The False Claims Act – Application of the Lincoln Law to the Health Care Industry

 When Congress originally passed the False Claims Act (31 USC §§ 3729-3733), no one had the health care system in mind.  The False Claims Act was also commonly referred to as the “Lincoln Law”.  The original law was focused on unscrupulous vendors who provided overpriced and often faulty supplies to the military during the Civil War.

The law was unique in several ways; not least of which was the creation of “qui tam” rights.  Qui tam provisions permit individuals to bring suit alleging false claims and to retain a portion of the award.  The amount of potential award available to a qui tam claimant depends on whether the government chooses to take over the case after it is brought.

The False Claims Act was strengthened in 1986 in response to some of the much publicized $1,000 toilet seats and other abuses with respect to companies supplying the United States military.  The 1986 amendments to the False Claims Act provided for treble damages plus civil penalties of between $5,000 and $11,000 per claim.  These legislative changes were intended to add real incentive for “qui tam” litigants to bring fraud claims.

The health care industry was never the real target of the False Claims Act.  In fact, when the original “Lincoln Law” was passed in the 1860’s, there was no federal health care program in existence.  From the inception of the False Claims Act through the 1986 amendments, the primary target had been the suppliers to the defense industry.  The defense industry generally makes claims on a monthly or other periodic basis for large amounts of supplies.  Although the 1986 amendments added substantial penalties for making false claims, the impact on the defense industry does not come close to matching the impact on health care providers.

In health care, a single hospital may make hundreds of claims to the federal government per day.  False claim allegations can cover a number of years, greatly increasing the number and value of claims that may be at issue.  When treble damages plus $5,000 to $11,000 per claim are applied on top of the actual amount of a “fraudulent” claim, the obligation amount can become staggering.

The extension of the False Claims Act liability to areas such as Stark Law and Anti-Kickback Statute liability indicate how extreme the sanctions can be.  By way of example, take one physician who is determined to have been compensated at significantly over fair market value.  Assume that the excessive compensation creates a violation of the Anti-Kickback Statute and the Stark Law.  The Affordable Care Act clarified that claims made in violation of these laws create a cause of action under the False Claims Act.  Potential damages would be three times the total value of claims attributable to services of the overpaid physician, plus between $5,000 and $11,000 per claim.  You can see that the potential damages would cause grave financial impact on the hospital.  This is the type of thing that keeps compliance officers awake at night.

Even though the False Claims Act was not originally designed to target the health care industry, there does not seem to be any momentum toward making legislative.  To the contrary, the government is quite content to leave these disproportionate penalties in place as part of its effort to reduce cost of health care (and to generate additional revenues) by assessing astronomical fines against health care providers and to hold these penalties over their heads to force health care providers to take extreme actions to prevent compliance problems.  The government is taking a “return on investment” approach to health care fraud enforcement.  The False Claims Act allows the government to put its thumb on the scale in the “return on investment” game.  The qui tam provisions provide the government with “quasi agents” who may be disgruntled employees or others who can scout out potential claims, bring them to the governments attention, and take a piece of the financial reward.

Providers have only one real way to reduce the disproportionate impact of the False Claims Act on their operations.  This is to create an effective compliance program that proactively detects problems so they can be addressed and corrected before they create excessive risk.  Compliance programs are an outgrowth of the federal sentencing guidelines that permit reduced corporate penalties for fraud if an “effective” compliance program will actually reduce the risk of a violation occurring or depending because it forces the organization to proactively look for compliance problems and correct them before they become insurmountable.  An effective compliance program will also include regular training to staff which also reduces the risk of compliance problems.

The Affordable Care Act made compliance programs mandatory for most health care providers.  Nursing homes are the first to be effected in 2013.  Other types of providers will subject to mandatory compliance programs as regulations are rolled out over the next few years.  Providers will be required to maintain an effective compliance program as a condition of participation in the Medicare program.  It is strongly recommended that all providers begin development of compliance programs now.  It will take time to tailor compliance programs to fit the specific risk areas associated with your business.  You will be required to certify not only that you have established a compliance program, but that the program is effective.

