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| Dear Friend,
Paying or receiving fair market value isn't the same as anti-kickback compliance.
A recent U.S. District Court ruling serves as a reminder that more than fair market value is needed to remove an arrangement from scrutiny under the federal Anti-Kickback Statute (“AKS”).
For example, I might pay you fair market value for providing consulting services in regard to my medical device, the “UpcodeExtractor 2.0” —but what if I engage your services as a reward for implanting the device? Or, what if the number of consulting days (paid for to the penny at the amount per day or even per minute opined to by 23 of the nation’s most recognized valuation experts) correlates to the volume of your use of UpcodeExtractor 2.0s? Then we’ve got a problem.
In February 2022, the Court in U.S. ex rel. Dr. Kuo Chao v. Medtronic PLC, et al., issued an order denying the defendants’ motion to dismiss. The case is a False Claims Act lawsuit brought by whistleblower/relator Dr. Kuo Chao, who alleges, among other things, that the defendants, collectively referred to as “Medtronic”, engaged in a multifaceted kickback scheme to compensate doctors for ordering a greater number of Medtronic “Pipeline” devices, an implantable device used to treat brain aneurysms.
The whistleblower alleged, among other things, that Medtronic maintains a proctoring program through with it regularly pays doctors for professional services. Those doctors were experienced in implanting Pipeline devices and, as paid proctors, they taught other doctors how to do the Pipeline procedure. Dr. Chao’s allegation is that Medtronic systematically and habitually overpays the proctors for their proctoring services as a disguised kickback meant to incentivize them to order more Pipeline devices for their own cases. Other alleged circumstances include other alleged overpayments for similar purposes.
The defendants argued that Dr. Chao did not specifically allege that the payments exceeded FMV and moved for a dismissal.
The Court’s response in its order denying the motion to dismiss was that, as has been established by case law, the payor of remuneration violates the AKS whenever one purpose of the remuneration was to induce future referrals or orders, even if the payments were also intended to compensate for professional services. The court also stated that even some fair market value payments will qualify as illegal kickbacks, such as when the payor has considered the volume of reimbursable business between the parties in providing compensation and otherwise intends for the compensation to function as an inducement for more business. It also stated, citing previous case law, that “neither a legitimate business purpose for the arrangement, nor a fair market value payment will legitimize a payment if there is also an illegal purpose (i.e., inducing Federal health care program business).”
Some takeaways for you: - Fair market value is an “ingredient” in AKS compliance. It’s not the whole meal.
- Even if FMV is present, the analysis isn’t over by a long shot.
- The underlying scheme, not the ink on the paper, governs legality versus illegality.
- Every new, and every existing, financial relationship with anyone or any entity with which physicians and other healthcare providers do business must be vetted or re-vetted in light of enforcement reality. Immediately.
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| | | Business Life in the Time of Coronavirus Mini-Series
The coronavirus crisis caused a short term economic crisis for many medical groups. Our mini-series shows you the way out. Plus, many of the concepts discussed are applicable during both good times and bad.
[If you haven't already seen them, follow this link to watch our entire series.] |
| | Watch Tuesday's video here, or just keep reading below for a revised, more polished version:
I read a news article that reported that since 2010, 83 rural hospitals in the U.S. have closed.
On the one hand, it shows the pressure that hospitals are under to survive in a world in which cases are moving outside of their facilities.
It also illustrates the fragility of exclusive contracts for hospital-based services at most hospitals. And it’s a sad fact for the employees (physicians and non-physicians alike) at those facilities and for the office-practice physicians who center their practices around the hospital's “world” of those facilities.
At the same time, especially in connection with rural hospitals, it presents an opportunity (83 opportunities or some multiple of that) for the formation of physician-owned surgery centers and other outpatient facilities, either in the physical location previously occupied by the hospital, in terms of a large facility, or even more likely the ASC “condo-ization” of these facilities in order to preserve the availability of medical services for the community and to create a profit-making venture for physicians.
If you’re a physician in a rural community (or in a city with outlying rural communities within a moderate drive) look at the opportunities that exist, not only presently, but in the event of a facility closure.
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•Defense as a defective default: It’s necessary, but not sufficient.
•Exploiting weakness: Drop the guilt and identify opportunity.
