Healthcare Integration Advisors - Overcoming Obstacles Along the Continuum of Care

While the headlines reported colorful allegations of kickbacks to physicians, such as Hawaiian vacations and Madonna tickets, and the stunning magnitude of the largest healthcare fraud settlement and payment by a drug company , the most significant aspect of the $3 Billion settlement by global pharmaceutical giant GlaxoSmithKline LLC (GSK) was the Corporate Integrity Agreement  (CIA), which restructures its sales and promotion practices.  The alleged misconduct involved “off-label” drug promotions (recommendations to use medicines for different conditions and patients than the FDA approved), payment of kickbacks, making false and misleading statements concerning the safety of Avandia, and reporting false “best prices” in order to underpay rebates owed under the Medicaid Drug Rebate Program.

With the theme “patients before profits, science before sales” the government set about to restructure GSK’s marketing practices in significant ways.  In addition to changing its incentive compensation practices, such that executive bonuses are now required to be clawed back for regulatory compliance failures, and field representative compensation must be based on service quality rather than sales volume, the 123-page CIA outlines a major overhaul of GSK’s physician arrangements policies and procedures.

Physicians and hospitals/academic medical centers may obtain remuneration from drug companies under any number of arrangements, including consulting agreements, speaker programs, service on advisory boards, research, publication activities, and grants for medical education activities.  Concern that these payments may undermine medical judgment or scientific independence led Congress to adopt the “Physician Payments Sunshine Act” reporting requirements, which go into effect on  January 1, 2013.  CMS blogged that the final rule will come later this year.  In the meantime, however, the CIA goes far beyond requiring the transparency of monetary payments. It requires that each type of physician relationship involving compensation be conducted in such a manner as to promote compliance with federal standards.

Physicians should see the following changes, among others, in their relationships with GSK and possibly with other companies that read the CIA as “a word to the wise” and adopt similar compliance practices voluntarily:

• Physicians will receive a letter from GSK describing the allegations, the settlement, and requesting that physicians report inappropriate promotion of products or other questionable conduct;
• Any requests by physicians for information on “off-label” uses of drugs will be required to be put in writing, confirming what information was requested, whether or not the request was unsolicited, signed by the medical professional, referred to the Medical Affairs Department, and all such requests for information will be tracked internally at GSK;
• Drug company sales and field reps may be accompanied by monitors who will observe their meetings with health care providers and assess the promotional materials distributed;
• Speakers at programs will be required to have compliance training and written agreements describing the scope of the work, speaker fees to be paid (fair market value with annual caps), compliance obligations. In addition, their programs will be monitored and their fees reported on the GSX website;
• Samples, coupons, and vouchers for drugs will be distributed only to the medical specialty or types of clinical practices for which the drug’s use has been approved;
• Researchers will have written agreements describing the scope of clinical research or other work, fees based on a pre-set rate structure, and compliance obligations;
• Physicians who sit on drug formulary boards or who develop clinical guidelines will be required to disclose their financial relationships with GSK; and
• Sponsorship or funding of grants to healthcare-related organizations in support of educational programs will be limited. The programs must be non-promotional and accurate in nature, and financial relationships with teaching faculty will be disclosed,.

It is important that the health care provider community as well as drug and medical device manufacturers read this CIA in order to have a clear understanding of what the Office of the Inspector General and the FDA expect.  Both business practices and compliance programs may need to be modified or enhanced to address financial incentives related to promotional and scientific activities that could compromise high quality patient care.  Transparency of financial arrangements is useful to raise the question of whether benefits have influenced physician judgment, but this CIA seeks to reform the underlying industry marketing, research, and compensation practices that drive many manufacturers’ arrangements with physicians.

On March 5, 2005, the Office of the Inspector General (OIG) posted its Compliance 101 web page, with links to a wealth of easily accessible educational materials and guidance for the health care industry.

General Compliance Materials by Industry.  Industry-specific guidance has been compiled on a linked page, providing access to a series of OIG voluntary compliance programs for health care industry members, including hospitals, physician practices, nursing homes, third-party billers, pharmaceutical manufacturers, HHS and PHS research grant recipients, and durable medical equipment suppliers.  The industry guidance, issued over the last several years, identifies high-risk areas for each industry segment, so that compliance efforts can be focused.

