Transcript Presentation Title

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WHAT’S NEW IN FRAUD & ABUSE
Tennessee Bar Association
Health Law Forum
Sandy Teplitzky
Bill Mathias
410-347-7364
[email protected]
410-347-7667
[email protected]
Ober | Kaler
Ober | Kaler
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AGENDA
 Background
 Recent Cases & Lessons Learned
 Advisory Opinions
 60-Day Repayment
 Monthly Exclusion Screening
 Mandatory Compliance Program
 Contractor Confusion/Fatigue
 What’s Next?
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Some Things Don’t Change
 Medicare and Medicaid regulations remain
incredibly complex
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“There can be no doubt but that the statutes and provisions
in question, involving the financing of Medicare and
Medicaid, are among the most completely impenetrable
texts within human experience. Indeed, one approaches
them at the level of specificity herein demanded with
dread, for not only are they dense reading of the most
tortuous kind, but Congress also revisits the area
frequently, generously cutting and pruning in the process
and making any solid grasp of matters addressed merely
a passing phase.”
—
Chief Judge Ervin
United States Court of Appeals for
the Fourth Circuit in Rehabilitation
Association of Virginia v. Kozlowski,
42 F. 3d 1444, 1450 (4th Circuit 1994)
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More Things That Don’t Change
 Government continues to view Fraud, Waste, and
Abuse as a significant source of revenue
 Enforcement remains aggressive
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Have You Seen the OIG’s Website
Lately?
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Aggressive Enforcement
 From new joint DOJ/OIG website
www.stopmedicarefraud.gov
 “A joint effort by HHS and the Department of
Justice recovered a record $4 billion from
fraudsters in FY2010.”
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Fighting Fraud is a Good Investment
 The return-on-investment (ROI) for Health Care
Fraud and Abuse Control (HCFAC) program
 Since 1997, $4.9 returned for every $1.0
expended.
 3-year average (2008-2010), $6.8 returned for
every $1.0 expended
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Government Balancing Issues
 Additional Cost
 Over, Under, and Mis-Utilization
 Quality of Care
 Access to Care
 Patients’ Freedom of Choice
 Competition
 Exercise of Professional Judgment
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Recent Cases
 Recent Cases
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Tuomey
Bradford
Kosenske
Christ Hospital
Saint Joseph Medical Center
United Shockwave
Wright Medical
 Lessons Learned
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U.S. ex rel. Drakeford v.
Tuomey Healthcare System, Inc.
 Facts
 Tuomey employed surgeons on a part-time basis
through a new wholly-owned LLC to provide
surgery at Tuomey’s new outpatient surgery
center.
 Agreements were ten years in length, and required
the employed surgeons to exclusively perform
outpatient surgery at the Tuomey outpatient surgery
center;
 Surgeons were paid in excess of 100% of
collections.
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U.S. ex rel. Drakeford v.
Tuomey Healthcare System, Inc.
 Facts (continued)
 Tuomey likely entered into the contracts in
response to the opening of a competing
surgery center in the community – feared that
these surgeons would redirect their patients
away from Tuomey to the new surgery center.
 In Fall of 2005, qui tam lawsuit filed by one of
the physicians approached for the venture
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U.S. ex rel. Drakeford v.
Tuomey Healthcare System, Inc.
 Outcome
 Jury returned a split verdict on March 29, 2010
 Employment agreements violated Stark law but did
not violate FCA
 Tuomey ordered to repay $45 million for Stark
law violations
 Court ordered a new trial on FCA allegations
due to a mistake in excluding certain testimony
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U.S. ex rel. Drakeford v.
Tuomey Healthcare System, Inc.
 Takeaways
 Virtually all FCA cases are resolved through
settlement agreements due to potential
ramifications of losing – unusual that this case
went to trial
 Physician employment does not necessarily
insulate agreements from Stark liability
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U.S. ex rel. Drakeford v.
Tuomey Healthcare System, Inc.
