The OIG & You: Health Care
Compliance Programs (and ACOs) in
2011 and Beyond
May 10, 2011
Douglas A. Grimm, FACHE
Pillsbury Winthrop Shaw Pittman
douglas.grimm@pillsburylaw.com
Pillsbury Winthrop Shaw Pittman LLP
Pillsbury’s Health Care Capabilities
 Pillsbury’s Health Care team serves the legal needs of
health care providers, physician groups, insurers, medical
device manufacturers, group purchasing organizations and
pharmaceutical companies.
 Our Health Care Industry Team members have extensive
experience on legal issues specific to the industry, including:
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State and federal certification and licensure
Medicare and Medicaid rules and regulations
Patient privacy laws
Reimbursement and other regulatory regimes
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Tonight’s Agenda
 Part I
: The Costs of Health Care Fraud and Abuse
 Part II : OIG’s 2011 Work Plan
 Part III : Deviations from the Normal (or How to Handle a
Problem)
 Part IV : ACOs - Legal Structure, Governance &
Compliance
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Part I: The Costs of Health Care
Fraud and Abuse
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INTERNATIONAL COMPARISON OF HEALTH
SPENDING 1980–2007
Average spending on health
per capita ($US PPP)
Total expenditures on health
as percent of GDP
16%
$7,290
8%
$2,454
Note: $US PPP = purchasing power parity.
Source: Organization for Economic Cooperation and Development, OECD Health Data, 2009 (Paris: OECD, Nov. 2009).
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Fraud, Waste, and Abuse Costs
Cost in Billions
1. Unwarranted Use
$250-325
2. Fraud and Abuse
$125-175
3. Administrative Inefficiencies
$100-150
4. Provider Inefficiency and Errors
$75-100
5. Lack of Care Coordination
$25-50
6. Preventable Conditions
$25-50
$600-850
Source: Thomson Reuters, 2011
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Recent News: January 24, 2011
“U.S. Department of Health and Human Services Secretary Kathleen
Sebelius and U.S. Associate Attorney General Thomas J. Perrelli today
announced a new report showing that the government’s health care
fraud prevention and enforcement efforts recovered more than $4
billion in taxpayer dollars in Fiscal Year 2010. This is the highest
annual amount ever recovered from people who attempted to defraud
seniors and taxpayers.”*
In 2009, recovered $2.5 billion**
*Sources: HHS press release Jan. 24, 2011
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Part II: OIG’s 2011 Work Plan
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OIG’s Mission and Activities
 Mission:
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Protect program integrity and the well being of program beneficiaries by
detecting and preventing waste, fraud, and abuse.
Identify opportunities to improve program economy, efficiency, and
effectiveness.
Hold accountable those who do not meet program requirements or who
violate Federal laws.
 Activities:
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Conduct audits, evaluations, and investigations.
Provide guidance to industry.
When appropriate, impose civil monetary penalties, assessments, and
administrative sanctions.
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Annual Work Plan
 Describes the activities and audits on which the OIG will focus for the
protection of federal health program integrity.
 Furthers OIG’s goals to detect and mitigate fraud, waste, and abuse.
 Hold accountable those who do not meet program requirements.
 2011 Work Plan was released October 1, 2010.
 Several new priorities.
 Largely builds on objectives in 2010 Work Plan.
 2011 Work Plan omits EMTALA and coding and documentation
under the MS-DRG system.
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2011 Work Plan: New Priorities
 General areas of focus – less specific than in past years.
 New topics address quality, billing concerns.
 Any time OIG adds new issues to the work plan,
providers who provide these services and other Medicare
stakeholders should be knowledgeable of these changes.
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2011 Work Plan: New Priorities
 (1) Replacement Devices
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Hospital receives full or partial credit from a device manufacturer –
hospital must use modifiers on the inpatient and outpatient claims.
Medicare not responsible for the full cost of a replaced medical device
when hospital receives a credit from manufacturer of 50 percent or more
for a replacement device.
 (2) Radiation Therapy Quality and Safety Review
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OIG to review safety and quality of intensity-modulated radiation therapy
and image-guided radiation therapy.
 (3) Brachytherapy Reimbursement
 (4) Payments for Non-Physician Outpatient Services Under the
Inpatient Prospective Payment System (“IPPS”)
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OIG to review appropriateness of the payments for non-physician
outpatient services shortly before or during hospital stays.
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Continued Priorities
(1/5)
 Priorities continued from the 2010 Work Plan include:
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Provider-Based Status
 OIG reviewing cost reports of hospitals claiming provider based status to
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determine the appropriateness of the designation and the potential impact on
Medicare.
