Mandatory Compliance Programs – Is Your Practice Ready?

The Office of Inspector General has encouraged health care providers to adopt compliance programs since the late 1990s.  Most larger organizations have implemented compliance programs as a way to detect and mitigate risk of non-compliance and to reduce penalties if a problem is detected.  However, many smaller providers, such as physician practices, have not adopted any type of formal compliance program.  The Patient Protection and Affordable Care Act (the “PPACA”) makes compliance programs mandatory for the first time  for all suppliers and healthcare providers enrolled in federal healthcare programs. Providers of all sizes will be required to certify that they have an effective compliance program in place as a condition of participation of federal healthcare programs.

The Office of Inspector General is charged with issuing regulations that define the core elements that providers must implement in order to certify compliance with the mandatory compliance program requirement.  The first set of regulations have been issued relative to nursing home who must certify their compliance programs as of 2013.  Regulations addressed at other provider types have not yet been issues but are expected soon. We can expect that the regulations will be similar to the guidance that has been provide by the OIG covering various industry sectors over the years.

Requirements for nursing home compliance plans have been released.  The nursing home regulations require the following:

• The adoptions of formal written compliance policies, standards and procedures that are effective at reducing the risk of compliance violations.
• The assignment of compliance responsibility to a Specific individual within the organization.  The individual should be a high ranking member of the management team and should report directly to the governing body.
• The compliance program must be adequately funded to assure its proper operations.
• Systems must be put in place to assure that authority is not delegated to individuals who may show a propensity to commit compliance violations.  For example, a program should be put in place to screen employees, staff members, vendors and others against OIG and GSA exclusions lists.
• The program elements and the ability to report compliance violations must be stressed and an atmosphere of compliance should be created.
• A strong system of anti-retaliation for individuals reporting compliance concerns must be maintained and communicated throughout the organization.
• Effective communication of the standards and procedures to all employees and required participation in training programs.
• Systems of monitoring and auditing should be put in place to help detect potential practices that could lead to compliance violations.
• Disciplinary processes must be maintained in order to enforce the compliance program.  Discipline should be coordinated with existing policies and procedures regarding employee discipline.
• The compliance program should “learn from itself.”  In other words, systems of corrective actions should be put in place that includes revisions of policies and procedures based on compliance concerns that are detected or reported.
• Continued review of the effectiveness of the compliance program should be undertaken.  Simply having a compliance program in place is not sufficient.  The organization must assure that the program is effective by continually reassessing and testing the program.

The exact date that compliance programs will become mandatory is not yet certain.  Nevertheless, enforcement activity is on a rise.  Prudent providers will take proactive efforts to reduce their compliance risks.  This includes that creation of an effective compliance program that is specifically tailored to the compliance risks associated with the specific provider.  Many smaller providers have never contemplated creating such a program in the past.  Mandatory requirements, increased enforcement activities and penalties, are all factors forcing providers to take proactive steps to reduce their exposure.  This creates a disproportionate burden on smaller providers such as small group practices.  At the same time, the OIG has in the past recognized that smaller organizations do not need to go to the same extremes as larger systems to meet their compliance obligations.  In other words, compliance programs are permitted to have a degree of scalability and allow for the size and resources of the organization.  It is critical for small providers to know where to place their compliance resources.  A “shotgun” approach will provide very little benefit.  Creating an overbroad plan that can never be operationalized does nothing more than create a roadmap leading authorities to the actions that your organization is not taking.

It is most prudent for providers of all sizes to have some level of compliance plan in place sooner rather than later.  A well focused plan scaled to your biggest risk areas is much better than a robust plan that you can never operationalize.  The point is to start with your compliance efforts and build upon them as time passes and new risk areas are identified.  Your plan should be structured to operationalize the identification of risk areas and address them as they arise in your practice.

Billing of “Incident To” Services In Physician’s Office

Physician offices will generally bill for certain services performed by non-physician personnel as “incident to” the services of a physician.  “Incident to” services generally means services or supplies that are furnished as an integral, although incidental, part of the personal professional services of the physician.

