Transcript Overview of Final HIPAA Security Regulations

Reimbursement, Prompt Pay, and Beyond
A Health Law Update
By Jennifer Rangel, Partner
Locke Liddell & Sapp LLP
DISCLAIMER: This material should not be considered as legal advice
or legal opinion, which may often turn on specific facts. The contents
are for informational purposes only. Readers should seek specific
legal advice before acting with regard to the subjects mentioned here.
Prompt Pay: Background
 1997: Legislation passed to further revise prompt-
payment requirements and establish requirements for
submission of a clean claim, but the bill was subsequently
vetoed.
 1999: Legislature passed “prompt pay” legislation (HB
610) containing interest penalties, administrative finds,
attorneys’ fees.
– Still allowed plans to modify the penalties by contract
– Regulations failed to correct payment problems
– Applies to services performed after August 1, 2000
 2003: Senate Bill 418: Applies to contracts that were
renewed and services provided after October 5, 2003
• August 16, 2003: Emergency rules
• October 5, 2005: Final rules
Prompt Pay: Background
Was your HMO / PPO contact entered
or last renewed on or after
August 16, 2003?
NO
Services provided on or after
August 1, 2000 are subject to
HB 610 and related rules.
YES
Services are subject to SB 418
and the Emergency rules
until contract renews on or
after Oct. 5, 2003.
Once the contract renews
on or after Oct. 5, 2003
services are subject to
SB 418 and the final rules.
Prompt Pay: Applicability
 Applicable to: fully-insured HMO and PPO
products licensed and sold in Texas.
 Not applicable to: Medicare, Medicaid,
workers’ compensation, TriCare, self-funded
employer ERISA plans, state and federal
employee plans, indemnity policies, and outof-state Blue Cross plans filed to Blue Cross
and Blue shield of Texas.
Prompt Pay: “Clean Claims”
 Defined in TEX. INS. CODE § 1301.131 and
28 TAC §§ 21.2802-2803
 Clean claims must include all required data
elements such as specific information about
the patient (name, address, gender, date of
birth, plan ID number), subscriber, and
insured’s or enrollee’s policy.
Prompt Pay: Submission Procedures
 A clean claim must be submitted to an insurer not later
than the 95th day after:
– Date health care services for the claim are provided (physician or
provider)
– Date of discharge (institutional provider); or
– Date physician or provider receives notice of payment or denial
from the primary payor (coordination of benefits)
 The deadline may be extended by contract between
provider and insurer
 A physician or provider that fails to submit a claim within
the designated timeframe forfeits the right to payment
unless delay is a result of a catastrophic event.
Prompt Pay:
Processing Clean Claims
 After receiving a clean claim, the insurer must
determine whether the claim is payable.
 The insurer must pay the entire claim, a portion of
the claim (if not entirely payable), or notify the
provider that a claim will not be paid within:
– 45 days after receiving a claim in non-electronic format
– 30 days after receiving a claim received in electronic format
– 21 days for affirmatively adjudicated pharmacy claims that
are electronically submitted.
Prompt Pay: Auditing Procedures
 When an insurer decides to audit, must pay 100% of the
contract rate within the processing deadlines but indicate
that payment is subject to the audit.
 Insurer may notify provider that the claim will be forfeited
if information requested in connection with the audit is not
supplied within 45 days and. If the provider does not
provide the information, the insurer may recover the
amount of the claim.
 An audit must be completed on or before 180 days after
the date insurer receives the clean claim.
 Provider has right to appeal.
Prompt Pay: Requests for
Additional Information
 An insurer may obtain additional information from the provider (or
other third party) to determine payment.
 Request must be made within 30 days after insurer receives a clean
claim.
 Information must be relevant and necessary for clarification of the
claim.
 Insurer must determine whether the claim is payable within 15 days
from receiving additional information (or the latest date allowable).
 Requests for additional information limited to one-per-claim.
 Claims for which requests are made to persons other than the
preferred provider cannot be delayed due to the third-party’s failure to
reply.
