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When is a Referral Mandate for Employed Physicians Permitted under the Stark Law?

Monday, June 4th, 2018

When Employed Physicians be Required to Make Referrals for Designated Health Services

Referral Requirements Employed PhysiciansThe Stark Law Regulations include a provision that dictates the conditions under which an employer of a physician may mandate referrals for designated health services.  Certain specific conditions must be met if an employer wishes to require its employed physicians to make referrals to the employer’s designated health services.  Many institutions assume that an employer may always require an employed physician to make referrals to its ancillary services.  That assumption is not correct.

The Stark regulations provides that a physician’s compensation from a bona fide employer or under a managed care contract or other contract for personal services may be conditioned on the physician’s referrals to a particular provider, practitioner, or supplier.    There are a number of specific requirements that must be present to permit referral requirements including:

  1.  The required referrals can only relate to the physician’s services covered by the scope of the employment or the contract.
  2. The referral requirement must be reasonably necessary to effectuate the legitimate business purposes of the compensation arrangement.
  3. The physician’s compensation must be set in advance for the term of the agreement requiring referrals.
  4.  The physician’s compensation must be consistent with fair market value for services performed (that is, the payment may not take into account the volume or value of anticipated or required referrals).
  5. The arrangement must otherwise comply with an applicable exception under Sec. 411.355 or Sec. 411.357.
  6.  The requirement to make referrals to a particular provider, practitioner, or supplier is set forth in a written agreement signed by the parties.
  7. The requirement to make referrals to a particular provider, practitioner, or supplier may not apply if the patient expresses a preference for a different provider.
  8. The referral requirement may not apply to cases where the patient’s insurer determines the provider, practitioner, or supplier;.
  9. The referral requirement may not apply where the referral is not in the patient’s best medical interests in the judgment of the referring physician.
  10. There can be no requirement that an employed physician make referrals that relate to services that are not provided by the physician under the scope of his or her employment or contract.

This scenario most commonly applies in cases where a hospital or health system employs a physician and requires direction of referrals to the system’s designated health services.  It is not uncommon to see a health system contractually require employed doctors to refer to the hospital or ancillary services of the hospital.  The Stark Law permits the employing hospital to require referrals subject to these conditions.  It is also common to see referral requirements without including in the contract the various conditions that must be present to permit the direction of referrals.  The Stark Law would cast a shadow over a compensation arrangement with an employed physician that requires referrals without subjecting the referrals to the conditions set forth in the Stark regulations.  Failing to subject the required referrals to the Stark Law conditions would seem to make the compensation arrangement illegal.  Any referral made to the hospital’s designated health services may be tainted and reimbursement arising from the illegally required referrals would be prohibited.

Stark Law Provisions Relating to Referral Requirements of Employed Physicians

The following is the exact wording of the portion of the Stark Law that established the various conditions that must be met in order to permit the provider of designated health services to require employed physician’s to refer to its DHS.

42 C.F.R. § 411.354(d)(4)

(4) A physician’s compensation from a bona fide employer or under a managed care contract or other contract for personal services may be conditioned on the physician’s referrals to a particular provider, practitioner, or supplier, provided that the compensation arrangement meets all of the following conditions. The compensation arrangement:
(i) Is set in advance for the term of the agreement.
(ii) Is consistent with fair market value for services performed (that is, the payment does not take into account the volume or value of anticipated or required referrals).(iii) Otherwise complies with an applicable exception under §411.355 or §411.357.(iv) Complies with both of the following conditions:

(A) The requirement to make referrals to a particular provider, practitioner, or supplier is set forth in a
written agreement signed by the parties.

(B) The requirement to make referrals to a particular provider, practitioner, or supplier does not apply if the patient expresses a preference for a different provider, practitioner, or supplier; the patient’s insurer determines the provider, practitioner, or supplier; or the referral is not in the patient’s
best medical interests in the physician’s judgment.

(v) The required referrals relate solely to the physician’s services covered by the scope of the employment or the contract, and the referral requirement is reasonably necessary to effectuate
the legitimate business purposes of the compensation arrangement. In no event may the physician be required to make referrals that relate to services that are not provided by the physician under the scope of his or her employment
or contract.

