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Physician Arrangement Integrity

November 20, 2015

Biography

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Kyle VasquezHealth Care Services312.463.6338kvasquez@polsinelli.com

Gail PeacePresident, Ludi 312.632.9109gail@ludiinc.com

Kyle Vasquez provides pragmatic legal and compliance support to a wide range of health care clients. He utilizes his background in health law and his prior experience as a health care consultant to develop creative approaches that address the unique challenges that health care providers face. Kyle’s areas of focus include:

� Developing innovative physician alignment models while navigating applicable fraud and abuse standards, including the development of Medicare Shared Savings Program ACOs, clinical integration, and co-management models

� Providing 340B regulatory, compliance, audit, and contract support to Covered Entities, Contract Pharmacies, and other key stakeholders

� Structuring and negotiating a variety of transactions, including provider-based conversions, physician practice acquisitions, joint ventures, joint operating agreements, mergers, and acquisitions

Gail Peace is a health care executive with 20 years of health care experience. She has spent the past four years developing a new state of the art solution to help hospitals thrive in the evolving environment. She is President and CEO of Ludi, a company that helps hospitals and health systems actively manage physician activity through automation. DocTime Log® makes it easy to pay physicians appropriately, drive accountability and improve arrangement tracking.

Prior to founding Ludi, she was Vice President for Business Development at Vanguard Health Chicago, today part of Tenet. Gail was responsible for development efforts for the market.

Additional past work history includes leading growth initiatives for Subimo, which became part of WebMD in 2008, Vice President of Business Development for MacNealHospital in Berwyn, IL, and Vice President of Client Services for Solucient, today Truven.

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Agenda

1. Stark Law and Anti-Kickback Statute Refresher

2. Lessons Learned from Recent Enforcement

3. Pitfalls of Current Operational Processes

4. Best Practices for Managing Agreements to Facilitate Compliance

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ViolationRisks

Manage & Measure

Setup – Tips

StreamlineProcesses

Agreements

Stark and Anti-Kickback Overview

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The OIG’s Position

� OIG Fraud Alert (October 9, 2015)

– Physician compensation arrangements, such as medical directorships, may result in significant liability

– OIG cited to settlements reached with 12 physicians (Fairmont) who entered into “questionable medical directorship and office staff arrangements”

– Payments took account the physicians’ referrals, did not reflect FMV, and paid for services the physicians did not provide

– Time tracking and recordkeeping critical!

� OIG Work Plan (FY 2016)

– Continued focus on fraud and abuse

– OIG did not identify specific types of arrangements as targets

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Summarized Best in April 20, 2015 Release of “Practical Guidance”

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Source: Practical guidance for Health Care Boards on Compliance Oversight, AHIA, AHLA, HCCA and OIG, April 20, 2015

Stark Law (“Stark”)

� Prohibition: If a physician, or a member of the physician’s immediate family, has a financial relationship with an entity, then the physician is prohibited from making a referral to the entity for the provision of a designated health service paid for by Medicare, and the entity is prohibited from billing for such service, unless an exception is satisfied in its entirety1

� Stark only applies to physicians

� Strict liability statute = No margin for error!

– Compare: Federal Anti-Kickback Statute is intent-based

1 See 42 U.S.C. § 1395nn and 42 C.F.R. 1395nn

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Stark Illustration

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Dr. X$

Physician Org/Group Practice

DHS REFERRAL

Hospital

Entity

Co-Management Services

Owner

“Stand In the Shoes”

Legal Implications of Violating Stark

� Monetary penalties of up to $15,000 per service.

� An assessment of up to three times the amount claimed.

� Possible exclusion from the Medicare and Medicaid programs.

� False claim actions

� Payment is denied for Medicare DHS claims.

� Any amounts collected from individual patients or third-party payers for DHS must be refunded on a timely basis (60 days).

� Penalties can add up quickly based on claims

– Tuomey; $237m; Settled for $72.4m

– Halifax > $1b; Settled for $85m

� Compare: Stark Law penalties are CIVIL; Anti-Kickback are CRIMINAL and CIVIL

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Stark Exceptions

� Stark is all about EXCEPTIONS

– If a Stark exception is met, it is permissible for the physician to make a referral of DHS to a DHS entity with which the physician (or the physician’s immediate family member) has a financial relationship

– Every element of an Exception must be met

– Compare: Federal Anti-Kickback Statute Safe Harbors do not require strict compliance to avoid prosecution (i.e., AKS still requires intent)

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The Federal Anti-Kickback Statute (the “AKS”)

� Prohibition: It is a felony to knowingly and willfully offer, pay, solicit, or receive anything of value to induce or reward referrals or generate Federal health care program business

� The AKS applies to everyone (not just providers or physicians)– E.g.: vendors, manufactures, GPOs, marketers, directors, etc. may

be liable.

– Statute often used in criminal cases against patient recruiters, etc.

