Compliance, Stark and Fraud and Abuse

Social determinants of health have risen to the forefront of changes in payment to acknowledge that factors such as food, housing and other environmental issues can have a direct impact on the health of people for whom the government (and private payers) pay for care.  Both government and private payors traditionally have not offered any payment for services that address social determinants of health directly.  That, however, is changing in the new health care environment.  In “Finding an Oasis in the Food Desert: Legal Issues in One Social Determinant of Health”, Dan Shay explores the new payments and programs that are available to support people with diabetes, hypertension and other conditions affected by nutrition and food availability.  In addition to new payment potentials, both for providers and patients in Medicare and Medicaid, there are a range of legal issues that can arise in providing or arranging for food support, from compliance risks associated with beneficiary inducements, to Medicare enrollment, to HIPAA, to documentation issues and more. Dan considers all of these, as well as practical issues that health care providers may face, clarifying a rapidly developing area of both social and health care policy combined, which should be of interest to those who represent a wide range of providers.
“Incident to” services paid for by Medicare have been a hallmark of the program since its inception.  Back in the early 70s, the principle of paying for those services of auxiliary personnel in the physician office as “an integral although incidental part of the physician’s personal professional services” was addressed in two paragraphs in the Carrier’s Manual. Today it is the subject of 9 conditions set forth in regulations with 8 definitions underlying its meaning.  Failure to conform with “incident to” requirements has been the basis for multiple False Claims Act cases continuing to the present. Still further, understanding what it permits is essential to compliance with Stark internal compensation requirements to qualify as a group practice.  In our most recent AGG Note, “The Not So Incidental “Incident To” Rules” we elucidate the conditions that pertain for compliance, explain the significance for Stark purposes and also debunk some myths about whether the government can actually enforce based on failure to comply with the rules.
Many non-lawyers confuse the effects of the Stark statute as distinct from the Anti-kickback Statute (AKS). Both can be the basis for false claims, but they aren’t even in the same Titles of the Social Security Act. Stark is a strict liability statute which means intent is irrelevant to its impact. Your motivations can be pure as the driven snow and you can still violate the law. To violate the AKS, however, the acts must be willful or with reckless disregard of the law. Stark is Medicare only, physician referrals only and about specific services only.  AKS is far broader, touching everyone on the food chain of federal health care program payments.  In her crisp video for Darshan Talks Unpacking the Hype Around Stark Law Issues for Pharma | Alice Gosfield - YouTube] Alice clarifies the distinctions and how to begin analyzing whether problems exist under either law, with, at the end, some specific observations about pharma and research effects. This is useful to anyone who has to deal with either of these critical statutes.
Alice has been working on physician compensation issues throughout her career. We both address these issues as they arise today in a far more complex environment than many years ago.  Stark rears its ugly head here too.  In the teleconference, “Avoiding Modern Physician Compensation Pitfalls”, Alice explores the varying sources of revenue which provide the funds from which physician compensation can be made in any practice. She elucidates the confounding Stark regulations which apply to both productivity and profit sharing payments, and considers how to address audits as well as potential voluntary repayments in the context of compensation. This brisk presentation includes a 12 page substantive handout.  She has also addressed these issues in Family Practice Management in “Pitfalls to Avoid in Physician Compensation Models”.
The No Surprises Act is actually rather full of surprises.  Its scope is far broader than many realize. In “Clarifying Questions About The No Surprises Act”, Dan explains the types of providers, practitioners and settings to which the law applies in its intention to help patients understand their financial obligations when they obtain services from out-of-network providers. He confronts the law’s approach to specific obligations related to notices, consents, disclosures, and good faith estimates. He explicates the differences between “convening providers” and “co-providers” and their different duties. This teleconference is accompanied by a 14 page substantive handout and includes practical guidance.

False claims liability has typically turned on financial behaviors -- upcoding, submitting claims pursuant to Stark or anti-kickback violations, and other financial arrangements, activities and transactions. Rarely considered are the increasingly new liabilities associated with what Alice calls “quality fraud.” These are improper clinical behaviors including wasteful services, medical errors, over-use, under-use, failed medical necessity and violation of basic requirements for payment that turn on clinical compliance.  In addition, with the advent of value-based purchasing and significantly more reporting about quality, inaccurate or false reporting can create exposure as well. In “Quality Fraud: Gathering The Threads” Alice elucidates the multiple bases for quality fraud, what such fraud looks like as action, penalties associated with misbehaviors, the guidance the government has offered on point, and suggestions for avoiding these risks. Most providers-- including hospitals and physicians -- will have to update their compliance programs to address effectively these augmented perils.

Continuing her theme on the need for vigilance in billing company relationships, a second circuit Court of Appeals case [Retina Grp of New England PC v Dynasty Healthcare LLC, No 21-1622-cv (2dCir, July 7, 2023] rejected a medical billing company’s claims against a Medicare Administrative Contractor,(MAC) who misclassified the billing company’s client as non-participating when they intended to enroll as participating. The MAC never notified the billing company of the classification, but paid some claims at the lower rate for non-participating physicians. The problem was discovered a year after the relationship between the biller and client ended. The client sued the biller for negligence, breach of contract and fraud. The court found it had no jurisdiction because the biller neglected to exhaust its administrative remedies before suing the MAC. But the real story in this case is that the rate at which a physician practice is paid is one of the most essential responsibilities of a billing company. The failure of the biller to confirm the proper enrollment of its client is unfathomable. The client’s reliance on the billing company with little oversight of what was being paid and at what rate is also problematic and underscores Alice’s advice regarding the need for clients to monitoring billing even when the activity is outsourced.

It is widely believed that false claims liability attaches only to claims submitted to federal payment programs. This is wrong. An 11th Circuit case, recently upheld the criminal conviction of a physician assistant for submitting faked physical therapy claims with visits charged as well, for patients who were also paid kickbacks for coming to the clinic offices to use their Blue Cross Blue Shield coverage. While the facts were egregious, the point of highlighting this case is to underscore that all compliance programs should include attention to commercial claims submission as well. Besides criminal exposure, more likely is the use of mail fraud and false claims act charges, including cases instigated by whistleblowers, where the claims submitted were to commercial payers.

Following promulgation of two sets of interim final regulations (IFRs) by the Departments of Labor, Treasury, and Health and Human Services, we now have regulations for the No Surprises Act of 2021 which addressed balance billing prohibitions for some providers and transparency issues for all providers.  In our AGG Note, “The No Surprises Act Regulations,” we explain both sets of requirements.  They are both detailed in some ways and vague in others.  What a surprise!
The split/shared rule is back with a few alterations.  The original rule was promulgated through CMS’ manual system, and dates back to the Carrier’s Manual.  CMS has now implemented the rule as a regulation (42 CFR § 415.140), liberalizing several aspects and restricting different aspects.  The new rule expands available settings to include SNFs and nursing facilities, and may now also be applied to new patients instead of just established patients.  In our AGG Note, “Split/Shared Visit Revisions,” we explain the requirements around what constitutes the “substantive portion” of the visit which determines who can bill for the service.  Two methods are available in 2022: component-based or time-based.  For 2023 and beyond, the “substantive portion” can only be time-based.  The split/shared visit rules will form the basis for overpayments and false claims if physicians and their NPPs fail to comply with the rules.

