Stark Lease Violations Generate $1.5 in False Claim Penalties for Rush Medical
This is a Stark settlement that will send chills down the spines of hospital compliance officers. Rush Medical Center has entered into a Settlement Agreement with the DOJ, in which they agree to pay approximately $1.5 in False Claims Act Penalties.
The settlement arose out of a qui tam (whistleblower) lawsuit filed in July 2004. The Department of Justice intervened on behalf of the whistleblowers. Among the alleged Stark Law violations were the lack of fully executed written leases and lease arrangements with inconsistent rental terms among physicians.
Since the financial relationships between Rush Medical Center and the physicians did not qualify for Stark exceptions, the referrals by the physicians to the hospital were prohibited, and billing for the illegally referred services by the hospital was prohibited – thereby generating the False Claims Act violations. The whistleblowers collected approximately $270,000 of the settlement money.
Note that the false claims were submitted by the hospitals and therefore the penalties were paid by the hospital, which is one of the reasons hospitals believe that the penalties for Stark violations fall unfairly upon the hospitals, even when the physicians are equally involved.
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Posted By Michael Cassidy In Fraud - Stark
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October 1, 2009: Effective Date of New Stark Rules
This is just a reminder of the effective date for certain new Stark Rules:
1. CMS prohibits percentage formulae conjunction with space on equipment leases, fair market value exception transactions and indirect compensation effective October 1, 2009.
2. Per click leases are prohibited effective October 1, 2009.
3. "Under arrangement" relationships have been changed because the definition of "entity" will, as of October 1, 2009 include both the billing provider and the provider who actually performed the service. Therefore, since the "in-office ancillary service" exception would not apply, these arrangements may no longer comply with existing Stark exceptions.
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Posted By Michael Cassidy In Fraud - Stark
, Medicare & Reimbursement
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Covenant Medical Center to Pay U.S. $4.5 Million to Resolve False Claims Act and Stark Law Allegations
The U.S. Department of Justice issued a press release on August 25, 2009 announcing a $4.5 million False Claims Act Settlement against an Iowa hospital, Covenant Medical Center. The False Claims Act liability allegations were based upon charges by the Attorney General that paying excessive compensation violated the Stark Law.
Based upon IRS 990 forms, the 5 highest paid physicians made between $635,000 to $2.1 million dollars. Two orthopedic surgeons made $2.1 million and $1 million in 2002, and a gastroenterologist was also paid $2.1 million.
Note the action was settled by the hospital, for making false claims for billing prohibited by the Stark Law.
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Posted By Michael Cassidy In Fraud - Stark
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OIG Advisory Opinion 09-05 Approves Physician On Call Compensation
The Office of Inspector General of the Department of Health and Human Services has issued Advisory Opinion No. 09-05, which states that the OIG will not impose sanctions regarding a proposed on call arrangement in which the hospital will compensate physicians for providing on call coverage for patients presenting to the hospital or emergency department. The hospital will have a formal on call policy and program only available to active members of the medical staff of the hospital who specifically agreed to participate in accordance with the terms and conditions of the policy, and who will receive a flat fee that varies for consults, admissions, and certain surgical and other procedures.
The Advisory Opinion recognizes the potential for abuse for paying physicians to provide on call coverage at hospitals to which they admit patients, but also recognizes the difficulties all hospitals have had securing appropriate call coverage in a changing environment in which physicians no longer voluntarily assume the burden of providing on call coverage.
In addition to citing the presence of the factors objectifying approval, i.e. participation in a formal call coverage based upon a written agreement providing fixed fees for certain services which fees were determined to represent fair market value, the OIG has also identified circumstances in which it would have had enforcement questions, i.e.:
1. Compensation for lost opportunity or similarly designed payments that do not reflect bona fide lost income;
2. Payment structures that compensate physicians when no identifiable services are provided;
3. Aggregate on call payments that are disproportionately high compared to the physician's regular medical practice income; or
4. Payment structures that compensate the on call physician for professional services for which he or she receives separate reimbursement from insurers or patients, resulting in the physician essentially being paid twice for the same service.
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Posted By Michael Cassidy In Fraud - Stark
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Stark Case Text - Apologies for the Missing Link
1 of 3 DOCUMENTS
UNITED STATES OF AMERICA ex rel. TED D. KOSENSKE, M.D. v. CARLISLE HMA, INC.; HEALTH MANAGEMENT ASSOCIATES, INC., Ted D. Kosenske, M.D., Appellant
NO. 07-4616
UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT
2009 U.S. App. LEXIS 971
October 31, 2008, Argued
January 21, 2009, Opinion Filed
PRIOR HISTORY: [*1]
On Appeal From the United States District Court For the Middle District of Pennsylvania. (D.C. Civil Action No. 05-cv-02184). District Judge: Hon. Christopher C. Conner.
United States ex rel. Kosenske v. Carlisle HMA, Inc., 2007 U.S. Dist. LEXIS 84294 (M.D. Pa., Nov. 14, 2007)
COUNSEL: Gregory M. Simpson (Argued), Simpson Law Firm, LLC, Jonesboro, GA and Andrew M. Stone, Stone Law Firm, LLC, Pittsburgh, PA, Attorneys for Appellant, Ted D. Kosenske.
D. Brian Simpson, Office of the U.S. Attorney, Harrisburg, PA, Attorneys for Amicus Curiae United States of America.
Larry B. Selkowitz (Argued), James W. Saxon, Stevens & Lee, Harrisburg, PA, Attorneys for Appellees.
JUDGES: BEFORE: SLOVITER, STAPLETON and TASHIMA, * Circuit Judges.
* Hon. A. Wallace Tashima, Senior United States Circuit Judge for the Ninth Circuit, sitting by designation.
OPINION BY: STAPLETON
OPINION
OPINION OF THE COURT
STAPLETON, Circuit Judge:
Appellant Ted D. Kosenske brought this qui tam action under the False Claims Act, 31 U.S.C. § 3729, et seq., against Carlisle HMA, Inc. ("HMA"), and its parent company, Health Management Associates, Inc. The complaint alleged that they submitted outpatient hospital claims to the Medicare program and other federal healthcare programs, falsely certifying that such claims were in compliance with the Stark Act, 42 U.S.C. § 1395nn ("the [*2] Act"), and the Anti-Kickback Act, 42 U.S.C. § 1320a-7b. The parties filed cross-motions for summary judgment. The District Court granted the defendants' motion and denied the plaintiff's motion. This appeal followed.
This appeal presents two principal issues. First, we must decide whether the exclusive service arrangement between Kosenske's former practice, Blue Mountain Anesthesia Associates, P.C. ("BMAA"), and defendants, in which BMAA provided pain management services at an outpatient HMA clinic, triggered the restrictions placed by the Stark and Anti-Kickback Acts on the submissions of claims for services rendered following "referrals" by a physician having a "financial relationship" with the service provider. We conclude that the Stark and Anti-Kickback Acts were implicated. Second, we must determine if the arrangement between BMAA and HMA satisfied the personal service exception to the Stark Act and the substantially identical safe harbor provision of the Anti-Kickback Act. We conclude that it did not. It follows that summary judgment was wrongly awarded to HMA. Accordingly, we will reverse and remand to the District Court for further proceedings consistent with this opinion. [*3] Because the parties agree that, in the context of this case, the requirements of the Anti-Kickback Act and its implementary regulations are indistinguishable from those of the Stark Act, we refer only to the latter in the following analysis.
I.
BMAA, a group of four physicians that practiced anesthesiology, engaged in negotiations with Carlisle Hospital and Health Systems ("CHHS"), culminating in an Anesthesiology Services Agreement ("the Agreement") dated December 31, 1992. Kosenske was a member of that group.
The purpose of the Agreement was to establish an exclusive service arrangement under which BMAA would provide all anesthesia services required by the Hospital's patients at CHHS's hospital in Carlisle, Pennsylvania (the "Hospital"). While no pain management services were being performed by BMAA physicians at the Hospital in 1992, the Agreement contemplated that such services might be rendered in the future. The Agreement essentially provided that (1) BMAA would provide anesthesia coverage for Hospital patients on a 24/7 hour/day basis; (2) the Hospital would provide at no charge the space, equipment and supplies reasonably necessary and economical for BMAA to provide these anesthesiology [*4] services; (3) BMAA would use the personnel, space, equipment and supplies provided by the Hospital solely for the practice of anesthesiology and pain management for the Hospital's patients; (4) the Hospital would not allow anyone other than BMAA physicians to provide anesthesia or pain management services at the Hospital; and (5) BMAA physicians would not practice anesthesia or pain management at any location other than "the Hospital and . . . such other facilities and locations as may be operated by Hospital and Carlisle Hospital & Health Services ("CHHS"), the entity which owns Hospital." JA at 2.
