In Stark Contrast: ACA Payment Reforms and The Physician Self-Referral Law

Transcription

1 In Stark Contrast: ACA Payment Reforms and The Physician Self-Referral Law Washington Health Law Summit December 12, 2016 Rachel A. Seifert, Executive Vice President and General Counsel, Community Health Systems Albert W. Shay, Partner, Morgan, Lewis & Bockius LLP Jill Wright, Special Counsel, Foley & Lardner 1

2 Disclaimer The views expressed in these slides and in the seminar presentation are the personal views of the authors and do not represent the formal positions of Foley & Lardner, Morgan Lewis or Community Health Services.

3 Today s Discussion 1. Why is Congress looking at the Stark law? Concerns from stakeholders about Stark law MACRA 2. Overview of Senate Finance Committee (SFC) White Paper Suggestions for reform 3. Issues not addressed in SFC report Use of False Claims Act (FCA) to enforce 4. Likelihood of changes/modifications to Stark law Legislative Administrative 5. Questions 3

4 Additional Materials 1. Senate Finance Committee White Paper: Why Stark, Why Now? (June 30, 2016) 2. Examples of Comment Letters Stark Law Coalition Federation of American Hospitals 3. Troy A. Barsky, written testimony, Senate Finance Committee Hearing: Examining the Stark Law: Current Issues and Opportunities (July 12, 2016) 4

5 Physician Self-Referral Law Stark Law [I]f a physician (or an immediate family member of such physician) has a financial relationship with an entity... then the physician may not make a referral to the entity for the furnishing of designated health services for which payment otherwise may be made under Medicare unless an exception applies. 42 U.S.C. 1395nn 5

6 One Court s View of the Stark Law U.S. ex rel. Drakeford v. Tuomey Healthcare System even for well-intentioned health care providers, the Stark Law has become a booby trap rigged with strict liability and potentially ruinous exposure especially when coupled with the False Claims Act. 6

7 What Got Congress s Attention? It s not the first time in recent years. H.R Stark Administrative Simplification Act of 2015 Fast track pathway with specified fines for technical noncompliance. Would be alternative to Self-Referral Disclosure Protocol for non-substantive violations. H.R Promoting Access, Competition, and Equity (PACE) Act of 2015 Would temporarily remove moratorium on new physician owned hospitals and expansion of existing ones. After moratorium ends, would allow hospitals with 3 or more stars on Hospital Compare over a 3 year period to expand its capacity. 7

8 What Got Congress s Attention? Constituent concerns across the country have grown. FCA litigation of Stark Concerns not limited to one party or certain regions Constituents have something new to point to (MACRA) And, MACRA. The Medicare Access & CHIP Reauthorization Act of 2015 (MACRA) Merit-Based Incentive Payment System (MIPS) Incentives for participation in Alternative Payment Models (APMs) in general and bonus payments to those in the most highly advanced APMs 8

9 Congressional Efforts to Address Stark Law Challenges December 2015 Stark Roundtable: Hosted jointly by the Senate Finance Committee and the House Ways and Means Committee Invited experts to discuss the Stark Law and potential changes to improve the law Stark Roundtable Focus: Problems in Stark Law s implementation Costs of Stark compliance and disclosures Possible fixes for Alternate Payment Models and Fee-For-Service Method 9

10 Congressional Efforts to Address Stark Law Challenges Post-Roundtable: Invited broader group of stakeholders and experts to submit suggestions to improve Stark Law, focusing on The line between technical violations and more serious, substantive, or problematic violations Changes to the Stark Law necessary to implement MACRA in its current form and ACOs/shared savings programs June-July 2016: Senate Finance Committee Released White Paper Held hearing on Stark law 10

11 Stark Law Challenges Complex and rigid law with difficult exceptions and complicated regulatory scheme Strict liability with severe penalties Designed to reduce perverse incentives in a fee-forservice system, but complicates value-based payment Not aligned with delivery system reform Poses challenges to implementing MACRA (Medicare Access and CHIP Reauthorization Act of 2015) Potential barrier to care coordination 11

