w. trivial pursuit: stark law edition · trivial pursuit: stark law edition 5 remuneration • any...

AHLA

Fraud and Compliance Forum ● September 27-29, 2015

W. Trivial Pursuit: Stark Law Edition Tony R. Maida McDermott Will & Emery LLP New York, NY Catherine A. Martin Ober | Kaler Baltimore, MD Lisa Ohrin Wilson Senior Technical Advisor Centers for Medicare and Medicaid Services Windsor Mill, MD

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Trivial Pursuit:Stark Law Edition

American Health Lawyers AssociationFraud & Compliance ForumSeptember 28 & 29, 2015

Tony MaidaMcDermott Will &

Emery

Catherine MartinOber|Kaler

Lisa Ohrin WilsonCenters for Medicare &

Medicaid Services

Disclaimers

The views expressed today are those of the speakers in their personal capacities and not the official position(s) of the Centers for Medicare & Medicaid Services or any other governmental agency; Ober|Kaler or its clients; or McDermott

Will & Emery or its clients.

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Today’s Presentation

• Remuneration: What is and what is not remuneration?

• The intricacies of nonmonetary compensation• Recruitment and retention: Anomalies and roadblocks

• Challenging compliance issues: office space, rental charges, rural providers, and more

• Clarifications and proposals from the CY 2016 Physician Fee Schedule proposed rule– 80 Fed. Reg. 41686 (Jul. 15, 2015)

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Trivial Pursuit: Stark Law Edition

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Remuneration

• Any payment or other benefit made directlyor indirectly, overtly or covertly, in cash or in kind

• Exceptions– Forgiveness of amounts owed for inaccurate tests or

procedures, mistakenly performed tests or procedures, or the correction of minor billing errors

– Items, devices or supplies (other than surgical items, devices or supplies) that are “used solely” for specified purposes

– Payment made by an insurer or a self‐insured plan to a physician to satisfy a claim submitted on a fee‐for‐service basis for the furnishing of health services by the physician to an individual who is covered by a policy with the insurer or self‐insured plan (under certain conditions)

• 42 C.F.R. §411.351

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Remuneration

• Guidance on “carveouts”

– CMS advisory opinions

• CMS‐AO‐2008‐01

• CMS‐AO‐2010‐01

• CMS‐AO‐2013‐01

• CMS‐AO‐2013‐02

– CY 2016 PFS Proposed Rule

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Remuneration

• Item, device or supply must be used solely for the entity that furnished the item, device or supply

• Item, device or supply must be used for one or more of the 6 purposes in order to qualify for the “used solely” carveout– Collect specimens for the entity furnishing the items, devices, or supplies– Transport specimens for the entity furnishing the items, devices, or supplies– Process specimens for the entity furnishing the items, devices, or supplies– Store specimens for the entity furnishing the items, devices, or supplies– Order tests or procedures for the entity furnishing the items, devices, or

supplies– Communicate the results of tests or procedures for the entity furnishing the

items, devices, or supplies

• Surgical items, devices or supplies are always remuneration• 80 Fed. Reg. at 41918

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Remuneration

• Split billing scenarios– There is no remuneration where—

• Physician provides professional services to the patient on site at a DHS entity and bills the appropriate payor for his or her services; and

• DHS entity provides its resources and services to the patient and bills the appropriate payor for the resources and services

– Caution• If a physician or a DHS entity bills a non‐Medicare payor globally for both the physician’s services and the hospital’s resources and services, a benefit is conferred on the party receiving payment

– 80 Fed. Reg. at 41918

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Remuneration

• Primarily for the benefit of the DHS entity or its patients

– “The free use of a dedicated computer terminal used only for the hospital patients and services strikes us as unlikely to involve remuneration to the physician so long as the computer terminal has no independent value to the physician.”

• 69 Fed. Reg. 16054, 16114 (Mar. 26, 2004)

– Letters from CMS to ACCME and AMA

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Remuneration

• What about:– Training on use of gamma knife or MAKOplasty procedure?

• Is the training reasonable?• Does it require travel or can it be done on‐site?• Is it contemplated in the physician’s agreement?• What impact will it have on the physician’s reimbursement?

– Direct mailboxes – EHR secured transmissions?• Restricted use vs. allowing personal use• Is there a value to the physician?

