July 9, 2015

Major Stark Provisions in 2016 Proposed Medicare Physician Fee Schedule

On July 8, 2015, the Centers for Medicare & Medicaid Services (CMS) released a proposed rule containing major provisions relating to the Physician Self-Referral Law (i.e., the Stark Law) and its exceptions. CMS states that the purpose of the Stark proposals is: "to accommodate delivery and payment system reform, to reduce burden, and to facilitate compliance," as well as to "expand access to needed health care services." CMS also states that it realizes that "additional clarification" of Stark would help.

Below is a brief summary of the proposals affecting the Stark Law:

a) Proposes new Stark exception for recruitment assistance and retention payments from hospitals, federally-qualified health centers (FQHCs), and rural hospital clinics (RHCs to physicians to assist them in employing non-physician practitioners (NPPs) in the geographical area served by the hospital, FQHC, or RHC providing the remuneration.
• The exception would not apply to remuneration flowing to a group practice or other type of physician practice (i.e., physician organizations). But, the exception would protect physicians from being considered to be "standing in the shoes of the physician organization" when determining a direct compensation arrangement.
• The exception would only apply where the NPP is a bona fide employee of the physician (or physician's practice).
• The exception would only apply to NPP services that are primary care services (i.e., family practice, internal medicine, pediatrics, geriatrics, and OB-GYN).
• Additional proposals seek to limit or "cap" the remuneration allowed under this exception.

b) Proposes adding a definition of the geographical area served by FQHs and RHCs under 42 CFR 411.357(e).

c) Proposes to standardize the various terms (e.g., "based on" or "without regard to") used for the principle of "takes into account" referrals to clarify that there are not different volume or value of referral standards in the Stark exceptions.

d) Proposes revisions to clarify that the policy stated in the Stark Phase III regulations regarding retention payments in underserved areas (42 CFR 411.357(t)) is correct and remains CMS's policy.

e) Proposes revisions to clarify that the Stark exceptions requiring that a lease or arrangement be set out in writing do not require a single formal contract. Rather, "a collection of documents, including contemporaneous documents evidencing the course of conduct between the parties, may satisfy the writing requirement." Additionally, the proposed rule clarifies that the one-year term requirement is satisfied "as long as the arrangement clearly establishes a business relationship that will last for at least 1 year."

f) Proposes to extend the "holdover" arrangements permitted by 42 CFR 411.357(a), (b) and (d) from six months to indefinitely (or, alternatively, a longer but definite period), provided that the holdover continues on the same terms and conditions and that it meets the fair market value requirements. Additionally, CMS proposes to revise the fair market value compensation exception "to permit renewals of arrangements of any length of time, including arrangements for 1 year or greater."

g) Proposes to revise the definition of remuneration to clarify that if one of the six statutory exceptions to remuneration applies, then the term "used solely" does not mean that the exception does not apply if the item, device or supply is used for more than one of the six statutorily allowed purposes.

h) CMS clarifies that employees or independent contractors do not "stand in the shoes" of their physician organization's arrangements "unless they voluntarily stand in the shoes of the physician organization as permitted under 42 CFR 411.354(c)(1)(iii) or (c)(2)(iv)(B). Additionally, CMS proposes to remove the phrase "stands in the shoes" from the definition of "locum tenens physician."

i) Proposes to expand the exception for ownership of publicly traded securities to include protection for "trading on an electronic stock market or OTC quotation system in which quotations are published on a daily basis and trades are standardized and publicly transparent."

j) Proposes a new exception for timeshare leasing "that would protect timeshare arrangements that meet certain criteria," including, but not limited to, that "the arrangement is between a hospital or physician organization (licensor) and a physician (licensee) for the use of the licensor's premises, equipment, personnel, items, supplies, or services...used predominantly to furnish evaluation and management services." This exception would not apply to independent diagnostic testing facilities or clinical laboratories.

k) CMS provides further guidance to physician-owned hospitals on the disclosure of its ownership interests, including that social media websites are not considered to be public websites for the hospital.

l) CMS also solicits comments on the affect that the Stark Law may have on Accountable Care Organizations.

In addition to the above-noted Stark provisions, the proposed rule contains a number of other proposals, including provisions on appropriate use criteria for advanced imaging services, telehealth, self-referral disclosure protocol, and more. More information on these provisions will be coming soon.