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Others see a crisis and freeze in fear. Learn how to see the opportunities and obtain the tools to increase your odds of obtaining them.
The price to attend is $479. The cost of not attending is astronomical. |
| | | Wednesday - A Naive Anti-Kickback Question Answered - Medical Group Minute
Watch the video here, or just keep reading below for a slightly polished transcript:
Every once in while I get someone who asks me the following type of question: “Can you give me the name of one person who has gone to jail for violating the federal Anti-Kickback Statute in the context of . . . ” and then they go and describe some very specific fact situation, for example, in the subcontract they have with another medical group or in the agreement they have with an ASC or in their deal with a CRNA.
The fact is that there are a lot of people who’ve gone to jail for violating the federal Anti-Kickback Statute. Maybe not in the exact fact situation queried, but that’s usually irrelevant.
In essence, those questions are a bit like saying, “Do you know any left-handed people who have gone to jail for violating the federal Anti-Kickback Statute?”
What’s the difference whether you’re right-handed or left-handed? What’s the difference whether the violation takes place in the context of a hospital or in the context of a surgery center? What’s the difference whether the kickback was a discount as opposed to cash in an envelope handed over the countertop at a Denny’s restaurant? What’s the difference if no one has gone to jail for violating the AKS in the such-and-such context, when you might be the first one to be? It doesn’t make any difference.
The federal Anti-Kickback Statute, unlike Stark, is a criminal statute. There’s actually jail involved. And, people do go to jail.
But even if they don’t go to jail, groups fall apart, and whistleblowers file False Claims Act lawsuits that result in disgorgement of tens or even hundreds of millions of dollars of improperly billed and collected claims from federal health care programs. It’s serious stuff.
There’s an expression in carpentry, "measure twice, cut once." We should have the same expression in terms of healthcare deals, something like “check compliance issues twice, then do the deal.”
Just don’t start cutting — or you’re going to find out that some of that cutting is on you.
After all, for those challenging me to give them "just one name" of anyone who's gone to jail for an AKS violation involving some specific fact situation (the favorite appears to be some twist on the company model), you don't want that name to be yours. |
| | | Listen to the podcast here, or just keep reading for the transcript.
Frédéric Bastiat, the early 19th Century French political economist, is perhaps most known for his essay, That Which is Seen and That Which is Not Seen.
Bastiat’s point was that politicians legislate to correct a problem (and then bask in the glory of having taken action) but never truly consider what problems they create when they enacted the legislation to correct the initial problem. That is, they act based on what is seen (the initial “problem” and the easily seen “solution”) but do not pause to consider the unseen, potential damage that their action will later cause.
In part, we can blame this on the short lifespan of term of office. “I’ll be out of office and retired in the Bahamas before the shit hits the fan.” In part, we can blame this on the immunity from liability for negligence that we’ve given politicians and bureaucrats. I’ve heard, but can’t find any proof, that the Romans made bridge builders and their families live under their bridges for an extended period of time, the ultimate test of quality construction. We don’t impose any risk at all on politicians who impose harebrained schemes on us.
Here are two recent examples from the healthcare world, both of which are instructive.
The first, drawn from a Wall Street Journal Op Ed, points out that Hawaii’s extremely high state income taxes combined with certificate of need laws have resulted in the fewest hospital beds per capita of any state, the 10th longest emergency room wait times, and a severe doctor shortage.
You'd think that the politicians in Hawaii would have at least consulted with the politicians in California who could have told them (sotto voce, I am sure), that sucking the financial lifeblood out of productive people, even in a relative paradise, isn’t good for keeping them in the state or attracting them in the first place. CONs, too, are great in terms of political contributions, but not so hot in reducing the cost of healthcare and of, well, actually delivering care.
The second, drawn from the bureaucrats at the Department of Justice with an assist from the bureaucrats at CMS (based on the work of the now deceased Congressman, Fortney “Pete” Stark, who later regretted his own Frankenstein monster, the so-called “Stark Law”) concerns the $18.2 million settlement of False Claims Act allegations that a partially physician-owned hospital, Flower Mound Hospital Partners, LLC d/b/a Texas Health Presbyterian Hospital Flower Mound, impermissibly took into account the volume or value of certain physicians’ referrals when it (1) selected the physicians to whom shares [repurchased from other physicians] would be resold and (2) determined the number of shares each physician would receive.