While we do not often comment on Advisory Opinions of the OIG under the Anti-kickback statute, a recent negative opinion is noteworthy because (1) the facts described were so obviously violative;  and (2)  while trumped up in new clothing, they represent a throw-back to joint ventures the OIG first rejected and wrote a Special Fraud Alert about in 1994!! In Advisory Opinion No. 21-18, the OIG considered an arrangement where a contract therapy services company, already providing services to long term care facilities owned by LTCco,   would enter into a joint venture with an entity owned by LTCco to provide the same therapy services to the company's affiliated facilities.  The valuation of LTCco's investment would turn in part on the expected business to be provided by the LTC facilities. LTCco would not be involved in the company's operations; and the joint venture would do what the partner therapy company was already doing.  What rock were these people living under? This, as the OIG noted, is a classic prohibited contractual joint venture. Since it is possible to withdraw an advisory opinion request if it looks like the answer will not be favorable, one can only conclude that someone wanted the negative opinion.  Without any background, it might well have been the therapy company itself who didn't want to share profits with their primary source of business.  Back in the early 80s, there were many proposed joint ventures between hospitals and either DME companies or home health agencies to which they would refer.  Almost all were illegitimate. So was the proposed arrangement here. For those who might want to see what a negative advisory opinion looks like, this one's facts are so obvious it's a good one to start with!

As we have noted previously, the EKRA statute was passed as part of the opioid legislation and, among other things,  provides for stiff penalties for remuneration for referrals to any laboratory. It is far broader than Stark or the anti-kickback statute. While there have been settlements for bad behavior under its provisions we have, now, the first court opinion, S&G Labs Hawaii, LLC v Graves (2021 WL 4847430) interpreting that part of the statute that appeared to prohibit commission payments to employed salesmen.  In this case, the court found that commission payments were legitimate where they were to a salesman who introduced to the lab physicians, counseling centers and other entities who would refer to the lab. He had no contact with any individuals whose own specimens would be tested.  The law prohibits remuneration for the referral of "an individual." The commission sales payment under the employment agreement was upheld.  Clients have asked and we have cautioned that this opinion is extremely narrow in its implications.  EKRA remains a thorny problem for all laboratories and those who refer to them.

Among the designated health services (DHS) which are the subject of the Stark law restrictions are outpatient prescription drugs.  When the Stark statute was enacted, Part D of Medicare didn't even exist; so, while it was obvious that drugs paid for under Part B, (many of which are provided in physician offices in infusions and otherwise) were covered, the answer was not so clear for drugs paid for by Part D, which may come from pharmacies, including physician owned pharmacies in some places. In fact, there is a specific regulation which sweeps Part D drugs into the ambit of Stark DHS. Physician groups which own pharmacies need to take this into account in their compensation and profit-sharing formulas.

The issue of internal compensation formulae leading to enforcement under Stark has been underscored again by a primary care practice in South Carolina paying $2 million dollars in settlement for, in part, compensating their physicians a percentage of the value of laboratory and other claims they submitted to Medicare and TRICARE.  The CEO and laboratory director agreed not to be involved in managing the practice for five years.  The Stark rules are complicated; and their intersection with the anti-kickback statute and the anti-markup rules are complex.  It is essential for every practicinvolved with Stark services to review their compensation formula with sophisticated counsel.

The Medicare enrollment system represents an ongoing, high-stakes administrative headache for Medicare Part-B providers. Keeping enrollment data current is a complex, detail-oriented process, but the price for failure is the potential loss of Medicare billing privileges. In his article, “The Medicare Part-B Enrollment Obstacle Course: It Hasn’t Gotten Any Easier,” Daniel Shay revisits the complexities of the Medicare enrollment system, looking at what has and hasn’t changed in the past eight years. He examines real-world examples of Part-B providers running afoul of Medicare’s enrollment requirements, and their largely unsuccessful attempts to challenge their subsequent loss of billing privileges. Finally, he offers practical strategies for maintaining accurate enrollment data to avoid problems in the first place.

In a unanimous (!) and yet hardly clear false claims case last year – the infamous Escobar  case -- , the Supreme Court of the United States drew one of the murkiest lines ever written. In determining whether the failed licensure of people providing behavioral health services under Medicaid, could render a claim as false, they addressed the notion of ‘implied false claims.”  The case turned on whether implied statements in a claim (e.g., all the individuals rendering services were licensed, the facility met all the conditions of participation when the services were rendered) as opposed to explicit statements on the CMS-1500 (e.g., that the services were medically necessary or the level of CPT code was accurate) could render a claim false.  Of the Court’s two pronged test, perhaps most importantly the court said the implied statement had to be ‘material’ to the falsity of the claim. The health law bar is now watching with interest as courts apply the Escobar standard. In a case in Pennsylvania, Us ex rel Emanuele v. Medicor Associates, ED Pa No 10-cv-245, the District Court rules that at least two medical directorship agreements violated the Stark law which could lead to false claims liability.  The real problem was the absence of current and updated documentation of the physician-hospital agreements.  The defendants argued these were mere technicalities and not material. CMS itself has liberalized its rules on what constitutes a proper writing to create a contract (see our AGG Note of July 2016).  Before the case could go to trial it was settled with the parties paying $20.75 million.  The court’s findings would have been one of many interpretations of what is material versus technical.  The message here is the safest course is to dot all i’s and cross all t’s, when whistleblowers lurk in unknown places.  We will be watching and reporting on what is found to be material and not by various courts around the country in order to advise our clients.  The best approach is to get is right so no whistleblower has a claim. Check out our Fraud and Abuse Compliance Plan Development Protocol as well as our simplified and shortened version of the HCCA-OIG suggestions regarding how to measure if your compliance program is working.


In the big focus on the opioid crisis, kickbacks that occur in the drug treatment arena have become the target of a little discussed Federal law enacted in February of 2018. The Eliminating Kickbacks in Recovery Act (EKRA) has provided stiff penalties (up to $200,000 and up to 10 years in jail or both) for paying or soliciting kickbacks in the recovery area to provide or refer for provision of care by a recovery home, clinical treatment facility or laboratory. There are a few exceptions for properly disclosed discounts, employment relationships, management contracts and other safe harbors similar to those under the Anti-kickback statute; and, this new law also applies to any federal health care benefit program. Although the targeted facilities are a narrow range of entities providing care in the drug treatment space, the definition of “laboratory” is as broad as that under the Public Health Service Act, which reaches most clinical laboratories in America. While treatment facilities and recovery centers have reason to pay attention, the implications for all laboratories are broader and the penalties twice as harsh as those under AKS.

Medicare has the right to recoup Medicare overpayments, pending a provider’s appeal through the byzantine appeals process. Here we address two cases on recoupment: one refusing relief from recoupment pending review – the traditional response to these complaints – and, one forestalling recoupment by issuing a TRO. Since the paralysis of the Administrative Law Judge review process, which has stalled appeals for two years and more despite Federal court orders to move things along, the courts have approached the recoupment issue variably. A Federal court in Ohio refused to enjoin the recoupment of almost $11 million dollars from a home health agency based on extrapolation of a review of 30 records after an initial overpayment determined the year before found about $60,000 in overpayment. Accident Injury and Rehabilitation PC et al v. Azar (C/A No4:18-Cv-02173-DCC). Even though the agency argued that it would be irreparably harmed before it could exhaust its appeal rights, the court found the agency’s success on review was unlikely and that the agency could not show it was deprived of a due process right. By contrast, a SC Federal Court found that a chiropractic practice, from which Palmetto GBA had withheld $1.8 million in response to an AdvanceMed ZPIC audit, was entitled to a temporary restraining order against the recoupment, PHHC, LLC v. Azar, No1:18CV1824 (ND Ohio) since exhaustion of administrative remedies would harm the practice in a way that could not be recompensed, despite what the traditional law requires. The court found that the ALJ process was the most important step in the appeals gauntlet, since new evidence can be introduced there. Since ALJ’s overturn lower decisions 60% of the time (!), this court found the likelihood of success on appeal was great. The TRO was issued. These decisions highlight the types of arguments that can succeed when the government’s appeal process is broken. It has been virtually impossible in the past to get any relief from recoupment pending appeal. There is some light now in this tunnel of process.

