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

In what would undoubtedly be a devastating blow to many medical practices that rely on the Stark in-office ancillary services exception (which allows physicians to refer within their practices for Stark services), President Obama's proposed FY 2014 would seek to eliminate the exception for physical therapy, radiation therapy and advanced imaging such as CT and MRI.  The budget suggests that the exception may still apply for those providers that meet certain "accountability standards" established by the Secretary of the Department of Health and Human Services.  The proposed budget offers no further detail on what these accountability standards might be. 

Although passing budgets has not been much of a priority in Washington for the last few years, this proposal clearly demonstrates that these services in the physician office setting are targeted for extinction.  Practices that offer these services should begin making contingency plans now to divest or restructure in the event that the exception is eliminated.

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Adding an interesting wrinkle to an already complex environment, the Federal Trade Commission filed a suit this month to block an Idaho hospital from acquiring a physician practice.  According to an article on thomsonreuters.com, the FTC and the IDAHO Attorney General have filed an antitrust complaint  seeking to block St. Luke's Health System's acquisition of Saltzer Medical Group, a large multi-specialty practice.  The FTC's alleges that the acquisition would result in St. Luke's having a 60% share  of the local primary care market.  This most recent foray into the physician/hospital acquisition arena suggests that a truly integrated delivery model may simply not be possible in some markets.

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Yesterday the U.S. Department of Justice announced that it has entered into a $26M False Claims settlement with a dermatologist in Florida.  According to the DOJ, this is one of the largest False Claims settlements against an individual in history.  The physician was accused of allegedly accepting kickbacks from a pathology lab and billing for medically unnecessary services. 

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I imagine that few physicians contemplated being part of organized labor when they enrolled in medical school but as more and more physicians make the leap from private practice to hospital employment, perhaps large-scale unionization of the physician workforce could become a reality.  According to an article by David J. Leffell today on WSJ.com, the notion is perhaps not as far-fetched as we might have thought.  Mr. Leffell notes that one of the side-effects of the shift by physicians to employee status will be the right to engage in collective bargaining.  This presumably would also entail the right to strike -- likely not the ideal model for the delivery of quality care.  The implications of physician unionization are so monumental that one must wonder whether this possibility is an unintended consequence or an intended result. 

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Last week the U.S. Department of Health and Human Services (HHS) released final regulations modifying existing HIPAA enforcement, privacy and security regulations. Although a number of the changes merely serve as clarification of existing regulations, the modifications impose a number of new requirements on covered entities and business associates.

Some of the important issues addressed in the new rules include the following:

• Clarification of the definition of a privacy breach;
• Adoption of risk assessment factors to be taken into consideration in conducting a breach analysis;
• Modifications to the limitations on the use and disclosure of protected health information for marketing and fundraising purposes;
• Modifications regarding business associates including changes to the definition of a business associates and when business associates may held directly liable for violations;
• Modifications to the required terms in business associate agreements; and
• Modifications that covered entities are required to make to their Notices of Privacy Practices.

The new regulations take effect on March 26, 2013 and covered entities and business associates have until September 23, 2013 to comply. The regs were published in the Federal Register on January , 2013 and can be viewed here Federal Register.

Check back for more detail on the required business associates and NPP changes.
 

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According to a recent study published in the Journal of the Association of American Medical Colleges, a primary care physician who graduates with education debt of $160,000 should be able to raise a family, live in an expensive urban area, and repay their debt in 10 years without incurring additional debt, as long as their household income and spending are consistent with median statistics. However, the ability to meet education debt repayment obligations as a primary care physician becomes significantly more difficult when the education debt is $200,000 or more. According to the study, of 2011 medical school graduates, 59% had education debt of $150,000 or more at graduation, 33% had more than $200,000, 15% had more than $250,000, and 5% had more than $300,000.

By national standards, physicians – even primary care physicians -- have a pretty good earning capability. However, the financial, emotional and physician investment required to earn a medical degree and complete training is daunting – particularly when coupled with the fact that most physicians cannot begin saving for retirement in a meaningful way until their early to mid-thirties. With the emphasis placed on primary care under the federal Affordable Care Act, what will the federal government need to do to entice the best and the brightest to go into primary care? 
 

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If you're like most physicians, you have probably given some recent thought to selling your practice or merging with one or more other groups.  If you are part of a group practice, it's quite possible that all members of the group might not agree on a single course of action.  Keep in mind that even if your corporate agreements say that "majority rules", dissenting shareholders may have certain rights under state law, including the right to fair value for their shares in the practice.  For an idea of what can happen if these dissenter's rights are ignored, have a look at this recent article on Indystar.com.

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This week the Office of Inspector General of the Department of Health and Human Services published Advisory Opinion 12-15 in which it blessed an on-call compensation arrangement between a hospital and specialist physicians on its staff.  In finding that it would not prosecute the arrangement, the OIG pointed to several "safeguards" which it felt would adequately protect against a violation of the anti-kickback statute.  Among others, these included the following protections:

1. Based on an independent valuation, the per diem payment amounts were stipulated to be commercially reasonable, within the range of fair market value for actual and necessary services provided without regard to referrals or other business generated between the parties;

2. The hospital allocates funds for call coverage for each participating specialty and calculates the per diem annually, in advance, without regard to the individual Participating Physician’s referrals to the hospital;

3. Participating Physicians provide actual and necessary services, for which they are not otherwise compensated, including that Participating Physicians must respond within 30 minutes to a request from the hospital’s emergency department and, in some cases, must provide follow-up care.

