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Christopher Beckham
Senior Manager, PYA
R. Ross Burris III
Shareholder, Polsinelli PC
Modern Physician-Hospital Affiliatio...
Prepared for AHLA Physicians and Hospital Law Institute
2016 | Austin, TX
page | 2
Program Agenda
1
2
3
Trends and Forces ...
Trends and Forces Driving Affiliation Activity
• Forces Driving Affiliation
• Triple Aim
• Types of Affiliation
• Regulato...
Prepared for AHLA Physicians and Hospital Law Institute
2016 | Austin, TX
page | 4
▪ Decreasing Medicare reimbursement
▪ B...
Prepared for AHLA Physicians and Hospital Law Institute
2016 | Austin, TX
page | 5
Alignment – the “Triple Aim”
Prepared for AHLA Physicians and Hospital Law Institute
2016 | Austin, TX
page | 6
Bundled
Payments
Partial
Capitation
Glo...
Prepared for AHLA Physicians and Hospital Law Institute
2016 | Austin, TX
page | 7
Shifting from Volume to Value
As Figure...
Prepared for AHLA Physicians and Hospital Law Institute
2016 | Austin, TX
page | 8
Value Creation
Quality Efficiency “Valu...
Prepared for AHLA Physicians and Hospital Law Institute
2016 | Austin, TX
page | 9
New Programs Impacting Revenue
▪ Hospit...
Prepared for AHLA Physicians and Hospital Law Institute
2016 | Austin, TX
page | 10
Healthcare Reform Is Here to Stay
“Our...
Prepared for AHLA Physicians and Hospital Law Institute
2016 | Austin, TX
page | 11
Physician Practice Ownership
MGMA Surv...
Prepared for AHLA Physicians and Hospital Law Institute
2016 | Austin, TX
page | 12
Hospital Employment of Physicians
Surv...
Prepared for AHLA Physicians and Hospital Law Institute
2016 | Austin, TX
page | 13
$67,901
$190,626
$325,276
$193,316
$-
...
Prepared for AHLA Physicians and Hospital Law Institute
2016 | Austin, TX
page | 14
Affiliation Considerations
▪ Physician...
Prepared for AHLA Physicians and Hospital Law Institute
2016 | Austin, TX
page | 15
Alignment Changing: Over Time
Hospital...
Prepared for AHLA Physicians and Hospital Law Institute
2016 | Austin, TX
page | 16
Affiliation Options
Independent
Practi...
Prepared for AHLA Physicians and Hospital Law Institute
2016 | Austin, TX
page | 17
Affiliation Models
1 Service Line Co-M...
Prepared for AHLA Physicians and Hospital Law Institute
2016 | Austin, TX
page | 18
Affiliation Models
4 Clinically Integr...
Prepared for AHLA Physicians and Hospital Law Institute
2016 | Austin, TX
page | 19
New Bundled Payment – Incoming Models
...
Prepared for AHLA Physicians and Hospital Law Institute
2016 | Austin, TX
page | 20
Applicable Healthcare Laws
▪ Federal P...
Prepared for AHLA Physicians and Hospital Law Institute
2016 | Austin, TX
page | 21
Regulatory Requirements
TIME
1863
Fals...
Prepared for AHLA Physicians and Hospital Law Institute
2016 | Austin, TX
page | 22
2016 Medicare Physician Fee Schedule F...
Prepared for AHLA Physicians and Hospital Law Institute
2016 | Austin, TX
page | 23
Stark Law Moving Forward
Regulatory Re...
Prepared for AHLA Physicians and Hospital Law Institute
2016 | Austin, TX
page | 24
▪ June 30, 2015, OIG announced a new “...
Prepared for AHLA Physicians and Hospital Law Institute
2016 | Austin, TX
page | 25
Regulatory Requirements
▪ Regulators a...
Prepared for AHLA Physicians and Hospital Law Institute
2016 | Austin, TX
page | 26
▪ Fair market value considerations for...
• Major Affiliation Cases
• Recent Settlements and
Noteworthy Decisions
• HIPAA Privacy and Security
Examination of Recent...
Prepared for AHLA Physicians and Hospital Law Institute
2016 | Austin, TX
page | 28
Major Affiliation Cases
▪ Successor Li...
Prepared for AHLA Physicians and Hospital Law Institute
2016 | Austin, TX
page | 29
Major Affiliation Cases
 Fraud and Ab...
Prepared for AHLA Physicians and Hospital Law Institute
2016 | Austin, TX
page | 30
Settlement Trends
▪ Kickback cases sti...
Prepared for AHLA Physicians and Hospital Law Institute
2016 | Austin, TX
page | 31
Settlement Trends
▪ Physician employme...
Prepared for AHLA Physicians and Hospital Law Institute
2016 | Austin, TX
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Settlement Trends
▪ Resolution of DOJ’...
Prepared for AHLA Physicians and Hospital Law Institute
2016 | Austin, TX
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Settlement Trends
▪ 2 Louisiana physic...
Prepared for AHLA Physicians and Hospital Law Institute
2016 | Austin, TX
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Noteworthy Court Decisions
▪ First dec...
