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Posts Tagged ‘Anti-kickback Statute’

Differential Valuations and the Anti-kickback Statute

Monday, April 3rd, 2017

Ambulatory Surgery Case Demonstrates Differential Value Theory of Renumeration

ASC Fraud and Abuse RemunerationA relatively recent case involving buy-in terms in an ambulatory surgery center demonstrates how different valuations for referral sources and non-referral sources can be evidence of remuneration under the Medicare Anti-Kickback Statute (42 U.S.C. § 1320a-7b(a)-(b)).  The case also demonstrates how the initial investment terms that favor referral sources can foreclose reliance on safe harbor regulations.

The case involved an ambulatory surgery center management company what purchased an interest in an ambulatory surgery center.  The company then offered shares of the company for investment to physicians who were in a position to refer surgical cases to the surgery center.  The physician investment was structured to meet the terms of the safe harbor regulations for ambulatory surgery center investments (“ASC Safe Harbors”).  The ASC Safe Harbors provide protection from remuneration that is received by a referring physician as a return on investment as long as the physician meets certain minimum practice revenue and surgical volume requirements. Physician investors must generally receive at least 1/3 of their practice income from the provision of surgical procedures and perform at least 1/3 of their surgical procedures in the center in which they hold an investment interest.

The problem with the way that the investment interest was structured was the different valuation that applied to the purchase that was made by the management company and the investment offer made to the referring physicians.  The management company purchased its investment at a much higher price than was offered to the physicians.  The differential valuation violated a threshold requirement of the safe harbor regulations that prohibits the initial investment interest to be based, in whole or in part, on the volume or value of referrals that the investor might make to the entity.  It was very difficult for the parties to justify the different value applied to physician investment.  The only apparent difference appeared to be that the physician investors were the referral sources for the surgery center.

This case specifically involved an ambulatory surgery center investment but the concept of differential valuation could apply in other situations involving the Anti-Kickback Statute.  Different values paid to or received from referral sources and non-referral sources can suggest that at least one of the reasons for the differential is the volume or value of potential referrals.  This points out a general area of risk assessment for all health care providers.  Areas where different pricing is applied to referral sources and non-referral sources could signify a potential violation of the Anti-Kickback Statute.

Employment Exceptions From Anti-kickback Statute

Friday, May 9th, 2014

Employee Exception to the Anti-Kickback Statute

Are There Limitations on the Protection?

employment exception safe harbor regulationsBoth the Anti-Kickback Statute and the Stark Law contain exceptions that apply to employer/employee relationships.  The Stark Law exception contains several additional requirements and limitations that vary based on whether the physician is an employee of the group practice, or of a hospital or other provider of designated health services.

The Anti-Kickback Statute contains a fairly broadly worded exception which is generally been interpreted to exempt any remuneration made from an employer to a bona fide employee from consideration under the Anti-Kickback Statute’s criminal and civil prohibitions.  However, close examination of the wording of the exception, together with recent case law, may begin to demonstrate some limitations on the protection that is provided by the Anti-Kickback Statute’s employment exception.

The statutory exception under the Anti-Kickback Statue has been in place for over 35 years.  It is not a safe harbor under the safe harbor regulations but is directly included within the statute itself.  This has significant implications for the government’s burden of proof once a bona fide employee arrangement is established.  The Anti-Kickback Statute employment exception states that remuneration “shall not apply…to any amount paid by an employer to an employee for employment in the provision of covered items and services.”  The exception applies only to “bona fide employment relationships.”

Some of the limitations of the statutory exception may be included in the wording of the statutory provision itself.  The employment exception states that “remuneration” does not include amounts paid for “employment in the provision of covered items and services.”  On the other hand, a comparable safe harbor addressing employment arrangements that is included in the safe harbor regulation protects amounts paid to employee for “employment in the furnishing of” covered items and services.

Historically, most attorneys reviewing the employment exception have assumed that it provides complete insulation for employment arrangements.  This is contrary to statements from the Office of Inspector General which indicates that the scope of the exception may be more limited to payment for the provision of covered services rather than all payments.  Strictly interpreted, the statutory protection may not apply to payment that is made to an employee for administrative or other types of services that are not covered services under the Medicare and Medicaid programs.  This statutory language leaves open whether payment for services that are not covered services are included within the Anti-Kickback Statute’s exception.  There is no answer to this question as there has been no further interpretation or case law.  It is worthy to note however, that there could be limitations to the employee exception which should be considered when structuring arrangements; particularly when those arrangements could be abusive except for the fact that payment is being made to an employee.