 Takeaways (continued)
 If a proposed arrangement appears to have
been developed in response to the fear of losing
a referral stream, the government may look
closely at issues of commercial reasonableness
 Long-term arrangements should be reviewed
periodically for compliance
 Providers cannot blindly follow a fair market
value or commercial reasonableness
determination
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United States ex rel. Singh v.
Bradford Regional Medical Center
 Facts
 V&S Medical Associates was a physician group
and a significant source of referrals for Bradford,
including referrals for nuclear testing. In 2001,
V&S leased a nuclear camera from GE, which was
maintained at V&S’ offices.
 Bradford threatened the physicians with the loss of
staff privileges, arguing that the lease violated a
hospital policy on physicians having competing
financial interests. To resolve the dispute, V&S
and Bradford entered into a sublease agreement
(with a non-compete provision) in October of 2003.
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United States ex rel. Singh v.
Bradford Regional Medical Center
 Facts (continued)
 Bradford obtained a report prepared by an
accountant which concluded that the amounts to be
paid under the sublease were “reasonable.”
 The analysis compared Bradford’s expected
revenues with and without the sublease in place
 Revenue projections were based on the
assumption that V&S would refer nuclear imaging
services to Bradford once the sublease went into
effect
 Qui tam lawsuit – Government did not intervene
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United States ex rel. Singh v.
Bradford Regional Medical Center
 Outcome
 Summary judgment against the Hospital and other
defendants
 The equipment subleasing arrangement, and related
non-compete agreement, improperly assigned value to
the volume of anticipated referrals in violation of the
Stark law
 Fair market value report took into account anticipated referrals from
V&S to Bradford
 Defendants bear burden of showing that fixed compensation is
consistent with fair market value, and failed to meet that burden
 Immaterial that non-compete agreement did not require physicians to
refer to Bradford – compensation arrangement was inflated to
compensate physicians for anticipated referrals and thus did not
reflect fair market value
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United States ex rel. Singh v.
Bradford Regional Medical Center
 Takeaways
 Question is whether hospital can allocate portion
of payment to non-competes and other intangible
assets when entering into financial arrangements
with physicians
 Fair market value analysis should be based on
the Stark law definition of fair market value
 Valuations that consider anticipated referrals may
be subject to challenge
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United States ex rel. Singh v.
Bradford Regional Medical Center
 Takeaways (continued)
 Providers should formally document in a
signed written agreement all financial
relationships with referring physicians, and
adhere to the terms of the agreement
 Proposal letter and an invoice did not constitute
a written agreement sufficient to satisfy a Stark
law exception
 Review state contract law
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United States ex rel. Kosenske v.
Carlisle HMA, Inc.
 Facts
 In 1992, Blue Mountain Anesthesia Associates
(BMAA) and Carlisle Hospital entered into an
exclusive anesthesiology services agreement
 BMAA would provide all anesthesiology services
to patients at Carlisle, and would not provide
these services anywhere else
 Carlisle would provide the space, equipment,
and supplies necessary for BMAA to provide
these services
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United States ex rel. Kosenske v.
Carlisle HMA, Inc.
 Facts (continued)
 In 1998, Carlisle built a new facility containing
an outpatient surgery center and a pain clinic
nearby, and BMAA provided services at the
facility under essentially the same terms as the
1992 Agreement
 The 1992 Agreement was never amended to include pain
management services; nor was a new written agreement
executed to cover the provision of services at the new
facility
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United States ex rel. Kosenske v.
Carlisle HMA, Inc.
 Outcome
 District Court: the arrangement satisfied the Stark
law personal services exception, and thus granted
summary judgment to Carlisle
 1992 Agreement constituted a written agreement that
governed the arrangements at the 1998 pain clinic in
light of the parties’ intent and actions from 1992
forward
 Mutuality of rights and responsibilities (physicians
right to provide exclusive services and obtain free
office space; hospital’s benefit of having on-call
anesthesiologists) was evidence of fair market value
exchange
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United States ex rel. Kosenske v.
Carlisle HMA, Inc.