Hospitals should review the provider-based requirements (42 C.F.R. §
413.65(d)).
Physicians’ Evaluation and Management (“E&M”) coding and
documentation.
 OIG reviewing the extent of potentially inappropriate payments for E&M
services and consistency of E&M medical review determinations.
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Payments to Critical Access Hospitals (“CAHs”)
 OIG determining whether CAHs meet the conditions of participation and
whether CAHs have met the designation criteria in the Social Security Act.
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Continued Priorities
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(2/5)
Medicare Excessive Payments
 OIG continuing to review Medicare claims with unusually high payments to
determine their appropriateness.
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Medicare Disproportionate Share Payments (“DSH”)
 OIG continuing to determine whether these payments have been made in
accordance with Medicare requirements.
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Medicare Outlier Payments
 OIG reviewing outlier payments and identifying national trends and
characteristics of hospitals with high or increasing rates of outlier payments.
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Duplicate Graduate Medical Education (“GME”) Payments
 OIG continuing to review provider data from CMS’s Intern and Resident
Information System to determine whether duplicate GME payments have been
claimed.
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Continued Priorities
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(3/5)
Hospital Capital Payments
 OIG reviewing Medicare inpatient capital payments to determine whether
capital payments to hospitals are appropriate.
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Hospital Acquired Conditions (“HAC”)
 OIG reviewing early implementation of the CMS HAC policy; also reviewing
Medicare claims data to identify the number of beneficiary stays associated
with HACs and determine impact on reimbursement.
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Hospital Readmissions
 OIG continuing to review claims to determine readmission trends.
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Place of Service Errors
 OIG reviewing place of service coding on Medicare Part B for hospital
outpatient departments.
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Continued Priorities
(4/5)
 ASC Payment Rates
 OIG reviewing the appropriateness of the methodology for
setting ASC payment rates under the revised ASC payment
system.
 Excluded Providers and Deceased Beneficiaries
 OIG assessing the extent to which Medicare paid for services
ordered or referred by excluded providers; OIG continuing to
review claims with dates of service that occur after the
beneficiary’s death.
 Independent Physical Therapists
 OIG focusing on independent physical therapists with high
utilization rates for outpatient therapy services to assess
compliance with Medicare regulations.
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Continued Priorities
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(5/5)
Skilled Nursing Facilities (“SNFs”)
 OIG reviewing Medicare Part A payments to SNFs and conducting reviews to
determine the medical necessity of claims and whether the claims were
sufficiently documented and correctly coded during CY 2009.
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Nursing Homes
 Continuing oversight of poorly performing nursing homes and reviewing the
extent to which nursing home residents are hospitalized.
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Home Health
 Reviewing Part B payments for services and medical supplies provided to
beneficiaries in home health episodes and examining the adequacy of controls
established to prevent inappropriate Part B payments for services and medical
supplies.
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Part III: Deviations from the Normal
(How to Handle a Problem – Qui
Tams, Internal Investigations, SelfDisclosure)
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Potentialities
 Investigatory letter from the Department of Health and
Human Services Office of the Inspector General (“OIG”).
 Time consuming, costly audit/investigation.
 Civil monetary penalties.
 Treble damages.
 Criminal penalties, including jail time.
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Qui Tam Trends
 False Claims Act
 Any person who knowingly presents, or caused to be presented, to an agent or
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officer of the United States government a claim for payment or approval that is
false or fraudulent is liable to the United States for a civil penalty of not more than
$11,000 per claim plus three times the amount of the government’s damages.
The qui tam provision allows private citizens to sue on the government’s behalf
(“whistleblowers”). A whistleblower can receive 15-30% of the total proceeds from
a successful case.
 DOJ recovered $2.5 billion in 2010 for False Claims Act violations
related to health care fraud.
 Amendments since 2009 broadened the scope of the Act (FERA,
PPACA).
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Qui Tam Trends Continued…
 The 60-Day Rule
 PPACA expanded the definition of a “reverse false claim” to include the
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knowing retention of overpayments.
Overpaid funds must be reported and returned either within 60 days of
identification or when the corresponding cost report is due.
Increased exposure. Potential for whistleblowers.
 Civil Investigative Demands
 FERA authorized the U.S. Attorney General to issue Civil Investigative
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Demands (“CIDs”). U.S. Attorneys may issue a CID to any person believed to
have possession, custody, or control over documents or documentary
information relevant to an investigation of false claims prior to government
intervention into a qui tam suit.
A CID can consist of (a) a request for the production of documents; (b) a
demand for oral or deposition testimony; (c) service of interrogatories
requiring written response; and (d) any combination of these devices.
FERA also authorizes U.S. Attorneys to share information obtained pursuant
to a CID with counsel for a qui tam relator.
