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The federal government was apparently not kidding when it said it planned to take a closer look at physician/hospital arrangements.  According to a recent Department of Justice Press Release, the DOJ has elected to intervene in a whistle-blower lawsuit against Christ Hospital and the Ohio Heart Health Center, a large cardiology group in Ohio. The lawsuit alleges that the hospital and the cardiology group entered into an arrangement that provided the cardiologists improper financial incentives in exchange for generating revenue for the hospital through the hospital’s outpatient cardiology testing center. This suit was originally filed by a cardiologist who had provided services to Christ Hospital and Ohio Heart. The lawsuit alleges that cardiologists were allocated time at the Hospital’s heart station based on the number of cardiac services they generated for the Hospital in the prior year.

This is only one of what can expected to be a slew of these types of cases as enforcement authorities tune in to the creative ways in which hospitals and physicians have been teaming up over the last few years.  Physicians who have financial arrangements with their hospitals should take a close look at those arrangements for compliance with current regulatory requirements.

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Proving the theory that no good deed goes unpunished, according to a March 17, 2008 Department of Justice press release, Hardeman County Memorial Hospital in Texas agreed to pay the federal government a total of $398,230 to resolve allegations that it violated the federal False Claims Act by submitting improper claims for payment to the Medicare program for healthcare items and services that were provided as a result of improper physician referrals. Interestingly, the case was based on a 2005 self-disclosure by Hardeman to the Office of Inspector General of the Department of Health and Human Services that Hardeman had discovered a physician lease arrangement pursuant to which a referring physician had received free rent from Hardeman. The self-disclosure triggered an investigation which concluded in the settlement and Hardeman's entry into a 3-year Corporate Integrity Agreement.

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As previously reported on this blog, the Centers for Medicare and Medicaid Services (CMS) had announced in 2007 that they intended to send requests for information to all Medicare participating hospitals for details regarding the investment/ownership and compensation arrangements between those hospitals and physicians to determine whether the arrangements were in compliance with the federal Stark statute. However, according to an April 10, 2008 notice published by the Office of Management and Budget, CMS has now withdrawn the Request for Information survey with no indication as to whether a new survey will be issued in the future. Of course, physicians who have financial relationships with hospitals should not assume that this issue is dead and gone but rather should take this opportunity to review their existing hospital relationships to ensure compliance with the Stark statute and regulations.

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Earlier this week, a number of major orthopedic medical device companies, as part of an anti-kickback settlement agreement, began posting on their websites the names of physicians to whom the companies have paid consulting fees.  Now, as a perfect example of why this "transparency" is a danger to all physicians, a Michigan newspaper is reporting that one of the companies, Smith and Nephew, incorrectly identified a physician on its website.  Apparently the physician in question does not and never had a consulting relationship with the company.  A spokesman for Smith & Nephew blamed the mix up on some kind of sorting error.    

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Several weeks ago I posted an entry on this blog about a major federal anti-kickback settlement agreement entered into by the five largest orthopedic device companies: Zimmer Inc., Depuy Orthopaedics, Inc., Smith & Nephew Inc., Biomet Orthopedics, Inc., and Stryker Orthopedics, Inc.  At the heart of the government's allegations in the case were consulting fees paid to physicians which the government alleged were kickbacks intended to induce the physicians to use the companies' products.  One of the key components of that settlement was that the companies are required to disclose the name of each consultant and what they have been paid on each company's website.  The companies have now begun posting this information and it is, to the say the least, quite interesting.

According to an article published today by the Center for Science in the Public Interest, almost 50 orthopedic surgeons each earned over $1 million a year in consulting fees and royalties from the five companies subject to the settlement, and many of the surgeons are affiliated with top institutions. 

Physician consulting arrangements with pharmaceutical and device manufacturers are nothing new and are not necessarily illegal.  In fact, many of these arrangements are quite necessary to the development of new and innovative drugs and devices.  However, payments for "phantom" consulting services or which are in excess of fair market value for the consulting services may, if intended to induce the consultant to recommend and/or use the particular company's products, violate the federal anti-kickback statute.  

