Category Archives: Self-Referral

CMS Proposed Stark Law Revisions

On July 15, 2015, the Centers for Medicare and Medicaid Services (“CMS”) published proposed revisions to the regulations implementing the physician self-referral law, or Stark Law.

The Stark Law is a key regulatory scheme in the healthcare industry that governs relationships between physicians and the providers to whom they refer certain designated health services. In order to receive Medicare reimbursement for these services, all financial relationships between providers and the referring physician must satisfy a statutory or regulatory exception to the Stark Law. These exceptions are complex and very technical, and providers who fail to fully comply with the Stark Law’s many requirements can be subjected to significant penalties and other sanctions.

Many of CMS’ proposed revisions appear designed to reduce the burden of some of these technical requirements. In addition, CMS is proposing several new exceptions. If enacted, these will be some of the most significant changes to the Stark Law in years.

Highlights of the proposed revisions include the following:

  • Contractual requirements. Many of the Stark Law exceptions require the relationship between the parties to be “set out in writing” or be pursuant to a “written agreement.” CMS is proposing to revise all exceptions to contain the same language, using the phrase “arrangement.” CMS has further clarified that the “arrangement” does not have to be a formal, written contract, and the exceptions can potentially be satisfied by multiple documents evidencing the course of conduct between the parties.
  • Recruitment of Nonphysician Practitioners (NPPs).   CMS is proposing a new exception that would allow hospitals and other providers to provide recruitment support for nurse practitioners and other NPPs. Previously, this support had only been allowed for physicians.
  • Timeshare Arrangements. CMS is proposing a new exception that would allow providers to enter into timeshare arrangements with physicians for the use of office space, equipment, personnel, supply and other services.
  • Standardized language. CMS is proposing to standardize the use of certain phrases throughout the regulations. As described above, various references to “contracts” or “writings” will now be uniformly replaced with the term “arrangement.” In addition, all references to the volume or value of referrals between parties will use the phrase “takes into account.”
  • Holdovers. Under the proposed regulations, parties may continue to provide services under leases and personal service agreements that have technically expired for an indefinite period without violating the Stark Law. Previously, providers could only do so for six months.
  • Signature Requirements. Under the proposed regulations, contracts could be signed up to 90 days after services started and be considered compliant with the Stark Law. Previously, the period was only 30 days in most circumstances.
  • Term Requirements. Many of the exceptions to the Stark Law require the parties to have an agreement for at least one year. CMS is clarifying that the contract or agreement between the parties does not have to have an explicit one-year term, so long as the relationship does in fact last one year.  CMS is continuing the requirement that if an agreement is terminated prior to the one year term, the parties cannot enter into a similar agreement until that one-year period is up.

Providers who may be impacted by these proposed changes are encouraged to submit comments to CMS. Comments may be submitted electronically here and should be received by September 8, 2015.

Benesch is preparing an in-depth client alert analyzing the potential impact of these regulations. If you have questions regarding the scope and impact of these proposed regulations in the mean time, please contact any member of the Benesch Health Law team.

One Of The Country’s Largest Hospital Organizations to Pay $98.15 Million Settlement on False Claims Act Allegations

On Monday, August 4, 2014, The Department of Justice announced that Community Health Systems (“CHS”), the nation’s largest operator of acute care hospitals, agreed to pay $98.15 million to settle nine whistleblower lawsuits alleging that the company violated the False Claims Act between January 2005 and December 2010. The whistleblowers alleged that CHS knowingly billed Medicare, Medicaid, and TRICARE for medically unnecessary inpatient admissions rather than the lower outpatient or observation rates at 119 hospitals. Additionally, allegations were made that services were rendered to patients at one of CHS’s hospitals in Laredo, Texas by a physician who was offered a medical directorship in violation of the physician self-referral law, known as the Stark Law.

Under the settlement, CHS entered into a five-year Corporate Integrity Agreement requiring it to retain independent review organizations to review the accuracy of the claims for inpatient services under federal health care programs, and to engage in significant compliance efforts over the next five years.

The allegations against CHS are particularly notable in light of new regulations such as the two-midnight rule, which took effect October 1, 2013. The two-midnight rule requires that physicians deem a patient’s condition as serious enough to require at least two overnight stays in order to qualify for Medicare reimbursement under inpatient rates. Patients who aren’t formally admitted may remain under outpatient or observation status. Emergency and internal medicine physicians often struggle to get the right designation and status for the patient. The federal government has delayed enforcement of the rule until March 31, 2015 at which time hospitals may face financial penalties if auditors determine the hospital could have met the patient’s needs in an outpatient setting.

For more information on the CHS settlement, the two-midnight rule, the Stark Law, the Anti-Kickback Statute, or related fraud and abuse issues, please feel free to contact Daniel Meier or any member of our health care practice group for a further discussion.

