Audit Tools/Approach. Organization. Role and Contact Information Regional Director of Compliance x 5206

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1 Audit Tools/Approach Organization Pediatrix Medical Group Neonatal physicians who provide services at more than 275 neonatal intensive care units Nation s largest provider of newborn hearing screens American Anesthesiology, Inc. More than 550 anesthesiologists and advanced practitioners Employs more than 1,450 physicians in 33 states and Puerto Rico Role and Contact Information Regional Director of Compliance x

2 Organization Regional Non-Profit Acute Care Hospital System 8 Acute Care Hospitals 3 Joint Ventured Hospitals 8 Affiliate and Specialty Hospitals 7 Joint Ventured Short Stay Surgical Hospitals/ Endoscopy 17 Joint Ventured Ambulatory Surgical Centers 2 Hospital / JV Short Stay Surgical Hospital Under Development 29 Outpatient Facilities 122 Health Texas Physician Network with 3,000 physicians Role and Contact Information VP, Internal Audit Team of 12 Auditors Nicole Huff, CHSP, CHC Edward Hospital and Health Services Organization Regional Non-Profit Acute Care Hospital System Magnet Status Acute Care Hospital Behavioral Health 2 Fitness Centers 2 Outpatient Cancer Centers 2 Immediate Care Centers Edward Management Corporation (billing service) Foundation Surgery Center Joint Ventures Role and Contact Information Chief Compliance & Privacy Officer

3 There is no kind of dishonesty into which otherwise good people more easily and frequently fall than that of defrauding the Government. -Benjamin Franklin 5 Physician Self-Referral Law (STARK) Anti-Kickback Statute False Claims Act and Qui Tam Actions Civil Monetary Penalties Law Auditing Techniques and Tools Physician Arrangement Scenarios 6

4 Promote quality healthcare Ensure public safety Prevent fraudulent waste of healthcare dollars associated with: Payment for unnecessary medical services Payment for services that were not provided Payment for duplicative services 7 Imprisonment Monetary penalties and fines Exclusion from participation in Federal Health Care programs Extensive and costly government investigations Unwanted and negative publicity Loss of community support 8

5 Stark I was effective Stark II was effective Stark I regulations were published Phase I of Stark II regulations were published Phase II of Stark II regulations were published Phase III of Stark II regulations were published 9 Unless an exception applies, a physician is prohibited from making a referral to an entity for the furnishing of designated health services ( DHS ) payable by Medicare, if the physician or an immediate family member of the physician has a financial relationship with the entity. 10

6 No entity furnishing DHS may submit a claim to Medicare or bill any individual or entity for services furnished pursuant to a prohibited referral. The primary focus of Stark is a Medicare billing and payment rule. 11 General Prohibition on Self-Referrals and Associated Billing and Payment (cont.) No penalties for making a prohibited referral No payment may be made for claims submitted pursuant to a prohibited referral Stark is a strict liability statute Sanctions (including civil monetary penalties and potential program exclusion) may be imposed against any person who submits or causes such claims to be submitted or fails to make a timely refund of any amounts collected 12

7 General Prohibition on Self-Referrals and Associated Billing and Payment The Stark prohibitions only apply to referrals for DHS covered by Medicare. Stark does not prohibit self-referrals for DHS covered by Medicaid or other federal healthcare programs. Many states have enacted their own self-referral laws which deny DHS entities payment by the state s Medicaid program for prohibited referrals. 13 The DHS subject to the physician self-referral prohibitions are as follows: Clinical laboratory services Physical/occupational therapy and speech-language pathology services Radiology and certain other imaging services, including nuclear imaging services Durable medical equipment and supplies Parenteral and enteral nutrients, equipment and supplies Prosthetics, orthotics and supplies Home health services Outpatient prescription drugs Inpatient and outpatient hospital services Outpatient speech-language pathology services 14

8 A physician is prohibited from making referrals for Medicare-covered DHS to an entity with which the physician or an immediate family member has a financial relationship, unless an exception applies. A financial relationship is defined as a direct or indirect ownership or investment interest or a direct or indirect compensation relationship 15 Compensation Arrangement: defined as: any arrangement involving remuneration between a physician (or immediate family member) and an entity. When we are analyzing these arrangements must never forget family members. Example: Physician s wife is a CPA and does consulting work for the hospital CFO. Therefore, the physician has a compensation arrangement with that hospital. 16