4. The hospital offers the opportunity to participate in the arrangement to all specialists on its staff who are required by its bylaws to take unrestricted call and the method of scheduling on-call coverage is governed by a uniform equitable policy that does not take referrals into account.
 

Although an OIG Advisory Opinion may only be relied upon by the parties requesting it, this Advisory Opinion may provide useful guidance to hospitals and physicians in ensuring that their on-call arrangements are compliant.

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On October 9, the Pennsylvania Department of Health (PA DOH) announced that it has changed the Pennsylvania rules regarding the J-1 Physician Waiver Program. DOH has established three filing periods, which could result in the Conrad 30 numbers being assigned earlier in the fiscal year. Read the entire text: http://immigrationview.foxrothschild.com/j-1-waiver/j-1-physician-waivers-in-pennsylvania-change-in-processing-times/

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According to a a major study published in the Archives of Internal Medicine this week, almost half of physicians surveyed (over 7,000 physicians were surveyed), reported at least one symptom of burnout.  As a recent article in the Atlantic points out, although physician burnout may not be news to most physicians who are living with the realities of shrinking reimbursements, growing costs and increasing administrative burdens, the general public may not have a real understanding of what this means for them.  Given the financial and time investment required to become a physician, the health care reform debate likely scared a lot of folks away from attending medical school already. 

For the public, fewer physicians surely means less access to care.  More people may have insurance coverage under the Affordable Care Act but insurance coverage will do little to address the impending access problem.  Interestingly enough, however, this shortage is likely to have a silver lining for physicians who choose to stay in practice:  short supply means higher demand and higher demand is likely to mean increased reimbursement.  In other words, those hearty souls who elect to continue to brave the storm of medical practice over the next couple of years will likely be able to demand higher reimbursement rates for their services.  In fact, some doctors may find that patients are willing to pay cash to avoid waiting for care.  Stay tuned - the pendulum may be swinging back before you know it.

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Recent press releases provide notice of activities that draw the government's ire -- and result in serious criminal consequences.  Focusing on these issues is a helpful exercise for any physician trying to stay within the law.  The cases include:

*    An Illinois physician ordered medically unnecessary tests for patients, used false diagnosis codes to justify the tests, and then submitted claims for government reimbursement.  The government's evidence included testimony that the defendant administered EEGs, EKGs and other tests for an unusually high number of patients, which was perhaps the trigger to a more detailed government review of his practice.  For his efforts, the defendant was given a 2-½ year prison sentence. 

*    Two Mississippi residents plead guilty to charges of billing Medicare for chemotherapy services that were never performed.  The defendants were caught when the services billed exceeded the volume of chemotherapy drugs actually purchased from suppliers, and the activities were made worse by efforts to cover up the fraud in advance of a scheduled audit.  The defendants will be sentenced in October, and face up to 20 years in prison. 

*    A 31-year old physician assistant in Texas plead guilty to his part in a scheme involving pre-signed prescriptions that the assistant then issued to patients -- without the physician having participated in the consultation or the decision to prescribe medicines.  The fraud took the form of false representations that the physician was involved because the services would have been ineligible for government reimbursement absent the doctor's involvement. The defendant faces a maximum sentence of five years in prison. 

*    A Rhode Island physician's assistant was convicted of taking kickbacks in a scheme involving payments from a medical device company in exchange for prescriptions that ordered the use of that company’s devices. This violated the Anti-Kickback Law.  He was sentenced to one year in prison, and ordered to pay a fine -- with his sentence having been upgraded because he lied to a grand jury and a government investigator.  The investigation with respect to others is ongoing.

*    A New Jersey doctor was convicted of accepting cash kickbacks in exchange for referring patients to a medical diagnostic facility, and was caught when he accepted payments from a cooperating government witness. 

*    Finally, this month's special award goes to a California physician who was sentenced to six years in prison for medical services provided by a health clinic.  Unfortunately, the clinic provided no services.   Instead, the mostly non-English speaking visitors to the clinic were paid $100 per visit for their Medicare eligibility, which the clinic then used to create false charts for tests that were never conducted -- and submitted these as claims to Medicare.  Compounding the problem, the defendant tried to flee to Canada with cash, a fake passport and a bottle of hair dye.  Needless to say, the sentencing judge did not find her sympathetic.  In fact, the judge made a point of emphasizing the defendant's exemplary education, finding a lack-of-knowledge defense ridiculous.  (Other participants in the conspiracy received extended prison time or still await sentencing). 

These cases provide lessons for practicing physicians.  First, assume the government will be reviewing records of the tests administered to patients, and ensure that all tests are medically necessary.  Next, it also may be advisable to periodically compare the quantity of drugs utilized to the services rendered to ensure that there is a reasonably relationship between the two.  Third, any offer to provide remuneration in exchange for services or referrals should be a "red flag" for fraud.  Finally, and perhaps most importantly, any activities that are handled by others should be periodically examined -- preferably without advance notice lest a criminal actor hide his/her tracks -- to make sure that others are not submitting false claims without approval.  Otherwise, you might be the next physician whose education renders a lack-of-knowledge claim incredible.

