Physician Law

Office of Inspector General pOIG Guidance on Physician-owned Distributorships "PODs"

Todd Rodriguez — Tue, 30 Apr 2013 12:15:49 -0500

On March 26, 2013, the Office of Inspector General published much-awaited guidance on physician-owned medical device distributorships (commonly known as "PODs") in the form of a Special Fraud Alert. The OIG makes no bones about where it stands on PODs which it describes as "physician-owned entities that derive revenue from selling, or arranging for the sale of, implantable medical devices ordered by their physician-owners for use in procedures the physician-owners perform on their own patients at hospitals or ambulatory surgical centers."

The Fraud Alert describes a number of characteristics which, according to the OIG, make POD arrangements potentially suspect under the federal anti-kickback statute. These include the following:

1. Selection of investors because they are in a position to generate substantial business for the entity.

2. Requiring investors who cease practicing in the service area to divest their ownership interests.

3. Distributing extraordinary returns on investment compared to the level of risk involved.

4. Choice of brand and the type of device may be made or strongly influenced by the physician.

5. The size of the investment offered to each physician varies with the expected or actual volume or value of devices used by the physician.

6. Distributions are not made in proportion to ownership interest, or physician-owners pay different prices for their ownership interests, because of the expected or actual volume or value of devices used by the physicians.

7. Physician-owners condition their referrals to hospitals or ASCs on their purchase of the POD’s devices through coercion or promises, for example, by stating or implying they will perform surgeries or refer patients elsewhere if a hospital or an ASC does not purchase devices from the POD, by promising or implying they will move surgeries to the hospital or ASC if it purchases devices from the POD, or by requiring a hospital or an ASC to enter into an exclusive purchase arrangement with the POD.

8. Physician-owners are required, pressured, or actively encouraged to refer, recommend, or arrange for the purchase of the devices sold by the POD or, conversely, are threatened with, or experience, negative repercussions (e.g., decreased distributions, required divestiture) for failing to use the POD’s devices for their patients.

9. The POD retains the right to repurchase a physician-owner’s interest for the physician’s failure or inability (through relocation, retirement, or otherwise) to refer, recommend, or arrange for the purchase of the POD’s devices.

10. The POD is a shell entity that does not conduct appropriate product evaluations, maintain or manage sufficient inventory in its own facility, or employ or otherwise contract with personnel necessary for operations.

11. The POD does not maintain continuous oversight of all distribution functions.

12. When a hospital or an ASC requires physicians to disclose conflicts of interest, the POD’s physician-owners either fail to inform the hospital or ASC of, or actively conceal through misrepresentations, their ownership interest in the POD.

13. POD exclusively serves its physician-owners’ patient base.

14. Physician-owners are few in number, such that the volume or value of a particular physician-owner’s recommendations or referrals closely correlates to that physician-owner’s return on investment.

15. Physician-owners alter their medical practice after or shortly before investing in the POD.

Although the OIG notes that not all PODs will necessarily be illegal under the statute, it believes they are "inherently suspect".

President Proposes Eliminating Stark In-Office Ancillary Services Exception For Therapy and Advanced Imaging

Todd Rodriguez — Mon, 29 Apr 2013 12:37:51 -0500

In what would undoubtedly be a devastating blow to many medical practices that rely on the Stark in-office ancillary services exception (which allows physicians to refer within their practices for Stark services), President Obama's proposed FY 2014 would seek to eliminate the exception for physical therapy, radiation therapy and advanced imaging such as CT and MRI. The budget suggests that the exception may still apply for those providers that meet certain "accountability standards" established by the Secretary of the Department of Health and Human Services. The proposed budget offers no further detail on what these accountability standards might be.

Although passing budgets has not been much of a priority in Washington for the last few years, this proposal clearly demonstrates that these services in the physician office setting are targeted for extinction. Practices that offer these services should begin making contingency plans now to divest or restructure in the event that the exception is eliminated.

