Health Law Section Spring Conference May 7, 2013 Scott S. Bell. parsonsbehle.com

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1 ANTI-KICKBACK STATUTE AND STARK LAW UPDATE Health Law Section Spring Conference May 7, 2013 Scott S. Bell parsonsbehle.com

2 Anti-Kickback Statute Don t pay for referrals! 2

3 Anti-Kickback Statute Prohibits knowingly offering or receiving any remuneration to induce or as reward for referrals of items or services covered by federal health care programs. 42 U.S.C. 1320a-7b(b)(1)(A) & (b)(2)(a). Prohibits knowingly offering or receiving any remuneration to induce or as reward for arranging for or recommending purchasing any item for which payment may be made by a federal health care program. 42 U.S.C. 1320a-7b(b)(1)(B) & (b)(2)(b). 3

4 Anti-Kickback Statute Criminal law violation is a felony Violation can be basis of civil monetary penalty, False Claims Act, exclusion from Medicare, Medicaid Worded and interpreted broadly Intent: knowingly and willfully Safe harbors provide protection Administered by OIG 4

5 Stark Law Don t refer to yourself! 5

6 Stark Law Prohibits physicians from referring designated health services covered by Medicare or Medicaid to entities with which the physicians have a financial relationship. 42 U.S.C. 1395nn(a)(1). 6

7 Not criminal Stark Law Violation can be basis of civil monetary penalty, False Claims Act, exclusion from Medicare, Medicaid No wiggle room if actions fall within prohibition Exceptions provide protection Administered by CMS 7

8 Special Fraud Alert: Physician-Owned Entities OIG Issued Special Fraud Alert 3/26/13 14 th Special Fraud Alert 2 nd since 2003 Addresses Physician-Owned Distributorships (PODs) POD: Physician-owned entities that derive revenue from selling, or arranging for the sale of, implantable medical devices ordered by their physician-owners for use in procedures the physician-owners perform on their own patients. 8

9 Special Fraud Alert AKS Implications for PODs Physician diagnoses need for medical device Physician uses device supplied by POD Medicare pays for device POD makes distribution to physician owners 9

10 Special Fraud Alert AKS Implications for PODs Does investment safe harbor apply? (42 C.F.R (a)) Eight elements No more than 40 percent of investment interests may be held by investors who are in a position to make or influence referrals. No more than 40 percent of gross revenue related to the furnishing of health care may come from business generated from investors. 10

11 Special Fraud Alert OIG History With PODs: 2006 OIG letter noted strong potential for improper inducements between physician investors, the entities, device vendors, and device purchasers. 11

12 Special Fraud Alert Stark Implications for PODs Feels like self-referral issue Stark Law definitions may not fit 12

13 Special Fraud Alert Stark Law Implications for PODs Stark prohibits referrals from a physician to an entity with which physician has financial relationship Are PODs entities? Entity is a person or entity that performs services billed as DHS or presents a claim to Medicare for the DHS PODs don t perform services or bill Medicare 13

14 Special Fraud Alert CMS History With PODs [W]e are not adopting the position that [PODs] necessarily perform the DHS and are therefore an entity. 73 Fed. Reg (Aug. 19, 2008) We are concerned that some [PODs] may serve little purpose other than providing physicians the opportunity to earn economic benefits in exchange for nothing more than ordering medical devices that the physician-investors use on their own patients. 73 Fed. Reg (April 30, 2008) 14

15 Special Fraud Alert March 26, 2013, Alert from OIG PODs produce substantial fraud and abuse risk and pose dangers to patient safety Questionable features: Selecting investors in position to generate business Requiring investors who leave area to divest ownership Distributing extraordinary returns on investment compared to risk involved 15

16 Special Fraud Alert PODs Are Inherently Suspect Under AKS Some Suspect Characteristics: Size of investment varies with value of devices used Physician-owners condition referrals to hospitals on purchase of POD devices POD is a shell entity that doesn t maintain necessary inventory, personnel 16

17 Special Fraud Alert OIG Concerns Magnified: Physician-Owners are few in number volume of referrals closely correlates to return on investment Physician-Owners alter medical practices after or shortly before investing in POD 17

18 PODs Bottom Line: Be Careful Never Comfortable Engaging in Activity That OIG is Closely Monitoring 18

19 Advisory Opinions OIG Issues Approximately 20 Per Year Helpful to Understand OIG Perspective Opinions based on Submitted Questions, Not Necessarily Hot Topics CMS Rarely Issues Last in

20 Advisory Opinion No Issued on Dec. 31, 2012 Topic: Rural Hospital Pays Cardiology Group Performance Bonuses Verdict: OIG Will Not Impose Sanctions 20

21 Facts: Advisory Opinion Only cardiac catheterization lab around Physician group manages lab, performs procedures, provides training Part of compensation is performance fee based primarily on cost savings (also service quality, patient satisfaction, etc.) Independent utilization review firm reviews annually to confirm no adverse impact on patients 21

22 Advisory Opinion OIG Reasoning: AKS is implicated because physicians refer patients to the lab, and hospital pays physicians performance bonus Personal services safe harbor (42 CFR (d)) does not apply because aggregate payment not set in advance No sanctions because (i) compensation is FMV, (ii) payment doesn t vary with referrals, (iii) specificity of performance measures based on national standards 22

23 Advisory Opinion No Issued on Dec. 12, 2012 Topic: Hospital Provides Free Access to Electronic Interface for Physicians to Transmit Orders for Services to Hospital Verdict: OIG Will Not Impose Sanctions; Arrangement Doesn t Generate Prohibited Remuneration 23

24 Advisory Opinion No Facts: Hospital would provide free access to electronic interface to all physicians who ask Physicians could transmit orders for lab and diagnostic services from hospital Hospital would maintain interface Physicians responsible for own electronic health record system 24

25 Advisory Opinion No OIG Reasoning: Whether remuneration is exchanged is threshold question Provision of free services to referral sources is suspect Free access would have no independent value to physicians apart from services hospital provides 25

26 Advisory Opinion No Issued on Nov. 29, 2012 Topic: 3 Municipalities Would Waive Cost- Sharing Obligations of Each Other s Residents for Backup Emergency Medical Services Transportation Verdict: OIG Will Not Impose Sanctions 26

27 Advisory Opinion No Facts: Municipalities will provide backup response and transportation for emergency calls from each other s citizens The municipalities will waive cost-sharing obligations for each other s residents and only bill for amounts covered by insurance 27

28 Advisory Opinion No OIG Reasoning: Routine waivers of cost-sharing obligations are suspicious because they may induce referrals Concern alleviated here because (i) municipalities will only provide services on sporadic basis, (ii) emergency transportation unlikely to lead to overutilization, (iii) local governments in mutual aid arrangement unlikely to abuse system 28