Ober Kaler Health Law Client Alert

2014 Ober Kaler Health Law Client Alert CMS Self-Disclosure Protocol Overview, Practical Tips and Summary of Settlements Prepared by: Catherine A. Martin 1 Principal, Ober Kaler camartin@ober.com 410.347.7320 www.ober.com I. The CMS Self-Disclosure Protocol Background Under delegated authority, the Centers for Medicare and Medicaid Services (CMS) released its Self-Referral Disclosure Protocol (SRDP) on September 23, 2010, with the goal of enabling providers and suppliers to selfdisclose actual or potential violations of the physician self-referral statute known as Stark. Stark, Section 1877 of the Social Security Act, prohibits physicians from making referrals for certain designated health services payable by Medicare to an entity with which the physician (or an immediate family member) has a financial relationship. The SRDP is open to all health care providers and suppliers, whether individuals or entities. The SRDP is available only for matters that may actually violate the Stark law (matters which may violate the Anti- Kickback Statute as well should be reported to the Office of the Inspector General s Self Disclosure Program). The SRDP has quickly become the much needed pathway for providers and suppliers to seek resolution of actual or potential Stark violations. Communicating with CMS: 1 The author wishes to acknowledge the assistance of Hannah Whitman Clark, and associate at Ober Kaler, in preparing this article.

When considering making a disclosure to the SRDP, providers and suppliers should understand that they may need to inform CMS early in the process about other related and potentially non-compliant arrangements, and about their particular time constraints. As part of its internal review and resolution process, CMS coordinates with the OIG and the Department of Justice. Disclosing parties should notify CMS in their SRDP submissions if they are contemporaneously disclosing to the OIG arrangements that are related to, or which involve the same parties as, the arrangements in the SRDP disclosure. Disclosing parties should also notify CMS know if the matter is time-sensitive. CMS may be able to prioritize its review of a time sensitive disclosure to accommodate the needs of a disclosing party due to a pending transaction, or some other reason. Developing a Submission: Through the SRDP, CMS considers five core factors in determining whether to reduce the amounts owed namely, the nature of the violation, the disclosure s timeliness, the provider s cooperation, the matter s litigation risk, and the disclosing party s financial position. Providers and suppliers should keep those factors in mind when drafting their submission. They should carefully follow the SRDP instructions to submit as much information as CMS will need to evaluate the submission based on those five factors. Disclosing parties will need to provide CMS with the name, National Provider Identifier Number, and Tax Identification Number (if applicable) of each physician or group practice involved in the non-compliant arrangement. CMS encourages disclosing parties to thoroughly demonstrate how the noncompliance occurred, the full extent of the noncompliant conduct, and how that conduct was cured or brought into compliance. CMS also encourages disclosing parties to include a timeline of the noncompliance and the steps taken to cure it, even if the matter is not fully cured. Disclosing parties should include any additional information that they believe CMS should be aware of for settlement purposes, such as explanations of their compliance programs. When preparing a submission, disclosing parties must provide a financial analysis. The financial analysis conducted for the disclosure should be performed on an arrangement-by-arrangement basis and broken down by year and physician. The disclosure should reflect the total amount that is actually or potentially due based upon the applicable look back period, though estimates are acceptable when accompanied by an explanation of the need to estimate the overpayment amount, and an explanation of the methodology used to develop the estimate. Separate CMS divisions handle different stages of the SRDP process. The disclosing parties should describe the specific time periods of the non-compliant arrangement from the inception of the arrangement and not limit that discussion to the applicable look back period. For purposes of calculating and/or estimating the potential overpayment liability, the look back period is limited to the 4-year reopening period set forth at 42 C.F.R. 405.980(b) and the financial information provided can be limited to this period.

