physician compensation: regulatory and business concerns
TRANSCRIPT
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Physician Compensation:Regulatory and Business Concerns
Kelly S. McIntosh
May 29, 2014
Roadmap
Laws and Liability
Examples and Recent Enforcement Actions/Horror Stories
Compensation Models
Contract Terms to Consider
Additional Considerations for 501(c)(3) Entities
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Preliminaries
Presentation will be recorded and available for download at www.hhhealthlawblog.com
Written materials:– PowerPoint slides
– OIG Handout on Stark Law and Anti-Kickback Statute
– CMS Chart Comparing Stark Exceptions
Preliminaries
If you have questions, please submit them using chat line or e-mail me at [email protected]
If you experience technical problems during the program, please contact Luke Kelly at [email protected]
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Preliminaries
This program offers an overview of legal issues and considerations
This program does not establish an attorney-client relationship
This program does not constitute the giving of legal advice
Laws and Liability
Anti-Kickback Statute
Stark Law (self-referrals)
Civil Monetary Penalties Law
False Claims Act
Whistleblower/Qui Tam Actions
Remember: State law counterparts!
Fee-Splitting
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Laws and Liability
Anti-Kickback Statute– 42 U.S.C. § 1320a-7b
– Criminal statute
– Cannot knowingly and willingly offer, pay, solicit or receive remuneration to induce referrals for items or services covered by Federal health care programs Unless exception or safe harbor applies
– Penalties
Laws and Liability
Anti-Kickback Statute– “One purpose test” – if one purpose of the remuneration
is to induce referrals, even if other legitimate business purposes apply.
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Laws and Liability
Anti-Kickback Statute– Beware how broadly “remuneration” may be considered
Hospital paying staff physicians to attend conferences in their areas of specialty
Hospital offering free training for physician’s office staff in CPT coding or laboratory techniques
– OIG Fraud Alerts contain helpful examples
Laws and Liability
Anti-Kickback Statute
Facility,Physician,
Vendor, Patient, Other
Remuneration
Referrals
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Laws and Liability
Stark Law– 42 U.S.C. § 1395nn; 42 C.F.R. § 411.350
– Civil statute – strict liability
– If a “physician” (or immediate family member) has a financial relationship with an entity, the physician may not refer patients to the entity for “designated health services” and the entity may not bill for such services Unless exception applies
– Definition of physician
– Definition of DHS
– Penalties
Laws and Liability
Stark Law
DHS Entity
Physician, or Family Member
Financial Relationship
Referral for DHS
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Laws and Liability
Civil Monetary Penalties Law– 42 U.S.C. § 1320a-7a
– Prohibits certain conduct including submitting false or fraudulent claims, providing inducements for limiting services, submitting claims for unnecessary services, offering inducements to program beneficiaries and contracting with excluded persons
– Penalties
Laws and Liability
False Claims Act– 18 U.S.C. § 1347
– Cannot knowingly submit a false claim for payment to the government
– Penalties
– AKS violation is an automatic False Claims Act violation
– Qui Tam – private actions
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Whistleblowers/Qui Tam
Mechanics of a whistleblower case– Relator files under seal in federal court
– Disclosure of information to Attorney General and local Assistant US Attorney
– Seal at least 60 days; sometimes months or years
– Government decides whether to intervene
Whistleblowers/Qui Tam
Relators are commonly former employees, competitors or others with inside information!
Incentive to report– 15-30% of recovery
– Plus attorney fees and costs
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Whistleblowers/Qui Tam
2012 – Record setting year - $6 Billion – 647 qui tam lawsuits filed
– 80% of False Claims Act investigations came from qui tam complaints
Consequences– Fines
Mandatory treble damages for False Claims Act
Mandatory civil penalties ($5,500 to $11,000 per false claim)
– Criminal investigations
– Exclusion from government health care programs
– Corporate integrity agreements
State Laws
“Mini” Stark and Anti-Kickback Statutes– Not necessarily tied to source of payment
Fee-Splitting Prohibitions
Limitations on How Different Providers May Work Together
Penalties
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Risks and Horror Stories
In 2012, the OIG reported:– More than $6.9 billion in recovery
– 778 criminal actions
– 367 civil actions
– 3,131 exclusions
2014- over 30 new Corporate Integrity Agreements – so far!
