Health Headlines – February 26, 2024

FEATURED ARTICLES

Department of Justice Releases False Claims Act Statistics for Fiscal Year 2023 – On February 22, 2024, DOJ issued a press release regarding its Fiscal Year (FY) 2023 statistics regarding settlements and judgments under the False Claims Act (FCA). Notably, FY 2023 represents the highest number of settlements and judgments in history, which exceeded $2.68 billion. Of that, over $1.8 billion related to matters involving the health care industry.

In FY 2023, the government and whistleblowers were party to 543 settlements and judgments, the highest in a single year. As noted above, health care fraud remained the leading source of FCA recoveries and judgments for DOJ in FY 2023. One key area of healthcare enforcement highlighted by DOJ is Medicare Advantage matters. DOJ explained that Medicare Part C is now the largest component of Medicare, both in terms of federal dollars spent and the number of beneficiaries. In addition, DOJ highlighted its work regarding healthcare matters involving medically unnecessary services and substandard care, the opioid epidemic, and unlawful kickbacks paid or received by health care providers. DOJ also reported enforcement actions involving procurement fraud, pandemic-related fraud and cyber-fraud, including the Civil Cyber-Fraud Initiative.

In addition, DOJ underscored its continued commitment to use the FCA to deter and address fraud by individuals as well as corporations. To illustrate this priority, DOJ summarized recoveries involving individuals in FY 2023.

Of the more than $2.68 billion in settlements and judgments reported in FY 2023, over $2.3 billion arose from lawsuits that were filed under the qui tam provisions of the FCA and pursued by either the government or whistleblowers. Notably, whistleblowers filed 712 qui tam suits in fiscal year 2023.

The press release was issued in concert with the 2024 Federal Bar Association Qui Tam Conference, where Principal Deputy Assistant Attorney General Brian Boynton gave a keynote address. In his address, Boynton also highlighted that 2023 was a landmark year for DOJ’s investigatory efforts, issuing 1,504 civil investigative demands in FY 2023, the most ever issued in a year. Looking ahead, Boynton forecasted DOJ’s priorities for 2024. These included a continued interest in financial inducements to generate referrals, with a spotlight on electronic health record vendors and laboratory providers, nursing homes and elder care, and cyber fraud. Additionally, DOJ will continue to focus on protecting with Medicare Advantage program with an added focus on the role of vendors and providers in the diagnoses submitted to the government. Boynton also highlighted DOJ’s increased focus on third-parties causing the submission of false claims, including private equity firms and other investors in the healthcare space.

The DOJ press release is available here and the FY 2023 statistics are available here. The transcript of Boynton’s remarks is available here.

Reporters, Alana Broe, Atlanta, + 1 404 572 2720, abroe@kslaw.com; and Lauren S. Gennett, Atlanta, + 1 404 572 3592, lgennett@kslaw.com

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CMS Issues Final Rule Changing Medicaid DSH Third-Party Payor Rule – On February 23, 2024, CMS published a final rule updating the regulatory requirements of the Medicaid disproportionate share hospital (DSH) program in response to the Consolidated Appropriations Act (CAA) of 2021.  The final rule implements DSH-related provisions of the CAA concerning the treatment of third-party payments for purposes of calculating Medicaid hospital-specific DSH limits.  The final rule also enhances the ability of CMS and state auditors to understand how the hospital-specific DSH limits will be calculated as well as identify and recover Medicaid DSH overpayments.  CMS published the final rule as proposed, with only minor phrasing changes.

Background on DSH Payments

The Medicaid statute requires states to make DSH payments to Medicaid-enrolled hospitals that serve patients who are uninsured. DSH payments are not considered part of base payments or supplemental payments to providers.  Section 1923 of the Social Security Act contains specific requirements related to DSH payments, including aggregate annual state-specific DSH allotments that limit federal financial participation (FFP) for statewide total DSH payments under Section 1923(f) of the act, and hospital-specific limits on DSH payments under Section 1923(g) of the act.  Per Section 1923(g), a hospital’s DSH payments may not exceed the costs incurred by that hospital in furnishing inpatient and outpatient hospital services during the year to certain Medicaid beneficiaries and the uninsured, less payments received for Medicaid-eligible individuals.  States are required under Section 1923(a)(2)(D) of the act to provide the HHS secretary with an annual report describing the DSH payment adjustments made to each hospital.

Controversy Over Hospital-Specific Limit

In recent years, the Medicaid DSH program has seen several changes in the legal landscape, as well as changes in enforcement by CMS and state Medicaid agencies.  A major issue has been the calculation of the hospital-specific limit.  More specifically, controversy arose over whether hospitals must report commercial insurance payments and Medicare payments for their so-called “dually eligible” patients (i.e., patients eligible for Medicaid and either Medicare or commercial insurance) as an offset to their uncompensated care costs for purposes of calculating the hospital-specific limit.  This calculation is known as the Medicaid shortfall.

Ultimately, Congress resolved the issue with Section 203 of the CAA, which allows hospitals to include only the costs of Medicaid-eligible (including waivers) patients for whom Medicaid is the primary payer.  However, under Section 1923(g)(2)(B) of the Social Security Act, hospitals in the 97th percentile of all hospitals with respect to inpatient days made up of patients who, for such days, were entitled to Medicare Part A benefits and to Supplemental Security Income (SSI) benefits are excepted from this provision of the CAA and are entitled to a higher hospital-specific limit.

