recent developments in inducement enforcement …...between hospital or physician organization and a...

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Recent Developments in Inducement Enforcement Stark, Antikickback and

the False Claims Act

Ben DurieHooper Lundy & Bookman P.C.

September 17th – HFMA Northern California

Hooper, Lundy & Bookman, PC©

Topics Covered Today

• Stark Law Developments/Updates

• Stark Law Amendments (Statute/Regulations)

• Antikickback Statute Developments/Updates

• Updated Safe Harbors/Regulatory Guidance

• FCA and Enforcement Trends

• Compliance Hot Topics

• Legislative Reform Efforts – Stark & Kickback

2


Stark Law Overview

3


Stark Law Overview

4

• Goal of the Stark Law: Prevent financial relationships from corrupting physician judgment, address overutilization.

• Approach of the Stark Law:

• Strict liability statute – good intentions don’t matter

• Physician is prohibited from referring Medicare patients for “designated health services” if physician has a “financial relationship” (compensation/investment) with the entity, unless an exception applies.

• Entity is prohibited from billing for designated health services provided pursuant to any prohibited referrals.


Referral, 42 USC § 1395nn(h)(5)

• “the request by a physician for the item or service, including the request by a physician for a consultation with another physician (and any test or procedure ordered by, or to be performed by (or under the supervision of) that other physician)”

• “the request or establishment of a plan of care by a physician which includes the provision of the designated health service”

5


DHS, 42 USC § 1395nn(h)(6)(A) Clinical laboratory services.

(B) Physical therapy services.

(C) Occupational therapy services.

(D) Radiology services, including MRI, CAT scans, and ultrasound services.

(E) Radiation therapy services and supplies.

(F) Durable medical equipment and supplies.

(G) Parenteral and enteral nutrients, equipment, and supplies.

(H) Prosthetics, orthotics, and prosthetic devices and supplies.

(I) Home health services.

(J) Outpatient prescription drugs.

(K) Inpatient and outpatient hospital services.

(L) Outpatient speech-language pathology services.

6


Legal Ramifications

• If Stark applies and

• If no Stark exception is applicable…

• The referral is prohibited

• The DHS provider cannot make a claim for payment from Medicare or Medicaid, bill the patient, or seek third party payment for the DHS service

7


New Stark Regulations/Statutory Changes

8


Regulations Update: List of Key Changes

• Leniency on “written agreement” and “one-year term” requirements

• New exception for recruitment of mid-level clinicians

• New exception for timeshare arrangements

• Extensions on permitted “holdover” arrangements

• More latitude on missing signatures

9


Written Agreement/Term Requirements

• Depending on the facts and circumstances, a collection of documents, e.g., e-mails, drafts, invoices, cancelled checks, timesheets, etc. can constitute a “written agreement”

• The “one-year term” requirement can be satisfied if the arrangement lasted one year, even if the written agreement does not specify a term

• These are both “clarifications” of existing law, meaning that they apply retroactively too

10


Recruiting Non-physician Practitioners

• Previously, there was just a “physician” recruitment exception

• Now, hospitals (and FQHC/RHC) can recruit mid-levels to provide primary care or mental health services to a physician’s practice

• Covers PAs, NPs, clinical nurse, specialists, certified nurse, midwives, LCSWs and psychologists

• Up to 50% of compensation, once every 3 years (and other restrictions apply)

11


Timeshare Arrangements

• Protects certain “timeshare” arrangements (not leases) between hospital or physician organization and a physician or medical group

• Space, equipment and other items are predominantly for evaluation and management (E/M) visits

• Any equipment is in the same building as E/M visits and used for diagnostic imaging only if incidental to E/M visit, and not used advanced imaging, radiation therapy or clinical laboratory services (other than CLIA-waived tests)

12


Holdovers on Expired Arrangements

• The old rule allowed expired leases and personal services arrangements to continue after expiration on the same terms for up to 6 months, if exception otherwise satisfied

• Their new rule extends the 6 months to an unlimited period of time

• But, beware of fair market value issues and changes in services and/or compensation

13


Signatures on Written Agreements

• The old rule allowed arrangements where only a signature was missing, for up to 90 days if inadvertent and 30 days if advertent

• Now, all arrangements are allowed, when onlya signature is missing, for up to 90 days

• This grace period no longer limited to once per physician every 3 years

14


Stark Self-Disclosure

• Stark Self-Referral Disclosure Protocol mandated by ACA in 2010

• Effective June 1, 2017; Updated Mandatory Form for SRDP

15


Stark Self-Disclosure

•Used for “Stark only” self-disclosure

•Tolls the 60 day repayment obligation, but doesn’t permit payment with the self-disclosure!

•Requires detailed submission, including:

• facts and circumstances of violation

• legal analysis of why it doesn’t comply

• calculation of financial damages

• New: Formula for calculating pervasiveness of non-compliance

• New: Requires certification of non-compliance16


Antikickback Statute Overview

17


Antikickback Prohibition

18

• Knowingly and willfully

• Solicit, receive, offer or pay

• Remuneration

• For referring, for purchasing or ordering

• For arranging for or recommending

• Services covered by Medicare/Medicaid


Antikickback Penalties

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• Felony -- $25,000 fine + 5 years in prison

• Exclusion

• Civil Money Penalties

• False Claims Act?


