Abuse and Fraud Medicare Agreement

Abuse and Fraud

Medicare Agreement

The board of directors has directed that I enter into a joint venture agreement with Central Park Medical Group, a physician group practice whose patient population (60%) consists of Medicare patients. To make the bid attractive, they have authorized me to offer permanent staff privileges to the physician owners as well as monthly bonus arrangements. However, I have concerns that such an arrangement might violate the applicable statutory and case law, especially in light of the decision in Feldstein v. Nash Community Health Servs., Inc., 51 F. Supp. 2d 673 (E.D.N.C. 1999), which stopped short of allowing ignorance of aspects of the Federal Anti-Kickback Law to be a defense to its violation, while strictly construing its intent requirement.

U.S.C.S. 1320a-7b (b), the Federal Anti-Kickback Law, prohibits a person from paying or seeking payment in exchange for referred business that that will be reimbursed by a federal health care program, including Medicaid. In fact, under the Federal Anti-Kickback Law, it is a felony for a party to make a payment, whether directly or indirectly, overtly or covertly, in cash or in kind, that is knowingly and willfully intended to induce another to refer federal health care program patients or to obtain goods or services that are reimbursable under a federal health care program. Violations of this law can have severe consequences; parties can be imprisoned for up to five years and face fines of up to $25,000; convicted violators are subject to mandatory exclusion from participation in federal health care programs; violators who are not criminally convicted can be excluded from participation in federal health care programs through a voluntary exclusion administrative hearing; enforcement authorities can pursue civil remedies, which permit fines of up to $50,000, plus three times the payment offered. See 42 U.S.C.S. 1320a-7. The Federal Anti-Kickback Law is based on intention, but the courts have interpreted the intent standard very broadly; if payment is made for a wide variety of services, and those services include the providing of referrals, then the statute is violated.

There are certain situations that do not violate the Federal Anti-Kickback Law, and these are referred to as safe harbors. The safe harbors are found in 42 U.S.C.S. 1320a-7b (b)(3), and provide exceptions for: (1) properly disclosed discounts or other reductions in price; (2) payments to bona fide employees; (3) some payments to group purchasing organizations; (4) coinsurance waivers for Medicare services for individuals qualifying for some Public Health Service programs; and (5) risk-sharing and related arrangements with managed-care organizations. 42 C.F.R. 1001.952(a)-(u) provides additional safe harbors for a variety of practices, ranging from (1) investments; (2) space rentals; (3) equipment rentals; (4) personal service and management contracts; (5) sale of practices to hospitals in shortage areas; (6) sale of practices from one practitioner to another; (7) referral services; (8) warranties; (9) discounts; (10) bona fide employment arrangements; (11) group purchasing organizations; (12) coinsurance and deductible waivers; (13) health plan related discounts; (14) practitioner recruitment in underserved areas; (15) subsidies for obstetrical malpractice insurance in underserved areas; (16) investments in group practices; (17) health co-ops; and (18) investments in ambulatory surgical centers. The safe harbors do not cover every area of permissible behavior, and an arrangement may not qualify as a safe harbor, but still not subject someone to the risk of prosecution.

In fact, the courts have interpreted the Federal Anti-Kickback Law relatively narrowly. The court in Feldstein v. Nash Community Health Servs., 51 F. Supp.2d 673 (E.D.N.C. 1999), implied that the government has to show that a defendant knowingly intended to violate the anti-kickback law. However, the court did not go so far as to permit ignorance of the law to form a defense to the charge; on the contrary, the court expected the health-care providers to know the content of fraud alerts issued by the regulatory agency. The Feldstein court was building on earlier similar decisions in Hanlester Network v. Shalala, 51 F.3d 1390 (9th Cir. 1995) and United States v. Bay State Ambulance & Hosp. Rental Serv. Inc., 874 F.2d 20 (1st Cir. 1989).

The Office of Inspector General (OIG) of the U.S. Department of Health is in charge of enforcing the Federal Anti-Kickback Law. The OIG has developed regulations to help ensure compliance with the Law, but is also aware that many contemplated arrangements may not fall within the safe harbors, but still would not violate the Law. Therefore, the OIG will provide advisory opinions about specific proposed business arrangements. Moreover, while these opinions cannot be used as legal precedent, the OIG does publish the opinions, to help provide guidance to people in determining whether a specific arrangement would violate the Federal Anti-Kickback Law. It also publishes fraud alerts, which highlight specific areas of concern.