Reed Tinsley, CPA

OIG Offers Free Compliance Training Seminar

The Office of Inspector General (OIG) for the U.S. Department of Health and Human Services is offering a series of free, half-day compliance training sessions for local health care providers, compliance professionals, and their legal counsel. The first one is on February 16 in Houston at the Houston InterContinental near the Galleria.

The sessions will feature experts from OIG, the Centers for Medicare and Medicaid Services, United States Attorneys’ Offices, and State Medicaid Fraud Control Units. They will talk about the realities of health care fraud and the importance of implementing an effective compliance program.

Space is limited!  For information regarding the training and additional dates and cities, visit http://compliance.oig.hhs.gov

Physician practices can say bye bye to red flag rules

Physicians and other professionals and service providers get some relief from proposed identity theft compliance obligations. On December 18, President Obama signed the "Red Flag Program Clarification Act of 2010" into law [Text, PDF].  Under the measure, physicianswill no longer be defined as "creditors" under the controversial "Red Flag Rules."  The changes were passed by the Senate in November and the House last week after months of lobbying and litigation by professional societies.

The brief clarifying statute redefines "creditor" to exclude service providers that advance funds on behalf of a person for expenses incidental to a service they provide to that person. The Red Flag Rule was designed to require creditors such as banks, credit card companies and other lenders, to implement various safeguards to protect their clients from identity theft.  

The original statute defined "creditor" broadly, and the FTC initially interpreted it to apply to physicians and other professionals who bill their clients for services, believing that they were obligated to do so by the statutory language. After being bombarded with complaints, FTC chairman Jon Liebowitz assured physicians that his agency was pushing Congress to work quickly to fix the Red Flag Rule that he said had "unintentionally swept up countless small businesses – including every doctor, dentist, lawyer, gardener, plumber, and housekeeper who bill customers on a monthly basis."

The effective date of the Red Flag rules has been postponed several times, most recently in June, and will take effect for other creditors on January 1, 2011.  The American Bar Association and other professional societies had sued the FTC earlier this year and the federal agency had agreed to delay enforcement for attorneys, physicians and accountants until the appeal of that ruling was heard - it remains pending but will be rendered moot by this legislation. 

Hospital Pays $22M Settlement for Allegedly Improper Physician Professional Service Agreements

The United States Attorney’s Office for the District of Maryland has announced that St. Joseph Medical Center in Towson Maryland will pay $22 million to settle allegations that it violated the federal False Claims Act, the federal anti-kickback statute and Stark by entering into several improper professional services contracts with a cardiology group, MidAtlantic Cardiovascular Associates that involved the payment of illegal remuneration.

The DOJ alleged that St. Joseph paid kickbacks to the cardiology group through sham professional services agreements between 1996 and 2006. Specifically, the parties had entered into 11 professional services agreements which involved payments above fair market value, and/or payments for services that were either not rendered or not commercially reasonable.

Importantly, the settlement was the result of a qui tam whistleblower lawsuit brought by a group of cardiac surgeons who alleged that the service agreements were in violation of federal law. 

This settlement underscores the importance of ensuring that all financial relationships between physicians and hospitals to which they refer, including medical directorships, call coverage arrangements, rental arrangements and the like are for legitimate and necessary items/services and that payments are consistent with fair market value. 

tark In-Office Ancillary Services Exception Disclosure Requirements Effective January 1, 2011

Effective January 1, 2011, the new Stark In-Office Ancillary Services Exception (the "IOASE") provisions will require physicians or group practices relying upon the IOASE (collectively, "Physician Practices") to furnish the following notice/disclosure to patients receiving MRI, CT, and PET (as identified on the Stark CPT/HCPCS Code list):

• Written notice at the time of the referral (not the time of the service)that the Medicare patient may receive the same services from another person or other supplier.

• The written notice must include a list of at least 5 (this was reduced from the original list of 10) suppliers that provide such services and which are located within a 25-mile radius of the referring physician's office location (depending upon the various office locations, a Physician Practice may be required to have different lists) at the time of the referral. (Note that so long as the requisite number of suppliers is listed, you can now also include a list of providers on the notice (e.g., hospitals) this was previously prohibited under the proposed rule).

• The notice must be written as to be understood by all patients and should include at a minimum, for each listed supplier the supplier's name, address, and telephone number. (Note that CMS removed the requirement that the practice obtain the patient's signature on the notice and maintain a copy in the patient's medical record. Also, note that CMS is no longer requiring the practice to list the mile radius for each listed supplier.) NOTE that although Physician Practices are no longer required to obtain and maintain the patient's signature, it may be prudent to otherwise document that the disclosure requirement was met such as having a physician in the Physician Practice document in the chart that the notice was given.

