The Federal Trade Commission announced on May 28, 2010 that it will further delay enforcement of the identity theft “Red Flags” Rule through December 31, 2010. The Rule requires creditors and financial institutions that have certain accounts to develop and implement written identity theft prevention programs. The delay gives Congress time to consider legislation that would affect the scope of entities covered by the Rule. The FTC will begin enforcing the Rule at an earlier date if Congress enacts legislation to limit the scope of the Rule and provides an effective date earlier than December 31, 2010.
You may access the FTC’s announcement here and a von Briesen & Roper Health Law Bulletin on the Rule here.
The OIG recently published an advisory opinion relating to a proposal for several diagnostic imaging service providers (a clinic and a medical center) to provide free pre-authorization services to physicians and patients. Many insurers require pre-authorization for imaging services. This is a measure intended to prevent over utilization. In the proposed arrangement, the imaging providers would operate a call center that patients and physicians could contact to obtain pre-authorization services. The center would in turn submit necessary information to the insurers.
Before ultimately approving the arrangement, the OIG acknowledged that free pre-authorization services could implicate the federal anti-kickback statute if the intent to induce referrals was present. The OIG noted that free pre-authorization services could constitute prohibited “remuneration” if the physician’s contract with the insurance company required the referring physician to obtain the pre-authorizations. The imaging provider’s provision of the free pre-authorization services would relieve the physician of the burden and expense of obtaining pre-authorizations directly. Additionally, the OIG noted that free pre-authorization services could constitute prohibited “remuneration” even if the insurance contract placed the burden on the imaging provider or did not allocate the responsibility at all. The OIG provided an example in which the physician’s staff is devoting considerable time to obtaining the pre-authorizations and might realize significant savings. Nevertheless, the OIG determined that it would not impose sanctions for the arrangement at issue based on the following factors:
1. Low risk of fraud and Abuse. The arrangement would not target particular referring physicians, but would be available to all patients and physicians regardless of the volume or value of referrals.
2. Additional Safeguards to Reduce Risk of Fraud and Abuse. The imaging providers would not make any payments to the physicians or otherwise have any ancillary agreements with the physicians. Further, the imaging providers would not make assurances to the physicians that the pre-authorization requests would be approved. The imaging providers would only collect and provide documentation of medical necessity as received from the patients or physicians. The arrangement would also comply with all state and federal privacy laws.
3. Transparency. The call center’s staff would identify themselves as representatives of the imaging providers and would disclose the nature of the pre-authorization program. The call center would also provide the referring physicians with a copy of information provided to insurers.
4. Legitimate Business Purpose. The imaging providers have a legitimate business purpose that is wholly distinct from gaining favor with referral sources—that is, it is the imaging providers who have a financial interest at stake and desire to ensure that pre-authorizations are pursued.
The OIG’s advisory opinion only protects the actual requestors of the opinion and cannot be relied on by other entities. That said, it provides helpful guidance because it suggests factors to consider when constructing similar arrangement to reduce anti-kickback risk. You may review the OIG’s Advisory Opinion 10-04 here.
Two recent cases demonstrate the consequences of hospital-physician financial relationships that do not comply with Stark.
The first involved a qui tam case against Rush University Medical Center in Chicago. A former Rush employee and a member of Rush’s medical staff blew the whistle on certain medical office leases, calling into question various rent concessions, lack of documentation, and the failure to collect rent from the physician-tenants in a timely and consistent manner, all in violation of Stark. The United States Department of Justice intervened, and contended that these failures tainted Rush’s resulting claims to the Medicare and Medicaid programs, and that Rush improperly certified in its cost reports that the services were provided consistent with applicable law, all in violation of the federal False Claims Act. Rush ultimately settled with DOJ for over $1.5 million.
The second case, also a qui tam action, alleged that Tuomey Hospital in Sumter, South Carolina, violated Stark and the False Claims Act when it paid compensation to various physicians that was in excess of fair market value, not commercially reasonable, and tied to the volume or value of referrals. The whistleblower in the Tuomey action was an orthopedic surgeon whom Tuomey tried, unsuccessfully, to hire. Unlike Rush, Tuomey took the case to trial and convinced the jury that it did not submit false claims to the government. Nevertheless, the jury still concluded that Tuomey had violated the Stark statute, which may result in potential liability of up to $45 million. In so doing, the jury apparently rejected a fair market value opinion that Tuomey had obtained in support of the compensation paid to the physicians.
The U.S. Department of Justice’s office in the Western District of New York is reviewing potentially medically unnecessary inpatient admissions for chest pain. The issue initially was identified by the ZPIC for New York state and referred to the MAC. The DOJ is basing its investigation on results of the MAC audits, including unnecessary admissions identified by the MAC for which hospitals have returned overpayments. It also is investigating errors identified by the Recovery Audit Contractor to determine if specific claims rise to the level of fraud.
For now, this investigation is limited to chest pain admissions in 2008 at 24 New York hospitals, although it could become a more in-depth collaboration between the DOJ and program-integrity contractors. Remember – this is the same DOJ office that coordinated the national kyphoplasty investigation.
The National Summit on Health Care Fraud webcast.
