Fraud & Abuse

Published on: November 14, 2022

NPDB Reporting Obligations Reinforced by Recent Court Decision

Recently, a federal court in Oregon held that healthcare entities, including hospitals, are legally obligated to report to the National Practitioner Data Bank (NPDB) where a practitioner surrenders their clinical privileges while under investigation, even if the physician did not know that he or she was under investigation.

The Department of Health and Human Services (HHS) originally established the NPDB pursuant to the Health Care Quality Improvement Act of 1986 (HCQIA) in order to collect and release certain information relating to the professional competence and conduct of physicians, dentists, and other healthcare practitioners. Under the Act, healthcare entities, particularly hospitals, are generally required to disclose the acceptance of the surrender of clinical privileges of a physician while the physician is under an investigation by the hospital relating to alleged incompetence or improper professional conduct. The overarching goal of this provision was to close a loophole where physicians under investigation and healthcare entities would resort to “plea bargains” in which a physician agreed to such a surrender in return for the healthcare entity’s promise not to inform other healthcare entities about the circumstances of the physician’s surrender of privileges.

In the recent case, a hospital reported to the NPDB that a physician surrendered his privileges with the hospital while the physician was under investigation. The physician sought a preliminary injunction ordering the hospital to withdraw the report and argued that the report was false because he was not under investigation when he surrendered his privileges since the hospital officials allegedly failed to comply with the hospital’s policies before an investigation had begun. The court stated that for NPDB reporting purposes, the term “investigation” is not controlled by how that term may be defined in a healthcare entity’s bylaws or policies. Rather, that term is viewed expansively for NPDB reporting purposes, and is considered to run from the start of a general inquiry until a final decision on a clinical privileges action is reached. Notably, the court implied that the result would be the same even if the physician was not aware that he was under investigation, since there is no requirement in the context of NPDB reporting that the healthcare practitioner be notified or aware of the investigation. Thus, the court ultimately disagreed with the physician and upheld the hospital’s report.

Published on: October 25, 2022

HHS OIG Releases Template for Requests for Advisory Opinions

by Wachler & Associates, P.C.

The Office of Inspector General (OIG) for the United State Department of Health and Human Services (HHS) recently released a template to assist with preparing advisory opinion requests. This template can be used to ensure that requestors include the information required for the advisory opinion process. The template lays out the basic information required for an advisory opinion request and leaves an optional section for legal analysis. Although providing a legal analysis is not required, most requests include significant legal analysis regarding why OIG should approve the arrangement and it is often the most detailed and insightful portion of a successful advisory opinion request.

Advisory opinions issued by HHS OIG are legal opinions that are issued to the requesting parties that apply OIG’s fraud and abuse authorities to the requesting parties’ current or proposed business arrangement. Since the advisory opinion is tailored to and binding on a requesting party’s current or proposed business arrangement, OIG will not advise on any hypothetical or other arrangements that the party does not actually intend to engage in. Although most advisory opinion requests seek guidance regarding the Anti-Kickback Statute (AKS) and its safe harbors, OIG is also authorized to issue advisory opinions on the application of exclusion authorities, civil monetary penalty authorities, and criminal penalties.

OIG also declines to issue opinions on general questions of interpretation, the fair market value of goods, services, or property, or the application of the Stark law or the Eliminating Kickbacks in Recovery Act (EKRA). Although advisory opinions can provide valuable guidance, requesting an advisory opinion is a completely voluntary process. Accordingly, failure to seek an advisory opinion regarding a business arrangement cannot be introduced as evidence as proof that the party violated the law.

Published on: October 17, 2022

Audited by a UPIC? Batten Down the Hatches.

by Wachler & Associates, P.C.

One of the most destructive types of audits that a Medicare provider can suffer from a Medicare contractor is a UPIC audit. A UPIC (Unified Program Integrity Contractor) is a type of Medicare contractor that combines several program integrity functions that were previously handled by different entities. The primary goal of the UPICs is to identify potential fraud; however, they are often quick to accuse providers of significant fraud and bring devastating consequences to providers without giving the providers an opportunity to respond. Even a UPIC audit for a relatively small number of claims or a relatively small dollar value should be treated as a significant investigation.

