Physician Law

Senate Bill Would Strengthen Anti-Fraud Efforts

trodriguez@foxrothschild.com (Todd Rodriguez) — Tue, 17 Nov 2009 08:44:02 -0500

While all eyes are on the health care reform debate, a new Senate bill would give the government improved tools for investigating and prosecuting fraud and abuse in both federal and private health insurance programs. One of the most significant proposed changes would authorize a qui tam whistleblower action under the False Claims Act based solely on allegations of a violation of the Anti-Kickback law.

Senator Ted Kaufman (D-DE) introduced the Health Care Fraud Enforcement Act of 2009, co-sponsored by Committee Chairman Patrick Leahy (D-VT) and Committee members Arlen Specter (D-PA), Herb Kohl (D-WI), Chuck Schumer (D-NY) and Amy Klobuchar (D-MN).

Kaufman’s proposed legislation would modify federal sentencing guidelines, health care fraud statutes, and forfeiture, money laundering, and obstruction statutes, including:

Sentencing increases: The bill directs the Sentencing Commission to increase the guidelines range for health care fraud offenses and clarifies that the full potential scope of the fraud should be considered at sentencing.

Redefining “health care fraud offense”: The bill includes all health care crimes within the definition of “health care fraud offense,” regardless of where they are codified. (ERISA, drug marketing, and kickback crimes are currently not included) This change will make available to law enforcement the full range of antifraud tools, including criminal forfeiture and obstruction penalties, to combat these offenses.

Improving whistleblower claims: kickbacks lead to unnecessary and risky medical care and pervert the doctor-patient relationship. This bill clarifies that all payments made pursuant to illegal kickbacks are false for purposes of the False Claims Act, regardless of who submitted the claim.
Creating a common-sense mental state requirement for health care fraud offenses: some courts have held that defendants must be aware that their conduct violates a specific provision of criminal law in order to be held accountable. This bill restores the original intent of Congress that a person is guilty of a health care offense if he knowingly does what the law forbids.

Increasing funding: Money spent on health care fraud prevention and enforcement is returned manifold through costs savings and civil and criminal recoveries. This bill authorizes a modest, yet significant, increase in federal antifraud spending of $20,000,000 per year through 2016.

If enacted, this bill would reduce a number of obstacles that have frustrated enforcement efforts and discouraged private qui tam cases. Since Congress is under pressure to find ways to pay for the increased coverage which may be mandated by the larger reform efforts, it is reasonable to anticipate that some form of increased enforcement efforts will garner bipartisan support. Plaintiff’s lawyers who represent whistleblowers are already beginning to publicize this bill on their web sites, so look for increased qui tam activity if it is passed.

For Sen. Kaufmann’s section-by-section summary, Click here. For more information on the Health Care Fraud Enforcement Act of 2009, contact William H. Maruca.

Texas Hospital System Settles Sham Lease/Directorship Claims for $27.5 Million

trodriguez@foxrothschild.com (Todd Rodriguez) — Mon, 16 Nov 2009 10:30:17 -0500

A cautionary tale for physicians who lease space or provide medical director services to hospitals. These common arrangements are coming under increasing scrutiny, and must be commercially reasonable to withstand challenge.

McAllen Hospitals L.P., d/b/a/ South Texas Health System entered into a settlement agreement with the Department of Justice on October 30, 2009 to pay $27.5 million to resolve allegations of violations of the Stark and Anti-Kickback law arising from lease and medical directorship payments to physicians. A qui tam whistleblower suit was brought by a former employee fired by the health system who will receive $5.5 million from the settlement. The system also agreed to a five-year Corporate Integrity Agreement.

The suit alleged that McAllen leased an unfinished office suite with a dirt floor from a referring physician for $8,000 per month, paid four physicians questionable medical director fees, wrote off a $150,000 loan to a cardiology group, and provided free rent, equipment, supplies and housekeeping services to other referring physicians, among other violations. The small Texas community had attracted national attention earlier this year when an article in the New Yorker reported that its average Medicare spending per enrollee was nearly two times the national average, and $3,000 more than the average local annual income, without a notably sicker population or better medical outcomes. These statistics may help the government publicize the connection between hospitals that pay kickbacks to induce referrals and increased costs passed along to Medicare.

The DOJ press release is here: http://www.justice.gov/opa/pr/2009/October/09-civ-1175.html

For more information, see: http://www.themonitor.com/articles/suit-32626-fraud-system.html

For more information regarding this settlement agreement, please contact William H. Maruca.

