Kusserow’s Corner: GAO Report Reveals Doctors Self-Referring Patients for Financial Gain

On July 15, 2013, the Senate Finance Committee, Senate Judiciary Committee, House Ways and Means Committee and House Energy and Commerce Committee revealed a dramatic increase in the rates of doctors ordering anatomic pathology tests and procedures when they stand to make financial gains. They referred to the Government Accountability Office (GAO) report issued June 24, 2013 that estimated that in 2010 alone, the increase resulted in $69 million charged to Medicare and 918,000 treatments that would not have occurred had these physicians been referring patients at the same rates as physicians who do not stand to benefit financially from the referral. Self-referred anatomic pathology services increased at a faster rate than non-self-referred services from 2004 to 2010 and more than doubled, growing from 1.06 million services to about 2.26 million services. In contrast, the noted non-self-referred services grew about 38 percent, from about 5.64 million services to about 7.77 million services. Similarly, the growth rate of expenditures for self-referred anatomic pathology services was higher than for non-self-referred services. Three provider specialties–dermatology, gastroenterology, and urology–accounted for 90 percent of referrals for self-referred anatomic pathology services in 2010.

GAO was requested by Congress to examine the prevalence of anatomic pathology self-referral and its effect on Medicare spending. A self-referral is the practice of a physician ordering tests on a patient that are performed by either the referring physician himself or another physician or facility from whom he has a financial interest. The report examines (1) trends in the number of and expenditures for self-referred and non-self-referred anatomic pathology services, (2) how provision of these services may differ on the basis of whether providers self-refer, and (3) implications of self-referral for Medicare spending. GAO analyzed Medicare Part B claims data from 2004 through 2010 and interviewed officials from the Centers for Medicare & Medicaid Services (CMS) and other stakeholders. GAO developed a claims-based approach to identify self-referred services because Medicare claims lack such an indicator.

This report was the second in a series of GAO reports examining the rise of self-referrals. The first released dated Sept 2012, investigated the growth of self-referral in magnetic resonance imaging (MRI) and computed tomography (CT) services over the same 2004-2010 time span. It found a similarly dramatic increase in imaging services ordered by physicians who self-refer compared to those who do not.

The report recommended that CMS require providers of pathology services to flag when treatment was self-referred and develop a policy to ensure that biopsies performed by self-referred physicians are appropriate. In addition they recommended that CMS implement a new payment model for pathology services to limit financial incentives. HHS rejected the first two suggestions, indicating in a letter that neither strategy would have a significant effect on the problem.

It is important to put the findings of these GAO reports in relation to the DOJ, OIG, and CMS Anti-Kickback Statute and Stark Law investigations. Self-referrals in context of these laws continue to be their highest enforcement priority. The vast majority of cases settled with the Federal government involve these issue areas. If you check the OIG website on Corporate Integrity Agreements (CIAs), most involve physician relationshiops. It is likely that these GAO reports and Congressional interest will only heighten enforcement initiatives.


Richard P. Kusserow served as DHHS Inspector General for 11 years.  He currently is CEO of Strategic Management Services, LLC (SM), a firm that has assisted more than 3,000 organizations and entities with compliance related matters.  The SM sister company, CRC, provides a wide range of compliance tools including sanction-screening.

Connect with Richard Kusserow on Google+ or LinkedIn.

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


Hospitals, Physicians Face Increased Scrutiny as Enforcement of Physician Sunshine Law Rolls Out

This article includes contributions from Paul Clark.

Hospitals and physicians will be under increased risk of federal sanctions in the coming years related to payments and transfers they receive from drug and medical device manufacturers, according to Andrew Ruskin, partner in Morgan Lewis’s FDA and Healthcare Practice and a member of the WK Health Law Advisory Board. The risk is a result of implementation of the Physician Sunshine law, which was part of the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148).

Background. PPACA sec. 6002, codified at Social Security Act sec. 1128G, requires any manufacturer of a covered drug, device, biological, or medical supply that provides a payment or other transfer of value to a physician or teaching hospital to submit to the Secretary of HHS information regarding the recipient; the amount, date of, form, and nature of the payment or transfer; and any other information the Secretary deems appropriate.  In February 2013, HHS issued a Final rule including regulations based on the statute (Final rule, 78 FR 9458, February 8, 2013).

