Fraud & Abuse Enforcement Soars Sky High

Investigations and successful prosecutions for violation of laws like the Anti Kickback Statute (“AKS”), the Stark Law and the False Claims Act were dramatically up in 2011 and are expected to climb still higher in 2012. For instance 13 doctors were charged in December, 2011 with violating the AKS by receiving payment for referring patients to an MRI center. Physicians and other healthcare business people MUST have any suspect arrangement closely scrutinized by highly qualified counsel. A “suspect arrangement” is any arrangement between providers of healthcare services that involve, to any degree, the exchange or payment of anything of value, including money. The AKS is a criminal statute; and the risks of enforcement are now huge.
Business and arrangements which are designed at all to lock in physician referrals carry particularly large risks and require close scrutiny. For instance, surgery centers that received referrals from non-owner physicians viewed that as a great thing. Now, referrals from unaffiliated physicians are viewed as inherently suspect. “What,” the regulator thinks, “is driving this referral? What wrongful conduct is being engaged in here?” This is especially so with any marketing arrangement as well.

Physicians and other healthcare business people would do well to recall that if even “one purpose” of the arrangement is to compensate (cash or anything of value) someone for a patient referral, the AKS is triggered. Moreover, where Safe Harbor Act compliance was recommended, many now find it necessary.


Senate OKs Two-Month Freeze on Doc Pay

Wrapping up legislative business before the Christmas recess, the Senate on Saturday approved legislation that freezes Medicare payments to physicians until Feb. 29.

In a vote of 89-10, the Senate passed an amended version of the House payroll tax bill that the lower chamber approved earlier this week. The legislation from Senate Majority Leader Harry Reid (D-Nev.) and Minority Leader Mitch McConnell (R-Ky.) (PDF)—which extends a payroll tax holiday for two months—provides no payment update in Medicare reimbursement levels for the nation’s doctors in January and February 2012, which prevents a 27.4% cut that was scheduled to tax effect on Jan. 1.

Meanwhile, the bill also extends for two months a host of Medicare and health-related provisions that would otherwise have expired by year’s end. These measures include reimbursement raises for ambulance services, mental health reimbursements, the Qualifying Individual (QI) program, the outpatient “hold harmless” provision, and transitional medical assistance, which provides Medicaid benefits for low-income families who are transitioning from welfare to work.

In a statement, American Medical Association President Dr. Peter Carmel said waiting until the final week of the legislative session to address an issue Congress knew about all year is no way to conduct business for the country.

Read more: Senate OKs two-month freeze on doc pay – Healthcare business news and research | Modern Healthcare http://www.modernhealthcare.com/article/20111217/NEWS/312179947#ixzz1gzkQmEcy
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The 2012 OIG Work Plan – The Government is Still at Work During the Holidays

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On November 10, 2011, the Office of the Inspector General of the Department of Health and Humans Services (the “OIG”) issued their 2012 Work Plan. The annual Work Plan is designed to give Medicare providers and supplier notice and information on areas of potential abuse that the OIG to address with particular attention. As we approach a new year, here are some areas that our clients and friends may wish to examine to avoid scrutiny by the OIG

Medical Equipment Companies

Enrollment Abuses

The OIG has discovered a pattern of improper enrollment among supplier of durable medical equipment, prosthetics, orthotics and supplies (DMEPOS). The OIG is looking to Medicare contractors (carriers and intermediaries) to be more scrutinizing in the enrollment of DMEPOS suppliers. The contractors will be assessed on their use of enrollment screening mechanisms and post enrollment monitoring activities to find companies that may pose fraud risks. It is, therefore, important for DMEPOS suppliers to make sure all applications for enrollment and even those for change of ownership are completed accurately and thoroughly.

Payments for High Priced Equipment

Additionally, the OIG will be undertaking a heightened review of the appropriateness of payments to DMEPOS suppliers for “high ticket” items such power mobility devices, oxygen and hospital beds. The medical equipment industry has always been the target of potential abuse. The OIG confirms this stating that there continues to be wide spread abuse of DME not ordered by physicians, not delivered or not needed. The OIG will focus on geographic areas with high volumes of “high ticket” reimbursements and review for compete records demonstrating that the services are “reasonable and necessary for the diagnosis and treatment of the illness or injury.” For frequently replaced supplies such as CPAP and respiratory supplies, the OIG will review compliance with the requirements that a Certificate of Medical Necessity must specify the type of supplies needed and the frequency with which they must be replaced used or consumed.

