Health Law Attorney Blog

In the December 29, 2011 Federal Register, the Office of Inspector General ("OIG") issued a notice of intent to develop regulations wherein it "solicits proposals and recommendations for developing new and modifying existing safe harbor provisions under the Federal anti-kickback statute...." Comments must be delivered no later than February 27, 2012 at 5pm and may be submitted electronically, by regular, express or overnight mail, or by hand courier.

Continue reading "OIG Soliciting Recommendations for AKS Safe Harbors" »

Until October 2009, physicians could lawfully act as service providers to hospitals by furnishing their services "under arrangements" where a physician or group of physicians would provide services, equipment and supplies to a hospital's patients by contracting with the hospital to provide the services. Urologists, for instance, regularly furnished lithotripsy services under arrangements. The relationship was permissible under Stark because the hospital would bill for the services, deeming the hospital the entity furnishing the designated health services ("DHS"), not the physicians. However, in October 2009, new Stark regulations made these relationships impermissible as the regulations declared entities providing under arrangement services (e.g., the urologists) were furnishing DHS.

After the regulations were issued, but before they became effective, the Council for Urological Interests ("Council") filed suit in the US District Court for the District of Columbia, challenging the new regulations. Generally, the Social Security Act provides for judicial review of reimbursement decisions only after administrative remedies have been exhausted. The Supreme Court held in Shalala v. Illinois Council on Long Term Care, Inc. ("Illinois Council") that an exception to this requirement existed where application of the general rule "would not lead to a channeling of review through the agency, but would mean no review at all." The District Court, relying on Illinois Council, held that Council's claims must be channeled through the agency's administrative procedures prior to seeking judicial review. Despite Council's contention that physician groups are not afforded administrative review (as administrative review was limited to "providers" only), the District Court dismissed Council's complaint for lack of subject matter jurisdiction, holding that the hospitals (i.e. providers) could challenge the regulation through the administrative process.

On December 23, 2011, the US Court of Appeals for the District of Columbia Circuit overturned the District Court's decision holding that the channeling requirement under Illinois Council was not a requirement of complete preclusion of judicial review. "Particularly considering the Supreme Court's characterization of section 405(h) [of the Act] as 'a channeling requirement, not a foreclosure provision' we see no 'clear and convincing evidence' in the statute's language or structure indicating that Congress deliberately intended to completely bar non-providers from seeking review of regulations that target them directly" (internal citations omitted).

This ruling is a victory for physicians and physician groups in that the DC Appeals Court has recognized the administrative and judicial limitations imposed upon them to represent their interests and has rectified this bar.

Continue reading "DC Appeals Court Permits Physicians to Challenge Stark Law Regulations" »

The Office of Inspector General ("OIG") has posted its Health Care Fraud Prevention and Enforcement Action Team ("HEAT") compliance training resources on its website wherein it provides videos and audio podcasts regarding a number of topics, including:

• An overview of the OIG


• Overviews of the healthcare fraud and abuse laws;


• Exclusion from Medicare;


• Compliance programs; and


• The importance of documentation.

In light of increased enforcement and prosecution, healthcare providers are encouraged to utilize these resources to better educate themselves on the myriad laws and regulations governing the practice of their profession.

Continue reading "OIG Posts HEAT Healthcare Provider Compliance Videos and Audio Podcasts" »

On December 7, 2011, the Office of Inspector General ("OIG") posted a favorable Advisory Opinion 11-18 pertaining to Requestor's online service that would facilitate the exchange of information between healthcare practitioners, providers and suppliers ("Proposed Arrangement"). Requestor, a publicly traded company, currently provides web-based services that help physicians "achieve faster reimbursement from payors, reduce error rates, improve collection rates, improve patient compliance and satisfaction, and more efficiently manage clinical and billing information." To facilitate this goal, Requestor provides three (3) principal services:

1. Billing Service - This service automates and manages the physician practices' billing-related functions and assists with non-billing related, back-office operations (e.g., scheduling appointments, verifying insurance eligibility, reconciling accounts and reporting);

2. EHR Service - This service automates and manages physician offices' medical record-related functions; and

3. Messaging Service - This service automates practice communications with patients and includes patient messaging services, live operator services, and a patient web portal.

Under the Proposed Arrangement, Requestor proposes adding a new service--the Coordination Service--which "is intended both to facilitate the exchange of information between health care practitioners, providers, and suppliers (collectively, 'Health Professionals'), and to help them keep track of patients receiving services from other Health Professionals." In its evaluation of the Proposed Arrangement, the OIG reviewed four (4) sub-arrangements:

1. Making referrals using the Coordination Service;
2. Receiving referrals using the Coordination Service: Trading Partners;
3. Receiving referrals using the Coordination Service: Non-Trading Partners; and
4. Fees Associated with the Coordination Service.