The Division of Technical Payment Policy reviews disclosures, then will meet with the Office of Financial Management (OFM) to discuss mitigating facts and circumstances. The OFM then calculates a proposed settlement amount. If the disclosing party is considering making an inability to pay argument, it should notify CMS early in the process, though the entity s distressed financial condition will not be considered until after the analysis of the self-disclosure is complete and the OFM has calculated an initial determination of the proposed settlement amount. Submitting a Disclosure: CMS does not dictate use of a particular format for SRDP disclosures, but they do require that electronic submissions be in a readable format like Microsoft Word and Excel. CMS encourages disclosing parties to be brief, and to provide copies of relevant supporting documents. SRDP disclosures must be submitted electronically to 1877SRDP@cms.hhs.gov, and the original and a copy must be mailed to CMS. Once a disclosure is submitted, providers sometimes discover additional arrangements that warrant disclosure. In that case, providers should submit additional separate disclosures, and the submission will again toll the repayment obligation. Where providers discover additional information relevant to arrangements already disclosed, they may file a supplemental submission so that their disclosure is comprehensive. Post Disclosure Change in Ownership: Potential Stark violations are frequently discovered when providers review their physician arrangements as part of the due diligence review prior to a potential merger or acquisition transaction. In 2013, CMS clarified how providers should handle post-disclosure changes of ownership. CMS made clear that the liability of an overpayment stemming from potential noncompliance with the Stark law lies with the entity that is the party to the relevant Medicare provider agreement, regardless of when the noncompliance occurred. Therefore, only the current party to the provider agreement would receive the release from Stark liability. CMS also clarified that to the extent a purchaser accepts assignment of the Medicare provider agreement, the purchaser is liable for the overpayments related to the Stark noncompliance as of the effective date of the change of ownership, including any noncompliance that occurred prior to the change of ownership. Purchasers may choose to either resolve the disclosure under the SRDP, or may withdraw the disclosure. Where a purchaser elects to withdraw the disclosure, it must have determined that Stark was not violated, or it must pay the full amount of the overpayment to Medicare, losing the benefit of a potential compromise through the SRDP. II. SRDP Statistics

Since CMS implemented the SRDP, many providers of services and suppliers have taken advantage of the ability to resolve liabilities. The Affordable Care Act (Pub. L. 111-148) established a deadline for reporting and returning overpayments, which has provided the impetus for numerous providers and suppliers to submit to the SRDP because submission of a disclosure temporarily tolls a provider s obligation to return overpayments. The SRDP produced three settlements in 2011, thirteen in 2012, and twenty-one in 2013. The sizes of the settlements vary dramatically, suggesting that settlement calculations are highly fact dependent. CMS has yet to disclose the total potential overpayments in settled cases, so providers are unable to calculate an average discount that may be realized through disclosure. As the chart below demonstrates, commonly disclosed violations include failure to comply with the personal service arrangements exception, the nonmonetary compensation exception, and the rental of office space exception. A brief description of each settlement reflected in the chart below follows. Resolved Settlements 2011-2013 Personal Services Nonmonetary Comp Rental Office Space In Office Ancillary Bona Fide Employee Physician Recruitment FMV Compensation Whole Hospital The SRDP contains a list of required information that a party s disclosure must include such as a description of the actual or potential violations, and a financial analysis of the actual or potential violations. You can learn more about the history of the SRDP and the CMS s internal review process by reading the Implementation Report to Congress. CMS also published answers to a set of SRDP Frequently Asked Questions in May, 2012. Last but not least, AHLA s Practitioner s Guide to the Stark Self Disclosure Protocol, published in 2013, is an excellent resource containing practical tips for successfully submitting a disclosure.