Treatment Center Plead Guilty to Anti-kickback Statute Violations Involving Alcohol and Drug Addiction Treatment Centers

Tuesday, May 22nd, 2018

Substance Abuse Treatment Center Fraud Scheme Results in Guilty Plea

Treatment Center Fraud PleaThe Department of Justice recently announced the guilty plea of two individual alcohol and substance abuse treatment center owners for their participation in what DOJ labeled a “multi-million dollar health care fraud and money laundering scheme.”  The two individuals owned a licensed substance abuse service provider (or treatment center) offering clinical treatment services for persons suffering from alcohol and drug addiction. The treatment center also offered medication-based treatment for opioid addiction.

The government had accused the two owners of paying illegal kickbacks/bribes to “sober homes” in exchange for the referral of the sober homes’ insured residents to treatment program. The sober homes provided safe and drug-free residences for individuals suffering from drug and alcohol addiction. This made them a prime source of potential referrals to the treatment program.

The accusations against these defendants read like a laundry list of thinly veiled kickback schemes.  Some of the specific accusations included:

  1. Providing funds used to purchase or rent several sober home properties under purchase agreements or leases that were in the names of other parties so as to disguise the source of funds.
  2. Paying remuneration for referrals in the form of free or reduced rent, insurance premium payments, and other benefits to individuals with insurance who agreed to reside at the sober homes and attend drug treatment.
  3. Using a separate entity to pay insurance premiums for treatment patients so that the treatment program could continue to bill the patients’ insurance companies for treatment expenses.
  4. Hiring a doctor to serve as the medical director who frequently pre-signed prescriptions that were used to dispense controlled substances.
  5. Continuing to employ the medical director after the doctor’s license was suspended.
  6. Failing to inform the Florida Department of Children and Families that it could not continue to operate when the treatment center lost the medical director.
  7. Submitting insurance claims that falsely stated that testing and treatment was medically necessary.

If the allegations made by the government are to be believed, the treatment center is an illustration of exactly what intentional fraud looks like.  This was not a mistake.  Rather, it appears that the defendants deliberately set up a system intended to generate referrals and providing financial benefits to individuals in a position to make or influence those referrals.  In short, this is what health care fraud looks like.

Providers that we deal with go to great lengths just to make certain that they proactively look for potential risk areas and take affirmative and proactive actions to be certain that they are not making mistakes that could inadvertently result in an overpayment or imputed knowledge.  A great deal of expense goes into assuring that these providers are in complete compliance.   By contrast, cases like the one involving these treatment programs illustrate the very reason why well providers with the best of intentions find it necessary to look over their shoulders.

Investment Interest in Radiation Therapy Anti-kickback Statute Settlement

Sunday, May 20th, 2018

Radiation Therapy Referral Kickback Arrangements with Investors.

Anti-kickback Statute Radiation Therapy InvestmentsA national operator of radiation therapy centers, has agreed to settle a False Claims Act action alleging that it submitted claims violated the Anti‑Kickback Statute by paying of $11.5 million and entering into a 5 year Corporate Integrity Agreement with the Office of Inspector General.  The arrangement involved payments to investors who were allegedly targeted because of their referral potential to the therapy centers.  The challenged arrangement involved a series of leasing companies that accepted investments from referring physicians.  The investment interests resulted in the payment of investment returns that the government considered to be remuneration for referrals in violation of the Anti-Kickback Statute.  The whistleblower who originally raised the issue will receive up to $1.725 million.

This case involves a garden variety claim of a kickback by investment interest.  The typical investment case involves targeting potential investors who are in a professional position to make referrals to the company in which they are asked to invest.  The referral source has a financial incentive to increase referrals.  This might be an excellent financial investment scenario, but the problem is that the investment return might well be an illegal kickback; which is potentially a federal felony.

Fraud Allegation for Unnecessary Breast Cancer Index (BCI)Testing

Friday, May 18th, 2018

Unnecessary Breast Cancer Testing Fraud Settlement

False Claim Breast Cancer Index TestingA company will pay around $2 million to settle allegations of making false claims to Medicare for Breast Cancer Index (BCI) tests that were alleged to be not reasonable and necessary for the diagnosis and treatment of breast cancer.

