anti-kickback statute kickback statute anti-kickback statute kickback statute and safe harbors

ANTIANTI--KICKBACK STATUTEKICKBACK STATUTEANTIANTI--KICKBACK STATUTEKICKBACK STATUTEANDAND

SAFE HARBORSSAFE HARBORSRobert A. Wade

PartnerKrieg DeVault LLP

4101 Edison Lakes Parkway, Suite 100

Mishawaka, IN 46545Telephone: 574-485-2002

Email: [email protected]

KD_4901976

MEDICARE AND MEDICARE AND MEDICAID MEDICAID FRAUD AND ABUSE:FRAUD AND ABUSE:

OverviewOverview

1. History and Development of the Anti-Kickback Statute 42 U.S.C. §1320a-7b

2. The Anti-Kickback “Safe Harbors” 42 C F R §1001 952C.F.R. §1001.952

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DISMANTLING THE $70DISMANTLING THE $70--$100 BILLION $100 BILLION INDUSTRYINDUSTRYINDUSTRYINDUSTRY

The Government’s Weapons:• Anti-Kickback Statute• False Claims Act• Stark Acts

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The History and DevelopmentThe History and Developmentof of the Antithe Anti--Kickback Kickback StatuteStatuteof of the Antithe Anti--Kickback Kickback StatuteStatute

A law that prohibits conduct that isA law that prohibits conduct that is commonly accepted and legal in businesses other than health care.businesses other than health care.

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19651965

• Medicare and Medicaid Created• REIMBURSEMENT: Fee for Service

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19721972

H lth id di th f d lHealth care providers discover the federal deep pocket:

More Patients More RevenueMore Patients, More Revenue.

C th fi t ti ki kb kCongress passes the first anti‐kickback provisions in the Social Security Act

AmendmentsAmendments.

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1972 1972 -- First AntiFirst Anti--Kickback Kickback ProvisionsProvisionsProvisionsProvisions

“Whoever furnishes items or services to an individual for which payment is or may be made under this title and who solicits, offers, or receives any:

1) Kickback or bribe in connection with furnishing of such items or services or making or receipt of such payment; or

2) Rebate of any fee or charge for referring any such individual to another person for furnishing of such items or services,

shall be guilty of a misdemeanor and shall be fined not more than $10,000 or imprisoned for 1 year or both”.

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The 1972 AmendmentsThe 1972 AmendmentsThe 1972 AmendmentsThe 1972 Amendments

Congress’ Goal: To prohibit by law certainCongress Goal: To prohibit by law certain practices that have long been regarded by professional organizations as unethical andprofessional organizations as unethical and that contribute to the cost of the Medicare and Medicaid programs.

Simply Stated: Congress made unlawful p y gconduct that was already considered unethical.

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Immediate Problems Arose in Courts Over How Immediate Problems Arose in Courts Over How to Define to Define KickbacksKickbacks, , BribesBribes and and RebatesRebates

• U.S. v. Porter, 591 F.2d 1048 (5th Cir. 1979), ( )

First case prosecuted under 1972 amendments. Fifth Circuit reversed the convictions of physicians who had received ‘handling fees’ for referring blood samples to a laboratorysamples to a laboratory

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Immediate Problems Arose in Courts Over How Immediate Problems Arose in Courts Over How to Define to Define KickbacksKickbacks, , BribesBribes and and RebatesRebates

• U.S. v. Hancock, 604 F.2d 999 (7th Cir. 1979) Rejected Porter and adopted a broad definition

of kickback, upheld the indictments of a group of chiropractors who had referred blood and tissue psamples to a laboratory in exchange for handling fees.

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19771977

Health care fra d and ab se contin es to groHealth care fraud and abuse continues to grow.

Congress dreams of putting teeth into law so itCongress dreams of putting teeth into law so it enacts the Medicare and Medicaid Antifraud

and Abuse Amendments.

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The 1977 AmendmentsThe 1977 Amendments

• Broadens language of statute to prohibit solicitation, offer payment or receipt of any “remuneration” givenoffer, payment or receipt of any “remuneration” given directly or indirectly, overtly or covertly, in cash or in kind, in return for patient, product, or service referrals or recommendations of b siness reimb rsed thro ghor recommendations of business reimbursed through federal health care programs

• Upgrades crime to a Felony

Punishable by up to 5 years imprisonment and/or• Punishable by up to 5 years imprisonment and/or $25,000 Fine.

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UNTIL THIS TIME THEUNTIL THIS TIME, THE ANTI‐KICKBACK STATUTEANTI KICKBACK STATUTE

CONTAINED NO “INTENT” OR STATE OF

MIND ELEMENTMIND ELEMENT

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19801980

The Statute was amended to require that a person “knowingly and willfully”

violate the law before he or she may be convictedconvicted.