Prompt Pay: Overpayment
 Insurer may recover overpayment to a
physician or provider if:
– Insurer provides written notice of overpayment
within 180 days after physician or provider
received payment; and
– Physician or provider does not make
arrangement for repayment on or before the
45th day after receiving notice
– Physician or provider may appeal request for
recovery of an overpayment.
Prompt Pay: Penalties for Late
Payments
 Texas prompt pay laws say insurance companies
must pay providers a penalty when they are late in
paying a clean claim, based on the number of
days the payment is late and the amount of the
claim.
 FORMULA: Graduated Late Payment Penalty
[Billed Charges]
─ [Contracted Rate]
×
[Percentage for the applicable statutory claim payment period]
AMOUNT OF PENALTY PAYMENT
Prompt Pay: Penalties for
Underpayments

Penalties are also imposed if the insurer pays on time but underpays
the claim. If the claim is not fully paid by the statutory deadline, the
insurer must pay a penalty based on the number of days the payment
is late and the underpaid amount of the claim.

FORMULA
[Amount underpaid on the contracted rate]
÷ [Amount of the contracted rate]
× [the billed charges]
the “underpaid amount”
the “underpaid amount”
× Percentage for the applicable statutory claim payment period
AMOUNT OF PENALTY PAYMENT
Prompt Pay:
“Percentage for the applicable statutory claim
payment period”
 1 – 45 days late: 50%
– $100,000 maximum penalty
 46 – 90 days late: 100%
– $200,000 maximum penalty
 91 or more days late: 100% plus 18%
interest
Prompt Pay:
Exceptions to Penalties
 Catastrophic event that substantially
interferes with insurer’s normal business
operations
 Notice of underpayment properly sent and
paid within statutory period
Prompt Pay:
Administrative Penalties
 Less than 98% compliance with prompt
payment requirements may result in fines
of $1000 per unpaid claim per day.
Prompt Pay: Verification
 Defined:
A guarantee by an HMO or preferred provider carrier
that the HMO or preferred provider carrier will pay for
proposed medical care or health care services if the
services are rendered within the required timeframe to the
patient for whom the services are proposed. The term
includes pre-certification, certification, re-certification
and any other term that would be a reliable representation
by an HMO or preferred provider carrier to a physician
or provider if the request for the pre-certification,
certification, re-certification, or representation includes
the requirements of § 19.1724(d) of this title (relating to
Verification). 28 TAC § 19.1703.
Prompt Pay: Verification
 For a ‘verification for guarantee of payment,’ certain required
elements about the patient and the proposed procedures to be
performed must be given to the carrier.
 Insurer must inform provider—without delay—whether a proposed
service will be paid.
 Verification is effective for 30 day or longer if specified by the insurer.
 If an HMO or preferred provider carrier does not issue a verification
for proposed medical care or health care services, this “declination” is
not necessarily a determination that a claim resulting from the
proposed services will not ultimately be paid.
Prompt Pay: Verification
 Insurer must respond to verification “without
delay,” but within the following timeframes upon
receipt of request (during normal business hours):
– 1 hour: Life-threatening condition or post-stabilization
– 24 hours: Concurrent hospitalization
– 5 calendar days: All other requests
 All carriers subject to SB418 must make a good
faith effort to entertain requests for verification
rather than adopting a policy of no verifications.
Carrier may decline by stating the specific reason
for the declination. Declination must be specific
to the request.
Prompt Pay: Preauthorization
 Defined: A determination by an HMO preferred
provider carrier that medical care or health care services
proposed to be provided to an enrollee are medically
necessary and appropriate.
 Once service is preauthorized, carrier may not
deny nor reduce payment based on medical
necessity or appropriateness of care.
 Provider can request preauthorization only where
carrier has determined that certain services
require preauthorization. Carrier does not have to
issue a preauthorization for proposed services.
Prompt Pay: ERISA
 ERISA governs self-funded plans.
 ERISA Prompt Pay Obligation: Applies to
group health plans.
– Group Health Plans: employee welfare benefit
plan to the extent that the plan provides medical
care.
