Ober | Kaler New Pitfalls in Health Care Transactions ~~~ Fraud & Abuse Perspective Bill Mathias [email protected].

Ober | Kaler • www.ober.com

New Pitfalls in Health Care Transactions

~~~Fraud & Abuse Perspective

Bill MathiasBill Mathias410-347-7667410-347-7667

[email protected]@ober.com


Some Things Don’t Change

Medicare and Medicaid regulations remain incredibly complicated


“There can be no doubt but that the statutes and provisions in question, involving the financing of Medicare and Medicaid, are among the most completely impenetrable texts within human experience. Indeed, one approaches them at the level of specificity herein demanded with dread, for not only are they dense reading of the most tortuous kind, but Congress also revisits the area frequently, generously cutting and pruning in the process and making any solid grasp of matters addressed merely a passing phase.”

— Chief Judge ErvinUnited States Court of Appeals for the fourth Circuit in Rehabilitation Association of Virginia v. Kozlowski, 42 F. 3d 1444, 1450 (4th Circuit 1994)


More Things Never Change

Government continues to view Fraud, Waste, and Abuse as a significant source of revenue

Enforcement remains aggressive


Have You Seen the OIG’s Website Lately?


Aggressive Enforcement

From new joint DOJ/OIG website www.stopmedicarefraud.gov– “A joint effort by HHS and the

Department of Justice recovered a record $4 billion from fraudsters in FY2010.”


Fighting Fraud is Good Investment

The return-on-investment (ROI) for Health Care Fraud and Abuse Control (HCFAC) program– Since 1997, $4.9 returned for every

$1.0 expended.– 3-year average (2008-2010), $6.8

returned for every $1.0 expended


Federal Fraud & Abuse Laws

Anti-Kickback Statute Stark Physician Self-Referral Law Various Civil Monetary Penalties

– Prohibition against inducements to beneficiaries

– Prohibition against hospitals paying inducements to physicians to limit care

False Claims Act


Areas of Government Concern in Fraud & Abuse Law

Additional Cost Over, Under, and Mis-Utilization Quality of Care Access to Care Patients’ Freedom of Choice Competition Exercise of Professional Judgment


State Fraud & Abuse Laws

Don’t forget about state laws– State fraud and abuse laws– State mini-Stark laws– Fee splitting prohibitions– Certificate of Need (CON)– State Licensure– Corporate practice of medicine


Fraud & Abuse Laws in Healthcare Transactions

Beginning Middle End


In the Beginning...

Need to analyze overall structure of the transaction to make sure the deal is consistent with fraud and abuse laws


In the middle...

Need to conduct detailed due diligence to avoid fraud and abuse liability


In the end...

Need to have a plan for operating in compliance with fraud and abuse laws– PPACA to require mandatory

compliance program


Healthcare Industry Feeling Undervalued


Anti-Kickback Statute

Federal anti-kickback law generally prohibits the provision of any economic benefit in exchange for the referral of patients or business that will be reimbursed under any Federal health care program.– 42 U.S.C. § 1320a-7b(b).


What’s New withAnti-Kickback Statute

PPACA expressly makes Anti-Kickback violations actionable under the FCA

PPACA legislatively overrules Hanlester with respect to intent– “With respect to violations of this

section, a person need not have actual knowledge of this section or specific intent to commit a violation of this section.”


AKS Decision Tree

1. Is there an economic benefit? If No

If Yes

2. Is there a referral or recommendation?

If No

If Yes

3. Is there a statutory exception? If Yes

If No

4. Is there a safe harbor? If Yes

If No

5. Is there a potential for abuse?

If No

Go to Stark Analysis

If Yes, Problem!


Stark Self-Referral Law

The federal Stark physician self-referral law generally prohibits a physician from making referrals to an entity for any of eleven (11) designated health services if the physician (or an immediate family member) has a “financial relationship” with the entity. – 42 U.S.C. § 1395nn


What’s New withthe Stark Law

Over past few years, changes to Stark law have limited possibilities for joint venture with physicians– “Stand in the shoes” (10/1/08)– Percentage-based compensation and

“per click” (10/1/09)– “Under arrangement” services –

revised definition of “entity” (10/1/09)


PPACA Provisions Affecting Stark

Overpayments Stark self-disclosure authority Stark in office ancillary disclosure

requirement Restrictions on physician

investments in hospitals


Stark Decision Tree

If No

If Yes

Okay!

If Yes

If Yes

If Yes

If Yes

6. Is there a regulatory exception?

If Yes5. Is there a statutory exception?

If No4. Is there a designated health service?

If No3. Is there a referral?

If No2. Is there a direct or indirect financial relationship?

If No1. Is there a physician or immediate family member?

If No, Problem!


False Claims Act

Potential liability remains enormous in healthcare context

Liability– 3X Damages– $5,500 to $11,000 per claim


DEFENSE CONTRACTOR

$100,000 damages X 3 = $300,000

12 (# of claims) X $11,000 = $132,000

Total liability = $432,000

Sample Penalty Calculation


HEALTH CARE PROVIDER

$100,000 damages X 3 = $300,000

2000 (# of claims) X $11,000 =$22,000,000

Total Liability = $22,300,000

Sample Penalty Calculation


FERA Amendments

Revised FCA to codified “reverse false claims”

– it is now illegal to “knowingly conceal…or knowingly and improperly avoid…or decrease…an obligation to pay or transmit money or property to the Government…”

»31 U.S.C. §3729(a)(1)(G)


60-day Overpayment Rule

PPACA requires reporting and repayment of overpayments within 60 day of identification (or due date of next cost report, if applicable)– What’s “identification”?

Violations actionable under FCA


Self-Disclosure

OIG Voluntary Disclosure Protocol CMS Stark Self-Disclosure Protocol MAC Disclosure


Risk/Reward ofSelf-Disclosure

Eliminate potential overpayment recoupment and FCA exposure

Can be costly– $$$– Time


Self-Disclosure Deal Points

What to disclose? Who to disclose it to? Disclosure by seller or buyer? Allow sufficient time to resolve

disclosure How definitive is your deal?


“Health Care in the New Millennium”


Questions?

Bill MathiasBill MathiasOber|Kaler410-347-7667

[email protected]

Ober | Kaler New Pitfalls in Health Care Transactions ~~~ Fraud & Abuse Perspective Bill Mathias [email protected].

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