Although there is nowhere near as much substance to the 2019 MPFS Stark issues, the regulators have confirmed that they will permit a lease arrangement or personal service arrangement to continue indefinitely beyond the stated expiration of the written documentation under certain circumstances as set forth in existing regulatory provisions. With regard to compensation arrangements, the concept of the relationship being documented in writing is reconfirmed to allow a collection of documents, including contemporaneous documents evidencing the course of conduct between the parties. Both of these issues were supported by subsequent statutory language. Similarly, with regard to the non-compliance of a transaction with the regulatory exceptions, with respect to missing signatures, not later than 90 days following the date on which the arrangement became non-compliant the parties must obtain the signatures. Because of statutory requirements, the applicable signature requirement is not limited to specific exceptions and entities nor is it any longer limited to being used only once every three years with respect to the same referring physician.

A recent 11th Circuit Court of Appeals case has finally put to rest any remaining controversy over whether employers may incentivize and pay bona fide employees for referrals. In that case, an AIDS foundation paid its employees to refer additional patients to it. The court had no difficulty finding that the payment was legal under the antikickback statute.

It should go without saying in this day and age, that any entity which bills federal payers without having in place a robust compliance program is simply playing with fire. Too many physician practices and other entities adopt a plan and then simply let it languish. We have had to update our Compliance Plan Development Protocol multiple times to be sure we have captured developing risk areas. Likely we will have to do it again soon. However, if anyone had doubts about the need to review their compliance plan, update it and then comply with its direction, in April 2019 the US Department of Justice Criminal Division (!) published a document on how they think prosecutors should conduct Evaluation of Corporate Compliance Programs. Whether a program is truly effective is directly relevant to whether there might be mitigating or aggravating factors to lower or raise the criminal penalties associated with violating behavior. But the real import of the guidance is that all entities subject to federal law ought to take this opportunity to revamp and amp up their compliance programs. In our AGG Note, we have taken the DOJ generic guidance and recast it in the context of the clients we represent – physician practices, IDTFs, health systems, pharmacies, DME providers, practice managers, billing companies and the like. We have identified a simple ten point list of things to revise in upgrading a compliance program. We also advise our readers that the point of a good compliance program is not to offer defenses or mitigation to prosecutors; the point is to prevent problems in the first place.

For most of her career, Alice has had to call on and be called on by valuators and accountants to meet the needs of her clients. She has worked extensively with David Glusman of Marcum LLP and in September 2019, he interviewed her about her views on forthcoming government efforts regarding enforcement of matters involving fraud and abuse, fair market value and the like.

We have written extensively on the voluntary repayment rules and Dan has added to that with his new publication “Key Questions and Answers for Medicare Voluntary Repayments,”. Alice focuses on a specific unappreciated trap lurking in the audit process as it relates to voluntary repayments in “Heightened Peril From Physician Audits” because an external audit by one of the myriad federal contractors is prima facie credible evidence there is something to be looked at. It is more important today than ever to approach an audit properly in order to come out with a positive result. Internal audits create their own separate obligations to take action. Physician practices and anyone else paid under Parts A and B would do well to take heed.

While we previously noted the arrival of the draconian EKRA statute, passed in dark of night, enforcement has begun. Among the earliest settlements announced by the Department of Justice was a conspiracy to broker patients to recovery centers. While we don't think our clients would engage in such activities, the point of reporting these settlements and guilty pleas is that the government will enforce and whistleblowers are likely to pay attention to the less scandalous challenges this law presents to otherwise law abiding providers.

The use of off shore services and personnel to contribute to the delivery of health care has a long standing presence in health care. Yet, state law, federal reimbursement principles and other federal laws create barriers to the use of overseas personnel, resources, information technology and more in the delivery of health care.  Issues of whether supervision can be rendered from afar, licensure requirements, HIPAA restrictions and Medicare reimbursement prohibitions create a challenging context to make these arrangements work.  Dan Shay explores all of this and offers practical contractual language to use in any of these undertakings in his article "The Lure of Foreign Shores: Outsourcing of Overseas Health Care Functions" in the 2021 edition of the Health Law Handbook.

The role of the billing function in physician practices is critical-- so critical that many groups do not trust themselves to do it effectively. They outsource this role. Hospitals are increasingly doing the same thing. The billing function is also essential in emerging transactions such as leasing a practice to a health system, private equity management contracts, MSOs and more.  In her article "Billing Company Contracts: Accountability and Pitfalls" Alice elucidates who does this work, explores and challenges the traditional compensation model for these tasks and offers an alternative approach.  She addresses performance metrics to be considered, and then dissects the allocation of responsibilities to be set forth in these agreements. She further assesses the implications of the Medicare reassignment rules, the OIG's Model Compliance Guidance and its import, and then presents information on what happens when things go wrong.  This little addressed area of the law merits significantly more attention than it has gotten to date.

Almost six years after the law creating the basis for regulations, the Office of the Inspector General issued rules regarding voluntary repayments.  If a provider or supplier under Part A or B, receives an overpayment and does not return it within 60 days of identifying it, the claims convert to false claims and become available to whistleblowers and enforcers.  For physician practices in particular, the challenges in managing this process are considerable.  How to monitor, what is reasonable diligence, how to report, when to report and how and when to extrapolate from a sample are all issues to be confronted.  We think this is such an important issue for physician practices that we have published five separate articles about it with practical guidance, including Alice’s major chapter in the 2017 edition of the HEALTH LAW HANDBOOK. We also have presented a teleconference on the subject.
For many years, providers have struggled with whether it is a violation of the anti-kickback statute to provide free or discounted transportation to patients. The OIG has now offered a new safe harbor for local transport, among some others that are not so relevant to our clients. In addition under the civil money penalties provisions, they have created exceptions for beneficiary inducements that promote access to care, or another where the patient has financial need.  The devil, of course, is in the details. Our AGG Note addresses the extended commentary which was published with the relatively brief regulations setting forth both the new safe harbors and the new CMP exceptions that are most relevant to physicians.
In Wichita, Kansas a notorious cardiologist, who has paid settlements to the government before, recently paid $5.8 million to settle claims regarding unnecessary cardiac procedures. While this significant settlement amount is noteworthy, Dr. Galichia also agreed to a three year exclusion, demonstrating that Three Times Is No Charm. The whistleblower case was brought in 2014, but Galichia had already paid $1.5 million in 2000 for services that were claimed at a higher level than documented, that were billed twice in some instances or were not provided. Bad as that was, in 2009 he paid again $1.3 million in a settlement for services not documented properly or not provided. The 2014 investigation of a whistleblower claim was conducted by the US Attorney’s Office, the DOJ Civil Division in conjunction with the HHS-OIG, the FBI, the Defense Health Agency for TRICARE, the Defense Criminal Investigative Service of the IG for the Department of Defense and the OIG of the Office of Personnel Management. Given the array of prosecutors, it is unclear whether this was a settlement of criminal charges (after two prior settlements) or civil charges only. He is out of the program for three years; but the case demonstrates the firepower the government has available to investigate and punish bad acts.
As the role of whistleblowers has become a real driver of false claims enforcement in the federal health programs, the government has recently taken to avoiding intervening in cases. In the early days of these cases, the whistleblower’s lawyers were very eager to have the government intervene to get the full power of the Department of Justice behind their case. That is no longer the case. More and more whistleblowers proceed with their cases even when the government chooses not to intervene and control the prosecution of the case. In the civil arena, the whistleblower stands to get even more money (25-30%) if they succeed than if the government does intervene (15-25%). Against this background, in a unanimous opinion, the United States Supreme Court held in Cochise Consultancy Inc. v. US ex rel Hunt that the statute of limitations for false claims act challenges where the government does not intervene extends beyond the traditional six years, to a maximum of ten years. Until this opinion, only the government itself could claim the ten year limit. This means that the risk of actions today for behaviors before has increased and will remain in play going forward. The drumbeat for robust compliance is coming from all corners. All who submit federal health care claims should take heed!

