Reed Tinsley, CPA

Lessons to be learned from Tuomey Hospital Stark case

From the Health Law Daily by Wolters Kluwer:

On May 22, 2013, the Department of Justice (DOJ) filed a motion with the U.S. District Court of South Carolina Court requesting $237 million in additional fines and penalties from Toumey Healthcare System in Sumter, S.C., on top of the $39 million in illegal payments determined by a jury trial on May 8. Tuomey went to trial over whether it violated the Stark Law in its contracts with outside physicians to provide surgery exclusively in its facilities and pay the physicians a bonus for productivity. This case is sending shock waves to the hospital sector.

The $237 million in fines and penalties on top of the $39 million already leveled was calculated as the minimum of treble of the $39 million plus the minimum of $5,500 per claim, for the more than 21,000 claims the jury determined were tainted. The hospital has two weeks to respond to this motion. The DOJ opened the door to mitigating its request by saying it would consider discussions to settle at a lower rate upon other concessions by the hospital, which likely would mean a change in its leadership.

The background on this case is that Tuomey entered into exclusive part-time employment negotiations with affiliated specialist physicians to prevent these physicians from moving their outpatient business out of Tuomey’s ambulatory surgery center and into lower cost competing locations, some of which would be owned by the physicians themselves. The physicians agreed to enter into exclusive part-time employment agreements with Tuomey, thus keeping all of their outpatient business at Tuomey, in exchange for very favorable compensation arrangements.

A key issue in this case was that, under exclusive part-time employment agreements, Tuomey agreed to pay the physicians 131 percent of their net revenues collected (or 31 percent over the amount that the physicians actually generated in revenues) in return for their services and a noncompetition agreement. In developing the arrangement, Tuomey, through its legal counsel, obtained and relied upon the fair market value (FMV) opinion of an “expert” that agreed the rates being offered were at FMV and the compensation was unlikely to violate the Stark Law. One physician, an orthopedic surgeon, became the relator (i.e. “whistleblower”) in the federal government’s case against Tuomey. He concluded, and the government agreed, that the Tuomey employment agreements exceeded FMV, were commercially unreasonable, and took into account the volume or value of referrals all in contravention of the Stark Law. Ultimately, the jury agreed, as well.

There are a number of lessons to be learned from this case:

1. This case was built on the Stark Law, not Anti-Kickback Statute (AKS). This case was not coupled with the AKS and underscores the government’s continuing interest in Stark Law enforcement. This is significant in that the OIG recently downplayed its involvement with the AKS, stating its interests would be aroused only if it was coupled with the AKS. Also, the Tuomey case precedent will open doors to other prosecutions following the same legal arguments.

2. Many view the Stark Law as a checklist that has to be followed in the relation of agreements. This case dramatically makes it clear that the government does not view only the “four corners” of the document, but encompasses all the surrounding facts and evidence. The evidence at the trial focused on those surrounding factors.

3. Compensation for a referring physician for the services that he or she provides must be at FMV and the arrangement must be commercially reasonable. Both these standards must be supportable in the record. This includes any and all arrangements and understandings with the physician, written or verbal. It will be the total record that determines whether these standards were properly met, not just the written agreement.

4. Another key issue of note is that just finding someone who claims to be a FMV expert who will give the hospital whatever it wants in an arrangement is not sufficient to guard against violation of the law. You cannot buy a self-proclaimed expert and expect to have somehow have blocked the government on this issue. The government may have given wide latitude to hospitals developing a FMV determination, but any such efforts by recognized experts still need to be supported in a reasonable fashion along with the data they rely upon in generating their opinion.

5. This case underscores the importance of ongoing monitoring and auditing of all existing arrangement with referring physicians to ensure they comply with both the AKS and Stark Law standards, most particularly FMV and commercial reasonableness. The review should extend beyond the written agreement to the facts and circumstance surrounding its development, including the selection of, and methodology employed by, FMV experts.

This article was written by Richard P. Kusserow, who was the DHHS Inspector General for over eleven years. He is the founder and CEO of Strategic Management, a firm that provides specialized compliance advisory services. Richard can be contacted at rkusserow@strategicm.com.

