HCCA Compliance Institute 2010 Legal & Regulatory W6, Part1 April 21, 2010 Recent Developments In Voluntary Disclosure Stark Law Jeffrey Fitzgerald Faegre & Benson LLP jfitgerald@faegre.com 303.607.3740 Not So Hypothetical, Case 1 Hospital leases office space to anesthesia group for pain medicine clinic in a hospital-owned MOB Lease expired 3 years ago; lease has no evergreen clause Under state law, an expired lease converts to a month-month tenancy Anesthesia group pays rent every month, on time Monthly rent has not changed in 5 years 2 1
Not So Hypothetical, Case 2 Popular surgeon completes term as medical staff president Surgeon receives the traditional flower bouquet and bottle of champagne on last day ($100) Medical Staff Office gives surgeon a crystal vase ($150) CMO gives surgeon pair of NFL tickets ($200) The tickets were the CMO s personal tickets, but the CMO requests reimbursement through his expense report (submitted a month after the tickets were gifted) CEO takes surgeon (and spouses) to a thank you dinner at Morton s ($100 per person) 3 Not So Hypothetical, Case 3 Moderate size orthopedic group owns an x-ray and MRI Group s compensation plan has not been updated in years Group s finances handled by an accountant who retired last year and moved to Guam Much of Group s historic financial information is disorganized or lost New accountant discovers that Group s compensation plan allocates net revenue for x-rays and MRI (both professional and technical) to the ordering physician New accountant estimates total DHS payments over the past 6 years to be over $5 million 4 2
Stark Noncomplaince Issues Stark Law and regulations have become excessively complicated Too complex to realistically expect perfect compliance? Penalties for noncomplaince can be significant Penalties can be disproportionate to conduct Minimal guidance from CMS CMS has issued some guidance concerning potential noncompliance Holdover period, lacking signature, inadvertent noncomplaince, period of disallowance 5 Stark Noncomplaince Issues Minimal guidance from HHS Office of the Inspector General OIG Open Letter to Providers (April 2009) Stark only disclosures not accepted under OIG Voluntary Disclosure Protocol Disclosures involving a combination of the Stark Law and Antikickback Statute violations will be accepted under the OIG Voluntary Disclosure Protocol 6 3
Initial Steps Identify the issue of alleged noncompliance Identify the best practice for compliance and how the arrangement fell short of the best practice standard Conduct an internal review to gather additional information Additional fact gathering almost always required Consider whether the internal review should be under the attorney-client privilege Gather and review all potentially relevant documents For example, if the issue is an expired contract, also look at invoices, timesheets, correspondence Based upon preliminary analysis, additional fact gathering is often required 7 Initial Steps Engage qualified legal counsel Use attorney-client privilege strategically Complex legal issues will likely require detailed analysis Can and should include in-house counsel Timing Stark Law regulations require repayment on a timely basis Timely basis defined to be 60 days after the DHS payment 42 C.F.R. 1003.102(a), (b)(9) As a practical matter, the factual and legal review should be conducted promptly and diligently, but not hastily 8 4
Substantive Analysis Four key questions Is there a legal duty to refund Medicare payments? Can the Entity s legal exposure be mitigated (without a repayment)? Do the benefits of a potential risk mitigation strategy outweigh the costs of the mitigation strategy? If disclosure is needed, how should the disclosure be structured? 9 Is there a duty to refund Medicare payments? The Stark Law s primary sanction is a prohibition on billing An entity may not present a claim under this title for [DHS] furnished pursuant to a referral prohibited under subparagraph (A) 42 U.S.C. 1395nn(a) The Stark Law also prohibits Medicare payment No payment may be made under this title for a [DHS] which is provided in violation of subsection (a)(1) 42 U.S.C. 1395nn(g)(1) Thus, if there is a prohibited financial relationship, then Medicare claims were submitted in violation of a statute, and Medicare payments were contrary to a statutory provision 10 5
Is there a duty to refund Medicare payments? Stark Statute contains a refund obligation If a person collects any amounts that were billed in violation of subsection (a)(1) of this section, the person shall be liable to the individual for, and shall refund on a timely basis to the individual, any amounts so collected 42 U.S.C. 1395nn(g)(2) Stark regulations include a refund obligation An entity that collects payment for a [DHS] that was performed pursuant to a prohibited referral must refund all collected amounts on a timely basis 42 C.F.R. 411.353(c) OIG can impose CMPs for failure to issue a refund of DHS payments 42 C.F.R. 1003.102(b)(9) 11 Is there a duty to refund Medicare payments? Fraud Enforcement and Recovery Act of 2009 Amended the False Claims Act Makes it a False Claims Act violation to knowingly and improperly conceal, avoid or decrease an obligation to repay the government Obligation defined to include an overpayment Unclear if a mere nonpayment of an overpayment constitutes an act to improperly conceal, avoid or decrease the obligation 12 6
