Articles Posted in Anti-Kickback

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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:

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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.

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Late last year, the Department of Health and Human Services (HHS) Office of Inspector General (OIG) issued a significant Advisory Opinion regarding a proposed joint venture (JV) between a therapy services provider and an owner of various long-term care (LTC) facilities. OIG concluded that it viewed the Proposed Arrangement as presenting a significant risk of fraud and abuse and potentially designed to permit the therapy services provider to pay the LTC owner a share of the profits derived from referrals for therapy services made by the LTC owner’s facilities. The opinion reiterates OIG’s longstanding concern that joint ventures formed between healthcare providers or suppliers and referral sources can present risk under the Anti-Kickback Statute (AKS).

Under the Proposed Arrangement, a therapy services provider would form a JV with an owner of LTC facilities where the JV would provide therapy services to the LTC facilities. The JV would contract out the bulk of operations (all clinical and non-clinical employees, space, and equipment) to the therapy services provider in exchange for a fair market value fee. The LTC owner would hold a 40% interest in the JV and the therapy services provider would hold the remaining 60% interest. The LTC owner’s investment in the JV would be based, at least in part, on the JV’s expected business from the LTC owner’s facilities. The LTC owner’s facilities were not required to contract with the JV or otherwise make or direct referrals to the JV, although the therapy services provider certified that it expected the LTC owner’s facilities to do so, and during the initial phases of the JV all of the JV’s revenues would be generated by services provided to the LTC owner’s facilities.

OIG concluded that the Proposed Arrangement would not satisfy any AKS safe harbors, including the small entity investment safe harbor, because the Arrangement likely violates the investor test, the revenue test, and the investment offer test. Moreover, OIG referred to its landmark 2003 Special Advisory Bulletin on Contractual Joint Ventures, which includes a detailed list of characteristics that OIG considers suspect when present under a contractual JV. Since the JV described in the Proposed Arrangement included several of these previously outlined suspect characteristics, OIG further determined that the proposed JV presents significant risk of fraud and abuse. This Advisory Opinion serves as a useful reminder of the regulatory framework applicable to joint ventures between healthcare providers and entities in a position to refer or generate business for the joint venture. Providers considering joint ventures should ensure that they are structured to comply with AKS and OIG guidance.

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In a recent advisory opinion, the Department of Health and Human Services (HHS) Office of the Inspector General (OIG) opined that employment of an anesthesia provider may be low risk under the Federal Anti-Kickback Statute (AKS) under certain circumstances. This opinion, Advisory Opinion 21-15, may represent a softening of OIG’s position on anesthesia providers.

OIG’s position on anesthesia providers is largely found in a 2012 advisory opinion, Advisory Opinion 12-06, concerning two proposals by an anesthesia provider (Requestor) for structuring its relationship with several ambulatory surgery centers (ASCs). Under the first proposal, the Requestor would remain the ASCs’ sole provider of anesthesia services but would also pay the ASCs a per-patient fee, exclusive of federal healthcare beneficiaries, in exchange for management services (e.g., pre-operative nursing assessments, procuring office space, and transferring billing documentation). OIG rejected this proposal, finding that the carve-out for federal healthcare beneficiaries would not save the per-patient management fee from constituting improper remuneration under AKS. Specifically, by collecting both a management fee from the Requestor and a facility fee from payors, OIG concluded that the ASCs would be receiving double payments for the same services and therefore would be unduly influenced to keep the Requestor as their exclusive provider of anesthesia services to all patients.

Under the second proposal, the ASCs’ physician-owners would form wholly owned subsidiaries for the purpose of providing anesthesia services to ASC patients. The subsidiaries would bill for and furnish all anesthesia-related services (e.g., recruiting personnel and assisting in structuring employment or independent contractor relationships with anesthesia personnel, ordering supplies, quality assurance, and providing logistics). The subsidiaries would pay the Requestor a negotiated rate for its services and retain any profits, presumably for distribution to the non-anesthesiologist physician-owners. OIG rejected this proposal as well, concluding that no AKS safe harbor would protect the distribution of profits from the subsidiaries to their physician-owners because such profits would be a function of the Requestor’s anesthesia services revenue resulting from the physician-owners’ referrals. In particular, OIG found the ASC safe harbor inapplicable because it protects only returns on investments in Medicare-certified ASCs, or entities operated exclusively for the purpose of providing “surgical” services, and anesthesia services are nonsurgical in nature. Additionally, while noting that payments by the subsidiaries to the Requestor, employees, or independent contractors could be protected under the personal services, employee, and/or management contract safe harbors, OIG nevertheless indicated that none of these safe harbors would protect the distributions of profits from the subsidiaries to their physician-owners, since a likely purpose of such distributions would be to generate referrals for anesthesia services.

