Life Science Compliance Update

February 12, 2016

CMS Issues Final 60 Day Payment Rule

The Sixty Day Rule

The Centers for Medicare and Medicaid Services (CMS) has finally issued its final rule related to the reporting and refunding of Medicare Part A and Part B overpayments, also known as the "60 Day Rule." The Final Rule requires healthcare providers to repay an overpayment and to notify the federal government, the state, and any "intermediary, carrier or contractor to whom the overpayment was returned in writing of the reason for the overpayment," within sixty days of first identifying the overpayment. Providers who fail to heed the sixty day reporting and return window can face potential civil monetary penalties and incur False Claims Act liability.

The 60 Day Rule will go into effect 30 days after its publication in the Federal Register, which is likely to be February 12, 2016. As a reminder, Medicare providers and suppliers have had an obligation to report and refund identified Medicare overpayments since the Affordable Care Act's enactment in 2010.


This new rule simply clarifies that an overpayment is considered "identified" when a provider or supplier "has, or should have, through the exercise of reasonable diligence, determined that the person has received an overpayment and quantified the amount of the overpayment." CMS believes that this clarification of the standard should allow for consistency in the application of the 60 Day Rule.

Standard for Knowledge

The standard that CMS is using for knowledge is not "actual knowledge," but instead is when the provider would have identified the overpayment, had it exercised a reasonable level of diligence. This standard is known as the "reasonable diligence" standard, and comes into play, as noted above, once a person has "identified an overpayment when the person has or should have, through the exercise of reasonable diligence, determined both that the person has received an overpayment and quantified the amount of the overpayment."

Some physicians are concerned that when they get a hotline complaint about billing Medicare incorrectly, that hotline complaint is what triggers the countdown, and from that time forward, they only have sixty days to find it and return the money. Tony Maida, JD, Partner in the Health Industry Advisory Group at McDermott Will & Emery, advised CMS on drafting the proposed 60 Day Rule while he was at the Department of Health and Human Services Office of Inspector General, says that is not true. "The clock doesn't start to tick as soon as the call comes in, as long as the physician exercises reasonable diligence in looking into it." Maida continues, stating, "there's an obligation to decide if that call gives you what CMS calls 'credible information' of a potential overpayment and if it does...then the provider should exercise reasonable diligence to look into it and determine whether in fact they have received an overpayment and how much that overpayment is." It isn't until that process is completed that the sixty days to report and return starts to run. However, if you receive a hotline call and fail to investigate it, then CMS may find that you "failed to exercise reasonable diligence and you may be violating" the 60 Day Rule.

How Must Refund Be Made

The Final Rule specifies, "providers and suppliers must use an applicable claims adjustment, credit balance, self-reported refund, or another appropriate process to satisfy the obligation to report and return overpayments." The reason for the government specifying the payment and delivery of the overpayment could possibly be to prevent providers from mailing in the repayment in the hopes that the agency does not notice a potentially more serious bill overpayment.

Look-Back Provision

The 60 Day Rule also provides for a look-back period of six years, instead of the ten years CMS had originally put in its 2012 proposed rulemaking. This means that CMS can review six years of claims for any additional overpayments on top of the original overpayment identified by the provider or supplier.

Tony Maida believes that "reducing the lookback period is a positive move." While a six year period is almost unanimously preferred, some groups are displeased that CMS didn't shorten the lookback period even further. Wanda Filer, MD, MBA, President of the American Academy of Family Physicians (AAFP), for example, expressed her dissatisfaction by saying, "Six years is better than 10 years, but not as good as 3 years which is what we would prefer. We will continue to encourage CMS – maybe once they've got the learning curve established on 6 years, maybe 3 years may become more palatable."

If you are interested, Mintz Levin has provided a "Comparison of the Proposed Rule to the Final Rule Medicare Program; Reporting and Returning of Overpayments," to aid in your review of the changes between the Final Rule and the Proposed Rule.

February 11, 2016

Bloomberg Health Law Reporter Outlook 2016 – Issues Driving the Healthcare System

Now that the year has gotten off to a quick start with all things healthcare-related, we would like to take a moment to acknowledge the Bloomberg Health Reporter's 2016 Outlook. Each year, Bloomberg BNA publishes a brief outlook on the issues they think will be front and center in the upcoming year. Because this is an election year we believe that uncertainty will have significant impact on the healthcare economy similar to 2008.

