AHLA. DD. Hot Topics in Laboratory Compliance. Karen Stephanie Lovitch Mintz Levin Cohn Ferris Glovsky & Popeo PC Washington, DC

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1 AHLA DD. Hot Topics in Laboratory Compliance Karen Stephanie Lovitch Mintz Levin Cohn Ferris Glovsky & Popeo PC Washington, DC Robert J. Rossi Senior Vice President & Chief Compliance Officer Calloway Laboratories Woburn, MA Fraud and Compliance Forum September 27-29, 2015

2 Hot Topics in Laboratory Compliance AHLA Fraud and Compliance Forum Karen S. Lovitch, Mintz Levin Robert J. Rossi, Calloway Laboratories, Inc. September 29, 2015 Agenda Topic 1 Health Care Fraud Enforcement Climate Topic 2 Business Arrangements with Physicians Topic 3 Waivers/Discounts Offered to Patients 2 1

3 Health Care Fraud Enforcement Climate Background 1990s: LabScam, first systemic nationwide law enforcement project focused on the health care industry Early 2000s: Focus on pharmaceutical companies, medical device companies Today: LabScam Part II? Seems to be a recent increase in prosecutions, settlements, and pending False Claims Act cases involving laboratories Laboratories are also facing lawsuits filed by insurance companies and competitors 4 2

4 Biodiagnostics Laboratory Services ( ) The saga continues with additional convictions and indictments Over a 7-year period, BLS and related entities allegedly paid millions of dollars to physicians to induce referrals BLS reportedly received at least $200 million dollars from Medicare and private insurance payors for those referrals BLS allegedly paid physicians up to thousands of dollars a month through sham lease, service, consulting agreements Over 38 individuals (including BLS owners/employees as well as 26 physicians) have pled guilty; also a recent indictment Fines Forfeiture of cash received ($11.5 million recovered to date) Jail time or supervised release 5 Health Diagnostic Laboratory, Inc. (2015) HDL and Singulex settled three related whistleblower cases in March 2015 Together they agreed to pay $48.5 million ($47 million paid by HDL discounted amount based on ability to pay defense) Signed separate Corporate Integrity Agreements Cases brought by: A physician pitched by HDL A physician office employee A competitor 6 3

5 Health Diagnostic Laboratory, Inc. (2015) Covered Conduct: Offering and/or paying illegal remuneration to health care providers through ""process and handling' payments related to the collection of blood; speaker programs; advisory boards; consulting arrangements; goods and services; and gifts" in violation of the AKS and the Stark Law Routinely offering to waive and/or waiving cost-sharing obligations, such as copayments and deductibles. for certain TRICARE beneficiaries, with the intent, to induce referrals, in violation of the AKS Submitting or causing to be submitted claims for payment for tests that were not medically necessary or that were not appropriately coded Offering and/or paying illegal remuneration in the form of commission payments to BlueWave Healthcare Consultants, Inc. to induce BlueWave to arrange or recommend referrals, in violation of the AKS 7 Health Diagnostic Laboratory, Inc. (2015) According to the DOJ Press Release: "The claims settled by these agreements and asserted against these companies and individuals are allegations only, and there has been no determination of liability." DOJ intervened as to similar allegations and has filed its own complaint against: BlueWave Healthcare Consultants Inc. and its owners, Floyd Calhoun Dent and J. Bradley Johnson (independent sales group that worked on behalf of HDL and Singulex) HDL's former CEO, Latonya Mallory Another, now-defunct laboratory DOJ declined to pursue the parent company of the other laboratory and Singulex's former CEO 8 4

6 Family Dermatology (2015) Settled a FCA case against the practice and its sole shareholder based on Stark Law, other violations for $3.2 million Allegedly purchased other practices and then contracted with selling dermatologists to work for the practice Required to send skin samples to the practice and the practice's lab Paid based on a percentage of professional services rendered by the physicians Suits filed by three physicians According to the DOJ press release: Health care companies that make sweetheart deals with physicians to boost profits undercut both the financial integrity of Medicare and the public s trust in the medical profession" 9 CIGNA v. HDL (2015) CIGNA brought suit against HDL for $84 million in Connecticut federal court Alleged failure to charge CIGNA's members for out-of-network services and for payment of fees to in-network providers that encouraged them to violate their contracts with CIGNA Claims based on ERISA and Connecticut's Unfair Trade Practices Act, as well as common law theories of unjust enrichment, fraud tortuous interference with contracts Claimed that CIGNA submitted "grossly inflated, phantom 'charges'" that don't reflect its actual charges Alleged that HDL advertised to patients that they would have no payment responsibility HDL has moved for dismissal and filed counterclaims 10 5

