Compliance 101: Don't Forget the Basics
by Howard E. Bogard
Reprinted with Permission from the Birmingham Medical News
These days it is easy to get caught up in the debate about health care reform, shared savings
plans and accountable care organizations. However, compliance in the health care industry is an ongoing
and significant issue for providers and warrants the utmost attention. The National Health Care AntiFraud Association estimates that Medicare and Medicaid fraud amounts to $60 Billion per year. To
combat health care fraud, the government has increased fraud investigations and enforcement, RAC
audits are on the rise, and the number of whistleblower lawsuits continue to increase each year.
While full compliance with the increasingly complex rules and regulations of the Medicare and
Medicaid programs is, some would say, virtually impossible, providers should start with understanding
the three major laws utilized by the government to combat fraud and abuse: the False Claims Act, the
Anti-kickback Statute and the Stark Law. While there are other laws and regulations that must also be
followed, compliance with these "Big Three" will go a long way in reducing a provider's risk of an
enforcement action.
The Federal False Claims Act
The Federal False Claims Act was enacted in 1863 during the Civil War to address fraud by
contractors providing goods to the Union Army. In its current form, the False Claims Act attaches civil
liability to any person or entity who knowingly presents a false claim for payment to any federally
funded program, including the Medicare and Medicaid programs. The Act defines knowingly to mean
that a person has knowledge of the information, acts in deliberate ignorance of whether the information
is true or false or acts in reckless disregard of whether the information is true or false. A violation of the
False Claims Act carries a civil penalty of $5,500 to $11,000 per false claim, plus three times the amount
of damages sustained by the government, plus costs. Some general examples of false claims include:
billing for items or services not rendered or not provided as claimed; submitting claims for equipment,
medical supplies and services that are not reasonable and necessary; double billing resulting in duplicate
payment; billing for non-covered services as if covered; unbundling (billing for each component of the
service instead of billing or using an all-inclusive code); failure to properly use coding modifiers; and
upcoding the level of service provided.
The False Claims Act also contains a whistleblower or qui tam provision that allows private
citizens to file lawsuits on behalf of the government and receive a portion of any recovery (ranging from
15% to 30%), plus expenses and attorneys' fees. The whistleblower provisions are intended to
encourage persons to expose False Claim Act and other violations of law. For 2011, there were over 762
new False Claims Act matters (referrals, investigations, and qui tam actions), with total settlements of
$3,029 Billion, of which almost $2.8 Billion related to qui tams. Whistleblower plaintiffs (called relators)
received payments in 2011 totaling $532 million.
The Federal Anti-kickback Statute
Whenever Medicare and/or Medicaid health care services are provided and an arrangement
exists between two persons or entities, the application of the Federal Anti-kickback Statute must be
considered. The Anti-kickback Statute establishes criminal penalties with respect to any person who
knowingly and willfully offers, pays, solicits or receives any remuneration to induce or in return for: (a)
referring any individual to a person for the furnishing or arranging for the furnishing of any item or
service payable in whole or in part under a federal health care program, or (b) purchasing, leasing,
ordering, or arranging for, or recommending purchasing, leasing, or ordering any good, facility, service,
or item payable under a federal health care program. Remuneration is defined broadly to include the
transfer of anything of value, in cash or in kind, directly or indirectly, overtly or covertly.
A violation of the Anti-kickback Statute constitutes a felony punishable by a maximum fine of
$25,000, imprisonment up to five years, or both. Also, the Secretary of Health and Human Services
("Secretary") may, and in some cases must, exclude individuals and entities from participating in any
federal health care program, including the Medicare and Medicaid programs, in the event the
Secretary determines that an individual or entity has "committed an act" in violation of the Antikickback Statute or has improperly filed claims in violation of the Anti-kickback Statute. In addition,
under the Balanced Budget Act of 1997, violations of the Anti-kickback Statute are also subject to civil
monetary penalties of up to $50,000 and damages of up to three times the amount of the illegal
kickback. Examples of physician arrangements that should be reviewed for Anti-kickback compliance
include: physician arrangements with outside entities to whom the physician may refer federal health
care program business; joint ventures with entities supplying goods or services to the physician
practice or its patients; consulting contracts or medical directorships; office and equipment leases with
entities to which the physician refers; and soliciting, accepting or offering any gift or gratuity of more
than nominal value to or from those who may benefit from a physician practice's referral of federal
health care program business.
Given the broad scope of the Anti-Kickback Statute, the Office of Inspector General ("OIG") has
issued regulations which define certain categories of activities deemed not to violate the Anti-Kickback
Statute (the "Safe Harbors"). According to the preamble to the Safe Harbor regulations, the failure of a
particular business arrangement to comply with a Safe Harbor regulation does not mean that the
arrangement violates the Anti-kickback Statute. Rather, the Safe Harbor regulations provide an
assurance that qualifying arrangements do not violate the law. Thus, arrangements that do not qualify
for Safe Harbor protection are in largely the same positions as they were prior to the promulgation of
these regulations, and they must be carefully evaluated in light of the prohibitions of the Anti-kickback
Statute.
The Federal Stark Law
The Federal Stark Law prohibits physicians from referring Medicare or Medicaid patients for
certain designated health services ("DHS") to entities with which the physician (or an immediate family
member of the physician) has a financial relationship, unless an exception applies. The Stark Law also
prohibits the entity from billing for services provided pursuant to a prohibited referral. If an entity is
paid for services rendered pursuant to a prohibited referral, it may incur civil penalties of up to $15,000
per prohibited claim and may be excluded from participating in the Medicare and/or Medicaid
programs. The DHS covered by the Stark Law are clinical laboratory services, physical therapy,
occupational therapy, speech-language pathology, radiology services, radiation therapy and supplies,
durable medical equipment and supplies, parenteral and enteral nutrients, equipment and supplies,
prosthetics and orthotics devices and supplies, home healthcare, outpatient prescription drugs, and
inpatient and outpatient hospital services. The Stark Law is a strict liability statute, meaning that proof
of specific intent to violate the law is not required. If an arrangement falls within the Stark Law selfreferral prohibitions, the referral is prohibited unless an exception is fully satisfied. For example,
physician owners of a medical group (by virtue of that ownership interest) and physician employees and
independent contractors of the medical group (by virtue of their compensation arrangements) are
prohibited from referring patients to the medical group for Medicare or Medicaid covered DHS unless an
exception applies to permit those referrals. One particularly useful exception called the "in-office
ancillary services" exception applies to both compensation arrangements and ownership interests alike.
Conclusion
Providers are encouraged to carefully review their coding and billing, documentation and
relationships with referral sources in light of the False Claims Act, Anti-kickback Statute and Stark Law.
The government is actively pursing fraud, waste and abuse in the health care industry and compliance
with the "Big Three" laws is the cornerstone of any provider compliance effort.
Howard E. Bogard
Attorney at Law
Direct: (205) 458-5416
Main: (205) 251-3000
hbogard@burr.com
420 North 20th Street, Suite 3400
Birmingham, Alabama 35203
www.burr.com
Howard E. Bogard is Chair of the Health Care
Practice Group at Burr & Forman LLP and
exclusively represents health care providers in
regulatory and corporate matters.