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Articles Posted in Stark and Anti-Kickback

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In her Federation of American Hospitals’ 2019 Public Policy Conference speech, CMS Administrator Seema Verma indicated the Stark Law would be receiving a major overhaul sometime in 2019. This update, according to Verma, will “represent the most significant changes to the Stark Law since its [1989] inception.”

One of the primary goals of this update is to ensure the policy maintains relevance in the modern health care world with the relatively recent implementation of electronic health records and cybersecurity. This includes the clarification of certain areas of noncompliance as well as reflection of the shift from a fee-for-service model to a value-based care model.

These regulatory modifications come in response to CMS’ public Request for Information (RFI) in June 2018 concerning adjustments that may be necessary in order to lessen any undue impact or burden brought about by the Stark Law. Specifically, CMS solicited responses regarding “the structure of arrangements between parties that participate in alternative payment models or other novel financial arrangements, the need for revisions or additions to exceptions to the physician self-referral law, and terminology related to alternative payment models and the physician self-referral law.”

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June 2018 – On June 19, 2018, the Centers for Medicare & Medicaid Services (“CMS”) issued a Request for Information (“RFI”) seeking public input on how to address any undue impact and burden of the physician self-referral law, 42 U.S.C. § 1395nn (the “Stark Law”).

By way of background, the Stark Law addresses the concern that health care decision making can be unduly influenced by a profit motive and when physicians have a financial incentive to refer patients for health care services, overutilization in medical services may result. To counter such concerns, the Stark Law, subject to certain exceptions: (1) prohibits physicians from making referrals for certain designated health services (“DHS”) payable by Medicare to an entity with which the physician (or an immediate family member) has a financial relationship; and (2) prohibits the entity from filing claims with Medicare (or billing another individual, entity, or third-party payer) for those referred services.

In response to a prior RFI published by CMS requesting comments on improvements that can be made to the health care delivery system that reduce unnecessary burdens, the commenters identified compliance with the Stark Law and its regulations as one of the top areas of burden. In response to these concerns, CMS is now requesting additional information. Specifically, CMS is interested in thoughts on issues that include the structure of arrangements between parties that participate in alternative payment models or other novel financial arrangements, the need for revisions or additions to exceptions to the Stark Law and terminology related to alternative payment models and the Stark Law.

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In its recent Advisory Opinion No. 17-05, OIG stated that the Proposed Arrangement (“Arrangement”) would not violate the anti-kickback statute (“AKS”) nor would it prompt administrative sanctions under the Civil Monetary Penalties (“CMP”) provision of the Social Security Act, prohibiting inducements to beneficiaries.

The Proposed Arrangement discussed in the Opinion centers around a retail pharmacy chain offering a voluntary membership program to Federal healthcare program beneficiaries that includes discounts on certain prescriptions and clinic services.

OIG further noted that Program Members receiving discounts would also be eligible to earn rewards in the form of credits when certain merchandise in-store photo-finishing services were purchased. On its face, the Arrangement would appear to invoke prohibitions of the CMP and AKS, since the discounted items and services and earned credits could induce a beneficiary to select the retail pharmacy chain as his or her supplier for federally reimbursable items or services.

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On December 7, 2016, the Department of Health and Human Services Office of Inspector General (“OIG”) released a final rule (“Final Rule”) codifying new safe harbors to the Anti-Kickback Statute (“AKS”) and new exceptions to the beneficiary inducement provisions of the Civil Monetary Penalties law (“CMP”). The Final Rule will go into effect on January 6, 2017. The final rule can be found using the following link, https://www.gpo.gov/fdsys/pkg/FR-2016-12-07/pdf/2016-28297.pdf.

The Final Rule creates several new safe harbors to the AKS and new exceptions to the beneficiary inducement provisions of the CMP. Below is a summary of the newly codified Local Transportation Safe Harbor to the AKS.

The Local Transportation Safe Harbor that protects free or discounted local transportation made available by an “eligible entity” to federal health care program beneficiaries as long as the following conditions are met:

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The U.S. Senate Committee on Finance released a whitepaper, which addresses proposed reforms of the Stark law (which prohibits physicians from referring Medicare beneficiaries to an entity in which they have a financial relationship for designated health services).