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July 9, 2015

OCR Announces Consolidation of Kansas City and Chicago Branches

On April 20, 2015, the Department of Health and Human Services' Office of Inspector General, in partnership with the American Health Lawyers Association and the Association of Healthcare Internal Auditors, published Practical Guidance for Health Care Governing Boards on Compliance Oversight, which describes the OIG's expectations of the compliance oversight role healthcare governing boards (e.g., Board of Directors of a hospital) should play in a healthcare organization. For a summary of this guidance, please visit: http://www.americanbar.org/publications/aba_health_esource/2014-2015/June/oig.html

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June 25, 2015

United States Supreme Court Rules to Uphold Federal Subsidies Created by the Affordable Care Act

June 25, 2015

On June 18, 2015, the United States Supreme Court decided the case of King, et al. v. Burwell, Secretary of Health and Human Services, et al., upholding federal subsidies for taxpayers who buy health insurance on the federal government's healthcare.gov webpage. The potential loss of the subsidies was seen by commentators as a significant threat to the Affordable Care Act.

Chief Justice John Roberts wrote for the 6-3 majority of the Court, finding that though the text of the law was ambiguous, the Affordable Care Act was passed "to improve health insurance markets, not destroy them." Thus, the Court found that the tax credits that are available to the state health insurance exchanges should also be available to insurance purchased on the federal government's healthcare.gov page, which is relied upon by as many as 37 states that do not have their own insurance exchanges. Chief Justice Roberts' opinion was joined by Justices Kennedy, Ginsburg, Breyer, Sotomayor and Kagan. Justice Scalia dissented, and was joined by Justices Thomas and Alito.

The attorneys at The Health Law Partners have a significant amount of experience in providing guidance to healthcare stakeholders as to developments in healthcare law, regulation and policy throughout the United States. For more information regarding such matters, please call (248) 996-8510 or visit thehlp.com.

June 18, 2015

U.S. Government Arrests 243 Individuals for Healthcare Fraud Allegations

On June 18, 2015, the U.S. Department of Health and Human Services ("HHS") arrested 243 individuals for allegedly participating in Medicare/Medicaid fraud schemes. The government claims that combined, the cases involve $712 million in supposedly false billings. As part of the sweep, the Centers for Medicare and Medicaid ("CMS") also suspended a number of providers' ability to bill Medicare using the Affordable Care Act's suspension authority. 16 individuals in the Metro Detroit area were arrested as part of the sweep. The arrests were credited to the Health Care Fraud Prevention and Enforcement Action Team ("HEAT"), a joint initiative between HHS and the Justice Department. HEAT operates in regions of concern throughout the U.S., including the Baton Rouge, Brooklyn, Chicago, Dallas, Detroit, Houston, Los Angeles, Miami-Dade and Tampa Bay areas.

The government claims that the fraud occurred in various areas of healthcare, including home health care, psychotherapy, physical and occupational therapy, durable medical equipment ("DME") and pharmacy. Court documents claim that those charged were involved in billing Medicare and Medicaid for treatment that never occurred, treatment that was not medically necessary or for the payment of kickbacks in exchange for patient referrals.

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June 14, 2015

OIG and DOJ Commentary on Physician-Vendor Relationships at the ABA Physician Legal Issues Conference

In a speech at the American Bar Association's Physician Legal Issues Conference on June 11, 2105, a representative from the Office of Inspector General (OIG) noted that the OIG is currently hiring attorneys to gear up to pursue claims against physicians under the OIG's administrative penalty authorities. This means that the OIG will not wait for whistleblowers to pursue qui tam actions. Instead, the OIG will target physicians on its own. These comments come on the heels of the OIG issuing a Fraud Alert titled "Physician Compensation Arrangements May Result in Significant Liability. (For more information, visit our recent blog on this Fraud Alert, available here. Physicians should review their relationships with vendors and other entities to which they refer for compliance.

