FOR PROVIDERS
- » OIG Refines Self-Disclosure Protocol Through Open Letter to Health Care Providers
- » Court Finds Hospital Entitled to HCQIA Immunity Despite Lack of Formal Hearing
- » Medical Center Files Lawsuit Challenging RAC’s Denial of Claim on the Basis that the RAC’s Opening of the Claim Was Not Timely
- » OIG Advisory Opinion Found That Employment Contract Entered Into Concurrently With Real Estate Purchase From Employee Falls Under Safe Harbor
- » Healthways Inc. to Pay $40 Million to Settle 15 Year Old Whistleblower Lawsuit
- » Diagnostic Imaging Service Company and Owners Agree to Pay $2 Million to Settle OIG Allegations
FOR PROVIDERS
OIG Refines Self-Disclosure Protocol Through Open Letter to Health Care Providers
On March 24, 2009, the Office of Inspector General (“OIG”) of the Department of Health and Human Services released an “Open Letter to Health Care Providers” providing further refinements to the OIG’s Self-Disclosure Protocol (“SDP”). In an effort to further prioritize the OIG’s work and effectively use resources, these refinements narrow the SDP’s scope and establish a minimum settlement for all submissions accepted into the SDP.
First, the Open Letter announces that the OIG will no longer accept disclosure of a matter that only involves liability under the physician self-referral law (aka “Stark”). The OIG will, however, continue to accept providers into the SDP when the disclosed conduct involves “colorable violations” of the anti-kickback statute (even if they also involve colorable violations of Stark). According to the Open Letter, these refinements are intended to focus the OIG’s resources on kickbacks intended to induce or reward a physician’s referrals. However, the OIG urges providers not to interpret these refinements as the government losing focus on the enforcement of Stark.
Second, the Open Letter establishes a minimum settlement amount for all submissions accepted into the SDP. The OIG will now require a minimum of $50,000 to settle any kickback-related submissions accepted into the SDP, regardless of the nature or scope of the potential misconduct at issue. The Open Letter suggests that such minimum amounts are consistent with the OIG’s statutory authority to impose a penalty of up to $50,000 (in addition to treble damages). While imposing a minimum penalty amount, the OIG did reiterate that it will continue to look at the facts and circumstances of each disclosure “to determine the appropriate settlement amount consistent with our practice, stated in the 2006 Open Letter, of generally resolving the matter near the lower end of the damages continuum, i.e., a multiplier of the value of the financial benefit conferred.”
A copy of the OIG’s March 24, 2009 Open Letter to Health Care Providers can be found at
http://www.oig.hhs.gov/fraud/docs/openletters/
OpenLetter3-24-09.pdf.
Court Finds Hospital Entitled to HCQIA Immunity Despite Lack of Formal Hearing
On April 10, 2009, the Fourth Circuit ruled that a hospital was immune from various state and federal claims under the Health Care Quality Improvement Act (“HCQIA”) for suspending a physician’s privileges without affording him a hearing. Wahi v. Charleston Area Med. Ctr., Inc., No. 06-2162 (4th Cir. Apr. 10, 2009). Affirming the lower court’s grant of summary judgment in favor of the hospital, the Fourth Circuit found that even though it did not hold a formal hearing before issuing the suspension, the hospital provided “other procedures” that were “fair and reasonable … under the circumstances.” Id. While the Court noted that the hospital’s process was “not a recommended model,” the failures in such process, “when viewed in the totality of circumstances against a measuring stick of objective reasonableness,” did not rebut the presumption of immunity under the HCQIA. Id.
Rakesh Wahi, M.D., a licensed cardiologist, was granted privileges at Charleston Area Medical Center (CAMC) in January 1993. In the subsequent years, CAMC temporarily suspended Wahi’s privileges on several occasions, and, as required, made numerous reports to the National Practitioner’s Data Bank (“NPDB”). On July 30, 1999, while investigating allegations that arose during the review of Wahi’s application for reappointment, CAMC summarily suspended Wahi’s privileges in “the best interest of patient care.” His suspension was to continue until resolution of his application for reappointment and any hearing, if requested. On August 26, 1999, the CAMC Credentials Committee subsequently recommended denying Wahi’s application for reappointment and notified Wahi of his right to a hearing regarding the decision.
