Hot Topics in Laboratory Regulatory Affairs

1. Hot Topics in Laboratory Regulatory Affairs Presented By Christopher P, Young, CHC cpyoung@cox.net www.labcomply.com at the: 2011 Ohio River Valley CLMA/AACC Conference March 18, 2011

2. Objectives • Understand what the government intends to do in the area of regulatory and Medicare and Medicaid compliance in the near future. • Plan for upcoming regulatory and billing changes that may be imposed by the government by hearing specific “best practices” for these changes. • Get specific information about questions participants may have concerning their own laboratory problems and issues during the question and answer portion of the program.

3. Recent Congressional Testimony • Daniel R. Levinson, Inspector General (IG), Dept of Health and Human Services (HHS) • March 2nd and March 9th gave testimony before several congressional committees • “New Tools for Curbing Waste and Fraud in Medicare and Medicaid” • Lewis Morris, Chief Counsel to the HHS IG • March 2nd testimony to House Ways and Means subcommittee on Oversight

4. Recent Congressional Testimony • Gerald T. Roy, Deputy Inspector General for Investigations, HHS • Omar Pérez, Assistant Special Agent in Charge, OIG, HHS • Testimony before The House Committee On Energy and Commerce Subcommittee on Oversight and Investigations • “Waste, Fraud and Abuse: A Continuing Threat to Medicare and Medicaid”

5. Daniel Levinson – HHS - OIG • “the majority of health care providers are honest and well-intentioned” • In the last fiscal year (FY 2010), the OIG has: • Opened more than 1700 investigations • Resulting in over 900 criminal and civil actions • More than $3 billion in “expected” recoveries • Including $1 billion in audit receivables • “Fraud is a serious problem requiring a serious response”

6. Common Health Care Schemes Purposefully billing for services never provided Purposely billing for services that are not medically necessary Billing for a higher level of service than was provided Misreporting cost or other information to increase payments Paying or receiving kickbacks Illegal or improper marketing of products Providing substandard or poor quality care Stealing providers’ or beneficiaries’ identities

7. Waste, Fraud and Abuse • CMS estimates that 10.5% of fee for service claims paid in FY 2010 did not meet program guidelines • Government considers these “errors in payment” found through its error testing audits like CERT and RAC audits • Main reasons: • Insufficient documentation • Miscoded claims • Medically unnecessary services

8. Collaborative Effort • “Collaboration and innovation are essential in the fight against health care fraud” • HIPAA of 1996 established the Health Care Fraud and Abuse Control (HCFAC) Program • Return on investment in this program is $6.80 returned for every $1.00 spent • $4 billion in FY 2010, $18 billion since 1997 • May 20th, 2009 HHS Secretary and Attorney General announced creation of Health Care Fraud Prevention and Enforcement Action Team (HEAT)

9. HEAT Assembles resources from different government agencies and enhances partnerships between agencies “Strike Forces are designed to identify and investigate fraud, and prosecute the perpetrators quickly “ Strike Force teams are composed of dedicated prosecutors from DOJ and U.S. Attorneys Offices and Special Agents from OIG; the Federal Bureau of Investigation (FBI); and, in some cases, State and local law enforcement agencies

10. HEAT Enforcement teams are supported by data analysts and program experts Teams use data to identify suspicious billing patterns as they occur OIG created a team of data experts composed of OIG special agents, statisticians, programmers, and auditors Have decreased the time from start of investigation to prosecution by approximately half

11. ACA Enhancements to Program Integrity Increased funding for new technology and “boots on the ground” More robust enrollment screening and more intense payment oversight for new providers Enrollment “moratoria” when the Secretary identifies fraud “hot spots,” Heightened disclosure and transparency requirements Mandatory compliance programs

12. Other Enforcement Tools Authority to suspend payments pending investigation of “credible” allegations Changes to the False Claims Act, the Federal anti-kickback statute, OIG’s administrative authorities, and the Federal Sentencing Guidelines to allow more effective prosecution and stiffer penalties

13. Permissive Exclusion Authority • No program payment may be made for any item or service that an excluded person or entity furnishes, orders, or prescribes • Entities cannot employ excluded individuals • OIG weighs fraud risk against considerations like access to care • Some entities cannot be excluded because they are too big or are a sole provider, etc. • Discretionary exclusion allows the government to exclude individuals and executives of companies • Are excluded as “responsible corporate officers”

14. Permissive Exclusion of Executives • Seen as a deterrent in cases where the executive or employee may be willing to risk non-compliant behavior because the cost/benefit ratio of getting caught can be absorbed by the business or affects the business but not them directly • As long as the profit outweighs the cost may be considered part of the “cost of doing business” • Excluding individuals responsible for the non-compliant behavior of a company serves the purpose of deterrence