Diabetic Testing Supplies

The OIG will also review Medicare claims for diabetic testing strips and lancets (diabetic testing supplies) to identify questionable billing. Medicare has utilization guidelines for the amount of diabetic testing supplies (DTS) that beneficiaries may receive. To receive reimbursement from Medicare, suppliers must maintain documentation demonstrating that their DTS claims meet all Medicare coverage, coding, and medical necessity requirements. DTS claims with certain characteristics (e.g., DTS provided to a beneficiary at irregular intervals) may indicate improper supplier billing.

Physicians

Some highlights of physician’s services that are going to be under review include the following:

Place-of-Service Errors

The OIG will be reviewing physicians’ coding practices on Medicare Part B claims for services performed in ambulatory surgical centers and hospital outpatient departments to determine whether they properly coded the places of service. The OIG will particularly pay attention to this as there is evidence of physicians coding for services at the higher non-facility rate when the services were actually performed in an ASC or outpatient setting. Medicare pays a physician higher amounts for serviced performed in a non-facility setting such as the physician’s office.

Incident-To Services

“Incident-to” services will also be reviewed. This is a new initiative on the part of the OIG and therefore, should garner lots of attention. The OIG will try to determine whether payment for such services had a higher error rate than that for non-incident-to services. We will also assess CMS’s ability to monitor services billed as “incident-to.” One of the main focuses of this review is to cut down the amount of billings for incident to services performed by non-physicians without the required direct physician supervision. The OIG has found that unqualified non-physicians performed 21 percent of the services that physicians did not perform personally. Incident-to services represent a potential abuse for the Medicare program in that they do not appear in claims data and can be identified only by reviewing the medical record.

Evaluation and Management Services (“E/M Services”)

In 2009, Medicare paid $32 billion for E/M services. This represented nearly 20% of all Medicare Part B payments. With those dollars at stake, the OIG will be reviewing E/M claims to assure there is appropriate documentation to justify payment for the more intensive E/M codes. It is important to thoroughly document records to demonstrate the type, setting, and complexity of services provided and the patient status, such as new or established. Also under review will cases of multiple E/M services for the same providers and beneficiaries to identify electronic health records (EHR) documentation practices associated with potentially improper payments. Medicare contractors have noted an increased frequency of medical records with identical documentation across services.

Payments for Services Ordered or Referred by Excluded Providers

Medicare does not allow payment to a physician or supplier for services and items provided that were prescribed or ordered by individuals or entities excluded from the Medicare program. To combat that practice, the OIG will undertake a review of the nature and extent of Medicare payments for services ordered or referred by excluded providers (those who have been barred from billing Federal health care programs) and examine CMS’s oversight mechanisms to identify and prevent payments for such services.

There are numerous other areas of concern that will be reviewed by the OIG during 2012. To assure compliance with the items describes as well as other health care laws, the Florida Healthcare Law Firm offers a comprehensive compliance audit of your organization. For more information please contact us  at 561-455-7700


Physician Owned Distributorships (PODS) Make Waves

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Physician owned distributorships (PODs) have been the source of considerable controversy for years, but now they’ve caught the attention of Congress!

PODs distribute various things, most commonly surgical implants and devices, that are reimbursed by insurers. A patient needs a spinal rod, a surgical implant/device company makes it and a distributor rep distributed it. Device/implant companies usually contract with distributorships to sell their products. Distributorships contract with reps who are paid commissions for sales. Surgeons who actually order the devices sometimes think “Since I’m the one doing the surgery and ordering all this stuff, why don’t I make something from the selling it?” PODs are one way for physicians to financially benefit from the sales of devices and items their patients need, but they have never been more controversial than now.

Conceptually speaking, PODs are controversial because government regulators think physicians who have an economic stake in health care items or services will tend to over utilize them. Moreover, there is a specific concern that allowing physicians to profit from the devices their patients need violates federal anti kickback laws or the Stark prohibition on compensation arrangements.

In 2006, the Office of the Inspector General of HHS and CMS expressed major concerns about PODs, and cited concerns about “improper inducements.” At that time, the OIG stopped short of prohibiting them, but called for heightened scrutiny. CMS itself has stated that PODs “serve little purpose other than providing physicians the opportunity to earn economic benefits in exchange for nothing more than ordering medical devices or other products that the physician-investors use on their own patients.”