Making Referrals Using the Coordination Service
The Requestor states that because much of the benefit of the Coordination Service rests in the data contained within the EHR Service, only those Health Professionals purchasing the EHR Service could use the Coordination Service to transmit patient information to other Health Professionals when making a referral. As such, the Requestor proposes offering the Coordination Service in combination with the EHR Service (collectively, the "Coordination Service Package"). The Coordination Service Package would reduce the expense and opportunity for error associated with Health Professionals wishing to make referrals ("Ordering Health Professionals") who communicate with other Health Professionals by facilitating the transmission of the following information:

• Sending the demographic, medical record, insurance and billing information of a patient when the patient is seen by other Health Professionals;
• Issuing appropriate referral reminders;
• Tracking communications with other Health Professionals; and
• Exchanging information about orders, order results, and healthcare recommendations.

Ordering Health Professionals would also utilize an electronic database ("Network") to identify Health Professionals to which they may make a referral. The Network would contain contact information (e.g., location, fax, and phone numbers) for physicians, laboratories, pharmacies, durable medical equipment suppliers and imaging providers. The Network would be populated by collecting information from Requestor's existing database of Health Professionals, publicly available Health Professional databases, Requestor's clients, and other Health Professionals that would like to be included. Inclusion in the Network would be free of charge.

Receiving Referrals Using the Coordination Service: Trading Partners
Requestor proposes that Health Professionals interested in receiving referrals through the Coordination Service would enter into Trading Partner Agreements with the Requestor. Those Professionals entering into the Trading Partner Agreements ("Trading Partners") would have the opportunity to customize their Network profiles to include additional information, including subspecialty areas, availability for appointments, and any clinical information required as part of a referral. Trading Partners would also be able to receive comprehensive referrals ("Formatted Orders") electronically from the Ordering Health Professionals. To become a Trading Partner would be free of charge; however, the services provided would be provided for a fee, as described below.

Receiving Referrals Using the Coordination Service: Non-Trading Partners
Being a Trading Partner is not required to receive referrals. However, Health Professionals that are not Trading Partners ("Non-Trading Partners") will not have the opportunity to customize their Network profiles and would not receive Formatted Orders.

Fees Associated with the Coordination Service
Under the Proposed Arrangement, Requestor would charge the Ordering Health Professionals the usual monthly subscription fee for the EHR Service component of the Coordination Service Package at a discounted rate. In addition to the monthly subscription fee, Requestor would charge three (3) types of transaction-based fees for the referrals made and received using the Coordination Service, all fees being set at fair market value, individually and in the aggregate:

1. Transmission Fee - The Transmission Fee is the base fee for transmitting the referral. This fee would be charged each time an Ordering Health Professional makes a referral using the Coordination Service. The party responsible for paying the fee, however, would vary depending on whether the receiving Health Professional is a Trading Partner or a Non-Trading Partner. If the receiving Health Professional is a Trading Partner, the Trading Partner would pay the Transmission Fee. Those Trading Partners that are Requestor's clients would pay a slightly lower fee (≤$1) as Requestor's costs would be lower to transmit information from one client to another within its own system. For receiving Health Professionals that are Non-Trading Partners, the Ordering Health Professional would pay the Transmission Fee.

2. Functionality Fee - The Functionality Fee includes Requestor's services of recording and maintaining the Trading Partner's preferences, attaching the clinical documentation in accordance with those preferences, facilitating the appointment scheduling with the Trading Partner, and providing "report builder" functionality. The Functionality Fee would be assessed each time an Ordering Health Professional uses the Coordination Service to make a referral to a Trading Partner. This fee would always be paid by the Trading Partner and would be a fixed fee.

3. Service Fee - The Service Fee is associated with the referrals made to Trading Partners and the work performed by Requestor to verify benefit eligibility and obtain the referral authorization. The Service Fee would always be paid by the Trading Partner and would vary based on the level of effort required to provide the services.

After evaluating the pertinent facts, in its analysis, the OIG determined that the Proposed Arrangement implicates the federal Anti-kickback Statute ("AKS") and does not fit within a regulatory safe harbor. However, an arrangements failure to fit within a safe harbor does not automatically imply violation of the AKS; instead, the OIG must make a determination, based on the facts, of whether the Proposed Arrangement adequately reduces the risk that the remuneration provided could be an improper payment for referrals or for arranging for referrals of Federal healthcare program business. The OIG concluded that, due to the following factors, the Proposed Arrangement appropriately minimizes the risk of AKS violation:

First - Inclusion in the Network is free of charge (however, payment could be made to obtain specific services) and Requestor would not control or influence the decision as to which Health Professional a referral would be made.