Provider Compliance Training.  The Compliance 101 page has a link to a page collecting provider compliance education materials, including recently developed video and audio podcasts, webcasts,  and written presentation materials on such topics as the federal fraud and abuse laws, the Anti-kickback law, the Physician Self-Referral law (Stark), operating an effective compliance program, tips for the OIG Self-Disclosure protocol, enforcement, and health reform information.  These materials are in many ways a ready-made, easy to use, training program on general compliance. 

Compliance Education for Health Care Boards.  Video and presentation materials, and a toolkit for health care leaders, geared to helping directors create a corporate culture of high-quality care and compliance, are available through a link from the Compliance 101 web page.

Compliance Education Materials for Physicians.  The OIG web page also provides a link to its recently issued pamphlet entitled "A Road Map for New Physicians," which should be used by every hospital and physician practice to educate physicians in complying with the five most important fraud and abuse laws which govern relationships with payers, vendors, fellow physicians and other providers.

The Compliance 101 page is a helpful compilation of OIG resources and compliance guidance, but remember, compliance is the responsibility of the individual members of the  health care industry, who are also responsible for staying current with regulatory changes and developments.

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.

If you are a durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) company who thinks you can secure an exclusive contract with a skilled nursing facility (SNF) for Medicare covered items by offering a below-cost discount on non-covered items, think again.  OIG posted an advisory opinion on August 4, 2011, that makes clear such discounts could run afoul of the anti-kickback law.

Covered items furnished by a DMEPOS company to an SNF are billed directly to Medicare, while non-covered items are billed directly to the SNF.  Normally, for non-covered items, a DMEPOS company will charge the SNF a price that covers the cost of providing the items, overhead, and profit.  In the advisory opinion issued by OIG, an SNF had issued a request for proposal soliciting bids to be the exclusive supplier of covered items.  Suppliers that submitted bids were also required to submit pricing for non-covered items, which the SNF could purchase at its option.  The DMEPOS company questioned if it could offer below-cost pricing on the non-covered items, noting that the payments it would receive from covered items would offset any losses it would incur in furnishing the discounted non-covered item.

OIG stated that “in evaluating whether an improper nexus exists between the rate offered for items and services and referrals of Federal business in a particular arrangement, we look for indicia that the rate is not commercially reasonable in the absence of other, non-discounted business.”  In the eyes of OIG, the proposed exclusive service arrangement combined with the discount gives rise to an inference that the parties are “swapping below-cost rates on business for which the SNF bears the business risk in exchange for other profitable non-discounted Federal business, from which the supplier can recoup losses incurred on the below-cost business, potentially through overutilization or abusive billing practices.”  This type of “swapping” of business poses a substantial legal risk under the anti-kickback statute.

The Center for Medicare and Medicaid Services issued its Voluntary Self-Referral Disclosure Protocol (“SRDP”) on September 23, 2010.  I outlined the problems with the SRDP and summarized the guidance provided by CMS representatives for making a submission in prior posts.  The purpose of the SRDP is to self-report that an entity received payments from Medicare in violation of the Stark statute.

One issue that an entity making a self-disclosure will encounter is how far back it should go when determining the period of non-compliance. The Stark law was first effective in 1989, and initially prohibited physicians from making referrals for clinical laboratory services.  This is commonly referred to as Stark I.  The list of designated health services was expanded to ten (now 12) in 1993.  This is commonly referred to as Stark II.  Stark II was effective January 1, 1995, but the Stark II, Phase I regulations were not effective until January 4, 2002.  Thus, from January 1, 1995 to January 4, 2002, the only legal basis for prohibiting claims for designated health services other than clinical laboratory services is the statute itself. 

An argument can be made that the earliest date for reporting that a claim was submitted to Medicare in violation of Stark II is January 4, 2002.  Prior to that date, although the statute was in effect, the obligation in 42 C.F.R. §411.353(d) to refund any payments made by Medicare pursuant to a prohibited referral did not apply to the other designated health services, including hospital inpatient and outpatient services.  This obligation is not found in the statute, which requires that providers make refunds to individuals on a timely basis.  CMS acknowledges in the SRDP that this obligation is distinct from the obligation to refund payments made by Medicare and cannot be compromised.  