During the same speech, a representative of the U.S. Department of Justice offered practical guidance for physicians and their legal counsel. He discussed seven factors to consider when determining if these physician-vendor relationships are compliant. The seven factors include:

1) Physician Selection: How were the physicians selected by the vendor? Were they selected because of the physicians' ability to refer patients to the vendor?
2) Purpose of the Relationship: Is the inducement of referrals one purpose of the relationship - even if there are other reasons for the relationship?
3) Referrals: What was the referral relationship between the physician and the vendor before, during and after the relationship? Does the physician track his or her referrals to the vendor? If so, why? Does the arrangement include consequences for a low volumes referrals or bonuses for a high volume of referrals?
4) Business Structure: Is the vendor a shell entity, is business actually transacted, does the entity even own equipment? What kind of capital contribution was made to get the entity up and running?
5) Compensation: Is the physician's compensation fair-market value, does it vary with the volume or value of referrals, was it negotiated in an arm's length transaction? If multiple physicians are involved, how is each physician compensated relative to the other physicians? If the compensation is not the same for all physicians but their responsibilities are the same, then why is, for example, Physician A being paid more than Physician B?
6) Capital Contribution and Risk: Is the physician's investment nominal? Is the return on investment proportional to the ignition investment contribution? Is the physician's level of risk proportionate?
7) Disclosure: Are patients informed of the relationship? Even within the joint venture itself, is everything transparent to the parties involved?

Continue reading "OIG and DOJ Commentary on Physician-Vendor Relationships at the ABA Physician Legal Issues Conference" »

June 14, 2015

Department of Health and Human Services

At the American Bar Association's Physician Legal Issues Conference, Celeste Davis, Esq., of the Office for Civil Rights announced that, effective Monday, June 15, 2015, the Kansas City branch of the Office for Civil Rights will consolidate with the Chicago branch to form the new Department of Health and Human Services, Office for Civil Rights, Midwest Region. The new Midwest Region will still maintain offices in both Chicago and Kansas City. This will be the first consolidation in the history of the Office for Civil Rights. Ms. Davis stated that the consolidation will allow the agency to work quicker, smarter, and to be more available to covered entities to assist with compliance.

For more information about this announcement or HIPAA compliance, please contact Adrienne Dresevic, Esq., (adresevic@thehlp.com), or Clinton Mikel, Esq., (cmikel@thehlp.com) at (248) 996-8510.

June 11, 2015

OIG Issues New Fraud Alert Warning Physicians of Increased Scrutiny

On June 9, 2015, the Office of Inspector General (OIG) issued a Fraud Alert titled "Physician Compensation Arrangements May Result in Significant Liability," which is available here. In the Fraud Alert, the OIG warns physicians of the dangers of entering into compensation arrangements with health care entities, such as medical directorships or office staff arrangements, that do not reflect fair-market value or are not for bona fide services that the physicians actually provide. These compensation arrangements will violate the Federal Anti-Kickback Statute and expose the physicians to civil monetary penalties if not properly structured. Additionally, the OIG reminds physicians that the Anti-Kickback Statute will be violated "if even one purpose of the arrangement is to compensate a physician for his or her past or future referrals of Federal health care program business."

While the Fraud Alert does not include any guidance that has not been promulgated previously by the government, it does evidence the OIG's intent to target physicians (as opposed to larger health care entities). In fact, the OIG references 12 recent settlements with physicians who entered into questionable medical directorship and office staff arrangements. In these cases, the OIG states that the medical directorship arrangements took into account the physicians' referrals, did not reflect fair-market value and, in some cases, the physician did not even provide the medical directorship services contemplated under the arrangement. Some of the arrangements even involved the health care entity paying the salaries of the physicians' office staff. Such arrangements are highly suspect and likely constitute a transfer of remuneration to the physician because the physicians are relieved of the financial burden of paying their employee salaries.

However, any medical directorship arrangements may be structured to comply with the Anti-Kickback Statute. In addition to structuring the arrangement to meet the fair-market value and bona fide services requirements, physicians can protect themselves by ensuring that there is an actual need for the services they are to provide and by documenting the performance of those services. In light of the recent government scrutiny on these arrangements, physicians should have their medical directorship agreements reviewed by healthcare compliance counsel.

