Just prior to arguments before the U.S. Supreme Court challenging the Patient Protection and Affordable Care Act (the “Act”), the Department of Health and Human Services published a final rule on the centerpiece of the Act – state insurance exchanges. The final rule, which was published in March, defines the method by which states will establish, or have established for them, an insurance exchange under the Act. It makes concrete one of the most visible proposed changes to healthcare delivery envisioned by the Act.

The rule, which regulates exchanges that would go into existence as of January 1, 2014, permits states to either operate their own exchange consistent with the federal rules or have an exchange imposed upon the state by the federal government, ensuring that every citizen has access to information on health benefits coverage. The rule envisions the exchange as the virtual marketplace in which categories of health benefit plans, defined by the federal government, can be compared by consumers as to price, as well as other factors that may be relevant in choosing such a plan.

The rule and comments to the rule, which are set forth in 640 pages of regulations, among other things:

1. Establishes the method by which an exchange is established.  A state may choose to establish an exchange through a branch of government, or permit the formation of a nonprofit, quasi-public entity to oversee the exchange;

2. Requires action and approval by each state no later than January 1, 2013, regarding whether the state will establish such a plan;

3. Sets standards for the exchange regarding its ability to carry out required functions, information reporting, and encompass the entire geographic area of the state;

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On March 26, 2012, the U.S. Department of Health and Human Services announced that several final HIPAA rules have been sent to the White House Office of Management and Budget (“OMB”) for final review. The Office for Civil Rights Deputy Director for Health Information announced that the OMB review process is expected to take 90 days. Once the review is complete, the rules could become final.

The omnibus rule will include the following:

• The final breach notification rule;
• The final HIPAA enforcement rule;
• The final rule implementing the HIPAA privacy and security changes that were mandated by the HITECH Act; and
• The final rule implementing HIPAA changes made by the Genetic Information Nondiscrimination Act (GINA).

The Office for Civil Rights also announced that it would be issuing guidance in the coming months to address certain provisions in the rule, including how to de-identify data and how to define “minimum necessary.”

Based on the proposed rules, it is anticipated that following the final rule, covered entities and business associates will be required to revise their Notice of Privacy Practices and Business Associate Agreements, as well as many of their HIPAA privacy and security policies.

In a case before the Indiana Tax Court published on February 16, 2012, an Indiana county hospital Foundation argued that it was entitled to a per se exemption from property tax solely because the assisted living facility that it leased to a for-profit entity provides for the needs of the elderly. The Foundation’s argument relied on precedent, holding that independent apartments (“The Villas”) located on a campus that also operates an assisted living facility and a nursing home qualified for exemption from property tax because:

“[T]he needs of senior citizens are not exclusively financial, nor are they merely health-related. Indeed, seniors also need a sense of community and involvement. Id. at 815. Seniors need a sense of security and safety. Id. Seniors need social interaction. Id. Seniors need supportive services that enable them to live more independently for a longer period of time.  Id. Seniors need to function at active levels. Id. The Villas meet all these needs and are  thus owned, occupied, and used for a charitable purpose.”

Wittenberg Lutheran Village Endowment Corp. v. Lake County Property Tax Assessment Board of Appeals, 782 N.E.2d 483, 488-89 (Ind. Tax Ct. 2003), review denied; quoting Raintree Friends Housing, Inc. v. Indiana Department of State Revenue, 667 N.E.2d 810, 814-815 (Ind. Tax Ct. 1996).

The Tax Court clarified that “neither the language of one case nor an apparent trend from several cases has established a per se rule that an assisted living facility that cares for the elderly is automatically considered exempt by the mere character of its deeds.”  Tipton County Health Care Found., Inc. v. Tipton County Assessor, 961 N.E.2d 1048, 1052 (Ind. T.C. 2012).

This case establishes that where the owner and operator of an assisted living facility are not the same entity, and particularly where the operator is a for-profit entity, both entities must be prepared to justify an exemption from property tax by providing evidence of their separate charitable purposes, “not simply the accomplishment of good and noble deeds, to ensure that: 1) the benefit conferred by the exemption relieves government of a cost it would otherwise bear, and 2) the exemption’s largess does not primarily fulfill a commercial profit motive.” Id. at 1052.