This year, according to Bloomberg BNA, the top ten issues that will commandeer the healthcare arena are:

  1. Compliance challenges of responding to unprecedented hospital/physician alignment pressures make this the top issue for the second year in a row.
  2. Fraud and abuse remains a huge practice focus for nearly every health lawyer.
  3. Concerns over implementation costs and data breaches make health information and technology a top issue.
  4. Medicare payment and audit regimes continue to drive health system change.
  5. Realignment pressures and focused enforcement scrutiny keep antitrust law compliance key.
  6. Overall provider compliance and individual liability risks demand substantial attention to corporate governance.
  7. Healthcare quality remains the guiding principal of health system reform.
  8. Regulatory uncertainties facing commercial payers and new provider payment methods elevate health plan regulation concerns.
  9. The growing field of telemedicine provides new challenges for providers and regulators alike.
  10. Medicaid program expansion and states' adoption of managed care to meet recipient needs continue.

Hospital/Physician Alignment

Hospital and physician alignment remains a top concern for 2016 with the Affordable Care Act and its goals of improving access to high-quality healthcare at low costs. Such a lofty goal requires collaboration of providers and will likely lead to more mergers, affiliations, and cooperative endeavors.

Fraud and Abuse

As stated by Gary W. Herschman, an attorney with Epstein Becker & Green PC in Newark, NJ, "there are so many ambiguities in the Stark law and Anti-Kickback Statute (AKS) that even health-care facilities and companies that think they are compliant may be targets for major compliance and False Claims Act (FCA) exposures." Such concerns and ambiguities are partly driven by changes in healthcare delivery patterns and changing provider relationships.

Health Information and Technology

Health IT issues are becoming more prevalent, and are posing some of the most complex and challenging hurdles in the healthcare arena. The cost and complexity of health information technology is a major concern, as is the slow rate of adoption and unavoidable risk of data breaches.

Interoperability and determining how systems can share data in a meaningful way takes up a tremendous amount of time and resources. A failure to achieve interoperability "raises the risk of losing meaningful use incentive payments, Stark law exceptions, and AKS safe-harbors." While there has been slight progress toward interoperability, it is likely that in order for progress to continue to be made and full interoperability achieved, the government may have to keep the pressure on, including incentives.

Data breaches is another large area for concern, especially as more and more medical records are becoming digitized. A cybersecurity law recently passed by the Senate carves out the healthcare industry for receiving special attention in the data breach arena.


Given that Medicare is the main revenue source of many healthcare providers, it will remain an important topic in the healthcare world. Advisory board members believe that this year, we will see an increase in questions revolving around the number of baby boomers that are becoming Medicare-eligible and the continued solvency of the program. It is likely that this year, there will be an increased focus by healthcare providers on meeting the requirements of the new payment system announced in January 2015, where by the end of 2016, 30% of Medicare reimbursements will be linked to the quality and value metrics in the Merit-Based Incentive Payment System (MIPS).

This year we will also see the grace period for the newly implemented ICD-10 expire on October 1, 2016. Healthcare providers will need to continue to work through any growing pains and changes associated with this more detailed coding system, so they are in compliance come October 1.


John Washlick, of Buchanan Ingersoll & Rooney, Philadelphia, believes that "as a result of the surge of M&A and other strategic affiliations, antitrust is a serious consideration" when determining whether a transaction can take place at all. The Federal Trade Commission (FTC) and state agencies have been keeping an eye on the recent hospital consolidation trend and will challenge any merger or acquisition they feel is reducing patient options.

It isn't just hospital and healthcare mergers to be watchful of, however, pending insurance company mergers should also be on the radar. Hospitals and physicians groups have expressed concerns about the effects of such mergers on payer consolidation, and the DOJ has been weighing the effect of those mergers on competition and consumers. It has yet to be seen if the FTC will put insurance company mergers through the same ringer as they do hospital and healthcare mergers.

Corporate Governance

While governance has always been an important issue, it is beginning to come to the forefront. The government's more aggressive ways of enforcing fraud and abuse laws, combined with a perception that directors should be doing more to ensure compliance to avoid damages and settlement costs, are leading to an increased concern and focus on governance.

It seems as though the non-profit world is starting to shift to using similar practices as the for-profit world, with emphasis being placed on "pursuing competency-based board selection; more precise executive succession practices; broader attention to director refreshment mechanisms such as tenure, term and age limitations and fitness-to-serve policies; assuring an equal distribution of labor across board committees; assuring a sufficient number of directors to address the increasing demands of the enterprise; and greater engagement between the board and the executive leadership team."

