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Healthcare Enforcement Quarterly Roundup – Q2 2019

In this second installment of the Healthcare Enforcement Quarterly Roundup for 2019, we cover several topics that have persisted over the past few years and identify new issues that will shape the scope of enforcement efforts for the remainder of this year and beyond. In this Quarterly Roundup, we discuss DOJ’s guidance on compliance programs and cooperation credit, new US Department of Health and Human Services (HHS) rules and enforcement activity on provider religious/conscience opt-out rights, enforcement activity against home health agencies and telemedicine providers, continued federal action to combat the opioid crisis, and resolution of ambiguity in the False Claims Act (FCA) statute of limitations.

Click here to read the full issue of the Healthcare Enforcement Quarterly Roundup.

Click here to download a PDF of the issue.  




OIG Seeks Comments on Anti-Kickback Statute and Beneficiary Inducements as Part of its Regulatory Sprint to Coordinated Care

On August 24, 2018, the Office of Inspector General (OIG), Department of Health and Human Services (HHS) published a request for information, seeking input from the public on potential new safe harbors to the Anti-Kickback Statute and exceptions to the beneficiary inducement prohibition in the Civil Monetary Penalty (CMP) Law to remove impediments to care coordination and value-based care. The broad scope of the laws involved and the wide-ranging nature of OIG’s request underscore the potential significance of anticipated regulatory reforms for virtually every healthcare stakeholder.

The request for information follows a similar request by the Centers for Medicare and Medicaid Services (CMS) published on June 25, 2018, regarding the physician self-referral law, commonly known as the Stark Law. Both of these requests are part of HHS’s “Regulatory Sprint to Coordinated Care,” which is being spearheaded by the Deputy Secretary as an effort to address regulatory obstacles to coordinated care.

The Anti-Kickback Statute prohibits offering, paying, soliciting or receiving anything of value in exchange for or to induce a person to make referrals for items and services that are payable by a federal health care program, or to purchase, lease, order or arrange for or recommend purchasing, leasing or ordering any services or items that may be covered by a federal health care program. The beneficiary inducement prohibition in the CMP Law authorizes the imposition of civil money penalties for paying or offering any remuneration to a Medicare or Medicaid beneficiary that the offeror knows or should know is likely to influence the beneficiary’s selection of a particular provider or supplier of Medicare or Medicaid payable items. Many value-based payment models implicate these statutes, and the OIG acknowledges that they are widely viewed as impediments to arrangements that would advance coordinated care.

While the request for information arises in the context of a concerted focus on care coordination and value-based payment, the request is wide-ranging and effectively invites stakeholders to provide comments on a broad range of potential issues under both the Anti-Kickback Statute and the beneficiary inducement prohibition. The OIG solicits comments across four general categories: (1) promoting care coordination and value-based care; (2) beneficiary engagement, including beneficiary incentives and cost-sharing waivers; (3) other regulatory topics, including feedback on current fraud and abuse waivers, cybersecurity-related items and services, and new exceptions required by the Bipartisan Budget Act of 2018; and (4) the intersection of the Stark Law and the Anti-Kickback Statute.

The OIG encourages individuals and organizations who previously submitted comments to CMS in response to its request for information on the Stark Law to also submit comments directly to OIG, even where those comments may be duplicative, to ensure they are considered by OIG as it exercises its independent authority with respect to the Anti-Kickback Statute and CMP Law.

Comments are due by October 26, 2018.




HHS Will Soon Seek Public Comment on Anti-Kickback Statute Reform

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 payment system. Deputy Secretary Hargan confirmed that the agency is looking at regulatory reforms to both the physician self-referral law (Stark Law) and the Anti-Kickback Statute (AKS) as part of HHS’ “Regulatory Sprint to Coordinate Care.”

According to Hargan’s testimony, “the goal of the sprint is to remove regulatory barriers to coordinated care while ensuring patient safety. We want to genuinely engage stakeholders in this effort, and solicit feedback at each stage—but this is a sprint, not a jog. These words were chosen specifically because we want to fix, as quickly as possible, the regulatory processes that have increased provider burden.”

As part of this Sprint, in June the Centers for Medicare & Medicaid Services (CMS) issued a broad Stark Law Request for Information (RFI) that solicited public comments on how the Stark Law impedes care coordination and how Stark Law exceptions could be modified or create to promote such coordination as well as on how other exceptions may require regulatory change to reduce regulatory burden. Comments to the Stark Law RFI are due August 24.  We previously reported on the Stark Law RFI here.

