CMS Proposes to Increase Reward for Reporting Medicare Fraud to $10 Million

Posted by Laurie K. Chisolm on May 21, 2013

Health provider compliance officers may soon have another cause for busy days and sleepless nights.  CMS recently issued a proposed rule that, if finalized, would revise its little-used Medicare Incentive Reward Program (IRP).   Under the current IRP, an individual may recover up to $1,000 for providing information that leads to the recovery of Medicare funds from individuals and entities that have engaged in fraudulent Medicare activities.  The proposed rule both significantly increases the potential reward and simplifies the process that an informant must follow.   It also expands CMS’s ability to deny Medicare enrollment to providers who have unpaid Medicare debts.

Since the current IRP was put into effect in July 1998, CMS has collected less than $3.5 million, and only 18 rewards totaling less than $16,000 have been paid.  In contrast, a reward program under the Internal Revenue Code has caused the IRS to collect almost $1.6 billion (from 2007 to 2012) for which it paid rewards to informants totaling approximately $193 million.

Understandably, CMS believes that remodeling its IRP after the IRS program will encourage many more individuals to report Medicare fraud and increase returns to the Medicare fund.

Under the proposed IRP an informant could receive up to $10 million for reporting specific information that leads to the recoupment of an overpayment made by Medicare to a supplier or provider.  The reward for information received on or after the effective date of the rule would be “15 percent of the final amounts collected applied to the first $66,000,000 for the sanctionable conduct.”

In order to qualify for a reward, an individual need not go the effort of commencing a qui tam action, as required under the False Claims Act.  Rather, the informant need only provide specific information to OIG, CMS, or a CMS contractor relating to an individual or entity that has engaged in or is engaging in sanctionable fraud and abuse against the Medicare program and specifying the particular time period.

There are some limitations on the reward system.  For example, CMS will not give a reward if the same or substantially similar information was the basis for payment of a reward under any other federal reward program.  An informant who participated in the sanctionable conduct is ineligible. Before the informant may collect the reward, he or she must complete an attestation acknowledging that he or she has not participated in the conduct, is not otherwise ineligible to receive the reward, has furnished truthful information, and further acknowledging that failure to provide truthful information can subject the informant to potential criminal and civil liability.

The proposed rule also imposes broader Medicare enrollment requirements for providers who have existing unpaid Medicare debt.  Under the current rule, an owner, physician, or nonphysician practitioner may be denied Medicare enrollment under a new name or entity if he or she has a Medicare debt.  However, if the practitioner was an owner of another entity that had a Medicare debt, the practitioner could not be denied Medicare enrollment because the entity had  a Medicare debt.  Under the proposed rule, if the provider seeking enrollment was the owner of another provider or supplier that had a Medicare debt that existed when the latter’s enrollment was voluntarily or involuntarily terminated or revoked, Medicare enrollment may be denied if certain criteria are met.

Comments on CMS’s proposed rule must be received by June 28, 2013. 

OIG Nixes Anesthesia Fee Grabs by ASCs

Posted by Linda Terner on June 07, 2012

On June 1, 2012,  the Office of the Inspector General of the Department of Health and Human Services (OIG) issued Advisory Opinion No. 12-06, opining that two business arrangements proposed to be entered into by a 31-member anesthesia physician practice (“Anesthesiologists”) with Ambulatory Surgery Centers (ASCs) could potentially violate the anti-kickback statute.  

One arrangement involved the ASC charging the Anesthesiologists, who were the exclusive anesthesia provider and who were billing payors and patients directly, for per-patient  “management services,” including space for physicians and transferring billing documentation.  The charge applied only to patients covered by non-governmental payors.  The OIG viewed this as charging the Anesthesiologists for services already covered by facility fees, and it concluded that the payment of these per-patient charges would unduly influence the ASC’s referral of all of its patients, including Federal Health Care Program beneficiaries.  The “carve out” of non-Federally insured patients did not remove the anti-kickback issues here because the arrangement was an exclusive services agreement and there was still a risk that the payments would be made to induce referrals of Federally insured patients.  In general, the OIG views such carve-outs with a concern that there might be disguised remuneration for referrals.

