Budget Would Limit “In-Office” Ancillary Service Exception to Stark Law 

President Obama’s 2014 proposed budget proposes to limit the types of ancillary services that physicians can provide in their offices.  Physician practices rely on the “in-office ancillary service” exception to the Stark Law to permit certain designated health services that are performed in their offices to be billed to governmental health programs.  The Obama budget proposes the possible elimination of certain types of services from protection under that exception, including physical therapy, radiation therapy, and advanced imaging services, from the list of services that can be provided in a physician’s office and billed without violating Stark Law.

The budget proposal suggests that physicians may be permitted to continue to provide these services in their offices if certain “accountability criteria” are met.  The contents of the accountability standards are not well defined.  Presumably, the standards would dictate standards for medical necessity or appropriateness.  Whatever the standards require, it appears that the judgment of physicians would be further regulated by these requirements if they are passed into law.

Physicians who provide these types of services in their offices should monitor the course of budget legislation as they plan the future of this line of their business.

Toumey Stark Law Case – Second Trial Finds Stark Law Violation

Virtually every lawyer in the country who is involved with physician compensation and Stark Law issues were waiting anxiously over the past couple of weeks for a jury verdict in the second Stark Law trial involving Toumey Healthcare System.  On May 8, 2013, we all got what we had been waiting for; a jury verdict in the much heralded case alleging Stark Law violations that were brought by a physician whistleblower.  Once the case went to jury, a verdict was reached in less than five hours.

The case alleged that Toumey had paid 19 part-time surgeons on its staff based on the business that the surgeons generated for the hospital.  The first trial in the case found that Toumey had violated the Stark Law and assessed $45 million in damages under the Federal False Claims Act.  An appellate court set the first judgment aside which lead to the necessity for a second trial.

A bulletin posted on the website of the firm that handled the case for the physician whistleblower states that Toumey could now be liable for up to $357 million under the False Claims Act.  The actual damages from the second verdict have not yet been determined.

We will be providing further analysis of this decision and possible implications for physician compensation arrangements with hospitals in future blog posts.  In the meantime, feel free to contact John Fisher at Ruder Ware Health Care.

OIG Bulletin On Reimbursement For Services of Excluded Parties

The Office of Inspector General has issued an updated Special Advisory Bulletin that describes the scope and effect of the legal prohibition on payment for services that are provided by excluded parties. The Advisory Bulletin was issued on May 9, 2013.

The updated Bulletin provides guidance to the health care industry on the scope and frequency of screening employees and contractors to determine whether they are excluded persons.

In the Bulletin, the OIG clarifies that services that are furnished by an excluded person or under the medical direction or prescription of an excluded person do not qualify for reimbursement under Federal health care programs.

Payment by a Federal health care program can include amounts based on a cost report, fee schedule, prospective payment system, capitated rate, or other payment methodology.

The OIG Bulletin describes how the exclusion prohibition can be violated and the administrative sanctions OIG can seek.

See: Updated Special Advisory Bulletin on the Effect of Exclusion from Participation in Federal Health Care Programs; Special Advisory Bulletin dated May 9, 2013

John Fisher Presents at National Health Care Compliance Institute in Washington, D.C.

John Fisher, JD, CHC, CCEP

Ruder Ware health care and compliance attorney John Fisher was a featured speaker at the Health Care Compliance Association’s 2013 Compliance Institute.  The Institute was attended by nearly 3,000 compliance officers, attorneys, and vendors from across the country.  Mr. Fisher spoke on the topic “Compliance Issues in Mergers and Acquisitions.”

Mr. Fisher is certified in Health Care Compliance by the Health Care Compliance Association and in Corporate Compliance and Ethics by the Society for Corporate Compliance and Ethics.

Mr. Fisher’s presentation covered some of the following issues:

• The role of the compliance officer in mergers and acquisitions.
• Compliance related due diligence requests.
• The scope of compliance due diligence.
• Successor liability and assumption of liabilities by purchasers.
• Compliance impact of deal structure and agreement terms.
• Compliance effectiveness reviews in mergers and acquisitions.
• Common due diligence compliance risk areas.

For more information on compliance and health law issues, visit our health care law blog at www.healthlaw-blog.com.

