backFederal Judge Vacates Regulation Excluding Section 1115 Days From DSH Formula – On August 15, 2024, the United States District Court for the Northern District of Texas vacated a Medicare regulation excluding from the Medicare DSH payment days attributable to inpatients covered by a section 1115 waiver uncompensated care pool. The decision in Baylor All Saints Medical Center, et al. v. Becerra sets aside CMS’s regulation as contrary to the Medicare statute. King & Spalding represented the plaintiff hospitals.
The Issue in Baylor All Saints v. Becerra
In Baylor All Saints, more than a dozen Texas hospitals sued HHS seeking to include inpatient days attributable to uninsured patients receiving benefits through an uncompensated care pool established under Section 1115 waiver programs. Specifically, the hospitals argued that patients receiving care under these waiver programs should count as Medicaid eligible because they receive medical assistance under an approved section 1115 waiver.
Section 1115 of the Social Security Act allows the Secretary of HHS to authorize “‘demonstration projects’—pilot programs that ‘assist in promoting the objectives of [Medicaid].’” 42 U.S.C. § 1315(a). Despite patients in these programs receiving coverage for their inpatient services under experimental Medicaid programs, HHS promulgated what the court termed an “Exclusion Rule” to prevent these patients from being included in the DSH calculation.
The District Court’s Decision
The District Court sided with the hospitals, holding that the “case is simple on the merits” and that whatever discretion HHS has to determine which patients count as Medicaid eligible, that discretion is exercised at the time HHS approves a Section 1115 waiver program and not after the fact in calculating a hospital’s Medicare DSH payment. The District Court’s opinion relied heavily on preexisting Fifth Circuit precedent in Forrest General Hospital v. Becerra, which held that the number of inpatient days associated with patients “eligible for medical assistance under a state plan approved under Medicaid” includes both “(1) days a hospital treated patients who were Medicaid-eligible and (2) days a hospital treated patients who are regarded as Medicaid-eligible because they received demonstration project benefits.’”
The District Court determined that once the Secretary approves a Section 1115 waiver program, that is the end of the Secretary’s discretion, and those days must be included in the Medicaid fraction under both a plain reading of the Medicare statute and the Fifth Circuit’s precedent.
Upon determining that the “Exclusion Rule” was an “unlawful agency action,” the District Court ordered that the rule should be vacated. HHS has 60 days to seek an appeal to the Fifth Circuit. King & Spalding also represents more than 200 other hospitals in affected states such as Florida and Tennessee in companion litigation on this issue.
The District Court’s full decision can be found here.
Reporter, Gregory Fantin, Washington D.C., +1 202-626-9271, GFantin@kslaw.com.
D.C. Circuit Upholds Dismissal of Proposed Class Action Against HHS for Home Health Aid Shortage – On August 9, 2024, the U.S. Court of Appeals for the District of Columbia upheld a lower court’s decision to dismiss a proposed class action accusing HHS of causing a shortage of home health aides willing to assist Medicare beneficiaries. The D.C. Circuit Court affirmed the lower court’s ruling that the lead plaintiffs lacked standing because they failed to prove the causation and redressability requirements of standing.
The lead plaintiffs consist of Medicare beneficiaries with chronic illnesses that depend on the services of home health aides. While these services are generally covered by Medicare, the plaintiffs alleged Medicare-enrolled home health agencies (HHAs) have failed to provide in-home care or offered fewer services than the Medicare beneficiaries are entitled to under Medicare due to HHS’s policies, enforcement practices, and/or lax oversight of HHAs.
Specifically, the plaintiffs sued HHS under two types of claims. First, the plaintiffs alleged HHS violated Medicare laws by insufficiently enforcing the conditions of participation on HHAs and unlawfully implementing the Medicare home health benefit. The plaintiffs claimed Medicare-enrolled HHAs regularly disregard the Medicare conditions of participation by underserving the chronically ill and that HHS has continuously failed to prevent these violations. Moreover, the plaintiffs argued that HHS’s policies and practices contributed to the shortage of home health services available to Medicare beneficiaries.
Second, the plaintiffs claim that HHS’s alleged actions (or lack thereof) violated the ban on disability discrimination. HHA’s alleged refusal to accept or adequately care for Medicare beneficiaries has led to patients being forced into nursing homes or other institutionalized settings. The plaintiffs therefore contended HHS violated its responsibility to ensure health care is provided to individuals in the most integrated setting appropriate to their needs.
Based on these allegations, the plaintiffs sued HHS and sought to represent a class of chronically ill and disabled Medicare beneficiaries who had similarly been unable to find Medicare-covered home health services. The plaintiffs requested both declaratory judgement and injunctive relief in an effort to compel systemwide reforms to improve the provision of Medicare-covered home health aides to Medicare beneficiaries, such as stricter enforcement of the Medicare conditions of participation governing home health services and policy reforms related to HHS’s auditing, payment, and quality rating system.
