Dorsey Health Law

With the enactment of the Eliminating Kickbacks in Recovery Act (“EKRA”) in 2018, the permissibility of commission-based compensation to laboratory sales representatives based on volume, revenue, or profit has come under question, and there is still little case law interpreting the Act. Despite EKRA being a relatively newer law, laboratories should remain mindful of how the more established Anti-Kickback Statute (the “AKS”) impacts the permissibility of such commission-based compensation as well. Under current law, commission-based payments (including commission based on volume, revenue, profit, etc.) should be permissible when paid to employee sales representatives. However, labs should be cautious when considering commission-based compensation to independent contractor sales representatives. I. The Anti-Kickback Statute The AKS subjects to criminal and civil penalties anyone who knowingly and willfully offers, pays, solicits, or receives remuneration to induce or reward the referral of business reimbursable under any federal health care programs. 42 U.S.C. § 1320a-7b(b). Importantly, the AKS extends beyond paying value in exchange for direct patient referrals; it also prohibits paying remuneration intended to induce or reward someone to arrange for or recommend that others purchase, lease, or order any good, facility, service, or item reimbursable by any federal health care program. See Id. The AKS contains numerous safe harbors, the compliance with which protects parties from violation of the AKS. One of these is the employment safe harbor, which permits any payments to an employee if there is a bona fide employment relationship. 42 U.S.C. § 1320a-7b(b)(3)(B). This safe harbor does not extend to independent contractors. Id. II. The Eliminating Kickbacks in Recovery Act EKRA subjects to criminal penalties anyone who, with respect to services covered by certain public health care benefit programs, knowingly and willfully: (1) solicits or receives any remuneration in return for referring a patient or patronage to a recovery home, clinical treatment facility, or laboratory; or (2) pays any remuneration to induce a referral of an individual to a recovery home, clinical treatment facility, or laboratory or in exchange for an individual using the services of that recovery home, clinical treatment facility, or laboratory. 18 U.S.C. § 220(a). Laboratory is defined to include all laboratories, not just those that perform testing related to substance abuse. 18 U.S.C. § 220(e)(4). Notably, EKRA’s language appears to be limited to paying for direct referrals. Unlike AKS, EKRA does not include language that extends its prohibitions to paying for arranging or recommending others to make referrals or order services. In addition, EKRA does not have an employee safe harbor analogous to the employee safe harbor under AKS, but rather has a narrower exception permitting payments made under a bona fide employment relationship (including with independent contractors, unlike under the AKS employment safe harbor) where the payment does not vary based on the procedures performed, or amounts billed or received from the health care benefit program from the individuals referred. 18 U.S.C. § 220(b)(2). In 2021, a federal district court in Hawaii issued the first and, to date, only judicial opinion interpreting EKRA in S&G Labs Haw., LLC v. Graves, 2021 U.S. Dist. LEXIS 200365. The district court held that while the employment agreement with Graves (a client account manager) provided for commission-based payments that varied based on the number of tests S&G performed, the arrangement did not violate EKRA since there was only an attenuated connection between the commission-based payments and patient referrals: “Undoubtedly, Graves’s commission-based compensation structure induced him to try to bring more business to S&G . . . However, the ‘client’ accounts they serviced were not individuals whose samples were tested at S&G. Their ‘clients’ were ‘the physicians, substance abuse counseling centers, or other organizations in need of having persons tested.’ However, S&G was not compensated by those ‘clients’; S&G was ‘compensated for the testing services on a ‘per test’ basis by third party insurers, government agencies under the Medicare and Medicaid programs, and direct self-pay by some individuals.’ There is no evidence that Graves’s client accounts included individuals who self-paid for S&G to perform urinalysis on their samples.” Id. at 33-34. The district court concluded that since “Graves was not working with individuals, the compensation that S&G paid him was not paid to induce him to refer individuals to S&G.” Id. at 34. In other words, the district court concluded that because Graves was not himself a source of lab referrals, EKRA’s prohibitions could not reach the volume-based compensation arrangement between Graves and his laboratory employer. III. Commissions to Employee Sales Representatives vs. Independent Contractor Sales Representatives Under current law discussed above, labs should generally be able to make commission-based payments (including commissions based on volume, revenue, profit, etc.) to employee sales representatives, but should carefully consider the AKS when proceeding with respect to independent contractor sales representatives. A. Employee Sales Representatives Commission-based payments, including commission based on volume, revenue, profit, etc., to employee sales representatives are permissible under the AKS. Such payments would fall within the AKS employment safe harbor so long as a bona fide employment relationship exists. Per the S&G Labs interpretation of EKRA, commission-based payments, including commission based on volume, revenue, profit, etc., to employee sales representatives are also permissible under EKRA, provided that a lab’s employee sales representatives have a similar relationship to their client accounts as that described in S&G Labs, wherein sales representatives are working with physician clinics, hospitals, and other organizations and facilities that would utilize the lab, and are not working with individual patients. B. Independent Contractor Sales Representatives Based on the only case law to address the issue at this point, so long as independent contractor sales representatives work with organizations and facilities, and are not in a position to refer individual patients, then EKRA should not bar commission-based payments to a lab’s independent contractor sales representatives. However, commission-based payments to independent contractor sales representatives remain an issue under the AKS if the laboratory business involves federal health care programs. Such payments fall outside of the employment safe harbor to the AKS, and the broad reach of the AKS prohibition on arranging or recommending that others order items and services could extend to payment arrangements with independent contractor sales representatives. Consequently, laboratories should proceed cautiously when considering compensating independent contractor sales personnel based in whole or in part on a volume- or value-based methodology. We will continue to closely monitor the state of EKRA and the AKS for guidance, revisions to the law, and enforcement. If you have further questions or need advice on how to restructure compensation arrangements to comply with EKRA and the AKS, please contact the authors or your regular Dorsey attorney.  

In just two weeks, on January 19, 2021, a sweeping set of changes to the federal physician self-referral law (or “Stark Law”) and anti-kickback statute (“AKS”) regulations go into effect.  These changes, which are part of the U.S. Department of Health and Human Services (“HHS”) “Regulatory Sprint to Coordinated Care,” are the most significant changes to the Stark Law and AKS in a decade.  There are hundreds of pages of preamble guidance and revised regulation text setting forth these sweeping changes from the Centers for Medicare & Medicaid Services (“CMS”) and HHS Office of Inspector General (“OIG”). To help you digest these materials, a team of attorneys from Dorsey & Whitney’s Healthcare Transactions and Regulations Practice Group has published two white papers, which are available at the following links: White Paper: Understanding the Final Rules to Revise the Stark Law Regulations White Paper: Understanding the Final Rules to Revise the Anti-Kickback Statute and Beneficiary Inducement Civil Monetary Penalty Regulations These white papers provide an in-depth summary of the changes to these regulations, including key provisions from CMS and OIG preamble guidance.  Please contact the authors or your regular Dorsey attorney if you would like assistance with understanding how the final rules impact your organization.

On June 1, 2020, the Department of Justice (“DOJ”) issued an updated version of its “Evaluation of Corporate Compliance Programs” (the “DOJ Guidance”), available here. The DOJ Guidance is an update to guidance first issued by the DOJ in February 2017 (which we described in our prior blog post), and was last updated by the DOJ in April 2019.  Although the DOJ Guidance is directed to prosecutors, it is a useful roadmap for corporations in seeking to ensure their compliance program is effectively preventing, detecting and responding to improper conduct, and is not a program on paper only. The DOJ Guidance is intended to be used by prosecutors to assist them “in making informed decisions as to whether, and to what extent, [a] corporation’s compliance program was effective at the time of [an] offense, and is effective at the time of a charging decision or resolution, for purposes of determining the appropriate (1) form of any resolution or prosecution; (2) monetary penalty, if any; and (3) compliance obligations contained in any corporate criminal resolution (e.g., monitorship or reporting obligations).”  Thus, in the event that there is an investigation into alleged improper conduct, having a compliance program that operates in line with the DOJ Guidance may lead to a more favorable resolution than there otherwise would be. The DOJ Guidance notes that there are three “fundamental questions” a prosecutor should ask when evaluating compliance programs: Is the corporation’s compliance program well designed? Is the program being applied earnestly and in good faith? In other words, is the program adequately resourced and empowered to function effectively? Does the corporation’s compliance program work in practice? The DOJ Guidance sets forth a number of sample topics under the heading of each of the three questions listed above, which it says are not a checklist or formula, but are the topics “that the Criminal Division has frequently found relevant in evaluating a corporate compliance program both at the time of the offense and at the time of the charging decision and resolution.”  The DOJ Guidance emphasizes the importance of a compliance program being not merely a “paper program,” but rather one that is “implemented, reviewed, and revised, as appropriate, in an effective manner.” The most recent updates to the DOJ Guidance reflect the DOJ’s increased focus of taking a functional and dynamic approach to evaluating the effectiveness of a company’s compliance program.  The revisions explain new factors prosecutors may consider in the areas of risk assessment, policies and procedures, training and communications, mergers and acquisitions, and more in their assessment of corporate compliance programs.  Organizations should use the DOJ Guidance, including a consideration of these new factors, when evaluating the effectiveness of their compliance program. Key revisions to the DOJ Guidance are summarized below. Risk Assessments. The DOJ Guidance directs prosecutors to consider whether a company has “a process for tracking and incorporating into its periodic risk assessment lessons learned either from the company’s own prior issues or from those of other companies operating in the same industry and/or geographical region.” Prosecutors are also instructed to evaluate whether a company takes a continuous assessment approach to compliance review and updates, as opposed to a “snapshot-in-time” approach. Thus, it is imperative that compliance teams at an organization perform regular assessments, stay up-to-date on compliance problems, and incorporate lessons learned into the risk assessment process. Policies and Procedures. The DOJ Guidance continues to emphasize the importance of adequately communicating compliance policies and procedures throughout the company. The update includes two new questions related to the accessibility of policies and procedures: “Have the policies and procedures been published in a searchable format for easy reference?” and “Does the company track access to various policies and procedures to understand what policies are attracting more attention from relevant employees?” Training and Communications. New questions in the DOJ Guidance instruct prosecutors to evaluate whether a company is evaluating the effect of its training program on employee behavior or operations. Additionally, the DOJ will be assessing whether employees have opportunities to ask questions and whether the company overall has “relayed information in a manner tailored to the audience’s size, sophistication, or subject-matter expertise.” Confidential Reporting. The revisions also address confidential employee hotlines and other reporting mechanisms. Prosecutors will assess whether confidential reporting mechanisms are publicized both to employees and third parties, and whether a company is periodically testing the mechanism’s effectiveness. Third-Party Management. The DOJ Guidance adds a new question about a company’s management of third-party relationships: is risk assessment conducted only during the onboarding process or throughout the lifespan of the engagement? Mergers and Acquisitions. The DOJ has always considered comprehensive due diligence of acquisition targets to be an important part of a compliance program. The recent revisions to the DOJ Guidance, however, recognize that pre-acquisition due diligence may not always be possible. Where such pre-acquisition diligence is not conducted, the DOJ Guidance indicates that a company should have a legitimate reason for not conducting it, and that the company should conduct post-acquisition diligence and audits.  In addition, an acquired entity should always be timely integrated into a company’s existing compliance program structure. Compliance Resources. Adequate resources are essential for effective implementation of a compliance program. The DOJ Guidance instructs prosecutors to ask whether a company’s compliance program is “adequately resourced and empowered to function effectively.” Companies should continue to invest in the training and development of personnel and in the compliance program more broadly, throughout all levels of the organization. * * * Overall, the revised DOJ Guidance affirms previous guidance and stresses that compliance programs should be well-resourced, dynamic, and tailored to a company’s unique size, structure, and needs.  The DOJ Guidance also serves as a reminder that even in the midst of a global pandemic, the compliance function of an organization must remain robust and ever-adapting.  Healthcare organizations should use the DOJ Guidance and other existing resources to thoughtfully design, assess, and revise their compliance programs. Dorsey attorneys have substantial experience with assisting health industry clients in implementing compliance programs following the elements of an effective compliance program from the Department of Health and Human Services Office of Inspector General, in updating compliance programs, and in evaluating the effectiveness of existing compliance programs in line with the DOJ Guidance and other guidance.  For assistance with your organization’s compliance program, please contact the authors or your regular Dorsey attorney.

