Illinois Critical Access Hospital Network

1. Illinois Critical Access Hospital Network What Does an �Effective� Hospital Compliance Program Require? Can a Critical Access Hospital be a Standard Setter? Steve Ortquist Partner, Meade & Roach, LLP Managing Director, Aegis Compliance & Ethics Center, LLP

2. Agenda Discuss elements of a compliance program Recommendations/requirements from government agencies; Best practices; What makes programs �effective�? Discuss a model for sharing resources Review risk areas for Critical Access Hospitals

3. Role of a Compliance Program Support good corporate culture Preventive medicine for the organization Risk management Mitigating factor should problems arise

4. Who Decides What�s Recommended or Required for Effective Compliance? United States� Sentencing Commission US Sentencing Guidelines (1990) as amended (2004) US DHHS Office of Inspector General OIG Compliance Program Guidance for Hospitals (1998) OIG Supplemental CPG for Hospitals (2004) OIG CPG for Physicians, Home Health, Labs, other Courts US Department of Justice CMS Compliance Program Effectiveness Pilot Final report due July 2007 New York Medicaid Program (soon) Others?

5. What is a Compliance Program? Designated Leadership Code of Conduct/P&P Education/Training Auditing & Monitoring Reporting Mechanism(s) Screening & Appropriate Delegation Incentives/Discipline Investigation/Response Risk Assessment

6. Scalability USSC application notes for �small� organizations same degree of commitment to ethical conduct and compliance as larger organizations less formality and fewer resources expected reliance on existing resources and simple systems where appropriate Question: what is a �small� organization? US Sentencing Guidelines application note 2.C.

7. Scalability � Examples Governing authority oversight accomplished by direct management of compliance efforts Training through informal staff meetings Monitoring through regular �walk-arounds� or continuous observation Using available personnel rather than employing separate compliance staff Modeling program after best practices of others US Sentencing Guidelines application note 2.C.

8. Designated Leadership Governing Board Oversight Board�s Role & Responsibilities Duties of Loyalty and Care Duty of Care Theories: (1) negligent decision making or (2) failure to monitor Duty of Care � In re Caremark �a director's obligation includes a duty to attempt in good faith to assure that a corporate information and reporting system, which the board concludes is adequate [to inform the board of improprieties in a timely manner] exists, and that failure to do so under some circumstances may, in theory at least, render a director liable for losses caused by non- compliance with applicable legal standards.�

9. Designated Leadership Governing Board Oversight Board�s Role �The organization�s governing authority [1] shall be knowledgeable about the content and operation of the compliance and ethics program and [2] shall exercise reasonable oversight with respect to the implementation and effectiveness of the compliance and ethics program.� US Sentencing Guidelines �8B2.1.b.(2)(A)

10. Designated Leadership Governing Board Oversight Board�s Role Compliance program generally created at direction of Board (best practice) Receive periodic reports on operation and effectiveness from CO Accessible to CO (CO shall have �direct access�) Participate in periodic training re: program and requirements US Sentencing Guidelines �8B2.1

11. Designated Leadership Compliance Officer Overall management responsibility situated with �high level personnel� Individual with operational responsibility must have adequate resources, appropriate authority & direct access to board or sub-committee US Sentencing Guidelines �8B2.1.(b)(2)(B) & (C)

12. Designated Leadership Compliance Officer Focal point for CP activities (visible & accessible) Must have appropriate authority & sufficient staffing/funding OIG CPG for Hospitals (1998) Well qualified Member of senior management OIG Supplemental CPG for Hospitals (2005) Scalability: May be other management responsibility in smaller hospitals (1998)

13. Designated LeadershipCompliance Officer Full time or part time? What about conflicting roles? CFO; GC; other? Qualifications? Education; certification; other?

