WHAT’S NEW IN FRAUD & ABUSE

1. WHAT’S NEW IN FRAUD & ABUSE Tennessee Bar Association Health Law Forum Sandy Teplitzky Ober | Kaler410-347-7364teplitzky@ober.com Bill Mathias Ober | Kaler410-347-7667wtmathias@ober.com

2. AGENDA • Background • Recent Cases & Lessons Learned • Advisory Opinions • 60-Day Repayment • Monthly Exclusion Screening • Mandatory Compliance Program • Contractor Confusion/Fatigue • What’s Next?

3. Some Things Don’t Change • Medicare and Medicaid regulations remain incredibly complex

4. “There can be no doubt but that the statutes and provisions in question, involving the financing of Medicare and Medicaid, are among the most completely impenetrable texts within human experience. Indeed, one approaches them at the level of specificity herein demanded with dread, for not only are they dense reading of the most tortuous kind, but Congress also revisits the area frequently, generously cutting and pruning in the process and making any solid grasp of matters addressed merely a passing phase.” — Chief Judge Ervin United States Court of Appeals for the Fourth Circuit in Rehabilitation Association of Virginia v. Kozlowski, 42 F. 3d 1444, 1450 (4th Circuit 1994)

5. More Things That Don’t Change • Government continues to view Fraud, Waste, and Abuse as a significant source of revenue • Enforcement remains aggressive

6. Have You Seen the OIG’s Website Lately?

7. Aggressive Enforcement • From new joint DOJ/OIG website www.stopmedicarefraud.gov • “A joint effort by HHS and the Department of Justice recovered a record $4 billion from fraudsters in FY2010.”

8. Fighting Fraud is a Good Investment • The return-on-investment (ROI) for Health Care Fraud and Abuse Control (HCFAC) program • Since 1997, $4.9 returned for every $1.0 expended. • 3-year average (2008-2010), $6.8 returned for every $1.0 expended

9. Government Balancing Issues • Additional Cost • Over, Under, and Mis-Utilization • Quality of Care • Access to Care • Patients’ Freedom of Choice • Competition • Exercise of Professional Judgment

10. Recent Cases • Recent Cases • Tuomey • Bradford • Kosenske • Christ Hospital • Saint Joseph Medical Center • United Shockwave • Wright Medical • Lessons Learned

11. U.S. ex rel. Drakeford v. Tuomey Healthcare System, Inc. • Facts • Tuomey employed surgeons on a part-time basis through a new wholly-owned LLC to provide surgery at Tuomey’s new outpatient surgery center. • Agreements were ten years in length, and required the employed surgeons to exclusively perform outpatient surgery at the Tuomey outpatient surgery center; • Surgeons were paid in excess of 100% of collections.

12. U.S. ex rel. Drakeford v. Tuomey Healthcare System, Inc. • Facts (continued) • Tuomey likely entered into the contracts in response to the opening of a competing surgery center in the community – feared that these surgeons would redirect their patients away from Tuomey to the new surgery center. • In Fall of 2005, qui tam lawsuit filed by one of the physicians approached for the venture

13. U.S. ex rel. Drakeford v. Tuomey Healthcare System, Inc. • Outcome • Jury returned a split verdict on March 29, 2010 • Employment agreements violated Stark law but did not violate FCA • Tuomey ordered to repay $45 million for Stark law violations • Court ordered a new trial on FCA allegations due to a mistake in excluding certain testimony

14. U.S. ex rel. Drakeford v. Tuomey Healthcare System, Inc. • Takeaways • Virtually all FCA cases are resolved through settlement agreements due to potential ramifications of losing – unusual that this case went to trial • Physician employment does not necessarily insulate agreements from Stark liability

15. U.S. ex rel. Drakeford v. Tuomey Healthcare System, Inc. • Takeaways(continued) • If a proposed arrangement appears to have been developed in response to the fear of losing a referral stream, the government may look closely at issues of commercial reasonableness • Long-term arrangements should be reviewed periodically for compliance • Providers cannot blindly follow a fair market value or commercial reasonableness determination

