 340B claims
  • Implementation of 340B operations Compliance Programs
  • Response and defense of HRSA Section 340B audits

Transactional Matters

Hospital-Ambulatory Surgery Center (ASC) Joint Ventures

Hospitals across the country, seeing the trend toward more complex procedures being able to be performed on an outpatient basis, have partnered with ASCs, and their physicians as part of their strategies. Hospital-ASC joint ventures have allowed hospitals to keep some of their outpatient surgery revenue that could otherwise leak from their systems. New payment models such as bundled payments also benefit hospitals and health systems that have ASCs within their network to reduce costs while maintaining quality across the continuum of care.

Successfully creating Hospital-ASC joint ventures require navigating through numerous regulatory and licensing issues, as such relationships can implicate the Stark and Anti-Kickback statutes if not implemented appropriately. Those involved with standing up these joint ventures must also work closely with state licensing bodies, whose rules and regulations vary from state to state.

Hospital/ Health System- Medical Group Partnership

With a trend toward health system integration over the past decade, hospitals and health systems have become increasing active in partnering with medical practices, both primary care and

Specialists. These partnerships can take on different forms, including straight employment of physicians, leasing both the services of a practice and its non-clinical assets, or a hybrid that involves a combination of purchased assets and leased professional services.

Successful Health System- Medical Group partnerships require careful planning throughout the negotiation process, to make sure important operational and financial details are considered, with the foresight to provide solutions to potential issues that may arise years down the road in ways that align the interests of all parties. Developing these relationships also requires ensuring compliance with regulatory issues such as the Stark and Anti-Kickback statutes, and antitrust statutes intended to prevent anti-competitive actions in the healthcare marketplace.

Medical Staff and Professional Licensure Matters

Hospitals and health systems routinely encounter internal disciplinary matters that may impact a Medical Staff member’s hospital privileges, and these actions may further require reporting by the hospital to a state licensing body such as a Board of Medical Examiners. Additionally, hospital reporting to the National Practitioner Data Bank (NPDB), a database operated by the U.S. Department of Health and Human Services that contains medical malpractice payment and adverse action reports on health care professionals, must also be considered and is mandatory under many circumstances. Hospitals and health care systems must thoughtfully manage these investigative matters, satisfying their duties to protecting their patient populations and report misconduct while ensuring that the physician’s due process rights are also adhered to.

Government Reimbursement Matters

Hospitals and health systems are confronted with an increasingly complex system of reimbursement for services. While the transformation from pay-for-volume toward pay-for-value continues, hospitals and health systems must keep an eye on the ever-changing rules and regulations in both of these areas, to ensure that they are paid appropriately for the services they render to patients. All of this is taking place under increasing scrutiny from the government, with various layers of pre-payment and post-payment review in place to identify potentially aberrant patterns of billing, and contractors incentivized by the government to recoup payments in large amounts swiftly. Once the funds have been recouped, hospitals and health systems then need to appeal these determinations, making sure that they are complying with the strict time limits and documentation burdens involved with doing so. These appeal processes can take several years to navigate, and one misstep by the hospital or health system can lead to the appeal being denied with no further recourse available.

Managed Care Negotiations and Appeals

Commercial payers often place barriers in the way of hospitals and health systems seeking appropriate reimbursement, at negotiated rates, for the services they provide to the managed care company’s insured patients. Healthcare providers must leverage their organization’s financial and operational data to negotiate successfully with insurers, and have tools in place to quickly identify any patterns of denials or incorrect payments to troubleshoot internally and with the payers to make sure they receive the reimbursement they deserve. Managed care companies now utilize external audit firms that are paid on a contingency, and thus are incentivized to find the largest opportunities for overpayments, putting the onus on healthcare providers to ensure they are documenting appropriately for the services they rendered.

Once a commercial payer has denied a healthcare providers claim for payment or recouped an already paid claim as an overpayment, the provider can seek recourse either through a) the process established with the insurer through the negotiated payer contract or the internal policies of the insurer; b) through external review processes that are sometimes established under state insurance laws; or c) through litigation, or arbitration if the negotiated contract with the payer mandates this.

HIPAA/Cybersecurity/Data Breach Analysis and Reporting

While the Health Insurance Portability and Accountability Act (HIPAA) has been in place for almost two decades, recent developments in healthcare technology have brought increasing complexity to matters in involving healthcare privacy and security. Large Electronic Medical Record (EMR) systems that many hospitals and health systems utilize now span across healthcare providers nationally, and the government’s goal to create a seamless process for sharing Protected Health Information (PHI) between providers can sometimes work at cross-purposes with its other goal of ensuring patient confidentiality and electronic data security.

When hospitals or health systems learn of a potential data breach, they must undertake a detailed root cause analysis to determine the cause of the breach, and whether the breach constitutes a reportable event to either the U.S. Department of Health and Human Services Office of Civil Rights (OCR) or state agencies responsible for data security oversight.

How Frier Levitt Can Help

If you are a hospital or healthcare system facing Pharmacy Benefit Manager, pharmacy law, 340B, regulatory or business challenges, please contact us today.