April 2012 Health Care Compliance Update
The Health Law Web Site & Blog
Be sure to check out the Health Law web site and blog: http://health.wolterskluwerlb.com/.
Updated daily, the content in the blog focuses attention on topics related to health care
compliance, reimbursement, and food and drugs.
Health Care Compliance & Reimbursement Daily Smart Chart
The Health Care Compliance and Reimbursement Daily Smart Chart provides access to the full
text of Federal Register issuances, case law, CMS Letters and Memorandums, and
administrative decisions at approximately 5:00 p.m. CST of the day they were published and
includes a brief summary of the document, the citation, and issuing agency or court.
Additionally, recap news stories from CCH Editorial summarizing the most important documents
of the week and month are included. The Daily Smart Chart is available via the IntelliConnect
mobile app (IC Mobile). For further information, go to http://health.wolterskluwerlb.com/.
Health Care Compliance Letter
Volume 15-4, April 17, 2012, Read the Letter
HIPAA
HIPAA enforcement discretion period extended to June 30th. CMS’ Office of E-Health
Standards and Services (OESS) has announced that it will not initiate enforcement action
against any covered entity that is required to comply with the updated transactions standards
adopted under the Health Insurance Portability and Accountability Act of 1996 (HIPAA): ASC
X12 Version 5010 and NCPDP Versions D.0 and 3.0 for an additional three (3) months, through
June 30, 2012. OESS is aware that there are a number of outstanding issues and challenges
impeding full implementation of these versions. OESS believes that these remaining issues
warrant an extension of enforcement discretion to ensure that all entities can complete the
transition. OESS expects that transition statistics will reach 98 percent industry-wide by the
end of the enforcement discretion period on June 30, 2012. OESS is stepping up its existing
outreach to include more technical assistance for covered entities. OESS is also partnering with
several industry groups as well as Medicare fee for service and Medicaid to expand technical
assistance opportunities and eliminate remaining barriers, and more will be forthcoming on
these efforts. CCH Chicago Bureau, March 28, 2012
Anti-kickback
Website offering coupons for health items, services, and advertising proposed. A proposed
arrangement by an S-corporation that would operate a website that includes coupons for health
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care items and services and advertising on behalf of individuals and entities operating in the
health care industry poses sufficiently low risk under the anti-kickback statute, according to
the Office of Inspector General (OIG). OIG noted that: (1) the S-corporation is not a health care
provider or supplier; (2) payments from providers and advertisers to the corporation do not
depend on customers using the coupons or obtaining services from the providers or suppliers;
(3) the advertising under the proposed arrangement may take the form of a banner or pop-up
advertisements on a publicly accessible website; and (4) the structure of, and limitations
associated with the coupons, decreases risks under the anti-kickback statute. OIG has indicated
that the proposed coupons may include discounts on items or services that are reimbursable by
federal health care programs if the discounts comply with all applicable federal health care
program coverage and payment statutes, regulations, and guidance. The proposed arrangement
also includes sufficient safeguards to mitigate risks associated with the S-corporation’s role in
posting the potential discounts for the following reasons: (1) the coupons would be for a
reduced price or percentage reduction on a particular item or service and any discount would
inure to the payor as well as the patient, and (2) the terms of use would require providers to
comply with the discount safe harbor. OIG Advisory Opinion, No. 12-02, March 20, 2012, Health
Care Compliance Reporter, ¶500,274
Tax-exempt Organizations
Practitioners Discuss Form 990, Community Benefit Reporting Lessons Learned (Part II) Part
I of this article appeared in the CCH Health Care Compliance Letter on March 15, 2012,
Volume 15, Issue 3
Form 990, Governance Policies. For 2011, the IRS has begun to allow organizations to answer
“Yes” to questions regarding policies listed in Form 990, Core Part VI, Section B, Policies, if a
subcommittee of the board approved the policy. “I think it’s for the best because there was
confusion as to the type of approval [required],” stated Jennifer Rhoderick, Ernst & Young,
Indianapolis. In addition, the form changed the wording from “does” to “did” to focus on
practices during the reporting year. Rhoderick explained, “It’s a change in focus. They want to
see what happened during your reporting year.”