In his testimony, Hargan stated that HHS is also looking at the AKS and its intersection with the Stark Law based on feedback from providers who find it “very difficult if not impossible to understand” how to comply with both laws.  Hargan described a four-agency task force that is working together to examine obstacles to coordinate care related to the Stark Law, the AKS, the Health Insurance Portability and Accountability Act of 1996 (HIPAA)  and rules under 42 CFR Part 2 related to opioid and substance abuse disorder treatment.  This task force is composed of CMS, the HHS Office of Inspector General (OIG), the HHS Office of Civil Rights, and the Substance Abuse and Mental Health Services Administration (SAMHSA) to “coordinate amongst themselves to facilitate a coordinated care system” to “reduce duplication, overlap and contradictions” in regulations and “ensure regulatory requirements are aligned.”  As part of this effort, Hargan indicated that HHS would soon issue an RFI on AKS reforms as part of the Sprint.

HHS has already begun exploring changes to the AKS regarding drug pricing.  On July 18, 2018, OIG sent a proposed rule to the Office of Management and Budget entitled “Removal Of Safe Harbor Protection for Rebates to Plans or PBMs Involving Prescription Pharmaceuticals and Creation of New Safe Harbor Protection.”  While the text of the proposed rule is not available at this time, the rule is expected to propose revisions to the AKS discount safe harbor to scale back or exclude rebates from drug manufacturers.




CMS Seeks Comments on Stark Law Reforms Needed to Reduce Obstacles to Innovation

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 the overall focus of CMS’s request for information is on the Stark Law’s actual or perceived barriers to innovation, the request also gives the health care industry a unique opportunity to comment on and request revisions or clarifications for any significant Stark Law provision, including the provisions regarding fair market value, volume or value, and commercial reasonableness, as well as the Stark “group practice” definition.

As part of its focus to shift from a fee-for-service to a value-based health care delivery system, the US Department of Health and Human Services (HHS) launched a “Regulatory Sprint to Coordinated Care,” which is focused on identifying regulatory barriers to coordinated care. CMS identified aspects of the Stark Law that may create obstacles to participation in integrated delivery models, alternative payment models, and other arrangements incentivizing improvements in outcomes and reductions in costs, and is seeking input on revisions or additions to exceptions to the Stark Law.

The Stark Law is largely indifferent to the good faith intentions of health systems to integrate and enter into coordinated care arrangements with physicians, and continues to impose on health systems burdens of proof that the arrangements comply with ambiguous standards like fair market value, volume or value and commercial reasonableness. While financial transactions incident to CMS’s innovative care delivery and payment initiatives, such as accountable care organizations (ACOs), medical homes and bundled payment arrangements can be protected by certain fraud and abuse/Stark Law waivers, there are other common transactions and arrangements with physicians still operating in a fee-for-service environment (such as practice acquisitions, employment, “gainsharing,” service line co-management, pay-for-quality and non-ACO clinically integrated networks) that are not protected by the waivers. CMS’s request for information provides a welcome opportunity for the health care industry to educate CMS on the obstacles the Stark Law presents for innovative coordinated care arrangements with physicians.

In its request, CMS posed 20 specific requests for information on novel financial arrangements and alternative payment models, the applicability of current Stark Law exceptions to such arrangements, and what additional exceptions or revisions to the Stark Law are necessary to protect coordinated care arrangements from Stark Law liability. These requests, however, are so far ranging that they effectively invite comments on just about any Stark Law provision that a stakeholder believes warrants revision or clarification.

Comments are due by 5 pm EDT on August 24, 2018. If you would like assistance in preparing comments, please contact one of the authors or your regular McDermott lawyer.




False Claims Act Settlement with eClinicalWorks Raises Questions for Electronic Health Record Software Vendors

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 violation of the False Claims Act.

Read the full article.




New OIG Exclusion Regulations About to Go into Effect

The Office of Inspector General (OIG) recently published a final rule regarding its exclusion authorities. The final rule goes into effect March 21, 2017, and expands OIG’s authority to exclude certain individuals and entities from participating in federal health care programs under section 1128 of the Social Security Act.

Read full article.




