Compliance Lessons Learned from Recent Investigations & Prosecutions

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1 Compliance Lessons Learned from Recent Investigations & Prosecutions First Illinois HFMA Compliance Program March 3, 2011 Laura Keidan Martin

2 Agenda for Today s Presentation Enforcement Trends and Tools Lessons Learned from Recent Investigations, Cases and Settlements Billing and Coding Physician Relationships Patient Care Counseling Tips for Minimizing Risk in an Environment of Heightened Scrutiny (See handout) 2

3 Enforcement Trends and Tools Mandatory return of overpayments within 60 days Civil Monetary Penalty (CMP) changes Mandatory compliance programs Sunshine provisions requiring pharma and device companies to track all payments (in cash or in kind) over $10 to physicians and teaching hospitals as of January 2012 with reporting to begin March 2013 and web posting to begin September 2013 Increased funding for enforcement 3

4 Increased Resources for Enforcement Omnibus Appropriations Act of 2009 provided a one-time additional $198 million Budget invests $311 million in 2-year funding (50 percent increase over FY09) Budget seeks $250 million to expand the Health Care Fraud Prevention & Enforcement Action Team (HEAT). PPACA increases Health Care Fraud and Abuse Control (HCFAC) Account for FY11-20 by $10 million a year. Reconciliation Act added an additional $250 million to the account between 2011 and The Federal Government recovered more than $4 billion in FY2010 from health care fraud prosecutions. The Government estimates that it reaps a ROI of at least $15 for every $1 it spends on enforcement. 4

5 Enforcement Trends and Tools Expansion of Recovery Audit Contractor ( RAC ) program to Medicaid. Health Care Fraud Prevention & Enforcement Action Teams ( HEAT ) join HHS and DOJ in strike forces to combat Medicare/Medicaid fraud. DOJ staff may issue civil investigate demands without Attorney General approval and share information with Qui Tam whistleblowers. Prosecutions of physicians who solicited or accepted financial benefits in return for referrals. Medicare is refusing payment for preventable errors and never events, admonishing that failure to accurately document, report and code cases involving never events may violate the FCA. Focus on site of service errors and medical necessity. 5

6 Enforcement Focus on Documentation, Billing and Coding Lack of medical necessity. Billing for services at higher level of care (i.e., upcoding) or setting (inpatient instead of outpatient) than is medically appropriate to generate higher reimbursement. Improper use of modifiers (especially modifier 25). Duplicate claims and unbundling. Improper billing of non-physician practitioner services, including billing for services beyond practitioner s scope of practice. Billing non-physician services as physician services other than in accordance with incident to rules. Failure to comply with teaching physician rules. Billing for inpatient services that should have been categorized as observations or ER visits. Inflating charges to receive outlier payments. Lack of a valid, documented H&P within 30 days of a surgery. Failure to abide by terms/rules associated with research grants. Failure to refund credit balances. 6

7 Recent Cases and Settlements: Billing and Coding Chicago area cardiologist paid $20M and is serving five year prison term for submitting false claims for care he never provided. A cardiologist and his practice group, Galichia Medical Group, paid $1.3 million to settle allegations that they submitted claims for services not provided, as well as claims without proper documentation. A Florida internal medicine physician paid $1.5M for billing at higher levels of service than he actually provided (and for services not provided at all). Last year, a California physician paid $2.2 million to resolve FCA allegations that he inappropriately allowed his UPIN to be used to bill Medicare for respiratory therapy he did not perform. Simi Valley Medical Center paid $5.5M to settle charges that it misbilled detox services as psych services and admitted patients for overnight stays who did not satisfy inpatient criteria. Mercy Health System and others have paid multi-million dollar settlements for billing short inpatient stays that should have been billed as observation, outpatient or ER visits. Double billing resulted in multi-million dollar settlements against HCA, Harlem Hospital, University of Medicine and Dentistry of New Jersey among others. In the UMDNJ case, both the hospital and a physician group billed for the same outpatient services. 7