The first report to HHS will be due March 31, 2014, and will cover all payments and transfers of value from August 1, 2013, to December 31, 2013. Reports will be due on March 31 of subsequent years for all payments and transfers made during the previous year. A covered drug, device, biological or medical supply includes (1) one that is covered by Medicare, Medicaid or CHIP; (2) a drug or biological that requires a prescription; and (3) a device or medical supply that has a pre-market approval by the Food and Drug Administration (FDA) or a pre-market notification to the FDA. Physicians and teaching hospitals will have 45 days to review the reports and, if necessary, challenge any information before the information is made publicly available on a CMS website.

At a presentation at the American Health Lawyers Association annual meeting in San Diego on July 1, Ruskin noted the form of the payment that must be reported by the manufacturer must fall into one of the following categories: cash or cash equivalent; in-kind item or services; ownership interest, including stock; or return on investment. In his presentation, Ruskin said that the purpose of the payment that must be reported must fall into one of 16 categories, as deemed most appropriate by the manufacturer: consulting fee; fee for other type of service; honoraria; gift; entertainment; food and beverage; travel and lodging; education; research; charitable contribution; royalty or license; ownership interest; compensation for speaking at a non-certified continuing education program; compensation for speaking at a certified continued education program; grant; or space rental or facility fees.

Expanding regulations. Ruskin later told Health Law Daily that over the next several years, use of the data submitted by manufacturers and GPOs to detect and act on potentially impermissible relationships will expand. Hospitals are most at risk under the new law and regulations, Ruskin said, because the federal government will hold the hospital responsible for not having taking steps to prevent their physicians from having entered into improper relationships, or for not having taken prompt action to cause these relationships to end once they’re discovered through a review of the manufacturer and GPO disclosures. If those relationships are truly unlawful, the hospitals’ claims to Medicare and Medicaid would be tainted, and since hospitals have deeper pockets than physicians, they make better targets.

Ruskin said that hospitals have to be pay close attention to three particular conflicts of interest:

(1)   Physician-owned distributors (PODs), which are physician-owned entities that derive revenue from selling implantable medical devices ordered by their physician-owners for use in procedures the physician-owners perform on their own patients at hospitals or ambulatory surgical centers. This is a large conflict of interest because physicians are essentially double-dipping, Ruskin said, by getting revenue from performing the service, as well as by selling the hospital the item used in the service.

(2)   Researchers (in a hospital) who fail to disclose to their hospitals that they are doing research on an approved product, perhaps to look for potential new indications, and possibly with free drugs or devices to be used in the research. There are many steps that need to occur before bills for care rendered in a research setting can be submitted, and in some cases, there’s no way to fix a problem by taking those steps after the bills have already been submitted.  If the hospital was previously unaware of the clinical trial until seeing on manufacturer disclosure statements that its medical staff have been receiving research payments, Ruskin said, it may find that it has engaged in billing non-compliance.

(3)   Meals provided by a manufacturer. When a group meal is furnished, the value of the meal needs to be divided only among individuals actually partaking. Buffets at large-scale events, however, can be disregarded.  The problem is that if the meal needs to be disclosed, the general public may not understand why a manufacturer is furnishing these meals to their physicians.

Similar to claims audits and the implementation of health reform, Ruskin said, the health care industry tends to wait until the regulations impact them, meaning that some hospitals may not take actions until the first wave of manufacturer and GPO disclosures is released in 2014. The same is true for the Sunshine Act. Further, he said it is conceivable that as the government realizes the extent of violations that are occurring across the country, they may create another entity similar to Recovery Audit Contractors (RACs) to audit providers and manufacturers.