Second - Requestor certified that the Transmission Fee, Functionality Fee and Service Fee would all reflect fair market value of the actual services provided and the Requestor's service would provide value that is unrelated to inducing referrals. Moreover, the fees Requestor would charge are independent of the value of the items or services that are being referred or ultimately provided.

Third - Even though the Requestor would charge a "per-click" Transmission Fee, this fee is reasonable as the fee would be assessed regardless of whether the patient actually receives the items or services from the receiving Health Professional.

Fourth - The Proposed Arrangement's fee structure would unlikely materially influence an Ordering Health Professional's referral decisions for two reasons: the Transmission Fee is low and the aggregate amount of the Transmission Fees that could have been charged to an Ordering Health Professional would be capped to ensure that the Ordering Health Professionals would not pay more for the Coordination Service Package than they would have paid for the EHR Service alone.

Fifth - The Coordination service is intended to facilitate the exchange of information between Health Professionals and is not intended to impede on a patient's or provider's freedom of choice.

Sixth - A Trading Partner's payment of the Transmission Fee, Functionality Fee and Service Fee to the Requestor would not give the Trading Partner access to a referral stream not available to Non-Trading Partners.

Continue reading "OIG Views Favorably Online Service Facilitating the Exchange of Information Between Healthcare Practitioners, Providers and Suppliers" »

According to a press release, the Department of Health and Human Services ("HHS") announced that it will be awarding $9 million from the Centers for Medicare and Medicaid Services ("CMS") to Senior Medicare Patrol ("SMP") programs across the country tasked at fighting Medicare fraud. SMP is operated by the Administration on Aging in close partnership with CMS and the HHS Office of Inspector General. The new grants will allow for increased awareness for Medicare beneficiaries about how to prevent, detect and report healthcare fraud.

According to the press release:

The SMP volunteers work in their communities to educate Medicare beneficiaries, family members, and caregivers about the importance of reviewing their Medicare notices, and Medicaid claims if dually-eligible, to identify errors and potentially fraudulent activity. Program volunteers also encourage seniors to make inquiries to the SMP Program when such issues are identified, so that the project may ensure appropriate resolution or referral.

Therefore, providers must continue to emphasize compliance within their practices and also have strong communications with patients to avoid misunderstandings by patients as scrutiny has spread beyond just government officials. The government is investing in patients to help them in the fight against Medicare fraud.

Continue reading "Providers and Suppliers Beware: Medicare Patients Now Looking for Fraud, Too" »

On July 19, 2011, the Centers for Medicare and Medicaid Services ("CMS") published in the Federal Register its CY 2012 Physician Fee Schedule Proposed Rule ("Proposed Rule"). On November 1, 2011, CMS issued its 2012 Final Physician Fee Schedule ("Final Rule"), in part, to "address changes to the physician fee schedule and other Medicare Part B payment policies to ensure that our payment systems are updated to reflect changes in medical practice and the relative value of services." Some key provisions of the Final Rule are set forth below:

• Payment Reduction Pursuant to the Sustainable Growth Rate - Payments to providers under the Medicare Physician Fee Schedule is set to be reduced by 27.4%, as required by the Sustainable Growth Rate formula, beginning January 1, 2012 absent legislative measures to block to reduction.


• Addition of Certain Telehealth Services - Generally speaking, CMS reimburses providers for telehealth services--located at a distant site--furnished to an eligible telehealth beneficiary in an originating site. In the Final Rule, CMS proposes adding smoking cessation services to the services to the list of Medicare telehealth services, but notably, chose not to include online evaluation and management ("E&M") services (i.e., to add CPT code 99444) because "(1) these services are non-face-to-face; and (2) the code descriptor includes language that recognizes the provision of services to parties other than the beneficiary and for whom Medicare does not provide coverage (for example, a guardian)."


• Expansion of the Multiple Procedure Payment Reduction ("MPPR") - The MPPR has been expanded to include the professional component of certain advanced diagnostic imaging services. For a more detailed explanation of this change, please see this blog entry.


• Anesthesia Fee Schedule Conversion Factor - For 2012, the anesthesia conversion factor is $24.6712 with the national average anesthesia conversion factor equal to $15.5264, a decrease of 26.2% from 2011.


• Additions to the Physician Self-Referral List of CPT/HCPCS Codes - Beginning January 1, 2012, the following tables provide the codes will be added and removed as designated health services ("DHS") for purposes of the physician self-referral law (a/k/a the Stark Law):

Continue reading "CMS Issues 2012 Final Physician Fee Schedule" »

Premier Home Care, a Durable Medical Equipment company operating in Indiana and Kentucky, agreed to pay a $578,820 settlement with the United States Department of Justice and the State of Indiana in a Whistleblower action alleging violations of the False Claims Act.

