Healthcare Fraud Concerns in Ambulatory Surgery Centers

1
Healthcare Fraud Concerns in Ambulatory Surgery
Centers

• By Tara L. Adyanthaya
• Morris, Manning Martin, LLP
• 1600 Atlanta Financial Center
• 3343 Peachtree Road, N.E.
• Atlanta, Georgia 30326
• Phone [phone]
• http//www.mmmlaw.com

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Laws Under Which GovernmentCan Punish Fraud

• Anti-Kickback Statute
• Stark II
• False Claims Act
• General federal laws on mail fraud, presenting
  false claims to government agencies, conspiracy
  to defraud government, and racketeering

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Anti-Kickback Statute

• Designed to prevent referrals based on financial
  incentives rather than proper patient care 
• Prohibits knowingly and willfully receiving
  remuneration directly or indirectly, overtly or
  covertly, in cash or in kind for referrals or any
  other transaction for which payment will be made
  under federal or state healthcare programs

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Anti-Kickback Statute

• Intent Requirements for Violation
• Courts are split as to whether knowingly and
  willfully requires that the government prove
  that the Defendants engaged in prohibited conduct
  with the specific intent to violate the law or
  simply specific intent to commit the act act in
  question.
• OIG interprets the statute to cover any
  arrangement where one purpose of the remuneration
  is to obtain money for the referral of services
  or to induce further referrals.
• Circuit Courts Approach
• 11th Circuit Reasonable inference that
  Defendants knew they were breaking the law.

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Anti-Kickback Statute

• Possible penalties
• Felony conviction
• Up to 25,000 fine and/or imprisonment for up to
  five years
• Up to 50,000 per act plus treble damages
• Exclusion from federal and state healthcare
  programs
• Mandatory exclusion from Medicare and Medicaid
  for criminal conviction related to program
  participation for at least five years, maybe more
  if aggravating circumstances
• Permissive exclusion upon convictions relating to
  fraud or controlled substances, obstruction of
  investigation, or violations of Anti-Kickback
  Statute for at least three years, maybe more if
  aggravating circumstances

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How to Avoid Kickbacks (Joint Venture Fraud
Alert)

• Avoid shell entities, i.e., entities that do
  not perform any services and operate solely to
  compensate for referrals through profit
  distributions
• Avoid lack of relationship between capital
  investment and the returns

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How to Avoid Kickbacks (Joint Venture Fraud
Alert)

• Avoid choosing investors because they are in a
  position to make referrals
• Avoid offering a greater investment opportunity
  to physicians who are expected to make a large
  number of referrals than those anticipated to
  make fewer referrals
• Avoid actively encouraging physician investors to
  make referrals to the joint venture and avoid
  encouraging them to divest their ownership
  interest if they fail to sustain an acceptable
  level of referrals
• Avoid tracking sources of referrals and
  distributing this information to investors
• Avoid requiring divestment of ownership interest
  if physician investors cease to practice in the
  service area, for example, if they move, become
  disabled or retire
• Avoid making investment interests nontransferable

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What Does It Mean to Fall Within a Safe Harbor?

• Conformance of activity to a safe harbor protects
  against violating Anti-Kickback Statute
• BUT
• Just because you do not fall within a safe harbor
  does not mean you violate the statute
• Will look to facts and circumstances to determine
  intent
• Do not want to be subject to scrutiny
• Possible to seek Advisory Opinion from the OIG

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Safe Harbor Regulations

• New final safe-harbor regulations issued November
  19, 1999, protect four different types of ASCs
• Surgeon-owned ASCs
• Single-specialty ASCs
• Multi-specialty ASCs
• Hospital/physician ASCs

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Common Safe Harbor Requirements for All ASC
Arrangements

• ASC must be certified under 42 CFR 416
• ASCs operating and recovery room space must be
  dedicated exclusively to the ASC
• Full disclosure to patient of referring
  physicians investment interest
• Investment terms must not be related to previous
  or expected volume of referrals
• Investors may not receive loans from ASC or other
  investors in order to make investment
• Distributions or return on investment must be
  directly proportional to the amount of the
  investment
• All ancillary services must be directly related
  to the surgical procedures performed at the ASC
  and may not be separately billed
• Must treat federal healthcare beneficiaries in
  non-discriminating manner

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Surgeon-Owned ASCs

• In addition to common requirements, must meet
  following
• All investors are either
• General surgeons or surgeons engaged in the same
  specialty
• Surgical group practices
• Unrelated persons (not related to investors or
  otherwise in a position to refer business to the
  ASC)
• At least one-third of all surgeon investors
  aggregate medical practice income for immediately
  preceding fiscal year or 12-month period must be
  derived from outpatient surgical procedures