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Do you have a succession plan for your medical practice? In my experience, too many physicians wait until close to retirement age to begin developing a plan to transition out of practice. Given the volatility of the healthcare market, you should certainly not assume that there will be a ready and willing buyer for your practice if and when you decide to slow down or retire.

If your local hospital, or another practice or physician in your community is not interested in purchasing your practice, you could be out of luck. Without someone to take over the practice, your only option is to close your doors and liquidate your assets. If you're lucky, you may find a local physician who will take custody of your medical records, but if not, you will need to pay to store these to the extent required by law.
 

To ensure against the possibility that there may be no external market for your practice, consider developing an internal succession plan pursuant to which junior physicians will, over a period of years, develop greater involvement in the practice affairs and ultimately be in a position to assume the practice and buy you out. Bear in mind, however, that finding and training the right candidate(s) - not only those capable but also willing - to take over your practice may take several years. Accordingly, it is important to begin practice succession planning well before you are ready to transition out of practice.

Keys to a successful practice succession plan will include the following:

1. Physician candidates who are both capable and willing you to become practice leaders and ultimately owners. Not every physician is cut out to own or manage a medical practice. Just because someone is willing to take on additional responsibility does not necessarily make them the right person to do so. In addition, the idea of owning a medical practice is alluring to many junior physicians but very few receive any kind of business training in medical school or residency. Accordingly, several years of on-the-job training may be necessary before a junior physician is ready to take leadership responsibility.

2. A "buy-in" and "buy-out" mechanism which attracts the right candidates and creates incentives to follow through with the succession plan. The buy-in and buy-out formulas should make sense and be explainable. If either the buy-in or buy-out is perceived to be too costly, otherwise qualified junior physicians may balk at taking on the responsibility of practice ownership.

3. Realistic expectations regarding practice values and transition timing. Senior physicians must be willing to acknowledge that in order to attract and retain qualified junior physicians, the cost and timeline to become an owner must be realistic. Similarly, junior physicians should acknowledge that few physicians will be capable of running a medical practice only one or two years out of training.
 

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Health care fraud and abuse enforcement activity is at an all-time high yet many physicians and other providers lack a basic understanding of the key healthcare fraud and abuse statutes that apply to them.  Although each state may have its own fraud and abuse laws, any healthcare provider that receives federal funds should be familiar with three significant federal fraud and abuse statutes: the anti-antikickback statute, the federal false claims act and the physician self-referral law (also known as the Stark law). 

Each of the statutes imposes a different set of prohibitions on healthcare providers and each carries separate but significant penalties for violation. For an introductory overview to each of these statutes, consider listening to the brief podcasts produced by physicianspractice.com at the following links:

http://www.physicianspractice.com/podcasts/content/article/1462168/2048688

http://www.physicianspractice.com/podcasts/content/article/1462168/2048678

http://www.physicianspractice.com/podcasts/content/article/1462168/2048188

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I have been speaking with physicians for years about the importance of developing effective fraud and abuse compliance programs in their practices and I often still get the same response:  The government is only interested in the big fish like pharmaceutical manufacturers and hospitals -physicians are under the radar. 

Well, contrary to popular belief, it appears that there are some pretty big fish in the physician community when it comes to fraud enforcement.  The Department of Justice announced this week the largest Medicare fraud bust by dollar amount of a single physician ever. Dr. Jacques Roy of Texas was accused on Tuesday of a fraud scheme which resulted in improper payments from the Medicare and Medicaid programs totaling in excess of $375 million and spanning more than half a decade.

According to the DOJ, Dr. Roy allegedly certified or directed the certification of more than 11,000 individual patients from more than 500 home health agencies over the past five years. Between 2006 and 2011, Dr. Roy's medical-practice allegedly certified more Medicare beneficiary for home health services and any other practice in the country. 

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There's an interesting piece in the Miami Herald today regarding hospitals once again acquiring physician practices. The article raises some good questions regarding the motivations underlying this growing (recurring) trend and suggests that it might be more about control than preparing for a "reformed" health care system. The article also questions whether hospitals will be any more successful this go-round in managing the acquired practices than they were in previous attempts.

I frequently represent both hospitals and physicians in practice acquisition transactions. In my experience, only a handful of hospitals and health systems have a true plan for how they will integrate the practices they are acquiring in a manner that will improve the delivery of healthcare. To be sure, how best to integrate providers to improve care is not an easy question to answer. I find, however, that the "smart" hospitals and health systems are willing to acknowledge that physicians should be involved in the development process and that they (the hospitals) do not necessarily have all the answers for how best to accomplish that goal.

If you are considering selling your practice to a hospital, or you are a hospital looking to integrate the physicians in a thoughtful way, consider whether it makes sense to begin the process with a dialogue about where each party envisions the relationship to be several years in the future. If you can reach consensus on where you want to end up, you can then structure a transaction which is specifically designed to get you there.
 

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By David Restaino, Esquire

Federal prosecutors continue to focus their efforts on preventing health care fraud, as evidenced by a recent case arising in Texas. Earlier this year, a Houston doctor (Dr. Christina Clardy) was convicted of three counts of mail fraud, 14 counts of health care fraud and one count of conspiracy to commit health care fraud – all relating to over $45 million in false billings to Medicare and Texas’ Medicaid programs. In particular, the scheme involved a nursing service having billed over $25 million in physical therapy services under Dr. Clardy’s physician provider numbers.

