COMPLIANCE ISSUES FACING GROUP PRACTICES Growing and Operating a Large Medical Practice

1. Broad and CasselHyatt Regency Orlando International AirportMarch 3, 2006 GABRIEL L. IMPERATO, ESQ. Broad & Cassel Fort Lauderdale, FL COMPLIANCE ISSUES FACING GROUP PRACTICESGrowing and Operating a Large Medical Practice

2. OVERVIEW • RECENT TRENDS IN GOVERNMENT ENFORCEMENT • PRIVATE PAYOR HEALTH CARE FRAUD • THE ANTI-KICKBACK STATUTE • THE STARK LAW • THE FALSE CLAIMS ACT • OFFICE OF INSPECTOR GENERAL WORK PLAN

3. TRENDS IN GOVERNMENT ENFORCEMENT • Health Care Fraud Enforcement Continues As a Priority and Includes Anything Whistleblowers May Target • Medicare Reform Act-Expansion of Prescription Drug Benefit – New Fraud Opportunities • Corporate Liability and Compliance • Quality of Care • Stark Law and Anti-Kickback Violations • OIG Work Plan 2006

4. HOT TOPICS • Physician Recruitment • Medical Directorships • Joint Ventures • Pharma and Medical Device Marketing • Clinical Research

5. PHYSICIAN RECRUITMENT • Community need (vs. hospital need) • Physician relocating practice to hospital service area • Benefits geared to reasonable financial security of physician in startup phase • Payout period limited to 3 years • No benefits to existing group practice beyond actual incremental additional costs of adding new physician • No relationship to anticipated referrals • OK to require maintenance of hospital privileges

6. MEDICAL DIRECTORSHIPS • Actual, necessary, non-duplicative services • Fair market value payments • Contemporaneous time and effort documentation • No relationship to referrals

7. JOINT VENTURES • Issue: Excessive reward to referral sources? • Any relationship of investment opportunity to referral volume • Minimal investment by referral sources • Tracking/pressure regarding referrals • Extraordinary returns on investment • Required divestments/non-transferability of investment interests • “Shell” structures: contractual joint ventures

8. MARKETING OF PHARMACEUTICALS AND MEDICAL DEVICES • Discounts and remuneration to purchasers • Educational grants • Research grants • “Switching” or conversion payments • Formularies and formulary support • Relations with formulary committee members • Formulary placement payments • Relationships with physicians • Consulting and advisory payments • Business courtesies and gifts • Education/research funding

9. CLINICAL RESEARCH • NIH Guidance on Financial Conflicts of Interest • Any relationship between outcome and compensation • Researcher’s proprietary interest in studied product • Equity interest in the sponsor • Other significant compensation by sponsor • Grants for unnecessary or duplicative research • Cost mischarging

10. Clinical Research Grants • Commercial Sources • Pharma and medical device • Consultant Arrangements with Clinical Trial Sponsors (Pharma CPG) • Recruitment of clinical trial subjects • Integrity of reporting of clinical trial information • Medical treatment of clinical trial subjects • Federal Grants • NIH and other • Clinical Investigations time allocation • Billing for services covered under a grant • Recent CPG

11. Hospital Specific Billing Issues • Discharge/Transfers • Inpatient DRG Coding • Suspect Pairings • Pneumonia • Septicimia • Post Acute DRGs (29 existing DRGs) • Bill as transfer, not discharge • OIG highlights in its semi-annual report ($116 million Medicare overpayment in 2 year period)

12. Hospital Specific Billing Issues • Outpatient PPS • Pass-through costs • Outpatient Cardiac Rehab • Incident to/direct supervision by Physician • Diagnostic Testing in ERs • Contemporaneous interpretations • Medically necessary?