Prepared for AHLA Physicians and Hospital Law Institute
2016 | Austin, TX
page | 35
Noteworthy Court Decisions
▪ U.S. v. P...
Prepared for AHLA Physicians and Hospital Law Institute
2016 | Austin, TX
page | 36
HIPAA Privacy and Security
▪ Triple – ...
Prepared for AHLA Physicians and Hospital Law Institute
2016 | Austin, TX
page | 37
HIPAA Privacy and Security
▪ Large vol...
• The Yates Memo
• OIG Fraud Alerts Related to Affiliation
Discussion of Recent OIG Fraud Alerts
Section 3
Prepared for AHLA Physicians and Hospital Law Institute
2016 | Austin, TX
page | 39
The Yates Memo
▪ September 2015 memora...
Prepared for AHLA Physicians and Hospital Law Institute
2016 | Austin, TX
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OIG Also Focusing on Individuals
▪ OIG...
Prepared for AHLA Physicians and Hospital Law Institute
2016 | Austin, TX
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OIG Fraud Alert
▪ February 8, 2012 – E...
Prepared for AHLA Physicians and Hospital Law Institute
2016 | Austin, TX
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OIG Fraud Alert
▪ June 26, 2014 – Labo...
Prepared for AHLA Physicians and Hospital Law Institute
2016 | Austin, TX
page | 43
OIG Fraud Alert
▪ June 9, 2015 – Physi...
• OIG FY 2016 Work Plan
• Best Practices
Best Practices for Providers and Provider
Organizations
Section 4
Prepared for AHLA Physicians and Hospital Law Institute
2016 | Austin, TX
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HHS OIG Work Plan – FY 2016
1 Medicare...
Prepared for AHLA Physicians and Hospital Law Institute
2016 | Austin, TX
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▪ Identifying parties open to buying, ...
Prepared for AHLA Physicians and Hospital Law Institute
2016 | Austin, TX
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Due Diligence
▪ Purpose: obtain inform...
Prepared for AHLA Physicians and Hospital Law Institute
2016 | Austin, TX
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Transaction Closing
▪ Signing and deli...
Prepared for AHLA Physicians and Hospital Law Institute
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CHOW/CHOI Notifications
▪ Change of Ow...
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Licenses/Permits/Certifications
▪ Diff...
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Medicare and Medicaid Enrollment
▪ Is ...
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Medicare and Medicaid Enrollment
▪ Tra...
Prepared for AHLA Physicians and Hospital Law Institute
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▪ Determine whether locations will qua...
Prepared for AHLA Physicians and Hospital Law Institute
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▪ Review HIPAA privacy and security po...
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▪ Determine whether the electronic hea...
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▪ Compliance with Legal Requirements
▪...
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Hospital/Physician Recruitment
When to...
Prepared for AHLA Physicians and Hospital Law Institute
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▪ Key Practical Aspects:
▪ Applies to ...
Prepared for AHLA Physicians and Hospital Law Institute
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Need and FMV
▪ Basic elements in all t...
Prepared for AHLA Physicians and Hospital Law Institute
2016 | Austin, TX
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Need and FMV
Advisory Opinion No. 01-4...
Prepared for AHLA Physicians and Hospital Law Institute
2016 | Austin, TX
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Contact Information
CHRISTOPHER T. BEC...
PERSHING YOAKLEY & ASSOCIATES
Monarch Tower, Suite 700 | 3424 Peachtree Road NE | Atlanta, GA 30326
800.270.9629 | www.pya...
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Modern Physician-Hospital Affiliations in an Era of Increased Fraud and Abuse Scrutiny

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PYA Senior Manager Chris Beckham co-presented “Modern Physician-Hospital Affiliations in an Era of Increased Fraud and Abuse Scrutiny” with Ross Burris of Polsinelli at the American Health Lawyer Association’s (AHLA) Physicians and Hospitals Law Institute, February 8-10, 2016.