Diagnostic testing in Medicare is a thorny, complicated subject that touches on multiple different regulatory schemes, requirements, and prohibitions. Many physicians and their managers are confused by the interplay of Stark, anti-kickback, incident-to, and supervision rules. If not managed effectively, this issue can lead to overpayments, denied claims, and false claims liability. Dan explores these issues in two articles. In “Stark, Diagnostic Testing, and Group Compensation,” Dan examines how diagnostic testing can affect a physician group’s compliance with Stark, especially with regards to how the group pays its physicians. In “Navigating Spaghetti Junction: The Intersection of Medicare’s Diagnostic Testing Rules,” Dan takes a much deeper dive into the topic and explores a broader range of Medicare regulations and how they intersect in diagnostic testing. The article offers both legal analysis, and touches on real-world experiences our clients have had in this area.

The Stark statute has become the basis for some astoundingly high verdicts and settlements in the last few years. While one might think that in the developing value driven health care environment the risk of over-utilization because of financial relationships would become a diminished concern, in August 2014 the government entered into the first Stark settlement ever with respect to improper compensation within a private physician practice!  Still further, the bad compensation occurred in 2007 and 2008.  The group apparently compensated its partners based on the volume of nuclear scans and CT scans they ordered.  The group agreed to pay more than $1.33 million dollars to the government. We have been focused on issues associated with physician compensation for years, but before even knowing about the pending settlement we developed a teleconference which illuminates proper compensation practices including profit sharing, productivity bonuses, incident to and anti-markup principles.  This is now a must listen to MP3 since it is clear that the government will use its enforcement authority to reach deep within private practices. The settlement motivated Alice to dig deeply into the confounding intersections of Stark and Medicare reimbursement, in “Stark and Medicare’s Physician Reimbursement Rules: Unraveling the Knots.” It is time to review what you are doing.
The problem of overuse is getting more attention than ever in the move toward greater value in health care. But overuse is no longer just an issue of cost.  It is increasingly a fraud and abuse concern, and in sometimes surprising arenas. Cardiologists have been charged and convicted for over-stenting but over-stenting has been a dirty secret in cardiology for years. More surprising is that an oncologist in Michigan has been charged with administering medically unnecessary chemotherapy. In a whistleblower lawsuit in Georgia, a different spin on overuse was presented where both a physician and the medical center where he practiced were charged with false claims based on his incompetence to perform procedures for which, it is alleged, the hospital should never have granted him privileges. Now, the GAO has focused on the exponential increase in both radiation therapy for prostate cancer by urologists with a financial interest in the radiation therapy center as well as anatomic pathology services billed by urologists, dermatologists and gastroenterologists who had obtained the opportunity to self-refer. While the Stark statute was primarily aimed at overuse, self-referral and financial benefit are not the only motivators of overuse. Defensive medicine also makes the cut. As the house of medicine has, at long last, begun to address the problem of overuse in the Choosing Wisely campaign providers who do not make the value of care a core value in their efforts to confront the changing environment, do so at their own peril from expanding fronts.
We have reported the increasing focus of the OIG on quality issues as a matter of fraud and abuse. (See Issues: #7, #55, #56).  In addition, with the advent of many more quality reporting programs and more to come, risks associated with quality reporting-based false claims are also increasing. (See also Issues #63, #64) demonstrating the major emphasis the OIG is now placing on this aspect of its amped up enforcement efforts, the OIG has created a separate web page for Corporate Integrity Agreements that entail quality of care issues. For those who have naysayed our warnings, the writing is on the wall. Everyone should be including these types of issues in their compliance programs, and in the current environment, no provider should be functioning without a meaningful, operational compliance program.

As the concept has unfolded from an article in Health Affairs in December 2006, we have expressed skepticism about the implementation of Medicare Accountable Care Organizations (ACOs). The proposed regulations were met with resounding criticism throughout the industry from almost all sides; and the supporting statements, by the Federal Trade Commission on antitrust and the OIG on fraud and abuse, derided both as too restrictive and too lenient.  Many forget that this program enacted as part of health reform was never intended to be applicable to most provider groups.  At its best, CMS has estimated that 75-100 provider entities will be approved as ACOs.

We firmly believe this is a considerable over-estimate even if there is a complete revamping of the regulations. We are not alone.  In “Onerous Regs Put ACOs on the Ropes” Alice and Jeff Goldsmith are the principal interviewees explaining why of the 5800 hospitals and more than 780,000 physicians in America, very few will find themselves in Medicare ACOs. That said, the pressures to be accountable for care and what that will require are an entirely different proposition. In “ACOs vs. Accountable Care: Is There A Difference?”, Alice further describes the problems with the Medicare approach, but elucidates the essential activities that are necessary to be accountable for care; and they are activities that providers should be engaged in even if no one pays them differently.

While specialists are seeking employment by health systems, health systems are forming multi-specialty groups and the billiard balls are repositioning themselves throughout the country, the illusion that health system employment of physicians will solve alignment problems going forward is unfortunately far too simplistic for the current state of affairs. In her new HEALTH LAW HANDBOOK chapter, “Avoiding Marriage: Hospital and Physician Non-Acquisition Financial Strategies”  Alice examines these issues in greater depth than was presented in her teleconference. She explores the phenomenon of enthusiasm for full merger business strategies and offers a range of other techniques by which physicians and hospitals may bond more tightly while physicians remain independent---all with particular emphasis on improving healthcare value and quality.

In his chapter for the 2010 HEALTH LAW HANDBOOK, Dan Shay explores the rapidly intensifying issues associated with significantly increased quality reporting. We now have evidence that where the stakes for reporting go up, bad behavior will arise “Physician and Hospital Quality Reporting Fraud: Risks and Compliance Techniques” looks at the diverse range of quality reports required of hospitals, health systems, and physicians. The fact of express and implied statements about quality can create false claims and other types of fraud. He suggests techniques in association with a formal compliance program by which risks might be avoided.

