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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.

Friday, May 25th, 2018

Complying with Michigan’s New Controlled Substance Laws – The Bona-Fide Prescriber-Patient Relationship Requirement

The state of Michigan has enacted a number of separate pieces of legislation to address the opioid epidemic.  Most of these laws are directed at controlling the prescribing relationship between a physician and a patient.

Generally, Michigan requires a controlled substance license to prescribe controlled substances in the state. A holder of a controlled substance license may administer or dispense a schedule 2 to 5 controlled substance without a separate controlled substance license covering those substances. Additional requirements will attach to the prescribing relationship commencing at various intervals.

This article covers the new requirement regarding the establishment of a bona-fide prescriber-patient relationship.  Starting on the sooner of March 31, 2019 or the date that regulations are issued, a licensed prescriber will be required to have a “bona-fide prescriber-patient relationship” in order to prescribe a schedule 2 to 5 controlled substance.  In order to be considered a “bona-fide prescriber” the prescriber must review relevant medical/clinical records, complete a full assessment of medical history and current medical condition, conduct a relevant medical evaluation either in person or through telehealth, and maintain records of the patient’s condition to medically accepted standards.

All of these factors should be supported by the patient’s medical record.  There are a lot of lose ends on the definitions applicable to each of these requirements.  It is possible that additional details will be forthcoming when regulations are finalized.  Because these requirements a condition precedent to being able to prescribe schedule 2 to 5 controlled substance, it is critical that physicians and other prescribers review their documentation standards to be certain that these requirements are reflected in the patient’s chart in each instance.  Provider entities will need to consider adopting policies and procedures setting the standards for documentation and integrating the other requirements of Michigan’s new laws.  Appropriate training should also be conducted to assure that prescribers and their support staff are aware of the detailed documentation requirements.  Additionally, appropriate monitoring and auditing should be conducted to assure that prescribers are meeting the requirements.

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.

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 – Definition and Reimbursement Implications

Wednesday, January 24th, 2018

Physician Orders – Big Implications but Few Definitions

Physician Ordering Services Physician OrdersI wanted to talk a bit about physician orders. Physician orders hold a great deal of significance in health care. The root purpose of a physician order is to direct other providers to furnish certain services. Services ordered by a physician might include things like therapy services, skilled nursing services, home health, diagnostic testing, and a variety of other therapeutic and/or diagnostic services that might flow from the physician’s examination of the patient.

In addition to the practical application of directing care, health care payors look to physician orders to make payment determinations. The Medicare program places a great deal of importance on physician orders to support claims for ancillary and diagnostic services. Certain services require a physician’s order as a prerequisite to payment on a claim for service. In other cases there may be no direct, fee-for-service payment implication to a physician’s order, but they are still critical to patient safety and to communicate matters that may impact care and treatment of patients.

A few weeks back, my trials and tribulations as a health care compliance lawyer resulted in my need to locate a definition of what constitutes a physician’s order. I looked in the Medicare regulations and was surprised to find that there is no statutory or regulatory definition of what constitutes the order of a physician. This seemed odd given the importance of physician orders as conditions for payment of many Medicare claims. There are references throughout the regulations that require physician orders. I was finally able to locate a definition in a CMS Policy Manual. But if push comes to shove in the context of a case, these policy manuals are not binding on the interpretation of regulatory terms. CMS may define physician orders internally, but that does not necessarilly mean that a court will uphold that definition.

Some states do a better job than Medicare at defining what constitutes a physician’s order. Medicare policy sometimes defers to state law, particularly regarding some of the technical aspects of physician orders such as what constitutes a valid electronic signature. State law should always be referenced when determining issues relating to physician orders, attestation, signatures, and other issues. This does not always provide clarification and, in fact, sometimes it causes confusion. But it is necessary for a full analysis and identification of where there may be uncertainty.

So no I am inspired to do some further exploration on physician orders. When are they necessary? When are they required? What technical requirements apply? Stay tuned to this blog for additional articles and hopefully some fairly comprehensive coverage of physician orders.