Keep in mind also that payments made to physician groups (a professional corporation or limited liability company) would not constitute a financial relationship with the individual referring physicians in the group unless the arrangement met the definition of an indirect compensation arrangement prior to the Stark II, Phase III regulations implementing the “stand-in-the shoes” rule. Therefore, if the financial relationship was between the entity and a physician group and the referring physicians in the group did not receive compensation from the group that varied with the volume or value of referrals to the entity, the earliest date of the potential disallowance period would be December 4, 2007, which is the effective date of the Stark II, Phase III regulations.

As originally proposed, any physician in the group would stand in the shoes of his or her group.  The stand-in-the shoes rule was later modified effective October 1, 2008 so that only physicians who have an ownership or investment interest in the physician group would stand in the shoes of the group, and other physicians may stand in the shoes.

It would make sense for CMS to apply the stand-in-shoes rules only to the owners of the physician group as of December 4, 2007, and not require that all physicians who were employees or independent contractors in the group between December 4, 2007 and October 1, 2008 stand in the shoes of the group. Determining which physicians had employment or independent contractor arrangements with a particular group could be burdensome, whereas information regarding the owners of a physician group is publicly available, at least in New York.

The decision of the United States District Court for the District of New Jersey provides a recent example (decided on January 4, 2011) of how the United States pursues False Claims Act liability against physicians as well as hospitals as a result of violations of the Stark Law.  Here is a summary of what happened and what it means to the healthcare community, specifically physicians.

 The United States settled a False Claims Act case  against the University of Medicine and Dentistry of New Jersey (“the Hospital”) for $8.3 million.  This resulted from the government’s assertion that the Hospital entered into bogus part-time employment contracts with cardiologists designed to cause the referral of enough cardiology patients to the Hospital to maintain the volume required for a Level 1 Trauma Center. 

The physicians did not perform many of the duties required under their part-time employment contracts and the Hospital did  not require performance.  For this reason, the court found that the contracts were commercially unreasonable and resulted in payments in excess of fair market value.  Although the part-time employment agreements had been reviewed and approved by the Hospital’s in-house counsel and an outside valuation consultant, the court observed that the opinions were based on the assumption that the physicians were performing the contractual services, which proved not to be the case. 

After settling with the Hospital, the government pursued Dr. Campbell, who claimed that he relied upon the Hospital’s assurances that the contract had been reviewed by Hospital counsel and did not violate the Stark Law.  The physician’s attempt to “claim over” against the Hospital and two of its employees for indemnification and contribution was dismissed by the court.

The opinion is significant for four reasons: 

1. It shows the intention of the United States to pursue physicians as well as hospitals for Stark Law violations.  Many physicians think Stark is solely a hospital problem.  It is not. 
2. The opinion provides a warning that physicians may be sued by the government for causing a false claim to be filed if they violate the Stark Law and then facilitate the hospital’s unlawful billing for designated health services.
3. A physician will not be saved from liability under Stark because he or she claims to have relied on the hospital to produce a legally compliant agreement. 
4. Most importantly, hospitals and physicians must ensure that physicians are actually performing and documenting the performance of the duties set forth in their written contracts.  Absent such documentation, favorable legal and fair-market-value expert review will not save the day.

Before it was acquired by Vanguard Health Systems, Detroit Medical Center (DMC) entered into a Settlement Agreement with the US Department of Justice (US DOJ) and the US Department of Health and Human Services, Office of the Inspector General (OIG) to resolve potential violations of federal law as a result of entering into improper financial relationships with referring physicians. DMC agreed to pay $30 million in exchange for a release from liability under the False Claims Act, the Civil Monetary Penalties Law (which authorizes civil penalties for violations of the anti-kickback statute), the Program Fraud Civil Remedies Act, and the civil money penalties under the Physician Self-Referral (Stark) Law.