 Enforced by the Department of Labor.
Prompt Pay: ERISA
 ERISA requires payment of claims within a
“reasonable time,” but no later than 30 days after
receipt of the claim.
– One 15-day extension is permitted if the plan provides
notice of the delay to the claimant.
 Failure to Comply:
– Claimant can pursue remedies under ERISA, including
filing suit against the plan for denial of plan benefits
and to enforce rights under the plan.
– Claimant is deemed to have exhausted the
administrative process.
Prompt Pay: ERISA & Texas Law
 ERISA does not supersede state law that
regulates insurance.
 Health plan identification cards indicate if
the health plan is fully-insured and
regulated by the TDI — and thus subject to
state prompt pay laws.
– I.D. Card must say “DOI” or “TDI”
Medicare Reimbursement
Update
Medicare Reimbursement:
Legislative History
 The Balanced Budget Act of 1997: Reduced the
payments that providers received from Medicare.
 The Balanced Budget Refinement Act of 1999:
Reaction to the Balanced Budget Act of 1997.
 Medicare Modernization Act of 2003:
– Medicare Prescription Drug Benefit
– Medicare Advantage
– Part A (ex. Charges for Inpatient Hospital Services, New
Medical Technologies, Hospice Consultation)
– Part B (ex. Physicians’ Services, Preventative Services)
– Medicaid DSH Payments
 Deficit Reduction Act of 2005
Medicare Reimbursement:
Deficit Reduction Act of 2005 Overview
 President Bush signed the Deficit Reduction Act
(DRA) of 2005, also known as the budget
reconciliation act, into law on February 8, 2006.
 DRA is expected to reduce Medicare spending by
$6.4 billion and Medicaid spending by $4.7 billion
from 2006 to 2010.
 The majority of the savings, regarding Medicare
and Medicaid, will be achieved from freezing or
reducing payments to Medicare providers.
Medicare Reimbursement
Hospital Quality Improvement (DRA, Sec. 5001)
 Requires hospitals to report additional quality measures to
receive the full market basket increase to their payment
rates.
 Penalties for not reporting quality measures: Beginning
FY 2007—Increase the penalty from the market basked
update less 0.4% to the market basket less 2%.
 Beginning 2008—Reductions in Medicare payments for
services provided as a result of certain hospital-acquired
infections.
 By 2009—HHS must develop and implement the Value-
Based Purchasing Plan for inpatient prospective payment
system (PPS) services.
Medicare Reimbursement
Hospital Quality Improvement (CMS Final Rules)
 August 1, 2006: CMS issued the final
hospital inpatient prospective payment
system (IPPS) rule for FY 2007.
 The Final Rule addressed four issues related
to quality:
–
–
–
–
Transparency of health care information;
Value-based purchasing;
Hospital quality data; and
Promoting effective use of health information
technology.
Medicare Reimbursement
Medicare-Dependent Hospital Program (DRA, Sec. 5003)
 Extends the MDH program, which was created to provide
financial protections to certain rural hospitals with less
than 100 beds that have a greater than 60% share of
Medicare patients, through October 1, 2011.
 Allows hospitals the option to use 2002 base year costs, in
addition to base year costs from 1982 to 1987.
 Improves the blended payment rate by raising it from 50%
to 75% of the difference between prospective payment
system (PPS) payments and cost-based payments.
 Removes the 12% disproportionate share hospital (DSH)
payment cap for qualifying hospitals.
Medicare Reimbursement
IRF Classification Criteria
(DRA, Sec. 5005)
 DRA delays the phase-in of the "75 percent rule."
 Currently, a facility must show that at least 60% of
the admitted patients meet one or more of the 13
specified conditions in order to quality for
inpatient rehabilitation facility (IRF) status.
 Changes the transition period for the compliance
threshold (as established in the 2004) as follows:
– At 60% from July 1, 2006 and before July 1, 2007
– At 65% from July 1, 2007 and before July 1, 2008
– At 75% on July 1, 2008 and thereafter
Medicare Reimbursement
Rental of Oxygen Equipment (DRA, Sec. 5101)
 Limits Medicare payments for rental of
oxygen equipment to 36 months. Requires
the suppler to transfer title to the equipment
after the 36th month.