Referral Fee Fine Despite Kickback Concerns – OIG Advisory Opinion 14-01

Friday, January 24th, 2014

Independent Placement Agency Fee By Senior House Approved By OIG

senior housing kickback oig opinionThe Office of Inspector General posted its first advisory opinion of the year this past Tuesday.  OIG Advisory Opinion No. 14-01 responds to a nonprofit senior housing and geriatric care provider’s question of whether it may pay an independent placement agency a fee for referring new residents to its facilities.  Despite concerns that the arrangement could potentially generate prohibited remuneration under the anti-kickback statute, the OIG opinion states it would not impose sanctions in connection with the arrangement.

Here’s the facts:

  • The senior care provider operates 11 senior residential communities, two skilled nursing facilities, and a management company.
  • The residential communities offer to their residents various services – including skilled nursing services (e.g. wound care) and help with daily living activities (e.g. housekeeping).
  • A Medicaid program pays for services provided to residents in three of the residential communities.  Other than this, the skilled nursing facilities are the only entities that provide federally reimbursed health care services to residents.
  • Two of the residential communities pay an independent placement agency for referring new residents.  The placement agency receives a fee for every referral – a percentage of the new resident’s charges for his or her initial month or two.
  • The placement agency is prohibited from referring, and the residential communities are prohibited from accepting, residents who are known to rely on Medicaid, Medicare, or other state or federal funding.
  • Neither of the residential communities provide services reimbursed by Medicare.

Although the two residential communities pay a placement fee for a resident who may in the future receive federally reimbursed services from one of the senior care provider entities (which would potentially be illegal remuneration under anti-kickback laws), the OIG advisory opinion indicates that this referral arrangement is fine because:

  1. The placement fee is calculated only considering initial rent and services.
  2. The contracts underlying the arrangement prohibit both placement and acceptance of potential residents who are known to rely on government funding for their health care.
  3. Neither of the residential communities using the referral arrangement provide services reimbursed by Medicare.
  4. The senior care provider does not track referrals or common residents or patients nor do they limit their residents’ choice of providers.

Please feel free to contact John Fisher, CHC, CCEP, in the Ruder Ware Health Care Industry Focus Group for more information.

Block Leasing of Group Practice Facilities – Anti-Kickback Statute Risks

Friday, October 18th, 2013

Block Leasing of Ancillary Services – Risks Under The Anti-Kickback Statute

Block Lease Anti-kickback StatutePhysician groups will often look for ways to share the expenses of excess capacity of high cost center ancillary services.  One approach that is sometimes considered is leasing the ancillary center to another physician group. 2009 changes to the Stark Regulations established new requirements for part-time leasing arrangements.  “Per use” arrangements are now prohibited under the Stark Law which applies when the ancillary service is categorized as a designated health service under the Stark Law.  Comments to the 2009 Stark Regulations maintained an opening to permit some  “block leasing” or “time sharing” arrangements.  CMS left open the parameters that must be met making compliance a bit tricky.  But block leasing arrangements are at least possible in theory under the Stark Law.  Until a few years back, block leasing arrangements were a relatively common way to permit separate physician groups to, in effect, share an ancillary service line. An OIG Advisory Opinion that was issued in 2010 cast a significant shadow on block leasing arrangements; including those arrangements that previously appeared to be legitimated under the Stark Law.  The 2010 Advisory Opinion refused to endorse a block leasing arrangement between two physician groups.

OIG Advisory Opinion 08-10, an oncology group asked the OIG to approve a block lease of  a radiation therapy facility to various different urology groups.  The block lease included all equipment, facility, and staff necessary for the urology group to provide radiation therapy services for their own patients.  The block leasing arrangements were structured in a manner suggested by CMS comments to be legitimate under the Stark Law.   Even though the arrangement likely complied with the Stark Law, the OIG raised concern and refused to endorse the arrangement under the Anti-Kickback Statute.  The OIG expressed concern that the block lease was nothing more than a  vehicle to permit the urology groups to profit from their referrals for radiation therapy services.  The OIG seemed to focus on many of the same factors that it had previously identified in joint venture arrangements.  For example, the OIG pointed to the fact that the oncology group was an existing provider of radiation therapy services and that the urology group was a natural referral source for those services.  Viewed from this angle, the OIG considered the block leasing arrangement to be nothing more than a cleaver way to compensate the urology group for its referrals.

The OIG noted that the opportunity for the urology groups to profit from radiation services amounted to “remuneration” under the anti-Kickback Statute.  The OIG looked past the fact that at least part of the arrangement complied with a safe harbor and instead focused on the overall “big picture” of the arrangement.

