Analysis | CMS moves to patch $3 billion fraud problem (2024)

Today’s edition: The Federal Trade Commission has opened an investigation into Teva Pharmaceuticals in an escalation of a fight over patents with the pharmaceutical industry. The Supreme Court issued another ruling yesterday that will affect health agencies. But first ….

Federal officials move to protect providers from fraudulent catheter billings

As national attention ping-ponged Friday between presidential debate reactions and Supreme Court decisions, you’d be forgiven for missing a proposed rule released by the Centers for Medicare and Medicaid Services.

Particularly because the rule’s wonky title — “Mitigating the Impact of Significant, Anomalous, and Highly Suspect Billing Activity on Medicare Shared Savings Program Financial Calculations in Calendar Year 2023” — camouflages the scope of what’s at stake.

It’s an attempt by federal officials to protect health-care providers from more than $3 billion in fraudulent catheter billings, involving 11 companies, CMS confirmed to me on Monday.

We’ve been covering this saga since February: My colleagues Lauren Weber, Dan Keating and I broke the news that the FBI and other agencies were investigating the catheter fraud this year. Lawmakers on Capitol Hill also have been demanding answers.

The Biden administration had been cagey about the scope of the fraud, saying it couldn’t comment on in-progress investigations. But Friday’s proposed rule and an accompanying statement Monday shed new light on officials’ actions.

The agency said it had quickly detected the unusual bills and blocked about $3 billion in payments, in addition to taking other steps.

“Our investigation into the matter is ongoing, and we have taken initial actions in response,” CMS said in its proposed rule. “We have made referrals to law enforcement, recouped improper Medicare payments, and terminated certain suppliers from the Medicare program.”

Why ACOs were so worried: The scheme has been a source of great anxiety for accountable care organizations (ACOs) — the groups of hospitals and physicians that care for a dedicated patient population, and first saw the fraudulent billings piling up last year.

Under Medicare’s shared-savings formula, ACOs are rewarded if they hit quality and financial targets, and penalized if they miss them. The fraudulent catheter bills made it look like the ACOs were not reining in costs, even though their patients did not order nor receive the catheters.

Some individual ACOs said they stood to lose more than $1 million in planned payments before CMS said it would essentially hold the providers harmless, under the proposed rule.

“It solves this year’s problem,” said Clif Gaus, the head of the National Association of ACOs, the lobbying group that helped publicly spot the fraud. “We’re protected this year and very happy about that.”

Gaus said he and colleagues were looking forward to the forthcoming physician fee schedule rule, which would address plans for future remediations.

The broader health industry remains on high alert after the catheter scheme, which appeared to involve companies using personal data from hundreds of thousands of patients to rack up billions of dollars in catheter bills. It’s still not clear how those companies got the patients’ personal data.

The ACOs, which have a financial incentive to detect unusual billing patterns, also continue to alert officials about other possible fraud schemes.

“The 2023 catheter spending is not the first, and unfortunately likely not the last, instance of ACOs reporting suspected fraudulent billing,” Jennifer Holloman, senior associate director of policy at the American Hospital Association, said in a statement.

Gaus — who served as a health official in the Nixon, Ford, Carter and Clinton administrations — said he was unaware of CMS ever proposing a federal rule simply because of one fraud scheme.

“I don’t think they’ve ever seen anything of this scale,” Gaus said.

FTC opens investigation into Teva, escalating patent fight with pharma industry

Teva Pharmaceuticals is under investigation by the Federal Trade Commission over its patents for asthma and chronic obstructive pulmonary disease (COPD) inhalers, Dan scooped.

The FTC last week sent a civil investigative demand — effectively a subpoena — ordering Teva to provide internal communications, analysis and financial data related to the contested patents listed in a federal registry known as the Orange Book. The agency has argued that pharmaceutical companies such as Teva have wrongly made minor tweaks to their products to keep patents in the Orange Book and fend off generic competition.

The company has until July 24 to cooperate with the FTC’s demand. A spokeswoman for the FTC declined to comment. Teva has said it believes its patents are properly listed in the Orange Book.

The FTC’s investigation into Teva represents a significant escalation of Democrats’ months-long fight with the pharmaceutical industry, with lawmakers criticizing companies for making cosmetic changes to devices to extend patent protections.

The backstory: In November, the FTC called on Teva and nine other companies to voluntarily take down more than 100 patents, and in April, the agency expanded its targets to over 300 “junk” patent listings. Drug companies have generally balked at the pressure campaign, and PhRMA, the drug industry’s largest lobbying group, last week launched a campaign to defend the industry’s intellectual property protections, which include patents.

Teva also is facing a legal challenge from Amneal Pharmaceuticals, which has sought to make a generic version of one of Teva’s inhalers. New Jersey District Judge Stanley R. Chesler, a George W. Bush appointee, last month sided with Amneal and the FTC — and ordered Teva to either correct or take down five patents in the Orange Book.

How the Supreme Court has roiled federal health agencies

The high court has issued another ruling that will add yet another wrinkle to the changing regulatory landscape in health care.

On Monday, the Supreme Court opened the door to more easily challenging long-settled regulations. The justices ruled in favor of a North Dakota truck stop that argued it should be allowed to push back against a federal regulation on debit card swipe fees because the truck stop company had not been incorporated until after the six-year statute of limitations on the fee regulation expired.

All told, the Supreme Court has delivered a seismic jolt to an administrative state that has for years been in the crosshairs of conservatives and industries. Legal experts and heath officials expect a gusher of litigation that will complicate the regulation of drugs, tobacco products and cutting-edge medical technologies.

Here’s one thing we’re watching this week: whether abortion rights advocates gather enough signatures to put abortion access on the ballot this fall in Arkansas.

In states like California, Ohio and Michigan, voters have enshrined abortion rights in their state constitution. But the effort is facing perhaps its biggest test yet in Arkansas, a state with a near-total ban on abortion and also strong evangelical and conservative values, the New York Times’s Emily Cochrane reports.

A victory in such a state would underscore just how the Supreme Court’s 2022 decision to overturn Roe v. Wade has scrambled the country’s political landscape. As of yesterday, supporters of the initiative estimated they need at least 10,000 more signatures to more easily meet the requirement for getting on the ballot.

Also this week: Abortion rights groups in other states, such as Arizona and Nebraska, face deadlines for submitting signatures.