 Limits Medicare payments for maintenance
and servicing to reasonable and necessary
services
 Effective January 1, 2006
Medicare Reimbursement
Rental of Oxygen Equipment (CMS Proposed Rules)
 Reduces out-of-pocket costs for beneficiaries who pay a
20% coinsurance on this equipment.
 Provides for payment for up to 36 months of continuous
rental of oxygen equipment. After 36 months of rental
payments, title transferred to the beneficiary.
 Medicare pays for reasonable and necessary maintenance
and servicing.
 Proposes separate payment classes for: (1) new
technologies that eliminate the need for refilling and
delivery of oxygen contents; (2) delivery of portable
oxygen contents; and (3) delivery of stationary oxygen
contents.
 Additional supplier requirements for safeguarding
beneficiaries.
Medicare Reimbursement
Capped Rentals for DME
(DRA, 5101)
 Dates of service (DOS) on or after January
1, 2006, limits payment for capped rental
DME to 13 months.
 Sets payments for capped rental times at
10% of the purchase price for each of the
first three months and at 7.5% for the
remaining months.
 After 13 months, title for the equipment
transferred to the beneficiary.
Medicare Reimbursement
Capped Rentals for DME
(CMS Proposed Rule)
 Applies to capped rental items furnished beginning on or
after January 1, 2006.
 Transfers title for capped rental equipment to the
beneficiary after 13 months of continuous rental payments.
 Beneficiary continues to pay coinsurance of 20% of rental
payments until the transfer of title.
 Medicare continues monthly payments for oxygen contents
for beneficiary-owned equipment.
 Medicare pays for reasonable and necessary maintenance
and servicing
 “Capped Rental Items,”: hospital beds, nebulizers and
powered wheelchairs
Medicare Reimbursement
Imaging Reimbursement Cuts
(DRA, 5102)
 Caps the technical component of payments for
imaging services provided in a physician’s office
and reduces the technical component for second
and subsequent imaging procedures performed on
contiguous body parts.
 Under DRA, these reductions shall be phased in
during 2006 (25%) and 2007 (50%)
Medicare Reimbursement
Imaging Reimbursement Cuts
(CMS Proposed Rules)
 CMS is proposing to maintain the multiple procedure
reduction at its current 25% level rather than increasing the
reduction to 50% next year based on information received
from the American College of Radiology demonstrating
that a 50% reduction in multiple procedure technical
component payments was not justified.
 Proposed Legislation: Access to Medicare Imaging Act:
(HR 5704 and S. 3795) (introduced June 28, 2006 /
referred to House subcommittee July 17, 2006): Calls for
a two-year moratorium on Medicare imaging
reimbursement cuts in the DRA pending a Government
Accountability Office study.
Medicare Reimbursement
Imaging Payment Caps
(DRA, 5102)
 Effective January 1, 2007
 Imaging and computer-assisted imaging services
subject to payment caps.
– Includes: X-ray, ultrasound, nuclear medicine, magnetic
resonance imaging, computed tomography, and
fluoroscopy
– Excludes: diagnostic and screening mammography
 Payment for the technical component of these
services will be limited to the amount that would
be paid for them under Medicare’s outpatient
hospital prospective payment system (OPPS).
Medicare Reimbursement
Imaging Payment Caps
(Proposed Rules)
 Imaging services furnished on or after January 1, 2007.
 Caps the MPFS payment amount for certain imaging
services by the CY 2007 OPPS payment amount. Applies
geographic adjustment.
 Cap excludes:
– Nuclear medicine services that were either non-imaging diagnostic
or treatment services;
– Diagnostic and screening mammography;
– Radiation oncology services that were not imaging or computerassisted imaging service; and
– Any CPT with fluoroscopy, ultrasound, or another imaging
modality.
 If subject to multiple imaging reduction policy and the
outpatient hospital cap, first apply the multiple imaging
adjustment and then apply the outpatient cap.
