Kusserow’s Corner: Physician Arrangements Remain the Number One Enforcement Priority

From the very beginning of the Medicare and Medicaid programs, Congress was concerned about the corrupt influence of money in medical decision-making.  Simply put, it did not want patients bought and sold to the highest bidder, so it began enacting legislation to curb the problem.  The Anti-Kickback Statute (42 U.S.C. § 1320a-7b) was passed in 1972 as a misdemeanor and was subsequently amended a number of times over the years to become a felony.  The high burden of proof in establishing intent led to the passage of what became known as the Stark Law (42 C.F.R. §411.350 through §411.389), which prohibits  referrals of designated health services (“DHS”) for Medicare and Medicaid patients if the physician (or an immediate family member) has a financial relationship with that entity.

The enforcement of these laws over the years has risen to the highest priority for the HHS Office of Inspector General (OIG) and the Department of Justice (DOJ).  The overwhelming majority of these cases are predicated by “whistleblowers,” most often physicians, who report arrangements to the government.   All one has to do to gain some insight as to the significance of enforcement actions in this area is review all the Corporate Integrity Agreements (CIAs) posted on the OIG website to see that the great majority are founded on improper physician arrangements.

Among the most recent examples of the Federal government’s commitment to enforcement actions in this area is the Tuomey Healthcare System trial that ended with a conviction against the hospital on May 8, 2013.  The court found that Tuomey violated the Stark Law and the False Claims Act (31 U.S.C. sec. 3729 et seq.) and imposed a $39.3 million judgment; Tuomey could potentially face heavy fines and penalties.   In another case, the Adventist Health System/West and affiliate White Memorial Medical Center in Los Angeles will pay the federal government and the state of California $14.1 million to settle whistleblower claims that they violated the False Claims Act. Two Montana hospitals have agreed to pay nearly $4 million after self-disclosing to the federal government Stark Law and False Claims Act allegations, the DOJ announced.

What this means is that all hospitals and other providers who have arrangements with physicians are well advised to:

  1. Review all existing arrangements in light of both the Anti-Kickback Statute and Stark Law. In view of the fact that it is likely legal assistance was involved in developing these arrangements, using an outside independent consultant specializing in this area may be advisable.
  2. Ensure there are adequate policies, procedures, and controls in developing and managing physician arrangements; and
  3. Verify that physicians performing paid services under an arrangement are properly evidencing performance of those duties.

Richard P. Kusserow was the Department of Health and Human Services Inspector General for over eleven years where he was responsible for issuing the original “safe harbor” rules related to the Anti-Kickback Statute. He is the founder and CEO of Strategic Management, a firm that conducts reviews and does FMV determination of physician arrangements on behalf of clients.  For more information, contact him at rkusserow@strategicm.com. Richard now contributes content to Wolters Kluwer Law & Business Health Law blog to assist the industry in its understanding of compliance from the perspective of a former Inspector General.

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Copyright © 2013 Strategic Management Services, LLC.  Published with permission.