On September 8, 1999, Wahi requested a hearing regarding both his suspension and the decision not to renew his clinical privileges. Over the next several months, CAMC engaged in discussions regarding Wahi’s access to his files, the composition of the hearing panel and other aspects of the hearing. However, despite frequent requests by CAMC to schedule the hearing, Wahi never provided CAMC with any dates on which he would be available for a hearing. Eventually, all discussions halted and the hearing was never scheduled. On September 13, 1999, CAMC reported Wahi’s suspension to the NPDB and the West Virginia Board of Medicine.
Affirming the district court decision, the Fourth Circuit rejected Wahi’s argument that the hospital was not entitled to immunity under HCQIA because it failed to provide him notice and a hearing. The Fourth Circuit explained that a hospital may qualify for immunity if the review action was taken either “after adequate notice and hearing procedures” or “after such other procedures as are fair to the physician under the circumstances.” Specifically, the Fourth Circuit noted that the hospital put Wahi on notice of the charges against him, notified him of his rights and repeatedly asked him to schedule the hearing. The court further noted that Wahi, who refused to select dates unless the hospital met his preconditions, seemed more intent on forestalling a hearing than on having one.
Medical Center Files Lawsuit Challenging RAC’s Denial of Claim on the Basis that the RAC’s Opening of the Claim Was Not Timely
On March 24, 2009, a California medical center filed a complaint in the U.S. District Court for the Southern District of California, alleging that the Recovery Audit Contractor (“RAC”) unlawfully reopened a Medicare claim submitted by the medical center. Specifically, the medical center alleged that the RAC impermissibly reopened a claim more than one year after payment without showing good cause for doing so. The medical center challenged the RAC’s showing of good cause, arguing that the reopening at issue was invalid and could not support the RAC’s recovery of paid claims.
Medicare regulations permit RAC’s to reopen and review claims for any reason within one year of receipt of payment for such claims. This one year review period provides the Medicare program with an opportunity to audit claims for compliance with applicable regulations. A RAC must show “good cause,” as defined in the regulations, to open and review claims one to four years after payment by Medicare.
The California case involves the reopening of a two-year old Medicare claim submitted by Palomar Medical Center in connection with care provided in the hospital’s acute rehabilitation unit in June 2005. Such claim was paid by Medicare on July 7, 2005. Upon review of the medical records, on July 10, 2007, the RAC retroactively denied coverage for the claim on the basis of medical necessity. Palomar appealed the RAC’s decision to a fiscal intermediary and to a qualified independent contractor, both of which upheld the RAC’s denial of coverage. The medical center subsequently appealed to an ALJ, arguing both that the care provided was medically necessary and thus covered by Medicare and that the RAC had no authority to reopen the claim because no “good cause” was shown for reopening the claim more than one year after payment. The ALJ held that it had jurisdiction to determine whether the reopening was proper and found that the RAC had not shown good cause to reopen the case. The Medicare Appeals Council (“MAC”) reversed the ALJ’s decision, holding that the ALJ lacked jurisdiction to determine whether the claim was lawfully reopened by the RAC.
The present lawsuit was filed in response to the MAC’s decision. It is the first lawsuit to challenge the ability of RACs to reopen claims more than one year after payment and raises questions regarding which body has the jurisdiction to determine whether cases are properly reopened. A District Court decision in this matter has important implications for providers: a decision in favor of the medical center would affirm an important basis for challenging RAC claim reviews, but a decision in favor of the government would increase provider uncertainty with respect to which Medicare claims may be subject to RAC review.
A copy of the complaint filed March 24, 2009 in Palomar Medical Center v. Johnson, S.D. Cal., No. 3:09-cv-00605-BEN-NLS can be found at http://op.bna.com/hl.nsf/id/jthn-7qhs4x/$File/Palomar%20Medical%20Center%20v.
%20Johnson.pdf.
FRAUD AND ABUSE
OIG Advisory Opinion Found That Employment Contract Entered Into Concurrently With Real Estate Purchase From Employee Falls Under Safe Harbor
On March 26, 2009, the Office of Inspector General (“OIG”) issued Advisory Opinion 09-02, concluding that a contract for the employment of a mental health practitioner entered into concurrently with a contract for the employer to purchase real estate from the employee satisfied the anti-kickback statutory employment exception and the employment safe harbor and, therefore, would not generate prohibited remuneration under the anti-kickback statute.
