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.

Physician ancillary service joint ventures continue to proliferate and not surprisingly, federal and state regulators are on the lookout for arrangements which may violate fraud and abuse laws .  In its recent “Special Fraud Alert: Laboratory Payments to Referring Physicians”, the Office of Inspector General (OIG) has (once again) expressed concern over financial arrangement between physicians and clinical laboratories to which they may refer.  In the alert, the OIG focus on two types of financial arrangements which they believe raise substantial risk under the anti-kickback statute:

1.            Payments by clinical laboratories to physicians to collect, process, and package patients’ specimens; and

2.            Payments by clinical laboratories to physicians to report patient data to “registries” established by the clinical laboratories.

With regard to specimen collection arrangements, the OIG cites the following characteristics as potentially problematic:

  • Payments that exceed fair market value for services actually rendered by the physician;
  • Payment for services for which payment is also made by a third party, such as Medicare;
  • Payments made directly to the ordering physician rather than to the ordering physician’s group practice, which may bear the cost of collecting and processing the specimen;
  • Payments made on a per-specimen basis for more than one specimen collected during a single patient encounter or on a per-test, per-patient, or other basis that takes into account the volume or value of referrals;
  • Payments offered on the condition that the physician order either a specified volume or type of tests or test panel, especially if the panel includes duplicative tests;
  • Payments made to the physician or the physician’s group practice, despite the fact that the specimen processing is actually being performed by a phlebotomist placed in the physician’s office by the laboratory or a third party.

With regard to registry arrangements, the OIG cites, among other things, the following characteristics of concern:

  • The laboratory requires, encourages, or recommends that physicians who enter into Registry Arrangements perform the tests with a stated frequency (e.g., four times per year) to be eligible to receive, or to not receive a reduction in, compensation;
  • The laboratory collects comparative data for the Registry from, and bills for, multiple tests that may be duplicative or that otherwise are not reasonable and necessary;
  • Compensation paid to physicians on a per-patient or other basis that takes into account the value or volume of referrals;
  • Compensation paid to physicians which is not fair market value for the physicians’ efforts in collecting and reporting patient data; and
  • Compensation paid to physicians that is not supported by timely documentation memorializing the physicians’ efforts.

Physicians considering entering in to financial arrangements with clinical labs should review their arrangements carefully for compliance with not only the federal anti-kickback statute but other federal and state fraud and abuse laws.

Many physicians I speak with are still surprised to learn that the federal Stark statute imposes restrictions on income division within group practices.  These restrictions only apply to profits generated from any of the Stark “designated health services” and only those that are covered by Medicare and Medicaid (including managed care), but if your group provides any of these designated services, the Stark income division rules apply to you and  penalties for failing to comply are steep.  )  Penalties for violating this statute include a $15,000 civil money penalty for each tainted referral and for each claim submitted pursuant to a tainted referral, as well as potential false claims liability.

Here are some of the basics (but realize that Stark is a complex and technical law so if you think this is an issue for your group, you should consult with a knoweldgeable health care attorney).  Stark designated health services include the following:

–clinical laboratory services;
–physical therapy services;
–occupational therapy services;
–radiology, including MRIs, CAT scans and ultrasound services;
–radiation therapy services and supplies;
–durable medical equipment and supplies;
–parenteral and enteral nutrients, equipment and supplies;
–prosthetics, orthotics, and prosthetic devices;
–home health services and supplies;
–outpatient prescription drugs; and
–inpatient and outpatient hospital services

Most physician group practices rely upon what is known as the Stark “in-office ancillary services exception” to legally permit them to refer to and bill for Stark designated health services within their practices.  One of the conditions of this exception is that the practice must meet Stark’s definition of a “group practice”.  And, group practices may only divide Stark profits in a limited number of ways.

Under Stark, physicians in a group practice may receive a share of the practice’s overall profits derived from the DHS of the group provided the share is not determined in any manner which is directly related to the volume or value of referrals by such physician.  The regulations define “a share of the overall profits” to mean a share in either all of the profits derived from the Stark services of the entire group or of any component of the group that consists of at least five (5) physicians.  This means that Stark DHS profits may be allocated among all physicians in the group or among subgroupings of no fewer than five (5) physicians – bu even then, the profits may not be allocated to individual physicians in a manner that reflects their referrals to the stark services.

The Stark regulators have provided the following examples of permissible income division formulas:

–per capita division of the overall profits (i.e., equally among all physicians in the group);
–based on the distribution of the group practice’s revenues attributable to services that are not Stark services payable by federal or private payors;
–Any distribution of Stark revenues if the group practice’s Stark revenues are less than 5% of the group’s total revenues, and no physician’s allocated portion is more than 5% of that physician’s total compensation from the group.

Physicians may also be paid productivity bonuses for personally-performed services (or incident to personally perfomed services) as long as the bonus is not directly related to the volume or value of referrals for Stark services by the physician.

Stark is a strict liability statute, so penalties will attach to a violative arrangement whether the violation was intentional or inadvertant.  Therefore, if you have not reviewed your income division formula for Stark compliance, you should do so without delay.

 

 

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. 

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

 

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. 

In June of 2011, I reported on this blog about a software program being launched by the federal Department of Health and Human Services to use a technology called predictive modeling to identify fraudulent and abusive billing practices on a prepayment basis.  The program, known as the Fraud Prevention System, was funded through the The Patient Protection and Affordable Care Act of 2010 and carried an initial price tag of $77 million.  According to the Associated Press, initial results are back on use of the Fraud Prevention System and they are pretty disappointing.  Specifically, according to a recent article published by the AP, the program identified only a single case of fraud which resulted in him him him him him him him Medicare savings totaling $7,591. 

Medicare officials say it’s too early to judge the system’s effectiveness and, on its blog, the White House stated on Friday that "predictive modeling has identified 2,500 leads for further investigation, 600 preliminary law enforcement cases under review and resulted in 400 direct interviews with providers who would not have otherwise been contacted."   Clearly there are some bugs in the system to be worked out but it appears that HHS is not yet ready to pull the plug on the program.

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.
 

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.