It’s widely anticipated that, in many areas, the advent of the new Trump administration will result in a significant reduction in the number of enforcement actions against commercial entities alleging violations of federal laws and regulations. However, given the new president’s promises to “vigorously eliminate waste, fraud, and abuse in the federal government,”1 one may anticipate that aggressive enforcement of healthcare fraud and abuse laws may continue, and prudent healthcare providers are strongly advised to focus renewed attention to compliance in this area. Among the most important federal fraud and abuse laws that apply to physicians are the Anti-Kickback Statute (AKS), the Federal False Claims Act (FCA), and the physician self-referral law (Stark law). Failing to comply with these laws can result in criminal penalties, civil fines, exclusion from federal healthcare programs, and, potentially, the loss of the healthcare provider’s state medical license. These laws should be of special concern to wound care practitioners, who typically treat a high percentage of patients who are beneficiaries of Medicare, Medicaid, or other federal healthcare programs. This article will provide an overview of these laws
Under the AKS, it’s illegal to offer, ask for, or receive “remuneration,” which includes essentially anything of value, in exchange for referrals of federal healthcare program business. The law thus prohibits not only the giving or receiving of cash in exchange for using or recommending goods or services, but also bestowing or accepting non-cash benefits that provide value to the practitioner or to the clinic. More obvious non-cash kickbacks include recreational travel, tickets to sporting events and concerts, bottles of wine, lunches or dinners that lack any educational component, or the provision of food to a provider’s office staff. The pitfalls could lie within activities that may appear more benign but that nonetheless could be deemed to carry value. For example, it may violate the AKS to provide or to accept such things as: 1) assistance by sales representatives with treating patients (such as when sales representatives apply a product or prepare a wound), or with clerical or administrative work (such as when representatives help staff at the front desk, review charts, or assist with routine office paperwork); 2) payment for conducting research that hasn’t actually been carried out or that is not part of a bona fide research program; 3) excessive compensation for medical directorships; 4) speakers’ fees that exceed the fair market value of the service; 5) free or excessively cheap fees for rental/lease of expensive equipment for a wound care center; and 6) excessive free samples, or the guarantee of reimbursement for a wound care product.
The penalties for violations of the AKS are steep, running up to $50,000 per violation plus three times the amount of the improper remuneration and potential prison terms. In one recent case, a manufacturer of a wound care product paid $350 million to settle allegations that its salespersons induced physicians to use the product by providing expensive dinners and entertainment; giving them medical equipment and supplies; paying unearned speakers’ fees and compensating doctors for bogus case studies; and providing cash, credits, and rebates.2 However, it isn’t only those within the companies offering kickbacks who may be prosecuted; healthcare practitioners who accept such remuneration may also face problems. Recently, for example, a physician in Illinois was sentenced to nine months in prison and ordered to pay more than $500,000 for accepting excessive or unearned consulting fees and lavish entertainment from drug companies in exchange for prescribing and promoting certain drugs.3 If the monetary violations and criminal penalties are not enough, another tool that government prosecutors can use is exclusion from participation in federal healthcare programs. Given that government beneficiaries comprise such a significant component of the patients in need of wound care, exclusion could be a devastating outcome that can effectively shut down one’s practice.
False Claims Act
The FCA prohibits submitting false or fraudulent claims for payment to federal government, and penalizes such claims with “treble damages” (meaning the provider may be fined an amount up to three times the amount of the program’s loss), plus a minimum penalty of $10,781 and a maximum penalty of $21,563 per claim. Violations can also lead to the provider’s exclusion from participation in the federal healthcare programs. A claim for reimbursement for services rendered to beneficiaries of federal healthcare programs will be considered false if, for example, the service was not actually carried out, was carried out but was previously reimbursed under another claim, has been miscoded (for purposes of obtaining a higher payment), or is not supported by the medical record. The government also takes the position that a claim may be false or fraudulent if it is submitted for care that is considered grossly inadequate. For example, a wound care center paid $4.3 million to settle allegations that it had billed Medicare for services provided to beneficiaries by unqualified personnel.4 This case serves as reminder that the FCA provides prosecutors with a powerful weapon to ensure both the fiscal integrity of federal healthcare programs and the quality of the services paid for.
Physician Self-Referral Law
Stark law prohibits physicians from making referrals for certain items or services, known as designated health services (DHS), to an entity in which the physician, or any of his/her immediate family members, has an ownership, investment, or compensation arrangement. The entity receiving the referral is also prohibited from submitting any claim, causing a claim to be submitted, or billing any individual or entity for services provided pursuant to a referral that was made in violation of the Stark law. Unless a specific Stark law regulatory exception applies, if the Stark law is violated, physicians are subject to repayment, fines of $23,863 per service, a fine of $159,089 if there is found to be a scheme to circumvent Stark law, and exclusions from federal healthcare programs.
An additional consideration is that, even if the government does not pursue a given case, the federal whistleblower laws offer substantial financial incentives (sometimes reaching tens of millions of dollars) to private citizens who sue to establish AKS or FCA violations. Given the nature of modern medical practices, there will usually be numerous people (including office staff, patients, business partners, and even competitors) with knowledge of a provider’s business practices and billing activities, and the longer an improper practice goes on, the more likely that someone will report it to the government. In 2014, three whistleblowers brought an FCA case against a large wound care center operator, alleging it was the company’s practice to “upcode” certain services and to falsify patient eligibility for certain treatments. Although the case was ultimately dismissed because the whistleblowers could not identify any actual instances of these practices, it remains a cautionary tale for healthcare providers, highlighting the need for scrupulous attention to fraud and abuse compliance.
Why Wound Care Practitioners Must Pay Attention
As discussed at the outset, the current political environment is uncertain, but wound care providers should anticipate that violations of healthcare fraud and abuse laws will continue to be an area of aggressive federal and state enforcement. Penalties for violations are steep. Given the stiff consequences that are posed with noncompliance, wound care practitioners should not only be vigilant in staying abreast of the laws but also should be aware of what’s occurring at their respective offices or clinics. What may seem like a salesperson’s benign offer to “help around the office” could wind up getting the clinician into more trouble than it’s worth.
James R. Ravitz, Naomi J. L. Halpern and Rachel Hold-Weiss are attorneys with Arent Fox LLP in Washington, DC.
1. Billies R. How Republican Candidates Might Impact Federal Employees. Government Waste, Fraud and Abuse. Accessed online: http://wastefraudandabuse.org/2436-2
2. Shire PLC Subsidiaries to Pay $350 Million to Settle False Claims Act Allegations. United State Department of Justice. Accessed online: www.justice.gov/opa/pr/shire-plc-subsidiaries-pay-350-million-settle-false-claims-act-allegations
3. Chicago Psychiatrist Who Took Kickbacks to Prescribe Mental Health Medication Sentenced to Nine Months in Federal Prison. United State Department of Justice. Accessed online: www.justice.gov/usao-ndil/pr/chicago-psychiatrist-who-took-kickbacks-prescribe-mental-health-medication-sentenced
4. Lymphedema & Wound Care Institute Settle False Claims Act Allegations. United States Department of Justice. Accessed online: www.justice.gov/usao-sdtx/pr/lymphedema-wound-care-institute-settle-false-claims-act-allegations