The documents produced at trial included a letter from the doctor showing her knowledge of the fraudulent activities, specifically, requiring her employer’s owner to immediately cease all billing under her number or she would notify the authorities – which she never did even though the billings continued. The evidence against Dr. Clardy was compounded by her receipt of large cash payments from the owner soon after her letter was sent.

The Court recently announced its sentence against Dr. Clardy. The sentence serves as a clear warning to physicians who are tempted by the illegal profits to be made from defrauding Medicare and Medicaid: Dr. Clardy will be spending 135 months in federal prison and must personally pay over $15 million in restitution. This sentence is in addition to the separate sentences handed out against two other convicted defendants involved in the scheme; a fourth person will be sentenced this month.
 

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Have you or your practice been the subject of a negative online review? If not, there's a pretty good chance that you might be in the future. Online physician rating websites are proliferating and it is becoming increasingly common for disgruntled patients to vent their frustrations on the World Wide Web. Even worse is the fact that many of these websites permit anonymous posting, so you may not even know who your detractor is. It's finally, case law generally exempts rating websites from liability provided they are only facilitating publication of the personal opinions of posters. None of this however means that you must take a negative online review lying down. In fact, given that a physician's reputation is one of his or her most valuable professional assets, I would encourage you to proactively protect your online reputation. Here are a few things you can do:

• Regularly (at least monthly) do an online search of your name and your practice's name to see if comments have been posted. Some search engines allow you to set up an "alert" to notify you by e-mail if your name appears in a search.
• If you know who the poster is, consider calling them and trying to work through their concerns to see if they would be willing to retract their online comment.
• Review the website's “terms of use” to see if the posting is in compliance them. Some websites prohibit posters from personally naming or attacking an individual physician or claiming malpractice on the part of a physician. If you believe a posting does not conform to the terms of use, there is typically a mechanism to report the posting and often the website will remove a noncompliant posting.
• If you have patients with positive things to say about you or your practice, encourage them to post positive comments on one or more of the available rating websites. Not only does this counter any negative comments but it can also push negative comments further down in the list so that they are less prominent.
• Consider involving legal counsel to advise you on your options. Sometimes a well drafted letter from an attorney to either the website or the poster is enough to encourage them to take down the posting.

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One of the common struggles I often come across in private medical practices is what to do when a senior physician wants to go part-time. In busy practices, this issue can be emotionally charged and I have even seen it lead to practice breakups.

Some practices simply take the position that either you work full-time, carry a full patient load, do surgery and take full on-call duties or there is no place for you in the practice. This can be a big mistake, especially if the senior physician seeking part-time status has a large patient or referring physician following.

In my experience, the key to successfully handling a physician’s transition to part-time status is having a clear documented policy in place well before the issue even arises. This takes the emotion out of the process and gives everyone fair notice of what to expect if and when they seek part-time status. Some of the key considerations that should go into a part-time policy are as follows:

• If the physician seeking part-time status is a shareholder or owner in the practice, consider whether going to part-time status should automatically require sale of his or her ownership interest back to the practice. Remember that being an owner in a business carries with it a lot of financial responsibility. Someone who is only part-time and eventually looking to move on to full retirement may be unwilling to accept these financial risks.

• The policy should spell out clearly the options for going to part-time status (e.g., no call, one last day in the office per week etc.), as well as the financial implications associated with that decision. The policy should address what will happen with the physician’s salary, bonus participation, benefits and other practice expenses such as malpractice insurance.

• The policy should spell out clearly that part-time status is of limited duration. Physicians should not have the expectation that they can drop to part-time status indefinitely; otherwise you could end up with a practice of all part-time physicians. Part-time status for senior physicians should be used as an interim step in the transition to full retirement. It is generally advisable to make termination of part-time status automatic at the end of a defined period of time so that the practice’s governing body is not forced to make a politically charged decision to either terminate part-time status or allow it to continue.

• Finally, it is critical to the success of any part-time policy that it be implemented consistently. While there can be some flexibility in implementation to account for practice needs at any given time, applying the policy in a discriminatory manner can create legal exposure for the practice and also undermine the policy’s effectiveness.

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Physicians are feeling the economic burn of the down economy perhaps more than the average American. Not surprisingly, creative physician joint ventures are proliferating in the healthcare industry as a means of stabilizing revenue streams and referral patterns. Unfortunately, many of these arrangements may raise questions under applicable fraud and abuse laws. One such proposed arrangement was the subject of the most recent (and negative) Advisory Opinion issued by the Office of Inspector General (OIG) of the Department of Health and Human Services.

The arrangement involved a proposed management services agreement for pathology services pursuant to which a physician-owned management company would provide pathology laboratory management services to a pathology lab. Under the management services agreement, the management company would provide all pathology services, utilities, furniture, fixtures, space and laboratory equipment. In addition, the management company would provide both marketing and billing services. For all of these services, the pathology lab would pay the management company a "usage" fee based on a percentage of the lab's revenue. Moreover, the management company would offer ownership interests to physicians in a position to refer to the pathology lab.