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Modern Physician-Hospital Affiliations in an Era of Increased Fraud and Abuse Scrutiny

  1. 1. Christopher Beckham Senior Manager, PYA R. Ross Burris III Shareholder, Polsinelli PC Modern Physician-Hospital Affiliations in an Era of Increased Fraud and Abuse Scrutiny 2016 AHLA Physicians and Hospital Law Institute, Austin, TX
  2. 2. Prepared for AHLA Physicians and Hospital Law Institute 2016 | Austin, TX page | 2 Program Agenda 1 2 3 Trends and Forces Driving Affiliation Activity Examination of Recent Cases Discussion of Recent OIG Fraud Alerts Best Practices for Providers and Provider Organizations 4
  3. 3. Trends and Forces Driving Affiliation Activity • Forces Driving Affiliation • Triple Aim • Types of Affiliation • Regulatory Considerations Section 1
  4. 4. Prepared for AHLA Physicians and Hospital Law Institute 2016 | Austin, TX page | 4 ▪ Decreasing Medicare reimbursement ▪ Business complexities ▪ Insurers that are dominant in markets may dictate rates ▪ Healthcare reform ▪ Pay for performance ▪ Bundled payments ▪ ACOs ▪ Overhead and cost of doing business ▪ High malpractice insurance premiums ▪ Pressure to adopt expensive electronic health records (EHR) ▪ Practice demographics – aging partners/new partners ▪ Medical students graduating with large debt often prefer employment ▪ Market Factors Forces Driving Affiliation
  5. 5. Prepared for AHLA Physicians and Hospital Law Institute 2016 | Austin, TX page | 5 Alignment – the “Triple Aim”
  6. 6. Prepared for AHLA Physicians and Hospital Law Institute 2016 | Austin, TX page | 6 Bundled Payments Partial Capitation Global Payment Fee for Service Shared Savings Visitor Symptomatic Acute Needs Services & Supplies Unit-Based No Financial Risk Patient Episode Most Common Conditions Packaged Treatments Efficiency-Based Partial Financial Risk Person Overall Health Community Health Characteristics Manage Well Being Outcome-Based Full Financial Risk Delivery System Reform
  7. 7. Prepared for AHLA Physicians and Hospital Law Institute 2016 | Austin, TX page | 7 Shifting from Volume to Value As Figure 1 [above] illustrates, healthcare leaders must gauge the speed at which this transition will occur in their markets. Leaders need both a strategy to ensure their organization’s survival during this transition period and a strategy to change the provider culture to match the requirements of value-based payments. The switch from volume- to value-based payments is occurring…but in market-specific ways and at different speeds.
  8. 8. Prepared for AHLA Physicians and Hospital Law Institute 2016 | Austin, TX page | 8 Value Creation Quality Efficiency “Value” “The old ways we did things – appoint medical directors, enter into co- management agreements or joint ventures – now they’re just small pieces of the big picture of creating value. They may still exist, but they’re inefficient.” – Alan S. Kaplan, MD, MMM The CMS Definition of Value
  9. 9. Prepared for AHLA Physicians and Hospital Law Institute 2016 | Austin, TX page | 9 New Programs Impacting Revenue ▪ Hospital Readmission ▪ DRG Modifier ▪ HAC Reduction ▪ Hospital Value-Based Purchasing ▪ Chronic Care Management Fees ▪ EHR Incentives ▪ Medicare ACOs ▪ PQRS ▪ Value-Based Payment Modifier ▪ CAHPS ▪ Physician Compare
  10. 10. Prepared for AHLA Physicians and Hospital Law Institute 2016 | Austin, TX page | 10 Healthcare Reform Is Here to Stay “Our goal is to have 85% of all Medicare fee-for- service payments tied to quality or value by 2016, and 90% by 2018.” “Our target is to have 30% of Medicare payments tied to quality or value through alternative payment models by the end of 2016, and 50% of payments by the end of 2018.” Source: HHS Secretary Sylvia Burwell (January 30, 2015)
  11. 11. Prepared for AHLA Physicians and Hospital Law Institute 2016 | Austin, TX page | 11 Physician Practice Ownership MGMA Survey Respondents 31% 29% 44% 52% 55% 53% 52% 60% 57% 85% 61% 63% 49% 42% 38% 42% 39% 34% 31% 14% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Hospital/IDS Owned Physician Owned Source: MGMA Cost Survey Respondents, 2006-2015. 14 Years Ago (2000) MGMA AMGA 76% 21% 54% 39%
  12. 12. Prepared for AHLA Physicians and Hospital Law Institute 2016 | Austin, TX page | 12 Hospital Employment of Physicians Survey Results Suggest Employment Will Remain Does your hospital/system plan to employ a greater percentage of physicians in the next 12-36 months? Percentage of Hospitals (82%) and Health Systems (80%) reporting employment as an alignment mechanism. Sources: HealthLeaders Intelligence Report, September 2013 and September 2014 80% 70% 30% Yes No
  13. 13. Prepared for AHLA Physicians and Hospital Law Institute 2016 | Austin, TX page | 13 $67,901 $190,626 $325,276 $193,316 $- $50,000 $100,000 $150,000 $200,000 $250,000 $300,000 $350,000 2005 (n=105) 2006 (n=99) 2007 (n=97) 2008* (n=83) 2009 (n=242) 2010 (n=189) 2011 (n=181) 2012 (n=195) 2013 (n=176) 2014 (n=158) Trends in Net Loss per FTE Physician Hospital-Owned Multispecialty Practices 1998 Loss per Physician = $83,000 Source: MGMA Cost Survey, 2006 – 2015. Note: For 2008, Net income, practices without financial support were used to provide a more accurate data point.