A UPIC may initiate an investigation based on several types of leads. The UPICs are authorized to use analysis of claims data to identify potential billing irregularities or suspected fraud, and this is the most frequent source of a UPIC investigation. This means that providers with unusual billing patters or high utilization are inherently more susceptible to UPIC investigations, even if these billing practices are for entirely legitimate reasons, such as a particular patient population. The UPICs may also receive referrals from other agencies and from outside sources, such as news media, interviews, or beneficiary complaints.

Once a UPIC initiates an investigation, it has many tools at its disposal. It may utilize records requests, onsite reviews at the place of business of the provider or supplier, or interviews of employees of the provider or supplier. Often UPIC audits begin as small probe audits, possible only a dozen claims valued at a few thousand dollars. These small probe audits may at first appear to be not worth defending or appealing. However, UPICs often use the results of these small probe audits to jump to the conclusion that the provider is committing fraud and, seemingly out of nowhere, suspend the provider’s Medicare payments. The UPIC may also persuade the Centers for Medicare & Medicaid Services (CMS) to revoke the provider’s Medicare billing privileges because the UPIC’s probe audits have made it appear as though the provider has a pattern of submitting claims that do not meet Medicare requirements. At this point, it may be too late to appeal the results of the earlier probe audits, leaving the provider in the unenviable position of defending itself when CMS thinks the results of the probe audits are set in stone.

Published on: September 28, 2022

HHS OIG Issues New Advisory Opinion Regarding Speaking Engagements

by Wachler & Associates, P.C.

The Department of Health and Human Services (HHS) Office of Inspector General (OIG) recently issued OIG Advisory Opinion No. 22-14 that applied its November 2020 special fraud alert targeting remuneration associated with speaking arrangements funded by pharmaceutical and medical device companies.

The November 2020 special fraud alert addressed potential Anti-Kickback Statute (AKS) risks arising from paying physicians to speak at educational programs and providing benefits to attendees. OIG outlined several factors that, if present, would increase the risk of an AKS violation.

OIG’s No. 22-14 Advisory Opinion was issued in response to an ophthalmology practice’s proposed continued education program. The practice intended to offer continued education programs to local optometrists, who may be responsible for referring approximately half of the practice’s surgical patients. Although many of the local optometrists refer their patients to the practice, the program would be available to all optometrists in the area, and there would be no obligation to refer patients to the practice after attending the program.

Published on: August 4, 2022

Contours of EKRA Still Forming

by Wachler & Associates, P.C.

One of the largest areas of debate in healthcare regulatory compliance is the Eliminating Kickbacks in Recovery Act (EKRA). Despite the many question marks by healthcare providers around how to comply with EKRA, the statute also carries some of the stiffest penalties for failing to do so. Enacted in 2018, EKRA provides criminal penalties for paying, receiving, or soliciting any remuneration in return for referrals to recovery homes, clinical treatment facilities, or laboratories. Although initially intended to apply only to substance abuse and recovery, EKRA was written so broadly that it applies to all clinical laboratory services, not just in connection with substance abuse and recovery. It is unclear if Congress intended this effect, as the expansion to all lab services was included a mere 6 days before the final version of the law passed. Regardless, a violation of EKRA may be punished by fines up to $200,000, imprisonment of up to 10 years, or both, for each occurrence.

EKRA is often compared to other federal regulatory statutes, such as the Physician Self-Referral Law (commonly called the Stark Law) and the Anti-Kickback Statute (AKS). However, EKRA is written incredibly broadly and may prohibit conduct that might otherwise be permissible under the Stark Law and AKS. The Stark Law and AKS also have volumes of regulations and decades of enforcement, such that it is generally well understood how these statutes function, how government agencies view and enforce them, and how to structure arrangements to comply with them. EKRA, on the other hand, has no regulations and few enforcement actions, often leaving healthcare providers with only the bare text of what is potentially a very broad statute.

Recent enforcement actions are beginning to show that EKRA is likely as broad as it appears. Initially, enforcement actions under EKRA were limited to allegations regarding substance abuse and recovery services, as originally intended. But this summer, the Department of Justice (DOJ) charged a clinical lab with an alleged multi-million-dollar healthcare fraud scheme, which included allegations that the lab violated EKRA by paying for referrals for COVID-19 testing, showing a willingness to enforce the full breadth of EKRA on clinical lab services.