In 2008, a former employee filed suit against Premier under seal alleging that the company was not using licensed respiratory therapists to set up patients with CPAP and BiPAP. Indiana law is broad enough to include CPAP set-up's in the definition of "respiratory care." Only persons licensed as respiratory therapists in the state of Indiana are permitted to perform respiratory care services under Indiana law.

A joint investigation by the Office of the Inspector General of the US Department of Health and Human Services, the Department of Justice and the Indiana Attorney General's office ensued. The complaint alleged that Premier violated the False Claims Act by certifying to Medicare that it was in compliance with Indiana's respiratory therapy law when it used unlicensed personnel to set-up CPAP and BiPAP.

The False Claims Act allows for civil recoveries of up to three times the amount of actual damages, and allows whistleblowers to collect up to 25% of the award. Premier agreed to settle its suit for $578,820 to the United States and $21,180 to the State of Indiana, an amount representing more than twice the estimated damages to the Medicare and Medicaid programs.

You can access the Department of Justice's Press Release story at: http://www.justice.gov/usao/ins/press_releases/Pressrelease11/Premier.20111019.pdf.

Continue reading "CPAP Supplier Agrees to Pay $578,820 for Failure to Use Licensed Respiratory Therapists for PAP Set-Up's" »

In the Office of Inspector General ("OIG") Advisory Opinion 11-15, dated October 11, 2011, the OIG analyzes an arrangement in which Requestor is a Delaware Limited Liability Company owned and managed by a physician (the "Owner/Manager") which would enter into a management contract with an existing or to be formed Medicare-certified clinical anatomic pathology laboratory (the "Path Lab"). The OIG opined that the proposed arrangement could lead to prohibited remuneration under the anti-kickback statute.

The proposed arrangement would work as follows: The Requestor and the Path Lab would enter into a management contract, which would be for a term of at least 3 years. The Requestor would furnish the Path Lab the complete array of clinical laboratory pathology services for a fixed maximum number of hours each year, as well as utilities, furniture, fixtures, and the exclusive use of laboratory space and equipment. The Requestor would also provide the Path Lab marketing and billing services, and essential non-physician staff. In turn, the Path Lab would pay the Requestor a usage fee that would be calculated based on a percentage of the Path Lab's income, fixed in advance for a term of 12 months, which generally would correspond to the volume of the Path Lab's use of the Requestor's services, personnel, and equipment. The Path Lab's income could include payments from Federal health care programs for laboratory services provided to program beneficiaries.

The Owner/Manager would offer the opportunity to invest in the Requestor to additional physicians. The Requestor certified that the value of the investment interests in the Requestor that would be held by physician investors in a position to generate business for the Requestor through referrals of laboratory specimens to the Path Lab would exceed 40 percent. The Requestor further anticipates that substantially more than 40 percent of the Requestor's gross revenue related to the furnishing of health care items and services would derive from business generated by its physician investors through referrals of laboratory specimens to the Path Lab. The Requestor certified that each of the New Physician Investors would have the option of referring specimens to the Path Lab but that there would be no implicit or explicit agreement or condition that a New Physician Investor make referrals to, or use the services of, the Requestor or the Path Lab.

The OIG found that the proposed arrangement could violate the anti-kickback statute, which makes it a criminal offense to knowingly and willfully to offer, pay, solicit, or receive any remuneration to induce or reward referrals of items or services reimbursed by a Federal health care program.

The OIG began by noting the similarities between the proposed arrangement and other joint venture arrangements which have been the subject of OIG guidance. In the past, the OIG has warned about arrangements in which a health care provider expands into clinical diagnostic laboratory services by contracting with an existing provider of laboratory services to operate a newly formed laboratory subsidiary on essentially a turn-key basis. The OIG viewed the proposed arrangement as the converse of the above-described arrangement. Instead of contracting with a provider to obtain laboratory services for which a physician-owned entity would bill Federal health care programs, the Requestor would contract to provide such services to an entity that would, in turn, bill Federal health care programs. Under both types of arrangements, however, the income of the physician-owned entity would vary with the volume or value of referrals from physician investors, which would make the anti-kickback statute relevant.

The Proposed Arrangement was therefore evaluated for compliance with any applicable safe harbor of the anti-kickback statute and for the potential for abuse. The OIG found that the following harbors were potentially applicable: the small entity investment safe harbor and the safe harbors for space rental, equipment rental, and for personal services and management contracts.