In the second arrangement, the ASC formed a subsidiary for the sole purpose of providing anesthesia services to the ASC.  The ASC’s subsidiary would bill and collect for services itself, while contracting with the Anesthesiologists (either with the group directly or the group’s employees individually) at a negotiated rate for services.  The profits generated by the difference between fee collections and the rate paid to the Anesthesiologists were to be up-streamed through the subsidiary to the owners of the ASC.  This type of arrangement is known as the “company model.” There were no safe harbors available for this distribution of profits, so the OIG conducted a factual and legal analysis to determine the risk of fraud and abuse in these circumstances.  The OIG observed that the arrangement was “designed to permit the [ASC’s] physician-owners to do indirectly what they cannot do directly; that is, to receive compensation, in the form of a portion of the [Anesthesiologist’s] anesthesia services revenues, in return for their referrals to the [Anesthesiologists], and concluded that the arrangement would pose "more than a minimal risk of fraud and abuse." 

Both of these arrangements involved the flow of funds, directly or indirectly, derived from the fees earned by physicians performing services (the Anesthesiologists), to the owners of the ASC (the entity referring the services).  The OIG noted the Anesthesiologists’ representation that they were “under competitive pressures to enter into the Proposed Arrangements to stem the loss of its business.”   The use of the “company model” has been a concern for anesthesiologists for some time.  Two years ago, in a letter dated June 16, 2010, and then again on February 27, 2012, the American Society of Anesthesiologists (ASA) requested that the OIG take action to protect anesthesia providers from being forced to provide allegedly illegal kickbacks through the “company model” and/or by paying fees for services provided by the facility.  The ASA represented to the OIG  that 41% of responding anesthesia companies surveyed had been requested by an ASC to provide services under the “company model.” Additionally, the ASA identified service quality, competition, and overutilization concerns relating to that model.  Even though OIG advisory opinions only apply to the parties that request them, the analysis given in Advisory Opinion No. 12-06 of the “company model” should cause anesthesia subsidiaries to be eliminated from ASC business structures and from similar  arrangements with physician groups who also contract for anesthesia services (specialties such as ophthalmology, urology, pulmonology, surgery, neurology, and gastroenterology).

There is no doubt that health care providers face many competitive pressures, but their business arrangements are constrained by laws and regulations promulgated to serve public purposes. According to the OIG’s opinion, “the anti-kickback statute seeks to ensure that referrals will be based on sound medical judgment, and that health care professionals will compete for business based on quality and convenience, instead of paying for referrals.”  Because both parties to arrangements that are found to violate the anti-kickback laws would face civil and criminal liability, health care providers are advised to consult counsel to review/structure their arrangements to come as close as possible to the anti-kickback safe harbors as well as other applicable laws.

Using Information Technology to Detect Health Care Fraud

Posted by Laurie K. Chisolm on February 13, 2012

computerThe prevention and detection of Medicaid fraud and abuse was the general theme at the New York State Bar Association Health Law Section meeting held on January 25, 2012.  While speakers from various governmental agencies and private attorneys addressed the topic from different perspectives, one sub-theme emanated across the board: the government has increasing authority and ability to collect, store, and use information that participants in the health care world are required to disclose.

More than one speaker boasted about the wealth of information that is available right at his or her fingertips.  An ever increasing number of health care related entities must make information available to the government which, in turn, may disclose the information to the public generally via the internet.  The importance of information technology cannot be overstated.

Below are several points addressed by the speakers.

  • Early detection of fraud  The strategy of the Center for Program Integrity (CPI) within the Centers for Medicare & Medicaid Services (CMS) is to prevent payment of fraudulent claims by screening providers and spotting fraudulent practices before claims are ever paid.  To accomplish this, CPI has created a state of the art Medicaid data analysis management information system that captures and stores certain state Medicaid data.  Algorithm concepts have been developed and applied to detect payment anomalies, leading to the recovery of fraudulent payments and identifying targets for audits.

 

  • Sharing of information across states  Information stored electronically can be made available to multiple users.  For example, CPI has developed a platform for states to share information with one another on terminated providers and supplies.  A provider who has been terminated from participation under one state’s Medicaid program can now be identified by regulators in other states.  This sounds a death knell for a terminated provider since under 42 CFR § 455.416(c) a state Medicaid agency must deny enrollment or terminate the enrollment of any provider that is terminated on or after January 1, 2011, under Medicare, the Medicaid program, or CHIP of any other state. 

