Health Law Blog - Healthcare Legal Issues

Archive for January, 2012

Medically Directed Anesthesia – Payment Conditions

Monday, January 23rd, 2012

Conditions For Payment Of Medically Directed Anesthesia

 In my previous article regarding anesthesia billing practices, I neglected to mention another risk associated with overbilling 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.

False Claims Act – Applying the Lincoln Law To Modern Health Care

Monday, January 23rd, 2012

The False Claims Act – Application of the Lincoln Law to the Health Care Industry

 When Congress originally passed the False Claims Act (31 USC §§ 3729-3733), no one had the health care system in mind.  The False Claims Act was also commonly referred to as the “Lincoln Law”.  The original law was focused on unscrupulous vendors who provided overpriced and often faulty supplies to the military during the Civil War.

The law was unique in several ways; not least of which was the creation of “qui tam” rights.  Qui tam provisions permit individuals to bring suit alleging false claims and to retain a portion of the award.  The amount of potential award available to a qui tam claimant depends on whether the government chooses to take over the case after it is brought.

The False Claims Act was strengthened in 1986 in response to some of the much publicized $1,000 toilet seats and other abuses with respect to companies supplying the United States military.  The 1986 amendments to the False Claims Act provided for treble damages plus civil penalties of between $5,000 and $11,000 per claim.  These legislative changes were intended to add real incentive for “qui tam” litigants to bring fraud claims.

The health care industry was never the real target of the False Claims Act.  In fact, when the original “Lincoln Law” was passed in the 1860’s, there was no federal health care program in existence.  From the inception of the False Claims Act through the 1986 amendments, the primary target had been the suppliers to the defense industry.  The defense industry generally makes claims on a monthly or other periodic basis for large amounts of supplies.  Although the 1986 amendments added substantial penalties for making false claims, the impact on the defense industry does not come close to matching the impact on health care providers.

In health care, a single hospital may make hundreds of claims to the federal government per day.  False claim allegations can cover a number of years, greatly increasing the number and value of claims that may be at issue.  When treble damages plus $5,000 to $11,000 per claim are applied on top of the actual amount of a “fraudulent” claim, the obligation amount can become staggering.

The extension of the False Claims Act liability to areas such as Stark Law and Anti-Kickback Statute liability indicate how extreme the sanctions can be.  By way of example, take one physician who is determined to have been compensated at significantly over fair market value.  Assume that the excessive compensation creates a violation of the Anti-Kickback Statute and the Stark Law.  The Affordable Care Act clarified that claims made in violation of these laws create a cause of action under the False Claims Act.  Potential damages would be three times the total value of claims attributable to services of the overpaid physician, plus between $5,000 and $11,000 per claim.  You can see that the potential damages would cause grave financial impact on the hospital.  This is the type of thing that keeps compliance officers awake at night.

Even though the False Claims Act was not originally designed to target the health care industry, there does not seem to be any momentum toward making legislative.  To the contrary, the government is quite content to leave these disproportionate penalties in place as part of its effort to reduce cost of health care (and to generate additional revenues) by assessing astronomical fines against health care providers and to hold these penalties over their heads to force health care providers to take extreme actions to prevent compliance problems.  The government is taking a “return on investment” approach to health care fraud enforcement.  The False Claims Act allows the government to put its thumb on the scale in the “return on investment” game.  The qui tam provisions provide the government with “quasi agents” who may be disgruntled employees or others who can scout out potential claims, bring them to the governments attention, and take a piece of the financial reward.

Providers have only one real way to reduce the disproportionate impact of the False Claims Act on their operations.  This is to create an effective compliance program that proactively detects problems so they can be addressed and corrected before they create excessive risk.  Compliance programs are an outgrowth of the federal sentencing guidelines that permit reduced corporate penalties for fraud if an “effective” compliance program will actually reduce the risk of a violation occurring or depending because it forces the organization to proactively look for compliance problems and correct them before they become insurmountable.  An effective compliance program will also include regular training to staff which also reduces the risk of compliance problems.

The Affordable Care Act made compliance programs mandatory for most health care providers.  Nursing homes are the first to be effected in 2013.  Other types of providers will subject to mandatory compliance programs as regulations are rolled out over the next few years.  Providers will be required to maintain an effective compliance program as a condition of participation in the Medicare program.  It is strongly recommended that all providers begin development of compliance programs now.  It will take time to tailor compliance programs to fit the specific risk areas associated with your business.  You will be required to certify not only that you have established a compliance program, but that the program is effective.

Anesthesia Billing Company Costly Advise Medically Directed Anesthesia

Monday, January 23rd, 2012

Agressive Anesthesia Billing Advice Can Be Costly

I wanted to alert anesthesia groups to what I consider to be some very bad advice that is being provid ed by some billing consultants.  If taken, the advice could put your group in the midst of a lawsuit with a third-party payor or even a claim of insurance fraud under state insurance laws.

By now, pretty much everyone understands the general rule for billing multiple medically directed CRNAs.  It is industry standard to compensate a provider for up to four medically directed CRNAs; provided that the seven basis elements for medical direction are performed and documents in the patient’s record.  Industry standard and Medicare regulation permit reimbursement for multiple medical directions, but total reimbursement is never allowed in amounts that would exceed 100% of what the anesthesiologist would be paid if he or she had performed the service on their own.