  14. 14. Prepared for AHLA Physicians and Hospital Law Institute 2016 | Austin, TX page | 14 Affiliation Considerations ▪ Physician/hospital coordinated care leads to lower costs, higher quality ▪ Physicians concentrating on service can improve quality ▪ Better information sharing among providers and patients ▪ Reduced contracting costs ▪ Increased visibility with insurers ▪ Economies of scale ▪ Eliminate duplicative services ▪ Degree of Desired Autonomy ▪ Degree of Business Risk ▪ Volatility of Compensation/Revenues ▪ Demographics ▪ Market Factors Potential Efficiencies Factors Impacting Model
  15. 15. Prepared for AHLA Physicians and Hospital Law Institute 2016 | Austin, TX page | 15 Alignment Changing: Over Time Hospital/Physician Employment Trending Private Practice/ Hospital Employed Physicians Influx of Acquisitions of Private Practices Focus Begins Shifting from Volume to Quality Quality-Based Reimbursement Initiatives Begin Hospitals Implement Metrics to Align with Physicians on Quality Goals TIME
  16. 16. Prepared for AHLA Physicians and Hospital Law Institute 2016 | Austin, TX page | 16 Affiliation Options Independent Practice Office Sharing Partnerships (PS) Limited Liability Company (LLC) Professional Corporation Independent Practice Association Group Practice Without Walls Hospital Services Agreement Hospital-Owned Physician Practice Hospital Employment Less More
  17. 17. Prepared for AHLA Physicians and Hospital Law Institute 2016 | Austin, TX page | 17 Affiliation Models 1 Service Line Co-Management Arrangement ▪ Hospital and physician group enter into a service line co-management arrangement for physician group (alone or in conjunction with other physician practices and/or the hospital) to manage a hospital- based service line ▪ Physician group continues to exist and provides services consistent with historical practice 2 Acquisition  PSA ("Synthetic Affiliation") ▪ Hospital acquires assets/certain employees of physician group ▪ Can convert practice locations to provider-based status ▪ Physician group maintains itself as a separate legal entity and contracts with the hospital under a PSA to provide professional medical services (and potentially management, billing, and medical director services when needed) 3 Acquisition  Employment ▪ Hospital acquires assets of physician group and employs physicians
  18. 18. Prepared for AHLA Physicians and Hospital Law Institute 2016 | Austin, TX page | 18 Affiliation Models 4 Clinically Integrated Network (CIN) ▪ Health network utilizing proven protocols and measures to improve patient care ▪ Decrease cost and demonstrate value to the market 5 Independent Physician Associations (IPA) ▪ Group of independent physicians to execute single contract to provide services to managed care or healthcare delivery organizations ▪ Leveraging the scale and collective strength of member physicians 6 Physician-Hospital Organization (PHO) ▪ Overseeing affiliation of physicians and hospitals into health delivery networks ▪ Collecting, analyzing, and disseminating information ▪ Contracting with managed care organizations with joint risk sharing
  19. 19. Prepared for AHLA Physicians and Hospital Law Institute 2016 | Austin, TX page | 19 New Bundled Payment – Incoming Models Who? (Mandatory) 788 Hospitals in the chosen 67 Metropolitan Statistical Areas What?  Perform on 3 quality measures  Perform lower extremity joint replacement DRGs at set target price or less  Gainsharing. Alternative Payment Models. When? CJR takes place April 1, 2016 – December 31, 2020 Why? Increase quality while decreasing cost Comprehensive Care for Joint Replacement (CJR)
  20. 20. Prepared for AHLA Physicians and Hospital Law Institute 2016 | Austin, TX page | 20 Applicable Healthcare Laws ▪ Federal Physician Self-Referral Law, aka “Stark” & Federal Anti- Kickback Statute ▪ Establish requirements for healthcare transactions which include: ▪ Fair market value ▪ Not based on volume or value of referrals or other business generated between the parties ▪ Commercial reasonableness www.aicpa.org/fvs
  21. 21. Prepared for AHLA Physicians and Hospital Law Institute 2016 | Austin, TX page | 21 Regulatory Requirements TIME 1863 False Claims Act 1972 Anti-Kickback Statute 1992 Stark Law Phase I 2015 $712M Largest Fraudulent Billing Case to Date 2007 Stark Law Phase III 2015 OIG Litigation Team Formed 1993 Stark Law Phase II 1977 Origins of Exclusion Statute Changes Over Time
  22. 22. Prepared for AHLA Physicians and Hospital Law Institute 2016 | Austin, TX page | 22 2016 Medicare Physician Fee Schedule Final Rule: Over 100 pages of the rule are dedicated to Stark Law changes – including an acknowledgement that Stark Law may actually impede hospital-physician collaboration. Regulatory Requirements Stark Law Changes
  23. 23. Prepared for AHLA Physicians and Hospital Law Institute 2016 | Austin, TX page | 23 Stark Law Moving Forward Regulatory Requirements ▪ Exceptions for “remuneration” for recruitment of “non-physician practitioners” ▪ Implementation of “take into account” terminology ▪ Favorable changes in required documentation for agreements ▪ Clarification of term requirements ▪ Extension of “holdover periods” ▪ Exceptions for “timeshare leasing” ▪ Physician-owned hospital clarification regarding ownership levels and availability of ownership information to patients
