Federal Fraud and Abuse Laws: Anti-Kickback Statute

1

Anti-Kickback StatuteKim C. Stanger

(2/13)

Overview

Anti-Kickback Statute (“AKS”)– Prohibitions– Penalties– Safe harbors

Applying AKS to common situations Responding to potential AKS problems Action items Questions?

Preliminaries

Written materials.– .ppt slides– Anti-Kickback Statute, 42 USC 1320a-7b.– Regulations, 42 CFR 1001.952 et seq.– OIG Supplemental Compliance Program Guidance for pp p g

Hospitals (70 FR 4858).– OIG, Roadmap for Physicians: Avoiding Fraud and Abuse.

Presentation will be recorded and available for download at www.hhhealthlawblog.com.

If you have questions, please submit them using chat line or e-mail me at [email protected].

Copyright © 2013, Holland & Hart LLP Kim C. Stanger 208-383-3913 [email protected] www.hollandhart.com www.hhhealthlawblog.com

2

Preliminaries

This program provides an overview of the relevant law. Read the law, regulations and advisory opinions or consult

with qualified expert when applying the law to facts. Consider other applicable laws, e.g.,

– Ethics in Patient Referrals Act (“Stark”)Ethics in Patient Referrals Act ( Stark )– Civil Monetary Penalties Law (“CMP”)– State laws

This program does not establish an attorney-client relationship.

This program does not constitute the giving of legal advice.

Anti-Kickback Statute


Prohibits knowingly and willfully soliciting, receiving, offering or paying any remuneration directly or indirectly, overtly or covertly, in cash or in kind to any person to induce referrals for items or services for which payment may be made in whole or in part under a Federal health care program unlesstransaction fits within regulatory exception.

(42 USC 1320a-7b(b))

Violated if “one purpose” of the remuneration is to induce or reward referrals unless transaction fits within regulatory exception.

(U.S. v. Greber (3d Cir. 1985))


3


Anytime you want to:• Give anything to induce or reward

referrals, or• Do any deal with a referral source.

Anti-Kickback Statute:Penalties

Felony 5 years in prison $25,000 fine(42 USC 1320a-7b(b)) AKS violation = Civil Monetary Penalties Law violation

$50 000 civil administrative penalty– $50,000 civil administrative penalty– 3x damages– Exclusion from Medicare/Medicaid

(42 USC1320a-7a(a)(7)) AKS violation = False Claims Act violation

– Preponderance of evidence standard– $5,500 to $11,000 per violation– 3x damages– Qui tam lawsuit

U.S. v. Anderson (10th Cir. 2001).

Clinic paid two physicians who were substantial referral sources $75,000/year to serve as co-directors and consultants for geriatric department, but physicians performed few documented services.

Jury found AKS violations.Ph i i 1 6 $75 000 fi $142 000– Physician 1: 6 years + $75,000 fine + $142,000 restitution.

– Physician 2: 3 years + $25,000 fine.– Clinic CEO: 4 years + $75,000 fine.– Clinic CFO: acquittal reversed.– Clinic attorney: acquitted.


4


Remuneration

Intent to induce referral for services or items paid by government health program unless transaction is structured to fit within regulatory safe harbor.

Referrals

Affected Entities

Applies to anyone who solicits, receives, offers or pays with intent to induce or reward referrals for federal program business.– Providers– Vendors– Managers or administrators– Marketing personnel– Patients– Attorneys– Anyone else

Applies to participants on both sides of the transaction.

Remuneration

Applies to any form of remuneration in exchange for referrals for federal program business.– Money– Contracts for services– Leases– Free or discounted items or services (e.g., perks, gifts, ( g , p , g ,

meals, insurance, trips, CME, etc.)– Overpayments or underpayments (e.g., not fair market

value)– Payments if no services provided or required– Waivers of copays or deductibles– Low interest loans– Business opportunities– Anything else of value…


5

Referrals

Applies to referrals for items or services covered by federal health care program.– Medicare– Medicaid– Other federal programs

Li iti fi i l t t M di /M di id Limiting a financial arrangement to non-Medicare/Medicaid patients does not necessarily insulate the arrangement from AKS scrutiny.