OIG Fraud and Abuse / HEAT Program Videos

The Office of Inspector General is posting a series of video presentation on the HEAT program.  Topics covered include general information on health care fraud laws, the Anti-kickback Statute, the False Claims Act and dealing with investigations.  The OIG will be posting a total of 11 videos and audio podcasts that are part of the award-winning Health Care Fraud Prevention and Enforcement Action Team (HEAT) Provider Compliance Training initiative. The first educational presentation was posted on the OIG website the week of December 5.  New posting will be made over the next few months.

As of the time of this post, the OIG page includes 4 new videos.  One is an introduction to the new video program.  Other current videos cover the False Claims Act, Anti-kickback Statute and Program Exclusions.

You can access the OIG video web site here:  OIG Fraud and Abuse Videos

Through the OIG video presentation page, you can also access a series of 16 videos covering a variety of compliance related topics including:

Diagnostic Imaging – Medicare Requirements Radiology Test Coverage

We often get questions regarding the conditions of coverage for non-hospital (radiology group) coverage of diagnostic radiology services. Most questions involve the level of supervision that is required under Medicare rules and the requirements that a treating physician order the applicable test. Oftentimes, these questions are tied to issues relative to the Physician Self-Referral (Stark law) exception for diagnostic radiology services that are performed following a consultation request from another health care provider.

 There are three core requirements for a radiology test to be covered under Medicare. The test must be properly ordered by a treating physician (with limited exceptions), the test must be performed by an authorized supplier, and the test must be performed under the proper level of physician supervision. This article will briefly cover all three of the prerequisites to coverage of diagnostic radiology tests. The requirements described in this article apply to outpatient tests. Tests ordered in the hospital context are subject to slightly different rules and beyond the scope of this article.

 Who may order diagnostic radiology tests?

 he Medicare reimbursement rules have strict standards for determining who is authorized to order a diagnostic radiology test. The rules are different depending upon whether the provider is located in a hospital or in a non-hospital setting such as an independent diagnostic testing facility or physician’s office.

 Generally, in a non-hospital setting, a diagnostic radiology test must be ordered by the treating physician. The treating physician rule is located in the Medicare regulations and requires that the diagnostic test be ordered by the physician (or in certain circumstances a non-physician practitioner) who furnishes a consultation or treats a beneficiary for a specific medical problem and who uses the results of the diagnostic radiology test in the management of the patient’s medical problem.

Generally, the radiologist performing the test is not permitted to order a diagnostic radiology test. There are certain exceptions to the treating physician rule which were described in Medicare Transmittal 80. Transmittal 80 describes limited circumstances where a radiologist is permitted to order a diagnostic test and still receive payment for the technical component under Medicare rules.

A radiologist is authorized to order a diagnostic mammography test based upon the results of an initial screening examination. Where the treating physician cannot be reached and this is documented in the patient’s chart , the testing facility may furnish additional diagnostic tests if the interpreting radiologist at the testing facility documents that there are abnormal results with the test originally ordered by the treating physician and that an additional test is medically necessary. In order to rely on this exception, the fact that the treating physician was not available and that additional tests were medically necessary should be well documented in the chart. This exception requires the results of the test to be communicated to the treating physician and used by the treating physician in treating the patient’s medical condition.

Where medically appropriate, the interpreting radiologist is also permitted to make determinations regarding the parameters of the diagnostic test contained in the initial order from the treating physician. In cases where there is a clear and obvious error in the initial order, the interpreting physician may make appropriate modifications. The intervening physician may also cancel orders based upon the patient’s medical condition at the time of the diagnostic tests.

Except for the limited circumstances described above and included in Transmittal 80, the radiologist must always rely upon the order that is made by the treating physician and may not independently order diagnostic radiology tests.

Who Is Qualified To Perform the Radiology Test?