15. Permissive Exclusion of Executives • Can be imposed even if the employee was not actually convicted of any crime themselves • OIG has used this authority in over 30 cases since 1996 • Previously only used in smaller companies but now may be used in larger, more complex organizations • Would be imposed in those cases where evidence shows that an individual knew, or should have known of the fraud • OIG will operate with a “presumption in favor of exclusion” • Guidelines are published on the OIG website

16. Enlist The Public and “Honest Providers” Provides guidance documents for beneficiaries and health care providers to help them prevent or detect fraud and abuse Provides compliance program guidance for providers Provides training for companies on how to prevent and detect non-compliant behavior Published “10 most wanted” list of fugitives

17. HEAT Provider Compliance Training • Free half day seminars on how to create a “culture of compliance” • Hear from the Office of Inspector General and other government experts as they educate local health care providers, compliance officers, and their legal counsel about the realities of Medicare fraud and the importance of implementing an effective compliance program

18. HEAT Provider Compliance Training Get the Facts. Understand the law and the consequences of violating it Make a Plan.  Cultivate a culture of compliance within your health care organization Know Where to Go. Learn what to do when a compliance issue arises All classes are filled but the Washington DC training on May 18th will be webcast http://compliance.oig.hhs.gov/index.html

19. FERA of 2009 • Fraud Enforcement and Recovery Act (FERA) of 2009 • Significantly expanded the scope and applicability of the Federal False Claims Act (FCA) • Coupled with the ACA, cases against providers for FCA violations have new meaning and significantly improves the government’s chances at successful prosecutions for FCA violations

20. FERA and FCA • Changes the requirement that a claim must be “presented to the government” to include claims presented to agents and contractors of the government • Definition of claim now includes; “requests or demands for money or property where the government has paid or will pay any portion of the money, regardless of whether the government actually has title to the property at the time of the request or demand.” • Ensures that the FCA is applicable to Medicaid and Medicare Advantage Plans

21. FERA and FCA • Removes the language that required “specific intent” to defraud the government and replaces it with language that says a liability under the FCA may exist as long as the false record or statement was “material” to the claim meaning it had a tendency to influence the payment or receipt of money or property • Some interpret this as making it possible to include vendors in FCA actions • FERA also extends liability to keeping funds retained through a false claim by making the refunding of that money an “obligation”

22. FCA Title 31, Section 3729(b) Expanded • (b) KNOWING AND KNOWINGLY DEFINED.—For • purposes of this section, the terms ‘‘knowing’’ and ‘‘knowingly’’ mean that a person, with respect • to information— • (1) has actual knowledge of the information; • (2) acts in deliberate ignorance of the truth or falsity of the information; or • (3) acts in reckless disregard of the truth or falsity of the information, • and 6402(f) adds no proof of specific intent to defraud is required

23. Reporting and Returning Overpayments • If a person has received an overpayment, the person “shall” • Report and return the overpayment • Report means a written statement of the reason for the overpayment • Report shall be to the “Secretary, the State, an intermediary, a carrier, or a contractor, as appropriate, at the correct address” • The deadline for returning and reporting is 60 days from the date the overpayment is identified or the date a cost report (if applicable) is due • Failure to report and refund by the 60 day deadline constitutes an actionable violation of law (an obligation) so, missing the deadline turns a simple error and refund into a potential FCA violation

24. Obligation To Return • Laboratories now must meet the 60 day deadline which means: • Investigate a potential overpayment situation, • Reconcile possibly complex computations, • Consider possible defenses with in-house or outside counsel, • File an appropriate report explaining the facts, and • Make a full refund of a potentially large amount of money

25. Example Refund vs FCA • Example: Overpayment caused by computer error discovered in a routine audit – Test X @ overpayment of $10.00 per test. Test X volume is 15 tests/day • Refund example: Example – Test X @ $10.00/test – volume of 15/day for 3 months (21 days x 3=63 days) = 945 tests with a refund of $9,450.00 • If not refunded in 60 days it becomes an “obligation” and is an FCA violation. Here is what happens under FCA • Treble Damages - 3x amount of the overpayment or $28,350.00 (refund part) • Penalties - $5,500 - $11,000 per false claim filed • @ minimum penalty = $5,500/claim x 945 claims = $ 5,197,500 • @ maximum penalty = $11,500/claim x 945 = $10,867,500.00 • For a $9,450.00 refund problem not paid back in 60 days, FCA sanctions could go as high as $10.8 million

26. FBI Fugitives-10 Most Wanted OIG Fugitives: Clara Guilarte and Caridad Guilarte were captured in Colombia on March 13, 2011 The Guilartes allegedly defrauded Medicare of nearly $4.3 million (and submitted $9.1 million in false and fraudulent claims), according to a Federal indictment

