Recently in Stark and Anti-Kickback Category

August 6, 2013

Congressional Bill Introduced to Close the In-Office Ancillary Services Exception under the Stark Law

On Thursday, August 1, 2013, Congresswoman Jackie Speier (D-CA-14) introduced the "Promoting Integrity in Medicare Act of 2013 (PIMA) in the United States House of Representatives. As the law stands, Stark Law prohibits physicians from referring Medicare patients for certain health care services in which they have a financial interest. However, there is an in-office ancillary service exception included in the Stark Law, which according to two recent reports issued by the United States Government Accountability Office (GAO), has led to the overutilization of self-referrals. The reports estimate that in 2010 alone, Medicare could have saved $109 million on advanced imaging and $69 million on anatomic pathology if self-referring physicians had referred the same number of procedures as non-self-referring physicians.

According to Congresswoman Speier's press release, the proposed bill would eliminate diagnostic MRI, CT, PET, and other advanced diagnostic imaging services, anatomic pathology, radiation oncology, and physical therapy from the in-office exception because they are services that are rarely provided on the same day as the initial office visit. According to the release, "the goal of PIMA is to cut spending in Medicare by hundreds of millions annually without reducing the essential care that seniors rely on."

On the same day that the bill was introduced in Congress, the Alliance for Integrity in Medicare (AIM) issued a joint statement that applauded the strong leadership of Congresswoman Speier and showed its support for PIMA. The statement explained that if PIMA is enacted, the ability of collaborative group practices to operate as they do today will be preserved and physicians will continue to be allowed to order x-rays and other routine clinical laboratory tests in order to diagnose and treat patients during office visits. The AIM reiterated that reforming the in-office exception through the passing of PIMA will ensure that Medicare patients will "receive the highest quality and safest health care most appropriate to their needs, and Medicare policy incentives are properly aligned saving billions of dollars, which is in the best interests of beneficiaries, providers, and our nation's health system overall."

To see the full text of the Promoting Integrity in Medicare Act of 2013, click here.

To see the full text of the two GAO reports analyzing the in-office exception, click here and here.

To see the full text of the AIM's statement in support of the bill, click here.

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April 12, 2013

Obama Administration Budget Request for Fiscal Year 2014 Proposal Would Exclude Certain Services from the In-Office Ancillary Services Exception to Stark and Require Prior Authorization for Advanced Imaging Services

On Thursday, April 11, 2013, the Obama Administration released its Budget Request for Fiscal Year 2014 ("FY 2014") that begins at the beginning of October. If implemented, the Budget Proposal would include approximately $1.8 trillion in savings over the next ten years, enough to replace the automatic sequestration that took effect last month and was imposed as part of the Budget Control Act of 2011.

To achieve these savings, the Administration's Budget Request includes nearly $401 billion in Healthcare reductions that would likely affect all providers. While it is nearly impossible that the budget will pass Congress, some of the proposals are likely to make it into law in one form or another.

One of the numerous proposals from the Centers for Medicare and Medicaid Services ("CMS") is beginning in 2015, to exclude radiation therapy, outpatient therapy, and advanced imaging services from the Stark Law's exception for In-Office Ancillary Services ("IOAS") except in cases where a practice meets certain accountability standards, as defined by the Secretary. The IOAS exception to the Stark Law's prohibition on physician self-referrals was intended to allow physicians to provide beneficiaries with certain services that were a natural extension of their core practices and to lawfully bill for such services; however, CMS takes the position that radiation therapy, outpatient therapy, and advanced imaging services, in a significant number of cases, do not fit within the rationale underlying the IOAS exception insofar as they are "rarely performed on the same day as the related office visit." In addition, CMS cites evidence suggesting that allowing these services to fit the IOAS exception has led to overutilization and rapid growth of these services. By excluding the services from the exception, CMS believes that the government will save nearly $6.1 billion over the next 10 years.

CMS has also proposed to begin requiring prior authorization for advanced imaging services on the theory that the rapid growth in the number and intensity of services in the last decade is the result of inappropriate use of the services. In its summary of the proposal, CMS notes that this proposal would bring the program in line with private payers, which typically require prior authorization. Furthermore, the proposal satisfies a request from the Government Accountability Office ("GAO") that CMS implement prior authorizations or attempt other methods to limit growth in spending for advanced imaging services. However, at this time, CMS does not believe this will have an effect on the budget.

Continue reading "Obama Administration Budget Request for Fiscal Year 2014 Proposal Would Exclude Certain Services from the In-Office Ancillary Services Exception to Stark and Require Prior Authorization for Advanced Imaging Services" »

March 27, 2013

HHS Office of Inspector General Issues Special Fraud Alert Regarding Physician Owned Distributorships

On March 26, 2013, the Office of Inspector General ("OIG") of the United States Department of Health and Human Services ("HHS") issued a Special Fraud Alert ("SFA") regarding the potential for Physician-Owned Distributorships ("PODs") to violate the federal Anti-Kickback Statute ("AKS"). While the OIG has provided guidance previously on the potential for physician-owned entities to create AKS and other fraud and abuse issues, this SFA focuses on the "specific attributes of PODs" that the OIG believes makes these entities "inherently suspect under the anti-kickback statute. With the increase in prevalence of these types of entities, this is an important development that has even piqued the interest of the Wall Street Journal.

