Infirmary Health Systems, Inc. $25 Million Stark violation

HCCA Clinical Practice Compliance Conference October 11-13, 2015

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Physician/Hospital Arrangements –

Strategies to Reduce Compliance Risk

Bret S. Bissey, MBA, FACHE, CHC, CMPE,

Senior vice president, Compliance Services, MediTract

Michael P. Mckeever, CPA, CHC, CHRC

Director, Internal Audit, Saint Peter’s Healthcare System

Agenda

1. Speaker introductions

2. Industry update: physician arrangements

3. Physician arrangement overview/Focus

Arrangements

4. Best practices to reduce risk

5. Stark and Anti-Kickback Statute

6. Contract review

7. Q&A

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Introduction

Michael P. McKeever, CPA, CHC, CHRC

Director, Internal Audit, Saint Peter’s Healthcare System

• Over 28 years of healthcare experience.

• Former Director, Compliance Operations for UMDNJ/Rutgers.

o Responsible to the Senior Vice President, Chief Ethics and Compliance Officer.

o Oversaw operations of the compliance functions of a health sciences university under a CIA.

• Former Chief Compliance Officer, Deborah Heart and Lung Center.

• Former Director of Finance, Deborah Heart and Lung Center, Wills Eye Health

System.

• Intricately involved in the first Voluntary Disclosure to the OIG (1998) and an Advisory

Opinion related to AKS.

• Director of New Jersey HFMA.

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Introduction Bret S. Bissey, MBA, FACHE, CHC, CMPE

Senior vice president, Compliance Services

• 30 years of diversified healthcare management, operations and compliance

experience.

• Former SVP, chief of ethics and compliance officer at UMDNJ.

o Credited with re-engineering the compliance program of the nation’s largest free-standing public

health sciences university.

o Successfully led the compliance program to adhere to CIA with DHHS/OIG that occurred

following a Deferred Prosecution Agreement.

• Chief compliance and privacy officer at Deborah Heart and Lung

Center.

o Three-year CIA, first settlement of Voluntary Disclosure Protocol.

o Compliance program recognized by HCCA as a “Best Practice.”

• Certified in HCCA and the Medical Group Management Association.

• Author of The Compliance Officer’s Handbook.

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• Federal claims for services (hospital, physician, etc.).

• Physician arrangements with hospitals.

• Contracts with ancillary services tied to referrals.

• Quality – accurate measurement and honest information.

• Regardless of federal or private payors, risk remains.

Compliance Risk Areas of Concern for Governance

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Peter Drucker on Healthcare:

“Even small Healthcare institutions are complex, barely

manageable places… Large Healthcare institutions may

be the most complex organizations in human history.”

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• Targeted at physicians and directs that all compensation

arrangements need to be fair market value and reflect payment for

bona fide services that have been provided.

• If any purpose of the arrangement is to compensate a physician for

past or future referrals, the potential does exist for violation of the

Anti-Kickback Statute.

• This could result in possible criminal, civil or administrative

sanctions, including but not limited to exclusion from the federal

healthcare programs and potential draconian penalties via the False

Claims Act.

June 2015 – OIG Fraud Alert focuses on Physician Compensation Arrangements

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Regulatory Sanctions

• Many times Regulatory Sanctions, such as:

Fines, Penalties, Corporate Integrity Agreements, etc… have

nothing to do with “Intentional” actions.

• Rather they are due to Best Practice business processes not being

established to mitigate risk and to enhance efficiencies.

• You didn’t know about the risk or didn’t have the resources to

adequately address the risk and are not advised of actions to take in

this high risk area.

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Why Do We Need to Discuss Relationships in 2015?

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• Hospital gives physician free office spaces.

• Hospital pays physician under suspect arrangement, i.e., medical

directorship or consulting agreement.

• Referring physician has a interest in a company that hospital is

doing business with.

• Referring physician has an immediate family member that has a

interest in a company that hospital is doing business with.

• Hospital stocks ambulances with supplies, provides transporters

with free food, or other “benefits”.

• Contract never makes it completely through the hospital review

process… (time sensitive / forego the bureaucracy of the “suits”).

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What Investigators are looking for: Common Kickback Scenarios

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According to BNA’s Health Care Fraud Report, the following are the top

issues to watch in 2015:

1. Increase in False Claims Act cases involving Stark issues, Medicare

Advantage and managed care and pharmaceuticals.

2. Increase in prosecutions of healthcare executives.

3. Increase in cases alleging fraud within the insurance exchanges.

4. Expansion of fraud enforcement into Medicare Part C and Part D.

5. Increased scrutiny of Open Payments data and the CMS Part B

database.