13. Hospital Billing/Medical Necessity Issues • Coronary Artery Stents • Medically necessary • Multiple procedures • 70% now drug eluting stents ($ 4,859 extra payment on OPPS)

14. Hospital and Physicians – Medical Necessity Conundrum • Physicians decide what is medically necessary • Staff Physicians not employed by hospital • Independent Peer Review function • Overutilization? Patient Care/Safety • United Memorial Hospital/Corporate Liability • Redding Hospital/Physician and Corporate Liability

15. Physician Billing Issues • E&M coding (perennial target - $ 23 billion in 2001) • Consultations • Use of -25 Modifier (E&M service unrelated to procedure code on same day) • Place of Service coding errors

16. Physician Billing Issues • Medical Necessity of Diagnostic Tests • Radiation Therapy Management Services • One billable unit for every five sessions • Services and Suppliers “Incident to” • Training and billing Reviews for physician practices • Essential in OIG’s view

17. PHARMACEUTICAL FRAUD • Medicaid Rebates – Best Price Violations • Price Manipulation (“AWP”/”ASP”) • Promotion of Off Label Use • Relationships with Health Care Professionals and Inducements to Prescribe • Marketing Schemes • Pharmacy Benefit Managers and Switching Arrangements and Contract Kickbacks • Shorting Prescriptions and Drugs Returned to Stock • Secondary Market and Internet Purchases

18. Quality of Care • Hospital/Physician Services • Cardiac Catheterization Procedures • Hospital/Medical Staff Responsibility • Quality of Care in Nursing Homes • Services Not Provided • “Deficient” Services vs. “Worthless” Services • Physician Services

19. CORPORATE LIABILITY,COMPLIANCE AND GOVERNANCE • HIPPA 96” and Corporate Scandals • The New Era of Corporate Responsibility • Sarbanes-Oxley Act of 2002 • United States Sentencing Guideline Amendments of 2004 • Department of Justice Principles of Federal Prosecution of Business Organizations

20. SARBANES-OXLEY AND THE SENTINEL EFFECT ON HEALTH CARE ORGANIZATIONS • Public Companies – Governance and Integrity of Reporting Financial Information • Private Companies – Fiduciary Obligations of Board of Directors and Shareholder Derivative Liability • Not-for-Profit Organizations – Fiduciary Obligations and Attorney General Oversight • Caremark Decision – All Organizations

21. SENTENCING GUIDELINE AMENDMENTS RAISE THE STAKES FOR BUSINESS ORGANIZATIONS • Codification of Principles of the Caremark Decision • Oversight and Responsibility of the Board of Directors and High Level Personnel of the Organization • Board Knowledge About the Content and Operation of the Compliance Program to Prevent and Detect Violations of the Law • Board Exercises Reasonable Oversight with Respect to Implementation and Effectiveness of the Compliance Program • Risk Assessment as an Essential Component of Design Implementation of an Effective Compliance Program • Assessment of Likely Compliance Risks Given an Organization’s Business Activities

22. UNITED STATES SENTENCING GUIDELINE AMENDMENTS AND DEPARTMENT OF JUSTICE PRINCIPLES OF FEDERAL PROSECUTION OF BUSINESS ORGANIZATIONS“COOPERATION” OR “UNCONDITIONAL SURRENDER” • Voluntary Disclosure and Self-Reporting as Quasi Mandatory Function of Cooperation • Cooperation in Investigating Business Organizations Own Wrongdoing • Effects Charging Decision Against Business Organization • Effects Scope of Liability for Business Organization • Effects Sentence under Sentencing Guidelines • Business Organization’s Cannot Run the Risk of Failing to Have an Effective Compliance and Governance Program • Failure to Detect and Prevent Wrongful Conduct will Result in Consequences for Any Business Organization in Current Compliance Environment

23. Corporate Integrity Agreements • A part of global criminal and/or civil settlement • May represent OIG’s opinion on the organization’s compliance programs • 7 significant elements of an effective compliance program, including: • Specific training language • Focused audits/reviews • Independence of Compliance Officer • Annual Reporting Requirements Under CIA

24. Independence of theCompliance Officer • Dual responsibility of compliance officers are increasingly suspect to the OIG at large organizations • Sufficient commitment of resources • Reporting to Board of Directors/Trustees • CCO Subordinate to General Counsel or CFO Not Favored by OIG

25. OIG Expectations:Compliance Training • Broad based compliance program training • Extensive and specific training for risk areas • Document training • Efforts made to train physicians • Technology training • Essential for effective compliance programs