At the heart of the OIG's new SFA is the agency's belief that any "opportunity for a referring physician to earn a profit" could be unlawful remuneration under the AKS. Previously, the OIG's has highlighted a number of questionable features for physician-owned entities, such as:

1. Selecting investors for their potential to generate business;
2. Requiring investors that retire or move from the service area to divest their ownership; and
3. Distributing outsized returns compared to the level of risk in the investment.

In particular, the OIG believes that physician-owned entities, particularly PODs, with these features may lead to issues including:

• Corruption of medical judgment;
• Overutilization;
• Increased costs to Federal and State Medical Programs; and
• Unfair competition.

In this new SFA, the OIG, recognizing that whether an entity is lawful under the AKS is dependent on the intent of the parties involved, includes a number of features that the agency believes provide evidence of the intent to induce illegal remuneration.

• The size of the investment offered to each physician varies with the expected or actual volume or value of devices used by the physician.
• Distributions are not made in proportion to ownership interest, or physician-owners pay different prices for their ownership interests, because of the expected or actual volume or value of devices used by the physicians.
• Physician-owners condition their referrals to hospitals or ASCs on their purchase of the POD's devices through coercion or promises, for example, by stating or implying they will perform surgeries or refer patients elsewhere if a hospital or an ASC does not purchase devices from the POD, by promising or implying they will move surgeries to the hospital or ASC if it purchases devices from the POD, or by requiring a hospital or an ASC to enter into an exclusive purchase arrangement with the POD.
• Physician-owners are required, pressured, or actively encouraged to refer, recommend, or arrange for the purchase of the devices sold by the POD or, conversely, are threatened with, or experience, negative repercussions (e.g., decreased distributions, required divestiture) for failing to use the POD's devices for their patients.
• The POD retains the right to repurchase a physician-owner's interest for the physician's failure or inability (through relocation, retirement, or otherwise) to refer, recommend, or arrange for the purchase of the POD's devices.
• The POD is a shell entity that does not conduct appropriate product evaluations, maintain or manage sufficient inventory in its own facility, or employ or otherwise contract with personnel necessary for operations.
• The POD does not maintain continuous oversight of all distribution functions.
• When a hospital or an ASC requires physicians to disclose conflicts of interest, the POD's physician-owners either fail to inform the hospital or ASC of, or actively conceal through misrepresentations, their ownership interest in the POD.

While the OIG considers the factors above evidence of intent, the agency does not consider the list a "blueprint for how to structure a lawful POD" and other PODs without these characteristics may violate the AKS. In particular, the OIG mentions concerns with PODs that:

• Exclusively serve its physician-owners rather than a POD that also sells to Ambulatory Surgical Centers ("ASCs") and Hospitals and
• Purport to designs and sell their own devices, particularly when the physician-owners are the sole users of the device.
Because both sides of a transaction are liable for violations of the AKS, the SFA indicates Hospitals and ASCs that have arrangements with PODs to provide devices are also at risk if one purpose of the arrangement is to secure physician referrals to the facilities.

Following OIG's release of this SFA, the Physician-owners, managers, and partners of existing PODs, as well as individuals and/or entities considering forming a new POD, should contact their legal counsel to begin to examine the structure of their entities in order to, at minimum, ensure the entities do not include any of the features the OIG highlight above. Likewise, hospitals and ASCs should examine agreements with PODs to ensure they are not structured to generate referrals from the physician-owners.

Continue reading "HHS Office of Inspector General Issues Special Fraud Alert Regarding Physician Owned Distributorships" »

February 1, 2013

New Jersey Hospital Settles Anti-Kickback Qui Tam Case for $12.5 Million; Case Alleged Cardiologists Were Compensated $18,000 Per Year to Serve on Advisory Board That Was Actually Tied to Patient Referrals

On January 24, 2013, the U.S. Attorney's Office for the State of New Jersey unsealed a $12.5 Million Dollar settlement with Cooper Health System, headquartered in the Camden, New Jersey area, but serving regions of New Jersey, Pennsylvania and Delaware. The settlement was the result of cardiologist Nicholas DePace's whistleblower qui tam lawsuit, which alleged that the government had been defrauded.
The case arose out of an arrangement where cardiologists were paid $18,000 per year to sit on an advisory board. The physicians were paid to sit on the board from 2004 until 2010. Under the participating physicians' "consulting" and "compensation" agreements, they were required to attend at least four board meetings per year to receive the $18,000 payment. The complaint alleged that these physicians did little "advising" on the advisory board, and simply listened to lectures at the meetings.
In his qui tam complaint, DePace alleged that the hospital violated the Federal Anti-Kickback Statute (42 U.S.C. § 1320a-7b(b)), Federal "Stark Law" (42 U.S.C. § 1395nn), the New Jersey Anti-Kickback Statute (N.J.S.A. 30:4D-14(c)), and New Jersey's physician self-referral law (N.J.S.A. 45:9-22.4, et seq., or the "Codey Law"). The U.S. Attorney's office alleged that Cooper's payments to physicians sitting on the board were at least in part to compensate them for their referrals of patients to the hospital, and that some of those patients were Medicare or Medicaid recipients. Dr. DePace was paid $2.39 Million from the United States and New Jersey for reporting the claims.
The $12.6 Million Dollar settlement will have a significant financial impact on the Camden-based healthcare system, which posted a 2012 11-month operating income of $13 Million, according to financial disclosures.