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Single-Specialty ASCs

• In addition to common requirements, must satisfy
  the following
• All investors are
• Physicians engaged in same medical practice
  specialty who are in position to refer patients
  to ASC and to perform procedures on patients of
  the ASC
• Group practices composed exclusively of such
  physicians or
• Unrelated persons
• At least one-third of aggregate medical practice
  income for immediately preceding fiscal year or
  12-month period must be derived from the
  performance of ASC procedures

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Multi-Specialty ASCs

• In addition to common requirements, a
  multi-specialty ASC must meet the following
• All investors must be
• Physicians who are in the position to refer
  patients to the ASC or to perform procedures on
  patients there
• Group practices composed exclusively of such
  physicians or
• Unrelated parties
• At least one-third of aggregate medical practice
  income for immediately preceding fiscal year or
  12-month period must be derived from outpatient
  surgery
• At least one-third of ASC procedures performed by
  each physician investor must be performed at ASC
  in which physician has ownership interest

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Hospital/Physician ASCs

• In addition to the common requirements, a
  hospital-physician joint venture ASC must satisfy
  the following criteria
• Investors are at least one hospital and
• Physicians that meet criteria of one of other ASC
  safe harbors
• Surgical group practices
• Group practices composed exclusively of such
  physicians
• Unrelated persons
• ASC may not use hospital space, equipment or
  services unless arrangement meets space rental,
  equipment rental and/or personnel or management
  services safe harbors, as appropriate

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Advisory Opinion 98-12

• Notes that HCFA policy supports ASCs as a
  cost-effective alternative to higher-cost
  settings, such as hospital in-patient facilities
• Advisory Opinion 98-12
• OIG approved proposed surgery center owned by
  three orthopedic surgeons and two
  anesthesiologists specializing in pain medicine,
  to provide treatment for musculoskeletal
  conditions result from work- and sports-related
  injuries
• Determined that this proposed situation
  technically violated the Anti-Kickback Statute if
  the requisite intent were present
• Declined to impose sanctions

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Advisory Opinion 98-12

• Why the proposed arrangement did not work
• All investors will be referral sources to the ASC
  
• Virtually all business of the ASC will be from
  investor referrals
• Before the ASC Safe Harbor became final

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Advisory Opinion 98-12

• Obvious and legitimate business and professional
  reasons for surgeons to want to own an ASC in
  which they personally perform services on a
  routine basis
• Personal and patient convenience, professional
  autonomy, accountability, and quality control
• Risk of overutilization or unnecessary surgery
  already present because a surgeon already
  generates his professional fee
• Additional financial return from ASC investment
  not likely to increase the risk of
  overutilization substantially.

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Advisory Opinion 98-12

• Characteristics that were critical to OIG in
  approving the arrangement
• Each physician investor made substantial
  financial investments and incurred financial
  exposure
• Each doctor derived substantial percentage of
  overall medical practice income from outpatient
  surgical procedures (in that case, in excess of
  40 percent)
• Each certified that he would perform the majority
  of surgical procedures performed by that doctor
  in the ASC
• Revenue from Medicare beneficiaries insubstantial
  (5 percent)
• Return on investment proportional to capital
  investment, not referrals
• Written disclosures of ownership in the ASC (more
  geared toward abuse of patient trust than program
  abuse)

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Advisory Opinion 01-17

• New OIG Advisory Opinions on ASCs
• Advisory Opinion 01-17
• Approved an ASC joint venture between a
  hospital-affiliated ASC and an ASC owned
  indirectly by five ophthalmologists for a
  free-standing eye surgery center

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Advisory Opinion 01-17

• Factors Considered
• Joint ventures between physicians and hospitals
  are susceptible to fraud and abuse precluding
  joint ownership of ASCs may place hospitals at a
  competitive disadvantage
• ASC did not meet the Hospital-Physician ASC Safe
  Harbor because hospital was a potential referral
  source and ophthalmologists did not directly
  invest in the ASC

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Advisory Opinion 01-17

• How Kickback Violation Was Avoided
• Hospital-affiliated physicians may refer patients
  to the ophthalmologists or their group practices
  but not directly to the ASC
• Hospital to refrain from requiring or encouraging
  hospital-affiliated physicians to refer patients
  to the ASC, the investing ophthalmologists, or
  their group practices
• No tracking referrals made by hospital-affiliated
  physicians to the ASC, the investing
  ophthalmologists, or their group practices
• Compensation paid to hospital-affiliated
  physicians not related directly or indirectly to
  the volume or value of referrals or other
  business generated (consistent with fair market
  value in arms-length transactions)
• Hospital to inform hospital-affiliated physicians
  of the safeguards annually

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OIG Advisory Opinion 01-17

• Each ophthalmologist met the one-third practice
  income test
• Each ophthalmologist received a return on
  investment proportionate to ownership
• Terms on which interests purchased not based on
  volume or value of ASC referrals

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Advisory Opinion 01-17

• Space Lease Agreement
• All elements of the Space Rental Safe Harbor were
  met
• Terms fixed
• Payments consistent with fair market value
• Medical Director Agreement
• Did not meet Personal Services Safe Harbor, BUT
  compensation
• Consistent with fair market value
• Based on a specific hourly rate
• Subject to a monthly payment cap
• Paid only if there was written documentation of
  the hours and services rendered.