14. A Note on Effectiveness: CMS Compliance Effectiveness Pilot Initiated in 2003 by Administrator Scully Workgroup including CMS central and regional offices; OIG staff; and industry experts Initial pilot consists of 16 participating hospitals (72-550 beds; 1-7 years of program operation)

15. CMS Compliance Effectiveness Pilot Site visits to understand compliance process occurred in November, 2004 and January-March, 2005 Incl. interviews of key staff (CEO, compliance staff, CFO, Medical Director and various other key staff)

16. CMS Compliance Effectiveness Pilot: Preliminary Observations Importance of Compliance Officer Should be known throughout organization (especially in high risk areas, should be present at orientation/training in some form) Effectiveness of CO may be based on personality of CO Must have free access to board and senior management to be effective Must be good communicator/relationship builder

17. Designated Leadership Compliance Officer OIG assessment questions�-Does CO: Have direct access to governing body, president/CEO, all senior mgmt, and legal counsel? Have independent authority to hire counsel? Have a good working relationship with other key operational areas? Make regular reports to the board & management? OIG Supplemental CPG for Hospitals (2005)

18. Designated Leadership Role of Management Allocate adequate resources Vest CO & Compliance Committee with sufficient autonomy, authority and accountability Foster a culture that values ethics/ compliance OIG Supplemental CPG for Hospitals (2005)

19. Establishing Shared Compliance Resources - Leadership Establish a Network Compliance Steering Committee Position description document for hospital compliance officer Designate CO in each hospital Network sponsored training for hospital COs Board training Format and frequency for CO reports to management & board Special training for managers Shared Network Compliance Officer

20. Written Standards �The organization shall establish standards and procedures to prevent and detect criminal conduct.� US Sentencing Guidelines 8B2.1.(b)(1)

21. Written Standards Code of Conduct � . . .general organizational statement of ethical and compliance principles that will guide the entity�s operations.� � . . .should function in the same fashion as a constitution.� � . . . should be brief, easily readable, and cover general principles applicable to all members of the organization.� OIG Supplemental CPG for Hospitals (2005)

22. Written Standards Policies & Procedures Substantive Risk Areas (EMTALA; Stark & Anti-kickback; Upcoding & DRG Creep; Unbundling; Credit Balances; Cost Reporting; etc.) OIG CPG for Hospitals (1998) Compliance Program Structure (e.g., non-retaliation; discipline; screening; training requirements)

23. Written Standards OIG Assessment Questions Are P&P clearly written, relevant to day-to-day responsibilities & readily available to those who need them Are P&P re-evaluated on a regular basis? Has Code of Conduct been distributed to all directors, officers, managers, employees, contractors, medical and clinical staff members? Does risk assessment process drive creation of new P&P? OIG Supplemental CPG for Hospitals (2005)

24. Establishing Shared Compliance Resources � Written Standards Develop a standardized Code of Conduct CoC distribution plan Develop templates for structural CP policies Initiate shared risk assessment process to identify risk areas requiring P&P (more later) Draft substantive compliance policies for use by member hospitals

25. Communication & Training �The organization shall take reasonable steps to communicate periodically and in a practical manner its standards and procedures, and other aspects of the compliance and ethics program . . . by conducting effective training programs and otherwise disseminating information appropriate to such individuals� respective roles and responsibilities.� Who? Board, management, employees and, as appropriate, agents. US Sentencing Guidelines 8B2.1.(b)(4)

26. Training Compliance Training Program Design General Training (awareness) Specific Training (specific risks; detailed & application oriented) Management & board training

27. Training Issues How � delivery mechanisms; trainers Mandatory or voluntary? Consequences Documentation Non-employed medical/clinical staff Non-employed agents Unions

28. The Compliance Effectiveness Study First empirical study of compliance program effectiveness Performed as doctoral dissertation by Lori Richardson Pelliccioni at UCLA Identified 137 indicators of effective compliance Focus of findings: auditing and monitoring and training are keys to effective CP

29. Awareness is Key �Most employees were either entirely unaware of the existence of [the compliance] program, or were not familiar with its details.� Merck-Medco Complaint (2003)

30. Awareness is Key The �Five Questions� (1) Does your organization have a compliance officer? (2) Do you know who the compliance officer is? (3) Do you know how to contact the compliance officer? (4) Are you obligated by your organization to report improper or unethical conduct? Can you provide an example of improper conduct that you would be required to report?

31. Training OIG Assessment Questions Qualified trainers for both general and specific training? Has content of training programs been evaluated annually for appropriateness & sufficiency? Does training reflect regulatory changes? Does training reflect trends seen in audits, hotline reports, investigations, etc?