It is helpful to note at the outset two limitations on the obligations of BMAA under the carefully drafted Agreement. First, as the section of the Agreement we have just quoted suggests and as the remainder of the Agreement confirms, "Hospital" refers only to the "Carlisle Hospital located at 246 Parker Street, Carlisle, Pennsylvania." JA at 1. Thus, the patients that BMAA committed itself to provide 24/7 hour/day anesthesia services for were the patients in the existing facility of the Carlisle Hospital. While it is true that the Agreement contains a few provisions that contemplated the [*5] possibility of BMAA services being performed elsewhere, those provisions only confirm that BMAA's commitment under this Agreement to provide services was limited to that facility. Section 7B, for example, provides as follows:
In the event that Hospital or CHHS obtains, opens, or operates another facility or location at which anesthesiology or pain management services are required or offered, Hospital and CHHS shall offer BMAA the opportunity to provide exclusive anesthesiology and pain management services at such new facility or location under the same terms and conditions as provided in this agreement, to the fullest extent that the Hospital and/or CHHS is able to contract with BMAA to provide such services on the same terms and conditions as set forth herein. Should Hospital and/or CHHS be unable, for any lawful reason, to enter into a contract with BMAA to provide such services on the same terms and conditions as set forth herein, then Hospital and/or CHHS shall offer BMAA the first opportunity to provide exclusive anesthesiology and pain management services at such new facility or location on whatever terms Hospital and/or CHHS and BMAA may negotiate and, in the event that the parties [*6] are not able to negotiate an agreement for the provision of such exclusive services by BMAA, BMAA shall have the right of first refusal for any proposal or contract entered, offered, or made by Hospital and/or CHHS with any other person or entity to provide anesthesiology or pain management services at such new facility. Hospital and/or CHHS shall not enter into any agreement with any other provider without first offering to BMAA the opportunity and right to provide such exclusive services at such facility or location on identical terms offered to or negotiated with such other provider.
JA at 8-9 (emphasis added).
Thus, understandably, BMAA was not committing itself to provide continuous 24/7 service at any new facility that the Hospital or CHHS might choose to open in the future. Rather, it insisted that if and when that happened they would either have to "offer BMAA the opportunity to provide exclusive anesthesiology and pain management services" in the new facility under the same terms and conditions or would have to provide BMAA with an opportunity to exercise a right of first refusal. In short, if BMAA were going to undertake the obligation of providing service beyond the patients [*7] of the then current facility, a new contract would be required.
Second, while BMAA committed itself to satisfying all of the anesthesiology needs of the patients at the Hospital, it did not similarly commit itself to provide pain management services. Not surprisingly, given that no pain management services were being provided when the Agreement was signed, BMAA only committed itself to "devote such time as necessary to provide anesthesia services to Hospital patients and provide anesthesiology consultation to other physicians in the Medical Staff as needed," including "reasonable emergency response on a 24 hour a day, 7 day per week basis." 1 JA at 2, 4.
1 It is true, as the District Court found, that the mutual exclusivity provisions, including one contained in the section entitled "Obligations of BMAA," restrict its right to practice both "anesthesiology and pain management" elsewhere, but those provisions expressly relate only to BMAA's right to practice rather than its obligation to do so.
The Agreement, while using the terms "anesthesiology" and "pain management" as distinct fields of practice, did not define these terms. In context, however, anesthesiology is used in the traditional [*8] sense -- the practice of administering anesthesia to patients undergoing a surgical procedure. Accordingly, it is a hospital- or surgery-center-based practice. The practice of "pain management," as commonly understood, involves the evaluation and management of pain symptoms. It can be, but is not required to be, hospital-based. This distinction between anesthesiology and pain management is relevant in the context of the Stark Act because it bears on the issue of referrals. As the Department of Health and Human Services ("HHS") has recognized, with traditional hospital-based practices like anesthesiology, "it is typically the hospitals that are in a position to influence the flow of business to the physicians, rather than the physicians making referrals to the hospitals." OIG Supplemental Compliance Program Guidance for Hospitals, 70 Fed. Reg. 4858, 4867 (Jan. 31, 2005). In such situations, HHS is primarily concerned with any remuneration flowing from anesthesiologists to the hospital. With respect to a pain management practice that is not a hospital-based practice, the concerns are different. Patients typically come to see pain management physicians for office visits, and the physicians [*9] frequently order tests or procedures at a hospital, lab, or other facility. Thus, in pain management, a physician in an outpatient facility is in a position to generate substantial business for a hospital. See id. at 4865 (noting that "[p]hysicians are the primary referral source for hospitals"). Therefore, HHS's concern would be with remuneration flowing from the hospital to the physicians in order to induce the physicians to provide business for the hospital.
Approximately fifteen months after signing the 1992 Agreement, Kosenske and a Hospital nurse began administering pain management services, in addition to traditional anesthesia, to Hospital patients. Because there was no dedicated space for pain management services, Kosenske saw these patients in space used for other hospital purposes.
In 1998, the Hospital built a new, stand-alone facility, containing an outpatient ambulatory surgery center and a pain clinic ("the Pain Clinic"), which was located about three miles away from the Hospital. From the day of its opening, BMAA provided pain management services to patients in the Pain Clinic, and the Hospital did not charge BMAA rent for the space and equipment, or a fee for the support [*10] personnel it provided to BMAA at the Pain Clinic. BMAA provided a physician to see patients in the Pain Clinic, and this physician when serving there did not have other anesthesiology duties at the Hospital. As with the anesthesia services, BMAA physicians submitted claims to Medicare for the professional services performed during these visits, and the Hospital submitted claims for the facility and technical component of the visits. No one other than BMAA provided pain management services at the Pain Clinic. However, the parties did not amend the 1992 Agreement or enter into a new agreement.
In June 2001, HMA purchased the Hospital from CHHS, as an asset purchase, and renamed it Carlisle Regional Medical Center. The 1992 Agreement was not assigned to HMA, but both HMA and BMAA acted as if the Agreement were still in effect at the Hospital. We will assume, without deciding, that HMA was CHHS's successor under the applicable law.
II.
We review the District Court's grant of summary judgment de novo. DIRECTV Inc. v. Seijas, 508 F.3d 123, 125 (3d Cir. 2007) (citing CAT Internet Servs. Inc. v. Providence Wash. Ins. Co., 333 F.3d 138, 141 (3d Cir. 2003)). 2 We apply the same standard as the [*11] District Court in determining whether summary judgment was appropriate. Congregation Kol Ami v. Abington Twp., 309 F.3d 120, 130 (3d Cir. 2002). Thus, summary judgment was proper if, viewing the record in the light most favorable to the non-moving party and drawing all inferences in that party's favor, there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. See Abramson v. William Paterson Coll., 260 F.3d 265, 276 (3d Cir. 2001); Fed. R. Civ. P. 56(c).
2 We have jurisdiction under 28 U.S.C. § 1291, in that this is an appeal from a final judgment in favor of defendants. Judgment was entered on November 15, 2007, and Appellant timely filed a notice of appeal on December 10, 2007.
III.
Section 3729 of the False Claims Act ("FCA") imposes liability on any person or entity who:
(1) knowingly presents, or causes to be presented, to an officer or employee of the United States Government or a member of the Armed Forces of the United States a false or fraudulent claim for payment or approval;
(2) knowingly makes, uses, or causes to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the Government;
(3) [*12] conspires to defraud the Government by getting a false or fraudulent claim allowed or paid; . . . .
31 U.S.C. 3729(a)(1)-(3). Falsely certifying compliance with the Stark or Anti-Kickback Acts in connection with a claim submitted to a federally funded insurance program is actionable under the FCA. See United States ex rel. Schmidt v. Zimmer, Inc., 386 F.3d 235, 243 (3d Cir. 2004) (citing United States ex rel. Thompson v. Columbia/HCA Healthcare Corp., 125 F.3d 899, 902 (5th Cir. 1997)); United States v. Rogan, 459 F. Supp. 2d 692, 717 (N.D.Ill. 2006).
A
Section 1395nn(a)(i) of the Stark Act provides, in pertinent part:
if a physician (or an immediate family member of such physician) has a financial relationship with an entity specified in paragraph (2), then (A) the physician may not make a referral to the entity for the furnishing of designated health services for which payment otherwise may be made under this subchapter, and (B) the entity may not present or cause to be presented a claim under this subchapter or bill to any individual, third party payor, or other entity for designated health services furnished pursuant to a referral prohibited under subparagraph (A).
42 U.S.C. § 1395nn(a)(1). [*13] Under the Act, a physician has a "financial relationship" with an entity if the physician has "an ownership or investment interest in the entity," or "a compensation arrangement" with it. 42 U.S.C. § 1395nn(a)(2). A "compensation arrangement" consists, with certain exceptions not here relevant, of "any arrangement involving any remuneration between a physician . . . and an entity . . . ." 42 U.S.C. § 1395nn(h)(1)(A). "The term 'remuneration' includes any remuneration, directly or indirectly, overtly or covertly, in cash or in kind." 42 U.S.C. § 1395nn(h)(1)(B). The Stark Act defines "referral" as "the request by a physician for the item or service, including the request by a physician for a consultation with another physician (and any test or procedure ordered by, or to be performed by (or under the supervision of) that other physician)." 42 U.S.C. § 1395nn(h)(5)(A). The "oft-stated goal" of the Act is "to curb overutilization of services by physicians who could profit by referring patients to facilities in which they have a financial interest." See Jo-Ellyn Sakowitz Klein, The Stark Laws: Conquering Physician Conflicts of Interest?, 87 GEO. L.J. 499, 511 (1998).
