Archives: Fraud and Abuse

Long gone are the days when drug reps enticed physicians with extravagant meals at five-star restaurants and box seats to the Phillies’ playoffs (and sadly, gone are the days when the Phillies actually made the playoffs).

According to a recent study published in the journal, JAMA Internal Medicine, physicians who are provided a meal for less than $20 from drug reps are more inclined to prescribe that rep’s name-brand drug, which is not always covered by insurance, over the less pricy bioequivalent generic.

Researchers from the University of California, San Francisco, the University of Hawaii, and the Pacific Health Research and Education Institute examined data from 280,000 physicians in Medicare’s prescription drug program from August through December 2013.  Four top-selling name-brand drugs were considered: Benicar and Bystolic, both of which are used to treat high blood pressure, Pristiq, used to treat depression, and Crestor, used to treat high cholesterol.

The study revealed that doctors who received a meal linked to Benicar and Bystolic promotion were 70% and 52%, respectively, more likely to choose the name-brand than those doctors who did not receive a free meal.  Those who received a meal linked to Pristiq were 118% more likely to prescribe Pristiq, and Crestor was linked to an 18% prescribing increase over the bioequivalent generic Lipitor.

Further, an alarming $73 billion per year is spent on name-brand drugs for which there is an equally effective generic, with patients themselves spending $24 billion of that amount.

Dr. Adams Dudley, the study’s lead author, remarked, “Doctors are human, and humans respond to gifts.”

Forgive me for being a skeptic, but isn’t it also quite possible that the sales pitch given during the meal was what actually influenced physicians’ prescribing habits? Call it naiveté, but let’s hope it takes more than a measly slice of pizza to buy our healthcare providers’ loyalties.

–Alexandra L. Sobol, Esq.

(Click here to view Ms. Sobol’s biography)

In a recent Advisory Opinion (No. 16-02), the OIG concluded that it would not seek sanctions against a state-run hospital (the “Hospital”) under the federal anti-kickback statute or the civil monetary penalty law for two arrangements under which the Hospital provides transportation aid and short-term lodging to pregnant women covered by federal health care programs.  Although the OIG stressed that the unique factors of the arrangements led to its decision, the OIG’s analysis offers some insight into its concerns regarding the provision of transportation and other aid to patients by a provider.

The Hospital is a state academic medical center that operates 11 Hospital-based clinics providing prenatal care (the “Clinics”).  The patients are primarily low-income women, and each is presented with the Hospital as a potential location for the delivery of her child.  In 2014, 97% of the Clinics’ patients who delivered at the Hospital had high-risk pregnancies.

Under the first arrangement, Hospital employees offer transportation aid to any Clinic patient with a high-risk pregnancy who expresses concern about the cost and distance of traveling to the Hospital for delivery.  The aid is offered in the form of mileage reimbursement or fare reimbursement (for public transportation).

Under the second arrangement, the Hospital offers a Clinic patient and her companions free lodging at an apartment building near the Hospital under certain circumstances.  The apartments have simple living accommodations and are staffed by an on-call nurse.  To be offered lodging, the patient must have a physician’s order justifying the stay.  As a result, the majority of the patients who receive free lodging under this arrangement have high-risk pregnancies requiring frequent monitoring.  Patients without high-risk pregnancies may be offered lodging only if they are experiencing contractions or are scheduled for induction of labor or delivery the following day.  All patients receiving free lodging also receive free transportation to the Hospital for delivery.

The Hospital stated that the purpose of the above-described arrangements is to allow Clinic patients to benefit from specialty and continuing care at the Hospital when close to the end of their pregnancies.  In its Advisory Opinion, the OIG acknowledged the Hospital’s legitimate purpose and concluded that it would not pursue sanctions against the Hospital under the federal anti-kickback statute or civil monetary penalties law, even though, in the OIG’s opinion, these arrangements implicated both laws.  The OIG emphasized that its decision was influenced by the unique circumstances of the arrangements, and that no individual factor (or any combination of factors other than all of them) would necessarily result in the same decision.  Nonetheless, the OIG’s concerns provide some insight into how the OIG would view similar arrangements in the future.