Is there a duty to refund Medicare payments? While Stark is a civil statute, failure to refund could be seen as a criminal offense The failure to disclose an overpayment could be seen as an unlawful effort to conceal or perpetuate a fraud 18 U.S.C. 371 (conspiracy to defraud by obstructing and impairing a government program) 18 U.S.C. 1001 (concealment of a material fact) Medicare Fraud and Abuse Statute may impose a duty to disclose Whoever--having knowledge of the occurrence of any event affecting his initial or continued right to any such benefit or payment conceals or fails to disclose such event with an intent fraudulently to secure such benefit or payment either in a greater amount or quantity than is due or when no such benefit or payment is authorized, shall be guilty of a felony 42 U.S.C. 1320a-7b(a)(3) 13 Is there a duty to refund Medicare payments? Distinguish between a best practice and a minimal legal requirement Best practices are the preferred methodology for structuring arrangements to comply with the Stark Law Best practices are typically based upon a conservative interpretation of the law, as to be above reproach Ambiguities in the law resolved in favor of the government A minimal legal requirement is the bare minimum required to meet the letter of the law (i.e., whether there is a reasonable or colorable argument of compliance) A minimal legal requirement includes arguments that would be made if the Entity was required to defend an arrangement to an investigator Ambiguities in the law resolved in favor of the Entity 14 7
Is there a duty to refund Medicare payments? Distinguish between a best practice and a minimal legal requirement cont. For example Best practice for a space lease is a detailed written contract with FMV documentation on file But the napkin initialed by the CFO and practice administrator that says lease renewed for 5 years, same terms may meet the minimal legal requirement After full fact analysis, determine whether the actual conduct met the minimal legal requirement Stated differently, if CMS denied claims, would the provider have a reasonable argument on appeal? 15 Can the Entity s legal exposure be mitigated? Key Question 2: Can the Entity s legal exposure be mitigated? Even if there is a reasonable argument that minimal legal requirements were met, the government may have a reasonable argument of noncomplaince The government s arguments may be stronger than the provider s The government may have a viable claim under False Claims Act violation Refund of DHS will mitigate this risk Consider whether Risk can be effectively mitigated short of a repayment Risk is large enough to warrant remedial action 16 8
Can the Entity s legal exposure be mitigated? Analyze the legal exposure Compare strength of entity s legal argument against strength of government s argument Is the potential violation technical or substantive Is the conduct egregious Is there potential for (or indicia of) over-utilization or improper financial incentives? If the government investigated, does the Entity have adequate or reasonable defenses? Consider likely application of prosecutorial discretion 17 Can the Entity s legal exposure be mitigated? Identify potential mitigation Address noncomplaince prospectively If physician overpaid, request refund or return of property If physician underpaid, issue invoice and seek payment Complete audit or chart review to examine utilization issues Retroactively apply necessary criteria, is applicable Does not include back-dating documents Seek legal opinion on conduct General disclosure to MAC without refund Be cautions of mitigation requires cooperation of independent persons (e.g., physicians) 18 9
Do mitigation benefits outweigh costs? Key Question 3: Do the benefits of risk mitigation outweigh the costs of the mitigation? Acknowledge that some risk may not be able to be mitigated Falling short of best practice standard increases risk, even if Entity has strong arguments of compliance Benefits of mitigation Creates new legal defenses If entity has no decent legal defense, benefit of mitigation may be significant Demonstration/development of corporate culture Allows Entity to have greater control over the process Helps achieve a timely resolution of the issue 19 Do mitigation benefits outweigh costs? Identify risks Whistleblowers Likelihood of governmental inquiry Strength of potential allegation/interpretation Culture of compliance Calculate costs of mitigation Repayment costs Auditing costs Attorneys fees Relationship and operational costs Discuss Entity s appetite for risk 20 10
How to structure disclosure if needed? Key Question 4: If disclosure is needed, how should the disclosure be structured? Determine if there was a related violation of the Anti-kickback Statute Requires specific intent to violate the law If no Anti-kickback violation, then repayment can be addressed in manner comparable to routine billing-related overpayments No OIG or DOJ involvement necessary for overpayment resolution 21 How to structure disclosure if needed? Calculate refund amount Detailed analysis of period of disallowance needed Identify core assumptions used to calculate overpayment amount Identify each claim to be refunded Submit refund with form to MAC Whether cover letter or telephone call to MAC representative will depend upon circumstances Refund should include reasonable disclosure of the claims refunded Detailed discussion of the Stark Law issues may not be necessary (will depend upon circumstances) Consider repayments to beneficiaries 22 11
Questions? This presentation is for educational purposes only. Nothing in this presentation should be construed as legal advice, and the specific advice of legal counsel is recommended before acting on any matter discussed herein. FB.US.4864341 23 HCCA Compliance Institute 2010 Legal & Regulatory W6, Part1 April 21, 2010 Recent Developments In Voluntary Disclosure Jeffrey Fitzgerald Faegre & Benson LLP jfitgerald@faegre.com 303.607.3740 This presentation is for educational purposes only. Nothing in this presentation should be construed as legal advice, and the specific advice of legal counsel is recommended before acting on any matter discussed herein. 12