DMC discovered the improper relationships through the due diligence process. The improper relationships included so-called "technical violations" of Stark, such as the failure to have a written agreement in place that met the requirements of a Stark exception.  It also included more substantive violations that may have raised a colorable allegation of an anti-kickback violation, such as providing business courtesies to physicians and paying higher than fair market value compensation. 

Although it  attempted to use the new CMS Voluntary Self-Referral Disclosure Protocol, CMS encouraged the hospital to work through US DOJ after DMC advised that they wanted to settle the matter within four to six weeks so they could close on the acquisition. 

It is interesting to note that CMS was not a party to the settlement agreement. Further,  the agreement does not resolve DMC's obligation to repay Medicare for any claims that it submitted in violation of the Stark law, only the civil penalties that would be assessed for such violations. Such repayments are required under 42 CFR §411.353(d), and arguably, the statute itself, although the statute addresses only the obligation to refund payments to individuals.

CMS is authorized to compromise the amount due and owing for violations of the Stark law, including the repayment obligation, when the provider makes a submission under the Self-Referral Disclosure Protocol. Hopefully, in the future, CMS will also exercise this authority if the provider enters into a settlement agreement with US DOJ or the OIG.

On November 19, 2010, the American Health Lawyers Association sponsored a Webinar entitled “The New Reality of Stark Self-Disclosures, What to Do and Not Do”. 

The Presenters included Troy Barsky, Esq. and Roy Albert, Esq.  from the Centers for Medicare and Medicaid Services. Mr. Barsky is the Director, Division of Technical Payment Policy and Mr. Albert is in the Financial Services Group, Office of Financial Management.

Mr. Barsky and Mr. Albert made the following points regarding the Stark Self-Referral Disclosure Protocol (SRDP):

•  Prior to the enactment of Section 6409 of the Patient Protection and Affordable Care Act (PPACA), CMS was not authorized to reduce amounts due and owing as a result of a violation of the Stark statute.  The inclusion of this provision in PPACA is essential to the Stark self-disclosure process because without this authority an entity has no incentive to self-disclose.

• CMS essentially adopted the approach taken by the HHS Office of Inspector General in accepting self-disclosures under the anti-kickback statute.

• The purpose of the SRDP is to resolve actual and potential violations of the law and not to provide a process to obtain an opinion on whether a particular factual situation constitutes a violation.  Therefore, if a disclosure is made under the protocol, CMS will assume that it constitutes a violation.  A submission that attempts to argue that a particular arrangement did not violate the statute will be rejected.

• If a submission is rejected, CMS will be entitled to reopen the claims submitted in violation of the statute from the date of the disclosure. 

• CMS and OIG will know whether there are simultaneous disclosures of the same conduct.  If a submission is made under the SRDP, CMS will assume it did not fall within the Department of Justice or OIG jurisdiction.

• The submission should not include protected health information (PHI).  If the submitter believes it is necessary to include PHI, the information should be segregated and the submitter should let CMS know that PHI is included.

• Submissions must be made electronically. If the submission constitutes a large PDF file, the PDF files should be broken up into the cover memo and the exhibits.

• Submitters should expect a response immediately indicating the submission has been received.  It is the receipt of this automated e-mail that stops the sixty day clock on the obligation to refund any over payments.  CMS expects to review each submission within two to three weeks and advise whether the submission has been accepted, rejected or whether additional information is required.  In most cases, CMS expects to request additional information.

• CMS is considering whether it needs to promulgate frequently asked questions on its website regarding the SRDP.

• CMS is not providing any specific guidance on how the submissions will be resolved.  The only assurances they will provide are that they will strive to be reasonable and efficient and will evaluate each submission on a case by case basis.

• The financial analysis should include the total amount actually or potentially due and owing to CMS.  This would include any payments made by Medicare fee for service for a designated health service that was furnished pursuant to a prohibited referral.  The submission should be itemized by year.  If the submitter is estimating the amount due and owing, the description of the methodology used should be provided.

• The Office of Financial Management (OFM) has the responsibility to determine whether the amount due and owing should be reduced. 

