Feb 2012

Physician Off-Label Marketing

As physician reimbursement decreases, physicians are increasingly looking to other means to replace lost income and control more of the healthcare dollar. From television infomercials to highway billboards, physicians are entering the world of marketing to build and sustain a medical practice.

Part of the marketing by physicians involves describing the nature and benefits of off-label use of medical devices and drugs. But physicians need to be wary of the many restrictions surrounding off-label marketing. While these restrictions generally apply to manufacturers, it is important for physicians to understand the extent of these restrictions and how they may apply to them. The extent to which the prohibition against off-label marketing applies to physicians is ambiguous. This article explores the ways in which physicians may engage in off-label marketing of drugs and devices, while noting the restrictions that may apply to such practices.

FDA Regulations Governing Manufacturers
Regulation of off-label marketing of drugs and medical devices is focused on governing the actions and behavior of those in the manufacturing process. The Food and Drug Administration’s (FDA’s) enforcement actions are premised on the theory that a drug or device is illegally “misbranded” under the federal Food, Drug, and Cosmetic Act1 (FDCA) if it is marketed for a use inconsistent with the direction on its label.2 Under 21 C.F.R. §§ 201.128 and 801.4, the “intended use” (or “on-label” use) is determined by the intent of those who are legally responsible for the labeling of the drug or device. Consequently, enforcement actions against off-label marketing have focused on manufacturers—those who are engaged in the “labeling” of drugs and devices.

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Nov 2011

State Medicaid RAC Audits to Begin in 2012

Medicaid providers will be subject to new audits by Medicaid Recovery Audit Contractors (RACs), beginning in January 2012.

These new audits will be in addition to existing audits being conducted by Medicare RACs, Medicaid Integrity Contractors (MICs) and Zone Program Integrity Contractors (ZPICs), among others. “The Medicaid RAC audits, mandated as part of the 2010 Patient Protection and Affordable Care Act (the Health Reform Act), are expected to result in the recovery of $2.13 billion over the next five years.”
Medicaid RAC auditors will receive contingency fees of between 9% and 12.5% of amounts recovered as a result of overpayments, resulting in total contingency payments to Medicaid RACs of approximately $190 million to $266 million over the next five years. Medicaid providers will thus face audits from entities that have large financial incentives and resources to mount aggressive challenges to payments received from Medicaid programs.

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Oct 2011

Despite Decreased Regulatory Burdens and Increased Financial Incentives, ACOs Still Face Large Start-Up Costs and Uncertain Savings In Final CMS Rules

Under final rules issued by the Centers for Medicare and Medicaid Services (CMS), Accountable Care Organizations (ACOs) will continue to face large start-up costs and uncertain savings, despite a decreased regulatory scheme and increased financial incentives.

ACOs are organizations of health care providers that agree to be accountable for cost, quality and the overall care of Medicare beneficiaries. Responding to over 1300 public comments filed in response to earlier draft regulations, CMS made a number of modifications that result in greater flexibility of ACO operations, increased financial incentives for ACO participants and simpler, more streamlined quality performance standards. Nonetheless, the modifications are unlikely to change the cost-benefit analysis that healthcare providers will face when deciding whether to participate in the ACO program.

In an implicit acknowledgement that healthcare providers will be slow to warm to the idea of ACOs, CMS lowered its range of anticipated ACOs to between 50 and 270, a drastic decrease from the 300 to 800 potential ACOs it estimated in its draft regulations. However, CMS maintains that start-up and ongoing annual operating costs will remain at approximately $1.7 million per ACO, despite a widely-publicized American Hospital Association study that estimated such costs to be in the range of $11.6 million to $26.1 million, depending on the size of the ACO.1 CMS also maintains that the median estimated savings shared with ACO participants to be $1.3 billion over a four-year period. Due to the lower number of anticipated ACO participants, CMS estimates that ACOs will enjoy a benefit-cost ratio of 2.9. However, if the AHA estimates of start-up and operating costs are correct, ACOs will not achieve any savings and will face enormous losses.

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Aug 2011

Florida Fines Medicaid HMO for Failing to Report Suspected Fraud by Providers

The Florida Agency for Health Care Administration (“AHCA”) in August 2011 fined Humana $3.4 million for failing to promptly report suspected cases of Medicaid fraud and abuse by others, as required by statute and Humana’s Medicaid HMO contract.

Though many states have similar laws or regulations, this appears to be the first enforcement action of its kind in the nation. These laws and regulations impose substantial requirements on managed care companies to engage in anti-fraud investigative activities of their providers and promptly report the results of those investigations to the appropriate state agencies. Given the current budgetary constraints throughout the country, many states could begin to enforce these investigation and reporting requirements more stringently.
The Florida Action

Under Florida law, managed care organizations (“MCOs”) that participate in the state Medicaid program have substantial statutory and contractual obligations to conduct robust and comprehensive investigative activities designed to detect and prevent overpayments, abuse and fraud. Additionally, MCOs must report all suspected or confirmed instances of provider or recipient fraud and abuse within 15 calendar days after detection to the Florida Office of Medicaid Program Integrity. Failure to report will result in a fine of $1,000 per day. In the situation with Humana, AHCA alleged that it failed to report suspected cases of provider fraud within the 15-day reporting period, stemming as far back as August 2009. For these statutory violations, AHCA imposed a $2.7 million fine

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