the latest paradigm shift in health care: providers, patients and payers play musical chairs

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Craig B. GarnerGarner Health Law Corporation

The Latest ParadigmShift In Health Care

THE LATEST PARADIGM SHIFT IN HEALTH CARE

PROVIDERS, PATIENTS AND PAYERS PLAY MUSICAL CHAIRS

ORANGE COUNTY BAR ASSOCIATION

DATE: February 24, 2014TIME: 12:00 PM to 1:30 PM (PST)PLACE: The Pacific Club

4110 MacArthur BoulevardNewport Beach, CA 92660

PRESENTER: Craig B. GarnerGarner Health Law Corporation

MCLE Credit -- 1.00Craig B. Garner is a State Bar of California approved MCLE provider and certifies that this activity conforms to the standards for approved education activities prescribed by the rules and regulations of the State Bar of California governing MCLE.

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ACA MEETS ADR

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On March 23, 2010, President Obama signed the Patient Protection and Affordable Care Act into law.

The Health Care and Education Reconciliation Act followed a week later.

Together, this landmark legislation became the Affordable Care Act, also known as Health Care Reform.

March 2014 will be the fourth anniversary of the Affordable Care Act.

The Affordable Care Act

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28 U.S.C. § 651

Federal law requires that all federal courts pursue alternative dispute resolution (“ADR”) in every case.

“An [ADR] process includes any process or procedure, other than an adjudication by a presiding judge, in which a neutral third party participates to assist in the resolution of issues in controversy, through processes such as early neutral evaluation, mediation, minitrial, and arbitration as provided in sections 654 through 658.”

Federal Alternative Dispute Resolution Act

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9 U.S.C. § 2

“A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.”

Federal Arbitration Act

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California Code of Civil Procedure § 1281.2

“On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party thereto refuses to arbitrate such controversy, the court shall order the petition and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists, unless it determines:”

Right has been waived There is a basis for revocation of agreement There is a pending court action with a third party

California Right to Arbitration

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Perry v. Thomas, 482 U.S. 483 (1987)

The Court held that the Federal Arbitration Act preempts the California Labor Code. “[T]he present appeal addresses the pre-emptive effect of the Federal Arbitration Act, a statute that embodies Congress’ intent to provide for the enforcement of arbitration agreements within the full reach of the Commerce Clause.”

California Right to Arbitration Continued

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California Code of Civil Procedure § 1295(a)

The first article of the contract must state: “It is understood that any dispute as to medical malpractice . . . will be determined by submission to arbitration as provided by California law, and not by a lawsuit or resort to court process. . . . Both parties to this contract, by entering into it, are giving up their constitutional right to have any such dispute decided in a court of law before a jury, and instead are accepting the use of arbitration.”

Arbitration of Medical Malpractice

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Mormile v. Sinclair, 21 Cal. App. 4th 1508 (1994) (patient’s agreement to arbitrate all claims arising out of a physician’s professional negligence was binding on her husband).

Warfield v. Summerville Senior Living, Inc., 158 Cal. App. 4th 443 (2007) (plaintiff’s husband, who was also a resident of the residential care facility for the elderly, was not an agent of plaintiff, with respect to execution of agreement to arbitrate disputes with facility’s owner).

Arbitration of Medical Malpractice Continued

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California Health and Safety Code § 1430(b): “An agreement by a resident or patient of a skilled nursing facility or intermediate care facility to waive his or her rights to sue pursuant to this subdivision shall be void as contrary to public policy.”

California Health and Safety Code § 1599.81(d): “In the event the contract contains an arbitration clause, the contract attachment pertaining to arbitration shall contain notice that under Section 1430, the patient may not waive his or her ability to sue for violation of the Patient’s Bill of Rights.”

Arbitration of Medical Malpractice Continued

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Valley View Health Care, Inc. v. Chapman, 2014 WL 197778 (E.D. Cal. 2014): California Health and Safety Code Sections 1430 and 1599.81 effectively preclude arbitration of Patient’s Bill of Rights claims.

“Under Section 1430(b), parties are able to reach no more than a void agreement to arbitrate Patient’s Bill of Rights claims. Section 1430(b) precludes arbitration of Patient’s Bill of Rights claims by voiding agreements to arbitrate such claims, prohibits outright arbitration of a particular claim, and disproportionately impacts arbitration.”