16. United States ex rel. Singh v. Bradford Regional Medical Center • Facts • V&S Medical Associates was a physician group and a significant source of referrals for Bradford, including referrals for nuclear testing. In 2001, V&S leased a nuclear camera from GE, which was maintained at V&S’ offices. • Bradford threatened the physicians with the loss of staff privileges, arguing that the lease violated a hospital policy on physicians having competing financial interests. To resolve the dispute, V&S and Bradford entered into a sublease agreement (with a non-compete provision) in October of 2003.

17. United States ex rel. Singh v. Bradford Regional Medical Center • Facts (continued) • Bradford obtained a report prepared by an accountant which concluded that the amounts to be paid under the sublease were “reasonable.” • The analysis compared Bradford’s expected revenues with and without the sublease in place • Revenue projections were based on the assumption that V&S would refer nuclear imaging services to Bradford once the sublease went into effect • Qui tam lawsuit – Government did not intervene

18. United States ex rel. Singh v. Bradford Regional Medical Center • Outcome • Summary judgment against the Hospital and other defendants • The equipment subleasing arrangement, and related non-compete agreement, improperly assigned value to the volume of anticipated referrals in violation of the Stark law • Fair market value report took into account anticipated referrals from V&S to Bradford • Defendants bear burden of showing that fixed compensation is consistent with fair market value, and failed to meet that burden • Immaterial that non-compete agreement did not require physicians to refer to Bradford – compensation arrangement was inflated to compensate physicians for anticipated referrals and thus did not reflect fair market value

19. United States ex rel. Singh v. Bradford Regional Medical Center • Takeaways • Question is whether hospital can allocate portion of payment to non-competes and other intangible assets when entering into financial arrangements with physicians • Fair market value analysis should be based on the Stark law definition of fair market value • Valuations that consider anticipated referrals may be subject to challenge

20. United States ex rel. Singh v. Bradford Regional Medical Center • Takeaways(continued) • Providers should formally document in a signed written agreement all financial relationships with referring physicians, and adhere to the terms of the agreement • Proposal letter and an invoice did not constitute a written agreement sufficient to satisfy a Stark law exception • Review state contract law

21. United States ex rel. Kosenske v. Carlisle HMA, Inc. • Facts • In 1992, Blue Mountain Anesthesia Associates (BMAA) and Carlisle Hospital entered into an exclusive anesthesiology services agreement • BMAA would provide all anesthesiology services to patients at Carlisle, and would not provide these services anywhere else • Carlisle would provide the space, equipment, and supplies necessary for BMAA to provide these services

22. United States ex rel. Kosenske v. Carlisle HMA, Inc. • Facts (continued) • In 1998, Carlisle built a new facility containing an outpatient surgery center and a pain clinic nearby, and BMAA provided services at the facility under essentially the same terms as the 1992 Agreement • The 1992 Agreement was never amended to include pain management services; nor was a new written agreement executed to cover the provision of services at the new facility

23. United States ex rel. Kosenske v. Carlisle HMA, Inc. • Outcome • District Court: the arrangement satisfied the Stark law personal services exception, and thus granted summary judgment to Carlisle • 1992 Agreement constituted a written agreement that governed the arrangements at the 1998 pain clinic in light of the parties’ intent and actions from 1992 forward • Mutuality of rights and responsibilities (physicians right to provide exclusive services and obtain free office space; hospital’s benefit of having on-call anesthesiologists) was evidence of fair market value exchange

24. United States ex rel. Kosenske v. Carlisle HMA, Inc. • Outcome(continued) • Circuit Court: reversed and remanded the summary judgment ruling • The arrangement did not satisfy the personal services exception • Rejected the fair market value analysis of the lower court

25. United States ex rel. Kosenske v. Carlisle HMA, Inc. • Takeaways • The “procedural” components of the Stark law are essential – keep written agreements updated so that they accurately reflect the services being performed • What may have constituted fair market value consideration at the signing of an agreement must be able to withstand a current fair market value analysis in light of changed circumstances

