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| Dear Friend,
Tangled webs and deceit. They underlie the subject of this past Monday's blog post, How To Convict Yourself Of Violating The Anti-Kickback Statute. Follow that link to the blog or just keep reading for the rest of the story:
Oh, what a tangled web we weave
when first we practice to deceive!
I doubt that Sir Walter Scott was envisioning the future of American healthcare when he wrote those lines in his epic poem Marmion.
But he could have been.
They apply to kickback avoidance schemes all the time. Eventually, the web folds in on itself and someone ends up stuck.
Take for instance the highly instructive case of William Choi, M.D., a Colorado neurosurgeon.
To be fair to Choi, the case against him, at least so far, was civil only – a federal False Claims Act (“FCA”) lawsuit brought on behalf of the United States government by whistleblower Mark Rahe, a former employee of Dr. Choi’s medical practice and, later, of one of the medical device distributorships at the heart of the allegations.
On February 12, 2020, the United States Attorney for the District of Colorado announced that Choi and companies he owned paid the government $2.35 million to resolve whistleblower case allegations that Choi violated the federal Anti-Kickback Statute (the “AKS”) by receiving illegal kickbacks from distributors of spinal implant devices used in surgeries he performed.
The AKS prohibits any person or entity from knowingly and willfully offering, paying, soliciting, or receiving any remuneration, directly or indirectly, to induce or reward a person for, among other things, purchasing, ordering, arranging for, or recommending the purchase or ordering of any goods or services for which payment may be made, in whole or in part, under a federal health care program.
The AKS is criminal statute, violation of which can lead to prison time and significant fines. Proving a violation requires proving intent.
However, intent that can be inferred from the facts.
Additionally, a violation of the AKS results in a violation of the FCA, a civil statute that permits whistleblowers to file suit on behalf of the government and share in any resulting settlement or judgment. The FCA provides for treble damages and significant civil penalties.
The FCA, and related AKS, allegations against Choi were that he arranged to receive unlawful kickbacks through the creation of spinal equipment distributorships purportedly owned by third parties. However, the claims were that Choi himself secretly maintained the true ownership and control of those distributorships and the money they made. Those distributorships provided spinal implants to hospitals for use in surgeries that Choi himself performed.
As a result, the government alleged that Choi solicited and received, through those distributorships, improper payments and other benefits that induced him to use the distributorships’ products. Furthermore, the government alleged that that conduct resulted in false claims for payments to federal health care programs in violation of the FCA.
Note that a civil settlement is just that – a settlement. It is not a conviction nor is it an admission by Choi of actual liability.
That said, the allegations in the Choi case read like a roadmap of what any physician should not do, that is, if he or she wants to avoid AKS/FCA allegations.
It doesn’t help any physician, whether or not you are involved in connection with a so-called POD, a “physician owned distributorship,” to participate in a scheme in which you insert a “straw man” owner to disguise your actual ownership and control of an entity with which you deal in the course of your practice.
A POD can’t be turned into a “non-POD,” nor any other owned entity turned into a non-owned-entity, by using a phony owner any more than can “salary” paid to a referring physician’s spouse who never shows up for “work” fit into the AKS’s employment agreement safe harbor.
In fact, it’s the equivalent of a red, blinking, neon sign that reads, “I have actual, specific, intent to violate the law.” And, sooner or later, someone will see it. |
| | Tuesday - Success in Motion Video: Steal a Play from Merck and Qualcomm
Watch Tuesday's video here, or just keep reading below for a revised, more polished transcript: |
| | Two articles on the same page of the Wall Street Journal address somewhat related strategies that you as a medical group leader can emulate to drive profit for your medical group, or even to a facility.
The first article addressed Merck, the pharmaceutical giant that is spinning off some of its assets, pushing them into a new entity. Valued at around $6.5 billion, those spun off assets consist chiefly of pharmaceuticals that are now either out of, or soon to be out of, patent protection.
The notion is that they’ll be able to drive more overall profit by creating a new entity that is producing off-patent drugs, while the original company, Merck, will focus on discovering new drugs, obtaining patent rights, and then marketing those protected products.
The second article was about Qualcomm, the giant chip maker, which is now heavily engaged in licensing its intellectual property to third parties. According to analysts, that licensing strategy drove a 5% increase in profits during the fiscal quarter.
What does this mean for you?
if you're the leader of the average medical group, your group's business actually involves much more than delivering medical services. For example, let’s say it's a radiology group. The reality is that your practice entity has other assets and provides other value, as well.
For example, your group might have technology or know-how that it's developed, tech or know-how that can be packaged and sold or licensed to third parties.
Or, for example, your group may have developed a significant wealth of knowledge into, in our radiology example, imaging facilities. That business line can be freed from within your medical group by spinning it off into a separate, lay entity arm (say a consulting arm, a management group arm). The new entity, which can bring in outside investors and later be sold free of the restrictions placed on medical practice ownership in many states, can take the assigned knowledge and market it free of advertising rules placed on physicians and their practices.
Don’t think about your business as being simply the traditional medical group or facility.
Think of ways that you can take the byproducts that you’ve developed and either package them up, license and sell them, or, in essence, shuttle them off to a separate entity. You can profit from those byproducts in a way outside of your group that you probably are not able to do through it.
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| | Wednesday - Medical Group Minute Video: Deteriorated Insulation From The Hassles Of Running A Medical Practice
Watch the video here, or just keep reading below for a slightly polished transcript:
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| If you haven't read it already, take a look at my August 5, 2019, blog post, Physician Discontent With Hospital Employment Beginning To Boil. In that post, I discuss the epidemic of discontent among hospital-employed physicians. Instead of seeing the outbreak as a negative, my post explores some of the opportunities that this trend presents.
