Be proactive, not reactive: Best practices to shield physician arrangements from Stark, AKS liability


As federal and state governments face budget shortfalls, hospital-physician arrangements face increasing Stark Law and Anti-Kickback Statute enforcement actions. Yet the rules of these laws remain broad and complex.

"We know healthcare is probably one of the most complex business models ever created and that continues today," Bret Bissey, senior vice president of compliance services at MediTract, a healthcare contract compliance advisory firm, said in a recent webinar hosted by Becker's Hospital Review.

Mr. Bissey was joined by Sean McKenna, partner and co-chair of healthcare practice at Haynes and Boone, to discuss the importance of hospitals and health systems proactively investing in compliance to insulate physician agreements from Stark Law and Anti-Kickback risk.

These physician agreements are increasingly at risk in today's legal environment. The government is actively scouring for potential criminal liability, according to Mr. McKenna. Hospitals with organized, up-to-date compliance plans are better positioned than those reacting to regulatory scrutiny.

Compliance programs and best practices are vital to avoid legal fees, which can add up quickly. Daytona Beach, Fla.-based Halifax Health Medical Center incurred $85 million in legal fees for a Stark Law violation, Chicago-based Amedisys paid $150 million to settle a whistleblower lawsuit that included Stark and Anti-Kickback violations and one individual psychiatrist even paid a $3.8 million settlement for receiving kickbacks for prescribing certain drugs to patients.

Mr. McKenna noted Stark Law violations involve physicians or their immediate family members making a referral for designated health services in exchange for ownership interest or indirect or direct compensation, with a number of exceptions. However, he noted, the Stark Law does not require intent to violate it, though penalties may be enhanced for knowing violations.

"One of the things to consider is that sometimes there is hidden physician investment," says Mr. McKenna. "Even though on its face, company X or vendor Y may not have physician ownership, if they do, that necessarily would implicate the Stark Law. So if you're talking about a nonproprietary market value or otherwise noncompliant arrangement, you potentially could have some issues."

This is in contrast to the Anti-Kickback Statute, which bars physicians from knowingly receiving or soliciting kickbacks, or remuneration, for referrals of services or goods. This may include free office space, medical directorship compensation or other incentives.

"[The Anti-Kickback Statute] is a criminal statute, but it can, and increasingly has been used as a predicate of the False Claims Act. So if you are noncompliant with Stark or there is an Anti-Kickback violation, that in and of itself can be a violation of the False Claims Act," Mr. McKenna said.

Common risk areas within professional service agreements include false time reporting, billing for services never performed, inflated research grants, billing for free or trial goods from a manufacturer, improper cost sharing or accounting policies. Referrals also pose a big risk for providers.

"Referrals are a whistleblowers best friend," Mr. Bissey said.

Professional service agreements with physicians, medical groups and physician-owned entities tie into the Stark Law, Anti-Kickback Statute, Civil Monetary Penalties Law and False Claims Act. Even non-hospital employed physicians who are in a position to refer patients are under regulatory scrutiny, according to Mr. Bissey and Mr. McKenna.

However, beyond hospital-physician relationships are what corporate integrity agreements identify as "focus arrangements." These arrangements include (1) those between the entity and the source of business or referrals that involve offering or paying anything of value, (2) those between the entity and any physician who makes a referral for designated health services, or (3) those between an entity and any physician or physician's family member that involve offering or paying anything of value for recruitment purposes.

"It's important to understand we're dealing with patients and treatments for patients that may be medically necessary, but any time there is an incentive for a referral or some sort of behavior or clinical care, that's what gets the direct attention from the enforcer standpoint," said Mr. Bissey. "So we often recommend to many of our clients — and at MediTract we serve one in four hospitals in the country — that irrespective of the payer, you [follow] best practices, because you are also risking reputational harm."

If an organization is at risk for violating Stark or Anti-Kickback laws, the government may offer a reduction in penalties if an effective compliance program is in place, according to Mr. McKenna and Mr. Bissey. This makes it doubly critical to implement a compliance program and use best practices to ensure it is as effective as possible.

Mr. Bissey stressed that all hospital-physician contracts should be signed in writing by both parties and stored in one place that is easy to find, preferably in a database or contract management system. He also recommended documenting a job description to validate the need for each arrangement and documenting performance reviews regularly.

"In my experience, I like to keep documentation at least 10 years," Mr. Bissey said. Documents for all existing, new or renewed physician arrangements should be kept in a database, which should implement the requirements recommended by the OIG and be reconciled to payments at least quarterly.

"The statute of limitations is 10 years and criminal statute is five years, but because of technology you don't have to keep paper files anymore. You can keep electronic copies, you can back it up, put it on a hard drive, put it in a drawer, know where it is, etc.," Mr. McKenna said. "There's really no excuse for not being able to locate signed contracts in this day and age."

Other best practices recommended include implementing a process that covers the life cycle of the agreements, from the initial needs assessment, to the fair market value documentation, to the legal review, to management approval, to payment and performance review. For contracts that pay based on time, a system should be put in place to track, monitor and report time and effort. Nonmonetary compensation and negotiations should be tracked and employee concerns and complaints should be managed and fully addressed, Mr. Bissey recommended.

Lastly, the compliance program should have oversight by a compliance officer to regularly review the contract database, approval process and best practices. This officer can regularly provide results for the compliance committee and take action when suspected violations are discovered.

"Proactive compliance is good," Mr. Bissey said. "Make the investment. Don't view compliance as an expense and don't be reactive on these things. Do your best practices up front, put the processes in place, monitor them, manage them and you'll mitigate a lot of risk down the line and insulate some of these high-risk contracts from huge liability."

To learn more, download the webinar presentation here.

Note: View archived webinars by clicking here.


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