8 Recent Cases and Settlements: Billing and Coding Genesys Health System settled claims that it billed for higher levels of E/M services than were actually provided to cardiology patients. Louisiana State University, Queens Medical Center and Kaiser settled FCA allegations that teaching physicians were not present during the critical portion of surgical procedures. Several hospitals, including Lahey Clinic Hospital in Massachusetts, settled allegations that they improperly submitted claims for multiple units of drug infusion therapy, chemotherapy and blood transfusion therapy services when only one unit per date of service should have been billed. Yale University paid $7.6M to resolve FCA allegations that it made unallowable research grant fund transfers and submitted inaccurate time/effort reports. 8

9 Lessons Learned from Recent Billing and Coding Cases The Government will look beyond whether a service was rendered to determine if it was medically necessary, rendered in the appropriate setting and billed at the appropriate level. Don t underestimate the importance of educating physicians on proper medical record documentation and E&M coding (including proper use of modifiers). Adopt clear policies/ guidelines to drive coding compliance and provide user-friendly pocket guides. Ensure an accurate system for tracking units of service (e.g., drug infusion, chemotherapy, blood transfusion) and sedation start and stop times. Routine audits are essential to catch systemic billing errors and correct them before the Government catches them. Consider updating your auditing plan to provide for concurrent audits, corrective action plans and oneon-one counseling for physicians with higher than acceptable error rates. Teaching hospitals and physician groups should maintain a detailed policy on teaching physician supervision. Require documentation of physician presence during key and critical portion and of immediate availability during surgeries. Self-reporting almost always results in more lenient treatment than when a qui tam or auditor identifies the issue but must be done after a thorough analysis of the proper scope of the disclosure and the channel. 9

10 Lessons Learned from Recent Cases, Settlements and Investigations Involving Physician Relationships Aside from billing/coding, the greatest FCA exposure arises from physician relationships. The Government and Qui Tam plaintiffs use Anti-Kickback Statute (AKS) and Stark Act violations as a basis for asserting FCA violations. Rationale: When a provider certifies compliance with law on a claim or cost report, but has violated the AKS or Stark Act, it submits a false claim. The AKS prohibits offer, payment, solicitation or receipt of any remuneration (direct or indirect, in cash or in kind) in return for or to induce referrals or recommendations for services or items covered by a federal health care program - In short, no payment for referrals. The government asserts that it need only prove that one purpose of the remuneration is to induce referrals unless a safe harbor applies. The Stark Act prohibits referrals of Medicare and Medicaid patients for certain designated health services (including hospital services) - and an entity cannot bill for DHS provided pursuant to prohibited referrals - if the referring physician has a financial relationship with the entity, unless an exception applies. 10

11 Recent Cases Attacking Physician Relationships Condell: Paid $34M after self-reporting potential AKS and Stark violations, including: Financial support agreements under which Condell loaned money to physicians to recruit them from nearby hospitals and allowed them to work off the amounts owing at above FMV rates and without demonstrable need for services provided. Below FMV leases Rent deferrals/abatements without reasonable collection efforts. Self-report was essential to closing transaction with Advocate. Waterloo: Covenant Medical Center paid $4.5M to settle charges that its employment contracts with five highly paid (and productive) specialists violated the AKS and Stark Act, resulting in FCA violations. The Government asserted that the compensation paid to the physicians in question ($1.9M in one case) simply was not commercially reasonable in Waterloo, Iowa, particularly because CMC lost money on its physician employment arrangements. Contemporaneous third-party FMV opinions did not dissuade the Government from filing suit. Case arose from tip by competing physician group that had unsuccessfully brought antitrust suit alleging that high salaries paid by CMC made it impossible for group to compete for physician talent. 11