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19831983

Hoping for magical cure to spiraling costs ofHoping for magical cure to spiraling costs of health care, the Medicare program

implements DRGs Affiliations and jointimplements DRGs. Affiliations and joint ventures between health care providers for

outpatient services explodeoutpatient services explode.

REIMBURSEMENT: DRGs

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Affiliations and Joint VenturesAffiliations and Joint VenturesJJ

• Hospitals and other providers joint venture to form outpatient service entities.

• Motive: To maintain and maximize inpatient f l d t t i t f f ireferrals and to tap into fee-for-service

outpatient revenue streams.

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1985 1985 --TESTING SCOPE OF CONDUCT TESTING SCOPE OF CONDUCT PROHIBITED BY ANTIPROHIBITED BY ANTI KICKBACK STATUTEKICKBACK STATUTEPROHIBITED BY ANTIPROHIBITED BY ANTI--KICKBACK STATUTEKICKBACK STATUTE

UNITED STATES V. GREBER

THE “ONE PURPOSE” RULE

If If oneone purpose of the remuneration is to purpose of the remuneration is to induce referrals the statute is violatedinduce referrals the statute is violatedinduce referrals, the statute is violated, induce referrals, the statute is violated,

even if the payment was also intended to even if the payment was also intended to compensate for professional servicescompensate for professional services

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compensate for professional services.compensate for professional services.

Responding to industry confusion andResponding to industry confusion and uncertainty regarding the application

of the law Congress passes theof the law, Congress passes the Medicare and Medicaid Patient and

P P t ti A t f 1987Program Protection Act of 1987.

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Medicare and Medicaid Patient and Medicare and Medicaid Patient and Program Protection Act of 1987Program Protection Act of 1987Program Protection Act of 1987Program Protection Act of 1987

• United the separate Medicare and Medicaid• United the separate Medicare and Medicaid Anti-Kickback statutes into one statute.

• Created an intermediate sanction -- program exclusion.

• Directed HHS to develop “safe harbors” of protected conduct.

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Litigating the Anti-Kickback Statute

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What Constitutes “Knowing and What Constitutes “Knowing and Willf l” Willf l” f h L ?f h L ?Willful” Willful” ViolationViolation of the Law?of the Law?

• Hanlester Network v. Shalala - the OIG tests the new remedy of program exclusion; providers win because they did not specifically intend to violate the Antithey did not specifically intend to violate the Anti-Kickback Statute.

• United States v. Jain - rejected the Hanlester holding; “willfully means unjustifiably and wrongfully, known to be such by the defendant ” Specific intent to violatebe such by the defendant. Specific intent to violate the Anti-Kickback Statute not necessary.

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1991Promulgation of the Federal Sentencing

Guidelines for Organizations

• Imposes severe economic sanctions on corporations convicted of criminal wrongdoing.

• Eliminates most judicial discretion in sentencing.

Allows for significant reductions in sanctions where• Allows for significant reductions in sanctions where organization has adopted effective compliance program.

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• 1993 - IRS moves to rescind tax exempt status1993 IRS moves to rescind tax exempt status of organizations accused of health care fraud (i.e., Baptist Health System, Birmingham, Alabama).)

• 1996 - Health Insurance Portability and Accountability ActAccountability Act

Increased penalties for some types of fraud. Increased funding for enforcement Increased funding for enforcement. OIG to issue advisory opinions and fraud alerts. Authorized new exception to Anti-Kickback Statute for

risk sharing arrangements.

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risk sharing arrangements.

MEDICARE AND MEDICAIDMEDICARE AND MEDICAIDFRAUD AND ABUSE LAWFRAUD AND ABUSE LAW

(“ANTI(“ANTI KICKBACK STATUTE”)KICKBACK STATUTE”)( ANTI( ANTI--KICKBACK STATUTE )KICKBACK STATUTE )42 42 U.S.C.U.S.C. 1320a1320a--7b7b

• Under the Anti-kickback Statute it is illegal to• Under the Anti kickback Statute, it is illegal to knowingly or willfully: offer, pay, solicit, or receive remuneration; directly or indirectly; in cash or in kind;

i h f in exchange for;• referring an individual; or• furnishing or arranging for a good or service; and

for which payment may be made under Medicare or Medicaid.

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PENALTYPENALTYPENALTYPENALTY

Finednot more than $25,000 or imprisoned for not more p

than five (5) years

or bothor both

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THREE NECESSARY ELEMENTSTHREE NECESSARY ELEMENTS

Intentional Act

Direct or Indirect Payment of Remuneration

To InduceInduce the Referral of P i B i

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Patients or Business

WHAT IS REMUNERATION?WHAT IS REMUNERATION?