Red Flag Rule Enforcement Date Extended to June 2010

trodriguez@foxrothschild.com (Todd Rodriguez) — Tue, 03 Nov 2009 10:29:47 -0500

According to a Federal Trade Commission (FTC) press release, the FTC is once again delaying the "Red Flag Rule" identity theft enforcement date. In its current form, the Red Flag Rule could apply to many physician practices. The new enforcement date is June 1, 2010. For more information on the Rule, click here.

West Penn Allegheny Antitrust Suit Dismissed

trodriguez@foxrothschild.com (Todd Rodriguez) — Fri, 30 Oct 2009 07:40:51 -0500

According to a recent article in the Pittsburgh Post-Gazette, West Penn Allegheny Health System's federal antitrust lawsuit against University of Pittsburgh Medical Center and Highmark Inc., has been dismissed. Filed in April of this year, the lawsuit alleged that UPMC and Highmark conspired to raise prices and squeeze out competition. According to the article, the Court found that West Penn's position was inconsistent and that there was no conspiracy on the part of UPMC and Highmark.

No Long Term Fix for Medicare Physician Fee Cuts

trodriguez@foxrothschild.com (Todd Rodriguez) — Thu, 22 Oct 2009 14:03:28 -0500

Despite efforts by Senator Harry Reid to pass legislation which would have effectively frozen Medicare payment rates for physicians, it looks like Congress will once again look to freeze physician payment rates with a one-year patch. According to an article published by the Wall Street Journal, Senator Reid’s proposed bill would have permanently prevented Medicare payment cuts to doctors. However, the bill was estimated to cost $247 billion over ten years and Senator Reid was unable to secure the votes necessary to get the bill out of the Senate. The bad news for physicians is that there’s no permanent fix for the sustainable growth rate formula in the Medicare Physician Fee Schedule. The good news however is that Senator Reid has indicated an intention to pass a measure which would forestall the projected 21% decease in physician payments expected for 2010.

Substantial Reduction in Medicare Payment Rates Under Baucus Bill

trodriguez@foxrothschild.com (Todd Rodriguez) — Thu, 08 Oct 2009 16:59:08 -0500

According to the Congressional Budget Office (CBO), the Chairman’s mark for the Healthy Futures Act of 2009 proposed by Senator Max Baucus will be paid for, in part, through a reduction in Medicare payment rates. Specifically, according to a blog post by the CBO, the legislation would "substantially reduce the growth of Medicare’s payment rates for most services".

The CBO also acknowledges that it's estimated cost projections is based on the proposed legislation and legislation currently in effect such as the current Sustainable Growth Rate system pursuant to which physicians are already scheduled to see a major reduction in Medicare reimbursement. Lower reimbursement means physicians will likely need to see more patients (the bill would result in an estimated 29 million more insured patients) than they are currently seeing to generate the same revenue.

Doctor to Return to U.S. to Face Fraud Charges

trodriguez@foxrothschild.com (Todd Rodriguez) — Wed, 07 Oct 2009 10:45:58 -0500

According to an article in the News Tribune, the long arm of the federal government has tracked a Washington state doctor to Madagascar and brought him back to the U.S. to face fraud charges. The doctor, who operated four clinics in Washington, will be charged with conspiracy to commit health care fraud following an audit of the doctor's Medicaid billing practices. According to the article, undercover agents posing as patients visited the practice and claims were allegedly submitted for higher levels of service than were actually provided and/or for services not rendered.

OIG Blesses Chiropractic Referral Network

trodriguez@foxrothschild.com (Todd Rodriguez) — Wed, 30 Sep 2009 17:23:46 -0500

In the recently released OIG Advisory Opinion No. 09-16, the OIG found that participation by chiropractors in a referral network would not run afoul of the federal antikickback statute. In AO 09-16, the OIG reviewed a proposed arrangement whereby chiropractors who are members of an association would each pay $200 per month to participate in a "network" that would advertise chiropractic services through internet, print, radio, or television advertising and provide referrals for such services. A prospective patient who contacts the network for a chiropractor referral would be asked to provide a zip code. The network would then provide contact information for a participating chiropractor who practices in that zip code or, if no participating chiropractor practices in that zip code, in a nearby zip code. If more than one participating chiropractor is in the particular zip code, a name would be provided in sequence from a rotating list. The network would pay the chiropractic association $10 for each chiropractor that participated in the network.