Under the Stark statute and regulations, there are significant restrictions on how hospitals may pay physicians or provide financial benefit to them. In today’s environment of increased demand for quality performance, paying physicians for their contribution to hospital quality performance is increasingly a sought after technique. In the proposed update to the 2009 Medicare Physician Fee Schedule (MPFS), CMS asked for comments on how they should approach gainsharing (“shared savings programs”) and quality performance payments (“incentive payment plans”). Alice responded with comments on the quality payments. We do not believe gainsharing programs are about quality. They are about saving hospitals money. They have a short shelf life, distract physicians from work they should be doing, and are not sustainable as a business model. We do not comment on them to the government, although we do advise clients who choose to implement them. Most of the programs which have been greenlighted by the OIG are so overloaded with safeguards and protections that they have relatively little utility, other than to the consultants whom the OIG apparently thinks are a protection in their structuring and review of these programs. Unfortunately, in their proposed regulations, the government failed to understand the very significant policy and operational differences between programs that pay physicians a portion of shared savings and programs which pay physicians for contributing to improved hospital quality performance as measured on nationally recognized bases.

When the time came to actually publish an exception that would address these issues, the regulators waffled. Instead they posed 55 specific questions about how to regulate these programs. There are many ways in which the Stark program is out of control and this is one of them. Admitting their lack of familiarity with quality measurement or improvement techniques, they called for answers to their questions, leaving the comment period open another ninety days into February. Alice has provided a 16 page response addressing quality performance payment programs, setting forth the minimal regulation that is necessary here to safeguard patients and protect against rewarding referrals. The government has to stop using the Stark statute as a vehicle for basic regulation of issues that are highly regulated already in other contexts.

The fraud and abuse liabilities which lurk in inadequate quality performance have been highlighted on this website since 2003 with an AGG Note and later Alice's article in The Journal of Health Care Compliance, “Doing What Matters.” From Jim Sheehan’s first public statements on his priorities regarding quality enforcement, to the first OIG settlement based on quality failures, to Sheehan’s 2006 PowerPoint enumerating the many ways in which quality will be the foundation for fraud enforcement, the weight of punitive attention is increasing. Now, with the OIG's published statements regarding Board responsibility for quality in hospital, and a major initiative on nursing home quality performance beginning with a joint publication with the Health Care Compliance Association the pace of the inexorable moves in this direction has quickened considerably. Those who ignore the risks do so at their own peril.

First convened in December 2004 as a disparate group of experts intending to design a new payment model, PROMETHEUS Payment® Inc., was awarded a $6.4 million grant from the Robert Wood Johnson Foundation, to develop a scorecard, refine the concepts and most importantly test the program in four pilot sites across the country. Having modeled its first Evidence-informed Case Rates™ for actual implementation beginning in 2009, the results are quite stunning. In her plain language article, “Making PROMETHEUS Payment® Rates Real: Ya’Gotta’ Start Somewhere” Alice explains the methodology of constructing the rates. First, she elucidates how the Design Team took into account its clear understanding that physicians would be suspicious of rates built on claims data. There are five specific financial cushions built into the rates. The result is that the care for a controlled non-insulin dependent diabetic, whose care comes primarily from a physician office, would be paid based just on the claims data at $311 a year; but, under the PROMETHEUS system, the same patient’s care would be eligible for $2329 to the physician!!! At the same time, what is most remarkable, is that this approach to the broad problem of delivering science based diabetes care would save the system represented in just the database we are using and this one condition, more than $340 million. This is a very powerful reason to move to the PROMETHEUS Payment® model. Similar results are emerging for the other conditions we will address initially as well. The more important hidden message in the article, though, is whether our specific program is implemented is not the issue. Throughout the American healthcare system, we are spending extraordinary amounts of money on potentially avoidable complications, while we are not paying providers enough to do what needs to be done to prevent those complications in the first place. Exploring which services the PROMETHEUS model considers to be potentially avoidable, and then analyzing how to avoid them, is a good way to think about how to organize clinical service delivery for better results with greater efficiency.

Since the inception of this website we have highlighted the inexorable movement of fraud enforcers to direct targeting of quality problems as fraud. (See, link to (3) #56, #45) When the AHLA and the OIG published joint guidance to hospital boards on their fiduciary responsibilities for quality it was clearly game on! We have highlighted the quality-compliance nexus in the past as well. The rules of the game have so intensified, however, that we now believe that it can be said that a major goal for all health care providers in the 21st century will be “Avoiding Quality Fraud”. Alice’s article with Jim Reinertsen in Trustee magazine is directed to hospital boards, but has meaning to everyone in health care. The increasing volume of quality data reporting, implied statements about quality in claims filed, and flat out false claims liability lurk. It is significant that hospital quality data reporting has been targeted by the OIG in the 2009 Work Plan as a topic of attention.
With her study of the current identified effects of P4P, traditional compensation models within physician groups, survey of groups which do compensate on quality and consideration of the legal issues in doing so, Alice opened the door to focusing on this aspect of motivating quality improvement. In her article, “Compensation for Quality: The Next Inevitable Step”, she not only makes the point that quality will never reach optimal levels if physicians do not have consistent payment incentives within their groups, but she affirmatively calls for more information about organizations which do pay their physicians for quality. It is hard to believe that only 14 groups around the country, and most of them very large multi-specialty organizations, are experimenting with these efforts. If your group pays your physicians in any measure for their quality performance or based on their quality performance, please contact us at with your story.

A case decided in the Commonwealth Court of Pennsylvania has taken the quality-payment nexus further without any “never event”, or a finding of fraud, or even a bad outcome to the patients involved. In Pinnacle Health System v. Department of Public Welfare (2008 WL 140985) the hospital appealed from payment denials affirmed by the Bureau of Hearings and Appeals. The Medicaid agency denied payment for psychiatric hospitalizations where the patients were not seen by a psychiatrist on a daily basis. The hospital argued there was no regulation requiring it. The agency argued that this failure caused care to fall below the regulatory requirement that care be rendered in accordance with "accepted medical treatment standards." Both sides had experts -- the hospital's testifying to the fact that daily visits were not medically necessary, the agency's that daily visits were the standard of care. While the standard of judicial review for administrative purposes was whether the determination by the agency was supported by substantial evidence, the court held that even though the standard of ‘accepted medical treatment standards’ was general, it was not improperly vague and did put providers on notice of what was expected of them.

Considering (1) standard managed care contract language regarding treatment in accordance with accepted standards of care, (2) the burgeoning expectations that American health care should be provided at higher levels than it is, (3) increasing fraud and abuse liability for quality failures and (4) that malpractice caselaw which addresses the standard of care has imposed as the standard of care treatment regimens not widely applied, the Pinnacle case offers a tightening view of the quality imperative. Without a finding of malpractice, fraud, or a “never event” payment denial for failure to deliver services properly is a new reason to do the right thing at the right time in the right way.

Pay for performance programs show no signs of abating in popularity, yet their impact remains equivocal. Whether quality would be better if physicians within groups also paid themselves based on quality performance is unknown. If the incentives of P4P are to have impact, how are those monies distributed to the individual physicians once the group gets paid? There is virtually nothing in the literature on point. In “Physician Compensation for Quality: Behind The Group’s Green Door,” Alice looks at the data on P4P programs, the basics of traditional compensation within groups and then presents the findings from a unique survey which was sent out on her behalf by the AMGA producing responses from 14 groups around the country who are variably paying for quality as part of physician compensation. Some report significant improvement in quality performance too. Alice then looks at the payment reform models on the horizon and concludes that traditional notions of productivity, on which most current group compensation models turn, will not reward what the new systems, and most particularly the PROMETHEUS Payment® model ( is designed to generate. She examines whether the Stark rules on compensation will be a barrier to changed, creative approaches, concludes that it will not, and then looks at what employment contracts will have to accommodate to make physician compensation for quality within groups real and of value to both patients and physicians.

