2013 Healthcare Fraud and Abuse Bootcamp Webinar Series; 2013 Healthcare Fraud and Abuse Bootcamp Webinar Series; Part I: Fraud, Abuse, and Waste: A Primer Part I: Fraud, Abuse, and Waste: A Primer

This bootcamp webinar series is brought to you by the Fraud and Abuse (Fraud) Practice Group and is co-sponsored by the Healthcare Liability and Litigation (HLL); Hospitals and Health Systems (HHS); In-House Counsel (In-House); Labor and Employment (Labor); Long Term Care, Senior Housing, In-Home Care, and Rehabilitation (LTC-SIR); Life Sciences (LS); Medical Staff, Credentialing, and Peer Review (MSCPR);

Payors, Plans, and Managed Care (PPMC); Physician Organizations (Physicians); Regulation, Accreditation, and Payment (RAP); and Teaching Hospitals and Academic Medical Centers (THAMC) Practice Groups.

February 13, 2013 1:00-2:30 pm Eastern

Presenters

Joseph M. Kahn, Esquire,Member, Nexsen Pruet LLC, Raleigh, NC, jkahn@nexsenpruet.com

Laura F. Laemmle-Weidenfeld, Esquire,Partner, Patton Boggs LLP, Washington, DC, llaemmleweidenfeld@pattonboggs.com

Kevin E. Raphael, Esquire,Partner, Pietragallo Gordon Alfano Bosick & Raspanti LLP, Philadelphia, PA, KER@PIETRAGALLO.com

1

Stark Law42 U.S.C. § 1395nn et seq. A physician may not:

Make a referral To an entity In which the physician or an immediate family member has a

financial relationship For a designated health service (DHS) For which payment may be made under Medicare

2

Stark Law

Regulatory HistoryPhases I – III of Stark regs were issued primarily through independent regulations (2001-2007)Since Phase III, CMS has proposed or finalized new or revised Stark regulations as part of annual IPPS and MPFS regulatory updatesMost recent revisions issued as part of the Patient Protection and Affordable Care Act

3

Stark Law

Refund any amounts collected Civil monetary penalties of $15,000.00 for each service Personal monetary penalties for up to $100,000.00 per

arrangement or scheme to circumvent the law Potential exclusion from the Medicare program

4

Stark Law

“Referral” Broad definition A request by a physician for, or ordering of, or the certifying or

recertifying the need for, DHS A request for a consultation with another physician and any test

or procedure ordered by or performed by the other physician The establishment of a plan of care by a physician that includes

the provision of DHS

5

Stark Law

Exclusions from “referral” definition DHS personally performed by the requesting physician Requests by certain physicians:

Radiologists Pathologists Radiation oncologists

6

Stark Law

“Financial Interest” Any direct or indirect:

Ownership or investment interest Compensation arrangement

The physician may not refer to the DHS entity and the “DHS entity” cannot bill Medicare for that referral if Stark applies

A “DHS entity” is one that either bills Medicare for the DHS or that “performs” the DHS

7

Stark Law

11 Designated Health Services

1. Clinical Laboratory Services

2. Physical Therapy Services

3. Occupational Therapy Services

4. Radiology (x-ray, MRI, CT, ultrasound, nuclear medicine, PET)

5. Radiation Therapy Services

8

Stark Law11 Designated Health Services (cont’d)

6. Durable Medical Equipment7. Parenteral and Enteral Nutrients/Supplies/Equipment8. Prosthetics and Orthotics9. Home Health Services10. Outpatient Prescription Drugs11. Inpatient and Outpatient Hospital ServicesSee CPT Code List:

http://www.cms.gov/Medicare/Fraud-and-Abuse/PhysicianSelfReferral/List_of_Codes.html

9

Stark Law

Overview of Certain Common Exceptions 42 C.F.R. § 411.355-57

For Ownership/Investment Interest In-Office Ancillary Services Physician-ownership of a whole hospital

For Compensation Arrangements Rental of Office Space/Equipment Personal Services Arrangements Fair Market Value Compensation Indirect Compensation Arrangements Physician Recruitment Employment Arrangements

10

The Antikickback Statute (AKS)