There is continuing to be an increased emphasis on individual accountability, and officers and directors of healthcare companies need to be aware of that and work to protect themselves against any fines that could be levied against them. This helps to increase the attention paid to what is going on within the company and forces executives to understand all facets of their company or organization.

Additionally, it is likely that, according to Gerry Griffith, there will be continuing attention paid to governance issues at the state level and that state attorneys general "will continue to focus on conflicts of interest and insider deals" as they review major transactions.

Healthcare Quality

Almost every issue in the top ten includes at least some indication that the decision makers involved are concerned about maintaining, and even improving, the quality of care that is available to patients. It is likely that in the coming year, increased pressure will be felt by healthcare providers to "expand quality metrics to cover areas like patient engagement and social determinants of health that are hard to quantify."

In 2015, the Institute of Medicine (IOM) released a report that focused on eliminating diagnostic errors, which supposedly "persist throughout all settings of care, involve common and rare diseases and continue to harm an unacceptable number of patients." This report will likely be emphasized by providers who are looking to increase the quality of care that they offer.

Health Plan Regulation

With continued changes brought about by the Affordable Care Act (ACA), healthcare attorneys advice to health plan clients in the coming year may change, depending on the viability of the ACA. Health plans continue to face enormous challenges, ranging from data issues, cybersecurity risks, and antitrust concerns.

Issues with narrow networks and other plans that limit the number of in-network providers will remain an issue as health insurance plans struggle to balance access with the need to control for costs, and remain viable as insurance companies themselves.


Telemedicine is likely to have a larger impact and larger role to play in the upcoming year, considering the development of technologies that allow more remote access to healthcare providers, and insurers' expansion of coverage for such services.

However, there are still many legal hurdles to overcome. For example, the failure to "properly structure telemedicine agreements, including credentialing providers who are rendering actual services to patients, is a chronic problem that will only get worse." Another legal concern is the ability to secure health information that is transmitted and stored by providers, telemedicine entities, and others in the chain of electrons.

Lastly, the expansion of telemedicine relies, in part, on state licensing requirements. In 2015, eleven states adopted the Federation of State Medical Board's Interstate Medical Licensure Compact, and nine other states have introduced legislation to follow. The Compact allows for an expedited licensure process for eligible physicians and is intended to "improve license portability and increase patient access to care." Once the licensure issue is resolved, a next step is to resolve professional liability issues; providers who engage in telehealth will need to check their own malpractice insurance coverage to determine whether or not it covers telemedicine/telehealth services.


Medicaid has two separate, but related issues, that will likely present themselves for the 2016 calendar year. The first is the expansion of Medicaid under the ACA, along with the affect it has on the budgets of states that participated in the Medicaid expansion, even after considering the federal funds that are available to help cover the costs until 2017.

The second issue is agreements with managed care organizations, which states are beginning to enter into to help cover extra costs. It is also likely that the current lame duck administration will continue to look favorably upon granting waivers to implement Medicaid managed care and other initiatives to help fulfill the aspirations of the ACA. The growth of managed Medicaid will increase as a financially- and care management-attractive alternative for states, as well as a significant business expansion opportunity for health insurers.

February 10, 2016

BioSimilars: FDA Panel Overwhelming Recommends Approval of Remicade BioSimilar, Congress Asks Tough Questions of FDA and CMS

Yesterday an FDA Advisory panel overwhelmingly recommended the Celltrion/Pfizer biosimilar Remsima 21-3 for approval for all the clinical indications for Jannsen's Remicade including (RA, AS, PsA, PsO, adult CD, pediatric CD, adult UC). The discussions were straight forward outlining just how similar the two products really were.

This is only the second biosimilar to get an advisory committee. But given the FDA's staff enthusiastic analysis of the clinical program and the advisory panels whole hearted validation for all the questions before the panel we can expect to see the flow of biosimilar applications and approvals start to accelerate.


While Martin Shkerli was busy making fun of congress for discussing his Wu Tang album at the Government Oversight committee hearing. The real work to reduce drug prices was being held at the same time in the Committee on Energy and Commerce Subcommittee on Health, entitled, "Examining Implementation of the Biologics Price Competition and Innovation Act." The hearing was an opportunity for the Congress and the general public to get an update from the Food and Drug Administration (FDA) on the regulation and approval of biosimilars, as well as an update from the Centers for Medicare and Medicaid Services (CMS) on the recent reimbursement policy.