7 Aetna v. HDL (2015) Aetna also filed suit against HDL and BlueWave alleging the submission of "inflated and fraudulent claims" Billed Aetna at amounts that were six times higher than Medicare and paid based on a percentage of billed charges Routine waiver of amounts owed by patients Kickbacks to physicians Unlawful inducements to patients Encouragement of physicians to order testing that was not medically necessary Aetna has a similar case pending against a group of surgery centers 11 Ameritox v. Millennium Laboratories ( ) Enforcement by a private party rather than the government Ameritox brought suit against Millennium under Florida's unfair competition statute for violation of, among other laws, the federal Anti-Kickback Statute and the Stark Law Jury awarded Ameritox $ million and rejected all counterclaims Millennium appealed Government filed an amicus curiae brief supporting Ameritox U.S. Court of Appeals overturned the verdict on jurisdictional grounds 12 6

8 ACS v. Pinnacle ( ) ACS filed suit against Pinnacle in July 2014 claiming an illegal kickback scheme Alleged payments to physicians associated with testing covered by commercial payors, in exchange for the referral of testing reimbursed by government payors Case filed in state rather than federal court Various legal theories alleged, including violation of Florida's Unfair and Deceptive Trade Practices Act Pinnacle has filed a countersuit 13 Applicable Laws Anti-Kickback Statute Stark Law False Claims Act CMP Law Substantially in Excess Prohibition Criminal Health Care Fraud State Laws 14 7

9 Business Arrangements with Physicians Making Payments to Physicians Stark, AKS, FCA implications (and similar state laws) AKS: personal services safe harbor Stark: personal services or fair market value exception June 25, 2014 Special Fraud Alert Practical considerations: Policy/procedure to define the decision making process Documentation of all decisions/arrangements (written agreement) Engagement of an outside vendor to perform a FMV analysis 16 8

10 Placing Personnel in Physician Offices Topic has renewed significance in light of the June 25, 2014 Special Fraud Alert essentially prohibiting payments to physicians for specimen processing and handling OIG Guidance 1994 Fraud Alert (and subsequent OIG letters) CLIA State laws/agency guidance Practical considerations Documentation of the arrangement Monitoring to help ensure compliance 17 Renting Space from Referral Sources AKS Safe harbor for space rental February 2000 Special Fraud Alert on Rental of Space in Physician Offices Stark law Exception for space rental State law Practical considerations Fair market value assessments "Commercially reasonable" analyses 18 9

11 Providing Supplies/Equipment to Clients AKS OIG letters: articulate factors considered by OIG when assessing whether the item/service has "independent value" to the client Stark law Exception to the definition of remuneration State laws/guidance New York's list of prohibited items April 2002 Practical considerations Monitoring of use of supplies and equipment Equipment loan/use agreements 19 Structuring Client Billing Arrangements Federal law OIG Advisory Opinions (99-13 and 15-04) State law Client billing prohibitions Exceptions (e.g., lab-to-lab) Mark-up prohibitions Disclosure requirements Fee-splitting prohibitions Kickback prohibitions Medicaid best price requirements Practical considerations 20 10

12 Waivers/Discounts Offered to Out-of-Network Patients Waivers/Discounts: Interested Parties Patients Physicians Private insurers Threats of revocation of in-network status Payments directly to patients/caps on OON benefits Lawsuits BCBS change in policy on plan to be billed Government agencies (maybe?) 22 11

13 Waivers/Discounts: Legal Considerations Federal law OIG Advisory Opinion No ERISA State law Insurance fraud Physician inducement Patient inducement Practical considerations 23 12