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On December 1, 2016, Parker Hannifin Corporation and CLARCOR Inc. announced that the companies have entered into a definitive agreement under which Parker will acquire CLARCOR for approximately $4.3 billion in cash, including the assumption of net debt. The transaction has been unanimously approved by the board of directors of each company. Upon closing of the transaction, expected to be completed by or during the first quarter of Parker’s fiscal year 2018, CLARCOR will be combined with Parker’s Filtration Group to form a leading and diverse global filtration business. Bass, Berry & Sims has served CLARCOR as primary corporate and securities counsel for 10 years and served as lead counsel on this transaction. Read more here.

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Another Contractor on the CMS Block: The Supplemental Medical Review Contractor

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September 30, 2013

Part A, Part B, and durable medical equipment ("DME") providers and suppliers should prepare for requests from the newest medical review auditor: the Supplemental Medical Review/Specialty Contractor ("SMRC"). Though the SMRC model is still developing, StrategicHealthSolutions, LLC ("Strategic") recently embarked on its role as SMRC and now has reviews underway.

Overview

The SMRC audits Medicare claims submitted by Part A, Part B, and DME providers and suppliers to identify improper payments. This role is fulfilled by a private company that contracts with the Centers for Medicare and Medicaid Services ("CMS"). In 2012, Strategic was awarded a five-year contract to perform these audits. Entities falling within the ambit of SMRC review will be evaluated if CMS targets their service/provider specialty and possibly geographic region. CMS selects subjects to audit based on its own data and the Comprehensive Error Rate Testing ("CERT") program, which estimates improper payment rates by category (including service and provider type). CMS also considers feedback from professional organizations and federal agencies like HHS-OIG. The purpose of SMRC evaluation is to maximize government funds, as the government recoups excess payments identified by the SRMC. It is too early to know, however, whether the SRMC model will be efficient or whether it simply will duplicate existing efforts by other audit contractors.

Audit Process

An audit by the SMRC begins when the provider or supplier receives an Additional Document Request ("ADR") letter.1 The ADR letter identifies the service/provider specialty that triggered the review and requests records related to Medicare claims submitted under this category. In accordance with § 1833(e) of the Social Security Act, the provider must turn over the requested documents.2 If the provider fails to turn over requested documents, the SMRC must contact CMS, which then may recover previously awarded Medicare funds.

After submission, the SMRC then will review the documents to search for practices that, when performed improperly, may result in excess reimbursement. These practices include billing, payment, coverage, and coding. The SMRC review must comply with multiple CMS authorities, including its regulations, the Program Integrity Manual, and initiatives issued by the Provider Compliance Group/Division of Medical Review and Education.3 If the SMRC detects overpayment, the SMRC must contact CMS, after which the applicable Medicare Administrative Contractor ("MAC") will pursue a claim adjustment and/or overpayment collection action against the provider through the overpayment recovery process. To appeal the SMRC's finding, a provider must go through the normal MAC appeal process.

Effect on Providers and Suppliers

Providers and suppliers that may be subject to SMRC review should prepare for the possibility of an audit. CERT reports may indicate which service/provider specialties are likely to be audited.4 Strategic currently is performing medical review in the following areas: (Y1P1) Power Mobility Devices; (Y1P2) Evaluation and Management Services; (Y1P4) Hyperbaric Oxygen Therapy Services; (Y1P6) Inpatient Rehabilitation Facility Services; (Y1P7) HCPCS L7900: Male Vacuum Erection Devices; (Y1P8) Transforaminal Epidural Injections; (Y1P9) Medicare Part B Outpatient Therapy Services; (Y1P10) DME Part 2 Provider; (Y1P11) Evaluation and Management Services; (Y1P12) Non-Emergent MRI of the Lumbar Spine and (Y1P13) Non-Emergent Myocardial SPECT. With renewed emphasis on these areas, providers regularly should review their billing, payment, coverage, and coding procedures to ensure that these comply with regulatory and statutory obligations. Providers also should consider offering educational sessions to ensure that employees understand their responsibilities under the law, as well as potential penalties for noncompliance.

Moreover, providers should ensure that they are able to respond fully and promptly to an ADR. Implementing an SMRC response plan before receiving an SMRC request or appeal can be crucial. In addition, providers should ensure that their system enables them to access the documents requested by an ADR letter in a time- and cost-efficient manner.

Conclusion

Given the infancy of the SMRC, providers and suppliers should pay particular attention to the results of current SMRC audits and monitor the development of this new auditor. If you have any questions, please contact any of the attorneys in our Healthcare Practice Group or Healthcare Fraud Task Force.

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1 A sample ADR letter is available here.
2 42 U.S.C. § 1395l(e) (2013) ("No payment shall be made to any provider . . . unless there has been furnished such information as may be necessary . . . to determine the amounts due [to] such provider . . . .").
3 This group is part of the Office of Financial Management within CMS.
4 See http://www.strategichs.com/wpcms/home-smrc/ for more information on current projects.


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