Arbitration of Patient’s Bill of Rights

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COVERAGE RESOLUTION

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The Appeals Process for Improved CoverageSection 10101 of the Affordable Care Act requires a group health plan and a health insurance issuer offering group or individual coverage to establish an effective process for the administration of appeals.

42 U.S.C. § 300gg-19 (appeals process) 42 U.S.C. § 300gg-93 (health insurance consumer information) 45 C.F.R. § 147.136 (internal claims and appeals and external

review processes) 29 C.F.R. 2560.503-1 (claims procedure) 29 C.F.R. 2590.715-2719 (internal claims and appeals and

external review processes)

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The Appeals Process For Improved Coverage ContinuedTitle 42, United States Code, Ch. 6A, Subch. XXV, Part A, Subpart II and Part C

No lifetime or annual limits (42 U.S.C. § 300gg-11) Prohibition on rescissions (42 U.S.C. § 300gg-12) Coverage of preventative care (42 U.S.C. § 300gg-13) Extension of dependent coverage (42 U.S.C. § 300gg-14) Uniform policy documents (42 U.S.C. § 300gg-15) Highly compensated individuals (42 U.S.C. § 300gg-16) Ensure quality of care (42 U.S.C. § 300gg-17) Minimum medical loss ratio (42 U.S.C. § 300gg-18) Ensure value for consumer premiums (42 U.S.C. § 300gg-94) Uniform fraud and abuse reporting (42 U.S.C. § 300gg-95)

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The Appeals Process For Improved Coverage Continued42 U.S.C. § 300gg-19(a)(1):

“A group health plan and a health insurance issuer offering group or individual health insurance coverage shall implement an effective appeals process for appeals of coverage determination and claims, under which the plan or issuer shall, at a minimum:”

(A) Have an appeals process(B) Provide notice in “a culturally and linguistically appropriate”

manner(C)Enrollee review of file, present evidence as part of

process, and maintain coverage pending the outcome of the appeal

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42 U.S.C. § 300gg-19(a)(1)(B): “[P]rovide notice to enrollees, in a culturally and linguistically appropriate manner, of available internal and external appeals processes, and the availability of any applicable office of health insurance consumer assistance or ombudsman established . . . to assist such enrollees with the appeals process.”

The Appeals Process For Improved Coverage Continued

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Ombudsman

42 U.S.C. § 300gg-93(c):

“The office of health insurance consumer assistance or health insurance ombudsman shall:

(1) assist with the filing of complaints and appeals;(2) collect, track and quantify problems and inquiries encountered

by consumers;(3) educate consumers on their rights and responsibilities;(4) assist consumers with enrollment ; and(5) resolve problems with obtaining premium tax credits.”

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Premium Tax Credit Refunds26 U.S.C. § 36B

In 2014, premium assistance is available for eligible enrollees purchasing insurance from the Exchanges.

Credit is refundable and payable in advance to subsidize the purchase of insurance.

Credits are eligible only for months in which there is enrollment in Exchange coverage.

Does not apply to insurance obtained through employer or catastrophic plan.

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The Appeals Process Continued

42 U.S.C. § 300gg-19(b): A group health plan and a health insurance issuer offering group or individual health insurance coverage: “(1) [S]hall comply with the applicable state external review process for such plans and issuers that, at a minimum, includes the consumer protections set forth in the Uniform External Review Model Act. . . ; or

(2) [S]hall implement an effective review process that meets minimum standards established by [HHS].

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Uniform Health Carrier External Review ActSummary Section 2719 of the Affordable Care Act requires non-grandfathered insured health plans to comply with state external review processes that at a minimum conform to the NAIC Uniform External Model Review Act. Insurers in states that have not adopted the NAIC Model Act and self-insured employee health plans must, under section 2719, offer their enrollees an external review process that meets minimum standards established by HHS.

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Multi-State Plan Program (“MSPP”)

78 Federal Register 15560 (Mar. 11, 2013)

Through contracts with the U.S. Office of Personnel Management (“OPM”), health insurance issuers will offer at least two multi-state plans (“MSPs”) on each of the Affordable Insurance Exchanges (“Exchanges”) (Exchanges must be non-profit).

An MSSP issuer may phase in the states it chooses to offer over 4 years, but it must offer MSPs on Exchanges in all states (and D.C.) by the fourth year.

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Multi-State Plan Program Continued

45 C.F.R. § 800.10 (Scope) Establishes standards for state health insurance issuers to

contract with OPM to offer multi-State plans providing health insurance coverage on Exchanges for each State.

