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Appellate Court Affirms $237 Million Award Against Hospital for Stark Law Violations
/in Fraud and Abuseby Teresa Locke, Holland & Hart LLP
The Fourth Circuit Court of Appeals recently issued an alarming decision affirming a $237 million judgment against Tuomey Healthcare Systems, a nonprofit hospital located in a small, largely rural South Carolina community that is a federally-designated medically underserved area. The judgment resulted from a jury’s finding that Tuomey submitted 21,730 false claims to Medicare for reimbursement knowing that the claims were generated through part-time physician employment contracts that violated the referral constraints found in the Stark Law. The decision clarifies that hospital “facility fees” associated with outpatient procedures performed by physicians constitute “referrals” under the Stark Law even when the “referring” physician is personally performing the outpatient procedure. The false claims themselves had a total value of $39 million, but with automatic treble damages and civil penalties in the minimum amount for each violation, the resulting judgment was for $237 million. Despite its affirmance of the judgment, the Fourth Circuit panel recognized “the troubling picture this case paints: An impenetrably complex set of laws and regulations that will result in a likely death sentence for a community hospital in an already medically underserved area.” U.S. ex rel. Drakeford v. Tuomey.
The part-time employment contracts at issue in Tuomey allowed the physicians to maintain their private practices, but required them to perform all outpatient surgical procedures exclusively at the hospital. The contracts had multiple compensation components, two of which proved problematic under Stark. First, each physician was paid an annual guaranteed base salary which was adjusted from year to year based on the amount the physician collected from all services rendered the previous year. Second, the bulk of the physicians’ compensation was earned in the form of a productivity bonus, which paid the physicians 80% of the amount of their collections for that year. Read more
HIPAA, E-mails, and Texts to Patients or Others
/in HIPAAby Kim C. Stanger, Holland & Hart LLP
The HIPAA Privacy and Security Rules require covered entities (including healthcare providers and health plans) and their business associates to implement certain safeguards when e-mailing or texting electronic protected health information (“e-PHI”) to patients or others.
E-mails and Texts to Patients. The HIPAA Privacy Rule not only allows but requires covered entities to communicate with patients via e-mail or text if requested by the patient. (See 45 CFR 164.522(b)). However, the Privacy Rule requires covered entities to implement appropriate safeguards when e-mailing or texting e-PHI to patients. The Office for Civil Rights (“OCR”) explained:
The Privacy Rule allows covered health care providers to communicate electronically, such as through e-mail, with their patients, provided they apply reasonable safeguards when doing so. (See 45 CFR 164.530(c)). For example, certain precautions may need to be taken when using e-mail to avoid unintentional disclosures, such as checking the e-mail address for accuracy before sending, or sending an e-mail alert to the patient for address confirmation prior to sending the message. Further, while the Privacy Rule does not prohibit the use of unencrypted e-mail for treatment-related communications between health care providers and patients, other safeguards should be applied to reasonably protect privacy, such as limiting the amount or type of information disclosed through the unencrypted e-mail. In addition, covered entities will want to ensure that any transmission of electronic protected health information is in compliance with the HIPAA Security Rule requirements at 45 CFR Part 164, Subpart C.
(OCR FAQ dated 12/15/08, available at http://www.hhs.gov/ocr/privacy/hipaa/faq/health_information_technology/570.html). Read more
Idaho’s Medical Lien Statute
/in Reimbursement & Collectionsby Kim C. Stanger, Holland & Hart LLP
Idaho law allows hospitals and other healthcare providers to file a lien to help secure payment of treatment to persons who have been involved in an accident or who might otherwise be entitled to recovery from a third party for injuries the patient suffers. The lien statute is, however, limited in scope and must be strictly followed to enforce the lien.
Medical Liens. Idaho’s medical lien statutes allow hospitals,1 nursing care providers,2 and other entities licensed to practice medicine3 to file a lien “for the reasonable charges for … care, treatment and maintenance of an injured person, … or to the legal representative of such person, on account of injuries” caused by another person.4 Significantly, the lien statutes do not apply charges for care rendered to all patients; instead, they only apply to charges for care rendered to patients who were injured by the actions of another person (e.g., auto accidents, personal injury cases, assault and battery, etc.). Also, the lien statutes do not enable the healthcare provider to file or enforce a lien against the patient’s own property; instead, the lien gives the healthcare provider a right to recover against the person or entity causing the patient’s injuries (the “tortfeasor”). The net effect is that the tortfeasor (or their insurer) will want to ensure that the provider is paid as part of any personal injury settlement, or the tortfeasor may remain directly liable to the provider for the cost of the provider’s care. The lien does not apply to accidents or injuries that are covered by workers compensation.5
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Referral Reward Programs
/in Fraud and Abuseby Kim C. Stanger, Holland & Hart LLP
I often see programs in which health care providers offer rewards to persons who refer new business to the practice. Such programs are risky.
Anti-Kickback Statute. The federal Anti-Kickback Statute prohibits offering or paying any remuneration to induce referrals for items or services payable by federal healthcare programs, including Medicare or Medicaid. (42 USC 1320a-7b(b)). Violation of the Anti-Kickback Statute is a felony. It is also an automatic violation of the federal False Claims Act. Accordingly, providers should never reward referrals for Medicare or Medicaid business. In addition, the OIG has suggested that carving out federal program business from reward programs may not insulate the provider from Anti-Kickback Statute liability because a person who receives rewards for referring non-federal program business is likely to refer federal program business as well. (OIG Advisory Opinion No. 12-06).
State Laws. Referral reward programs might also violate state laws. For example, the Idaho Medical Practices Act prohibits “[d]ivision of fees or gifts or agreement to split or divide fees or gifts received for professional services with any person, institution or corporation in exchange for referral.” (Idaho Code 54-1814(8)). Idaho’s insurance code also prohibits rewarding referrals that result in “treatment of physical or mental illness or injury arising in whole or substantial part from trauma.” (Idaho Code 41-348). I am not aware of any cases in which these statutes have been applied to referral reward programs, but there is a risk. Read more
Stark Requirements for Physician Contracts
/in Contracts & Transactions, Fraud and Abuseby Kim C. Stanger, Holland & Hart LLP
Entities that employ or contract with physicians must ensure their agreements are structured to comply with the federal Ethics in Patient Referrals Act (“Stark”)1 if they intend to bill Medicare for services rendered or referred by the physicians. Under Stark, if a physician (or a member of the physician’s family) has a financial relationship with an entity, the physician may not refer patients to the entity for certain designated health services (“DHS”)2 payable by Medicare unless the financial relationship is structured to fit within a regulatory safe harbor.3 Entities may not bill Medicare for services improperly referred and, if they have done so, the entity must repay amounts improperly received. Failure to report and repay within 60 days may result in additional civil penalties of $15,000 per claim as well as False Claims Act liability.4 Repayments can easily run into the hundreds of thousands if not millions of dollars. Given the potential liability, it is critical that physician arrangements be structured to fit within the regulatory safe harbors.
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