Physician Law : Pennsylvania Health Law Lawyer & Attorney : Fox Rothschild LLP : serving Philadelphia, Pittsburgh, Allentown, Erie, Upper Darby Twp

While all eyes are on the health care reform debate, a new Senate bill would give the government improved tools for investigating and prosecuting fraud and abuse in both federal and private health insurance programs. One of the most significant proposed changes would authorize a qui tam whistleblower action under the False Claims Act based solely on allegations of a violation of the Anti-Kickback law.

Senator Ted Kaufman (D-DE) introduced the Health Care Fraud Enforcement Act of 2009, co-sponsored by Committee Chairman Patrick Leahy (D-VT) and Committee members Arlen Specter (D-PA), Herb Kohl (D-WI), Chuck Schumer (D-NY) and Amy Klobuchar (D-MN).

Kaufman’s proposed legislation would modify federal sentencing guidelines, health care fraud statutes, and forfeiture, money laundering, and obstruction statutes, including:

Sentencing increases: The bill directs the Sentencing Commission to increase the guidelines range for health care fraud offenses and clarifies that the full potential scope of the fraud should be considered at sentencing.

Redefining “health care fraud offense”: The bill includes all health care crimes within the definition of “health care fraud offense,” regardless of where they are codified. (ERISA, drug marketing, and kickback crimes are currently not included) This change will make available to law enforcement the full range of antifraud tools, including criminal forfeiture and obstruction penalties, to combat these offenses.

 

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For more information regarding this settlement agreement, please contact William H. Maruca.

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According to an article in the News Tribune, the long arm of the federal government has tracked a Washington state doctor to Madagascar and brought him back to the U.S. to face fraud charges.  The doctor, who operated four clinics in Washington, will be charged with conspiracy to commit health care fraud following an audit of the doctor's Medicaid billing practices.  According to the article, undercover agents posing as patients visited the practice and claims were allegedly submitted for higher levels of service than were actually provided and/or for services not rendered.

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In the recently released OIG Advisory Opinion No. 09-16, the OIG found that participation by chiropractors in a referral network would not run afoul of the federal antikickback statute.  In AO 09-16, the OIG reviewed a proposed arrangement whereby chiropractors who are members of an association would each pay $200 per month to participate in a "network" that would advertise chiropractic services through internet, print, radio, or television advertising and provide referrals for such services.  A prospective patient who contacts the network for a chiropractor referral would be asked to provide a zip code. The network would then provide contact information for a participating chiropractor who practices in that zip code or, if no participating chiropractor practices in that zip code, in a nearby zip code. If more than one participating chiropractor is in the particular zip code, a name would be provided in sequence from a rotating list.  The network would pay the chiropractic association $10 for each chiropractor that participated in the network.

Although the compensation paid by the network to the association would vary with the number of chiropractors who join the network, the OIG stated that it would not prosecute the arrangement because (1) the network itself would not provide any items or services payable by Federal health care programs, (2) the participation fee would not vary on the basis of referrals of Federally payable business, (3) referral of potential patients to participating chiropractors would be on a rotating basis, by geographic area, and (4) the referral service would be open to participation by any chiropractor licensed to practice in the state, and participating chiropractors would receive referrals on an equal basis, would not be influenced by the variation in fees paid by participants.

 

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In case you somehow missed the news, effective October 1, 2009 (that's right, tomorrow), 'under arrangements' ventures involving Stark services are no longer permissible.  An under arrangements venture usually involves provision of a diagnostic or therapeutic service on a turn-key basis by an outside supplier (often a physician office) on behalf of a hospital.  The hospital then bills for the service to Medicare as if the service was performed by the hospital pays the under arrangements provider a fee for performing the service.  In the 2009 Inpatient Prospective Payment System Regulations, CMS revised the definition of a designate health service "entity" for purpose of the Stark law to include not only the entity that submits the claim and receives payment from the Medicare program for the service (i.e., the hospital) but also the entity that performs the service (i.e., the under arrangements physician office).   As a result of this change, physician practice will, as of tomorrow, no longer be able to provide services under arrangements to hospitals to which they refer Medicare patients.   If for some reason you have not terminated or corrected any of your under arrangements contracts, you need to act quickly to avoid on-going Stark liability.  