FTC Sues to Block Hospital Acquisition of Medical Practice

Todd Rodriguez — Fri, 29 Mar 2013 10:30:17 -0500

Adding an interesting wrinkle to an already complex environment, the Federal Trade Commission filed a suit this month to block an Idaho hospital from acquiring a physician practice. According to an article on thomsonreuters.com, the FTC and the IDAHO Attorney General have filed an antitrust complaint seeking to block St. Luke's Health System's acquisition of Saltzer Medical Group, a large multi-specialty practice. The FTC's alleges that the acquisition would result in St. Luke's having a 60% share of the local primary care market. This most recent foray into the physician/hospital acquisition arena suggests that a truly integrated delivery model may simply not be possible in some markets.

Budget Sequester Brings Bad News for Physicians

Todd Rodriguez — Wed, 13 Mar 2013 08:35:40 -0500

Unless you've been living under a rock for the last several weeks, you are likely well aware of the budget sequester that took effect on March 1. The sequestration requires "across the board" cuts in federal spending. That, in and of itself, may not be such a bad news. However, what you may not be aware of is that the sequestration will directly impact physician reimbursement. Specifically, according to a recent article in OrthopedicsToday, the sequestration includes a 2% cut in Medicare reimbursement for physicians. At a time when physicians are struggling to make ends meet, this is just more bad news from the feds.

Hospitals Should Think Outside the Box When Employing Physicians

Todd Rodriguez — Wed, 27 Feb 2013 12:46:08 -0500

Over the last several years, hospitals have been acquiring specialty physician practices in response to a number of market forces. However, these types of acquisitions are not new to the American health care system and those who have been around long enough know that these arrangements can and badly. In my experience, one of the primary reasons that these combinations fail is that traditional hospital/physician practice acquisition/employment transactions tend to focus on short-term concerns and protections and as a result fail to build a strong foundation for a long-term successful relationship. Under a typical acquisition/employment model, the physician is engaged for the sole purpose of providing clinical services and is insulated from input into the management and operations of the post-acquisition practice. This has the effect of removing the physician from one of the key areas where they can provide significant value: participation in operational cost savings.

I have long been of the mind that physicians are in the best position to control healthcare costs since they are the key decision-makers when it comes to any given course of treatment. Any model which insulates physicians from participation in practice management is unlikely to experience any meaningful cost savings in the long run. If you are a hospital acquiring medical practices or a physician contemplating selling it to a hospital, consider that both hospitals and physicians must seek to move beyond traditional models built upon an us-against-them mentality to one which capitalizes on the strengths of both parties to the relationship. Hospitals interested in being in the physician business for any meaningful length of time should seek to develop an organizational structure that fosters an ownership mentality and a commitment to achieving collaborative organizational goals.

CMS Releases Final "Sunshine Act" Regulations

Todd Rodriguez — Tue, 26 Feb 2013 14:43:45 -0500

Earlier this month, the Centers for Medicare and Medicaid Services (CMS) released final regulations implementing the federal Physician Payment Sunshine Act contained in the Federal Accountable Care Act. Among other things, the Sunshine Act requires manufacturers of drugs, biologics, devices and medical supplies to track and report payments (including anything of value) made to physicians. As many physicians receive compensation from these types of manufacturers for consulting, teaching and the like, physicians should understand that the payments they receive are likely to become matters of public record. Regardless of the legalities of such payments (which are, of course, subject to various kickback and fee splitting laws), when entering into these types of arrangements, physicians should consider whether disclosure of such payments could have a negative implications from a public relations standpoint. The regulations can be seen here: https://www.federalregister.gov/articles/2013/02/08/2013-02572/medicare-medicaid-childrens-health-insurance-programs-transparency-reports-and-reporting-of

DOJ Announces Record Fraud Settlement Against Physician

Todd Rodriguez — Tue, 12 Feb 2013 10:24:23 -0500

Yesterday the U.S. Department of Justice announced that it has entered into a $26M False Claims settlement with a dermatologist in Florida. According to the DOJ, this is one of the largest False Claims settlements against an individual in history. The physician was accused of allegedly accepting kickbacks from a pathology lab and billing for medically unnecessary services.

2012 is Record Year for Fraud Recovery

Todd Rodriguez — Mon, 11 Feb 2013 19:08:17 -0500

The Obama administration announced today that as a result of increased federal health care fraud and abuse enforcement efforts, the federal government recovered $4.2 billion in 2012, setting a new record. According to the Department of Health and Human Services, for every $1 spent on enforcement efforts, they recouped $7.90. For more on the topic see "U.S. recovers $4.2 billion from healthcare fraud probes: report" on reuters.com.