Thursday, January 28, 2010 from 8:45 a.m. – 4:00 p.m. (CST)
The U.S. Attorney recently settled its case against the former owners of a Los Angeles Medical Center. The former executives have agreed to pay over $10 million for paying kickbacks to recruiters to bring homeless people to the hospital facility for unnecessary medical services. View the U.S. Attorney’s statement related to this case.
The OIG has issued an updated Special Fraud Alert on telemarketing by DME suppliers. The updated Alert was apparently issued in light of information that some DME suppliers continue to use marketing firms to place unsolicited telephone calls to Medicare beneficiaries. The original alert was published in March 2003.
The Alert reminds DME suppliers that federal law generally prohibits DME suppliers from making unsolicited telephone calls to Medicare beneficiaries regarding the furnishing of DME, except in some limited circumstances. The rule applies even if another firm contacts the beneficiary on the DME supplier’s behalf. The Alert also reminds DME suppliers that claims for items or services generated from a prohibited solicitation could expose the DME supplier and the telemarketer to criminal, civil and administrative penalties. You can review the OIG’s Alert here.
The Justice Department recently announced a $846,461 settlement by a Minnesota critical access hospital and one of its physician’s to settle False Claims Act allegations. A former doctor at the critical access hospital filed a qui tam (“whistleblower”) action alleging that the physician admitted patients that did not need to be admitted, or kept other patients in acute care when doing so was not medically necessary, and ordered unnecessary testing. The whistleblower contended that he complained to the hospital about the physician’s alleged practices, but that the hospital did nothing. The government investigated the allegations, reviewing nearly 200 of the physician’s patient admissions. Several admissions were identified as not medically necessary under Medicare rules. Additionally, the investigation revealed that the physician generated more than $4 million a year in billings for the hospital, which is 10 times that of its other doctors. You may read the DOJ’s press release here.
If you just don’t get Stark, you’re not alone. Recognizing that even a simple question like “Who must sign an agreement?” continues to defy a simple answer, CMS has issued a clarification to its Phase III “stand in the shoes” doctrine that it is only necessary for a single authorized representative of a physician organization to sign an agreement; it is not necessary for all physicians who stand in the shoes of that physician organization to also sign the agreement. This regulatory change formalizes guidance issued by CMS in a January 2008 FAQ. While the result may seem obvious, the fact that CMS thought it necessary to issue formal regulatory guidance demonstrates how Stark continues to fall short of its goal as a “bright-line” statute.
This clarification, set forth in the CY 2010 Medicare Physician Fee Schedule Final Rule, was accompanied by a CMS solicitation for public comment on another area of continuing confusion involving its recent change to the definition of an “entity” under Stark. As of October 1, 2009, the term “entity” includes not only the entity billing for designated health services but also the person or entity that “performs” the DHS. While not proposing any clarification at this time, CMS has solicited comments on how it might craft future guidance, such as by tying the concept of “performing services” to factors such as the presence of a space or equipment lease, the use of supplies, management or billing services, and whether accompanying non-physician services are separately billable. While it remains to be seen what CMS actually does with the comments it receives, one thing seems certain: the adoption of a multi-variable calculus such as that mentioned by CMS would make “bright-line” comprehension that much more elusive.
The Department of Justice announced on October 30, 2009 that McAllen Hospitals, L.P. d/b/a South Texas Health System, a hospital system based in McAllen, Texas agreed to pay the United States $27.5 million to settle claims that it violated the False Claims Act, the Anti-Kickback Statute and the Stark Statute between 1999 and 2006. The settlement involves allegations that the defendants entered into financial relationships with several doctors in McAllen in order to induce them to refer patients to the defendants’ hospitals. The government alleged that these payments were disguised through a series of sham contracts, including medical directorships and lease agreements.
Two of the Government’s attorneys commented that payments for referrals are improper, corrupt physicians’ judgment in treating patients and contribute to the cost of health care. Tony West, the Assistant Attorney General for the Department’s Civil Division, stated “improper financial relationships between health care providers and their referral sources can corrupt a physician’s judgment about the patient’s true healthcare needs. In addition to yielding a substantial recovery for taxpayers, this settlement should deter similar conduct in the future and help make health care more affordable for patients.” Tim Johnson, U.S. Attorney for the Southern District of Texas said “payment by hospitals to doctors for patient referrals violates federal law and carries the inherent risk that the independent judgment of doctors regarding the best facility for the treatment and care for a particular patient may be adversely influenced; the patient and his medical needs should always be foremost. Our district will continue in its joint effort with our law enforcement partners to enforce these federal laws that protect the public.”
The settlement requires the hospital system to enter into a 5-year Corporate Integrity Agreement. The hospital system must establish procedures for tracking and evaluating financial arrangements between its health care facilities and their referral sources. The agreement also requires specific training for health system representatives involved with financial arrangements, an independent third-party’s annual review of the health system’s compliance with the Corporate Integrity Agreement obligations involving financial arrangements, and a report to the Office of Inspector General by the independent third-party reflecting the results of the review.
Of the $27.5 million settlement, the federal government, the state of Texas and Bruce Moilan, the qui tam whistleblower (a former employee of the health system) will share in the proceeds.
The Department of Justice’s press release can be found here.
A New Yorker magazine article released in June 2009 noted that McAllen, Texas is one of the most expensive health care markets in the United States. Read “The Cost Conundrum” article.