The Dorsey Health Law blog team keeps readers up-to-date on relevant topics in the health care industry. In order to do so, the members of the blog team communicate regularly with other practice groups within the firm for applicable updates from client publications. For this post, we would like to thank Andrew Brantingham, Ross C. D'Emanuele, and Alex Hontos for the following post from Dorsey's FCA Now blog: The CARES Act allocated $100 billion in relief funds to hospitals and other healthcare providers, to be distributed by the Department of Health and Human Services (“HHS”) through the Public Health and Social Services Emergency Relief Fund (or “Provider Relief Fund”). Many healthcare providers across the country have received payments from the Fund...[Continue Reading]

On March 30, 2020, the Centers for Medicare & Medicaid Services (“CMS”) published a compilation of COVID-19 Emergency Declaration Blanket Waivers for Health Care Providers (each, a “Blanket Waiver”). Section 1135 of the Social Security Act gives CMS the authority to issue waivers that ease requirements for providers affected by an emergency if: (1) the President makes an emergency declaration under the Robert T. Stafford Disaster Relief and Emergency Assistance Act, 42 U.S.C. 5121-5207 (the “Stafford Act”); and (2) the Secretary of the Department of Health and Human Services declares a Public Health Emergency (“PHE”), both of which have now occurred in light of COVID-19. CMS is permitted to issue both blanket waivers and provider/supplier requested waivers on a case-by-case basis. Blanket waivers apply to all applicable providers and suppliers, while individual waivers apply only to the requesting provider or supplier. A provider or supplier need not request a provider/supplier-specific waiver of a requirement if CMS has issued a blanket waiver addressing the same requirement. It is important to note that 1135 waivers apply solely to federal requirements and do not apply to state licensure or other requirements. Any applicable state requirements (e.g., licensure) must also be addressed with the relevant state agency. Another important note of caution is that these 1135 waivers often include specific details and requirements. It is critical for health care providers to review the waivers carefully before taking action under them. To that end, providers should visit the CMS Coronavirus Waivers & Flexibilities website, here, to locate the specific guidance and requirements from CMS about the type of program waiver(s) being sought. CMS has provided numerous Frequently Asked Questions (“FAQ”) documents and provider-specific fact sheets that detail the details about and limits of the available waivers and flexibilities for each type of provider (hospital, skilled nursing facility, physicians, laboratories, home health providers, etc.). Additionally, this website contains links to all of the waivers provided in each state. The following is a summary of the Blanket Waivers CMS has made available to providers and suppliers on March 30, 2020. These Blanket Waivers are retroactively effective back to March 1, 2020 and will continue through the end of the emergency declaration. I. Hospital Waivers The Blanket Waivers include significant regulatory relief for hospitals. The following is a summary of the hospital-specific Blanket Waivers, and here is a CMS Fact Sheet that was published for hospitals to further explain these specific Blanket Waivers: a. Temporary Expansion Sites (a.k.a. Hospitals Without Walls) Under this Blanket Waiver, hospitals are permitted to offer health care services in locations that are not currently part of the hospital. Previously, hospitals would have been required to meet Life Safety Code and other regulatory provisions and obtain approvals to provide services in a new location. This waiver will help hospitals set up temporary expansion sites to offer inpatient services (e.g., nursing, room and board) in locations such as shell space in a hospital, parking structures, dormitories and the like – as long as the hospital exercises control and oversees the services provided at the location, and as long as the location is approved by the state (to ensure safety and comfort for patients and staff). CMS is also allowing currently enrolled ambulatory surgery centers (“ASCs”) to temporarily enroll as hospitals by calling the COVID-19 Provider Enrollment Hotline to complete and sign an attestation form in order to enroll and provide services during the PHE as a hospital. CMS also encourages other entities (e.g., freestanding emergency departments which are not currently allowed to enroll in Medicare) to call the COVID-19 Provider Enrollment Hotline to complete and sign an attestation form in order to enroll and provide services during the PHE. Further, CMS is allowing hospitals to change their provider-based locations to address patient needs, as well as allowing additional flexibilities related to inpatient services furnished under arrangements. Moreover, hospitals are permitted to screen patients at locations off of a provider’s campus, in order to avoid the spread of COVID-19. Further, for surge facilities in off campus departments, CMS is waiving the requirements to have policies and procedures for evaluating emergencies so these facilities do not need to focus time on drafting policies and procedures but rather can focus on patient care needs. b. Relaxed Paperwork, Policies, Cost Reporting, Filing Deadlines and Enrollment Requirements For hospitals that are impacted by a widespread outbreak of COVID-19, the timeframes for providing patients a copy of their medical records are waived, as are the requirements related to visitation and seclusion. Additionally, CMS is granting a 30-day post-discharge requirement to complete medical records, CMS is waiving medical records department staffing requirements, and also waiving specific requirements for the form and content of the medical record and the medical record completion requirements. Further, verbal orders can be authenticated more than 48 hours after the fact (although read-back verification is still required). CMS is also waiving requirements to provide information about advanced directives to patients. Further, To ensure that hospitals and critical access hospitals focus on patient care and ensuring patients are discharged in an appropriate setting, as opposed to focusing on the paperwork and other regulatory obligations, CMS is waiving the detailed regulatory paperwork and other requirements related to discharge planning. For example, CMS recognizes that during the PHE, hospitals may not be able to use specific quality metrics and other data, or a comprehensive list of nursing homes in the area, to select a nursing home or home health agency. However, hospitals are still required to work with families to ensure that the discharge meets patients’ care needs. Further, CMS is waiving the entire condition of participation related to utilization review plans and committees, nursing care plans, having available a current therapeutic diet manual, developing and implementing emergency preparedness policies and procedures and communication plans, as well as waiving the detailed provisions governing a hospital’s quality assessment and performance improvement program (although hospitals must still have such a program in place). CMS has established a toll-free hotline for all providers as well as significant flexibilities in provider enrollment. See here for additional information from CMS on provider enrollment relief, as well as our previous blog post on this topic, available here. Further, CMS is waiving the signature and proof of delivery requirements for Part B drugs and durable medical equipment (although the delivery and the fact that a signature could not be obtained due to COVID-19 should be documented in the record). Additionally, CMS is delaying the cost-report filing deadlines until June and July, and CMS is extending the data submission deadlines for hospitals on the reporting of occupational mix of employees until August 3, 2020. Further, Medicare Administrative Contractors (“MACs”), Qualified Independent Contractors (“QICs”), and Independent Review Entities (“IREs”) are allowed to grant extensions to providers on appeals and are permitted to offer other flexibilities on filings and deadlines. c. Critical Access Hospitals (“CAHs”) Without Walls CAHs are now permitted to exceed their 25 bed limit and the 96 hour length of stay limit. CMS is also permitting CAHs to treat patients in urban areas (they typically must be located in a rural area) as needed in order to establish surge locations. Further, CMS is waiving the restrictions on CAHs’ ability to establish off campus provider based locations, and to establish the normally restricted co-location arrangements with other providers. CMS is waiving the minimum personnel qualification requirements at CAHs for clinical nurse specialists, nurse practitioners and physician assistants, and CMS is deferring to the state for the requirements of staff licensure, certification or registration, which will allow more flexibility to CAHs in states where federal requirements are more stringent. d. Distinct Part Units CMS is also now allowing hospitals to house acute care patients in excluded distinct part units (as long as the unit’s beds are appropriate for acute inpatients). Hospitals are permitted to bill for the care provided in the distinct part unit under the Inpatient Prospective Payment System. Providers should annotate in the medical record to explain that the care was provided in the distinct part unit due to capacity issues related to the PHE. Hospitals are also now permitted to provide care in acute care beds and units for patients who would normally be treated in distinct part psychiatric units or distinct part rehabilitation units, as long as the acute beds and units are appropriate for such patients. Hospitals should continue to bill under the Inpatient Psychiatric or Inpatient Rehabilitation Prospective Payment System for those patients, and annotate in the medical record to explain that the care was provided in the acute care unit due to capacity issues or other exigent circumstances related to the PHE. e. Telemedicine CMS is waiving telemedicine restrictions on hospitals and CAHs to make it easier for these providers to provide telemedicine for their patients through agreements with off-site hospitals, in order to improve access to specialty care. f. Workforce CMS is waiving the sterile compounding requirements to allow the re-use of face masks. CMS is also waiving the 2-year reappointment period for medical staff re-credentialing, the requirement that patients in a hospital be under the care of a physician (to allow other practitioners like physician assistants and APRNs to be used to the fullest extent possible), and CMS is waiving the requirement for CRNAs to work under the supervision of a physician. Further, CMS has stated that Hospitals do not have to designate in writing the personnel qualified to perform specific respiratory care procedures or the amount of supervision required for personnel to carry out those procedures. II. Long-Term Care, Skilled Nursing Facilities, and Nursing Facility Waivers The Blanket Waivers provide a number of flexibilities related to nursing services. See here for the CMS fact sheet published specifically for long term care facilities. CMS is waiving the 3-day prior hospitalization requirement for coverage of a skilled nursing facility (“SNF”) stay, waiving the timeframe requirements for certain data submission for SNFs and long-term care (“LTC”) facilities, and allowing nursing homes to suspend pre-admission screening and annual resident review assessments. Certain physical environment requirements are now waived, allowing for expanded use of non-SNF buildings or non-resident rooms in a LTC facility for patients in certain emergency circumstances. To promote social distancing: requirements that residents participate in-person in resident groups are waived; requirements related to room-sharing and moving a resident’s room are waived for the purpose of grouping or separating residents with respiratory illness symptoms and/or residents with a confirmed COVID-19 diagnosis from residents without these symptoms or diagnosis; and physicians and non-physician practitioners may conduct visits through telehealth options when previously the visits were required to be in-person. CMS is also partially waiving training and certification requirements required for nurse aids employed for longer than four months at a facility in order to assist with potential staffing shortages. CMS has waived certain resident transfer and discharge requirements in particular circumstances, though advance notification and receiving facility agreements are generally still required, and related care planning requirements are also waived in certain circumstances. Additionally, CMS is delaying the cost-report filing deadlines until June and July, and CMS is extending the data submission deadlines for hospitals on the reporting of occupational mix of employees until August 3, 2020. Further, Medicare Administrative Contractors (“MACs”), Qualified Independent Contractors (“QICs”), and Independent Review Entities (“IREs”) are allowed to grant extensions to providers on appeals and are permitted to offer other flexibilities on filings and deadlines. III. Home Health, Hospice, ESRD, and DMEPOS Waivers CMS has provided FAQ documents on these waivers for home health, here; for hospice, here; for ESRD Facilities, here; and for DME Suppliers, here. Under the Blanket Waivers, CMS provided extensions for home health, hospice, and ESRD providers to complete certain assessment required for Medicare reimbursement. CMS also waived certain home health, hospice and ESRD in-person assessment, visit, and supervision requirements to reduce the need for ordinary course check-ins and to allow for greater use of telehealth. In addition, hospices are relieved of the requirement to provide non-core hospice services, such as physical therapy, occupational therapy, and speech-language pathology. In providing additional flexibility in timing and in-person visits, CMS’s goal is to support containment efforts for at-risk populations and to free up professional resources to focus on treatment of those infected with coronavirus and to focus on operations related to the pandemic. In addition, CMS is waiving certain routine audits, maintenance, and certification requirements for ESRD Facilities and ESRD Facility staff. Again, CMS is attempting to free up resources and provide flexibility to support providers’ focus on pandemic-related efforts. CMS authorized the establishment of Special Purpose Renal Dialysis Facilities (“SPRDF”) to mitigate transmission among the at-risk population. Such facilities do not require a federal survey to be completed before providing services. CMS is allowing physicians that are appropriately credentialed at a certified dialysis facility to provide care at a “designated isolation location” such as a SPRDF without separate credentialing. Dialysis services may now also be provided in nursing homes and SNFs, so long as the services and necessary equipment and supplies are provided by personnel of the resident’s usual Medicare-certified dialysis facility. In an effort to expedite supply of and reimbursement for DMEPOS, CMS is waiving the replacement requirements (such as the face-to-face requirement, a new physician’s order, and new medical necessity documentation) for DMEPOS that are lost, destroyed, irreparably damaged, or otherwise rendered unusable. DMEPOS suppliers must still provide a narrative description about why the equipment must be replaced. IV. Practitioner Licensure, Provider Enrollment, Appeals, and Medicaid/CHIP Waivers CMS has provided a specific fact sheet describing the waivers and flexibilities available for physicians and other clinicians, available here. The Blanket Waivers are intended to ease the burden on the health system in order to allow providers to focus on patient care. To that end, CMS is temporarily waiving the Medicare reimbursement requirements that out-of-state practitioners be licensed in the state in which they are providing services when they are licensed in another state when the following four conditions are met: The practitioner must be enrolled in Medicare; The practitioner must have a valid license to practice in the state which relates to his or her Medicare enrollment; The services must be furnished, whether in-person or remote via telehealth, in a state in which the emergency is occurring in order to contribute to relief efforts in his or her professional capacity; and The practitioner must not be excluded in any state that is part of the PHE. Please note that the foregoing Medicare reimbursement waiver for licensure does not waive state or local licensure requirements. As a result, providers must review the state licensure requirements in each jurisdiction prior to delivering telehealth to patients in that location. Please see the blog post we published on this topic of telehealth opportunities here. Additionally, CMS has taken a number of steps to ease the provider enrollment requirements. See here for additional information from CMS on provider enrollment relief, as well as our previous blog post on this topic, available here. CMS has set up a hotline for physicians and non-physician practitioners to enroll and receive temporary Medicare billing privileges. Additionally, CMS has taken the following steps to facilitate the enrollment of providers in the wake of the COVID-19 outbreak, including: Waiver of certain screening requirements, including application fees, background checks, and site visits; Postponement of revalidation actions; Allowing licensed providers to render services outside their state of enrollment;  Expediting pending or new applications;  Easing telehealth restrictions; and Allowing physicians and non-physician practitioners to terminate opt-out status early and enroll in Medicare. Regarding appeals, the new waivers grant broad powers to MACs, QICs, and IREs to relax the requirements of federal regulations regarding the appeals process in FFS, and Parts C and D. MACs, QIEs, and IREs are instructed to allow extensions to file an appeal and to permit the waiver of requests for timeliness requirements for additional information to adjudicate appeals. MACs, QICs, and IREs are now allowed to process an appeal even with incomplete Appointment of Representation forms as outlined in federal regulations. Additionally, MACs, QICs, and IREs can now process appeals that do not meet the required elements of those same federal regulations. MACs, QICs, and IREs are given broad flexibility with respect to other parts of the appeals process so long as good cause requirements are satisfied. Finally, regarding Medicaid and CHIP, the new waivers permit states to request approval that certain statutes and implementing regulations be waived under section 1135. To request such an approval, states may submit an 1135 waiver request directly to their Center for Medicaid and CHIP Services (CMCS) state lead or Jackie Glaze, Acting Director, Medicaid and CHIP Operations Group, Center for Medicaid and CHIP Services at CMS by e-mail (Jackie.Glaze@cms.hhs.gov) or by letter. CMS sets forth a number of examples of the kinds of requests that states can make under this waiver, including: Waiver of prior authorization requirements for FFS programs; Waiver of out-of-state requirements for providers to provide care to another state’s Medicaid enrollees impacted by COVID-19; Temporary suspension of provider enrollment and revalidation requirements to increase access to care; Temporary waiver of state licensure requirements; Temporary suspension of requirements for pre-admission and annual screening requirements for nursing home residents. CMS encourages states to assess their needs and take advantage of these waivers. To assist states with the waiver request process and provide additional guidance, CMS released the Medicaid and CHIP Disaster Response Toolkit, which can be found here. Further, the CMS Coronavirus Waivers & Flexibilities website, here, contains a link to each state’s request for waivers and the responses from CMS. V. Stark Waivers On the same date, CMS also issued much-anticipated Blanket Waivers of sanctions under the federal physician self-referral law, or “Stark Law,” for “COVID-19 Purposes.” These Blanket Waivers are set forth here. Please see our separate post, available here, with detailed information about these Stark Law Blanket Waivers. * * * If you have questions about the new CMS waivers, please contact the authors or your regular Dorsey & Whitney LLP attorney. Dorsey is closely monitoring the rapidly evolving legal landscape related to the COVID-19 pandemic. You can access Dorsey’s health law blog related to health law updates, available here. You can also access Dorsey’s coronavirus resource center, which contains a wide variety of legal resources related to the coronavirus outbreak, available here.