Published on: July 22, 2022

HHS OIG Issues Special Fraud Alert for Telemedicine

by Wachler & Associates, P.C.

On July 20, 2020, the Department of Health and Human Services (HHS) Office of Inspector General (OIG) released a special fraud alert targeting remuneration paid to physicians and other practitioners by telemedicine companies. As telemedicine use has increased exponentially over the last two years, so too have the proliferation of telemedicine marketing arrangements and the prosecution of these arrangements by OIG and federal law enforcement. OIG issued the fraud alert in conjunction with the announcement of a new $1.2 billion enforcement action regarding alleged telemedicine fraud.

Generally, the arrangements at issue involve a telemedicine company that may recruit both patients and physicians (or other practitioners). The telemedicine company then pays the physician to review some form of medical record, possibly contact the patient, and order some product or service, generally durable medical equipment (DME) or laboratory testing. OIG has taken the position that the fees paid to physicians and practitioners under these arrangements may constitute unlawful “remuneration” meant to induce or reward referrals under the Anti-Kickback Statute (AKS). Pursuant to the AKS, it is unlawful to knowingly and willfully solicit, receive, offer, or pay any remuneration to induce or reward, among other things, referrals for, or orders of, items or services reimbursable by a federal health care program.

OIG drafted the alert as a notice to physicians and other practitioners to be wary of certain characteristics in these arrangements. OIG outlined several ‘suspect characteristics’ that it believes may increase the risk of fraud and abuse in telemedicine arrangements:

Published on: July 6, 2022

Kickback Allegations Illustrate Compliance Challenges of Complex Transactions.

by Wachler & Associates, P.C.

This spring, the Department of Justice (DOJ) intervened in a two-year-old qui tam whistleblower lawsuit against a hospital and oncology practice in Memphis, Tennessee. DOJ accused the hospital of violating the Anti-Kickback Statute (AKS) and the False Claims Act (FCA) by paying the oncology practice for its patient referrals. The hospital and the practice have maintained that the complex series of contracts between them represented a lawful business relationship meant to create a new cancer treatment center.

The AKS is a criminal statute that prohibits the knowing and willful payment of “remuneration” to induce or reward patient referrals or the generation of business involving any item or service payable by federal health care programs. Remuneration goes beyond cash payments and includes anything of value. If the AKS applies, conduct may still be lawful if it falls into one of several “safe harbors.” Some of the most common safe harbors are the investment interest safe harbor, specific types of rental agreements for office space or equipment, and contracts for personal services that meet certain criteria. The AKS is often enforced in conjunction with the FCA, which imposes civil liability for knowingly submitting false claims to the government. Importantly, the FCA carries severe consequences, including treble damages and a per-claim penalty that increases each year with inflation ($12,537 per claim for 2022).

In this case, the arrangement between the hospital and practice involved several distinct agreements. First, the hospital purchased many of the assets of the practice, including offices and equipment. Second, the hospital leased approximately 200 physician and non-physician employees from the practice. These first two agreements were supported by fair market value (FMV) opinions. Third, the hospital paid the physicians for management services under a Management Services Agreement (MSA). Lastly, the hospital made a several-million-dollar investment in a for-profit research entity controlled by the practice’s owners.

Published on: May 31, 2022

Why It’s Important to Appeal that Medicare Audit

by Wachler & Associates, P.C.

There are many types of Medicare audits, conducted by many types of Medicare contractors: Medicare Administrative Contractors (MACs), Recovery Audit Contractors (RACs), Unified Program Integrity Contractors (UPICs), the Supplemental Medical Review Contractor (SMRC), and others. Sometimes, where a Medicare audit results in a relatively small overpayment demand, a healthcare provider may consider simply paying it and moving on. However, there are several reasons why Medicare audits should be appealed, regardless of the dollar amount at issue, that providers should consider.

First and foremost, the audit results and overpayment determinations issued by Medicare contractors are often erroneous. This may be because the contractor either misunderstands Medicare requirements, misapplies them to a provider’s records, or misapprehends the medical documentation in the first place.

Second, a provider who does not appeal a Medicare audit result may unwittingly signal to the contractors a tacit admission that the audit findings were correct, and that the provider is non-compliant in some way. This may expose the provider to additional, larger audits on the same issues. Further, some contractors are paid a percentage of the overpayments they demand from providers and may have an incentive to conduct further audits. On the other hand, appealing an audit signals that the provider believes it is following Medicare requirements and are entitled to payment.

