Lori K. Nomura | AWPHD Administrator’s Only Retreat Trends in Hospital/Physician Relations and Corporate Compliance May 22-24, 2011 Richland, WA

2 Objectives Focus on fraud and individual accountability Overview of federal fraud and abuse laws Review of common physician relationships Review recent compliance and enforcement activities

Health Care Fraud Health Care Fraud and Abuse Control Program 2010 = Recovered $4 billion 1,787 criminal investigations 1,290 civil investigations 3,340 excluded individuals

Focus on Individual Accountability  Congressional testimony by Deputy Inspector General  Responsible corporate officer theory  Permissive exclusion authority

5 Federal Fraud and Abuse Laws  Stark Law  Anti-kickback Statute (AKS)  False Claims Act  State law equivalents

6 The Stark Prohibition  If a physician (or a physician’s family member) has a financial relationship with an entity, the physician may not refer Medicare patients to the entity for designated health services unless an exception applies  Stark also prohibits an entity from billing for services provided as a result of a prohibited referral

7 Financial Relationship Ownership and investment interests can be through debt, equity or other means Compensation arrangements

8 Referral Referral includes:  A physician’s request or order for any DHS for which payment may be made under Part B  The physician’s establishment of a plan of care  The physician’s request for a consultation with another physician and any test or procedure ordered by that other physician

9 Designated Health Services  Clinical lab services  PT and OT  Radiology services (MR, CT, ultrasound)  Radiation therapy  DME  Parenteral and enteral nutrients  Prosthetics and orthotics  Home health  Outpatient prescription drugs  IP and OP hospital services

10 Penalties  Payment denial/recovery by Medicare  Refund to the individual  Civil monetary penalties of up to $15,000 per prohibited service/billing  Civil assessment of up to 3x amount claimed  Program exclusion

11 Analytical Approach  Is there a direct or indirect financial relationship between the referring physician and hospital? If yes,  Does the physician refer Medicare patients to the hospital for DHS? If yes,  Does the arrangement comply with an exception? If no, any bill submitted for a DHS resulting from a prohibited referral violates the statute.

12 Anti-kickback Statute  All federal health care programs  All providers and entities  Criminal statute

13 The Prohibition  Prohibits the knowing and willful offer or receipt of remuneration intended to induce or reward referrals payable by any federal health care program  Criminal statute requires intent  Greber “one purpose” test

Health Care Reform Implications - AKS  New intent standard  a person need not have actual knowledge that the AKS prohibits particular conduct  government is not required to prove “specific intent” to commit an AKS violation  AKS violations are now explicitly false claims under the FCA

15 Penalties  Criminal fines and imprisonment up to five years  Civil money penalties of $50,000 plus treble damages  Exclusion from federal health care programs  Violation of the False Claims Act

16 Safe Harbors  If the conduct in question complies with a safe harbor, no liability under the statute  Unlike the Stark exceptions, compliance with a safe harbor is not mandatory

False Claims Act The False Claims Act makes it illegal to submit false or fraudulent claims for payment to the federal government

False Claims Act, continued Essential Elements to FCA: 1.a person or entity must “knowingly” 2. submit or cause to be submitted a “claim” for payment to the U.S. Government 3.that is false or fraudulent

False Claims Act, continued Returning Overpayments  FCA now requires prompt refund of overpayments  Explicitly defines “overpayment”  Must report and return overpayment within 60 days  Retaining an overpayment is defined as an “obligation” under the FCA and failure to discharge an obligation violates the FCA

Returning Overpayments  Overpayment defined  Refund required  Timing for refund

Penalties  CMPs of $5,500 to $11,000 per false claim  Treble damages

Qui Tam/Whistleblower  Relator files FCA suit under seal on behalf of government  Government has 60 days to intervene  Relators receive between 15-30% of total award  Most FCA cases start out with Whistleblowers

Common Hospital Physician Relations Employment  Direct hospital employment  Affiliated entity model Personal Services Arrangements

Employment Payment to an employed physician is permissible if:  Employment is for identifiable services  The payment is consistent with fair market value and commercially reasonable even if no referrals are made  The payment is not tied to referrals  Any productivity bonus is based on services personally performed

Personally Performed Services Examples of services that the physician directly performs: physician prepares and administers an antigen physician refills an implantable pump Excludes credit for incident-to services and technical component of any ancillaries

26 Personal Services Arrangements  Payments made to a physician or group practice for physician services are permitted if:  Written agreement specifying services, signed by the parties  Agreement covers all services by physician or references other agreements  Aggregate services are reasonable and necessary  Term is at least one year

27 Personal Services Arrangements, continued  Compensation is set in advance, does not exceed fair market value, and is not tied to referrals or other business generated  “Set in advance”:  Permits per click or time-based unit of service  Must be fair market value  Must not vary based on referrals or other business

Problem Areas Physician Employment  Compensation methodology  Scrutiny of compensation levels – FMV analysis  Lack of credible services by physicians

Personal Services  Compensation methodology  Lack of written agreements  Expired agreements

Self Disclosure OIG Program for AKS and CMP CMS Program for Stark violations Why self disclose?

Action Steps  Identify financial relationships with physicians/immediate family members  finance/accounts payable  facilities management  medical staff office  Other non-cash benefits  Identify Stark exception and AKS safe harbor

32 Contact Information Lori Nomura Telephone: Foster Pepper PLLC 1111 Third Avenue, Suite 3400 Seattle, WA These materials are for informational purposes only and do not constitute legal advice.