 Medicare imposes the 100% restriction by compensating both the anesthesiologist and the CRNA 50% each when the anesthesiologist is medically directing up to four CRNAs.  The overall limitation is generally followed in the private insurance context by either reimbursing 100% of the anesthesiologist charge or by paying 100% of the first claim to be processed.

Some billing companies have begun giving extremely aggressive, and I believe extremely risky, advice to their anesthesia clients.  In some cases, there may be a history of the anesthesia group “self-discounting” their medically directed cases so they cannot be viewed as double billing for medically directed cases.  Double billing would occur if the group billed and collected for 100% of both the anesthesiologist and the CRNAs charge.  This is fairly clear.  Billing for both providers can be justified in some instances, but the presence of both providers must be medically directed and well documented in the medical record.  Special coding modifiers are used to indicate when a claim is being made for 100% of both the CRNA and anesthesiologist’s time.

Some aggressive billing companies will recommend that the anesthesia group end a previous practice of pre-discounting their bills without notice to the insurance provider.  This is sometimes done by the billing company without first advising the client.  This practice has the effect of greatly increasing revenues because it in effect double bills the insurer for medically directed cases.  The case coding remains the same as the group previously coded; indicating a medically directed case.  The effective per unit cost doubles virtually overnight.  In some cases, it may continue undetected.  Usually the insurance company will eventually notice that anesthesia costs are increasing.  At the point of discovery, the insurance company will seek recoupment of amounts that it has overpaid.  Most contracts will permit the insurance company to withhold future payments to offset previously overpaid amounts.

Even though the group may have relied on the advice of a billing company, the group really has no meaningful defense once the insurance company discovers that a change in billing practice without prior notice resulted in a significant overpayment.  The amount of overpayment can climb into the millions of dollars before it is discovered.

 If this practice took place involving the Medicare program, there is no question that it would create liability under the False Claims Act and could possibly even trigger criminal charges for false billing.  Most states have insurance fraud statutes that create civil and/or criminal liability for submitting false or fraudulent insurance claims that could apply to the type of practice.

The Federal False Claims Act could expose the practice to three times the actual total amount of the improperly billed claims plus between $5,000 and $11,000 per claim.  There can be hundreds of claims involved, so the dollar amount of exposure can be financially devastating.  The application of state insurance law statutes will vary by state.  However, the financial and criminal exposure from this type of practice can be significant under state law as well.

The group will always remain “on the hook” for the consequences of billing for their services; even when they were advised to undertake the practice and often even when the practice was commenced without their knowledge.  You may have a lawsuit against the billing company, but the insurer, the OIG, DOJ or state enforcement agencies will look primarily to the physician or the group when problems arise.

If you have been presented with “unique” billing opportunities that promise to net your increased revenue, take great care.  It is always possible that you can legitimately amend your practices to net more revenue.  You should be cautious before implementing any changes in billing practices.  If you are being promised something that may be too good to be true, it probably is.  If you have any doubts, contact a health care attorney before changing your practices.

Once the issue is raised by a third party, you will necessarily be on the defensive.  The additional revenues that you receive along the way will not come close to justifying the pain and anguish you will go through following detection.

Be careful of who you choose to do your billing.  Make certain that you bind them to a contract that restricts the type of activity described in this article.  Make certain that you have an ongoing dialogue with your billing company about their practices.  Make certain that you periodically audit their activities under your compliance program.

Billing Fraud Claims By Employees – What Not To Do

Monday, January 23rd, 2012

What Not To Do If An Employee Alleges Fraud

In the course of some reading on anesthesia billing issues, I came across a case from 2002 that clearly describes how not to handle an employee who alleges that your practice may have a billing problem.

 Brandon v. Anesthesia & Pain Management Associates, Ltd., 277 F.3d 936 (2002) involved a physician who became suspicious that other members of his anesthesia group may have been pumping up the billings a bit.  Specifically, the physician felt that other members of his group may have been falsifying the number of operations that they were supervising in order to qualify for “medically directed” reimbursement rates.  He also alleged that members of the group may have altered billing sheets to indicate that they had performed work, even though they had left the hospital for the day.

 It is not clear from the case whether the physician’s allegations were true or proved.  However, the reaction of the anesthesia group where the physician raised these issues was far short of ideal from a legal standpoint.

The allegations were raised by the physician during a board meeting.  A few weeks after the disclosure, the physician was told that he should start looking for other work.  The physician asked for more information on his shortcomings and was not provided with any details.  At that point, he began keeping a journal of suspected billing problems.  A few months later, the physician was notified that he would be required to leave his job by the end of the year.  The physician reiterated his complaints at that point.  The complaints were met with strong, vulgar language (which you can read in the case).  He was told that he did not have a contract and that the group would make life difficult for him if he did not resign.

The group was found to have violated Illinois’ retaliatory discharge laws for taking action against the physician who had alleged billing fraud.  The court upheld the state law claim even though the Federal False Claims Act provided a civil remedy for the physician.

It should be pointed out that the physician had a possible claim as a “qui tam” litigant under the False Claim Act, assuming the facts described in the complaint were true.