State's "More Stringent" Stark Law Restrictions Upheld By Court

Dave Restaino — Wed, 30 Jan 2013 17:04:37 -0500

Today I am focusing on the self-referral ban under the federal Stark laws. In particular, a recent case – Fresenius Medical Care Holdings, Inc. v. Tucker (Dkt. No. 4:03-cv-00411-SPM-GRJ (Jan. 10, 2013, 11^th Cir.)) – discussed the interplay between those laws and a State’s attempt to impose more stringent requirements.

The court first focused on two exceptions to the Stark laws’ ban on physician self-referrals. These exemptions concern clinical lab services for end-stage renal disease (ESRD), as well as certain lab services performed by a company with stockholder equity in excess of $75 million.

A Florida statute subsequently narrowed these exemptions, and that statutory change impacted a Florida business’ ability to make referrals.

The plaintiff argued that Congress had crafted the Stark laws’ exemptions in order to benefit Medicare and Medicaid recipients and, as such, intended to provided explicit benefits. That argument was rejected.

The circuit court found that federal law permitted State laws to be more stringent, and that this was such a situation. Moreover, the court was not convinced that the plaintiff’s business was stifled by the State rules and, instead, found that the impact to the business was marginal.

It remains to be seen whether or not this ruling will encourage States to enact more stringent restrictions and make it even more difficult for businesses to comply with a non-uniform set of rules.

Physician Unions - An Unintended Consequence of Health Reform?

Todd Rodriguez — Wed, 30 Jan 2013 16:47:04 -0500

I imagine that few physicians contemplated being part of organized labor when they enrolled in medical school but as more and more physicians make the leap from private practice to hospital employment, perhaps large-scale unionization of the physician workforce could become a reality. According to an article by David J. Leffell today on WSJ.com, the notion is perhaps not as far-fetched as we might have thought. Mr. Leffell notes that one of the side-effects of the shift by physicians to employee status will be the right to engage in collective bargaining. This presumably would also entail the right to strike -- likely not the ideal model for the delivery of quality care. The implications of physician unionization are so monumental that one must wonder whether this possibility is an unintended consequence or an intended result.

Health and Human Services Releases New HIPAA Regulations

Todd Rodriguez — Mon, 28 Jan 2013 10:28:50 -0500

Last week the U.S. Department of Health and Human Services (HHS) released final regulations modifying existing HIPAA enforcement, privacy and security regulations. Although a number of the changes merely serve as clarification of existing regulations, the modifications impose a number of new requirements on covered entities and business associates.

Some of the important issues addressed in the new rules include the following:

Clarification of the definition of a privacy breach;
Adoption of risk assessment factors to be taken into consideration in conducting a breach analysis;
Modifications to the limitations on the use and disclosure of protected health information for marketing and fundraising purposes;
Modifications regarding business associates including changes to the definition of a business associates and when business associates may held directly liable for violations;
Modifications to the required terms in business associate agreements; and
Modifications that covered entities are required to make to their Notices of Privacy Practices.

The new regulations take effect on March 26, 2013 and covered entities and business associates have until September 23, 2013 to comply. The regs were published in the Federal Register on January , 2013 and can be viewed here Federal Register.

Check back for more detail on the required business associates and NPP changes.

OIG Offers Guidance on Cardiology Co-Management Agreement

Todd Rodriguez — Tue, 08 Jan 2013 17:05:56 -0500

This week the Office of Inspector General published an interesting Advisory Opinion (AO 12-22) dealing with a cardiology co-management agreement between a hospital and a private cardiology group practice.

Under the arrangement, the hospital would compensate the physicians for certain management, oversight, strategic planning and medical direction services in connection with the hospital’s four catheterization labs.

The Compensation payable to the physicians would consist of a fixed guaranteed amount and potential performance bonuses based on achieving specific patient satisfaction, quality and cost-saving targets.

Based on a number of safeguards within the arrangement, including that the bonus criteria were developed by a committee including providers outside the cardiology group and that the group's performance and compensation would be reviewed by an independent consultant, the OIG stated that it would not impose sanctions on the requesting parties.

