On April 16, 2008, the Louisiana Third Circuit Court of Appeal upheld a trial judge’s application of a 35% minority discount in determining the fair market value of the interest of a partner withdrawing from a limited liability partnership (LLP). It appears that the Supreme Court has been asked to consider this case, but has not yet made a determination of whether to do so. Accordingly, this decision may or may not be final, and although it did not involve a health care entity, it is instructive for health law purposes.
Continue Reading Louisiana Decision on Sale of Minority LLP Interest Absent Liquidation Has Health Care Provider Implications

On December 4, 2007, Phase III of the Stark Law’s regulations became effective. They include some significant substantive changes, one of which is a change to the professional courtesy exception. This change is likely to have a significant effect on many designated health service (“DHS”) providers, as those entities are defined by the Stark Law. DHS providers that have a professional courtesy policy would be well-served to review it and take appropriate action in light of the new regulations.
Continue Reading Professional Courtesy Exception under Stark III: Significant Changes

On November 2, 2007, the Louisiana Court of Appeal for the First Circuit ruled that the Louisiana Medicaid Program may not recoup payments from a health care provider participating in Medicaid based solely on a billing record review when the basis for the alleged overpayment is that the services were not medically necessary. In Doc’s Clinic, APMC v. Louisiana Department of Health and Hospitals, No. 2007 CA 0480 (La.App. 1 Cir. 11/2/07), Doc’s Clinic appealed an Administrative Law Judge’s decision affirming an alleged overpayment of approximately $260,000.00. The Louisiana Department of Health and Hospitals (“DHH”) alleged that Doc’s Clinic had billed for medically unnecessary services, based on a billing record review by a nurse, with some assistance from a physician. DHH originally notified Doc’s Clinic of not only the alleged overpayment amount, but also of DHH’s intention to exclude the provider from the Medicaid Program participation.
Continue Reading Medicaid Recoupment Based on Lack of Medical Necessity Not Permitted If Based on Review of Billing Records Alone

The United States Court of Appeals for the Ninth Circuit recently upheld the health care fraud conviction of a mental health clinic owner in Idaho, ruling that proof of intent to defraud can be made by showing reckless indifference to the truth or falsity of statements in health care cases. The Ninth Circuit Court of Appeals case is entitled United States v. Dearing, No. 06-30606 (9th Cir. 9/25/07). The reckless indifference standard, which has long been a standard for civil liability in cases brought under the Federal Civil False Claims Act, 31 U.S.C. §3729, et seq., was cited as being sufficient to uphold a criminal conviction under 18 U.S.C. §1347, a federal criminal health care fraud statute.
Continue Reading Reckless Disregard Upheld as Standard in Criminal Conviction

The medical necessity of durable medical equipment (“DME”) billed to the Medicare Program may have no relevance to a court’s determination of whether a DME supplier submitted claims based on fraudulent Certificates of Medical Necessity (“CMN”).   The Sixth Circuit Court of Appeal recently upheld a conviction of aiding and abetting Medicare fraud when a DME supplier submitted apparent fraudulent CMNs, even though the DME supplier might have been able to prove the medical necessity of the DME.

In United States v. Davis, Nos. 06-5073/5074, decided June 22, 2007, the Sixth Circuit affirmed a conviction on twelve (12) counts of aiding and abetting Medicare fraud. The convictions of an owner and an employee of the DME supplier stemmed from the supplier’s submitting claims to the Medicare Program for oxygen equipment that had been provided to miners with black lung disease.Continue Reading Medically Necessary DME May Not Save Supplier From Fraud Conviction

In June, 2007, the United State Court of Appeals for the District of Columbia Circuit affirmed the dismissal of a lawsuit brought by a physician association, alleging that the “fair market value safe harbor” under the federal Stark law developed by the Centers for Medicare and Medicaid Services (“CMS”) is invalid because it was implemented without following proper procedure. The court did not rule on the merits of the association’s claim. Instead, the court decided that the association did not have standing to bring the suit because even if the court were to declare the “safe harbor” invalid, the substance of the “safe harbor” would likely still be relied on to demonstrate that physicians who refer Medicare and Medicaid patients to “designated health services” (DHS) providers with whom they have a financial relationship are being paid fair market value by the DHS providers for any contracted services they perform.
Continue Reading D.C. Circuit Upholds Dismissal of Lawsuit Alleging Invalidity of Stark Exception

The Centers for Medicare and Medicaid Services (”CMS”) recently issued a letter to State Survey Directors, who conduct surveys to ensure that health care providers (such as hospitals) are meeting the Medicare conditions of participation, to advise them that a hospital may not condition its acceptance of an EMTALA transfer on the sending hospital’s using a particular transport service. In Letter No. S&C-07-20, dated April 27, 2007, CMS indicated that the Emergency Medical Treatment and Active Labor Act (“EMTALA”) Technical Advisory Group has received testimony that in some instances in which an EMTALA transfer was appropriate, the receiving hospital conditioned its acceptance of the patient on the sending hospital’s using a medical transport service owned by the receiving hospital.
Continue Reading CMS Issues EMTALA Guidance

On November 3, 2006, the United States Court of Appeals for the Eleventh Circuit, in the case of Gulfcoast Medical Supply v. Secretary, Department of Health and Human Services, issued an opinion that a certificate of medical necessity (“CMN”) does not unequivocally establish that durable medical equipment (“DME”) meets the reimbursement test of “reasonable and necessary”, as required by Medicare Part B. In the first case of its kind in any federal court of appeals, the Eleventh Circuit held that the Secretary of the Department of Health and Human Services (“DHHS”) may require a DME supplier to submit additional evidence beyond the CMN in order to establish the medical necessity of the item for reimbursement.
Continue Reading Certificate of Medical Necessity (CMN) May Not Be Enough To Prove Item “Reasonable and Necessary”