Health Law Blog - Healthcare Legal Issues

Archive for May, 2013

Physician Practice Compliance Programs – Practical Approach

Wednesday, May 22nd, 2013

Physician Practice Compliance Programs – A Practical Approach

physician group compliance programsThere is currently a lot of hype out there about the need for physicians to establish compliance programs. I agree that each practice should have a compliance program in place. However, I do not agree that the compliance program necessarily needs to be lengthy or complicated. In fact, I believe that it is most important to be focused in on the key elements that are applicable to your practice and that can be followed given the resources that are available. Simply adopting precanned policies will do little more than create a roadmap of items that you cannot possibly achieve.

So what should be included in your compliance program? Your program should certainly include reference to the seven basic elements that are commonly identified as being required in a compliance program. You should describe the steps that you will take to assure that each of the seven elements are achieved. You will also want to prepare a basic code of conduct that reflects your commitment to creating a culture of compliance.

The Office of Inspector General published guidance for physician practice compliance programs in October of 2000. You should read those guidelines and integrate the aspects of the guidance that applies to your practice. The OIG guidance also includes a description of the seven basic compliance program elements. The seven basic elements of a compliance program include:

1. Internal auditing and monitoring,
2. Compliance processes and standards,
3. Appointing a compliance officer or compliance responsible individual,
4. Providing education and training to your staff,
5. Responding to compliance issues in an appropriate fashion and taking corrective action,
6. Creating an open system of communication of compliance issues, and
7. Taking appropriate disciplinary action with respect to compliance infractions.

You will also want to adopt policies to implement some of these general areas. For example, it is crucial that your compliance program include a strong anti-retaliation policy and a system that permits employees to register anonymous complaints. Your compliance policies should also be integrated into your employment and disciplinary procedures so that employees are made aware that non-compliant behavior will not be tolerated. Your policies need to be uniformly applied, from the top to the bottom of your organization.

Applicable guidelines recognize that your compliance program may be scaled to the size of your organization. However, scalability does not permit you to ignore or overlook specific areas that present risk to your business. Your program, regardless of its size or the number of words that are used to convey your standards, must be uniformly and consistently followed and can under no circumstances be left on the shelf collecting dust.

Role of Compliance Officer In Mergers and Acquisitions

Wednesday, May 22nd, 2013

The Role of the Compliance Office in Mergers and Acquisitions

compliance due diligence mergers acquisitionsHealth care reform initiatives have accelerated consolidation within the health care industry in a way we have not seen since the 1990s.  Consolidations take a number of forms.  Regardless of the structure, consolidation activities can involve the assumption of compliance risk by the acquiring party.

Current consolidation is taking place in a more complex regulatory environment that existed during the 1990s.  The government has new fraud enforcement tools and has indicated that it is not afraid to use them.  Providers are subject to a much higher degree of regulatory risk than has ever existed.  Additionally, compliance as a separate and distinct professional has developed since the 1990s.

The rise of the compliance profession as a separate and distinct profession from the legal profession has caused a degree of tension between the roles of the compliance and legal professions.  The relative roles of legal counsel and the compliance office continue to be defined.  The merger and acquisition process is one area where those roles collide.

The merger and acquisition process, including the due diligence process, has historically been in the domain of the attorneys.  However, the need to be proactive in regulatory compliance speaks loudly for a strong compliance officer presence on every merger and acquisition team.

Compliance role in an acquisition includes both assessment and integration.  Compliance assesses the effectiveness of the target’s past compliance efforts as a necessary step toward mitigation of the inheritance of past compliance liabilities.  Based on this assessment, the compliance officer will make judgments regarding the potential impact on the structure of the transaction and additional risk areas that may require further assessment.  The scope of compliance due diligence is a judgment call that is most appropriately made in consultation between compliance and legal.  The difficult issue is not whether due diligence should be conducted but rather “what diligence is due” under all of the facts and circumstances.  These decisions require the perspective of both compliance and legal.

If a judgment is made that past compliance efforts have been robust, the compliance officer may be more comfortable with a lower level of risk area audits.  If the target had an “on the self only” compliance program, the compliance officer will likely find it necessary to drill down further into specific risk areas.  The key here is that this decision requires the judgment of an experienced compliance professional.

The second role of compliance in mergers and acquisitions is integrative.  The pre-closing stage is a key time for the compliance officer to integrate the target into the compliance culture of the acquiring entity.  Compliance due diligence will likely include interviews of the target’s compliance department, upper management, and other key employees.  These interviews can serve an important integrative role of introducing the target to the compliance culture of the acquiring entity.  The information that is collected will form the beginning of a compliance “work plan” for the new division and will help the compliance office identify specific risk areas that may require further examination either before or after closing.  The same information will help compliance integrate the new division into its overall compliance work plan.