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The number of physicians seeking employment with hospitals seems once again to be on the rise and not surprisingly, physicians negotiating those arrangements will do their best to ensure that they are paid fairly for their services.  In light of the recent settlement of a federal False Claims case, however, physicians should be careful to ensure that their compensation - even as W-2 employees of a hospital - is consistent with fair market value and commercially reasonable. 

According to a US Department of Justice Press Release, Covenant Medical Center in Iowa has agreed to pay the United States $4.5 million to resolve allegations that it violated the False Claims Act by paying employed physicians compensation in excess of fair market value in violation of the federal Stark statute.  While there is an exception under the Stark law for compensation paid to a W-2 employee, the compensation must (1) be consistent with the fair market value of the services; (2) may not be determined in a manner that takes into account (directly or indirectly) the volume or value of any referrals by the referring physician; and (3) be pursuant to an agreement that would be commercially reasonable even if no referrals were made to the employer.

According to the Press Release, the compensation to the 5 physicians in question far exceeded fair market value, and in fact, the physicians were among the highest paid hospital-employed physicians in the entire United States.

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Physician/Medical Device financial arrangements continue to draw scrutiny by regulators. According to an article in the New York Times, Senator Charles Grassley has instituted an inquiry into payments between device-maker Medtronic and Dr. David Polly that Grassley says were not disclosed by Dr. Polly when he testified before Senate Panel in 2006. Specifically, Dr. Polly allegedly failed to disclose during his testimony that Medtronic was paying him $6,000 for his appearance before the committee.

Although the amount not disclosed is small, documents released by Senator Grassley show that between 2003 and 2007, Medtronic paid Dr. Polly in excess of $1.14 million in consulting fees and expenses from Medtronic. The lesson for physicians: As medical costs and quality emerge as the buzzwords for health care reform, financial arrangements which create or which give the appearance of conflicts of interest are increasingly likely to come under scrutiny by regulators and enforcement authorities. Physician contemplating these arrangements must carefully evaluate the benefit of the arrangements and the potential pitfalls.

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According to a statement by Secretary of HHS Catherine Sebelius in a June 24 HHS Press Release, "the Obama Administration is committed to turning up the heat on Medicare fraud..."  As evidence of this commitment, the Press Release announced the indictment of 53 individuals, including physicians and health care executives, accused of various Medicare fraud offenses ranging from conspiracy to defraud the Medicare program, false claims anti-kickback statute violations.  Among other things, the indictments allege that the individuals conspired to submit claims for medically unnecessary services and services not rendered as well as to pay kickbacks to beneficiaries to attest that they received the services.  The Press Release can be viewed here.

 

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In its recent Advisory Opinion No. 09-05, the OIG reviewed a proposed arrangement whereby a hospital would compensate physicians for on-call services performed on behalf of the hospital’s uninsured patients. The OIG concluded that while the Proposed Arrangement could potentially generate prohibited remuneration under the anti-kickback statute, if the requisite intent to induce or reward referrals of Federal health care program business were present, the Office of Inspector General (“OIG”) would not impose administrative sanctions on the arrangement.

Under the proposed arrangement, the hospital would pay physicians for services provided during on-call periods to indigent patients. The proposal included four discount payment amounts/categories: (1) Emergency consultations: $100 flat fee; (2) Care of patients admitted as inpatients from the Emergency Department: $300 per admission. (3) Surgical procedure or procedures performed on a patient admitted from the Emergency Department: $350 flat fee; and (4) Endoscopy procedure or procedures performed on a patient admitted from the Emergency Department: $150 flat fee.