26. United States ex rel. Kosenske v. Carlisle HMA, Inc. • Takeaways(continued) • In-kind remuneration – including free office space and equipment – can serve as the basis for finding a Stark violation • Anesthesiologists who provide pain management services are viewed as referral sources

27. Christ Hospital • Facts • From 1997 until 2004, the hospital limited work at its Heart Station – an outpatient cardiology testing unit – to those physicians who referred to the hospital • Qui tam lawsuit filed by cardiologist who formerly worked at Christ Hospital

28. Christ Hospital • Outcome • The Health Alliance of Greater Cincinnati and Christ Hospital agreed to pay the U.S. $108 million to settle the alleged violations of the AKS and FCA and entered into a CIA

29. Christ Hospital • Takeaways • Certain physician benefits – such as paid call coverage arrangements and other opportunities that can generate income for physicians – cannot be based on the volume or value of referrals from the physicians • Opportunity to generate a fee may constitute a financial benefit to physicians

30. Saint Joseph Medical CenterBaltimore, Maryland • Facts • From 1996 until 2006, Saint Joseph Medical Center (SJMC) allegedly paid kickbacks to a group of cardiologists under the guise of professional services agreements to induce the referral of patients to SJMC • E.g., an EKG-reading contract was renewed annually, and eventually SJMC was paying for services that had no relationship to reading EKGs, including payments for the salaries of two nurse practitioners who previously worked at the hospital • When SJMC tried to eliminate the nurse practitioner salaries in 2004, the physicians “demanded” that the hospital pay equivalent amounts under a new contract to maintain overall remuneration levels • Qui tam lawsuit filed by three cardiac surgeons who were members of a rival cardiology group

31. Saint Joseph Medical Center • Outcome • SJMC agreed to pay the U.S. $22 million to settle allegations that it violated the FCA, AKS, and Stark Law and entered into a CIA • SJMC must appoint physician executives to oversee medical staff quality-of-care matters and hire a Peer Review Consultant to evaluate the hospital’s peer review practices

32. Saint Joseph Medical Center • Takeaways • All financial relationships between physicians and the hospitals to which they refer, including medical directorships, call coverage arrangements, and rental arrangements, must be for legitimate and necessary items or services and payments must be consistent with fair market value

33. United States v. Borrasi • Facts • Sometime between 1999-2002, Dr. Borrasi conspired with 2 executives of inpatient psychiatric hospital to provide remuneration to Dr. Borrasi and other members of his group in exchange for increased Medicare referrals. • Dr. Borrasi argued that remuneration was paid under part-time employment relationships for administrative services. • Testimony at trial suggested that physicians were given “false titles,” “faux job descriptions,” and were asked to submit “false time sheets.” • Testimony also suggested that physicians did not perform any of the administrative duties in their job descriptions and only occasionally attended committee meetings.

34. United States v. Borrasi • Outcome • Criminal conviction of physician for conspiring to defraud the United States and accepting kickbacks in exchange for patient referrals in violation of AKS. • 7th Circuit affirmed conviction and 72-month sentence of physician • Upheld jury instruction based on one-purpose test

35. United States v. Borrasi • Takeaways • Not enough just to call a payment employment • Employment exception and safe harbor require • Employment relationship to be bona fide • Services to actually be provided

36. United Shockwave Services • Facts • United provides hospitals with lithotripsy (shockwave therapy) and laser services and equipment to crush kidney stones and treat men with enlarged prostates • United has several physician-owners • Allegedly leveraged patient referrals to obtain contract business from hospitals in Illinois, Indiana, and Iowa • Physician owners were involved in contract negotiations with hospital customers

37. United Shockwave Services • Outcome • United entered into a $7.3 million CMP settlement with OIG • United entered into a 5-year CIA • Required to hire an IRO to monitor lithotripsy and laser arrangements between United and any hospital in Illinois, Iowa, and Indiana that receives referrals from United or any of its physician-owners

38. United Shockwave Services • Takeaways • “This settlement sends a strong message that companies, including those with physician-owners, cannot use Federal health care beneficiary referrals to line their pockets by securing business from hospitals or other providers. We continue to have serious kickback concerns when companies link investment opportunities to the ability to generate business and offer returns on investment that are disproportionate to business risk.”