(Adv. Op. 12-06)

Caution: state anti-kickback statutes may apply to any payor source.

Intent

Must “knowingly and willfully” solicit, receive, offer or pay remuneration in exchange for referrals.– Do not need actual knowledge of the law or specific

intent to commit a violation of the law.– Ignorance of the law is not an excuse.g

(42 USC 1320a-7b(b) and (h)).

Violated if “one purpose” of the remuneration is to induce or reward referrals unless transaction fits within regulatory exception.

(U.S. v. Greber (3d Cir. 1985))

Difficult to disprove intent…

Safe Harbors

No liability if satisfy all the requirements of a safe harbor.

Not required to fit within safe harbor since ultimate question is whether “one purpose” of remuneration

t i d f lwas to induce referrals.– May comply with AKS even if do not fit within safe

harbor. The closer you come to satisfying regulatory

requirements, the safer you will be.


6

Safe Harbors

Exceptions and safe harbors– Bona fide employment– Personal services contracts– Leases for space or equipment– Investments in group practice– Investments in ASCs– Sale of practice– Recruitment– Certain investment interests– Waiver of beneficiary coinsurance and deductible

amounts.(42 CFR 1001.952)

Safe Harbors

Exceptions and safe harbors (cont.)– OB malpractice insurance subsidies– Referral services– Referral arrangements for specialty services– Warranties– Discounts– Group purchasing organizations– Price reductions offered to health plans and MCOs– Ambulance replenishing– Health centers– Electronic health record items or services

(42 CFR 1001.952)

Unsafe Harbors

No de minimus safe harbor.– But not too much risk if remuneration is negligible.

No substantial risk of federal program abuse.– Due to nature of transaction.– Incorporate safeguards to protect against abuse.

No “fair market value” safe harbor– But fairly safe if remuneration represents fair market

value for legitimate, needed services or items.– Does not factor in continuing or future referrals from

seller.


7

Fair Market Value

“When considering the question of fair market value, … the traditional or common methods of economic valuation do not comport with the prescriptions of the anti-kickback statute. Items ordinarily considered in determining the fair market value may be expressly barred by the anti-kickback statute's prohibition against payments for referrals…. The fact that a buyer in aagainst payments for referrals…. The fact that a buyer in a position to benefit from referrals is willing to pay a particular price may only be a reflection of the value of the referral stream that is likely to result from the purchase. Accordingly, when attempting to assess the fair market value (as that term is used in an anti-kickback analysis) …, it may be necessary to exclude from consideration any amounts which reflect, facilitate or otherwise relate to [payment for referrals].”

(OIG Letter dated 12/22/92)

Advisory Opinions

OIG may issue advisory opinions.– Listed on OIG fraud and abuse website,

www.oig.hhs.gov/fraud. Not binding on anyone other than participants to

the opinionthe opinion. But you are probably fairly safe if act consistently

with favorable advisory opinion.

https://oig.hhs.gov/compliance/advisory-opinions/index.asp


8

Anti-Kickback Statute:Analysis

1. Is there remuneration to or from a potential referral source?

2. Do any of the parties to the arrangement make referrals for items or services covered by federal h lth ?healthcare programs?

3. Is “one purpose” of the arrangement to induce or reward referrals for federal healthcare programs?

4. Does the transaction fit within a regulatory safe harbor?

5. Is there an applicable advisory opinion that provides some protection?

Applying Anti-Kickback Statute to Common Situations

Applying AKS to Common Relationships

As we consider these safe harbors, ask yourself:– Do we have such relationships?– Do our relationships fit the requirements of the

applicable safe harbor? Remember Stark.

– If transaction involves physician or a physician’s family member, likely need to comply with Stark.

– Stark safe harbors have additional requirements.


9

Employment Agreements

Compensation paid by employer to employee. Bona fide employment relationship.(42 CFR 1001.952(i))

What is bona fide employment relationship?– Compensation represents fair market value for services

provided, not based on referrals?– Employment for legitimate, needed services?

