April 2000

Health Care E-lert - HIPAA Civil Monetary Penalty Rules - Final at last, 04/28/00

4 min

HIPAA - the Health Insurance Portability and Accountability Act of 1996 - changed the landscape of fraud and abuse and added many new civil monetary penalties (CMP) that went into effect on January 1, 1997. HIPAA 1) increased the maximum fine per false claim from $2,000 to $10,000, plus treble the amount falsely claimed, and 2) added three new CMPs for (i) offering inducements to beneficiaries to choose a particular provider, (ii) a pattern of billing for upcoded or medically unnecessary procedures; and (iii) false certification of eligibility for home health care services. On March 25, 1998, HCFA issued its proposed rules. Final rules have just been issued and are in effect. See 65 Fed. Reg. 24400 (April 26, 2000). Important changes are noted below:

A provider can not offer a financial incentive to patients to choose that provider. However, waivers of copayments and deductibles in certain circumstances and offering free or discounted preventative care are protected. The regulations provide significant guidance on this issue:

WAIVERS OF COINSURANCE AND DEDUCTIBLES must not be advertised or solicited or made routinely, and are permissible only if: 1) made after an individualized and good faith determination of financial need; 2) after reasonable collection efforts have failed; 3) made as part of offering preventative care services (see below) or; 4) made under some other Safe Harbor. HCFA declined to state any bright line standard for either 1 or 2 above, but normal commercially reasonable provider practices should suffice.

INCENTIVES TO PROMOTE THE DELIVERY OF PREVENTATIVE CARE do not violate the law if 1) the preventative care service is listed in the Guide To Clinical Preventive Services published by the U.S. Preventative Services Task Force, 2nd Ed., Baltimore, published by Williams and Wilkins, 1996; and 2) the incentive is either i) the waiver of all or a part of copayment and deductible or ii) the offer of free care as a community service with foregoing billing both the patient and Medicare or Medicaid. Two limits are imposed. First, the financial benefit must not be too disproportionate to the value of the preventative care. Second, it can't be cash. One other bit of helpful commentary notes that if the incentive is neither advertised nor known to beneficiaries before the beneficiary comes to the provider, the CMP does not apply. The example given is that free home visits given to a obstetrics patient after the delivery of the baby are OK if the benefit was not advertised or known in advance.

The second edition of the Guide to Clinical Preventive Services is available online via the National Library of Medicine's HSTAT database at http://text.nlm.nih.gov/ and the Office of Disease Prevention and Health Promotion at http://odphp.osophs.dhhs.gov/pubs/guidecps. It is also available in a printed edition from the Superintendent of Documents, U.S. Government Printing Office, at 202-512-1800 (Stock No. 017001005258; $40, including shipping) or the Agency for Health Care Policy and Reform Publications Clearinghouse, at 800-358-9295 ($20). A third edition is apparently being developed.

PENALTIES FOR UPCODING AND MEDICALLY UNECESSARY SERVICES created the biggest stir when HIPAA was enacted. HCFA has tried to reassure physicians and providers that it will not punish people for mistakes. We remain unconvinced.

HCFA starts with the principle that the provider must "assume responsibility for appropriate billing of their services" but that it "is not our intention to subject physicians to penalties for legitimate disagreements over the medical necessity of items and the services, or for honest mistakes or errors."

"The OIG intends to impose CMPs only after establishing that a provider knew that a billed item or service was not medically necessary, or that he or she deliberately ignored or recklessly disregarded such information" and such billing is "part of a pattern of such claims".

The reassurance is welcome, but upcoding penalties remain a bogeyman in the reality of modern practice. How much reliance can one place on the assurance that a physician won't be sanctioned unless he or she "knew or should have known" the error -- i.e., he or she "deliberately ignored or recklessly disregarded" information that would have indicated the bill was upcoded or the service not medically necessary -- given the reality of computerized billing systems, the incredible complexity of the system itself and the fact that a software generated glitch could easily lead to a "pattern" of false claims? Treble damages and extraordinary per claim penalties could ruin almost any practice.

The message is clear. You must have some system of checks and balances to attempt to ensure that the bill sent matches the service provided. The ostrich defense of sticking one's head in the sand will no longer suffice.

For further information contact Peter Parvis (410-244-7644, ppparvis@venable.com)