The COVID-19 pandemic has led to rapid and drastic changes to health care delivery in the United States, including as it relates to arrangements between health care providers and physicians that may implicate the federal physician self-referral law, or “Stark Law.” On March 30, 2020, the Centers for Medicare & Medicaid Services (“CMS”) issued much-anticipated nationwide blanket waivers of sanctions under the Stark Law for “COVID-19 Purposes” (the “Stark Blanket Waivers”), which are available here. The Stark Blanket Waivers have a retroactive effective date of March 1, 2020 and will continue through the end of the Public Health Emergency (“PHE”) that was declared related to the COVID-19 outbreak. The Stark Blanket Waivers, which were issued under Section 1135 of the Social Security Act, permit numerous flexibilities to ensure that: “(1) sufficient health care items and services are available to meet the needs of individuals enrolled in the Medicare, Medicaid, and CHIP programs; and (2) health care providers . . . that furnish such items and services in good faith, but are unable to comply with one or more of the specified requirements of [Stark] as a result of the consequences of the COVID-19 pandemic, may be reimbursed for such items and services and exempted from sanctions for such noncompliance, absent the government’s determination of fraud or abuse.” These flexibilities provide welcome relief for health care providers that are facing much uncertainty and overwhelm in this time of rapid and drastic change. Stark is a strict liability law with very significant civil penalties and prohibitions on billing the Medicare program associated with its violation. However, during the PHE, CMS will reimburse for services provided pursuant to referrals that would otherwise violate Stark, and will not impose penalties, as long as the Stark Blanket Waivers are followed. It is important to keep in mind that each Stark Blanket Waiver is limited to the specific circumstances described in the waiver. Health care providers are required to satisfy every condition of the Stark Blanket Waiver in order to take advantage of it, so special attention should be paid to the requirements. CMS cautioned that any remuneration described in the Stark Blanket Waivers must be directly between the entity and: (1) the physician or the physician organization in whose shoes the physician stands under 42 C.F.R. § 411.354(c); or (2) the immediate family member of the physician. Further, CMS cautioned that the remuneration and referrals described in the Stark Blanket Waivers must be solely related to “COVID-19 Purposes.” CMS specifies that “COVID-19 Purposes” means, for purposes of the Stark Blanket Waivers: Diagnosis or medically necessary treatment of COVID-19 for any patient or individual, whether or not the patient or individual is diagnosed with a confirmed case of COVID-19; Securing the services of physicians and other health care practitioners and professionals to furnish medically necessary patient care services, including services not related to the diagnosis and treatment of COVID-19, in response to the COVID-19 outbreak in the United States; Ensuring the ability of health care providers to address patient and community needs due to the COVID-19 outbreak in the United States;  Expanding the capacity of health care providers to address patient and community needs due to the COVID-19 outbreak in the United States; Shifting the diagnosis and care of patients to appropriate alternative settings due to the COVID-19 outbreak in the United States; or Addressing medical practice or business interruption due to the COVID-19 outbreak in the United States in order to maintain the availability of medical care and related services for patients and the community. There are eighteen Stark Blanket Waivers. It is critical to know that each waiver is specific in its requirements and application, so health care providers should not rely on this summary in order to use a Stark Blanket Waiver. Instead, providers should carefully review the details of each waiver prior to making a decision to proceed with an arrangement in reliance on a waiver. A few of the Stark Blanket Waivers are briefly summarized as follows: Remuneration to a physician that is above or below fair market value for services personally performed by the physician. Rental charges paid to a physician that are below fair market value. Remuneration to a physician in the form of medical staff incidental benefits or non-monetary compensation that exceeds the limits set forth in applicable Stark regulations. Loans to a physician with below fair market value interest rates or on terms that are not available from a traditional lender. Referrals by a physician owner of a hospital that temporarily expands its facility capacity above its baseline number without prior application and approval of the facility expansion as required under Stark. Referrals by physicians in a group practice in a location that does not qualify as the “same building” or “centralized building” as typically required under Stark. Referrals by a physician to an entity with which the physician has a compensation arrangement that does not satisfy the writing or signature requirements of the applicable Stark exception, as long as all of the other requirements of the exception are met (unless the other requirements have been waived under one or more of the Stark Blanket Waivers). While no data or notification is required to be submitted to CMS in order to use the Stark Blanket Waivers, parties seeking to utilize the Stark Blanket Waivers should develop and retain records related to the use of the waivers in order to support the fact that the decision to use the waivers was for COVID-19 Purposes, and to document that each requirement of the waiver was satisfied. These records must be made available to the Secretary of the Department of Health and Human Services upon request. At the end of the document setting forth the Stark Blanket Waivers, CMS provided two pages of examples of the application of the Stark Blanket Waivers. CMS clarified that unless a Stark Blanket Waiver expressly applies only to a specific type of entity (e.g., a home health provider), then the examples that CMS provided which reference a hospital would apply to any entity that furnishes designated health services. Finally, CMS provided the email address for individuals to use to submit inquiries about the blanket waivers, available here: 1877CallCenter@cms.hhs.gov. We note that individual waivers of sanctions under the Stark Law are still available and may be granted upon request submitted to the email address noted above. Such individual waiver requests are a good option for a party to consider if an existing or proposed arrangement does not appear to qualify for a Stark Blanket Waiver (or an existing Stark exception). * * * For assistance in determining whether an existing or proposed arrangement complies with a Stark Blanket Waiver and/or for inquiries regarding individual waiver requests, please contact the authors or your regular Dorsey & Whitney LLP attorney. Dorsey is closely monitoring the rapidly evolving legal landscape related to the COVID-19 pandemic. You can access Dorsey’s health law blog related to health law updates, available here. You can also access Dorsey’s coronavirus resource center, which contains a wide variety of legal resources related to the coronavirus outbreak, available here.

In the final quarter of calendar year 2019, the Department of Health and Human Services Office of Inspector General ("OIG") released its Semiannual Report to Congress (the "Report").  The Report covers the six-month period from April 2019 through September 2019 and details for Congress the OIG’s activities during that time and how the office uses its resources. For the six-month period detailed throughout the Report, one thing is obvious: the OIG continued its aggressive approach in pursuing providers of all kinds for suspected fraud and abuse in HHS programs. The Report details how the OIG’s investigative work, in conjunction with other federal and state agencies, led to $2.74 billion in expected investigative recoveries, 388 criminal actions, 364 assessments of monetary penalties, and 1,347 exclusions of individuals and entities from Federal health care program. For comparison, for entirety of 2018, OIG reported expected recoveries of $2.91 billion, criminal actions against 764 individuals or entities, and exclusion of 2,712 entities from federal healthcare programs.   Thus, 2019 was a much more active year for the OIG.  Among other highlights included in the Report, the OIG reports an April 2019 investigation (known as Operation Brace Yourself) that dismantled a healthcare fraud scheme involving over $1.2 billion in losses.  In the alleged scheme, medical professionals working with fraudulent telemedicine companies received illegal kickbacks and bribes from medical equipment companies.  In exchange, the medical equipment companies obtained prescriptions for medically unnecessary orthotic braces and used them to fraudulently bill Medicare.  The operation led to charges against twenty-four defendants across seventeen federal districts. In the six-month period outlined in the Report, the OIG also netted the largest healthcare fraud scheme ever charged by federal authorities.  The fraud scheme involved a record $1.3 billion in claims.  According to the investigation, the leader of the scheme bribed physicians to admit patients into care facilities he owned, and then cycled the patients through facilities in his network.  In addition to billing Medicare and Medicaid for services and prescription drugs that were unnecessary or not provided, witnesses testified that the facilities were in poor condition and provided inadequate care—information that was concealed by bribing a state regulator for advance notice of surprise inspections.  The leader of the scheme was sentenced to twenty years in prison, and his accomplice was sentenced to over six years in prison. The Report also recounts the case of an inpatient rehabilitation company that settled allegations of submitting false patient diagnoses and admitting patients unnecessarily to bolster Medicare payments.  The company allegedly provided false diagnoses on patient assessments to keep its facilities eligible for a special Medicare status that pays a higher rate.  The company also allegedly admitted and billed for Medicare patients that did not need the care they were provided.  The company ended up paying $48 million to resolve the allegations. What this means for you: the OIG's aggressive pursuit of providers for fraud and abuse related to federal and state healthcare programs continues to ramp up, with OIG reporting a $5.4 billion in expected recoveries from FY 2019, which is a significant increase over 2018’s $2.91 billion.  It's critical that providers ensure their operations, including all of their agreements, are up to date with the most current requirements under the law. Hospitals and health systems need to ensure their providers are educated on the fraud and abuse laws and remain diligent in the upcoming year.  To paraphrase, according to Acting Inspector General Joanne M. Chiedi, 2020 will see the OIG continue its bold pursuit of those who attempt to cheat HHS programs or harm HHS beneficiaries and the agency will be resolute in catching and holding accountable perpetrators of fraud and identifying misspent funds.

The Centers for Medicare & Medicaid Services (“CMS”) recently posted two annual updates related to the physician self-referral law (“Stark Law” or “Stark”) on its Stark website: (1) CPI-U updates related to the nonmonetary compensation exception and medical staff incidental benefits exception; and (2) CPT/HCPCS codes used to identify certain categories of Stark designated health services (or “DHS”).  These updates are important for stakeholders to be aware of as they seek to ensure continued compliance with Stark Law requirements. CPI-U Updates As per usual, the CPI-U Updates page of the CMS Stark website, found here, was updated before the end of the year to reflect the new compensation limits (based on inflation) for the nonmonetary compensation exception (at 42 C.F.R. § 411.357(k)) and medical staff incidental benefits exception (at 42 C.F.R. § 411.357(m)).  For calendar year 2020, the non-monetary compensation limit is $423 (up from $416 for calendar year 2019) and medical staff incidental benefits must be less than $36 per occurrence (up from $35 in calendar year 2019). DHS Code List Updates As we explained in our blog post here, in the calendar year 2020 Medicare physician fee schedule final rule (“PFS”), CMS finalized changes to the advisory opinion process under the Stark Law, and also included the annual update to the list of CPT/HCPCS codes used to identify certain categories of DHS (the “Code List”).  As we also explained, the Stark Law regulations at 42 C.F.R. § 411.351 specify that the following four categories of DHS are defined by reference to the Code List: (1) clinical laboratory services; (2) physical therapy, occupational therapy, and outpatient speech-language pathology services; (3) radiology and certain other imaging services; and (4) radiation therapy services and supplies.  The Code List is updated annually to reflect changes in the most recent CPT and HCPCS Level II publications. Further, items and services that may qualify for either of two Stark Law exceptions—the exception for preventive screening tests, immunizations and vaccines at 42 C.F.R. § 411.355(h) and the exception for EPO and other dialysis-related drugs at 42 C.F.R. § 411.355(g)—are identified by reference to the Code List.  The Code List included the annual updates to the codes eligible for the preventive screening tests, immunizations and vaccines exception.  However, as in previous years, the Code List does not include any codes eligible for the EPO and other dialysis-related drugs exception (for reasons explained by CMS in the rule).  The PFS rule includes tables showing the additions and deletions to the Code List. As per usual, the complete Code List was posted before the end of the year to the CMS Stark website dedicated to the Code List, found here.  The new list is effective January 1, 2020.