Services Agreements (Independent Contractors)

Written agreement signed by the parties. Agreement specifies the services to be provided. If services provided on periodic basis rather than fulltime,

agreement specifies schedule, precise length, and charges. Term is not less than one year.

A t ti i Aggregate compensation is:– set in advance– consistent with fair market value– not determined in a manner that takes into account the

volume or value of referrals for federal program business Aggregate services do not exceed those that are reasonable

to accomplish commercially reasonable purpose.(42 CFR 1001.952(d))

Kosenske v. Carlisle HMA (E. Dist. Pa. 2010)

Hospital contracted with anesthesiologists to provide anesthesiology services. Hospital provided free space, equipment and personnel. Years later, physician services were expanded to affiliated pain clinic, but no new contract executed. Physician brought qui tam case based on Stark y g qand AKS violation.

Court denied motions for summary judgment, holding that fact issues remained concerning Stark and AKS violations.– No written contract covering pain clinic services.– Hospital provided free space, equipment, and

personnel.


10

Leases for Space or Equipment

Written lease signed by parties. Lease specifies space or equipment. If leased on periodic basis, lease specifies the exact

schedule, precise length, and exact rent. Terms is not less than one year. Aggregate rent is: Aggregate rent is:

– set in advance– consistent with fair market value– not determined in a manner that takes into account the

volume or value of referrals for federal program business Aggregate space or equipment does not exceed that which is

reasonable to accomplish commercially reasonable purpose.(42 CFR 1001.952(b)-(c))

Leases for Space or Equipment(cont.)“Fair market value” = For space: “value of rental property for general commercial

purposes, but shall not be adjusted to reflect the additional value that one party (either the prospective lessee or lessor) would attribute to the property as a result of its proximity or convenience to sources of referrals or business otherwise generated for which payment may be made in whole or in part g p y y punder Medicare, Medicaid and all other Federal health care programs.”

For equipment: “value of equipment when obtained from a manufacturer or professional distributor, but shall not be adjusted to reflect the additional value that one party (either the prospective lessee or lessor) would attribute to the equipment as a result of its proximity or convenience to sources of referrals or business otherwise generated for which payment may be made in whole or in part under Medicare, Medicaid and all other Federal health care programs.”

(42 CFR 1001.952(b)(6) and (c)(6))

U.S. ex rel. Singh v. Bradford Reg. Med. Ctr. (W. Dist. Pa. 2010)

Physicians leased their own nuclear camera. Hospital subleased the camera. Based on accountant’s fair market valuation which considered anticipated referrals from the physicians, hospital paid $6500/month to sublease the camera; $24,000/month for a non-compete; and $2500/ th t t th h t$2500/month to rent space even though agreement required camera to be located at hospital.

Physicians brought qui tam lawsuit alleging Stark and Anti-Kickback Statute violations.

In 2010, court held the arrangement took into consideration anticipated referrals and violated Stark; fact issues remained as to violations of the Anti-Kickback Statute.


11

Investment in Group Practice

Equity interests in group must be held by licensed health care professionals who practice in the group.

Equity interests must be in group itself, not some subdivision of the group.

Qualify as a “group practice” under the Stark rules, 42 CFR411.352.

Be a unified business with centralized decision-making, pooling of expenses and revenues, and compensation/profit distribution system that is not based on satellite offices operating as separate enterprises or profit centers.

Revenues from ancillary services, if any, must be derived from in-office ancillary services’ that meet definition in Stark.

(42 CFR 1001.952(p))

Ambulatory Surgery Centers

Investments in ASC. Operating and recovery room space is dedicated

exclusively to the ASC. Patients referred by an investor are informed of investor’s

interest. Satisfy specific requirements depending on:

– Surgeon-owned ASCs– Single-specialty ASCs– Multi-specialty ASCs– Hospital/physician ASCs

(42 CFR 1001.952(r))

Investment Interests

No more than 40% of investment interests during prior year may be held by investors who are in a position to refer or generate business for entity.