Continue reading "New Jersey Hospital Settles Anti-Kickback Qui Tam Case for $12.5 Million; Case Alleged Cardiologists Were Compensated $18,000 Per Year to Serve on Advisory Board That Was Actually Tied to Patient Referrals" »

September 6, 2012

THE HEALTH LAW PARTNERS' ADRIENNE DRESEVIC AND JESSICA GUSTAFSON PRESENT AT THE ASSOCIATION FOR MEDICAL IMAGING MANAGEMENT NATIONAL MEETING

Adrienne Dresevic and Jessica Gustafson, founding partners of Southfield, Mich.-based The Health Law Partners, recently presented at The Association for Medical Imaging Management's (AHRA) 40th Annual Meeting and Expo in Orlando, Fla. Founding partner, Abby Pendleton made the announcement.
Dresevic and Gustafson spoke on key legal issues impacting radiology providers and suppliers, including new Medicare initiatives, Stark and Anti-Kickback Law, updates from the Office of the Inspector General, and practical tips on compliance issues. Nearly 1,000 imaging leaders attended the expo that took place over a three-day period.
An avid writer and speaker, Dresevic has published more than 60 articles on healthcare law and presents at national conferences throughout the year. Dresevic's practice encompasses the full spectrum of healthcare law and has specialized her practice in Stark and fraud abuse. She received her juris doctorate from Wayne State University Law School, finishing second in her class magna cum laude, and was a member of the Order of the Coif.
Gustafson specializes her practice in Recovery Audit Contracts and Medicare audit appeals, and she routinely publishes articles and speaks on the subject across the country. Gustafson graduated cum laude from Miami University, and earned her juris doctorate from Wayne State University Law School. She is a member of the American Health Lawyers Association, American Bar Association - Health Law Section and the Michigan Bar Association - Health Law Section.

Southfield, Mich.-based The Health Law Partners is a law firm dedicated to the practice of healthcare law. The firm takes pride in delivering progressive results for their clients and exceeding their high standards for service. Established in 2009 by Adrienne Dresevic, Jessica Gustafson, Robert Iwrey, Carey Kalmowitz, and Abby Pendleton, the firm has built a national network, with additional offices in New York and Atlanta. Clients include solo practitioners, group practices, hospitals, hospice organizations and health systems.
The firm has extensive knowledge and experience in Stark and Anti-Kickback law compliance, healthcare billing and reimbursement issues, healthcare transactional work, and Medicare and Medicaid appeals, as well as licensing issues, physician and staff privileging, and participation with third-party payers. HLP attorneys are adept at providing post-audit defense and appeals, a specialty that also provides them with valuable insight and experience into the compliance side of the legal equation--identifying and addressing avoidable vulnerabilities and exposures.

Continue reading "THE HEALTH LAW PARTNERS' ADRIENNE DRESEVIC AND JESSICA GUSTAFSON PRESENT AT THE ASSOCIATION FOR MEDICAL IMAGING MANAGEMENT NATIONAL MEETING" »

September 6, 2012

THE HEALTH LAW PARTNERS' CLAUDIA HINRICHSEN TO PRESENT WEBINAR ON MANAGED CARE CONTRACTS Hinrichsen will serve as panelist and will provide roadmap to successful contract negotiations

Claudia Hinrichsen, partner at Lake Success, N.Y.-based The Greenberg, Dresevic, Hinrichsen, Iwrey, Kalmowitz, La Salle, Lebow & Pendleton Law Group, a division of The Health Law Partners, P.C., will present at a Continued Legal Education webinar entitled "Drafting Managed Care Contracts: Considerations for Providers" on Sept. 6 at 1:00 p.m. Founding Partner Adrienne Dresevic made the announcement.
The 90-minute webinar will provide best practices for providers negotiating managed care contracts, review current trends in negotiations, discuss key provisions and solutions to common areas of dispute. In addition to the presentations, there will be a question and answer session for attendees to gain insight on their own key issues.
Hinrichsen practices in all areas of healthcare law and has specialized in managed care. She has robust experience in independent practice association network formation and corporate governance, negotiation and dispute, payor audits and underpayments. Hinrichsen has received numerous accolades during her career, including being named a Top Healthcare Attorney in 2009 by the Chambers Association. Hinrichsen graduated from Hofstra Law School with distinction, and she earned her bachelor's degree from SUNY Geneseo where she graduated magna cum laude.
For more information on the webinar please visit www.straffordpub.com
Southfield, Mich.-based The Health Law Partners is a law firm dedicated to the practice of healthcare law. The firm takes pride in delivering progressive results for their clients and exceeding their high standards for service. Established in 2009 by Adrienne Dresevic, Jessica Gustafson, Robert Iwrey, Carey Kalmowitz, and Abby Pendleton, the firm has built a national network, with additional offices in New York and Atlanta. Clients include solo practitioners, group practices, hospitals, hospice organizations and health systems.

The firm has extensive knowledge and experience in Stark and Anti-Kickback law compliance, managed care, healthcare billing and reimbursement issues, healthcare transactional work, and Medicare and Medicaid appeals, as well as licensing issues, physician and staff privileging, and participation with third-party payers. HLP attorneys are adept at providing post-audit defense and appeals, a specialty that also provides them with valuable insight and experience into the compliance side of the legal equation--identifying and addressing avoidable vulnerabilities and exposures. Please visit www.thehealthlawpartners.com for more information.