26. Private Payor Fraud • What is Private Payor Insurance Fraud? • Fraud against those who pay for private heath insurance coverage

27. Federal Statutes Prohibiting Private Payor Insurance Fraud • Mail Fraud • Wire Fraud • Fraud against health care benefit plans • Conspiracy to commit fraud through false claims and false statements • Fraud under the RICO statute

28. Federal Prosecutions involving Fraud Against Private Persons • Examples • US v. Posner, D.C., et. Al (S.D. Fla.) Mail fraud; 18 U.S.C. §1341; Wire fraud; 18 U.S.C. §1343; and Conspiracy; 18 U.S.C. § 371 – for submission of claims to private payors for services not rendered, not rendered as claimed and for medically unnecessary services • US v. Individual Chiropractor Health care fraud; 18 U.S.C. § 1347; Conspiracy; 18 U.S.C. § 371 – for claims for services in accordance with a standard treatment protocol lasting approximately three months regardless of the patient injuries or the medical necessity of the treatment protocol, and for submission of claims for medical, chiropractic and therapeutic services which were not performed during the treatment protocol and/or never occurred

29. Private Payor Attempts to Limit Fraud and Abuse through State Legislation • Examples: • Florida legislation regulating activities under the personal injury protection program – limiting solicitation of patients; imposition of Medical Director responsibilities on personal injury medical clinics • Licensure and registration of clinics and denial of payment for unlicensed or unregistered clinics by private health plans

30. Examples of Private Payor Positionsin Civil Litigation • Violations of federal or state false claims statutes • Violations of federal or state Anti-Kickback and self-referral laws • Violations of state law governing insurance and provider relationships • Submission of claims which are allegedly medically unnecessary and/or unreasonable

31. Private Payor Affirmative Litigation Against Providers in State and Federal Courts • Examples: • State Farm Mutual Automobile Insurance Company v. Universal Medical Center of South Florida, Inc. (Dade County, Court of Appeal) – Denial of payment because physical therapy performed by medical assistants (not licensed physical therapists) provided under physician supervision is prohibited under State law. • State Farm Mutual Automobile Insurance Company v. Comprehensive Medical Group, Inc., et al (N.D. Illinois) – Complaint by insurance company against multiple providers for false and fraudulent claims for worthless and unnecessary diagnostic tests rendered to victims of automobile accidents on an a nation-wide scale. • Medically unnecessary diagnostic tests of no clinic value • Misleading diagnostic findings • False claims for multiple procedure codes • Diagnostic studies rendered to maximize profit without regard to medical necessity • Spinal ultra sounds; somotosensory evoke potential; dermatome evoke potentials; and nerve conduction velocity studies, having no clinical value in confirming or excluding the existence of nerve root injury or location of neurological dysfunction or inflammation • Purpose of performing the test is merely for financial gain

32. REVIEW OF PAYMENT & REFERRAL RELATIONSHIPS UNDERSTATE AND FEDERAL LAW

33. I. THE ANTI-KICKBACK STATUTE 42 USC § 1320a-7b(b)(2)   It is unlawful to knowingly and willfully offer or pay any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind to any person to induce such person--      (A) to refer an individual to a person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part under a Federal health care program, or      (B) to purchase, lease, order, or arrange for or recommend purchasing, leasing, or ordering any good, facility, service, or item for which payment may be made in whole or in part under a Federal health care program.

34. The Anti-Kickback Statute • What It All Means? - Prohibits anyone from purposefully offering, soliciting, or receiving anything of value to generate referrals for items or services payable by any Federal health care program. • 42 States and D.C. have enacted anti-kickback statutes

35. Purpose of the Law • Prevent the corruption of medical decision-making • Prevent the overutilization of items or services • Prevent unfair competition

36. Elements • Remuneration • Offered, Paid, Solicited, or Received • Knowingly & Willfully • To Induce or In Exchange for Federal Program Referrals

37. Remuneration • Anything of value • “In-cash or in-kind” • Paid directly or indirectly • Examples: cash, free goods or services, discounts, below market rent, relief of financial obligations

