With
the Department Of Justice focusing on Stark Law actions, and the proliferation
of qui tam claims by whistle-blowers, 2015 has been riddled with
record-breaking settlements. In June, the Office of the Inspector General issued a fraud alert putting
physicians and health systems on notice, urging stricter scrutiny over physician
compensation agreements, and potential liability under Anti-kickback and
self-referral laws. The Stark Law
prohibits physician referrals of designated health services for Medicare and
Medicaid patients if the physician has a financial relationship with the entity
that the patient is referred to, unless an exception applies.
Stark imposes strict liability for
every transaction that violates, and provides severe penalties including, but
not limited to: denial of payment and refund of claims paid, civil monetary penalties
up to $15,000 per claim, and exclusion from Medicare, Medicaid and any other
state healthcare programs. Stark Law
liability also attaches False
Claims Act (FCA) liability, which may include treble
damages up to $11,500 for each claim submitted to the federal government. The Fraud
Enforcement Recovery Act's requirement that overpayments
knowingly retained and the Patient Protection and Affordable Care Act’s
requirement that overpayments be returned within 60 days strengthened the enforcement of claims against
physician self-referral.
Stark Law violations are either defined
substantively or technically. Substantive
violations cover the core issues the law was designed to prevent, such as
compensating physicians based on volume and value of referrals, and leasing
equipment or office space under fair market value. Technical violations cover inadvertent
mistakes, such as forgetting to sign contracts, allowing contracts to expire
without renewal, or failing to include all elements of the agreement in a written
document. Even though technical
violations are often unintentional, they can impose massive penalties upon providers.
Tuomey Healthcare System was found
liable for substantive violations in U.S. ex rel. Drakeford
v. Tuomey Healthcare System, Inc. The United States Fourth Circuit Court of
Appeals found that Tuomey had agreements in which physicians’ compensation
varied on the hospitals’ collections for procedures performed by those
physicians. The court ordered the
largest penalty against a community hospital, $237
million, a sum later reduced in a post-trial
settlement to $72 million. As a term of the settlement, the Tuomey hospital
was sold to Palmetto Health, which was required to retain an independent review
organization to monitor all arrangements with healthcare professionals.
In his concurrence, Judge James A.
Wynn wrote: “It seems as if, even for
well-intentioned healthcare providers, the Stark law has become a booby trap
rigged with strict liability and potentially ruinous exposure—especially when
coupled with the False Claims Act.” Judge
Wynn’s opinion considered the that fact no wrongful charge claims, such as
upcoding or charging for procedures not performed, were ever raised by the
government.
Last year, Stark settlements accounted for almost $4 billion in recoveries. This also increase the financial incentive for
whistle-blowers to file qui tam claims, in which they may receive
between 15% to 30% of the recovery. Due
to the severity of penalties that can be imposed even for unintentional
technical violations, providers are often pressured to settle.
A record-breaking settlement in 2015
was reached between Department Of Justice and Adventist Health System, which operates
44 hospitals throughout 10 states. Adventist
agreed to pay $115 million to the federal government, as well as additional
$3.7 million to Florida, North Carolina, Tennessee and Texas. This settlement came only a
week after Broward Health, a South Florida provider, settled its Stark claims
for $69 million. Neither provider was
required to admit liability, or enter into a Corporate Integrity
Agreement, as part of the settlement. In the Tuomey settlement, which was the
result of litigation, executives were forced to leave their jobs, and the
hospital was sold to a competing health system. This forced resignation provides an additional
incentive for providers to settle, rather than litigate their potential
liability under the Stark Law.
In order to streamline their
enforcement of substantive claims, rather than unintentional technical claims, Centers
for Medicare and Medicaid Services (CMS) published its final changes to the CY 2016 Medicare
Physician Fee Schedule rule, in order to ease compliance with the law. The final rule
clarified some regulations, relaxed certain technical requirements and created
new exceptions. These changes also
widened the path for the Stark violation self-disclosure
protocol,
already in place with CMS.
A
pending U.S. Supreme Court case will have a great impact on the enforcement of
substantive violations. Universal Health
Services v. United States ex rel Escobar
focuses on implied
certification as a way to include FCA claims in healthcare fraud claims. Implied certification generally means that a
party had an ongoing obligation to comply with a law, irrespective of whether
the party submitting the claim made a direct certification of compliance. In other words, FCA liability will attach to
any claim submitted in connection to an underlying violation, similar to Stark.
The ruling in this matter will either
take the bite out of the penalties imposed on providers, or solidify the
federal government’s aggressive enforcement of Stark violations. Regardless of the Court’s decision, providers
and health care attorneys are in dire need of bright line rules that will
simultaneously make complying with self-referral rules more transparent, and
consequences for violators more predictable.