9 Examples: Rental of space, equipment Professional services agreements with stipends; collection guarantees On-call arrangements 17 Remuneration: defined as: any payment or other benefit made directly or indirectly, overtly or covertly, in cash or in kind. Does not have to be money Pay off a physician s student loan Use of hospital personnel for free instead of the physician having to hire someone 18

10 Permitted Compensation Arrangements Direct compensation arrangement: remuneration passes between the referring physician and the entity Example: a medical director agreement between a hospital and a physician where the hospital and the physician are the signatures to the agreement and the physician receives the compensation directly from the hospital 19 Indirect Compensation Arrangements Must be an unbroken change of persons or entities between the DHS entity and the referring physician; each with a financial relationship; an investment interest or a compensation arrangement. Example: a hospital has a contract with a group practice for the provision of medical director services. The group practice employees the physician who is to provide services. The hospital pays the group practice and then the group practice, through some other mechanism, pays the physician. For example: an employment agreement between the group practice and the physician. 20

11 Rental of office space Rental of equipment Bona fide employment relationships Personal service arrangements Physician recruitment Retention payments in underserved areas Isolated transactions Unrelated remuneration Group practice arrangements with hospitals Payments by a physician Charitable donations by a physician Non-monetary compensation up to $300 (includes an annual adjustment) Fair market value compensation Medical staff incidental benefits Risk sharing arrangements Compliance training Indirect-compensation arrangements Referral services Obstetrical malpractice insurance subsidiaries Professional courtesy discounts Community wide health information systems Electronic prescribing items and services Electronic health records items and services 21 Fair market value Commercially reasonable Volume or value of referrals Other business generated Set-in-advance Note: These terms appear throughout most of the 23 permitted compensation arrangement exceptions. 22

12 Key Definitions (cont.) Fair market value: the value in arm s-length transactions, consistent with the general market value. Commercially reasonable: sensible, prudent business agreement, from the perspective of the particular parties involved, even in the absence of potential referrals. Volume or value of referrals: Does not include time or service based Does include aggregate compensation Does include referrals for Medicare DHS Does not include referrals for non-medicare covered services Does not include referrals for the professional component of DHS personally performed by the referring physician 23 Key Definitions (cont.) Other business generated: includes private pay business, as well as Medicare covered DHS and other Medicare items or services. Set-in-advance: the compensation amount, rate or formula must be set out in an agreement between the parties before the furnishing of items or services for which the compensation is paid and may not be changed during the term of the agreement in a manner that reflects the volume or value of referrals or other business generated between the parties. 24

13 Key Definitions (cont.) Conditioning compensation on referrals: relates to a limited exception under which a DHS Entity may condition compensation on referrals from a referring physician who is a bona fide employee of the DHS Entity. 25 Payment penalties No payment may be made by Medicare for a DHS that is provided as a result of a prohibited referral The physician or DHS Entity must refund If not refunded on a timely basis - $10,000 for each act Improper claims Any person who presents or causes to be presented a bill or claim for a service that the person knows or should know is for a DHS provided as a result of a prohibited referral in violation of the Stark law will be subject to a civil monetary penalty of up to $15,000 for each claim Possibly subject to treble damages Circumvention schemes Civil monetary penalties can be imposed up to $100,000 for any arrangement or scheme which a physician or DHS Entity knows or should know has a principal purpose of assuring referrals by the physician to the DHS Entity 26

14 Made by DHHS based upon procedures set forth by the U.S. Attorney General Statute of limitations for such claims 6 years CMP and exclusion are not mutually exclusive If a party successfully defends against the imposition of CMP, the government will not seek exclusion Exclusion orders apply both to Medicare and Medicaid The OIG may exclude only from Medicare The OIG then directs a state or multiple states to exclude the person or entity for the same period time 27 Corporate Integrity Agreement ( CIA ) Typical term is 5 years There are standard requirements for each CIA these relate to basic compliance activities such as a Code of Conduct, policies and procedures, etc. Certificate of Compliance Agreement ( CCA ) Basically an agreement to maintain existing compliance programs Deferred Prosecution Agreement ( DPA ) Stipulate to the facts in a writing, basically an admission If the entity does not comply with the terms of the DPA, the stipulation of facts is entered into evidence against the entity 28

15 The Anti-Kickback Statute 42 U.S.C. 1320A 76(b) 29 [T]he anti-kick statute prohibits in the health care industry some practices that are common in other business sectors. In short, practices that may be common or longstanding in other businesses are not necessarily acceptable or lawful when soliciting federal health care program business. *OIG Compliance Program Guidance for Pharmaceutical Manufacturers 30