 Outcome (continued)
 Circuit Court: reversed and remanded the
summary judgment ruling
 The arrangement did not satisfy the personal
services exception
 Rejected the fair market value analysis of the
lower court
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United States ex rel. Kosenske v.
Carlisle HMA, Inc.
 Takeaways
 The “procedural” components of the Stark law
are essential – keep written agreements
updated so that they accurately reflect the
services being performed
 What may have constituted fair market value
consideration at the signing of an agreement
must be able to withstand a current fair
market value analysis in light of changed
circumstances
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United States ex rel. Kosenske v.
Carlisle HMA, Inc.
 Takeaways (continued)
 In-kind remuneration – including free office
space and equipment – can serve as the
basis for finding a Stark violation
 Anesthesiologists who provide pain
management services are viewed as referral
sources
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Christ Hospital
 Facts
 From 1997 until 2004, the hospital limited
work at its Heart Station – an outpatient
cardiology testing unit – to those physicians
who referred to the hospital
 Qui tam lawsuit filed by cardiologist who
formerly worked at Christ Hospital
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Christ Hospital
 Outcome
 The Health Alliance of Greater Cincinnati and
Christ Hospital agreed to pay the U.S. $108
million to settle the alleged violations of the
AKS and FCA and entered into a CIA
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Christ Hospital
 Takeaways
 Certain physician benefits – such as paid
call coverage arrangements and other
opportunities that can generate income for
physicians – cannot be based on the volume
or value of referrals from the physicians
 Opportunity to generate a fee may constitute
a financial benefit to physicians
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Saint Joseph Medical Center
Baltimore, Maryland
 Facts
 From 1996 until 2006, Saint Joseph Medical Center
(SJMC) allegedly paid kickbacks to a group of
cardiologists under the guise of professional services
agreements to induce the referral of patients to SJMC
 E.g., an EKG-reading contract was renewed annually, and
eventually SJMC was paying for services that had no relationship
to reading EKGs, including payments for the salaries of two
nurse practitioners who previously worked at the hospital
 When SJMC tried to eliminate the nurse practitioner salaries in
2004, the physicians “demanded” that the hospital pay equivalent
amounts under a new contract to maintain overall remuneration
levels
 Qui tam lawsuit filed by three cardiac surgeons who were
members of a rival cardiology group
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Saint Joseph Medical Center
 Outcome
 SJMC agreed to pay the U.S. $22 million to
settle allegations that it violated the FCA,
AKS, and Stark Law and entered into a CIA
 SJMC must appoint physician executives to
oversee medical staff quality-of-care matters and
hire a Peer Review Consultant to evaluate the
hospital’s peer review practices
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Saint Joseph Medical Center
 Takeaways
 All financial relationships between physicians
and the hospitals to which they refer, including
medical directorships, call coverage
arrangements, and rental arrangements, must
be for legitimate and necessary items or
services and payments must be consistent
with fair market value
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United States v. Borrasi
 Facts
 Sometime between 1999-2002, Dr. Borrasi conspired
with 2 executives of inpatient psychiatric hospital to
provide remuneration to Dr. Borrasi and other members
of his group in exchange for increased Medicare
referrals.
 Dr. Borrasi argued that remuneration was paid under
part-time employment relationships for administrative
services.
 Testimony at trial suggested that physicians were given
“false titles,” “faux job descriptions,” and were asked to
submit “false time sheets.”
 Testimony also suggested that physicians did not
perform any of the administrative duties in their job
descriptions and only occasionally attended committee
meetings.
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United States v. Borrasi
 Outcome
 Criminal conviction of physician for conspiring
to defraud the United States and accepting
kickbacks in exchange for patient referrals in
violation of AKS.
