CMS Issues Voluntary Disclosure Protocol for Stark Law Violations

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1 ALBANY AMSTERDAM ATLANTA AUSTIN BOSTON CHICAGO DALLAS DELAWARE DENVER FORT LAUDERDALE HOUSTON LAS VEGAS LONDON* LOS ANGELES MIAMI NEW JERSEY NEW YORK ORANGE COUNTY ORLANDO PALM BEACH COUNTY PHILADELPHIA PHOENIX SACRAMENTO SAN FRANCISCO SHANGHAI SILICON VALLEY TALLAHASSEE TAMPA TYSONS CORNER WASHINGTON, D.C. WHITE PLAINS Strategic Alliances with Independent Law Firms** MILAN ROME ZURICH CMS Issues Voluntary Disclosure Protocol for Stark Law Violations The federal government is continuing its aggressive efforts to pressure health care providers to self-disclose violations of the Medicare and Medicaid fraud and abuse laws. The government s campaign emphasizes that providers who avail themselves of the self-disclosure process can limit their potential criminal and civil liabilities, and lessen the possibility of being excluded from the Medicare and/or Medicaid programs. Protocols for providers to follow in disclosing violations of the federal Anti-Kickback Law and False Claims Act to the government have been around for some time. Until 2009, the Office of Inspector General (OIG) of the U.S. Department of Health & Human Services (HHS) also allowed providers to self-disclose violations of the Stark Anti-Referral Law. In March of 2009, however, OIG restricted self-disclosures of Stark Law violations to only those instances that also involved a potential violation of the Anti-Kickback Law, thereby severely curtailing providers ability to selfdisclose. In Section 6409 of the Patient Protection and Affordable Care Act (PPACA), Congress mandated that HHS and OIG issue a protocol to allow providers once again to selfdisclose potential Stark Law violations. The Centers for Medicare and Medicaid Services (CMS) of HHS recently released the guidelines that providers must follow in self-disclosing potential violations of the Stark Anti-Referral law. Background The Stark Anti-Referral Law prohibits physicians (and other licensed professionals) from referring Medicare patients for certain designated health services to an entity with which the physician (or immediate family member) has a financial relationship. The law also prohibits billing for a designated health service furnished pursuant to a prohibited referral. The designated health services covered by the Stark Law are: clinical laboratory services physical therapy or occupational therapy services outpatient speech-language pathology services radiology and certain imaging services radiation therapy services and supplies durable medical equipment and supplies parenteral and enteral nutrients and supplies prosthetics, orthotics, and prosthetic devices and supplies home health services outpatient prescription drugs inpatient and outpatient hospital services 1

2 There are several important exceptions to Stark, such as for ancillary services provided in a physician s office, a rural provider exception, an academic medical center exception, a rental of office space and equipment exception, and others. However, each exception has specific and technical requirements that must be met, so arrangements pursuant to these exceptions must be very carefully structured. It is important to note that the Stark Law is a strict liability statute, so no intent need be proven in prosecuting a violation of the law. The Stark Law also imposes a number of reporting and disclosure requirements on referring physicians. Moreover, PPACA added new disclosure requirements to the Stark Law. For example, Sec of PPACA now requires that, in order to qualify for the in-office ancillary service exception for MRIs, CT scans or PET scans, the referring physician must inform the patient in writing that the patient may obtain these services from another provider, and furnish a list of such providers in the area where the patient resides. Penalties Violations of the Stark Law can result in severe penalties: denial of payment for improper referrals; refund of any payment that resulted from improper referrals; a civil money penalty of up to $15,000 for each improper referral, and exclusion from government health benefit programs; for circumvention schemes, a civil money penalty of up to $100,000 and exclusion from government health benefit programs; for failure to meet any reporting requirements under the statute, a civil money penalty of up to $10,000 per day of non-reporting, and exclusion. In addition, violations of the Stark Law can be used as the basis for alleging violations of the False Claims Act, thereby exposing those involved in improper referrals to that statute s draconian penalties. Self-Disclosure The new protocols for self-disclosing violations of the Stark Law were issued by CMS and became effective on September 23, 2010, as required by PPACA. A disclosing party must include the following information in its voluntary disclosure submission to CMS: the name, address, provider and tax I.D. number of the disclosing party; the names and addresses of any related entities, and any affected corporate divisions, departments or branches; the name and address of the disclosing party s designated representative (e.g., in-house or outside counsel); a description of the nature of the matter being disclosed, including the type of financial relationship, the parties involved, the time periods during which the violation occurred, the date the violation stopped, the type of designated health service claims at issue, the type of transaction or conduct giving rise to the selfdisclosure, the names of the entities and individuals believed to be implicated, and an explanation of their roles in the matter; a statement by the disclosing party explaining why it believes a Stark Law violation may have occurred, including a complete legal analysis of the Stark Law s applicability to the conduct, an explanation as to whether any Stark Law exceptions were met or not met, and a description of the potential causes of the problem; how the disclosed matter was discovered, and the steps taken to address the problem and prevent future recurrences; 2