42 U.S.C. §1320a-7b(b)

Enacted by Congress in 1972 and revised over the years to address concerns about overutilization and to clarify that scope covers sham transactions

Last revised in 2010 (Affordable Care Act)

11

AKS Prohibitions

Prohibits the solicitation or receipt of any remuneration in return for:

referring an individual to another person or entity for the provision of any item or service, or purchasing, ordering, or arranging for, or recommending purchasing, ordering, or arranging

for, any service, facility or item for which payment may be made, in whole or in part, under any Federal health care program

Prohibits the offer or payment of any remuneration to any person to induce that person to

refer an individual to a person for the provision of any item or service, or purchase, order, or arrange for, or recommend purchasing, ordering, or arranging for, any

service, facility or item for which payment may be made, in whole or in part, under any Federal health care program

12

AKS Scope

Statutory prohibitions apply to both sides of the remuneration: payor and payee Both can be liable under the statute Possible to have situation where only one side is liable Prosecutor need not prosecute both

Intended to sweep broadly Intent-based statute:

Cannot violate the statute without acting “knowingly and willfully” with intent to induce or reward referrals.

“Actual knowledge or specific intent — With respect to violations of this section, a person need not have actual knowledge of this section or specific intent to commit a violation of this section.”

13

Liability Under AKS Felony statute

Fines Imprisonment

As of ACA in 2010, claim resulting from violation of the statute constitutes a false or fraudulent claim under the FCA.

Even pre-2010, AKS allegations often bootstrapped onto FCA

14

AKS Safe Harbors

Both statute and regulations set forth various safe harbors Very narrowly defined Must satisfy ALL criteria to have protection If arrangement falls within safe harbor, immune from

prosecution, regardless of intent Fitting a financial relationship into a safe harbor is not required

Statute contains several safe harbors, including: Discounts and similar price reductions Amounts paid by employers to bona fide employees Amounts paid by vendors to GPOs Any additional safe harbors the Secretary promulgates in

regulations

15 15

AKS Regulatory Safe Harbors

Regulatory safe harbors, 42 C.F.R. §1001.952: Investment interests Space rental Equipment rental Personal services and management agreements Sale of practice Practitioner recruitment Ambulatory surgical centers Ambulance replenishing HER

Regulatory safe harbor for every statutory safe harbor, PLUS

16 16

Damages/Loss Under the AKS

Previously somewhat unsettled. Different theories: Value of claims submitted Value of claims paid Value of the kickback

FCA context: Under new ACA provision that AKS violation results in submission of a false claim under the FCA, DOJ argues that the measure of damages is the value of the claims submitted.

Under new ACA provision defining criminal loss, Sentencing Guidelines amended “to provide that the aggregate dollar amount of fraudulent bills submitted to [a] Government health care program shall constitute prima facie evidence of the amount of the intended loss by the defendant.” PPACA, § 10606(a)(2)(B).

17

AKS vs. Stark Law AKS applies to all health care providers and anyone else who

can influence referrals; Stark applies only to physicians and DHS entities to whom they refer.

AKS applies to all items or services reimbursable under FHCP; Stark applies only to Designated Health Services.

AKS requires willful intent to induce referrals; Stark imposes strict liability.

Failure to fit relationship within AKS safe harbor does not mean automatic violation; failure to fit relationship within Stark exception does mean automatic violation.

18 18

Civil False Claims Act

31 U.S.C. §3729 et seq. Civil statute Initially enacted in 1863 to combat fraud, waste and

abuse in Civil War effort Revised significantly in 1943, 1986, 2009 Add’l revisions as part of PPACA in 2010 Department of Justice has responsibility for enforcing

(Civil Frauds, USAOs)

19 19

Conduct Prohibited Under FCA

Submitting a claim for payment, OR causing claim to be submitted for payment, by Government funds. § 3729(a)(1)(A)

Making or using, or causing to be made or used, false records or statements material to a false claim, §3729(a)(1)(B)

Making or using, or causing to be made or used, false records or statements material to an obligation to pay money or property to the Government, or knowingly concealing or improperly avoiding or decreasing an obligation to pay money to the Government, §3729(a)(1)(G)