I do not want to suggest by any means that compliance take over the merger and acquisition process.  A multi-disciplinary team approach, with legal assuming lead transactional role, is most appropriate.  Legal counsel must recognize the value of the compliance office and the separate and distinct skill that compliance brings to the closing table.  In reality, this is the key to the larger issue of division of roles between compliance and legal.  Each is a separate and distinct professional area with a unique skill set.  In the context of a health care organization, each profession depends on the other to fully perform their role.

False Claims Act Liability For Failure To Repay Overpayment

Wednesday, May 22nd, 2013

False Claims Act Basics – Known Overpayment Become False Claims

overpayment false claims act liability 60 dayThe False Claims Act (“FCA”) provides a very strong enforcement tool to the federal government. The FCA also provides the opportunity for whistleblowers to bring “qui tam” cases and collect a portion of the recovery where false claims are proved against the federal government.

FCA recovery was originally intended to provide a remedy against unscrupulous civil war profiteers. Penalties were enhanced when the FCA was dragged off the shelf in the 1980s in reaction to some of the overpricing of government contracts selling supplies to the federal government.

Recently, the FCA has become one of the government’s prime enforcement tools t o deter fraud in the federal health care programs. Historically, the FCA has been available when a health care provider falsely bills for covered services. Triple damages and an $11,000 per claim penalty provide a strong deterrent in an industry that may make hundreds of claims per day.

Recent legislation has expanded FCA liability to claims that the provider knows resulted in an overpayment if the provider does not make repayment within 60 days of obtaining knowledge of the wrongfully billed amount. Some of the potential applications of this that makes a simple overpayment a false claim has generated much discussion among health care lawyers and compliance officers alike. When an organization is deemed to have knowledge of the overpayment has been the subject of much speculation due to the ambiguities that exist in the new rule.

It may be helpful to frame this discussion by touching on the general requirements that must be met in order to prove any claim under the Federal False Claims Act. The three general elements that must be proved include:

1. The submission of a claim to the federal government. In the health care context, the claim will normally be submitted to a government health program.

2. The claim must be false.

3. The claim must have been submitted knowingly. Actual knowledge that the claim was false will always prove the knowledge requirement. However, a FCA case can also be built around the submission of a claim with “reckless disregard” for its truth or falsity.

Recent health care legislation, in particular the Fraud Enforcement Recovery Act of 2009, greatly expanded the scope of the FCA. The FCA is now applicable to a wide variety of situations that would not have previously been covered. For example, the failure to return an identified overpayment now becomes a false claim. The potential remedies that a provider may face for not promptly repaying known overpayments creates a strong incentive for health care providers to monitor and audit their claims and set up processes that will catch improper billing that could ripen into the FCA.

Reckless disregard or hiding your head in the sand like an ostrich is no longer a way to avoid massive potential FCA liability.

Compliance programs need to be amended appropriately to address the new potential legal and financial risk presented by these new penalties.

In Office Ancillary Service Exception to Stark – 2014 Budget Proposal

Friday, May 17th, 2013

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

radiology in office ancillary servicesPresident 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.

Anesthesia Company Models and Advisory Opinion 12-06

Friday, May 17th, 2013

Anesthesia Company Models and Advisory Opinion 12-06

anesthesia company modelAs 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.

Toumey Stark Law Case – Verdict In Second Toumey Trial

Friday, May 17th, 2013

Toumey Stark Law Case – Second Trial Finds Stark Law Violation

Toumey Stark Law Case Second Jury VerdictVirtually 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.

Compliance Audits in Mergers and Acquisitions

Thursday, May 16th, 2013

Compliance Audits in Mergers and Acquisitions

Compliance Mergers Acquisitions Due DiligenceThere 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.

Excluded Parties – OIG Bulletin On Reimbursement

Wednesday, May 15th, 2013

OIG Bulletin On Reimbursement For Services of Excluded Parties

excluded party reimbursementThe 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

Medically Directed Anesthesia Conditions For Payment

Wednesday, May 8th, 2013

Conditions For Payment Of Medically Directed Anesthesia

 medically directed anesthesia coverageIn 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.

HCCA Compliance Institute Presentation On Compliance Role In Mergers and Acquisitions

Friday, May 3rd, 2013

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

John Fisher, JD, CHC

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

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

The Health Care Law Blog is made available by Ruder Ware for educational purposes and to provide a general understanding of some of the legal issues relating to the health care industry. This site does not provide specific legal advice and you should not use the information contained on this site to address your specific situation without consulting with legal counsel that is well versed in health care law and regulation. By using the Health Care Law Blog site you understand that there is no attorney client relationship between you and Ruder Ware or any individual attorney. Postings on this site do not represent the views of our clients. This site links to other information resources on the Internet; these sites are not endorsed or supported by Ruder Ware, and Ruder Ware does not vouch for the accuracy or reliability of any information provided therein. For further information regarding the articles on this blog, contact Ruder Ware through our primary website.