This case provides a textbook example of how “not to” address employee allegations of billing deficiencies.  All such allegations should be taken seriously and investigated.  Your practice should adopt compliance policies to provide procedures to follow when employees or others make complaints.  Handling complaints in the manner of the group in this case, exposes the group to a great deal of unnecessary risk.  Once a complaint is made, make sure is it investigated.  If there is a problem, take appropriate steps to remedy the situation.  In some cases, this may require self-disclosure and repayment.  When in doubt about what to do, consult your health care compliance attorney.

Hospital Acquired Conditions – 2012 OIG Work Plan

Monday, January 23rd, 2012

OIG To Review Accuracy Of Present-On-Admission Indicators – Hospital Acquired Conditions

 In 2008, CMS began requiring hospitals to submit indicators for present-on-admission (“POA”) with each Medicare diagnoses code.  This enables CMS to identify which diagnoses were present when the patient was admitted and which developed during the term of the stay in the hospital.  Hospitals do not receive any additional compensation relative to conditions that develop during the term of the hospital stay.  In fact, hospitals with high rates of hospital-acquired conditions receive reduced Medicare payments under the Affordable Care Act.

 The 2012 work plan includes a new item relating to hospital-acquired conditions.  The OIG will be using certified coders to review claims for accuracy of POA indicators.  It appears that the OIG will be providing this information to CMS to assist CMS in fulfilling its responsibilities to reduce payment to hospitals with high levels of hospital-acquired conditions.  This action item reflects increased focus on the issue of hospital acquired conditions.

Physician Compensation Stark Law Compliance Excessive Compensation

Monday, January 23rd, 2012

Physician Compensation – Recent Cases Illustrate Risks of Excessive Payments Under Medical Director Agreements

Physician compensation is changing along with the reconfiguration of payment incentives within the health care industry.  Physician compensation issues may be one of the biggest issues affecting the relationship between health care systems and physicians as these changes continue.  These changes are reflected in a number of recent decisions that provide some guidance on the legal topics that affect physician compensation.

One of the most important laws that affect physician compensation for physicians who are employed by a health care system is the Federal Stark Law.  The Stark law prohibits financial relationships between physicians and other providers to which the physicians make referrals for “designated health services.”  It is fair to say that virtually every relationship between a physician and a hospital will involve the referral of designated health services.  Therefore, the Stark Law will nearly always come into play and the payment pursuant to the employment agreement must be structured to comply with the Stark Law.

The Stark Law is a strict liability statute and does not require a showing of intent to violate its terms.  It is implicated based on referrals unless there is an applicable exception that applies to the referral arrangement.  In the case of employed physicians, there is an exception that covers bona-fide employment relationships that can be used to exempt the relationship provided that all of the conditions of that exception are strictly followed.  A bona-fide employment relationship must meet all of the following requirements:

  • the employment must be for “identifiable services”
  • the amount of remuneration must be consistent with fair market value
  • the amount of the remuneration cannot be determined in any manner that takes into account the volume or value of referrals by the referring physician
  • the compensation must be “commercially reasonable” even if no referrals were made between the physician and the organization

The recent cases have focused on the issue of “fair market value” and “commercial reasonableness” of the compensation paid from the hospital or health system to the employed physician.  These cases provide some guidance and parameters to examine when negotiating physician compensation.  However, the factual situations in the recent cases are unique and the extent that they will be of guidance to any specific compensation issue is uncertain.

The most recent case United States v. Campbell, 2011 U.S. Dist. LEXIS 1207 (2011) and arises out of the United States District Court of New Jersey.  The case involved the University of Medicine and Dentistry of New Jersey (UMDNJ) which was at risk of losing its Level I Trauma Center license due to a shortage in the number of cardiac procedures performed at the facility.  In order to secure its Level 1 Trauma Center status, UMDNJ developed a recruitment initiative directed towards increasing the number of cardiothoracic patients being served at the hospital.  This initiative focused on entering part-time employment arrangements with local cardiologists who were in a position to refer cardiology patients to the hospital.

The part time arrangements involved entering Clinical Assistant Professor Agreements with these cardiologists which enumerated a list of teaching, lecturing and research activities that the physician were to perform.  The physician in turn received salaries ranging from $50,000 to $180,000 per year.  The physician at issue in the case, Dr. Campbell, entered a part time employment agreement to perform a specific list of teaching related services for UMDNJ.

The US Attorney brought charges against Dr. Campbell and UMDNJ based upon alleged violations of the Stark Law and the Anti-kickback Statute.  The government contended that the primary service actually performed by Dr. Campbell under his part time employment contract was to refer cardiology patients to the hospital and that the contract was actually a sham arrangement designed to cover up payments for referral of cardiology patients.  Through the process, a federally appointed monitor reviewed the arrangements and concluded that the hospital’s program was an illegal device to compensate cardiologists for patient referrals.

The Court in the case was faced with deciding whether the case should be dismissed for failure to state a claim.  In refusing to dismiss the claims made by the government, the Court analyzed the Stark Law employment exception which requires that the payment of compensation to an employee who is in a position to make referrals for designated health services be at fair market value for the services  that are actually provided and that the arrangement be commercially reasonable.

The Court refused to dismiss the case noting that if “there was no requirement to actually perform the duties of [the contract] then the compensation could not be the fair market value for those services….”  The Court concluded that the payment above fair market value for the services that were actually required to be performed would serve some other purpose, such as compensation for referrals.  In the Court’s opinion, the excess payments would violate the Stark Law and would make claims made to Medicare for those services false claims.