Increased exposure. Potential for whistleblowers.
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Plan for Addressing Problems
 From OIG’s website:
 If you are engaged in a relationship you think is problematic or
have been following billing practices you now realize were wrong:
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Immediately cease filing the problematic bills.
Seek knowledgeable legal counsel.
Determine if any funds were collected in error from your patients and
from the federal health care programs. Report and return
overpayments.
Unwind the problematic investment.
Disentangle yourself from the problematic relationship.
Consider using OIG’s or the Centers for Medicare and Medicaid’s
(“CMS’s”) self-disclosure protocols.
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Internal Investigations
 Purpose: seek to uncover the truth about alleged misconduct within
the organization.
 Typical elements:
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Collect and examine written or recorded evidence.
Interview suspects and witnesses.
Obtain written statements.
Conduct computer and network forensics.
Consult with managers, human resources, and legal personnel.
 Helpful to have clear policies on conducting internal investigations.
 Document everything.
 Need-to-know-basis: inform only those necessary.
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Self-Disclosure
 OIG Self-Disclosure Protocol (Anti-Kickback, False Claims
Act violations)
 CMS Self-Referral Disclosure Protocol (Stark violations)
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OIG Voluntary Self-Disclosure Protocol (“SDP”)
“The OIG’s use of voluntary self-disclosure programs . . . is
premised on a belief that health care providers must be
willing to police themselves, correct underlying problems
and work with Government to resolve these matters.”
Federal Register, Vol. 63, No. 21, October 30, 1998.
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OIG Voluntary Self-Disclosure Protocol
 Matters that are “potentially violative of Federal criminal,
civil or administrative laws.”
 OIG “may conclude that the disclosed matter warrants
referral to DOJ.”
 No firm commitments about resolution – OIG is “not
obligated to resolve the matter in any particular manner.”
 Opening lines of communication at an early stage
“generally benefits” the provider.
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CMS Self-Referral Disclosure Protocol (“SRDP”)
 Mandated by PPACA.
 Describes process for providers and suppliers to voluntarily disclose
actual or potential violations of the physician self-referral or Stark law,
and the associated actual or potential Medicare overpayment.
 CMS open to resolve certain Stark violations for less than the
maximum possible penalties for disclosures through the SRDP.
 The Stark Law is a strict liability statute with huge potential penalties
that could attach to even technical violations of the law, such as a
lapsed contract or a missing signature. The SRDP represents a
chance to reduce potential exposure to Stark Law penalties.
 Among concerns: CMS has “encouraged” parties to place anticipated
repayments in an “interest-bearing escrow account.” May be difficult
for some providers.
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Decision to Voluntarily Self-Disclose:
Considerations
 Why disclose?
 Disclosure is a mitigating factor in determining the severity of the penalties.
 Increased opportunity to negotiate a fair monetary settlement.
 Offers providers the opportunity to minimize costs and disruptions from a full-scale
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audit/investigation.
Potential to avoid exclusion from federal health care programs.
Potentially high overpayment (>$1 million).
Right thing to do.
 Why not?
 Does not guarantee protection from civil, criminal, or administrative actions from
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another agency.
Admission will likely carry substantial civil penalties.
May be used against you by private insurers.
Potential waiver of attorney-client privilege, information may become discoverable
by a qui tam plaintiff.
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Guidance
 OIG Self-Disclosure Guidelines:
www.oig.hhs.gov/fraud/selfdisclosure.asp
 OIG SDP Guidance after 2003:
www.oig.hhs.gov/fraud/openletters.asp
 CMS Self-Referral Disclosure Protocol:
https://www.cms.gov/PhysicianSelfReferral/Downloads/6409_SRDP_
Protocol.pdf
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Responding to an OIG Investigatory Letter
 Litigation hold.
 Communicate to all employees that they are not to destroy any documents related
to the investigation.
 Conduct internal investigation.
 Cooperate with investigators.
 Provide complete, truthful, accurate information to investigators.
 Supply documents and materials within your control.
 OIG has the power to:
 Obtain statements under oath.
 Gather evidence.
 Serve subpoenas.
 Review documents relevant to a matter under investigation.
 Under special authorities, make arrests.
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Takeaways for Part III
 Take control and define scope.
 Obtain expert advice – bring counsel in early.
 Understand options for self-reporting.
 Address all elements of the protocol (whether OIG or
CMS).
 Expect delays.
 Keep CEO and Board informed.
 Do not underestimate the benefits of a robust Compliance
Program and Cooperative Approach.
 Anticipate publicity.