Continue reading "THE HEALTH LAW PARTNERS' CLAUDIA HINRICHSEN TO PRESENT WEBINAR ON MANAGED CARE CONTRACTS Hinrichsen will serve as panelist and will provide roadmap to successful contract negotiations" »

August 30, 2012

THE HEALTH LAW PARTNERS' ADRIENNE DRESEVIC APPOINTED TO AMERICAN BAR ASSOCIATION EDITORIAL BOARDS AND PUBLICATIONS COMMITTEE

Adrienne Dresevic, founding partner of Southfield, Mich.-based The Health Law Partners, has been appointed chair of the American Bar Association (ABA) Publications Committee, liaison from the publications committee to The Health Lawyer Editorial Board and chair of the Stark & Anti-Kickback Toolkit Editorial Board. Founding partner, Carey Kalmowitz made the announcement.
As chair of the Publications Committee, Dresevic will work with section project managers to actively increase the number of publications produced by cultivating an encouraging atmosphere with the ABA Interest Groups and strong support from the Publications Committee.
Dresevic will serve as a facilitator and ensure open communication in her role as liaison between The Health Lawyer Editorial Board and the Publications Committee.
Serving as chair of the Stark & Anti-Kickback Toolkit Editorial Board, Dresevic will work toward increasing subscriptions by improving and updating the toolkit from prior years.
An avid writer and speaker, Dresevic has published over 60 articles on healthcare law and presents at national conferences throughout the year. Dresevic's practice encompasses the full spectrum of healthcare law and has specialized her practice in Stark and fraud abuse. She received her juris doctorate from Wayne State University Law School, finishing second in her class magna cum laude, and was a member of the Order of the Coif.

Southfield, Mich.-based The Health Law Partners is a law firm dedicated to the practice of healthcare law. The firm takes pride in delivering progressive results for their clients and exceeding their high standards for service. Established in 2009 by Adrienne Dresevic, Jessica Gustafson, Robert Iwrey, Carey Kalmowitz, and Abby Pendleton, the firm has built a national network, with additional offices in New York and Atlanta. Clients include solo practitioners, group practices, hospitals, hospice organizations and health systems.

The firm has extensive knowledge and experience in Stark and Anti-Kickback law compliance, healthcare billing and reimbursement issues, healthcare transactional work, and Medicare and Medicaid appeals, as well as licensing issues, physician and staff privileging, and participation with third-party payers. HLP attorneys are adept at providing post-audit defense and appeals, a specialty that also provides them with valuable insight and experience into the compliance side of the legal equation--identifying and addressing avoidable vulnerabilities and exposures.

Continue reading "THE HEALTH LAW PARTNERS' ADRIENNE DRESEVIC APPOINTED TO AMERICAN BAR ASSOCIATION EDITORIAL BOARDS AND PUBLICATIONS COMMITTEE" »

June 5, 2012

Viewing the Recent OIG Company Model Advisory Opinion for What It Truly Is: Meaningful Guidance That Must Be Incorporated Into These Arrangements (But Certainly Not the Death Knell to All Company Models Across the Country)

On June 1, 2012, the Department of Health and Human Services Office of Inspector General (the "OIG") issued its Advisory Opinion No. 12-06, which provides long-awaited guidance to the health care industry regarding the legal permissibility of an anesthesia delivery service model commonly referred to as the "company model." Insofar as Advisory Opinion No. 12-06 is the initial OIG guidance that specifically focuses on such an arrangement and determines that the factual paradigms presented implicate risks under the Medicare and Medicaid Antikickback Statute (the "AKS"), this Advisory Opinion understandably is capturing broad attention within the medical and legal communities. While OIG Advisory Opinion 12-06 clarifies the almost-axiomatic observation that company model arrangements, especially those that contain the indicia that the OIG historically has identified as problematic under the AKS, certainly have the potential to violate the AKS, the legal permissibility of each company model arrangement should continue to be analyzed based upon each arrangement's unique facts and circumstances. Stated otherwise, OIG Advisory Opinion 12-06 should not be interpreted to mean that all company model frameworks necessarily are violative of the AKS; rather, the Advisory Opinion reinforces the consistent guidance provided by The Health Law Partners that these arrangements need to incorporate the requisite structural safeguards.

Broad Overview of Company Model Arrangements and Related Controversy

A significant percentage of ASC procedures involve anesthesia services provided by an anesthesiologist or a certified registered nurse anesthetist ("CRNA"). Due to changes within the health care environment, including, in particular, contraction to reimbursement and an increased emphasis on quality and efficiency of patient care, an increasing number of ASCs around the country have transformed their relationships with the anesthesia providers from the normative arrangement (under which an independent anesthesia group bills fee-for-service for the anesthesia services that it furnishes at the ASC) to "company model" arrangement. Although there are a number of permutations of the structure, the company model generally involves the ASC or some or all of its physician owners (hereafter, in either case, the "ASC Physician Members") establishing a separate legal entity that will provide anesthesia services to the ASC by employing or contracting with anesthesia providers (the "New Company"). The New Company separately bills for the anesthesia services and then pays the anesthesia providers an agreed-upon rate (or contractual compensation in the case of employed anesthesiologists). As a result, the ASC Physician Members capture a portion of the anesthesia revenue generated from procedures furnished at the ASC (which, under the traditional paradigm, had been exclusively realized by the anesthesiologists).