The Act contains exceptions [*14] to its broad prohibition, however, in order to exclude from the prohibition financial arrangements that exist for reasons independent of referrals. See 2 BARRY R. FURROW ET AL., HEALTH LAW: PRACTITIONER TREATISE SERIES, § 13-9 (2d ed. 2000). One such exception excludes "personal service arrangements" if:
(i) the arrangement is set out in writing, signed by the parties, and specifies the services covered by the arrangement,
(ii) the arrangement covers all of the services to be provided by the physician (or an immediate family member of such physician) to the entity,
(iii) the aggregate services contracted for do not exceed those that are reasonable and necessary for the legitimate business purposes of the arrangement,
(iv) the term of the arrangement is for at least 1 year,
(v) the compensation to be paid over the term of the arrangement is set in advance, does not exceed fair market value, and except in the case of a physician incentive plan described in subparagraph (B), is not determined in a manner that takes into account the volume or value of any referrals or other business generated between the parties,
(vi) the services to be performed under the arrangement do not involve the counseling [*15] or promotion or a business arrangement or other activity that violates any State or Federal law, and
(vii) the arrangement meets such other requirements as the Secretary may impose by regulation as needed to protect against program or patient abuse.
42 U.S.C. § 1395nn(e)(3)(A).
The Act defines "fair market value" as "the value in arms length transactions, consistent with the general market value . . . ." 42 U.S.C. § 1395nn(h)(3). Once the plaintiff or the government has established proof of each element of a violation under the Act, the burden shifts to the defendant to establish that the conduct was protected by an exception. Rogan, 459 F. Supp. 2d at 716.
B
In the course of concluding that HMA was entitled to summary judgment, the District Court found that BMAA received numerous benefits as a result of its relationship to HMA which constituted "remuneration" for purposes of the Act and established a "compensation arrangement" and "financial relationship" between BMAA and HMA. The Court further concluded that BMAA physicians had requested services from the Hospital that constituted referrals and that HMA had submitted claims to Medicare based on those services. The Court held, however, [*16] that HMA's undisputed evidence had established that its arrangement with BMAA at the Pain Clinic was within the scope of the "personal service" exception of § 1395nn(e)(3)(A).
In the course of concluding that HMA had carried its burden of demonstrating satisfaction of all elements of the personal service exception, the District Court tacitly assumed that the Agreement was applicable to BMAA's service at the Pain Clinic and held that it satisfied the "arrangement . . . in writing" requirement because "all parties intended . . . HMA to succeed CHHS under the 1992 agreement for purposes of the Stark Act." JA at 41. After concluding that the provisions of the Agreement "adequately address all of the anesthesiology and pain management services to be rendered by BMAA at the hospital and the pain management clinic," JA at 43, it turned to the issue of whether the Agreement set forth in advance compensation to be provided for those services, which did not exceed their fair market value. The Court concluded that this requirement of the "personal service" exception was satisfied even though HMA had tendered no evidence regarding the market value of the space, equipment and staff services provided [*17] to BMAA at the Pain Clinic or of the mutual exclusivity rights the parties were apparently according each other there. The Court found such evidence unnecessary because the consideration provided for in the Agreement was the result of negotiation between unrelated parties and "[b]y definition" reflected fair market value. As the Court put it:
The mutuality of rights and responsibilities imposed by the 1992 agreement is compelling evidence that the parties engaged in a fair-market-value exchange. . . . By definition, the terms of the contract reflect the fair market value of the benefits conferred on each party. Therefore, the court finds that [the] agreement complies with the fair market value requirements of the personal service exception.
JA at 46-47 (emphasis added).
C
We agree with the District Court's determination that the arrangement between BMAA and HMA implicates the Stark Act. BMAA received numerous benefits as a result of its relationship with HMA, including the exclusive right to provide all anesthesia and pain management services, and the receipt of office space, medical equipment and personnel. These benefits constitute remuneration in-kind from HMA to BMAA, which is considered [*18] a compensation arrangement under the Act and establishes a financial relationship between BMAA and HMA. We cannot, however, agree with the District Court that the arrangement between BMAA and HMA at the Pain Clinic qualifies for the personal service exception.
The exception recognizes that there can be personal service arrangements involving referrals that are beneficial and seeks to take advantage of those benefits while assuring that the referrals will not result in abuses. The Act does this by insisting on the transparency and verifiability that comes from an express agreement reduced to writing and signed by the parties which specifies all of the services to be provided by the physician and all of the remuneration to be received for those services.
In this case, the only written contract in existence between the parties is one that did not, and obviously was not intended to, apply to services at a non-existent facility. It was negotiated in 1992 in a context wholly different from the one that existed six years later after the opening of the Pain Clinic. No pain management services were being provided by BMAA in 1992, and by 1998 it was providing exclusive pain management services [*19] for a facility devoted solely to such services. Similarly, with respect to the value to be received by BMAA for those services, in 1992 no free Hospital space, staff or facilities were devoted solely to pain management, and the opening of the Pain Clinic represented a very substantial change.
In this context, it is apparent that there was no written contract setting forth the relevant arrangement at the Pain Clinic following its opening. Moreover, even if the 1992 Agreement could otherwise be read as reflecting the parties' arrangement at the Pain Clinic, that Agreement said nothing about much of the consideration that BMAA was receiving for its services. The Agreement says nothing whatsoever about the provision of free office space, equipment and staff necessary to the practice of pain management, much less about a stand-alone Pain Clinic.
Finally, it is clear that there were no arm's length negotiations that could vouch for the fair match of service and compensation that the whole statutory scheme is designed to assure. The District Court's determination that such a match existed cannot be sustained for two reasons. First, as a factual matter, negotiations in 1992 could not possibly [*20] reflect the fair market value of the consideration given and received more than six years later under materially different circumstances. Second, as a legal matter, a negotiated agreement between interested parties does not "by definition" reflect fair market value. To the contrary, the Stark Act is predicated on the recognition that, where one party is in a position to generate business for the other, negotiated agreements between such parties are often designed to disguise the payment of non-fair-market-value compensation.
The Act provides that "[t]he term 'fair market value' means the value in arms length transactions, consistent with the general market value . . ." 42 U.S.C. § 1395nn(h)(3). The regulations amplify this definition as follows:
Fair market value means the value in arm's-length transactions, consistent with the general market value. "General market value" means the price that an asset would bring as the result of bona fide bargaining between well-informed buyers and sellers who are not otherwise in a position to generate business for the other party, or the compensation that would be included in a service agreement as the result of bona fide bargaining between well-informed [*21] parties to the agreement who are not otherwise in a position to generate business for the other party, on the date of acquisition of the asset or at the time of the service agreement.
42 C.F.R. § 411.351 (emphasis added). As we have explained, BMAA and HMA are in a position to generate business for each other.
HMA makes no plausible argument in support of the District Court's analysis. Rather, it advances two alternative rationales for reaching the Court's ultimate conclusion. We find no merit in either.
First, HMA insists that there can be no fair market value issue because BMAA physicians at the Pain Clinic are compensated for their medical services directly by Medicare and HMA is compensated for its commitment of facilities directly by Medicare. The suggestion, as we understand HMA's brief, is that Medicare's evaluation should be accepted as a fair market evaluation of each. This would not help HMA, however, unless we were willing to ignore the current arrangement under which BMAA is receiving the free use of the Pain Clinic facilities and apparently the exclusive right to practice pain management there. Given the text of the Act and the concerns which prompted it, we must decline [*22] the invitation to do so.
HMA's second alternative ground for sustaining the judgment of the District Court is based on a Medicare regulation setting forth requirements "for a determination that a facility . . . has provider-based status." 42 C.F.R. § 413.65. HMA's argument is that the Act is inapplicable to referrals by BMAA to the Hospital for diagnostic tests and other services because "patients treated by BMAA physicians [at the Pain Clinic] were de facto patients of the hospital, and, therefore, BMAA did not actually make any referrals." JA at 51, n.19. This argument is founded not on evidence regarding how patients get to BMAA physicians at the Clinic, but rather upon 42 C.F.R. § 413.65 which sets forth the conditions under which a facility may be considered a part of the main hospital -- rather than a free standing facility unrelated to the main provider. This regulation determines whether a facility like the Pain Clinic has sufficient connections to a hospital so that it can be considered a part thereof and, for example, can submit claims under the hospital's provider number. Under § 413.65, among other things, the professional staff at the off-site facility must have clinical [*23] privileges at the main provider, medical records must be integrated into a unified retrieval system, and patients at the off-site facility who require further care must have full access to all services of the main provider. 42 C.F.R. § 413.65(d)(2). As we read § 413.65, it has nothing to do with referrals or the concerns of the Stark Act.