• Have you crossed the threshold into “remuneration” –– Are there exceptions available to protect the relationship

• Nonmonetary compensation• Medical staff incidental benefits

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Nonmonetary Compensation

• Definition: compensation in the form of items or services (not including cash or cash equivalents)

• The provision of NMC that does not exceed the limit set by CMS does not constitute a financial relationship if—– The compensation is not determined in any manner that takes into account the volume or value of referrals or other business generated between the parties;

– The compensation is not solicited by the physician or the physician’s practice; and

– The compensation arrangement does not violate the anti‐kickback statute or any Federal or State law or regulation governing billing or claims submission

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Nonmonetary Compensation• Calendar year limit—

– Resets each January 1• Longest period of noncompliance runs through December 31 (absent unusual

circumstances)

– Adjusted each calendar year by the increase in the CPI‐U for the 12‐month period ending the previous September 30

– $392 limit for 2015

• NMC that exceeds the annual limit may be deemed to be within the limit if—– The value of the excess is no more than 50 percent of the limit; and– The physician returns to the entity the excess NMC (or an amount

equal to the value of the excess NMC) by the earlier of• The end of the calendar year in which it was received; or• 180 consecutive calendar days following the date the excess NMC was

received by the physician

• Deeming provision may be used by an entity only once every 3 years with respect to the same referring physician

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• Divisibility of NMC

– Artwork

– Plants

– Sandwich trays

• Doctors’ Day

• Ugly holiday sweaters and other compliance issues

• NMC to immediate family members

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• Allocating NMC to physicians in a physician organization

• “The exception for nonmonetary compensation up to $300 protects only gifts to individual physicians. Thus, gifts given to a group practice would not qualify for this exception.”

– 66 Fed. Reg. 856, 921 (Jan. 4, 2001)

• Stand in the shoes rules deem a gift to a physician organization to be a gift to each physician who stands in the shoes of the physician organization.

– Indirect compensation arrangement analysis for

physicians who do not stand in the shoes of the

physician organization

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• Allocating nonmonetary compensation to physicians in a physician organization—luncheons

– How many people were present at the luncheon provided as NMC?

» How many of the attendees were physicians?

» How many physicians are in the physician organization?

– Did the DHS entity (or its representative) participate in the luncheon?

– Does the physician organization usually provide lunch for its staff?

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• Doctors’ Day and other medical staff functions– In addition to NMC up to the annual limit, an entity may provide

one medical staff appreciation event per year, provided that—• The entity has a formal medical staff

– Physician organizations are deemed to have formal medical staffs

• The event is local• The event is for the entire medical staff

– Door prizes and favors DO count as NMC

• If the entity has more than one event, only one is exempt from the NMC annual limit. Choose wisely.

• These events generally do not qualify as medical staff incidental benefits because the physicians are not making rounds or engaged in other services or activities that benefit the hospital or its patients.

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• Best practices for monitoring compliance– Maintain a Stark Log– Centralize the process/routine monitoring– Be mindful of the year‐end events and gifts and the annual limit

• Establish clear guidelines on how to assign value– Valuing free things– Valuing discounted things– Floccinaucinihilipilification

• “The estimation of something as valueless”• In physician self‐referral terms, how to value something the physician says has no value

• Gift cards and travelers checks – cash equivalents• Immediate family member issues

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• Why do immediate family members have a separate annual NMC limit?• Step 1: Has an physician made a prohibited referral when an immediate

family member has been provided NMC?– Look to the prohibition on referrals at 42 C.F.R. §411.353(a)

• Physician who has a financial relationship with an entity OR who has an immediate family member who has a financial relationship with an entity

• Step 2: Does the immediate family member have a financial relationship with the hospital and, if so, which type?– Direct financial relationship exists if remuneration passes between the

referring physician (or a member of his or her immediate family) and the entity furnishing DHS without any intervening persons or entities between them (42 CFR §411.354(a)(2)(i))

– Definition of “financial relationship” includes an ownership or investment interest and a compensation arrangement (42 CFR §411.354(a)(1))

• A compensation arrangement is any arrangement involving remuneration, direct or indirect, between a physician (or a member of a physician's immediate family) and an entity (42 CFR §411.354(c))

• A direct compensation arrangement exists if remuneration passes between the referring physician (or a member of his or her immediate family) and the entity furnishing DHS without any intervening persons or entities (42 CFR §411.354(c)(1))

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• Step 3: Does the compensation arrangement between the immediate family member and the hospital satisfy the requirements of the exception for nonmonetary compensation at 42 C.F.R. §411.357(k), thus rendering it NOT a financial relationship that implicates the physician self‐referral law?– For purposes of 42 C.F.R. §411.353, the following compensation arrangements do not constitute a financial relationship—

• Compensation from an entity in the form of items or services (not including cash or cash equivalents) that does not exceed an aggregate of $300 per calendar year, as adjusted for inflation in accordance with paragraph (k)(2) of this section where all of the requirements of the exception are satisfied.