Source: http://www.bna.com/look-crystal-ball-b17179921946/

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Top Five Health Care Fraud Issues in 2015 BNA’s Health Care Fraud Report

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$85 million – Halifax Hospital Medical Center.

• Allegedly violated Stark Law by executing contracts giving incentive bonuses with physicians.

• Incentives inappropriately covered the value of prescription drugs and tests that physicians ordered and billed to Medicare.

$237 million – Tuomey Healthcare System

• The hospital offered 10-year employment contracts to 19 specialists in exchange for performing all outpatient procedures at Tuomey Hospital or its other facilities.

• Referring physicians would shift outpatient procedures from the hospital to their own practices or an ambulatory surgery center.

• Compensation was based on net cash collections for outpatient procedures and productivity bonus that was found to be above fair market value.

Recent Stark and AKS Settlements

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Federal whistle-blower lawsuit that claimed its clinics routinely

overpaid doctors to refer their radiology patients to hospitals.

• Whistleblower was a physician (2008), who received $4.4 million.

• Case centered upon incentives paid to physicians for referrals.

• Signed Corporate Integrity Agreement:

o Five-year commitment.

o Legal IRO required.

o Focus Arrangement obligations.

Physician Arrangements Infirmary Health Systems, Inc. $24.5 million violation (July 14)

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Sources: http://oig.hhs.gov/fraud/cia/agreements/Infirmary_Health_System_07182014.pdf

• Healthcare organizations must ensure professional services agreements with

physicians, medical groups, physician-owned entities and other focused

arrangements, including laboratories, ambulance companies and research, are

in compliance with applicable laws.

• These laws are broad in reach and complex in nature and require consistent

policies and procedures to address risks.

• Physician Financial Relationships set forth basic expectations for such

organizations’ policies and procedures.

• Federal laws applying to physician financial arrangements include:

o Stark Law.

o Anti-Kickback Statute.

o Civil Monetary Penalties Law.

o False Claims Act.

Physician Financial Arrangements Overview

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You need to identify which of your contracts are focus

arrangements. CIAs define “focus arrangements” as:

• Between entity and actual source of healthcare business or referrals

to medical center and involves, directly or indirectly, the offer,

payment or provision of anything of value;

• Between entity and any physician who makes a referral to medical

center for designated health services; or

• Between entity and any physician (or a physician’s immediate family

member) or medical practice that involves, directly or indirectly, the

offer, payment or provision of anything of value in anticipation of that

physician becoming an actual source of healthcare business or

referrals (e.g., for purposes of recruitment).

Focus Arrangements

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• Accreditation services.

• Affiliation agreements.

• Ambulance service agreements.

• Billing and collection agreements.

• Biomed services agreements.

• Blood and plasma agreements.

• Chaplain services agreements.

• Clinical services agreements.

• Coding services agreements.

• Compliance services agreements.

• Software license with PHI agreements.

• Software or hardware maintenance or support with PHI

agreements.

• Consignment agreements.

• Consulting services – clinical agreements.

• Contract labor agreements Contract management

agreements.

• CRNA services agreements.

• Document shredding agreements.

• Durable medical equipment agreements.

• Equipment lease or rental – medical agreements.

• Equipment maintenance or support – medical agreements.

• Housekeeping services agreements.

• Interpreting services agreements.

• Laboratory services agreements.

• Laundry services agreements.

• Linen supply agreements.

• Lithotripsy services agreements.

• Management agreements.

• Massage therapy services agreements.

• Master services agreements.

• Medical director agreements.

• Medical records services agreements.

• Music therapy agreements.

• Nurse practitioner services agreements.

• Pharmacy services agreements.

• Physician assistant services agreements.

• Physician medical director agreements.

• Physician on-call agreements.

• Physician services agreements.

• Purchasing agreements.

• Quality improvement services agreements.

• Residency program agreements.

• Safe child services agreements.

• Services – nutrition agreements.

• Telemedicine services agreements.

• Therapy services agreements.

• Transcription services agreements.

• Utility services agreements.

• Others.

Could These Types of Contracts be Focus Arrangements in Any Organization?

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Contracting Best Practices

• Realize the threat of whistleblowers.

• Who might be a whistleblower?

• Application of False Claims Act.

• You cannot afford not taking appropriate steps to try and minimize this risk.

• Consider compliance actions to take.

• In writing, signed by both parties.

• In a database or contract management system.

• No relationship to referrals.

• Documentation related to FMV determination.

• Job description.

o Perform evaluation of performance.

