by Pia Dean, Holland & Hart LLP

A recent ruling from the United States District Court for the Southern District of New York is the first decision regarding the requirement of the Affordable Care Act (ACA) to return identified overpayments from Medicare and Medicaid within 60 days and provides a cautionary tale about the failure to do so. The Court’s opinion offers clarification about when the 60-day “report and repay” provision of the ACA starts and underscores the importance of identifying and acting on a notice of improper payments in a timely manner.

Background

The action stems from a computer glitch on the part of Healthfirst, Inc. (Healthfirst), a private, non-profit insurance program. The glitch caused three New York City hospitals to submit improper claims to Medicaid for services rendered to beneficiaries of a managed care program administered by Healthfirst. All three hospitals belong to a network of non-profit hospitals operated and coordinated by Continuum Health Partners, Inc. (Continuum). Continue reading →

by Kim C. Stanger, Holland & Hart LLP

Hospitals and other entities that offer incentives to recruit physicians must ensure their arrangements comply with federal and state laws governing financial relationships with physicians, including the the Ethics in Patient Referrals Act (“Stark”), Anti-Kickback Statute (“AKS”), and the IRS’s 501(c)(3) requirements. Recruitment arrangements usually need to fit within one of the following safe harbors:

1. Employment Arrangements. If you are going to hire the physician as an employee and pay him or her no more than fair market value, you can structure the deal to fit within Stark’s bona fide employment safe harbor, which requires the following:

• The employment must be for identifiable services.
• The compensation (including benefits, housing, relocation reimbursement, stipends, and anything else of value given to the physician) must be consistent with fair market value.
• The compensation may not take into account the volume or value of referrals. For example, you may not compensate the physician based on, or give the physician a percentage of, services performed by other persons or ancillary tests ordered by the physician. You may, however, compensate the physician based on services the physician personally performs.

(42 CFR 411.357(c)). Under the employment safe harbor, you are not required to have a written agreement or establish the compensation formula in advance, but it is generally a good idea to do so to avoid misunderstandings. Complying with the foregoing Stark parameters should also satisfy the AKS and 501(c)(3) rules. (See 42 CFR 1001.952(i); IRS Healthcare Provider Reference Guide, 2004 EO CPE Text at p.18). If you need to pay more than fair market value or provide additional incentives to recruit the physician, you will likely need to structure the deal to satisfy the Stark recruitment safe harbor described below. Continue reading →

by Teresa Locke, Holland & Hart LLP

The Fourth Circuit Court of Appeals recently issued an alarming decision affirming a $237 million judgment against Tuomey Healthcare Systems, a nonprofit hospital located in a small, largely rural South Carolina community that is a federally-designated medically underserved area. The judgment resulted from a jury’s finding that Tuomey submitted 21,730 false claims to Medicare for reimbursement knowing that the claims were generated through part-time physician employment contracts that violated the referral constraints found in the Stark Law. The decision clarifies that hospital “facility fees” associated with outpatient procedures performed by physicians constitute “referrals” under the Stark Law even when the “referring” physician is personally performing the outpatient procedure. The false claims themselves had a total value of $39 million, but with automatic treble damages and civil penalties in the minimum amount for each violation, the resulting judgment was for $237 million. Despite its affirmance of the judgment, the Fourth Circuit panel recognized “the troubling picture this case paints: An impenetrably complex set of laws and regulations that will result in a likely death sentence for a community hospital in an already medically underserved area.” U.S. ex rel. Drakeford v. Tuomey.

The part-time employment contracts at issue in Tuomey allowed the physicians to maintain their private practices, but required them to perform all outpatient surgical procedures exclusively at the hospital. The contracts had multiple compensation components, two of which proved problematic under Stark. First, each physician was paid an annual guaranteed base salary which was adjusted from year to year based on the amount the physician collected from all services rendered the previous year. Second, the bulk of the physicians’ compensation was earned in the form of a productivity bonus, which paid the physicians 80% of the amount of their collections for that year. Continue reading →

by Ellen Bonner, Holland & Hart LLP

In late April, the Office of Inspector General, U.S. Department of Health and Human Services (“OIG HHS”) issued Practical Guidance for Health Care Governing Boards on Compliance Oversight (“Compliance Guidance”)¹. The Compliance Guidance assists health care organization boards (“Boards”) with compliance plan oversight obligations. Highlighted below are a few of the Compliance Guidance’s numerous practical tips for proactive compliance oversight and review of health care organizations.