Culture and publicity. Ruskin noted that for a hospital to be successful at implementing a policy of physician disclosures to the hospital, as well as the avoidance of conflicts, the culture must be right. The physicians have to want to do the right thing and the physicians need to trust the hospital administration wants to do the right thing. Ruskin further noted that data provided to HHS under the Sunshine Act regulations will be made public, and so there will be many opportunities for the media to access this data and analyze it and report on the outliers. Fear of reputation being harmed is powerful, Ruskin emphasized.


Andrew Ruskin is a partner in Morgan Lewis’s FDA and Healthcare Practice. Mr. Ruskin’s practice focuses on providing counsel to hospitals and other healthcare service providers on Medicare and Medicaid regulatory issues.  Mr. Ruskin frequently advocates his client’s position to the Centers for Medicare & Medicaid Services and other government agencies.  He has argued matters in front of numerous tribunals, including the Provider Reimbursement Review Board, the Departmental Appeals Board, several ALJs, and Federal court.  These matters have covered graduate medical education reimbursement, provider-based status, Medicare and Medicaid disproportionate share hospital payments.  Mr. Ruskin also furnishes compliance advice on these matters and leads internal investigations in billing issues, including billing for care furnished to clinical trial subjects.  Mr. Ruskin’s practice also includes defending healthcare entities involved in investigations by the U.S. Attorney’s Office or by the Department of Health and Human Services Office of Inspector General.

Contributor’s Corner: Charges Really Do Matter; Just Ask Me!

Health Wolters Kluwer Law & Business will periodically feature posts from outside contributors who are members of our Advisory Board. Today’s post comes from Allan P. DeKaye, MBA, FHFMA.

There’s been quite a hoopla over the recent report of the disparate range of charges to Medicare for some of the most common procedures and medical conditions.  It’s been covered and reported in most healthcare news services and journals—and even in the mainstream media.  It follows on the heels of the Time magazine issue devoted to this subject a few months ago. This topic shouldn’t come as a surprise to most healthcare professionals.  It’s been there ever since the Medicare provision related to the “…lesser of costs or charges…” was established that led providers to be sure that their charges exceeded costs to maximize reimbursement paid for the cost of care.  Suddenly now, the collective conscience has been awakened to raise awareness.  Some will argue that DRG payments will neutralize these excessive charges, and even that payers may only pay UCR (usual, customary and reasonable) charges regardless of the bloated charges levied for procedures.  Hey—but wait a minute—what about me—it’s costing me more!

 Yeah—a lot more—and for patients with Medicare Part B (physician and outpatient services) coverage, and especially anyone who has seen their out-of-pocket costs rise with now having to pay “coinsurance” amounts—that is a portion (usually a percentage) of the (approved) charges—not just a copayment and/or a deductible will find little solace is the industry speak of DRG payments and negotiated rates.  No longer is it just the $15 or $25 copay—it could now be $30, $45 or $50 or more per service.  But it’s the 10%, 20% (or more) of covered charges that adds an unknown amount to a patient’s bill.  We (especially those healthcare professionals likely to read this blog) might simply shrug off the increased copay amounts—or even the higher premium costs employers have been passing along to employees.  Just wait—it could be you having to pay an amount you never ever knew about.  After all, when was the last time you (or one of your organization’s patients) asked how much the MRI or CT scan that is needed costs?  How about adding the cost of the contrast, too?

 The literature is replete with having consumers (read patients) becoming more educated and involved in their care decisions knowing more and asking the right questions to help bend the cost curve.  High-deductible health plans should help—right?  Wrong.  However, consumers, now patients, will learn that an MRI or CT scan will very quickly use up the $2,500 high deductible, and may also trigger a coinsurance amount due, as well.

The consumer has a much better choice shopping for a new car than for a needed healthcare procedure.  Let’s face it, you can go to two or more dealers (even online) to comparative shop:  add leather, moon roof, GPS, etc., and receive competitive pricing.  Try that with an MRI, CT scan or other procedure.  Many hospitals still can’t provide reasonable or accurate cost estimates.  And you’re not likely to consider anesthesia to be an “optional” add-on for a surgical procedure.  Uninsured patients will have even fewer choices, and are likely to rely on neighborhood hospitals, especially those with a municipal or safety net status for the care they need.