The company model debate has prompted vigorous discussion within the health care bar. The legal dialogue, in particular, focuses upon the application of the AKS to the company model structure. In pertinent part, the AKS prohibits anyone from knowingly and willfully soliciting, receiving, offering or paying remuneration, in cash or in kind, to induce or in return for referrals of items or services payable by any federal health care program. Liability is imposed upon both parties to an impermissible transaction. The AKS has been interpreted to cover any arrangement where one purpose of the remuneration is to obtain money for referral of services or to induce further referrals, even if other salutary purposes exist. Violation of the AKS constitutes a felony punishable by a maximum fine of $25,000, imprisonment up to five years or both. Conviction will also lead to automatic exclusion from federal health care programs, including Medicare and Medicaid and may result in the imposition of civil monetary penalties.

In the company model context, the profit that the ASC Physician Members derive from the anesthesia revenue at the ASC, in an improperly structured arrangement, potentially represents impermissible remuneration in the AKS context. In its most basic terms, the issue is whether, in substance, the ASC Physician Members are "converting their referral stream into a revenue stream." The theory is that the anesthesiologists would essentially be required to forego the anesthesia profit (in favor of the New Company) in exchange for the ability to provide (or, in the case of a then-current anesthesia provider, continue providing) anesthesia services at the ASC, and the ASC Physician Members would earn such profit, based in part, upon their referrals of such services to the anesthesiologists. As discussed below, the fact that the company model affords the ASC Physician Members the ability to capture anesthesia revenue, by itself, does not violate AKS insofar as the determinative element of any AKS violation is impermissible intent. Further, the Federal government is particularly concerned with arrangements that have the ability to negatively affect patient care and/or to result in overutilization. OIG Advisory Opinion No. 12-06 states "[t]he anti-kickback statute seeks to ensure that referrals will be based on sound medical judgment, and that health care professionals will compete for business based on quality and convenience, instead of paying for referrals." Any AKS analysis requires consideration of the aggregate facts and circumstances in light of available Federal guidance.

In our view, OIG Advisory Opinion No. 12-06 should be seen as corroborative of the AKS principles that the OIG has articulated in prior guidance. Thus, there is no unique company model jurisprudence. Rather, to the extent that a company model arrangement contains the suspect indicia that the OIG has consistently identified, then such an arrangement will assume a higher level on the risk spectrum, whereas, by contrast, company models that both demonstrate a clearer nexus between the ASC Physician Members and New Company's business (especially in the form of active participation, particularly focused towards the elevation of clinical care), and which avoid correlations between distributions to the ASC Physician Members and their referrals, the risks will be comparatively lower.

Recent OIG Advisory Opinion No. 12-06 and HLP Comments

In OIG Advisory Opinion No. 12-06, the OIG reviewed two proposals (i.e., Proposal A and B) (the "Proposed Arrangements") for modifying the relationship between certain ASCs and their exclusive provider of anesthesia services (the "Requestor") and determined that both of the Proposed Arrangements could potentially violate AKS and result in administrative sanctions.

At the outset, we note that Proposal A itself is not truly a "company model" arrangement. Proposal A involved the Requestor continuing to serve as the exclusive provider of anesthesia services and to bill and retain collections for its services, subject, however, to the requirement that it would pay the ASCs a per-patient fee for certain "management services" with respect to non-federal health care program patients. The OIG clarified that the proposed "carve out" of federal health care program patients is does not insulate the otherwise-defective structure from AKS scrutiny. The Federal government would view the relationship between the Requestor and the ASCs (which also included the provision of services to federal health care program patients) as a whole. The OIG noted that the ASCs were already essentially paid for such management services through the facility fee that the ASCs receive from Medicare and therefore, under Proposal A, the ASCs would be paid twice for the same services. Further, such management fee would have the potential to inappropriately dictate which anesthesia provider was selected by the ASC. The OIG's disapproval of Proposal A reaffirms the position that HLP has consistently taken that conditioning a provider's (e.g., an anesthesiologist's) right to perform services upon entry into a contractual arrangement with a group of physicians who potentially control the referrals to such provider (e.g., ASC Physician Members) can implicate substantial regulatory risks.

In contrast to Proposal A described above, Proposal B represents a more normative variant of company model arrangement (albeit one against which we have counseled). Under Proposal B, the ASC Physician Members would indirectly (through their professional entities or the ASC itself) own a new subsidiary entity (the "Subsidiary"). The Subsidiary would engage the Requestor as an independent contractor to provide a broad (i.e., substantially the full spectrum of required) anesthesia-related administrative services through the new Subsidiary entity in return for a negotiated fee. Further, the Subsidiary would employ anesthesia providers (some or all of whom would be affiliated with Requestor) or contract with the Requestor's anesthesia providers on a contractor basis. The Subsidiary would furnish and bill for all anesthesia services provided at the ASC and pay the anesthesia providers agreed-upon compensation. Simply stated, insofar as the ASC Physician Members would indirectly own the Subsidiary, there would be a correlation between the number of procedures performed at the ASC that require anesthesia and the profit distributions to the ASC Physician Members from the Subsidiary. (It should be noted, in the context of this discussion, that such correlation between referrals and profit distributions exists in legally permissible in-office ancillary service arrangements, even among single specialty group practices.) Among other factors, the OIG also found it significant that the ASC physicians would not be involved in the operations of the Subsidiary and that substantially all of the operations would be contracted out to Requestor. Further, it is noteworthy that the anesthesia services would be provided by the same provider that historically furnished the anesthesia services before entry into the company model arrangement. Relying heavily upon its previously issued joint venture guidance, the OIG concluded that Proposal B would pose "more than a minimal risk of fraud and abuse."