In a subsequent email exchange, my friend Devona Slater of ACE (Auditing for Compliance and Education), commented that she, too, sees the exit of hospital employed physicians as an opportunity. But then she made a very interesting observation, which I’ve edited slightly for presentation: “It’s just part of the cycle of ‘the grass is always greener,’ but, truly, there are weeds in every yard.”
Many physicians opted for hospital employment, some straight from residency and others from independent practice, because they bought the line that hospitals fed them: “You didn’t go to medical school to run a business. We’ll run the business. You get to practice medicine!”
But the word “hospital” means “bureaucracy.”
I’m seeing several interesting trends. Over the past four or five months, I've worked on four or five consumer focused medicine projects with physicians, both office practice and hospital-based, who were leaving hospital employment. And, I’m beginning to work with internal medicine physicians pulling out of hospital-affiliated clinic settings to establish rather unique group practices.
Certainly, some physicians will remain hospital employees and, for newly minted physicians with an employee mindset, it will continue to be a viable option. That is, until the worsening financial condition of hospitals renders them unable to support employed and affiliated physician groups.
But for most physicians, having to fill in requisition forms, attend moronic meetings, and report to the clinic medical director, who reports to the regional medical director, who reports to the chief medical officer, who reports to the CEO, isn’t exactly hassle free.
Riffing off of Devona’s “weed” analogy, the layers of bureaucracy that were supposedly meant to insulate the doctors from the “hassles of running a medical practice” out hassled the actual “hassles of running a medical practice.” Go figure. |
| | Thursday - Podcast: Compound Drugs Miracle Cure or Kickback Lure |
| Listen to the podcast here, or just keep reading for the transcript.
It’s the middle ground between light and shadow, between medical science and stupidity, and it lies between the pit of man’s desires and the summit of his bank account. This is the dimension of disintegration. It’s an area which we call the Indictment Zone.
Gary Robert Lee, Krishna Balarma Parchuri, and Jerry May Keepers. Christopher R. Parks. Three doctors and a former lawyer. The stuff of dreams compounded, so it is said, with a heavy dose of dreams of stuff.
Compounding pharmaceuticals, specific drugs for specific patients, offers tremendous benefit. The problems arise when the benefit is for the prescribing physician. Then, as Drs. Lee, Parchuri, and Keepers, and Mr. Parks, might attest, that is, if they elect to testify in their own defense at trial, we’re dealing with analyses under the federal Anti-Kickback Statute (AKS) and state law counterparts.
In a case currently winding its way toward trial in the U.S. District Court for the Northern District of Oklahoma, Lee, et al., are alleged to have engaged in a host of criminal acts centering around a compounded prescription scheme.
Lee and Keepers are charged with conspiracy to commit health care fraud. Keepers and Parchuri are also charged with soliciting and receiving illegal bribes and kickback payments. Additionally, Parchuri is charged with obstructing the criminal investigation into the health care offenses.
According to the indictment, beginning in 2012, Parks and Lee, who controlled several compounding pharmacies, conspired to pay kickbacks to physicians to induce them to write expensive compounding prescriptions to be filled at the controlled pharmacies.
As a part of the conspiracy, the government alleges that the kickback-receiving physicians were provided with pre-printed prescription pads that listed compounding formula choices; physicians checked a box and then faxed the form directly to the associated pharmacy – no prescription was handed to the patient for him or her to take to a pharmacy of choice.
Claims for payment for the compounded drugs were submitted to federal health care programs as well as to private payors, and the proceeds allegedly split among the defendants using a variety of methods.
The government alleges that Parchuri received up to $50,000 a month in exchange for writing those prescriptions, and that over time, Keepers solicited and received more than $860,000 in kickbacks and bribes.
The indictment claims that kickbacks were disguised through sham agreements, including purported pharmacy and university study “medical directorships” and “consulting physician” agreements, as well as via intermediary limited liability companies.
As always, note that allegations and indictments are charges only and not convictions. The defendants are innocent until proven guilty.
However, defending against charges such as these is mindbogglingly expensive. At least one of the physicians defendants had replacement counsel appointed for him by the court because he could no longer afford to pay for his own defense.
If convicted, conspiracy to violate the federal anti-kickback stature carries a possible maximum sentence of five years in prison and a $250,000 fine. In addition, violation of the anti-kickback statute itself carries up to 10 years in prison and a $100,000 possible fine. A conviction of health care fraud without injury or death also carries a possible maximum of 10 years in prison, but if resulting in injury or death, the maximum penalty climbs to 20 years or life in prison, respectively.
Compounded drugs are valid treatment. Prescribing them is legal. However, accepting (or paying) kickbacks to prescribe them is a crime.
Seems simple, but each year, no, each week, we’re reminded that “simple” isn’t much of a deterrent to stupid.
There are many legitimate ways for physicians to increase their practice income. They include, depending on state law, investments in compounding pharmacies and the direct dispensing of pharmaceuticals. But any deal must be structured in compliance with the anti-kickback statue. And then, of course, also in compliance with other applicable laws, from Stark to state law considerations.
Just because some other party to the deal tells you that a deal’s been vetted by their lawyers and is “legal,” don’t bet on it. Vet it through your own counsel and assess your own risk. As in carpentry, measure (assess) twice, cut (do the deal) once. Or not do the deal – you get the idea.
After all, that other party won’t be paying your fine or doing your time.
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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 here.
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Come listen to Mark speak in sunny
Las Vegas on June 5, 2020, at The Advanced Institute for Anesthesia Billing and Practice Management.
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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.
4. If You’re Not Yet a Client, Engage Me to Represent You. If you’re interested in increasing your profit and managing your risk of loss, email me to connect directly. |
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