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Physician Recruitment Exception

• Remuneration by a hospital to a physician

• Intended to induce the physician

– To relocate his or her medical practice to the hospital’s geographic service area

– To become a member of the hospital’s medical staff

• Writing signed by all parties (hospital, physician, and group if joining)

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• Compensation

– Not conditioned on referrals

– Hospital does not determine the amount of remuneration in any manner that takes into account the volume or value of any actual or anticipated referrals by the physician or other business generated between the parties

• Physician must be permitted to establish staff privileges at other hospitals

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• Geographic Service Area (GSA)– Lowest number of contiguous zip codes from which the hospital draws at least 75% of inpatients

• Donut hole exception for surrounded Zero Zip Code

– All contiguous zip codes from which the hospital draws inpatients if fewer than 75%

– Rural hospitals• Contiguous zip codes with 90%

• If less than 90%, noncontiguous zip codes available

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• Relocation:

– Moves practice into GSA and—

• 25 miles or

• New practice derives at least 75% of its professional revenues from new patients (not seen in last 3 years)

– During year 1, can have “reasonable expectation”

– Exceptions to relocation requirement for residents or new physicians

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• Joining Existing Practice– Remuneration stays with physician– If there is an income guarantee, the parties can only allocate actual incremental costs attributable to physician

• Special rule for recruitment into a rural area or HPSA

– Remuneration is not determined in any manner that takes into account the volume or value of referrals from the recruited physician or the practice

• Includes the referrals of any physician affiliated with the practice• Actual or anticipated referrals

– The practice may not impose practice restrictions that unreasonably restrict the recruited physician’s ability to practice medicine in the hospital’s GSA

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Exception for Physician Recruitment• Important limitations

– Intended to induce the physician to come to the area and join the medical staff

• Pre‐existing obligation to move to the area and become employed by a physician organization could negate the hospital’s ability to recruit the physician

– Cannot add remuneration after it’s been decided and agreed upon

• Use caution when recruiting residents with significant time remaining in residency

– Only covers remuneration from the hospital to the physician (not providing the physician practice assistance to recruit)

• What about hiring the physician practice to perform recruitment services?

• Must comply with an available exception– Personal service arrangement– Fair market value compensation

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Physician Recruitment

• Hospital under construction

– What is the hospital’s GSA if the hospital does not exist?

– Limit what you give the doctor

– If you get it wrong, cancel the agreement and repay? (better be in contract for that option)

– Quit medical staff and start over?

• 25 miles

• 75% new patient revenue

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• Part‐time recruitment

– Not prohibited

– No FMV requirement

– Practice tips – must consider AKS

• Shared recruitment by two hospitals

– GSA overlap issue

– Timing issues

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• Loans

– Not required but common

– Hospital must enforce terms• Forgiving loan outside of terms may be considered remuneration to the physician or group for which there is no exception

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• Errata

– No definition of GSA for FQHCs or RHCs

• Addressed in CY 2016 Medicare Physician Fee Schedule proposed rule

– 80 Fed. Reg. at 41913

• CMS proposed two alternative definitions

– Retention payment guidance mismatch

• Addressed in CY 2016 Medicare Physician Fee Schedule proposed rule

– 80 Fed. Reg. at 41914‐15

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• Anomaly

– Joining a practice after the individual recruited physician has relocated and the

arrangement exists

• In the case of a physician who joins a physician practice, 42 C.F.R. §411.357(e)(4)(i) requires that the physician practice has signed the writing that evidences the arrangement ‐‐‐ regardless of when the physician joins

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Recruitment of Nonphysician Practitioners

• “The physician recruitment exception in §411.357(e) applies only to payments made directly (or, in some circumstances, passed through) to a recruited physician. Recruitment payments made by a hospital directly to a nonphysician practitioner would not implicate the physician self‐referral law, unless the nonphysician practitioner serves as conduit for physician referrals or is an immediate family member of a referral physician.”– 72 Fed. Reg. 51012, 51049 (Sep. 5, 2007)