 7th Circuit affirmed conviction and 72-month
sentence of physician
 Upheld jury instruction based on one-purpose
test
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United States v. Borrasi
 Takeaways
 Not enough just to call a payment
employment
 Employment exception and safe harbor
require
 Employment relationship to be bona fide
 Services to actually be provided
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United Shockwave Services
 Facts
 United provides hospitals with lithotripsy (shockwave
therapy) and laser services and equipment to crush
kidney stones and treat men with enlarged prostates
 United has several physician-owners
 Allegedly leveraged patient referrals to obtain
contract business from hospitals in Illinois, Indiana,
and Iowa
 Physician owners were involved in contract
negotiations with hospital customers
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United Shockwave Services
 Outcome
 United entered into a $7.3 million CMP
settlement with OIG
 United entered into a 5-year CIA
 Required to hire an IRO to monitor lithotripsy and
laser arrangements between United and any
hospital in Illinois, Iowa, and Indiana that receives
referrals from United or any of its physician-owners
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United Shockwave Services
 Takeaways
 “This settlement sends a strong message that
companies, including those with physicianowners, cannot use Federal health care
beneficiary referrals to line their pockets by
securing business from hospitals or other
providers. We continue to have serious kickback
concerns when companies link investment
opportunities to the ability to generate business
and offer returns on investment that are
disproportionate to business risk.”
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Wright Medical Technology, Inc.
 Facts
 Allegedly hired orthopedic surgeons as
consultants, in an effort to induce them to
use the firm's hip and knee reconstruction
and replacement products
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Wright Medical Technology, Inc.
 Outcome
 Wright paid $7.9 million to the U.S. to settle
allegations that it paid kickbacks to induce
doctors to use its hip and knee devices and
engaged in fraudulent marketing practices in
violation of the FCA
 Wright entered into a one year Deferred
Prosecution Agreement (DPA) with the USAO
for the District of New Jersey and a 5 year
CIA with HHS-OIG
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Wright Medical Technology, Inc.
 Outcome (continued)
 USAO offered the DPA in light of the
company’s remedial actions to date and its
willingness to
 Undertake additional remediation as needed;
Acknowledge responsibility for its behavior;
Continue its cooperation with the government;
Demonstrate its good faith and commitment to full
compliance with federal health care laws
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Wright Medical Technology, Inc.
 Takeaways
 Consulting contracts may be subject to
increased scrutiny under the AKS
 Being proactive – taking sensible remedial
action when a potential violation is
discovered – can influence prosecutorial
decisions and subsequent enforcement
actions
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Lessons Learned
 Providers should formally document all financial
relationships with referring physicians in a signed
written agreement before any services are
provided or any space or equipment is used
 The parties must adhere to the terms of the
agreement
 Arrangements with physicians must be for real
and meaningful services, leases, equipment
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Lessons Learned
 Document purpose and intent of relationship,
highlighting non-referral business reasons –
answer the “why” question
 Fair market value analysis should be based on the
Stark law definition of fair market value
 Document the provision of services
 In-kind remuneration – including free office space
and equipment – can serve as the basis for
scrutiny under AKS and Stark violation
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Lessons Learned
 Opportunity to generate a fee could be viewed
as an inappropriate financial benefit to
physicians
 Long-term arrangements should be reviewed
periodically for compliance
 Employment relationships and fair market
valuations may be subject to challenge
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Recent Advisory Opinions
 Since last years Health Law Forum, there have been
several important advisory opinions
 10-23
 10-24
 11-01
 11-02
 11-06
 11-08
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Advisory Opinions 10-23 & 10-24
 OIG analyzed 2 different, but related arrangements
between sleep testing provider and hospital
 OIG rejected proposed arrangement with part-time
marketing and per-click payments
 OIG approved proposed arrangement with full-time
marketing and fixed, annual fees
 Not all such arrangements are illegal
 High standard for favorable advisory opinion
 Helpful discussion of risks associated with “under
arrangements” transactions
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Advisory Opinion 11-01
 OIG analyzed arrangement by pediatric charity
hospital to waive all cost sharing, provide lodging
assistance, and to provide transportation
assistance
 OIG approved cost sharing based on
longstanding, charitable mission of the hospital.
 OIG approved lodging and transportation
assistance, citing PPACA amendment to permit
payments that promotes access to care and poses
low risk of F&A.