The OIG's conclusions with respect to Proposal B are consistent with the advice that HLP has previously provided: if a company model arrangement (such as Proposal B) is implemented (or appears to be implemented) to convert referrals (by ASC physicians to anesthesiologists) to a revenue stream and to incentivize overutilization and undue influence over choice of anesthesia provider, such company model involves a high level of risk and is likely impermissible. Factors that increase the risk of inappropriate utilization through the ordering of unnecessary procedures and anesthesiology services to generate revenue have the ability to increase costs to the federal health care programs, interfere with clinical decision-making and raise patient safety or quality of care concerns. By contrast, if a company model arrangement is organized and operated for legally permissible goals (i.e., improving quality and efficiency of care), the ASC Physician Members participate actively in the business' conduct, and the profit distribution mechanism does not bear a connection between distributions and the ability to generate procedures, its legal risk is significantly mitigated and the arrangement is in a far better position to be defensible, especially if all the requisite structural safeguards are included.

Conclusion

OIG Advisory Opinion No. 12-06 reminds us that company model arrangements must include meaningful safeguards to mitigate legal risk and to be defensible from an AKS perspective. That being said, the value of such safeguards depends upon the manner in which they are implemented and the actual intent that underlies their inclusion.

Any company model arrangement must be structured, and most importantly, actually implemented, in a good faith manner and involve circumstances that reflect good intent, such as improving quality, efficiency and coordination of care or other permissible purposes. Meaningful efforts to coordinate care through increased integration and alignment among providers is a favorable factor. Employment of the anesthesiologists and CRNA's by the new ASC or physician owned anesthesia entity would promote such a nexus. Further, if the objective of the new entity is genuinely to improve quality and efficiency, all the physician owners should be meaningfully engaged in the operations of the Company, especially with regard to the development and continuous refinement to policies and protocols (e.g., "best practices") designed to enhance the quality and efficiency of services furnished at the ASC.

We also take the opportunity to emphasize that distributions from the new company under a company model arrangement to the physician owners (directly or indirectly) should be made in accordance with such physicians' respective ownership interests (or some other factor unrelated to referrals) and certainly not based upon the number of procedures they perform at the ASC. Accordingly, it is imperative that such new company not determine the ownership interests of the physicians based upon their anticipated referrals or business generated, not encourage physician investors to divest their ownership interest if they fail to generate a certain level of referrals or business generated, and not track the source of referrals to or business generated for the company.

Continue reading "Viewing the Recent OIG Company Model Advisory Opinion for What It Truly Is: Meaningful Guidance That Must Be Incorporated Into These Arrangements (But Certainly Not the Death Knell to All Company Models Across the Country)" »

June 5, 2012

In Office DME Arrangements Should be Carefully Reviewed by Legal Counsel

In their June newsletter, The Record, Blue Cross Blue Shield of Michigan (BCBSM) recommended that physicians "consult with their legal counsel periodically." The problem that BCBSM identified is the situation where physicians prescribe and dispense durable medical equipment and prosthetics and orthotics items in order to provide a means for their patients to be ambulatory prior to leaving the physician's office. BCBSM has encouraged this practice; however, they warn physicians that certain practices may run afoul to local, state and federal laws. In particular, physicians should worry about the Stark and anti-kickback laws that prohibit self-referrals. Therefore, as BCBSM concludes, it is important for physicians to consult with their legal counsel to ensure compliance with the law. This is especially important when physicians provide durable medical equipment to patients directly from their office. Legal counsel should carefully review such practices to ensure compliance with the Stark law.

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May 2, 2012

New CMS Guidance Allows SRDP Analysis to be Limited to Four Years

In four new recently posted frequently asked questions (FAQs) (select Fraud and Abuse in the left column), the Centers for Medicare & Medicaid Services (CMS) offers new guidance regarding the CMS Voluntary Self-Referral Disclosure Protocol. On September 23, 2010, CMS published the Medicare self-referral disclosure protocol ("SRDP") pursuant to Section 6409(a) of the Patient Protection and Affordable Care Act (ACA). The SRDP sets forth a process to enable providers of services and suppliers to self-disclose actual or potential violations of the physician self-referral statute.

Although the SRDP provides that the financial analysis must cover the entire look-back period, the new FAQs indicate that a disclosing party will satisfy the SRDP by submitting financial analysis setting forth the total amount actually or potentially due and owing for claims improperly submitted and paid within the time frame established for reopening determinations at 42 C.F.R. s 405.980(b) (i.e. four years). However, a disclosing party must still comply with other aspects of the SRDP, which includes specifying the duration of any period of noncompliance with the physician self-referral statute. That requirement remains unchanged by the recently added FAQs and a disclosing party must continue to specify the duration of any period of noncompliance, even if that period exceeds the time period that the party must submit financial analysis for.

The new guidance provided by the recent FAQs is a positive development for providers, as it reduces the burden on a provider who participates in the SRDP process.