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

Gainsharing Arrangement Addressed in New Advisory Opinion

Thursday, January 11th, 2018

 OIG Advisory Opinion 17-09

OIG Advisory Opinion Gain SharingThe Office of Inspector General (“OIG”) recently released a new advisory opinion (Advisory Opinion 17-09 – January 5, 2018), addressing a gainsharing arrangement between a group of neurosurgeons and a health center.  Under the proposed arrangement, a neurosurgery group agreed to implement measures to reduce the costs associated with a defined scope of surgical procedures.  As part of its agreement with the health center, the neurosurgeons were to participate in a portion of the cost savings that resulted from the implementation of the measures.

The OIG has historically issued around a dozen Advisory Opinions addressing gainsharing arrangements.  However, the OIG had not issued an advisory opinion in the gainsharing area since the passage of the Medicare Access and CHIP Reauthorization Act (known as MACRA) in 2015.  That law made modifications to Civil Monetary Penalty provisions that are applicable in the gainsharing area by removing some of the impediments to gainsharing arrangements that previously existing in the Civil Monetary Penalty laws.

Gainsharing arrangements have emerged as a way to align the economic interests of hospitals and physicians in efforts to work together to reduce cost and enhance quality of care.  A gainsharing arrangements provides doctors with economic incentives to adhere to practices that reduce the hospital’s costs associated with defined procedures or treatment courses.  Under traditional fee-for-service reimbursement, a financial incentive is created for physicians to provide more service to maximize reimbursement.  A properly structured gainsharing arrangement creates incentives for appropriate levels of service and rewards physicians for efficiencies and quality outcomes.  Interests are aligned because the facility and the physician, who is often the engine driving the level of care, share in the savings.

Prior to the passage of MACRA in 2015, the OIG expressed suspicion about gainsharing through Special Advisory Bulletins as well as advisory opinions.  This has the effect of chilling the proliferation of gainsharing arrangements because providers were cautious about potential regulatory issues. A major impediment prior to 2015 was the CMP law that restricted hospitals from compensating physicians in order to induce a reduction or limitation on services provided to Medicare and Medicaid beneficiaries.  MACRA clarified that the CMP law was only violated if the payment to the physician is for purposes of reducing services that are medically necessary.  This subtle yet significant change opened the door for the proliferation of gainsharing arrangements.

Coming full circle to Advisory Opinion 17-09, the OIG concluded that the specific gainsharing arrangement described in the opinion would not result in sanctions under the Civil Monetary Penalty rules or the Federal Anti-kickback Statute.  The OIG acknowledged that both the CMP laws and the Anti-kickback had potential implication but that the structural issues of the particular arrangement between the neurosurgeons and the health system would not result in the OIG pursuing sanctions.

By their very nature, Advisory Opinions only apply to the requesting party.  However, we can gain useful concepts from the analysis and conclusions of the OIG relating to the specific facts that formed the basis of their opinions.

Fair market value will always remain an issue in gainsharing arrangements.  The Federal Stark Law, Anti-kickback Statutes, and applicable state laws will require adherence to fair market value standards when payment is made between a referring party and the provider of a service. Advisory Opinion 17-09 provides us with some useful guidance regarding some of the consideration that should go into establishing fair market value and structuring a gainsharing arrangements.  Fair market value concepts in these arrangements are often subtle and must be well thought out to avoid regulatory issues. In addition, concepts of commercial reasonableness, which has emerged as a related but distinct issue impacting payments must be considered in addition to fair market value.

Advisory Opinion 17-09 is worth a review to anyone involved in structuring gainsharing arrangements. By no means should 17-09 be the only guidance that you rely upon because the opinion only touches on a few considerations that were relevant to the structure of the specific arrangement.  Some important factors to keep on your radar when structuring a gainsharing arrangement relate to the determination of baselines that are used to measure cost savings through program implementation.  The frequency and method of calculating available gainsharing amounts is subtle but important for regulatory compliance.  Of course the specific protocols or description of the method for reducing costs should be described in detail, together with a method for determining the level of compliance with those protocols.  Another issue that often arises in these arrangements involves the scope of costs that are allocated to the program.  It is important that costs allocated be reasonable to avoid potential disguised kickbacks.

If you require additional information regarding this article, gainsharing arrangements, or health care issues in general, please contact us through the contact section of this blog.