You can find a more extensive discussion about the CHS settlement, the impact of observation status on patients and the two-midnight rule in the following Client Bulletin.

The Halifax $85 Million Lesson: Compensation Arrangements Between Hospitals and Physicians Must Be Reviewed

The Department of Justice (“DOJ”) announced another multi-million dollar settlement of alleged False Claims Act violations on March 11, 2014. Specifically, Halifax Hospital Medical Center and Halifax Staffing, Inc. agreed to settle various issues with the DOJ for $85 million in order to resolve allegations that they violated the False Claims Act (“FCA”) by submitting claims to Medicare that violated the federal prohibition on physician self-referrals, 42 USC §1395nn (the “Stark Law”). United States ex rel. Baklid-Kunz v. Halifax Hospital Medical Center, et al., No. 09-cv-1002 (M.D. Fla.).

The Stark Law and the Bona Fide Employment Exception

The Stark Law prohibits a physician from referring a patient for certain designated health services (“DHS”) to an entity in which the physician, or an immediate family member, has a financial interest, such as an ownership or investment interest in the entity or a compensation arrangement with the entity. Certain exceptions for arrangements are permitted under Stark. However, because the Stark Law is a strict liability statute, the arrangement must fit completely within the criteria of the exception in order not to violate the statute. At issue in Halifax, as explained below, is the bona fide employment exception, Continue reading

Long Island Radiology Group Settles FCA Allegations That It Billed Medicaid And Medicare For Unnecessary Tests For $15.5M

A company operating diagnostic testing facilities in New York has agreed to pay $13.65 million to the federal government and $1.85 million to New York and New Jersey for a total of $15.5 million in penalties to settle claims it falsely billed federal and state health care programs for tests that were not performed or not medically necessary and for paying kickbacks to physicians. The company denies liability for the allegations that are part of the settlement.

The settlement resolves allegations that between 1999 and 2010 the radiology group submitted false claims to Medicare and state Medicaid programs in New Jersey and New York for Three Dimensional reconstructions of CT scans that, according to the complaint, were medically unnecessary, were not ordered by the treating physicians, and in some cases were never actually performed or interpreted.  These scans are often used in orthopedic, cardiovascular and neurologic imaging, including to visualize complex fractures, tumors in the lungs or soft tissues, and cardiac issues.  In addition, the group allegedly submitted false billings for expensive imaging services, including retroperitoneal ultrasounds, Doppler scans, transrectal ultrasounds and pelvic x-rays.  These imaging services allegedly resulted in a total of more than 40,000 false claims made to the New York Medicaid program. Continue reading

OIG Report: Finds Questionable Billing of Nearly $17 Million for Sleep Study Services

On October 9, 2013, the US Department of Health and Human Services Office of the Inspector General’s (OIG) Office of Evaluation and Inspections (OEI) issued a report (OEI-05-12-00340) entitled “Questionable Billing for Polysomnography Services.”  The report found that Medicare paid nearly $17 million for sleep study (polysomnography) services that did not meet one or more of the three Medicare requirements and that 180 providers demonstrated patterns of questionable billing for these services.  The OIG chose to study this issue because Medicare spending for sleep study services rose from $407 million to $565 million from 2005 to 2011, and fraud investigators and sleep medicine professionals have identified specific vulnerabilities regarding polysomnography services.  The findings of the OIG’s report are significant because just as we accurately predicted that the OIG’s December 2010 Report: “Questionable Billing by Skilled Nursing Facilities” would generate increased investigations of therapy services for skilled nursing facilities (“SNFs”), the findings in this Report represents an area in which sleep study service providers can also expect increased enforcement. Continue reading

Health Care Provider – Vendor Agreements: Have you looked at them lately?

Health care providers enter into agreements with vendors on a daily basis. Providers have agreements with suppliers for items and services, such as – durable medical equipment, medical supplies, EKG/Holter monitoring services and pharmaceuticals. Providers also have agreements with ancillary providers, like rehabilitation therapists, audiologists, psychologists, wound care professionals, and others.

Entering into and working with these types of agreements and arrangements can and does become a routine function of any provider. Often when providers treat these agreements as a routine day to day function, important compliance and business related concerns can get overlooked. An important element of the compliance function of any provider organization should include a periodic review of its vendor agreements and arrangements. Continue reading

Final Rule on Expansion of Physician-Owned Hospitals under the Stark Physicians Self Referral Rule

On November 1, 2010, the Centers for Medicare and Medicaid Services (“CMS”) released the final rule governing the procedures and requirements by which a physician-owned hospital may apply for an exception to the Stark Physician Self Referral Law’s prohibition against expanding a physician-owned hospital’s capacity. The rule, effective on January 1, 2012, will be published in the Federal Register on November 30, 2011. Continue reading