Yes, it is true that taking into account the volume or value of referrals knocks an arrangement out of Stark’s mandatory safe harbor and supports kickback allegations under the federal Anti-Kickback Statute. I’m not in any way suggesting that you ignore this fact.
However, trying to recruit physicians into a deal without some reference to whether they will use the facility is a fool’s errand because at what point do you draw the line? Although Stark rarely applies in the ASC context (and then, only in relation to services that are not reimbursed under the ASC fee schedule), the same analysis (and the AKS) applies to selecting physician investors in those facilities as well.
Must the facility offer every investor the same percentage? But why even offer the interests to those docs–it could be seen by Agent Such N. Such or whistleblower Pete to be influenced by referrals–so why not require a lottery? And, why just among docs? Why not include massage therapists, because they (probably) won’t refer.
A broke and soon to be bankrupt hospital or ASC (as well as one that was never built), is compliant, it’s just not of much use to the patients who will soon find that it’s being converted into a Holiday Inn or a veterinary clinic. Think about it: not one cent was actually overpaid to the facility by the government. Not one actual bribe, as the term was used for hundreds of years, was involved.
Each week I speak with physicians and with healthcare investors who are no longer participating in any government reimbursement program. Some refuse to take even private payer reimbursement – it’s patient self-pay or no service. They’ve had it.
For those quick to write me hate email, I am, once again(!), not suggesting that you break the law. I am warning you that you need to be very careful in structuring deals that implicate, or even might implicate, Stark or the AKS. What I am suggesting is that the law is, in this context and to this extent, an ass.
Despite all the talk about, as in the FCA settlement, “protecting our warfighters” [not an issue in the case] (that’s the Department of Defense Office of Inspector General, Defense Criminal Investigative Service spokesperson) and of delivering and billing “for services based on their medical appropriateness and necessity, not their potential profitability” [not an issue in the case] (that’s the Department of Health and Human Services Office of Inspector General spokesperson), and the involvement of the DOJ’s Civil Division, and its Commercial Litigation Branch, and its Fraud Section, and the U.S. Attorney’s Office for the Northern District of Texas, no one offered a quote about protecting taxpayers from the cost of duplicative silos of investigative and prosecutorial bureaucracies, and of the cost in terms of morbidity and mortality from reducing the availability of healthcare.
After all, that’s the unseen damage that they will cause. |
| | | Calibrate Your Compass
Read our exclusive RedPaper to guide you through this evolving situation.
The coronavirus crisis caused a short-term economic crisis for many medical groups. Our RedPaper shows you the way out. Plus, many of the concepts discussed are applicable during both good times and bad.
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| | | | We all hear, and most of us say, that the pace of change in healthcare is quickening. That means that the pace of required decision-making is increasing, too. Unless, that is, you want to take the “default” route. That’s the one is which you let someone else make the decisions that impact you; you’re just along for the ride. Of course, playing a bit part in scripting your own future isn’t the smart route to stardom. But despite your own best intentions, perhaps it’s your medical group’s governance structure that’s holding you back.
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| In fact, it’s very likely that the problem is systemic. The Medical Group Governance Matrix introduces a simple four-quadrant diagnostic tool to help you find out. It then shows you how to use that tool to build your better, more profitable future. Get your free copy Free.
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| | | | Whenever you're ready, here are 4 ways I can help you and your business:
1. Download a copy of The Success Prescription. My book, The Success Prescription provides you with a framework for thinking about your success. Download a copy of The Success Prescription here.
2. Be a guest on “Wisdom. Applied. Podcast.” Although most of my podcasts involve me addressing an important point for your success, I’m always looking for guests who’d like to be interviewed about their personal and professional achievements and the lessons learned. Email me if you’re interested in participating.
3. Book me to speak to your group or organization. I’ve spoken at dozens of medical group, healthcare organization, university-sponsored, and private events on many topics such as The Impending Death of Hospitals, the strategic use of OIG Advisory Opinions, medical group governance, and succeeding at negotiations. For more information about a custom presentation for you, drop us a line.
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