32. Training OIG Assessment Questions Feedback after training? Post-training quizzes to assess understanding & retention? Has governing board been trained on fraud & abuse laws? Does hospital document who completes training? Are sanctions imposed for failing to attend? Incentives given for attendance? OIG Supplemental CPG for Hospitals (2005)

33. Establishing Shared Compliance Resources - Training Develop general compliance training video Identify low cost/free specific training content & training already occurring Develop workable process for documenting attendance Training policy

34. Auditing & Monitoring �The organization shall take reasonable steps. . . to ensure that the organization�s compliance and ethics program is followed, including monitoring and auditing to detect criminal conduct� US Sentencing Guidelines 8B2.1.(b)(5)

35. Auditing & Monitoring - Issues Determining what to audit Auditing vs. monitoring Internal vs. external Sample size What to do with findings

36. CMS Compliance Effectiveness Pilot Identified leadership (CO & management), education, and auditing/monitoring as key components for assuring effectiveness.

37. Auditing & Monitoring OIG Assessment Questions Is the audit plan re-evaluated annually and does it address proper concerns (given past years audits, risk assessment, volumes, etc.) Do audits include root cause analysis of billing systems? Independent and qualified auditors? Resources available for unscheduled reviews?

38. Auditing & Monitoring OIG assessment questions Have error rates been evaluated? If error rates are not decreasing, what is being done? Do audits include a review of all documentation, including clinical documentation? OIG Supplemental CPG for Hospitals (2005)

39. Establishing Shared Compliance Resources � Auditing & Monitoring Benchmark against available public data Identify/share internal resources (DRG & other coding audits) Risk assessment (more later) Construct simple audit plan Identify/budget for external resources

40. Reporting Mechanisms �The organization shall take reasonable steps to have and publicize a system, which may include mechanisms that allow for anonymity or confidentiality, whereby the organization�s employees and agents may report or seek guidance regarding potential or actual criminal conduct without fear of retaliation.� US Sentencing Guidelines 8B2.1.(b)(4)

41. Reporting Mechanisms Remember Caremark �a director's obligation includes a duty to attempt in good faith to assure that a corporate information and reporting system, which the board concludes is adequate [to inform the board of improprieties in a timely manner] exists, and that failure to do so under some circumstances may, in theory at least, render a director liable for losses caused by non-compliance with applicable legal standards.�

42. Reporting Mechanism Hotline � pros & cons +Provides greater assurance of anonymity +Good tool for finding problem areas +Available 24/7 +Not as costly as you think-inexpensive way to show CP efforts May be over-utilized Doesn�t provide detail that direct conversation can

43. Reporting Mechanisms Other possibilities Lock box Email Direct contact Record keeping

44. Establishing Shared Compliance Resources � Reporting Systems Shared mechanisms (hotline or otherwise) for receiving reports Develop simple database for tracking contacts and responses Are shared investigative resources possible? Blind and benefit from the findings of others

45. Screening �The organization shall use reasonable efforts not to include within the substantial authority personnel of the organization any individual whom the organization knew, or should have known through the exercise of due diligence, has engaged in illegal activities or other conduct inconsistent with an effective compliance and ethics program.� US Sentencing Guidelines 8B2.1.(b)(3)

46. Screening What�s Required? Criminal Background Check OIG sanctions list GSA sanction list Treasury Department terrorist list National Practitioner Database Reference check Other?

47. Screening - Issues How does someone get excluded? Who is responsible for screening? Periodic re-screening � how often? What to do when you have a hit? Reinstatement Documentation

48. Screening What�s at stake? June 2004 - After a Pennsylvania hospital self-disclosed conduct to the Office of Inspector General (OIG), the hospital agreed to pay $61,699 for allegedly violating the Civil Monetary Penalty Law (CMPL). The OIG alleged that the hospital employed a Registered Nurse who was excluded from participating in federal health care programs. April 2004 - After a Virginia health system self-disclosed conduct to the OIG, the health system agreed to pay $125,494 for allegedly violating the CMPL. The OIG alleged that the health system employed two individuals and contracted with a physician that were excluded from participating in federal health care programs.