HMA points to one subsection of 42 C.F.R. § 413.65 relating to the requirement that the clinical services of the facility and the main provider must be "integrated as evidenced by the following," inter alia:
Inpatient and outpatient services of the facility or organization and the main provider are integrated, and patients treated at the facility or organization who require further care have full access to all services of the main provider and are referred where appropriate to the corresponding inpatient or outpatient department or service of the main provider.
42 C.F.R. § 413.65(d)(2)(vi) (emphasis supplied by HMA).
HMA reads this sub-section as depriving physicians at the facility of any discretion in making referrals of their patients, i.e., as mandating referrals to the main provider. We believe HMA reads too much into this provision. While Pain Clinic [*24] patients clearly must have access to all services provided by the Hospital in order for it to be considered a part thereof, we are unpersuaded that BMAA physicians at the Clinic have been deprived of the right to refer their patients in accordance with their best medical judgment.
The referrals of patients by BMAA physicians at the Pain Clinic to the Hospital for diagnostic tests and other treatments comes within the statutory definition of referrals and the circumstances in which they are made present the same concerns that motivated the Act. Accordingly, we conclude that that Act is implicated and that HMA had the burden of demonstrating its right to an exception, a burden that it failed to carry.
IV
The judgment of the District Court will be reversed, and this matter will be remanded for further proceedings consistent with this opinion. 3
3 Because the District Court determined that the Stark and Anti-Kickback Statutes were not violated, it did not determine whether Kosenske satisfied the remaining elements necessary to establish a prima facie claim under the False Claims Act, 31 U.S.C. § 3729(a), specifically whether HMA knew its certifications were false because it was in violation [*25] of the Stark and Anti-Kickback Acts. See United States ex rel. Schmidt v. Zimmer, Inc., 386 F.3d 235, 242 (3d Cir. 2004) (To establish a prima facie claim under 31 U.S.C. § 3729(a)(1), a plaintiff must show that: "'(1) the defendant presented or caused to be presented to an agent of the United States a claim for payment; (2) the claim was false or fraudulent; and (3) the defendant knew the claim was false or fraudulent.'") (quoting Hutchins v. Wilentz, Goldman & Spitzer, 253 F.3d 176, 182 (3d Cir. 2001), cert. denied, 536 U.S. 906, 122 S. Ct. 2360, 153 L. Ed. 2d 182 (2002)).
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Third Circuit Decides Stark Exception Case in Qui Tam Context
Third Circuit Decides Stark Exception Case in Qui Tam Context
The Third Circuit Court of Appeals has rendered a provocative decision in the qui tam case, United States of America ex rel. Ted D. Kosenske, M.D. v. Carlisle HMA, Inc., which opinion was filed on January 21, 2009 and which is available at the link below.
This qui tam action alleges improper billing by CarlisleHospital (now CarlisleRegionalMedicalCenter due to its acquisition by HMA in 2001), based upon the fact that the hospital lacked an agreement which would comply with the Stark personal services exception. Anesthesia services at the hospital were being provided by Blue Mountain Anesthesia Associates under an exclusive service agreement starting in 1992. In 1998, the hospital added a new free-standing facility which included a pain management clinic and Blue Mountain Anesthesia began providing the exclusive pain management services at the new clinic.
The qui tam case was based upon the fact that the 1992 agreement did not cover the new facility and services commenced in 1998.
The decision was simply a remand of the case back to the District Court for further proceedings, but the aspect of the decision indicating that a new contract specifically covering the new services is necessary for Stark compliance is important. Even more significant could be the language in the opinion that “free use of the pain clinic facilities and apparently the exclusive right to practice pain management” should be considered when evaluating fair market value for purposes of the Stark exception.
Note that local Pittsburgh counsel, Andrew M. Stone from the Stone Law Firm was involved in representing the qui tam relator.
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OIG ISSUES ANOTHER GAINSHARING ADVISSORY OPINION (08/21)
OIG issues another in a string of gainsharing opinions involving hospitals and groups of cardiologists and radiologists. This and the solicitation by HHS of comments on shared savings exceptions and safe harbors confirm HHS's intent to continue to encourage legitimate cost savings and incentive programs.
Link: http://www.oig.hhs.gov/fraud/docs/advisorgopinions/2008/AdvOpn08-21.2.pdf.
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Posted By Michael Cassidy In Fraud - Stark
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OIG ADVISORY OPINION 08-16 APPROVES P4P
Advisory Opinion 08-16, the text of which is linked below, involved a nonprofit hospital's Pay for Performance (P4P) program with a commercial insurer and certain physicians on the hospital's medical staff. Under the P4P program, the insurer pays the hospital bonus compensation calculated as percentage of the annual base compensation it otherwise pays to the hospital if the hospital meets specified quality and efficiency standards. The insurer can pay the hospital a maximum amount of bonus compensation of 4% of the annual base compensation. To receive bonus compensation in 2008, the hospital must meet quality standards for all hospital patients (including Medicare, Medicaid, and privately insured patients). The patients must be admitted to the hospital with six specified conditions or procedures, by reporting data and meeting quality targets derived from the Specifications Manual for National Hospital Quality Measures published by The Joint Commission (the Quality Measures Manual).
The physician component of the program calls for the hospital to enter into a quality enhancement professional services agreement with a physician entity for an initial term of three years, subject to automatic renewal for additional terms. Under the quality enhancement agreement, the hospital will pay the physician entity a portion not to exceed 50% of the bonus compensation the hospital receives from the commercial insurer for meeting the quality targets. The hospital and physician entity will negotiate a specific fair market value percentage to be paid to the physician entity from year to year. Upon receipt of its payment, the physician entity will distribute the hospital payment to its physician members on a per capita basis. The program also includes a cap on payments to the physician entity, which is tied to the base compensation paid by the commercial insurer to the hospital. Any increase in patient referrals to the hospital due to an increase in annual base compensation receive d by the hospital from the commercial insurer would not increase the annual payment to the physician entity. In addition, the hospital will monitor the implementation of quality targets throughout the program to ensure that they do not result in inappropriate reductions or limitations on patient care—and the hospital will terminate application of any quality target determined to have an adverse effect on patient care. Likewise, the hospital will terminate physicians with significant referral increases to the hospital from participation in the program. The hospital will also inform all patients admitted to the hospital with one of the specified conditions subject to quality targets about the program in writing.
In its analysis of the hospital payments to the physician entity under the CMP law, the OIG declined to impose penalties due to the presence of the following program safeguards designed to reduce the risk of fraud and abuse:
· The quality targets are based on credibly medical evidence indicating that they improve patient care;
· If a quality standards is contraindicated for a particular patient, the hospital payment to the physicians will not be reduced;
· The quality targets are reasonably related to the practices and patient population of the hospital; and
· The hospital will monitor the quality targets and their implementation throughout the program to avoid inappropriate limits on patient care or services.
The OIG also noted that the base compensation and bonus compensation paid by the commercial insurer to the hospital, as well as the physicians' quality efforts, involved all hospital patients admitted with the specified conditions—not just those patients insured by the commercial insurer.
Similarly, the OIG declined to impose administrative sanctions under the anti-kickback statute based on the presence of the following program safeguards:
· The membership of the physician entity will be limited to physicians who have been on the active medical staff for at least one year, thereby minimizing the likelihood that the arrangement will attract referring physicians or increase referrals from existing physicians;
· Compensation paid to the physician entity will be subject to a cap tied to the base compensation paid by the private insurer to the hospital in the base year so that increases in patient referrals to the hospital will not increase hospital payments to the physician entity;
· The physician entity's distribution of hospital payments to its physician members will be on a per capita basis—and participation in the program will be offered to all physicians, not just high-referring physicians (these factors will serve to reduce the risk of rewarding individual physicians for referrals to the hospital);
· The commercial insurer will oversee the arrangement to ensure that hospital payments to physicians are based on meeting the quality standards based on the Quality Measures Manual published by The Joint Commission with input from CMS; and
· The program will be limited to a three-year term (the OIG expressed no opinion on the potential future renewal terms of the program but nevertheless suggested that payments in subsequent terms should not be based on improvements achieved in prior years such that incentives for achievement of new improvements should be included in future terms).
Advisory Opinion 08-16 is available at this link: http://oig.hhs.gov/fraud/docs/advisoryopinions/2008/AdvOpn08-16A.pdf
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Posted By Michael Cassidy In Fraud - Stark
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Stark IV: Per-Click Leases; Stand-in-Shoes; and Disallowance
The Department of Health and Human Services and Centers for Medicare and Medicaid Services (CMS) published final Stark IV regulations in the Federal Register on August 19, 2008. The web link is ttp://edocket.access.gpo.gov/2008/E8-17914.htm. The final regulations cover issues in addition to physician self-referral. Three issues of particular interest are the per-click compensation arrangements, the Stand-in-shoes regulations, and compliance rules regarding the period of disallowance for non-complying transactions.