Medicare Reimbursement
ASC Payments
(DRA, 5103)
 Effective January 1, 2007
 Medicare payment for ASC services will be
capped at the amount that would be paid for
these services under Medicare’s hospital
outpatient prospective payment system
(under the HOPD system).
Medicare Reimbursement
ASC Payments
(Proposed Rule)
 ASC payments linked to rates paid under HOPD, with
adjustments.
 Pay a blended amount equal to 50% of the rate under the
existing payment system and 50% of the rate under the new
system in 2008. Starting in 2009, payment rates would be tied
entirely to the new methodology. Beginning in 2010, payment
rates will be updated each year by the CPI-U. Under the fiveyear freeze enacted in 2003, ASCs receive no updates in 2008 or
2009.
 For the 500 or so lower intensity services added to the ASC list,
CMS is proposing to cap facility payments at the practice
expense reimbursement received by physicians in their offices.
 2007: Add 14 procedures to the list of surgeries for which
Medicare would make a facility payment to ASCs
 2008: More than 750 additional procedures added. Most are
lower intensity procedures typically performed in offices and
payment rates are relatively low.
Medicare Reimbursement
Payment for Physician Services
(DRA, 5104 / Proposed Rules)
 DRA: freeze Medicare physician payments at 2005 levels.
 Proposed Rules: Replace the current sustainable growth
rate formula (SGR), which requires the cut, with new
methodology.
 During the last several years, Congress passed stop-gap measures
to pay doctors for Medicare services.
 Under SRG, Medicare payment rates to physicians would fall 5.1%
in 2007.
 CMS also proposing to increase MPFS rates for physicians
who spend more time with their patients
– Proposal focuses on: (1) a comprehensive review of physician
work relative value units (RVUs); and (2) change in methodology
for calculating practice expenses.
– Expect final rule in early November.
– Changes will apply to payments for services furnished to Medicare
beneficiaries beginning with 2007.
Medicare Reimbursement
Therapy Caps
(DRA, 5107)
 Since 1999, Congress has enacted a
moratorium on implementation of the
therapy caps twice.
 The therapy cap exceptions process is
available only for services provided during
calendar year 2006.
Medicare Reimbursement
Therapy Caps: Exceptions Process
 Exceptions Process:
– Effective Date, March 13, 2006
– Retroactive to January 1, 2006
 Automatic Exception:
– Certain diagnoses, conditions, or complexities are
allowed without a written request.
– Clinician attestation of compliance justifies exception.
– CMS expects most will qualify for automatic
exceptions.
 Manual Exception:
– Must be submitted to carrier/fiscal intermediary for
approval for exception.
HIPAA Update
Who Is a “Covered Entity”?
 HIPAA covers health plans,
health care clearinghouses,
and health care providers
who conduct certain
financial and administrative
transactions (e.g., electronic
billing and funds transfers)
electronically
Not Covered by HIPAA
 Employers - unless they maintain and act on
behalf of employee health benefits plans many employers have self-insured health
plans for employees (or large selfretentions) and are heavily involved in
administering the Plans
Penalties for Non Compliance
 $100 per violation
 $25,000 of an identical requirement or
prohibition during one year
 $50,000 penalty for wrongful disclosure
 $100,000 penalty or 5 year imprisonment or
both for wrongful disclosure committed under
false pretenses
 $250,000 or 10 years imprisonment or both for
offense committed with intent to sell or
transfer information for commercial advantage
Final Enforcement Rule
 Effective as of March 16, 2006
 Details the investigation, hearing, and
appeals process
 Describes basis for liability and determining
penalties.
Enforcement To Date
 As of July 2006, OCR has received and initiated
reviews of over 21,438 complaints, and has closed
75% of those cases.