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Part IV: Accountable Care
Organizations - Legal Structure and
Governance Issues
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ACO Structural Requirements
 Each ACO must:
 Be a legal entity recognized and authorized under applicable
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state law to engage in its business.
Have a taxpayer identification number.
Be comprised of an eligible group of ACO Participants.
Have a mechanism for shared governance.
 Organizations coming together to form an ACO will almost
always need to form a new entity.
 An existing organization may become an ACO without
forming a new entity, but satisfying governance
requirements will probably discourage it from doing so.
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Legal Entity
 ACO must have a formal legal structure that is authorized
under state law to:
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Receive and distribute shared savings under the Medicare Shared
Savings Program (“MSSP”).
Repay shared losses under MSSP.
Establish, report and ensure provider compliance with health care quality
criteria, including quality performance and reporting standards.
Perform the ACO’s other functions.
 Corporation, partnership, limited liability company, etc.
 May not be a contractual joint venture alone.
 Existing entity may qualify if it satisfies requirements,
including shared governance.
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Taxpayer Identification Number
 ACO must have a taxpayer identification number.
 MSSP payments will be made to that TIN.
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Eligible ACO Participants
 Who may form an ACO
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ACO Professionals, i.e., physicians, physician assistants, nurse
practitioners and clinical nurses.
Networks of ACO Professionals.
Partnerships and joint venture arrangements between hospitals and ACO
Professionals.
Hospitals employing ACO Professionals.
 Who may also participate in an ACO
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Certain other providers, such as Federally Qualified Health Centers
(“FQHCs”) and Rural Health Centers (“RHCs”).
Critical Access Hospitals that bill Medicare for both facility and
professional services.
 Others may provide services to an ACO, but may have a
smaller or no role in governance.
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Mechanism for Shared Governance
 ACO must have a governing body, e.g., Board of
Directors, Board of Managers, etc. with broad authority
and responsibility for the ACO’s administrative, fiduciary
and clinical operations.
 Governing Body’s responsibility includes definition of
processes to promote evidence-based medicine and
patient engagement, report on quality and cost measures,
and coordinate care.
 Governing Body must be separate and unique to the ACO
where the ACO comprises multiple entities, e.g.,
independent group practices.
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Proportional Representation
 Governing Body must provide proportional representation
for ACO Participants.
 At least 75% of Governing Body must be ACO
Participants or their designated representatives.
 “Each ACO participant must choose an appropriate representative
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from within its [sic] organization to represent them [sic] on the
governing body and each ACO participant must have appropriate
proportionate control over governing body decision making.”
How does this work with 1 hospital and 200 independent
physicians?
 Governing Body must include at least 1 ACO beneficiary
with no “conflict of interest,” includes family members.
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Leadership and Management
 ACO operations must be managed by an executive,
officer, manager or general partner accountable to the
Governing Body.
 Full-time senior-level medical director who is physically
present on a regular basis.
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Medical license in the state(s) in which ACO operates.
Board-certified.
 ACO Participants and providers/suppliers must have a
meaningful financial or other commitment to the ACO’s
clinical integration program likely to motivate them to
make clinical integration program succeed.
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Tax-Exemption Considerations
 Tax-exempt organizations (“TEOs”) may avoid private
inurement and private benefit, and wish to avoid unrelated
business insurance tax (UBIT).
 Must have all of the following:
 Terms of TEO’s participation set forth in advance in writing,
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negotiated at arms length.
ACO’s current participation in MSSP.
TEO’s share of benefits & losses proportional to benefits or
contribution TEO provides.
Any ownership interest of TEO must be in proportion to value of
capital contributions; allocations & distributions in proportion to
ownership.
All contracts and transactions are at fair market value.
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Fraud and Abuse Considerations
 As a concept, ACOs violate Stark, AKS and CMP.
 No proposed regulations addressing fraud & abuse.
 Preamble language proposes waivers.
 Stark waiver for payments to ACO participants including providers.
 AKS waiver for any payments necessary for ACOs participating in
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MSSP.
CMP waiver for distribution of shared savings as long as
payments are not for reducing medically necessary services.
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Mandatory Self-Reporting Obligation
 ACOs are required to create a compliance plan.
 Plan must contain “a requirement to report suspected
violations of law to an appropriate law enforcement
agency.”
 “Suspected violation”? Who to report?
 “Appropriate law enforcement agency”?
 Apply to ACO, ACO participants, other providers/suppliers?
 Incentives for voluntary self-reporting.
 Contrast: Penalties for failure to make reports.
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Douglas A. Grimm, FACHE
Pillsbury Winthrop Shaw Pittman
2300 N Street, NW
Washington, D.C. 20037
(202) 663-8283
douglas.grimm@pillsburylaw.com
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