Updated OIG guidelines for evaluating state false claims acts

https://oig.hhs.gov/fraud/docs/falseclaimsact/guidelines-sfca.pdf

 

Florida dermatologist pays $26.1M to settle False Claim Act allegations

One of the largest settlements with an individual under the False Claims Act (FCA) in U.S. history has been announced by the Department of Justice (DOJ). A Florida dermatologist, Steven J. Wasserman, M.D., has agreed to pay $26.1 million to resolve allegations that he violated the FCA by accepting illegal kickbacks from Tampa Pathology Laboratory (TPL), a clinical laboratory in Tampa, Florida, and billing the Medicare program for medically unnecessary services, according to the announcement. In addition, Dr. Wasserman is being excluded from participation in Medicare, Medicaid, and all other federal health care programs. The United States previously settled with TPL and Dr. José SuarezHoyos, a pathologist and the owner of TPL, for $950,000 to resolve the allegations asserted against them in the same lawsuit.

According to court documents, the government alleged that around 1997, Dr. Wasserman entered into an illegal kickback arrangement with TPL and Dr. SuarezHoyos under which they submitted tens of thousands of false claims to Medicare for biopsies, slide preparations, and slide readings. Under that agreement, Dr. Wasserman allegedly sent biopsy specimens for Medicare beneficiaries to TPL for testing and diagnosis. In return, to increase Dr. Wasserman’s referrals to TPL, TPL allowed Wasserman to bill Medicare for the professional component for the specimen even though TPL had performed the diagnostic work. TPL allegedly provided Dr. Wasserman a diagnosis on a pathology report that included a signature line for Dr. Wasserman to make it appear to Medicare that he had performed the diagnostic work that TPL had performed. Dr. Wasserman then billed the Medicare program for TPL’s work, passing it off as his own, for which he received more than $6 million in Medicare payments.

In addition, the government alleged that Dr. Wasserman substantially increased the number of skin biopsies he performed on Medicare patients, thus increasing the referral business for TPL. Dr. Wasserman also allegedly falsely billed Medicare for patient office visits and unnecessary skin surgeries referred to as adjacent issue transfers on Medicare beneficiaries.

http://docs.justia.com/cases/federal/district-courts/florida/flmdce/8:2004cv00933/114255/81/0.pdf?1300535749

FTC Will Not Challenge Proposed Clinically Integrated Health Network

The Federal Trade Commission (FTC) said February 13 that it will not take any enforcement action against Norman Physician Hospital Organization (Norman PHO) in relation to its proposed formation or operation of a clinically integrated healthcare network.
 
FTC said in a staff opinion letter that the network’s proposed activities “appear unlikely to unreasonably restrain trade.” Instead, the letter concluded the “proposed clinical integration program offers the potential to create a high degree of interdependence and cooperation among its participating physicians and to generate significant efficiencies in the provision of physician services.” 
 
Norman’s network includes approximately 280 participating physicians and hospitals but the proposal contemplates horizontal combinations or pricing agreements only in the provision of physician services.
 
Norman represented that the network’s “operations will not involve horizontal agreements among competing providers of inpatient hospital services, or outpatient hospital and ambulatory care services, because Norman Regional Health System is the only provider of such services that will participate in the network.”
 
Because FTC concluded the proposed joint contracting “appears to be subordinate” to the network’s effort to improve efficiency and quality through the clinical integration of its participating physicians, the agency analyzed the proposal using a rule-of-reason analysis, rather than subjecting it to a per se bar under the antitrust laws.
 
The letter noted concerns about market power are mitigated by Norman PHO’s representations that it will not attempt to force payors to contract with it, and payors who do not want to contract with the network for any reason may bypass the network and contract individually with the participating providers, either directly or through other networks, and without interference from Norman PHO.

http://ftc.gov/opa/2013/02/healthcare.shtm

2013 OIG Work Plan - What is directed at physicians?

The U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) Work Plan for Fiscal Year 2013 (Work Plan) summarizes new and ongoing reviews and activities that OIG plans to pursue with respect to HHS programs and operations during the next fiscal year (FY) and beyond. The following are items in the Work Plan directed towards physicians and physician practices:

Non-Hospital-Owned Physician Practices Billing Medicare as Provider- Based Physician Practices

The OIG will determine the impact of non-hospital-owned physician practices billing Medicare as provider-based physician practices. Also, the OIG will determine whether practices using the provider-based status meet the CMS billing requirements. Additional Medicare payments are paid for services furnished at provider-based facilities, so the OIG has an interest in making sure that those claiming provider-based status are accurate.
 