 

  • Sunshine Act  This law requires that by March 31, 2013, manufacturers of pharmaceutical, device, biological, and other medical supplies must report payments and gifts to physicians and teaching hospitals. The name, address, and NPI of the recipient of the payment or gift must be reported along with a description of the form of payment, the value, and the dates on which the payments were provided.  This information will be made public on the website of the Department of Health and Human Services by September  30, 2013.   Even if payments are legitimate and do not violate any fraud or abuse laws, there is sure to be great interest by the press and others in this information.

For health care providers, it is important to be aware not only of ever changing disclosure requirements, but to be cognizant that the information you disclose may be used by many different readers for many different purposes.

New York Hospital Paid Millions to Settle Stark Physician Recruitment Claims Made by Whistleblower

Posted by Linda Terner on February 09, 2012

whistleOn January 25, 2012, the United States Department of Justice issued a press release  announcing its settlement of a False Claims Act matter with Cayuga Medical Center of Ithaca, New York (the “Hospital”), for $3,576,056, in connection with recruitment agreements which allegedly violated Stark  regulations. The settlement resolves a lawsuit filed by a Dr. David Jorgenson, a physician who was a party to one of the allegedly flawed contracts. The False Claims act permits a whistleblower to file a lawsuit on behalf of the United States and to share in recoveries.  Dr. Jorgenson received $566,955, an 18% share of the settlement proceeds, for reporting his concerns and cooperating in the litigation.  The State of New York also received part of the settlement related to Medicaid recoveries.

This case is significant because the Hospital had self-disclosed four recruitment arrangements under the OIG’s Self-Disclosure Protocol six months before Dr. Jorgenson filed his qui tam lawsuit against the Hospital.  Dr. Jorgensen asserted a claim against the Hospital relating to his own contract, which had already been disclosed confidentially to the government, along with an additional claim relating to an undisclosed recruitment contract.

In general, if the hospital-physician practice recruitment contract violates the Stark law, then the hospital must return all of the proceeds of Medicare and Medicaid claims arising from referrals of patients, for designated health services in the hospital, made by all of the physician owners of the practice, during the period of non-compliance. 

The recruitment contracts here were alleged to have become non-compliant after they were signed, due to changes in the Phase II Stark regulations.  The government’s position that existing contracts are not grandfathered and must comply with subsequent Stark regulations has not been tested in any published court opinion, but the hospital self-disclosed, and the parties settled, without seeking a judicial determination of this issue.  The settlement was structured so that the government took less of a recovery, sharing the proceeds with the whistleblower in order to incentivize others to follow this physician's example of disclosure and cooperation.

To avoid this type of scenario,  

  • when self-disclosing regulatory non-compliance, disclose all instances;
  • when regulations change, review prior arrangements to ensure they continue to be compliant, especially recruitment contracts with currently ongoing benefits or loan forgiveness dated before July 26, 20004 (Stark II effective date); and
  • recognize that physicians and others with knowledge may serve as whistleblowers, as the government offers statutory incentives for private individuals to participate in corrective litigation in order to improve the integrity of the federal health care system.

 

Diagnostic Testing Center Fined Millions Under False Claims Act For Physician Supervision Failure In Whistleblower Case Brought By Former Employee

Posted by Linda Terner on November 22, 2011

On October 21, 2011, the federal district court in Nashville, Tennessee denied an Eighth Amendment “excessive fine” challenge to the judgment entered on August 23, 2011 for $11.1 Million against Medquest Associates Inc. and certain affiliates  (Medquest) in a False Claims Act (FCA) (31 U.S.C. §§ 3729 through 3733) whistleblower case.  The U.S. Attorney's Office in Nashville filed the FCA case after it received information from a former Medquest employee who complained to her employer that diagnostic testing was being done either without any physicians at all, or  by physicians who lacked the required certification or specialized training. United States ex. Re. Hobbs v. MedQuest Associates, Inc. et al., No. 3:06-01169 (M.D. Tennesee) 2011 U.S. Dist. LEXIS 126539. 

The court held that compensatory damages and penalties were appropriate statutory damages for submitting claims to Medicare for contrast testing done without the physician supervision, and for failing to give CMS notice of a change of ownership and billing under the former owner’s Medicare provider number. The court had decided earlier in the litigation that CMS regulations on physician supervision of diagnostic tests were conditions of payment and that submitting claims for payment without regulatory compliance amounted to a violation of the FCA. 