• Extremely Broad Scope, whether in cash or in kind and whether made directly or indirectlykind, and whether made directly or indirectly, including: Kickbacks; Bribes; Bribes; Rebates; Gifts; Above or below market rent or lease payments; Above or below market rent or lease payments; Discounts; Furnishing of supplies, services or equipment

either free above or below market;either free, above or below market; Above or below market credit arrangements; and Waivers of payments due.

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CAUTIONCAUTIONCAUTIONCAUTION

Almost Any Benefitby and Between M di l P idMedical Providers

Can Be Considered RemunerationRemuneration

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REAL LIFE EXAMPLES OF ILLEGAL REAL LIFE EXAMPLES OF ILLEGAL CONDUCTCONDUCTCONDUCTCONDUCT

• Hospital paying staff physicians to attend• Hospital paying staff physicians to attend conferences in their areas of specialty. (OIG Special Fraud Alert, May 1992)

• Contract between DME company and marketing company paid marketing company percentage ofcompany paid marketing company percentage of business it developed for DME company through its marketing program. (Medical Development Network, Inc v Professional Respiratory Care 673 So 2d 565Inc. v. Professional Respiratory Care, 673 So.2d 565 (Fla. Ct. App. 1996))

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REAL LIFE EXAMPLES OF ILLEGAL REAL LIFE EXAMPLES OF ILLEGAL CONDUCTCONDUCT

• Physician or other supplier routinely waives coinsurance and

CONDUCTCONDUCT

Physician or other supplier routinely waives coinsurance and deductible amounts for Medicare and Medicaid beneficiaries. (OIG Special Fraud Alert, May 1991; Preamble of Final Rule Governing Safe Harbors, 56 FR 35962)

• Hospital offers free training for physician’s office staff in CPT coding or laboratory techniques. (OIG Special Fraud Alert, May 1992)

• Company provides free surgical packs (sutures, gloves, etc.) with purchase of company’s intraocular lens. (Preamble of Final Rule Governing Safe Harbors, 56 FR 35978)

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Ph i i i t ff d h i j i t

CONDUCTCONDUCT

• Physician investors are offered shares in joint venture laboratory based on volume of referrals they could make; they know that if referrals from them d th ld l th i h (H l tdecrease, they could lose their shares. (Hanlester Network v. Shalala, 51 F.3d 1390 (9th Cir. 1995))

• Pharmaceutical company offers 1,000 frequent flier miles every time physician starts patient on certain drug and completes a marketing questionnaire; after g p g q50 patients, physician has free plane ticket anywhere in U.S. (OIG Special Fraud Alert, August 1994)

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)

REAL LIFE EXAMPLES OF ILLEGAL REAL LIFE EXAMPLES OF ILLEGAL CONDUCTCONDUCTCONDUCTCONDUCT

• Ambulance service seeking exclusive contract with city hires city employee who is part of bid committee to be a “consultant,” reimbursing him with cash, cars, , g , ,and trips. (United States v. Bay State Ambulance, 874 F.2d 20 (1st Cir. 1989))

• Struggling hospital pays 2 physicians $70 for each patient they admit--payments are designated as “consulting fees.” (OIG Special Fraud Alert, May 1992.)

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P k M f t ff d t $250 f

CONDUCTCONDUCT

• Pacemaker Manufacturer offers doctor $250 for each of its pacemakers doctor implants; a competitor offers $400--in the end, doctor receives $238,000 f t fi d i l t ffrom two firms and implants scores of unnecessary pacemakers. (Excerpted from Marc. A. Rodwin, Medicine, Money, and Morals, 57 - 63 (1993))

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The First Eleven Safe Harbors Are P bli h d I 1991Published In 1991Two More In 1996

The Last Eight In 1999

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SAFE HARBOR PROVISIONSSAFE HARBOR PROVISIONS42 C FR 1001 95242 C FR 1001 95242 C.F.R. 1001.95242 C.F.R. 1001.952

• If entity/person satisfies requirements of one or more of the y p qfollowing safe harbor provisions, otherwise suspect payment practices are NOT subject to criminal prosecution –

Investment interests for publicly traded companies and smaller entities; Investment interests for publicly traded companies and smaller entities; Space and equipment rental agreements; Personal services and management contracts; Sale of a medical practice; Sale of a medical practice; Employees; Group purchasing organizations and Discounts; Waiver of beneficiary co-insurance and deductible amounts; Warranties; and Health Plan/Managed care.

