A few days before Thanksgiving, the news media published an internal memo by the Office of General Counsel (OGC) at the US Department of Health and Human Services (Department) to officials at the Centers for Medicare and Medicaid Services (CMS). The memo expressed OGC’s views on the impact of the Supreme Court’s Azar v. Allina
On October 9, 2019, the US Department of Health and Human Services Centers for Medicare and Medicaid Services (CMS) published proposed changes to the physician self-referral law (Stark Law). Physician practices are subject to the Stark Law, and the proposed rule includes an important clarification affecting certain group practices’ compensation models.
CMS proposes to revise its regulations to clarify the special rule for group practice distributions of income from Stark designated health services (DHS). Compliance with this special rule is a requirement of the Stark Law’s definition of a “group practice,” and compliance with the “group practice” definition is generally necessary for physician groups to have the protection of the in-office ancillary services (IOAS) exception to the Stark Law. The special rule for sharing DHS profits permits a group, or a pod of five or more physicians in the group, to pool their DHS income and distribute the pool in a manner that does not directly take into account the volume or value of any physician’s referrals for DHS.
For years, there has been a debate within the health law bar regarding how these DHS income pools can be structured under the special rule. One position is that the special rule permits pools to be organized by DHS, meaning, for example, that if the group’s only DHS are imaging and physical therapy services (PT), the group can have one pool for diagnostic imaging income in which one set of five or more physicians participate, and another pool for PT income in which another (perhaps overlapping) set of five or more physicians participate (split-DHS income pooling). The other position is that the special rule requires that the DHS income pool must include all the DHS generated by the participating physicians. In such a case, the imaging and PT pools described above would have to be consolidated (all-DHS income pooling).
On October 9, 2019, the US Department of Health and Human Services (HHS) published proposed changes to the physician self-referral law (Stark Law) (Stark Proposed Rule) and the Anti-Kickback Statute (AKS) and the Beneficiary Inducement Civil Monetary Penalty Law (CMPL) (AKS Proposed Rule).
The proposed rules represent some of the most significant potential changes to these laws in the last decade. HHS Deputy Secretary Eric Hargan said that they “would be a historic reform of how healthcare is regulated in America.” This On the Subject provides a high-level overview of key provisions in the proposed rules. More in-depth analysis will follow at our Regulatory Sprint Resource Page.
The Stark Law and AKS Proposed Rules have been promulgated as part of HHS’s “Regulatory Sprint to Coordinated Care,” which was launched in 2018 with the goal of reducing regulatory burden and incentivizing coordinated care. As part of this initiative, the Centers for Medicare and Medicaid Services (CMS) and the HHS Office of Inspector General (OIG) began scrutinizing a variety of long-standing regulatory requirements and prohibitions to determine whether they unnecessarily hinder the innovative arrangements that policymakers are otherwise hoping to see develop. The agencies took the step of formally seeking public input on this topic by issuing requests for information (RFIs) in June and August 2018. More information about HHS’s Sprint and the RFIs is available on our Regulatory Sprint Resource Page.
The Proposed Rules reflect a coordinated effort between CMS and OIG to address various challenges to the transition to value-based care. Both agencies clearly recognize that the two laws often operate in tandem, but they also emphasize that they are distinct and separate enforcement vehicles. Thus, in some instances OIG’s proposals may be more restrictive that CMS’s, and both agencies state that the AKS may act as a “backstop” to protect against arrangements that meet a Stark Law exception but are nonetheless considered abusive. CMS also proposes to remove compliance with the AKS as a requirement from several Stark Law exceptions, further underscoring the laws’ separateness.
During a July 17, 2018, hearing before the House Ways and Means Subcommittee on Health, United States Department of Health and Human Services (HHS) Deputy Secretary Eric Hargan testified about HHS’ efforts to review and address obstacles that longstanding fraud and abuse laws pose to shifting the Medicare payment system to a value-based, coordinated care…
On June 25, 2018, the Centers for Medicare and Medicaid Services (CMS) published a request for information, seeking input from the public on how to address any undue regulatory impact and burden of the physician self-referral law (Stark Law) on value-based and other coordinated care arrangements designed to improve quality and lower cost. While…
Eventually, any health care organization with an effective compliance program is very likely to discover an issue that raises potential liability and requires disclosure to a government entity. While we largely discuss False Claims Act (FCA) litigation and defense issues on this blog, a complementary issue is how to address matters that raise potential liability risks for an organization proactively.