The government accused the company of knowingly promoting and performing BCI testing for breast cancer patients who had not been in remission for five years and who had not been taking tamoxifen.  The government alleged that performing BCI testing under these circumstances was not reasonable and necessary based on published clinical trial data and clinical practice guidelines.

This case highlights the need to assure that there is clinical support for providing and billing for services.  In this case, the government took the position that patients who did not meet certain criteria would not benefit from the BCI testing.

Unnecessary Inpatient Admissions Results in Hospital DOJ Settlement

Thursday, May 17th, 2018

Unnecessary Inpatient Admissions – Hospital Fraud Settlement.

Hospital Admissions Fraud Risk AreaAn $18 million settlement was agreed by a hospital chain after allegations that claims were submitted to Medicare for patients who were admitted to an inpatient facility when they allegedly could have been treated on a less costly outpatient basis.  The government alleged that the hospital system billed Medicare for short-stay, inpatient procedures that should have been billed on a less costly outpatient basis.  The government also accused the hospital system of inflating reports to Medicare regarding the number of hours of outpatient observation care that was provided.

This is a fairly typical case where the allegation involved billing for services that were of a higher level than required by the patient.  In effect, the excess services are deemed to be medically unnecessary.  In this case, the services involved inpatient admissions that the government alleged could have been taken care of in a less costly outpatient setting.

A former employee was the whistleblower in the case and walks away with over $3.25 million from the settlement.

Whistleblower Settlements Increase Compliance Risk for Providers

Wednesday, May 16th, 2018

Recent Fraud Settlements Emphasize Risk of Whisttleblowers

Dermatology Risk Areas Fraud and AbuseOne of the reasons why compliance officers and health care attorneys read fraud settlements is to identify the issues that the government is focused on.  The cases that the government decides to pursue are very indicative of the areas of fraud enforcement that they feel are important.  These are not the only issues that should be considered, but government enforcement actions certainly tell us what types of arrangements the government considers important.

The misfortune of the defendants involved in these cases hold a potential learning experience for everyone else.  Others have an opportunity to focus on their own operations to identify whether they are at risk in any of the areas involved in these cases.

An ancillary lesson that these settlements hold is that each was initially raised by a whistleblower.  The False Claims Act gives whistleblowers a portion of the settlement in cases where the government decides to intervene.  This in effect creates a universe of potential claimants that can include almost anyone with original knowledge of the alleged practice.

Common whistleblowers include former or disgruntled employees.  It really does not matter of the employee is or was the worst employee in the world, they can still bring an action as a whistleblower.  Not only are they protected by a host of laws, they can also profit greatly if the claim is eventually decided in their favor.  Whistleblowers often receive awards in the millions of dollars.  This makes the area ripe for plaintiff’s attorneys who often take these cases on a contingency fee basis.  This makes it a relatively low-cost proposition for a whistleblower to bring a case forward, at least from the perspective of attorney fees.

Opioid Prescribing Results in Medicare Fraud Claim

Tuesday, May 15th, 2018

Overprescribing Opioids Without Demonstrated Medical Justification.

A settlement was recently announced by the Department of Justice that symbolizes another use of fraud enforcement by the government to combat the opioid epidemic.  Providers need to take notice of these enforcement actions as they indicate opioid related issues as significant compliance risk areas.

The government alleged that a chiropractor billed Medicare and a state Medicaid program improperly for painkillers, including Opioids. The case involved four managed pain clinics, all which were closed through the course of the case.  The settlement also required a nurse practitioner to pay $32,000 and surrender her DEA registration to settle allegations that she violated the Controlled Substances Act.

The Department of Justice issued a press release announcing the settlement that directly comments on the opioid issues involved in the case, leaving no ambiguity about what the government is up to.  The quotations are not part of the normal “canned” statements that are normally included in these settlements.  Every indication is that the opioid related language might be adopted a standard form as the government focuses in on these cases.

“More Americans are dying because of drugs today than ever before—a trend that is being driven by opioids,” said Attorney General Jeff Sessions. “If we’re going to end this unprecedented drug crisis, which is claiming the lives of 64,000 Americans each year, doctors must stop overprescribing opioids and law enforcement must aggressively pursue those medical professionals who act in their own financial interests, at the expense of their patients’ best interests.”