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In a recent Stark law Advisory Opinion (CMS-AO-2007-01), the Centers for Medicare and Medicaid Services (CMS) found that a hospital could not change the terms of an existing physician recruitment assistance agreement where that change would effectively result in additional compensation to the recruited physician.  Specifically, the original recruitment assistance agreement between the hospital and the physician included an excess receipts provision which obligated the physician to remit to the hospital any collections in excess of the physicians' expenses and guaranteed compensation.   

The hospital sought CMS' opinion on whether (1) an excess receipts provision was required in recruitment assistance agreements by the Stark regulations, and (2) whether the hospital could delete the provision from the existing agreement.  CMS declined to opine on the first issue (although they did note that the recruitment assistance exception does not require such a provision) but found with respect to the second issue that deleting the excess receipts provision would have the effect of providing more compensation to the recruited physician than he would originally have been entitled to.  On this, CMS stated the following:  "Because the Physician has already relocated his medical practice, the additional compensation is not for the purpose of inducing relocation and may directly or indirectly reflect the volume or value of the recruited physician’s actual or potential referrals."

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According to a recent DOJ Press Release, five medical device companies (comprising approximately 95% of the hip and knee joint implant market) have settled kickback allegations relating to payments to surgeons by agreeing to pay a total of $311 million and entering into five-year Corporate Integrity Agreements.  The companies include Zimmer Inc., Depuy Orthopaedics, Inc., Smith & Nephew Inc., Biomet Orthopedics, Inc., and Stryker Orthopedics, Inc.  Physicians who deal with these and other implant manufacturers clearly need to take a close look at their device relationships to be sure they conform to the anti-kickback statute and other applicable laws.

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In accordance with the Deficit Reduction Act, the Department of Health and Human Services (“HHS”) is undertaking an initiative to require all hospitals participating in a Medicare program to provide information to HHS on a periodic basis concerning their investment and compensation relationships with physicians. As the initial step in this process, HHS will send a mandatory disclosure report form to 500 hospitals in September of this year, on which those hospitals will be required to disclose their investment and compensation arrangements with physicians. HHS will use the information gathered to analyze the relationships for compliance with applicable federal law, including the federal Stark statute. 

The HHS notice can be found by clicking here. The mandatory information request is authorized by federal regulations found at 42 CFR 411.361.

In addition to the obligation to return any amounts improperly collected from the Medicare program, penalties for violating the Stark statute include a $15,000 fine for each impermissible referral and for each claim submitted pursuant to an impermissible referral, as well as potential liability under the False Claims Act.

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As lucrative ancillary services continue shift from hospitals to outpatient sites, hospitals are anxious to find ways to keep they're hand in the mix.  Not surprisingly, physician-hospital joint ventures are all the rage.  While such ventures can be legally structured, the stakes of failing to comply with applicable legal requirements can be very high.  For important considerations in structuring joint ventures, see the following article in Physicians' News Digest: Structuring Contractual Joint Ventures. 

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The Medicare incident-to rules permit a physician to bill for the services of auxiliary personnel as if the physician performed those services himself.  You may already know that the incident-to rules require a physician to be present in the office suite and immediately available to assist while auxiliary personnel are performing incident-to services in the office.  But, did you know that you could be supervising incident-to services without even knowing it? 

In a recent federal District Court whistleblower case out of Hawaii, a court rejected a whistleblower physician's claim that he could not have been the supervising physician for incident-to services since he was not made aware by his group practice that the services would be billed to Medicare under his provider number.   Under the incident -to rules, any physician in a "physician directed clinic" may supervise incident-to services and the court agreed with the defense that a physician in a "physician directed clinic" need not have specific knowledge that he will be the supervising physician for billing purposes.  The court's opinion can be found here.

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The Centers for Medicare and Medicaid Services (CMS) announced today in the federal register that it will delay publication of the much anticipated Phase III final Stark self-referral regulations (which were due out by today) until March 23, 2008. According to CMS, the delay is necessary in order to allow time to review and consider the extensive public comments on the Interim Final regulations (Phase II) of the regulations which were published in 2004.  Until publication of Phase II, the Phase II rules will remain in place.  