• The SRDP discusses the factors that OFM will use to determine whether to reduce the amount due and owing.  The most important factor is the nature and extent of the improper or illegal practice.  Some of the sub-factors OFM will consider are whether the arrangement was commercially reasonable, whether the compensation paid was fair market value, whether the arrangement took volume or value of referrals into account, whether the entity has a history of program abuse, whether the payments were set in advance, whether the entity has a pre-existing compliance program and the strength of the program, the length and pervasiveness of non-compliance in relation to the size of the disclosing entity, and the steps taken to correct the problems causing the non-compliance.  Ideally, the steps would be taken before the disclosure is submitted, but must come before settlement.

• The additional factors that OFM will consider are the timeliness of the self-disclosure, the cooperation in providing additional information, litigation risks and the financial position of the disclosing party.  The definition of litigation risk is found at 42 CFR § 401.613.  Under this Section, CMS may compromise a claim if it determines that it would be difficult to prevail in a case before a court of law as a result of the legal issues involved or inability of the parties to agree to the facts of the case.  The amount that CMS accepts as a compromise under this provision will reflect; (i) the likelihood that CMS would have prevailed on the legal questions involved; (ii) whether and to what extent CMS would have obtained a full or partial recovery of judgment, depending on the availability of witnesses, or other evidentiary support for CMS’ claim; and (iii) the amount of court costs that would be assessed to CMS.

• CMS will also look at the financial position of disclosing entity.  CMS expects to look at the ability to pay in only limited circumstances.  It would be a factor if the disclosing entity argued that it could not pay the amount the amount of the penalty that CMS believed was appropriate to assess.

• Under Section 6409(c) of PPACA, CMS must submit a report to Congress no later than March 23, 2012, which addresses the implementation of the SRDP.  The report shall include the number of health care providers/suppliers making disclosures; the amount collected pursuant to the SRDP; the types of violations reported under the SRDP and such other information as may be necessary to evaluate the impact of Section 6409 of the PPACA.

• CMS has not determined yet whether it will make settlements under the SRDP available to the public.  The OIG has made settlement terms available to the public.

• CMS has received approximately thirty submissions, some prior to the date that the SRDP was promulgated.  The size of the submission so far has varied from one or two violations to fifty to one hundred financial relationships.  All of the proposed violations relate to compensation arrangements and not ownership interests. The potential violations disclosed include technical violations and lack of fair market value and commercial reasonableness. 

• In the case of a technical violation where the parties continue to perform under an expired contact as an example, the starting point for the financial analysis is the total amount billed to Medicare fee for service for designated health services and not the total compensation paid under the arrangement.  If CMS agrees that the violation is solely related to signature requirements and not a more substantive requirement, CMS expects to compromise the amount due and owing significantly.  The analysis will begin, however with the overpayment amount.

• The SRDP only applies to Medicare payments and not to Medicaid payments, although the federal Stark law does apply to the federal government's share of the Medicaid payments. If the payor is a Medicare Advantage Plan, there is an exception for such arrangements that should apply in those cases.

Please see our prior post on the SRDP for additional insights on Stark compliance and the impact of the protocol.

Can a physician group continue to bill under its tax identification number if it is providing patient services to hospital patients under a personal services arrangement with a hospital? According to CMS, the answer is yes. The services do not have to be billed under the hospital's tax identification number.

CMS expressed the opinion that it did not matter which entity did the billing. Under the revised definition of entity, the arrangement must satisfy the personal services exception regardless of whether the group continues to do the billing under its tax identification number or whether it bills for the services on behalf of the hospital under the hospital’s  tax identification number.  The billing tax identification number is not relevant to whether the elements of the Stark personal services exception are met.

CMS noted, however, that if the group did the billing under its tax identification number and the proceeds were deposited into a lock box account, the group must control the lock box account.  If the group does the billing on behalf of the hospital under the hospital’s tax id number, then the lock box can be controlled by the hospital

CMS issued its Self-Referral Disclosure Protocol on September 24, 2010. CMS mandated that CMS establish the SDRP when it passed the Affordable Care Act in March 2010. The purpose of the SRDP is to provide a process for health care providers to self-disclose potential and actual violations of the federal Stark law. Although CMS was given the authority to compromise the amounts owed due to a violation of the Stark law, it declined to directly exercise that authority in the SRDP. This significantly undercuts the utility of the SRDP to providers.

