Monthly Archives: December 2014

December 15, 2014

Referral Reward Programs

by Kim C. Stanger, Holland & Hart LLP

I often see programs in which health care providers offer rewards to persons who refer new business to the practice.  Such programs are risky.

Anti-Kickback Statute.  The federal Anti-Kickback Statute prohibits offering or paying any remuneration to induce referrals for items or services payable by federal healthcare programs, including Medicare or Medicaid.  (42 USC 1320a-7b(b)).  Violation of the Anti-Kickback Statute is a felony.  It is also an automatic violation of the federal False Claims Act.  Accordingly, providers should never reward referrals for Medicare or Medicaid business.  In addition, the OIG has suggested that carving out federal program business from reward programs may not insulate the provider from Anti-Kickback Statute liability because a person who receives rewards for referring non-federal program business is likely to refer federal program business as well.  (OIG Advisory Opinion No. 12-06).

State Laws.  Referral reward programs might also violate state laws.  For example, the Idaho Medical Practices Act prohibits “[d]ivision of fees or gifts or agreement to split or divide fees or gifts received for professional services with any person, institution or corporation in exchange for referral.”  (Idaho Code 54-1814(8)).  Idaho’s insurance code also prohibits rewarding referrals that result in “treatment of physical or mental illness or injury arising in whole or substantial part from trauma.” (Idaho Code 41-348). I am not aware of any cases in which these statutes have been applied to referral reward programs, but there is a risk. Continue reading

December 11, 2014

Stark Requirements for Physician Contracts

by Kim C. Stanger, Holland & Hart LLP

Entities that employ or contract with physicians must ensure their agreements are structured to comply with the federal Ethics in Patient Referrals Act (“Stark”)1 if they intend to bill Medicare for services rendered or referred by the physicians. Under Stark, if a physician (or a member of the physician’s family) has a financial relationship with an entity, the physician may not refer patients to the entity for certain designated health services (“DHS”)2 payable by Medicare unless the financial relationship is structured to fit within a regulatory safe harbor.3 Entities may not bill Medicare for services improperly referred and, if they have done so, the entity must repay amounts improperly received. Failure to report and repay within 60 days may result in additional civil penalties of $15,000 per claim as well as False Claims Act liability.4 Repayments can easily run into the hundreds of thousands if not millions of dollars. Given the potential liability, it is critical that physician arrangements be structured to fit within the regulatory safe harbors.
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December 3, 2014

Physicians Should Beware Illegal Conspiracies when Dealing with Hospitals

by Melissa Starry, Holland & Hart LLP

Physicians and other providers must beware illegal conspiracies when taking coordinated action to obtain payment from hospitals. On December 1, 2014, the State of Idaho Office of the Attorney General reached settlements with four physicians who were investigated for their actions during on-call pay negotiations with Madison Memorial Hospital in Rexburg, Idaho.

According to the Attorney General’s press release, the hospital’s on-call policy required physicians to provide unpaid on-call coverage for the emergency department as a condition of receiving privileges. Several doctors jointly sought to negotiate changes to the policy and notified hospital administrators that they would no longer provide on-call coverage until the hospital agreed to pay them. The Attorney General asserted that the physicians’ coordinated response violated the Idaho Competition Act.

Both federal and state laws prohibit agreements between competitors that restrain trade. At issue in Rexburg was the Idaho Competition Act which prohibits conspiracies “between two or more persons in unreasonable restraint of Idaho commerce.” See Idaho Code § 48-104. Examples of unreasonable restraint include price fixing, allocating or dividing markets, and boycotting or refusing to deal. Attorney General Lawrence Wasden said, “[a]t issue for my office in this investigation is using anticompetitive tactics to bring about change in the marketplace.” The investigation did not consider the merits of paying physicians for on-call services. According to the Attorney General’s press release, the investigation into the matter is ongoing. Continue reading