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Think hanging on to insurance overpayments is no big deal?  Think again.  According to a press release by the U.S. Attorney for the Eastern District of Tennessee, one cardiology practice that neglected to refund overpayments to federal and private insurers and patients has learned a valuable ... and expensive lesson: if you have money you're not entitled to, give it back!  East Tennessee Heart Consultants has reportedly entered into a settlement with the US Attorney for $2.9 Million in connection with the alleged failure to refund overpayments.  For tips on investigating and refunding overpayments, click here.

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According to an audit report published by the Office of Inspector, doctors are not reporting the correct "Place of Service" codes when submitting claims.  Medicare payments for the same services may vary depending on the location where the services were rendered.  This is because Medicare has determined, among other things, that the cost to produce a service may be more or less in certain settings.  In addition, payment for a professional service which is rendered in a facility (where a facility fee applies) will typically be lower than if the same services is rendered in the office setting, since the facility expense in the office setting (known as the practice expense) is rolled into the professional fee and not paid separately.  Failing to correctly code the POS can result in a physician receiving an overpayment and could even result in false claims liability.

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According to a Department of Justice press release the DOJ recovered a record $3.1 Billion in settlements and judgments in cases involving allegations of fraud against the government.  $1.3 billion of the recoveries were initiated by whistleblowers under the federal qui tam whistleblower statute.  Of the recoveries, 72% ($2.2 billion) were related to health care fraud. 

It is apparent from this development that false claims actions are on the rise, so physicians and other providers who have not yet developed compliance policies and procedures to prevent false claims and whistleblower actions by their employees are well advised to do so. 

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In November 2006 the Centers for Medicare & Medicaid Services (CMS) issued Advisory Opinion 2006-01 dealing with the Stark exception for physician recruitment arrangements.  Specifically, the Opinion addressed a proposed arrangement whereby a hospital and a medical practice would share the expense of recruiting a new physician into the hospital's service area and the hospital would provide certain forgivable loans to the physician. 

Although the recruited physician would either would move his or her practice at least 25 miles or would derive at least 75% of revenues from professional services furnished to patients not seen or treated by the Physician previously, as required by the recruitment exception, 10 to 20% of the recruited physician's time would be spent providing medical services at a practice location outside of the hospital’s geographic service area.  The parties seeking the advisory opinion sought clarification of whether a physician would be deemed to have relocated his practice to the a hospital's service area if the physician spends a percentage of his time practicing medicine outside of the hospital's service area.

Based on the fact that the recruitment exception includes no explicit requirement that the recruited physician spend 100% of his medical practice time in the geographic area served by the recruiting hospital, CMS concluded that the proposed arrangement would meet the recruitment exception.  However, CMS notes that it might reach a different conclusion if the time spent by the recruited
physician outside of the geographic service area was more substantial than under the proposed arrangement.

AO-206-01 is noteworthy in that it signals a willingness on the part of CMS to provide more meaningful guidance through the Advisory Opinion process than it has in the past.  It also serves as a reminder to physicians and counsel that CMS will apply a technical reading when applying the Stark exceptions.

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According to a press release by the U.S. Attorney for the Eastern District of Pennsylvania, Keystone Mercy Health Plan has agreed to pay $5 million to resolve civil liabilities under the federal False Claims Act and other federal and state statutes and common law principles.  According to the complaint filed by the U.S. Attorney, KMHP allegedly violated the federal False Claims Act by failing to remit to the Pennsylvania Department of Public Welfare overpayments recouped by KMHP from providers.  Of note is the fact that the case was initiated by a former employee of KMHP under the whistleblower provisions of the False Claims Act.  According to the complaint, the whistleblower stands to receive $780,000 from the settlement proceeds.

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Each fall, the Office of Inspector General (OIG) announces its enforcement priorities for the coming year in the form of a Work Plan. The 2007 Work Plan was released on September 26, 2006 and can be found here: http://oig.hhs.gov/publications/docs/workplan/2007/Work%20Plan%202007.pdf. As in past years, the Work Plan should be required reading for all compliance officers and others interested in getting an advance look at the feds' playbook.

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According to a recent press release by the U.S. Attorney for the District of Colorado, Pediatrix Medical Group, Inc. has agreed to pay the government $25,078,918 to settle government claims of upcoding under the False Claims Act.  Specifically, the government alleged that Peiatrix billed for critical care services when patients were not critically ill.   This should serve as a strong reminder to physician groups of the importance of maintaining an effective compliance program.

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