The OIG’s analysis rested on the following key factors of the arrangements:

  • The arrangements were beneficial to the patients because they provided continuity of care, access to specialty care, and focused on patients who lack sufficient financial means of delivering at the Hospital.
  • The aid given to the patients would be “modest” in nature and available only in limited circumstances.  Specifically, (i) the transportation aid would be available only if a patient expressed concern about her ability to afford the cost of traveling to the Hospital for delivery, and (ii) the lodging aid would be available only if the patient has a high-risk pregnancy or is scheduled for delivery the following day, and the patient receives a physician’s order justifying the stay.
  • The aid would not be advertised by the Hospital or the Clinics, and would be offered only to existing patients.  As a result, the OIG did not view this arrangement as being designed to serve as an inducement for patients to seek care at a Clinic or the Hospital over other providers.
  • Eligibility for the aid would not be limited to patients on the basis of their health insurance coverage.
  • The cost of the aid would not be claimed as bad debt or otherwise shifted to Medicare, Medicaid or another federal health care program.
  • The aid would be part of a program of care operated by a state-run academic medical center for the benefit of a large number of Medicaid and CHIP beneficiaries.  As a result, the OIG stated that it would expect the State to promote the integrity of the arrangements.

If you or your practice is interested in guidance on providing aid or other benefits to patients, be sure to consult experienced legal counsel.

The full text of the Advisory Opinion is available here:  http://oig.hhs.gov/fraud/docs/advisoryopinions/2016/AdvOpn16-02.pdf

Called by some the “King of Nursing Homes” for his many low-income nursing home patients in northeast Illinois, Dr. Venkateswara Kuchipudi was recently convicted for referring patients to Sacred Heart Hospital in Chicago in exchange for kickbacks.  Kuchipudi became the fifth physician and tenth defendant to be convicted for a massive Medicare and Medicaid fraud scheme that led to the closure of Sacred Heart Hospital.

Kuchipudi’s arrangement was not overly complicated.  He struck a deal with the Owner and CEO of Sacred Heart Hospital (who was recently sentenced to 4.5 years in prison) to refer all of his Medicare patients requiring hospital care to Sacred Heart in exchange for the Hospital’s assignment of an exclusive team of health care practitioners to treat Kuchipudi’s patients both inside and outside the Hospital.  In some instances, Kuchipudi referred patients to Sacred Heart for admission, despite the fact that other hospitals were closer in distance to the patients’ nursing homes and had better staffing and access to routine procedures, such as x-rays and lab work.

The arrangement allowed Sacred Heart Hospital to greatly increase its collections, netting the hospital owner upwards of $29 million over three years, while Kuchipudi was able to bill Medicare approximately $1.6 million for services provided by his exclusive team of Sacred Heart professionals.

Kuchipudi argued that his goal was to improve patient care and that he had no idea the arrangement could be construed as involving kickbacks for referrals.  The government countered by arguing that the anti-kickback statute is violated as long as at least one of the purposes of the arrangement is to induce referrals.  The jury sided with the government on 10 of the 12 charges.

Kuchipudi was convicted of one count of conspiracy to defraud the United States and nine counts of illegally soliciting or receiving benefits in return for referrals of patients covered under a federal health care program.  He was acquitted of two counts involving mileage reimbursements paid by the Hospital to one of the physician assistants assigned to treat Kuchipudi’s patients at nursing homes.

This case is another example of the federal government’s crackdown on fraud, waste and abuse in federal health care programs, and shows that violations of the federal anti-kickback statute can involve kickbacks in a form other than direct payment for referrals.  It underscores the need for physicians to carefully review their hospital and other provider relationships to be sure such arrangements do not – even inadvertently – run afoul of these complicated statutes.

Alexandra L. Sobol writes:

Since as early as the fifth century, physicians have taken an oath to do no harm. But one California internist was sentenced to 30 years to life in prison on Friday after three of her patients overdosed and died while under her watch. Dr. Hsiu-Ying “Lisa” Tseng, 40, of Rowland Heights, California was convicted of second degree murder for prescribing exorbitant amounts of painkillers to her patients.