On September 5, 2019, the Centers for Medicare & Medicaid Services (“CMS”) issued a final rule (“Final Rule”) effective November 4, 2019, which increases disclosure requirements for the provider and supplier enrollment and revalidation process. The Final Rule is aimed at increasing the information provided to CMS in enrollment and revalidation to identify fraud, waste, and abuse, and expanding CMS’s authority to deny, revoke, or delay a provider’s or supplier’s ability to participate in Medicare, Medicaid and CHIP based on a provider’s or supplier’s relationship with previously sanctioned entities.  The Final Rule revises several existing regulations and adds an onerous regulation titled “disclosure of affiliations,” at 42 C.F.R. § 424.519. This new disclosure requirement mandates that, at the time of reenrollment or revalidation, each provider and supplier must list all “disclosable events” for each “affiliation” within the past five (5) years, even if the provider/supplier is not affiliated with such person/entity at the time of enrollment or revalidation. This new requirement is greatly expanded from the previous disclosure requirement, where providers/suppliers were only required to disclose their own adverse actions. A provider or supplier must disclose its affiliations that have one of the following “disclosable events”: Currently has an uncollected debt to Medicare, Medicaid or CHIP; Has been or is subject to a payment suspension under a federal health care program; Has been or is excluded by the Office of the Inspector General from participation in Medicare, Medicaid, or CHIP; or Has had its Medicare, Medicaid, or CHIP enrollment denied, revoked, or terminated. 42 C.F.R. § 424.502. Note that on the last disclosable event, the Final Rule could be interpreted to require disclosure of any enrollment denial, including billing privileges and arguably denials of Change of Ownership or Change of Location requests. Moreover, CMS articulated a broad definition of “affiliations” which means, in relation to the provider/supplier, any individual or entity that holds: A five (5) percent or greater direct or indirect ownership interest; A general or limited partnership interest (regardless of the percentage); An interest in which an individual or entity exercises operational or managerial control over, or directly or indirectly conducts, the day-to-day operations of another organization regardless of an employment relationship; An officer or director position; or Any reassignment relationship (e.g., reassignment of billing rights). 42 C.F.R. § 424.502.   CMS may revoke privileges if a provider or supplier knew or reasonably should have known about an affiliate’s disclosable events. CMS declined to provide an objective standard to such a knowledge requirement, but provided that a provider/supplier must make a “sufficient effort” when evaluating whether an affiliate has a disclosable event that such provider/supplier must report.  Such an effort could  include the provider/supplier directly contacting the affiliate, and potentially mining historical data, not just publically available data. In the context of complex legal structures including publicly owned companies or private equity-backed providers, CMS’s definition of affiliation can quickly result in a time-consuming process of review.  The disclosure requirements in the Final Rule apply to all providers and suppliers, but only at time of initial enrollment and revalidation, which is a significant improvement from the proposed rule (which, if adopted, would have required disclosures for change of ownership and change of information filings). Once an affiliation is disclosed to CMS, CMS will require additional information about the affiliate, the relationship, and the disclosed adverse information, and will conduct an analysis of whether such affiliation presents an “undue risk” of fraud, waste, and abuse to the Medicare Program, such that the disclosing provider/supplier’s billing privileges should be denied or revoked. Recognizing that compliance with this Final Rule will be an arduous task for a large number of providers and suppliers, CMS adopted a “phased in” approach. First, CMS will require disclosure of affiliations only when specifically requested by CMS. CMS will then implement new CMS-855 forms (which will also go through a separate notice and comment period), and will issue subregulatory guidance on the new forms and disclosure requirements. Only then will providers and suppliers be required to comply with the disclosure requirements during initial enrollment and revalidation.  It is expected that the “phased-in” approach could extend over the course of the next few years, and in the second phase, may initially only require compliance by certain providers/suppliers. Even though the immediate impact of the disclosure requirements is limited, providers and suppliers should understand the extensive scope of the new requirement and understand what steps will need to be taken to review in detail their affiliations, both past and present, once the complete scope of the disclosure requirements are officially implemented.   If you have further questions about this Final Rule, please contact the authors or your regular Dorsey attorney.   The Final Rule on the new disclosure requirements can be found on the website of the Federal Register here.    

In the calendar year 2020 Medicare physician fee schedule final rule (“PFS”), which was published in the Federal Register on November 15, 2019 (available here), CMS finalized changes to the advisory opinion process under the federal physician self-referral law (“Stark Law” or “Stark”).  CMS also published its annual update to CPT/HCPCS codes used to identify certain categories of Stark designated health services (or “DHS”).  These regulatory changes and annual code update both go into effect on January 1, 2020. Finalized Changes to Stark Advisory Opinion Regulations Under the CMS advisory opinion process, the regulations for which are found at 42 C.F.R. §§ 411.370–389, parties can seek an advisory opinion from CMS as to whether a referral for DHS (other than clinical laboratory services) is prohibited under the Stark Law.  CMS determines in the opinion whether an arrangement constitutes a “financial relationship” that would implicate the Stark Law’s referral prohibition and whether the arrangement or the referred service qualifies for a Stark Law exception.  CMS issued a Request for Information (“RFI”) in June 2018 as part of the “Regulatory Sprint to Coordinated Care” about ways CMS could modify the Stark Law regulations in order to reduce barriers to patient care coordination and value-based arrangements and to reduce the regulatory burden of complying with the Stark Law generally, which we wrote about here.  CMS did not specifically solicit comments regarding the Stark advisory opinion process in the RFI, but CMS received a number of comments about ways that the Stark advisory opinion process could be improved.  CMS explains in preamble to the PFS that it “undertook a fresh review” of the advisory opinion process in light of the comments it received to “identify limitations and restrictions that may be unnecessarily serving as an obstacle to a more robust advisory opinion process.” CMS also recently issued sweeping proposed Stark Law regulatory changes as part of the Regulatory Sprint to Coordinated Care on topics related to the RFI, which we wrote about in a white paper available here.  While the changes to the advisory opinion regulations do not directly relate to the shift to a value-based health care delivery system, CMS acknowledges in preamble to the PFS that “a faster and more robust advisory opinion process facilitates the shift to value-based care arrangements by providing more guidance for parties trying to understand how the physician self-referral law applies in an evolving and innovative marketplace. This will help to reduce provider burden by providing insight into what does and does not comply with the law, which encourages innovation.” Since the initial advisory opinion regulations were issued in 1998, CMS has only issued 16 advisory opinions, which are available here.  (CMS also issued 15 advisory opinions from 2004-2005 during the 18-month moratorium on physician ownership and investment interests in specialty hospitals that was in effect at that time, which are available here.)  In contrast, the Department of Health and Human Services (“HHS”) Office of Inspector General (“OIG”), which has a separate advisory opinion process for the federal anti-kickback statute (“AKS”) and certain other laws, issued 14 advisory opinions in calendar year 2018 alone (available here).  In preamble to the PFS, CMS recognizes the importance of an accessible advisory opinion process and acknowledges that the current advisory opinion process has not been widely used.  An accessible advisory opinion process is particularly important in the context of the Stark Law, since it is a strict liability statute, and there is a great need for certainty because, as CMS acknowledges, “parties that act in good faith may nonetheless face significant financial exposure if they misunderstand or misapply the law’s exceptions.” We anticipate that the changes to the advisory opinion process may indeed help to make the process more meaningful and accessible to entities that are seeking to understand if their arrangement complies with the Stark Law, particularly due to CMS’s broadening of how advisory opinions can be relied upon (as described below).  If you are interested in submitting an advisory opinion request, or for advice on whether and how you can rely on a published advisory opinion in assessing an arrangement for compliance with the Stark Law, please contact the authors or your regular Dorsey attorney. The most notable changes to the advisory opinion regulations in the PFS are the following: Reliance on an Advisory Opinion: Under existing Stark regulations, only the individual or entity that requested the advisory opinion may rely on the opinion. In the PFS, CMS finalizes revisions to regulations to specify the following: An advisory opinion is binding on the Secretary of HHS, and a favorable advisory opinion means that sanctions will not be imposed under the Stark Law with respect to individuals/entities that are parties to the arrangement upon which the opinion was issued (as well as the individuals/entities that requested the opinion). The Secretary of HHS will not pursue sanctions under the Stark Law “against any party to an arrangement that CMS determines is indistinguishable in all its material aspects from an arrangement with respect to which CMS issued a favorable advisory opinion.” Parties can submit an advisory opinion request to determine whether CMS would view their arrangement as “indistinguishable in all material aspects” from another arrangement that has received a favorable opinion, which will be issued by CMS on an expedited basis (as explained below). Individuals/entities can rely on advisory opinions “as non-binding guidance that illustrates the application of the physician self-referral law and regulations to the specific facts and circumstances described in the advisory opinion.” CMS acknowledges that stakeholders already use advisory opinions to inform their decision-making, and this change is intended to make clear that “such reliance is permissible and reasonable.” Timeline for Issuing an Advisory Opinion: Under existing regulations, CMS currently has a 90-day timeframe to issue an advisory opinion. CMS finalizes its proposed changes to the regulatory text to shorten this to 60 “working days” (where “working day” excludes weekends and holidays) after the request has been formally accepted.  CMS maintains the discretion it has in existing regulations to extend this time period when a request involves “complex legal issues of first impression or highly complicated fact patterns” and to suspend the time period in certain circumstances. CMS finalizes revisions to regulations to provide for expedited review of advisory opinion requests that relate to whether an arrangement is “indistinguishable in all material aspects” from an arrangement that was the subject of a favorable advisory opinion. The expedited review period will be 30 working days. Fees for the Cost of Advisory Opinions: CMS finalizes revisions to regulations to revise the fee structure for advisory opinions. Specifically, the $250 initial fee is removed and a $220 hourly rate is implemented. In the PFS, CMS also finalizes its proposed changes to the advisory opinion regulations in the following areas (among others): Matters Subject to Advisory Opinions: CMS finalizes revisions to regulations to allow CMS to consider advisory opinion requests that “relate to” existing or planned arrangements, rather than requests that “involve” them, which is intended to capture the scope of appropriate advisory opinion requests. CMS explains that it remains its position that advisory opinion requests cannot be regarding only “hypothetical facts or general questions of interpretation,” but must be about a specific referral, physician, financial relationship and facts/circumstances. CMS does acknowledge, however, that there is some confusion over what is a planned arrangement versus a hypothetical arrangement, so is removing this language from the advisory opinion regulations.  It also revised the regulatory text to reflect its view that a request for an advisory opinion would not be accepted if the claim could not be billed to Medicare for some reason unrelated to the Stark Law. CMS finalizes revisions to regulations to allow CMS more flexibility related to advisory opinion requests that involve conduct that is “substantially similar to conduct that is under investigation or is the subject of a law enforcement proceeding.” Certification Requirement: CMS finalizes revisions to regulations to allow for any authorized officer of the corporation to sign the certification statement, in addition to the Chief Executive Officer. Rescission: CMS finalizes revisions to regulations related to when CMS may rescind an advisory opinion, which is when CMS determines that there is good cause to do so. “Good cause” exists when “(i) there is a material change in the law that affects the conclusions reached in an opinion; or (ii) a party that has received a negative advisory opinion seeks reconsideration based on new facts or law.”  CMS declines to adopt a minimum wind-down period in regulatory text for arrangements that are the subject of a rescinded advisory opinion, and states that it will work with parties affected by a rescinded opinion to determine a reasonable wind down period.  CMS also finalizes regulatory changes to provide for an advance notice to the requestor and the public of a rescinded opinion. 2020 DHS Code List and CPI-U Updates The PFS also includes the annual update to the list of CPT/HCPCS codes used to identify certain categories of DHS (the “Code List”).  As we explained in prior posts (such as this one), the Stark Law regulations at 42 C.F.R. § 411.351 specify that the following four categories of DHS are defined by reference to the Code List: (1) clinical laboratory services; (2) physical therapy, occupational therapy, and outpatient speech-language pathology services; (3) radiology and certain other imaging services; and (4) radiation therapy services and supplies.  The Code List is updated annually to reflect changes in the most recent CPT and HCPCS Level II publications. Further, items and services that may qualify for either of two Stark Law exceptions—the exception for preventive screening tests, immunizations and vaccines at 42 C.F.R. § 411.355(h) and the exception for EPO and other dialysis-related drugs at 42 C.F.R. § 411.355(g)—are identified by reference to the Code List.  The Code List included the annual updates to the codes eligible for the preventive screening tests, immunizations and vaccines exception.  However, as in previous years, the Code List does not include any codes eligible for the EPO and other dialysis-related drugs exception (for reasons explained by CMS in the rule).  The PFS rule includes tables showing the additions and deletions to the Code List.  We expect that, as per usual, the complete list will be posted before the end of the year to the CMS Stark website dedicated to the Code List, found here. We also expect that the CPI-U Updates page of the CMS Stark website, found here, will be updated before the end of the year to reflect the new compensation limits for the nonmonetary compensation exception (at 42 C.F.R. § 411.357(k)) and medical staff incidental benefits exception (at 42 C.F.R. § 411.357(m)), which are both updated annually for inflation.

Today, the Centers for Medicare & Medicaid Services (CMS) and the Department of Health and Human Services (HHS) Office of Inspector General (OIG) each released their long-anticipated proposed rules to revise the federal self-referral law (or “Stark Law”) regulations, the safe harbors under the federal anti-kickback statute (AKS), and the civil monetary penalty law (CMP) for beneficiary inducements.  The proposed rules are part of HHS’s “Regulatory Sprint to Coordinated Care,” which seeks to remove regulatory obstacles to care coordination and a value-based healthcare delivery system. The HHS press release regarding the proposed rules is available here,  and includes links to each of the CMS and OIG proposed rules.  For our prior posts on the Regulatory Sprint to Coordinated Care, see here and here. Relatedly, the Substance Abuse and Mental Health Services Administration (SAMHSA) published proposed rules to revise privacy rules for substance use disorder records on August 26, and CMS published proposed rules to revise the Stark Law advisory opinion regulations on August 14 (as part of the Medicare Physician Fee Schedule proposed rule). We are reviewing the proposed rules and will post an in-depth analysis shortly.

As reported here in February, the Department of Health and Human Services (HHS) Office of Inspector General (OIG) released two new significant proposed regulations that would have had a transformative effect on the drug discount and rebate arrangements that are commonplace between pharmaceutical manufacturers and Medicare Part D Plans and Medicaid Managed Care Organizations (and the pharmacy benefit managers (PBMs) acting on their behalf). The Administration’s goal with these proposed regulations was to reduce prescription drug prices.  However, in July, the Administration abandoned these proposed regulations (as shown on the Office of Management and Budget website) out of concern that they would actually have the opposite effect and result in increased drug prices.  President Trump reportedly became concerned after the proposals received significant support from the pharmaceutical companies. The proposals would have eliminated the current federal anti-kickback statute (AKS) safe harbor protection relied upon by manufacturers and PBMs for the rebates paid by manufacturers to PBMs for certain drugs.  In its place, the OIG proposed a much more narrow safe harbor that would have only applied if the reduced price from the manufacturer was fixed in advance and disclosed to the plan, the full value of the price reduction was disclosed to the pharmacy through a chargeback to ensure that the total payment to the pharmacy for the drug was no less than what the health plan (or PBM on its behalf) paid to the manufacturer for the drug, and the reduction in the drug’s price was completely applied to the price charged to the patient at the point of sale. At the same time, the OIG also proposed a new PBM service fee AKS safe harbor that would have protected payments by manufacturers to PBMs for certain services provided by PBMs, but with strict requirements for the manufacturer and PBM to have a written agreement for the services which set the compensation for the services in advance at a rate that is consistent with fair market value and not based on the volume or value of any referrals or other business generated between the parties or the health plan.  The proposed service fee safe harbor would have also required the PBM to annually disclose such arrangements, services and compensation to the health plans and to the Secretary of HHS upon request. The Administration has been vocal about its goal of reducing drug prices for patients.  So, we expect alternative action in the future which could take the form of legislation rather than the rule-making process. We are continuing to closely monitor changes in the area.