III. Published SRDP Settlements 2011 1. February 10 A Massachusetts hospital settled several Stark law violations involving failure to satisfy the requirements of the personal services arrangements exception with department chiefs and medical staff for leadership services, and for arrangements with physician groups for on-site overnight coverage for patients at the Hospital. Settlement Amount - $579,000.00 2. September 10 An Ohio physician group practice settled two Stark law violations involving prescribing and supplying a certain type of DME that did not satisfy the requirements of the inoffice ancillary services exception. Settlement Amount - $60.00 3. November 11 A Mississippi critical access hospital settled several violations of the Stark law relating to its failure to satisfy the requirements of the personal services arrangements exception for arrangements with hospital and emergency room physicians. Settlement Amount - $130,000 2012 1. January 5 - A California hospital settled two Stark law violations that exceeded the annual nonmonetary compensation limit for physicians. Settlement Amount - $6,700 2. January 5 - A hospital in Georgia settled violations involving two physicians and the annual nonmonetary compensation limit. Settlement Amount - $4,500 3. March 9 - A physician group practice in Iowa settled Stark law violations after disclosing that its compensation for certain employed physicians failed to satisfy the requirements of the bona fide employment relationship exception. Settlement Amount - $74,000 4. March 20 - An Arizona acute care hospital settled a Stark law violation after disclosing a single physician arrangement that did not meet the personal service arrangements exception. Settlement Amount - $22,000 5. April 5 - A hospital located in North Carolina settled six Stark law violations for $6,800 after disclosing that it exceeded the calendar year nonmonetary compensation limit for two physicians during three consecutive years. Settlement Amount - $6,800

6. June 13 - An Alabama hospital resolved a Stark violation involving a rental charge formula that did not satisfy the requirements of the rental of equipment exception. Settlement Amount - $42,000 7. June 28 - A hospital in Maine settled potential Stark law violations relating to arrangements with a physician and physician group practice that failed to satisfy the requirements of the personal services exception. Settlement Amount - $59,000 8. July 31 - A Massachusetts hospital settled violations concerning arrangements with two physician practices for call coverage that did not satisfy the personal service arrangements exceptions. Settlement Amount - $208,000 9. August 15 - A hospital located in Florida resolved arrangements with three physicians that did not satisfy the personal service arrangements exception. Settlement Amount - $22,000 10. August 22 - A Missouri hospital settled Stark law violations involving two physicians for the provision of dental services that did not meet the requirements of the personal service exception. Settlement Amount - $125,000 11. October 25 - A North Carolina-based general acute care hospital and its hospice agreed to settle several Stark law violations involving arrangements and payments that failed to meet the physician recruitment, fair market value, and personal services arrangement exceptions. Settlement Amount - $584,700 12. November 6 - A hospital in California settled a Stark law violation, which arose from its failure to meet the physician recruitment exception. Settlement Amount - $28,000 13. December 27 - An acute care hospital in California settled a violation of the Stark law after disclosing that it failed to meet the personal service arrangements exception for an on-call arrangement with a physician. Settlement Amount - $1,600 2013 1. February 21 - A South Carolina general acute care hospital settled several violations of the Stark law involving arrangements with physicians and physician group practices that failed to satisfy the requirements of the FMV compensation exception, the personal services arrangements exception, and the rental office space exception.

Settlement Amount - $256,000 2. March 7 A Massachusetts acute care hospital settled several Stark law violations involving arrangements with physicians that failed to satisfy the definition of entity, the rental office space exception, and the personal services arrangement exception. Settlement Amount - $199,400 3. March 29 A Louisiana acute care hospital used the SRDP to resolve violations related to professional service arrangements with physicians, a professional staffing organization, and a physician group practice. Settlement Amount - $317,620 4. May 7 A Minnesota hospital agreed to settle a Stark violation that stemmed from a recruitment arrangement that failed to satisfy the requirements of the physician recruitment exception. Settlement Amount - $760.00 5. May 7 A Texas rehabilitation hospital resolved several Stark violations through the SRDP involving arrangements for ownership interests held by certain physicians that failed to satisfy the whole hospital exception. Settlement Amount - $23,730 6. May 22 A general acute care hospital in New York agreed to settle a violation of the Stark law that involved an arrangement that failed to satisfy the requirements of the rental office space exception. Settlement Amount - $78,500 7. June 6 A Florida acute care hospital settled several Stark violations relating to arrangements with multiple physicians for emergency cardiology call-coverage that did not satisfy the requirements of any applicable exception. Settlement Amount - $109,000 8. June 6 A general acute care hospital in Florida settled several Stark violations involving arrangement with a group practice to provide residency program services, a physician to provide electronic health records subject matter expert services, a physician to provide Medical Director services, and a physician to provide leadership services for a hospital committee, none of which satisfied applicable exceptions. Settlement Amount - $76,000 9. June 12 An Alabama acute care hospital resolved a violation of the Stark law involving an arrangement with a physician group practice for the rental of office space that did not satisfy the exception. Settlement Amount - $187,340