Dr. Tseng, alongside her husband, Dr. Gene Tu, operated a strip mall clinic where she wrote more than 27,000 prescriptions over a three-year period. Her patients were generally young and paid in cash.

Dr. Tseng ignored all of the red flags: she was notified by authorities on numerous occasions of her patients’ overdoses and received countless phone calls from her patients’ families, begging her to stop over-prescribing their loved ones.

Many physicians have faced similar charges. This case, however, is precedential, as Dr. Tseng is the first doctor to be convicted of murder in connection with a patient’s overdose. Just a few months ago, Dr. Gerald Klein of Palm Beach, Florida was acquitted after being charged with first degree murder for running what prosecutors termed a “pill mill.” In 2011, Dr. Conrad Murray was only convicted of involuntary manslaughter, not murder, in a widely-publicized trial after the death of Michael Jackson.

Many are concerned that Dr. Tseng’s verdict will cause physicians to drastically limit the number of painkillers they prescribe, even to those with a legitimate medical need, for fear of facing a similar fate. One thing is certain: state medical boards must better police their own to ensure that doctors like Tseng aren’t able fly under the radar for so long.

“The message this case sends is you can’t hide behind a white lab coat and commit crimes,” Deputy District Attorney John Niedermann remarked according to an article in the LA Times. “A lab coat and stethoscope are no shield.”

The Affordable Care Act (ACA) requires Medicare providers to return overpayments within 60 days of the date they are identified in order to avoid liability under the False Claims Act.  Four years ago, CMS issued a proposed rule to implement this statutory requirement that would have placed a substantial burden on providers to identify and return overpayments within the 60-day period.  Last week, CMS issued its long-awaited “final rule” on the matter. The final rule is substantially less burdensome than the proposed rule would have been and offers providers a clearer view of their obligations to investigate and report overpayments.

Here are five key aspects of the final 60-Day Overpayment Rule that physicians and medical practices should keep in mind:

  1. What It Means to Identify an Overpayment

CMS clarifies that identifying an overpayment requires reasonable diligence and quantification of the overpayment.  Specifically, a provider has “identified” an overpayment when the provider “has or should have, through the exercise of reasonable diligence, determined that it has received an overpayment and can quantify the amount of the overpayment.”  In contrast, the proposed rule would have held providers to a “deliberate ignorance” or knowledge standard regarding the existence of an overpayment and would have included no leeway for quantification of the overpayment.

  1. The New Timeframe In Which Providers Must Identify Overpayments

One of the biggest questions that arose from the proposed rule was: “When does the 60-day clock to identify overpayments start ticking?”  The proposed rule called for providers to act with “all deliberate speed” to identify overpayments once they became aware of a possible billing error.  In its final rule, CMS provides a clearer answer to the question.  Providers will have up to 6 months to investigate a possible overpayment before the 60-day reporting period begins.

  1. The “Look-Back Period” Is Shortened

Part of a provider’s obligation with respect to overpayments under the ACA is to search through past records for overpayments after a provider identifies that it has received at least one overpayment.  CMS originally proposed a requirement that providers “look back” 10 years in their records for other overpayments in order to comply with this rule.  Acknowledging the unreasonable burden such a time period would impose on providers (both in effort and cost), in the final rule CMS has reduced the duration of the look-back period to 6 years.

  1. Documentation of Reasonable Diligence Is Advisable

In prefatory comments to the rule, CMS stated that it is “certainly advisable” for providers to document their diligence in investigating possible overpayments.  While documenting an investigation may not make a provider’s diligence “reasonable” per se, it may provide strong evidence of the provider’s efforts.

  1. Proactive Compliance

CMS emphasizes in the final rule that “reasonable diligence” requires not only reactive activities, such as a good faith investigation of potential overpayments by qualified individuals, but also “proactive compliance activities conducted in good faith by qualified individuals to monitor for the receipt of overpayments.”