The Eliminating Kickbacks in Recovery Act of 2018 (EKRA) became law on October 24, 2018, and is codified at 18 U.S.C. § 220.  As part of the Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment (SUPPORT) for Patients and Communities Act, EKRA was enacted in response to a concern that the federal Anti-Kickback Statute (AKS) was not broad enough to cover certain abusive payment arrangements related to opioid addiction treatment centers, since the AKS only applies to federal health care programs.  EKRA has considerable similarities to the AKS, but is notably distinct from the AKS in that it applies to all payors rather than just federal health care programs and has an exception for employment compensation that is much narrower than the AKS’s employment safe harbor.  Further, EKRA relates to arrangements with recovery homes, clinical treatment facilities, and laboratories (the “Subject Entities”).  With respect to laboratories, even though EKRA was enacted in response to the opioid crisis, it applies to all laboratories, not just laboratories that perform testing related to substance abuse (e.g., toxicology screening). We set forth below an overview of EKRA, exceptions to the law’s prohibitions, and recommendations to ensure compliance. Overview EKRA subjects to criminal penalties anyone who, with respect to services covered by any health care benefit program (whether federal or private), knowingly and willfully: solicits or receives any remuneration in return for referring a patient or patronage to a Subject Entity; or pays or offers any remuneration: to induce a referral of an individual to a Subject Entity; or in exchange for an individual using the services of that Subject Entity. Penalties for each occurrence of violating the law are a fine of not more than $200,000 (which is double the possible fine per violation of the AKS), imprisonment for not more than 10 years, or both. EKRA defines the Subject Entities as follows: Recovery home: “a shared living environment that is, or purports to be, free from alcohol and illicit drug use and centered on peer support and connection to services that promote sustained recovery from substance use disorders.” Clinical treatment facility: “a medical setting, other than a hospital, that provides detoxification, risk reduction, outpatient treatment and care, residential treatment, or rehabilitation for substance use, pursuant to licensure or certification under State law.” Laboratories: defined by reference to CLIA, which means that all laboratories are subject to EKRA. EKRA does not apply to conduct that is prohibited by the AKS, and EKRA does not “occupy the field” in which any state law may be more stringent related to the same subject matter. Exceptions Similar to AKS statutory exceptions and regulatory safe harbors, EKRA provides a number of exceptions to its prohibitions, including exceptions for payments made under employment arrangements, personal services and management contracts, waivers or discounts of any coinsurance or copayment, and certain other exceptions that meet specified parameters (some of which are similar to and some of which are different from the parameters under the parallel AKS exceptions/safe harbors).  EKRA also has an exception for remuneration made pursuant to certain alternative payment models, a parallel of which is not present in AKS exceptions/safe harbors. Of note, the EKRA exception for payments made by an employer is much narrower than the AKS safe harbor for employment.  Specifically, while the AKS safe harbor permits any payments to an employee as long as there is a bona fide employment relationship, the EKRA exception requires that the payment not vary based on the number of individuals referred, tests or procedures performed, or amounts billed to or received from the health care benefit program from the individuals referred.  This means that employment arrangements that would not be prohibited under the AKS, such as those with sales and marketing personnel that include commission-based compensation, appear to be prohibited under EKRA and thus need to be carefully evaluated for compliance with this new law.  (The EKRA employment exception applies to payments made by an employer both to employees and independent contractors (rather than just to employees), even though EKRA has a separate exception for personal services and management contracts.) EKRA provides that the Attorney General, in consultation with the Secretary of Health and Human Services, may promulgate regulations to clarify the exceptions described in the statute. Recommendations for Complying with EKRA The Subject Entities need to: Ensure existing and future compensation arrangements fit within EKRA exceptions, particularly for employment compensation due to the narrower parameters of the EKRA employment exception as compared to the AKS employment safe harbor, and to the extent certain of such arrangements would not otherwise be analyzed for compliance with the AKS because they do not involve payment under any federal health care program. Update policies and procedures related to financial arrangements with referral sources and related to patient copay and coinsurance waivers to address compliance with EKRA. Further, entities that are not themselves a Subject Entity but that do business with a Subject Entity should evaluate their relationships with Subject Entities to ensure that such relationships are in compliance with EKRA, since the law applies to parties on both sides of the prohibited arrangement (i.e., the law prohibits both the payment or offering of referral/inducement fees, but also the soliciting or receiving of such remuneration).  Policies and procedures of non-Subject Entities who have such business relationships should also be updated to address EKRA compliance. We will continue to closely monitor the state of EKRA for guidance, revisions to the law and enforcement. Further, it is important to also understand that several states, such as Florida, Utah and California, have passed their own state level “patient brokering” laws which prohibit similar conduct and arrangements as addressed by EKRA.  These laws can also be implicated and we are monitoring their development as well.   Summer Associate Monica Delgado provided substantial assistance researching and drafting this blog post.

Today, the Federal Government announced enforcement actions against 60 defendants in eleven federal districts, including 31 doctors, seven pharmacists, eight nurse practitioners, and seven other licensed medical professional for allegedly prescribing and distribution opioids and other dangerous narcotics and for health care fraud schemes. (DOJ Press Release, April 17, 2019). The charges involve over 350,000 controlled substances prescriptions and over 32 million pills. The unsealed indictments against the defendants can be found here. The enforcement action was led by the Appalachian Regional Prescription Opioid (ARPO) Strike Force. The ARPO Strike Force was formed in December and includes a team of federal agents and prosecutors to combat the opioid epidemic in the worst hit area of the country. The Strike Force analyzed a variety of databases to identify suspicious prescribing activity; investigators then used confidential and undercover agents to document medical professionals’ prescribing and dispensing of opioids in exchange for sex and cash. Sari Horwitz & Scott Higham, Doctors in seven states charged with prescribing pain killers for cash, sex, Wall St. J. (Apr. 17, 2019, 1:36 PM), https://www.washingtonpost.com/world/national-security/doctors-in-five-states-charged-with-prescribing-pain-killers-for-cash-sex/2019/04/17/7670d20e-607e-11e9-9ff2-abc984dc9eec_story.html?utm_term=.7ae448f3b507. In one case, a doctor allegedly prescribed combinations of opioids and benzodiazepine, sometimes in exchange for sexual favors; in total, the doctor is alleged to have prescribed approximately 500,000 hydrocodone pills, 300,000 oxycodone pills, 1,500 fentanyl patches and more than 600,000 benzodiazepine pills. In another case, a pharmacist was charged with allegedly dispensing large amounts of opioids outside the usual scope of professional practice and for no legitimate medical purpose. A dentist was also charged for alleged conduct that included writing prescriptions for opioids that had no legitimate medical purpose, removing teeth unnecessarily, scheduling unnecessary follow-up appointments and incorrect billing practices. While there has been an intense focus through litigation across the country on the role of manufacturers and distributors in the opioid crisis, recent initiatives have focused on prescribers and dispensers. Since June 2018, over 650 individuals have been excluded from participation in Medicare, Medicaid and all other Federal health care programs for conduct related to opioid diversion and abuse. For law-abiding prescribers and dispensers, it may be easy to dismiss today’s headline news as “not applicable”. However, all prescribers and dispensers should take notice of the increased number of investigations against their fellow licensees. The increased scrutiny of providers’ opioid prescribing and dispensing across the country could mean that even innocent providers are caught up in an investigation. Federal and state resources are being devoted in record numbers to investigations of prescribers and dispensers. There are regional DEA and DOJ task forces in place, dedicated funding streams for U.S. Attorneys, focused attention by state Medicaid agencies and Medicaid Fraud Control Units, and enforcement actions by state Boards of Medicine and Pharmacy. Cases against prescribers and dispensers are more likely today than in the past to include both civil and criminal penalties related to opioid prescribing and dispensing. As evidenced by today’s announcement, the government has become sophisticated in the use of data mining to identify outliers who will be the next targets of government investigations. Outliers in the number and dosages of prescriptions, the numbers of pain patients, the combinations of drugs prescribed, and failure to check and report to state prescription drug monitoring programs or report significant loss or theft to the DEA, can all trigger an investigation. In order to reduce risk of becoming the target of an investigation, prescribers and dispensers of opioids should ensure that they stay abreast of all State specific guidelines and standards of care for prescribing and dispensing opioids; review CMS guidance on opioid prescribing; review CDC Guidelines for prescribing opioids for chronic pain; and utilize their state’s prescription drug monitoring programs. Prescribers and dispensers should also focus on appropriate recordkeeping and documentation and inventory counts to reduce theft and unexplained inventory shortages. Dispensers should also ensure they know and verify the prescribers of prescriptions and document how any red flags in opioid prescriptions are resolved.   If you have any questions about these topics, please contact the authors or your regular attorney at Dorsey & Whitney.

The Centers for Medicare & Medicaid Services (CMS) is “actively working” on updates to regulations under the federal physician self-referral law (or “Stark Law”), according to CMS Administrator Seema Verma during a March 4, 2019 speech. Verma stated that the updated regulations will be issued later this year, and “will represent the most significant changes to the Stark law since its inception.” Verma explained in her remarks that the Stark Law, when enacted in 1989, made sense in a fee-for-service context, but as health care transitions to a value-based system where providers take on risk and payment is for outcomes rather than individual services, “we don’t have nearly as much need to interfere with who’s getting paid for what service.” According to Verma, CMS hopes that Stark Law regulatory changes “will help spur better care coordination and help support our work to remove barriers to innovation while continuing to provide appropriate safeguards for our programs.” Verma stated that the updated regulations will include “clarifying the regulatory definitions of volume or value, commercial reasonableness and fair market value; addressing issues such as lack of signature, incorrect dates or other areas of technical noncompliance; and updating the regulation to address a world in which there are cybersecurity and electronic health records requirements.” These Stark Law regulatory reforms are part of the “Regulatory Sprint to Coordinated Care” launched by the Department of Health and Human Services (HHS). Under this initiative, various HHS agencies have issued requests for information (RFIs) to solicit feedback from stakeholders on removing regulatory obstacles to care coordination. CMS published an RFI on June 25, 2018 soliciting comments regarding Stark Law reforms (as we described in our post here), which received 392 comments before the close of the comment period. We anticipate that CMS will summarize and respond to many of the comments that it received in preamble to the proposed Stark Law regulations to be issued later this year, as well as incorporate suggestions from stakeholders in the proposed regulations themselves. Also as part of the Regulatory Sprint, the HHS Office of Inspector General (OIG) published an RFI on August 27, 2018 soliciting comments on reforms to the anti-kickback statute and beneficiary inducements civil monetary penalty (as we described in our post here), which received 359 comments before the close of the comment period. Additionally, the HHS Office for Civil Rights (OCR) published an RFI on December 14, 2018 soliciting comments on reforms to the Health Insurance Portability and Accountability Act (HIPAA) privacy and security regulations, on which the comment period closed last month. The fourth and final area of focus of the Regulatory Sprint (according to an HHS press release) is 42 CFR Part 2, which relates to the confidentiality of substance use disorder patient records. An RFI under the Regulatory Sprint for this regulation has not been published by the Substance Abuse and Mental Health Services Administration (SAMHSA, which is the agency that administers this regulation). We will provide information about regulatory reform developments under these other areas of the Regulatory Sprint as they become available.