All Physician Practices nonetheless should begin working to identify the alternative list of suppliers that they will provide (including the name, address and number of each) on the notice. Physician Practices should also ensure that they have their notices ready by January 1, 2011 and have procedures established to ensure that their office staff is providing the notice to Medicare patients at the time the MR/CT/PET is ORDERED. Physician Practices should be mindful of the fact that the notice can be simple and only needs to merely provide notice. A Physician Practice is permitted to identify its own services on the notice and according to CMS, a Physician Practice can also include language on the notice which informs patients that the inclusion of the alternate suppliers is not intended to endorse or recommend those suppliers.

DOJ: Record-Breaking Year for False Claims Act Recoveries

The U.S. Justice Department recovered more than $5 billion under the False Claims Act since the beginning of 2009, the largest amount in any two-year period in history, a DOJ official said today.

In that time, health care fraud recovery accounted for $4.6 billion, Assistant Attorney General Tony West of the Civil Division told reporters. Most of the cases that resulted in a recovery of taxpayer money were brought through the whistleblower provision of the False Claims Act.

Need an overview of physician compliance issues?

Most physicians strive to work ethically, render high-quality medical care to their patients, and submit proper claims for payment. Society places enormous trust in physicians, and rightly so. Trust is at the core of the physician-patient relationship. When our health is at its most vulnerable, we rely on physicians to use their expert medical training to put us on the road to a healthy recovery.

The Federal Government also places enormous trust in physicians. Medicare, Medicaid, and other Federal health care programs rely on physicians’ medical judgment to treat beneficiaries with appropriate services. When reimbursing physicians and hospitals for services provided to program beneficiaries, the Federal Government relies on physicians to submit accurate and truthful claims information.

The presence of some dishonest health care providers who exploit the health care system for illegal personal gain has created the need for laws that combat fraud and abuse and ensure appropriate quality medical care. This brochure assists physicians in understanding how to comply with these Federal laws by identifying “red flags” that could lead to potential liability in law enforcement and administrative actions. The information is organized around three types of relationships that physicians frequently encounter in their careers:

1. Relationships with payers,
2. Relationships with fellow physicians and other providers, and
3. Relationships with vendors.

The key issues addressed in this brochure are relevant to all physicians, regardless of
specialty or practice setting.

Follow this link for access to the brochure:

http://oig.hhs.gov/fraud/PhysicianEducation/roadmap_web_version.pdf

2011 OIG Work Plan – how it’s directed at physician practices

Evaluation & Management Services

In 2009, Medicare spent nearly one fifth of its Part B payments on Evaluation and Management (E&M) Services. Providers are responsible for ensuring proper coding when submitting their claims. The OIG will review the E&M claims that have been submitted to determine if coding patterns vary by provider. Furthermore, the OIG will examine the "extent of potentially inappropriate payments for E&M services and the consistency of E&M medical review determinations" as a result of receiving multiple claims with identical documentation services. Finally, there will be an evaluation of whether or not the global surgery fee is still appropriate since the global surgery period's inception in 1992.

Imaging Services

Currently, Medicare Part B pays for imaging services pursuant to the physician professional cost component, the malpractice costs, and the practice expenses. Practice expenses are resources used in furnishing the services (i.e., rent, personnel costs, equipment costs, etc.). The OIG will review whether the Medicare payments for practice expenses "reflect the expenses incurred and whether the utilization rates reflect industry practices." Furthermore, the OIG will review providers of portable x-ray services with unusual claim patterns.

Diagnostic Testing

The OIG will review the high-cost diagnostic tests to ensure that they were medically necessary by looking at the same diagnostic tests ordered by the primary care physician as well as the specialist. With respect to independent diagnostic testing facilities (IDTFs), federal regulations require compliance with 17 standards. The OIG will look at IDTFs to ensure compliance with all standards in addition to identifying billing patterns of non-compliant IDTFs.

Importance of compliance for physician entities

Unfortunately, many physicians believe their activities are “under the radar” when it comes to fraud and abuse enforcement. A settlement announcement by the Office of Inspector General (OIG) of the Department of Health and Human Services illustrates that this is not the case. According to the press release, the OIG has entered into a $7.3 million settlement with three physician-owned entities, United Shockwave Services, United Prostate Centers, and United Urology Centers, for allegedly soliciting and receiving payments in violation of the federal anti-kickback statute.

Among other things, the OIG alleged that certain of the physician investors in the entities had suggested to hospital administrators that if the hospitals did not enter into contractual arrangements to utilize the entities’ services, the physicians would take their cases to other hospitals. In addition to the $7.3 million settlement, the entities also agreed to a five-year corporate integrity agreement under which an independent reviewer will monitor all of the contractual arrangements between the entities and any hospital in Illinois, Iowa and Indiana.

