Trump Administration Invites Health Care Industry to Help Rewrite Ban on Kickbacks

The Trump administration has labored zealously to cut federal regulations, but its latest move has still astonished some experts on health care: It has asked for recommendations to relax rules that prohibit kickbacks and other payments intended to influence care for people on Medicare or Medicaid.

The goal is to open pathways for doctors and hospitals to work together to improve care and save money. The challenge will be to accomplish that without also increasing the risk of fraud.

With its request for advice, the administration has touched off a lobbying frenzy. Health care providers of all types are urging officials to waive or roll back the requirements of federal fraud and abuse laws so they can join forces and coordinate care, sharing cost reductions and profits in ways that would not otherwise be allowed.

From hundreds of letters sent to the government by health care executives and lobbyists in the last few weeks, some themes emerge: Federal laws prevent insurers from rewarding Medicare patients who lose weight or take medicines as prescribed. And they create legal risks for any arrangement in which a hospital pays a bonus to doctors for cutting costs or achieving clinical goals.

The existing rules are aimed at preventing improper influence over choices of doctors, hospitals and prescription drugs for Medicare and Medicaid beneficiaries. The two programs cover more than 100 million Americans and account for more than one-third of all health spending, so even small changes in law enforcement priorities can have big implications.

Federal health officials are reviewing the proposals for what they call a “regulatory sprint to coordinated care” even as the Justice Department and other law enforcement agencies crack down on health care fraud, continually exposing schemes to bilk government health programs.

“The administration is inviting companies in the health care industry to write a ‘get out of jail free card’ for themselves, which they can use if they are investigated or prosecuted,” said James J. Pepper, a lawyer outside Philadelphia who has represented many whistle-blowers in the industry.

Federal laws make it a crime to offer or pay any “remuneration” in return for the referral of Medicare or Medicaid patients, and they limit doctors’ ability to refer patients to medical businesses in which the doctors have a financial interest, a practice known as self-referral.

These laws “impose undue burdens on physicians and serve as obstacles to coordinated care,” said Dr. James L. Madara, the chief executive of the American Medical Association. The laws, he said, were enacted decades ago “in a fee-for-service world that paid for services on a piecemeal basis.”

Melinda R. Hatton, senior vice president and general counsel of the American Hospital Association, said the laws stifle “many innocuous or beneficial arrangements” that could provide patients with better care at lower cost.

Hospitals often say they want to reward doctors who meet certain goals for improving the health of patients, reducing the length of hospital stays and preventing readmissions. But federal courts have held that the anti-kickback statute can be violated if even one purpose of the remuneration is to induce referrals or generate business for the hospital.

The premise of the kickback and self-referral laws is that health care providers should make medical decisions based on the needs of patients, not on the financial interests of doctors or other providers.

The Trump administration is calling its effort a “regulatory sprint to coordinated care.”CreditSarah Silbiger/The New York Times.

Health care providers can be fined if they offer financial incentives to Medicare or Medicaid patients to use their services or products. Drug companies have been found to violate the law when they give kickbacks to pharmacies in return for recommending their drugs to patients. Hospitals can also be fined if they make payments to a doctor “as an inducement to reduce or limit services” provided to a Medicare or Medicaid beneficiary.

Doctors, hospitals and drug companies are urging the Trump administration to provide broad legal protection — a “safe harbor” — for arrangements that promote coordinated, “value-based care.” In soliciting advice, the Trump administration said it wanted to hear about the possible need for “a new exception to the physician self-referral law” and “exceptions to the definition of remuneration.”

Almost every week the Justice Department files another case against health care providers. Many of the cases were brought to the government’s attention by people who say they saw the bad behavior while working in the industry.

“Good providers can work within the existing rules,” said Joel M. Androphy, a Houston lawyer who has handled many health care fraud cases. “The only people I ever hear complaining are people who got caught cheating or are trying to take advantage of the system. It would be disgraceful to change the rules to appease the violators.”

But the laws are complex, and the stakes are high. A health care provider who violates the anti-kickback or self-referral law may face business-crippling fines under the False Claims Act and can be excluded from Medicare and Medicaid, a penalty tantamount to a professional death sentence for some providers.

Federal law generally prevents insurers and health care providers from offering free or discounted goods and services to Medicare and Medicaid patients if the gifts are likely to influence a patient’s choice of a particular provider. Hospital executives say the law creates potential problems when they want to offer social services, free meals, transportation vouchers or housing assistance to patients in the community.