Sixth Circuit Finds Limits to False Claims Act 

The sixth circuit court of appeals has found that there are limits to how the False Claims Act can be used to attach health care providers.  The court ruled that the future of an Independent Diagnostic Testing Facility to assure appropriately qualified providers supervised diagnostic tests could not form the basis for a claim under the False Claims Act.

The suit has been in the courts since it was filed by a qui tam complainant in 2006.  The lower court had found that the failure of the facility to assure appropriate supervision made claims for services “false claims” to which the extreme penalties of the Federal False Claims Act could be applied?

The appellate court found that even though the provider’s activities may have violated the conditions of participation for IDTFs, they did not amount to a violation of a “condition of payment.”  Based on the distinction between conditions of participation and conditions of payment, the court refused to apply the False Claims Act.

The extent that other courts will adopt similar reasoning in other types of cases is yet to be determined.  For now, providers can take some assurance in the fact that courts may be willing to find some limitation on the ability of the government to use the rather extreme penalties under the False Claims Act to prosecute every failure to comply with a condition of participation.  Had the court upheld the lower court’s ruling, it could have resulted in significant potential exposure to health care providers who could have been subject to False Claims Act exposure for every nonconformity with conditions of participation.

Self Disclosure Protocols Revised By OIG

The Health and Human Services Office of Inspector General released revised Provider Self-Disclosure Protocol (SDP). The new protocols were released on April 16, 2013. We have not reviewed the protocols in detail at this point and will likely have further information once we review them in depth and compare to previous protocols.  It appears from an initial reading that there were changes in the scope of coverage when there is a violation of the Stark Law. There is also a minimum settlement amount.  More detailed guidelines governing what is applcable in initial submissions are also included.

Stay tuned for more information on the new self-disclosure protocols that were released by the OIG last week.

Conditions For Payment Of Medically Directed Anesthesia

 In my previous article regarding anesthesia billing practices, I neglected to mention another risk associated with over billing for medically directed anesthesia.  Engaging in the described practices tends to raise issues beyond the “double billing” issue that is directly raised.  This type of issue can also raise further scrutiny of the source bills.  For example, an insurer may decide to perform an extended audit of billings as a result of the billing anomalies that I described in my previous article.  The review might disclose a systematic problem documenting all of the prerequisites that permit the billing for medically directed services.

 In order to bill medically directed anesthesia services, seven primary elements need to be clearly indicated in the medical record:

1. The physician must perform a pre-anesthetic examination and evaluation;
2. The physician must prescribe the anesthesia care;
3. The physician must personally participate in the most demanding aspects of the anesthesia plan, including, if applicable, induction and emergence;
4. The physician must assure that any procedures in the anesthesia plan, that he or she does not perform, are performed by a qualified individual as defined in the operating instructions;
5. The physician must monitor the course of anesthesia administration at frequent intervals;
6. The physician must remain physically present and available for immediate diagnosis and treatment of emergencies; and
7. The physician must provide indicated post-anesthesia care.

If one or more of these elements is not indicated in the medical record, the claim may be denied altogether, sometimes for both the physician and the CRNA services.  The physician alone is responsible for documenting each of these activities in the chart.  Like everything else, if it is not in the chart, it did not take place.

You can see how the originally risky billing practice could trigger a further audit and in turn uncover deficiencies in documenting the conditions for medically directed reimbursement.  If a systematic error is made in documenting the seven elements, there can be significant additional financial exposure to the group.

Anesthesia Company Models and Advisory Opinion 12-06

As previously reported on this blog, the Department of Health and Human Services issued advisory opinion 12-06 in June 2012.  This advisory opinion has an impact on many relationships between physician groups, ambulatory surgery centers and providers of anesthesia services.

Generally, the advisory opinion addressed the permissibly of the “company model.”  Under the company model, a physician group who provides surgical services will establish a separate company and provide ownership interest to an anesthesia group.  This structure is created in order for the surgery group to take advantage of some of the revenues from anesthesia services.  The jointly held entity is the billing provider for the anesthesia component of the care.