Conspiring to defraud the Government by getting a false or fraudulent claim paid, §3729(a)(3)

All require “knowledge” and link to Government funding

20 20

“Knowledge” Under the FCA

Statute defines as: Actual knowledge that the claim or statement was false, OR Deliberate ignorance of truth or falsity of the claim or statement,

OR Reckless disregard of the truth or falsity of the claim or

statement

Proof of specific intent to defraud is NOT required

21 21

Other Key Provisions

Materiality: having a tendency to influence or be capable of influencing payment or receipt of money or property

Obligation: established duty, including that arising out of retention of any overpayment

22

Damages and Penalties Under the False Claims ActThe FCA imposes:

Treble the “amount of damages which the government sustains because of the act” giving rise to liability.

A civil penalty of $5,500 to $11,000 for each false claim.

23 23

Qui Tam Provisions

A person may bring a civil action for a violation of § 3729 “for the person and for the United States Government.”

The case is filed under seal to give the Government time to investigate and decide whether to “intervene.” Seal provision often extends up to two years, or longer.

The “relator” receives 15% - 25% of the “proceeds of the action of settlement of the claim” or, if the government declines, 25% to 30%.

Relators have received over $3.4 billion from the “proceeds” of False Claims Act cases.

Certain jurisdictional bars, such as the “public disclosure” bar and the “first to file” bar, have been the subject of significant litigation. Rockwell v. United States (Supreme Court 2007).

24 24

FCA Liability Predicated on Violation of Other Laws and Regulations The violation of a separate statute or regulation can provide the

basis for liability under the FCA

The underlying violation renders the claim false or fraudulent, thus giving rise to the FCA violation

Three basic categories:

Items or services were defective

Claimant falsely expressly certified compliance with statute/regulation

Compliance was a condition of payment

25 25

“Express Certification” Theory

FCA liability arises when: the person submitting the claim expressly certifies in writing that the

items or services at issue comply with the law, knowing that in fact they do not, and

compliance with the law is a condition of payment by the government

Often arises in the cost report context in conjunction with AKS

violations Cost reports contain certifications that the individual signing it is

aware of relevant statutes and regulations and that the services provided complied with all such statutes and regulations

Some cost reports even contain language directly referencing the AKS

26 26

“Implied Certification” Theory

FCA liability arises even in the absence of an express certification of compliance with relevant statutes or regulations when: the claimant knows it did not comply with the statute or

regulation but nevertheless submits the claim (or causes it to be submitted)

again, compliance with that statute or regulation is a condition of payment

Applies more often in context of health care claims for individual patients (UB-92s, HCFA 1500s), which implicitly represent that the submitter is in compliance with applicable law and regulations and is, therefore, entitled to payment

Initially more controversial theory than express certification, but becoming well-established now in AKS and Stark context

27 27

Compliance Basics

Common Grounds For Non-Compliance:

Compensation methodology not appropriatePayment not consistent with FMVPayments are made without documentation of work performedStark non-compliance often a technical violation

Contract not fully executed or Contract expires without written renewal Improper amendments

28

Compliance Basics

Common Problem Areas With Physician/Hospital Contractual Relationships Building Leases Equipment Leases Medical Director Agreements Employment Agreements Physician Recruitment Issues Professional Service Agreements

29

Compliance Basics

Competitor Government AuditDisgruntled Employee

• Disgruntled or former employee may turn into a whistleblower.

• Be wary of disruptive employees. The number of physician whistleblowers is on the rise.

• Recovery Audit Contractors (RAC)

• Zone Program Integrity Contractors

Ways Compliance Issues Are Often Identified:

• More likely in highly competitive markets in which providers are vying for key referral source relations

• Double-edged sword

30

Compliance Basics

Governmental Guidance OIG Compliance Guidance:

https://oig.hhs.gov/compliance/compliance-guidance/index.asp Section 6401 of PPACA: Requires Medicare providers adopt a

compliance plan with “core elements” (to be defined) MMA Guidance: http://www.cms.gov/Medicare/Medicare-