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Advisory Opinion 01-21

• Proposed acquisition by a medical center, a
  subsidiary of a Health System, of a 15 percent
  interest in ambulatory service center owned by
  group of gastroenterologists
• Ancillary agreements
• Management service agreement
• Facility support agreement
• Lease for the center

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Advisory Opinion 01-21

• Why ASC Safe Harbor Not Met
• Payment to investors not directly proportional to
  the amount of capital invested by those
  investors, since the price per investment unit
  varied for different investors
• Medical center and its parent health system are
  in a position to refer directly or indirectly to,
  or otherwise generate business for, the center
  and
• Management agreement and support agreement do not
  satisfy the requirements of applicable safe harbor

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Advisory Opinion 01-21

• How Anti-Kickback Violation Avoided
• Will not take any actions to require or encourage
  physicians affiliated with the health system to
  refer patients to the center or the investor
  gastroenterologists
• Will not track any referrals
• Compensation paid to physicians by health system
  consistent with FMV and not related to any
  referrals or other business generated by the
  physicians and
• Will inform affiliated physicians of these
  measures on an annual basis

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Advisory Opinion 01-21

• Management Services Agreement and Facility
  Support Agreement permit termination for cause
  within one year without prohibiting renegotiation
  so they did not meet Personal Services and
  Management Contracts safe harbors, BUT
• The termination and fee renegotiation provisions
  were strictly limited to commercially reasonable
  and well-defined contingencies unrelated to
  referrals
• Certified that if fees are renegotiated before
  expiration of a year, renegotiated fees will be
  FMV and not reflect directly or indirectly the
  value or volume of any referrals or other
  business generated renegotiation will occur not
  more often than annually

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Stark II Considerations

• Prohibits physicians making referrals for a
  designated health service if the physician or a
  member of his/her immediate family has a
  financial relationship with that entity
• Must report information to CMS on the entitys
  ownership, investment and compensation
  arrangements, including those that meet the
  exceptions
• There are exceptions under Stark, but you must
  meet them exactly or you violate Stark.
• Because Stark is based on fact rather than
  intent, you violate Stark regardless of intent if
  you have a prohibited financial relationship
  unless you meet an exception.

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Stark II Considerations

• Penalties
• Denial of payment
• Disgorgement of payment
• Up to 15,000 fine for each service
• Treble damages
• Exclusion from Federal and State health programs
• Not a criminal statute

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Stark II Considerations

• Ambulatory surgery services are not designated
  health services under Stark II (composite rate
  exception)
• Not an express exclusion
• Medicare reimburses ASCs on the basis of a number
  of fixed rates that include procedures ancillary
  to a surgery
• Stark applies only if ASCs perform lab test or
  other services that are not included in the ASC
  facility rates and are billed separately

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False Claims Act

• Violated when a provider presents a claim for
  approval to the government
• The intent of the statute is to establish
  liability for persons who knowingly present,
  assist in presenting, or conspire to present a
  false claim to the government for payments

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False Claims Act

• What is a claim?
• Essentially any request or demand for payment
  regardless of whether it is paid
• What is a knowing presentation of a false
  claim?
• Actual knowledge of the false information
  presented in the claim
• Deliberate ignorance of the truth of the
  information presented in the claim
• Reckless disregard for the truth or falsity of
  the information presented
• Deliberate ignorance may result in physicians
  responsibility for not only staff errors, but
  billing agents

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False Claims Act

• Examples of False Claims are
• Upcoding (including not having proper
  documentation)
• Claiming medically unnecessary services
  different from commonly understood definition
• Billing for services that are not provided
• Unbundling
• Submitting Claims pursuant to violations of
  Anti-Kickback Statute and Stark II

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False Claims Act

• Potential penalties for violation of False Claims
  Statute
• 5,000 - 10,000 fine levied per false claim
• Treble damages for any and all false claims
• Exclusion from Medicare and Medicaid
• Up to five years imprisonment, up to 10,000 in
  fines, or both

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False Claims Act

• Private and public enforcement mechanisms for
  False Claims Statute
• The Qui Tam Statute
• Provides that anyone with knowledge of false
  claims submissions who brings the matter to the
  Governments attention may bring suit on behalf
  of the Government to recover treble damages.
• Whistleblowers are permitted to retain certain
  proceeds from the litigation (15 - 25 percent),
  as are the counsel for whistleblowers.