Antikickback vs. Stark

AKS Prohibition (Remuneration to Induce

or in Returnfor Referrals)

Returnfor Referrals)

SH

SH

SH

Stark Prohibition(Dr’s referral

to DHS provider with whom s/he has a

financial relationship)

Exception

Exception

Exception Exception

SH

Exception

20


AKS vs. Stark

AKS

• Criminal and Civil Penalties

• Knowledge requirement

• Conduct involves “remuneration” to induce referrals

• Any payment made by Federal health care program (but not commercial insurance)

Stark

• Mainly Civil penalties unless in combination with another statute

• Strict liability statute

• All financial/compensation relationships unless exception applies

• Limited to designated health services (but not commercial insurance) 21


Antikickback and CMP Changes

22


Local Transportation Safe Harbor

Antikickback Complimentary Local Transportation Safe Harbor•Effective January 2017•Policy must set forth free transportation and be uniformly applied•Can’t be based on federal business volume/value•Can’t be air, luxury or ambulance•Must be established patient•25 miles radius•Drivers can’t be paid per beneficiary•Entity must bear the cost•Can’t market the free transportation, can’t market the beneficiary while being transported

• 23


CMP – Beneficiary Inducement

•Exceptions

• Nominal value, i.e., no more than $15 per item, $75 per year per patient

• Incentives to promote delivery of preventive care (pre-natal care, post-natal well-baby visits or listed in Guide)

• Promotes access to care and low risk of harm -- but can’t market

• Financial need – but can’t market

24


Stark and Kickback Enforcement

Developments

25


Application of False Claims Act

• The False Claims Act imposes liability for: • Knowingly submitting or causing someone else to

present a false or fraudulent claim to the federal government

• Knowingly making, using, or causing someone else to make or use a false record or statement material to a false or fraudulent claim • “Knowingly” means having actual knowledge of the falsity of the

information, or acting with reckless disregard or deliberate ignorance of the truth or falsity of the information

• “Materiality” means “having a natural tendency to influence, or be capable of influencing, the payment or receipt of money or property”

26



•Because the Stark Law is a Medicare payment rule, hospitals can be found liable under the federal civil False Claims Act if the U.S. or relator proves:

• The hospital submitted claims to Medicare for DHS pursuant to referrals by a physician with which the hospital has a financial relationship

• The hospital submitted these Medicare claims when it knew or should have known that its financial relationship with the referring physician, or the physician’s referrals, did not satisfy a Stark Law exception

• The hospital’s express or “implied” certification of compliance with the Stark Law was false and “material” to Medicare’s decision to pay these claims

27



Universal Health Services v. Escobar

•The U.S. Supreme Court held that a misrepresentation of compliance with a particular law cannot be deemed material merely because the Government makes such compliance a condition of payment, or noncompliance would be grounds for denial of payment if the Government knew of the noncompliance •Materiality cannot be found where noncompliance is “minor or insubstantial”

28



• Escobar Materiality

•Compliance with Stark is material – U.S. ex rel. Emanuele v. Medicor Associates, Inc. (W.D. Pa. Mar. 15, 2017)

•Compliance with Federal Antikickback statute is per se material – U.S. ex rel. Lutz v. Berkeley Heartlab, Inc. (D. S.C. Dec. 4, 2017)

29


Emanuele v. Medicor Associates, Inc.

Important from perspective of both Stark and Kickback compliance

• Case involved 8 medical directorship agreements between UPMC Hamot, a hospital based in Erie, Pennsylvania and Medicor Associates Inc., a physician cardiology practice

• Allegations that arrangements implicated False Claims Act, Antikickback Statute and FCA

30



Stark Implications:

•First time since Universal Health Services v. Escobar that a court has considered whether a false certification of compliance with the Stark Law’s signed writing requirements is material to the Medicare program’s payment decision

•Failure to satisfy signed writing requirement of personal services/FMV exceptions is material to Medicare’s payment decision

•Interpreted CMS “collection of documents” approach

31



Kickback/FCA:

•$21 million settlement for FCA, Stark, Kickback allegations (March 7, 2018)

•Unnecessary medical directorship and professional services agreements – disguised payments (kickbacks) to secure referrals from cardiology practice

32



•Changes in FCA Enforcement?

• Brand Memo – DOJ civil litigators are prohibited from using agency guidance documents to establish violations of law (Nov. 16, 2017)

• Granston Memo – DOJ will consider dismissing FCA actions that lack substantial merit (Jan. 10, 2018)

33


Hot Topic Issues Physician Contracting

34


Commercial Reasonableness

“Commercial Reasonableness”

vs.

Fair Market Value

•Rental of office space; Rental of Equipment; Personal Services; FMV Compensation; Indirect Compensation; and Isolated Transactions

35



• FMV - the value in arm’s length transactions, consistent with the general market value

• Bona fide bargaining between well-informed buyers and sellers

• Not in a position to general business for the other party

• Not determined in a manner that takes into account the volume or value of anticipated or actual referrals

36



“An arrangement will be considered ‘commercially reasonable’ in the absence of referrals if the

arrangement would make commercial sense if entered into by a reasonable entity of similar type and size and

a reasonable physician (or family member or group practice) of similar scope and specialty, even if there were not potential DHS [designated health services]

referrals.”