49. Establishing Shared Compliance Resources - Screening Discuss/share best practices Develop internal audit to assess current processes Contract for shared screening tool

50. Promotion/Enforcement �The organization�s compliance and ethics program shall be promoted and enforced consistently throughout the organization through (A) appropriate incentives to perform in accordance with the compliance and ethics program; and (B) appropriate disciplinary measures for engaging in criminal conduct and for failing to take reasonable steps to prevent or detect criminal conduct.� US Sentencing Guidelines 8B2.1.(b)(6)

51. Promotion/Enforcement Extensive discussion of necessary P&P Setting forth degrees of discipline that may be imposed (e.g., �verbal warning . . . up to and including termination�) Discipline for failure to detect non-compliance in appropriate situations Consistent application and enforcement Discipline for foreseeable failures of subordinates OIG CPG for Hospitals (1998)

52. Promotion/Enforcement Are disciplinary standards well publicized and readily available to hospital personnel? Are standards enforced consistently throughout the organization? Is each instance involving enforcement thoroughly documented? OIG Supplemental CPG for Hospitals (2005)

53. Investigation/Response �After criminal conduct has been detected, the organization shall take reasonable steps to respond appropriately to the criminal conduct and to prevent further similar criminal conduct, including making any necessary modifications to the organization�s compliance and ethics program.� US Sentencing Guidelines 8B2.1.(b)(6)

54. Investigation/Response OIG Assessment Questions Are all matters thoroughly and promptly investigated? Are corrective action plans developed that take into account the root causes of each potential violation? Are periodic reviews conducted to confirm implementation of corrective action plans? When an overpayment is found, is it returned to the FI? Are probable violations of law disclosed to appropriate law enforcement?

55. Establishing Shared Compliance Resources: Enforcement/Promotion & Investigation/Response Discipline policy template CO position description/Compliance Committee Charter Create simple logging tool to track number of days an investigation is open

56. Risk Assessment: What is it? Risk assessment is the identification, measurement and prioritization of likely relevant events or risks that may have a material consequence on an organization�s ability to achieve its objectives.

57. COSO Basic Sequence of Internal Control

58. Risk Identification � How? Interviews Document review Internal (e.g., audit reports, hotline logs, etc.) External (e.g., OIG Workplan, industry newsletters, third party litigation Employee surveys Other?

59. Factors to Consider in Measuring Impact of Adverse Media Reputational Risk Revenue at Risk Cost of Investigation & Settlement Probability of Occurrence External Environment Mitigating Factors Others?

60. Risk Areas for Critical Access Hospitals

61. Stark & Anti-Kickback

62. Healthcare Anti-Kickback Statute Unlawful to: Knowingly and willfully Solicit or receive Any remuneration (directly or indirectly, overtly or covertly, in cash or kind) In return for referring for any item or service reimbursable by Federal health care programs, or purchasing, leasing, ordering or arranging for (or recommending any of the same) any good, facility or service reimbursable by Federal health care programs

63. Healthcare Anti-Kickback Statute Unlawful to Knowingly and willfully Offer or pay Any remuneration (directly or indirectly, overtly or covertly, in cash or kind) To induce referring for any item or service reimbursable by Federal health care programs, or purchasing, leasing, ordering or arranging for (or recommending any of the same) any good, facility or service reimbursable by Federal health care programs

64. Healthcare Anti-Kickback Statute Shall be guilty of a felony and, upon conviction: Fined not more than $25,000; Imprisoned not more than 5 years; or both

65. Healthcare Anti-Kickback Statute OIG Civil Money Penalty and Exclusion Authorities Up to $50,000 per violation Up to 3-times the amount of the remuneration Exclusion

66. Definitions REMUNERATION (note�same for Stark) �For purposes of the anti-kickback statute, �remuneration� includes the transfer of anything of value, in cash or in-kind, directly or indirectly, covertly or overtly.� OIG Advisory Opinion 01-10, July 26, 2001. No De Minimis exception

67. Definitions KNOWINGLY AND WILLFULLY �We construe "knowingly and willfully" in � 1128B(b)(2) of the anti-kickback statute as requiring appellants to (1) know that � 1128B prohibits offering or paying remuneration to induce referrals, and (2) engage in prohibited conduct with the specific intent to disobey the law.� The Hanlester Network V. Shalala, 51 F.3d 1390 (9th Cir. Ct. App. 1995)

68. But�One Purpose Test �We do not agree and hold that if one purpose of the payment was to induce future referrals, the Medicare statute has been violated.� United States v. Greber, 760 F.2d 68 (3d Cir.1985)

69. Definition �INDUCE� "an intent to exercise influence over the reason or judgment of another in an effort to cause the referral of [Medicare] program-related business". The Hanlester Network V. Shalala, 51 F.3d 1390 (9th Cir. Ct. App. 1995)

70. What Does the AKS Prohibit?U.S. v. Anderson, 85 F.Supp.2d 1047 (Kan 1999)

71. What Does the AKS Prohibit? U.S. v. Carroll, 320 F. Supp.2d 748 (S.D. Ill 2004) Defendant�s were DME providers who sold enteral nutrients and supplies. Government alleged that free pumps were given to induce purchase of nutrients and supplies. Court denied D�s motion for dismissal of governments complaint on grounds that their free item practice met the discount safe harbor.

