In March 2016, we covered the conviction of Dr. Venkateswara Kuchipudi for violating the federal anti-kickback statute by referring nursing home patients to Sacred Heart Hospital (in Chicago) in exchange for kickbacks. For a summary of the case, please see our post here: Nursing Home Fraud Scam Results in Conviction for King of Nursing Homes

Dr. 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. On August 12, 2016, the U.S. District Court for the Northern District of Illinois sentenced Kuchipudi to two (2) years in prison and the return of over $786,000, consisting of overpayments and fines.

According to the Court, Kuchipudi had become more focused on making money than on the best interests of his patients, and knew that his scheme to refer nursing home patients for kickbacks was “morally wrong”.

The Hospital made the following kickbacks to Kuchipudi:  (1) it covered the costs of the physician assistants (PAs) and nurse practitioners (NPs) who exclusively treated Kuchipudi’s patients, while allowing Kuchipudi to bill Medicare and Medicaid for the services of the PAs and NPs treating his patients; (2) it inappropriately paid him rent payments; and (3) it paid him bogus teaching fees.

The prosecutors sought 6 to 8 years in prison for Kuchipudi, and stressed Kuchipudi’s greed in engaging in the scheme.  In his defense, Kuchipudi offered support letters from many of his patients, testifying to his selfless nature and years of patient-centered care. However, some of the most telling evidence of Kuchipudi’s intentions was that he frequently did not know why his patients were admitted to the Hospital or even who they were.  In addition, in the sentencing memorandum, prosecutors noted that Kuchipudi pressured the Hospital to pay for his meals at an expensive steakhouse in Chicago, which a Hospital executive agreed to do expressly in exchange for Kuchipudi’s admissions.

As we noted before, this case is an example of how violations of the federal anti-kickback statute can involve kickbacks in forms other than direct payment for referrals. It also serves as a reminder to physicians to carefully review their hospital relationships and arrangements with other providers to avoid running afoul of federal and state fraud and abuse laws. We encourage you to seek legal counsel with experience in the nuances of these laws and regulations if you have any questions regarding your arrangements with providers.

There are big changes coming to the Medicare incentive programs as we know them.  Beginning on January 1, 2017, the new Quality Payment Program (the “Program”) will replace all existing Medicare incentive programs with a comprehensive incentive model.  The Program will involve a modified set of EHR Meaningful Use requirements, new quality of care metrics, new cost efficiency goals and “clinical practice improvement activities” (for which physicians will be rewarded for care coordination, beneficiary engagement and patient safety).  The Program will also have a separate track for incentive payments associated with participation in Advanced Alternative Payment Models (such as Accountable Care Organizations) (“APMs“).

Congress provided for the development of the Program in the 2015 Medicare Access and CHIP Reauthorization Act (the “MACRA”).  Under the MACRA, the Program must be “budget-neutral” each year.  In other words, the rewards paid by Medicare to well-performing physicians and practices must be equally offset by the penalties levied against poor-performing providers.  The rewards will continue to take the form of payment adjustments to the Medicare Physician Fee Schedule.  The first year of payment adjustments will be 2019, based on data from the 2017 reporting year.  For 2019, the reward paid to (or penalty levied against) any provider may not exceed a 4% adjustment to the Medicare Physician Fee Schedule.  However, in subsequent years, the limits are set to increase, reaching a maximum of 9% in 2022.

The potential for substantial penalties under the Program has led to concerns that the Program will make it difficult for smaller practices with higher numbers of Medicare patients to be financially viable.  Foreseeing these economic issues, Congress earmarked $100 million over five years to help small practices successfully participate in the Program.

In June, the U.S. Department of Health and Human Services (“HHS”) announced that the first $20 million of these earmarked funds will be awarded by the end of 2016.  The recipients of the funding will be organizations that provide education, training and consultation on the Program to small practices.  In particular, these organizations will assist small practices in understanding what quality measures, EHR options and clinical practice improvement activities are most appropriate for their practices.  The organizations will also help small practices evaluate their options for joining an APM.  HHS has not announced when the organizations will begin training and educating small practices.

While the intention behind such training and education is laudable, it does not lay to rest the concern that small practices serving substantial Medicare populations will be under greater pressure and financial strain to continue to operate independently.  After all, the Program itself must remain budget-neutral.  If practices improve their compliance and quality of care metrics, payment adjustments will have to be reduced or compliance standards raised.  In the long-term, this may lead to small practices being forced to join an APM in order to continue to serve Medicare patients.

Stay tuned for updates on the Program from CMS, including details on the final regulations for the Program.  If you have specific questions about how the Program may affect your practice, be sure to contact a knowledgeable healthcare attorney.

The deadline for providers to file a hardship exception application to the electronic health record (EHR) meaningful use requirements for the 2015 reporting period is July 1, 2016.

If you have any concern that your practice or certain eligible professionals in your practice may have been unable to meet the meaningful use requirements for the 2015 reporting period, it may be appropriate for the applicable provider to file a hardship exception application with CMS to avoid future payment adjustments.  Note also that certain provider types may automatically qualify for a hardship exception for the 2015 reporting period without the need to file an application.

For more information, please see the Health Law Practice Alert recently published by Fox Rothschild LLP on this topic, accessible at this link:  Fox Rothschild LLP Health Law Practice Alert – Hardship Exception (June 17, 2016).

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:

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.

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:

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.

Earlier this month, the Centers for Medicare and Medicaid Services released a new tool designed to give providers and consumers insight into Medicare drug spending.  The Medicare Drug Spending Dashboard, which at present only includes 2014 data, summarizes information on 80 drugs, 40 of which are covered under Medicare Part B and 40 of which are covered under Medicare Part D.  Data on the dashboard (which is sortable) includes total drug spending, number of beneficiaries utilizing each drug, drug spending per user, beneficiary costs, and the annual change in average drug unit cost.

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.