Dermatology Fraud Risk Areas – Impossibly Long Days

Tuesday, June 27th, 2017

Failure to Supervise and Impossibly Long Days

Payment of $302,000 and Forced Corporate Integrity Agreement – July 2016

fraud and abuse dermatologistsThe government alleged the dermatologist in this case repeatedly billed for services under the “incident to” billing rules during periods when the dermatologist was not present in the office.  Some of the services were allegedly performed when the doctor was traveling out of the country.  The government also alleged the doctor billed for impossibly long days including one day where 26 hours were billed.

This case illustrates the need to comply with the “incident to” billing rules.  Those rules permit a physician extender’s services be billed under the physician in certain circumstances.  In order to qualify to bill incident to, the physician must be physically present within the office suite at the time the extender performs the service.  The physician cannot order the procedure and then leave the office while the procedure is being performed.  There are new Medicare rules clarifying some aspects of the “incident to” billing rules.  There was a previous ambiguity that some providers interpreted as permitting the physician that ordered the service to bill for the services, even though another physician actually supervised the performance of the service.  The rules revision clarified only the supervising physician can bill the services as “incident to” his or her service.  The ordering physician can only bill the service if he or she also supervises the extender.

Dermatology Practice Fraud and Abuse Risks Identified in Florida Case

Tuesday, June 27th, 2017

Dermatologist Fraud and Abuse Risks – Identified from Florida Case Targeting Demotologist

Dermatology Risk Areas Fraud and AbuseAn allegation from a competing dermatologist resulted in a Federal government investigation of a Florida dermatologist.  The dermatologist was accused of charging the Medicare program for unnecessary biopsies and radiation treatments that were not rendered, not properly supervised, or given by unqualified physician assistants.  It was alleged the doctor was not even in the country when some of the procedures at issue were performed.  The unnecessary charges were alleged to have totaled around $49 million over a 6-year period.

The dermatologist did not admit wrongdoing in the settlement.  Rather, he alleged the overbilling resulted from his unique practice that relied on radiation, instead of disfiguring surgery, to help patients.  The doctor claimed he had cured “over 45,000 non-melanoma skin cancers with radiation therapy” over a 30-year period.  The problem with that argument appears to be the fact that the dermatologist was not trained or qualified in providing radiation oncology treatments.

There are a number of interesting things about this case.  The case was brought by a competing physician as a whistleblower.  The physician who brought the case expressed concern about having to treat patients that the accused doctor had misdiagnosed with squamous cell carcinoma.

The case also alleged significant billing for services allegedly provided when the doctor was not even in the office.  The accused doctor alleged he was available by phone while the procedures at issue were being performed.  This raises interesting issues under the rules regarding “incident to” billing.  Those rules permit a physician to bill for physician extender services.  In order to qualify to bill a service as “incident to” a physician’s service, the billing physician must meet supervisions requirements.  The physician must be physically present within the office suite during the performance of the procedure in order to qualify to bill a service as “incident to” the physician’s services.

It appears there were a number of things going on in this case.

  • There appears to have been a pattern of diagnosing a higher level of severity than was supported by the patient’s condition.
  • There was a routine use of radiation therapy, even in cases that were not medically appropriate.  This placed patients at potential risk.
  • There appears to have been questions whether the accused doctor was authorized to perform radiation therapy.
  • There were issues regarding improper use of the “incident to” billing rules when the doctor was not present to actively supervise the service.
  • There was also some evidence the doctor had offered incentives for staff to misdiagnose and over utilize the radiation treatment.
  • There was an alleged kickback arrangement with another physician who operated a clinical laboratory.

Challenging Physician Payment Sunshine Act Disclosures

Tuesday, June 27th, 2017

The Affordable Care Act added the Physician Payment Sunshine Act (Sunshine Act) as section 1128G to the Social Security Act. The Sunshine Act requires applicable manufacturers of drugs, devices, biologicals, or medical supplies and certain group purchasing organizations to report annually to the Centers for Medicare & Medicaid Services (CMS) certain payments or items of value that are provided to physicians and teaching hospitals.  The Sunshine Act also requires CMS to publish payments reported on a public Web site.

In 2013, CMS issued final regulations interpreting and clarifying the requirements of the Sunshine Act.  The final regulations clarify the reporting process, identify exceptions and exclusions from the reporting requirements, and provide further details regarding what constitutes a reportable relationship.  The final rule delineates the specific data elements reporting organizations are required to include and the required reporting format.  Reporting organizations failing to make required reports are subject to potential civil monetary penalties.  Continued

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.