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Advisory Opinion 11-02
 OIG analyzed comprehensive local transportation
arrangement.
 OIG approved arrangement despite it not fitting
into earlier guidance on local transportation
arrangements.
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Advisory Opinion 11-06
 OIG analyzed payments for electronically receiving and
responding to referral requests from hospitals through
online post-acute care referral service.
 OIG found that the payments did not meet referral services
safe harbor because they were not assessed uniformly and
were not based solely on cost of operating referral service.
 OIG issued unfavorable opinion out of concern that
payments created an uneven playing field and that
payments could be an unlawful pay-to-play fee.
 Many hospitals participate in online post-acute care
referral services and need to re-assess those relationships
in light of this Opinion.
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Advisory Opinion 11-08
 OIG analyzed existing and proposed CPAP set up
arrangements between DME supplier and IDTF.
 OIG issued unfavorable opinion.
 With regard to existing arrangement, the OIG found that
“carve out” of Federal business was not sufficient
protection for favorable advisory opinion.
 With regard to proposed arrangement, the OIG reiterated
longstanding concerns about arrangements between DME
suppliers and IDTFs as potential referral sources.
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Advisory Opinion 11-08
 Opinion represents warning about CPAP set-up
services arrangements
 ... but does not rule out possibility that such
arrangements could be appropriately structured.
 Keys will be existence of a legitimate business
purpose of arrangement and FMV of payments.
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60-Day Repayment Requirement
 §6402 of PPACA requires reporting and repayment of
overpayments within 60 days of identification (or due date
of next cost report, if applicable)
 What’s “identification”?
 Violations actionable under FCA
 Regulatory guidance will be forthcoming... (or so we’ve
heard)
 Absent guidance, providers must struggle to come up with
practical approaches to complying with the 60-day
requirement.
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Monthly Exclusion Checking
 Seriously.... every month
 Growing number of State Medicaid Programs are requiring
monthly screening of current employees and contractors.
 See TennCare Policy PI 11-002 (effective 6/22/2011)
 State Medicaid Director Letter instructed states to “require
providers to search the HHS-OIG website monthly
to capture exclusions and reinstatements that
have occurred since the last search.”
 HHS-OIG CIAs still only require annual screening.
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Mandatory Compliance Programs
 It’s coming.... eventually.
 §6401 of PPACA makes compliance programs
mandatory....
 ....but only after implementing regulations establish the
core elements for mandatory compliance programs
 Growing numbers of providers are establishing (or
updating) compliance programs in anticipation of them
becoming mandatory.
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Need a Plan??
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Contractor Confusion/Fatigue
 Hard to keep track of the alphabet soup of contractors
looking for fraud
 Comprehensive Error Rate Testing (CERT) Contractors
 Medicare Administrative Contractors (MACs)
 Recovery Audit Contractors (RACs)
 Medicaid Integrity Contractors (MICs)
 Zone Program Integrity Contractors (ZPICs)
 Program Safeguard Contractors (PSCs)
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Contractor Confusion/Fatigue
 Administrative burdens and costs
 Responding to multiple inquiries
 Greater documentation requirements
 Confusion about applicable rules
 E.g.: Site visits to DME suppliers requesting physician
notes, yet no Medicare requirement that DME suppliers
maintain such notes.
 Lack of coordination by contractors
 Unreasonable extrapolations
 Protracted appeals
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What’s Next?
 OIG/DOJ increased emphasis on pursuing
individual liability for fraud and abuse perpetrated
by health care entities - Goal is “to alter the costbenefit calculus of the corporate executives who
run these companies”
 Increasingly aggressive federal/state enforcement
 Qui Tam Relators driving government priorities
 Increasing importance of comprehensive and
aggressive corporate compliance efforts
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“Be careful out there”
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QUESTIONS?
Sandy Teplitzky
Ober | Kaler
410-347-7364
[email protected]
Bill Mathias
Ober | Kaler
410-347-7667
[email protected]
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