39. Wright Medical Technology, Inc. • Facts • Allegedly hired orthopedic surgeons as consultants, in an effort to induce them to use the firm's hip and knee reconstruction and replacement products

40. Wright Medical Technology, Inc. • Outcome • Wright paid $7.9 million to the U.S. to settle allegations that it paid kickbacks to induce doctors to use its hip and knee devices and engaged in fraudulent marketing practices in violation of the FCA • Wright entered into a one year Deferred Prosecution Agreement (DPA) with the USAO for the District of New Jersey and a 5 year CIA with HHS-OIG

41. Wright Medical Technology, Inc. • Outcome(continued) • USAO offered the DPA in light of the company’s remedial actions to date and its willingness to • Undertake additional remediation as needed; Acknowledge responsibility for its behavior; Continue its cooperation with the government; Demonstrate its good faith and commitment to full compliance with federal health care laws

42. Wright Medical Technology, Inc. • Takeaways • Consulting contracts may be subject to increased scrutiny under the AKS • Being proactive – taking sensible remedial action when a potential violation is discovered – can influence prosecutorial decisions and subsequent enforcement actions

43. Lessons Learned • Providers should formally document all financial relationships with referring physicians in a signed written agreement before any services are provided or any space or equipment is used • The parties must adhere to the terms of the agreement • Arrangements with physicians must be for real and meaningful services, leases, equipment

44. Lessons Learned • Document purpose and intent of relationship, highlighting non-referral business reasons – answer the “why” question • Fair market value analysis should be based on the Stark law definition of fair market value • Document the provision of services • In-kind remuneration – including free office space and equipment – can serve as the basis for scrutiny under AKS and Stark violation

45. Lessons Learned • Opportunity to generate a fee could be viewed as an inappropriate financial benefit to physicians • Long-term arrangements should be reviewed periodically for compliance • Employment relationships and fair market valuations may be subject to challenge

46. Recent Advisory Opinions • Since last years Health Law Forum, there have been several important advisory opinions • 10-23 • 10-24 • 11-01 • 11-02 • 11-06 • 11-08

47. Advisory Opinions 10-23 & 10-24 • OIG analyzed 2 different, but related arrangements between sleep testing provider and hospital • OIG rejected proposed arrangement with part-time marketing and per-click payments • OIG approved proposed arrangement with full-time marketing and fixed, annual fees • Not all such arrangements are illegal • High standard for favorable advisory opinion • Helpful discussion of risks associated with “under arrangements” transactions

48. Advisory Opinion 11-01 • OIG analyzed arrangement by pediatric charity hospital to waive all cost sharing, provide lodging assistance, and to provide transportation assistance • OIG approved cost sharing based on longstanding, charitable mission of the hospital. • OIG approved lodging and transportation assistance, citing PPACA amendment to permit payments that promotes access to care and poses low risk of F&A.

49. Advisory Opinion 11-02 • OIG analyzed comprehensive local transportation arrangement. • OIG approved arrangement despite it not fitting into earlier guidance on local transportation arrangements.

50. Advisory Opinion 11-06 • OIG analyzed payments for electronically receiving and responding to referral requests from hospitals through online post-acute care referral service. • OIG found that the payments did not meet referral services safe harbor because they were not assessed uniformly and were not based solely on cost of operating referral service. • OIG issued unfavorable opinion out of concern that payments created an uneven playing field and that payments could be an unlawful pay-to-play fee. • Many hospitals participate in online post-acute care referral services and need to re-assess those relationships in light of this Opinion.