27. 2012 Budget for Fraud and Abuse • Proposes nearly doubling the expenditure for discretionary spending for HCFAC operations • Discretionary spending is in addition to that already mandated by the 1996 HCFAC • Expands the HEAT program from 7 cities to 20 cities • Touted as leading to savings of over $10 billion in the next ten years based on “conservative projections” of the benefits of prevention

28. Predictive Modeling Data analysis tools designed to analyze claims data to prevent payments based on the risk that the claim is likely improper Uses “Innovative risk-scoring technology” to detect improper claims before they are paid Uses a wide range of data to generate each risk score, such as claims data, complaints to the Medicare hot line, and law enforcement information CMS would thoroughly test the technology to ensure it provided a low rate of false positives and did not disrupt legitimate providers

29. HIPAA Cases in the News Two recent, well publicized HIPAA violation cases remind us “don’t forget about the privacy rules” Cignet Health fined $4.3 million for a relatively minor violation because it did not cooperate with the investigation and failed to correct the problem on its own Massachusetts General hospital fined $1 million and forced to implement a 3 year “corrective action plan” for files lost when an employee left them on a subway train

30. FDA Oversight of LDTs The Food and Drug Administration has decided to take up the active oversight and regulation of LDTs They believe they already have the authority because LDTs are considered “medical devices” and they have the authority to regulate all medical devices They have chosen to exercise an “enforcement discretion” authority in the past and not actively regulated LDTs The expansion of new genetic testing, personalized medicine and Direct to Consumer (DTC) genetic tests has convinced the FDA that there are patient safety issues at stake requiring them to regulate LDTs

31. What Is An LDT? • Most people think that when you talk about an LDT you are talking about some kind of complex molecular diagnostic or genetic test • Truth is, almost all clinical laboratories are probably doing a few LDTs • Any time that you use an FDA approved test in any way that is outside of what that test is specifically approved to do, you are performing an LDT • For instance testing urine samples with a test kit approved for serum samples • Some tests have no FDA approved kit

32. Problems Related to FDA Regulation • Clinical labs and device manufacturing companies are different in many ways and those differences have never been addressed by FDA • Medical device manufacturers develop test kits for distribution to many laboratories who then interact with the ordering physician providers • Laboratory developed tests are developed by one laboratory and provided directly to the physicians who order them

33. Problems Related to FDA Regulation • Laboratories are regulated by CLIA and LDT’s are only performed in laboratories categorized as highly complex laboratories under CLIA • Adding FDA regulation without taking into account the regulations labs already meet under CLIA will result in unnecessary duplication • FDA may not have the resources necessary to effectively and efficiently regulate LDT’s • FDA would face a serious learning curve because it lacks a clear understanding of how clinical laboratories work and how LDT’s are performed in a clinical laboratory

34. Legislation for 2011 During the past four congressional sessions, bills concerning genomics, personalized medicine and laboratory developed tests have been introduced They have addressed various aspects of these issues We expect that new bills, or reiterations of old bills, will be introduced in 2011 Congress needs to balance patient and consumer safety issues and rights against innovation and development of advancements in medical testing

35. Potential Legislation for 2011 • Potential reintroduction of a revised version of HR 5440 - “Genomics and Personalized Medicine Act of 2010” • Would create an Office of Personalized Healthcare (OPH) within HHS • Defines roles of FDA and CMS related to responsibilities for oversight of diagnostics • Would address Direct to Consumer testing issues in the marketplace

36. Potential Legislation for 2011 • "Better Evaluation and Treatment Through Essential Regulatory Reform for Patient Care Act” • Developed by Senator Orrin Hatch of Utah during 2010 but never introduced • Would create Center for Advanced Diagnostics Evaluation and Research • Would be responsible for ensuring the safety and efficacy of a new category of tests called "advanced personalized diagnostics," comprising both test kits and laboratory-developed tests

37. OIG Workplan 2011 • Laboratory Test Unbundling by Clinical Laboratories • Medicare Part B Payments for Glycated Hemoglobin A1C Tests • Frequency of tests should not be less than every 3 months • Trends in Laboratory Utilization • What tests are done and difference in ordering by specialty and geography

38. OIG Workplan 2011 • Lab Test Payments: Comparison of Medicare with Other Public Payers • Compares top 10 tests Medicare payments against other payers like the VA and Medicaid programs • Medicare Payments for Claims Deemed Not Reasonable and Necessary • Not necessarily lab specific • Looks for GA and GZ modifiers and compares similar claims for similar services

39. OIG Workplan 2011 • Medicare Billings With Modifier GY • Not necessarily lab specific • Examines use of GY modifiers • Payments for Services Ordered or Referred by Excluded Providers • Variation in Coverage of Services and Medicare Expenditures Due to Local Coverage Determinations • Over 2800 LCDs exist