Contracting/MedicareContractingReform/ComplianceProgramGuidance.html

31

Compliance Basics

7 Basic Tenets of an Effective Compliance Plan Establish and distribute written policies Designation of individual(s) to monitor compliance Commitment to training and education System for receiving reports of non-compliance Regular internal audits Disciplinary policies developed and enforced Process for investigation and report of issues

32

Compliance Basics

General Best Practices:Follow Policies and ProceduresCreate culture of compliance Regularly audit contracts and compensationCompliance education for administrators and medical staffUse template agreements designed to meet Stark exceptions and Anti-kickback statute safe harbors

33

Compliance Basics

Best Practice “Do’s”:Develop and follow consistent process for physician contractingEducate, Educate, EducateRequire use of time sheets or other verifiable documentation before compensation is paid to physicians Tie physician payment requests to executed contracts

34

Compliance Basics

Best Practice “Do’s”:Document, Document, DocumentDocument FMV determination for all payments made to physiciansDocument compliance effortsMaintain database of contracts and supporting documentsCarefully define duties in each agreement with a physician

35

Compliance Basics

Analysis FundamentalsIs a physician and/or DHS entity involved?Ownership or compensation?Which direction are referrals going?Which direction is compensation going?What Stark exception could apply?What AKS Safe Harbor could apply?

36

OIG Work Plan

Provides description of new and ongoing areas/issues that OIG plans to pursue during the next 12 months and beyond

Published annually, usually during the first week of October

Covers Medicare, Medicaid, and legislative and legal activities

37

Fiscal Year 2013 Work Plan

Examples of Work Plan Concerns: Hospital – Owned Physician Practices Using Provider-Based

Status Hospital – Acute-Care Inpatient Transfer to Inpatient Hospice

Care Hospitals – Inpatient and Outpatient Hospital Claims for the

Replacement of Medical Devices Hospitals – Outpatient Observation Services During Outpatient

Visits Nursing Homes – Adverse Events in Post-Acute Care Nursing Homes – Quality of Care Hospice – Nursing Home Practices and Financial Relationships Home Health Face-to-Face Requirement

38

Consolidation of Databases

Medicare – Fraud Investigation Database Medicaid – Medicaid Integrity Group Data Engine Payment Databases Databases can be accessed by Program Integrity

contractors, OIG, and law enforcement

39

Data Mining

Increasingly advanced investigation technique Review for discrepancies:

Services provided to wrong gender Transport when not consistent with other procedures Services provided on same date of service by different providers

40

Data Mining

Look for overutilization trends and billing outliers Start audit or investigation

Communication between private insurance companies and government investigations

41

7 ZPICs with the following areas of focus: Identify fraud, waste, and abuse through data analysis. Impose Administrative Actions such as suspensions,

overpayment collections, referrals or sanctions. Provide data to law enforcement to ensure coordination on

investigations.

Data available to ZPICs: Part A/B claims, Home Health/Hospice claims, DME

claims, and Part D PDE data Beneficiary and provider information

Zone Program Integrity Contractors (ZPICs)

42

Recovery Audit Contractors (RACs)

RAC PROJECT to detect and correct past improper payments

to implement actions that will prevent future improper payments.

Providers can avoid submitting claims that don’t comply with Medicare rules

CMS can lower its error rate

Taxpayers & future Medicare beneficiaries are protected

43

Recovery Audit Contractors (RACs)

4 RACs with the following areas of focus: Identify past improper payments made on claims for items or services provided

to Medicare beneficiaries. Recoup improper payment errors. Make recommendations to recoup improper payments.

Data available to RACs: Part A/B claims, Home Health/Hospice claims, and DME claims. All applicable data files for all claims paid during the specific timeframes of the

contract for the appropriate geographic area.

Timeliness of Data: Adjudicated claims data updates are provided by CMS as they become available

(monthly or quarterly).