Risks and Horror Stories
Recent DOJ/OIG Settlements – with CIAs– May 28 – Medtronic, Inc. - $9.9 million related to
allegations of kickbacks to physicians
– May 28 – Ashland Hospital Corp/King’s Daughters Medical Center – $40.9 million related kickbacks/prohibited financial relationships with physicians and unnecessary services – also resolved alleged Stark law violations
– http://www.justice.gov/opa/pr/2014/May/
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Risks and Horror Stories
Recent CMS Self-Referral Disclosure Protocol Settlements
– Physician group practice - $13,572
– Nonprofit community hospital - $9,570
– Acute psychiatric hospital - $67,750
– Acute care hospital - $87,110
Exceptions and Safe Harbors
Stark and Anti-Kickback Statutes– If only dealing with the Federal laws, Federal health
care programs must be involved
– Consider state law exceptions
Potential Exceptions– Bona fide employment relationships (Stark/AKS)
– Personal services arrangements (Stark/AKS)
– Physician services (Stark)
– Fair market value (Stark)
– Investment interest in group practice (AKS)
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Exceptions and Safe Harbors
Key elements:– Fair market value
– Commercially reasonable
– Not determined based on volume or value of referrals or business generated between the parties
Consider any limitations on how arrangement may be structured (e.g. corporate practice of medicine prohibitions based in state law, etc.)
See OIG Handout and Chart Comparing Stark Exceptions
Employment
Key elements:– Bona fide employment relationship
– Compensation is: Fair market value
Not determined based on volume or value of referrals (but allows productivity for personally-performed services)
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Independent Contractor
Personal Services
Key elements:– Written agreement
– Term of at least one year
– Exact schedule of services if less than full-time (AKS)
– Compensation is: Fair market value
Not determined based on volume or value of referrals
More flexibility with employees than independent contractors
Independent Contractor
Fair Market Value Exception (Stark)
Key elements:– Written agreement
– Any specified time frame, but only one arrangement in a one year period
– Compensation is: Fair market value
Not determined based on volume or value of referrals
More flexibility with employees than independent contractors
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Group Practice Physician
Physician Services Exception (Stark)
Other exceptions requiring group practice (Stark)
Key elements:– Group must meet “group practice” requirements
– Compensation is: Fair market value
Not determined based on volume or value of referrals
Set in advance
– May pay for overall shares of DHS profits so long as not determined based on referrals of DHS
– Personally performed and “incident to” – NO ancillary
– “Five or more” Rule
Fair Market Value
FMV means “the compensation that would be included in a service agreement as a result of bona fide bargaining between well-informed parties to the agreement who are not otherwise in a position to generate business for the other party…”
Recent cases involving FMV: Tuomey, Halifax
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Compensation Models
Straight salary
Production-based
Quality-based
Efficiency/shared savings
Combination
Suggested Terms
Services– Specify different types of services – clinical,
administrative, call
– Assignment of right to bill and collect for services/right to contract with payors
– Schedule
– Location(s)
– Moonlighting/outside services
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Suggested Terms
Performance Standards– Compliance with other requirements (applicable laws,
facility governing documents)
– Record-keeping
– Professionalism
Suggested Terms
Compensation– Base compensation
– Specified service compensation (e.g., call shift, medical director fees, etc.)
– Bonus/incentive compensation
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Suggested Terms
Benefits/Expenses– Malpractice (consider tail coverage)
– Insurance
– Retirement
– License fees
– CME
– Phone
– Professional expenses
Suggested Terms
Term and Termination– Initial term and renewal term(s) – automatic renewal?
– Without cause
– With cause – curable breaches and immediate termination
– Effect of termination on other provisions
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Suggested Terms
Restrictive Covenants– Consider arrangement/relationship with physician
– Consider reasonableness
– Look to state law
501(c)(3) Entities
Private inurement: to qualify for tax exempt status, no part of the organization’s net earnings shall inure in whole or in part to the benefit of private individuals– Applies to those with the power to exercise control or
influence over the organization
– May apply to physicians
Payments not in excess of FMV
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501(c)(3) Entities
IRS Definition of FMV:– Price expressed as price at which property would
change hands between a hypothetical willing and able buyer and hypothetical willing and able seller acting at arms’ length in an open and unrestricted market when neither is under compulsion to buy or sell and when both parties have reasonable knowledge of relevant facts
– Reasonable compensation is the amount that would ordinarily be paid for like services by like enterprises under like circumstances
501(c)(3) Entities
Penalties– Loss of exempt status
– Intermediate sanctions
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Additional Holland & Hart Resources Healthcare Update and Health Law Blog
– Under “Publications” at www.hollandhart.com.
– www.hhhealthlawblog.com
– E-mail me at [email protected]
Future Webinars– June 12 – Recruiting Physicians and Other Practitioners
– June 26 – FDA and Medical Devices
– July 10 – Pharmacy, Prescription, and Controlled Substance Laws
Additional Holland & Hart Resources
Past webinars covering related topics available through the Health Law Blog:– Stark
– Anti-Kickback Statute
– Civil Monetary Penalties laws
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Questions?
Kelly S. McIntosh
Holland & Hart LLP5441 Kietzke Lane, Second Floor
Reno, Nevada 89511(775) 327-3004