On August 11, 2017, a group of affiliated home health providers in Tennessee (referred to collectively as “Home Health Providers”) entered into an FCA settlement agreement with the US Department of Justice (DOJ) and the US Department of Health and Human Services Office of Inspector General (OIG) for $1.8 million to resolve self-disclosed, potential violations of the Stark Law, the Federal Anti-Kickback Statute, and a failure to meet certain Medicare coverage and payment requirements for home health services. This settlement agreement underscores the strategic considerations that providers must weigh as they face self-disclosing potential violations to the US government.…
On May 31, 2017, the US Department of Justice announced a Settlement Agreement under which eClinicalWorks, a vendor of electronic health record software, agreed to pay $155 million and enter into a five-year Corporate Integrity Agreement to resolve allegations that it caused its customers to submit false claims for Medicare and Medicaid meaningful use payments…
In a case of first impression, a federal court found that the federal physician self-referral law’s (Stark Law) requirement that financial arrangements with physicians be memorialized in a signed writing could be material to the government’s payment decision. This case raises troubling questions about applying the False Claims Act (FCA) to what many in the industry consider “technical” Stark issues, especially given the Supreme Court’s description of the materiality test as “demanding” and not satisfied by “minor or insubstantial” regulatory noncompliance.
United States ex rel. Tullio Emanuele v. Medicor Associates (Emanuele), in the US District Court for the Western District of Pennsylvania, involves Medicor Associates, Inc., a private medical group practice (Medicor), and Hamot Medical Center’s (Hamot) exclusive provider of cardiology coverage. Tullio Emanuele, a qui tam relator and former physician member of Medicor, alleged that Hamot, Medicor, and four of Medicor’s shareholder-employee cardiologists (the Physicians) violated the FCA and Stark Law because Hamot’s multiple medical director compensation arrangements with Medicor failed to satisfy the signed writing requirement in the Stark Law’s personal services or fair market value exceptions during various periods of time. The US Department of Justice declined to intervene in the case, but filed a statement of interest in the summary judgment stage supporting the relator’s position.…
On May 1, 2017, the US Court of Appeals for the Third Circuit affirmed the dismissal of United States ex rel. Petratos, et al. v. Genentech, Inc., et al., No. 15-3801 (3d. Cir. May 1, 2017). On appeal from the US District Court for the District of New Jersey, the Third Circuit reinforced the applicability of the materiality standard set forth by the US Supreme Court in Universal Health Services v. Escobar. Per the Court, the relator’s claims implicate “three interlocking federal schemes:” the False Claims Act (FCA), Medicare reimbursement, and US Food and Drug Administration (FDA) approval.
The relator, Gerasimos Petratos, was the former head of health care data analytics at Genentech. He alleged that Genentech suppressed data related to the cancer drug Avastin, thereby causing physicians to certify incorrectly that the drug was “reasonable and necessary” for certain Medicare patients. This standard is drawn from Medicare’s statutory framework: “no payment may be made” for items and services that “are not reasonable and necessary for the diagnosis and treatment of illness or injury.” 42 U.S.C. § 1395y(a)(1)(A) (emphasis added). In turn, the Centers for Medicare and Medicaid Services (CMS) consider whether a drug has received FDA approval in determining, for its part, whether a drug is “reasonable and necessary.” Petratos claimed that Genentech “ignored and suppressed data that would have shown that Avastin’s side effects for certain patients were more common and severe than reported.” Petratos further asserted that analyses of these data would have required the company to file adverse-event reports with the FDA and could have triggered the need to change Avastin’s FDA label.
The good, reassuring news about that “old dog” fraud and abuse as it enters an age of payment reform is that criminal liability for fraud still requires a specific intent to defraud the federal health care programs, anti-kickback liability still requires actual knowledge of at least the wrongfulness, if not the illegality, of the financial…