• In the CY 2016 Medicare Physician Fee Schedule proposed rule, CMS proposed a limited exception for assistance to employ a nonphysician practitioner.– 80 Fed. Reg. at 41910

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Proposed Exception for Assistance to Employ Nonphysician Practitioners

• Proposed to protect arrangements—– Between a DHS entity and a physician (either directly or standing in the shoes of his or her physician organization

– Where remuneration from the DHS entity does not exceed the lower of—

• 50 percent of the actual salary, signing bonus and benefits paid by the physician to the NPP; or

• Salary, signing bonus and benefits paid to the NPP minus receipts attributable to services furnished by the NPP

– Not conditioned on the referrals of the physician or NPP– Where remuneration does not take into account the volume or value of the referrals by the physician, NPP, or any other physician or NPP in the practice (or other business generated between the parties)

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Proposed Exception for Assistance to Employ Nonphysician Practitioners

• Proposed requirements for protected arrangements include– Geographic service area

• NPP must not have practiced in the GSA within 3 years of becoming employed by the physician (or the physician organization in whose shoes the physician stands)

• NPP must not have been employed or otherwise engaged to provide patient care services by a physician or a physician organization that has a medical practice site located in the GSA, regardless of whether the nonphysician practitioner furnished services at the medical practice site located in the GSA

– Employment status of NPP: bona fide employee– Services furnished by NPP: only primary care services– Physician may not impose practice restrictions that unreasonably

restrict the NPP’s ability to provide patient care services in the GSA– Arrangement does not violate the anti‐kickback statute or any Federal

or State law governing billing or claims submission– Records made available to the Secretary upon request for at least 6

years

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Retention Payments• Disconnect between Phase III preamble and regulation text

– Preamble: A retention payment based on a physician certification may not exceed the lower of the following: (1) an amount equal to 25 percent of the physician’s current annual income (averaged over the previous 24 months) using a reasonable and consistent methodology that is calculated uniformly; and (2) the reasonable costs the hospital would otherwise have to expend to recruit a new physician to the geographic area served by the hospital in order to join the medical staff of the hospital to replace the retained physician.

• 72 Fed. Reg. at 51066

– Regulation text: A retention payment based on a physician certification may not exceed the lower of: (1) an amount equal to 25 percent of the physician’s current income (measured over no more than a 24‐month period), using a reasonable and consistent methodology that is calculated uniformly; or (2) the reasonable costs the hospital would otherwise have to expend to recruit a new physician.

• Proposed regulation text would mirror the Phase III preamble.

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Compliance Challenges• Office space: Item or service? Or neither?

– Proposal to interpret “other items or services” in the exception for payments by a physician to mean any kind of items or services that a physician might purchase, but not include clinical laboratory services or those specifically excepted under another provision in §§411.355 through §§411.357

• 63 Fed. Reg. 1659, 1703 (Jan. 9, 1998)

– Phase II response to a commenter disagreeing with CMS’s interpretation stated that CMS’s position is consistent with the overall statutory scheme and purpose, and is necessary to prevent the exception from negating the statute.

• 69 Fed. Reg. at 16099

– CMS does not believe that the lease of office space is an “item or service.” A space lease must qualify under the exception for the rental of office space.

• 72 Fed. Reg. at 51059

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Compliance Challenges• Office space: Lease or license?

– Comment: One commenter described a “time‐share” leasingarrangement under which a physician or group practice pays the lessor for the right to use office space exclusively on a turnkey basis . . . . The commenter suggested that, although this arrangement may qualify under the exceptions for the rental of [office] space and equipment, it would be addressed more appropriately in the fair market value exception or payments by a physician exception. The commenter urged us to clarify that such “time‐share” arrangements may qualify under [these exceptions].

– Response: We disagree with the commenter. As we stated in Phase II, we decline to permit space leases to be eligible for the fair market value exception in §411.357(l). Similarly, we are not persuaded that [the exception for payments by a physician] should protect space leases.