Although the Advisory Opinion is fact specific, as one of the first opinions dealing with co-management arrangements, it offers providers significant insight into how the OIG is likely to view these types of arrangements going forward.

OIG Announces 2013 Priorities

Dave Restaino — Thu, 03 Jan 2013 13:37:21 -0500

Now that the new year is upon us, today’s post will look at the Department of Health and Human Services’ Office of Inspector General (OIG), in particular, OIG’s priorities for 2013. According to OIG’s Fiscal Year 2013 Work Plan, it will be focusing upon a number of topics of interest – including some items not addressed last year.

OIG’s planned reviews of Medicare Part A and Part B will include:

● Billing patterns for nursing home stays.

● Accreditation of medical equipment suppliers, with a particular focus on quality standards.

● Claims submitted by medical equipment suppliers for lower limb prosthetics, power mobility devices and vacuum erection systems.

● Replacement of medical equipment, especially the frequency and necessity of that replacement.

● Independent physical therapists’ claims and whether the claims are reasonable, medically necessary and properly documented.

● Billing for electrodiagnostic testing.

● Ensuring that payments are not made for alien beneficiaries who were unlawfully present in the United States.

● Reviewing payments for Part A and Part B services to avoid claims starting after a beneficiary has died.

Special attention should be paid to these areas in the coming year given OIG's additional scrutiny.

Eleventh Hour and No "Doc Fix" - What Else is New?

Todd Rodriguez — Mon, 31 Dec 2012 15:37:38 -0500

It appears to be business as usual on Capitol Hill this New Year's Eve. Once again, Congress has failed to fix the sustainable growth rate formula in the Medicare physician fee schedule. Unless at least a temporary "patch" is put in place to keep Medicare physician payment rates steady, physicians will experience a 27% cut starting January 1, 2013.

Year after year, Congress has elected to put a one-year patch in place to forestall these drastics cuts and very often negotiations over even a temporary fix go to the eleventh hour. While another temporary patch has been part of the ongoing "fiscal cliff" negotiations in Congress, no agreement has been reached yet on the cliff, so it appears that a "doc fix" may have fallen it by the wayside. However, according to rollcall.com, both Senate Majority Whip Richard Durbin and Senate Finance Chairman Max Baucus still believe a doc fix will be in any agreement ultimately reached on the fiscal cliff. Keep your fingers crossed for a Happy New Year.

Don't Expect Hospital Employment to be Free from Economic Pressures

Todd Rodriguez — Thu, 27 Dec 2012 09:55:01 -0500

Finding it increasingly difficult to remain profitable in private practice, many physicians are turning to hospital employment to avoid the economic realities of running a small business. However, as a recent article in the New York Times illustrates (see "A Hospital War Reflects a Bind for Doctors"), physicians should bear in mind that even under hospital employment, economic pressures -- though perhaps different from those in private practice -- will continue to exist.

Few hospital-owned physician practices are actually profitable after payment of practice overhead and physician compensation. Although hospitals typically receive economic benefit from ongoing physician referrals for hospital services, under federal law, hospitals are not supposed to take these dollars into consideration when establishing physician compensation. Moreover, Hospital employers may lose sight of the intangible contributions of employed physicians when they are compelled to provide a regular financial subsidy to their captive physician practices. It is critical, therefore when establishing physician employment arrangements with hospitals to reach clarity on the economic expectations on both sides of the transaction and build adequate protections for both parties into the employment agreement. Key elements of such an understanding will include productivity expectations, budgeting and staffing considerations and appropriate incentives for continuing or improved performance.

OIG Issues Favorable Advisory Opinion on Free Technology from Hospital

Todd Rodriguez — Wed, 26 Dec 2012 11:29:45 -0500

Physicians in private practice are increasingly relying upon their local hospitals for assistance in making the transition to full-fledged electronic medical records. The Office of Inspector General (OIG) of the Department of Health and Human Services recently gave the nod to a proposed arrangement which would enhance electronic communication between private practices and a community hospital. Specifically, the OIG issued a favorable advisory opinion on December 12, 2012 (Advisory Opinion 12-20) regarding a hospital’s proposal to give physicians free access to an electronic interface which would permit the physicians to electronically transmit test orders and receive results from the hospital.