The OIG found that the small entity investment safe harbor could not be satisfied because more than 40% of the Requestor would be held by investors who would be in a position to generate business for the Requestor through referrals and more than 40% of the Requestor's gross revenue relating to furnishing health care items and services would come from laboratory business generated by its physician investors. The OIG further found that the safe harbors for space rental, equipment rental and for personal services and management contracts could not be satisfied because the usage fees paid to the Requestor would not be set in advance, but would rather be calculated based on a percentage of the Path Lab's income.

Finding that no safe harbor would apply to the proposed arrangement, the OIG then analyzed whether the proposed arrangement would pose more than a minimal risk of fraud and abuse. For the combination of the following reasons, the OIG concluded that the Proposed Arrangement would pose more than a minimal risk of fraud and abuse:
First, the fee structure of the proposed arrangement would effectively link the Requestor's investors' profit distributions to the laboratory business they send the Path Lab, posing considerable risks of overutilization of laboratory services, distorted medical decision-making, and increased costs to Federal health care programs;
Second, the more than 40 percent of the Requestor's investment interests would be held by physician investors in a position to generate business for the Path Lab in the form of referrals of laboratory specimens and substantially more than 40 percent of Requestor's gross revenue would come from business generated from the investors, which further increases the risks of overutilization, distorted medical decision-making, and increased program costs; and
Third, the Proposed Arrangement appears to have no business purpose other than to permit the physician investors to profit from the business they generate for the Path Lab in the form of their laboratory specimen referrals.

Continue reading "OIG Takes an Unfavorable View of Proposed Pathology Laboratory/Physician Owned LLC Management Services Contract " »

In the Office of Inspector General ("OIG") Advisory Opinion 11-14, dated October 7, 2011, the OIG analyzes an arrangement in which Requestor is an opthalmic physician group practice that provides cataract surgeries and also employs optometrists. By way of brief background, generally, patients receiving cataract surgery may elect to have either a conventional intraocular lens ("Conventional IOL") or a premium intraocular lens ("Premium IOL") (Premium IOLs have the ability to correct preexisting refractive problems whereas Conventional IOLs do not). Medicare covers Conventional IOLs when reasonable and necessary, but only partially covers the professional and facility fees associated with Premium IOLs as Premium IOLs are significantly more expensive. When billing Medicare, cataract surgery is a global surgical procedure in which the physician is reimbursed one global fee covering the pre-operative care, the surgery and the post-operative care for the ninety (90) days following the surgery. If a physician transfers the patient to another healthcare professional during the "global surgical period," the healthcare provider must use either modifier -54 (surgical care only) or -55 (post-operative management only).

Under the Proposed Arrangement, the ophthalmologists providing Premium IOLs will offer patients the opportunity to return to their optometrists for post-surgical care. However, under this co-management arrangement, the optometrists would likely charge separately for its services that are not covered by Medicare. Requestor seeks an advisory opinion on whether this Proposed Arrangement is permissible under the Social Security Act. Specifically, the OIG framed the issue and took a position as follows:

The Requestor has posed a very narrow question: whether the Proposed Arrangement, pursuant to which the Requestor would co-manage a Medicare beneficiary with an optometrist who would charge the beneficiary for the additional testing and services related to the Premium IOLs, would constitute remuneration to a referral source in the form of an opportunity to earn a fee. The Requestor has not asked whether the opportunity to earn a fee through the co-management of Medicare beneficiaries may be prohibited remuneration under the anti-kickback statute when the optometrist charges no fee in excess of the Medicare fee schedule, and we express no opinion on that separate question. Rather, the Requestor has asked us whether the opportunity for the optometrist to earn a fee for services not covered by the Medicare program in connection with post-operative management of Premium IOL patients may constitute prohibited remuneration. Under the facts present in the Proposed Arrangement, we conclude that it would not.

The OIG's favorable position rests on the following elements of the Proposed Arrangement:

1. There would be no written or unwritten agreements to co-manage patients between Requestor and the optometrists. Rather, the Requestor would explain that the patients may return to their optometrists.


2. Requestor would inform those patients electing to receive Premium IOL that the optometrist may charge them separately for his/her services related to the Premium IOL. This, essentially, reduces the likelihood that the patient would return to the optometrist.


3. The increased costs associated with the Premium IOLs are not covered by Medicare. Additionally, Requestor has certified that it complies with all applicable Medicare billing and coding requirements.


4. Upon patient request and upon signing an informed consent form, Requestor will transfer patients back to the referring optometrists.

