June 22, 2016

The New Supreme Court Decision – and Why it’s a Big Deal

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A case related to a failed Medicare and Medicaid Advantage plan was decided 8-0 against the plan by the Supreme Court last week. The case arose when Massachusetts Medicaid discovered that some of the mental health counselors billing the plan were not licensed to provide the services they were providing.

It became a FCA issue because the plan paid the claims, then received reimbursement from Massachusetts Medicaid. The government argued that billed services were covered under the FCA not because the services themselves were necessarily deficient, but because the providers of the services were unqualified to perform them. 

In the majority opinion, Justice Clarence Thomas wrote:

"A defendant can have 'actual knowledge' that a condi­tion is material even if the government does not expressly call it a condition of payment. What matters is not the label that the gov­ernment attaches to a requirement, but whether the defendant know­ingly violated a requirement that the defendant knows is material to the government's payment decision.”

I am going to reword this so we can apply it to other situations and break it into parts:  

"A defendant can have 'actual knowledge' that a condi­tion is material even if the government does not expressly call it a condition of payment"

Let’s use some examples to illustrate how this works. Let’s say you run a skilled nursing home. You know you are supposed to have a compliance plan as part of your conditions of participation. You keep putting off creating one. You ignore it. What difference does it make?  

Then you get audited by a Recovery Audit Contractor, a RAC. The RAC asks for a copy of your compliance plan and you answer honestly that you do not have one. 

In light of this decision, because you do not have a compliance plan and you therefore are in violation of the conditions of participation of Medicare, the RAC could argue that all claims submitted while you were in non-compliance violate the FCA.   

"What matters is not the label that the gov­ernment attaches to a requirement, but whether the defendant know­ingly violated a requirement that the defendant knows is material to the government's payment decision.” 

In the example above, the question would be: If the government knew that you willingly refused to create a compliance plan, would they have continued to pay your claims? It is not a payment condition. It has nothing to do with the claims you submitted or the coding, but under Justice Thomas’s view, Medicare could consider this material and therefore result in the finding of an  FCA violation.

Why do I say you may or may not have a problem? Let’s look at another part of the decision:

"A misrepresentation cannot be deemed material merely because the government designates compliance with a particular re­quirement as a condition of payment," Thomas wrote. "Materiality also cannot be found where noncompliance is minor or insubstantial.”

So, in looking at the above facts, does the lack of a compliance plan constitute a material issue? What if, in reviewing claims, the RAC finds errors and argues that if a compliance plan had been in place, the errors would have been found prior to submission of the claims? 

I am going to give some examples that may or may not violate the FCA under this interpretation:

  • You run a physician practice. Your physician assistant does not yet have his license to practice in your state, but you are billing patients.
  • One of your staff members has been convicted of a felony not related to healthcare. You find out and you know that he or she would lose their license if the government knew. You continue billing for their services anyway.
  • Your facility has situations that would result in serious health code penalties if the government found out. You wait until you have funds to make the needed repairs and continue providing and billing for services in the meantime. 

The million-dollar question in all these cases is this: would the government have considered the issues material enough in nature that they would have paid for services, had they known? 

It also raises the question: can you reduce or eliminate your exposure by telling the government of the issue before submitting bills to them?

What Do You Do Now?

First, as always, I recommend having a compliance plan in place. Your compliance plan should include looking at billing practices for potential issues. Your plan should also include background checks of key employees. When in doubt, contact a competent healthcare attorney. Finally, stay informed of healthcare compliance issues on the Internet through sites like RACmonitor.

 

About the Author 

Timothy Powell is a nationally recognized expert on regulatory matters including the False Claims Act, Zone Program Integrity Contractor audits and OIG compliance. He is a member of the RACmonitor editorial board. 

Contact the Author

tpowell@tpowellcpa.com 

Comment on this Article

editor@racmonitor.com

Timothy Powell, CPA CHCP

Timothy Powell is a nationally recognized expert on regulatory matters, including the False Claims Act, Zone Program Integrity Contractor (ZPIC) audits, and U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) compliance. He is a member of the RACmonitor editorial board and a national correspondent for Monitor Mondays.

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