Federal Health Care Fraud and Abuse Enforcement Made a Strong Showing in FY 2016

According to a report released last week, the Health Care Fraud and Abuse Control Program (HCFAC) returned over $3.3 billion to the federal government or private individuals as a result of its health care enforcement efforts in fiscal year (FY) 2016, its 20th year in operation. Established by the Health Insurance Portability and Accountability Act of 1996 (HIPAA) under the authority of the Department of Justice (DOJ) and the Department of Health and Human Services (HHS), HCFAC was designed to combat fraud and abuse in health care. The total FY 2016 return represents an increase over the $2.4 billion amount reported by the agencies for FY 2015.

The report serves as a useful resource to understand the federal health care fraud enforcement environment. It highlights costs and returns of federal health care fraud enforcement, providing not only amounts recovered from settlements and awards related to civil and criminal investigations but also outlining funds allocated for each departmental function covered by the HCFAC appropriation. Total HCFAC allocations to HHS for 2016 totaled $836 million (approximately $255 million of which was allocated to the HHS Office of Inspector General (OIG)) and allocations to DOJ totaled $119 million. The report touts a return on investment of $5 for every dollar expended over the last three years.

The report also includes summaries of high-profile criminal and civil cases involving claims of violations of the False Claims Act (FCA), among other claims. The cases include OIG and HHS enforcement actions as well as some of those pursued by the Medicare Fraud Strike Force, which is an interagency task force composed of OIG and DOJ analysts, investigators, and prosecutors. Successful criminal and civil investigations touch virtually all areas of the health care industry from various health care providers to pharmaceutical companies, device manufacturers and health maintenance organizations, among others.

The report follows an announcement by the DOJ last December declaring FY 2016’s recovery of more than $4.7 billion in settlements and judgments from civil cases involving fraud and false claims in all industry sectors to be its third highest annual recovery, the bulk of which, $2.5 billion, resulted from enforcement in the health care industry.




DOJ Announces Largest Kickback Settlement with Nursing Home for Medical Directorship Allegations

Barely a week after the U.S. Department of Health & Human Services Office of Inspector General (OIG) issued a new fraud alert about Anti-Kickback Statute compliance risks with medical director arrangements, the U.S. Department of Justice (DOJ) announced a $17 million False Claims Act settlement with a nursing home for alleged kickback violations concerning medical director arrangements.

Hebrew Homes Health Network, Inc., a Miami-Dade County nursing home network, and its former president and executive director, William Zubkoff, agreed on June 16, 2015, to settle the qui tam suit brought by Hebrew Homes’ former CFO. According to DOJ, this is the largest False Claims Act settlement for a nursing home allegedly violating the Anti-Kickback Statute.

In the settlement agreement, the government alleged that Zubkoff and Hebrew Homes devised a scheme that, from 2006 to 2013, involved hiring numerous physicians as “sham” medical directors who performed few or no actual services as a way to compensate the physicians for their Medicare referrals.

The government contended in the settlement that the following alleged facts served as “evidence proving” the alleged violations:

  • Hebrew Homes drafted and provided the medical directors with uniform contracts that detailed numerous job duties for the medical director position.
  • As corroborated by statements made by certain of the medical directors to the United States, the medical directors performed none, or almost none, of the job duties listed in their contracts, but nonetheless were paid the salaries provided in their contracts.
  • The medical directors’ patient referrals, without exception, increased exponentially once the medical director contract and payments began.
  • Hebrew Home employees recommended via e-mail increasing the salary of various medical directors because of their high number of patient referrals, and recommended decreasing the salary of, or terminating, medical directors for their lack of patient referrals.

The relator makes other allegations in the complaint to support his case, such as facilities having multiple medical directors simultaneously, the failure to require or request time records of performing services, and examples of internal communications to support the theory that directorships were used as a way to increase referrals.

As part of the settlement, Zubkoff agreed to resign as an employee of Hebrew Homes on March 23, 2015. OIG expressly reserved its exclusion rights against Zubkoff, which is an indication that OIG is considering pursuing an exclusion case against him. Hebrew Homes also agreed to enter into a five-year Corporate Integrity Agreement (CIA) with OIG, which involves OIG monitoring Hebrew Homes’ arrangements with referral sources. The CIA also requires the board of directors to hire a compliance expert to review and report on the compliance program.

The physicians who had the medical directorships were not a party to the settlement, and their potential liability was not released by the settlement. In light of OIG’s fraud alert, it remains to be seen whether OIG will pursue spin-off investigations of some physicians.