Although the compensation paid by the network to the association would vary with the number of chiropractors who join the network, the OIG stated that it would not prosecute the arrangement because (1) the network itself would not provide any items or services payable by Federal health care programs, (2) the participation fee would not vary on the basis of referrals of Federally payable business, (3) referral of potential patients to participating chiropractors would be on a rotating basis, by geographic area, and (4) the referral service would be open to participation by any chiropractor licensed to practice in the state, and participating chiropractors would receive referrals on an equal basis, would not be influenced by the variation in fees paid by participants.

No More "Under Arrangements" Effective October 1, 2009

trodriguez@foxrothschild.com (Todd Rodriguez) — Wed, 30 Sep 2009 09:32:39 -0500

In case you somehow missed the news, effective October 1, 2009 (that's right, tomorrow), 'under arrangements' ventures involving Stark services are no longer permissible. An under arrangements venture usually involves provision of a diagnostic or therapeutic service on a turn-key basis by an outside supplier (often a physician office) on behalf of a hospital. The hospital then bills for the service to Medicare as if the service was performed by the hospital pays the under arrangements provider a fee for performing the service. In the 2009 Inpatient Prospective Payment System Regulations, CMS revised the definition of a designate health service "entity" for purpose of the Stark law to include not only the entity that submits the claim and receives payment from the Medicare program for the service (i.e., the hospital) but also the entity that performs the service (i.e., the under arrangements physician office). As a result of this change, physician practice will, as of tomorrow, no longer be able to provide services under arrangements to hospitals to which they refer Medicare patients. If for some reason you have not terminated or corrected any of your under arrangements contracts, you need to act quickly to avoid on-going Stark liability.

Medicare Rules on Preventive Care Services

trodriguez@foxrothschild.com (Todd Rodriguez) — Sat, 26 Sep 2009 08:19:56 -0500

It is apparent that preventive care will take on greater importance in the "reformed " health care system and while Medicare historically did not cover routine or preventive screening services, the list of preventive services now covered by Medicare has grown in recent years. Physicians should familiarize themselves with the applicable coverage and billing rules so as not to miss an opportunity to capture revenue for these services where appropriate. To help physicians in this regard, CMS has published a guide to preventive and screening services for physicians and other providers. Also, for a good overview on the OIG's current thinking on offering free screening services, physicians and other providers should have a look at the recent OIG Advisory Opinion 09-11 addressing free blood pressure screenings to walk-in visitors at a hospital.

Physician Owned Hospitals Targeted in Baucus Reform Proposal

trodriguez@foxrothschild.com (Todd Rodriguez) — Fri, 25 Sep 2009 10:02:53 -0500

The original Stark II regulations included an 18 month moratorium on an exception to Stark that would have permitted physician to invest in specialty hospitals. Since expiration of that moratorium some physicians seeking more control over their practice environments have embarked on a mission to develop specialty hospitals as an alternative to the traditional acute care hospital setting. However, hospital groups and certain legislators have also (unsuccessfully so far) attempted to ban physician ownership in these hospitals permanently.

Efforts to ban physician ownership in these hospitals continue and in fact, if passed, the health care reform bill proposed by the Senate Finance Chairman, Max Baucus, would effectively prohibit physician ownership of specialty hospitals unless those hospitals had a Medicare Provider Agreement in place on November 1, 2009. This means that physicians who have invested money in hospitals that are under development could expect to lose their entire investment.

Support for Mr. Baucus’s ban on physician ownership in hospitals would appear, however, to not be unanimous in the Senate, according to a September 15, 2009 letter from Senator Diane Feinstein to Mr. Baucus. In that letter, Ms. Feinstein states that “as the federal government continues to spend hundred of billions of dollars in federal funds to create jobs and stimulate the economy, it is nonsensical to approve legislation that will force ongoing construction on desperately needed projects to come to a halt.” Ms. Feinstein concludes her letter by requesting that Mr. Baucus consider changes to his proposed legislation that will allow facilities currently under construction to be brought to completion.

Physicians concerned about these developments should contact their representatives and professional societies.

Get Your COmments In the the 2010 Proposed Physician Fee Schedule

trodriguez@foxrothschild.com (Todd Rodriguez) — Thu, 27 Aug 2009 10:29:02 -0500

As reported previously on this Blog, the Centers for Medicare and Medicaid Services published the proposed Medicare Physician Fee Schedule CY 2010 on July 13, 2009 in the Federal Register. Unless Congress takes action before the end of the year, physician payment rates with be reduced by an average of 21.5%. Some specialties will face deeper cuts.