Physicians Encountering Beneficiaries Face-to-Face When Certifying Them for Medicare Home Health Services

This item focuses on a requirement of the Affordable Care Act that physicians who certify beneficiaries as eligible for Medicare home health services have face-to-face encounters with the beneficiaries. The OIG will examine current practices. The statute dictates that the encounters must occur within the 90 days before the beneficiary starts home health care or up to 30 days after care begins.
 
Physicians’ Improper Use of Commercial Mailboxes

In this item, the OIG directs attention to physicians’ use of commercial mailboxes. The OIG will determine the extent to which Medicare Part B providers and suppliers had practice locations matching commercial mailbox addresses in 2011. These types of mailboxes are forbidden, and the OIG believes that physicians were using commercial mailboxes in order to defraud Medicare.
 
Physicians Failing to Refund Overpayments Will Have Recent Medicare Payments Reviewed

The OIG will review providers and suppliers that have failed to refund their overpayments. Physicians begin to bill Medicare under a different provider number after overpayments are found on their first number. CMS may deny a physician’s enrollment in the Medicare program if he or she has an overpayment outstanding at the time of filing an enrollment application. Thus, the OIG is interested in knowing how many physicians are abusing Medicare by billing under a new provider number that he or she should not have.
 
Questionable Billing By Ophthalmologists

The OIG will focus on 2011 and questionable billing for ophthalmological services during that year. The OIG is also interested in the geographic locations of providers exhibiting questionable billing.
 
Questionable Billing for Electrodiagnostic Testing

The OIG is interested in questionable billing for electrodiagnostic testing. In reviewing this billing, the OIG will also focus on provider specialty, diagnosis, and geographic area to see if these factors make a difference in the billing of electrodiagnostic testing.
 
Interest in Recent Increase of Medicare Payments for Polysomnography

OIG found that Medicare payments for polysomnography – a sleep study service – increased from $62 million in 2001 to $235 million in 2009. Sleep studies may be reimbursable for certain patients, but the OIG believes this increase in payments to be questionable. The OIG will review payments from 2009 through 2010.
 
Review of High Utilization of Sleep Testing Procedures

The OIG is interested in Medicare payments for high utilization of sleep testing procedures. Medicare will only pay for items and services that are "reasonable and necessary," and the OIG is skeptical as to the reasonableness and necessity of the high increase in sleep testing procedures. Medicare payments to physicians will be examined.
 
Orthopedic Implant Devices Used in Spinal Fusion Procedures

The OIG and Congress are giving increased focus to physician-owned distributors (POD) which provide devices to hospitals. Currently, PODs provide spinal implants, but the concern arises from growth into other areas. The OIG and Congress believe that PODs could create conflicts of interest and safety concerns for patients. Physicians that plan to enter such high-risk arrangements should seek qualified legal advice.
 
Safety and Quality of Surgery and Procedures in Ambulatory Surgical Centers and Hospital Outpatient Departments

The OIG is interested in the safety and quality of care provided by ambulatory surgical centers (ASC) and hospital outpatient departments (HOPD). Physicians perform certain procedures in ASCs and HOPDs when they do not require hospitalization, so they must be prepared for the OIG’s review of the safety and quality of such procedures for Medicare beneficiaries. The OIG will assess care in preparation for and provided during surgeries and procedures in both settings.
 
Medicare Payments for Practice Expenses Related to Part B Imaging Services

The OIG will review Medicare payments for practice expenses related to Part B imaging services. The OIG will also determine whether the utilization rates reflect industry practices.
 
Medical Necessity of High-Cost Tests for Diagnostic Radiology

The OIG will review payments made for high-cost diagnostic radiology tests. It plans to determine whether these tests are medically necessary. The OIG also is interested in determining the extent to which primary physicians and specialty physicians are ordering the tests for the same patient.
 