No more than 40% of revenues during prior year come from investor referrals.

Same terms offered to passive investors whether or not they can refer business to entity.

Terms are not related to previous or expected volume of referrals or other business generated for entity.

No requirement to refer or generate business for entity. Cannot loan funds to investor to acquire investment. Returns directly proportional to capital investment.(42 CFR 1001.952(a)(2))


12

Investment Interests

Several Advisory Opinions have approved investment interests in joint venture where certain safeguards are in place, e.g., – Employees are prohibited from making or are not

required or encouraged to make referrals to entity.– Parties do not track referrals.– Compensation does not take into account referrals.– Employees are informed of the limits on periodic basis.

(See, e.g., Adv. Ops. 01-21, 03-2)

No guarantee of protection!

Recruitment

Recruit into a HPSA. Written agreement signed by parties. At least 75% of revenues come from new patients. Benefits provided for no more than 3 years. Terms not renegotiated during the 3-year term.

C t i f l t tit b t i th t it Cannot require referrals to entity, but can require that recruit maintain medical staff membership.

Cannot restrict practitioner from establishing privileges at or making referrals to any other entity.

Compensation does not vary based on referrals. Cannot discriminate against federal program beneficiaries. At least 75% of revenues come from HPSA, MUA or MUP. Cannot benefit another entity in a position to make referrals.(42 CFR 1001.952(n))

Recruitment

Since it is very difficult to satisfy recruitment safe harbor, it is very important to document legitimate reasons for joint recruitment arrangement, e.g., community need.


13

U.S. v. Tenet Health (S. Dist. Cal. 2003)

Government alleged that over a 10 year period, hospital improperly paid excessive amounts to recruit 100 physicians, many of whom joined existing practices. Some of the physicians were paid excessive amounts In some cases thepaid excessive amounts. In some cases, the practices were paid for remodels which never occurred.

After two mistrials, Tenet agreed to pay $21 million and sell the hospital.

Additional Safe Harbors

Waiver of beneficiary coinsurance or deductible amounts. Obstetrical malpractice insurance. Referral services. Warranties. Discounts. Group purchasing organizations. Price reductions to MCOs. Community-wide health information systems. Electronic prescribing items and services. Electronic health records items and services. Health centers. Others.(42 CFR 1001.952)

State Anti-Kickback Statutes

Most states have their own anti-kickback statutes, e.g.,– Medicaid fraud statutes– Medical practices acts

F litti / b ti t t t– Fee splitting / rebating statutes– Others

May be broader than federal AKS– May extend to private payors– May not contain safe harbors

Check state laws!


14

Responding to a Potential AKS Problem

Anytime you want to:• Give anything to induce or reward

referrals, or• Do any deal with a referral source.

If you think you have an AKSproblem…

Don’t ignore it or attempt to sweep under rug.– Remember the False Claims Act penalties?

Don’t submit claims to Medicare or Medicaid until situation resolved.

If possible, suspend remuneration to physician until resolved. Evaluate the situation carefully.

– Confirm facts.– Review AKS for possible exceptions.– As necessary, seek qualified expert advice.– May consider Advisory Opinion, but rare...

As necessary, revise the arrangement going forward. If necessary, repay CMS…

Repayment Obligation

CMS: “[W]e note the following with regard to overpayments that arise due to a violation of the anti-kickback statute. Compliance with the anti-kickback statute is a condition of payment. Claims that include items and services resulting from a violation of this law are

t bl d tit t f l f d l t l i fnot payable and constitute false or fraudulent claims for purposes of the False Claims Act.”

(77 FR 9183-84)

Payments received in violation of the AKS are overpayments and subject to the new report and repayment rule.