If you haven't already done so, you may wish to submit comments to CMS on the proposed rule, but you'll need to do so soon. The deadline for submitting comments is 5PM on August 31, 2009 - this Monday. Comments can be submitted electronically at http://www.regulations.gov, by regular mail, by express or overnight mail or by hand or courier. Instructions for submitting comments can be found at the beginning of the Federal register document.

Hospital/Physician Employment Compensation May Run Afoul of Stark

trodriguez@foxrothschild.com (Todd Rodriguez) — Wed, 26 Aug 2009 12:31:22 -0500

The number of physicians seeking employment with hospitals seems once again to be on the rise and not surprisingly, physicians negotiating those arrangements will do their best to ensure that they are paid fairly for their services. In light of the recent settlement of a federal False Claims case, however, physicians should be careful to ensure that their compensation - even as W-2 employees of a hospital - is consistent with fair market value and commercially reasonable.

According to a US Department of Justice Press Release, Covenant Medical Center in Iowa has agreed to pay the United States $4.5 million to resolve allegations that it violated the False Claims Act by paying employed physicians compensation in excess of fair market value in violation of the federal Stark statute. While there is an exception under the Stark law for compensation paid to a W-2 employee, the compensation must (1) be consistent with the fair market value of the services; (2) may not be determined in a manner that takes into account (directly or indirectly) the volume or value of any referrals by the referring physician; and (3) be pursuant to an agreement that would be commercially reasonable even if no referrals were made to the employer.

According to the Press Release, the compensation to the 5 physicians in question far exceeded fair market value, and in fact, the physicians were among the highest paid hospital-employed physicians in the entire United States.

Stuff You Didn't Know About Medicare: Physician Signature Requirements

trodriguez@foxrothschild.com (Todd Rodriguez) — Tue, 25 Aug 2009 13:07:22 -0500

With the rollout of the Recovery Audit Contractor (RAC) audit program in full swing, physicians should be paying close attention to their medical record documentation efforts. One of the Medicare documentation requirement that many physicians don't fully appreciate is the requirement that all medical records be signed by the performing physician. Specifically, Medicare requires that medical records include a "legible identifier" for all services provided/ordered. According to the Medicare medical review documentation standards, the legible identifier must be in the form of a hand written or electronic signature (stamp signatures are not acceptable). The medical review documentation standards can be found at Section 3.4.1.1 of the Medicare Program Integrity Manual.

FTC Delays "Red Flags" Rule Compliance Date Until November 1, 2009

trodriguez@foxrothschild.com (Todd Rodriguez) — Thu, 30 Jul 2009 10:38:31 -0500

Citing lingering confusion over to whom the identity theft rules apply, the FTC announced yesterday that it is delaying the Red Flags Rule compliance date for a third time. The compliance date, which was August 1, is now November 1, 2009. The FTC intends to use the additional time to further educate industry about the rules and specifically to whom they apply. For more information about the new deadline, see the article in the Wall Street Journal.

More information about the Red Flags Rule can be found on the FTC Website.

Physician/Medical Device Manufacturer Financial Arrangements Continue to Draw Scrutiny

trodriguez@foxrothschild.com (Todd Rodriguez) — Thu, 30 Jul 2009 10:22:59 -0500

Physician/Medical Device financial arrangements continue to draw scrutiny by regulators. According to an article in the New York Times, Senator Charles Grassley has instituted an inquiry into payments between device-maker Medtronic and Dr. David Polly that Grassley says were not disclosed by Dr. Polly when he testified before Senate Panel in 2006. Specifically, Dr. Polly allegedly failed to disclose during his testimony that Medtronic was paying him $6,000 for his appearance before the committee.

Although the amount not disclosed is small, documents released by Senator Grassley show that between 2003 and 2007, Medtronic paid Dr. Polly in excess of $1.14 million in consulting fees and expenses from Medtronic. The lesson for physicians: As medical costs and quality emerge as the buzzwords for health care reform, financial arrangements which create or which give the appearance of conflicts of interest are increasingly likely to come under scrutiny by regulators and enforcement authorities. Physician contemplating these arrangements must carefully evaluate the benefit of the arrangements and the potential pitfalls.

Insurance Department to Investigate the Blues in Pennsylvania

trodriguez@foxrothschild.com (Todd Rodriguez) — Thu, 23 Jul 2009 13:46:02 -0500

In what many Pennsylvania physicians feel is a long overdue move, the Pennsylvania Insurance Commissioner has announced that the Department of Insurance will investigate whether any of Pennsylvania's Blue Cross-Blue Shield insurers have engaged in anti-competitive behavior in violation of the Unfair Trade Practices act. According to a recent article in the Pittsburgh Post-Gazette, among other activities, the Department will look at licensing and other agreements among the Blues that may impede competition, provider contracting activity, and data sharing and other market practices to determine whether any of these activities were anti-competitive or unfair in violation of the law.