3 whether the disclosing party has a history of similar conduct, or any prior criminal, civil or regulatory enforcement actions (including payment suspensions); a description of the disclosing party s compliance program and its adequacy; a description of any notices that may have been provided to other government agencies (e.g., SEC, IRS) related to the disclosed matter; whether the disclosing party has knowledge of whether the matter is under current inquiry by a government agency or contractor, and the identity of the agency or contractor; and whether the disclosing party is under investigation or inquiry for any other matters relating to Medicare, Medicaid or other federal health benefit programs, including any disclosures made to other government agencies. The disclosing party s submission must also include a financial analysis demonstrating that it has performed a full examination of the disclosed conduct. CMS states that the financial analysis should include: the total amount, itemized by year, that is or may be due, based upon the duration of the disclosing party s non-compliance with the Stark Law; the methodology or estimates used in calculating the amount that may be due; and a summary of auditing activity undertaken by the disclosing party and the summary of the documents relied upon. The disclosing party must include with its submission a signed certification that, to the best of the certifying individual s knowledge, the information submitted is truthful and based upon a good faith effort to disclose the matter and resolve any potential liabilities. An individual may sign this certification for him/herself. If a corporate entity is self-disclosing, the certification must be signed by the chief executive, chief financial officer, or other authorized representative. Timeliness Section 6402 of PPACA sets a deadline for reporting and returning any overpayments to Medicare, Medicaid or other government health benefit programs. The deadline is 60 days after the date that the overpayment was identified, or the date any corresponding cost report is due, whichever is later. However, CMS advises that this repayment obligation will be suspended as of the date of electronic submission of the disclosure and electronic confirmation of CMS s receipt of the submitted disclosure. This suspension will continue in effect until a settlement agreement is concluded, or until the self-disclosing party withdraws or is terminated from the selfdisclosure process. Once the self-disclosure has been submitted and reviewed, CMS has the discretion to reduce the amount that the disclosing party would otherwise have to pay based upon: the nature and extent of the improper or illegal practice; the timeliness of the disclosure; the provider s cooperation in furnishing additional information related to the disclosure; the litigation risk associated with the disclosed matter; the disclosing party s financial position; and such other factors as the Secretary of HHS considers appropriate. 3

4 Caveats There are many other important conditions and requirements in the self-disclosure protocol: 1. The fact that a disclosing party is already the subject of a government audit or investigation will not automatically preclude a disclosure provided the disclosure is made in good faith. However, CMS warns: A disclosing party that attempts to circumvent an ongoing inquiry or fails to fully cooperate in the self-disclosure process will be removed from the [Self Referral Disclosure Protocol]. 2. The self-disclosure process cannot be used to solicit opinions from CMS as to whether an actual or potential violation of the Stark Law has taken place. Providers must still avail themselves of the OIG s advisory opinion process. The self-disclosure process and the advisory opinion process may not be used concurrently for the same self-referral problem. 3. CMS advises disclosing parties that are currently operating under a corporate integrity agreement or certification of compliance agreement to also comply with any disclosure or reportable event requirements under such agreements. Thus, for some providers, separate or even multiple disclosures will have to be made. 4. Disclosures must be submitted electronically and in hard copy. Facsimile submissions will not be accepted. CMS will respond by letter to the disclosing party after reviewing the submission. 5. A condition to disclosing a matter is that the disclosing party forfeits any appeal rights to claims relating to the conduct disclosed if they are resolved as part of a settlement agreement. However, the disclosing party retains the right to appeal if it withdraws or is terminated from the disclosure process. 6. A disclosing party need not and should not make a disclosure of a potential Stark vviolation under both the Stark self-disclosure process to CMS and the OIG s self-disclosure process. 7. The protocol makes clear that self-disclosure does not preclude CMS from referring the matter to law enforcement for possible civil or criminal proceedings. Analysis The Stark Law and its exceptions are quite complicated, more so even than the Anti-Kickback Law and the False Claims Act. While restoring a self-disclosure mechanism for possible Stark Law violations is a step in the right direction, the protocol issued by CMS raises more questions than it answers. For example, many Stark violations also implicate the Anti-Kickback Law. In such situations, is the provider obligated to disclose the Stark violation to CMS and the possible anti-kickback violation to OIG? If a provider is not certain whether a Stark Law violation actually occurred, it can seek an advisory opinion from OIG, but that process takes time, and if the resulting OIG opinion is unfavorable, the provider may have accumulated repayment obligations and penalties for what the opinion determines were violations of the Stark Law. The self-disclosure protocol also presents providers with a number of dilemmas, such as how to quantify their potential liability if they self-disclose. For example, if the rental in a lease of space turns out to have been above fair market value, is the remedy a forfeiture of the difference between fair market value and the actual rent, or a forfeiture of each and every payment for medical services provided in conjunction with the lease arrangement (and accompanying False Claims Act liabilities)? While it may be advisable to disclose a chronic failure to provide patients with a list of alternate providers, what about an inadvertent failure to do so for several weeks? And what penalties would attach to such a temporary violation if it were self-disclosed? 4

5 Conclusion It is certainly better to have a self-disclosure process for possible Stark Law violations even one as flawed and cumbersome as CMS has promulgated than not to have any self-disclosure process. As with any voluntary disclosure to the government, the decision to self-disclose and what goes into the disclosure must be carefully considered. But once the problem is identified, time is of the essence if the selfdisclosing party is to meet the new 60-day notification requirement. Disclosures of potential violations of the Stark Law can be quite complicated, and the submission must comply with CMS s protocol in every respect, including furnishing a complete legal analysis as to how the Stark Law may have been violated. Providers concerned about arrangements that may involve potential Stark Law violations should seek the assistance of experienced counsel, and understand all of the requirements, implications and potential liabilities of selfdisclosure, in order to make an informed decision. This GT Alert was prepared by Francis J. Serbaroli. Questions about this information can be directed to Mr. Serbaroli at (serbarolif@gtlaw.com) or to your Greenberg Traurig attorney. Additional GT Alerts are available on Greenberg Traurig s Health & FDA Business webpage. 5

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