I. Per-Click Lease Arrangements: At this time, CMS is adopting its proposal to prohibit per-click payments to physician lessors for services rendered to patients who are referred by the physician lessor. They continue to believe that per-click arrangements are particularly susceptible to abuse. The final rule revises the lease exceptions at Section 411.357(a)(5) and Section 411.357(b)(4), for office leases and equipment, as well as the fair market value exception at 411.357(l) and the exception for indirect compensation arrangements at Section 411.357(p), all of which provide that per unit of service rental charges are not allowed to the extent that such charges reflect services provided to patients referred by the lessor to the lessee. The prohibition on per-click payments for space or equipment used in the treatment of a patient referred to the lessee by a physician applies regardless of whether the physician himself or herself is the lessor, or whether the lessor is an entity in which the referring physician has an ownership or investment interest. Although the general effective date for the Stark IV regulations is October 1st, 2008, CMS is delaying the effective date of the amendments to the lease exceptions until October 1, 2009, in order to afford the party's adequate time to restructure their arrangements.
The new regulations require a compensation arrangement that is not determined in relation to the value or volume of referrals and does not use a formula based on either percentage of revenue or per unit valuation formula. The regulations do not prohibit percentage based formulas for compensation or leases as long as they do not involve physicians who are referring designated health services to the provider entities.
In an interesting aside, CMS acknowledged that lithotripsy is not DHS, but warned that any non-compliant per-click lease would be a non-protected compensation arrangement, thus prohibiting referrals of other DHS.
II. Stand-in-Shoes: In this final rule, CMS is finalizing the physician Stand-in-Shoes proposals so that a physician owner is deemed to stand in the shoes of a physician organization, and have a direct compensation relationship with that organization, if the physician organization is the only intervening entity between the physician and the provider entity. The regulations exclude titular owners, but allow such owners to elect to be covered in order to be evaluated in accordance with the direct compensation relationships if they so choose.
CMS is not finalizing the Stand-in-Shoes regulations with respect to designated health service entities and is not proposing exceptions for either mission support payments or academic medical center relationship.
III. Period of Disallowance: The Stark Regulations prohibit payment for any improperly referred designated health services during the period of non-compliance. The period of non-compliance begins when the relationship fails to satisfy the exception and continues no later than the following:
1. For non-compensation, non-compliance issues, the period of disallowance ends when the compliance issue is resolved.
2. For excess compensation issues, the period of disallowance ends when the excess compensation has been repaid.
3. For insufficient compensation issues, the period of non-compliance ends when the insufficient compensation has been repaid.
The regulations also clarify that the burden of proof lies upon the entity claiming the exception.
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Posted By Michael Cassidy In Fraud - Stark
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OIG Rejects Block Leasing Joint Venture
Check David Harlow's HealthBlawg ( http://healthblawg.typepad.com/) for a discussion of OIG Advisory Opinion 08-10, finding that a block leasing aggreement would be a prohibited joint venture.
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Posted By Michael Cassidy In Fraud - Stark
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CMS Proposes New "Stands in Shoes" Regulations
STARK: "STAND IN SHOES" REGULATIONS
The original proposed physician "Stand in Shoes" regulations provide that any physician would stand in the shoes of any other doctor in the following circumstances:
1. Another physician who employs the referring physician;
2. His or her wholly owned professional corporation;
3. A physician's medical practice that employs or contracts with the referring physician or in which the physician has an ownership interest; or
4. A group practice of which the referring physician is a member or independent contractor.
Following these proposals, institutional providers, i.e. academic medical centers, integrated delivery systems, etc., were concerned that support payments to a physician organization, which previously might have satisfied the indirect compensation arrangement exceptions, would no longer be available because the support payments are typically not expressly linked or tied to fair market value for identifiable services. Because of this concern, CMS announced a 12 month delay on November 15, 2007.
CMS has stated that it believes the institutional concerns are justifiable, but they also do not wish to suggest that support payments are totally without risk. Therefore, they are proposing two alternatives for the former "Stand in Shoes" regulations. First will be a multifaceted approach to the "Stand in Shoes" regulations to provide specific guidance, and second will be a universal exception for non-abusive relationships.
The first proposal would amend the "Stand in Shoes" regulations to provide that a physician does not stand in the shoes of a physician or entity that already meets an existing exception, i.e. bona fide employment, personal service arrangement, or fair market value compensation. The second component of that new exception would be to protect academic medical center payments that meet the graduate medical education requirements.
The second proposal is conceptual only; there are no specific proposals at this point. That global exception would be to protect mission support payments to physician components of integrated delivery systems. CMS is seeking comments on this concept because of the wide and non-specific scope of the term "integrated delivery system". CMS would like to define a sufficient degree of integration so that this exception will not simply be the universal escape hatch.
Coupled with the refinement of the physician "Stand in Shoes" regulations, CMS would like to clarify the entity "Stand in Shoes" regulations, so that Section 411.354(a) would be revised to provide that an entity that furnishes DHS would be deemed to stand in the shoes of an organization in which it has 100% ownership interest and would be deemed to have the same compensation arrangements with the same parties and on the same terms as does the organization that it owns.
The text of the CMS proposal can be accessed through the 04/17/08 post or in the Healthcare Links section of the MedLaw Blog.
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Posted By Michael Cassidy In Fraud - Stark
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CMS Posts Stark FAQs
CMS recently modified its website to include a new page called Frequently Asked Questions and just added twelve questions and responses under the Physician Self-Referral page. Access the FAQs. at http://www.cms.hhs.gov/PhysicianSelfReferral/05a_FAQs.asp#TopOfPage.
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Posted By Michael Cassidy In Fraud - Stark
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OIG Issues Advisory Opinions For Cardiac Surgeon And Anesthesiologist To Gain Sharing Programs
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Posted By Michael Cassidy In Fraud - Stark
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2008 Medicare Physician Fee Schedule Delays Stark Rules
2008 MEDICARE PHYSICIAN FEE SCHEDULE DELAYS STARK RULES
CMS announced in the 2008 Medicare Physician Fee Schedule final rule that the following proposed revisions will not be finalized until the future publication of a final rule:
§ burden of proof;
§ obstetrical malpractice insurance subsidies;
§ unit of service (per click);
§ payments in lease arrangements;
§ the period of this allowance for noncompliant financial relationships;
§ ownership or investment interest in retirement plans;
§ set in advance and percentage based compensation arrangements;
§ "stand in the shoes" provisions;
§ alternative criteria for satisfying certain exceptions; and
§ services furnished under arrangements.
The changes to reassignment and physician self-referral rules relating to diagnostic tests, i.e., the anti-markup provisions, will become final effective January 1, 2008 then will be addressed in a later post on the Med-Law blog.
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Posted By Michael Cassidy In Fraud - Stark
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OIG Issues 2008 Work Plan
The Office of Inspector General (OIG) of the Department of Health and Human Services (HHS) has issued its fiscal year 2008 Work Plan, identifying investigation projects for the coming fiscal year relating to the Medicare and Medicaid programs. Following is a copy of pages 3 through 13 of the 2008 OIG Work Plan, which identify the investigation projects for hospitals and physicians.
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Posted By Michael Cassidy In Fraud - Stark
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More Stark III Changes: Physician Recruitment
MORE STARK III CHANGES:
PHYSICIAN RECRUITMENT
There have been a number of definitional or technical changes to the physician recruitment exception.
· The definition of the hospital’s geographic service area, which was previously the area composed of these contiguous zip codes from which the hospital drew 75% of its inpatients, has been tweaked to exclude from that definition any zip code from which the hospital draws no inpatients so long as that zip code is totally surrounded by zip codes from which the hospital does draw patients.
· If the hospital does not draw 75% of its patients from contiguous zip codes, then the service area will be composed of the contiguous zip codes from which the hospital does draw its patients, meaning that zip codes that are not contiguous but from which the hospital draws its patients will be available as relocation areas for recruited physicians.
· There is also an optional definition for rural hospitals to allow them to use the contiguous zip codes from which they draw at least 90% of their patients, and to allow the hospital to include non-contiguous zip codes to their service area in decreasing order of the percentage of patients within those zip codes to be added.
· The definition of physician as been defined to exclude residents and physicians who have been in practice for less than a year as long as those physicians establish a practice within the hospital service area. I assume the term residents will be interpreted broadly enough to include fellows.
· The definition of allowable incremental costs that can be passed through in situations in which physicians have been recruited and are joining an existing rural practice has been broadened to include costs that are either the lower of actual, per capital, or 20% of the total costs.
· Finally, hospitals may recruit physicians to prohibited rural areas with the approval of the Secretary.
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Posted By Michael Cassidy In Fraud - Stark
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CMS Stark Advisory Opinion Rejects Amendment of Recruitment Agreement
CMS ISSUES STARK ADVISORY OPINION PROHIBITING
AMENDMENT OF RECRUITMENT AGREEMENT
On October 3, 2007, the Centers for Medicare and Medicaid Services (CMS) issued Advisory Opinion CMS - AO - 2007 - 01 denying permission to the hospital and physician to revise a physician recruitment agreement. The proposed amendment would have deleted and “excess receipts provision, which is a standard provision providing that physician or practice receipts in excess of the amount necessary to cover the expenses and compensation guarantee would be paid to the hospital to reduce the debt recreated by the arrangement.