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The Department of Justice (DOJ) recently announced a plea agreement regarding an alleged $73 million scheme to defraud Medicare that illustrates some of the pitfalls of compliance with the Anti-Kickback Statute (AKS). DOJ alleged that the owners of a clinical laboratory, Panda Conservation Group, LLC, and a telemedicine company, 1523 Holdings LLC, conspired to pay kickbacks in exchange for work arranging telemedicine providers to order genetic testing at Panda’s laboratories. While the parties had an agreement for IT and consultation services, DOJ alleged that this contract was a “sham” to hide the kickback payments and that the telemedicine company abused temporary, pandemic-responsive amendments to telehealth restrictions to refer beneficiaries to the laboratory for expensive and medically unnecessary cancer and cardiovascular genetic testing.

The Anti-Kickback Statute (42 U.S.C. § prohibits a person from knowingly offering, paying, soliciting, or receiving anything of value to induce or reward referrals for services covered by a Federal Healthcare Program. A Federal Healthcare Program is any program that provides health benefits, whether directly or through insurance, which is funded by the United States Government or any State health care program. A violation of the Anti-Kickback statute is a criminal offence and can carry severe penalties, including fines, prison sentences, and potential exclusion from participation in Federal Healthcare Programs in the future.

Since some referrals are necessary to optimize patient care, the Statute provides exceptions called “safe harbors” that permit certain arrangements that follow specific requirements. In the event an arrangement does not meet a safe harbor requirement, the arrangement will be considered on a case-by-case basis. Special care must be taken structure arrangements to comply with the AKS and its safe harbors.

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The Pharmaceutical Research and Manufacturers of America (PhRMA) issued an updated August 2021 Code on Interaction with Health Care Professionals, which takes effect January 1, 2022. Section 7 of the PhRMA Code’s guidance on speaker programs largely echoes a Special Fraud Alert regarding health care speaker programs which was issued by the Department of Health and Human Services’ (HHS) Office of Inspector General (OIG) in November 2020. The focus here is on programs where health care professionals (HCPs) participate in company-sponsored speaker programs in order to help educate and inform other health care professionals about the benefits, risks, and appropriate uses of company medicines. Similarly to the Special Fraud Alert, the PhRMA Code raises significant concerns about companies offering or paying remuneration (and HCPs soliciting or receiving remuneration) in connection with speaker programs in violation of health care fraud and abuse laws, such as the Anti-Kickback Statute.

A primary focus of the PhRMA Code’s speaker program guidance involves situations where attendees of such programs are offered meals incident to attendance. In general, the Code explains that incidental meals of modest value may be offered to attendees of company-sponsored speaker programs, subject to some non-exhaustive principles. The purpose of the speaker program should be to present substantive educational information designed to help address a bona fide educational need among attendees, taking into account recent substantive changes in relevant information or the importance of the availability of such educational programming. According to the PhRMA Code, only those with a bona fide educational need for the information should be invited and incidental meals furnished to attendees must be modest as judged by local standards, as well as subordinate in focus to the educational presentation. Companies should not pay for or provide alcohol in connection with the speaker program. Speaker programs should occur in a venue and manner conducive to informational communication, and a company representative should be physically present. Luxury resorts, high-end restaurants, and entertainment, sporting, or other recreational venues or events are cautioned against. Repeat attendance at a speaker program on the same or substantially the same topic is generally not appropriate, unless the attendee has a bona fide educational need to receive the information presented, including attendance by speakers as participants after speaking at such programs. Friends, significant others, family members, and other guests of a speaker or an invited attendee are not appropriate attendees unless such individuals have an independent, bona fide educational need to receive the information presented. To note, the PhRMA Code does not address attendance at a speaker program that does not include an incidental meal to the attendee.

The PhRMA Code also sets out four general principles that apply to companies’ retention of HCPs as speakers at company-sponsored speaker programs. First, HCPs may be engaged by companies as speakers for company-sponsored speaker programs to help educate and inform other HCPs who have an independent, bona fide educational need to receive information about the benefits, risks, and appropriate uses of company medicine and related disease states. Second, company decision regarding the selection or retention of HCPs as speakers should be made based on defined criteria such as general medical expertise, reputation, knowledge, experience regarding a particular therapeutic area, and communication skills. Third, HCPs engaged by the company as speakers should also participate in company-sponsored speaker training programs because the Food and Drug Administration (FDA) holds companies accountable for the presentation of their speakers. Finally, any compensation or reimbursement made to HCPs in conjunction with a speaking arrangement (including company-sponsored speaker training) should be reasonable, based on fair market value, and should not take into account the volume or value of past business that may have been, or potential future business that could be, generated for the company by the HCP. The PhRMA Code further cautions companies and speakers to be clear about the distinction between health care professional speaker programs and continued medical education programs. Health care providers should keep these guidelines in mind when designing company-sponsored HCP speaker programs.