The damages were calculated by adding the amount of each claim filed with Medicare, plus treble the amount of the claim, plus a per-claim civil penalty of $11,000 for the physician supervision claims and $5,000 for the claims made under the  former operator’s number.  The court held that the assessment of treble damages and civil penalties, with fixed ranges and multipliers keyed to actual harm, was mandatory under the statute, and that the amount calculated by the court was less than the statutory maximum.  The amount of the judgment did not run afoul of the excessive fines clause, given the degree of culpability of the sophisticated and experienced defendant, the relationship between the penalty and the harm, and sanctions imposed in other cases which the court analyzed.

The court pointed out that one of the “primary purposes of Medicare is to promote beneficiary access to high-quality medical care.”  The court also noted the importance of whistleblower claims, citing Congressional findings to the effect that “more effective fraud detection will only occur if changes are made at the basic employee level, to halt the so-called 'conspiracy of silence.'"

There are many health care services which have provider supervision requirements in many venues.  Health care providers are well-advised to diligently review, implement, and document compliance with the supervision requirements that apply to them.

Does Stark Permit Non-Competes in Recruitment Arrangements?

Posted by Rachel Ryan on October 06, 2011

SpecialistImagine the following: Hospital XYZ  wants to recruit a desperately needed specialist to the community to meet the needs of the patient population.   Physician Practice ABC is willing to recruit and employ such a specialist, provided Hospital XYZ agrees to enter into a recruitment (income guarantee)  agreement.  In order to protect its business interest, Physician Practice wants to include a non-compete clause in the new recruit’s employment agreement.  Is this permissible under Stark’s recruitment exception?  I have been asked this question on more than one occasion and the answer is yes, if the non-compete is reasonable. 

When CMS issued the Stark II, Phase III regulations on September 5, 2007, it changed its position on the permissibility of non-competes in recruitment arrangements.  Based on comments CMS received prior to the issuance of the Stark II, Phase III regulations, it was persuaded that categorically prohibiting physician practices from imposing non-compete provisions may have the unintended effect of making it more difficult for hospitals to recruit physicians.  CMS was concerned that physician practices would be reluctant to hire additional physicians, regardless of the financial assistance from hospitals, unless they are able to impose limited, reasonable non-compete clauses.  Consequently, CMS amended 42 CFR Section 411.357(e)(4) to state that physicians and physician practices may not impose on the recruited physician any practice restrictions that unreasonably restrict the recruited physician’s ability to practice medicine in the geographic area served by the hospital.   So what does “reasonable” mean? 

CMS addressed this very question in Advisory Opinion No. CMS-AO-2011-01 (May, 2011).  The following is a list of other factors CMS evaluates when determining if a non-compete is reasonable:

  • Compliance with applicable state law;
  • Time period;
  • Distance requirement; and
  • Physician’s ability to practice at certain hospitals both within and outside of the Hospital's geographic service area.

I think in order to balance the needs of both the hospital and the physician practice, the non-compete should be drafted so it allows the hospital to employ the physician should his/her relationship with the group not work out.  Using this approach, the hospital is able to retain necessary talent in the community and the practice is able to protect against unwanted competition.

CMS Will Screen Claims Starting July 1

Posted by Marcia Smith on June 20, 2011

Mathematical equationCMS announced on June 17 that it will deploy predictive modeling technology to pre-screen claims.  The goal is to identify fraudulent claims before they are paid. 

Medicare has typically paid whatever claims a participating provider submits, and then sought to recover erroneous claims through retrospective review.  This “pay and chase” approach is good for providers and keeps the cost of participating in Medicare at reasonable levels. It can be bad for taxpayers though because fraudulent claims will be paid just as quickly as valid claims.

Predictive modeling technology is widely used in private industry.  It is used by credit card companies to  detect fraud, insurers to evaluate risk, and financial analysts to evaluate business scenarios, among other things.

CMS has contracted with Northrop Grumman  to develop the technology:   

Northrop Grumman will deploy algorithms and an analytical process that looks at CMS claims – by beneficiary, provider, service origin or other patterns — to identify potential problems and assign an “alert” and assign “risk scores” for those claims.  These problem alerts will be further reviewed to allow CMS to both prioritize claims for additional review and assess the need for investigative or other enforcement actions.

Northrup Gruman has a number of software development contracts with CMS, including the contract to develop and maintain the National Level Repository for use in assessing whether a provider has met the meaningful use standard.

If the new technology works, it could be good for providers and taxpayers by detecting truly fraudulent claims and eliminating criminal abusers. If it does not work and yields too many false positives, providers could become bogged down in justifying valid claims that should be paid without any question.