� Intent-based/one purpose

� “Exceptions” = Safe Harbors– Arrangements are afforded absolute protection under the AKS if they

comply with all of the applicable Safe Harbor requirements

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AKS Violation Assessment Tool

Is there remuneration?

No. Stop. The AKS is not implicated.

Yes. Is there potential for a

referral?

No. Stop. The AKS is not implicated.

Yes. Are there any referrals for

Federal Healthcare program

business?

No. Stop. The AKS is not implicated.

Yes. Does the remuneration fit squarely within

an AKS safe harbor or

exception?

Yes. Stop. The AKS is

not violated.

No. Is thereintent?

No. Stop. The AKS is not violated.

Yes. The AKSis violated.

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Legal Implications of Violating AKS

� Criminal

– Fine of up to $25,000 per violation and/or

– Imprisonment for up to 5 years

� Civil

– Civil fines in the amount of $50,000 per violation

– Plus damages of not more than 3 times the total amount of remuneration offered, paid, solicited or received

� Exclusion From Federal/State Programs

� False Claim Actions

– 3X damages

– Plus penalties of $5,500 -$11,500 per claim

– This is a government favorite

� Compare: Stark Law penalties are CIVIL; Anti-Kickback are CRIMINALand CIVIL

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AKS Safe Harbors

� AKS "Safe Harbors"

– Safe Harbor = Payment in certain instances is not considered "remuneration"

– Must meet all of the requirements of a particular safe harbor to qualify for safe harbor protection

– BUT – if you don’t meet all requirements, the transaction is not necessarily illegal (still need intent)

• Facts and circumstances matter

• Fair market value is critical

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AKS Aggravating Factors

� If the AKS is violated, the government may consider the following potentially aggravating factors:

– Evidence that the arrangement interferes with, or skews, clinical decision-making

– Evidence that arrangement potentially increases costs to a Federal health care program or its beneficiaries.

– Evidence that the arrangement potentially increases the risk of overutilization or inappropriate utilization.

– Evidence that the arrangement raises patient safety or quality of care concerns.

– Evidence that the arrangement decreases Federal health care beneficiary access to care.

– Evidence that the arrangement increases or decreases competition.

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7 Key Compliance Elements

� Fair market value compensation

� Commercially reasonable

� Compensation not related to volume or value of referrals or business

� Contract term of at least one (1) year*

� Agreement in writing, signed by both parties*

� Aggregate payment is set in advance*

� Agreement must describe the services being performed*

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* Applicability varies based on whether the arrangement falls within certain exceptions or

outside of Stark altogether. Notwithstanding, keep in mind that most of the recent settlements

pertain to poor documentation and compensation that exceeded fair market value.

Other Safeguards to Consider

� Medicare Shared Savings Plan Fraud and Abuse Waivers

– Self-implementing

– Waives Stark, AKS and gainsharing / beneficiary inducement Civil Monetary Penalty provisions if requirements are met and arrangement is with the MSSP accountable care organization

� FY 2016 Physician Fee Schedule Final Rule

– Potentially relaxes certain Stark “technical requirements” such as:

• Documents that comprise of the “agreement”

• Impact of expired agreements

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What’s The Problem: Lessons Learned From Recent Enforcement

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Busy Fall for the DOJ

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� 45-Day Period Yields > Quarter of a Billion in DOJ Settlements

– Columbus Regional/Dr. Pappas settles $35 M/$425 K plus CIA (Sept .4)

– North Broward settles for $69.5 M (Sept. 15)

– Adventist settles $118.7 M (Sept. 21)

– Tuomey settles for $72.4 M plus CIA (Oct. 16)

Recent Voluntary Disclosure: March 31, 2015

Robinson Health System

$10M

Timesheets/ other technical

issues

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Lessons Learned

1. Employment is not a safe harbor – Operating physician practices at a loss may not be commercially reasonable (took into account DHS referrals to the hospital)

– Tuomey – $237 million jury verdict/$72.4 M settlement/CIA (salaries exceeded FMV and collections; comp tied to hospital referrals)

– Halifax Medical – $85 M/CIA (incentive bonus included value prescription drugs and tests ordered but not performed by six oncologists)

– Columbus Regional/Dr. Pappas – $35 M/CIA (salary exceeded fair market value and collections)

– North Broward – $69.5 M (salaries exceeded FMV and collections)

– Adventist – $118.7 M (bonus included value of referrals for services not performed by physicians at issue)

2. Physicians are being held accountable

3. Non-litigated settlements may still require CIA (e.g., Columbus Regional)

4. Long term, executive accountability

5. Experienced attorney needed to draft agreements that meet applicable Stark exception and AKS safe harbors – Need qualified FMV and commercial reasonableness opinion

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Tips for Providers

� In light of the recent enforcement activity and OIG policy statements, providers need:

– Clear policies and procedures regarding the development and ongoing oversight of physician contracts and related compensation

– Clearly written agreements that contemplate the various Fraud and Abuse exceptions, court interpretations, and facts

– Competent counsel that understands and adheres to your risk profile;

– Competent FMV and commercial reasonableness opinions;

– Ongoing mechanisms to track compliance, including time logs and audits of same

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* Don’t just sign the compensation agreement and leave it on the shelf! Sloppy administration and oversight is what results in significant liability.