12 Recent Cases Attacking Physician Relationships University of Medicine and Dentistry of New Jersey (UMDNJ): UMDNJ agreed to pay $8.3M to settle AKS and FCA allegations. Part-time employment contracts for teaching, research and on-call services allegedly served as vehicles to pay illegal kickbacks to cardiologists (who lacked research credentials and provided little or no teaching services). Government alleged that UMDNJ did not need the cardiologists services but wanted to counteract a decline in case volumes that threatened Level I Trauma Center status. Several cardiologists paid civil penalties and two pleaded guilty to criminal embezzlement. Detroit Medical Center: Prior to selling eight hospitals to Vanguard, DMC entered into a $30M settlement related to several self-reported, potentially improper arrangements, including: Giving physicians tickets to sporting, educational and charitable events in excess of limits under non-monetary compensation exception Providing advertising and signage on terms that may not have been consistent with FMV or commercially reasonable Failing to memorialize leases and professional services arrangements in fully executed contracts Paying above market compensation to physicians. Upcoding E&M services provided by employed physicians 12

13 Recent Cases Attacking Physician Relationships U.S. ex rel. Kosenske v. Carlisle HMA: Permitted a qui tam FCA case premised on Stark violations related to an exclusive anesthesia services contract to proceed because the hospital failed to amend the contract when the group began providing pain management services and failed to conduct a FMV analysis of the new service. Northside Hospital: A hospital and two physician-owned entities agreed to pay $6.37M to resolve a whistleblower FCA lawsuit alleging Stark and FCA violations arising from: Above-FMV management/medical director fees. Excessive fees for blood products to a surgeon owned entity. Provision of Northside employee services without charge to referring transplant surgeons. St. Joseph Medical Center: SJMC paid $22M and entered into CIA to settle Stark, AKS and FCA claims arising from alleged above FMV PSAs with cardiology group for services that were not rendered or were not commercially reasonable. SJMC also sent letters to hundreds of the referred patients letting them know that the cardiac stent implant procedures they received from one of the surgeons may not have been medically necessary. 13

14 Recent Cases Attacking Physician Relationships Rush: Rush paid $1.6M to settle qui tam allegations brought by former employee and disgruntled physician alleging that: Physician groups occupied MOB suites without fully executed leases and received rent concessions. Rush failed to collect rent in a timely manner and paid a physician for professional services without an executed agreement. Government dropped reference to AKS in settlement agreement and agreed not to impose CIA or CCA, but sought settlement based on alleged technical Stark violations such as lack of executed leases and lease renewals. Tuomey Healthcare System: Toumey is appealing $44.9M damages assessment for Stark violations arising from part-time employment contracts with surgeons who worked at a Tuomey-owned ASC. Tuomey offered the employment agreements after a competing ASC opened nearby, allegedly to lock the surgeons into a 10 year exclusive use arrangement. The Government contended that, because employment was extended to avoid the loss of a referral stream, it took into account the volume/value of referrals. Government also contended that arrangements involved above-fmv compensation that would not have been commercially reasonable absent referrals. Jury found in favor of Tuomey on FCA claims but court granted Government s motion for retrial. Health Alliance of Greater Cincinnati/ Christ Hospital: $108M settlement of qui tam suit alleging that hospital violated AKS and FCA by limiting opportunity to work in outpatient cardiac testing unit to cardiologists who referred patients to hospital. Two other Alliance hospitals and a physician group paid $2.6M to settle AKS and FCA claims arising from an arrangement under when the group agreed to provided interventional cardiology coverage that the hospital needed to participate in a clinical trial only if the hospital referred patients on a preferential basis. 14