• Position or activity justification.

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• Create and maintain a database of all existing and new or renewed

physician arrangements, and establish detailed procedures when

arrangements are initiated.

o Only one contract database should be maintained.

o Database should implement the requirements recommended by the OIG

in CIAs.

o The contract database should be reconciled to payments made or

received under the physician arrangements at least quarterly (i.e., test of

completeness and accuracy of the contract database).

• Keep documentation that the contract work is necessary and at fair

market value.

Compliance Best Practices

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• Implement or maintain a process that covers the initiation,

development, review, approval and performance (i.e., the life cycle).

o Needs assessment (justification).

o Fair-market-value documentation.

o Legal review by experienced counsel with expertise in the Anti-Kickback

Statute and Stark Law.

o Approval by appropriate members of management and governing bodies.

o Payment and performance review and approvals.

o Documentation of all internal controls, the purpose of which is to ensure that

all new and existing or renewed arrangements do not violate the Anti-

Kickback Statute and Stark Law.

o In writing, signed by both parties.

Compliance Best Practices (Continued)

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• If being paid for time related to activity, ensure that system is in place to track, monitor and report time and effort.

o Ensure checks and balances are in place.

• Track nonmonetary compensation.

• Conflict of interest disclosure.

• Keep documentation of negotiations.

• Proactively manage any complaints and concerns.

• Organize your data.

• Detail tracking of remuneration to and from all parties to arrangements.

o If the arrangement involves services, then track service and activity logs.

o If the arrangement involves space or equipment, then monitor the use of leased space or equipment.

• Require all “covered persons” to sign an agreement agreeing to abide by the organization’s code of conduct in connection with arrangements.

Compliant Best Practices (Continued)

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• Compliance oversight.

o Have the compliance officer review the arrangements database, contract

approval process and other arrangement procedures.

o Provide a report of the results of such review to the compliance

committee.

o Implement effective responses, including investigation, corrective action

and disclosure when suspected violations are discovered.

Compliant Best Practices (Continued)

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How to Contract for Success

Initiate

Contract Requisition

Negotiate

Author Review and Approve

Sign and Activate

Monitor

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• The regulations at § 411.357(k) and (m) set forth exceptions to the

physician self-referral prohibition for certain non-monetary

compensation and certain medical staff incidental benefits, respectively.

Under both exceptions, the compensation limits are adjusted each

calendar year to the nearest whole dollar by the increase in the

Consumer Price Index-Urban All Item (CPI-U) for the 12-month period

ending the preceding September 30, 2015 - Limit is $392.

• The percentage increase in the CPI-U for the 12-month period ending

September 30, 2014, is +1.7 percent. Thus, for the calendar year

beginning January 1, 2015, the compensation limit for the exception at

§ 411.357(k) is $392, and the value of any medical staff incidental

benefits to be furnished in compliance with the exception at §

411.357(m)(5) is less than $33 per occurrence of the benefit.

Non-Monetary Compensation

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Stark Law and the Anti-Kickback Statute (AKS)

Always seek the advice of skilled healthcare counsel.

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Prohibits self-referrals for Medicare or Medicaid business, 42 U.S.C. § 1395nn/

• Must involve physician (or immediate family); referral for:

o Designated Health Services (DHS).

o Ownership interest or compensation arrangement.

• State law may limit other business agreements.

Strict liability – intent not required.

• Agreements must fully satisfy statutory or regulatory exception.

• Enhanced penalties available for knowing violations.

Remedy is payment disallowance.

• Exclusion and administrative liability.

• Can be violation of False Claims Act (FCA).

Stark Law

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Criminal statute, 42 U.S.C. § 1320a-7b(b).

• Prohibits knowingly and willfully soliciting or receiving, or offering or paying,

any remuneration, directly or indirectly, covertly or overtly, in cash or in kind

(illegal inducement)…

• In return for recommending or arranging for items or services under federal

programs.

o Includes nonclinicians.

o Inducement does not have to be primary focus of arrangement.

o Liability can attach to both sides of arrangement or just one side.

The Anti-Kickback Statute (AKS)

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• Coordinate with legal counsel, compliance and key stakeholders.

• Consider the protection of attorney-client privilege.

• Document the business controls in effect around the development,

documentation and approval processes for all contracts with referral

sources.

• Determine how your entity tracks contracts and related payments and

receipts.

o Centralized database or by department or division.

Planning for Review of Risk

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Determine how the entity tracks both contracts and payments.

• Centralized database.

• If not, identify responsible parties and departments:

o Medical staff office.

o Legal.

o Operations.

o Clinical departments.

o Etc.