The full text of the final rule may be accessed here:  https://www.federalregister.gov/articles/2016/02/12/2016-02789/medicare-program-reporting-and-returning-of-overpayments.

Be sure to consult experienced legal counsel if you would like further guidance on the Medicare 60-Day Overpayment Rule, including what steps your practice should take to proactively and reactively address potential overpayments.

Under the federal Affordable Care Act, physicians and other providers have only 60 days to refund overpayments to the Medicare program before they face potential liability under the False Claims Act.  In addition, if CMS or the Medicare Area Contractor (MAC) identifies an overpayment, physicians have a limited period of time to respond or reply to the overpayment demand before CMS begins to recoup the overpayment.  A useful tool for understanding this process is this recently revised Medicare Learning on Medicare Overpayments.

This week the Office of Inspector General (OIG) published Advisory Opinion 15-16 addressing a 501(c)(3) charitable foundation (the “Requestor”) that would seek donations from third parties (including drug manufacturers) and provide financial assistance with out-of-pocket patient expenses for outpatient prescription drugs.

Under the proposed arrangement, the Requestor would maintain two disease funds, one of which would provide assistance to patients with various types of cancer, and the other of which would provide assistance to patients with chronic kidney disease or iron deficiency anemia. donors could earmark their donations for either fund but would have no control over the specific types of diseases each fund would apply to.

The OIG concluded that the proposed arrangement would not violate the federal prohibition against inducements to patients in the Civil Money Penalties law and that it would not impose sanctions under the federal anti-kickback statute. In coming to these conclusions, the OIG cited the following characteristics of the arrangement:

  • No donor, affiliate of any donor, physician, or health care provider would exert direct or indirect control over Requestor or its program.
  • Before applying for assistance, each patient already would have selected his or her health care providers, practitioners, or suppliers, and already would have a treatment regimen in place so that the existence of the program would influence the selection of a provider.
  • donors would not receive any data that would facilitate a donor in correlating the amount or frequency of its donations with the amount or frequency of the use of its drugs or services.
  • No donor or affiliate of any donor would influence directly or indirectly the identification or delineation of the diseases covered by its two disease funds.
  • The determination of a patient’s qualification for assistance would be based solely on his or her financial need, without considering the identity of any of his or her health care providers, practitioners, suppliers, drugs, or insurance plans; the identity of any referring party; or the identity of any donor.
  • The Requestor would assist all eligible, financially needy patients on a first-come, first-served basis to the extent funding is available.

This week, the Office of Inspector General (OIG) issued OIG Advisory Opinion No. 15-15 regarding a proposed arrangement in which a hospital would bill a radiology group for transcription of the radiology group’s reports for patients who are not hospital patients, but rather patients of a third-party clinic that provides radiology studies and refers to the radiology group. Under the proposed arrangement, the clinic would perform the technical component of radiology studies and transmit the results of the studies to the radiology group for interpretation.  The hospital would transcribe the professional component interpretive reports and bill the radiology practice a fixed transcription fee on a per line basis.

The OIG noted that because the clinic is a referral source to the radiology group, if transcription costs were reimbursed as part of the Medicare payment for the technical component, these costs would be the responsibility of the clinic and the payment of the transcription fees by the radiology group could be viewed as an improper kickback to the clinic. However, according to the OIG, the Centers for Medicare and Medicaid Services takes the position that when the technical and professional components of a test are performed by different parties, the parties may determine who will pay the transcription costs.  Accordingly, the OIG concluded that payment of the transcription fees by the radiology group would not be an improper inducement and, therefore, that the arrangement would not violate the anti-kickback statute.

Commercial payors are actively looking for ways to reduce payments to out-of-network providers.  One area of focus is discounts and waivers of patient copayments and deductibles by out-of-network providers.  In the eyes of these payors, coinsurance/copayments are essential to incentivizing patients to use in-network providers, and discounts on (or waivers of) coinsurance/copayments by out-of-network providers often result in higher costs to payors.

