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Stark Law Proposed Change Affects Group Practice Special Rules for Productivity Bonuses, Profit Shares

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...

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Agenda is Live: McDermott’s Healthcare Litigation, Compliance & Investigations Forum

Join McDermott for our 2019 Healthcare Litigation, Compliance & Investigations Forum on November 5, 2019 in Washington, DC Featuring insights from government representatives, in-house lawyers and compliance officers from across the healthcare and life sciences landscape, attendees will learn strategies for proactively managing and effectively responding to compliance risks, investigations and litigation during this day-long program. The event will also feature an address by Daniel R. Levinson, Former Inspector General, Office of Inspector General Department of Health and Human Services, and a lunchtime keynote by Dr. Ezekiel Emanuel,  Vice Provost for Global Initiatives & Chair of the Department of Medical Ethics and Health Policy, University of Pennsylvania; Former Special Advisor for Health Policy, White House Office of Management and Budget. Click here to view the program agenda and register today. 

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Third Circuit Perpetuates Tuomey’s Controversial Stark Law “Volume or Value” Standard

In U.S. ex rel. J. William Bookwalter, III, M.D. et al. v. UPMC et al., the US Court of Appeals for the Third Circuit endorsed two controversial interpretations of the Stark Law’s “volume or value” standard, known as the correlation theory and the practice “loss” theory. Specifically, the court held that the relators had made out a plausible allegation of an indirect compensation arrangement between surgeons and University of Pittsburgh Medical Center (UPMC)-affiliated hospitals. The court held that the relators were entitled to proceed to discovery because of the correlation between the amount of the productivity-based compensation paid to the surgeons and the volume of the surgeons’ referrals for inpatient hospital services (e.g., operating room and hospital room and board). Repeatedly invoking the concept of “where there is smoke, there might be fire,” the court also stated that the fact that at least three of the surgeons allegedly received compensation...

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Health Care Enforcement Quarterly Roundup | Q3 | September 2018

In the latest installment of Health Care Enforcement Quarterly Roundup, we examine key enforcement trends in the health care industry that we have observed over the past few months. In this issue, we report on: Practical applications of recent guidance from the US Department of Justice (DOJ) A recent blow to DOJ’s effort to use the federal False Claims Act (FCA) to attack Medicare Advantage reimbursement Continued enforcement efforts at the state and federal level to combat the opioid crisis Potential changes to the Stark Law and Anti-Kickback Statute Continued reporting on how the lower courts have interpreted the landmark Escobar case Click here to read the full issue of the Health Care Enforcement Quarterly Roundup. Join us on for a webinar discussion on Tuesday, October 23. will take a deep dive into the trends and issues covered in this installment of the Health Care Enforcement Quarterly Roundup. Click here to register.

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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...

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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...

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DOJ Issues Memorandum Outlining Factors for Evaluating Dismissal of Qui Tam FCA Cases in Which the Government Has Declined to Intervene

As first reported in the National Law Journal, the US Department of Justice (DOJ), Civil Division, recently issued an important memorandum to its lawyers handling qui tam cases filed under the False Claims Act (FCA) outlining circumstances under which the United States should seek to dismiss a case where it has declined intervention and, therefore, is not participating actively in the continued litigation of the case against the defendant by the qui tam relator. Authored by Michael Granston, director, Fraud Section, Commercial Litigation Branch of the Civil Division of the DOJ, the eight-page memorandum follows comments made by Mr. Granston last year suggesting that—in cases where the DOJ has determined that allegations in a qui tam complaint lack merit—the United States would more aggressively exercise its statutory authority to dismiss FCA complaints pursuant to 31 U.S.C. § 3730(c)(2)(A). The DOJ later indicated that Mr. Granston’s public discussion of its...

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Physician Compensation Scrutiny Continues in Recent FCA Settlement

A hospital system in Missouri recently agreed to settle with the US Department of Justice (DOJ) for $34 million to resolve claims related to alleged violations of the Stark Law. On May 18, 2017, DOJ announced a settlement agreement with Mercy Hospital Springfield (Hospital) and its affiliate, Mercy Clinic Springfield Communities (Clinic). The Hospital and Clinic are both located in Springfield, Missouri. The relator’s complaint was filed in the Western District of Missouri’s Southern Division on June 30, 2015. The complaint’s allegations center on compensation arrangements with physicians who provided services in an infusion center. According to the complaint, until 2009 the infusion center was operated as part of the Clinic, and the physicians who practiced at the infusion center shared in its profits under a collection compensation model. In 2009, ownership of the infusion center was transferred to Mercy Hospital so that it could participate in the 340B...

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A Hospital’s Deserving Stark and AKS Victory—But At What Cost?

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...

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Is the Stark Law’s “Signed Writing” Requirement Material to Payment: One Federal Court Says Yes

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...

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