Noting that the arrangement could not meet any of the available safe harbors under the federal anti-kickback statute and citing the fact that the management fee would fluctuate with the volume or value of services performed by the pathology lab, the OIG found that the arrangement would pose a substantial risk of fraud and abuse and, therefore, refused to bless it.

When revenue is flat and costs are increasing, it is hard to blame physicians for at least considering potentially lucrative joint venture proposals. Of course, many such arrangements may be perfectly legal and may even be eligible for safe harbor protection under the various healthcare laws. That being said, physicians must always be mindful that penalties for violating federal and state laws can be catastrophic. For example, violation of the federal anti-kickback statute is a felony a felony, punishable by a fine of up to $25,000, up to five years in jail, or both as well as potential false claims liability. Therefore, when it comes to joint venture arrangements, the best course is to proceed with caution.
 

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These are uncertain times for physicians. Under the looming threat of major Medicare reimbursement cuts, rising administrative costs and an increasingly complex regulatory environment, many of the physicians I speak to feel paralyzed in their professional lives. They are afraid to make capital investments in equipment or technology or recruit new physicians to expand their practices for fear that the government or third party payors may pull the rug out from under them. Physicians are desperate to change their situation but unable to see a clear path forward.
If you share the above sentiments, consider that one of the best ways to overcome the anxiety associated with the present uncertainties in medicine is to develop a strategic plan for your practice. Developing a strategic plan requires that you take a hard look at where your medical practice is today and that you give real thought to where you want your practice to be in the future.

At a very basic level, a strategic plan should answer the following three questions:
1. Where are you now?
2. Where do you want to be?
3. How will you get there?

The more specific you can be in answering these questions, the more successful you are likely to be in developing and implementing your strategic plan. Moreover, a strategic plan need not necessarily be set in stone. Rather, you may find it necessary to modify your plan from time to time and, in fact, you should revisit the plan on a regular basis to see how you’re doing. A medical practice strategic plan should address at least the following key issues:

1. Geographic service area;
2. Scope of clinical services;
3. Physician staffing;
4. A managed care strategy; and
5. Strategic relationships and referral sources.

There are certainly many unknowns in the practice of medicine today. One thing we know for sure however is that successful businesses evolve and you cannot get anywhere standing still. If you have never done strategic planning in your practice, consider picking a weekend in the next six months to meet with your partners for this purpose. Meet somewhere away from your practice where you can devote a significant block of uninterrupted time solely to developing a strategic plan. There are plenty of resources available online to help guide you in your efforts and, if you are still not sure how best to proceed, consider engaging a professional who regularly deals with medical practice development to help lead your strategic planning session.
 

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According to an announcement this week, the Centers for Medicare and Medicaid Services (CMS) has extended its 5-year Physician Group Practice (PGP) Payment Demonstration program by another two years.  The extension period commenced on January 1, 2011.

Under the Demonstration program, ten (10) physician group practices had the ability to earn incentive payments based on the quality of care they provided over an established minimum benchmark for each of the quality measures.  All ten groups will participate in the extension. 

The Demonstration participants were successful in the initial 5-year period at meeting most of the quality benchmarks and, according to the announcement, CMS paid $110 million in incentives to seven of the Demonstration participants and four of the groups are to receive incentive $29.4 million of total savings to Medicare of $36.2 million.

CMS has used and intends to continue to use data from the Demonstration project to further shape policy regarding shared savings and Accountable Care Organization (ACO) payment models currently under development.
 

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We spend a great deal of time on this blog recounting stories of physicians and other providers who have run afoul of the various federal and state abuse laws applicable to the practice of medicine.  However, in my travels in working with physicians and group practices, it is apparent that many physicians still lack a basic understanding of the complex legal and regulatory framework within which they practice every day.  Many physicians operate under the mistaken belief that their greatest area of legal exposure is professional (malpractice) liability.  But, unlike fraud and abuse exposure, most physicians carry significant insurance against catastrophic malpractice claims.  Too few physicians appreciate the fact that running afoul of Medicare billing and coding requirements or entering into an arrangement which is a violation of the federal stark or anti-kickback statutes could result in significant overpayments which must be refunded to the Medicare program or even worse, massive civil money penalties or false claims liability.
 

Following a recent study in which the Centers for Medicare and Medicaid services (CMS) determined that residents were getting inadequate training on fraud and abuse laws, the Office of Inspector General (OIG) recently published a document entitled “A Roadmap for New Physicians Avoiding Medicare and Medicaid Fraud and Abuse”.  The document serves as a good primer on the various fraud and abuse laws which apply to medical practice under the Medicare program. Physicians are well-advised to not only review the document themselves but to have key office personnel including administrators, office managers and key billing personnel review the document as part of their regular compliance training.  Although this basic document cannot take the place of competent legal counsel, it will give physicians and their employees a fundamental understanding of the regulatory framework that applies to their daily practice and enough knowledge to know when to get health care legal counsel involved.
 

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We’ve known for a while now that the Medicare Recovery Audit Contractors ("RAC") program would eventually start impacting physicians and other Part B providers. That time has now come as medical practices and physicians are beginning to receive both audit and repayment letters from RACs. So, if you’re still not familiar with this aggressive audit and recovery program, you are well-advised to begin preparing for the possibility that some of your claims may be reviewed by a RAC.