72. What Does the AKS Prohibit? TAP PHARMACEUTICALS � Justice Dept. Press Release dated October 3, 2001 �The indictment charges that the TAP defendants offered to give things of value, including free drugs, so-called educational grants, trips to resorts, free consulting services, medical equipment, and forgiveness of debt, to physicians and other customers to obtain their referrals of prescriptions for Lupron to Medicare program beneficiaries, in violation of the anti-kickback statute.�

73. February 16, 2005: Dr. John Romano, (urologist), Plymouth, MA Billed for $38,000 worth of Lupron samples received free from TAP representative $20,000 fine, $38,000 restitution Dr. Romano sentenced to 2 years probation (6 months home confinement w/electronic monitoring); community service�600 hours of free medical care to indigent patients

74. Don�t confuse the Anti-kickback Law with the Stark Law!

75. STARK Plain Language Restatement If a Physician (or immediate family member) has a direct or indirect Financial Relationship with an Entity, unless an exception applies: the Physician may not Refer any Designated Health Services (�DHS�) to the Entity, the Entity may not bill for any DHS referred by the physician, no Medicare payments may be made for DHS referred by the physician, and the Entity must refund all moneys collected for DHS referred by the physician (unless no actual knowledge or reckless disregard re: the physician�s identity)

76. Definitions PHYSICIAN � Doctor of Medicine; Doctor of Osteopathy; Dentist; Dental Surgeon; Doctor of Podiatric Medicine; Doctor of Optometry; or a Chiropractor. ALSO IMMEDIATE FAMILY MEMBER: husband or wife; birth or adoptive parent, child or sibling; stepchild; stepparent; stepbrother or stepsister; in-laws (mother, father, son, daughter, sister, brother); grandparent, grandchildren and the spouses of any of these.

77. Definitions Entity�a physician�s sole practice (not the physician him or herself), a practice of multiple physicians, any other person, sole proprietorship, public or private agency or trust, corporation, partnership, LLC, foundation, not-for-profit corporation or unincorporated association that furnishes DHS. Furnishes DHS if: (1) CMS pays the entity for DHS, or (2) payment has been reassigned to the entity for DHS.

78. Definitions Financial Relationship�(can be direct or indirect) Ownership/Investment Includes equity, debt or other means Stock, options, partnership, bonds, loans, etc. NOT retirement plan interest, options received as compensation until exercised INDIRECT�an unbroken chain of ownership/investment interests

79. Definitions Financial Relationship (cont.) Compensation�any remuneration (payment or benefit, directly or indirectly, overtly or covertly, in cash or in kind) between a physician (or immediate family member) and an entity. Indirect Compensation�(i) an unbroken chain of either compensation or ownership/investment interests between Physician and Entity, (ii) physician received compensation that varies with the volume or value of referrals, and (iii) the Entity has actual knowledge or acted with reckless disregard or deliberate ignorance of the physician�s financial relationship.

80. �Stands in the Shoes� (III) �A physician is deemed to have a direct compensation arrangement . . . if the only intervening entity . . . is his or her physician organization.� � 411.354(c)(ii) Physician Organization is newly defined as a physician (or the PC of which s/he is a sole owner), a physician practice or a group practice.