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Tips for Providers

� Purpose of the Transaction

– Justifiable Business Case

• Increased Access

• Increased Capability

• Community Benefit

– Payment Arrangements

• Not reflective of past/future referral streams including hospital’s technical component for services provided (this is particularly important in light of Broward, Halifax, etc.)

• Independent verification by objective data or 3rd party consultant

� Document the Actual Arrangement

– All items and services provided must be described in the written agreement prior to provision of services

– Document any changes in the arrangement prior to implementing the change

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Polsinelli provides this material for informational purposes only. The material provided herein is general and is not intended to be legal advice. Nothing herein should be relied upon or used without consulting a lawyer to consider your specific circumstances, possible changes to applicable laws, rules and regulations and other legal issues. Receipt of this material does not establish an attorney-client relationship.

Polsinelli is very proud of the results we obtain for our clients, but you should know that past results do not guarantee future results; that every case is different and must be judged on its own merits; and that the choice of a lawyer is an important decision and should not be based solely upon advertisements.

© 2015 Polsinelli PC. In California, Polsinelli LLP.Polsinelli is a registered mark of Polsinelli PC

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PITFALLS OF CURRENT OPERATIONAL PROCESSES

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The Problem is in the Execution

LEGALCONTRACT

MGMT

DUTIESFAIR

MARKETVALUE

TERMS

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Exposure Does Result from Technical Violations

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� Setup is correct� FMV set at start� Physician writes non-

compensable duty on time log

� FMV is breached because a payment is incorrect

Today’s Time Log Process Includes Manual Steps

Physician Logs Time

Physician Receives Payment

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Most tracking currently takes place on paper and goes through a multitude of steps for approval and payment

Results of Paper Processes

Room for error

Frustrating for physicians

Compliance risks

Measuring spend

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Pitfall: Process Breakdowns

� Contract ends but physicians continues to submit time logs and receive payment

� Late logs are batch submitted by physicians for payment at the end of a year

� Multiple time logs are submitted for the same month or same duties worked and then paid (e.g., logs for a medical director and co-management agreement)

� Duties are not actually checked against time logs

� Illegible time logs are often submitted and paid

� Time logs are not routinely collected for independent and employed physicians where needed

� Paper disappears, time logs are misplaced29

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Pitfall: Agreement Parameters Unclear

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� Duties aren’t outlined clearly or described within the contract (exacerbated by misuse of templates)

� Time to submit post-period close isn’t appropriately outlined within the contract

� Time log format leads to incorrect information being recorded

� Duplication with other agreement wherein a physician could be receiving payment for the same duty in two places

� Joinders are missing for physician group agreements

Pitfall: Fair Market Value (FMV) Breached

� Operationally FMV is not maintained when a monthly or annual maximum is exceeded

� Contract is not adjudicated financially on a consistent basis, or ever

� Layering of agreements leads to duplication of duties and time paid

� Calculations are incorrect

� Math is incorrect in the contract or so complex it is too difficult to follow

� Bonus structure calculation is not clearly outlined and providers pay to maintain physician relationships

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5 BEST PRACTICES FOR ACTIVE MANAGEMENT

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1. Remove Steps That Don’t Add Value

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2. Collect Time Logs for All Compensable Duties

3. Standardize and Streamline Duties

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� Ensure that the service line adheres to each hospital’s policies and procedures, applicable laws and regulations, accrediting body requirement and other regulatory compliance, and make recommendations to hospital personnel.

� The Director shall ensure compliance with regulatory agencies governing the medical staff, including the Joint Commission and state and federal agencies with the assistance of hospital personnel in the service.

� The Medical Director, in collaboration with the unit leadership, nursing director and hospital leadership, facilitates compliance with: department policies; TJC standards; federal rules and regulations; corporate integrity agreements

10 Unique Duties Per Facility

(10 x 60 = 600)

� Time consuming to check time log against specific duties each month – operational challenge

Reduce Variation

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4. Approver Training and Accountability

Access to physician’s historical and current logs

Access to actual contract

5. Mind the Math

Current time log details Year-to-date view

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Infrastructure Needs to Support Compliant Tracking and Analysis

Physicians are accountable

Clear expectations

Manage what you measure

Dashboards and data

Payments are within scope

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Thank you!

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Kyle Vasquez

kvasquez@polsinelli.com

312-463-6338

Gail Peace

gail@ludiinc.com

312-632-9109