The OIG noted that while there is “substantial risk that improperly structured payments for on-call coverage could be used to disguise unlawful remuneration” under the anti-kickback statute, the proposed arrangement included adequate safeguards against such abuse including:

(1) The payment amounts were represented to be within the range of fair market value for services rendered;

(2) The hospital had a legitimate rationale for revising its on-call coverage policy (physicians were refusing to provide on-call services);

(3) The proposed arrangement would be offered uniformly to all physicians on staff, the method of scheduling on-call coverage would be governed by the hospital’s medical staff by-laws, would be uniform within each department or specialty, and would not be used to selectively reward the highest referrers; and

(4) The proposed arrangement would appear to create an equitable mechanism for the hospital to compensate physicians who actually provide care that the Hospital must furnish.

While the Advisory Opinion does not contain any surprises, it provides a very useful analysis at a time when on-call compensation arrangements are proliferating. Physician who have on-call compensation arrangements or who are considering entering into one are well-advised to review their arrangements in light of the OIG’s analysis.
 

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Major Medicare fraud and false claims settlements against large providers and pharmaceutical and device companies are reported in the news on a regular basis these days.  Unfortunately this trend may lead many physicians to believe that their billing and collection activities are under the radar of federal and state enforcement authorities.  According to an article in the Scranton Times-Tribune, when it comes to Medicare fraud, size doesn't matter. 

According to the article, a Scranton podiatrist was sentenced this week to two years of probation and ordered to pay $23,266 in restitution for submitting false claims to Medicare.  What is significant about this case is that the podiatrist reportedly only received between $10,000 and $30,000 in improper payments from the Medicare program.  So, if you still think your practice is too small to get noticed, think again. 

The prospect of developing a full-blown fraud and abuse compliance plan may seem overwhelming for many physicians but a compliance plan is really the only "insurance" you can put in place to help minimize legal exposure from improper billing.  Consider starting small.  An annual coding and documentation audit with the help of a health care attorney and billing consultant is hands-down one of the best things you can do from a compliance standpoint and it need not be expensive.  Most importantly, however, when if comes to compliance, doing something is far better than doing nothing.  For more information on developing a cost effective compliance plan, see the article "Compliance Planning on a Shoestring Budget"www.physiciansnews.com/law/1107rodriguez.html.

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Pennsylvania physicians need to be aware that legislation (House Bill 1405) has once again been introduced in the Pennsylvania House which would severely limit the ability of physicians to refer to entities in which they have investment interests. As drafted, this Bill would create an outright prohibition on the referral by a health care provider of any patient to an entity in which the health care provider is an investor or has an investment interest for a provision of “designated health services”. Designated health services are limited to:
 

(1) clinical laboratory services;

(2) physical therapy services;

(3) comprehensive rehabilitative services

(4) diagnostic imaging services; and

(5) radiation therapy services.

 

It would also prohibit health care providers from referring patients for any health care services (other than (designated health services) to an entity in which the health care provider is an investor or has an investment interest unless (1) the investment is in a publicly traded company with assets greater than $50 million, or (2) no more then 50% of the investment interests are owned by persons in a position to refer to the entity. 

 

Penalties for violations include a $15,000 penalty for each improper claim submitted, $100,000 for a “circumvention scheme” and possible disciplinary action.

 

As drafted, the Bill does not incorporate the federal anti-kickback safe harbors or Stark exceptions so if passed, it would be far more restrictive than the federal statutes. Similar legislation has been introduced in the past and has not passed. At present the Bill is before the Health and Human Services Committee.

 

Physicians opposed to this legislation should contact their State Representatives and join their medical societies in lobbying against it.

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A recent whistleblower case out of the federal 3rd Circuit in Pennsylvania highlights some of the dangers in not properly documenting financial relationships between physicians and hospitals. Specifically, in US ex. rel. Kosenske v. Carlisle HMA, Inc., a Qui Tam lawsuit brought by the former member of an anesthesia group, the 3rd Circuit Court of Appeals reversed a US District Court’s summary judgment in favor of the defendant hospital and anesthesia group.

The anesthesia group in question had a written exclusive contract with the hospital for anesthesia services but, subsequent to entering into the exclusive agreement, began providing pain management services at the hospital’s freestanding pain center. The hospital did not charge the anesthesia group rent for use of the space in the pain center and the qui tam relator claimed that the arrangements failed to meet the Stark exception for personal service arrangements (and therefore that claims for services referred by the anesthesia group’s physicians to the hospital were in violation of the federal False Claim Act).