The RAC program is a national effort by the Centers for Medicare & Medicaid Services ("CMS") identify and correct improper Medicare payments. The RACs (private entities under contract with CMS) cover four national regions and are paid a percentage of the amounts they recover. The RACs and their regions are:

• Diversified Collection Services, Inc. of Livermore , California , in Region A, initially working in Maine , New Hampshire , Vermont , Massachusetts , Rhode Island and New York .
• CGI Technologies and Solutions, Inc. of Fairfax, Virginia, in Region B, initially working in Michigan , Indiana and Minnesota .
• Connolly Consulting Associates, Inc. of Wilton , Connecticut , in Region C, initially working in South Carolina , Florida , Colorado and New Mexico .
• HealthDataInsights, Inc. of Las Vegas, Nevada, in Region D, initially working in Montana , Wyoming , North Dakota , South Dakota , Utah and Arizona .

RACs may identify improper payments in one of two ways: (1) automated reviews of paid claims – the RAC makes an overpayment (or underpayment) determination without requesting or review medical records; and (2) complex reviews which involve a manual review of medical records.

So what should you do if you receive a RAC repayment request or records request? First, make sure that the services in question are actually within the period subject to RAC review. Under the RAC enabling legislation, RACs may only go back three years and cannot review claims from prior to October 1, 2007.

Next, consider having your own coding expert review the services (under attorney-client privilege) to see if there’s a basis to mount an appeal. Under the RAC program, providers have a limited period of time to open an informal discussion with the RAC to raise issues with or provide additional information impacting upon the RAC determination. Providers may also appeal RAC determinations through the CMS claims appeal process. But, pay close attention to the deadlines outlined in the RAC determination letter because failing to meet the applicable appeal deadlines can cause you to lose your appeal rights.

More information about the RAC program can be found here: http://www.cms.gov/RAC/
 

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The United States Attorney’s Office for the District of Maryland has announced that St. Joseph Medical Center in Towson Maryland will pay $22 million to settle allegations that it violated the federal False Claims Act, the federal anti-kickback statute and Stark by entering into several improper professional services contracts with a cardiology group, MidAtlantic Cardiovascular Associates that involved the payment of illegal remuneration.

The DOJ alleged that St. Joseph paid kickbacks to the cardiology group through sham professional services agreements between 1996 and 2006. Specifically, the parties had entered into 11 professional services agreements which involved payments above fair market value, and/or payments for services that were either not rendered or not commercially reasonable.

Importantly, the settlement was the result of a qui tam whistleblower lawsuit brought by a group of cardiac surgeons who alleged that the service agreements were in violation of federal law. 

This settlement underscores the importance of ensuring that all financial relationships between physicians and hospitals to which they refer, including medical directorships, call coverage arrangements, rental arrangements and the like are for legitimate and necessary items/services and that payments are consistent with fair market value. 

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Two recent Advisory Opinions by the Office of Inspector General (OIG) shed some much needed light of the OIG's view of marketing by health care providers.  Last week the OIG published Advisory Opinions 10-23 and 10-24, both concerning a proposed arrangement between a sleep testing provider and a hospital.  The facts in both Opinions were very similar: the hospital contracted with a sleep testing company to provide certain sleep testing equipment and services.  Among other things, the sleep testing company would provide marketing services for the hospital's sleep center.  

In Opinion 10-23 the OIG concluded that the arrangement could potentially generate prohibited remuneration under the anti-kickback statute and that the OIG could potentially impose administrative sanctions if the parties proceeded with the arrangement.  In opinion 10-24, however, 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 OIG would not impose sanctions on the parties because the arrangement included sufficient safeguards against the risks if improper inducement.

In both proposed arrangements, the parties stipulated that the compensation to be paid to the sleep testing company was consistent with fair market value.  However, in Opinion 10-23, the compensation was on a per test basis (sleep company was paid each time a patient was tested) and in Opinion 10-24, the sleep company was paid a fixed amount regardless of the number of patients seen or tested.  Although Advisory Opinions may generally only be relied upon by the parties requesting them, these two contrasting opinions suggest that marketing as an element of an independent service agreement is not fatal to the arrangement under the kickback statute as long as the compensation is fixed in advance, does not fluctuate with the volume or value of services and is consistent with fair market value.

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Hot on the heels of the online article in the Wall Street Journal focusing on questionable physician billing practices and Medicare's Carrier Standard Analytic File database, another recent online Wall Street Journal article is now questioning the propriety of physician involvement in setting the relative values used to establish Medicare physician fees.  Citing the potential conflict of interest in having physicians decide how much their own services are worth, the article takes aim at the American Medical Association's Relative Value Scale Update Committee or the RUC as it is commonly known -- which the article refers to as a "secretive committee".  The article suggests that the RUC's disproportionate specialty representation and reliance on survey data which may in some cases be insufficient results in "out of whack" physician fees.   

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The recently enacted health reform law has ignited a great deal of public interest in rising health care costs and the underlying reasons for them.  Not surprisingly, fraud, waste and abuse in the system is a recurring theme.   Although of late the third party insurance companies and "corporate fatcats" have drawn most of the criticism in these cost discussions, at least one recent Wall Street Journal article suggests that abusive billing practices and fraud on the part of the Nation's physicians may be largely to blame.  The article states that this information can be gleaned from a Medicare database (The Carrier Standard Analytic File) which shows how much physicians are paid each year by Medicare.  The only problem according to the article is that the identies of the physicians in the database are protected from disclosure.  This right to privacy has been challenged and upheld in federal court, so there is little reason to believe that the physician information will be made public.  Nevertheless, physicians will no doubt be very disturbed by the unflattering light in which this article casts them and should be wary of the direction in which the health care cost discussion appears, at least according to the WSJ article, to be going.