Published on: April 14, 2022

Private Equity and Healthcare Investments

by Wachler & Associates, P.C.

As a result of the emergence of the COVID-19 pandemic in early 2020, private equity (PE) investment activity saw a significant decline in many industries throughout the remainder of 2020. However, PE investments in healthcare have been viewed by some as a form of safe haven as the U.S. economy began to revitalize in the second half of 2020. While total deal value decreased by 7% from 2019 to 2020, total deal count increased by 10% as more investors looked to add-on existing platforms rather than seeking out new, larger targets of interest. Healthcare providers should be aware of some potential considerations when entering into PE investments or engaging in merger and acquisition activity.

A significant amount of deal activity materialized as a response to the numerous forced shutdowns caused by the pandemic. According to one survey conducted by the Alliance of M&A Advisors, while PE deals in other sectors experienced varying degrees of depressed activity levels through the Summer of 2020, healthcare transactions had the highest successful close rate of any industry (approximately 32%). Reported deal activity returned to 97% of pre-COVID levels by December 2020. Entering 2021, the PE transactions market remained very active, in large part due to PE firms being able to obtain cheap debt financing due to low interest rates. The transition to a new presidential administration and anticipated tax increases also caused many providers to contemplate exits ahead of potential increases in capital gains rates. Some areas worth noting that have garnered particularly strong preference amongst PE investors are behavioral and mental health, home health, and health technology services. While primary care has historically seen less PE activity than other healthcare segments, this seems to be changing as value-based care and capitated payment models become more popular.

Regarding business concerns relative to PE activity, there are many issues that are unique to the healthcare industry and providers should make sure that they have a clear understanding of how deals with PE investors may implicate these considerations. At the most basic level, states with corporate practice of medicine laws may restrict what types of entities or individuals may own or control a medical practice. Also, complex corporate structures and those that involve cross-ownership or ownership of multiple types of providers may implicate federal or state fraud and abuse laws, such as the Stark Law, Anti-Kickback Statute, and EKRA. As a practical consideration, long-time healthcare providers entering ventures with PE entities should ensure they understand how control of operations and the flow of revenues are allocated in the resulting structure. Moreover, the Executive Order issued by President Biden in July 2021 directs law enforcement to “focus in particular on … healthcare markets (which includes prescription drugs, hospital consolidation, and insurance), and the tech sector.” This may well result in heightened scrutiny of PE transaction in the healthcare industry and may also lengthen the timeline for closing deals in order to ensure compliance.

Published on: March 10, 2022

Referring Clinical Lab Services Under the “In Office Ancillary” Exception

by Wachler & Associates, P.C.

Physician referrals for clinical laboratory services are a common focus of federal regulatory and enforcement actions. Numerous statutes and their implementing regulations, including the Stark Law, Anti-Kickback Statute (AKS), and the Eliminating Kickbacks in Recovery Act (EKRA), may be implicated where a physician refers clinical lab services to an entity in which the physician has a financial interest. However, the “in-office ancillary” exception to the Stark Law provides an important exception.

The Physician Self-Referral Law, often referred to as the Stark Law, prohibits “physicians” (generally including MDs, DOs, dentists, optometrists, and chiropractors) from referring patients to receive “designated health services” payable by Medicare or Medicaid from entities with which the physician or an immediate family member has a financial relationship, unless an exception applies. Financial relationships include both compensation and ownership or investment interests. Designated health services include clinical laboratory services, PT and OT, DME, some imaging services, and several other services. Some of the most common exceptions to the Stark Law include the in-office ancillary exception, fair market value compensation, and bona fide employment relationships. CMS has also recently implemented exceptions related to value-based arrangements.

“In Office Ancillary” services are an exception to the Stark Law. Generally, under the “in office ancillary” exception, the Stark Law does not apply to services that (1) are performed by the referring physician, another physician in the same group practice, or an individual supervised by the referring physicians or another physician in the same group practice; (2) are performed in the same building as the referring physician or their group practice offers services or in another centralized location; and (3) are billed by the performing physician, the supervising physician, their group practice, or a subsidiary that is wholly owned by the group practice.