Advisory Opinion 09-02 involves the employment of a mental health practitioner (the “Practitioner”) by a corporation providing outpatient mental health services (“Requestor”). Prior to Requestor’s employment of Practitioner, she maintained an active mental health practice in a building she owned (the “Building”). In November 2007, Practitioner approached the Requestor about purchasing the Building. Requestor agreed to do so, on the condition that Practitioner would be employed by the Requestor as a counselor and clinic director. Requestor and Practitioner subsequently entered into an employment agreement which was expressly contingent upon the Requestor’s purchase of the Building.
Requestor certified to the OIG that: (i) Practitioner is a bona fide employee within the meaning of the applicable Internal Revenue Code provisions; (ii) Requestor paid “market value” for the Building, and the purchase price did not include payment for referrals; and (iii) Practitioner was compensated based upon professional services (including administrative services) she personally performed, and that such services are reimbursable by Medicare, Medicaid and other federal healthcare program services.
The OIG noted that “the anti-kickback statute does not prohibit payments made by employers to their bona fide employees for employment in the furnishings of items or services for which payment may be made under Medicare, Medicaid, or other Federal health care programs.” The OIG further noted that, similarly, the safe harbor regulations that prohibited remuneration do not include such amounts paid to bona fide employees.
Based on Requestor’s certification on the status of Practitioner’s employment and the terms of her compensation, the OIG concluded that the employment arrangement satisfied the statutory employment exception, and, therefore, Practitioner’s wages did not constitute prohibited remuneration under the anti-kickback statute. While the OIG declined to opine on whether Requestor’s purchase of the Building implicates the fraud or abuse laws, the OIG found that neither the purchase of the Building nor the purchase price Requestor paid was a factor in its opinion regarding the employment arrangement.
AdvOpn09-02.pdf.
Healthways Inc. to Pay $40 Million to Settle 15 Year Old Whistleblower Lawsuit
On March 13, 2009, Healthways, Inc., announced that it had agreed to settle a whistleblower lawsuit – filed in 1994 by a former employee on behalf of the federal government – involving Diabetes Treatment Centers of America Inc., formerly owned and operated by Healthways. Under the proposed settlement arrangement, Healthways is to pay $28 million to the federal government and approximately $12 million to the whistleblower. The proposed settlement still requires the approval of the Department of Justice.
The lawsuit alleged that the Diabetes Treatment Centers of America (“DTCA”) improperly compensated doctors for referrals. The lawsuit claimed that such compensation was in violation of the federal anti-kickback statute, the Stark Law and resulted in the submission of false claims to Medicare and Medicaid in violations of the federal False Claims Act. The claims under the Stark Law were dismissed upon summary judgment, but, the false claims and anti-kickback claims remained. The suit was scheduled to go to trial some time this year.
Diagnostic Imaging Service Company and Owners Agree to Pay $2 Million to Settle OIG Allegations
On March 25, 2009, the Department of Health and Human Services, Office of Inspector General (“OIG”) announced that West Valley Imaging LP, a Nevada diagnostic imaging service, and its two physician owners had agreed to pay $2 million and enter into a five-year corporate integrity agreement to resolve allegations that that they submitted false or fraudulent claims to Medicare. The settlement constitutes one of the largest civil monetary penalty (“CMP”) settlements to date.
The OIG alleged that between January 1, 1998 and June 1, 2003, West Valley Imaging and its two physician owners intentionally defrauded Medicare by improperly providing diagnostic tests to Medicare beneficiaries without the required treating physicians’ orders, in addition to failing to satisfy other billing and coverage requirements.
West Valley Imaging and its owners disputed the allegations and denied liability. Per its terms, the settlement is “neither an admission of liability” by the radiologists “nor a concession by the OIG that its claims are not well-founded.” West Valley Imaging claims that the lack of physician orders were the result of lax record-keeping by West Valley Imaging and its referring physicians.
In addition to the $2 million fine and as part of the CMP settlement, West Valley Imaging agreed to enter into a five year corporate integrity agreement (“CIA”). Terms of the CIA, require West Valley Imaging to, among other things, audit 15 claims each quarter, as well as an additional 60 claims each year, that relate to physician orders