16 Whoever knowingly and willfully offers or pays (or solicits or receives) any remuneration (including any kickback, bribe or rebate) directly or indirectly, overtly or covertly, in cash or in kind to any person to induce such person - to purchase, lease, order or arrange for a service or item for which payment may be made, in whole or in part, under a Federal healthcare program, shall be guilty of a felony, shall be fined not more than $25,000 or imprisoned for not more than five years or both. 42 U.S.C. 1320a 7(b). 31 To prevent inappropriate medical referrals by providers who may be unduly influenced by financial incentives To prevent overutilization and increased federal healthcare program costs To prevent unfair competition To ensure the proper reporting of costs to the government 32

17 Applies to both sides: offer/pay and solicit/receive. Interpreted broadly one purpose test. If one-purpose of the transaction is to induce referrals then the entire transaction is tainted Applicable to wide variety of common financial relationships that do not involve obvious kickbacks or fraud. Many practices common in the healthcare industry implicate the AKS. The fact that a business arrangement is common is not a defense! 33 Intent-based, but requisite intent may be inferred from the circumstances. In contrast to the stark law which is a strict liability statue where intent is irrelevant There are also state anti-kickback statutes, some of which are more broad than the Federal AKS. 34

18 Jury instructions from U.S. v. Weinbaum et al. (Tenet/Alvarado case), Oct. 26, 2005: To offer to pay remuneration to induce referrals means to offer to pay remuneration with the intent to gain influence over the reason or judgment of a person making referral decisions. 35 Jury instructions from U.S. v. Weinbaum et al. (Tenet/Alvarado case), October 26, 2005: The intent to gain such influence must have been one material purpose for which the remuneration was offered or paid. On the other hand, the defendants cannot be convicted merely because they hoped or expected or believed that referrals may occur from remuneration that was designated wholly for other purposes. An act is done knowingly if the defendant is aware of the act and does not act through ignorance, mistake, or accident. An act is done willfully if done voluntarily and intentionally with the purpose of violating a known legal duty. In the context of the anti-kickback statute, to establish that a defendant acted knowingly and willfully, the government must prove that the defendant (1) knew that the anti-kickback statute prohibited the offering or paying of remuneration to induce referrals; and (2) engaged in prohibited conduct with the specific intent to disobey the law. 36

19 Sanctions for violations can be severe: Substantial criminal fines and up to 5 years imprisonment. Exclusion from participation in Medicare, Medicaid and other federally funded healthcare programs individually and at the corporate level. Civil monetary penalties up to $50,000 per offense. 37 Equipment or space leases Personal services arrangements with physicians or others in a position to refer Gifts and business courtesies to patients or referral sources Professional courtesy discounts Waiver of patient copayments and deductibles Marketing arrangements Educational funding to providers from vendors Gifts or entertainment Free use of demonstration products Gain sharing arrangements 38

20 Those who structure their business arrangements to satisfy a statutory exception or regulatory safe harbor are protected from liability under the AKS. 39 Bona fide employment arrangements Certain discounts Payments to group purchasing agents Risk-sharing arrangements with managed care plans Waivers of coinsurance for federally qualified health centers 40

21 Investment interests Space rental Equipment rental Personal service and management contracts Sale of a practice Referral services Warranties Discounts Employees Group purchasing arrangements Certain waivers of Part A coinsurance and deductibles 41 Certain arrangements with managed care plans Practitioner recruitment OB malpractice insurance subsidies Investments in group practices Cooperative hospital services organizations Ambulatory surgical centers Referral arrangements for specialty services Ambulance replenishing 42

22 42 USC 1320a-7b(b)(3)(B) 42 CFR (i) Remuneration does not include any amount paid by an employer to a bona fide employee. Regulatory preamble reflects view that there is a reduced potential for program abuse because employers are presumed to have greater degree of control over activities of employees. 43 Typical transactions that should be structured to meet this safe harbor: Consulting or other services arrangements with physicians Research arrangements with physicians or healthcare institutes Services arrangements with manufacturers or other vendors 44

23 42 CFR (d) Written agreement that covers all services. If services will be on a part-time basis, agreement must specify exactly that schedule of intervals, their precise length and the exact charge for the intervals. Term of agreement must be for at least one year. Aggregate compensation must be set in advance, be consistent with fair market value and not be determined in a manner that takes into account the volume or value of referrals or business otherwise generated. Aggregate services contracted for do not exceed those reasonably necessary to accomplish the commercially reasonable business purpose of the services. 45 Space Rental: 42 CFR (b) Equipment Lease: 42 CFR (c) Requirements substantially similar to safe harbor for personal services contracts. 46