Continue reading "OIG Views Favorably Ophthalmologist-Optometrist Co-Management Arrangement Relative to Cataract Surgery" »

In July, the HEALTH LAW ATTORNEY BLOG reported on five U.S. Senators asking the Office of Inspector General ("OIG") and the Centers for Medicare and Medicaid Services ("CMS") to issue guidance on physician owned distributorships ("PODs") (or, sometimes referred to as physician owned intermediaries ("POIs")). The OIG and CMS have issued their responses.

By way of brief background, a POD is an arrangement in which, according to the U.S. Senate Committee on Finance ("Finance Committee"), "allow physician investors to purchase ownership shares in an entity that, in turn, purchases or serves as a medical device distributor for the products the physician utilizes in surgery." Because of lack of industry guidance on the potential for fraud and abuse violations, the Finance Committee issued Physician Owned Distributors (PODs): An Overview of Key Issues and Potential Areas for Congressional Oversight wherein it recommended letters be sent to the OIG and CMS articulating its concerns and asking for guidance.

On June 9, 2011, the Finance Committee issued two letters--one to the OIG and one to CMS. In its letter to the OIG, the Finance Committee sought guidance on how PODs fit, or don't fit, within the confines of the Anti-Kickback Statute ("AKS"). In so doing, the Finance Committee insisted that

[I]t is incumbent upon the OIG to address this rapidly evolving healthcare market issue by conducting an inquiry into PODs and their current structures and activities and then reporting to us the results of such an inquiry, along with your recommendations for further action should be taken by the OIG and Congress to effectively address the patient and program risks presented by PODs.

In its letter to CMS, the Finance Committee sought guidance on the Physician Payments Sunshine Act ("Sunshine Act") and accountable care organizations ("ACOs"). In seeking guidance on these issues, the Finance Committee requested CMS

[C]losely examine the physician ownership and investment interests presented by PODs and ensure that those are addressed as you finalize the reporting requirements of the Sunshine Act. This would mean that the distribution model of these physician owned companies would need to be included as CMS develops a final definition of "applicable manufacturers" and "applicable Group Purchasing Organizations (GPOs)."

The Finance Committee continued in its letter to ask CMS to take PODs into consideration when issuing the final ACO regulations:

CMS should take into account the POD models when developing its final regulation to ensure that qualification and oversight of ACOs protect against potential abuses posed by PODs. The final rule should prohibit ACOs from purchasing products or services from entities that are owned by physicians participating in the ACO. Ownership should be deemed to exist if the physician receives any remuneration (cash, equity, options, profits, dividends, etc.) from the entity supplying the product or service. It should be made clear that waivers of Stark and Anti-Kickback laws should not extend to PODs.

On August 10, 2011, CMS replied to the Finance Committee's letter stating that it will take the Finance Committee's letter into consideration when developing the Sunshine Act's proposed regulations. CMS also stated that the period for submitting comments on the ACO Waiver Designs proposed regulations ended on June 6, 2011 and that it was reviewing the comments it received and was developing the final ACO regulations with respect to its waiver authority.

More significant, however, is the September 13, 2011 OIG response to the Finance Committee. The OIG revealed that, pursuant to a meeting with the Finance Committee on July 19, it is "initiating a review of PODs that will seek to determine the extent to which PODs provide spinal implants purchased by hospitals." The OIG stated that it will be a national study of hospitals that bill Medicare for spinal surgery. After the review, the OIG intends to establish:

• How widespread PODs are;


• What services PODs offer to hospitals;


• Whether PODs save hospitals money in the acquisition of implants; and


• Whether the PODs identified in the review are associated with high use of spinal implants.

With respect to the AKS concerns raised by the Finance Committee, the OIG reminds the Finance Committee that such determinations are extremely fact specific and, therefore, the "OIG's ability to issue guidance about the application of the statute to these business structures is limited." The OIG also reminded the Finance Committee that when it evaluates the legality of situations in which referring physicians can earn a profit--including through an investment in an entity for which s/he generates business--it considers certain factors, including:

• The terms under which a physician may invest in the entity;


• The terms under which a physician-owner may be required to divest his/her ownership interest;


• The actual return or projected return on the physician's investment; and


• The amount of revenues generated for the entity by its physician-investors.

The OIG did not state how long its review would last, but providers and suppliers should be aware that the OIG is beginning to focus its attention on this issue and that guidance will be forthcoming.

Continue reading "CMS and OIG Respond to Finance Committee's Letters Regarding PODs" »

On September 1, 2011, the Department of Justice, the Department of Health and Human Services (HHS), the FBI and the HHS Office of Inspector General (HHS-OIG) jointly announced that eighteen individuals have been charged in the Eastern District of Michigan for their participation in a series of separate Medicare fraud schemes involving home health and psychotherapy services.

According to the court documents, the schemes allegedly involved a total of more than $28 million in fraudulent claims submitted to Medicare for services that were medically unnecessary and/or never provided.