However, in an opinion authored by Circuit Judge Neomi Rao, the D.C. Circuit affirmed the U.S. District Court Judge Trevor McFadden’s decision that the plaintiffs lacked standing to bring such claims. The D.C. Circuit agreed with the lower court’s ruling that the plaintiffs failed to plausibly allege that the requested relief would redress any harm.
The D.C. Circuit noted that the plaintiffs’ allegations were purely speculative as to whether the denials of services can be traced to HHS’s enforcement practices. The D.C. Circuit also reasoned that HHAs can freely choose whether to accept a patient and that there are many economic and practice reasons why an HHA may decide against providing services to chronically ill Medicare beneficiaries. The D.C. Circuit reasoned that the shortage of home health care services are a result of choices made by private HHAs.
The lack of a plausible causal link between HHS’s enforcement practices and the injuries alleged by the plaintiffs ultimately proved fatal to the plaintiff’s claims. Accordingly, the D.C. Circuit held that the plaintiffs failed to demonstrate their injuries are redressable and therefore failed to establish standing.
The D.C. Circuit’s opinion is available here.
Reporter, Dennis Mkrtchian, Los Angeles, + 1 213 218 4046, dmkrtchian@kslaw.com.
OIG Audit Finds Medicare Overpaid Hospitals an Estimated $79 Million for Enrollees Who Had Received Mechanical Ventilation – On August 12, 2024, OIG announced the results of an audit of payments made to hospitals for inpatient claims with the Medicare Severity Diagnosis-Related Groups (MS-DRGs) that require ninety-six hours of consecutive mechanical ventilation. The audit focused on claims that reported a mechanical ventilation start date that was five to ten days before the Medicare enrollee was discharged. The audit results showed that seventeen out of 250 sampled claims did not use the correct procedure or diagnosis codes. The 250 sampled claims were randomly selected from a sample of 83,259 inpatient claims that had dates for services from October 2015 through September 2021. Based on the sample results, OIG estimated that Medicare improperly paid hospitals more than $79 million for inpatient claims with certain MS-DRGs for the audit period.
This audit focused on MS-DRGs 207 and 870. MS-DRG 207 is described as “respiratory system diagnosis with ventilator support >96 hours.” MS-DRG 870 is described as “Septicemia or severe sepsis with mechanical ventilation >96 hours.” A hospital uses procedure code 5A1955Z on an inpatient claim to denote that an enrollee has received more than 96 hours of consecutive mechanical ventilation. If an enrollee did not receive ninety-six hours of consecutive mechanical ventilation, the hospital is supposed to assign an MS-DRG associated with a lower severity, and therefore, the hospital receives lower payment.
For eight of the sampled claims, hospitals used the procedure code for more than ninety-six hours of mechanical ventilation when enrollees had not received more than 96 hours of medical ventilation. OIG provided an example for which the documentation (i.e., physician’s notes and ventilation time logs) showed that the enrollee had received ninety-four consecutive hours of mechanical ventilation. The hospital used procedure code 5A1955Z on the claim, indicating that the enrollee had received more than 96 consecutive hours of mechanical ventilation; instead, the hospital should have used procedure code 5A1945Z, indicating that the enrollee received twenty-four to ninety-six hours of mechanical ventilation. Because the hospital used the incorrect procedure code, the claim was assigned incorrectly to MS-DRG 870 rather than MS-DRG 871, resulting in an overpayment of $10,192.
For nine of the sampled claims, hospitals used the incorrect diagnosis code or a procedure code that was not related to mechanical ventilation. OIG gave an example of a hospital that submitted a claim with principal diagnosis code J96.00 (defined as “acute respiratory failure, unspecified whether with hypoxia or hypercapnia”). A review of the medical records showed that the hospital should have used principal diagnosis code I12.0. (defined as “hypertensive chronic kidney disease with stage 5 chronic kidney disease or end stage renal disease”). Because the incorrect diagnosis code was used, the claim was incorrectly assigned to MS-DRG 207 rather than MS-DRG 682 (defined as “Renal failure with MCC”), resulting in an overpayment of $33,060.
OIG performed the audit because prior audits have shown that hospitals do not fully comply with Medicare requirements when using MS-DRGs that require mechanical ventilation for over ninety-six hours. An inpatient claim contains the start and end date of an enrollee’s hospitalization, but only the start date for when mechanical ventilation started. Prior audits resulted in CMS revising its system edit to identify any claim that reported a procedure code for more than ninety-six hours of consecutive ventilation with a mechanical ventilation start date that was four days or fewer before the enrollee was discharged, and then to return the claim to the hospital for validation and resubmission. This audit was conducted as follow-up and covers claims with a mechanical ventilation start date that was five to ten days before the enrollee discharge.
CMS issued guidance related to mechanical ventilation coding following prior audits, but OIG noted that the latest guidance was issued in 2017. Further, the guidance did not include the different ICD-10 procedure code options for reporting consecutive hours of mechanical ventilation or clarify how the procedure code options affect assignment to an MS-DRG.