The determination of whether a service is provided “incident to” a physician’s services can also have physician compensation implications.  The Stark law permits a group practice physician to be compensate based on personal production and “incident to” services.  Services that cannot be billed “incident to, such as diagnostic imaging services, cannot be credited directly to the physician when determining compensation within the group, a number of requirements must be met in order to bill a service as “incident to” the physician’s service performed in a physician’s office (as opposed to an outpatient department of a hospital).  The “incident to” billing requirements are summarized by the Center for Medicare and Medicaid Services in Chapter 15 of the Medicare Benefit Policy Manual.

Services and supplies commonly furnished in physicians’ offices are covered under the incident to provision. Where supplies are clearly of a type a physician is not expected to have on hand in his/her office or where services are of a type not considered medically appropriate to provide in the office setting, they would not be covered under the incident to provision.  Supplies usually furnished by the physician in the course of performing his/her services, e.g. bandages, and oxygen,  are also covered.

To be covered supplies, including drugs and biological, must represent an expense to the physician or legal entity billing fir he services or supplies. For example, where a patient purchases a drug and the physician administers it, the cost of the drug is not covered.  However, the administration of the drug, regardless of the source, is a service that represents an expense to the physician. Therefore, administration of the drug is payable if the drug would have been covered if the physician purchased it.

The physician must directly supervise the personnel performing the applicable service.  Direct supervision in the office setting does not mean that the physician must be present in the same room with his or her aide.  However, the physician must be present in the office suite and immediately available to provide assistance and direction throughout the time the aide is performing services.  The availability of the physician by telephone and the presence of the physician somewhere in the institution does not constitute direct supervision.  The physical presence of the physician is required in order to bill the service “incident to” the physician’s service.  In a group practice setting, other group members can supervise services that are ordered or directed by another physician member of the group.  However, a physician group members must be available in the office suite in order to bill the service on an “incident to” basis.  If there are no physicians in the office at the time that the service is rendered to a patient, the service cannot be billed. Even if the provider has the ability to provide the applicable service independently, physician supervision must be present if the service is billed “incident to” the service of a physician.  There must also be a primary physician professional service furnished to initiate a course of treatment.  The physician must provide the initial service and the non physician practitioner’s service must be related to the initial service in order to be billed “incident to.”

 The personnel providing the services must have  legal relationship to the entity that is billing the service as “incident to” the service of the physician.  In most cases this will not raise a problem because an employee of the practice will be billing the services.  However, this issue can raise a problem in cases where an outside provider supplies personnel to operate the technical component of medical equipment.  Inappropriate billings for “incident to” services present a significant compliance area for physician practices.  Policies should be put in place to direct staff on the appropriate rules to assure that a service is correctly billed.

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.

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

Rochester Network Antitrust Advisory Opinion - Clinical Integration

Under the federal antitrust laws, agreements between competing providers regarding pricing of services or collaborative efforts regarding negotiation of fees constitute per se illegal price fixing.  However, physician network joint ventures can be analyzed under a less stringent rule of reason analysis if the networks are substantially economically integrated into organizations that create enhancements in efficiency.  If physician organizations are substantially integrated to achieve pro-competitive benefits, the less stringent rule of reason analysis will be used to analyze the activity of the network that engages in joint price negotiations.  Many arrangements that would be per se illegal under the antitrust laws may be deemed to be legal to the extent that they create substantial efficiencies and provided that they do not involve a large share of the physicians in the market so that they do not significantly reduce competition.

One example of the application of the substantial integration requirements to a physician provider network was summarized in a 2007 advisory opinion from the Federal Trade Commission to and independent practice association  located in Rochester, New York.  The Rochester Network included 717 total physicians representing 41 specialty and sub-specialty areas.  Approximately 25% of the providers were primary care physicians and 75% represented specialists and sub-specialists.

The FTC found that the Rochester Network planned to sufficiently integrate the network members to create additional efficiencies in the local health care market.  The FTC states that the joint contracting with payers on behalf of the various network members are subordinate, reasonably related to, and reasonably necessary to implement the plan to integrate.  It also found that the number of physicians involved was not enough so that the network would be able to attain or exercise market power and therefore there would not be significant anti-competitive effects on the market.  The FTC’s advisory opinion stated that given these factors, it does not intend to bring enforcement actions against the Rochester Network.