  24. 24. Prepared for AHLA Physicians and Hospital Law Institute 2016 | Austin, TX page | 24 ▪ June 30, 2015, OIG announced a new “litigation team.” ▪ The litigation team will focus on pursuing civil - based monetary penalties and applying the exclusionary principle. ▪ The goal of the OIG in forming this new team is not only to pursue penalties from those in violation, but also to create publicity surrounding the cases. ▪ It is anticipated that this generation of public interest will lead to voluntary reporting for those avoiding the wrath of the DOJ. New Litigation Team Regulatory Requirements
  25. 25. Prepared for AHLA Physicians and Hospital Law Institute 2016 | Austin, TX page | 25 Regulatory Requirements ▪ Regulators are “cracking down” and it will continue… ▪ Recent Headlines: ▪ “New Jersey Doctor Sentenced for Taking Bribes in Test-Referrals Scheme with New Jersey Clinical Lab” ▪ “Former President of Houston Hospital, Son and Co-Conspirator Sentenced in $158 Million Medicare Fraud Scheme” ▪ “New York Pharmacist Sentenced for Multimillion-Dollar Medicare/Medicaid Fraud Scheme” Source: IRS More to Come
  26. 26. Prepared for AHLA Physicians and Hospital Law Institute 2016 | Austin, TX page | 26 ▪ Fair market value considerations for compensation agreements: ▪ Impact of value-based payments? ▪ Bonuses for population health – care-coordination efforts ▪ Ensure that provider coordination is well structured, particularly for arrangements like clinically integrated networks ▪ Vast regulatory requirements ▪ Significant amount of due diligence is required on the front end of such arrangements Future Considerations Regulatory Requirements
  27. 27. • Major Affiliation Cases • Recent Settlements and Noteworthy Decisions • HIPAA Privacy and Security Examination of Recent Cases Section 2
  28. 28. Prepared for AHLA Physicians and Hospital Law Institute 2016 | Austin, TX page | 28 Major Affiliation Cases ▪ Successor Liability for Overpayments ▪ United States v. Vernon Home Health, Inc., 21 F.3d 693, 5th Cir. 1994  Antitrust ▪ Federal Trade Commission v. St. Luke's Health System, Ltd. Case No. 1:12-CV-00560-BLW and 1:13-CV-00116-BLW (D. Idaho 2014)  Fraud and Abuse/Physician Compensation ▪ U.S. ex rel. Baklid-Kunz v. Halifax Hospital Medical Center, Case No. 6:09-cv-1002-Orl-31TBS (M.D. Fla. 2014)
  29. 29. Prepared for AHLA Physicians and Hospital Law Institute 2016 | Austin, TX page | 29 Major Affiliation Cases  Fraud and Abuse/Physician Compensation and Leasing Issues ▪ Intermountain Health Care, Inc., Settlement Agreement (2013) ▪ U.S. ex rel. Osheroff v. Tenet Healthcare, Case No. 09-22253-CIV- HUCK/O'SULLIVAN (S.D. Fla 2013) ▪ U.S. ex rel. Schubert v. All Children's Health System, Inc., Case No. 8:11- cv-1687-T-27-EAJ (M.D. Fla 2013)
  30. 30. Prepared for AHLA Physicians and Hospital Law Institute 2016 | Austin, TX page | 30 Settlement Trends ▪ Kickback cases still yielding big settlements ▪ Novartis AG $390M (kickbacks to specialty pharmacies for pushing Novartis drugs) ▪ Millennium Health $256M (free specimen testing cups) ▪ Warner Chilcott $125M (cash payments and expensive dinners for referring physicians) ▪ Health Diagnostics Laboratories $48.5M (S&H for lab specimens, waiver of co-pays) ▪ Daiichi Sanko $39M (honoraria and meals for referring physicians) ▪ Westchester Medical Center $18.8M (advancing money to physician practice and forgiving debt)
  31. 31. Prepared for AHLA Physicians and Hospital Law Institute 2016 | Austin, TX page | 31 Settlement Trends ▪ Physician employment and compensation cases ▪ Citizens Medical Center paid $21.7M ▪ Non-FMV payments to cardiologists ▪ Bonus payments to ED MDs based on cardiology referrals ▪ North Broward Hospital District paid $69.5M ▪ Non-FMV comp for nine employed physicians in violation of Stark ▪ Complaint alleged that losses on hospital-owned practice was evidence of non-FMV compensation
  32. 32. Prepared for AHLA Physicians and Hospital Law Institute 2016 | Austin, TX page | 32 Settlement Trends ▪ Resolution of DOJ’s ICD investigation ($250M settlement with 457 hospitals) ▪ Sandoz Inc., $12.6M (CMP for misrepresenting drugs pricing data) ▪ Piedmont Pathology Associates Inc., $500,000 (providing free EMR licenses allegedly for referrals) ▪ Regent Management Services $3.2M (alleged swapping arrangement for ambulance transport) ▪ Shelby Regional Med. Center's former CFO pled guilty and sentenced to 23 months for falsely certifying compliance with meaningful use
  33. 33. Prepared for AHLA Physicians and Hospital Law Institute 2016 | Austin, TX page | 33 Settlement Trends ▪ 2 Louisiana physicians sentenced for roles in $50M Medicare fraud scheme ▪ Two physicians and a registered nurse were sentenced for their roles in a $50 million Medicare fraud scheme, which federal prosecutors said involved multiple companies over the course of more than 10 years. ▪ Ex-hospital CFO, physicians guilty in $580M kickback scheme ▪ The ex-CFO of the now-defunct Pacific Hospital in Long Beach, Calif., was among those who reached a plea agreement with prosecutors for his involvement in a fraud scheme that generated $580 million in false billings. ▪ Millennium Health inks $256M deal to settle kickback, false claims allegations ▪ San Diego-based Millennium Health, formerly Millennium Laboratories, agreed to pay the federal government $256 million to resolve claims the company violated the False Claims Act and the Anti-Kickback Statute. Source: Articles from Becker’s Hospital Review, 2015