Establishes standards for appeal of a decision by OPM affecting the issuer’s participation in the MSSP and standards for an enrollee in a MSP to appeal denials of payment or services by an MSPP issuer.

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45 C.F.R. § 800.115 (Level playing field) An MSPP issuer must, with respect to its MSPs, meet the following requirements, among others:

Guaranteed renewal Preexisting conditions Rating Quality improvement Fraud and abuse Prompt payment Appeals and grievances

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45 C.F.R. § 800.116 (Process for dispute resolution) In the event of a dispute about the applicability to an MSP or

MSPP issuer of a state law, the state may request that OPM reconsider a determination that an MSP or MSPP issuer is not subject to such state law.

Request for review to OPM, who in turn will issue a decision within 60 days.

Final decision under the Administrative Procedure Act.

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45 C.F.R. § 800.503 (External review) OPM will conduct external review of adverse benefit

determinations.

Notice requirements.

Issuer obligation. An MSPP issuer must pay a claim pursuant to OPM’s final decision regardless of whether the plan or issuer intends to seek judicial review.

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45 C.F.R. § 890.105 (Filing claims for payment or service) Each health benefits carrier resolves claims filed under the

plan.

If carrier denies claim, insured may ask for reconsideration.

If carrier affirms its denial or does not respond in a timely fashion, the insured may ask OPM to review the claim.

Both levels must be exhausted before seeking judicial review.

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ERISA Preemption

Goldman v. BCBSM Foundation, 841 F. Supp. 2d 1021, 1026 (E.D. Mich. 2012) “[T]he external review process is an option, not a mandatory requirement, of administrative review. While BCBSM contends that the new federal health care law makes external review mandatory, the Court sees nothing . . .[to] indicate that external review by a state agency is a prerequisite to filing an ERISA claim. While the new law . . . seems to require a health care provider . . . [to] provide both an internal and external review process . . . it does not appear that the external review process must be completed before an individual has the right to sue under ERISA.”

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Second Amendment Protection

42 U.S.C. § 300gg-17(c)U.S. Const. amend. IIAffordable Care Act

Mandatory disclosure of the lawful ownership or possession of a firearm or ammunition, the lawful use of a firearm or ammunition, or the lawful storage of a firearm or ammunition is prohibited in the following examples:

Wellness and prevention programs Collection of data under the Affordable Care Act Determination of premium rates or eligibility for health

insurance

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Minimum Medical Loss Ratio

The Affordable Care Act established the Medical Loss Ratio (“MLR”) to ensure that issuers of insurance comply as follows:

Large Group Market: An issuer must provide a rebate to enrollees if the issuer has an MLR of less than 85% (subject to adjustments).

Small Group and Individual Markets: An issuer must provide a rebate to enrollees if the issuer has an MLR of less than 80% (also subject to adjustments).

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Minimum Medical Loss Ratio Continued“[A]n issuer must rebate a pro rata portion of premium revenue if it does not meet an 80 percent MLR for the small group market in a State that has not set a higher MLR. If an issuer has a 75 percent MLR for the coverage it offers in the small group market in a State that has not set a higher MLR, the issuer must rebate 5 percent of the premium paid by or on behalf of the enrollee for the MLR reporting year after subtracting premium and subtracting taxes and fees. . . . In this example, an enrollee may have paid $2,000 in premiums for the MLR reporting year. If the Federal and State taxes and licensing and regulatory fees that may be excluded from premium revenue . . . are $150 for a premium of $2,000, then the issuer would subtract $150 from premium revenue, for a base of $1,850 in premium. The enrollee would be entitled to a rebate of 5 percent of $1,850, or $92.50.”

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Sense of the SenateSection 6801 of the Affordable Care Act: “It is the sense of the Senate that:

(1) Health care reform represents an opportunity to address issues related to medical malpractice and medical liability insurance;

(2) States should be encouraged to develop and test alternatives to existing civil litigation as a way of improving patient safety, reducing medical errors, encouraging the efficient resolution of disputes; and

(3) Congress should consider establishing a State demonstration program to evaluate alternatives to the existing civil litigation system with respect to medical malpractice claims.”

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Alternatives to Tort Litigation42 U.S.C. § 280g-15(a): “[HHS] is authorized to award demonstration grants to States for the development, implementation, and evaluation of alternatives to current tort litigation for resolving disputes over injuries allegedly caused by health care providers or health care organizations.”