24 Written agreement. Specifies and covers all of the equipment/premises leased. If part-time lease, agreement must specify exactly the schedule of intervals, their precise length and the exact rent for the intervals. Term of agreement must be for at least one year. Aggregate rental charge must be set in advance, be consistent with fair market value and not be determined in a manner that takes into account the volume or value of referrals or business otherwise generated. Aggregate equipment/space leased must not exceed that reasonably necessary to accomplish the commercially reasonable business purpose of the rental. 47 The AKS safe harbor applies only to hospitals, but the Civil Monetary Penalties Statute permits waiver in certain circumstances: Must not be routinely offered. Must not be advertised. May be offered only pursuant to: A good faith, individualized determination of financial need; or After making reasonable collection efforts 48

25 The FCA is violated if a person knowingly presents, or causes to be presented, to an officer or employee of the United States Government or a member of the Armed Forces of the United States, a false or fraudulent claim for payment or approval. 31 U.S.C. 3729(a)(1). A FCA claim must have the following three elements: The submission of a claim for payment to the government; The falsity of that claim; and Knowledge of that falsity, or reckless disregard or deliberate ignorance of the truth or falsity of that claim 49 An optometrist submitted 551 claims to Medicaid for eye services that he allegedly never performed. The court found that the evidence established beyond question that the defendant presented the claims to Medicaid with the knowledge that such claims were false and fictitious. A nursing home operator and a physician submitted 120 claims to Medicare for services neither personally performed by the physician nor performed under the physician s supervision. The court found that the nursing home operator possessed knowledge or guilty intent in presenting the false claims. Further, the court stated that the physician acted with the knowledge that he was not entitled to the proceeds. 50

26 The FCA provides for mandatory treble damages and mandatory civil penalties between $5,000 and $10,000 per violation for each false claim submitted before September 29, 1999 False or fraudulent claims submitted on or after that date - $5,000 - $11,000 per claim Damages are calculated based upon actual damages to the United States In the context of FCA claims based upon a Stark law violation, the measure of damages will be the entire amount reimbursed that was not payable due to Stark violations 51 The FCA contains a provision that allows private citizens with original knowledge of alleged false claims to stand in for the government and sue the alleged perpetrator on behalf of the government Qui Tam is a Latin phrase that means: he who brings the action for the King as well as himself. The FCA creates incentives for whistleblowers, referred to as relators, to expose alleged fraud The relator may collect up to 30% of the money recovered 52

27 CMPs may be imposed on: Any individual or entity that knowingly submits an improperly filed claim for payment under a federal health care program. A hospital or critical access hospital that knowingly makes a payment to a physician to induce the reduction of services to patients under Medicare or Medicaid. Any person who violates the anti-kickback statute. Other acts that can trigger CMPs: Claims for physician services provided by an individual who is unlicensed or who obtained a license through misrepresentation Claims for services that were knowingly furnished while the provider was excluded from a Federal Health Care program Claims for services that are medically unnecessary and part of a pattern of such claims 53 Knowledge standard: Acting in deliberate ignorance of the truth or falsity of the information; or Acting in reckless disregard of the truth or falsity of the information No proof of specific intent to defraud is required 54

28 OIG Administrative Proceeding: No jury heard by administrative law judge Hearsay is permitted Limited discovery Preponderance of evidence standard not beyond a reasonable doubt 55 The OIG is authorized to seek different amounts of CMPs and assessments based on the type of violation. For example: False or fraudulent claims: $10,000 per item or service plus assessment of up to 3 times the amount claimed Anti-kickback statute violation: $50,000 per improper act plus damages of up to 3 times the remuneration at issue (regardless of whether some remuneration was for a lawful purpose) Exclusion from Federal Health Care Programs 56

29 57 Determine if audit needs to be under attorney-client privilege Determine the audit period Gather the following data Payments to all physicians/physician groups Contract matrix/database Payments from physicians - leases Evaluate level of risk - 100% testing vs. sampling Group types of agreements and assign work to the team 58

30 Develop testing templates containing attributes for each contract type Gather vendor files If you have employed physicians don t forget to get payroll information Determine if wire transfers are ever made to physicians/physician groups Consider intercompany transactions 59 Medical Directorship Administrative Services Professional Services Honorariums Leases Income Guarantee/Relocation 60