Because hospitals are in a position to benefit from physician referrals for diagnostic tests, giving free items or services to referring physicians to facilitate such referrals could run afoul of the federal anti-kickback statute. However, in arriving at the favorable opinion, the OIG cited its longstanding position that free items and services that are integrally related to a provider’s services and which cannot be used for purposes unrelated to the those services generally do not have independent value and therefore are unlikely to implicate the prohibitions of the anti-kickback statute. The OIG found that the proposed interface was integrally related to the diagnostic services offered by the hospital and as such did not have independent value to the referring physicians.

Can Concierge Medicine be Affordable for the Masses?

Todd Rodriguez — Fri, 30 Nov 2012 21:16:26 -0500

The term "concierge medicine" conjures images of exclusivity, special treatment and high cost. But can the concept be adapted to appeal to the masses? With an impending shortages of doctors - particularly in primary care - and many more patients covered by insurance than ever before (under the Affordable Care Act), there is a reasonably good chance that patients will need to wait longer for an appointment with their doctor and be able to spend less time visiting with him or her. In addition, more and more Americans are covered under high deductible health plans. Increasing out-out-pocket costs and decreased access might be the ingredients necessary to give birth (or rebirth) to cash pay medicine. For more on the possibility of affordable "concierge" medicine, consider this recent article published on Businessweek.com.

Does It Make Financial Sense To Go Into Medicine?

Todd Rodriguez — Thu, 29 Nov 2012 13:05:24 -0500

According to a recent study published in the Journal of the Association of American Medical Colleges, a primary care physician who graduates with education debt of $160,000 should be able to raise a family, live in an expensive urban area, and repay their debt in 10 years without incurring additional debt, as long as their household income and spending are consistent with median statistics. However, the ability to meet education debt repayment obligations as a primary care physician becomes significantly more difficult when the education debt is $200,000 or more. According to the study, of 2011 medical school graduates, 59% had education debt of $150,000 or more at graduation, 33% had more than $200,000, 15% had more than $250,000, and 5% had more than $300,000.

By national standards, physicians – even primary care physicians -- have a pretty good earning capability. However, the financial, emotional and physician investment required to earn a medical degree and complete training is daunting – particularly when coupled with the fact that most physicians cannot begin saving for retirement in a meaningful way until their early to mid-thirties. With the emphasis placed on primary care under the federal Affordable Care Act, what will the federal government need to do to entice the best and the brightest to go into primary care?

In Making Important Practice Decisions, Treat Dissenters With Respect

Todd Rodriguez — Tue, 27 Nov 2012 16:16:20 -0500

If you're like most physicians, you have probably given some recent thought to selling your practice or merging with one or more other groups. If you are part of a group practice, it's quite possible that all members of the group might not agree on a single course of action. Keep in mind that even if your corporate agreements say that "majority rules", dissenting shareholders may have certain rights under state law, including the right to fair value for their shares in the practice. For an idea of what can happen if these dissenter's rights are ignored, have a look at this recent article on Indystar.com.

MedPAC Site-Neutral Payment Proposal Could Level Outpatient Reimbursement Playing Field

Todd Rodriguez — Mon, 05 Nov 2012 08:51:07 -0500

It's no secret that Medicare pays significantly more for certain services when they are performed in a hospital outpatient department than when they are performed in a physician office. In fact, this is one of the reasons privately practicing physicians have been folding up shop in favor of hospital employment. Hospitals can make more from these services than physicians and, therefore, can generally pay physicians more than they could earn in private practice.

The Medicare Payment Advisory Commission (MedPAC) has taken notice of the discrepancy and recopmmended last month that the Centers for Medicare and Medicaid (CMS) consider adopting a policy of site neutrality when setting payment for outpatient services. This means the payment would be the same regardless of where it is performed. Presumably, however, the payment rates would gravtitate to the lower of the levels rather than the higher ones.

Not surprisingly, the American Hospital Association is none too happy about the proposal (see
MedPAC considers equal outpatient pay to hospitals, doc offices on Fiercehealthcare.com). Although there is no telling whether CMS will adopt the proposal, physicians considering selling or joint venturing with a hospital to take advantage of the outpatient payment differential should consider the potential implications such a change would have on the future viability of these arrangements.