The hospital, physician and medical practice entered into a recruitment agreement in 2004. That recruitment agreement was later amended to comply with Stark II, which added a requirement that recruitment agreements could guarantee or reimburse physicians and medical practices only for the actual incremental expenses associated with the recruitment. The parties then sought to amend the existing agreement to eliminate the excess receipts provision.
CMS concluded as follows:
“The purpose of the physician recruitment exception is to permit certain compensation arrangements to induce a physician to relocate his or her medical practice to the geographic area served by a hospital in order to become a member of the hospital’s medical staff. We do not believe that the parties should now be able to amend the arrangement to provide for additional (or potentially additional) compensation to the physician. Because the physician has already relocated his practice, the additional compensation is not for the purpose of inducing relocation and may directly or indirectly reflect the volume of value of the recruited physicians actual or potential referrals.”
The complete text of the Advisory Opinion is available at the link below. Note that this is a CMS/Stark Advisory Opinion, of which only five have been issued since 1998, rather than an OIG Advisory Opinion on the fraud and abuse safe harbors, which are issued on a much more frequent basis.
http://www.cms.hhs.gov/PhysicianSelfReferral/07_advisory_opinions.asp
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Posted By Michael Cassidy In Fraud - Stark
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OIG Advisory Opinion: Pay for Call Coverage Approved
OIG ADVISORY OPINION 07-10 APPROVES CALL PAY
On September 27, 2007, the Office of the Inspector General of the Department of Health and Human Services posted OIG Advisory Opinion No. 07-10 which approves a tax exempt hospital proposal for compensating physicians for on call coverage. While acknowledging that on call compensation potentially creates considerable risk that physicians may demand compensation as a condition of practicing and referring patients to a hospital, the OIG nevertheless concluded that, even though the personal service safe harbor may not apply because the compensation is not set in advance in accordance with those requirements, the arrangement nevertheless "presented a low risk of fraud and abuse".
The hospital designed a call coverage program requiring basic physician obligations as part of a two (2) year service contract available to all physicians on the medical staff. The basic obligations and the arrangement include the following:
- Participation in a monthly call rotation established on a monthly basis by the appropriate department or division chief or chair.
- Continuing in-patient care and consultation obligations for patients seen in the emergency department and then later admitted to the hospital.
- Timely response requirements for emergency calls.
- Cooperation with risk management and quality assurance initiatives within the hospital.
- Appropriate medical record completion.
The hospital established per diem compensation rates for each day dedicated to on call coverage excluding the 1 ½ days that each physician was required to contribute monthly as a medical staff obligation, which per diem rates differed among specialties based on the following factors:
- Severity of illness typically encountered by that specialty in treating a patient presenting the Emergency Department;
- Likelihood of having to respond when on call at the Emergency Department;
- Likelihood of having to respond to a request for inpatient consultative services for an uninsured patient when on call;
- Degree of inpatient care typically required of the specialty for patients that initially present to the Emergency Department.
The OIG noted in its opinion that the hospital had certified its belief that the compensation was legitimate or fair market value compensation and that a third party consultant had concluded that the compensation was within the fair market value range for services to be provided, although the OIG specifically caveated that it offered no opinion as to the legitimacy of the fair market valuation. You can access the text of the opinion at the link below to the OIG resource reading room.
http://oig.hhs.gov/fraud/advisoryopinions/opinions.html |
Posted By Michael Cassidy In Fraud - Stark
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Stark III Regulations: Compensation Surveys Eliminated
STARK III REGULATIONS TEXT
CMS issued the revised Stark III Regulations to be effective as of December 4, 2007. The text of the regulations is accessible at the link below, and the Med Law Blog will publish a number of short posts over the next two months highlighting certain changes prior to that effective date.
The subject of today’s post is the fair market value exception for compensation. CMS has eliminated the compensation survey provision for fair market value compensation. The use of national studies and attempts to define the fair market value compensation for relevant local market proved to be overly burdensome.
Future posts will deal with the changes for the definition of a physician group for the ancillary services exception, warnings regarding the use of shared facilities, and the allowable physician practice restrictions for recruiting arrangements.
http://www.medlawblog.com/Stark%20III.pdf
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Posted By Michael Cassidy In Fraud - Stark
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CMS Issues Final Stark III Regulations
CMS Issues Final Stark Phase III Regulations
Stark Phase III Regulations
On August 27, 2007, the Centers for Medicare and Medicaid Services (CMS) placed on display at the Office of the Federal Register a final rule on physician "self-referral" of Medicare beneficiaries for certain types of Medicare-covered services. The rule is commonly known as "Stark Phase III," named after the original sponsor of the legislation that became Section 1877 of the Social Security Act (42 U.S.C. § 1395nn) and being CMS' third final rule on the topic. With certain exceptions, "self-referral" is the practice of referring a patient to an entity in which a referring physician has an actual or deemed financial interest, either through an ownership or compensation arrangement.
Generally, the rule describes CMS' interpretation of the prohibitions and exceptions to the prohibitions laid out in Section 1877.
Among other changes, the rule:
· Modifies physician recruitment restrictions;
· Provides more flexibility in complying with non-monetary compensation limits;
· Reduces the administrative burden of complying with some exceptions to the Stark limitations; and
· "Clarifies" CMS' "interpretation of existing regulations."
The rule is scheduled to be published in the September 5, 2007, edition of the Federal Register.
Thanks to The RAP Practice Group of AHLA for posting this information.
Read the press release :
http://www.cms.hhs.gov/apps/media/press/release.asp?Counter=2417
or download the display version of the rule:
http://www.cms.hhs.gov/PhysicianSelfReferral/Downloads/CMS-1810-F.pdf
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Posted By Michael Cassidy In Fraud - Stark
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Pete Stark Proposes Elimination of Whole Hospital Ownership Exception
Congressman Pete Stark has proposed a new piece to the Stark legislation which would eliminate the existing “whole hospital” exception for a physician ownership by inserting a provision into H.R. 3162, the Children’s Health and Medicare Protection Act, which would impose new hospital disclosure requirements and new physician ownership limitations. The text of the provision follows below.
The physician ownership restriction would prohibit ownership by physicians of more than 40% of the total value of the investment interest held in the hospital and prohibit any individual physician ownership of more than 2%, while also prohibiting hospital assistance in financing the investment by the physicians.
The disclosure requirements would mandate that hospitals submit annual disclosure reports to the Secretary of Health and Human Services disclosing physician ownership and that the hospitals’ implement procedures that would require any referring physician owner to disclose to the referred patient the existence and extent of the referring physician ownership interest in the hospital.
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
SEC. 651. LIMITATION ON EXCEPTION TO THE PROHIBITION ON CERTAIN PHYSICIAN REFERRALS FOR HOSPITALS.
(a) IN GENERAL.—Section 1877 of the Social Security Act (42 U.S.C. 1395) is amended
(1) in subsection (d)(2)—
(A) in subparagraph (A), by striking "and" at the end;
(B) in subparagraph (B), by striking the period at the end and inserting "; and"; and
(C) by adding at the end the following new subparagraph:
"(C) if the entity is a hospital, the hospital meets the requirements of paragraph (3)(D).";
(2) in subsection (d)(3)
(A) in subparagraph (B), by striking "and" at the end;
(B) in subparagraph (C), by striking the period at the end and inserting "; and"; and
(C) by adding at the end the following new subparagraph:
"(D) the hospital meets the requirements described in subsection (i)(1) not later than 18 months after the date of the enactment of this subparagraph."; and
(3) by adding at the end the following new subsection:
"(i) REQUIREMENTS FOR HOSPITALS TO QUALIFY FOR HOSPITAL EXCEPTION TO OWNERSHIP OR INVESTMENT PROHIBITION.
"(1) REQUIREMENTS DESCRIBED. For purposes of paragraphs subsection (d)(3)(D), the requirements described in this paragraph for a hospital are as follows:
"(A) PROVIDER AGREEMENT.—The hospital had a provider agreement under section 1866 in effect on July 24, 2007.
"(B) PROHIBITION OF EXPANSION OF FACILITY CAPACITY. The number of operating rooms and beds of the hospital at any time on or after the date of the enactment of this subsection are no greater than the number of operating rooms and beds as of such date.
"(C) PREVENTING CONFLICTS OF INTEREST.—
"(i) The hospital submits to the Secretary an annual report containing a detailed description of
"(I) the identity of each physician owner and any other owners of the hospital; and
"(II) the nature and extent of all ownership interests in the hospital.
"(ii) The hospital has procedures in place to require that any referring physician owner discloses to the patient being referred, by a time that permits the patient to make a meaningful decision regarding the receipt of care, as determined by the Secretary,
"(I) the ownership interest of such referring physician in the hospital; and
"(II) if applicable, any such ownership interest of the treating physician.
"(iii) The hospital does not condition any physician ownership interests either directly or indirectly on the physician owner making or influencing referrals to the hospital or otherwise generating business for the hospital.
"(D) ENSURING BONA FIDE INVESTMENT.—
"(i) Physician owners in the aggregate do not own more than 40 percent of the total value of the investment interests held in the hospital or in an entity whose assets include the hospital.
"(ii) The investment interest of any individual physician owner does not exceed 2 percent of the total value of the investment interests held in the hospital or in an entity whose assets include the hospital.