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In July, the Centers for Medicare and Medicaid Services (CMS) released the much-anticipated final regulations that providers are required to meet in order to receive the Medicare incentives for adoption of a certified electronic health record system. In those regulations, In the final rule, CMS set forth 15 core elements which must be met in order to qualify for “meaningful use” of the EHR system.

Notwithstanding the regulations, the requirements are complex and many physicians and other providers have a host of questions regarding both the regulations and the incentive program. To address some of these questions, CMS has issued a number of Frequently Asked Questions (FAQs) on its website. To review the new EHR FAQs, physicians can click here and type the term “EHR” into the search window.

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Unfortunately, many physicians believe their activities are “under the radar” when it comes to fraud and abuse enforcement. A recent settlement announcement by the Office of Inspector General (OIG) of the Department of Health and Human Services illustrates that this is not the case. According to the press release, the OIG has entered into a $7.3 million settlement with three physician-owned entities, United Shockwave Services, United Prostate Centers, and United Urology Centers, for allegedly soliciting and receiving payments in violation of the federal anti-kickback statute.

Among other things, the OIG alleged that certain of the physician investors in the entities had suggested to hospital administrators that if the hospitals did not enter into contractual arrangements to utilize the entities’ services, the physicians would take their cases to other hospitals. In addition to the $7.3 million settlement, the entities also agreed to a five-year corporate integrity agreement under which an independent reviewer will monitor all of the contractual arrangements between the entities and any hospital in Illinois, Iowa and Indiana.

This recent settlement underscores the need for physicians and physician organizations to get serious about their compliance efforts.  All indications are that we will be seeing more and more enforcement actions against physicians in the months to come.

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The Centers For Medicare and Medicaid Services (CMS) has published the CY2011 Proposed Medicare Physician Fee Schedule for public inspection.  The Proposed Fee Schedule includes a number of provisions which, if adopted, would implement the recently enacted Affordable Care Act (ACA).  One of the proposed regulations would serve to clarify the requirement in ACA that physicians notify patients referred for imaging services within the physician's practice of alternate imaging providers. 

or someone in the physician’s group practice and provide the patient with a list of suppliers who furnish the service in the area in which the patient resides.

CMS has interpreted the ACA disclosure requirement to be effective only when the final rule is adopted.  If adopted in final, CMS would propose making the rule effective as of January 1, 2011.

The proposed rule includes the following clarifications:

1.  For the time being, the disclosure requirement would apply only to MRI, CT and PET, but CMS is asking for comments on whether the requirement should also apply to radiology and other imaging services;

2.  The disclosure notice should be written in a manner sufficient to be reasonably understood by all patients and must, as the ACA requires, be given to the patient at the time of the referral;

3.  Nothing on the disclosure notice or list of suppliers may indicate to the patient that he or she must receive imaging from a supplier on the list if not receiving the service from the referring
physician;

4.  The list can include on other "suppliers" of the services in question not including hospitals or critical access hospitals;

5.  The suppliers included in the notice should be located within a 25-mile radius of the physician’s office location at the time of the referral;

6.  The written notice must include no fewer than 10 other suppliers or all of the suppliers of the service within a 25-mile radius if there are fewer than 10;

7.  The list must include the name, address, phone number, and distance from the physician’s office location at the time of the referral;

8.  Finally, In order to document that this disclosure requirement has been satisfied, a record of the patient’s signature on the disclosure notification must be maintained as an element of the patient’s medical record.

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According to a recent article on Politico, federal lawmakers are close to passing legislation that would suspend until 2014 the 21% Medicare Physician Fee Schedule cuts that have been hanging over physicians' heads since January.  According to the article, under the bill physician payments would increase by 1.3% this year and another 1% in 2011.  In years 2012 and 2013, primary care physicians would get an additional raise equal to the gross domestic product plus 2%.  The House and Senate are expected to vote on the legislation as early as next week.
 

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Among its many provisions, the newly signed Patient Protection and Affordable Care Act has imposed a new requirement on physicians who rely on the Stark "In-Office Ancillary Services" exception.  Physicians who refer patients for CT, MRI or PET (or other Stark services as designated by the Secretary of HHS) that will be provided by the referring physician's practice under the Stark In-Office Ancillary Services exception must now inform the patient in writing at the time of the referral that the individual may obtain the services for which the individual is being referred from a person other than the referring physician's practice, and provide the patient with a written list of suppliers (who furnish such services in the area in which such individual resides.

The provision in the new law has an effective date of January 1, 2010, so absent clarification from Congress or HHS, the above requirement is effective immediately. 

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Under the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA), all Medicare suppliers of the technical component of advanced imaging services have until by January 1, 2012 to become accredited by an accreditation organization designated by the Secretary of Health and Human Services . This includes physicians, non-physician practitioners, and physician and non-physician organizations paid for the technical component of advanced imaging services under the Medicare Physician Fee Schedule. 

