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Stark, Anti-Kickback, Civil Monetary Penalty & False Claims Act Issues

Financial relationships in healthcare raise a number of potential issues under a variety of federal and state fraud and abuse laws that don’t typically arise in other industries. The Department of Health & Human Services (“HHS”) Office of the Inspector General (“OIG”) has identified the five most important federal fraud and abuse laws that apply to physicians and health industry participants who have relationships with them. Those laws include: the Physician Self-Referral Law (“Stark Law”), the Anti-Kickback Statute (“AKS”), the False Claims Act (“FCA”), the Civil Monetary Penalties Law (“CMPL”), and the Exclusion Authorities (federal statutes under which healthcare providers may be excluded from federal healthcare programs).

Like some other states, Georgia has also enacted its own Patient Self-Referral Act (the “Georgia Stark Law”) and two separate False Claims Acts (the “State False Medicaid Claims Act” and the “Georgia Taxpayer Protection False Claims Act”). So healthcare providers and businesses in Georgia are now regulated on both the state and federal levels by numerous laws designed to prevent and punish fraud or abuse. And some of these laws may be used to help prove fraud or abuse not only when a government agency or program is involved, but also in situations in which private insurers or patients themselves pay for healthcare services.

In recent years, federal and Georgia healthcare regulators (as well as private insurers) have obtained record recoveries from civil cases alleging fraud, abuse and false claims. And most recently, the broadened statutory bases of FCA recovery established by the Patient Protection and Affordable Care Act (“ACA”) have resulted in even greater proliferation of healthcare fraud recovery actions. Moreover, under the qui tam provisions of the FCA, private individuals may file enforcement actions on behalf of the government if they learn of fraudulently submitted claims that are otherwise undetected. Known as “relators” or “whistleblowers,” these individuals may receive up to 30 percent of any successful recovery, which has led to even more lawsuits and liability.

Consequently, these healthcare fraud prevention and enforcement laws should get the careful attention – if not strike fear in the heart – of any owner or operator of a business providing healthcare services in Georgia. A brief overview of the federal laws involved follows.

The Stark Law

The Stark Law (named for Congressman Pete Stark who sponsored the initial bill) refers to prohibition of the practice of physician self-referral under circumstances where a patient is referred to a medical facility in which the referring physician or an immediate family member has a pecuniary interest. Financial relationships that may violate Stark include both ownership/investment interests and compensation arrangements, which may be direct or indirect. Violations are subject to a strict liability standard (intent to defraud need not be proved), and enforcement extends to almost any type of remuneration within the Medicare system for patient referrals, unless a specific exception applies.

Like the AKS and FCA (summarized below), penalties under Stark can be devastating. They include recovery of payments made in violation, imposition of a $23,863 per service civil monetary penalty for violations, and a monetary fine of $100,000 for each arrangement found to have willfully circumvented the statutory scheme. Because many services or claims may be billed before a potential problem is detected or an issue is raised, potential liability can easily become astronomical.

The Anti-Kickback Statute

Similar to Stark but broader, the AKS prohibits anyone from offering, paying, soliciting or receiving remuneration (monetary or otherwise) to induce or reward referrals or generate business for anyone participating in any federal healthcare program (e.g., drugs, supplies or healthcare services for Medicare or Medicaid patients). Remuneration includes anything of value and can take many forms besides cash, such as free or below-market rent, hotel stays, meals and excessive compensation for medical directorships or consultancies.

Although neither knowledge of the AKS nor intent to commit a violation is required, the proof requirement under the AKS, unlike Stark, is knowing and willful misconduct. As a result, those found in violation of the AKS also face criminal penalties in the form of a prison term for each violation. Moreover, recent amendments to the AKS now establish that a violation of the AKS constitutes a false or fraudulent claim under the FCA, even if the service was medically necessary and properly provided.

Civil monetary penalties of up to three times each kickback and $50,000 per violation may be awarded under the AKS. Criminal penalties and administrative sanctions for violating the AKS include fines, jail terms and exclusion from participation in the federal healthcare programs.

“Safe harbor” rules protect certain payment and business practices that could otherwise implicate the AKS from civil and criminal prosecution. Some safe harbors address personal services and rental agreements, investments in ambulatory surgical centers, and payments to bona fide employees. But to be protected by a safe harbor, an arrangement must fit squarely in the safe harbor and satisfy all of its requirements.