 If you’ve not experienced these situations firsthand, ask an elderly friend or relative with Medicare Part B coverage.  Chances are they’ve had a recent procedure.  For example, two different MRIs at different providers may have had $2,000 and $2,200 charges respectively (as an illustration).  If the covered charges were $1,600 and $1,800, respectively, then the 20% Medicare Part B coinsurance would have resulted in either $320 or $360 in out-of-pocket expenses.  That’s a difference most seniors would have felt and certainly noticed.  Multiply the out-of-pocket cost by the number or complexity (read cost or charges) seniors are likely to have, and you’ll see that the outrage needs to be more vocal. 

 But wait a minute-it’s anybody with a policy that has a coinsurance provision—not only seniors.  I’ve already felt it–and it could be you, too.  So the next time the conversation of charges and disparity comes up, don’t focus on only the margin—but the care delivery mission to the community and improved customer (patient) understanding, too.  Bending the cost curve can start with providers taking a hard look at (and begin lowering) the charges for the care they deliver!


Allan DeKaye is the author/editor of The Patient Accounts Management Handbook (Aspen, 1997), and is presently developing a new book entitled: My Medical Bills are Killing Me©.  He is also a member of the WKLB Healthcare Editorial Advisory Board.


Kusserow’s Corner: Compliance Records Management Program

What kind of compliance records management system does your organization have?  According to the HHS Office of Inspector General (OIG), all effective compliance programs should provide for the implementation of a records system. The primary purpose is to ensure that all records necessary to protect the integrity of the organization’s compliance process and documents are current with applicable laws, regulations, and requirements and are properly maintained. A well-managed records management program also provides evidence to confirm the effectiveness of the program.

It should include, for example, documentation that employees were adequately trained; reports from the organization’s hotline, including the nature and results of any investigation that was conducted; modifications to the compliance program; self-disclosures; and the results of the organization’s auditing and monitoring efforts. The creation and retention of such documents and reports may raise a variety of legal issues, such as patient privacy and confidentiality.

Furthermore, the Compliance Officer should ensure that operational records are properly maintained.  For example, patient medical records, billing information, and cost reports are areas that should be guided by clear records management policies and procedures.  These policies are often controlled by specific laws and regulations and, therefore, would probably be developed in consultation with legal counsel.  However, once established, the compliance office may become involved in the auditing and monitoring of those policies and procedures because they are related to compliance in many ways.  For example, upon request, an organization should be able to provide documentation, such as patients’ medical records and physicians’ orders, to support the medical necessity of a service that the organization has provided.  The Compliance Officer should ensure that a clear, comprehensive summary of the “medical necessity” definitions and rules of the various government and private plans is prepared and disseminated appropriately.

The OIG recommends that attendance and participation in training programs be made a condition of continued employment and that failure to comply with training requirements should result in disciplinary action, including possible termination, when such failure is serious.

Here are some suggestions that Compliance Officers may wish to consider as part of a compliance records management program:

  1. Develop and implement policies and procedures for the creation, distribution, retention, storage, retrieval and destruction of compliance-related documents.
  2. Develop a document management system to track, administer, and store policy and other compliance-related documents.
  3. Ensure adequate records of its training of employees are maintained, including attendance logs and material distributed at training sessions.
  4. Ensure that there is a hotline log of calls that evidence how the information was handled and controlled.
  5. Review requirements established by CMS and the state for maintaining various categories of records, and then implement controls and document management to address these requirements.
  6. Ensure that the document management program addresses protection of patients’ protected health information.
  7. Extend document and records management to contracts and agreements with referral sources and a maintain a database of all such agreements.
  8. Ensure compliance with records/document management is included as part of ongoing monitoring and auditing.

Richard P. Kusserow was the DHHS Inspector General for over eleven years.  He is the author of nine books related to compliance.  He is the founder and CEO of Strategic Management, a firm that has been providing specialized compliance advisory services since 1992 to 2,000 clients. For more information, contact him at rkusserow@strategicm.com.

Connect with Richard Kusserow on Google+ or LinkedIn.

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