This case points out an important point under the Stark Law fair market value employment exception.  Even though there might be a detailed listing of obligations under a contract, there must be some assurances that those services are actually provided.  If the services are not provided, the excess compensation will be considered to be for another purpose such as the inducement for referrals.  As a compliance matter, health care organizations should monitor their contracts to assure that the specific services are actually being performed.  The employed physician and the facility have equal interest in assuring this as both would be in violation of the Stark Law if the services are not provided.

A recent criminal case under the Anti-kickback Statute provides another illustration of the risks associated with medical director agreements that are not properly monitored or, in extreme cases are entered for improper purposes.

The recent criminal case of United States v. Borrasi further reinforces this point and illustrates that there are cases where “sham” medical director payments can lead to criminal liability under the federal anti-kickback statute.  In Borrasi, a physician was convicted criminally under the Anti-kickback Statute for conspiring to receive bribes from a nursing home for referring patients to the facility.  The jury found that the physician and others were placed on the organization’s payroll as “service medical directors.”  They were provided with compensation for a list of services that, according to testimony at trial, they were never really expected to perform.  There was also testimony from employees that the “medical directors” were rarely seen around the facility and that time reports had been falsified in order to make it appear that they performed services at the facility.

In addition to compensation for what were found to be “sham” medical director services, the nursing home also paid for a secretary for the physician’s company and paid lease payments for the building owned by the physician.  There was also testimony that the physician had said to others that he was receiving “free money” from the facility.

From the published case, it appears that the facts in this case were extreme.  However, the case holds value because it further indicates the risks involved with medical director contracts.  In this case there were criminal consequences for the “sham” medical director agreement.  In Borrasi, the government carried its burden of demonstrating that the payments were intended to induce referrals.  In order to prove a criminal conviction, the government must show that “intent” to induce referrals was one of the purposes for the payment arrangement.

Cases where intent cannot be proved may still lead to liability under the Stark Law.  Although no one goes to jail under the Stark Law, the financial consequences can be severe and involve repayment of reimbursement and civil penalties.  Penalties are not inconsequential and can be large enough to cause a great deal of financial damage to the party who is found to be in violation.

Physician and Group Practice Representation

Wednesday, January 18th, 2012

Physician and Physician Group Representation – Health Care Attorneys

Physicians and physician groups face a multitude of business issues because of the intense regulatory requirements that exist in the health care industry.  Ruder Ware has a long history of representing physicians and physician groups.  The increasingly complex regulatory environment has led the firm to assemble a team of attorneys to focus on legal matters that are faced by physicians and physician groups.

Our skilled health law and business transactions attorneys understand health care and can guide our clients through a myriad of complex legal issues.  Our physician practice health care attorneys have assisted providers from various parts of the country since the early 1990s on issues related to provide integration and positioning their practices in the face of health care reform proposals.  Provider organizations have again emerged with the passage of health care reform legislation and the creation of Accountable Care Organizations.

We are equipped to advise physicians and physician groups on the various laws that are applicable to the creation of practice associations and group practices and the requirements to become qualified as Accountable Care Organizations.  We have also assisted physicians and physician groups in negotiating relationships with other providers such as hospitals, health systems, and ancillary providers.  We provide health law expertise throughout the country working with local counsel.

Our seasoned attorneys also assist physicians with their personal estate planning needs.  We offer comprehensive services in income, gift, and estate tax planning and trust and estate administration.  Our attorneys are able to implement creative and flexible strategies that hlp protect, manage, and dispose of client assets as they see fit, whether that is by lifetime transfer, transfers in the event of incapacity, or upon a client’s death. 

Some of the areas where we can assist physicians and physician groups include:

Physician Integration

  • Group Practice Mergers
  • Accountable Care Organizations
  • Independent Provider Associations
  • Group Practices Without Walls
  • Physician/Hospital Organizations
  • Provider Network Formation

Physician Practice Issues

  • General Corporate Issues
  • Ancillary Service Ventures
  • Ambulatory Surgery Centers
  • Internal Compensation Plans
  • Physician Contracting
  • Physician Recruitment
  • Non-Compete Analysis and Litigation
  • Billing and Collection
  • Practice Admissions and Departures
  • Practice Management Issues

Relationships With Other Providers

  • Physician/Hospital Contracts
  • Medical Director Agreements
  • Call Coverage Agreements
  • Physician Compensation Issues
  • Joint Ventures
  • Service Line Management
  • Antitrust Issues
  • Medical Staff and Credentialing Issues

Regulatory Compliance

  • Compliance Plan Creation and Operation
  • Stark Law and Anti-Kickback Statute
  • Anti-kickback and Safe Harbor Regulations
  • Physician Supervision Requirements
  • Medicare Billing Requirements
  • Licensing Requirements
  • Government Audits and Self Disclosures
  • Labor and Employment Issues
  • Medical Record Issues
  • Fraud and Abuse Avoidance

Reimbursement Issues

  • Medicare and Medicaid Reimbursement
  • Managed Care Contracting
  • Recovery Audit Contractors
  • Reimbursement Disputes

Business Transactions

  • Practice Sale and Acquisition
  • Major Medical Equipment Acquisitions
  • Corporate Transactions and Structuring
  • Practice Mergers
  • Real Estate Transactions
  • Practice Reorganizations
  • Practice Valuation Issues