81. �Stands in the Shoes� (III) �Thus [for example], if a DHS entity leases office space to a group practice, the lease will be deemed to be a direct compensation arrangement with each physician in the group practice, [and will need to fit the rental of office space exception] if the DHS entity wants to submit claims for DHS referrals from those physicians.� 72 FR 51028

82. Definitions Referral�request (any form�written, oral, electronic, other) by a physician for, or ordering of, or certifying or recertifying the need for, any DHS paid including consultation by another physician, but not services personally performed by the referring physician (incident-to services are not personally performed)

83. Definitions Designated Health Services Clinical Laboratory Services Physical Therapy, Occupational Therapy and Speech-Language Pathology Services Radiology and certain other imaging services Radiation Therapy services and supplies Durable medical equipment and supplies Parenteral and enteral nutrients, equipment, and supplies Prosthetics, orthotics, and prosthetic devices and supplies Home health services Outpatient prescription drugs Inpatient and outpatient hospital services

84. Definitions Clinical Laboratory Services �examination of materials derived from the human body for the purpose of providing information for the diagnosis, prevention, or treatment of any disease or impairment of, or the assessment of the health of, human beings� Specifically identified by the list of CPT/HCPCS Codes (Fed. Reg. or (www.cms.gov/medlearn/refphys.asp))

85. Definitions Physical Therapy, Occupational Therapy and Speech-Language Pathology Services PT and speech are outpatient services only Specifically identified by the list of CPT/HCPCS Codes (Fed. Reg. or (www.cms.gov/medlearn/refphys.asp))

86. Definitions Radiology and certain other imaging services Includes both professional and technical components of any x-rays, ultrasound, or other imaging services, CT or MRI that is covered by Medicare, but not: x-ray, fluoroscopy, or ultrasound that requires the insertion of a needle, catheter, tube or probe Radiology procedures that are integral to the performance of a nonradiological medical procedure and performed during or immediately following the nonradiological procedure Specifically identified by the list of CPT/HCPCS Codes (Fed. Reg. or (www.cms.gov/medlearn/refphys.asp))

87. Definitions Radiation Therapy services and supplies Specifically identified by the list of CPT/HCPCS Codes (Fed. Reg. or (www.cms.gov/medlearn/refphys.asp))

88. Definitions Durable medical equipment and supplies Durable medical equipment means equipment, furnished by a supplier or a home health agency that� (1) Can withstand repeated use; (2) Is primarily and customarily used to serve a medical purpose; (3) Generally is not useful to an individual in the absence of an illness or injury; and (4) Is appropriate for use in the home. (See � 410.38 of this chapter for a description of when an institution qualifies as a home.) 42 CFR � 414.202

89. Definitions Parenteral and enteral nutrients, equipment, and supplies Includes all HCPCS level 2 codes for these services, equipment and supplies

90. Definitions Prosthetics, orthotics, and prosthetic devices and supplies Includes all HCPCS level 2 codes for these items and services that are covered by Medicare.

91. Definitions Home Health Services All home health services 9. Outpatient Prescription Drugs All prescription drugs covered by Part B

92. Definitions Inpatient & Outpatient Hospital Services Inpatient includes psych & critical access, does not include dialysis & physician services, even if billed under assignment by the hospital Outpatient includes PHP, does not include physician services, even if billed under assignment by the hospital

93. Plain Language Restatement If a Physician (or immediate family member) has a direct or indirect Financial Relationship with an Entity, unless an exception applies: the Physician may not Refer any Designated Health Services (�DHS�) to the Entity, the Entity may not bill for any DHS referred by the physician, no Medicare payments may be made for DHS referred by the physician, and the Entity must refund all moneys collected for DHS referred by the physician (unless no actual knowledge or reckless disregard re: the physician�s identity)

94. AKS & Stark AKS Criminal/Civil Requires Proof of Improper Intent Applies to Any Referral Source Safe Harbors OIG Advisory Opinions STARK Civil Only Strict Liability Must be a Physician in the mix Exceptions CMS Advisory Opinions

95. Exceptions to Stark Rule General Exceptions Exceptions that apply only to ownership/investment interest Exceptions that apply only to compensation arrangements

96. I. General Exceptions Group Practice Personally performed services In office ancillary services Services furnished by certain organizations (HMOs, prepaid plans, etc. as defined by the regulations) to enrollees. Academic medical centers (i) referring physician meets certain conditions (bona fide employee, bona fide faculty appointment, etc.), (ii) compensation paid to referring physician meets conditions (set in advance, FMV, etc.), and (iii) academic medical center meets conditions. Implants furnished by an ASC

97. I. General Exceptions EPO and other dialysis-related drugs furnished in or by an ESRD facility Preventive screening tests, immunizations, and vaccines Eyeglasses and contact lenses following cataract surgery Rural referrals for DHS to an immediate family member or an entity with which an immediate family member has a financial interest

98. I. General Exceptions Also: Temporary Non-Compliance: new exception to the prohibition against billing The financial relationship in question fully complied with an exception for 180 consecutive calendar days immediately preceding the non-compliance The non-compliance is beyond the control of the entity, and the entity promptly takes steps to rectify (90 day limit), and The financial relationship does not violate the anti-kickback statute. Exception may only be utilized once every 3 years with respect to any physician.