As health plans and health systems have consolidated and fraud and abuse enforcement has intensified throughout healthcare, the natural business tendencies in any other industry for business partners to find ways to benefit each other economically in win-win strategies has been stifled in health care. Anxiety over fraud and abuse and antitrust risks, has gotten in the way of hospitals and physicians on one hand and health plans and physicians on the other working together for their mutual economic benefit with the purpose of improving quality. In a new chapter in the Health Law Handbook, Alice makes the argument that until the three principal drivers of the care that patients receive in this country take common ownership of the quality mission and stop thinking of themselves as disparate, adversarial stakeholders, quality will never advance to the levels we would like. "In Common Cause for Quality" she articulates a perspective on how to consider a business case for quality, sets forth the quality demands on hospitals and health plans which cannot be met without full cooperation of physicians and debunks the myths that the law impedes collaboration which benefits any party economically. She then enumerates 10 specific strategies by which hospitals and health plans can advance the physician's business case for quality through activities with direct beneficial financial impact on those physicians. She also presents 6 additional strategies through which physicians can and will have to help hospitals to optimize their quality efforts.

In "Enhancing Oncology's Business Case: How the Hospital Can Help" she presents a crisper version of these arguments in terms of how oncologists can safely look to their hospitals to help them with their own quality demands.

Since the inception of the DRG program in 1982, hospitals have been trying to find a way to motivate the physicians on their staffs to work with them to lower expenses by sharing savings generated. These 'gainsharing' notions had been virtually precluded to them going back as far as a Paracelsus hospital company program in 1983, and then in more modern iterations, by virtue of the OIG's Special Advisory Bulletin on Gainsharing Arrangements in 1999. Although the OIG approved one gainsharing program 18 months after the Bulletin (see discussion in Alice Gosfield's article on "Making Quality Happen: In Search of Legal Weightlessness"), the structure and operation of that program seemed sufficiently idiosyncratic as not to offer much by way of a model. Now the OIG has published six advisory opinions approving 'gainsharing' programs, where cardiologists and cardiac surgeons will be permitted to share in the savings hospitals generate by virtue of standardization of surgical supplies and their uses. As we note in our five principles for UFT-A, standardization for purposes of quality is important as an element of a business case for quality; but the advent of these gainsharing approvals further supports a business case for broad and deep standardization to the evidence. On the other hand, the gainsharing programs are time limited, appear to be predominately applicable in surgical contexts or analogous circumstances and hardly will serve to drive a sustainable business model for physicians.

Prosecutors are becoming increasingly interested in how quality implicates the fraud and abuse statutes. From understaffing in hospitals, to care which does not meet professionally recognized standards, to over-utilization, new theories of false claims and flat out fraud based on the clinical care rendered are emerging. Initially used to force some 40 or more false claims settlements around the country with nursing homes, prosecutors have now made it clear they intend to use similar theories to prosecute hospitals. In the current environment of diminishing reimbursement and heightened attention to quality, the fraud and abuse risks from less than optimal clinical behavior can no longer be ignored. Unless these issues are addressed in compliance programs, those initiatives will remain mired in the narrow focus of the administrative minutiae of billing problems, leaving the health care enterprise vulnerable and their compliance staff isolated from the principal focus of the organization – delivering high quality care.

At the same time, how to set priorities for compliance activities is beginning to stymie those compliance programs that addressed initial, low hanging fruit with corrective, voluntary actions. Some of our clients are struggling with where to go next. Many of them seem to believe that the role of compliance is to forever search out errors to report and repay. We do not share this view. We believe compliance is about doing it right in the first place and cleaning up problems found. It is not about eternal internal inspection. Our new AGG Note, “The Quality/Compliance Nexus: Moving to Programmatic Integration” examines the developing enforcement environment, sets forth liabilities already on the books, and then discusses how using clinical practice guidelines in compliance can integrate its import into the fundamental mission of health care. The result can be to (1) enhance compliance itself by making it meaningful for those from whom compliance is sought, (2) save time for the clinicians, and (3) actually improve quality on an on-going basis.

The health reform legislation has put a firm stake in the ground with respect to expanding the measurement of quality for many providers.  One of its principle vehicles was to solidify the former Physician Quality Reporting Initiative (PQRI) into a Congressionally mandated Physician Quality Reporting System (PQRS).  Although what is reported has nothing to do with whether either quality standards were met or quality itself improved, with the financial incentives available to those who report voluntarily, the idea is that physicians will learn to report quality effectively. By 2015, physicians who do not report will be penalized. In "PQRS and Its Penumbra", Dan Shay explores the implications of the program, how it relates to meaningful use financial incentives and the pitfalls, including false claims liability, that lurk in ineffective reporting. This program is a must know for physicians.

The last five years have heard a relentless call for information technology dissemination to improve quality and lower costs in health care. Electronic health records (EHR) have been touted as the first and most important step to a real technology revolution. For physicians, though, the cost of EHR implementation has often proven prohibitive. The Stark and anti-kickback protections for donated medical records was expected to jumpstart this effort. Not so fast. In his consideration of downstreamed EHR licenses Dan Shay takes his primer on EHR license agreements a step further in explicating the special complications of tri-partite license agreements. What happens on termination is at least as important as what is entailed in implementation.

For quality to advance in this country, it is becoming increasingly clear that universal electronic medical records will be necessary. Proposed regulations to permit hospitals to provide record systems to their physicians have been published under Stark. Many physician practices are looking to obtain these programs. Whatever the source of an electronic health record system, it is certain there will have to be a license agreement by which the practice obtains access to the software, unless they build their own. In "A Primer on Electronic Health Records License Agreements", Daniel Shay reviews the context for these contracts, elucidates their common features, based on reviews of real-life documents, and points out pitfalls that physician practices should avoid in obtaining access to these vital practice accessories. In a practical, easily applied application of the deeper issues addressed in the primer, Daniel has also offered guidance on “Top Ten Questions To Ask When Looking At An EHR License Agreement.”

Although for most Medicare entities, the maintenance of an effective compliance program is not mandatory, the absence of an effective compliance program is foolhardy. Halfhearted attempts at compliance can also create liabilities. This was dramatically demonstrated in the case of United States and State of Wisconsin, ex. rel Keltner v. Lakeshore Medical Clinic, Limited. Here, the whistleblower former employee brought a suit against a large multispecialty medical group for false claims on a host of bases, many of which were dismissed. But her allegations on evaluation and management services survived. The predicate for her claim was that an annual internal audit of 25 claims per physician demonstrated that two physicians had each up-coded more than ten percent of their claims. The employee alleged that even though the medical group returned overpayments related to their specific claims found to have been up-coded, the non-audited claims were not reviewed. She further alleged that the medical group subsequently stopped engaging in review of E/M services codes. Neither the United States nor the State of Wisconsin chose to intervene in the action. Nonetheless, the court refused to dismiss the case, focusing on the group's ignoring audits which disclosed "a high rate of upcoding." The court went on to say, "These allegations plausibly suggest that the medical group acted with reckless disregard for the truth." While many physicians wonder what reckless disregard might mean, this is one of the few cases that has actually confronted the issue.