The Office of Inspector General of the Department of Health and Human Services (“OIG”) released a proposed rule to eliminate safe harbor protection under the anti-kickback statute for drug price reductions that pharmaceutical manufacturers pay to Medicare and Medicaid plan sponsors and their pharmacy benefit managers (“PBMs”). The OIG proposed replacing the current safe harbor protection for drug price discounts and rebates with a new safe harbor to protect only those drug price reductions that are set in advance and are applied fully to the price of the product charged to the Medicare or Medicaid beneficiary at the point of sale. In addition, the OIG proposed a new safe harbor to protect compensation from pharmaceutical manufacturers to PBMs for services provided to the manufacturer, but only if those payments are fixed, fair market value payments not tied to volume or value, and the PBM discloses such payments to its health plan customers. The OIG’s proposals could have a significant impact on the drug discount and rebate arrangements that are commonly in place between manufacturers and Medicare Part D plans/Medicaid managed care organizations (and PBMs acting on behalf of these plans). The OIG’s proposals would also impact Medicare and Medicaid beneficiaries who would be entitled to receive any such discounts directly at the point of sale. The proposed rule release can be found here and is expected to be published in the Federal Register on February 6. The proposed effective date of the new rules is January 1, 2020, with an earlier effective date of 60 days after the final rule is published, for the new point of sale safe harbor.           I.        Discount Safe Harbor – Changes to Focus on Point-of-Sale Reductions in Drug Prices   The federal anti-kickback statute (Social Security Act § 1128B(b)) makes it a criminal offense for anyone knowingly and willfully to pay, solicit, or receive anything of value to induce referrals of items or services that are reimbursable under any federal health care program. Violation of the statute is a felony, and can carry civil fines, imprisonment, exclusion from federal health care programs, and be the basis for liability under the False Claims Act. An existing safe harbor protects from anti-kickback statute liability discounts and rebates on drug prices that pharmaceutical manufacturers pay to health plans or their PBMs. The OIG’s proposal would revise the discount safe harbor to exclude from protection any reduction in price or other compensation in any form paid from a pharmaceutical manufacturer to a Medicare Part D or Medicaid managed care organization or their PBM in connection with the sale or purchase of a prescription drug. The proposal reflects OIG’s concern that the current manner in which drug price discounts and rebates are structured does not result in lower drug costs to federal programs and federal program beneficiaries, and in fact may be a cause of rising drug costs, and may be contrary to the purposes of the anti-kickback statute. In its place, the OIG proposes to add a new safe harbor focused narrowly on point-of-sale reductions in prescription drug prices. That safe harbor would protect reductions in the price charged by a manufacturer for drug products that are payable by a Medicare Part D or Medicaid managed care organization or their PBM, but only if that price reduction meets three conditions (the “Point of Sale Safe Harbor”): First, the reduced price must be set in advance. OIG intends this to mean that the terms of the price reduction are fixed and disclosed in writing to the plan sponsor by the time of the initial purchase. Second, the sale may not involve a rebate unless the full value of the price reduction is provided to the dispensing pharmacy through chargebacks. This means that when a pharmacy dispenses a drug to a beneficiary, the total payment to the pharmacy (including the beneficiary co-payment, payment from the health plan, and any chargeback payment from the manufacturer) must be no less than the drug price agreed between the manufacturer and the health plan sponsor or their PBM. Lastly, the reduction in price must be completely applied to the price charged to the beneficiary at the time of sale. This means that the drug price to which the beneficiary’s cost-sharing obligations apply at the point of sale must be the same price (taking into account all discounts) that the manufacturer charges to the plan sponsor or their PBM. The OIG also noted that the discount safe harbor would continue to not apply if a manufacturer offered a price reduction to payors other than Medicare and Medicaid payors (i.e., situations in which parties “carve out” referrals of federal health care program beneficiaries or business from otherwise “questionable” financial arrangements). The OIG is especially concerned with these “carve out” arrangements if the offer of a discount on products would serve as an inducement for the purchase of products that are reimbursable by federal healthcare programs (e.g., offering a discount to a private health plan that is conditioned, even implicitly, on a product’s favorable formulary placement in the health payor’s Part D plans).            II.        New PBM Service Fee Safe Harbor   In addition, the OIG proposed a new safe harbor to protect compensation from pharmaceutical manufacturers to PBMs for services rendered to the manufacturers that relate to PBMs’ arrangements to provide PBM services to health plans (the “PBM Service Fee Safe Harbor”). The OIG did propose three specific conditions that must be met in order for compensation to be protected under the PBM Services Fee Safe Harbor. The first proposed condition of the safe harbor would require the PBM and the pharmaceutical manufacturer to have a written agreement that covers all of the services the PBM provides to the manufacturer in connection with the PBM’s arrangements with health plans for the term of the agreement, and specifies each of the services to be provided by the PBM and the compensation for such services. Notably, the OIG declined to propose a specific definition for PBM services but did provide a list of examples of services that it generally considers to be PBM services, including: contracting with a network of pharmacies; establishing payment levels for network pharmacies; negotiating rebate arrangements; developing and managing formularies, preferred drug lists, and prior authorization programs; performing drug utilization review; and operating disease management programs. The second proposed condition requires that compensation paid to the PBM must: (i) be consistent with fair market value in an arm’s-length transaction; (ii) be a fixed payment, not based on a percentage of sales; and (iii) not be determined in a manner that takes into account the volume or value of any referrals or business otherwise generated between the parties, or between the manufacturer and the PBM’s health plans, for which payment may be made in whole or in part under Medicare, Medicaid, or other Federal health care programs. Finally, the Department proposes that the PBM disclose in writing to each health plan with which it contracts at least annually, and to the Secretary upon request, the services it rendered to each pharmaceutical manufacturer that are related to the PBM’s arrangements with that health plan and the associated costs for such services. Other than the proposed revisions to the discount safe harbor, and the new PBM Service Fee Safe Harbor, the OIG did not propose to modify any other existing safe harbors which PBMs may use to protect payments from manufacturers. The OIG specifically noted the possibility that certain types of remuneration that manufacturers might pay to PBMs could continue to be protected under another existing safe harbor. For example, PBMs could presumably continue to rely on the Group Purchasing Organization (GPO) safe harbor to protect certain administrative fees paid by drug manufacturers to PBMs for GPO services, even if those fees are based on the total prescription volumes of health plans on behalf of which the PBM contracts with the manufacturers.          III.        Conclusion   The OIG proposal reflects a clear intent to substantially alter many of the current drug discount and services compensation practices among pharmaceutical manufacturers and Part D/Medicaid MCO payers and their PBMs. The proposal also reflects the OIG’s skepticism that current drug discount and compensation practices among manufacturers and PBMs are sufficiently transparent to health plans to ensure that all appropriate cost reductions and value is passed through to health plans and reflected in lower health plans costs and lower premiums for beneficiaries. The proposal to exclude drug price reductions to Part D and Medicaid MCO health plan sponsors and PBMs is proposed to be effective on January 1, 2020. The OIG is also proposing that the new Point-of-Sale Safe Harbor will take effect in a shorter time frame of sixty (60) days after the rule is finalized. Comments to the proposed rule may be submitted 60 days after publication in the Federal Register. There are a number of steps that parties to the type of arrangements covered by the proposed rule should take, including reviewing their current discount and rebate agreements to determine whether there will need to be amendments to these contracts in order to comply with the proposed rule, if it is finalized. Parties will also need to evaluate what compliance measures are needed in order to operationalize the changes in these arrangements to ensure compliance with the new safe harbor requirements. Finally, in light of the attention OIG is giving to these type of arrangements, now would be an opportune time to review arrangements for compliance with the current safe harbor restrictions, such as the carve out restriction described above. If you have further questions about this proposed rule, please contact the authors or any other health care transaction and regulatory attorneys at Dorsey & Whitney.

The Justice Department announced in a recent press release that it obtained more than $2.8 billion in settlements and judgments from cases involving fraud and false claims against the government. For more information, visit our FCA Now Blog: https://dorseyfca.com/for-fy2018-justice-department-touts-nearly-3-billion-in-false-claims-act-recoveries-mostly-from-qui-tams-and-alleged-healthcare-frauds/  

The Department of Health and Human Services’ (HHS) Office of Inspector General (OIG) has identified the anti-kickback statute (AKS) and beneficiary inducements civil monetary penalty (CMP) as potential barriers to arrangements that could promote better patient care coordination and value-based arrangements.  On August 27, 2018, the OIG published a Request for Information (RFI) seeking input from industry stakeholders on how the agency could modify existing or add new safe harbors to the AKS and exceptions to the beneficiary inducements CMP definition of “remuneration” in order to “foster arrangements that would promote care coordination and advance the delivery of value-based care, while also protecting against harms caused by fraud and abuse.”     The RFI describes how transforming the healthcare system into one that better pays for value is a key priority for HHS, and that HHS has launched what it calls a “Regulatory Sprint to Coordinated Care” to accelerate this transformation, with a focus of removing “unnecessary obstacles” to coordinated care. This OIG RFI is part of HHS’s Regulatory Sprint. As we described in our blog post here, the Centers for Medicare & Medicaid Services (CMS) also recently published an RFI related to reforms to the federal physician self-referral law (or “Stark Law”) as part of HHS’s Regulatory Sprint. Comments are due from stakeholders to the OIG RFI by 5 PM on October 26, 2018. Specifically, OIG is seeking input on the following topics: Promoting Care Coordination and Value-Based CareThe OIG would like information about potential arrangements that the healthcare industry is interested in pursuing, which may implicate the AKS and CMP, such as care coordination arrangements, value-based arrangements, alternative payment models, arrangements involving innovative technology and other novel financial arrangements.  The OIG requests a detailed explanation of the proposed structure and terms of the arrangements, and a description of how the arrangement promotes care coordination or value-based care.  The description should also include an explanation of how the proposed arrangement prevents potential harms such as increased costs, inappropriate utilization, poor quality of care and distorted decision-making.  For each detailed description, the OIG requests that stakeholders describe the new or modified AKS safe harbors or exceptions to the beneficiary inducements CMP definition of “remuneration” that may be necessary in order to protect the described arrangement.  The OIG is also seeking input on several key definitions that are used in the regulatory provisions related to health care delivery reform, payment reform and the AKS, such as the definition of coordinated care, care coordinator and care coordination services. Beneficiary Engagement, including Beneficiary Incentives and Beneficiary Cost-Sharing Obligations  The OIG is seeking feedback on the types of incentives that providers, suppliers and others want to provide to beneficiaries.  For each incentive, the OIG wants to know how providing the incentive would contribute to or improve quality of care, care coordination and patient engagement (including adherence programs).  The OIG published several specific questions in the RFI such as whether beneficiary incentives connected to medication adherence and medication management should be treated differently than other types of beneficiary incentives, and if so, how and why.  Further, the OIG is seeking input regarding what disclosures the offer or should be required to make to beneficiaries regarding an incentive, such as the source of the incentive, as well as input regarding the risks and benefits related to certain types of incentives such as cash equivalents, gift cards, in-kind items and services, and non-monetary remuneration.  Additionally, the OIG is also seeking input on whether the “nominal value” threshold under the CMP should be increased from $15 per item and $75 in the aggregate per patient on an annual basis, whether a similar nominal value “policy” should be applied to the AKS, and if so, how such policy would contribute to care coordination or value-based care.  The OIG is also requesting information about how reducing or eliminating patient cost-sharing obligations might improve care delivery and promote quality of care. Other Related Topics of Interest  The OIG is seeking feedback on a number of related topics of interest. These include: (a) current fraud and abuse waivers developed for purposes of carrying out the Medicare Shared Savings Program; (b) donated or subsidized cybersecurity-related items and services; and (c) new exceptions under the Bipartisan Budget Act of 2018 related to (i) incentive payments under the ACO Beneficiary Incentive Program and (ii) telehealth technologies. The Intersection of the Stark Law and the AKSFinally, the OIG would like feedback regarding circumstances in which Stark Law exceptions and AKS safe harbors should align for purposes of the goals of the RFI and circumstances in which Stark Law exceptions related to care coordination/value-based care should not have a corresponding AKS safe harbor. The OIG noted that, where relevant, it intends to review comments submitted in response to the CMS RFI related to the Stark Law (described above), but that it urges commenters to resubmit any relevant comments to the OIG RFI to ensure that they are considered by the OIG, given the volume of questions included in the CMS RFI and the separate authorities of the OIG and CMS.   Please contact the authors or your regular attorney at Dorsey & Whitney if you want more information about the RFI process or desire to submit comments to the RFI by the October 26, 2018 deadline.  

Many regulatory and legislative calls for modernizing the federal physician self-referral law (or “Stark Law”) in light of the move to value-based payment under Medicare have been made in recent months.  Most recently, a hearing on “Modernizing the Stark Law to Ensure the Successful Transition from Volume to Value in the Medicare Program” took place on July 17th with the House Ways and Means Subcommittee on Health.  At the hearing, the Department of Health and Human Services (HHS), legislators and providers emphasized that the Stark Law has slowed the move to value-based payment under Medicare and that reforms to the Stark Law are needed. Further, the Centers for Medicare & Medicaid Services (CMS) published a Request for Information (RFI) on June 25th regarding reducing the regulatory burdens of the Stark Law, with a particular focus on soliciting comments on how the Stark Law may impede care coordination initiatives.  The RFI describes how transforming the healthcare system into one that pays for value is a key priority of HHS, and that HHS launched a “Regulatory Sprint to Coordinated Care” to accelerate this transformation.  One of CMS’s goals in this Regulatory Sprint is to address “unnecessary obstacles to coordinated care, real or perceived, caused by the [Stark Law].”  In a press release related to the RFI, CMS Administrator Seema Verma is quoted as follows: “We are looking for information and bold ideas on how to change the existing regulations to reduce provider burden and put patients in the driver’s seat. . . . Dealing with the burden of the physician self-referral law is one of our top priorities as we move towards a health care system that pays for value rather than volume.” In the RFI, CMS requests public input on 20 different areas.  These areas include, among others, the structure of existing or potential alternative payment models and other novel financial arrangements, what additional exceptions to the Stark Law are needed for these arrangements, the utility of certain existing exceptions to the Stark Law, and creating new defined terms and revising certain existing defined terms.  CMS also requests comments on areas beyond care coordination initiatives, such as requests for input on defining “commercial reasonableness” in the context of Stark Law exceptions, qualifying as a “group practice,” other areas of Stark Law regulations that need clarification, and compliance costs for regulated entities. The hearing and RFI continue the recent trend of regulatory and legislative initiatives aimed at modernizing the Stark Law in light of the move to value-based payment under Medicare.  As we explained in our prior post, a bill that addresses this very topic, titled the “Medicare Care Coordination Improvement Act of 2017,” was introduced in both the U.S. House of Representatives (H.R. 4206) and Senate (S. 2051) in November 2017.  The bill is still under consideration in both the House and the Senate.  (Please see our prior post for a detailed explanation of the bill.)  As we also explained in this prior post, in January 2018, CMS Administrator Verma identified Stark Law reform as a top policy priority and reported that an inter-agency group was being formed to review the law. Next, as the RFI describes, the President’s fiscal year 2019 budget, which was released in February 2018, included a legislative proposal to create a new Stark Law exception for arrangements arising from alternative payment model participation. Given these recent developments, Stark Law legislative and regulatory reforms are likely to occur in the near future.  The RFI is a great opportunity for stakeholders to be involved in these reforms.  CMS is accepting comments on the RFI through August 24, 2018.  If you would like to submit comments, one of the authors or your regular Dorsey attorney would be happy to assist you.