Advisory opinion 12-06 addressed the company model and found that such a model was potentially a violation of the Medicare Anti-Kickback Statute.  However, the advisory opinion did not go so far as to say that all anesthesia models were impermissible.  Each circumstance must be looked at under its specific facts.  It is often possible to structure these arrangements to take advantage of an Anti-Kickback Statute Safe Harbor or to otherwise minimize the risk to an acceptable level.

There has been a lot of talk in the industry following the release of advisory opinion 12-06.  Many sources are saying that this advisory opinion completely abolished the ability of a surgery group to be involved in anesthesia service revenues.  It is important that providers have a clear understanding of the true implications of advisory opinion 12-06 and the structures that are still permissible without creating unacceptable risk under the Anti-Kickback Statute.

Ruder Ware health care has advised physician practices and anesthesia groups regarding the structuring of permissible arrangements.  We have also represented providers and payors with respect to other types of anesthesia billing and contract matters.  If you have questions regarding advisory opinion 12-06, or any other legal issue pertaining to health care law, please contact us through the contact information on this blog.

Compliance Audits in Mergers and Acquisitions

There is a current trend in the health care industry toward mergers and acquisitions.  As providers consolidate acquisition issues, such as due diligence, become major issues.  Transitional attorneys are well versed in the routine of transactional due diligence.  Health care and compliance attorneys are often asked to become involved in defining the appropriate scope of health care compliance due diligence in the context of a merger and acquisition transaction.

The structure of the contemplated transaction has a major impact on the scope of due diligence that should be performed regarding health care compliance areas.  Where the Medicare provider number of the acquired organization is part of the deal, robust audits of billing and compliance practices is necessary to identify any potential false billing or overpayment claims.  In this type of transaction, the acquiring provider will certainly have successor liability for all matters that took place (or did not take place) with respect to the provider number prior to closing.

Even when the provider number is not acquired, the transaction needs to be structured in a way that minimizes exposure to successor liability under state law.  Even when structured in a manner that insulates a provider from past liabilities, as a practical matter, the past methods of doing things will be carried on the acquiring entity following the acquisition.  Billing practices will carry forward for some period of time.  Referral relationships may exist without a written agreement being in place as required under state law exceptions or safe harbor rules.  It will take some period of time to identify specific problems that might be carried forward into the new organization, even under the most robust compliance program.

In any event, the compliance perspective should be involved to provide insight as part of every health care acquisition.  The scope of compliance needs to be appropriately scaled to reduce potential risk exposure to the acquiring organizations.

For more information regarding health care mergers and acquisitions, contact John Fisher, II at Ruder Ware.

Reimbursement Rules for Telemedicine Slow to Develop

The absence of consistent, comprehensive reimbursement policies has historically been one of the most serious obstacles to the development of telemedicine.  Without uniformity in reimbursement it is much more difficult for providers to develop economically self-sustaining telemedicine programs.  If reimbursement is inconsistent, providers must look to other factors, such as enhancement of efficiencies, to justify the development of new telemedicine technologies.  We are beginning to see changes in state and federal reimbursement for telehealth services, but changes are coming slowly.

All health care reimbursement policy is disjointed between a variety of federal agencies, state governments, and various types of private health care payors.  Reimbursement policies play an important role in determining the rate which new modes of providing care can develop.  CMS policy often sets some of the general rules that other payors look to when setting their reimbursement policies.  Unfortunately, in the area of telehealth coverage, CMS has not taken a progressive approach to developing a reimbursement policy.  Some progress has been made toward expanding Medicare coverage.  Yet, Medicare coverage is still severely limited and is only (with very few exceptions) available to patients that are located in specific rural areas.

Many state Medicaid programs, including Wisconsin’s Badger Care Program, provide more expansive coverage of services that are provided using telemedicine technologies.  Other states have more restrictive coverage.  Private insurance policies vary widely.  Some states have passed laws that mandate telemedicine coverage.  Even of the states that have passed mandatory laws, the nature and scope of the mandate differ widely.

Unfortunately, this inconsistency and unpredictability in reimbursement serves as an impediment to development in telemedicine.  Even when a telemedicine program is developed, reimbursement inconsistencies increase administrative burdens involved with billing for services.  The inconsistencies also necessarily increase compliance risk if the provider is not up to date and accurate as to the reimbursement rules that are applicable.