Recent OIG Report Spotlights Millions in Overpayments Caused by Physician Place-of-Service Coding Errors

On May 6, 2015, the Office of Inspector General (OIG) for the U.S. Department of Health & Human Services (HHS) released a report on overpayments attributed to incorrect physician place-of-service coding. The report determined that Medicare potentially overpaid physicians approximately $33.4 million for incorrectly coded services that were provided from January 2010 through September 2012.

As part of their claims submissions, physicians and other Medicare suppliers are required to report the setting in which they furnish services. This setting designation (either “facility” or “non-facility”) is a decisive reimbursement factor as Medicare only reimburses physicians for overhead expenses if their services are provided in a non-facility setting (e.g., physician offices and independent clinics). The OIG report compared same-day physician and facility claims to determine how often physicians performed services in facility locations but incorrectly coded the services as performed in non-facility locations. Of $33.4 million in estimated overpayments, approximately 75 percent were made for services provided in a hospital outpatient setting but coded as a non-facility claim. The other roughly 25 percent of the overpayments were made for miscoded services provided in ambulatory surgery centers.

The OIG attributed the overpayments to physician-level internal control weaknesses as well as insufficient Medicare contractor post-payment reviews. The OIG recommended that the Centers for Medicare & Medicaid Services (CMS) direct its Medicare contractors to initiate and monitor recoveries of the overpayments identified by the report (as of December 2014, $1.75 million of the 2010 overpayments had already been recovered). Other recommendations included more comprehensive education efforts and directives for Medicare contractors to perform similar place-of-service audits on high-risk physician services and recover any resulting overpayments.

Given the report’s recommendations, physician practices and employers should ensure they are proactively managing compliance to include periodic internal audits of place-of-service coding. By doing so, providers can better protect themselves from potential overpayment liability and can make more timely decisions about corrective actions and government disclosures.

Read the full report: “Incorrect Place-of-Service Claims Resulted in Potential Medicare Overpayments Costing Millions”




Recent Settlements and Enforcement Activity Serve as a Reminder of FCA Liability for Physicians and Practice Groups

While the health care industry has accounted for a large portion of settlements and judgments involving fraud and False Claims Act (FCA) liability in recent years—68 percent of the United States’ $3.8 billion recovery in 2013 and 40 percent of the $5.69 billion recovery in 2014—the U.S. Department of Health and Human Services Office of Inspector General (OIG) and the U.S. Department of Justice (DOJ) have been primarily focused on hospitals, health care systems and large health care companies.  However, recent settlement and enforcement trends reiterate that individual physicians and smaller practice groups are not immune to qui tam whistleblowers and direct investigation by the OIG.

Such was the case for Garden State Cardiovascular Specialists, P.C., (Garden State) a 12-physician group in New Jersey that just last week reached a $3.6 million settlement in United States ex rel. Cheryl Mazurek v. Garden State Cardiovascular Specialists, P.C. et al., Civil Action No. 10-4734 (D.N.J.).  The settlement resolved sealed allegations that Garden State’s physicians and their NJ Medcare / NJ Heart facilities submitted claims to Medicare for various cardiology diagnostic tests and procedures (including stress tests, cardiac catheterizations and external counterpulsation).  The case against Garden State and two of its principal physicians was brought by Cheryl Mazurek, who worked for Garden State’s third-party billing and coding vendor, MediGain Inc.  Mazurek’s claims against MediGain, also filed under seal, have not yet been resolved.

The OIG Work Plan, complemented by a Mid-Year Update last month, echoes the increased focus on issues that directly implicate physicians operating independent of hospitals and larger companies.  For example, the OIG is reviewing physician coding on Medicare Part B claims for services performed in ambulatory surgical centers (ASC) and hospital outpatient departments to determine whether they properly coded the places of service.  Because Medicare reimburses physicians at a higher level when services are performed in a non-facility setting (e.g., a physician’s office) versus services performed in a hospital outpatient department or (with some exceptions) in an ASC, the OIG will be closely scrutinizing site of service this year and beyond.

Whether on the billing/coding side of the equation, medical necessity or any number of focus areas for DOJ and the OIG, physicians and practice groups (even small ones) should be keenly aware of their compliance obligations under the current FCA regime.  For a quick refresher on fraud enforcement trends for 2015 and beyond (along with some practical tips), you may find this article to be a helpful resource.




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