10. June 18 A Wisconsin critical access hospital used the SRDP to resolve a violation of the Stark law relating to an arrangement with one physician for the provision of emergency room call coverage services at adjacent walk-in clinics that failed to satisfy any applicable exception. Settlement Amount - $12,724 11. June 18 A Tennessee acute care hospital settled a Stark violation involving an arrangement with one physician for the supervision of cardiac stress tests that failed to satisfy the requirements of any applicable exception. Settlement Amount - $72,270 12. June 20 An acute care hospital in Pennsylvania resolved several Stark violations related to arrangements for Medical Director services with certain physicians and a physician practice that did not satisfy the personal services exception. Settlement Amount $24,740 13. July 8 A general acute care hospital in Ohio used the SRDP to settle violations of the Stark law that involved arrangements with certain physicians for EKG interpretation, medical director services, Vice-Chief of Staff services, and hospital services that did not satisfy the requirements of any applicable exception. Additional violations stemmed from arrangements with certain physicians and a physician group practice for the donation of EHR items and services that failed to satisfy the applicable exception. Settlement Amount $235,565 14. July 11 A Texas acute care hospital settled a Stark violation involving an arrangement for case management physician advisor services with a physician that did not satisfy the requirements of any applicable exception. Settlement Amount - $54,108 15. August 19 A physician group practice in Louisiana resolved a Stark violation relating to arrangements with two physicians that failed to satisfy the requirements of the in-office ancillary services exception. Settlement Amount - $13,572 16. August 20 A non-profit community hospital in Minnesota settled a violation of the Stark law that involved an arrangement with a physician group practice for the rental of office space and provision of support services that failed to satisfy the requirements of any applicable exception. Settlement Amount - $9,570 17. August 29 A California acute-psychiatric hospital resolved two Stark violations relating to arrangements with two physicians for the provision of psychiatric services that did not satisfy the requirements of any applicable exception. Settlement Amount - $67,750

18. September 10 A North Carolina acute care hospital used the SRDP to settle several violations of the Stark law relating to arrangements with a physician to provide Medical Director Services, a physician group practice to provide medical coding and consulting services, and a physician and a physician group practice for the lease of office space, that failed to satisfy the requirements of any applicable exception. Settlement Amount - $87,110.00 19. September 12 A general acute care hospital in Texas resolved a Stark violation involving an arrangement with a physician to provide utilization review services that did not satisfy any applicable exception. Settlement Amount $82,055 20. September 18 A California acute care hospital resolved several violations of the Stark law involving arrangements with three physicians for the provision of on-call services to the Hospital s emergency department that did not satisfy the requirements of any applicable exception. Settlement Amount - $42,630 21. November 8 An acute care hospital in Oklahoma used the SRDP to settle several Stark violations relating to arrangements with four physicians for the provision of electrocardiogram interpretation services that failed to satisfy the requirements of the personal services exception. Settlement Amount - $124,008 About Ober Kaler Ober Kaler is a national law firm that provides integrated regulatory, transaction and litigation services to financial, health care, construction and other business organizations. The firm has more than 130 attorneys in offices in Baltimore, MD, Washington, DC and Falls Church, VA. For more information, visit www.ober.com.