Overview On February 9, President Trump signed the Bipartisan Budget Act of 2018 (“BBA”) into law. The BBA funds the federal government through March 23 and included a bipartisan agreement to increase annual spending authority for a two-year period. In addition, the legislation contains significant policy changes impacting Medicare, Medicaid and other federal health agencies. These changes include revisions to the federal physician self-referral law (commonly referred to as the “Stark Law”), expansion of coverage for telehealth services, funding extensions of several critical Medicare programs, and changes to the Medicare Shared Savings Program. A summary of some of these key health care policy changes is included below. Revisions to the Stark Law The BBA revised the Stark Law to codify certain regulatory changes that went into effect on January 1, 2016 and corresponding clarifications via preamble by the Centers for Medicare & Medicaid Services (“CMS”) in the 2016 Medicare Physician Fee Schedule Final Rule (the “2016 Final Rule”). Specifically, the BBA revised the Stark Law to indicate the following: The writing requirement of various Stark Law compensation exceptions can be satisfied “. . . by a collection of documents, including contemporaneous documents evidencing the course of conduct between the parties involved.” Previously, CMS had only indicated in preamble text in the 2016 Final Rule that a collection of documents could be relied upon to meet the writing requirement. This was not set forth in regulatory text, however. Now that this language is in the Stark Law itself, stakeholders can take greater comfort in relying on a collection of documents to meet the writing requirement. The signature requirement of various Stark compensation exceptions is met if the parties obtain the required signatures “not later than 90 consecutive calendar days immediately following the date on which the compensation arrangement became noncompliant” and the arrangement otherwise complies with all applicable criteria. This statutory language now aligns with regulatory language in 42 C.F.R. § 411.353(g) regarding temporary noncompliance with signature requirements. That regulatory language was revised in the 2016 Final Rule to provide organizations with greater flexibility and to eliminate the prior rule that included a confusing, and often unhelpful, distinction between inadvertent noncompliance not inadvertent noncompliance. The Stark Law itself, however, has not previously referenced any provisions with respect to temporary noncompliance with the signature requirements. A holdover lease or personal service arrangement can indefinitely meet the requirements of the Stark exceptions for rental of office space, rental of equipment and personal service arrangements, respectively. However, the immediately preceding arrangement must have expired after a term of at least one year, the arrangement must have met all requirements of the applicable exception when it expired, the holdover arrangement must be on the same terms and conditions as the immediately preceding arrangement, and the holdover arrangement must continue to satisfy the conditions of the applicable exception. This statutory language now aligns with regulatory language regarding holdovers in the rental of office space, rental of equipment and personal service arrangements exceptions in 42 C.F.R. § 411.357. That regulatory language was revised in the 2016 Final Rule which previously only permitted holdovers for up to six months. The Stark Law itself, however, has not previously referenced any provisions with respect to holdover arrangements. These Stark-related provisions of the BBA used the language from Section 301 of H.R.3178, titled the “Medicare Part B Improvement Act of 2017,” which we summarized in our blog post here. This bill, which includes many other non-Stark Law-related provisions, is still pending in the Senate. We note that, while the changes to the Stark Law under the BBA were fairly inconsequential, broader Stark Law reform initiatives, including in response to the move to value-based payments under Medicare, are also currently underway. See our blog post here for further details. Increase in Civil and Criminal Penalties for Violations of Fraud and Abuse Laws The BBA significantly increased civil and criminal penalties for federal health care program fraud and abuse. Specifically, existing maximum penalties under the Civil Monetary Penalties Law (“CMPL”) for improperly filed claims (under 42 U.S.C. § 1320a–7a(a)) increased to $20,000 (from $10,000), to $30,000 (from $15,000), and to $100,000 (from $50,000). Maximum penalties under the CMPL for payments to induce reduction or limitation of services (under 42 U.S.C. § 1320a–7a(b)) increased to $5,000 where they were previously $2,000 and $10,000 where they were previously $5,000. Additionally, criminal penalties for acts involving federal health care programs under 42 U.S.C. § 1320a–7b, including but not limited to the Anti-Kickback Statute, were increased to $100,000 (from $25,000), to $20,000 (from $10,000), and to $4,000 (from $2,000). Finally, maximum sentences for felonies involving federal health care program fraud and abuse under 42 U.S.C. § 1320a–7b, including but not limited to the Anti-Kickback Statute, were increased to ten years where they were previously five years. The effective date of these increased penalties is February 9, 2018 (the date of enactment of the BBA). We note that, in 2016, penalties under the CMPL and for criminal acts involving federal health care programs were adjusted for inflation in accordance with the Bipartisan Budget Act of 2015 (see 81 Fed. Reg. 61538 et seq. (Sept. 6, 2016)), and are adjusted on an annual basis under 45 C.F.R. § 102.3 (but have not yet been updated for 2018). So, the previous statutory maximum penalties had already been increased from the amounts set forth in the statute, and now have been increased even further. It is not clear how inflation adjustments will be applied in 2018 to the new statutory penalty maximums under these laws. Medicare Telehealth Expansion The BBA also included potentially far-reaching expansions to Medicare coverage for telehealth services. Telehealth Services for Stroke Patients Current Medicare coverage for telehealth services is limited to certain care locations that are either: (A) outside of any Metropolitan Statistical Area and designated as a rural health professional shortage area; or (B) participating in a Federal telemedicine demonstration project. The BBA eliminates this originating site requirement beginning January 1, 2019 for services to diagnose, treat, or evaluate symptoms of an acute stroke. The Medicare beneficiary receiving diagnosis, treatment, or evaluation of an acute stroke may be located at any hospital or critical access hospital, mobile stroke unit, or any other type of care site that CMS designates. Home Dialysis Assessments Similarly, beginning January 1, 2019 Medicare beneficiaries with End Stage Renal Disease (“ESRD”) may choose to receive monthly ESRD-related clinical assessments via telehealth. A face-to-face clinical assessment will be required monthly during the initial 3 months of home dialysis, and thereafter only once every 3 consecutive months. The statute also states that the provision of telehealth technologies to a Medicare beneficiary receiving home dialysis will not be considered remuneration under the beneficiary inducement statute, so long as the telehealth technologies are not offered as part of any advertisement or solicitation, are provided for purposes of furnishing telehealth services related to the beneficiary’s ESRD, and meet any other requirements CMS may adopt by regulation. The condition-based expansions in telehealth coverage for ESRD and stroke patients beyond rural health professional shortage areas signals an important recognition that service delivery via telehealth is both effective and increasingly common. Telehealth Services Provided Under Medicare Advantage Plans Beginning in plan year 2020, a Medicare Advantage Plan (“MA Plan”) may provide additional telehealth benefits to its enrollees. The telehealth benefits must be a service type available under Medicare Part B, and must be services that the MA Plan identifies as clinically appropriate to furnish using electronic information and telecommunications technology when a clinician is not at the same locations as the plan enrollee. CMS will adopt regulations regarding physician and practitioner requirements, coordination of benefits rules, and other requirements. If the MA Plan wishes to offer the service via telehealth, the MA Plan must offer the same benefit in-person and allow the enrollee to determine whether or not to receive the benefit via telehealth. The MA Plan’s bid to CMS must attribute the telehealth benefit cost to amounts attributable to the provision of benefits under the original Medicare fee-for-service program. Telehealth Services to ACO Beneficiaries Lastly, the BBA allows increased Medicare coverage for telehealth services provided to Medicare fee-for-service beneficiaries assigned to an Accountable Care Organization (“ACO”) participating in certain Medicare shared savings programs. After January 1, 2020, the existing Medicare telehealth geographic limitations will not apply when a physician or practitioner participating in an ACO provides telehealth services covered under Medicare to a Medicare beneficiary assigned to the ACO. The beneficiary’s home can be an originating site for the telehealth services, but the beneficiary’s home need not be located in a rural health professional shortage area. This expansion in telehealth coverage applies only to ACOs participating in a two-sided ACO model (in which the ACO shares in both savings and losses), or an ACO tested and expanded pursuant to authority granted to the Center for Medicare and Medicaid Innovation. No facility fee will be paid; only the professional service is paid pursuant to this telehealth expansion. And coverage does not extend to services appropriate only for hospital inpatients. Other ACO Changes The BBA includes a provision allowing ACOs to elect to have beneficiaries assigned to the ACO prospectively rather than having Medicare beneficiaries attributed to ACOs retroactively using encounter data based upon visits for primary care services. A beneficiary may also choose to align with an ACO in which his or her main primary care provider participates. The beneficiary can continue to receive services from any provider participating in Medicare even if he or she elects to align with a specific ACO. The BBA also establishes a new voluntary ACO beneficiary incentive program that allows certain two-sided risk ACOs to offer beneficiaries a payment of up to $20 per service for receiving select primary care services. ACOs that want to offer payment to beneficiaries will have to apply for approval to participate in the incentive program with Health and Human Services. Outpatient Therapy Payments The BBA repeals annual payment caps for outpatient hospital therapy services (including physical therapy, speech-language pathology services, and occupational therapy) effective January 1, 2018. Funding Extensions The BBA includes a number of funding extensions for critical health care programs, including: Extension of CHIP funding for four more years (Fiscal Year 2024 through Fiscal Year 2027); Five-year extension of the Medicare low-volume hospital payments through September 30, 2022; Five-year extension of the Medicare-dependent hospital (MDH) program through September 30, 2022. Two-year extension of funding for quality measure endorsement, input, selection, and reporting requirements. Five-year extension with reforms of the home health rural add-on until October 1, 2022.

https://dorseyfca.com/third-circuit-false-claims-act-liability-premised-on-an-anti-kickback-statute-violation-requires-proof-that-at-least-one-federal-claim-resulted-from-an-improper-referral-or-recommendation/

Stark Law Reform Initiatives The Centers for Medicare & Medicaid Services (CMS) Administrator Seema Verma recently identified federal physician self-referral law (or “Stark Law”) reform as a top policy priority and reported that an inter-agency group is being formed to review the law. Specifically, in a January 17 American Hospital Association Town Hall webcast focused on regulatory relief for hospitals and health systems (excerpt available here), Verma reported that CMS will be looking to modernize the Stark Law to reflect the move from fee-for-service to value-based payments under Medicare. According to Verma, the Stark Law was one of the top responses from providers to a CMS request asking providers to identify the most burdensome regulations. Because the Stark Law is not completely in CMS’s jurisdiction, an inter-agency group is being formed to look at Stark Law reform initiatives that will include CMS, the Department of Health and Human Services (HHS) Office of Inspector General, the HHS General Counsel, and the Department of Justice. Verma also indicated that then-acting Secretary of HHS Eric Hargan was interested in the issue. Lastly, Verma specified that Congressional intervention may be required. While not mentioned by Verma in the recent webcast, a bill that addresses modernizing the Stark Law in light of the shift to value-based payment under Medicare, titled the “Medicare Care Coordination Improvement Act of 2017,” was introduced in both the U.S. House of Representatives (H.R. 4206) and the Senate (S. 2051) on November 1, 2017. The bill is still under consideration in both the House and the Senate. If enacted, this bill would give HHS authority to grant waivers to fraud and abuse-related statutes for participants in the Medicare Shared Savings Program, i.e., accountable care organizations. Such waiver authority would be extended to “covered APM entities” such as entities participating in alternative payment models (or “APMs,” as defined by MACRA) and similar entities. Additionally, the bill would expand the authority of HHS to promulgate ownership and compensation exceptions to the Stark Law to promote care coordination, by expanding the HHS Secretary’s authority to provide exceptions for financial relationships not posing a “significant risk of program or patient abuse, including those that would promote care coordination, quality improvement, or resource conservation by physician practices under [Medicare] part B” (emphasis added), rather than the current standard for exceptions, which requires that excepted arrangements not pose a “risk of program or patient abuse.” It would also limit the Secretary from imposing requirements that could adversely affect care coordination or participation in APMs. Finally, it would establish a new statutory exception to the Stark Law for services furnished pursuant to an arrangement entered into for the purpose of developing or operating an APM, provided the arrangement meets certain requirements including that it is in writing, that services are furnished at fair market value and that semi-annual reports are submitted to the Secretary on the progress of the APM (among other requirements). Further, while not addressing modernizing the Stark Law in light of the shift to value-based payment under Medicare, two additional bills that would amend the Stark Law are currently pending. First, H.R. 3726, the “Stark Administrative Simplification Act of 2017,” was introduced in the House on September 11, 2017. This bill proposes an alternative protocol to the Stark self-referral disclosure protocol (SRDP) for inadvertent technical noncompliance (including, for example, compensation arrangements with an inadvertent missing signature) with the Stark Law and reduced civil monetary penalties for disclosures made pursuant to this alternative protocol. This bill is still under consideration in the House. Second, H.R. 3178, titled the “Medicare Part B Improvement Act of 2017”, was passed in the House in July 2017 and is currently pending in the Senate. Among non-Stark Law-related provisions, if enacted, this bill would codify in the Stark Law certain regulatory changes that went into effect on January 1, 2016 (and corresponding clarifications via preamble by CMS) regarding the writing requirement of the Stark Law compensation exceptions, temporary non-compliance with the signature requirement of the Stark Law compensation exceptions, and the indefinite holdover provision for the lease of office space or equipment and personal services arrangements exceptions. It remains to be seen where the above-described legislation will lead, and what additional legislative and/or regulatory initiatives will be pursued given the stated focus on Stark Law reform by CMS Administrator Verma, the inter-agency group formed to review Stark Law changes, and the new HHS Secretary Alex Azar. 2018 DHS Code List and CPI-U Updates The 2018 Medicare Physician Fee Schedule (PFS) final rule, which took effect on January 1, included the annual update to the list of CPT/HCPCS codes used to identify certain categories of Stark designated health services (DHS) (the Code List).  As we explained in our post on the 2017 PFS, the Stark Law regulations at 42 C.F.R. § 411.351 specify that the following four categories of DHS are defined by reference to the Code List: (1) clinical laboratory services; (2) physical therapy, occupational therapy, and outpatient speech-language pathology services; (3) radiology and certain other imaging services; and (4) radiation therapy services and supplies.  (The other categories of DHS—which are (1) durable medical equipment and supplies; (2) parenteral and enteral nutrients, equipment and supplies; (3) prosthetics, orthotics, and prosthetic devices and supplies; (4) home health services; (5) outpatient prescription drugs; and (6) inpatient and outpatient hospital services—are defined at 42 C.F.R. § 411.351 without reference to the Code List.) The Code List is updated annually to reflect changes in the most recent CPT and HCPCS Level II publications and to account for changes in Medicare coverage and payment policies. Further, items and services that may qualify for either of two Stark Law exceptions—the exception for preventive screening tests, immunizations and vaccines at 42 C.F.R. § 411.355(h) and the exception for EPO and other dialysis-related drugs at 42 C.F.R. § 411.355(g)—are identified by reference to the Code List.  The Code List included the annual updates to the codes eligible for the preventive screening tests, immunizations and vaccines exception.  However, as in previous years, the Code List does not include any codes eligible for the EPO and other dialysis-related drugs exception (for reasons explained by CMS in the rule). The PFS rule includes tables showing the additions and deletions to the Code List.  As per usual, the complete list was posted to the CMS website dedicated to the Code List, found here. Finally, per the CPI-U Updates page of the CMS Stark website, CMS updated the compensation limits for the nonmonetary compensation exception (at 42 C.F.R. § 411.357(k)) and medical staff incidental benefits exception (at 42 C.F.R. § 411.357(m)), which are both updated annually for inflation. For calendar year 2018, the non-monetary compensation limit is $407 and medical staff incidental benefits must be less than $34 per occurrence. (CMS also noted in a footnote on this page that, “From November 9, 2016, through November 16, 2017, the CY 2015 nonmonetary compensation limit was inadvertently listed on this website as $395 instead of $392.”)