Form 990, Schedule K: A review of the Schedule K, Supplemental Information on Tax-Exempt
Bonds, for Code Sec. 501(c)(3) bonds is expected to be on the TEB work plan for 2012.
Moreover, post-issuance compliance procedures are an IRS hot button in 2012. Garner said this
topic has been addressed in all of the bond-related questionnaires the IRS sends out.
Group Exemptions. A group exemption is an administrative convenience for both the IRS and
exempt organizations with many affiliates. In recent years, many exempt organization systems,
particularly in the healthcare provider sector, have filed applications for group exemption and
filed group returns. Organizations covered by a group exemption are not required to
participate in a group return. Entities that do not elect to participate in the group return may
file their own Forms 990. There may be some advantages for a healthcare system to have a
group exemption and file group returns, according to Michael Vecchioni, Ernst & Young,
Detroit.
Alternative Investments. Alternative investments may involve activity unrelated to the
exempt purpose of the exempt organization. As with any investment, if the alternative
investment itself is debt financed, the debt-financed income will be UBI. In addition, when
these investments are organized as partnerships, unrelated business income often results from
either debt-financed passthrough income or the income of the businesses operated by the
partnership.
Unrelated Business Income – Allocation Methodology. For unrelated business income
purposes, indirect or shared costs may be allocated using a “reasonable basis.” The IRS will
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carefully scrutinize the allocation base and methodology to prevent a tax-exempt organization
from being afforded an unfair advantage over taxable businesses. Depreciation, personnel
costs, rent for dual-use space, and utilities are types of expenses that may be allocated on a
reasonable basis. Examples of reasonable allocation methods may include hours spent, square
footage, and gross receipts. Read the article. Reprinted with permission from the CCH TaxExempt Advisor Newsletter, No. 452, March 27, 2012
On the Front Lines
SUITS AND SCRUBS AVOIDING ORANGE JUMPSUITS™ Volume II: The Metamorphosis Crook by
Allan P. DeKaye, MBA, FHFMA and Gregory J. Naclerio, JD
One day, Gregor Samsa, a travelling salesman, wakes up to find himself transformed into a
giant insect. Confused, he looks around his room which appeared normal. He decides to fall
asleep again and forget what happened in the hope that everything will revert back to
normal. He tries to roll over to his right but discovers that he cannot due to his new body - he
is stuck on his hard, convex back. Franz Kafka, Die Verwandlung (or The Transformation or
Metamorphosis), 1915.
Somehow, trying to remember the graphic recollection of the opening paragraph of Kafka’s
classic story of the transformation of man into bug seemed more foreboding when reading it in
a college German foreign language class than the translation shown above. For that matter, the
transition of Maslow’s “Hierarchy of Need” into a “Hierarchy of Greed” proffered as the basis
for healthcare fraud in DeKaye’s “Inside Criminal Minds” article may prove that the lessons
learned long ago should remind us that bad behavior is more often the result of changes over
time rather than of the moment. Fast forwarding to today, the Office of the Inspector General,
Health and Human Services (OIG) is currently chasing more than 170 fugitives charged with
stealing over $400 million dollars in Medicare/Medicaid funds. This manhunt utilizes the
resources of Interpol as well as the OIG “Most Wanted List” to bring fugitives who fled the
country back to face criminal charges. Unfortunately, there will always be a criminal element
in society whose goal will be to violate the Seventh Commandment as many times as possible
without being caught. But there also exists another element of society perhaps just as
dangerous as the criminal – the Metamorphosis Crook. Read the article.
Journal of Health Care Compliance
The March/April issue of the Journal of Health Care Compliance will be available to subscribers
on May 7, 2012.
Health Care Compliance Professional’s Manual
The Health Care Compliance Professional’s Manual quarterly update will be available to
subscribers on June 12, 2012.
Corporate Governance for Health Care and Compliance: A Practical Guide
The Corporate Governance for Health Care and Compliance: A Practical Guide annual update
will be available to electronic subscribers on May 21, 2012.
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