Fourteen individuals are charged in one indictment with conspiracy to commit health care fraud for their roles in a $14 million scheme to defraud Medicare by submitting fraudulent claims for home health care services. The defendants include three physicians, four clinic owners and managers, two clinic employees, one nurse, and four physical therapists and physical therapy assistants. As alleged, the conspiracy was operated out of multiple home health agencies located in Livonia.

In a separate complaint, a physician and two other individuals are charged with health care fraud and the submission of false claims in connection with an approximately $11.5 million scheme to defraud the Medicare program. The scheme allegedly involved false billings for individual and group psychotherapy services at two clinics located in Detroit. According to court documents, the defendants billed Medicare for services that were medically unnecessary and/or never provided.

In another indictment, the owner of a medical clinic located in Southfield was charged with conspiracy to commit health care fraud, health care fraud and identity theft for a scheme allegedly involving $2.9 million in fraudulent billings to Medicare. The clinic owner is alleged to have used the identities of Medicare providers and beneficiaries to bill for psychotherapy services that were medically unnecessary and never performed.

Including these charges, Medicare Fraud Strike Force operations in Detroit have charged a total of 138 individuals in cases involving approximately $148 million in fraudulent billings to Medicare.

These newly announced indictments bear out the advice that we have been delivering to clients, namely that the health care enforcement landscape is evolving and thus it is even more imperative to ensure that providers take pro-active steps to mitigate the likelihood that they will become subjects of the government's more robust initiatives to prevent health care fraud.

Continue reading "Metro Detroit Continues to be a Focus of Health Care Fraud Prosecutions" »

Statistics recently released by the Transactional Records Access Clearinghouse (TRAC), a Syracuse University Research organization, show a marked increase in federal health care fraud prosecutions. The statistics show 903 federal prosecutions for health care fraud through the first eight months of 2011, compared to 731 such prosecutions for all of 2010.

In addition to the increase in prosecutions, the federal government has also seen an increase in convictions for such fraud. Through the end of August, there have been 24 convictions, compared with 23 such convictions for all of 2010.

The increases in prosecutions and convictions come on the heels of the federal government's increased enforcement efforts. In February, the government added to health care fraud teams, which, in turn, has led to an elevated level of regulatory enforcement activity. These statistics bear out the advice that we have been delivering to clients, namely that the health care enforcement landscape is evolving and thus it is even more imperative to ensure that providers take pro-active steps to mitigate the likelihood that they will become subjects of the government's more robust initiatives to prevent health care fraud.

Continue reading "Health Care Fraud Prosecutions Continue to Rise" »

In its over-300-page complaint filed on 8/19/2011, GEICO General Insurance Company, et. al (hereinafter referred to as "GEICO") asserts that the 32 defendants named in this case--13 physicians, 18 entities, and 1 entity owner-- ("Defendants") defrauded GEICO in an amount in excess of $12.1 million under New York's No-Fault Insurance law. GEICO also seeks to recover $36 million in treble damages for "services that the Defendants never rendered, or were not entitled to bill for or that they knew or should have known were not medically necessary or were so improperly performed as to be useless."

GEICO alleges that the Defendants submitted claims for nerve conduction velocity tests that were not performed and for which results were fabricated. Nerve conduction tests assist in determining whether a patient has sustained nerve damage. GEICO claims that the Defendants falsified the test results by copying results from other patients. In its opening paragraphs, GEICO asserts

The Defendants have exploited and abused the No-fault system and have engaged in some of the most abusive practices in the history of the New York No-fault system. The Defendants have submitted fraudulent claims. In claim after claim after claim they have falsified test results. They have billed for fictitious services that were never rendered as billed and in many cases their services have been incompetent and rendered without regard to the welfare of the patients. Indeed, in many cases the practices of the Defendants could have endangered the welfare of their patients.

Among its many allegations, GEICO also claims that the Defendants engaged in improper referrals to entities they controlled and/or in exchange for financial consideration and payments.

Notably, some of the Defendants in this case are also named defendants in a similar fraud action filed by Allstate (8/19/2009) in which Allstate seeks to recover more than $1,780,000.00 in damages for fraudulent billing of medical services under the NY No-Fault law. As of the date of this post, this case is still pending.

The HEALTH LAW ATTORNEY BLOG has written on countless instances in which healthcare providers and suppliers have become the target of criminal investigations and convictions; however, this suit, as well as the Allstate suit, are evidence that insurance companies have begun to take matters into their own hands.