15 Recent Cases Attacking Physician Relationships Bradford Regional Medical Center: District court issued lengthy summary judgment opinion in FCA qui tam action alleging AKS and Stark violations: Evidence showed that BRMC CEO had unsuccessfully tried to persuade group not to lease its own nuclear imaging camera (rather than continuing to refer tests to BRMC) and that physician referrals for nuclear tests decreased significantly after lease. After BRMC adopted policy against medical staff members holding competing financial interests and BRMC Board preliminary found physicians in violation of policy, the parties entered into a sublease arrangement, which included covenant not to compete, validated by a third-party FMV assessment that assumed increased volumes from group physician referrals. Hospital agreed to pay the $6,545 charged by GE for the camera plus $23,655 per month for all other rights, including the non-compete. Court held that value assigned to non-compete took into account volume/value of anticipated referrals and that, therefore, the lease did not qualify for any Stark exception. BRMC s payments to the group for office space and billing services without written agreements violated Stark. Percentage of collection billing service arrangement varied based on referrals. Court held that the burden of establishing FMV for purposes of proving Stark exception rests with the defendants. Although the record did not favor the defendants, a genuine issue of material fact existed as to the knowing nature of the Stark violations, precluding judgment as a matter of law in favor of relators on the FCA claim. 15

16 Lessons Learned from Recent Cases Involving Physician Relationships Given the potential consequences of undocumented, unsigned and expired contracts, adopt internal controls and policies prohibiting the provision of services or the occupancy of space without a fully executed agreement. Contracts with physicians and other referral sources should be subject to internal review, ideally based on the IRS Excess Benefit Transaction Rules rebuttable presumption process. Review should include needs determination and commercial reasonableness review, not just FMV. A contract tracking system is highly advisable. Do not put blind faith in third-party FMV opinions review opinions with a critical eye to ensure that they do not take into account the volume or value of referrals and that their methodology is sound. Avoid the temptation to select valuation experts because they are the lowest cost or willing to tell you what you want to hear. Commercial reasonableness matters if a hospital will lose money on a deal (even if consistent with FMV), the Government may presume that an illicit motive exists. But this presumption can be countered by contemporaneous documentation of legitimate mission motives, such as serving underserved populations. Implement a robust non-monetary compensation policy and tracking system as a prophylactic against improper gifts, meals and entertainment. Avoid the temptation to make physicians whole for giving up ancillary opportunities or to pay above FMV fees to loyal referral sources. Don t wait to address Stark/AKS problems until you are about to close an M&A transaction as the Government may take advantage of your need to resolve due diligence issues to get the deal done. Many qui tam plaintiffs are insiders who didn t know where to bring their concerns or whose concerns fell on deaf ears. Providing multiple, well-publicized channels of reporting to an effective compliance function minimizes qui tam risk.. Having an effective compliance program and a proactive approach to compliance will minimize penalties and potentially avoid a CIA or CCA during settlement negotiations. 16

17 Patient Care-Based FCA Cases University of Chicago Hospitals paid $7M to settle charges that it double bunked NICU patients. After Medtronic paid $75M to settle allegations that the company defrauded Medicare by counseling hospitals to perform kyphoplasty as an inpatient procedure, even though many cases can safely be performed on an outpatient basis, the Government began to pursue hospitals, reaching settlements with at least 18 hospitals. St. Joseph Medical Center in Baltimore paid $22M to settle charges related to medically unnecessary coronary stents. The cardiologist at the center of the controversy allegedly received lavish gifts from the stent manufacturer, was named in the settlement, faces medical board charges and suits from numerous patients. A Michigan hospital and two of its chiefs of staff paid $1.6M to settle FCA charges based on the theory that they credentialed physicians who performed medically unnecessary services and failed to address staff complaints about those services. The Government sued Satilla Regional Medical Center in Georgia for billing cardiac cath procedures performed by an allegedly unqualified, incompetent physician. Hospitals have paid FCA penalties for billing services performed by non-physicians as physician services, (e.g., billing midwife services as obstetrician services or PA and NP services as neonatologist or oncologist services). 17

18 Lessons Learned from Patient- Care Based Cases Hospitals that systemically allow their facilities to be used for medically unnecessary procedures face FCA liability. Likewise, hospitals that allow unqualified, incompetent physicians to use their facilities are at FCA risk. Failures of care can be treated as FCA violations. Beware of device marketing ploys that promise new or increased revenue streams. Put policies in place to ensure that non-physician staff do not exceed their lawful scope of practice and bill accordingly. 18

19 Discussion of Top 10 Counseling Tips Handout