12 The Problem of Vagueness Many of the Stark exceptions include requirements that are not well defined: Fair market value standards are not defined and providers relying on different valuation methodologies yield different results; e.g., payment for workforce in place in physician practice purchases; using or eliminating payments by other hospitals in valuing lithotripsy services to physicianowned providers Even without the expected clarity of what should be valued in determining FMV, hospitals are spending millions and millions of dollars each year to have the back up in their files that what they are paying physicians is FMV 12

13 The Problem of Vagueness Taking into account the volume or value of referrals enforcement (DOJ and qui tam relators), aided by judicial decisions have moved the interpretation of this language away from does the compensation methodology state that it varies or is determined by the referrals the physician makes to did the hospital make observations about the referrals made (or their value, or the other business generated) in making employment related decisions Query An orthopedic surgeon performing at the 10 th percentile for professional services is probably also not referring patients to the affiliated hospital is the termination of this physician s employment problematic? 13

14 The Problem of Vagueness Commercial reasonableness a requirement for many of the Stark exceptions (employment, isolated transactions, space/equipment rental, fair market value), but the language is not consistent focus is on legitimacy and absence of referrals CMS guidance has been very general: appears to be a sensible, prudent business agreement, from the perspective of the particular parties involved, even in the absence of any potential referrals (1998); in the absence of referrals if the arrangement would make commercial sense if entered into by a reasonable entity of similar type and size and a reasonable physician... of similar scope and specialty, even if there were no potential DHS referrals (2004) 14

15 Stark Law Challenges APMs Stark Law is aimed at reducing risk of overutilization of designated health services (DHS) Not determined in a manner that takes into account volume or value of any referrals But the underlying premise of APMs is to pay based on the value of care provided APMs also aim to hold providers accountable for utilization of services to reduce overutilization (e.g., ACOs, Bundled Payments) by taking into account the volume of care. Is the Stark Law still a necessary safeguard for APM participants? 15

16 Stark Law Challenges Care Coordination Compensation Arrangement Requirements as a Potential Barrier to Implementing Care Coordination FMV requirements favor valuations based on time and resources, not outcomes. Financial relationships between physicians and entities they refer to can encourage coordination of care, improve quality, and promote efficiency IF they are both accountable. 16

17 Challenges Facing [Hospital] Providers Commercial Payers Seek to Develop Payment Models that Mimic (or Advance) the Cost Reduction Objectives of the ACA Quality measurements Reduce unnecessary services Providers Seek Make-Whole Compensation Quality incentives/payments Gainsharing Profit-sharing 17

18 Challenges Facing [Hospital] Providers BUT the waivers that have been granted under the ACA only apply to Medicare patient referrals and claims, not to the same types of arrangements between providers and other payers Gainsharing and payments for reducing services (or other results (i.e., improved quality ) that aren t services at all) fit awkwardly, at best, under the existing Stark Exceptions 18

19 Challenges Facing [Hospital] Providers The structures that are being developed to effectuate the payment reforms are also not within the Stark Law s contemplation, so physician-hospitalpayer issues, such as: Ownership/sources of funds Control/governance Capital expenditures (IT systems) Incentive payments Must be carefully vetted with the providers lawyers and third-party valuation firms at great delay and expense 19

20 Challenges Facing [Hospital] Providers The problem of how is compounded by the problem of what quality measures will improve care outcomes and reduce costs. In a recent GAO Report (GAO-17-5), published in October 2016, three factors were cited for driving misalignment of health care quality measures: Disbursed decision-making Variation in data collection and reporting systems Few meaningful measures 20

21 Challenges Facing [Hospital] Providers The concern for hospitals that the issues in the Oct. GAO report raise is whether, by participating in both commercial payer programs and MACRA programs (for their employed physicians), they are actually increasing their Stark risk profile? The misalignment of quality measures and varying payments from different payers put hospital providers at Stark risk for how those payments are shared with referring physicians Query what about variations between employment contract quality measures and CIN quality measures and can a physician earn both? What if the employment contract measures are less stringent? 21