 

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Massachusetts has joined the small but growing list of states regulating gifts and payments by pharmaceutical and device manufacturers to physicians.  According to a Boston Globe article, Massachusetts regulators have adopted regulations banning gifts to physician and mandating disclosure of consulting/speaking payments to doctors in excess of $50. The regulations apply to any pharmaceutical and device company doing business in Massachusetts and take effect July 1, 2009.

This is yet another indication that the landscape surrounding physician-industry relationships is undergoing major changes.  As regulators push for greater transparency, physicians must be careful to avoid arrangements with pharma and device companies which might not only violate state or federal laws (including the federal anti-kickback statute) but which could attract unwanted public attention and scrutiny. 

 

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As yet another warning to physicians and the medical device industry, the Department of Justice has entered into a Deferred Prosecution Agreement with medical device maker Neuromtrix in connection with an alleged kickback arrangement with referring physicians.  

According to a press release by the US Attorney's Office for the District of Massachusetts, the settlement has to do with a medical device used in physicians’ offices to assist in the diagnosis of neuropathies in peripheral nerves.  Physicians using the device are required to purchase disposable biosensors.  Accordingly to the press release, Neurometrix allegedly paid physicians in the form of free boxes of disposable biosensors to induce them to recommend purchase of the device to their colleagues. 

Under the Deferred Prosecution Agreement, Neurometrix has agreed to pay a criminal penalty of $1.2 million.  Neurometrix also agreed to pay $2,498,337 in civil damages and penalties for allegedly causing physicians to bill nerve conduction studies to Medicare using a higher code than was actually performed by the physicians.  The press release does not mention whether any action is being taken against the physicians in question.

It is apparent from this latest case that physician and device manufacturers are still willing to enter into questionable financial arrangements despite the numerous high-profile cases over the last few years.  Physicians considering entering into these relationships must be aware that where the devices in question are reimbursed by the Medicare or any other federal program or involve the submission of claims for services to those programs, any payment, in cash or anything else of value, may implicate the federal anti-kickback statute.  Violations of the anti-kickback statute are punishable by a fines of up to $25,000 per violation, up to five years in jail, or both, as well as civil money penalties of $50,000 for each violation.

Even where the arrangements do not involve federal payor programs, comparable state kickback laws may apply.  It is critical therefore that physicians carefully evaluate these arrangements and consult with experienced health care counsel before entering into them.

 

 

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Those of us in the health care industry are, by now, quite used to reading about major prosecutions and settlements by the federal government against drug and device companies for improper relationships with physicians.  It is far less common, however, to read about the physicians on the receiving end of those relationships.  This, according to an article in the New York Times, is likely about to change. 

According to the Times article, authorities are frustrated by what they perceive to be on-going abusive relationships between physicians and industry despite the many high profile actions that have been brought against drug and device companies.  To strengthen that message, authorities are now turning their attention to physicians who receive payments from industry.  In fact, according to the article, in the coming months the feds intend to file civil and criminal complaints against a number surgeons believed to have demanded lucrative consulting arrangements from device companies.

As relationships between physicians and industry become more transparent (some major drug and device manufacturers are now publishing on the web the names of physicians they pay), physicians should expect that their arrangements may come under scrutiny and should exercise an abundance of caution when considering entering into these relationships.

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Medtronic Inc. announced this week that beginning in 2011, it will start disclosing payments of more than $5,000 per year to physicians for consulting fees, royalties or honoraria.  According to an article by the Associated Press, Medtronic's decision comes in response to pressure from federal legislators to disclose the information.  Medtronic now joins Eli Lilly & Co. and Pfizer Inc. in making these voluntary disclosures.

Transparency will clearly be a major component of physician-industry financial relationships going forward.  Physicians who have or are entertaining these kinds of relationships should be mindful of the implications of these disclosures and, to the extent possible, try to exercise some control (through the underlying service/royalty agreements) over the content of disclosures.  

