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| Dear Friend,
Just because a potential kickback situation is hard to see, doesn't mean it doesn't exist.
Picture a revolving door.
Even though many physicians and facility administrators don’t realize it, a revolving door can be a useful analogy for anti-kickback analysis. Or, I suppose, just for kickbacks.
You see, although most understand the implications of the federal anti-kickback statute (“AKS”) to a physician’s obtaining an interest in a healthcare facility or other entity to which he or she refers, payments to the physician in connection with his or her departure might also implicate the AKS.
As a quick refresher, the AKS prohibits the offer of, demand for, payment of, or acceptance of any remuneration for referrals of federally funded healthcare program patients, such as Medicare or Medicaid patients. There are exceptions, most notably regulatory “safe harbors,” that describe certain arrangements not subject to the AKS because they are unlikely to result in fraud or abuse.
In early January 2024, the Department of Health and Human Services Office of Inspector General (“OIG”), the agency charged with regulating and enforcing AKS, released a December 2023 advisory opinion (Adv. Op. 23-12) addressing an instance in which retiring physician partners in a multi-hospital venture could elect into an arrangement by which their ownership interest would be redeemed in a series of three annual payments, set at fair market value at the time of each payment, which value would likely increase between the election and each subsequent years’ valuation.
The potential kickback twist: The electing physician partner would continue to practice and refer to the hospitals for 6 months following the first payment of redemption money. An increase in the value or number of the physician’s referrals could impact the amount of the subsequent valuation/payment he or she will receive over the remaining buyout term.
Based on two factors, the OIG determined that although the proposed arrangement would generate prohibited remuneration under the AKS if the requisite intent were present, it would not impose sanctions. The two factors are as follows:- The offer is being extended to all physicians upon attaining a certain age, in this case, 67. It is not conditioned on, or a reward for, the physician making referrals to or generating business for the hospitals or related entities and individuals. That reduces the risk of overutilization and of steering of patients.
- In order to qualify for the offer, the physician must agree not to refer patients to the hospitals or to its owners (a medical center entity and other physician partners) upon: (i) the physician partner’s retirement date (which would occur within 6 months of the first payment); or (ii) the date the physician partner no longer meets the requirements of the partnership agreement, whichever comes first. The OIG stated, “[i]t is true that the [p]hysician [p]artners who accept the [offer] may continue to refer patients to the [hospitals and other physician partners] for the 6-month period between the first payment under the [agreement] and retirement. However, because the period between the first payment under the [agreement] and retirement is time-limited and, as Requestor certified, is necessary to allow the [p]hysician [p]artners who accept the Redemption Offer to wind down their medical practices consistent with state law requirements, it is unlikely that the Arrangement would cause the retiring [p]hysician [p]artners to alter their referral patterns to benefit the [hospitals and other physician partners] during this 6-month period.”
The Essential Takeaways for You
- Although an Advisory Opinion is binding only on its Requestor, it’s a window into the thinking of the regulators.
- Payments to a referral source require analysis under the AKS.
- Here, the physician partners were making referrals, and receiving remuneration not in direct proportion to their ownership interests, which payments would increase based on the value and volume of their referrals – all red flags and outside of any safe harbor.
- Just because a flag is red doesn’t mean that the underlying arrangement violates the AKS, but there’s a significant chance that it does.
- Each situation must be analyzed carefully because the AKS is a criminal statute, the violation of which can lead to fines, civil penalties, whistleblower lawsuits, exclusion as a provider, and imprisonment.
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| | | | Wednesday - Jury Convicts Chief Compliance Officer For $50 Million Medicare Fraud Scheme - Medical Group Minute
Watch the video here, or just keep reading below for a slightly polished transcript:
Years ago, I was able to wipe a traffic ticket from my record by attending something billed as, as I recall, “comedy club traffic school.”
So, who says healthcare compliance stories can’t be funny?
We all know the expression “life imitating art”, but hardly anyone talks about “crimes imitating compliance”. That is, until today.
On June 8, 2023, a federal jury convicted the chief compliance officer of a pharmacy holding company, Steven King (yes, it would be funnier if his name were spelled “Stephen”), for fraudulently billing Medicare over $50 million for dispensing lidocaine and diabetic testing supplies that Medicare beneficiaries did not need or want.
The scam, which King and his co-conspirators ran through A1C Holdings LLC, involved pharmacies in multiple states. When A1C secured prescriptions and refills on behalf of its pharmacies for medically unnecessary lidocaine and diabetic testing supplies, it violated Medicare and pharmacy benefit manager rules.
Did the company hire King to keep them on the straight and narrow . . . but he strayed? Or did they hire him because they thought he knew how to run and, so they thought, conceal a scam? I have no idea.
However, the jury believed that King and his confederates ran and then took steps to conceal their scheme, including enrolling their mail order pharmacies as brick-and-mortar retail locations to evade more rigorous oversight, shipping prescription refills for high-reimbursing medications and supplies without patient consent, concealing the ownership of A1C Holdings LLC and its pharmacies, and transferring patients among pharmacies without patient consent.
As the DOJ put it in their press release: “King and his co-conspirators took each of these steps to ensure that Medicare continued to be billed for profitable medications and supplies. As chief compliance officer, King was in a unique position to prevent and report the fraudulent scheme, but he used his position to defraud Medicare instead.”
As I’ve mentioned many times on the blog, medical groups and facilities often create whistleblowers – their own compliance officers and other executives flip on them with regularity. Steven King flipped the entire thing on its head. And, as a result, he faces a maximum penalty of 20 years in prison on his conviction for conspiracy to commit health care fraud and wire fraud. His sentencing is scheduled for September 14, 2023.
Although Mr. King served us a heavy slice of schadenfreude, just as compliance, actual compliance, is far more than a compliance plan, he also showed us that compliance is far more than having a chief compliance officer. In fact, sometimes it’s the complete opposite.
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| | | Listen to the podcast here, or just keep reading for the transcript.
I was driving when I saw the sign, one of those large plasticized canvas ones, tacked up on the side of a small office building:
"FREE* First Chiropractic Visit"
But unlike the asterisk we're used to seeing, the one that matches with some terms found at the bottom of an advertisement, this one just stood there. Solitary. Telling every passerby that the sign was a . . . lie. That the chiropractor was a liar. That he can't be trusted because there's a catch, one that you're not even being told about.
What's the first thing that you're telling the people that you deal with? Not just patients but colleagues and potential deal partners?
Note that the communication needn't be in writing or even spoken. It might just be an action or even inaction.
The chiropractor was telling me and everyone else driving by that he can't be trusted.
Free* isn't free.
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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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