15


False Claims Act: – Must report and repay “overpayment” within 60 days.– Overpayment = payment to which you are not entitled,

including payment in violation of Anti-Kickback Statute. Knowing failure to repay =Knowing failure to repay

– Violation of False Claims Act $5,500 to $11,000 per claim 3x damages

– Violation of Civil Monetary Penalties Law $10,000 per claim

See CMS’s Proposed Repayment Rule, 77 FR 9179 (2/16/12)


“To the extent that a provider or supplier who is not a party to a kickback arrangement has sufficient knowledge of the arrangement to have identified the resulting overpayment, the provider or supplier must report the overpayment to CMS … [If] the provider has not identified the kickback or if it t d it h it did id tif th ki kb kif it reported it when it did identify the kickback, our expectation is that only the parties to the kickback scheme would be required to repay the overpayment that was received by the innocent provider or supplier, except in the most extraordinary circumstances.”

(77 FR 9183-84)

OIG Self-Disclosure Protocol

Voluntary program to self-report violations. SDP should only be used to resolve matters that

“potentially violat[e] Federal, criminal or civil or administrative laws. Matters exclusively involving overpayments or errors that do not suggest that violations of law have occurred should be brought directly to theof law have occurred should be brought directly to the attention of the [contractor].” (63 FR 58400)– Generally, SDP applies to violations that involve: Actual knowledge Reckless disregard Deliberate ignorance

– Not honest mistakes or errors.(63 FR 58399; Letters dated 4/15/08 and 3/24/09)


16

OIG Self-Disclosure Protocol

Benefits OIG may reduce penalties if

fully disclose and cooperate. Probably no corporate integrity

agreement. May preclude qui tam lawsuits

Risks Minimum $50,000 settlement for

AKS violations. OIG may broaden investigation. New matters discovered by OIG

are outside protocol May preclude qui tam lawsuits. Suspends repayment under

Proposed Repayment Rule.

are outside protocol. Failure to fully disclose or

cooperate may result in additional penalties.

OIG may report to other government agencies.

Participation is burdensome. Likely will waive of privilege.

https://oig.hhs.gov/compliance/self-disclosure-info/index.asp

Action Items


17

Action Items

Identify existing financial relationships with referral sources (e.g., providers, facilities, vendors, beneficiaries, etc.).– Contracts (employment, independent contractors,

purchasing, management, etc.).– Leases (space, equipment, etc.).( p , q p , )– Subsidies or loans.– Joint ventures or partnerships.– Free or discounted items or services (e.g., use of space,

equipment, personnel or resources; professional courtesies; insurance; gifts or perks; advertising; etc.).

– Marketing programs.– Others?

Action Items

Review relationships for compliance, including:– Written contract that is current and signed by parties.– Compliance with terms of contract. Parties providing required services. Documentation confirming that services provided Documentation confirming that services provided.

– Fair market value.– Compensation not based on volume or value of

referrals.– Arrangement is commercially reasonable and serves

legitimate business purpose.

Action Items

Implement method to track and monitor relationships with referral sources for compliance.– Central repository for contracts.– Method to track contract termination dates.– Process for confirming compliance before payments toProcess for confirming compliance before payments to

or receipt of payments from referral sources.– Require review and approval by compliance officer,

attorney or other qualified individual. Contracts. Joint transactions with physicians. Physician benefits or perks. Marketing or advertising.


18

Action Items

Ensure your compliance policies address AKS.– See, e.g., OIG Supplemental Hospital Compliance

Program Guidance, 70 FR 4858 (2005). Train key personnel regarding AKS compliance.

– Administration.– Compliance officers and committees.– Human resources.– Physician relations and medical staff officers.– Marketing / public relations.– Governing board members.– Purchasing.– Accounts payable.

Document training.

Action Items

If you think you have a problem:– See comments above….

Additional Resources


19

https://oig.hhs.gov/compliance/

Additional Holland & Hart Resources

Future webinars– Health Law Basics monthly webinar series– 2/28 Civil Monetary Penalties Law– 3/14 Physician Contracts

4/11 HIPAA– 4/11 HIPAA– 5/9 EMTALA

Healthcare Update and Health Law Blog

– Under “Publications” at www.hollandhart.com.– E-mail me at [email protected].

Questions?

Kim C. StangerHolland & Hart LLP

[email protected]@hollandhart.com(208) 383-3913