The second major requirement for the coverage radiology services in a non-hospital setting is that only a qualified provider of the services may be reimbursed. Qualified providers include physicians, group practices of physicians, approved portable x-ray suppliers, independent diagnostic test testing facilities, nurse practitioners or clinical nurse specialists as authorized under state law, FDA certified mammography facilities, clinical psychologists for certain types of tests, qualified audiologists, pathology slide preparation facilities, clinical laboratories for certain tests, and radiation therapy centers.

Level of Physician Supervision For Diagnostic Imaging Tests

The last of the major requirements for coverage of radiology services is the level of physician supervision that is required given the specific test being performed. Radiology services must be provided under at least a general level physician supervision. Additionally, certain tests must be provided under direct or personal supervision, which require higher levels of physician presence and involvement. Failure to provide the appropriate level of physician supervision and to document the supervision in the chart will result in loss of coverage under Medicare and Medicaid. Any claims submitted in spite of not meeting the supervision requirements will be considered to be not reasonable or necessary by Centers for Medicare & Medicaid.

There are a few exceptions from the physician supervision requirements for certain limited types of tests. It must be kept in mind however that these exceptions are Medicare only exceptions and there may be other federal or state laws that apply to require physician supervision. Tests that are excepted from physician supervision requirements include diagnostic mammography procedures, diagnostic tests performed by a qualified audiologist and certain psychological tests.

You must determine whether general, direct or personal supervision is required in order to bill the applicable diagnostic radiology procedure. Failure to meet the appropriate supervision requirement will lead to loss of reimbursement. This can also be an area of potential civil money penalty exposure if billings are made in spite of there not having been appropriate supervision. Thus, the supervision requirement is a significant compliance issue for medical practices who must establish and maintain appropriate policies and procedures regarding supervision of various levels of radiology diagnostic tests.

Each level of supervision has very specific requirements that must be met. For this reason it is important to know which level of supervision is required for the specific test being performed. General supervision requires that the procedure be furnished under the physicians overall direction in control. Physician presence is not necessarily required during the performance of procedures that require general supervision. Under general supervision the physician is responsible for general supervision and training of support personnel who are actually performing the test services. The physician is also responsible for maintaining the necessary equipment and supplies for the safe operation of the diagnostic test.

Direct and personal supervision each require higher levels of physician involvement and generally require some level of physician presence throughout the performance of the test. Direct supervision in the office setting requires that the physician be present in the office suite and immediately available to furnish assistance. Physical presence in the office suite must be maintained throughout the entire performance of the procedure. The physician is not required to be physically present in the room where the procedure is performed unless there is a need for the physician’s presence due to some problem that arises during the course of performing the test.

The highest level of physician supervision is personal supervision. Personal supervision requires a physician to actually be present in the room during the performance of the procedure. Personal supervision generally involves diagnostic tests with invasive or otherwise dangerous aspects. One significant example of a test that requires personal supervision is contrast studies.

It is important to know what level of supervision is required for the test that is being performed. The level of supervision that is required for each test is included in the Physician Relative Value Fee Schedule. The CMS web site includes a spreadsheet that designates the level of supervision that is required for a variety of services including diagnostic imaging services. The spreadsheet includes a column for “physician supervision.” The column indicates a numerical value with “1″ indicating general supervision, “2″ indicating direct supervision and “3″ indicating personal supervision.

Physician practices and compliance officers should be certain that their policies are in line with CMS requirements for coverage of diagnostic radiology tests. Radiology groups must be certain that the tests they are charged with performing meet each of the requirements stated above. Radiology groups need to be certain that the test is ordered by the treating physician unless inapplicable exception is present, and that the appropriate level of physician supervision is met for the type of test that is being performed.

For more information regarding the requirements for radiology services and other legal issues that affect radiology practices and providers, please contact John Fisher, member of Ruder Ware’s Health Care Focus Team.