Planning and Approach

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Determine if all contracts that meet the definition of a Focus Arrangement

are in the database.

• Every payment should be able to be matched to a contract, as well as

documentation required.

• Certain payments without a corresponding contract need to be documented and

investigated.

• Follow the money…

Completeness of Database

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Potential sources of payments related to Focus Arrangements.

• Certain G/L accounts.

• Accounts payable distribution reports.

• Payroll and W-2s.

• 1099s.

Potential sources of revenues related to Focus Arrangements.

• G/L rent, lease and miscellaneous revenue accounts.

• Rent or lease files maintained by plant and facilities.

• Medical office building records.

Sources of Information

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• Are all parties to the contract listed?

• Is the contract signed by all parties?

• Are the responsible parties identified?

• Does the contract include effective and termination dates?

• Does the contract contain an auto renewal provision?

• Is the contract type specified?

• Is the location, department or division specified?

Questions to Ask – All Contracts

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• Does the contract specify the amount of compensation to be paid and the

means by which it will be paid?

• Does the contract include certification by the parties that they will not violate

the Stark Law and Anti-Kickback Statute?

• Does the contract reference the entity’s Code of Conduct and related

policies and procedures?

• Does the contract certify that the compensation paid is not determined

based on the volume or value of any referrals?

Questions to Ask – All Contracts (Continued)

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• Is there evidence of a final legal review?

• Have all necessary approvals been documented?

• Is there documentation related to the FMV analysis?

• Was an analysis performed establishing that the arrangement was

commercially reasonable?

• How closely is compensation tracked?

• Is there documentation that the agreement meets the requirements of a

Stark exception or AKS safe harbor?

Questions to Ask – All Contracts (Continued)

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Are applicable terms contained within the contract properly defined?

• Designated Health Services (DSH).

• Commercially Reasonable.

• Fair Market Value (FMV).

• Immediate Family Member.

• Referral Source.

• Remuneration.

Personal Service Agreements (PSAs)

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• Is the need for the arrangement identified?

• Are the services to be performed defined?

• Does the agreement address quality?

• Are payments consistent with the written agreement?

• Does the agreement require additional services be memorialized in an

amendment?

• Are time and effort reports required?

• Are space and equipment use monitored?

PSAs (Continued)

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• Has need been documented?

• Are administrative duties properly identified in the agreement, and are they

being performed?

• Does the agreement require submission of formal time and effort reports prior to

payment, and are they properly authenticated?

• Are the documented hours as initially envisioned?

• Does the agreement specify performance measures such as JCAHO, etc., by

which the department is to be managed?

Medical Director Agreements

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• Is the space or equipment specified in the agreement?

• Is the space or equipment reasonable and necessary for the business purpose?

• How has the FMV been established?

o Commercial real estate appraisal?

o Independent equipment appraisal?

• If the agreement is for the part time use of space, are the specific times

identified?

Lease of Space or Equipment

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• Is a range, not a specific amount.

• Should be predicated on readily available independent data.

o MGMA, Sullivan Cotter, etc., for PSAs, Med Dir.

o Independent appraiser who specialize in healthcare.

• Question: Is the methodology appropriate to the agreement?

• Should be updated regularly – every two to three years in some circumstances.

Fair Market Value

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• The 50 percent percentile is ideal, but what if proposed compensation is greater

than or less than the benchmark?

o Nature of service or provider in the marketplace could demand greater remuneration.

o Always keep in mind that FMV is a range.

o Entity’s risk tolerance may enter thought process.

• Proper documentation of the reason specific compensation deemed to be within

the range of FMV is essential.

Fair Market Value (Continued)

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• Agreements need to be commercially reasonable without consideration of the

volume or value of resulting referrals.

• A valid business plan can provide documentation of commercial

reasonableness.

• Necessary to define the need for the service and how it will be provided.

• Establishing commercial reasonableness is a necessary first step to the

process.

Commercial Reasonableness

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• Needs to be for a period of at least one year.

• Should specify if auto renewal or not.

o Caution with auto renewal (evergreen) contracts – analyses could become stale.

o Update FMV and review need for arrangement.

• Stark and AKS allow for a six-month holdover period, as long as the terms

remain constant.

Contract Term

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Does the contract dictate how compensation will be paid?

• Are time and effort reports required?

• Define information required.

• Include template as an attachment.

• Define who will authorize payment.

Compensation

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• Payments for services not contained in a written agreement.

• Lack of documentation of required approvals.

o Contract process.

o Time and effort reporting.

o Payments.

