This April, providers cheered when a federal district court in the Middle District of Florida found insufficient evidence to support a relator’s theory that a hospital had provided free parking to physicians, in violation of the Stark Law and Anti-Kickback Statute (AKS). In the Report and Recommendation for United States ex rel. Bingham v. BayCare Health Systems, 2017 WL 126597, M.D. Fla., No. 8:14-cv-73, Judge Steven D. Merryday of the Middle District of Florida endorsed magistrate judge Julie Sneed’s recommendation that Plaintiff Thomas Bingham’s Motion for Partial Summary Judgment be denied and that Defendant BayCare Health System’s Motion for Summary Judgment be granted. However, as we discussed in a previous FCA blog post regarding these allegations, this type of case encapsulates a worrying and costly trend where courts allow thinly pleaded relator claims in which the government opted not to intervene, to survive past the motion to dismiss stage into the discovery phase of the litigation.

Bingham is a serial relator who practices as a certified real estate appraiser in Tennessee and was unaffiliated with BayCare. In his latest attempt, Bingham alleged that BayCare Health System had violated the Stark Law and the AKS by providing affiliated physicians free parking, valet services and tax benefits to induce physicians to refer patients to the health system. Continue Reading A Hospital’s Deserving Stark and AKS Victory—But At What Cost?

With health care becoming more consumer-driven, health care providers and health plans are wrestling with how to incentivize patients to participate in health promotion programs and treatment plans. As payments are increasingly being tied to quality outcomes, a provider’s ability to engage and improve patients’ access to care may both improve patient outcomes and increase providers’ payments. In December 2016, the Office of Inspector General of the US Department of Health and Human Services (OIG) issued a final regulation implementing new “safe harbors” for certain patient incentive arrangements and programs, and released its first Advisory Opinion (AO) under the new regulation in March 2017. Together, the new regulation and AO provide guardrails for how patient engagement and access incentives can be structured to avoid penalties under the federal civil monetary penalty statute (CMP) and the anti-kickback statute (AKS).

Read the full article.

On December 7, 2016, the Office of Inspector General of the US Department of Health and Human Services published a final rule containing revisions to both the federal Anti-Kickback Statute safe harbors and the beneficiary inducement prohibition in the civil monetary penalty rules. Effective January 6, 2017, the Final Rule modifies certain existing safe harbors and adds additional safe harbors to the Anti-Kickback Statute and incorporates Affordable Care Act-mandated exceptions into the definition of remuneration under the civil monetary penalty rules.

Read the full article here.

On December 7, 2016, the Office of the Inspector General (OIG) of the US Department of Health and Human Services (HHS) issued a policy statement increasing its thresholds for gifts that are considered “nominal” for purposes of the patient inducement provisions of the civil monetary penalties law (section 1128A(a)(5) of the Social Security Act) (CMP Law). HHS also announced the new thresholds in the preamble to a final rule issued on December 7, 2016, revising safe harbors under the Anti-Kickback Statute and rules under the CMP Law. 81 Fed. Reg. 88368, 88394 (Dec. 7, 2016).  The previous thresholds for gifts to Medicare and Medicaid beneficiaries were $10 per item or $50 in the aggregate annually per patient. The new thresholds are $15 per item or $75 in the aggregate annually per patient.

Under the CMP Law, a person who offers or provides any remuneration to a Medicare or Medicaid beneficiary that the person knows or should know is likely to influence the beneficiary’s selection of a particular provider, practitioner or supplier of Medicare or Medicaid payable items or services may be liable for civil money penalties, subject to a limited number of exceptions. The OIG has indicated that gifts of “nominal value” are not required to meet an exception. However, the OIG has not changed its thresholds for what constitutes “nominal value” since issuing its 2002 Special Advisory Bulletin: Offering Gifts and Other Inducements to Beneficiaries, which included thresholds of no more than $10 in value individually or $50 in value in the aggregate annually per patient. To account for inflation, the OIG has now increased its interpretation of “nominal value,” permitting inexpensive gifts (other than cash or cash equivalents) of no more than $15 per item or $75 in the aggregate per patient annually, effective immediately.

The OIG’s policy statement provides that violations of the CMP Law could result in penalties of up to $10,000 per wrongful act; however, HHS increased the penalty to $15,024 per violation in an interim final rule issued earlier this year. 81 Fed. Reg. 61538, 61543 (Sept. 6, 2016). While the new thresholds are still fairly low, they are a welcome update to the longstanding $10/$50 thresholds.

As many health lawyers know, the government usually only pursues the person or entity that offers or pays allegedly improper remuneration, even though the federal Anti-Kickback Statute (AKS) also applies to those to solicit or receive it.  This uneven enforcement pattern occurs for a variety of reasons — the alleged payor is the focus of the relator’s complaint and resulting investigation, the amount of time that this investigation and resolution takes can create practical and legal problems in pursuing additional defendants, and the increasing number of qui tam cases stretches the government’s limited resources.