Implantable medical devices are unusual in the way they come into use. Unlike DMEPOS, for instance, medical devices are not sold to distributors. They’re sold from the manufacture to the medical facility where the surgery will take place. So, the argument goes, physicians are not actually in a position to drive the sales volume of the implants. The counter: physicians invested in a POD can leverage their hospital admissions to influence the device choice of hospitals and surgery centers.

The biggest legal hurdle for PODs is the federal Anti Kickback Statute, which carries both criminal and civil penalties. Simply put, if even one purpose of an arrangement is to pay for patient referrals, the law is violated. So, the law is arguably violated if one purpose of the POD is to induce physicians to order implants for their patients. Looked at another way, the law is violated if one purpose of a hospital doing business with a POD is to ensure patient referrals by the physician POD investors.

A 1989 OIG Special Fraud Alert on fraudulent physician joint ventures is especially interesting on the fraud and abuse issues in pointing out that the following would indicate unlawful intent to induce patient referrals—

Investor choice. If the only investors chosen are surgeons with an opportunity to refer and if they lack any business or management expertise, the arrangement appears to be a cloaked way to incentivize unlawful referrals (i.e. ordering implants). The key question is whether the business, in selecting investors, is looking to raise capital or to lock in referral sources.

Risk. If the POD investment involves little or no financial risk, the OIG would likely take issue with it.

The bottom line seems to be that if there isn’t a real business, with real financial risk and qualified investors, a POD will likely be viewed as a suspicious arrangement based on locking in patient referrals or physician admitting pressure by physician investors.

In its June, 2011 Inquiry “Physician Owned Distributors (PODs): Overview of Key Issues and Potential Areas for Congressional Oversight,” the U.S. Senate Finance Committee Minority Staff, the Committee reports “A number of legal and ethical concerns have been identified as a result of this initial inquiry into the POD Models.” The Committee reviewed over 1,000 pages of documents and spoke with over 50 people in preparing its report. The Committee cited long-held concerns regarding PODs, and leaned heavily on the 2006 Hogan Lovells (previously Hogan & Hartson) law firm’s anti-POD analysis.

With the Committee’s call for greater OIG and CMS involvement, one thing seems clear: the future of PODs is uncertain. In this era of cost-cutting, it seems clear that PODs are gonna get a haircut and may even lose their head.


Supervisory Requirements for IDTFs

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supervisionWe get questions all the time regarding the supervisory requirements for Independent Diagnostic Treatment Facilities (IDTF). Here are some tips in complying with one of the key elements in obtaining and maintaining status as an IDTF and as a Medicare provider.

An IDTF must have one or more supervising physicians who are responsible for the direct and ongoing oversight of the quality of the testing performed, the proper operation and calibration of equipment used to perform tests, and the qualifications of non-physician IDTF personnel who use the equipment. Not every supervising physician has to be responsible for all of these functions. One supervising physician could be responsible for operation and calibration of equipment, while other physicians are responsible for test supervision and the qualifications of non-physician personnel.Continue reading

The Secret About Large Practices

Change in health care delivery and business is driving tremendous integration activity in all sectors. Hospitals are merging. Medical practices are merging with competitors (typically in single specialties). Size and growth is becoming the magic pill in this era of change and fear. But it is not “necessary” and it is certainly not enough.

“The day of the onsies and twosies is coming to an end.” How many lawyers and other consultants have said this? For how many years? For a very long time. And yet, one and two person practices persist and even flourish! That said, there are clear opportunities available to those practices that embrace the concept of size:

1.Economies of scale. Stuff costs less when you buy more of it, and large practices buy more stuff;

2.Pricing power. To some extent, the larger group gets to muscle back against commercial payers. Though this depends on complex things like the scope of services and geographic availability, the clear truth seems to be that size is a factor in pricing;

3.New income opportunities. Sure. Larger groups have a greater opportunity to develop new income sources. Ancillary services, for instance, are volume driven, so the larger the group, the greater the opportunity.

So, what’s the secret about large practices? Size alone does not fix much. People selling size are selling their expertise and consulting services. They are not in the business of making businesses operational, so their fix is structure (size) alone. Put another way, as someone one said “To a carpenter, everything is a nail.”

There are three medical practices—One, Two and Three. They each have their own challenges, successes and cultures. Put them into one large practice, what do you have for certain? A large practice with a collection of challenges, successes and cultures. Where is it going? How will it get there? Who will run it? Will they fund development, growth, operations, evolution? If questions like this aren’t asked and answered, the only thing certain is that the new large group will simply mirror the challenges, successes and cultures of their component parts.