38. Offered, Paid, Solicited, or Received • Different Perspectives – Payors and Payees • “It Takes Two To Tango” • Old Focus: Payors Subject to Prosecution • New Focus: Payees (usually doctors)

39. To Induce Federal Program Referrals • Any Federal Health Care program • A nexus between payments and referrals • Covers any act that is intended to influence and cause referrals to a Federal Health Care program • One purpose test

40. Knowingly & Willfully • The Anti-Kickback law requires that the individual have a particular “state of mind”, acting with knowledge and purpose when committing the offense • This “Knowingly & Willfully” requirement has been interpreted differently by the various Circuit Courts: • 9th Circuit: Must have knowledge of the Anti-Kickback statute and have specific intent to violate the statute • 8th Circuit: Mere knowledge that the conduct was “wrongful” satisfies the “Knowingly & Willfully” standard • 11th Circuit: Must show that one acted with an intent to “disobey or disregard” the law

41. Fines and Penalties • The Government may elect to proceed: Criminally: • Felony, Imprisonment up to 5 Years & a fine up to $25,000, or both • Mandatory exclusion from participating in Federal Health Care programs • Brought by the DOJ Civilly: • Violation is based on express or implied certification of compliance with violations of the Anti-Kickback and Starks statutes • Penalties are same as under False Claims Act (more later) • Controversial, yet expanding use of the FCA Administratively: • Monetary penalty of $ 50,000 per violation & assessment of up to three times the remuneration involved • Discretionary exclusion from participating in Federal Health Care programs • Brought by the OIG

42. Exceptions and Safe Harbors • Many harmless business arrangements may be subject to the Statute • Approximately 24 Exceptions (“Safe-Harbors”) have been created by the OIG • Compliance is Voluntary • Must meet all conditions to qualify for Safe Harbor protection • Is substantial compliance enough?

43. Statutory Exceptions • The 5 exceptions that have been enacted by Congress: • Discounts and other price reductions • Payments to employees • An amount paid by a vendor of goods or services to a group purchasing agent • Waiver of Part B co-payments by Federally qualified health centers • “Shared Risk” exception

44. Regulatory Safe Harbors • Investments in large entities • Investments in small entities • Investments in small entities in underserved areas • Investments in group practices • Investments in ambulatory surgical centers (ASCs)

45. Space and Rental Equipment Personal Services and management contracts Employees Discounts Managed Care Managed Care “shared risk” arrangements Practitioner recruiting in underserved areas Ambulance restocking Sale of practice Referral services Warranties Group purchasing organizations Routine waiver of co-payments and deductibles Subsidies for obstetrical malpractice insurance in underserved areas Cooperative Hospital Services Organizations Specialty referral arrangements between providers Additional Safe Harbors

46. Guidance on the Anti-Kickback Statute • Advisory Opinions from the OIG • A party may request advice on the law, concerning 1) remuneration within the meaning of the law, 2) whether they are meeting one of the law’s exceptions or safe harbors, or whether their arrangement warrants the imposition of a sanction • Recent Advisory Opinions on Gainsharing arrangements • Fraud Alerts and Special Advisory Bulletins • Preamble to the Safe Harbor Regulations • Compliance Program Guidance's • www.oig.hhs.gov

47. The Stark Law • Section 1877 of the Social Security Act, 42 U.S.C 1395nn • The law is complicated and consists of the original statute (Stark I) and the amended provisions (Stark II) • Most Stark II regulations went into effect in 2002, but some are still pending

48. The Stark Law • A Prohibition on Physician Self-Referrals • If a physician (or immediate family member) has a direct or indirect financial relationship (ownership or compensation) with an entity that provides designated health services (“DHS”), the physician cannot refer the patient to the entity for DHS and the entity cannot submit a claim for the DHS, unless the financial relationship fits in an exception

49. Penalties Nonpayment of claims Civil Money Penalties of $ 15,000 for each service rendered plus an Assessment of three times the amount claimed Penalty of up to $100,000 for “Circumvention Scheme” Don’t Forget FCA Liability

50. Difference Between Anti-Kickback Statute and The Stark Law • Physician Referrals only • No “Knowingly and Willfully Standard” – Strict Liability • Involves Designated Health Services (DHS)