The factors that the FTC looked at to determine that the Rochester Network was substantially integrated are particularly instructive.  In order to elucidate these factors, it is necessary to describe further some of the structural aspects of the Rochester Network that the FTC considered important in making its determination.  It is important to note that each network and the programs that they develop in order to create an integrated network will be different.  At the same time, we can broadly examine the types of programs that the Rochester Network implemented and which were found by the FTC to be integrative and create a network that would not likely result in anti-competitive impact on the market.  One factor that the FTC found particularly helpful was the creation of programs to obtain and analyze data regarding the care provided to patients and the performance of physicians.  This was coupled with a requirements that physicians within the network agreed to refer patients to other network members except in unusual circumstances.  The information that this provides to the network is essential for the network’s monitoring and oversight activities and for achieving potential efficiencies in the delivery of care.

The Rochester Network also created a well organized Care Management Service that included case management, disease management and pharmacy management programs, which the network planned to continue to expand to include additional disease states.  The network uses this program to identify patients who have not received care set forth in their guidelines for these disease states and to focus on patients in areas that lead to high costs, high utilization, chronic disease, co-morbid diagnosis, and under-utilization of services, such as preventive care.

In order to accomplish its clinical integration goals, the network formed a Clinical Integration Committee and Specialty Advisory Groups, both which included physician members of the network,  in order to develop and modify guidelines in various patient care areas and involving various disease states.  The network also included a network education program to keep network physicians informed of program requirements and solicited feedback from network physicians to help the network assess the need for revisions to the guidelines.

Physician members of the network agree to be bound by the various aspects of the network programs including agreeing to provide information to the network, is to follow the program protocols and cooperate with case and disease management procedures, and to be subject to educational and disciplinary requirements of the network.  The network also included technological integration, including a central clinical information system that includes a variety of information on patients.  The network also created a system to monitor the level of physician usage of the technology systems. The Rochester Network also created a Quality Assurance Council to perform peer review of individual providers and adherence to program requirements.  Network physicians agreed to be available to serve terms on the committee. The Rochester Network also created systems to assess the extent to which the program requirements result in improving the quality and cost-effectiveness, and reduce population costs.  The network established a system to monitor process measures and outcome measures to monitor improvements in quality and cost reduction.

The advisory opinion provides much more detail on the various programs that the Rochester Network created and that the FTC found to be evidence that the network was and integrated network that would not create anti-competitive effects on the market, in spite of joint negotiation on price and other areas with payers for health care services.

In its advisory opinion, the FTC looked to the joint FTC and Department of Justice Statement of Antitrust Enforcement Policy in Health Care.  The Joint Statement identifies ways that physician networks that do not involve the sharing of financial risk may be able to establish that they are sufficiently integrated and produce substantial efficiencies.  The Joint Letter states that integration can be shown by implementing active and ongoing programs to evaluate and modify practice patterns and by creating a high degree of interdependence and cooperation in order to control costs and ensure quality.

The Joint Letter illustrates some of the elements that may be involved in these programs in order to demonstrate this type of functional integration including (1) creating mechanisms to monitor and control utilization and costs and quality of services provided, (2) methods to selectively choose providers who are likely to achieve quality and cost standards, (3) significant monetary and human investment in the creation of the infrastructure that is aimed at creating efficiencies. The FTC analyzed the Rochester Network under each of the standards set forth in the Joint Letter and concluded that the network is both intended and structured to produce substantial integration among its participating providers and that the program appeared to have a potential to result in significant efficiencies in the cost and quality in the delivery of medical services.

 Having determined that the Rochester Network meets the test of being substantially integrated, the FTC went on to determine whether the joint contracting and negotiation aspects of the network related and subordinate to, and reasonably necessary for the creation of efficiencies and fulfillment of program goals.  Inherent in this analysis is the position that not all networks that are financially or structurally integrated meet antitrust scrutiny.  There must be a demonstrated necessity for the joint contracting and price negotiation activities.  These activities must be demonstrated to be necessary to achieve the goals of the programs that are created with the objective of controlling costs and creating efficiencies.

 The analysis of when joint contracting activity will be considered to be merely ancillary to the overall goals of the physician networks so that they pass antitrust scrutiny will be covered in detail in a subsequent post.