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April 11, 2012

New Hampshire House Passes Sweeping Rules Regarding Physician Relationships with Medical Device Companies


On March 29, 2012, with veritably no debate and less fan-fare, the New Hampshire House of Representatives recommended for passage HB 1725. HB 1725 is broad-reaching, and would prohibit all medical practitioners from prescribing or referring any FDA class II or class III implantable device in cases where they would gain profit, directly or indirectly from the sale of the device, or from performing any procedure involving the device. HB 1725 is currently being fast-tracked - the New Hampshire Senate Committee on Health and Human Services has scheduled a hearing on HB 1725 on April 19, 2012.

Supporters of the bill assert that it is necessary to protect New Hampshire from the perceived problems associated with physician-owned distributors ("PODs"), which appears to be pre-textual insofar as it is believed that no PODs are currently operating in New Hampshire, though supporters have argued the law is necessary as a preventative measure. As drafted, however, the bill goes significantly further than merely outlawing PODs; HB 1725 would essentially prohibit physicians from continuing to practice in their specialty in New Hampshire if they have legitimately developed medical devices and received payment for the same. Thus, even in the absence of any potential abuse or evidence of over-utilization, those physicians would effectively be barred from practice in the State.

Opponents of the bill argue that it could have significant unintended patient safety implications, as New Hampshire would effectively have outlawed the process by which physicians and legitimate medical device manufacturers continuously develop, promote, test, obtain feedback on, and improve life-saving medical devices. Additionally, HB 1725 could have significant chilling and anti-competitive effects on innovators, small businesses/medical device startup companies, and hospitals that employ physicians who develop intellectual property (such as university hospitals and others who engage in significant research and pay royalties to physicians).

Most of the potentially negative effects of HB 1725 occur because of the breadth of the bill, its lack of exceptions, and the fact that it layers upon a statutory definition in New Hampshire's current "self-referral" law, which currently merely requires disclosure of certain ownership interests to patients (a la the Stark In Office Ancillary Services exception's disclosure requirement for certain imaging services). That statute defines an "ownership interest" broadly as being:

"any and all ownership interest by a health care practitioner or such person's spouse or child, including, but not limited to, any membership, proprietary interest, stock interest, partnership interest, co-ownership in any form, or any profit-sharing arrangement. It shall not include ownership of investment securities purchased by the practitioner on terms available to the general public and which are publicly traded."

HB 1725, as drafted, would prevent a practicing physician (or their spouse/children) from receiving royalties for intellectual property that they have developed and licensed to a medical device manufacturer. Further, an innovative and entrepreneurial physician would be subject to liability if they, or their spouse or children, decided to create or invest in a medical device company for otherwise legal purposes. HB 1725, as drafted, does not distinguish between legitimate physician/medical device company interactions (e.g., bona fide businesses, as opposed to a marketing tool of a device manufacturer, or a sham entity designed to provider remuneration to referring physicians), and creates a near-absolute prohibition on physicians capitalizing on their intellectual property while continuing to practice in their field of specialty.

Opponents of the bill include the New Hampshire Medical Society, which questions the need for the legislation as no PODs currently exist within the state, and is concerned about the effect the law may have on medical innovation and legitimate cost savings vehicles, including ACOs and other payment/purchasing modalities. The Medical Society has further questioned whether the bill is necessary given developments in Federal law, and whether the legislature would be better off amending the bill to include the guidelines adopted by the AMA instead of a wholesale restriction on such activities.

To date, the legislative passage of New Hampshire's HB 1725 has not been widely publicized. The next significant legislative step occurs on April 19, 2012, when New Hampshire Senate Committee on Health and Human Services has scheduled a hearing on HB 1725.

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April 2, 2012

Significant Stark Law Case Overturned by the Fourth Circuit Court of Appeals

In an opinion issued March 30, 2012, the United States Court of Appeals for the Fourth Circuit overturned a $45 million judgment against Tuomey Healthcare System, Inc. ("Tuomey"), a private, nonprofit corporation which owns and operates Tuomey Hospital in Sumter County, South Carolina. A former physician brought a qui tam action against Tuomey alleging that certain contracts entered with physicians violated the Stark Law and that billings resulting from referrals from those physicians constituted false claims under the False Claims Act. The United States government intervened in the action, which proceeded to a jury trial, with the False Claims Act violations and other equitable theories pursued by the government, such as unjust enrichment and payment by mistake.

The jury found that the contracts between Tuomey and the physicians violated the Stark Law, but also found that Tuomey did not violate the False Claims Act. After the jury verdict, the District Court set aside the jury verdict and ordered a new trial on the False Claims Act allegations. Additionally, the District Court found that because the jury had found that the contracts in question violated the Stark Law, the government was entitled to judgment against Tuomey on the equitable claims. The District Court then entered judgment against Tuomey for approximately $45 million plus interest on the equitable claims.

The Fourth Circuit vacated the decision of the District Court to enter judgment against Tuomey on the equitable claims, finding that the Judge's decision to set aside the jury verdict and order a new trial on the False Claims Act allegations precluded his use of the jury's finding of Stark Law violations to enter judgment against Tuomey on the government's equitable claims. The Fourth Circuit found that the manner in which the District Court reached his conclusions violated Tuomey's Seventh Amendment rights. A new trial should take place in the near future.

Going forward, this will be an important case to monitor for further developments as they related to the Stark Law and the physician compensation arrangements.

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March 28, 2012

OIG Views Favorably a Proposal to Operate Website Containing Coupons and Advertising from Health Care Entities

On March 27, 2012, the Office of Inspector General ("OIG") posted a favorable, but narrowly defined, Advisory Opinion (Opinion No. 12-02) pertaining to Requestor's proposal to operate a website that would display coupons and advertising from health care providers, suppliers, and other entities (the "Proposed Arrangement").