Grants cannot exceed five years Allow for the resolution of disputes over injuries and promote a

reduction of health care errors Make the medical liability system more reliable by making

prompt and fair resolutions common No more than $500,000 per State

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340B Drug Pricing Program

The Veterans Health Care Act of 1992 enacted Section 340B of the Public Health Service Act. Section 340B implemented an outpatient drug discount program for high Medicaid public and private nonprofit hospitals, community health centers, and other such providers.

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340B Dispute Resolution Process

Section 7102 of the Affordable Care Act requires HHS to promulgate regulations to establish and implement an administrative dispute resolution process for the 340B Drug Pricing Program.

Resolution of claims by covered entities contending they have been overcharged for drugs purchased through the 340B Program.

Resolution of claims by manufacturers, after audit, of violations of the prohibition of duplicate discounts or rebates and/or the prohibition on resale of drugs purchased under the 340B Program.

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340B Dispute Resolution Process Continued The Affordable Care Act requires HHS to promulgate additional regulations that shall:

Designate or establish a decision making official or decision-making body within HHS to be responsible for reviewing and finally resolving claims by covered entities and manufacturers.

Establish deadlines and procedures as may be necessary to ensure that claims shall be resolved fairly, efficiently, and expeditiously.

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340B Dispute Resolution Process Continued Establish procedures by which a covered entity may discover

and obtain information and documents from manufacturers and third parties as may be relevant to demonstrate the merits of a claim that charges exceeded the ceiling price.

Require that a manufacturer conduct an audit of a covered entity as a prerequisite to initiating administrative dispute resolution proceedings.

Consolidate claims to permit multiple covered entities to jointly assert claims of overcharging.

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ARBITRATION OF FALSE CLAIMS

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Civil Actions for False Claims31 U.S.C. § 3730(b) (Actions by private persons)

“A person may bring a civil action for a violation under section 3729 [False Claims Liability] for the person and for the United States Government. The action shall be brought in the name of the Government. The action may be dismissed only if the court and the Attorney General give written consent to the dismissal and their reasons for consenting.”

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Civil Actions for False Claims ContinuedUnited States v. Bankers Ins. Co., 245 F.3d 315 (4th Cir. 2001)

“[W]here the Government has previously agreed to an arbitration process, the statutory authority of the Attorney General is not compromised by that agreement being honored. As Justice Brandeis cogently observed years ago, ‘In a government of laws, existence of the government will be imperiled if it fails to observe the law scrupulously. Our government is the potent, omnipresent teacher. For good or for ill, it teaches the whole people by its example.’ ” Id. at 325 (quoting Olmstead v. United States, 277 U.S. 438, 468 (1928)).

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Civil Actions for False Claims ContinuedMorgan v. Science Applications Int’l Corp., 612 F. Supp. 2d 81 315 (D.D.C. 2009)

Plaintiff filed wrongful termination/false claims lawsuit.

Statutory claims may be subject to an arbitration agreement under the Federal Arbitration Act.

Five factors to consider: (1) neutral arbitrators; (2) more than minimal discovery available; (3) written award; (4) all types of relief available that would otherwise be so in Court; (5) does not require employee to pay unreasonable fees.

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60 Days to PayThe Affordable Care Act, Section 640242 U.S.C. § 1320a-7k(d) (Reporting overpayments)

Must report and return any overpayments

60 day deadline from the date overpayment is identified or date any corresponding cost report is due

Violation of this obligation may result in penalties under the False Claims Act

10 year “look back” period

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Self-Referral Disclosure Protocol (SRDP)Affordable Care Act Section 6409.

Applies to Stark Act violations (42 U.S.C. § 1395nn). Separate from Self-Disclosure Protocol, which is administered by the Office of the Inspector General and relates to the Anti-Kickback Statute.

CMS is authorized to reduce any penalty based upon (1) the nature and extent of the violation, (2) the timeliness of such self-disclosure and (3) extent of cooperation by the provider.

SRDP tolls the 60 Days to Pay Deadline.

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Self-Referral Disclosure Protocol Continued

Must identify the disclosing provider, the issues involved, the nature of the transactions and the individuals involved. Focus on the details.

Must provide a complete legal analysis relating to Stark liability.

Must describe a preexisting and adequate compliance program.

Must set out a full financial analysis of the issues.

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Self-Referral Disclosure Protocol Continued CMS is not bound by provider’s conclusions.

CMS has no obligation to reduce the fine.

Provider has no right to appeal resolution through settlement.