The whitepaper asserts that support for reform of the Stark Law has grown tremendously in recent years, especially since the enactment of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), which addresses alternative payment models, in accordance with which the Stark law needs to be reformed. The Committee notes that, while the goals and effects of the Stark law were appropriate when it was initially implemented, the “huge penalties, and the breadth, complexity, and ambiguities of the Stark law” currently create a “minefield” for the healthcare industry. The spectrum of changes to the Stark law proposed in the whitepaper range from an expansion of its exceptions to the law’s repeal.

If enacted, such changes could have revolutionize the compliance efforts of healthcare agencies. Senator Orrin Hatch stated that the Committee will attempt to take action before next year.

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On July 28th, 2016, the Department of Justice released a report stating that the Lexington County Health Services District will pay $17 million for violations of the Physician Self-Referral Law (the Stark Law) and the False Claims Act.

The Department alleged that Lexington Medical Center (“LMC”) violated the Stark Law (which prohibits physicians from referring Medicare beneficiaries to an entity in which the physicians have a financial relationship for designated health services) by providing financial incentives to  28 physicians in exchange for referrals. The physicians were purportedly provided compensation in excess of fair market value, with the volume or value of referrals taken into account. The False Claims Act (which, in pertinent part, imposes penalties on healthcare providers for submitting false claims to a government program) lawsuit was filed by whistleblower Dr. David Hammett, a former employee who claims he was fired for not providing enough referrals to LMC.

This False Claims Act case is one of many since 2009, through which the government has, in total, recovered more than $18.3 billion from healthcare agencies. The countless violations of the Stark Law alleged by the government in recent years have called into question the complexity and breadth of the law.

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New rules published on June 30th, 2016 in the Federal Register could dramatically change the regulatory enforcement landscape for healthcare providers, with fraud penalties nearly doubling under the False Claims Act and the Anti-Kickback Act.

The False Claims Act (which in pertinent part imposes penalties on healthcare providers for submitting false claims to a government program) has had a penalty range of $5,500 to $11,000 per claim since 1996, but such penalties will increase to a range of $10,781 to $21,563 per claim. Penalties for violations of the Anti-Kickback Act (which prohibits physicians from referring Medicare beneficiaries to an entity in which they have a financial relationship for designated health services) will correlatively be substantially enhanced, from $11,000 per violation to $21,563 per violation.

The basis for these adjustments is the Federal Civil Monetary Penalties Inflation Adjustment Act of 1990, which requires that civil monetary penalties be adjusted regularly in order to account for inflation. These changes are set to take effect on August 1st, 2016. Public comments on the changes can be submitted to the Justice Department until August 29th, 2016.

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Please join The Health Law Partners, P.C., in congratulating Adrienne Dresevic (a Founding Shareholder), and Clinton Mikel (a Partner), for earning what has been described as the “Pulitzer Prize of Legal Writing”.

The Burton Award for Distinguished Legal Writing, which is run in association with the Library of Congress and co-sponsored by the American Bar Association, is earned each year by 35 exceptional authors nationwide.

Submissions for the Distinguished Legal Writing Award are extremely competitive. The award is generally selected by professors from Harvard Law School, Yale Law School, Stanford Law School, and Columbia Law School, among others.

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In U.S. ex rel. Wall v. Circle C. Construction, Case #14-6150, 2016 WL 423750 (6th Cir. Feb. 4, 2016), the 6th Circuit Court held that damages in false certification cases should be based on the difference between the value of the items or services the government should have received and the value of the items or services the government actually received. The holding, which arose in the non-healthcare context of a construction contract, arguably applies in healthcare matters where medically necessary items or services were furnished pursuant to referrals that violated AKS or Stark laws and thus the government did not sustain any actual damages. A court could then find that the treble damage provision under the False Claims Act is not applicable and the government’s damage recovery is limited to the $5,500-11,000 per claim penalty.
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On November 2, 2015 the President signed The Bipartisan Budget Act of 2015, requiring that civil monetary penalties must be raised to account for inflation, followed by an annual review for further increases. Providers accused of False Claims Act (FCA) violations are likely to see an increase as high as 40% over the current penalty ranging from $5,500 to $11,000. Higher penalties may add up quickly in FCA cases, which generally involve hundreds of alleged tainted claims.

This could potentially have a negative impact on providers that have earmarked monies for quality of care improvement efforts who must now spend the money on paying higher penalties. The threat of higher penalties might also influence a provider’s decision to settle FCA cases due to the risk of astronomical penalties that may be imposed.

Budget Deal Raises Stakes for False Claims, Civil Monetary Penalties [link]
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