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The Office of Inspector General of the Department of Health and Human Services (OIG) published a notice today seeking proposals and recommendations for developing new and modifying existing safe harbor provisions under the Federal anti-kickback statute and for developing new OIG Special Fraud Alerts.  To be considered, public comments must be delivered to the OIG by 5 p.m. on February 17, 2009 and can be sent by mail, electronically or by hand delivery.  For more information on how to submit comments, see the Federal Register notice here. 

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In response to an unusually straightforward fact pattern, the OIG today released an advisory opinion blessing certain part-time physician employment arrangements. The advisory opinion comes in response to a nonprofit, tax-exempt corporation’s proposal to employ two physicians on a part-time basis to perform endoscopies on the requestor’s own premises. Each of the physician employees would maintain separate medical practices, at separate premises, at outside of the part-time employment relationship with the requestor. The requestor certified that the physician employees would be bona fide employees in accordance with the employment safe harbor under the anti-kickback statute and that each physician employee would be a salary based on the fair market value of the professional services that he or she personally provides. Based on the facts presented, the OIG concluded that the proposed arrangement would not generate prohibited remuneration under the anti-kickback statute and would fall within the applicable employment safe harbor. The OIG did not opine on the issue of whether the employees would in fact be bona fide employees or on the issue of fair market value of the compensation in question. See Advisory Opinion 08-22

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Physicians, Do you have financial relationships (think joint venture, medical director stipends, lease arrangements, AS&T agreements) with a hospital? If so, your referrals to that hospital for inpatient and outpatient services may violate the federal Stark self referral law unless they fall within one of the exceptions to Stark.  You need to make sure your arrangements meet an exception!  Even if you originally structured those arrangements to fit within a Stark exception, if you have not reviewed those arrangements for Stark compliance for awhile, I strongly recommend that you review your arrangements for compliance now. 

Why the urgency? Because in the coming months, CMS will be auditing hospital/physician financial relationships for compliance with Stark. Specifically, CMS will be sending out “Disclosure of Financial Relationship” information requests to 500 hospitals across the Country soliciting specific information about the relationships the hospitals have with their physicians.  If yours is one of those hospitals, CMS will be looking at your arrangements.    

What should you be looking for? You need to identify your hospital financial relationships and then figure out which exception applies. If you have a contract, you need to be sure the contract meets the specific requirements of the applicable exception and that it is signed and currently in effect.  Remember, Stark is a strict liability statute so if you don’t meet all of the requirements of an exception, you likely have a violation of the statute and the penalties are draconian.

What if you’re not compliant? The Stark regulations do offer some ability to correct non-compliant arrangements but they are very limited. Generally a refund is required and penalties for violating Stark include a $15,000 civil money penalty for each tainted referral and for each claim submitted pursuant to a tainted referral, as well as potential false claims liability.

If you’d like assistance evaluating your hospital relationships for compliance with Stark (or handling non-compliant arrangements), please contact Todd Rodriguez.

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The Office of Inspector General (OIG) of the Dept of Health and Human Services released its FY2009 Workplan yesterday. The Workplan outlines the initiatives and audits that the OIG expects to undertake in the coming fiscal year.  Below are some of the key initiatives that the OIG expects to undertake with regard to physicians.  If you or your practice is engaged in any of these activities, now would be a great time to review whether you are complying with applicable Medicare rules.  If you need assistance reviewing any of your services for compliance with Medicare rules, please contact Todd Rodriguez.

Place of Service Errors
The OIG will review physician coding of place of service on Medicare Part B claims for services performed in ambulatory surgical centers (ASC) and hospital outpatient departments. The OIG will be looking to determine whether physicians properly coded the places of service on claims for services provided in ASCs and hospital outpatient departments.

Evaluation and Management Services During Global Surgery Periods
The OIG will review industry practices related to the number of evaluation and management (E&M) services provided by physicians and reimbursed as part of the global surgery fee. It will be looking determine whether industry practices related to the number of E&M services provided during the global surgery period have changed since the global surgery fee concept was developed in 1992.
 