• Expired agreements.

o Holdover period.

• Stale FMV and commercial reasonableness analysis.

Possible Findings

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• Revise and implement written policies and procedures to guide contracting

process.

• Communicate to all stakeholders the inherent risks in agreements with other

providers.

o Federal and state laws and regulations.

• Annual education for those involved at all levels of the contracting process.

o Don’t forget administrative staff.

Corrective Action

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COMPLIANCE

OFFICER &

PROGRAM

OVERSIGHT

1

POLICIES &

PROCEDURES

2

EDUCATION

3

AUDIT

4

CORRECTIVE

ACTIONS TO

IDENTIFIED

PROBLEMS

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OPEN COMMUNICATION

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ENFORCE

VIOLATIONS

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Compliance Is Pretty Basic

Seven Elements of the OIG Model Compliance Program:

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If an organization is found guilty

of a violation of state or federal

laws, the government may offer a

reduction in penalties if an effective

compliance program is in place.

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Q&A

© 2015, MediTract. All Rights Reserved.

This document contains general information only, and MediTract is not, by means of this document, rendering accounting, business,

financial, investment, legal, tax or other professional advice or services. This information is not a substitute for such professional advice or

services, nor should it be used as a basis for any decision or action that may affect your organization. Before making any decision or

taking any action that may affect your organization, you should consult a qualified, professional advisor. MediTract shall not be

responsible for any loss sustained by any person who relies on this information.

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MediTract — Risk and Compliance Experts

You don’t have to face compliance requirements alone.

Anti-Kickback Conflict of interest False Claims Act HIPAA

OIG CIA Stark Law Sunshine Act The Joint Commission Standards (LD)

We know healthcare.

Our mission is to minimize

risk through better contract

compliance solutions.

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CONTACT Phone: 423-693-0131

Email: [email protected]

PROFILE Provides compliance expertise to

hospital and healthcare

organizations.

EDUCATION &

HONORS

BS – Business Administration,

Shippensburg University

MBA – Marketing and

Healthcare Administration,

Wilkes College

Health Care Compliance

Association Certified

Medical Group Management

Association – CMPE

Fellow of the American College

of Healthcare Executives

BRET S. BISSEY MBA, FACHE, CHC, CMPE

Senior Vice President, Compliance Services

BACKGROUND •Bret has more than 30 years of diversified healthcare management, operations and compliance experience, and presented at

more than 100 regional and national industry conferences and meetings on numerous compliance topics.

•He joined MediTract in September 2013 as a senior executive.

•Bret is a fellow of the American College of Healthcare Executives.

•From 2010 to 2013, he was the Senior Vice President, Chief Ethics and Compliance Officer of the University of Medicine and

Dentistry of New Jersey (UMDNJ). There he successfully re-engineered the nation’s largest sector compliance and ethics

program under a rigorous Corporate Integrity Agreement (CIA) with the HHS OIG.

•Bret has taught undergraduate and graduate courses as an adjunct faculty member at College of St. Francis, Joliet, Illinois and

Allentown College of St. Francis De Sales, Center Valley, Pennsylvania.

•He is certified in the Health Care Compliance Association and the Medical Group Management Association. He is a past

president (2001-2003) for Region 2 of the HCCA.

•Bret is the author of The Compliance Officer’s Handbook, which was published in 2006.

PROFESSIONAL & INDUSTRY EXPERIENCE •At MediTract, Bret is responsible for thought management, enhancing product development, managing consulting engagements

and providing compliance expertise to more than 1400 hospital and healthcare clients.

•At UMDNJ, the largest public sciences university in the country, Bret reported to the Chairman of the Audit Committee of the

Board of Trustees and University President. There he managed 40 compliance, ethics and investigations professionals and an

annual operating budget of $5.2 million.

•Bret improves compliance through the development and implementation of departmental and institutional processes and

programs. He once developed a formal compliance process for a $1.7 billion international public company.

•Bret was responsible for the development and ongoing management of the Corporate Compliance Program, which resulted from

the nation’s first Voluntary Disclosure Settlement (October, 1998) at a specialty hospital with more than 90 employed physicians.

HCCA recognized the compliance program as a “Best Practice.”

•Bret uses his management leadership and direction to increase revenue. He once increased annual consulting revenue from $6

million to $11 million in one year. With his guidance, they signed contracts with many prestigious healthcare organizations and

physician groups and gained recognition as one of the top 100 fastest-growing private companies in America as reported by Inc.

Magazine (January 1998).

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mailto:[email protected]

Documents

Infirmary Health Systems, Inc. $25 Million Stark violation