  34. 34. Prepared for AHLA Physicians and Hospital Law Institute 2016 | Austin, TX page | 34 Noteworthy Court Decisions ▪ First decision addressing ACA’s 60-day rule ▪ U.S. ex rel. Kane v. Continuum Health Partners (S.D.N.Y.) ▪ Medicaid HMO has IT glitch that causes large NY hospitals to bill Medicaid FFS (resulting in Medicaid overpayments) ▪ All overpayments were refunded before DOJ intervened (but after DOJ investigation) ▪ Relator ran report identifying 900 claims, of which only 50% were actual overpayments; relator terminated 4 days after emailing report, and files complaint 61 days after email ▪ DOJ investigates for 3.25 years, then intervenes ▪ Court denies motion to dismiss Source: Articles from Becker’s Hospital Review, 2015
  35. 35. Prepared for AHLA Physicians and Hospital Law Institute 2016 | Austin, TX page | 35 Noteworthy Court Decisions ▪ U.S. v. Patel - 7th Circuit upholds physician’s AKS conviction, expands definition of “referral” to include home healthcare recertification ▪ U.S. ex rel. Boise v. Cephalon Inc. – Breach of corporate integrity agreement actionable under the FCA ▪ Amarin Pharma Inc., v. FDA – Truthful non-misleading off-label promotion of drug held not to violate FDCA’s prohibition on misbranding Source: Articles from Becker’s Hospital Review, 2015
  36. 36. Prepared for AHLA Physicians and Hospital Law Institute 2016 | Austin, TX page | 36 HIPAA Privacy and Security ▪ Triple – S Management Corp. - $3.5M settlement ▪ Widespread non-compliance including disclosing PHI to third-parties without permission and using or disclosing more than the min. necessary for mailings ▪ Lahey Hospital and Medical Center - $815,000 settlement ▪ Stolen laptop exposed PHI for 599 individuals ▪ The University of Washington Medicine - $750,000 settlement ▪ PHI of 90,000 individuals exposed after employee downloaded an email attachment that contained malicious malware ▪ Cancer Care Group PC - $750,000 settlement ▪ Stolen laptop from car exposed PHI for 55,000 current/former patients ▪ St. Elizabeth Medical Center - $218,000 settlement ▪ Use of unsecure internet-based document sharing system, unsecured PHI on employee’s laptop and USB drive
  37. 37. Prepared for AHLA Physicians and Hospital Law Institute 2016 | Austin, TX page | 37 HIPAA Privacy and Security ▪ Large volume of individuals’ PHI exposed during breaches based on hackers ▪ Anthem, Inc. (IN) – cyber attack on unencrypted PHI, 37.5M records impacted ▪ Premera Blue Cross (WA) – cyber attack exposed medical, financial, and claims data for 11M customers ▪ Excellus Health Plan Inc., (NY) – cyber attack allowed unauthorized access to 10M beneficiaries information ▪ UCLA (CA) – cyber attack on unencrypted data allowed access to information for 4.5M patients ▪ Medical Informatics Engineering (IN) – cyber attack on EHR provider compromised PHI for 3.9M individuals
  38. 38. • The Yates Memo • OIG Fraud Alerts Related to Affiliation Discussion of Recent OIG Fraud Alerts Section 3
  39. 39. Prepared for AHLA Physicians and Hospital Law Institute 2016 | Austin, TX page | 39 The Yates Memo ▪ September 2015 memorandum from Deputy Attorney General Sally Quillian Yates ▪ Outlined six steps to strengthen pursuit of individual corporate wrongdoing ▪ Some areas of focus new, while others were affirmation of prior policy ▪ Revision to USAM, particularly in regard to “cooperation credit” ▪ True impact is unclear at best ▪ New articulation of old policy? ▪ Practical impact of pursuing individuals and ability to reach civil settlements with entities substantially implicated if DOJ strictly interprets this policy
  40. 40. Prepared for AHLA Physicians and Hospital Law Institute 2016 | Austin, TX page | 40 OIG Also Focusing on Individuals ▪ OIG creates new litigation team to pursue CMP and exclusion cases: ▪ Jump in CMP cases from 36 in FY13 to 60 in FY14 ▪ Stated goal of holding individuals accountable ▪ Meant to complement DOJ’s enforcement activities (filling enforcement gaps) ▪ Potential to spin-off from FCA cases and pursuit of executives or physicians ▪ OIG issues Special Fraud Alert: “Physician Compensation Arrangements May Result in Significant Liability” ▪ Focus on FMV and bona fide services and MD exposure ▪ Came before North Broward settlements
  41. 41. Prepared for AHLA Physicians and Hospital Law Institute 2016 | Austin, TX page | 41 OIG Fraud Alert ▪ February 8, 2012 – Exercise Caution When Reassigning Their Medicare Payments ▪ Physicians should use caution when selecting entities to reassign their Medicare payments ▪ OIG settlements with eight physicians who submitted false claims from physical medicine companies
  42. 42. Prepared for AHLA Physicians and Hospital Law Institute 2016 | Austin, TX page | 42 OIG Fraud Alert ▪ June 26, 2014 – Laboratory Payments to Referring Physicians ▪ Addressed blood specimen collection, processing, and packaging. ▪ OIG aware of remuneration to physicians for these activities, directly or indirectly
  43. 43. Prepared for AHLA Physicians and Hospital Law Institute 2016 | Austin, TX page | 43 OIG Fraud Alert ▪ June 9, 2015 – Physician Compensation Arrangements ▪ Focused on Medical Directorships ▪ Ensure that such arrangements reflect fair market value for bona fide services ▪ Recently reached settlements with 12 individual physicians who entered into questionable arrangements
  44. 44. • OIG FY 2016 Work Plan • Best Practices Best Practices for Providers and Provider Organizations Section 4
  45. 45. Prepared for AHLA Physicians and Hospital Law Institute 2016 | Austin, TX page | 45 HHS OIG Work Plan – FY 2016 1 Medicare oversight of provider-based status. ▪ Monitoring the extent to which these facilities meet requirements ▪ MedPAC has expressed significant concerns about the financial incentives of this status 2 Comparison of provider-based and freestanding clinics. ▪ Linked to first work plan item.
