Compliance Issues with Referral Arrangements

1. Compliance Issues with Referral Arrangements Health Care Compliance Association Compliance Institute September 27, 2000 New Orleans, Louisiana John E. Steiner, Jr., Esq. Chief Compliance Officer The Cleveland Clinic Health System

2. Specific “Stark II” Proposed Regulations Issues Incorporating Stark Analysis in Compliance Audits These January 9,1998 regulations, and the Preamble, provide needed clarification and guidance for structuring a compliance audit

3. The following main points are particularly important to check when conducting a system-wide or entity specific “Stark” analysis:

4. Prohibition Reinforce understanding that,if Stark applies,the physician may not make the referral and the entity may not submit a claim or bill for services provided pursuant to a prohibited referral.

5. Prohibition (Continued) A “service for which payment may bemade under Part B” means that it is ordinarily covered even if Medicare ultimately doesn’t pay So, could face a sanction for submitting a claim even if Medicare suffers no fiscal harm (similar to civil False Claims Act)

6. Referral • Referral must be for a designated health service(d.h.s.). • Physician makes referral when physician: • Requests, orders, certifies or • re-certifies the need for, or establishes a plan of care that • includes,d.h.s. covered by Medicare Part A or Part B

7. BUT, Not a prohibited referral if physician merely establishes a plan of care that leads to furnishing a d.h.s. in an entity with which the physician has a financial relationship, if the physician does not control or influence the referral decision

8. NOTE: HCFA will presume that the physician with the financial relationship made the referral if it is unclear who made the referral, the physician can rebut the presumption

9. Financial Relationship • Ownership and Investment • Interests “equity, debt, or other means” Any indirect interest, no matter how many levels removed from a direct interest, creates a financial relationship

10. So, • explore “immediate family members” includes: • in-laws and spouses of grandchildren

11. Financial Relationship(Continued) • Ownership Interest includes stock options and non-vested interests NOTE: Could also be a compensation arrangement if provided as compensation to the physician

12. Financial Relationship(Continued) • Debt as ownership interest • Physician loans to entity and debt is secured by entity’s assets • Creditor-debtor relationship with signs of ownership,e.g., bonds convertible to common stock of entity

13. Financial Relationship(Continued) NOTE: Loans to physicians (or family member) from entity are not ownership interest, but are compensation arrangement

14. Compensation Arrangements Same definition as Stark I, i.e., Any remuneration, direct or indirect, no matter how many levels the remuneration passes through or whether it changes form

15. Compensation Arrangements(Continued) e.g., A physician who directs a research facility and owns a clinical lab might make research grants to other physicians who agree to refer to his lab

16. Compensation Arrangements NOTE: New Exception for Compensation Arrangement: “Fair Market Value Compensation” (‘good guy’ exception)

17. Compensation Arrangements “Fair Market Value” • Written, signed, cover identifiable items or services specified in document • Cover all items and services to be provided by physician or immediate family member or cross refer to agreements with those parties

18. “Fair Market Value” Compensation Arrangements (Continued) • Specify time frame and limit of one arrangement for same items or services in one year (can be for any period of time and include termination clause) • Specify compensation in advance or method for determining compensation

19. “Fair Market Value” Compensation Arrangements (Continued) • Compensation consistent with fair market value not take into account volume or value of any referrals, • payments for referrals for medical services not covered under Medicare or Medicare,or other business generated • between parties

20. “Fair Market Value” Compensation Arrangements (Continued) – Arrangement is commercially reasonable and furthers legitimate business purpose – Arrangement either meets a “safeharbor” or otherwise complies with Medicare/Medicaid anti-kickback law

21. CHECK: “Volume or Value” of referrals standard applies even if physician’s payments do not vary but payment is conditioned, expressly or otherwise, on physician referrals to a particular provider e.g.,condition of employment to refer only within hospital network of ancillary providers

22. Designated Health Services HCFA generally looks to Medicare Program definitions

23. Designated Health Services(Continued) Stark II regulations introduce points to bear in mind for compliance audits: • d.h.s. remains a d.h.s. even if billed as something else or bundled with other services for billing purposes e.g., SNF services and physical therapy

24. Designated Health Services(Continued) • “Merely peripheral” parts of a d.h.s. • e.g., echocardiography in a CABG • Exclude “invasive” radiology(or intentional radiology) because incidental to another procedure ordered. Unsettled area: is imaging used to guide • a needle, probe or catheter

25. Designated Health Services(Continued) • Inpatient and Outpatient Hospital Services • Inpatient: Part A definition of hospital services • NOTE: • dialysis • • lithotripsy

26. Designated Health Services(Continued) • Outpatient: Include services “incident to” physician services, diagnostic outpatient hospital services, and partial hospitalization services

27. Exceptions Group Practice: Member does not include independent contractor – “Substantially all” means 75% of total patient care services of group practice members measured by time

28. Exceptions(Continued) – Billing number “assigned to the group” can allow group or wholly- owned subsidiary of group to have more than one billing number – “Group” test annual attestation requirement

29. Medicare Anti-Kickback Statute CASE UPDATE

30. Medicare Anti-Kickback Statute(Continued) United States vs. Anderson, Lahue & Lahue In the United States Court of Appeals for the Tenth Circuit, on appeal from the United States District Court for the District of Kansas

31. Medicare Anti-Kickback Statute(Continued) • – Jury instruction that a finding of illegal intent to induce referrals “must, at least in part, have been the reason [for] the remuneration …” Jury instruction 32