Provider may appeal an adverse decision through the ordinary course.

CMS may open any Medicare cost reports filed since the initial disclosure.

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MEDICARE DISPUTES

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The Expansive Medicare RegulationsThe last 50 years have seen Medicare emerge to find itself the blueprint upon which the nation’s health care system is based. As a body of law, Medicare exists within the following:

Title 42 of the United States Code Title 42 of the Code of Federal Regulations The CMS Online Manual System (http://www.cms.hhs.gov) The Medicare Administrative Appeals Process Federal Court decisions

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The Five Levels of the Medicare Appeal ProcessSection 1869 of the Social Security Act and 42 C.F.R. Part 405, Subpart I, contain the procedures for conducting appeals of claims in Original Medicare (Parts A and B).

Redetermination by a CMS contractor (carrier, fiscal intermediary or Medicare Administrative Contractor (MAC))

Reconsideration by a Qualified Independent Contractor (QIC) Hearings before an Administrative Law Judge (ALJ) within

the Office of Medicare Hearings and Appeals in HHS Review by the Appeals Council within the Department

Appeals Board of HHS Judicial review in federal district court

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Exhaustion of Administrative Remedies

The Medicare Act sets forth very stringent channeling requirements to ensure a proper exhaustion of administrative remedies, which comes at a price. Nevertheless:

“In the context of a massive, complex health and safety program such as Medicare, embodied in hundreds of pages of statutes and thousands of pages of often interrelated regulations, any of which may become the subject of a legal challenge in any of several different courts, paying this price may seem justified.” Shalala v. Illinois Council on Long Term Care, Inc., 529 U.S. 1, 13 (2000).

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ACO Litigation

An ACO is a shared savings program that promotes accountability for a patient population, coordinates items and services under Medicare Parts A and B, and encourages investment in infrastructure and redesigned care processes.

Approximately 350 ACOs by the end of 2013 Quality care measures Focus on at-risk populations Compliance responsibilities

Disputes may arise between ACOs and their physician partners.

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TAX DISPUTES

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Disputes at the Points of IntersectionThe ACA has become inextricably connected to the laws of federal and state taxation, all of which may result in future disputes. Some points of intersection include:

Disclosure or Use of Information by Tax Return Preparers Medical Loss Ratio (MLR) (discussed above) Reporting Employer Provided Health Coverage in Form W-2 Net Investment Income Tax (3.8% tax as of 2013) Additional Requirements for Tax-Exempt Hospitals Minimum Value Tax-Exempt 501(c)(29) Qualified Nonprofit Health Insurance

Issuers

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Continued. . . Health Flexible Spending Arrangements Medical Device Excise Tax (2.3% tax as of 2010) Health Insurance Premium Tax Credit Individual Shared Responsibility Provision Health Coverage for Older Children Excise Tax on Indoor Tanning Salons (10% tax as of 2010) Adoption Credit Transitional Reinsurance Program Medicare Shared Savings Program Small Business Health Care Tax Credit

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Continued. . .

Therapeutic Discovery Project Program Group Health Plan Requirements Annual Fee on Health Insurance Providers Additional Medicare Tax (0.9% tax as of 2013) Annual Fee on Branded Prescription Pharmaceuticals Employer Shared Responsibility Payment Excise Tax on “Cadillac” Plans Patient-Centered Outcomes Research Institute Retiree Drug Subsidies

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Craig B. Garner Garner Health Law Corporation

Craig is an attorney and health care consultant, specializing in issues pertaining to modern American health care and the ways it should be managed in its current climate of reform.

Craig’s law practice focuses on health care mergers and acquisitions, regulatory compliance and counseling for providers. Craig is also an adjunct professor of law at Pepperdine University School of Law, where he teaches courses on Hospital Law and the Affordable Care Act.

Between 2002 and 2011, Craig was the Chief Executive Officer of Coast Plaza Hospital in Norwalk, California. Craig is also a Fellow Designate with the American College of Healthcare Executives, a Member of the State Bar of California, Business Law Section, Health Law Committee and a Vice Chair of the Healthcare Reform Educational Task Force of the American Health Lawyers Association.

Additional information can be found at www.garnerhealth.com.

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Craig B. GarnerGarner Health Law

Corporation1299 Ocean Ave., Suite 450

Santa Monica, CA 90401(310) 458.1560

[email protected]

Thank You

the latest paradigm shift in health care: providers, patients and payers play musical chairs

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