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SAFE HARBOR PROVISIONSSAFE HARBOR PROVISIONS42 C FR 100142 C FR 100142 C.F.R. 100142 C.F.R. 1001

• Investments in Ambulatory Surgical Centers (ASCs)Investments in Ambulatory Surgical Centers (ASCs)• Joint Ventures in Underserved Areas• Practitioner Recruitment in Underserved Areas

Sales of Physician Practices to Hospitals in Underserved Areas• Sales of Physician Practices to Hospitals in Underserved Areas• Subsidies for Obstetrical Malpractice Insurance in Underserved

Areas• Investments in Group Practices• Specialty Referral Arraignments Between Providers• Cooperative Hospital Services Organization

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SAFE HARBOR COMPLIANCESAFE HARBOR COMPLIANCESAFE HARBOR COMPLIANCESAFE HARBOR COMPLIANCE

• Failure to comply with a safe harbor means either --Failure to comply with a safe harbor means either

The Arrangement Is Not Covered by theThe Arrangement Is Not Covered by the Statute (i.e., No Intent to Induce a Referral)

or

The Arrangement May Be a Criminal Violation Subject to Prosecution

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INVESTMENT INTERESTS SAFE INVESTMENT INTERESTS SAFE HARBORHARBORHARBORHARBOR

Generally Safe Harbor provides protection returns onGenerally, Safe Harbor provides protection returns on “investment” in:

• Large publicly traded entities ($50 million+ in net g p y ($assets) if certain criteria are met; and,

• Small entities if i) no more than 40% of investment i t t h ld b i t i iti tinterests are held by investors in a position to generate business to the entity and ii) no more than 40% of gross revenues for venture may come from investors (and if other criteria are met).

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INVESTMENT INTERESTINVESTMENT INTERESTSAFE HARBORSAFE HARBOR

Small EntitiesSmall Entities

1) Investments

XYZ Physician Group

40% or Less

60% or Greater

Non Referrers

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INVESTMENT INTERESTINVESTMENT INTERESTSAFE HARBORSAFE HARBOR

Small EntitiesSmall Entities

2) Health Care ‐ Related Revenues

Patients ofPatients ofXYZ Physician Group

40% or Less

60% or Greater

Patients from other Referrers

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Patients from other Referrers

INVESTMENT INTEREST SAFE INVESTMENT INTEREST SAFE HARBORHARBORHARBORHARBOR

• Investment offer must be same for referrers and• Investment offer must be same for referrers and nonreferrers.

• Terms cannot consider past volumes of referrals.• No requirement that investor refer to entity.• Cannot market to referrers and nonreferrers

differentlydifferently.• Entity cannot loan funds to referrer to make

investment.• Return on investment must be proportionate to

investment.

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APPLICATION TO INTEGRATED DELIVERY APPLICATION TO INTEGRATED DELIVERY SYSTEM (“IDS”) INVESTMENT INTERESTSYSTEM (“IDS”) INVESTMENT INTERESTSYSTEM (“IDS”) INVESTMENT INTERESTSYSTEM (“IDS”) INVESTMENT INTEREST

• Key Question: Does the ownership structure affect the y Q psystems’ volume of business?

Ph i l H it l O i ti (“PHO”) i• Physical Hospital Organizations (“PHO”) issues:

If hospital and physician capitalize a PHO in proportion to benefits they receive from PHO, little risk.

If hospital provides more capital or resources to PHO, and physicians receive equal or greater benefit from PHO, risk that PHO treated as a guise to remunerate physicians.

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TO LIMIT LIABILITYTO LIMIT LIABILITY

• Ownership interest should be proportionate to capital contribution.p p p p

• Governance and control of entity should be proportionate to capital contribution.

• Right to participate in PHO should be offered both to physicians who refer and those who do not refer patients to hospital.

• No requirement that physician make referrals to hospital.

• Hospital or PHO should not loan or guarantee funds for physicians toHospital or PHO should not loan or guarantee funds for physicians to invest in PHO, and amounts received by physicians should be proportionate to amount contributed.

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SPACE AND EQUIPMENT SPACE AND EQUIPMENT RENTAL SAFE HARBORRENTAL SAFE HARBORRENTAL SAFE HARBORRENTAL SAFE HARBOR

• Requirements for the space and equipment rental safe q p q pharbor: Written agreement signed by the parties; Lease describes premises covered; Term of at least one year; The aggregate payment must be set in advance; and All payments and services (including build-out amounts) must be

reasonable and based upon fair market valuereasonable and based upon fair market value. All arrangements between lessor/lessee must be in ONE

Contract. Cannot have multiple overlapping contracts to circumvent the one year rule.

