18th Annual King & Spalding Health Law And Policy Forum: "Hot Topics" In Healthcare Fraud Enforcement - Administrative

Tuesday, March 31, 2009 - 01:00
Kim H. Roeder
Sara Kay Wheeler

Editors Note: The 18th Annual King & Spalding Health Law and Policy Forum took place on February 17, 2009, at the Four Seasons Hotel in Atlanta, Ga. The Forum included a panel discussion of "'Hot Topics' In Healthcare Fraud Enforcement." Our interviewees facilitated the discussion of the administrative aspects. This interview is an effort to capture some of the highlights of that discussion.

Editor: Kim and Sara Kay, tell us about your backgrounds in the healthcare field and the focus of your practices.

Roeder: I have practiced healthcare law for over 25 years. Sara Kay and I both joined King & Spalding as partners in November 2007. Before that, we practiced for a number of years together. My practice concentrates on representing providers of health services, whether hospital systems, physicians, and suppliers of various types of healthcare items or ancillary services. I advise them on federal and state regulatory and reimbursement programs, with a particular focus in recent years on regulation of providers' relationships with physicians and others who refer them business.

Wheeler: I've been practicing in healthcare for about 17 years. My practice is somewhat similar to Kim's. I do a lot of work with providers of healthcare services that have relationships with federal healthcare programs, including hospital systems, large physician groups, and retail and specialty pharmacies as well as large retailers that provide pharmacy services, including grocery-store pharmacies. Over the years my practice has evolved into a corporate compliance-focused practice.

Editor: Kim, please give us an overview of the federal administrative enforcement mechanism.

Roeder: When we refer to administrative enforcement, we mean the regulatory guidance and enforcement activities of the Department of Health and Human Services, including the Office of Inspector General (OIG) and the Center for Medicare and Medicaid Services (CMS), and their contractors, including Recovery Audit Contractors (RACs), Zone Program Safeguard Contractors (ZPICs) and Medicaid Integrity Contractors (MICs). The OIG has the authority to investigate, prosecute and impose civil money penalties or administrative sanctions such as exclusion from federal healthcare programs for providers who run afoul of either Medicare billing rules or the federal physician self-referral laws.

Our observation is that providers will be faced with a very active administrative review and enforcement landscape under the current administration and various health reform proposals. These various agencies oversee the accuracy and integrity of federal healthcare spending, and budgetary pressures will force an active regulatory oversight and enforcement agenda. Providers facing audits and demands from multiple agencies and contractors will need to appreciate how those agencies interact with each other and with law enforcement. Providers will also need to structure their internal processes so they know their own data through internal claims audits; get ahead of problems by correcting and reporting them proactively; track administrative audit requests and findings; and manage appeals from adverse decisions.

Editor: The financial relationships between providers and physicians are highly regulated and the regulations are very complex. Explain the role of the Stark Law and the Stark Rules.

Roeder: The Ethics In Patient Referral Law was adopted in the late 1980s and is commonly referred to as the Stark Law because it was sponsored by Pete Stark, a California Congressman. That law was intended to provide a "bright line" in setting the rules governing financial relationships between physicians and providers of services that are referred to in the law as "designated health services." Simplified, the law says that, if a physician has a financial relationship with a provider of these designated health services, then the physician cannot refer a Medicare or Medicaid patient to that provider, and the provider cannot bill for those services - unless the relationship is structured to fall into one of several exceptions. A broad range of healthcare services is covered by the law, including hospitals, home health, medical equipment, lab, imaging, outpatient, pharmacy and therapy services.

Editor: What are the Stark Rules?

Roeder: The Stark Rules are a very elaborate set of regulations that expand on the exceptions allowed for financial relationships between physicians and providers under the Stark Law. The rules have been proposed and finalized in at least four major stages over the past 10 years - and there are still proposed rules pending. In the most recent rules released last year, the agency changed position on some key points in these exceptions in a way that requires providers to make sure their relationships still comply with the rules in their current form. The most recent rules also tighten up significantly on what the agency perceived as "loopholes" in the exceptions, and focus on very technical documentation to qualify for exceptions. All of this can create a trap for providers who are not modifying their financial relationships and their contracting procedures to keep up with these developments.

Although it takes a substantial investment of time to understand the Stark Rules, the stakes are very high. If the healthcare provider bills for the services referred by a physician involved in a financial relationship that does not qualify for an exception, the penalties can be extremely high. The government takes the position that such behavior could violate the federal False Claims Act, which provides for treble damages. We've seen cases where the damages calculations in these cases get into the stratosphere for what seem like highly technical violations.

Editor: I understand that the federal Anti-Kickback Law also presents serious compliance challenges.

Roeder: The Anti-Kickback Law is a federal law that is in some respects similar to the Stark Law, but there are some important differences. We constantly balance these two laws in giving healthcare regulatory advice. The Anti-Kickback Law is a criminal felony statute as opposed to the Stark Law, which imposes only civil penalties.

Basically, the Anti-Kickback Law is an anti-bribery statute that makes it illegal to either solicit or pay anything of value in return for referral of federal healthcare business. It applies very broadly to the entire continuum of referral arrangements in the healthcare system.

Because the language of the Anti-Kickback Law is so broad, Congress directed the OIG to issue advisory opinions to providers who ask the agency to review a particular arrangement for compliance. Advisory opinions are important signals to the industry about interpretations of the Anti-Kickback Law. Some recent opinions, for example, appear to provide more leeway to hospitals to share a portion of their cost savings with physicians who have participated in efforts that generated the savings. However, the opinions do not address the Stark Law issues in these arrangements, and Stark Rules addressing these types of arrangements have been proposed but not finalized. Therefore, a number of uncertainties still surround these arrangements, which providers are very interested in pursuing in order to foster cost efficiencies.

Editor: Sara Kay, has the government taken any action to encourage companies to adopt compliance programs that will avoid expensive violations?

Wheeler: OIG, which is the agency charged with protecting the dollars paid by the federal healthcare program under Medicare and Medicaid, issued in 1998 a voluntary disclosure protocol designed to develop robust corporate compliance programs. But, after providers initially got familiar with the protocol, they wondered whether the benefits outweighed the risks The OIG has since recognized that they needed to be more explicit about how they thought the program would work and what the benefits to providers would be. As a result, OIG has clarified its voluntary disclosure protocol to make it a more effective vehicle for bringing potential problems to its attention.

Editor: Medicaid is different because there is also state involvement. Are the states beginning to issue their own self-disclosure policies or protocols?

Wheeler: Yes. In fact, they may offer an avenue in your own backyard that may be more streamlined and tailored to the way your Medicaid program is run. When we are advising our clients, we emphasize the need for very effective corporate compliance programs that take account of their vulnerabilities in terms of compliance with federal and state rules and regulations. Nevertheless, there is always the possibility that they may identify a violation. State-specific voluntary disclosure protocols offer our clients another alternative when considering what's going to be the most effective remedy for their organizations. And, we recognize that their decision will be very circumstance driven and that no one-size-fits-all solution applies to all providers at all places and times.

Please email the interviewees at kroeder@kslaw.com and swheeler@kslaw.com with questions about this interview.