Continue reading "GEICO Alleges $12.1 Million in Insurance Fraud, Seeks $36 Million in Damages" »

The most recent advisory opinion released by the Centers for Medicare & Medicaid Services ("CMS"), Advisory Opinion No. CMS-AO-2011-01, analyzes the acceptability of a non-competition clause in a proposed physician agreement ("Proposed Agreement") in light of the Stark Physician Recruitment Exception (42 C.F.R. 411.357(e)). Specifically, the Requestor (or "the Hospital") inquires whether the Proposed Agreement satisfies the criteria set forth at 42 C.F.R. 411.357(e)(4)(vi) which states that the "physician practice may not impose on the recruited physician practice restrictions that unreasonably restrict physician's ability to practice medicine in the geographic area served by the hospital."

In the situation presented, the Requestor and the Practice would like to execute a Proposed Agreement meant to persuade a pediatric orthopedic surgeon to relocate to the Requestor's geographic service area. The need for this physician exists because the sole orthopedic surgeon who practiced in the geographic area retired and no new pediatric orthopedic surgeons plan to move to the geographic service as far as the Requestor is aware. The Proposed Agreement would provide the Physician income guarantee and moving expense loans with repayment and forgiveness provisions in order to encourage the Physician to relocate and fulfill the need of the community. Under the Proposed Agreement, the Practice would impose a non-competition provision on the Physician which would restrict him or her "from establishing, operating, or providing professional medical services at any medical office, clinic, or other health care facility at any location within a 25-mile radius of the Hospital for a period of one year following the earlier of the termination or expiration of the Proposed Agreement." According to the Requestor, the Physician would not be restricted from practicing at one hospital within the geographic service area, three other known hospitals also exist within approximately 35 to 60 miles of the Hospital, and the non-competition provision would not violate applicable state laws.

In its analysis, the advisory opinion looks to the revised policy and conclusion reached in the Phase III rulemaking, 75 FR 51054 (Sept. 5, 2007), which revised the earlier conclusion reached in the preamble of the Phase II rulemaking, 69 Fed. Reg. 16094, 16096-97 (Mar. 26, 2004) (prohibiting all non-competition provisions from being placed on recruited physicians). The Phase III rulemaking states that non-competition provisions should not be entirely prohibited from recruitment arrangements because a categorical prohibition could have "the unintended effect of making it more difficult for hospitals to recruit physicians." Instead, such non-competition provisions are evaluated for reasonableness of the restriction. Based on the totality of the evaluated factors surrounding the non-competition provision (time period, distance, ability of the Physician to practice at hospitals within and outside the geographic service area, and compliance with state and local laws), the advisory opinion concludes that the provision does not "unreasonably restrict the Physician's ability to practice medicine." As such, the advisory opinion concludes that based on the certifications presented by the Requestor, the Proposed Agreement meets the requirements presented by the Stark Physician Recruitment Exception.

Although this advisory opinion provides some guidance regarding non-competition provisions in relation to the Stark Physician Recruitment Exception, it is limited to the specific situation presented by the Requestor. The full text of the Stark advisory opinion may be found here.

Continue reading "CMS Issues Stark Advisory Opinion, Allows Non-Competition Clause in Proposed Agreement to Meet Requirements of Stark Physician Recruitment Exception" »

On June 23, 2011, the Departments of Justice and Health and Human Services announced that, under the aegis of the inter-agency Health Care Fraud Prevention and Enforcement Action Team (HEAT) program, three employees of the Solstice Wellness Center, a Brooklyn-area clinic that purported to specialize in providing physical therapy and diagnostic tests, have pleaded guilty to one count of conspiracy to commit health care fraud, in connection with a $3.4 million Medicare fraud scheme. The Solstice employees currently are awaiting sentencing and are facing a maximum sentence of 10 years in prison.

According to the court documents, the three employees were involved in a scheme to pay cash kickbacks to Medicare beneficiaries to induce the beneficiaries to visit Solstice. The beneficiaries were transported to and from Solstice purportedly to receive physicians' services, physical therapy and diagnostic tests. During the plea hearing, the Solstice employees admitted that they paid kickbacks to the beneficiaries so that Medicare could be billed for services and diagnostic tests, notwithstanding the fact that such services were not medically necessary.

The case was brought in connection with the Medicare Fraud Strike Force, supervised by the Criminal Division's Fraud Section and the U.S. Attorney's Office for the Eastern District of New York. Since the HEAT Strike Force's inception in March 2007, operations in nine locations have charged more than 1,000 defendants who, collectively, have falsely billed the Medicare program for more than $2.3 billion. The action against Solstice evidences that HEAT enforcement shows no signs of relenting.

Continue reading "Three Brooklyn Physical Therapy Clinic Employees Plead Guilty in a $3.4 Million Health Care Fraud Scheme" »