The Department of Health and Human Services (HHS) Office of Civil Rights (OCR) has announced a settlement of $1.5 million with Blue Cross Blue Shield of Tennessee (BCBST) stemming from BCBST’s potential violations of the Health Insurance Portability and Accountability Act of 1996 (HIPAA) Privacy and Security Rules. See HHS March 13, 2012 press release “HHS Settles HIPAA Case with BCBST for $1.5 million.”

This is the first enforcement action taken by the OCR resulting from a breach report required by the Health Information Technology for Economic and Clinical Health (HITECH) Act Breach Notification Rule. The HITECH Breach Notification Rule requires covered entities to report an impermissible use or disclosure of protected health information, or a “breach” of 500 individuals or more to HHS and the media.

Pursuant to the HITECH Breach Notification Rule requirements, BCBST reported to OCR that 57 unencrypted computer hard drives were stolen from a facility that BSBCT leased in Tennessee and after such report, an OCR investigation ensued. The hard drives contained protected health information (PHI) of over 1 million individuals. The OCR’s investigation found that BCBST failed to implement appropriate administrative safeguards to protect the PHI at the leased facility by BCBST not performing required security evaluation in response to operational changes. The OCR also found that BCBST failed to implement appropriate physical safeguards by not having adequate facility access controls. Both of these safeguards are required by the HIPAA Security Rule.

In addition to the $1.5 million settlement, the OCR has entered into a corrective action plan with BCBST that requires BCBST to review, revise and maintain its HIPAA Privacy and Security policies and procedures, to conduct regular and robust training for BCBST covering employee responsibilities under HIPAA, and to perform monitor reviews to ensure BCBST compliance with the corrective action plan.

On Feb. 13, 2012, the Internal Revenue Service (IRS) released procedures (Revenue Procedure) by which qualified nonprofit health insurance issuers (QNHIIs, herein referred to as CO-OPs) may seek exemption from Federal income tax under Section 501(c)(29) of the Internal Revenue Code (Code).

Section 1322 of the Patient Protection and Affordable Care Act provides for the Consumer Operated and Oriented Plan (CO-OP) Program, which was implemented by Centers for Medicare and Medicaid Services (CMS) Final Rule on December 8, 2012.  The aim of the CO-OP Program is to foster the formation of new consumer-governed, private, nonprofit health insurance issuers that will create “a new competitive presence in the insurance marketplace.”  According to the Final Rule, CMS will provide loans and repayable grants (collectively, Funding) to selected CO-OPs, which will help cover start-up costs and meet any state mandated solvency requirements.

The Revenue Procedure sets forth the application requirements for recognition as a Section 501(c)(29) tax-exempt organization, a Section 501(a) tax-exempt classification that was added to the Code by the CO-OP Program.  A CO-OP seeking recognition of exemption under Section 501(c)(29) must submit a letter application with Form 8718 (Letter Application), rather than Form 1023.

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Today, the Centers for Medicare and Medicaid (CMS) published a proposed rule to implement a provision in the Patient Protection and Affordable Care Act (PPACA) that requires providers and suppliers receiving funds under the Medicare program to report and return most overpayments 60 days after the date on which the overpayment was identified. Medicare Program; Reporting and Returning of Overpayments, Proposed Rule, 77 Fed. Reg. 9179-9187 (Feb. 16, 2012) (to be codified at 42 C.F.R. pt. 401, 405). The penalty for failing to return an overpayment in a timely manner is the same as the penalty for false claims—a civil penalty of not less than $5,000 and not more than $10,000 per overpayment, plus three times the amount of the overpayment.

CMS also proposes to define that an overpayment is “identified” using the same standard applicable to false claims, such as when the provider has “actual knowledge of the existence of the overpayment or acts in reckless disregard or deliberate ignorance of the overpayment.”