Advanced diagnostic imaging procedures include diagnostic magnetic resonance imaging (MRI), computed tomography (CT), and nuclear medicine imaging such as positron emission tomography (PET).

CMS has named the American College of Radiology (ACR), the Intersocietal Accreditation Commission (IAC), and The Joint Commission (TJC) as the accrediting organizations.

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On November 24, 2009, the U.S. House of Representatives passed the Medicare Physician Payment Reform Act" (H.R. 3961) which would repeal the scheduled 21% fee reduction scheduled for January 2010.  The legislation would also permanently replace the existing Sustainable Growth Rate (SGR) formula with a new formula that, according to the House summary:

• Removes items such as drugs and laboratory services not paid directly to practitioners from spending targets;
• Allows spending on most services to grow at the rate of GDP plus 1 percentage point per year (compared to GDP without any adjustment today);
• Allows spending on primary and preventive care services to grow at GDP plus 2 percent per year; and
• Encourages coordinated, innovative care by allowing Accountable Care Organizations to be responsible for their own growth paths, irrespective of reductions or increases that apply elsewhere in the system.
   

The bill is now on the Senate calendar for consideration.

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It is apparent that preventive care will take on greater importance in the "reformed " health care system and while Medicare historically did not cover routine or preventive screening services, the list of preventive services now covered by Medicare has grown in recent years.  Physicians should familiarize themselves with the applicable coverage and billing rules so as not to miss an opportunity to capture revenue for these services where appropriate.  To help physicians in this regard, CMS has published a guide to preventive and screening services for physicians and other providers.  Also, for a good overview on the OIG's current thinking on offering free screening services, physicians and other providers should have a look at the recent OIG Advisory Opinion 09-11 addressing free blood pressure screenings to walk-in visitors at a hospital.

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The original Stark II regulations included an 18 month moratorium on an exception to Stark that would have permitted physician to invest in specialty hospitals. Since expiration of that moratorium some physicians seeking more control over their practice environments have embarked on a mission to develop specialty hospitals as an alternative to the traditional acute care hospital setting.  However, hospital groups and certain legislators have also (unsuccessfully so far) attempted to ban physician ownership in these hospitals permanently. 

Efforts to ban physician ownership in these hospitals continue and in fact, if passed, the health care reform bill proposed by the Senate Finance Chairman, Max Baucus, would effectively prohibit physician ownership of specialty hospitals unless those hospitals had a Medicare Provider Agreement in place on November 1, 2009. This means that physicians who have invested money in hospitals that are under development could expect to lose their entire investment.

Support for Mr. Baucus’s ban on physician ownership in hospitals would appear, however, to not be unanimous in the Senate, according to a September 15, 2009 letter from Senator Diane Feinstein to Mr. Baucus.  In that letter, Ms. Feinstein states that “as the federal government continues to spend hundred of billions of dollars in federal funds to create jobs and stimulate the economy, it is nonsensical to approve legislation that will force ongoing construction on desperately needed projects to come to a halt.” Ms. Feinstein concludes her letter by requesting that Mr. Baucus consider changes to his proposed legislation that will allow facilities currently under construction to be brought to completion.

Physicians concerned about these developments should contact their representatives and professional societies.

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With the rollout of the Recovery Audit Contractor (RAC) audit program in full swing, physicians should be paying close attention to their medical record documentation efforts.  One of the Medicare documentation requirement that many physicians don't fully appreciate is the requirement that all medical records be signed by the performing physician.  Specifically, Medicare requires that medical records include a "legible identifier" for all services provided/ordered. According to the Medicare medical review documentation standards, the legible identifier must be in the form of a hand written or electronic signature (stamp signatures are not acceptable).  The medical review documentation standards can be found at Section 3.4.1.1 of the Medicare Program Integrity Manual.

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On July 1, 2009 CMS released a display copy of the Proposed FY 2010 Medicare Physician Fee Schedule. It is evident from a variety of the proposed policy changes that CMS intends to force primary care into a more prominent role – in some cases at the expense of specialists. In addition, imaging services in the office setting have been targeted for greater regulation and lower reimbursement

Among other things CMS is proposing to stop paying for consultation codes at a higher rate than equivalent evaluation and management (E/M) services. Practitioners would be required to use existing E/M service codes when providing these services instead. Resulting savings would be redistributed to increase payments for the existing E/M services.

CMS is proposing to increase the payment rates for the Initial Preventive Physical Exam (the “Welcome to Medicare” visit) to be more in line with payment rates for higher complexity services.

Overall, CMS believes these and other policy changes will result in an increase in payments to general practitioners, family physicians, internists, and geriatric specialists by between 6% and 8%.

CMS has also proposed tightening the requirements for suppliers of diagnostic imaging services by:

(1) proposing to reduce payment for services that require the use of expensive diagnostic equipment; and

(2) proposing that suppliers of the technical component of advanced imaging services such as computed tomography (CT), magnetic resonance imaging (MRI), and positron emission tomography (PET) be accredited beginning January 1, 2012. The accreditation requirement would apply to mobile units, physicians’ offices, and independent diagnostic testing facilities that create the images, but would not apply to the physician who interprets them.

CMS will accept comments on the proposed rule until August 31, and will respond to all comments in a final rule to be issued by November 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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