The arrangement must serve a commercially reasonable business purpose.

The specific schedule of intervals must be set out in advance.

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Fair market valueis not determined

by what one lessorwill offer,,

but is determinedby looking atentire marketentire market

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Fair Market ValueFair Market Value Cannot Be Adjusted Based Upon Close

P i it OProximity Or Convenience To Medical Provider

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RENTAL FOR PERIODIC RENTAL FOR PERIODIC INTERVALSINTERVALSINTERVALSINTERVALS

Lease must specify:• Exact schedule.• Precise length.• Exact rent for intervals.

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REQUIREMENTS FOR PERSONAL SERVICES REQUIREMENTS FOR PERSONAL SERVICES AND MANAGEMENT CONTRACTSAND MANAGEMENT CONTRACTSAND MANAGEMENT CONTRACTSAND MANAGEMENT CONTRACTS

• Written agreement signed by parties.g g y p• Term of at least one year.• Agreement must specify aggregate payment and such payment

must be set in advance.Compensation must be reasonable fair market value and• Compensation must be reasonable, fair market value and determined through arm’s length negotiations.

• Must set exact services required to be performed.• Compensation must not be determined in manner that takes intoCompensation must not be determined in manner that takes into

account volume or value of referrals.• All arrangements must be in ONE contract. Cannot have multiple

overlapping contracts to circumvent the one-year rule.The arrangement must serve a commercially reasonable business• The arrangement must serve a commercially reasonable business purpose.

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PERSONAL SERVICES AND PERSONAL SERVICES AND MANAGEMENT CONTRACTSMANAGEMENT CONTRACTSMANAGEMENT CONTRACTSMANAGEMENT CONTRACTS

If Agreement does not contemplate f ll timeIf Agreement does not contemplate full-time services, it must also specify:

The exact schedule of intervals;• The exact schedule of intervals;• Their precise length; and• The exact charge for such intervals• The exact charge for such intervals.

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APPLICATION TO IDS SPACE OR EQUIPMENT APPLICATION TO IDS SPACE OR EQUIPMENT RENTAL, PERSONAL SERVICES AND RENTAL, PERSONAL SERVICES AND

MANAGEMENT CONTRACTSMANAGEMENT CONTRACTS

If hospital subsidizes MSO that providesIf hospital subsidizes MSO that provides services and/or assets to a physician

group, may constitute an indirect g p, ypayment in exchange for patient

referrals.

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APPLICATION TO IDSAPPLICATION TO IDSAPPLICATION TO IDSAPPLICATION TO IDS

T li it li bilitTo limit liability, ensure:• Fee charged for each service is reasonable, based

on FMV and constitutes an arms-length gtransaction;

• MSO compensation does not take into account volume or value of referrals or any other businessvolume or value of referrals or any other business between parties; and

• Obtain independent appraisal of fair rental value of premises or equipment prior to commencement ofpremises or equipment prior to commencement of negotiations.

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EMPLOYEE SAFE HARBOREMPLOYEE SAFE HARBOREMPLOYEE SAFE HARBOREMPLOYEE SAFE HARBOR

Payments made by employer to employee under bona fide

employment relationship withemployment relationship with employer for employment in

furnishing of any item or service for which payment may be made under Medicare or Medicaid are

excepted from statute’s pprohibitions.

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EMPLOYEE SAFE HARBOREMPLOYEE SAFE HARBOREMPLOYEE SAFE HARBOREMPLOYEE SAFE HARBOR

Compensation Must Be:

• Reasonable;• Fair Market Value;• Arm’s Length Negotiations;• Arm s Length Negotiations; and

• Not based upon number or value of referrals.

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SALE OF PRACTICE SAFE SALE OF PRACTICE SAFE HARBORHARBORHARBORHARBOR

Elements:Elements:

Maximum time fof one year

between date of agreement and effective date of

sale.

Sellermust not must not be in a position, be in a position, postpost‐‐salesale to pp

make referrals to purchaser.

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SALE OF PRACTICE SAFE SALE OF PRACTICE SAFE HARBORHARBORHARBORHARBOR

• Reasonable• Fair Market Value• Fair Market Value• Arm’s Length Negotiations• Amount Paid Not Based Upon Number or• Amount Paid Not Based Upon Number or

Value of Referrals by Physician

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REFERRAL SERVICES SAFE REFERRAL SERVICES SAFE HARBORHARBORHARBORHARBOR

Remuneration does not include payments to Referral p yService if:

Medicare/Medicaid participants are included Payments based only on cost of operating

Referral Service• Not Volume• Not Volume• Not Value

Referral Service cannot impose service requirements on medical provider

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REFERRAL SERVICES SAFE REFERRAL SERVICES SAFE HARBORHARBORHARBORHARBOR