The preamble to the proposed rule states in relevant part that:

We believe defining "identification" in this way gives providers and suppliers an incentive to exercise reasonable diligence to determine whether an overpayment exists. Without such a definition, some providers and suppliers might avoid performing activities to determine whether an overpayment exists, such as self-audits, compliance checks, and other additional research.

Thus, under the proposed rule, any overpayments made to a provider that are discovered by a whistleblower or a government contractor instead of by routine self-auditing may subject the provider to false claims penalties.

Click here for a link to the proposed rule.

In the Federal Register of January 4, 2011 (76 FR 256), the FDA published a final regulation amending the current informed consent regulation to require that informed consent documents and processes for applicable drug and device clinical trials include a specific statement that the trial information will be submitted for inclusion in the clinical trial registry data bank maintained by the National Institute of Health/National Library of Medicine.

This regulation, set forth at 21 CFR §50.25(c), provides that every informed consent shall include the following statement:  “A description of this clinical trial will be available on http://www.clinicaltrials.gov/, as required by U.S. Law. This web site will not include information that can identify you.  At most, the web site will include a summary of the results. You can search this web site at any time.”  The statement is provided to inform applicable trial participants of the availability of the clinical trial information in the public domain and at the web site.  This requirement only pertains to “applicable clinical trials” as defined at 42 U.S.C. §282(j)(1)(A). 

According to FDA guidance, “applicable clinical trials” generally include controlled interventional studies of drugs, biological products or devices that are subject to FDA regulation, meaning that a trial has one or more sites in the United States, involves a drug, biologic, or devices manufactured in the U.S. (or its territories) or is conducted under an investigational new drug application or investigation of new drug exemption.

The new statement must be included in all informed consent documents for applicable clinical trials initiated on or after March 7, 2012.  The consent rule will not be applied retroactively.  Therefore, clinical trials initiated before March 7, 2012 need not comply with new §50.25(c) nor will ongoing trials.

For additional information, please see Guidance for Sponsors, Investigators, and Institutional Review Boards - Questions and Answers on Informed Consent Elements, 21 CFR §50.25(c) (Small Entity Compliance Guide) as published by the FDA in February 2012 and available as a PDF on the FDA website. 

According to a U.S. Department of Health & Human Services media release that was issued earlier today, 32 health care organizations from around the country will participate in the Pioneer Accountable Care Organization (ACO) program.

Under the program, which is operated by the Centers for Medicare & Medicaid Services (CMS) Innovation Center, groups of health care providers that have formed ACOs will be rewarded by Medicare based on how well they are able to both improve the health of their Medicare patients and lower their health care costs. HHS hopes the program will save up to $1.1 billion over the next five years by encouraging health care specialists “to provide better, more coordinated care for people with Medicare.”

The 32 Pioneer ACOs were selected from a pool of over 80 applicants. According to the media release, “selected Pioneer ACOs include physician-led organizations and health systems, urban and rural organizations, and organizations in various geographic regions of the country, representing 18 states and the opportunity to improve care for 860,000 Medicare beneficiaries."

The first performance period of the Pioneer ACO Model will begin Jan. 1, 2012.

Additional information on the Pioneer ACO model can be accessed by downloading the CMS Fact Sheet here.

The Centers for Medicare and Medicaid Services (CMS) released the Final Rule produced by the Department of Health and Human Services (HHS) to establish the Consumer Operated and Oriented Plan (CO-OP) Program under Section 1322 of the Patient Protection and Affordable Care Act (PPACA) on December 8, 2011. 

The CO-OP program is designed to foster the creation of new consumer-governed, private, nonprofit health insurance issuers, known as CO-OPs, that will offer plans under the Affordable Insurance Exchanges (Exchanges). HHS hopes that the CO-OP Program will improve the quality and cost of integrated care by creating “a new competitive presence” in the insurance marketplace.

HHS made noteworthy modifications to the proposed rule in an effort to further these goals and to ensure the flexibility for and improve the potential viability of the CO-OP Program by making it easier for larger employers to participate, recognizing provider sponsorship in governing the formation and transition boards, and ensuring CO-OPs will be operated by participants who are truly “new” to the market.

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