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For those of you who have not been watching your Stark radar screen closely, be aware that CMS recently made a number of substantial changes to the Stark self-referral regulations that may affect your practice arrangements. Some of these changes will not take effect until October 1, 2009, but others changes will take effect on October 1, 2008. Key changes include (but are not limited to the following:

1.  “Stand-in-the shoes” Relationships – Under current regulations, physicians who refer to a Stark entity with which they have a financial relationship will be deemed to “stand in the shoes” (i.e., be treated as if they had the same compensation arrangements) of their physician organizations (e.g., their medical practice entity). CMS has clarified that, Effective October 1, 2008, this rule only applies to physicians who have an ownership interest in the physician organization – not physicians who are only employees, independent contractors or whose ownership interest is only titular.

2.  Services Furnished “Under Arrangements” -- CMS has in the past expressed concern over “under arrangements” ventures where a physician supplies items and services to a hospital for which the hospital bills the Medicare program and pays the physician fee. To address this concern, CMS has revised the definition of the term “entity” for purposes of the Stark prohibitions to the person or entity that actually performs a Stark services as well as the entity that causes a claim for the Stark service to be submitted to the Medicare program. This change will take effect on October 1, 2009.

 

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Document, document, document! is the cry of health care attorneys and consultants across the Country when asked what physicians can do to protect their practices from fraud and abuse liability.  But what happens if you receive a Medicare audit request and you find out that your documentation isn't so good or even non-existent?  Many physicians when faced with this prospect are tempted to recreate or alter medical record documentation.  Beware, this is probably the worst thing you can do in this situation. 

Poor or even non-existent medical record documentation is not necessarily an indicator of fraud or abuse.  In many cases it is simply an indication of the need for documentation and coding education or better record keeping protocols.  In these circumstances, a physician may have to return some money to Medicare or other payors but will generally not be looking at civil or criminal penalties.  Recreating, altering or falsifying records, however can quickly turn a simple overpayment situation into a criminal case.  That's what has apparently happened to a podiatrist in New Jersey according to a recent article in the New Brunswick Home News Journal.  According to the article, in response to a request by a Medicare contractor for 25 medical records, the podiatrist re-wrote the records to enhance the Medicare claims under review and was charged with obstructing a federal audit.  The potential penalty for this: a maximum of five years in prison and as much as a $250,000 fine.

 So what can you do if your documentation falls short in the face  of an audit submission?  If the documentation exists but is simply illegible, you might include a typed transcription along with the original records.  If pieces of information are missing from a note, you can include an annotation explaining why the information is missing, but any such annotation should be signed and dated when made.  Back-dating is major a no-no.  Finally, when records are missing altogether, a letter to the auditor explaining the situation and offering to refund the amounts received may make sense.  In any of these circumstances, however, it is highly advisable to immediately consult with a knowledgeable health care attorney before doing anything.

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It is no secret that the federal government is very interested in the connection between gifts and other remuneration from drug and device manufacturers and physician decision-making when it comes to ordering those items.  At least one Senator has gone so far as to introduce legislation which would require disclosure of these financial relationships.  According to a recent article in the Baltimore Sun, some doctors are voluntarily refusing to accept gifts from industry. 

While the legal ramifications of accepting remuneration from industry for goods and services covered by federal payor programs are quite severe under the federal anti-kickback statute, the line between what will be tolerated (e.g., low cost meals coupled with an educational program) and what will land a physician in hot water has become blurred.  This confusion is likley due, at least in part, to the pharmaceutical and device industries' efforts to self-police through their own codes of conduct which permit conduct not expressly permitted under the anti-kickback statute. 

As the Baltimore Sun article illustrates, some doctors are beginning to recognize that even if a compensation arrangement with industry is permissible -- or at least tolerated -- under federal law, there may still be negative consequences to particpating.  In particular, the public may be left with the perception -- right or wrong -- that a doctor with industry ties has a conflict of interest.  The legal implications are no doubt important, but doctors should remember that how something will look on the front page of the newspaper may be just as important.

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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. Continue Reading...

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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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