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On May 28, 2021, the Equal Employment Opportunity Commission (EEOC) released guidance indicating that employers could, under certain circumstances, offer incentives to employees to receive the COVID-19 vaccine and offer the vaccine to employees’ family members. The EEOC largely confined its analysis to the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA). However, employers who are also healthcare providers must also consider whether these benefits to employees or their family members implicate prohibitions on payment for referrals.

The Physician Self-Referral Law (also known as the Stark Law), the Anti-Kickback Statutes (AKS), and the Eliminating Kickbacks in Recovery Act (EKRA) all prohibit various forms of payment for referrals. 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. 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. EKRA provides criminal penalties for paying, receiving, or soliciting any remuneration in return for referrals to recovery homes, clinical treatment facilities, or clinical laboratories. All three and can carry stiff penalties, sometimes criminal penalties.

Healthcare employers who provide incentives to receive the COVID-19 vaccine to employees with the ability to make referrals to the employer or that offer benefits to such employees’ family members should account for these statutes. Depending on how the incentive is structured, it may fit into the bona fide employment exception to the Stark Law or one of the other exceptions or safe harbors in these rules. It is also important to note that, due to federal funding, the vaccine itself it available free-of-charge, but that administration of the vaccine and the convenience thereof may still represent things of value, as well as the value of any incentives, in cash or otherwise.

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When an expensive treatment option is unavailable to a patient because of cost or lack of insurance coverage, some healthcare providers turn to a Patient Assistance Program or PAP to help their patients pay for treatment. The Department of Health and Human Services Office of the Inspector General (OIG) has long recognized that PAPs provide important safety net financial assistance to patients that cannot afford the costs of treatment.

However, OIG believes PAPs also present a risk of fraud, waste, and abuse. OIG’s primary concerns are that donor contributions to the PAP and the PAP’s grants to patients both implicate the Anti-Kickback Statute because they could induce or influence the PAP to send business to the donor or influence the patient to choose certain items. Similarly, OIG has expressed concern that a PAP’s grants to patients implicate the Beneficiary Inducement Statute because it could influence the patient’s selection of a particular provider.

Therefore, a PAP should be structured with certain safeguards in place to steer clear of fraud, waste, and abuse allegations. These safeguards may include structuring the PAP as an independent charitable organization that is not controlled by the donors. OIG has indicated that, in order to ensure such independence, a PAP should not exert direct or indirect influence over its donors, nor should donors have links to the charity that could directly or indirectly influence the operations of the charity or its grant programs. Safeguards may also include making the assistance available to all eligible patients on an equal basis and providing it on a first-come, first-served basis to the extent that funding is available; awarding assistance without regard to any donor’s interests and without regard to the patient’s choice of product, provider, practitioner, supplier, or insurance plan; and providing assistance based upon a reasonable, verifiable, and uniform measure of a patient’s financial need. A PAP and providers should also be cautious about advertising the existence of the PAP or the availability of assistance.

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Imagine a physician wants to rent office space from another physician, but the two refer patients to each other. Or a clinical laboratory wants to contract with a marketer to promote their products. Three of the largest compliance concerns when structuring such an arrangement are the Stark Law, also known as the Physician Self-Referral Law, the Anti-Kickback Statute, often referred to as the AKS, and the Eliminating Kickbacks in Recovery Act, or EKRA. All three regulate referrals and can carry stiff penalties, sometimes criminal penalties. However, each also contains a series of exceptions or safe harbors into which some business structures may fit. Even simple arrangements between healthcare entities can involve complex analysis to comply with these statutes.

The Stark Law, 42 U.S.C. 1395nn, prohibits physicians 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.

The AKS, 42 U.S.C. 1320a-7b(b), 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 means far more than 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. Like the Stark Law, CMS has also implemented safe harbors for certain value-based arrangements.

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On February 17, 2021, the Department of Health and Human Services (HHS) Office of Inspector General (OIG) updated its FAQ’s concerning the COVID-19 public health emergency. In the update, OIG gave guidance on its enforcement discretion regarding administrative services provided to COVID-19 vaccination sites on a per-vaccine basis. It should be noted that this guidance is not an advisory opinion, is not binding on OIG, and does not constitute a waiver of any statutory or regulatory requirement, though it may be helpful when structuring these arrangements.

OIG addressed the question of whether a non-provider philanthropic entity could contract to provide administrative services to a healthcare provider relating to the operation of COVID-19 vaccination sites and be compensated on a per-vaccine basis. The entity would provide administrative services including arranging for the physical vaccination sites, data systems, online and web-based scheduling, site development and training, and reporting to state agencies. The healthcare provider would provide clinical staff, oversee administration of the vaccine, and bill third-party payors, including federal healthcare programs.

After billing for the vaccine administration, the healthcare provider would retain a certain amount per hour for compensation and to cover staffing costs. The remainder of the compensation would flow to the entity providing the administrative services. OIG specified that there would be no other arrangements between the entity, the healthcare provider, any beneficiary, or other person capable of arranging for referrals for items or services payable by a federal healthcare program.

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