Advisory Opinion 08-10 related to a radiation therapy center.  The reasoning in 08-10 applies equally to all types of ancillary services.  Because the OIG’s concerns arise from the Anti-Kickback Statute, the concept is not limited to “designated health services” under the Stark Law.  Leasing any ancillary service and providing the opportunity for a physician group to profit from billings for that service are called into question by the opinion.

Can Private Health Care Be Carved Out of Anti-kickback Application?

Monday, June 13th, 2011

Anti-Kickback Statute Advisory Opinion Clarifies

Medicare Carve Out Does Not Insulate Payment Arrangement

The anti-kickback statute makes it a criminal offense knowingly and willfully to offer, pay, solicit, or receive any remuneration to induce or reward referrals of items or services reimbursable by a Federal health care program. Where remuneration is paid purposefully to induce or reward referrals of items or services payable by a Federal health care program, the anti-kickback statute is violated, By its terms, the statute ascribes criminal liability to parties on both sides of an impermissible “kickback” transaction, , For purposes of the anti-kickback statute, “remuneration” includes the transfer of anything of value, directly or indirectly, overtly or covertly, in cash or in kind.
Clients often ask whether the Anti-kickback Statute covers payment arrangements that do not involve a Federal Health Care program.  In other words, the question is whether Federal Health Program beneficiaries can be “carved out” of the payment arrangement so that the Anti-kickback Statute is not applicable to the proposed financial arrangement.  The answer to this question is…..wait for it….no.  You cannot get around the Anti-kickback Statute by carving out Federal Health Care Programs from your payment arrangement.

This was confirmed by the Office of Inspector General in a recent Advisory Opinion regarding an arrangement between a DME Supplier of continuous positive airway pressure blower units, masks and supplies and an Independent Diagnostic Testing Facility.  The arrangement originally was structured to “carve out” Federal Health Care beneficiaries from the payment arrangement.  The OIG rather clearly found that “carve out” arrangements do not protect and arrangement from scrutiny under the Anti-kickback Statute.  The OIG’s wording best describes the reasoning behind this finding:

The Existing Arrangement covers services provided to non-Federally insured patients only,. Thus, as a threshold matter, we must address whether the “carve out” of Federal business is dispositive of the question of whether the Existing Arrangement implicates the anti-kickback statute, It is not. The OIG has a long-standing concern about arrangements pursuant to which parties “carve out” Federal health care program beneficiaries or business generated by Federal health care programs from otherwise questionable financial arrangements, Such arrangements implicate and may violate the anti-kickback statute by disguising remuneration for Federal business through the payment of amounts purportedly related to non-Federal business. Here, IDTFs participating in the Existing Arrangement may still influence referrals of Federal health care program beneficiaries to the Requestor for DME. Thus, we cannot conclude that there would be no nexus between the Requestor’s payments to the IDTF for services provided to non-Federal patients and referrals to the Requestor of Federally insured patients.

OIG Advisory Opinion Addresses Medicare Carve-Outs and Antit-kickback Statute

Monday, June 6th, 2011

Anti-Kickback Statute Advisory Opinion Clarifies

Medicare Carve Out Does Not Insulate Payment Arrangement

The anti-kickback statute makes it a criminal offense knowingly and willfully to offer, pay, solicit, or receive any remuneration to induce or reward referrals of items or services reimbursable by a Federal health care program. Where remuneration is paid purposefully to induce or reward referrals of items or services payable by a Federal health care program, the anti-kickback statute is violated, By its terms, the statute ascribes criminal liability to parties on both sides of an impermissible “kickback” transaction.  For purposes of the anti-kickback statute, “remuneration” includes the transfer of anything of value, directly or indirectly, overtly or covertly, in cash or in kind.

Clients often ask whether the Anti-kickback Statute covers payment arrangements that do not involve a Federal Health Care program.  In other words, the question is whether Federal Health Program beneficiaries can be “carved out” of the payment arrangement so that the Anti-kickback Statute is not applicable to the proposed financial arrangement.  The answer to this question is…..wait for it….no.  You cannot get around the Anti-kickback Statute by carving out Federal Health Care Programs from your payment arrangement.