Size alone is no panacea! And the truth is always the same in business, even medical practice: without business leadership (expertise) and commitment (money) and hard work over time, no business can grow, thrive or evolve. But, as Jerry Seinfeld once said “Not that there’s anything wrong with that.”


State Appellate Court Allows Burdensome Discovery Request

On August 10, 2011, the Fourth District Court of Appeals supported one litigant’s huge discovery request on the treating physician. The case (Katzman v. Rediron, No. 4D11-1290, August 10, 2011) arose with the following facts:

1.The doctor agreed to treat the patient under a letter of protection (LOP), which means the doctor would be paid out of the recovery of a lawsuit, not from health insurance proceeds;

2.The doctor allegedly performed a “controversial” surgical procedure, so Rediron’s lawyers wanted to know all sorts of information about how often he has ordered discectomies over the past four years and what he charged in litigation and non-litigation cases;

3.The doctor’s lawyer tried to block Rediron’s discovery request on the grounds that it would be a huge undertaking;

4.The trial court supported the discovery request, which was upheld on appeal.

The court’s analysis is interesting and instructive. The court found the treating physician to be BOTH a fact witness (because he treated the patient) and an expert witness (because he gives opinion testimony re the patient’s condition and injury). The court used their characterization of the doctor as a “hybrid” witness in order to support the trial court’s decision, which granted broad discovery on the issue of the reasonableness of the procedure’s cost and its necessity.

Discovery is something that can be used to harass and press someone into settlement. Hence, there are guidelines directed to ensuring that discovery requests are reasonable. That said, physicians who treat patients in lawsuits have a unique role that may expose them to greater than normal discovery requests.

Moreover, with this opinion, the old argument in bodily injury cases “What does reasonableness and necessity matter. It’s a BI lawsuit” will likely hold less water as all payers (including those who pay in BI lawsuits) are looking to reduce costs.


Path Lab Proposal Shot Down by OIG

The Office of Inspector General of the Department of Health and Human Services recently (October 11, 2011) shook its head at a proposal involving a pathology lab management services business that was to be owned by physicians. The proposed arrangement had the following features:

1.A path lab management business (“Manager”) would be formed and the business would be owned by doctors;
2.The Manager would provide a list of management services to a path lab;
3.The path lab (“Lab”) would not be owned by the doctors that own the Manager;
4.The Manager would provide a fixed amount of hours of services each year and would receive a percentage of the Lab’s income (fixed percentage in advance) and that fee would approximate the Lab’s use of the Manager’s services for the year;
5.The physician Manager investors would be in a position to refer to the Lab;
6.The ownership interests of the physician investors in the Manager would exceed forty percent (40%);
7.More than forty percent (40%) of the Lab’s revenues would come from the physician investors.

The OIG decided that the proposed arrangement posed more than a minimal risk of violating the Anti Kickback statute. The OIG also said the manager cannot refer its own patients or generate business in connection with the proposed arrangement. The OIG focused on the following points in its advisory opinion:

1.The Manager’s “usage fees” to the Lab are percentage based and not flat and set in advance;
2.The ownership interests of the doctor investors in the Manager would exceed what is specified in the so called “small entity” Safe Harbor;
3.The physician owners of the Manager have no experience in managing a lab, but are in a position to generate referrals to it.

Though the regulatory Safe Harbors (to the Anti Kickback Statute) are illustrative of permissible arrangements, the OIG is clearly sticking very close to them. where federal or state healthcare program dollars are involved, physician investors would do well to make sure they are Safe Harbor compliant.


CMS Delivers Final ACO Rules

Via Modern Healthcare

Final rules for Medicare’s accountable care organizations, released today by the CMS, made significant changes to proposals widely rejected by hospitals and physician groups.

Accountable care under Medicare offers financial incentives to providers that achieve quality and cost-saving targets. The Patient Protection and Affordable Care Act calls for Medicare to offer accountable-care agreements starting in 2012. The agency released draft rules in March for three-year agreements that providers sharply criticized as too risky and burdensome. More than 1,200 comments were submitted, according to CMS.

Final rules reduced quality measures to 33 (PDF) from the 65 originally proposed. CMS officials said in regulations released today the agency sought to reduce the administrative burden and eliminate potentially redundant measures. CMS also eliminated a potential penalty for the final year under one of two proposed accountable-care payment models. Previously, one payment proposal required ACOs to accept risk during the last year of a three-year agreement. The other model requires ACOs to accept risk for all three years.