However, on October 7, 2015, the U.S. Department of Justice (DOJ) announced a settlement with an alleged kickback recipient over three years after it settled with the alleged payor.  PharMerica Corporation, identified by the DOJ as the nation’s second-largest provider of pharmaceutical services to long-term care facilities, agreed to pay $9.25 million to settle allegations that, from 2001 to 2008, the company knowingly solicited and received kickbacks from Abbott Laboratories in the form of rebates, educational grants and other financial support in exchange for recommending that physicians prescribe Abbott’s anti-epileptic drug Depakote to nursing home patients where PharMerica provided pharmacy services.

PharMerica noted in a press release that it denied the government’s allegations and fully cooperated with the DOJ throughout the investigation.  Of note, the Office of Inspector General (OIG) did not require an amendment to PharMerica’s current corporate integrity agreement to add provisions concerning AKS compliance as part of this resolution.

This settlement comes over three years after Abbott entered into an FCA settlement agreement with the DOJ and several individual states in May 2012, which, along with addressing separate allegations related to the promotion of Depakote, settled allegations related to its arrangement with PharMerica. Abbott also did not admit to any wrongdoing in its settlement.  Both the PharMerica and Abbott settlements are the product of lawsuits filed in federal court in the Western District of Virginia under the whistleblower provisions of the False Claims Act.

The pursuit of the settlement with PharMerica may indicate a growing interest by DOJ in pursuing AKS allegations against both the alleged offeror and the alleged recipient of prohibited remuneration under the FCA.

On July 20, the Office of Inspector General of the Department of Health and Human Services (OIG) posted a new Advisory Opinion (the Opinion) addressing a health system’s restructured arrangement to lease employees, and provide other operational and management services, to a related psychiatric hospital (the Arrangement). The Opinion is a notable departure from other recent statements and enforcement actions, and signals a greater flexibility in how related entities may share non-clinical employees and operational expenses. It also shows the OIG’s willingness to consider more practical factors, such as cost reporting requirements and the systemic benefits from integrated entities behaving in cost-efficient ways, when determining the risk presented by an arrangement.

The Opinion concerns a nonprofit health system (System) with a membership interest in the psychiatric hospital (Center). The Center is also part of the System’s integrated health network.  The System and the Center are potential referral sources to each other. Currently, both parties have an existing arrangement, whereby the Center leases non-clinician employees and obtains certain other operational and management services from the System, paying the System’s fully loaded costs (e.g., salary, benefits, overhead expenses) plus a two percent administration fee. The Arrangement would continue the same relationship, but the Center would no longer pay the System the administration fee. The parties have asserted, and OIG verified, that the administrative fee is an unallowable cost under applicable Medicare cost-reporting rules, and would not be reimbursable by the Medicare program.

The OIG noted that the new Arrangement, where the System would provide the same services for less aggregate compensation, could raise fair market value (FMV) issues. Such a discount could be considered remuneration in exchange for the Center’s referrals. In addition, the aggregate compensation under the Arrangement can’t be set in advance as the System’s costs, and Center’s needs, may change during the term. Given these issues, the Arrangement would not meet the requirements of the Anti-Kickback Statute (AKS) safe harbor for personal services and management contracts. Nonetheless, given the totality of the circumstances, the OIG concluded that the Arrangement would present a low risk of fraud and abuse and thus OIG would not impose sanctions.

The Opinion described several mitigating factors that, from OIG’s perspective, decreased the Arrangement’s risk of fraud and abuse. Not only did the parties attempt to structure the Arrangement to be in compliance with Medicare cost-reporting rules for related parties, there was also no evidence that the Arrangement was structured to, or actually would, induce referrals. Moreover, the parties pointed to the cost efficiencies of health system integration that would be promoted by the Arrangement, and to the potential indirect benefits (by way of cost savings) to federal health care programs.

The Opinion’s more flexible approach to analyzing the Arrangement stands in contrast to the OIG’s other recent activities, all of which express a consistent concern with payments between independent actors that are not consistent with FMV. For example, the OIG issued a fraud alert focusing on improper physician financial arrangements on June 9, 2015 (previously discussed here. The alert encourages physicians to “ensure that [their] arrangements reflect fair market value for bona fide services.” Similarly, the OIG has recently settled with several leased-employee physicians compensated by Fairmont Diagnostic Center and Open MRI Inc. (Fairmont) following Fairmont’s False Claims Act settlement concerning these arrangements. The OIG alleged that full time Fairmont employees, placed in certain physicians’ offices for study-related tasks, were actually performing office functions on the physician’s behalf, which constituted improper remuneration intended to induce referrals. Given this sustained regulatory focus on FMV compensation, health care entities should pay particular attention to the business justifications of their arrangements.