Continue reading "OIG Issues New Fraud Alert Warning Physicians of Increased Scrutiny" »

June 11, 2015

Physicians Beware--the OIG Issued a New Fraud Alert Regarding Medical Directorships

On June 9, 2015, the U.S. Department of Health and Human Services Office of Inspector General (OIG) issued a fraud alert warning physicians of significant liability for entering into medical directorships that are non-compliant with the federal Anti-Kickback Statute (AKS). Medical directorships must reflect fair market value for bona fide services that the physicians actually provide. The OIG warns that if one purpose of the arrangement is to compensate a physician for his or her past or future referrals of Federal health care program business such as Medicare or Medicaid patients then such arrangement could be deemed in violation of the AKS and therefore subject the parties to the arrangement to significant liabilities including but not limited to civil monetary penalties.

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June 8, 2015


In addition to the proposed amendment to Michigan's No-Fault Act that is presently on the floor of the State House of Representatives awaiting a second reading, another bill that poses to decrease reimbursements has cleared the Michigan Senate's Insurance Committee. Senate Bill 288, proposed by Senator Virgil Smith, involves limiting no-fault benefits for injured residents of Detroit and potentially other large cities in the State of Michigan.

As proposed, cities over 500,000 in population (only the City of Detroit, with a U.S. Census-estimated 2014 population of 680,250 would qualify) or a city that can demonstrate that 35% or more of the city's residents who regularly drive a vehicle do so without automotive insurance would qualify. The bill's sponsors admit that it is not known which Michigan cities other than Detroit would qualify as 35% or greater uninsured, due to lack of data.

Under the bill, qualifying cities would be able to cause their residents to have access to particular insurers who could issue "qualifying no-fault policies." Unlike the current no-fault law, which requires that insurers provide unlimited coverage for reasonable charges incurred for medically necessary products, services for an injured person's care, recovery or rehabilitation, a qualifying no fault policy would have a minimum aggregate coverage amount of $275,000.00 for catastrophic injuries.

As currently proposed, the bill would limit coverage for the victims of catastrophic car accidents to as little as $275,000.00, which would have a significant negative effect on many healthcare providers/suppliers and their patients.

Now that the bill has been passed by the Senate Insurance Committee, it needs to be passed by the Senate as a whole before being sent to the Michigan House of Representatives for consideration.


May 22, 2015


Recently, pharmacies (specifically compounding pharmacies) across the country have begun receiving letters from the U.S. Department of Justice (DOJ) notifying them that the pharmacy is being investigated for fraud under the False Claims Act for knowingly billing for drugs that were not medically necessary. Industry insiders have reported that, just yesterday (on 5/21/2015), at least four pharmacies received these investigation notices from the DOJ. The industry insiders also reported that the letters were hand-delivered on Thursday, May 21, 2015, by U.S. Navy CIS agents, were signed by the U.S. Attorney General, and demanded that the pharmacies respond to the billing fraud allegations within twenty (20) days.

Further, pharmacies are being investigated and receiving DOJ letters specifically related to their contacts with patients, and allegations of impropriety regarding the same. These actions/letters are, of course, somewhat related to major recent developments related to Tricare's scrutiny of compounding pharmacies. For more information, please see the Enhanced Compound Ingredient Screening Notice issued by the Department of Defense's Pharmacy Operations Division on May 11, 2015, which is available here.

Letters from the DOJ alleging billing fraud, False Claims Act violations, or referencing a DOJ investigation are extremely time-sensitive. False Claims Act fines and penalties can be crippling for a pharmacy. A pharmacy that receives such a letter must act quickly to engage experienced healthcare legal counsel to defend it against these allegations and to represent them during the investigation.

The Health Law Partners, P.C. (HLP), is a full-service healthcare law firm representing pharmacies and other healthcare entities across the country. Healthcare regulatory matters are extremely complex and frequently evolving, and healthcare investigations require representation by attorneys experienced in such matters. The attorneys at HLP specialize in healthcare fraud and abuse matters, including government investigations. HLP has experience defending pharmacies in DOJ investigations and understands the defenses available to fight allegations of billing fraud and False Claims Act violations.

If you received a letter from the DOJ regarding an investigation, or for more information, please contact Adrienne Dresevic, Esq., adresevic@thehlp.com, or Clinton Mikel, Esq., cmikel@thehlp.com, at (248) 996-8510.

May 18, 2015

PHYSICIANS AND HEALTHCARE ATTORNEYS: Join HLP at the ABA's Physicians Legal Issues Conference on June 10-12th in Chicago.