On September 7, 2017, the OIG posted an advisory opinion regarding a retail pharmacy chain’s proposal to extend to federal health care program beneficiaries the option to participate in a paid membership program that includes discounts on certain prescriptions and clinical services offered by the retail chains’ pharmacies and in-store clinics.  Presently, the pharmacy chain’s program excludes federal health care program beneficiaries.  The OIG found that the proposed program would meet the retailer reward exception to the definition of remuneration under the Beneficiary Inducement law, and that the proposed program would pose a minimal risk of fraud and abuse under the Anti-Kickback Statute.   The pharmacy chain’s proposed membership program included the following benefits:   Members of the program would have access to discounts on the pharmacies’ retail prices for specific items that the Member paid for entirely out-of-pocket (ex. generic drugs, pet prescriptions, nebulizer devises, blood glucose testing meters, immunizations, and other prescriptions listed on the pharmacy membership benefit program’s formulary); Members would have access to a 10 percent discount on clinical services paid for out-of-pocket (ex. physicals, immunizations, health screenings); Members could earn a 10 percent credit toward future eligible retail purchases when they purchased certain company-branded products and in-store photo finishing.  The credit could not be used to purchase prescriptions, immunizations, clinic services, alcohol, gift cards, postage stamps, pre-paid cards, milk products, tobacco products, or for retail pharmacy or clinic cost-sharing amounts. The OIG noted that the vast majority of products and services for which Members could earn and redeem credits are not federally reimbursable.   Members could enroll in the program either online through the company’s website or in person. The membership would be open to the general public. The only requirements for membership are a payment of an annual membership fee, that the Member be over 18 years of age, and that the Member provide certain personal information such as name, date of birth, address and phone number.   In order for federal health care program beneficiaries to access the discounts, the Members would need to pay for such items and services out-of-pocket (if the Member’s health plan or prescription plan covers an item that the Member would like to purchase through the retailer’s membership program, the Member would have to relinquish his or her health or prescription plan’s coverage for that particular purchase and instead, pay for the item out-of-pocket). The proposed membership program’s terms and conditions specifically state that Members are entirely responsible for all charges for discounted items or services they purchase through the program and that there would be no additional incentives given to Members for filling or transferring a new prescription to the pharmacy. The proposed program would allow for Medicare beneficiaries to submit claims for drugs purchased out-of-pocket while the beneficiary is in the Part D coverage gap, which would count toward a Medicare Part D beneficiary’s true out-of-pocket cost calculation.   Based on these facts, the OIG concluded that the proposed arrangement would implicate both the Anti-Kickback Statute and the Beneficiary Inducement CMP because the discounted items, services and earned credits could induce a beneficiary to select the retailer for his or her federally reimbursable items or services.  However, the OIG found that inclusion of federal health care program beneficiaries into the paid membership program would not constitute grounds for civil money penalties under the Beneficiary Inducement law, and that the OIG would not impose administrative sanctions under the Anti-Kickback Statute because the program:   Would satisfy the requirements of the exception to the definition of remuneration related to retailer rewards under the Beneficiary Inducement law. Specifically, the OIG noted that: the membership is the equivalent of a “coupon” under the retailer rewards exception; the earned credits would constitute a “rebate” under the same exception; the membership is available to the general public on equal terms; and the offer or transfer of rewards would not be tied to the provision of any other items or services that are federally reimbursed.  The retailer specifically certified that its pharmacies and clinics would not submit a claim to a Federal healthcare program or to any other 3rd party payor for any of the items or services purchased at a discount under the membership program, and that the Members would be entirely responsible for all charges.  Further, the OIG noted that with respect to the credits, the membership program did not have a different mechanism for accumulating or redeeming credits between items and services that are, and are not, covered by Federal health care programs.  Also, the vast majority of items and services for which a Member could earn and redeem a credit are not federally reimbursable.  Of note, the OIG stated that if the Member could only earn or redeem (or could preferentially accumulate or use) credits based on the purchase of federally reimbursable items or services, the OIG would reach a different conclusion; and Would pose a low risk of fraud and abuse under the Anti-Kickback Statute because, in addition to the positive factors described under the OIG’s analysis under the Beneficiary Inducement law, the arrangement also does not include any features to specifically steer beneficiaries to the retail pharmacies or clinics or to purchase federally reimbursable items or services. It was noted that the membership program included a broad range of inventory, including groceries and toiletries.  The Members would not be required to purchase prescriptions, immunizations, clinic services or any other services that are federally reimbursable.  Instead, the Members would earn credits through other purchases under the membership program.  Also, there would not be any offers related to transferring prescriptions or filling them at the retailer, or receiving clinic services at the retailer’s stores. Further, the OIG pointed out that the arrangement would be unlikely to result in overutilization or otherwise increase costs to Federal health care programs because the Member would already have obtained a written order for a prescription from his or her prescriber, and, regardless, the pharmacies would not submit claims for the prescriptions purchased under the membership program to any Federal health care program.  Further, the arrangement would not involve a waiver or reduction in any cost sharing amounts incurred by Federal health care program beneficiaries, and there would only be “very limited exceptions” in which Members would earn/redeem credits on items that would be paid for by Federal health care programs.   As always, OIG opinions are only applicable to the requesting individual or entity and cannot be relied on by any other individual or entity. However, this opinion provides guidance on the OIG’s current stance on pharmacy member benefit programs that include federal health care beneficiaries. We recommend organizations looking to extend their member benefit programs to include federal health care beneficiaries contact their legal representatives to help structure the program in accordance with federal and state statutes and regulations.   The full advisory opinion can be found here.

Under 42 U.S.C. § 1320a-7b(b)(1)(A) it is a felony for a physician to solicit or receive a kickback “in return for referring” a Medicaid or Medicare patient to another medical provider. But as a recent decision by the Eighth Circuit in United States v. Iqbal demonstrates, physicians are not the only ones capable of making illegal referrals under the statute—consultants can, too. Defendant Iqbal was a consultant that managed a group of physicians. He approached a medical provider (“PCP,” a home care agency) with a profit-splitting scheme: he would send physicians’ patients to PCP in exchange for fifty-percent of PCP’s profits for serving the patient. PCP contacted authorities about the scheme and thereafter accepted Iqbal’s proposal while working undercover with authorities. The sting operation resulted, at first, in a March 2011 meeting between Iqbal and PCP. At that meeting Iqbal touted his strong relationship with the group of physicians and his ability to refer their patients to PCP, and reiterated his fifty-fifty profit sharing scheme to which PCP agreed. Iqbal’s physicians later referred two patients to PCP, which PCP served and received Medicaid and Medicare reimbursement. PCP sent Iqbal separate payments in June and August for his fifty-percent share of the profits that PCP made from serving the two patients. Iqbal was charged with three counts of illegal kickbacks: One, for soliciting illegal kickbacks during his March 2011 meeting with PCP; Two, for receiving an illegal kickback in June; and Three, for receiving an illegal kickback in August. All three counts were “in return for referring” patients to PCP under § 1320a-7b(b)(1)(A). Iqbal challenged the sufficiency of the evidence, and conceded that the statutory phrase “in return for referring” meant that one must cause or induce the referral. The two-judge majority willingly assumed as much, declined to interpret the statute any narrower, and found the evidence sufficient to affirm his convictions. Although the majority’s reasoning was not surprising, Judge Kelly in a partial dissent and concurrence took up the task of interpreting the statutory phrase, “in return for referring.” The Eighth Circuit had not previously defined the term. Judge Kelly relied on cases from other circuits in similar contexts to adopt the interpretation “that a person refers an individual for a service only when, as a practical matter, the person exercises decision-making control over the selection of the service provider.” As a result, Judge Kelly utilized a narrower definition than Iqbal and the majority. Under that definition, Judge Kelly found insufficient evidence to affirm Iqbal’s convictions for receiving a kickback for referring the two patients, because the government failed to show that Iqbal exercised decision-making control over the physicians’ referrals. Judge Kelly, however, affirmed Iqbal’s conviction for soliciting a kickback during his March meeting with PCP because Iqbal held himself out to PCP as having the ability to make the referrals, regardless of his actual ability to do so. So physicians, consultants, and everyone in between dealing with Medicaid and Medicare patients should keep in mind that while decision-making control over a referral is likely necessary evidence to prove a “referral” in return for an illegal kickback, solicitations do not require such decision-making control. All that is required is representing that one has the ability to do so.

On July 18, 2017, the United States Attorney’s Office for the Northern District of Illinois announced that it was creating a new unit located in Chicago within the office’s Criminal Division dedicated to prosecuting criminal health care fraud (the Health Care Fraud Unit). The office explained that it expected the unit, which will include five prosecutors, to build on its successful prosecution of numerous health care fraud cases in recent years and “bring even greater focus, efficiency and impact to [its] efforts in this important area.” The Health Care Fraud Unit will also build on the office’s previous prosecution of significant diversion of controlled substances cases, in line with the office’s emphasis on battling the opioid crisis. Other United States Attorney’s Offices may follow suit in creating such units. Chicago is also one of nine areas where a Medicare Fraud Strike Force team is located, which are inter-agency teams that focus on the worst offenders in health care fraud “hot spots.” The week prior to the announcement of the new Health Care Fraud Unit in Chicago, there was a national health care fraud “takedown” involving more than 400 defendants allegedly responsible for $1.3 billion in false billings to Medicare and Medicaid, which was the largest health care fraud enforcement action in the history of the Department of Justice and involved coordination among multiple federal and state agencies. While such “takedowns” occur on approximately a bi-annual basis, this one is notable for its size. These events and others like them show the continued emphasis on combating health care fraud under the new administration. In Chicago and across the country, prosecution of criminal healthcare fraud cases will likely continue to increase, and civil health care fraud investigations and qui tam actions will also likely increase.

On June 16th, 2017, The Department of Justice (“DOJ”) announced a $53.6 million dollar settlement with Genesis Healthcare Inc. (“Genesis”) over six federal whistleblower lawsuits alleging that subsidiaries of the rehabilitation and transitional care provider violated the False Claims Act (“FCA”). The original qui tam plaintiffs, former employees of companies acquired by Genesis, will receive a combined $9.67 million dollars in recovery. The settlement resolved allegations involving Genesis subsidiaries; Skilled Healthcare Group Inc. (“SKG”) and its subsidiaries, Sun Healthcare Group Inc., SunDance Rehabilitation Agency Inc., and SunDance Rehabilitation Corp. The settlement resolved the allegations that SKG and its subsidiaries knowingly submitted false claims for Medicare services by “billing for hospice services for patients who were not terminally ill” and “billing inappropriately for physician evaluation management services.” The complaint does not elaborate on the nature of the management services billing violations. Further, SKG and its subsidiaries allegedly submitted false claims to Medicare, TRICARE, and Medicaid by providing therapy to patients longer than medically needed, as well as billing for more therapy than patients actually received. The settlement also resolved allegations that Sun Healthcare Group Inc., SunDance Rehabilitation Agency Inc., and SunDance Rehabilitation Corp. knowingly submitted false claims to Medicare by billing for therapy services in the state of Georgia that were either medically unnecessary or unskilled in nature. Finally, the settlement resolved allegations that Skilled LLC, a subsidiary of SKG, violated the FCA by submitting false claims to the Medicare and Medi-Cal programs for “services that were grossly substandard or worthless and therefore ineligible for payment.” Specifically, the allegations pointed to Skilled LLC failing to meet the requirements for nurse staffing in order to be eligible for government healthcare program reimbursements. The case matter was handled by the DOJ Civil Division’s Commercial Litigation Branch, the Office of the Inspector General, and the U.S. Attorney’s Offices for the Northern District of California, the Northern District of Georgia, the Western District of Missouri, and the District of Nevada. Acting U.S. Attorney Steven W. Myhre for the District of Nevada noted, “Today’s settlement is an example of the U.S. Attorney’s Office’s commitment to holding medical providers accountable…We are committed to protecting federal health care programs, including Medicare, TRICARE, and Medicaid, which are funded by taxpayer dollars.” The recent settlement falls in line with the DOJ’s increased commitment to combating health care fraud. The DOJ budget request for 2017 included a $70.8 million dollar increase ($320.2 million in total) of funding for health care fraud prevention. Summer Associate Justin Taylor provided substantial assistance with the drafting of this blog post/article.