John Fisher is an experienced health care attorney who has practiced extensively in the health care industry providing counsel to a wide variety of health care providers. John has counseled health care clients, including hospitals, physicians, and health systems on health care regulatory compliance, contracts, mergers and acquisitions, joint ventures, recruitment and compensation issues, integrated network development, and Medicare and Medicaid reimbursement. John is knowledgeable on the laws and regulations that affect financial relationships between health care providers including the Stark Law, Anti-kickback Statute and safe harbor regulations, fraud and abuse, antitrust and exempt organization tax issues.

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.

Home Health Care Issues In OIG 2011 Work Plan

We are a little late at reporting this, but a couple of months back, the OIG released its Work Plan for Fiscal Year 2011. This publication provides brief descriptions of activities that the Office of Inspector General (OIG) plans to initiate or continue with respect to the programs and operations of the Department of Health & Human Services (HHS) in fiscal year (FY) 2011.  I will be posting several smaller articles of interest as a continue my more detailed review of the OIG Work Plan for 2011.  You can access the entire 2011 OIG Work Plan at the following link:  http://oig.hhs.gov/publications/workplan/2011/

This particular article will focus on some of the 2011 Work Plan issues that apply to home health providers.  The 2011 OIG Work Plan identified several key areas of focus for home health agencies.

Part B Payments for Home Health Beneficiaries

The OIG will be reviewing Part B payments for services and medical supplies provided to beneficiaries in home health episodes. Most services and non routine medical supplies furnished to Medicare beneficiaries during home health episodes are included in the home health agency (HHA) prospective payments. Normally payment for  home health services furnished under a plan of care of an HHA are made to the home health agency.  This includes payment for services and supplies provided under arrangements by outside suppliers. The OIG will be focusing on the identification of  Part B payments to outside suppliers for services and medical supplies that are included in the HHA prospective payment.  OIG will be conducting examinations concerning the adequacy of controls that the home health agency established to prevent inappropriate Part B payments for services and medical supplies.

Claims for Medicare Home Health Resource Groups

In order to receive home health services a patient must meet certain coverage requirements including:  (1) the patient must be homebound; (2) the patient must require intermittent skilled nursing care, physical or speech therapy, or occupational therapy; (3) the patient must be under the care of a physician; and (4) have a physician established and periodically reviewed plan of care.  The Work Plan states that the OIG will continue to perform reviews to assure compliance with these conditions of coverage.

Medicare reimburses for home health services on a prospective basis based on categories that are grouped based on the patient’s need for care and resources.  These categories are referred to as Home Health Resource Groups.   HHRGs are assigned based on an assessment of each patient.  The OIG  Work Plan will target the assignment of HHRG codes assigned to patients.

Home Health Agency Outcome and Assessment Information Set Data

Federal regulations require home health agencies to conduct  comprehensive patient assessments.  These examinations must include OASIS data items which must also be submitted to CMS.  The OASIS data is used by CMS in the home health prospective payment system. OASIS quality data is also used in CMS’ Home Health Compare web site.  The OASS data contains information on the performance of the home health agency in assisting patients to regain and maintain functioning and the activities involved with daily living.  The 2011 Work Plan states that the OIG will be reviewing CMS’s process to assure that the data being reported by home health agencies is complete and accurate.

PPS System Controls For Home Health Agencies

The OIG expresses concern with the rapid increase in home health expenditures since PPS was implemented in 2000. As a result of this concern, the OIG will be examining many aspects of the home health PPS.  Some of the areas specifically mentioned include whether the billing is for an the appropriate location, an analysis of trends in home health activities, visit frequency, ownership arrangements and arrangements with other providers and facilities.

Examination of Home Health Profit Margins

Again stating a concern over the growth in home health spending since PPS was implemented, the OIG states an intention to examine home health profitability. The OIG will examine cost report data to determine trends in profitability of home health providers since home health PPS was implemented.

Medicare Home Health Agency Enrollment

The OIG highlights DME suppliers, that it claims are often associated with home health agencies, who have been found to have provided innacurate information in their enrollment documentation.  The OIG states that it will be reviewed CMS and state agency program integrity efforts during the enrollment process to be certain that complete and accurate applications are provided.