Disclosures Must Be Made to Person Seeking Disclosures Must Be Made to Person Seeking

• How it selects participants

ReferralReferral

p p• Whether fee paid to Referral Service• How Referral Service selects participants• Relationship between Referral Service and

ParticipantsRestrictions on Participants• Restrictions on Participants

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WARRANTY SAFE HARBORWARRANTY SAFE HARBOR

Remuneration does not include payments under warranty obligations if:

Buyer reports warranty payments on cost reportB li t i f ti t DHHS Buyer supplies warranty information to DHHS upon request

Seller:• Report Warranty item on invoice.• If cost of warranty replacement not known, must

h t bli ti i i d tshow warranty obligation on invoice and report amount when known.

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DISCOUNT SAFE HARBORDISCOUNT SAFE HARBORDISCOUNT SAFE HARBORDISCOUNT SAFE HARBOR

Remuneration does not include discounts if Buyer: Earns Discount in a single fiscal year. Claims Discount in year earned or following year. Reports Discount on cost report.

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DISCOUNT SAFE HARBORDISCOUNT SAFE HARBORDISCOUNT SAFE HARBORDISCOUNT SAFE HARBOR

Remuneration does not include discounts if Seller: Reports Discount on invoice. If value of Discount not known at time of sale,

existence of Discount must be reported on invoice.

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DISCOUNT DEFINEDDISCOUNT DEFINEDDISCOUNT DEFINEDDISCOUNT DEFINED

A reduction in amount Seller charges Buyer (i e rebate check credit orBuyer (i.e., rebate check, credit or coupon) only if reduction in price is

attributable to original good or service.g g

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DISCOUNT DOES NOT INCLUDEDISCOUNT DOES NOT INCLUDEDISCOUNT DOES NOT INCLUDEDISCOUNT DOES NOT INCLUDE

• Cash Payment• Cash Payment

Furnishing good or service without or at• Furnishing good or service without or at reduced charge for agreement to buy different good or servicedifferent good or service

• Price reduction not applicable to• Price reduction not applicable to Medicare/Medicaid Programs

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DISCOUNTDISCOUNTDISCOUNTDISCOUNTCannot provide discount to private pay as ycondition to refer all Medicare/Medicaid patients.

Refer all MedicareIwill give youa discount

Refer all Medicare Patients to me!

M di P

Private Pay Pt.

Medicare Pt.

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DISCOUNTDISCOUNTDISCOUNTDISCOUNT

Tying Arrangement Covered by Discount Safe Harbor ONLY if goods reimbursed by Federal Healthcare Program in the same manner.

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DISCOUNTDISCOUNTDISCOUNTDISCOUNTPermitted Tying Arrangementy g g

Covered by same DRGCovered by same DRG.

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DISCOUNTDISCOUNTDISCOUNTDISCOUNTTying Arrangement Not Coveredy g g

DRG Reimbursed

C t R t R i b dCost Report Reimbursed

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DISCOUNT EXAMPLESDISCOUNT EXAMPLES--YOU YOU DECIDEDECIDEDECIDEDECIDE

• Buy 10 get 1 freeBuy 10, get 1 free

• Buy monitors, get service agreement free (Warranty?)

Buy insulin get syringes free• Buy insulin, get syringes free

• Buy 100 hearing aids in 6 months get $500Buy 100 hearing aids in 6 months, get $500 travel fee for seminar

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PRICE REDUCTIONS TO HEALTH PRICE REDUCTIONS TO HEALTH PLANSPLANSPLANSPLANS

Remuneration does not include price reductions offered to health care providers:

•If Medicare/Medicaid plan:•If Medicare/Medicaid plan: Written Agreement for not less than 1 year Covered items/services and payment requirements must be

set out in advanceset out in advance Fee schedule must remain in effect throughout term of

agreement unless updated by Medicare/MedicaidC R h id Cost Report must show amount paid

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PRICE REDUCTIONS TO HEALTH PRICE REDUCTIONS TO HEALTH PLANSPLANSPLANSPLANS

•If not a Medicare/Medicaid plan:•If not a Medicare/Medicaid plan: Written Agreement for not less than 1 year Covered items/services and payment must be set out in

advanceadvance Fee schedule must remain in effect throughout term of

agreementU l b d M di /M di id Upon request, plan must be reported to Medicare/Medicaid

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AMBULATORY SURGERY CENTER AMBULATORY SURGERY CENTER (“ASC ”) SAFE HARBOR(“ASC ”) SAFE HARBOR(“ASCs”) SAFE HARBOR(“ASCs”) SAFE HARBOR

Fo r T pes of ASCsFour Types of ASCs:

1) Surgeon-owned ASCs

2) Single-specialty ASCs

3) Multi-specialty ASCs

4) Hospital/physician ASCs4) Hospital/physician ASCs

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ASCASCSAFE HARBORSAFE HARBORSAFE HARBORSAFE HARBOR

Surgeon-owned ASCs:To qualify for this Safe Harbor, the following seven factors must be met:1) All investors must be general surgeons or surgeons ) esto s ust be ge e a su geo s o su geo s

engaged in the same surgical specialty.2)The investment terms must not be related to previous

or expected volume of referrals to be generated fromor expected volume of referrals to be generated from investor.

