Federal Appeals Court Affirms Medicare’s $8.9 Million Overpayment Determination based on Improper Multi-Dosing

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Vitreo Retinal Consultants of the Palm Beaches, P.A. (VRC) sued the U.S. Department of Health and Human Resources (HHS) to recover payments it made to Medicare, having previously refunded the payments to Medicare based on Medicare’s notice of overpayment. The Eleventh Circuit affirmed the decision of the U.S. District Court, which upheld the administrative decision supporting Medicare’s overpayment notice.  The ophthalmologist/owner of the VRC was indicted and charged with 46 counts of healthcare fraud, according to a Department of Justice press release.

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VRC treated Medicare patients who suffered from age-related macular degeneration (AMD) and similar retinal diseases with intravitreal injections of Lucentis, a Medicare Part B drug approved by the FDA.   There was no dispute in the case that the drug was medically reasonable and necessary for treatment of AMD.  However, the FDA labeling instructed that the full contents of the 2.0-mg vial be injected into a syringe for purposes of injecting a single 0.5-mg dose of Lucentis into the patient’s eye once a month.  The label clearly stated that “[e]ach vial should only be used for the treatment of a single eye.”  VRC did not follow the labeling instructions; rather, it treated up to three patients from a single vile.

Based on applicable Medicare reimbursement rates, if administered as per the FDA label, a physician would inject 0.5 mg into the patient’s eye, dispose of 1.5 mg, and receive reimbursement in the amount of approximately $2,025, the average total cost of the vial.  VRC would bill Medicare $2,025 for every 0.5-mg dose it administered, however, and be reimbursed $2,025 for every dose.  Since VRC would get up to three doses from a single vial, it was reimbursed up to $6,075 per vial, about three times the allowed reimbursement.

Medicare’s contractor issued a preliminary overpayment determination of $8.9 million.  Reconsideration was denied and the overpayment determination was upheld by and administrative law judge and the Medicare Appeals Council. VRC filed suit, and the US District Court deferred to the agency decision.

In reviewing this Federal appeal, the Eleventh Circuit Court of Appeals considered, among other authority, Center for Medicare and Medicaid Services’ Medicare Benefit Policy Manual, which provides guidance on reimbursement applicable to Medicare Part B coverage.  According to that manual, “[i]n order to meet all the general requirements for coverage under the ‘incident to’ provision . . . the cost of the drug . . . must represent an expense to the physician.” Pub. No. 100-02, Ch. 15, § 50.3.  Further, the Court determined, the manual requires that drugs be “safe and effective,” and drugs are only safe and effective when “used for the indications specified in the labeling.”  The Court also relied heavily on a Local Coverage Determination by the regional Medicare contractor, which said: “Each vial should only be used for treatment of a single eye. If the contralateral eye requires treatment, a new vial should be used.”  Thus, HHS, through its contractor, determined that Medicare would not reimburse for multi-dosing Lcentis.

The Court rejected arguments by VRC on appeal that Medicare reimbursement is not related to the physician’s expense.  The Court determined: “Nothing in the statute forbids the Secretary from relating Medicare reimbursement to the physician’s expense.  On the contrary, the very concept of ‘reimbursement’ contemplates payment for money that was actually spent.”  The Court found that VRC’s “extraordinary profits arose from using a single-dose-approved vial for three patients, in violation of the FDA-approved instructions.”  The Eleventh Circuit Court of Appeals affirmed the lower court’s decision.

Medicare (and other third-party payer) reimbursement continues to play a vital and evolving role in our healthcare industry, with tremendous financial stakes for most healthcare providers.  Our Atlanta and Augusta-based business and healthcare represents medical practices, healthcare providers and healthcare businesses.  If you have questions about this post, contact us today.

Sources:  Eleventh Circuit Court of Appeals Decision

*Disclaimer: Thoughts shared here do not constitute legal advice.

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