Estates, Asset Protection and Tax Planning

  • Succession Planning
  • Fiduciary Services
  • Asset Protection
  • Retirement Plans and ERISA

We have represented large and small groups in the following specialty areas:

  • Multispecialty Groups
  • Primary Care Clinics
  • Internal Medicine Groups
  • Hospital-Based Physicians
  • Cardiology Groups
  • Radiology Groups
  • Anesthesia Groups
  • Gastroenterology Groups
  • Surgery Groups
  • Nephrology Groups
  • Neurology Groups
  • Behavioral Health Groups
  • Ophthalmology Groups
  • Otolaryngology Groups
  • Urology Groups
  • Pediatric Groups
  • OB/GYN Groups
  • Pulmonary Groups
  • Emergency Medicine Groups
  • Hospitalists
  • Dental Groups
  • Chiropractic Centers
  • Alternative Clinics and Providers

Compliance Program Best Practices Mandatory Compliance Programs

Tuesday, January 17th, 2012

Mandatory Compliance Programs Under the Affordable care Act

Now Is The Time To Re-Examine Compliance “Best Practices” In Your Organization

Historically, compliance programs have not been per se mandatory.  However, most larger health care organizations have established formal compliance programs to foster an atmosphere of compliance and to take advantage of possible benefits under the Federal Sentencing Guidelines.  The Patient Protection and Affordable Care Act of 2010 has made compliance programs mandatory for many providers.  The exact scope of what type of provider will be required to establish formal compliance programs has not yet been set in stone by the Office of Inspector General.  However, it can probably be expected that most providers will be required to formalize their compliance efforts.

Institutional health care compliance has been growing for well over a decade now.  Compliance is becoming of major importance to health care providers of all nature and size.  The OIG has promoted compliance programs by releasing compliance guidance covering a number of industries, including billing companies, physician practices, hospitals, home health agencies, long term care facilities, ambulatory surgery centers and others.  Smaller providers who have previously not had the establishment of formal compliance programs on their radar will now be required to adopt formal plans.

It is not enough to simply adopt a compliance plan, place it on a shelf, and let it collect dust.  A compliance program requires active monitoring.  There are seven basic elements that are necessary for a compliance program to meet regulatory requirements and the requirements under the Federal Sentencing Guidelines.  The seven primary elements of an effective compliance program include:

1)      The establishment of written compliance policies and procedures;

2)      The designation of a high ranking individual within the organization to serve as compliance officer;

3)      The establishment of an effective training and education program for all levels of personnel;

4)      The establishment of effective lines of communication, such as a compliance hotline,  to enable individuals within the organization to report compliance breaches;

5)      Performing ongoing internal auditing and monitoring

6)      The creation of a system that enforces breaches of the compliance program including appropriate discipline and corrective measures

7)      The establishment of effective measures to respond to compliance problems that are detected.

 An effective compliance program establishes an atmosphere of compliance that permeates the entire organization.  A compliance program should be tailored to the specific circumstances of the provider.  The program should also feed and grow on itself.  As problems are detected appropriate changes should be made to the program and related policies and procedures.

 Mandatory compliance programs also highlight the importance of compliance on larger institutions who may have already adopted formal programs.  These institutions should take the signal that compliance is of growing importance.   Providers who have already adopted compliance plans should take the opportunity to dust them off and re-examine the role of compliance within their organization.  Now is the time to increase the focus on compliance and assure that compliance is an active system rather than a written plan that is sitting on the shelf.

Best Practices In Compliance Program Operation

 Given the increased importance of compliance, it is helpful to for providers to get a feel for what constitutes “best practice” when operating a compliance program.  “Best Practices” is a term that is thrown around all of the time in the business world.  It is used in many contexts and takes on a variety of meanings depending on who is using it and for what purpose.  Wikipedia defines “best practices” as follows:

Best practices are generally-accepted, informally-standardized techniques, methods or processes that have proven themselves over time to accomplish given tasks. Often based upon common sense, these practices are commonly used where no specific formal methodology is in place or the existing methodology does not sufficiently address the issue. The idea is that with proper processes, checks and testing, a desired outcome can be delivered more effectively with fewer problems and unforeseen complications. In addition, a “best” practice can evolve to become better as improvements are discovered.  Best practice is considered by some as a business buzzword, used to describe the process of developing and following a standard way of doing things that multiple organizations can use.

As I was thinking about the concept of “best practices” in health care compliance, the Wikipedia definition seems to fall al little bit short of what I would have in mind when discussing “best practices” in health care compliance programs.

The Miriam-Webster Dictionary defines “Best” as the superlative form of “good.”  “Best” means “excelling all others” and “offering or producing the greatest advantage, utility, or satisfaction.”  I believe that the definition from Wikipedia is an accurate depiction of what the term “best practices” has become in the business world.  The term has been thrown around loosely to the  point that is no longer carries the meaning of the plain words that make up the two word “buzzword.”

In the health care compliance context, I believe that it is not advisable to direct you efforts toward the standard “buzzword” meaning of “best practices.”  Instead, you should focus toward attempting to achieve the meaning of “best practices” that is tied to the superlative form of the word “good.”  You should not focus on the “we are doing what everyone else is doing” or the “what we are doing will pass by in most cases” version of best practices when looking at your compliance plan.  The consequences of that approach could easily come back to bite you in the superlative.

