New Pitfalls in
Health Care Transactions
~~~
Fraud & Abuse Perspective
Bill Mathias
410-347-7667
wtmathias@ober.com
Ober | Kaler • www.ober.com
Some Things Don’t Change

Medicare and Medicaid regulations
remain incredibly complicated
Ober | Kaler • www.ober.com
“There can be no doubt but that the statutes
and provisions in question, involving the
financing of Medicare and Medicaid, are
among the most completely impenetrable
texts within human experience. Indeed, one
approaches them at the level of specificity
herein demanded with dread, for not only are
they dense reading of the most tortuous kind,
but Congress also revisits the area frequently,
generously cutting and pruning in the process
and making any solid grasp of matters
addressed merely a passing phase.”
—
Chief Judge Ervin
United States Court of Appeals for the
fourth Circuit in Rehabilitation
Association of Virginia v. Kozlowski, 42
F. 3d 1444, 1450 (4th Circuit 1994)
Ober | Kaler • www.ober.com
More Things Never Change
Government continues to view
Fraud, Waste, and Abuse as a
significant source of revenue
 Enforcement remains aggressive

Ober | Kaler • www.ober.com
Have You Seen the OIG’s
Website Lately?
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Aggressive Enforcement

From new joint DOJ/OIG website
www.stopmedicarefraud.gov
– “A joint effort by HHS and the
Department of Justice recovered a
record $4 billion from fraudsters in
FY2010.”
Ober | Kaler • www.ober.com
Fighting Fraud
is Good Investment

The return-on-investment (ROI)
for Health Care Fraud and Abuse
Control (HCFAC) program
– Since 1997, $4.9 returned for every
$1.0 expended.
– 3-year average (2008-2010), $6.8
returned for every $1.0 expended
Ober | Kaler • www.ober.com
Federal Fraud & Abuse Laws
Anti-Kickback Statute
 Stark Physician Self-Referral Law
 Various Civil Monetary Penalties

– Prohibition against inducements to
beneficiaries
– Prohibition against hospitals paying
inducements to physicians to limit
care

False Claims Act
Ober | Kaler • www.ober.com
Areas of Government Concern
in Fraud & Abuse Law







Additional Cost
Over, Under, and Mis-Utilization
Quality of Care
Access to Care
Patients’ Freedom of Choice
Competition
Exercise of Professional Judgment
Ober | Kaler • www.ober.com
State Fraud & Abuse Laws

Don’t forget about state laws
– State fraud and abuse laws
– State mini-Stark laws
– Fee splitting prohibitions
– Certificate of Need (CON)
– State Licensure
– Corporate practice of medicine
Ober | Kaler • www.ober.com
Fraud & Abuse Laws in
Healthcare Transactions
Beginning
 Middle
 End

Ober | Kaler • www.ober.com
In the Beginning...

Need to analyze overall structure
of the transaction to make sure
the deal is consistent with fraud
and abuse laws
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In the middle...

Need to conduct detailed due
diligence to avoid fraud and abuse
liability
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In the end...

Need to have a plan for operating
in compliance with fraud and
abuse laws
– PPACA to require mandatory
compliance program
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Healthcare Industry
Feeling Undervalued
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Anti-Kickback Statute

Federal anti-kickback law generally
prohibits the provision of any
economic benefit in exchange for
the referral of patients or business
that will be reimbursed under any
Federal health care program.
– 42 U.S.C. § 1320a-7b(b).
Ober | Kaler • www.ober.com
What’s New with
Anti-Kickback Statute
PPACA expressly makes AntiKickback violations actionable
under the FCA
 PPACA legislatively overrules
Hanlester with respect to intent

– “With respect to violations of this
section, a person need not have
actual knowledge of this section or
specific intent to commit a violation
of this section.”
Ober | Kaler • www.ober.com
AKS Decision Tree
1. Is there an economic benefit?
If No
If Yes
2. Is there a referral or
recommendation?
If No
If Yes
3. Is there a statutory exception?
If Yes
If No
4. Is there a safe harbor?
If Yes
If No
5. Is there a potential for abuse?
If Yes, Problem!
If No
Go to Stark Analysis
Ober | Kaler • www.ober.com
Stark Self-Referral Law

The federal Stark physician selfreferral law generally prohibits a
physician from making referrals to
an entity for any of eleven (11)
designated health services if the
physician (or an immediate family
member) has a “financial
relationship” with the entity.
– 42 U.S.C. § 1395nn
Ober | Kaler • www.ober.com
What’s New with
the Stark Law

Over past few years, changes to
Stark law have limited possibilities
for joint venture with physicians
– “Stand in the shoes” (10/1/08)
– Percentage-based compensation and
“per click” (10/1/09)
– “Under arrangement” services –
revised definition of “entity”
(10/1/09)
Ober | Kaler • www.ober.com
PPACA Provisions
Affecting Stark
Overpayments
 Stark self-disclosure authority
 Stark in office ancillary disclosure
requirement
 Restrictions on physician
investments in hospitals

Ober | Kaler • www.ober.com
Stark Decision Tree
1. Is there a physician or immediate family member?
If No
If Yes
2. Is there a direct or indirect financial relationship?
If No
If Yes
3. Is there a referral?
If No
If Yes
4. Is there a designated health service?
If No
If Yes
5. Is there a statutory exception?
If Yes
If No
6. Is there a regulatory exception?
If No, Problem!
If Yes
Okay!
Ober | Kaler • www.ober.com
False Claims Act
Potential liability remains
enormous in healthcare context
 Liability

– 3X Damages
– $5,500 to $11,000 per claim
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Sample Penalty Calculation
DEFENSE CONTRACTOR

$100,000 damages X 3 =
$300,000

12 (# of claims) X $11,000 =
$132,000

Total liability = $432,000
Ober | Kaler • www.ober.com
Sample Penalty Calculation
HEALTH CARE PROVIDER

$100,000 damages X 3 =
$300,000

2000 (# of claims) X $11,000
=$22,000,000

Total Liability = $22,300,000
Ober | Kaler • www.ober.com
FERA Amendments

Revised FCA to codified “reverse false
claims”
– it is now illegal to “knowingly conceal…or
knowingly and improperly avoid…or
decrease…an obligation to pay or transmit
money or property to the Government…”
»31 U.S.C. §3729(a)(1)(G)
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60-day Overpayment Rule

PPACA requires reporting and
repayment of overpayments within
60 day of identification (or due
date of next cost report, if
applicable)
– What’s “identification”?

Violations actionable under FCA
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Self-Disclosure
OIG Voluntary Disclosure Protocol
 CMS Stark Self-Disclosure Protocol
 MAC Disclosure

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Risk/Reward of
Self-Disclosure
Eliminate potential overpayment
recoupment and FCA exposure
 Can be costly

– $$$
– Time
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Self-Disclosure Deal Points
What to disclose?
 Who to disclose it to?
 Disclosure by seller or buyer?
 Allow sufficient time to resolve
disclosure
 How definitive is your deal?

Ober | Kaler • www.ober.com
“Health Care in the New
Millennium”
Ober | Kaler • www.ober.com
Questions?
Bill Mathias
Ober|Kaler
410-347-7667
wtmathias@ober.com
Ober | Kaler • www.ober.com