We invite you to join Adrienne Dresevic, Esq., and Clinton Mikel, Esq., at the American Bar Association's Physicians Legal Issues Conference on June 10-12th in Chicago, Illinois. This annual conference is attended by both attorneys and physicians and is held in conjunction with the Chicago Medical Society and the American Association for Physician Leadership.

This year's theme is "Thriving in a Time of Change". This unique program has been designed to bring physicians and legal experts, as well as government and payer representatives, together, from around the country, to provide perspectives and ideas directly to physicians and attorneys on ways for physicians to thrive, not just "survive" in these uncertain times. Ms. Dresevic and Mr. Clinton are both presenting at the conference, covering issues such as the Stark Law, Anti-Kickback Statute, and HIPAA. Whether you are a physician or entering the field of healthcare, this conference will provide valuable insight and strategies that can improve your practice.

For program details, please visit http://ow.ly/NbMz3.

May 11, 2015

Proposed Legislation Would change Michigan CRNA Supervision Requirements and Increase Access to Anesthesia Care

On May 7, 2015, Michigan Senator Mike Kowall (R-White Lake) introduced legislation that would allow hospitals more flexibility in determining the best anesthesia delivery model for their patient's needs. While certified registered nurse anesthetists ("CRNAs") provide the anesthesia care during most patient procedures - staying with the patient throughout the entire procedure - Michigan law still requires physician supervision of CRNAs. However, Michigan law does not even require the supervising physician to be an anesthesiologist or surgeon.

The proposed legislation would change this model and increase access to anesthesia care for Michigan patients in medically underserved rural and urban areas, while also containing anesthesia-related costs statewide. Under S.B. 320, Michigan hospitals could choose to keep the current physician-supervision model or move to a model that allows CRNAs to practice without mandatory physician supervision. If enacted, Michigan would join 40 other states that do not require physician supervision for CRNAs to administer anesthesia. The bill is currently in the Michigan Senate awaiting testimony before the Senate Health Policy Committee. More information on S.B. 320 may be found on the Michigan Legislature's website, available here.

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May 6, 2015


Congratulations to Founding Shareholder, Adrienne Dresevic, nominated to once again serve on Council for the ABA Health Law Section. Nominations will be voted on by the membership at the Annual Meeting, August 2.


May 6, 2015


The AHA has taken its first steps to appeal a lower court's refusal to intervene to address the significant appeals backlog pending at the ALJ level of appeal.

On May 4, 2015, the AHA submitted its Opening Brief to the U.S. Court of Appeals for the D.C. Circuit, alleging that the District Court erred in its decision not to issue providers' and suppliers' mandamus relief. The AHA pressed the Circuit Court to overturn the District Court's ruling, which acknowledged the repercussions of the backlog but nonetheless concluded court intervention was inappropriate. http://www.aha.org/advocacy-issues/legal/litigation.shtml

More information regarding the ALJ appeals backlog is available here: http://www.thehealthlawpartners.com/docs/6.6.14.pdf


April 28, 2015

Electronic Case Adjudication and Processing Environment (ECAPE) Update

The appeals backlog has taken a toll not only on appellants, but also the Office of Medicare Hearings and Appeals (OMHA), tasked to adjudicate the appeals. The appeals submission and document management processes are overdue for an upgrade in order to keep up with OMHA's substantial workload. The new system to be put into place in early 2016 is the Electronic Case Adjudication and Processing Environment (ECAPE), which is a "dynamic workflow and case management system that supports an electronic, unified OMHA business process". ECAPE will allow OMHA to take advantage of the effectiveness and efficiency that electronic processing has to offer; this change will be a significant benefit for the appellants requiring information from OMHA.

What this means to us; ECAPE will provide functionality for:
• Case and workload management
• Exhibiting
• Scheduling
• Document generation
• Electronic filing of requests for hearing and supporting documents
• Enhanced management information and business intelligence
Under ECAPE, appellants will have the ability to view the entire case file. Appellants will be able to ensure that documents submitted at the lower levels of appeal are sent to the ALJ as required under the regulations. This will negate the necessity for appellants resubmitting documents, and will assist OMHA to address its storage concerns.

Slowly we will start to see these changes take place from early 2016 to Spring 2017.

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