44

Medicare Part D Integrity Contractors

Following areas of focus: Ensure that fraudulent or abusive behavior against the Medicare

program is identified and corrective action is taken

Serve as a law enforcement liaison to ensure coordination on cost-cutting issues

Identify, monitor and track fraud, waste, and abuse in Medicare through data analysis

Conduct compliance and financial audits

Data available to MEDICs: - Prescription Drug Event (PDE) data and Part B claims data Complaints Tracking Module (CTM) data

45

Medicare Overpayment Appeal Process – 5 Stages

Redetermination Reconsideration ALJ Hearing

If provider loses, as a matter of law, provider has to pay overpayment demand, regardless of further appeals

Medicare Appeals Council U.S. District Court

46

Background: Medicaid Integrity Program

Deficit Reduction Act (DRA) of 2005 established the Medicaid Integrity Program (MIP) in § 1936 of the Social Security Act

Dramatically increased Federal resources to fight Medicaid fraud, waste, and abuse

Requires CMS to contract with entities to: Review provider claims Audit providers and others Identify overpayments, and Educate providers, managed care entities, beneficiaries and others

with respect to payment integrity and quality of care

Provide effective support and assistance to States

47

Medicaid Integrity Contractors

Three types of MICs: Audit Review Education

Five jurisdictions: New York (CMS Regions I & II) Atlanta (CMS Regions III & IV) Chicago (CMS Regions V & VII) Dallas (CMS Regions VI & VIII) San Francisco (CMS Regions IX & X)

48

Objectives of MICs

Ensure that paid claims were:

For services provided and properly documented;

For services billed properly, using correct and appropriate procedure codes;

For covered services; and

Paid according to Federal and State laws, regulations, and policies

49

Audit MICs

Conduct post-payment audits Combination field and desk audits

Fee-for-service, cost report and managed care audits

Audits will identify overpayments; States will collect overpayments and adjudicate provider appeals

50

Suspension of Payments

Medicare/Medicaid payments to any provider or supplier may be suspended pending an investigation of credible allegations of fraud, unless a good cause exception applies (PPACA § 6402)

51

Self-Disclosure

• Refund to CMS/Medicaid/private insurers

• OIG Self Referral Program

• Stark Self-Referral Disclosure Program

• Proposed regulations (expected to be issued in final form soon) - refund “identified overpayments” in 60 days and refund $ or a potential False Claims Act violation

52

New Trend for Fiscal Intermediaries

Fiscal Intermediaries now sending letters indicating that overpayment exists, and demanding refund within 60 days pursuant to 60-Day Rule

53

Most Common Criminal Statutes - Federal

Mail Fraud – 18 U.S.C. sec. 1341 Wire Fraud – 18 U.S.C. sec. 1343

Both 20 years; fine

Health Care Fraud – 18 U.S.C. sec. 1347 10 year; fine

54

Most Common Criminal Statutes – Federal (cont.)

Obstruction of Justice Medicare Fraud – 42 U.S.C. sec 1320a-7(b)(a) – 5 year;

$25,000 False Statements – 18 U.S.C. sec. 1001

55

Most Often Used State Criminal Statutes

Medicaid Fraud Insurance Fraud

Private Right of Action for Insurance Cos.

Health Care Fraud Conspiracy

56

Most Common Fraud & Abuse Issues Investigated

Anti-Kickback Statute ex. Facility X pays doctors money for referrals

Upcoding Services not rendered/ghost visits Medical Necessity

Unnecessary Procedures

Violation of Stark as basis of FCA claim

57

Compliance Plan’s Importance in Criminal Investigations

• Sentencing guidelines – U.S.S.G. §8B2.1 – “Effective Compliance and Ethics Program”

• FCA liability considerations

• Corporate Integrity Agreement (“CIA”) required?

58

U.S.S.G. § 8B2.1 – Effective Compliance and Ethics Program

(a) To have an effective compliance and ethics program, for purposes of subsection (f) of §8C2.5 (Culpability Score) (Fines) and subsection (b)(1) of §8D1.4 (Recommended Conditions of Probation – Organization), an organization shall –

(1) exercise due diligence to prevent and detect criminal conduct; and

(2) otherwise promote an organizational culture that encourages ethical conduct and a commitment to compliance with the law

The failure to prevent or detect an offense does not necessarily mean that the program is not generally effective

59

Be Alert to Fraud Loss Calculation

• U.S.S.G. § 2B1.1 - sentencing guidelines for fraud – used in health care offenses

• Numbers driven – U.S.S.G § 2B1.1 (8) – additional offense levels after $1 million in loss

• Enhancements?• Abuse of Trust

• “Intended Loss” – Be aware!