22 Challenges Facing [Hospital] Providers The Stark Managed Care Exception Services furnished by an organization (or its contractors or subcontractors) to enrollees of one of the following prepaid health plans (not including services provided to enrollees in any other plan or line of business offered or administered by the same organization) CINs do not fit within any of the enumerated prepaid health plans 22

23 Overview of Senate Finance Committee White Paper Objective: consider whether changes in the Stark law are necessary to implement MACRA and, if so, what are the best options in a system that includes both FFS and APMs. White Paper, included in materials, also available on SFC website (search for Stark White Paper) ( hite%20paper,%20sfc%20majority%20staff% pdf) 23

24 Overview of Senate Finance Committee White Paper Suggestions for reform from stakeholders Repeal the Stark law in its entirety AKS can address conduct targeted by Stark Repeal just the prohibitions related to compensation arrangements Limit to just ownership and investment interests New waiver based on risk revenue Waiver available once the entity at risk revenue exceeds a certain percentage of total revenues 24

25 Overview of Senate Finance Committee White Paper Suggestions for reform from stakeholders Create new or expand existing waivers Expansion of waivers available to participants in CMS Innovation Center Models and/or the Medicare Shared Savings Program But not all waivers are alike Create new exceptions APM Participant Exception New financial relationship exceptions aimed at APMs 25

26 Overview of Senate Finance Committee White Paper Suggestions for reform from stakeholders Special compensation rules Revise FMV requirement for APM participants to accommodate APMs Compensation paid under an APM would not take into account the volume or value of referrals and constitute FMV 26

27 Overview of Senate Finance Committee White Paper Suggestions for reform from stakeholders Modify/expand existing exceptions Expand Prepaid Plan and Risk Sharing exceptions to protect services furnished by entities that participates in APM Currently, these exceptions only apply to referrals for services covered by the prepaid plan, but not FFS referrals by the same party. Expand the Secretary s authority Waivers Advisory Opinions Exemptions 27

28 Stark Reform Suggestions To implement MACRA and facilitate shared savings programs, the Stark Reform Coalition recommends amending the Stark Law to: add a new exception applicable to financial relationships between and among DHS Entities and referring physicians that are focused on promoting participating physicians compliance with clinical protocols designed to improve clinical quality and cost effectiveness. (Innovative Payment Arrangement Exception) 28

29 Stark Reform Suggestions The proposed Innovative Payment Arrangement Exception would Permit the requirement for referrals and the payments to the providers, subject to Patients best interests Patients freedom of choice Requirements of patients insurance coverage Expressly state that incentive and shared savings payments based on achievement of metrics designed to improve quality or enhance cost effectiveness will not be deemed to vary with or otherwise take into account a physician s referrals to or business generated for any hospital or DHS Entity 29

30 Stark Reform Suggestions The Federation of American Hospitals ( FAH ) also recommended a new Alternative Payment Model Exception, which would protect the payments by DHS Entities to physicians, provided all mandated program and patient safeguards were met 30

31 Stark Reform Suggestions The FAH s comment letter also provided alternatives to a new exception: Volume or Value Carve-out together with a Fair Market Value Carve-out Modification of the risk sharing exception to also apply to compensation arrangements But neither of these alternatives would fully address the gap 31

32 Senate Finance Committee White Paper, Technical Violations Defining Technical Violations Documentation Requirements Arrangements that do not incentivize referrals or unduly influence health care decision making Fair Market Value Divide violations into two categories: those where compensation is in excess of fair market value (and perhaps commercial reasonableness) and/or is determined in a manner that takes into account the volume or value of referrals; and those where compensation is not 32

33 Senate Finance Committee White Paper, Technical Violations Defining Technical Violations Compensation arrangements that do not violate the AKS Create bright line requirements for substantive noncompliance Clarify compensation arrangement terms Addition of an intent requirement Create exception for technical noncompliance 33