The case is noteworthy in that it focused around an organization that engaged in self-audits. This puts a premium on taking compliance seriously, as we have noted previously [See also links: #3; 51; 48; 45; 42; 33]. This case raises some significant issues with regard to how groups should interpret what they find on self-audits. With the new liability for false claims for failure to return overpayments within 60 days of their identification, more of these cases are likely to occur. It would also be important to focus on the OIG's Work Plan as we explain in our article, "May you never meet the OIG: The Work Plan." In updating your compliance plan, it is also time to include quality-based issues as Alice describes in "Quality fraud: Two pathways to trouble." While there are still no final regulations under the 60-day repayment rule, prudent practitioners will revisit their compliance programs and will seek legal counsel in evaluating the significance of what is learned on probe audits and more extensive self-audits.

We have already noted the implications of the Health Reform clarification that Stark violations can generate false claims. Little appreciated is the potential focus by whistleblowers on physician internal compensation formulas. To meet the definition of a "group practice" under Stark, compensation formulas must comply with the law. There is both more flexibility than most people understand, but also real liability lurking here since, while most of the Stark settlements have involved hospitals with non-compliant relationships with physicians, physician groups submitting claims for services which cannot comply with the definition of a "group practice" are vulnerable as well. In "The Stark realities your group needs to know" Alice elucidates issues which should be confronted in designing competition. Given the changes in the law, it is time for group practices that provide designated health services within them to revisit their compensation formulas.
Although most of the health reform furor was about the individual mandate, we have repeatedly made the point that health reform gave new weapons to prosecutors of fraud and abuse, and the financial pressures of the new environment make fraud and abuse enforcement a major focus of the regulators and enforcers. When GlaxoSmithKline paid more than $3 billion to settle false claims charges for a variety of misbehaviors, the government also made it clear, once again, that they would go after individual executives who ignore or worse yet encourage violative behavior.. Many in the commercial sector do not understand that the government is on a cultural jihad about this. It is remarkable that over the last twenty years, as measured by Public Citizen, fully more than 25% of Federal False Claims Act recoveries have come from big pharma. The government has new weapons and new approaches. "We used to hunt like an elephant and now we chase like a cheetah" is the line a senior advisor for investigation has used.  Alice authors a book which is updated every year titled Medicare and Medicaid Fraud and Abuse and the inexorable tightening of the enforcement snares is abundantly clear. What can regular providers do? As we have repeatedly recommended, now is the time to buff up your compliance program and if you don't have one it is imperative that you develop solid approaches to compliance. In "Compliance programs: more important now than ever" Alice and Dan explain why even though the law says having one is voluntary, those who don't adopt one, or merely pay lip service to the issue, do so at real peril. And, compliance is no longer just about false claims in billing.  The OIG has announced its invigorated focus on patient safety, noting that one in four Medicare beneficiaries suffers an adverse event in the hospital, and that it will continue and increase its attention to adverse events, never events and temporary harm events. Based on these developments it is clear that a good compliance program will encompass proactive management of a range of liabilities we have identified including Stark with attention to internal compensation as well as referral relationships, anti-kickback issues, maintaining enrollment and, increasingly, quality reporting and quality performance issues as well.
As we have noted before, Medicare’s focus on keeping bad actors out of the program has made the enrollment process fraught with peril. Minor errors in completing forms, misunderstanding who is a managing employee and who is a delegated official can stymie those who seek to update their information or now are required to under Medicare’s revalidation program. This means verifying all enrollment data. It is essentially filing a new application for enrollment. New regulations as a result of health reform have designated various types of providers in terms of the risk they pose to the program. DME and home health agencies are at the highest level of risk and new applicants are already subject to criminal background checks. IDTFs and physical therapists are a second level of risk.  Physician practices are at the lowest level of risk, but IDTFs owned by physicians are treated as IDTFs generally with no preferences or favorable presumptions because they are owned by physicians.  In “Medicare Enrollment: A Never Ending High Hurdles Race”, we explain further the practical implications of these processes.
Among the very significant fraud and abuse changes in the health reform legislation, Congress made it clear that they expect the regulators to keep bad actors out of Medicare.  One of the techniques they will use to do this is the revamped and bolstered Medicare enrollment process.  In his new consideration of these issues, “‘Halt! Who Goes There?’: Coping with the Continuing Crackdown on Medicare Enrollment,” Daniel Shay elucidates the new rules, explains their practical implications, and then reviews 18 months worth of Administrative Law Judge opinions dealing with appeals of enrollment denials.  However, the challenge is not merely getting in the front door, but maintaining enrollment, and the administrative burdens have grown exponentially.  This is a burgeoning area that all providers need to pay attention to.
Many providers are skeptical that the government really enforces the Stark statute. In a first of its kind settlement, Covenant Medical Center in Iowa agreed to pay the government $4.5 million to resolve false claims act allegations originally lodged by competitors of the physicians the Medical Center had recruited and to whom they were paying extremely high salaries as employees. The really unusual aspects of the settlement were that it was with the Department of Justice which cited the Stark statute violations as the basis for the settlement because the salaries were the highest in Iowa and among the highest in the United States for physicians. The US Attorney has refused to reveal what he used to determine fair market value but he did not cite MGMA compensation data as the basis for the determination. The Stark statute requires fair market value for a bona fide employment relationship compensation to qualify under the exception.

Lawyers offer special expertise which health care providers need in order to function in their highly regulated contexts. In addition, the special liability problems faced by those providers who do not meet the standard of care, merit careful attention to risk management. But increasingly, we see hospitals who are held captive by attorneys who needlessly scare them about compliance and liability risk. There are increasing tensions in this regard in the new world of quality transparency. We see lawyers advising physicians in so restrictive a way as to impinge on their ability to function as business entities. We see lawyers who over-estimate the nature of compliance problems and recommend potentially more risky efforts to fix them. After 35 years of working in this area, Alice can say, without limitation, that older lawyers offer more seasoned and reasoned advice than younger ones. Young lawyers get hysterical and rigid about things which do not merit such anxiety. In addition, too many lawyers of all ages over-control the situation where, mostly, the risks are purely the client’s to take.

On the other hand, it is not well understood that lawyers advising health care providers, and particularly boards of trustees, have personal liability, not only for what they do, but increasingly for what their clients do. This cannot help but influence the way they give advice. Still further, the context for the relationship between attorney and client can also color the way advice is given. What is the lawyer’s liability and how do we take that into account? Does a member of the law firm sit on the board of the hospital? How important are we as a client to the firm advising us? How does that affect what we are hearing from them? How did the in-house counsel pick the attorney she is recommending for a technical issue? What kinds of information should clients ask to assess the advice they are getting? Finally, are there certain kinds of issues on which the lawyer should be taken more seriously than others? These matters are never discussed openly – at the board, between the client and attorney, or by attorneys themselves. Alice is taking this issue on in a new webinar that addresses “When Should You Listen to Your Lawyer?” Aimed at hospital trustees, the issues she poses are relevant to all clients in the health care industry.