 This was confirmed by the Office of Inspector General in a recent Advisory Opinion regarding an arrangement between a DME Supplier of continuous positive airway pressure blower units, masks and supplies and an Independent Diagnostic Testing Facility.  The arrangement originally was structured to “carve out” Federal Health Care beneficiaries from the payment arrangement.  The OIG rather clearly found that “carve out” arrangements do not protect and arrangement from scrutiny under the Anti-kickback Statute.  The OIG’s wording best describes the reasoning behind this finding:

 The Existing Arrangement covers services provided to non-Federally insured patients only,. Thus, as a threshold matter, we must address whether the “carve out” of Federal business is dispositive of the question of whether the Existing Arrangement implicates the anti-kickback statute, It is not. The OIG has a long-standing concern about arrangements pursuant to which parties “carve out” Federal health care program beneficiaries or business generated by Federal health care programs from otherwise questionable financial arrangements, Such arrangements implicate and may violate the anti-kickback statute by disguising remuneration for Federal business through the payment of amounts purportedly related to non-Federal business. Here, IDTFs participating in the Existing Arrangement may still influence referrals of Federal health care program beneficiaries to the Requestor for DME. Thus, we cannot conclude that there would be no nexus between the Requestor’s payments to the IDTF for services provided to non-Federal patients and referrals to the Requestor of Federally insured patients.

OIG Upholds Patient Financial Assistance Program

Tuesday, May 26th, 2009

Patient Financial Assistance Program OIG Advisory Opinion

On May 18, 2009, the Office of Inspector General issued an advisory opinion in which it found that a tax-exempt hospital’s financial assistance program for patients requiring certain therapy management services and advanced diagnostic testing.  The primary focus of the program was to assist HIV-positive patients who require phenotype and tropism testing and colorectal cancer patients who require KRAS and Epidermal Growth Factor Receptor testing.

Funding for the program is obtained from private individual donors, corporations and foundation.  Donors include drug manufacturers, pharmacies, dispensers and suppliers ot the types of products and services received by patients who arre beneficiaries of the program.  Donations are placed in a various funds that is administered by the tax-exempt hospital.  Donors may provide unrestricted donations or may earmark contributions to one of the funds.  However, donations may not be designated for patients using a specific test or testing provider.  Donors are not permitted to exert direct or indirect influence over the program and the hospital maintain absolute discretion over the use of contributions to the funds.

Additionally, the hospital does not provide individual patient information to the donors but does provide information concerning the aggregate number of donors that qualify for assistance from each fund.  Additionally, the patients are not provided information concerning the donors except for general information that is required to be publicly provided in connection with Internal Revenue filings in support of the hospital’s tax-exempt status.

Patients that require care that is funded by the program must apply for coverage.  Requests are taken on a first-come, first-serve basis and patients receive available funding upon meeting objective eligibility standards involving financial necessity and diagnosis with HIV or colorectal cancer, among other factors.  Decisions on coverage are not based on the identity of the provider, ordering physician, supplier, service or product being used in connection with the treatment.

Other details of the program are laid out in the advisory opinion.

Based on the program details provided by the hospital, the OIG concluded that it would not pursue the arrangement under the Anti-kickback Statute.  The OIG addressed two potential areas of the program that could be considered to be remuneration intended to induce referrals; (1) the donations made by the donors, and (2) the benefit provided to the patient through participation in the program.

The OIG stated that long-standing guidance makes it permissible for industry stakeholders to contributed to the “health care safety net” for financially needy patients if the contribution is to an independent, bona fide charitable assistance program, as long as the program is properly structured to avoid inducement issues.  The OIG goes on to describe several elements that constitute a proper contribution program including:

– Independent decisions are made by the charitable organization without influence by the industry donors.
– The operator of the program is an independent charitable organization with autonomous decision-making power over the use of the funds.
– Donors interests are not taken into account when making decisions regarding use of the donated funds.
– Neither the applicants choice of provider, practitioner, supplier, service or product nor the identity of the referring party is taken into account when making program determinations.
– Tests and services provided with program funds are consistent with widely recognized clinical standards.

In short, the OIG concluded that the program provided sufficient objective insulation between the donor, patients, and determinations as to the use of the funds so that the donations would not be considered to be referral inducements.

The OIG also analyzed whether benefits provided to patients could be considered as inducement referral because of the chance that the benefits would induce patients to use the services of the hospital.  The OIG concluded that the program was a legitimate use of the hospital’s tax-exempt resources to fulfill its charitable mission.  The OIG also pointed to the objective standards that were developed to guide program administration.

Tax-exempt hospitals are often looking for means to provide beneficial assistance to needy patients in fulfillment of their tax-exempt and charitable purposes.  At the same time, charitable hospitals are under increased financial pressures due to economic conditions, increased regulation and decreased reimbursement.  The OIG decision is noteworthy because it provides a roadmap for tax-exempt providers who may be looking for ways to fulfill their charitable purposes in a manner that does not place additional financial burdens on their operating revenues.  Hospitals are encouraged to look at the details of this recent advisory opinion if they are considering commencing a similar program.

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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