Proposed FY 2010 Medicare Physician Fee Schedule: The Rise of Primary Care

trodriguez@foxrothschild.com (Todd Rodriguez) — Thu, 02 Jul 2009 09:42:54 -0500

On July 1, 2009 CMS released a display copy of the Proposed FY 2010 Medicare Physician Fee Schedule. It is evident from a variety of the proposed policy changes that CMS intends to force primary care into a more prominent role – in some cases at the expense of specialists. In addition, imaging services in the office setting have been targeted for greater regulation and lower reimbursement

Among other things CMS is proposing to stop paying for consultation codes at a higher rate than equivalent evaluation and management (E/M) services. Practitioners would be required to use existing E/M service codes when providing these services instead. Resulting savings would be redistributed to increase payments for the existing E/M services.

CMS is proposing to increase the payment rates for the Initial Preventive Physical Exam (the “Welcome to Medicare” visit) to be more in line with payment rates for higher complexity services.

Overall, CMS believes these and other policy changes will result in an increase in payments to general practitioners, family physicians, internists, and geriatric specialists by between 6% and 8%.

CMS has also proposed tightening the requirements for suppliers of diagnostic imaging services by:

(1) proposing to reduce payment for services that require the use of expensive diagnostic equipment; and

(2) proposing that suppliers of the technical component of advanced imaging services such as computed tomography (CT), magnetic resonance imaging (MRI), and positron emission tomography (PET) be accredited beginning January 1, 2012. The accreditation requirement would apply to mobile units, physicians’ offices, and independent diagnostic testing facilities that create the images, but would not apply to the physician who interprets them.

CMS will accept comments on the proposed rule until August 31, and will respond to all comments in a final rule to be issued by November 1, 2009.

HITECH Act Fact Sheet

trodriguez@foxrothschild.com (Todd Rodriguez) — Tue, 30 Jun 2009 11:09:03 -0500

On February 17, 2009, President Obama signed the American Recovery and Reinvestment Act of 2009 (Recovery Act), which, among other things, created financial incentives for physicians and other providers to adopt and utilize electronic health records (EHR) and penalties for those physicians who do not. The provisions addressing the incentives are known as the Health Information Technology for Economic and Clinical Health Act or the "HITECH Act". Many physicians remain uncertain about the details of the incentives so CMS has now published a Fact Sheet which is intended to shed some light on the HITECH payment incentives.

Here are some of the key points from the Fact Sheet:

Financial incentives will begin in January 2011 for eligible professionals (EPs) who are meaningful EHR users.
Beginning in 2015, payment adjustments will be imposed on EPs who are not meaningful EHR users by that date.
Hospital-based physicians who substantially furnish their services in a hospital setting are not eligible for incentive payments.
Incentive payments will equal to 75 percent of Medicare allowable charges for covered services furnished by the EP in a year, subject to a maximum payment in the first, second, third, fourth, and fifth years of $15,000; $12,000; $8,000; $4000; and $2,000, respectively.
For early adopters whose first payment year is 2011 or 2012, the maximum payment is $18,000 in the first year.
There will be no payments for meaningful EHR use after 2016.
The Medicare fee schedule amount for professional services provided by an EP who was not a meaningful EHR user for the year would be reduced by 1 percent in 2015, by 2 percent in 2016, by 3 percent for 2017 and by between 3 to 5 percent in subsequent years.
For 2018 and thereafter, if the Secretary finds that the proportion of EPs who are meaningful EHR users is less than 75 percent, then the reductions will be increased by 1 percentage point each year, but by not more than 5 percent overall.

Obama Administration Turns Up Heat On Medicare Fraud

trodriguez@foxrothschild.com (Todd Rodriguez) — Thu, 25 Jun 2009 09:04:07 -0500

According to a statement by Secretary of HHS Catherine Sebelius in a June 24 HHS Press Release, "the Obama Administration is committed to turning up the heat on Medicare fraud..." As evidence of this commitment, the Press Release announced the indictment of 53 individuals, including physicians and health care executives, accused of various Medicare fraud offenses ranging from conspiracy to defraud the Medicare program, false claims anti-kickback statute violations. Among other things, the indictments allege that the individuals conspired to submit claims for medically unnecessary services and services not rendered as well as to pay kickbacks to beneficiaries to attest that they received the services. The Press Release can be viewed here.