For the 2008 Medicare Physician Fee Schedule (MPFS), Medicare published rules with regard to the prohibition on marking up diagnostic testing which became effective January 1, 2008. On January 3, they were ‘suspended’ until the end of the year. With the 2009 MPFS, they were republished in final form offering two tests as to whether the prohibition is applicable: (1) whether the supervising or interpreting physician spends 75% of his time with the group; and if so, then there are no further restrictions to consider; if he does not then (2) whether the location where the service is provided is co-located with the office of the ordering physician, where that physician provides substantially the full range of his services on a regular basis. This is more restrictive than Stark; and it applies to all diagnostic testing, not just Stark DHS. Stark is about whether the service can be provided and be covered by Medicare. The anti-markup rules are about how much the billing entity can charge. The calculation of the ‘net charge’ when the prohibition does apply, if not obtained on a ‘per transaction’, ‘per click’ or ‘per study’ basis, is metaphysical at best. These rules relate to, although were not published with, the rules under Stark on “under arrangements” which also now extend far beyond the traditional hospital setting to all arrangements where a physician owned entity furnishes DHS to another entity which bills the DHS to Medicare --- most particularly, but not exclusively, hospitals.
The Medicare physician reimbursement program has been criticized, for years, as a fee-for-service program which, by definition, incentivizes physicians to overuse because the more you do the more money you make. In addition, there is no question that Medicare quality results have lagged, as quality results across health care have failed to reach optimal levels. In her polemic in the 2009 HEALTH LAW HANDBOOK, “Getting The Team Paid: How Medicare Physician Payment Policies Impede Quality”, Alice looks at four principles now known to enhance quality, and how Medicare’s own payment policies thwart the ability of physicians to deliver high quality care. Addressing specific Medicare rules that are widely applicable, she also confronts head on the now almost insufferable challenges presented by the Stark statute and its interpretations. As she points out, Pete Stark, himself, now regrets the law’s enactment. The regulators have created a monstrous regulatory program which rivals the Tax Code in its complexity without adding value. It doesn’t even work. Alice contrasts the burdens that Medicare imposes with the PROMETHEUS Payment® model ( which is a provider payment model explicitly designed to improve quality, pay providers more rationally, lower administrative burden and enhance patient engagement.
The regulations now referred to as “Stark III” have added to the complexities of Stark compliance, but do not require major reorganization of business or delivery relationships. There are many opportunities for hospitals to help physicians with their business case, including paying for quality performance, which is particularly intriguing in light of the widespread emphasis on measured hospital quality improvement. In her two part article “Stark III: Refinement Not Revolution”, Alice first identifies issues associated with Stark as applied within physician groups and in the second part identifies opportunities and pitfalls that the new regulations raise, with regard to hospital-physician interactions.
In October 2007, the US Attorney in New Jersey entered into deferred prosecution as well as settlement agreements with six device manufacturers who had paid physicians purportedly to advise them regarding the development of new devices. Unfortunately, many of these were apparently no show jobs. But in reading the settlements and corporate integrity agreements, while the manufacturers agreed to cease what the government found to be illegitimate relationships with physicians, the government did recognize that paying no more than $500 an hour to physicians to perform real services advising these companies would be permitted. This specifically acknowledges that device manufacturers do have a legitimate need for input from practicing physicians who might use their products. There are many myths about how device manufacturers and physicians may relate to each other. In “Physician Investment in Start-Up Device Companies: Debunking The Myths”, Alice presents the boundaries of safety and a continuum of arrangements between physicians and device manufacturers.
The increasing emphasis on quality as a basis for fraud and abuse enforcement is now clear. Yet many compliance officers are not integrated into the quality activities of the organizations they serve. In her viewpoint on “Doing What Really Matters: The Compliance Connection to Quality” in the Journal of Health Care Compliance, Alice presents three activities through which compliance officers can work more effectively on quality issues in addition to the fundamental challenge of raising the consciousness of the board and administration of any healthcare entity to these new quality mandates.

The issue of how physicians can collaborate effectively when two specialties seek to perform the same services has presented increasing challenges in many contexts. A classic problem area with regard to this is the advent of coronary computerized tomographic angiography (CTAs) performed by cardiologists who generally do not read the full chest cavity. In contrast, radiologists frequently hold exclusive privileges at the hospitals at which they practice and are not as intensely focused on cardiac organs. The American College of Radiology asked us to provide them with a white paper elucidating potential reimbursement liabilities associated with splitting these interpretations. That white paper is now available addressing these issues, all of which would be obviated with the advent of PROMETHEUS Payment®.

Hospitals and physicians have tried to collaborate more effectively through bonding, purchasing, owning and managing. Virtually none of these initiatives has improved quality of care. In addition, the rise in economic credentialing, conflicts of interest policies and disclosure of ‘competing investments’ further entrenches the parties as disparate stakeholders. In her work with hospitals and physicians in common cause for quality, Alice Gosfield has focused on the negative effect of these initiatives. Frequently, overly conservative attorneys contribute to mythologies pertaining to the impact of Stark and the anti-kickback statute on these issues. In an article jointly written with Jim Reinertsen, M.D., for Hospitals & Health Networks Online, they debunk these myths and offer strategies for more collaborative, quality-enhancing relationships. The second part of the presentation describes how PROMETHEUS Payment® can further these relationships by supporting with a different payment system efforts that hospitals and physicians ought to be involved in any way.
The Stark statute and regulations present a host of structuring and operational challenges for most physicians. Radiologists have often believed that they are immune from the implications of Stark since their ordering of diagnostics studies pursuant to a consultation is excluded from the definition of an implicated referral under Stark. However, this does not mean radiologists need not pay attention to the Stark statute. Moreover, many other types of physicians are seeking to engage radiologists in concert with them to deliver imaging services to their patients. Liabilities lurk everywhere. In “Radiologists and Their Business Significant Others: Underappreciated Traps in Stark”, we describe where some of these pitfalls lurk.
The implications of the Stark Phase II regulations when considered in light of Medicare reimbursement restrictions merit a new look.. In our AGG Note "Medicare Reimbursement Through The Stark Looking Glass", we elucidate some of the contradictions and unappreciated pitfalls lurking in issues pertaining to physician-to-physician referrals, in-office ancillary services, incident to billing, reassignment, and diagnostic testing. Unlike our previous AGG Notes, “Stark II, Phase II: The Interim Final Story”, (May 2004) and “Much Better Late Than We Thought: Stark II Final Regulations”, (February 2001) rather than reporting on the contents of the Stark regulations, this new AGG Note is more analytical. It should be read with the other two for a complete understanding of the internecine workings of Stark.
Regarding Stark, there remain considerable confusions about this badly drafted and misguidedly conceived piece of legislation. The fundamental concerns that motivated the legislation are legitimate: (1) Will physician investment motivate referral to poor quality, financially related entities; (2) Will Medicare overpay entities which create specious joint ventures just to investor physician referrals; (3) Will tainted referrals yield medically unnecessary care for financial return? The statute does precious little to address these core questions. Over the years we have addressed many of the misconceptions and myths about the law and regulations in addition to our two AGG Notes, two part article in Family Practice Management (Part I, Part II) and Ten Myths About the Stark Statute Debunked. Further exploration appears in the new article “Is Your Group A Group?
As physicians have become more interested in receiving the full economic value of the work they produce, and they have sought increased control over their work environment, more and more often they have created and financed health care enterprises which may compete with the hospitals at which they have traditionally maintained medical staff privileges. Some hospitals have reacted with restrictive medical staff policies, intrusive inquiries into staff members’ financial relationships with other health care enterprises, controls over who may be a medical staff officer and a variety of other defensive behaviors. Some restrictions or threshold criteria for privileges reflect a real effort to safeguard quality in the hospital and are quite legitimate. Others really implicate the federal anti-kickback statute. The OIG has called for comments on how economic credentialing by hospitals may violate the anti-kickback statute. We are making available our comments to the OIG on these points.