The False Claims Act

The FCA permits recovery of funds from anyone who knowingly presents or causes to be presented a fraudulent claim for payment to the government. Examples of conduct that may violate the FCA include:

  • Charging or submitting claims for services that were not rendered or performed
  • Charging or submitting claims for services that were not medically necessary
  • Charging or submitting claims for services for which patients do not meet the medical criteria to receive those services
  • Double billing (charging more than once for the same service)
  • Changing patient diagnosis for billing purposes
  • Upcoding patient visits
  • Unbundling billing codes (e.g., billing parts of a single, whole procedure separately instead of under a comprehensive code)
  • Bundling (e.g., billing for a battery of tests when only a single test was ordered)
  • Forging physician signatures on required medical documentation
  • Billing for brand name drugs when only generic were provided
  • Billing for premium equipment but providing inferior equipment
  • Off -label marketing of pharmaceuticals
  • Failing to report and return an overpayment by the government for the sale of a good or service (violating the 60-day rule)
  • False certifications of compliance with applicable federal and state laws
  • Paying kickbacks to physicians or other medical providers to refer patients for services in violation of the Stark or Anti-Kickback laws

To establish FCA liability, it must be proven that a defendant knowingly submitted or caused to be submitted a false claim for reimbursement of services. The claim need not be entirely fraudulent in order to violate the FCA, however. Rather, the FCA prohibits use of any false statement or document in support of a claim for government funds. In addition, liability under the FCA also attaches to anyone who acts improperly to avoid having to pay money to the government (known as “reverse” false claims).

Financial recovery under the FCA can be crippling, with penalties of $5,500 to $11,000 per claim plus three times the government’s actual damages. In the context of Medicare billing, the potential exists for a catastrophic judgment based on the number of claims at issue. Individuals may be held responsible if found to have acted willfully, recklessly, or with deliberate ignorance in making or causing the submission of false claims. Those responsible may even face criminal charges. And, as noted above, liability under the FCA is allowable for violations of the Stark Law or AKS. So the potential for imposition of individual liability and/or criminal sanctions allows the government to obtain large settlements when it has credible allegations of FCA violations.

The Civil Monetary Penalties Law

The CMPL authorizes HHS’s Secretary to impose civil monetary penalties, an assessment, and program exclusion for various forms of fraud and abuse involving the Medicare and Medicaid programs. Penalties range from $2,000 to $100,000 for each violation, depending on the specific misconduct involved. Thus, the monetary sanctions imposed generally far exceed the damages actually sustained by the government. The OIG must only prove liability by a “preponderance of the evidence” rather than the more demanding “beyond a reasonable doubt” standard required in criminal actions. And a healthcare provider owner or operator can be held liable based on his, her or its own negligence, or the negligence of employees. There is no requirement that intent to defraud be proved.

The Eliminating Kickbacks in Recovery Act

As part of the federal government’s efforts to combat the nationwide opioid crisis, Congress enacted the Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities Act (the “SUPPORT Act”), effective October 2018. Under two sections of the SUPPORT Act, Congress enacted the Eliminating Kickbacks in Recovery Act (“EKRA”), with the intent of prohibiting individuals from referring substance abuse patients in exchange for kickbacks to recovery homes, clinical treatment facilities and laboratories.

EKRA prohibits knowingly and willfully soliciting, receiving, offering or paying remuneration, directly or indirectly, in return for referring a patient to, or in exchange for an individual using the services of, a recovery home, clinical treatment facility, or laboratory with respect to services covered by a health care benefit program. The term “health care benefit program” includes “any public or private plan or contract affecting commerce, under which any medical benefit, item or service is provided to any individual, and includes any individual or entity who is providing a medical benefit, item or service for which payment may be made under the plan or contract.”

EKRA defines “recovery home” as “a shared living environment that is, or purports to be, free from alcohol and illicit drug use and centered on peer support and connection to services that promote sustained recovery from substance use disorders.” “Clinical treatment facility” is defined as “a medical setting, other than a hospital, that provides detoxification, risk reduction, outpatient treatment and care, residential treatment, or rehabilitation for substance use, pursuant to licensure or certification under state law.” “Laboratory” is defined to include all clinical laboratories, and thus all referrals for clinical laboratory tests implicate EKRA, regardless of whether the tests relate to substance abuse testing or treatment.

Importantly, EKRA does not define the term “referral.” Because EKRA’s prohibition against kickbacks is limited to remuneration paid in exchange for referrals or an individual’s use of services, an authoritative interpretation of the term “referral” under EKRA is necessary to determine the scope of the law. But while we await further clarification, EKRA established a new public and private payor intent-based criminal anti-kickback law that prohibits any form of remuneration in exchange for referrals to, or an individual’s use of, all entities that meet the definitions of recovery homes, clinical treatment facilities or laboratories, including referrals to laboratories unrelated to substance abuse testing or treatment.