40. OIG Workplan 2011 • Zone Program Integrity Contractors’ (ZPIC) Identification of Potential Fraud and Abuse • Essentially a review of the effectiveness of these contractors and barriers they encounter in fulfilling their responsibilities • Early Results From Medicaid Integrity Contractors (MIC) • Examines the effectiveness if these contractors

41. EMRs and EHRs Compliance Risks • Likely a high risk area for compliance issues under the Stark and Anti-kickback regulations • Labs are different when it comes to placement of computers and software • Most people do not understand this difference • Lots of confusion about what is and is not allowed and the details of how e-prescribing and EMRs are provided by different kinds of providers

42. Physician Signatures Even though the April 1, 2011 implementation date looms Even though CMS officials have told numerous individuals, associations and groups CMS has not yet published an “official document” rescinding the physician signature requirement for paper laboratory requisitions

43. Drug Screens • Many problems still exist with the coding and billing of drug screens • CMS HCPCS codes G0431 and G0434 descriptions are incorrect or confusing • The QW modifier for waived tests was added to the wrong HCPCS code • This has recently been corrected • A transmittal seemingly wrongly identified CPT code 80100 as not payable under Medicare Part B fee schedule for labs

44. Drug Screens • Best guess for billing these drug screens • Use G0431 for drug screens on instruments where multiple classes of drugs require multiple assays to detect • Use G0434 for drug screens using dipstick and other rapid testing methods where multiple drugs are detected with one procedure • See MedLearn Matters SE1105 • Currently, CPT 80100 is being denied in some jurisdictions leaving providers with no way to bill for drug tests done by chromatography

45. Modifiers • Transmittal R2148CP (Change Request 7228) is titled “Auto Denial of Claim Line(s) Items Submitted With a GZ Modifier” • Instructs “all MACs, CERT, RACs, PSCs and ZPICs shall automatically deny claim line(s) items submitted with a GZ modifier” • Also includes information about -59, -91, GA, GY and GX modifiers

46. New Molecular Diagnostic CPT Coding Effective in the 2012 AMA CPT code book, a new set of codes for molecular diagnostics will be published Changes do not affect microbiology and most cytogenetic assays Analytes/tests that have new codes assigned and are listed in Tiers 1 and 2 MUST be coded using the most specific CPT code available and NOT with ‘stacking codes’ (83890-83914) Most likely, stacking codes will be eliminated by 2013

47. New Molecular Diagnostic CPT Coding • Tests are divided in “tiers” • Tier 1 tests are the most commonly performed tests and each will have a specific CPT code • Tier 2 tests have been assigned to 9 resource level codes similar to the currently existing system for surgical pathology • Any tests not included in tiers 1 or 2 would be coded using the existing stacking codes • Codes include all analytical services required to perform the assay (e.g., cell lysis, nucleic acid stabilization, extraction, digestion, amplification, and detection) • Interpretations may be required for these tests

48. New Molecular Diagnostic CPT Coding • Definitions are provided to ensure all reviewers are interpreting information in the same way • Example: Exon: typically, one of multiple nucleic acid sequences used to encode information for a gene product (polypeptide or protein). Exons are separated from each other by non-protein-coding sequences known as introns. Exons at the respective ends of a gene also contain nucleic acid sequence that does not code for the gene’s protein product. • Very useful for those who are both knowledgeable and those who are not in terms of providing coding guidance

49. New Molecular Diagnostic CPT Coding • It is important to note the following (from the AMA request for feedback) • The information below is NOT final. Code assignment and final wording can be a source of confusion if portrayed as final • The codes and descriptors below are NOT yet available for reporting and are NOT yet recognized in any code set • The code numbers that precede each descriptor below are administrative alphanumeric placeholder designations used by the MPCW to track progress in construction of the code set and are not valid code numbers • The inclusion of an analyte in the CPT code set does not imply any health insurance coverage or reimbursement policy. While these descriptors describe a service, payment policy will determine appropriate payment for these services

50. New Molecular Diagnostic CPT Coding • Tier 1 examples: • BXXX7 BRCA1, BRCA2 (breast cancer 1 and 2) (e.g., hereditary breast and ovarian cancer) gene analysis; full sequence analysis and common duplication/deletion variants in BRCA1 (i.e., exon 13 del 3.835kb, exon 13 dup 6kb, exon 14-20 del 26kb, exon 22 del 510bp, exon 8-9 del 7.1kb) • BXXX8 185delAG, 5385insC, 6174delT variants • BXXX9 uncommon duplication/deletion variants • Tier 1 includes 92 codes including the HLA typing codes