The Proposed Medicaid Shortfall Calculation

In the final rule, CMS is revising the data elements identified in its regulations at 42 C.F.R. § 447.299(c)(6), (7), (10) and (16) to reflect the statutory changes made by Section 203 of the CAA to update the methodology for calculating the Medicaid shortfall portion (Medicaid costs less Medicaid payments) of the hospital-specific DSH limit.  The Medicaid shortfall calculation will only include costs and payments for hospital services furnished to beneficiaries for whom Medicaid is the primary payer (excluding hospitals that fall under the 97th percentile statutory exception).

The final rule also includes an additional data-reporting element that would allow state auditors discretion to quantify the financial impact of any missing data or documentation.  According to CMS, current audit reports may include a caveat noting the auditor’s finding that the hospital’s total uncompensated care cost may be misstated as a result of missing data, with an unknown impact on the hospital-specific DSH limit.  Under the final rule, for example, auditors will be able to use “alternative source documentation, utilize a methodology to estimate the financial impact in terms of the dollar amount at risk, or provide an estimated range of financial impact if a determination of an exact dollar amount is not possible.”  Importantly, the new data element—and the discretion it affords to auditors—will likely expand auditors’ ability to identify and recover DSH overpayments in excess of the hospital-specific limit.  Providers should take note of this change. 

Additional Changes to the Final Rule

In addition to the Medicaid shortfall calculation, the final rule includes several other changes.  For instance, the final rule clarifies the calculation of the one-year period by when a state must recover and identify overpayments.  Based on this change, the one-year period will begin at the earliest date of either:

(a) when the state submitted its DSH independent certified audit to the HHS secretary, or
(b) any of the dates specified in 42 C.F.R. § 433.316(c):

1. paragraph (c)(1) (the date on which any Medicaid agency official or other state official first notifies a provider in writing of an overpayment and specifies a dollar amount that is subject to recovery);
2. paragraph (c)(2) (the date on which a provider initially acknowledges a specific overpaid amount in writing to the Medicaid agency); and
3. paragraph (c)(3) (the date on which any state official or fiscal agent of the state initiates a formal action to recoup a specific overpaid amount from a provider without having first notified the provider in writing).

The final rule also modifies the factors by which Patient Protection and Affordable Care Act mandated state-by-state DSH allotment reduction amounts will occur beginning in fiscal year 2024 (reductions that have been repeatedly delayed).  The CAA modified the law to now have these reductions be phased in beginning in fiscal year 2024 through fiscal year 2027 in the amount of $8 billion per year.  Under the final rule, these mandated reductions will be calculated using the most recent state plan rate year for the state audits used in the DSH audits rather than the fiscal year subject to the reduction in states with Section 1115 waiver demonstrations.

Conclusion

The CAA-related provisions of the final rule will become effective retroactively as of October 1, 2021, to align with the effective date of the statute.  The remaining provisions will become effective 60 days after the publication of the final rule.    

A copy of the final rule is available here.  

Reporter, Doug Comin, Atlanta, +1 404 572 3525, dcomin@kslaw.com.

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GAO Issues Report Urging HHS to Address Worsening Maternal Health Outcomes—The Government Accountability Office (GAO) issued a report this month finding that maternal health outcomes worsened during the COVID-19 pandemic and urging HHS to use its resources to address the maternal health crisis occurring in the United States.

The CARES Act tasked the GAO with reporting on its pandemic oversight efforts. As part of its oversight, the GAO was asked to review the effects of the COVID-19 pandemic on maternal health outcomes. This recently issued report is a follow up to an earlier GAO report finding that maternal health disparities persisted throughout the pandemic and maternal health outcomes declined.

GAO reviewed three sources of HHS health data, including CDC vital health statistics, Agency for Healthcare Research and Quality’s Healthcare Cost and Utilization Project data regarding maternal morbidity and COVID-19 diagnoses, and CDC’s Pregnancy Risk Assessment Monitoring System survey data. To assess HHS’s maternal health efforts, GAO reviewed the Maternal Health Blueprint and two HHS programs focused on addressing maternal health. The Maternal Health Blueprint is a strategy document with specific agency action items intended to decrease maternal health morbidity and mortality, reduce maternal health disparities, and improve pregnant women’s prenatal to postpartum experience. The report focused on two maternal health: Alliance for Innovation on Maternal Health (AIM) and Perinatal Quality Collaborative. AIM is administered by the Health Resources and Services Administration (HRSA) to improve the safety of the births, and PQC is a CDC program working to improve maternal quality of care.

The report stated that maternal mortality and morbidity worsened during the pandemic and there were increased levels of depression and anxiety among women. In addition, disparities continued among certain groups of women. The GAO reported that maternal mortality was at its highest in 2021 and declined in 2022.

To address these issues, GAO recommended that: (1) HHS makes sure that the Office on Women’s Health and the Office of the Assistant Secretary for Planning and Evaluation incorporate the Maternal Health Blueprint’s goals and implements targeted short-term goals within quantitative targets and timelines; and (2) the CDC Director ensures that the Perinatal Quality Collaborative program set quantitative goals.

Reporter, Taylor Whitten, Sacramento, +1 916 321 4815, twhitten@kslaw.com.