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OIG Fraud Alert on Physician Compensation — Why Is No One Listening?

July 11, 2015 1 comment

A few weeks ago, the OIG published another one of its fraud alerts.  This one was entitled, “Physician Compensation Arrangements May Result in Significant Liability.”

Everyone knows (don’t they?) that business arrangements in healthcare have to meet several legal requirements, including: (1) it cannot be based on the value or volume of referrals, (2) it must be at arms’ length, and (3) it must be commercially reasonable.  When a healthcare provider enters into a transaction that violates any of these three requirements, he may have violated the anti-kickback statute or physician self-referral/Stark law or both, and any claim arising from the transaction that is submitted to the federal government for payment may be a false claim.  Healthcare lawyers have long been warning their clients to be cautious about how they pay (and recruit) physician employees and contractors in order to avoid violations of the kickback, self-referral, and false claims laws. Violations carry stiff penalties and in some cases criminal sanctions.

There is nothing new in this recent Fraud Alert.  Many similar fraud alerts and OIG advisory opinions and actual court cases have passed on the same message.  And there is nothing surprising other than that the facts described in this Fraud Alert so obviously violate these healthcare laws that you have to ask, why is no one listening?

I have a three explanations:

  • The false claims act was passed during the Civil War and was aimed at stopping corruption in how defense contractors were paid.  The law made sense.  There was a direct relationship between the defense contractor and the government dollars received.  However, the false claims act makes no sense in healthcare — treating a patient is so separated from payment; the provider at the time of care may not know who is paying — government, commercial, the patient, or no one.
  • The healthcare laws are so contrary to the economic rules that apply to other businesses and so counter-intuitive as to make them offensively ridiculous and begging to be ignored (which they are).
  • As we move to a pay for performance, quality-based healthcare reimbursement system, these laws become even more irrelevant.  Case in point — Accountable Care Organizations — a critical foundation for healthcare reform under the Accountable Care Act.  ACOs could not operate unless waivers to these healthcare laws were implemented.  Every healthcare provider is not in an ACO, but many are developing clinically integrated networks and other arrangements to oversee quality and utilization in order to compete more effectively with large healthcare systems and negotiate with payors in keeping with the goals of healthcare reform.  They are forced to act as if the waivers applied to them also.  In fact many consultants advise that the waivers DO apply to non-ACO networks.

It is time for a thoughtful review (and repeal) of these antiquated and economically debilitating laws in how they apply to healthcare providers.  It is time to stop calling business sensible healthcare transactions fraudulent and punishing the participants.

These laws allow regulators to be lazy and stupid. Anyone can enforce laws based an strict liability or ones that have lines so faint that crossing them is unavoidable.

Seriously, who cares if someone pays a fee for referring a patient for care?  Liability should be based on the quality and necessity of the care.  Providing care not needed or charging for care not given — those actions should be punished.  But that’s harder for regulators, so we continue to vilify healthcare providers and impose burdens on them that are far tougher than the benefits derived.

Do we need the Stark and Anti-Kickback Laws? Yes, unfortunately. Here’s another reason why.

April 12, 2015 Leave a comment

Thank goodness that most of us do not have to scrutinize every business deal we do to make sure that it is fully compliant with self-referral and kickback prohibitions.  In the healthcare arena, compliance with these counter-intuitive and overly punitive restrictions adds much unreimbursable administrative costs to the delivery of healthcare. Hopefully, shifting payment from procedures to quality of care will reduce the artificial inducements to violate these restrictions.

And while I advocate the repeal of these outdated self-referral and kickback laws which have unfairly burdened physicians in this country for decades, there is always another example of why the laws are still needed.

Benchmark Reporter has this story today:

2 U.S. organizations have been fined with a whopping $48.5 million in charges of conducting unnecessary medical tests linked with doctors who are responsible for referring patients to them for commission. These scamming corporations are Health Diagnostics Laboratory (HDL) and Singulex, both are well-known cardiovascular disease screening labs.

The Benchmark story is based on the Thursday announcement from the Department of Justice.  According to the DOJ  announcement, this is what the Labs did:

As alleged in the lawsuits, HDL, Singulex and Berkeley induced physicians to refer patients to them for blood tests by paying them processing and handling fees of between $10 and $17 per referral and by routinely waiving patient co-pays and deductibles. In addition, HDL and Singulex allegedly conspired with BlueWave to offer these inducements on behalf of HDL and Singulex. As a result, physicians allegedly referred patients to HDL, Singulex and Berkeley for medically unnecessary tests, which were then billed to federal health care programs, including Medicare.

And a reminder of why kickbacks are bad (some people apparently need to be reminded):

“When health care companies pursue profits by paying kickbacks to doctors, they undermine a patient’s ability to trust that medical decisions are being made for scientific reasons, not financial ones,” said Acting U.S. Attorney Vincent H. Cohen Jr. of the District of Columbia. “Those kickbacks also harm the taxpayer because they drive up the cost of federal health care programs with medically unnecessary tests. This significant settlement shows our determination to work with whistleblowers and our federal partners to defend the integrity of the health care system from illegal agreements that hurt patients and taxpayers.”

If this were a blog about the Seven Deadly Sins, the key words might be Greed, Pride, Envy, and Sloth.

There is no easy way for physicians to make more money.  Working hard is not enough.  And the current state of financial health of  physicians in this country is appalling.

Nevertheless, there are  physicians who are good providers, who are devoted to their patients, and who follow the law.  I know this because I represent many of them. They resist the temptation from these Labs and others like them.  They spend a lot of money on attorneys and consultants to do things the right way.   When they see their colleagues benefit through illegal behavior, it is good that they also see them caught and punished.

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