As a starting point for compliance assessment, the Compliance Guidance recommends the following publically available compliance resources:

• The Federal Sentencing Guidelines²
• OIG voluntary compliance program guidance documents³; and
• OIG Corporate Integrity Agreements (“CIAs”)⁴

With a nod towards the “ever-changing regulatory landscape and operating environment,” the Compliance Guidance promotes the development of formal plans, including periodic updates from informed staff, to stay current with the changes in regulations and operating environments that impact the organization and its Compliance Program. The following four areas are emphasized in the Compliance Guidance: Continue reading →

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 →

As with other free or discounted items or services, offering free screenings can violate (1) the federal Anti-Kickback Statute (“AKS”) if one purpose of the free screening is induce referrals for items or services payable by federal healthcare programs (42 USC § 1320a-7b), and/or (2) the federal Civil Monetary Penalties Law (“CMP”) if the physician knows or should know that the free screening is likely to induce a federal program beneficiary to purchase items or services covered by federal healthcare programs (42 USC § 1320a-7a).  There are several potentially relevant CMP exceptions, most of which focus on whether the screening is tied to the provision of other services payable by federal healthcare programs.  In Advisory Opinion 09-11, the OIG approved a hospital’s free blood pressure screening program where (1) the free screening was not conditioned on the use of any other goods or services from the hospital; (2) the patient receiving the screening was not directed to any particular provider; (3) the hospital did not offer the patient any special discounts on follow-up services; and (4) if the screening was abnormal, the patient as advised to see their own health care professional.  Under these circumstances, the OIG concluded that the test was not improperly tied to the provision of other services by the hospital.

For more information, see the OIG’s Special Advisory Bulletin:  Offering Gifts and Other Inducements to Beneficiaries (August 2002), available at https://oig.hhs.gov/fraud/docs/alertsandbulletins/SABGiftsandInducements.pdf.

Kim Stanger is the Chairman of Holland & Hart LLP’s Health Law Group.  He can be reached at kcstanger@hollandhart.com or (208) 383-3913.  To subscribe to Holland & Hart’s free e-newsletter or blog concerning health law issues, please e-mail Mr. Stanger.

This publication is designed to provide general information on pertinent legal topics. The statements made are provided for educational purposes only. They do not constitute legal or financial advice nor do they necessarily reflect the views of Holland & Hart LLP or any of its attorneys other than the author. This publication is not intended to create an attorney-client relationship between you and Holland & Hart LLP. Substantive changes in the law subsequent to the date of this publication might affect the analysis or commentary. Similarly, the analysis may differ depending on the jurisdiction or circumstances. If you have specific questions as to the application of the law to your activities, you should seek the advice of your legal counsel.

by Kim C. Stanger, Holland & Hart LLP

Federal laws generally prohibit providers from billing for services ordered by, or contracting with, persons or entities that have been excluded from participating in Medicare, Medicaid, or other federal health care programs. Violations may result in significant penalties, including repayment of amounts improperly received. To avoid penalties, providers should check the OIG’s List of Excluded Individuals and Entities (“LEIE”) before hiring, contracting with, or granting privileges to employees, contractors, or practitioners, and should periodically re-check the LEIE thereafter.

Effect on Excluded Entities. Federal statutes such as the Civil Monetary Penalties (“CMP”) law allows HHS to exclude individuals and entities from participating in federal health care programs if they have been convicted of fraud or abuse or engaged in certain other misconduct. (See, e.g., 42 USC §§ 1320a-7 and 1320c-5). States are required to exclude from Medicaid any person or entity that has been excluded by HHS. (Id.). An excluded individual or entity generally may not do the following: Continue reading →

by Kim C. Stanger, Holland & Hart LLP

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by Kim Stanger

Contracts and other financial arrangements with physicians and certain other healthcare providers must be structured to comply with the federal Stark,¹ Anti-Kickback,² and Civil Monetary Penalties Laws³ if the physician will refer patients for items or services payable by Medicare, Medicaid or other healthcare programs. Failure to comply may result in overpayments; failure to report and repay such overpayments within 60 days may violate the False Claims Act, subjecting the parties to additional penalties, including treble damages, fines of $5,500 to $11,000 per claim, and exclusion from Medicare and Medicaid.⁴ Given the severe penalties for noncompliance, hospitals and other healthcare providers should ensure that their physician contracts comply.

TOP COMPLIANCE CONCERNS FOR PHYSICIAN CONTRACTS. The following are top compliance issues for services contracts with referring physicians or their family members. Many of these same rules apply to contracts with other healthcare providers who may refer patients for services covered by Medicare or Medicaid.⁵ Continue reading →