 In reality, you may never be able to meet the truly “best” standard.  However, the point of the compliance program requirement is that you are trying to make your compliance program and your organization “the best” when it comes to compliance.  Here are a few tips to help you attempt to meet the “best practices” standard:

 1.         Act as if you are under a Corporate Integrity Agreement.  Always assume that the government is looking over your shoulder and that you will be called upon at some point to justify the effectiveness of your compliance program.

2.         Follow the government guidelines to the tee.  Familiarize yourself with the Federal Sentencing Guidelines and OIG Industry Guidance and integrate these requirements into your compliance plan.

3.         Keep up with government releases, speeches, regulations, comments, advisory opinions, and all other communication that help to define your obligations.

4.         Make your compliance plan a “living and breathing” documents that is continually up for revision based on specific things that you learn about your specific organizations.

5.         Make sure your compliance officer focuses on compliance and does not wear other hats that compete for time, attention or perspective.

6.         Make certain that sufficient resources are devoted to compliance.  Adopt the view that it is better to spend money on compliance that to pay for mistakes down the road.

 If there is any area where you are not able to achieve “best practices” for financial or other reasons, be prepared to justify your shortcomings.  Key to all of this is to operate as if you will someday be required to defend the effectiveness of your compliance program.  In all likelihood you will someday be in exactly that position given the current state of the health care industry and mentality of the governmental agencies that are charged with enforcement.

 These are just a few tips to get you thinking about your compliance approach.  Health care reform has made compliance programs mandatory for the first time.  There are also multiple indications that the government wants organizations to devote more to compliance as a way to save health care costs.  It is clearly time for organizations of all types and sizes to re-focus their efforts on compliance within their organizations.

Diagnostic Imaging Radiology Test Coverage

Tuesday, January 17th, 2012

Diagnostic Imaging – Medicare Requirements Radiology Test Coverage

We often get questions regarding the conditions of coverage for non-hospital (radiology group) coverage of diagnostic radiology services.  Most questions involve the level of supervision that is required under Medicare rules and the requirements that a treating physician order the applicable test.  Oftentimes, these questions are tied to issues relative to the Stark Law exception for diagnostic radiology services that are performed following a consultation request from another health care provider. 

There are three core requirements for a radiology test to be covered under Medicare. The test must be properly ordered by a treating physician (with limited exceptions), the test must be performed by an authorized supplier, and the test must be performed under the proper level of physician supervision.  This article will briefly cover all three of the prerequisites to coverage of diagnostic radiology tests. The requirements described in this article applies to outpatient tests. Tests ordered in the hospital context are subject to slightly different rules and is beyond the scope of this article.

 Who may order diagnostic radiology tests?

The Medicare reimbursement rules have strict standards for determining who is authorized to order a diagnostic radiology test. The rules are different depending upon whether the provider is located in a hospital or in a non-hospital setting such as an independent diagnostic testing facility or physician’s office.

Generally, in a non-hospital setting, a diagnostic radiology test must be ordered by the treating physician. The treating physician rule is located in the Medicare regulations and requires that the diagnostic test be ordered by the physician (or in certain circumstances a non-physician practitioner) who furnishes a consultation or treats a beneficiary for a specific medical problem and who uses the results of the diagnostic radiology test in the management of the patient’s medical problem.

Generally, the Radiologist performing the test is not permitted to order a diagnostic radiology test.  There are certain exceptions to the treating physician rule which were described in Medicare Transmittal 80. Transmittal 80 describes limited circumstances where a radiologist is permitted to order a diagnostic test and still receive payment for the technical component under Medicare rules.

A radiologist is authorized to order a diagnostic mammography test based upon the results of an initial screening examination.  Where the treating physician cannot be reached and this is documented in the patient’s chart , the testing facility may furnish additional Diagnostic tests if the interpreting radiologist at the testing facility documents that there are abnormal results with the test originally ordered by the treating physician and that an additional test is medically necessary. In order to rely on this exception, the fact that the treating physician was not available and that additional tests were medically necessary should be well documented in the chart.  This exception requires the results of the test to be communicated to the treating physician and used by the treating physician in treating the patient’s medical condition.

Where medically appropriate, the interpreting radiologists is also permitted to make determinations regarding the parameters of the diagnostic test contained in the initial order from the treating physician. In cases where there is a clear and obvious error in the initial order, the interpreting physician may make appropriate modifications. The intervening physician may also cancel orders based upon the patient’s medical condition at the time of the diagnostic tests.

Except for the limited circumstances described above and included in Transmittal 8, the radiologist must always rely upon the order that is made by the treating physician and may not independently order diagnostic radiology test.

Who Is Qualified To Perform the Radiology Test?

The second major requirement for the coverage radiology services in a non-hospital setting is that only a qualified provider of the services may be reimbursed. Qualified providers include physicians, group practices of physicians, approved portable x-ray suppliers, independent diagnostic test testing facilities, nurse practitioners or clinical nurse specialist as authorized under state law, FDA certified mammography facilities, clinical psychologists for certain types tests, qualified audiologists, pathology slide preparation facilities, clinical laboratories for certain tests, and radiation therapy centers.