 OCR has made 337 referrals to the DOJ
 Many complaints have been resolved through
voluntary compliance or were found to be invalid
or OCR lacked jurisdiction over the matter (i.e.,
not a HIPAA Privacy matter)
 No CMPs assessed to date
Most Frequent Complaints
 Impermissible use or disclosure of an individual’s
PHI
 Lack of adequate safeguards to protect PHI
 Refusal or failure to provide the individual with
 access to or a copy of his or her records
 Disclosure of more information than is minimally
necessary
 Failure to have the individual’s valid authorization
for a disclosure that requires one
What Information is Covered and
Protected under HIPAA?
 Protected Health Information
(PHI)
All medical records and other
individually identifiable health
information held or disclosed by a
Covered Entity in any form,
whether communicated
electronically, on paper, or orally
HIPAA Privacy - Simply Stated:
 You cannot use and disclose PHI without
Authorization except for:
– “TPOs”
• Treatment
• Payment
• Operations -- “Health care Operations”
– Or if an Exception is met
Many Businesses that are not health
care providers may be required to
comply with HIPAA under the
“Business Associates” Rule
Who is a “Business Associate?”
 “Business Associate means … a person to
whom the covered entity discloses protected
health information so that the person can
carry out, assist with the performance of, or
perform on behalf of, a function or activity
for the covered entity … [Business
Associates] include lawyers, auditors,
consultants, third party administrators …
billing firms …”
Confidentiality Agreements with
“Business Associates”
 Where data or Protected Health Information
is transmitted between Covered Entities and
others:
– Business Associate Agreements must be entered
into
– Business Associate must maintain same level of
privacy as Covered Entities
– Agreements must identify specific allowed uses
and disclosures of information
Business Associate Agreements
 BA Agreement must
– Establish permitted uses and disclosures of PHI
– Provide that the BA will not use or further
disclose information except as specified
– Use appropriate safeguards
– Report to Covered Entity any unauthorized use
or disclosure
– Ensure that any agents or subcontractors agree
to the same conditions
Business Associate Agreements
 BA Agreement Must
– Provide that, at termination of the Contract, if
feasible, return or destroy all PHI received from
or created by BA for Covered Entity, and keep
no copies
– If return or destruction is not feasible, extend
protection to the information as if BA
agreement were in place
BA Agreement Issues
 Retention after termination of work/project
 Accounting process for disclosures –
written or electronic accounting “log”
Business Associates Under the
HIPAA Security Rules
 Standard – Must receive satisfactory assurances
that the BA will appropriate safeguard EPHI
received from the CE
 Required Implementation Spec:
– Written BA agreement (meets requirements under the
Privacy Rule and require BA to implement reasonable
and appropriate administrative, physical and technical
safeguards)
 Organization Requirements
– CE Must cure known breach, terminate contract, or
report to Secretary
Compliance Update
OIG FY 2007 Work Plan
 http://oig.hhs.gov/publications/workplan.html
 Inpatient Rehab Facility classification criteria
– Did facilities bill for services in compliance with
Medicare and did admissions to rehab facilities meet
the regulatory requirements?
 LTACs –
– Review of appropriateness of early discharges to home
and interrupted stays
– Review extent to which admits from a sole acute care
hospital (are they really a unit)
– Compliance with average length of stay requirements
Additional OIG Work Plan Matters
 Home health outlier payments
 Home health therapy services
– Review appropriateness of services and whether
medically necessary
 Pathology services
– Review of appropriateness and billings for services
performed in a physician’s office and the relationship
with outside pathology companies
 Evaluation of Incident to services to determine if
medically necessary and appropriate
documentation
CIAs
 Generally have a 5 year term
 Require compliance policies and a
compliance contact/officer
 Require contract with an approved IRO to
conduct audits
 Some room to scale back if entity has an
effective compliance program in place
Compliance Programs
 As part of the DRA, effective January 1,
2007.
 If receive or make Medicaid payments of
$5M or more, then must have a compliance
program in place.
 Must have policies discussing the False
Claims Act and Qui Tam Suits.
THE END………..
DISCLAIMER: This material should not be considered as legal advice
or legal opinion, which may often turn on specific facts. The contents
are for informational purposes only. Readers should seek specific
legal advice before acting with regard to the subjects mentioned here.