99. II. Exceptions Related to Ownership/Investment Publicly Traded Securities� (i) listed on NYSE or similar exchange that reports daily, (ii) stockholder equity exceeds $75 million at end of last fiscal year or on average during previous three fiscal years. Mutual Funds� defined in �851(a) of the IRC, assets exceed $75 million at end of last fiscal year or on average during previous three fiscal years. Specific Providers� ownership in (i) rural provider (not specialty hospitals), (ii) hospital in Puerto Rico, or (iii) whole hospital (not specialty hospitals)

100. III. Exceptions Related to Compensation Arrangements Rental of Office Space Rental of Equipment Bona Fide Employment Personal Service Arrangements Physician Recruitment Isolated Transactions Certain Arrangements with Hospitals Group Practice Arrangements with a Hospital Payments to a Physician Charitable Donations by a Physician Non-Monetary Compensation up to $300 Fair Market Value Compensation Medical Staff Incidental Benefits Risk-Sharing Arrangements Compliance Training Referral Services Indirect Compensation Arrangements Obstetrical Malpractice Insurance Subsidies Professional Courtesy Retention Payments in Underserved Areas Community-Wide Health Information Systems

101. III. Exceptions Related to Compensation Arrangements Fair Market Value Generally, value in an arms length transaction, well informed buyers and sellers not otherwise in a position to generate business between them

102. FAIR MARKET VALUE (III) PHYSICIAN COMPENSATION SAFE HARBOR Average hourly rate for ED physician services in market with three or more EDs 50th percentile average national compensation for specialty identified in four of six surveys

103. III. Exceptions Related to Compensation Arrangements �Set in advance��compensation will be considered same if� An aggregate compensation, a time-based or per unit of service based amount, or a specific formula for calculating the compensation is set out in a agreement between the parties before services are furnished Per unit OK and not related to volume or value of referrals if consistent with FMV and does not vary during the course of the agreement

104. III. Exceptions Related to Compensation Arrangements Personal Service Arrangements�remuneration to a physician, immediate family member or group practice (can be multiple arrangements) if Each arrangement is set out in writing, signed by parties, and specifies the services covered The arrangement covers all of the services furnished by the physician (or family member) to the entity (can cross-reference all agreements in each agreement or keep a master contract list) Aggregate services contracted for do not exceed what is reasonable and necessary for the legitimate business purposes of the arrangements

105. III. Exceptions Related to Compensation Arrangements Personal Service Arrangements (cont.) Term of the arrangement is for at least 1 year (if terminated with or without cause, parties may not enter into substantially same arrangement during first year of the original term) Compensation is (i) set in advance, (ii) consistent with FMV, and (iii) except for physician incentive plan (as defined in regs), is not determined in a manner that considers volume or value of referrals or other business between parties Holdover for 6 months (after at least one year) OK at same terms.

106. III. Exceptions Related to Compensation Arrangements *Non-Monetary Compensation up to $300 compensation (except cash and cash equivalents) in the form of items or services that does not exceed $300 per year if: Determination of the compensation does not take into account the volume or value of any referrals from the physician, The compensation may not be solicited by the physician (including staff) or immediate family member The arrangement does not violate the anti-kickback statute or laws/regulations governing billing/claims submission

107. III. Exceptions Related to Compensation Arrangements (III) 11. Non-Monetary Compensation Clarifies that calendar year is the measuring point. New cure provision if� entity inadvertently provided excess non-monetary comp no greater than 50% over the limit, and Physician repays in lesser of 180 days from date of excess overpayment, or end of calendar year.