The Stark Compliance Dilemma

To establish a violation of the Stark law, the government needs to show:

• A financial relationship exists between a physician or a physician's immediate family member and an entity that provides designated health services;
• The financial relationship does not fit within any of the Stark exceptions;
• The physician has referred a Medicare beneficiary to the entity for a designated health service; and
• The entity has billed Medicare for that service.

Unlike the Anti-kickback Statute, which requires some proof of intent to violate the statute, the Stark law is a strict liability statute and does not require any proof of intent.

The penalties for violating Stark include a civil monetary penalty of up to $15,000 per claim and possible exclusion from the Medicare and Medicaid programs. In addition, the entity has an obligation to refund any amounts paid by Medicare or the beneficiary.

The failure to refund any amounts paid can also constitute a violation of the federal False Claims Act, which was amended in 2009 to extend liability to knowingly and improperly avoiding an obligation to repay a known overpayment. The penalties for violating the False Claims Act are a civil penalty of up to $11,000 plus 3 times the amount of the damages.

Thus, a violation of the Stark statute, which has its own high penalties, can now lead to even further penalties under the False Claims Act. It also subjects the organization to qui tam suits by private plaintiffs attempting to collect the amounts owed under the statutes on behalf of the government. A number of plaintiff's firms are actively soliciting qui tam plaintiffs who have knowledge of Anti-Kickback and Stark violations.

The amount of the potential pentalties under the Stark statute, particularly when combined with the penalties under the False Claims Act, are astronomical and often disproportionate to the harm caused by a violation. This disproportionality was noted by the American Health Lawyers Association, Public Interest Committee in its Stark white paper issued in August 2009:

Given the structure of the Law, innocent or highly technical violations can result in ruinous liability.  For example, an administrator's oversight in securing a physician's signature can trigger the referral pohibition. The unlucky hospital is consequently prohibited from billing Medicare for all services ordered by that physician and if bills have been submitted, any amounts collected from the Medicare program are subject to recoupment. If the omission is not discovered for months or years, the hospital's recoupment exposure mounts with each patient admitted and serivce ordered by the physician.

Compromising Stark Violations

Although Congress gave CMS the authority to reduce the amount due and owing for Stark violations, CMS chose not to directly exercise this authority in the SRDP. CMS is requiring a disclosing party to estimate the total amount of Medicare claims that were submitted in violation of the Stark law. The SRDP lists the factors that CMS will consider in reducing that amount:

1. The nature and extent of the improper or illegal practice;
2. The timeliness of the disclosure;
3. The cooperation in providing additional information related to the disclosure;
4. The litigation risk associated with the matter disclosed; and
5. The financial position of the disclosing party.

This approach provides cold comfort to a disclosing party. Even if CMS agrees to reduce the amount to 1% of the unlawful Medicare claims that were submitted, 1% of a big number is still a big number. Disclosing parties also have no way of estimating what the percentage reduction will be before they make the submission. This uncertainity will make it difficult for CFOs and auditing firms to account for the potential liability in year-end financial statements.

CMS has also reminded providers that they have an obligation to refund any amount owed to the Medicare beneficiaries who were the subject of the claims. It is not clear that CMS believes it  has the ability to compromise these refund obligations. The SRDP states that any amounts collected must be refunded.  Even if the amount of such refunds were reduced by the same percentage as the Medicare claims, there is a significant administrative burden associated with finding the current addresses for these patients, cutting the checks and tracking that the checks have been cashed. Any uncashed checks would need to be paid over to the State's abandoned property deparment.

CMS could have addressed the disproportionality problem directly by establishing a schedule showing what the penalty would be for different types of so-called technical violations, such as allowing an existing agreement to lapse or failing to have a signed agreement in place prior to making any payments. This would have provided some certainty to providers on how much they would owe if they used the SRDP to report such violations. CMS's unwillingness to do so has greatly diminished the utility to providers of using the SRDP to achieve Stark compliance and avoid a potential qui tam claim.