The government alleged that the defendants prescribed painkillers and caused pharmacy claims to be submitted where there was no legitimate medical purpose for the prescriptions.  Additionally, the government alleged that the clinics up-coded and billed Medicare for office visits that were not reimbursable at the levels sought.  In a demonstration of the commitment that the government has in this area, the clinics were also accused of billing for nurse practitioner services that were provided without the required collaboration arrangement in place.

The case was initially brought forward by a former office manager turned whistleblower who is set to earn $246,500 under the settlement.

Health Care Compliance Resource Portal Launched by OIG

Tuesday, May 1st, 2018

Office Inspector General Launches New Compliance Resource Portal

by John H. Fisher, II, JD, CHC, CCEP

At a recent Health Care Compliance Association (HCCA) compliance institute, the Office of Inspector General announced it had launched a new resource portal focused on compliance issues.  A trip to the OIG’s web site, and sure enough, there is a brand spankin’ new compliance portal.  You can check out the portal at OIG Portal.

On first brush through the portal, it appears most of the items that are accessible already existed prior to the launch of the portal.  The portal creates some organization that did not previously exist to guide providers to various compliance resources the OIG has made available.

 

Contents  Listing of the OIG Compliance Portal

  • Toolkits
  • Provider Compliance Resource and Training
  • Advisory opinions
  • Voluntary Compliance and Exclusions Resources
  • Special Fraud Alerts, Other Guidance, and Safe Harbors
  • Resources for Health Care Boards
  • Resources for Physicians
  • Accountable Care Organizations

This is a site that compliance officers will want to have bookmarked in their browser.  We are likely to see new developments in compliance posted on the portal.  For example, it already references a toolkit on identification of opioid misuse risk will be coming soon to the portal.

When you get a chance, check out the new OIG resource and the tools that are available on the site.  It is definitely something with which people in compliance should have familiarity.  As usual, if you have any questions regarding compliance or other health care legal issues, please don’t hesitate to contact your Ruder Ware health care attorney.

Health Law Firm Opens Green Bay Office

Tuesday, May 1st, 2018

Green Bay Health Care Lawyer – Opening Office in Green Bay Wisconsin

I just wanted to let readers of our health care blog know that Ruder Ware will be opening a Green Bay office and that three Green Bay attorneys will be joining our firm. This will provide us with a presence in the Green Bay/Appleton Markets that will enhance our community presence and enable us to better serve our client in eastern Wisconsin. Our health care and compliance practice with be greatly enhanced as a result of this move.

This move will provide a local platform through which we can better serve our health care clients.

Health Care Law Practice – Green Bay Health Lawyers Ruder Ware

Ruder Ware has a long history of representing health care clients.  The firm recognizes that the highly regulated and complex nature of the industry demands the attention of a team of attorneys who, as a group, monitor constantly evolving laws and regulations and their impact on our health care clients.  At Ruder Ware, we offer a full-service solution to clients as our focus team consists of health care, business, employment, and litigation attorneys with knowledge of the health care industry.   As a result, we are able to take best practices from other industries and apply them to the health care industry, thereby increasing the ability to respond promptly to the rapidly changing health care environment.

Members of the focus team have served on the governing bodies of various health care organizations.  This service has provided our attorneys with the opportunity to counsel the health care community.  

Our dedicated team of attorneys represents health care providers in various matters including:

 Health Care Business Transactions and Corporate Law

Our attorneys have substantial expertise representing various health care providers such as:

Below is the official press release:

Media Contact:
Jamie Schaefer
COO
Ruder Ware, L.L.S.C.
P: 715.845.4336
E: jschaefer@ruderware.com

For Immediate Release

Attorneys Ronald Metzler, Christopher Pahl, and Chad Levanetz to join
Ruder Ware at its new Green Bay Office

WAUSAU, WI – April 27, 2018 – Ruder Ware is pleased to announce the opening of its Green Bay office and that Attorneys Ronald Metzler, Christopher Pahl, and Chad Levanetz will be joining the firm. The new office will be located at 222 Cherry Street, Green Bay, Wisconsin, which is the current location of Metzler, Timm, Treleven, S.C.