"(iii) Any ownership or investment interests that the hospital offers to a physician owner are not offered on more favorable terms than the terms offered to a person who is not a physician owner.
"(iv) The hospital does not directly or indirectly provide loans or financing for any physician owner investments in the hospital.
"(v) The hospital does not directly or indirectly guarantee a loan, make a payment toward a loan, or otherwise subsidize a loan, for any individual physician owner or group of physician owners that is related to acquiring any ownership interest in the hospital.
"(vi) Investment returns are distributed to investors in the hospital in an amount that is directly proportional to the investment of capital by the physician owner in the hospital.
"(vii) Physician owners do not receive, directly or indirectly, any guaranteed receipt of or right to purchase other business interests related to the hospital, including the purchase or lease of any property under the control of other investors in the hospital or located near the premises of the hospital.
"(viii) The hospital does not offer a physician owner the opportunity to purchase or lease any property
under the control of the hospital or any other investor in the hospital on more favorable terms than the terms offered to an individual who is not a physician owner.
"(E) PATIENT SAFETY.?
"(i) Insofar as the hospital admits a patient and does not have any physician available on the premises to provide services during all hours in which the hospital is providing services to such patient, before admitting the patient:
"(I) the hospital discloses such fact to a patient; and
"(II) following such disclosure, the hospital receives from the patient a signed acknowledgment that the patient understands such fact.
"(ii) The hospital has the capacity to:
"(I) provide assessment and initial treatment for patients; and
"(II) refer and transfer patients to hospitals with the capability to treat the needs of the patient involved.
"(2) PUBLICATION OF INFORMATION REPORTED.—The Secretary shall publish, and update on an annual basis, the information submitted by hospitals under paragraph (1)(A)(i) on the public Internet website of the Centers for Medicare & Medicaid Services.
"(3) COLLECTION OF OWNERSHIP AND INVESTMENT INFORMATION.—For purposes of clauses (i) and (ii) of paragraph (1)(D), the Secretary shall collect physician ownership and investment information for each hospital as it existed on the date of the enactment of this subsection.
"(4) PHYSICIAN OWNER DEFINED.—For purposes of this subsection, the term 'physician owner' means a physician (or an immediate family member of such physician) with a direct or an indirect ownership interest in the hospital.".
(b) ENFORCEMENT.
(1) ENSURING COMPLIANCE.—The Secretary of Health and Human Services shall establish policies and procedures to ensure compliance with the requirements described in such section 1877(i)(1) of the Social Security Act, as added by subsection (a)(3), beginning on the date such requirements first apply. Such policies and procedures may include unannounced site reviews of hospitals.
(2) AUDITS.—Beginning not later than 18 months after the date of the enactment of this Act, the Secretary of Health and Human Services shall conduct audits to determine if hospitals violate the requirements referred to in paragraph (1).
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Posted By Michael Cassidy In Fraud - Stark
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CMS Proposes to Close Stark Loopholes
CMS has issued regulations within the intent of closing what it perceives to be loopholes in the Stark regulations. The major initiatives are as follows:
1. The definition of the term “entity” will be expanded to include both sole practitioners as well as other types of entities. The definition will state that an entity will include a physician’s sole practice or a practice of multiple physicians or any other person, sole proprietorship, public or private agency or trust, corporation, partnership, limited liability company, foundation, non-profit corporation or unincorporated association that furnishes DHS. An entity will not include the referring physician himself or herself, but does include his or her medical practice.
2. In order for compensation to be considered as “set in advance” and compliant, it may not be based on any percentage of revenue other than compensation based on revenues directly resulting from personally performed physician services. Compensation will be considered “set in advance” if the aggregate compensation, a time-based or per unit of service based (whether per use or per service) amount, or a specific formula for calculating the compensation is set in an agreement between the parties before the furnishing of the items or services for which the compensation is to be paid. The formula for determining the compensation must be set forth in sufficient detail so that it can be objectively verified, and the formula may not be changed to modify during the course of the agreement in any manner that reflects the volume or value of referrals or other business generated by the referring physician.
3. Per unit, rental arrangements will not be allowed to the extent that such charges reflect services provided to the patients referred by the lessor to the lessee.
4. The burden of proof on billing arrangements will be shifted to the billing entity. The proposed regulations will require that, when payment for a designated health service is denied on the basis that the service was furnished pursuant to a prohibited referral, the burden will be on the entity submitting the claim to establish that the service was not furnished pursuant to a prohibited referral.
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Posted By Michael Cassidy In Fraud - Stark
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District Court Rejects Renal Physicians Association Stark Challenge
The United States Court of Appeals has decided that the Renal Physicians Association (RPA), a national professional association, does not have legal standing to challenge the legality of the Stark Regulations.
RPA had asserted that certain of the Stark regulations defining fair market value and personal service arrangements for purposes of establishing exceptions to the statutory prohibition of referrals to financially related entities were not properly promulgated, and that the regulations were harming its members who had medical director agreements with dialysis facilities. The United States District Court, the trial court below in this matter, had granted the motion of the United States Department of Health and Human Services (HHS) seeking dismissal of the Complaint for lack of standing, i.e., the assertion that RPA by itself had not suffered any direct harm, regardless of any harm to its members, and, therefore, had no legal “standing” to bring this litigation. In upholding the decision of the District Court, the Court of Appeals wrote that standing on behalf of RPA would require that the regulations could be shown to be illegal or that the action requested by RPA had the potential of redressing the harm asserted. The Court concluded that neither element was present, concluding that redress was not available because, even if the action requested by RPA was granted, i.e., the retraction of the regulations, members of RPA would still be confronted with the statutory language of the Stark Act declaring that referrals were prohibited unless one of the statutory acceptance was available.
The case is Renal Physicians Association vs. U.S. Department of Health and Human Services, and it was decided by the United States Court of Appeals for the District of Columbia on June 12, 2007 (No. 06-5133).
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Posted By Michael Cassidy In Fraud - Stark
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OIG Rejects Hospital Purchase of Joint Venture Interest in ASC
The Office of Inspector General (OIG) has issued advisory opinion number 07-05 concluding that a proposal by a group of physicians owning an ambulatory surgery center to sell 40% of the ambulatory surgery center to a hospital has the potential to generate unlawful remuneration and is therefore not eligible for a safe harbor advisory opinion. The ASC is owned by a group of physicians consisting of the following:
· 3 Orthopedic Surgeons own 94%
· 2 Gastroenologists and 2 Anesthologistscollectively own an additional 6%
The Orthopedic Surgeons propose to personally sell sufficient units in the LLC to give the hospital a 40% interest at a price higher than the Orthopedic Surgeons' initial investment, thereby guaranteeing an additional personal return on their investment.
The OIG concluded that the potential for unlawful remuneration exists for the following reasons:
1. Since the investment return to all of the owners, including the hospital, following the transaction would be based upon ownership, the selling physicians would effectively receive a higher return on their investment than the other investors because of the profit built into this transaction;
2. units in the LLC were not offered to any other third party investor, raising the spectre that the purchases, remuneration and exchange for referrals to the hospital;
3. only the Orthopedic Surgeons shares were proposed to be sold and not the other physician investors.
The text of the advisory opinion is available at the following link:
http://oig.hhs.gov/fraud/docs/advisoryopinions/2007/AdvOpn07-05C.pdf
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Posted By Michael Cassidy In Fraud - Stark
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California Prosecutes 3 Doctors for Paying Patients to Submit to Unnecessary Surgery
The California Department of Insurance and the Orange County District Attorney’s Office have arrested three doctors in what they are describing as the largest medical fraud prosecution in the nation. Some stories are so abhorrent they taint entire professions. In Orange County, three physicians and a group of ambulatory surgery center developers, some of whom have already pled guilty and been sentenced to prison, arranged with patient recruiters, known as “cappers,” to recruit patients on whom unnecessary surgery would be performed in exchange for cash or cosmetic surgery. The District Attorney’s Office alleges the performance of more than 1,000 bogus procedures. Following is the link to the May 16, 2007 press release by the Office of the District Attorney of Orange County explaining the case in greater detail:
http://www.orangecountyda.com/home/index.asp?page=8&recordid=583&returnurl=index%2Easp%3Fpage%3D8
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Posted By Michael Cassidy In Fraud - Stark
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Employee Whistleblowers Cause $3 Million Dollar OverpaymentSettlement for Tennessee Cardiology Practice
Two former employees of East Tennessee Heart Consultants, a forty physician cardiology practice in Tennessee, tipped off federal prosecutors, who then filed a qui tam claim alleging the cardiology practice had a policy of retaining overpayments for services provided unless refunds were specifically requested, and that the practice maintained its billing records to conceal the credit balances.
Under the terms of the settlement agreement, the cardiology practice will pay $1.5 million to the federal government, $200,000 to the State of Tennessee, $44,000 to Blue Cross Blue Shield, $123,000 to private insurers, and $1 million to thousands of patients. East Tennessee Heart Consultants has also entered into a 5-year corporate integrity agreement with the Office of Inspector General, the terms of which can be viewed on the OIG website accessible through the health law links on this Blog.