This settlement underscores the need for physicians and physician organizations to get serious about their compliance efforts.  All indications are that we will be seeing more and more enforcement actions against physicians in the months to come.

DOJ and OIG Continue to Target Physician Consultant Arrangements

The following was reprinted from the Physician Organizations Practice Group section newsletter published by the American Health Lawyers Association. If you are not a member of this organization, I recommend you join immediately. You don’t have to be a lawyer to be a member. Go to www.healthlawyers.org.

Consulting agreements between medical device manufacturers and physicians can play a valuable role in advancing medical device development. However, the U.S. Department of Justice (DOJ) and the U.S. Department of Health and Human Services, Office of the Inspector General (OIG) view these consulting agreements with suspicion because of the potential conflict of interest that they create for physicians in contravention of the federal Anti-Kickback Statute (AKS). While media attention largely focuses on enforcement actions against the manufacturers and their large monetary settlements, the physicians receiving payments from medical device companies are not immune from AKS enforcement actions.

When physicians receive payments above fair market value or for services not actually rendered, consulting arrangements may constitute illegal payment to the physician in exchange for referrals. The DOJ and OIG intend to file complaints against physicians who receive payments under sham consulting agreements with device manufactures. In an interview with The New York Times, OIG Chief Counsel Lewis Morris stated "[w]hat we need to do is make examples of a couple of doctors so that their colleagues see that this isn't worth it."

The OIG has begun to take such action. On February 16, 2010, the OIG reported on its website that it had settled a claim against a Florida orthopedic surgeon whom the OIG claimed had solicited and received payment from medical device companies in exchange for using the companies' products. The physician agreed to pay $650,000 as part of his settlement agreement. Similar investigations and enforcement actions remain a threat to physicians in light of consulting agreement disclosures made to the government by medical device manufacturers. These disclosures have given the government access to the names of physicians who contract with a specific manufacturer and the amount of the physician's compensation, which allow the government to more easily investigate the legitimacy of these agreements.

The DOJ and OIG have investigated a number of major medical device manufacturers over the past several years. Perhaps most notably, the DOJ filed criminal complaints against four medical device companies in 2007. The complaints alleged that the companies had violated the AKS by using consulting agreements with physicians as a way to bolster the use of the respective company's artificial hip and knee products. The companies, Zimmer Inc., DePuy Orthopaedics Inc., Biomet Inc., and Smith & Nephew Inc., entered into eighteen-month deferred prosecution agreements with the DOJ pursuant to which they committed to extensive corporate compliance initiatives, federal monitoring, the creation of a consulting services "Needs Assessment," and disclosure of the name of each physician consultant and payment made to the consultant. Stryker Corp., which cooperated with the government and was not subject to a criminal complaint, entered a non-prosecution agreement subject to the same compliance reform requirements. On March 30, 2009, the DOJ announced the expiration of the deferred prosecution agreements and non-prosecution agreement, and announced that all five companies had met the terms contained therein. According to the DOJ, the enforcement actions against these five companies led to a 61% decrease in consulting payments made to physicians and a 63% decrease in the number of physicians receiving payments under such agreements from 2007-2008.

Leading to more disclosures, in December 2007, the DOJ requested almost ten years' worth of documents relating to consulting and professional service agreements from Exactech Inc. and Wright Medical Group Inc. The subpoenas focus on payments made to orthopedic surgeons and other medical professionals by the two orthopedic device companies.

With the increased disclosure to the government of information regarding arrangements between manufacturers and physicians, and in light of the increased attention the DOJ and OIG have announced for the physician side of the equation, physicians should enter such agreements with caution. Physicians need to take an active role to ensure that their consulting agreements comply with legal requirements. In particular, physicians should ensure that an agreement meets all the requirements of the safe harbor for personal services and management contracts, including that the agreement meets a legitimate need of the manufacturer, that the physician's compensation constitutes fair market value for services actually provided and documented, and that the compensation does not relate to the value of volume or the physician's referrals to the manufacturer.

Proposed Revisions to Horizontal Merger Guidelines

In case you missed it, on April 20, 2010, the U.S. Department of Justice and the Federal Trade Commission issued proposed revised Horizontal Merger Guidelines intended to inform companies and lawyers how the federal agencies evaluate the likely competitive impact of mergers. The proposed guidelines clarify guidelines issued by the two agencies in 1992 and last revised in 1997. The period for public comments closed June 4, 2010. These guidelines could impact physician practice merger and other related integrated joint ventures. As such, they are worth your time to take a look at. This is the time when we are going to see a lot of physician mergers and hospital acquisitions of physician medical practices.