Under the Proposed Arrangement, the Requestor, a corporation with a practicing physician member and another non-physician member, would contract with physicians and other health care providers and suppliers (the "Providers"), who wish to post coupons for health care items or services. The coupons could include discounts on items or services that are reimbursable by Federal health care programs, provided that such discounts comply with the applicable Federal health care program rules and regulations. As part of the service, the Requestor would not allow Providers to offer "free service" coupons; only coupons for a reduced price or a percentage discount would be permitted. The Providers would be required to give the same discount to any third party payor or insurance carrier that the Provider offers a patient. The Requestor also certified to the OIG that it would not be in a position to make any referrals to Providers that post coupons on the site. Even though one member of the Requestor was a practicing physician, the physician's name would not appear on the website, he would not post any coupons for his own services on the website, and he would not have any financial interest in the Providers the Requestor would contract with under the Proposed Arrangement. The Requestor would offer five (5) membership levels, one of which is a free "Basic" membership, the rest of which require a monthly fee, which would allow a Provider to create a profile, and if it chooses to do so, post coupons for consumers. The fee for the enhanced memberships would be a monthly flat fee.

The Requestor would also offer advertising on the website. Health care practitioners and entities (the "Advertisers") would be able to purchase space on the site for advertisement, including banner and pop-up advertisements. The Requestor certified that the fees for the coupon and advertising would be set in advance by Requestor, would be consistent with fair market value, and would not take into account the volume or value of any referrals or business otherwise generated between the parties for which payment may be made in whole or in part under any Federal health care program.

The potential customers (health care consumers) would pay no fees to access the website and coupons offered thereon. A customer would print a coupon (or download it to a mobile device) and the discount would be applied if the customer receives the service. The customer would not be required to pre-pay to receive the discount. The website would advise patients who submit their own claims of their obligation to report any discounts when submitting a claim.

After evaluating the pertinent facts, in its analysis, the OIG determined that the Proposed Arrangement involved two activities which implicate the federal Anti-kickback Statute ("AKS"): the selling of advertising space and the posting of Providers' coupons. The OIG indicated that both the posting of coupons and advertising on the website constitutes advertising activity. In evaluating advertising, there are a number of factors the OIG considers, including, the identity of the party engaged in the marketing activity and the party's relationship with its target audience; the nature of the marketing activity; the item or service being marketed; the target population; and any safeguards to prevent fraud and abuse. The OIG found that the Proposed Arrangement is sufficiently low risk under the anti-kickback statute for the following reasons:

1. The Requestor is not a health care provider or supplier and would simply operate a website hosting advertising and coupons;

2. The payments from Providers and Advertisers to the Requestor do not depend on the coupons being used by customers or obtaining services from the Providers or Advertisers, the fee is set in advance and does not take into account the volume or value of any referrals or business otherwise generated between the parties;

3. The advertising on the website would not be directed at the customer visiting the site and was akin to advertisements on a publically available website or in print media; and

4. The structure of the coupons decreases risk under the AKS because a customer does not pre-pay for the coupon and, thus, has no up-front investment. This fact, according to the OIG, significantly lowered the risk that a Provider's medical judgment would be improperly influenced to render medically unnecessary or inappropriate services based upon the fact that the Customer purchased a coupon.

The OIG also indicated additional risk existed due to the content of the coupons, which may offer discounts on items or services that are reimbursable by Federal health care programs. For the following reasons, the OIG found that the Proposed Arrangement included sufficient safeguards to mitigate the risks associated with the Requestor's role in posting the discounts:

1. Any discount would result in reduced costs which would benefit the patient as well as the payors, including Federal health care programs, as the discount would apply to the entire item or service, not only to the patient's cost-sharing obligations; and

2. The website's Terms of Use (which Providers must agree to before posting any coupons) require the Providers to comply with the discount safe harbor, which requires that buyers and sellers report any discounts to ensure that such discounts are shared with Federal health care programs; the coupons themselves would explain that the discount must apply to the entire item or service and not just a customer's cost-sharing obligation.

Notably, in its opinion, the OIG (without making specific references) makes it a point to differentiate the Proposed Arrangement from a "Social Coupon" type of situation involving relationships with websites such as "Groupon."

For the combination of the above reasons, the OIG concluded that the payments from the Providers and Advertisers for the Requestor's services associated with the Proposed Arrangement would pose an acceptably low risk of fraud and abuse under the anti-kickback statute and that the Requestor's role in posting the coupons also would be unlikely to improperly influence a beneficiary to choose a particular provider or supplier. However, the OIG does identify two areas of potential concern for which it expressed no opinion (1) Stark law issues in relation to the Physician Member and a person or entity with whom the Requestor would contract under the Proposed Arrangement; and (2) False Claims Act liability of the Requestor if the Requestor knows or should know that the Providers are not providing Federal health care programs with their share of the coupon discounts. Thus, although this ultimately was a favorable opinion, it was narrowly focused and identified potential other areas of concern/liability which fell outside the scope of the OIG's authority. As such, these types of arrangements must be carefully considered before a healthcare provider decides to participate.

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December 30, 2011

OIG Soliciting Recommendations for AKS Safe Harbors

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.

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December 30, 2011

DC Appeals Court Permits Physicians to Challenge Stark Law Regulations

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.

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