The seventeen non-compliant claims from this audit were incorrectly assigned to either MS-DRGs 207 or 870 and totaled to $382,032 in overpayments. OIG estimates that Medicare improperly paid hospitals $79.4 million based on the results of the audit. OIG recommended that CMS: (1) direct the Medicare Administrative Contractors to recover the portion of the $382,032 overpayment identified in the audit that is within the four-year reopening period in accordance with CMS’s policies and procedures; and (2) educate hospitals on correctly counting the hours that an enrollee received mechanical ventilation and submitting claims with correct procedure and diagnosis codes.
CMS agreed with the recommendations and will take actions to implement the recommendations.
OIG’s announcement of the audit results can be found here. The complete audit report can be found here.
Reporter, Priya Sinha, Atlanta, +1 404 572 3548, psinha@kslaw.com.
N.Y. Attorney General Issues Guidance for Internet Privacy Tools – On July 15, 2024, the Office of the New York State Attorney General (OAG) announced new guidance regarding the use of cookies, tags, and other online user information tracking tools. Although New York does not yet have a comprehensive set of state privacy laws, the OAG has indicated that based on a recent investigation, existing online privacy practices may run afoul of existing New York consumer protection laws.
The OAG’s guidance accompanied findings from the OAG’s investigation into the privacy tools maintained by major websites. These tools mostly involved personalized identifiers that help websites recognize visitors from one website to the next, commonly referred to as “cookies” and “tags,” as well as the privacy disclosure maintained by these websites.
More than a dozen “popular websites” were found out of compliance with New York consumer protection laws. Some of the recurring issues included:
- Uncategorized or Miscategorized Tags and Cookies: Many websites used a “consent management tool” to enable certain categories of tags or cookies (such as those related to marketing) to be turned off, while other categories (such as those related to fraud detection and analytics) would remain on regardless of the visitor’s consent choices. Based on OAG’s investigation, a number of websites miscategorized certain tags, and thus, those tags would remain active even if a website visitor opted to “turn off” certain categories.
- Misconfigured Tools: Many websites were found to have “tag-management tools” that were not cooperating correctly with the website’s “consent management tools.” As a result, when a website visitor disabled website cookies using the site’s “tag-management tools,” marketing tags regulated by the website’s separate “consent management tools” might still apply.
- Hardcoded Tags: Some websites had tags that were hardcoded directly into the website. Thus, regardless of what consent management tool options were selected by a website visitor, these tags would remain active.
- Tag Privacy Settings: Some websites used “limited data use” tools that limit the ways information collected by certain tools is used. However, these tools only apply to states with comprehensive privacy laws like California, Colorado and Connecticut. In states like New York without comprehensive privacy laws, these tools do not limit data use. According to OAG’s investigation, some companies had mistakenly assumed these limitations would apply to all states and had relied on them nationwide.
- Incomplete Understanding of Tag Data Collection and Use: Some businesses are not aware of the extent of what data tags collect and how that data may be used.
- Cookieless Tracking: Some websites did not use cookies or tags and instead directly captured visitor information and passed it along to advertising companies. The OAG reiterated that regardless of the tool used, websites should respect users’ privacy choices.
Suggestions from OAG to Identify and Prevent Issues with Tags and Cookies
- Designate: Designate a qualified individual to be responsible for implementing and managing website-tracking technologies.
- Investigate: Before deploying a new tag or tool, identify the types of data that will be collected and how the data will be used and shared, even if this means asking the developer of the tag or tool to provide information that is not publicly available about that tool.
- Configure: When deploying a new tag or tool, ensure that it is appropriately categorized and configured.
- Test & Review: Conduct regular testing to ensure that tags and tools are operating as intended, without relying solely on automated testing tools.
- Review: Conduct regular reviews to ensure tags and tools are properly configured, including ensuring that tags are properly categorized in a consent-management tool and that any tag-management tool is properly synced.
Suggestions from OAG to Ensure Privacy Disclosures Comply with New York Law
The OAG reiterates that any disclosures made by a business about its user tracking must be truthful and not misleading in order to comply with consumer protection laws.
In particular, the OAG points to popups on websites with buttons labeled “Accept Cookies,” or “Accept All” next to language stating that clicking those buttons means the user agrees to the use of cookies, which could convey to the user the mistaken impression that cookies will only be used if the user clicks “Accept,” rather than being used from the moment the user visits the site.
Similarly, the OAG emphasizes that any interfaces website visitors may use to change privacy settings should be user-friendly and not designed to obscure necessary tools to finalize the visitor’s selection (such as hiding a required “save” button.)
The full OAG guidance can be reviewed here.
Please reach out to King & Spalding for additional guidance in complying with New York or other state or federal regulatory requirements about the use of cookies, tags and other web privacy measures.
Reporter, Will Mavity, Los Angeles, + 1 213 218 4043, wmavity@kslaw.com.