3) At least one -third of surgeons/investors’ medical practiceincome from all sources must be derived from surgeons’

procedures.

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Surgeon-owned ASCs:gTo qualify for this Safe Harbor, the following seven factors must be met: (Continued)

4) The surgeon/investor must not receive loaned funds or guarantees from the entity or other investors.

5) The return on investment must be directly proportional to5) The return on investment must be directly proportional tothe amount of capital investment.

6) All ancillary services performed at the ASC must be directly and intricately related to the primary procedure performed at the ASC.

7) The entity and all surgeons/investors must treat

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Medicare/Medicaid patients in a nondiscriminatory manner.


Single-specialty ASCs:To qualify for this Safe Harbor, the following seven factors must be met:1) All investors must be physicians engaged in the same) esto s ust be p ys c a s e gaged t e sa e

medical practice specialty.2)The investment terms must not be related to previous

or expected volume of referrals to be generated fromor expected volume of referrals to be generated from investor.

3) At least one -third of surgeons/investors’ medical practiceincome from all sources must be derived from surgeons’

procedures.

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Single-specialty ASCs:g p yTo qualify for this Safe Harbor, the following seven factors must be met:(Continued)4) The surgeon/investor must not receive loaned funds or4) The surgeon/investor must not receive loaned funds or

guarantees from the entity or other investors.5) The return on investment must be directly proportional to

the amount of capital investmentthe amount of capital investment.6) All ancillary services performed at the ASC must be

directly and intricately related to the primary procedure performed at the ASC.

7) The entity and all surgeons/investors must treat Medicare/Medicaid patients in a nondiscriminatory manner.

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p y


Multi/specialty ASCs:To qualify for this Safe Harbor, the following eight factors must be met:1) All investors must be physicians who are in a position

to refer patients directly to the ASC and perform procedure on such referred procedures.

2)The investment terms must not be related to previous2)The investment terms must not be related to previousor expected volume of referrals to be generated from investor.

3) At l t thi d f /i t ’ di l ti3) At least one -third of surgeons/investors’ medical practiceincome from all sources must be derived from surgeons’

procedures.

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Multi-specialty ASCs:(Continued)(Continued)4) At least one-third of the procedures performed by each

physicians must be performed at the ASC.5) The surgeon/investor must not receive loaned funds or5) The surgeon/investor must not receive loaned funds or

guarantees from the entity or other investors.6) The return on investment must be directly proportional to

th t f it l i t tthe amount of capital investment.7) All ancillary services performed at the ASC must be

directly and intricately related to the primary procedure f SCperformed at the ASC.


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Hospital/physician ASCs:To qualify for this Safe Harbor, the following Nine factors must be met:1) At least one investor must be a hospital and all of the

i i i t t b h i i h t thremaining investors must be physicians who meet the requirements of the surgeon-owned ASC, single-specialty ASC or multi-specialty ASC.

2) The investment terms must not be related to previousor expected volume of referrals to be generated from investor.

3) The surgeon/investor must not receive loaned funds or guarantees from the entity or other investors.

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Hospital/physician ASCs:T lif f hi S f H b h f ll i Ni f bTo qualify for this Safe Harbor, the following Nine factors must be met:(Continued)4) The return on investment must be directly proportional to

the amount of capital investmentthe amount of capital investment.5) All ancillary services performed at the ASC must be

directly and intricately related to the primary procedure f d t th ASCperformed at the ASC.


7) Th ASC t i t d b th7) The ASC may not use space or equipment owned by the hospital unless such space/equipment meets the

Equipment/Leased Space Safe Harbor.

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Hospital/physician ASCs:T lif f hi S f H b h f ll i Ni f bTo qualify for this Safe Harbor, the following Nine factors must be met:(Continued)8) The hospital investor may not include any cost related to the

ASC on its cost report or any other claim for payment from

Medicare/Medicaid.

9) Th h it l t b i iti t k i fl9) The hospital may not be in a position to make or influence

referrals directly or indirectly to any investor or the ASC.