60

U.S.S.G. §2B1.1, Application Note 3(F)(viii):

“In a case in which the defendant is convicted of a Federal health care offense involving a Government health care program, the aggregate dollar amount of fraudulent bills submitted to the Government health care program shall constitute prima facie evidence of the amount of the intended loss, i.e. is evidence sufficient to establish the amount of intended loss, if not rebutted.”

61

Exclusion Overview

Health care equivalent of debarment

Medicare, Medicaid and other Federal health program won’t reimburse services provided, ordered or prescribed by individual or entity

HHS-OIG has exclusive federal authority

Issue arises in FCA cases and criminal cases, as well as administrative exclusion matters

Mandatory and permissive, 42 U.S.C. §1320a-762

Mandatory Exclusion Authority

Exclusion is non-discretionary where: Criminal conviction related to delivery of item or

service under Medicare/Medicaid Criminal conviction related to patient neglect or abuse Felony conviction for other health care-related fraud,

theft, or other financial misconduct Felony conviction relating to unlawful manufacture,

distribution, prescription, or dispensing of controlled substances

5-year minimum exclusion period, potentially longer under regulatory aggravating factors. 42 C.F.R. § 1001.102.

63

Permissive Exclusion

OIG may exclude on variety of grounds Misdemeanor convictions relating to

non-Medicare/Medicaid health care fraud and non-health care-related fraud against governmental program

Misdemeanor convictions relating to unlawful manufacture, distribution, prescription, or dispensing of controlled substances

Loss of health care license for reasons relating to professional competence, professional performance, or financial integrity

Provision of unnecessary or substandard items or services

64

Permissive Exclusion, cont’d.

Bases for permissive exclusion, cont’d: Submission of false/fraudulent claims to Federal health

care program Kickback arrangements Defaulting on health education loan or scholarship

obligations Controlling a sanctioned entity as an owner, officer or

managing employee Length of exclusion: presumptively 3 years, can be

extended or shortened based on regulatory factors. 42 C.F.R. §1001.201(b).

65

Duty Not to Employ Excluded Individuals / Entities

CMP liability attaches to employing excluded individual. 42 U.S.C. §1320a-7a(a)(6).

CMS generally will not pay for services provided by excluded individual

CIAs typically require annual exclusion check for employees

Some states require monthly verification

66

Criteria Considered by OIG for Permissive Exclusion

Severity of misconduct at issue

Provider’s future financial responsibility

Likelihood that same/similar conduct will reoccur

67

Exclusion Process

42 C.F.R. §1001.2001-1001.2007

Administrative process varies based on exclusion basis. In most cases, OIG provides notice of intent to exclude,

provider responds with additional information

In limited situations, OIG provides notice of exclusion

Provider may appeal exclusion through ALJ, then DAB, then district court

Reinstatement is not automatic when exclusion period ends

68

Exclusion / FCA Overlap

Big stick that drives FCA settlements

Typically FCA settlement agreements contain waiver of permissive exclusion by HHS-OIG in exchange for defendant entering into Corporate Integrity Agreement

OIG has ability to exclude despite settlement, if no waiver

69

Exclusion/Criminal Resolution Overlap

Again, exclusion can drive negotiated resolutions, particularly given mandatory exclusion risk

Can lead to complex negotiations regarding pleas, NPAs, DPAs

70

Questions?

71

2013 Healthcare Fraud and Abuse Bootcamp Webinar Series; Part I: Fraud, Abuse, and Waste: A Primer © 2013 is published by the American Health Lawyers Association. All rights reserved. No part of this publication may be reproduced in any form except by prior written permission from the publisher. Printed in the United States of America.

Any views or advice offered in this publication are those of its authors and should not be construed as the position of the American Health Lawyers Association.

“This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is provided with the understanding that the publisher is not engaged in rendering legal or other professional services. If legal advice or other expert assistance is required, the services of a competent professional person should be sought”—from a declaration of the American Bar Association

72