– 72 Fed. Reg. at 51044‐45 (emphasis added)

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Proposed Exception for Timeshare Arrangements

• CMS proposed a new exception for timeshare arrangements in the CY 2016 Physician Fee Schedule proposed rule

– 80 Fed. Reg. at 41921

• Proposed to protect arrangements for the license (or use) of premises, equipment, personnel, items, supplies or services

• Licensor must be a hospital or physician organization• Licensed premises, equipment, personnel, items, supplies or services must be used predominantly

for the provision of evaluation and management services• Licensed equipment must be located in the office suite where the evaluation and management

services are furnished and may not be—– Advanced imaging equipment– Radiation therapy equipment– Clinical or pathology laboratory equipment (other than equipment used to furnish CLIA‐waived tests)– Used to furnish DHS other than those incidental to the evaluation and management services furnished by

the physician at the time of the patient’s evaluation and management visit• The proposed regulatory text does NOT say “incident to” the evaluation and management services

• Proposed exception would not permit license fees that are percentage‐based or per‐unit of service‐based, but would protect per‐hour, per‐day, or other time‐based formulas

• Usual requirements to protect against program or patient abuse included—– Cannot violate the anti‐kickback statute– Compensation may not take into account the volume and value of referrals– Etc.

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Compliance Challenges

• Amending arrangements and preserving compliance – Material vs. nonmaterial amendments

– Rental charges and financial terms• 72 Fed. Reg. at 51044

• 73 Fed. Reg. 48434, 48697 (Aug. 19, 2008)

– Other terms and conditions• Notice and “pay to” address

• Payment frequency

• Space creep

• Employment status of physician

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Compliance Challenges• Live agreements and curing – is it even possible?

– Live lease arrangement with past due rent• Can you seek repayment and bring lease current during the existing lease term to cure the non‐compliance?

– Live lease with space creep issue ‐ rental charge remains the same, but amount of space leased increases

• Can you amend the amount of space (which is not a financial term) and cure the non‐compliance?

• Is there a series of writings to support the additional space?• Has the tenant been paying for the additional space at the rate set forth in the lease agreement?

– Live lease with inflation index – not collected• Can you collect inflation increase to cure?

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• Breach of contract claims and other disputes:

– Settling disputes to avoid litigation

• Have you evaluated the anticipated cost of litigation?

• Have you evaluated the likelihood of success/failure?

• Is the settlement amount reasonable?

• Is the Isolated Transaction Exception (42 C.F.R. 411.357(f)) available to protect the relationship?

– Legally enforceable agreement – but Stark violation

• Don’t submit claims for the services rendered;

• Prohibit referrals

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• Impact on the period of non‐compliance

• Waiving and/or compromising the amount owed may extend the period of disallowance– What is the practice/pattern?

– Are amounts owed routinely waived?

– Have you made reasonable collection efforts?

– Have you received for the compromised amount?

• Unringing the Stark bell ‐ is it possible to retroactively cure noncompliance?

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• Center for Medicare & Medicaid Innovation (CMMI) ‐responsible for the development and testing of innovative health care payment and delivery models – for example– ACOs– Episode Based Payment Models (Bundled Payments)

• Fraud and Abuse Waivers– Issued by CMS and OIG– Waive Stark, AKS, and CMP – rules don’t apply if acting within

the scope of the waivers; protects the financial arrangement– Shared Savings Program Waivers – currently at OPM!

• Different rules of play depending on payment model – be mindful of impact on hospital operations, training, compliance, policies and procedures, etc.

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Miscellaneous Explanations and Important Citations

• Rural provider exception– Must meet both parts of the 2‐part test

• The DHS must be furnished in a rural area• The entity must furnish substantially all (not less than 75 percent) of the DHS that it furnishes to residents of a rural area

• Productivity bonuses for hospital‐employed physicians– “The fact that corresponding hospital services are billed would

not invalidate an employed physician’s personally performed work, for which the physician may be paid a productivity bonus (subject to the fair market value requirement).”

• 69 Fed. Reg. at 16088‐09

• Inpatient and outpatient hospital services – converts otherwise non‐DHS to DHS by virtue of provider of service– Exception: lithotripsy

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Clarifications and Proposals from the CY 2016 PFS Proposed Rule

• Clarifications vs. proposals – what’s the difference?• Writing requirements, term requirements, and holdover

arrangements• Applying the exceptions where a physician “stands in the

shoes” of his or her physician organization• Signature requirements

– Timing– Form

• Physician‐owned hospitals– Public advertising and public website for the hospital– Physician ownership

• Web site vs. website

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Contact Information

• Tony MaidaPartner, McDermott Will & Emery [email protected]‐547‐5492

• Catherine MartinPrincipal, Ober|[email protected]‐347‐7320

• Lisa Ohrin WilsonSenior Technical Advisor, [email protected]‐786‐8852

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