 Level of Physician Supervision For Diagnostic Imaging Tests

The last of the major requirements for coverage of radiology services is the level of physician supervision that is required given the specific test being performed. Radiology services must be provided under at least a general level physician supervision. Additionally, certain tests must be provided under direct or personal supervision, which require higher levels of physician presence and involvement. Failure to provide the appropriate level of physician supervision and to document the supervision in the chart will result in loss of coverage under Medicare and Medicaid. Any claims submitted in spite of not meeting the supervision requirements will be considered to be not reasonable or necessary by CMS.

There are a few exception from the physician supervision requirements for certain limited types of tests. It must be kept in mind however that these exceptions are Medicare only exceptions and there may be other federal or state laws that apply to require physician supervision. Tests that are excepted from physician supervision requirements include diagnostic mammography procedures, diagnostic tests performed by a qualified audiologist and certain psychological tests.

You must determine whether general, direct or personal supervision is required in order to bill the applicable diagnostic radiology procedure. Failure to meet the appropriate supervision requirement will lead to loss of reimbursement. This can also be an area of potential civil money penalty exposure if billings are made in spite of there not having been appropriate supervision. Thus, the supervision requirement is a significant compliance issue for medical practices who must establish and maintain appropriate policies and procedures regarding supervision of various levels of radiology diagnostic test.

Each level of supervision has very specific requirements that must be met. For this reason it is important to know which level of supervision is required for the specific test being performed. General supervision requires that the procedure be furnished under the physicians overall direction in control. Physician presence is not necessarily required during the performance of procedures that require general supervision.  Under general supervision the physician is responsible for general supervision and training of support personnel who are actually performing the test services. The physician is also responsible for maintaining the necessary equipment and supplies for the safe operation of the diagnostic test.

Direct and  personal supervision each require higher levels of physician involvement and generally require some level of physician presence throughout the performance of the test.  Direct supervision in the office setting requires that the physician be present in the office suite and immediately available to furnish assistance. Physical presence in the office suite must be maintained throughout the entire performance of the procedure. The physician is not required to be physically present in the room where the procedure is performed unless there is a need for the physician’s presence due to some problem that arises during the course of performing the test.

The highest level of physician supervision is personal supervision. Personal supervision requires a physician to actually be present in the room during the performance of the procedure. Personal supervision generally involves diagnostic tests with invasive or otherwise dangerous aspects.  One significant example of a test that requires personal supervision are contrast studies.

It is important to know what level of supervision is required for the test that is being performed. The level of supervision that is required for each test is included in the Physician Relative Value Fee Schedule.  The CMS web site includes a spreadsheet that designates the level of supervision that is required for a variety of services including diagnostic imaging services.  The spreadsheet includes a column for “physician supervision.”  The column indicates a numerical value with “1” indicating general supervision, “2” indicating direct supervision and “3” indicating personal supervision.

 Physician practices and compliance officers should be certain that their policies are in line with CMS requirements for coverage of diagnostic radiology test. Radiology groups must be certain that the tests that they are charged with performing meet each of the requirements stated above. Radiology groups need to be certain that the test is ordered by the treating physician unless inapplicable exception is present, and that the appropriate level of physician supervision is met for the type of test that is being performed.

 For more information regarding the requirements for radiology services and other legal issues that affect radiology practices and providers, please contact John Fisher at the Ruder Ware Health Care Industry Practice Group.

Ambulatory Surgery Centers – ASC Safe Harbor Compliance

Tuesday, January 17th, 2012

Ambulatory Surgery Center – Anti-kickback Issues and Safe Harbor Regulation Compliance

More and more procedures are being performed in Ambulatory Surgical Centers. The CMS has recently expanded the procedures that it considers to be safely performed in an ASC. Clearly, the trend is to move many procedures to an outpatient facility unless the health care needs of the patient clearly require an inpatient presence. One of the primary sources of capital for these new ASC ventures is the physicians who are involved in performing procedures in the ASC or sending business to the ASC.

From a purely business point of view, it makes sense to have investors who have a direct financial interest in seeing that the business succeeds. However, from the point of view of the party paying for the care, this same financial interest can lead to an increased and arguably unnecessary levels of procedures performed in the facility.  For this reason, the Medicare and Medicaid program, and many states, have enacted the Anti-kickback Statutes and other anti-referral laws that prohibit, or at least limit, the financial interests that a referring provider can have with an organization where there is any control over the referral flow to that entity.

 Anti-Kickback Statute Prohibition

The Federal Anti-Kickback Statute proscribes the offering, payment, solicitation or receipt of any remuneration in exchange for a patient referral or referral of other business for which payment may be made by any Federal health care program. Violations of the Anti-Kickback Statute is a federal felony and can result in substantial prison time and criminal monetary penalties. Violation of the Anti-Kickback Statute can also serve as a basis for imposition of Civil Monetary Penalties. Enforcement of the Federal Anti-kickback Statute has been on the rise since the mid-1980s. Today, the federal government has made health care fraud one of its top priorities. We are hearing about new prosecutions on an almost daily basis as the government ramps up its enforcement through the creation of the HEAT program.

ASC Ownership and the Federal Anti-Kickback Statute

When we look at a typical Ambulatory Surgical Center venture, the primary concern is when the physicians (or hospital) who make referrals to the entity and provide services in the entity receive remuneration from the entity. This normally will involve remuneration in the form of a return on an investment interest. We are not concerned with the reimbursement applicable to the physician’s personally performed service.  What raises the issue is the physician receiving a portion of the technical component related to the use of the Ambulatory Surgery Center where the physician is in the position to make or influence referrals.  The referring physician may purchase an ownership or investment interest in the company that is set up to operate the ASC. The ASC can be set up with capital contributions from a number of physicians or it may involve a hospital sponsored ASC that seeks capital investment from physicians.