  46. 46. Prepared for AHLA Physicians and Hospital Law Institute 2016 | Austin, TX page | 46 ▪ Identifying parties open to buying, selling, integrating, etc. ▪ Confidentiality and non-solicitation agreements ▪ Getting the transaction team together ▪ BOD, Administrators (C-levels), Legal, Compliance, Finance, HR ▪ Outside counsel and advisors ▪ Valuations and fair market valuation (FMV) analysis ▪ Execution of letter of intent (LOI) or term sheet ▪ Sets forth the structure of the deal (asset or stock), price and payment terms, expected closing date, and other material terms. ▪ Used as the basis of the main transaction agreement (such as the asset purchase agreement). Planning and Negotiation
  47. 47. Prepared for AHLA Physicians and Hospital Law Institute 2016 | Austin, TX page | 47 Due Diligence ▪ Purpose: obtain information about what is material to the seller’s business and identify items that may need additional attention and analysis. ▪ Evaluate the risks of the transaction (search for “red flags”) ▪ Typical requests include information regarding: Corporate Documents Legal Issues and Govt. Investigations Accounting and Financial Statements Licensure and Certifications Assets and Liens Compliance Program and Training Material Contracts and Payor Agreements Privacy and Security Real Property – Owned/Leased Employees / Independent Contractors Intellectual Property Medical Staff Insurance Environmental
  48. 48. Prepared for AHLA Physicians and Hospital Law Institute 2016 | Austin, TX page | 48 Transaction Closing ▪ Signing and delivery of closing documents ▪ Transaction Documents (e.g., Asset Purchase Agreement) ▪ Officer Certificates/Secretary’s Certificates ▪ Bond Counsel Opinions ▪ Required Consents ▪ Payment / Consideration ▪ Escrows for indemnification
  49. 49. Prepared for AHLA Physicians and Hospital Law Institute 2016 | Austin, TX page | 49 CHOW/CHOI Notifications ▪ Change of Ownership (CHOW) or Change of Information (CHOI) Notifications ▪ Medicare/Medicaid ▪ Certificate of Need (CON) ▪ State Facility Licenses ▪ Accreditations ▪ CLIA / Laboratory Permits ▪ DEA Permits / State-Controlled Substances Permits ▪ Pharmacy Licenses ▪ Boiler Permits / Air Quality Permits ▪ Business Licenses ▪ Insurance Coverage
  50. 50. Prepared for AHLA Physicians and Hospital Law Institute 2016 | Austin, TX page | 50 Licenses/Permits/Certifications ▪ Different licensing agencies have varying definitions of “change of ownership” and notification requirements / timelines (pre- and post-closing). Plan ahead! ▪ Potential Issues: ▪ Verify with the agency regulators that the buyer can operate under old license until new license is issued. ▪ Verify that the new license will be retroactive to the date of closing. ▪ Agencies may require surveys or inspections, which can delay issuance of a new license.  Failure to provide proper notices and address provider enrollment issues can have substantial financial consequences and result in unnecessary risk and liability
  51. 51. Prepared for AHLA Physicians and Hospital Law Institute 2016 | Austin, TX page | 51 Medicare and Medicaid Enrollment ▪ Is this a Medicare/Medicaid CHOW? ▪ Whether to accept assignment: ▪ Under Medicare you can: ▪ (1) file a “change of ownership” and accept assignment of the provider number/agreement; or ▪ (2) file a new enrollment application and not accept assignment of the provider number/agreement ▪ Medicaid varies by state. Some states require the buyer to accept assignment of the selling provider’s Medicaid number. ▪ Be cautious of successor liability! Accepting assignment usually means accepting prior liabilities. Due diligence should assist in uncovering any potential liabilities.