69 Fed. Reg. 16054, 16093 (March 26, 2004). 37


Losses on Physician Services?

DOJ has asserted that compensation to physicians that exceeds the professional collections they generate cannot be FMV and cannot be commercially reasonable:

“Given that each neurosurgeon was paid total compensation that exceeded the collections received for neurosurgical physician services, Defendants could not reasonably have concluded that the compensation arrangements in those contracts were fair market value for the neurosurgical services or were commercially reasonable.” (Halifax case)

38


Losses on Physician Services?

But, there is no requirement that providing physician services must be profitable:

• If compensation is FMV and is not adjusted for referrals, it should satisfy the Stark Law

• Some service lines have unprofitable payor mixes or low demand

• CMS recognizes the legitimacy of subsidizing physician compensation, e.g. in the E.D.

• Likewise, call coverage and hospitalist services often require subsidies

39


Focus on Medical Directors?

• Attention of Federal agencies -- targeting “sham” physician/provider medical directorship arrangements that allegedly violate the FCA, the AKS, the Stark Law – see Emanuele

• Series of Stark/Kickback settlements in Southern California involving sham medical director/marketing activities

• Pacific Hospital of Long Beach (aka “Drobot”)

• Pacific Alliance Medical Center (aka “PAMC”)

40


• $42 million FCA/Stark/AKS settlement

• Hospital offered subsidized rent, marketing for physician practices and medical directorships based on the number of admissions

41


Long Beach Pacific Hospital• Largest WC fraud case in

California history

• Benefits and drawbacks of Self-Referral Disclosure Protocol (SRDP) Process

• Kickbacks paid through sham directorships, consulting agreements, collection agreements

• CEO: 5 years in prison, $10 million forfeiture

42


60 Day Rule, Reporting Obligations & Compliance

Challenges

43


Report & Return Overview

• ACA requires a person that receives an overpayment to report and return the overpayment by the later of:

• 60 days after the overpayment was identified

• The date any corresponding cost report is due

• An overpayment is any funds that a person receives or retains under to which the person, after applicable reconciliation, is not entitled under such subchapter

44


Report & Return Overview: Enforcement

• False Claims Act

• A retained overpayment is an “obligation”

• Liability for:• knowingly making, using, or causing to be made or used, a

false record or statement material to an obligation to pay or transmit money or property to the Government

• knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government

• Includes improperly retaining Stark-prohibited

Medicare payments, and improperly avoiding

the Stark-required refunds 45


Identification

• “A person has, or should have through the exercise of reasonable diligence, determined that the person has received an overpayment and quantified the amount of the overpayment.”

• Reasonable diligence includes:

• Proactive compliance

• Reactive compliance (good faith investigation in response to credible information of a potential overpayment)

• Credibility of information based on facts and circumstances

46


Defaults in Reasonable Diligence

• 60-days can run from date the provider “should have identified” the overpayment, i.e. when:

• “the person fails to exercise reasonable diligence” and

• “the person in fact received an overpayment”

• Proposed rule would have required examining when a provider would have identified the overpayment

47


Report & Return Deadline

• Later of:

• 60-days from identification

• Date any corresponding cost report is due

• Repayment deadline is suspended by

• OIG Self-Disclosure Protocol or Self-Referral Disclosure Protocol (from acknowledged submission to settlement, withdrawal, or removal from protocol)

• Repayment plan (from request until rejected or any non-compliance with plan)

48


Legislative and Agency Reform Efforts –

Stark & Antikickback

49


Loosening Regulatory Environment?

Stark Changes on Horizon?

• Proposed Medicare Care Coordination Improvement Act of 2017 pending in Congress• Expand authority of HHS to create new

exceptions to promote care coordination (including related to alternative payment models)

• CMS identified Stark Law reform as a top policy priority

• Established inter-agency working group to review the law in Jan 2018

50


Loosening Regulatory Environment?

OIG RFP -- Care Coordination and Value Based Care

• Alternative payment models, innovative technologies, novel financial arrangements, telemedicine arrangements

• Beneficiary incentives and cost-sharing obligations

• Alignment of Stark/Kickback safe harbors around care coordination/value based care

• Comments due October 26, 201851

Any views or opinions expressed in this presentation are solely those of the author(s) and do not necessarily represent those of Hooper, Lundy & Bookman. You should not assume or construe that this presentation represents the opinion of Hooper, Lundy & Bookman.Although this presentation provides information concerning potential legal issues, it is not a substitute for specific legal advice from qualified counsel. You should not and are not authorized to rely on this presentation as a source of legal advice. This presentation is solely for general educational and informational purposes. Your attendance at this presentation does not create any attorney-client relationship between you and Hooper, Lundy & Bookman. You should not act upon this information without seeking your own independent professional advice.

Ben Durie

•415.875.8502

•[email protected]

Questions?

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