34 Senate Finance Committee White Paper, Technical Violations Defining Technical Violations Develop mitigating factors for determination of penalties, such as whether the violation is technical or substantive; whether the parties failure to meet all of the prescribed criteria of an applicable exception was due to an innocent or unintentional mistake; the corrective action taken by the parties; whether the services provided were reasonable and medically necessary; whether access to a physician s services was required in an emergency situation; and whether the Medicare program suffered any harm beyond the statutory disallowance. 34

35 FCA prohibits Stark Law and the FCA Knowingly submitting or causing submission of false or fraudulent claims for payment Knowingly submitting or causing submission of false or fraudulent records in support of a false claim Conspiracy to submit a false claim Reverse false claims Conduct must be knowing Actual knowledge of the information Deliberate ignorance of truth or falsity of the information Reckless disregard of truth or falsity of information 35

36 Stark Law and the FCA Not limited to classic fraud Regulatory/contractual violations recast as fraud Can affect any institution, entity, or individual doing business directly or indirectly with the government Robust future substantial amendments by Congress in 2009 and 2010 Fastest growing area of federal civil litigation Defendants liable for mandatory treble damages, a penalty of between $10,781 and $21,563 per claim for each false claim to the government, and attorney s fees and litigation costs 36

37 Whistle Blower Provisions of the FCA Qui Tam provisions of the FCA permit any person to file an FCA lawsuit, under seal, in the name of the United States. DOJ has at least 60 days to investigate, and can either Intervene (essentially take over the prosecution of the complaint) Decline to intervene (but the relator can go forward) Relators receive a percentage of any settlement: 15-25% if the government intervenes 25-30% if the government does not intervene and the relator moves forward 37

38 Who are Qui Tam Relators? Disgruntled/Former Employees Concerned Employees Physicians Hospital/Health System Executives Consultants Compliance Staff Members Nearly anyone 38

39 Recent Stark Law Settlements U.S. ex rel. Baklid-Kunz v. Halifax Hospital Medical Center Lawsuit brought by the former Director of Physician Services at Halifax Health alleges that contracts with six (6) oncologists violated the Stark law and other relevant Medicare laws The government alleged that the prohibited referrals resulted in the submission of 74,838 claims and overpayment of $105,366,000 Executed contracts with six medical oncologists that included an incentive bonus that improperly included the value of prescription drugs and tests that the oncologists ordered and Halifax billed to Medicare 39

40 Recent Stark Law Settlements U.S. ex rel. Baklid-Kunz v. Halifax Hospital Medical Center Bonus Pool = 15% of Halifax Hospital's "operating margin" from outpatient medical oncology services (i.e., pool includes revenue from "designated health services" referred by oncologists) Does not comply with the Employment Exception, FMV, and prohibition on compensation related to volume or value 40

41 Recent Stark Law Settlements U.S. ex rel. Schubert v. All Children s Health System Relator alleged that, despite the compensation plan she developed such that pediatric neurosurgeons would paid between 25 th and 75 th salary percentile, hospital executives overcompensated these physicians Physician group operated at a loss while hospital saw financial boon due to referrals Nearly 1/3 of recruited physicians were paid above the 75 th percentile Court ruled that the relator sufficiently alleged financial relationship that took into account anticipated referrals and ability of physicians to generate business 41

42 Recent Stark Law Settlements U.S. ex rel. Schubert v. All Children s Health System Court ruled that the relator sufficiently alleged financial relationship that took into account anticipated referrals and ability of physicians to generate business FMV benchmark created by drawing form the median of three nationwide salary surveys and creating a competitive salary range. Relator used that information to allege an FMV salary benchmark and alleged the salaries paid to recruited physicians exceeded that benchmark. The Court rules that this was sufficient to satisfy Rule 9(b). Hospital settled case for $7.5M 42

43 A Continuing Challenge In light of (a) CMS inability to adopt protective bright-line regulations for this strict liability statute and (b) enforcement authorities that take extreme positions contrary to the regulatory agency s interpretations, Congress should and must act to modify the Stark statute to enable providers to conduct themselves with reasonable certainty. 43

44 Questions? 44