  52. 52. Prepared for AHLA Physicians and Hospital Law Institute 2016 | Austin, TX page | 52 Medicare and Medicaid Enrollment ▪ Transition Issues: ▪ Can buyer use seller’s provider number prior to tie-in issuance? ▪ How will the parties handle reimbursement from payors during the transition? Usually the transaction documents will provide for a “true-up” process. ▪ Potential Enrollment Issues: ▪ Reimbursement gap ▪ Survey requirement in some cases ▪ Medicare/Medicaid processing times can be lengthy
  53. 53. Prepared for AHLA Physicians and Hospital Law Institute 2016 | Austin, TX page | 53 ▪ Determine whether locations will qualify for on-campus or off-campus provider-based status ▪ Review CMS provider-based regulations to ensure documents and relationships comply with requirements [42 CFR §413.65] ▪ Pay particular attention to management relationships – specific regulations ▪ Advertising/publicity is often significant issue ▪ Provider-based facilities are gaining greater attention from regulators ▪ Navigators can help with patient issues Provider-Based Facilities
  54. 54. Prepared for AHLA Physicians and Hospital Law Institute 2016 | Austin, TX page | 54 ▪ Review HIPAA privacy and security policies and procedures with acquired entity and obtain documentation attesting to compliance with such policies and procedures ▪ Conduct HIPAA/HITECH training for employees and independent contractors of the acquired entity ▪ Obtain Business Associate Agreements, as necessary ▪ There may be significant penalties for data breaches or violations of HIPAA/HITECH (not to mention the bad publicity) Privacy and Security
  55. 55. Prepared for AHLA Physicians and Hospital Law Institute 2016 | Austin, TX page | 55 ▪ Determine whether the electronic health records (EHR) systems are compatible and, if not, which system will be used ▪ Work with IT team to plan and execute IT system transitions ▪ Educate acquired entity and its professionals on proper technology security measures: ▪ Access Controls (e.g., password, encryption) ▪ Workstation use (e.g., shielding screens when PHI is being viewed) ▪ Data backups ▪ Use of portable devices with sensitive information (e.g., smart phones, tablet computers, laptops, flash drives) IT Affiliation
  56. 56. Prepared for AHLA Physicians and Hospital Law Institute 2016 | Austin, TX page | 56 ▪ Compliance with Legal Requirements ▪ Stark, 42 C.F.R. §411.357(e) ▪ Anti-kickback Statute, 42 CFR 1001.952 ▪ “Recent” Guidance – Adv. Opinion 2007-01; Advisory Opinion 2011-01 Hospital/Physician Recruitment
  57. 57. Prepared for AHLA Physicians and Hospital Law Institute 2016 | Austin, TX page | 57 Hospital/Physician Recruitment When to Recruit • Established Community Need • Medical Staff Shortages as Indicated in a Physician Needs Assessment or Medical Staff Development Plan When Not To Recruit • Physicians Asking for Incentives / Payments • Surplus of Specific Services • Fear of Losing Referrals or Looking for Additional Referrals
  58. 58. Prepared for AHLA Physicians and Hospital Law Institute 2016 | Austin, TX page | 58 ▪ Key Practical Aspects: ▪ Applies to recruitment of physicians (note: new legislation impacts non-physician providers) ▪ Requires that physician “relocate” (exceptions for physicians employed full-time by correctional agency, U.S. Departments of Defense or Veterans Affairs, or facilities of the Indian Health Service) ▪ Available to hospitals and rural health clinics ▪ Typically 12- 24 months ▪ Agreement with physician practice; typically guaranteed by practice ▪ Only include “incremental costs” ▪ Can include non-compete clause that does not “unreasonably” restrict ability to practice medicine ▪ One Size Does NOT Fit All ▪ Document everything with the expectation that it will be reviewed Hospital/Physician Recruitment
  59. 59. Prepared for AHLA Physicians and Hospital Law Institute 2016 | Austin, TX page | 59 Need and FMV ▪ Basic elements in all the regulatory safe harbors and exceptions: ▪ Be in writing, signed by both parties ▪ Not conditioned on physician’s referrals ▪ Remuneration is not based on volume or value of actual or anticipated referrals ▪ Physician allowed to establish privileges at other facilities
  60. 60. Prepared for AHLA Physicians and Hospital Law Institute 2016 | Austin, TX page | 60 Need and FMV Advisory Opinion No. 01-4 ▪ Is there documented evidence of objective need for the physician? ▪ Does physician have existing stream of referrals within the service area? ▪ Are benefits narrowly constructed not to exceed what is reasonably necessary? ▪ Do the benefits directly/indirectly benefit other referral sources?
  61. 61. Prepared for AHLA Physicians and Hospital Law Institute 2016 | Austin, TX page | 61 Contact Information CHRISTOPHER T. BECKHAM, MSHA SENIOR MANAGER cbeckham@pyapc.com R. ROSS BURRIS III, ESQ. SHAREHOLDER rburris@polsinelli.com
  62. 62. PERSHING YOAKLEY & ASSOCIATES Monarch Tower, Suite 700 | 3424 Peachtree Road NE | Atlanta, GA 30326 800.270.9629 | www.pyapc.com

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