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Posted By Michael Cassidy In Fraud - Stark
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Stark Exceptions for E-Prescribing and E-Health Records Final
MEDICARE FACT SHEET
For Immediate release
CMS Office of Media Affairs August 1, 2006
Physician Self-Referral Exceptions for Electronic Prescribing and Electronic Health Records Technology
BACKGROUND: Section 1877 of the Social Security Act (the Act), commonly referred to as the "Stark" law, prohibits a physician from making referrals for certain "designated health services" (DHS) payable by Medicare to an entity with which the physician (or an immediate family member of the physician) has a financial relationship, unless an exception applies. Section 1877 of the Act also prohibits the entity from submitting claims to Medicare or anyone else for Medicare DHS that are furnished as a result of a prohibited referral. Violations of the statute are punishable by denial of payment for all DHS claims, refund of amounts collected for DHS claims, and civil money penalties for knowing violations of the prohibition.
The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) amended the Act to establish a prescription drug benefit in the Medicare program. As part of the new benefit, the Congress directed the Secretary to establish standards for electronic prescribing with the objective of improving patient safety, quality of care, and efficiency in the delivery of care. Because the donation of electronic prescribing technology may create a financial relationship that is subject to the physician self-referral prohibition, the MMA directed the Secretary, in consultation with the Attorney General, to create an exception to the physician self-referral prohibition to permit certain entities to provide non-monetary assistance to physicians to encourage their use of electronic prescribing technology. This final rule (CMS-1303-F) sets forth the terms and conditions of the MMA-mandated physician self-referral electronic prescribing exception and also sets forth the conditions for a new regulatory exception for arrangements involving the donation of electronic health records software or information technology and training services. The MMA mandated a similar safe harbor under the anti-kickback statute for donations of electronic prescribing technology made to physicians and certain other entities. The HHS Office of Inspector General (OIG) is simultaneously issuing a final rule regarding the MMA-mandated anti-kickback statute safe harbor for certain electronic prescribing arrangements, as well as a safe harbor for the donation of electronic health records software or information technology and training services. Information about the OIG regulations can be found on the OIG website at www.oig.hhs.gov.
Exception for Electronic Prescribing Arrangements
To qualify for the physician self-referral exception regarding donations of electronic prescribing technology and training services, the following criteria must be satisfied, as fully set forth at 42 CFR § 411.357(v):
§
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§ The items and services must be provided by a hospital to a physician who is a member of its medical staff; by a group practice to a physician who is a member of the group; or by a prescription drug plan sponsor or Medicare Advantage organization to a prescribing physician; and
§ The items and services are provided as part of, or are used to access, an electronic prescription drug program that meets applicable standards under Medicare Part D at the time the items and services are provided.
§ The donor (or any person on the donor's behalf) does not take any action to limit or restrict the use or compatibility of the items or services with other electronic prescribing or electronic health records systems;
§ For items or services that are of the type that can be used for any patient without regard to payor status, the donor does not restrict, or take any action to limit, the physician's right or ability to use the items or services for any patient;
§ Neither the physician nor the physician's practice (including employees and staff members) makes the receipt of items or services, or the amount or nature of the items or services, a condition of doing business with the donor.
§ Neither the eligibility of a physician for the items and services, nor the amount or nature of the items or services, is determined in a manner that takes into account the volume or value of referrals or other business generated between the parties;
§ The arrangement is in writing, is signed by the parties, specifies the items and services being provided, identifies the cost to the donor of the items and services, and covers all of the electronic prescribing items and services to be provided by the donor. This requirement will be met if all separate agreements between the donor and the physician (and the donor and any family members of the physician) incorporate each other by reference or if they cross-reference a master list of agreements that is maintained and
§ updated centrally and is available for review by the Secretary upon request. The master list should be maintained in a manner that preserves the historical record of agreements.
§ The donor does not have actual knowledge of, and does not act in reckless disregard or deliberate ignorance of, the fact that the physician possesses or has obtained items or services equivalent to those provided by the donor.
Exception for Electronic Health Records Arrangements
To qualify for the physician self-referral exception regarding donations of electronic health records software or information technology and training services, the arrangement is required to satisfy the following criteria, as fully set forth at 42 CFR § 411.357(w):
§ The software and training services must be necessary and used predominantly to create, maintain, transmit, or receive electronic health records;
§ The items and services are provided to a physician by a hospital or other entity that furnishes designated health care services;
§ The software is interoperable (as defined at §411.351) at the time it is provided to the physician. For purposes of the exception, "interoperable" means that the software is able to (i) communicate and exchange data accurately, effectively, securely, and consistently with different information technology systems, software applications, and networks, in various settings, and (ii) exchange data
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§ The donor (or any person on the donor's behalf) does not take any action to limit or restrict the use, compatibility, or interoperability of the items or services with other electronic prescribing or electronic health records systems;
§ Before receipt of the items and services, the physician pays 15 percent of the donor's cost for the items and services. The donor (or any party related to the donor) does not finance the physician's payment or loan funds to be used by the physician to pay for the items and services.
§ Neither the physician nor the physician's practice (including employees and staff members) makes the receipt of items or services, or the amount or nature of the items or services, a condition of doing business with the donor.
§ Neither the eligibility of a physician for the items and services, nor the amount or nature of the items and services, is determined in a manner that directly takes into account the
§ volume or value of referrals or other business generated between the parties. For purposes of this requirement, the determination is deemed not to directly take into account the volume or value of referrals or other business generated between the parties if any one of the following conditions is met:
(i) The determination is based on the total number of prescriptions written by the physician (but not the volume or value of prescriptions dispensed or paid by the donor or billed to the program);
(ii) The determination is based on the size of the physician's medical practice (for example, total patients, total patient encounters, or total relative value units);
(iii) The determination is based on the total number of hours that the physician practices medicine;
(iv) The determination is based on the physician's overall use of automated technology in his or her medical practice (without specific reference to the use of technology in connection with referrals made to the donor);
(v) The determination is based on whether the physician is a member of the donor's medical staff, if the donor has a formal medical staff;
(vi) The determination is based on the level of uncompensated care provided by the physician; or
(vii) The determination is made in any reasonable and verifiable manner that does not directly take into account the volume or value of referrals or other business generated between the parties.
§ The arrangement is in writing; is signed by the parties; specifies the items and services being provided, the cost to the donor of the items and services, and the amount of the physician's contribution; and covers all of the electronic health records items and services to be provided by the donor. This requirement will be met if all separate agreements between the donor and the physician (and the donor and any family members of the physician) incorporate each other by reference or if they cross-reference a master list of agreements that is maintained and updated centrally and is available for review by the Secretary upon request. The master list should be maintained in a manner that preserves the historical record of agreements.
§ The donor does not have actual knowledge of, and does not act in reckless
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§ For items or services that are of a type that can be used for any patient without regard to payor status, the donor does not restrict, or take any action to limit, the physician's right or ability to use the items or services for any patient;
§ The items and services do not include staffing of physician offices and are not used primarily to conduct personal business or business unrelated to the physician's medical practice;
§ The electronic health records software contains electronic prescribing capability, either through an electronic prescribing component or the ability to interface with the physician's existing electronic prescribing system, that meets the applicable standards under Medicare Part D at the time the items and services are provided;
§ The arrangement does not violate the anti-kickback statute or any Federal or State law or regulation governing billing or claims submission; and
§ The transfer of the items or services occurs on or before December 31, 2013.
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Posted By Michael Cassidy In Fraud - Stark
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Renal Physicians Association Lacks Standing To Challenge Stark Regulations
The U.S. District Court from the District of Columbia ruled on March 7, 2006 that the Renal Physicians Association (RPA), a national non-profit specialty society of dialysis facility medical directors, lacked standing to challenge the Stark regulations regarding fair market value compensation.
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Posted By Michael Cassidy In Fraud - Stark
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OIG Reports Enforcement Actions
For those who doubt the possibility of OIG enforcement regarding fraud and abuse violations, the OIG Semi-Annual Report lists the following enforcement results:
$2.8 billion on audit and investigative receivables;
3,806 individual and entity; receivables;
537 criminal actions; and
262 civil actions
The report is accessible on the OIG Web site.
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Posted By Michael Cassidy In Fraud - Stark
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Stark DHS Includes Nuclear Medicine
The final rule from the Medicare Physician Fee Schedule revises the Stark definition of designated health services (DHS) to include diagnostic and therapeutic nuclear medicine services. Since this change will impact existing relationships, this portion of the rule has a delayed effect date, i.e. January 1, 2007.
Fee Schedule: Nuclear Medicine: DHS (CMS's discussion on page 676)
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CMS Issues Stark Advisory Opinion
CMS Issues Stark Advisory Opinion Stating That Stock Interest In Non-Profit Practice Organization Is Not A Stark Financial Interest
CMS has determined that stock held by physician shareholders in a 700 physician non-profit group medical practice does not constitute a financial interest for purposes of Stark, so that it would not prohibit referrals by the physicians to that group.
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Posted By Michael Cassidy In Fraud - Stark
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