Attorney Ron Metzler – Having practiced law for over 30 years, Ron is a well-respected and well-known commercial attorney with close ties to the banking industry.

Attorney Chris Pahl – With his strong ties to the Green Bay community, Chris has built his practice around real estate development and condominium law as well as commercial transactions and estate planning.

Attorney Chad Levanetz – A seasoned litigation attorney, Chad counsels clients in the areas of real estate, construction, and general business disputes.

Stew Etten, Ruder Ware managing partner, stated, “Ruder Ware is always looking for outstanding attorneys to join our firm. With the opportunity to add Attorneys Metzler, Pahl, and Levanetz, the time was right to open a Green Bay office. We’re very excited to have attorneys of their caliber join our team of professionals.”

About Ruder Ware
Founded in 1920, Ruder Ware is the largest law firm headquartered north of Madison. With offices in Wausau, Eau Claire, and Green Bay over 40 attorneys provide legal and business advice to clients with operations of all sizes. Areas of practice include: Employment, Benefits & Labor Relations, Litigation & Dispute Resolution, Business Transactions, Trusts & Estates, and Fiduciary Services. Ruder Ware, Business Attorneys for Business Success. www.ruderware.com

Media Contact:
Jamie Schaefer
COO
Ruder Ware, L.L.S.C.
P: 715.845.4336
E: jschaefer@ruderware.com

Physician Orders : Why Are They So Important?

Wednesday, January 24th, 2018

The Importance of Physician Orders in Health Care

importance of physician ordersIn my last article on physician orders, I more or less ranted about the lack of a clear regulatory definition of physician orders. Yet, physician orders serve a variety of important purposes including communicating the physician’s direction for ancillary services and required diagnostic tests and securing the ability to receive reimbursement for services that flow from the physician’s encounter with the patient. The systematic use of physician orders also serves as proof that the physician is directing services to the patient and that conditions of participation of the facility, which require a physician driven process, are being complied with on a systematic basis.

Physician Orders as Conditions of Participation

Medicare law draws a distinction between conditions of participation and conditions of payment. Conditions of participation are compliance items, failure of which can result in corrective action and citations on survey. Failure of physician orders can result in survey deficiencies. The good news here is that a facility will normally be able to take action to correct a cited deficiency. If the failure of physician orders is systematic, other sanctions can attach; even including exclusion from governmental health program. But the garden variety, relatively isolated failure of a physician to timely sign an order can normally be corrected without devastating consequences.

Physician Orders As Condition of Payment

Physician orders can also be conditions of payment for specific services flowing from the physician’s encounter with the patient. This is where the real, serious regulatory exposure for failure to document physician orders occurs. Where an order is a condition of payment, claiming and accepting reimbursement results in an overpayment that should be repaid to Medicare. Failing to repay within 60 days of identification of the overpayment results in significant False Claims Act penalties that can far outweigh the original overpayment amount. Identification occurs when a provider “should know” that an overpayment exists which is why health care providers need to proactively look for missing physician orders as an identified risk as part of their compliance programs.

Physician Order Documentation Requirements

Health care providers will be familiar with the adage that “if it is not documented, it didn’t happen.” The same is true with respect to physician orders. A physician order that is not properly documented will be treated by payors as if the order does not exist. Even failure of seemingly technical failures to sign orders on a timely basis can result in payment denial or overpayment claims. In these cases, the provider is not entitled to reimbursement. If reimbursement is received, an overpayment will exist and I describe above the consequences of not repaying overpayments.

So it is important for physicians and other providers to understand the requirements for physician orders as they pertain to the services that they provide. Not getting it right can have very serious consequences. False Claims Act penalties are triple the original overpayment, plus up to $22,000 per claim. A systematic failure to properly use physician’s orders can result in draconian levels of damages under the False Claims Act.

Physician Orders Legal and Regulatory Article Series

Physician Order Reimbursement Issues

Physician Orders – Why Are They So Important?

The Verbal Order Minefield

Authenticating Verbal Orders : Compliance Requirements

Third Party Authentication of Verbal Orders

Physician Order – CMS Guidelines on Texting Physician Orders

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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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.