31 Analyze payments to physicians/physician groups Complete templates Summarize issues Create Audit Report 61 If you find an expired agreement that expired before audit period, you ll need to go back to determine total payments made under expired agreement to review entire issue Contracts may not cover services paid for so read contracts carefully, especially if paid amounts are not static 62

32 Have to consider how to handle past problems as well as getting new agreements/ amendments executed Things always take longer than you anticipate 63 64

33 Some healthcare providers use an average from three different physician surveys (current data): Medical Group Management Association (MGMA) Sullivan and Cotter American Medical Group Association (AMGA) Other consideration local market factors physician specialty *Fair Market Value ( FMV ) 65 Contract Review Payment(s) made to contracting party Memorandum of understanding Documentation to support FMV compensation Term has not expired and at least 1 year Executed before or at commencement date 66

34 Time logs support duties per agreement Medical Director signature and duties are authentic (not photocopied) Payments are consistent with contract terms. Written agreement signed by both parties 67 Medic al Direc t or Bi-w eek ly Tim e Rec ord and Ac t ivit y Log (Save t o your Desk t op prior t o Com plet ion) Medical Director: Designated Supervisor (Adm Dir or VP) Director For (Unit/Service): Dates From To Week Day Date (Brief Description Activity Meeting Attended or Duty Performed of is REQUIRED)*** Hours Worked Sunday Sunday Sunday Sunday Sunday Sunday Sunday Sunday Sunday Sunday Sunday Sunday Sunday Sunday TOTAL HOURS MEDICAL DIRECTOR SIGNATURE By signing this document, the Medical Director affirms and attests that the services and the number of hours recorded for such services set forth herein were performed by the Director and that all designated duties were fully performed during this period. Signature Date DESIGNATED SUPERVISOR (ADMIN DIR OR VP) SIGNATURE By signing this document, the Designated Supervisor affirms and attests that they have confirmed that the services rendered and the number of hours recorded for such services by Medical Director satisfy the contractual obligations of the Director. Signature Date ***General Routine Duties Per Contract include, but are not limited to: Administrative Oversight - Policy review and enforcements, Compliance with regulatory bodies; Planning and Resource Management - Program planning, Budget development, Expense control; Performance Improvement - Improves problem processes, implements evidence-based best practice protocols, assesses Center of Excellence measures; Education Marketing - sponsors and/or delivers continuing education to Med Staff, patients and community; Patient/Customer Satisfaction - Identifies and works on opportunities for improvement based on Patient satisfaction results. Communicates results to and works with physicians to identify and work on opportunities for improvement. Other duties include on-call availability and the provision of brief consultations and/or signatures. 1. All information recorded on this Log must be legible. Please print or type all information. 2. Please total your hours prior to submitting this Log to your hospital representative. 3. Log must contain original activity performed on a bi-weekly basis. Submitting photocopied logs is prohibited. 4. Log must contain original signatures of all parties attesting to services provided on a bi-weekly basis. Photocopied signatures are prohibited. 68

35 Written agreement signed by both parties Services must be performed by the physician. Incident to services performed by employees or independent contractors of the practice are prohibited. Productivity bonuses are permitted. Measure physician productivity by relative value units (RVUs) Compensation amount set for one year Set FMV at the time each MD is hired Written agreement signed by both parties Rental charges are set in advance and consistent with FMV. Specifies the premises it covers Term is at least one year A holdover month-to-month rental for up to 6 months Rental payments must be made and/or collected timely

36 Physician cannot hire an independent contractor to perform the services. Payment should be supported by schedule. Written agreement signed by both parties Compensation consistent with FMV Term is at least one year 72

37 Case Studies 73 74

38 Covenant paid a settlement of $4.5 million for improperly using Medicare funds to pay 5 employed physicians. Covenant claimed compensation was justified based on the physicians productivity. The employed gastroenterologist was paid $1.8 million in All five physicians were amongst the highest physicians paid in the country. 75 Paid $36 million after filing a voluntary selfdisclosure during an acquisition by Advocate Health Care. Questionable relationship between Condell and its physicians from 2002 through 2007: leases of medical office space at rates below fair market value; improper loans to physicians; and hospital reimbursement to doctors who performed patient services without required written agreements filed false claims for reimbursement 76

39 In, April 2008, St. John voluntarily selfdisclosed that their financial arrangements with 23 physicians did not appear to meet certain exceptions. St. John settled with the government by paying approximately $13.2 million for allegations it violated the False Claims Act