108. III. Exceptions Related to Compensation Arrangements (III) 11. Non-Monetary Compensation One appreciation event for entire medical staff per year in addition to non-monetary comp limit, but Any gifts (table gifts, etc.) must be counted toward limit

109. III. Exceptions Related to Compensation Arrangements *Medical Staff Incidental Benefits Compensation in the form of items or services (not cash or cash equivalents) that provide to medical staff members and are used on the hospital campus if the compensation: Is provided to all medical staff members practicing in the same specialty (does not have to be accepted by all) Except for advertising, is provided only during periods when the medical staff is making rounds or otherwise engaged in services or activities that benefit the hospital

110. III. Exceptions Related to Compensation Arrangements Medical Staff Incidental Benefits (cont) Provided by the hospital and used by the medical staff only on the hospital�s campus (except pagers, internet access, etc.) Reasonably related to or designed to facilitate the provision of medical services at the hospital Low value ($25 or less for each occurrence) Does not take into account the volume or value of referrals Does not violate the anti-kickback statute or laws governing billing and claims submission Applies to all entities with bona fide medical staffs

111. III. Exceptions Related to Compensation Arrangements (III) Compliance Training�on the elements of a compliance program or on the laws, rules, regulations governing the conduct of the trainee for physician (or their office staff) and immediate family member subject to the following restrictions� The training must be conducted in the entity�s local community or service area Cannot provide CME credit CME credit now OK if compliance training is primary purpose

112. Reporting Requirements Must submit information to CMS or OIG within 30 days of a request, the following information about all compensation or ownership/investment relationships (except publicly traded securities & mutual funds.) Name & UPIN of each physician who has (or whose immediate family member has) a financial relationships w/ a reportable financial relationships Covered services furnished by the entity Nature of the financial relationship (extent/ value of ownership or compensation)

113. Reporting Requirements Penalty for failure to report CMP of $10,000 per day for each day following the 30 day deadline established above

114. Stark � CMS Audit Memo Delivered to 500 Hospital CFOs Seeks Information on all Financial Relationships with Physicians All ownership relationships Personal service and lease arrangements Non-monetary comp that exceeds $300 limit Provides 45 days for response Offers $10,000 penalty per day for failure to respond

115. Open Letter � Stark Enforcement Attempts to answer CMS position that it has no authority to negotiate less than full repayment of overpayments as settlement Signals that w/Stark II regulations in 2004, the Stark law has been clarified

116. Open Letter � Stark Enforcement OIG will consider the lesser CMP penalty (3x amount of remuneration) for Stark violation self-disclosures in appropriate circumstances What implicates CMP authority? Only available when both Stark and AK in play? Is the amount of overpayment still relevant?

117. Compliance Strategies Physician contract database Comprehensive physician arrangement review No contract/no pay policy Bill Hold Tracking system for non-monetary compensation Business gift/business courtesy policy revision

118. Medicaid Fraud Enforcement Total Medicare & Medicaid Spending 2007: $790 Billion Medicare: $443 Billion Medicaid: $347 Billion

119. Medicaid Fraud Enforcement DRA � 2005 . . . �takes CMS� partnership with and oversight of States to a new level . . . . . . �unique opportunity to identify, recover and prevent inappropriate Medicaid payments . . .� �MIP provides CMS with the ability to more directly ensure the accuracy of Medicaid payments . . .�

120. Medicaid Fraud Enforcement Section 6034 of the DRA: CMS-MIP gets $50 million in 07 and 08, $75 million annually thereafter, with unspent retention authority. HHS-OIG Program Integrity Group recieves enhanced funding for Medicaid fraud efforts: $25 million annually. National expansion of the Medi-Medi pilot project: $12 million to start; $60 million annually by 2010.

121. Medicaid Fraud Enforcement Bottom line on NEW money spending by three Federal enforcement agencies (OIG, CMS-OFM, CMS-MIP) to enforce Medicaid payment integrity: 2007 = $87 million 2008 = $99 million 2009 = $136 million 2010 = $160 million

122. Medicaid Fraud Enforcement MIP � Strategic use of contractors to conduct audits and support States� program integrity efforts. �MIP expects to identify significant overpayments through a carefully crafted audit program.�

123. Medicaid Fraud Enforcement PERM- page 14 Strategic Plan targeted vulnerabilities: Nursing and personal care facilities/agencies Prescription drugs Durable medical equipment Improper claims for payment

124. Medicaid Fraud Enforcement PERM Audits will result in error rates for each program States will be required to develop corrective action plans that target major causes of error identified by the PERM reviews Under the new Federal rules states MUST recover any overpayments identified in the PERM audits

125. Questions? sortquist@meaderoach.com 312-285-4850