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HOSPITAL/PHYSICIAN ASCHOSPITAL/PHYSICIAN ASCSAFE HARBORSAFE HARBORSAFE HARBORSAFE HARBOR

Can a hospital comply with the requirement not to p p y qmake or influence referrals, directly or indirectly?

81

JOINT VENTURES IN JOINT VENTURES IN UNDERSERVED AREASUNDERSERVED AREAS

SAFE HARBORSAFE HARBORSAFE HARBORSAFE HARBOR

This safe harbor expands the Small InvestmentThis safe harbor expands the Small Investment Safe Harbor for underserved areas by:

1 Permitting up to fifty percent of investors to be1. Permitting up to fifty percent of investors to be referring investors; and

2 Unlimited revenues from referral investors2. Unlimited revenues from referral investors.

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PRACTIONERPRACTIONER RECRUITMENT AND RECRUITMENT AND UNDERSERVED AREASUNDERSERVED AREAS

SAFE HARBORSAFE HARBOR

Payments to physicians being recruited to an underserved area y y gwill qualify for Safe Harbor if:

1. The arrangement is set forth in a written agreement. 2 At least 75% of the revenues of the2. At least 75% of the revenues of the

new practice must be generated from new patients.3. The benefits cannot exceed three years.4 Th i i t th t th h i i k4. There is no requirement that the physician make

referrals to the hospital.5. The physician is not restricted from referring to any

f /provider of his/her choosing.6. The value of the benefits paid by the hospital may not

be based upon the volume or value of referrals.

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PRACTIONERPRACTIONER RECRUITMENT AND RECRUITMENT AND UNDERSERVED AREASUNDERSERVED AREAS


Payments to physicians being recruited to an underserved area will qualify for Safe Harbor if: (Continued)

7) The physician must treat Medicare/Medicaid patients ina non-discriminatory manner.

8) At l t 75% f th f th8) At least 75% of the revenues of the new practice must be from patients from the underserved area.

9) The payment may not benefit any other referral source except for the recruited physician.

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SALES OF PHYSICIAN PRACTICES TO SALES OF PHYSICIAN PRACTICES TO HOSPITALS IN UNDERSERVED AREAS SAFE HOSPITALS IN UNDERSERVED AREAS SAFE

HARBORHARBOR

To qualify for this safe harbor, the following four factors must be met:1. The time from the signing of the contract to the completion

of the sale must not exceed three years;2 The selling physician will not practice after completion of the2. The selling physician will not practice after completion of the

sales;3. The physician's practice must be in an underserved area; and4. After the first agreement is signed with the physician, the

hospital must engage in recruitment activities.

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COOPERATIVE HOSPITAL SERVICES COOPERATIVE HOSPITAL SERVICES ORGANIZATIONS (“ORGANIZATIONS (“CHSOCHSO”) ”)


Payments made by CHSOs and patron hospitals qualify for a y y ysafe harbor if:

1. Payments by patron-hospitals are for bonified operating expenses of the CHSO; and

2. Payments by the CHSO to the patron hospital must be a distribution of net earnings required to be paid by the IRS under Section 501(a) (2).Section 501(a) (2).

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INVESTMENTS IN GROUP PRACTICESINVESTMENTS IN GROUP PRACTICESSAFE HARBORSAFE HARBORSAFE HARBORSAFE HARBOR

Payments made to physicians investing in group practices y y g gqualify for a safe harbor if:1. The equity interest in the practice is held by licensed

health care professionals who practice in the group;2. The equity interest must be in the practice, not some

subdivision of the practice or group;3 The practice must meet the “group practice” definition3. The practice must meet the group practice definition

under the Stark Act; and4. Ancillary revenues must be derived from “in office

ill i ” d fi d i th St k A tancillary services” as defined in the Stark Act.

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SPECIALITYSPECIALITY REFERRAL ARRANGEMENTS REFERRAL ARRANGEMENTS BETWEEN PROVIDERSBETWEEN PROVIDERS


Agreements among providers to refer a patient to the other party g g yif the other party in return agrees to refer the patient back to the referring physician complies with the Safe Harbor as long as:1. The agreed time or circumstances for referring the patient

t b li i ll i tmust be clinically appropriate:2. The physician to whom the patient is referred has special

expertise required by the patient;3. The parties receive no payment for the referral and do not

split the fees paid; and4 The only compensation received by the parties is for4. The only compensation received by the parties is for

services actually rendered by the parties.

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ANTI-KICKBACK STATUTEAND

SAFE HARBORSSAFE HARBORS

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anti-kickback statute kickback statute anti-kickback statute kickback statute and safe harbors

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