In 2010, the Biologics Price Competition and Innovation Act was enacted to establish a new and abbreviated approval pathway at the FDA for biological products that are determined to be "biosimilar" to or "interchangeable" with an already-FDA licensed product. In 2012, the Biosimilar User Fee Act was enacted to support the FDA's work related to the development, review, and approval of biosimilar products. The FDA has continued to issue guidance documents on key policy considerations, and in March 2015, the FDA approved the first biosimilar in the United States. CMS, in preparation for biosimilars entering the market, has published final rules that set the stage for how Medicare will reimburse for biosimilar products.

The Contentious Hearing

Throughout the hearing, members of Congress were fairly critical about the pace at which the FDA is approving biosimilars and how Medicare plans to reimburse for them. Committee members asked Janet Woodcock, MD, the Director of the Center for Drug Evaluation and Research, and Sean Cavanaugh, Deputy Administrator and Director of CMS' Center of Medicare, whether the two agencies had ever discussed the differences between generics of small-molecule drugs and biosimilars of large-molecule biologics.

Throughout the hearing, the subcommittee reviewed the ways that differentiate biosimilars and their regulation. Congress was concerned that the unique qualities of biosimilars are not being properly considered by CMS, and that the existing payment policy could negatively impact biosimilars that enter the market in the future, or even ultimately, wind up limiting beneficiary access and negating program savings.

Congressman Joe Barton, for example, one of the authors of the Biologics Price Competition and Innovation Act, seemed troubled that the CMS payment system for biologic drugs may discourage competition and that the FDA has not moved quickly enough to finalize a naming convention or issue guidance to manufacturers of biosimilar medications. His comments sounded a bit like a disappointed teacher, "As to how you've been doing with biosimilars, I would give FDA a C plus, maybe a C minus, and CMS a D. The only reason I haven't given you an F is because you're trying, you got something out there."

He further commented that, "today, we sit as a subcommittee with numerous concerns about the implementation – or more appropriately, the lack thereof – of this important piece of legislation. Only one biosimilar has been approved, and numerous products are waiting to proceed through the approval process, and many physicians, patients, and concerned individuals like myself are concerned with the lack of progress."

CMS Reimbursement Policy

The current CMS policy, published in November 2015, allows for biosimilars to be paid for, depending on the average sales price, using six percent of the reference product price as the add-on, and also groups all biosimilars that share the same reference product, with each product being reimbursed under the same code.

This creates concern because, as Rep. Frank Pallone, Jr., stated, it "treats biosimilars like generic drugs" and runs the risk of "disincentiviz[ing] manufacturers from entering the biosimilars marketplace." Pallone also reminded Congress and the witnesses that Medicare Part D and Medicaid both acknowledge the difference between biosimilars and generics in their own programs.

Congressman Joe Barton also asked Sean Cavanaugh whether or not the agency has plans to revisit how biosimilar drugs are priced. Cavanaugh simply stated that, "From a clinical perspective, CMS knows that biosimilars are not the same as generics. From a regulatory perspective, there are similarities. Consequently, we created similarities as to how biosimilars and generics are priced," and that CMS will be monitoring the market closely and that rulemaking could be possible in the future.

FDA's Delay

The Subcommittee was also displeased with the way the FDA has worked to implement the BPCIA, since only one biosimilar has been approved. The FDA has been dragging its feet on implementation, but Dr. Woodcock claimed that, "We've seen a lot of progress since 2010, although most of it has been under the hood. We did approve the first biosimilar in 2015, and on Feb. 9, 2016, FDA's Arthritis Advisory Committee is scheduled to hold a meeting to discuss a biosimilar to Remicade (infliximab), a biological product licensed by FDA to treat conditions such as rheumatoid arthritis, ulcerative colitis and Crohn's disease."

Woodcock emphasized that for biosimilars, it is important to her that the FDA applies "rigorous standards" and that while biologics are life-changing and cost-saving, "we don't intend to sacrifice on their performance with biosimilars."

Woodcock also placed a bit of blame back on Congress for the slow pace at which biosimilars and biologics are being approved, highlighting the fact that "Congress didn't appropriate any additional funding to the FDA to implement BPCIA. We took money from other activities." She did mention that the FDA has begun to collect more money under the user fee program, and that she is hopeful that the FDA will have more "robust funding" for biosimilars. Dr. Woodcock further expressed concern that "as more biosimilar applications come in, … we will not have the staff because we always seem to be waiting to catch up."


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