EKRA includes eight exceptions to its broad prohibition on the payment of remuneration. Specifically, EKRA provides exceptions for the following types of arrangements, provided that they meet certain specified requirements: (1) discounts obtained by service providers; (2) payments made to employees and independent contractors that meet certain structural requirements; (3) drug manufacturer discounts provided under the Medicare coverage gap discount program; (4) arrangements that meet the personal services and management contracts safe harbor under the AKS; (5) waivers or discounts of coinsurance or copayments; (6) remuneration between healthcare entities and an individual or entity pursuant to an agreement that contributes to the availability (or enhances the quality) of services provided to medically underserved populations; (7) remuneration made pursuant to an alternative payment model or other model determined by the HHS Secretary to be necessary for care coordination or value-based care; and (8) any other regulatory safe harbor promulgated by the Attorney General in consultation with HHS’s Secretary that clarifies the exceptions described in (1) – (7) above.

While some of EKRA’s exceptions appear similar to certain exceptions and safe harbors available under the AKS, EKRA’s exceptions are inconsistent with the corresponding AKS exceptions and/or safe harbors. And because pre-existing federal laws, such as the AKS and Stark Law, govern the same arrangements implicated by EKRA, inconsistencies between EKRA and the AKS or Stark may lead to significant difficulties for healthcare providers and other entities and individuals that now must comply with EKRA in addition to pre-existing laws. For example, one important difference between EKRA’s exceptions and the AKS’s safe harbors is the absence of the AKS’s employment safe harbor under EKRA.  This means that previously compliant payment methodologies structured under the AKS’s employment safe harbor (such as paying W-2 employees volume or value-based commissions) are now at risk of violating EKRA. Moreover, state laws applicable to kickbacks, fee-splitting and self-referral may also be inconsistent with EKRA. In that regard, EKRA includes a confusingly written preemption section that specifies that (1) EKRA does not apply to conduct that is prohibited under the AKS, and (2) EKRA shall not “be construed to occupy the field in which any provisions of this section operate to the exclusion of State laws on the same subject matter.”

Similar to certain other federal laws in this area, EKRA is a criminal statute that includes a “knowing and willful” intent requirement. Violators of EKRA will be subjected to a fine of up to $200,000 or imprisonment of 10 years, or both, for each occurrence. Additionally, a violation of EKRA could have other collateral consequences, such as licensure sanctions, revocation, and exclusion from governmental healthcare programs.

EKRA is broadly drafted in a manner that requires those involved in healthcare arrangements that otherwise comply with federal and state fraud and abuse laws to reassess their compliance. Given the various areas of uncertainty created by EKRA, healthcare providers and other entities and individuals in the healthcare industry should consider taking a conservative approach when evaluating all relationships with recovery homes, clinical treatment facilities and laboratories that are governed by EKRA. Until Congress refines EKRA, or the Attorney General promulgates regulations, or there is other guidance (such as case law) interpreting EKRA, many existing relationships in the healthcare industry need to be revised in order to comply with EKRA and avoid risking criminal liability.

Conclusion

With recent enactment of the ACA and EKRA, the government’s healthcare fraud prevention and enforcement actions via Stark, the AKS and FCA have been strengthened and expanded further. And because violations of Stark and the AKS are now statutorily grafted into the FCA, individuals or entities found in violation of any of those three laws automatically face the severe civil penalties established by the FCA. As a result, government healthcare recovery actions and the amounts recovered in those actions continue to rise.

For almost any business other than one in healthcare, it is acceptable (and often a good idea) to reward those who send you business with financial incentives. Doing so in other industries and paying for “productivity” is usually considered smart business. However, in the healthcare industry, improper referral relationships can have dire legal and financial consequences. As the OIG has warned, “in the federal health care programs, paying for referrals is a crime.” Therefore, if you are a healthcare provider, or owner or operator of a business in the healthcare industry, you are well-advised to set aside what may be your normal business instincts when it comes to referral relationships. And contact a healthcare lawyer if you have any question before compensating, or agreeing to compensate, for any referral.

We are a healthcare and business law firm focused on helping healthcare providers, professionals and businesses succeed within the bounds of the law. We advise and represent physicians, medical groups, equipment suppliers, healthcare professionals, consultants and other businesses in the healthcare industry in Alpharetta, Atlanta, Cumming, Duluth, Johns Creek and across Georgia. If you have a question concerning federal or Georgia patient referral or healthcare fraud prevention laws, or other healthcare regulatory issues, please do not hesitate to contact us.

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