To challenge these discounts, some payors have denied reimbursement on claims where the patient’s copayment/coinsurance has been waived by an out-of-network provider.  Others have taken legal action, bringing cases for fraud and other claims, and arguing that they are not required to pay for items or services for which the patient is not billed.  There has been a special focus by some payors on instances where the provider “overstates” its charges in order to recoup the discounts or waivers of coinsurance/copayments it offers to patients.

The legal landscape is evolving on this issue; however, there are cases on the docket that may address certain aspects of this issue sooner rather than later.  Stay tuned to Fox Rothschild’s Physician Law Blog for updates.

In the interim, here are a few tips to keep in mind when considering whether to offer discounts on (or waivers of) coinsurance/copayments with respect to out-of-network plans:

  1. Consider offering the discounts solely in return for prompt payment by the patient. Under the federal Anti-Kickback Statute and other state anti-kickback laws, discounts could be considered remuneration to patients in exchange for purchasing of health care services.  However, the U.S. Office of Inspector General (OIG) has acknowledged that discounts for prompt payments of coinsurance/copayments may be permissible if they are not intended to induce purchases of services.  Note that the amount of such discounts should correspond to the savings in collection and billing costs of the Practice.
  1. Consider disclosing to payors your intent to offer the discounts to patients.  Based on recent case law, if a payor is aware of the out-of-network provider’s intent to offer discounts to patients, the payor is less likely to have a case for fraud against the provider.  See North Cypress Medical Center Operating Co. v. Cigna Healthcare, 781 F.3d 182, 205 (5th 2015) (available online here: http://www.ca5.uscourts.gov/opinions/pub/12/12-20695-CV0.pdf).  However, simply notifying payors of your intent to offer a discount would not address the risk of violating the federal anti-kickback statute and other state anti-kickback laws.  In addition, payors could deny your future claims based on the theory that the payor has no obligation to pay where the patient incurred no liability.  Therefore, payors should be notified only after discussing all options with your legal counsel.
  1. Avoid overstating charges for services provided.  If you offer discounts or waivers of coinsurance/copayments for services provided to patients of payors with which you are out-of-network, avoid charging the payors for the full cost of the services.  In addition, ensure that the charges reported to the payor reflect both the amount of coinsurance/copayment paid by the patient and any discount or waiver which you provide to the patient. Overcharging payors may be illegal under your state’s insurance laws, and, with respect to federal government payors, may lead to liability under the federal False Claims Act.
  1. Beware of “most-favored nation” clauses in your in-network provider contracts.   A most-favored nation clause requires a provider to charge a payor the lowest price it charges to any payor for a service.  If you charge payors with which you are out-of-network less to avoid overstating charges, you could also be required by your in-network payor contracts to charge the same rates for services billed in-network.

Finally, offering discounts or waivers of coinsurance/copayments is a complicated and unresolved legal issue.  You should consult a knowledgeable attorney to discuss the latest developments before taking any actions.

A new article in the online journal, JAMA Internal Medicine, highlights the importance for physicians of keeping valuable non-public information confidential.  Under insider trading laws, it is illegal for anyone to trade securities based on non-public information and for anyone to supply information to others who trade on such information, if the person sharing the information has an obligation to keep it confidential.  Examples of valuable confidential information to which you might be privy include data and opinions regarding unpublished or ongoing clinical trials or new medical equipment, and information regarding acquisitions involving public health care companies.

Physicians may share their opinions with investors about medical research or other valuable information that is already public knowledge, but the line quickly becomes blurry when it comes to non-public information.  If you are asked to share information with a potential investor that you think may violate insider trading laws, it would be best to consult your legal counsel before disclosing the information.  This includes instances where you are asked to disclose information to, or participate in, “expert consulting networks” and online physician forums.

The line is also blurry for physicians when disclosing non-public information to other physicians and scientists for medical research purposes.  Be careful to disclose such information only  for research purposes.  If you become aware that one of the recipients of the non-public information may be using such information to trade securities, cease disclosing the information immediately and consider seeking legal counsel.

The online JAMA article is accessible in full at this link:  http://archinte.jamanetwork.com/article.aspx?articleid=2457402