Noncompliance with Assignment Rules

The OIG is interested in the extent to which physicians and other suppliers fail to comply with assignment rules. The OIG intends to determine the extent of inappropriate billing in excess of amounts allowed by Medicare.
 
Incident-To Services

The OIG plans to review physician billing for "incident-to" services. Specifically, the OIG will look to see whether payment for such services had a higher error rate than that for non-incident-to services. The OIG is also interested in determining whether Medicare can monitor services that are billed as "incident-to."
 
Errors in Coding Based on Place-of-Service

Medicare pays a physician differently based on the location where the service is provided. The OIG is interested in errors in coding the place-of-service. Specifically, the OIG will review physicians’ coding on Medicare Part B claims for services performed in ambulatory surgical centers and hospital outpatient departments.
 
Appropriateness of Use of Claim Modifiers

The OIG will focus on the global surgery period in determining whether certain claims modifiers were correctly coded. The OIG is interested in this time period because prior OIG work found improper use of modifiers during the global surgery period.

Dear Physician: Don't get sloppy with your financial dealings with a hospital

I was reading the Whidbey Island Hospital District's Stark and Anti-Kickback civil monetary settlement with the government and it's a classic example of sloppiness. The Office of Inspector General contends the hospital had more than 100 violations stemming from its physician contracts and arrangements. Here are just a few of them and let this be a lesson to all physicians - even though the hospital is the one who got in to trouble, there are rumblings the government is eventually going to go after all participants in alleged compliance abuses:

1. Missing signatures on call-coverage contracts;

2. No contracts for medical staff leadership arrangements;

3. Office space lease that had a contract term for less than a year;

4. Missing signatures on hospitalist arrangements;

5. A housing allowance with no contract;

6. An equipment loan without a written agreement; and

7. Personal services agreement with term of less than a year.

OIG Posts Video & Audio Podcast on Stark Law

Today the OIG posted a video and an audio podcast about the Physician Self-Referral Law, also called the Stark law. This video and audio podcast includes a general introduction to the Physician Self-Referral Law, an important fraud and abuse law administered by the Centers for Medicare & Medicaid Services and enforced, in part, by OIG.

You can access all of the Provider Compliance Training videos and audio podcasts at http://go.usa.gov/5no%20.

Medical staff incidental benefits and nonmonetary compensation

Are the Stark law compensation exceptions for medical staff incidental benefits and nonmonetary compensation interrelated, or are they mutually exclusive? Said another way, does a DHS entity need to add up the value of medical staff benefits provided to a physician that are protected under the Stark law medical staff incidental benefits compensation section and aggregate this with benefits provided to that same physician that meet the nonmonetary compensation exception, to ensure that the nonmonetary compensation exception cap is not exceeded? Or are they two separate and distinct categories?

Note the non-monetary compensation exception and incidental medical staff benefits exception are not interrelated. The tracking for the non-monetary compensation is separate from the incidental medical staff benefits exception. If a benefit to a physician (e.g. lab coat or modest food/beverages in physician lounge) fits within the incidental medical staff benefit exception, it does not have to be tracked as non-monetary compensation.

2012 OIG Work Plan - Looking at physicians

Physicians: Incident-To Services. OIG will review physician billing for incident-to services to determine whether payment for such services had a higher error rate than non-incident-to services. Assess CMS’s ability to monitor incident-to services.

Evaluation and Management Services: Use of Modifiers During the Global Surgery Period. OIG will review the appropriateness of the use of certain modifier codes during the global surgery period and whether Medicare payments for claims with such modifiers used during the global surgery period were in accordance with Medicare requirements.

Diagnostic Radiology: Excessive Payments. OIG will review of Medicare payments for high-cost diagnostic radiology tests to determine whether they were medically necessary and to determine the extent to which the same tests were ordered for a beneficiary by both a primary care physician and a specialist.

Providers and Suppliers: High Cumulative Part B Payments. OIG will review what controls are in place to identify high cumulative Medicare Part B payments to individual physicians and suppliers, or on behalf of an individual beneficiary, over a specified time period.