 Regardless of the exact structure, the Anti-kickback Statute will come into play to govern the structure and ongoing operation of the ASC. The ASC venture must be structured from the start to comply with the Anti-Kickback Statute. It must also be monitored on an ongoing basis to assure that it does not fall out of compliance with the Anti-Kickback Statute.

 ASC Safe Harbors – The Four ASC Types Qualifying For Safe Harbor Protection

 The ASC Safe Harbor regulations identify four types of Ambulatory surgery center structures that can meet safe harbor protection.  These four types of ASCs include Surgeon-Owned ASCs, Single Specialty ASCs, Multi-Specialty ASCs and Hospital/Physician ASCs.  Each category has different requirements that must be met in addition to the threshold requirements identified above that are applicable to all ASCs to meet the safe harbor.

  • Surgeon-Owned ASCs

 Owners in a surgeon owned ASC can only include general surgeons or surgeons in the same surgical specialty.  The surgeons must be in a position to make referrals to the ASC and to perform surgical procedures in the ASC on the patients that they refer.  Each surgeon owner must meet a source of income test for the previous fiscal year or 12 month period.  Each surgeon must derive at least one-third of their total medical practice income from performing surgical procedures that require an ASC or Hospital surgical setting.  This does not require all of these procedures to be performed in the ASC in which they are an investor.  However, when the surgeons annual revenues are calculated at least one-third of the physicians medical practice revenues from all sources must be derived from the surgeon’s performance of procedures that are listed as Medicare covered services in an ASC.  The surgical services can be performed in an ASC or in a hospital outpatient department and are not limited to the procedures actually performed in the surgeon owned ASC.

  • Single-Specialty ASC

This safe harbor permits physicians within the same specialty, whether or not they are surgeons, to invest in an ASC to which they refer their patients and perform surgical procedures on their patients in the ASC.  Group practices composed of a single specialty may also own and refer to their own ASC.

 Multi-Specialty ASCs

This safe harbor permits physicians who are in a variety of specialties to form an ASC and make referrals to the ASC.  Physician investors in multi-specialty ASCs must meet the one-third practice revenue test described above in relation to surgeon owned ASCs.  However, unlike surgeon-owned ASCs, physicians in multi-specialty ASCs must actually perform one-third of their ASC procedures in the ASC in which they hold an investment interest.  This has become referred to as the “one-third/one-third” test.  The reasoning behind this requirement is that in these types of ASCs, the physicians are actually using the ASC as an extension of their medical office and this does not create significant incentives to generate referral revenues for other investors.  Group practices composed exclusively of physicians who meet the one-third/one-third test may also invest in multi-specialty ASCs.

  • Hospital/Physician ASC

Under this safe harbor, at least one hospital must be an investor in the Ambulatory Surgery Center.  The remainder of the investors must be physicians (or group practices) who meet the requirements for a surgeon-owned ASC. There are a number of additional requirements that must be met by physician/hospital ASCs.

Hospital Physician Owned ASC Safe Harbor Provisions

In a previous post, I discuss the requirements for a Hospital/Physician Owned Ambulatory Surgery Center to meet the ASC safe harbor requirements. Under the Hospital/Physician ASC safe harbor, at least one hospital must be an investor in the Ambulatory Surgery Center.  The remainder of the investors must be physicians (or group practices) who meet the requirements for a surgeon-owned ASC. There are some additional requirements that must be met by physician/hospital ASCs.

The ASC may not use an operating room, recovery room, or other space of the hospital unless it is properly leased from the hospital to the ASC under a lease agreement that meets the requirements of the safe harbor for space rental.  Likewise, any equipment provider by the hospital or services provided by the hospital must be pursuant to an agreement that complies with the equipment rental and/or services safe harbor provisions.

The hospital cannot be in a position to make or influence referrals to the ASC.  This excludes physicians who are employees of the hospital from becoming investors in the Ambulatory Surgery Center.  The hospital is also prohibited from including costs associated with the ASC in its Medicare cost report.


             The Anti-kickback Statute must be considered in any ambulatory surgical venture where potential referral sources could potentially receive remuneration of any kind.  The Anti-kickback Statute and safe harbors will have a large influence on the structure of most ASC ventures.  At the same time, the Anti-kickback Statute is not the only legal issue that must be considered when structuring ASCs.  In some cases, the Stark Law may be a consideration.  Even though ASC services are not “designated health services” under Stark, the ACS might provide other types of services that are covered by Stark.  Reimbursement issues may also have an impact on structure.  Where a hospital is involved, tax exempt tax issues will also play a role.

             For more information regarding Ambulatory Surgery Center structure and other health care law issues, contact John Fisher in the Ruder Ware Health Care Industry Focus Group.

John H. Fisher

Health Care Counsel
Ruder Ware, L.L.S.C.
500 First Street, Suite 8000
P.O. Box 8050
Wausau, WI 54402-8050

Tel 715.845.4336
Fax 715.845.2718

Ruder Ware is a member of Meritas Law Firms Worldwide

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