Update on Recent Physician Prosecutions

From the American Health Lawyers Association (www.healthlawyers.org) authored by Judd Harwood, Esquire (Balch & Bingham LLP, Birmingham, AL), and David Ivers, Esquire (Mitchell Blackstock Ivers & Sneddon PLLC, Little Rock, AR) Maryland Cardiologist Convicted for Inserting Unnecessary Cardiac Stents A federal jury in Baltimore, MD, convicted cardiologist, John McLean, MD, fifty-nine years old, on six healthcare fraud offenses on July 26, 2011, for inserting unnecessary cardiac stents, ordering unnecessary follow-up tests, and falsifying medical records to justify the stents. From at least 2003 to May 2007, McLean performed cardiac cathertizations and implanted unnecessary stents in more than 100 patients at Peninsula Regional Medical Center, according to the U.S. Department of Justice (DOJ). He then falsely recorded the existence of lesions observed during the procedures to justify the stents and the claims he submitted to Medicare and Medicaid. In addition, McLean ordered his cardiac patients to undergo medically unnecessary follow-up tests, including cardiolite stress tests, echocardiograms, and EKGs. McLean faces a maximum sentence of ten years in prison for healthcare fraud and five years in prison for each of five counts of making false statements related to healthcare matters. Sentencing is scheduled for November 10, 2011. The government is also seeking forfeiture of $711,583 in proceeds from the billings. The case was investigated by DOJ and Office of Inspector General. The case was tried by the U.S. Attorney's Office for the District of Maryland. California Oncologist Sentenced to Prison for Billing for Cancer Medications That Were Never Provided An Orange County, CA, oncologist was sentenced on July 25, 2011, to eighteen months in federal prison for submitting bills for cancer medications that were never provided. U.S. District Judge Cormac J. Carney sentenced Glen R. Justice, MD, sixty-six years old, of Corona del Mar, after Justice pleaded guilty to five counts of healthcare fraud. Justice operated the Pacific Coast Hematology/Oncology Medical Group in Fountain Valley, CA. He billed for injectable cancer medications when patients never received them. In some cases where patients did receive medications, Justice upcoded claims by billing for more expensive injectable medications than were actually provided. The medications involved were Neulasta, Neupogen, Procrit/Epogen/Aranesp, and Neumega. According to the U.S. Attorney's Office, the fraudulent billing occurred between 2004 through October 2009, despite Justice being advised about thee issue and subjected to a search warrant at his office in November 2006. Improper billings amounted to between $400,000-$1 million. Insurers he billed included Medicare, Tricare, the Federal Employees Health Benefit Program, and Blue Cross and Blue Shield of California. The judge ordered Justice to pay $1 million in restitution. The prosecution resulted from an investigation by the Federal Bureau of Investigation, U.S. Department of Health and Human Services Office of Inspector General, Internal Revenue Service Criminal Investigation Division, and U.S. Department of Defense Office of Inspector General. Washington Oncologist and Wife Indicted for Twenty Counts of Healthcare Fraud Alfred Hongleung Chan, MD, sixty-three years old, and his wife, Judy Yuan Chan, sixty-two years old, both of Lakewood, WA, were indicted by a federal grand jury for twenty counts of healthcare fraud, obstruction of justice, and money laundering. Alfred Chan was also indicted on two counts of making false statements. The indictment was unsealed in July. According to the indictment and the civil litigation, Alfred Chan would make patient treatment notes on individual slips of paper that were given to his nurse. The notes specified the amount of drugs to be provided to a specific patient. After the nurse provided the drugs to patients by injection or infusion, the slips of paper were returned to Alfred Chan who shredded them. The doctor then made entries into a "superbill" form, ostensibly recording the amount of medications the patients had received. However, he allegedly recorded more medication administered than actually received by the patient, and inflated the time spent administering the medication. Judy Chan allegedly prepared the bills for Medicare and other government and private healthcare programs using the inflated amounts, which substantially increased the amount of money paid to the Chan clinic for medication. The government alleges the scheme resulted in inflated payments to the clinic in the amount of $1.7 million.