Likewise, drug companies say they want to provide financial assistance to Medicare patients who cannot afford their share of the bill for expensive medicines.

AstraZeneca, the drug company, said that older Americans with drug coverage under Part D of Medicare “often face prohibitively high cost-sharing amounts for their medicines,” but that drug manufacturers cannot help them pay these costs. For this reason, it said, the government should provide legal protection for arrangements that link the cost of a drug to its value for patients.

Even as health care providers complain about the broad reach of the anti-kickback statute, the Justice Department is aggressively pursuing violations.

A Texas hospital administrator was convicted in October for his role in submitting false claims to Medicare for the treatment of people with severe mental illness. Evidence at the trial showed that he and others had paid kickbacks to “patient recruiters” who sent Medicare patients to the hospital.

The owner of a Florida pharmacy pleaded guilty last month for his role in a scheme to pay kickbacks to Medicare beneficiaries in exchange for their promise to fill prescriptions at his pharmacy.

The Justice Department in April accused Insys Therapeutics of paying kickbacks to induce doctors to prescribe its powerful opioid painkiller for their patients. The company said in August that it had reached an agreement in principle to settle the case by paying the government $150 million.

The line between patient assistance and marketing tactics is sometimes vague.

This month, the inspector general of the Department of Health and Human Services refused to approve a proposal by a drug company to give hospitals free vials of an expensive drug to treat a disorder that causes seizures in young children. The inspector general said this arrangement could encourage doctors to continue prescribing the drug for patients outside the hospital, driving up costs for consumers, Medicare, Medicaid and commercial insurance.

 

 

 

Los Angeles hospital closes, lays off all 638 employees

https://www.beckershospitalreview.com/finance/los-angeles-hospital-closes-lays-off-all-638-employees.html

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Pacific Alliance Medical Center in Los Angeles, which provided care for more than 150 years, closed Nov. 30.

The hospital, which was originally slated to close Dec. 11, cited the costs of retrofitting its facilities to meet California’s seismic standards as the reason for the closure. The hospital said it lacked a financially responsible way to make the required updates.

“PAMC does not own the land on which our hospital sits, and the owner is unwilling to sell the land to us,” the hospital said in a statement to Becker’s Hospital Review in October. “The hospital building does not meet current California seismic standards, and it is not economically viable for us to invest nearly $100 million to build a hospital on land that we would not own.”

A California Worker Adjustment and Retraining Notification Act notice dated Oct. 9 indicated all 638 of the hospital’s employees would be laid off when the hospital shut down. The hospital confirmed that number in its closure announcement.

In addition to the challenges related to the seismic requirements, Pacific Alliance Medical Center faced a few other major hurdles in the months leading up to its closure. In June, the hospital and its parent company agreed to pay $42 million to resolve allegations they violated the False Claims Act, Anti-Kickback Statute and Stark Law. The companies allegedly had improper financial relationships with certain physicians and billed Medicare and California’s Medicaid program for services provided to patients referred to Pacific Alliance Medical Center. In August, the hospital announced it was recovering from a ransomware attack that compromised the protected health information of 266,123 patients.

Broward Health counter-sues former CEO: 5 things to know

https://www.beckershospitalreview.com/legal-regulatory-issues/broward-health-counter-sues-former-ceo-5-things-to-know.html

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Fort Lauderdale, Fla.-based Broward Health’s ex-CEO Pauline Grant sued her former employer in December 2016. The health system fired back in a counter-suit filed Dec. 1, alleging Ms. Grant violated the Anti-Kickback Statute.

Here are five things to know about the litigation.

1. North Broward Hospital District, which does business as Broward Health, claims Ms. Grant violated the system’s code of conduct by serving as secretary of the board of directors of a long-term care provider that had contracts with Broward Health, according to the Sun Sentinel.

2. The health system alleges Ms. Grant’s position on the board violated the terms of a corporate integrity agreement the hospital district entered into with the federal government in 2015. The agreement was put into place after Broward Health paid $69.5 million in September 2015 to settle allegations it violated the False Claims Act by holding improper financial relationships with physicians.

3. Broward Health also claims Ms. Grant violated the Anti-Kickback Statute while she was CEO of Broward Health North in Deerfield Beach, Fla., one of the health system’s six hospitals.

4. Broward Health’s board voted 4-1 on Dec. 1, 2016, to fire Ms. Grant. The board voted to remove Ms. Grant from her position after an independent counsel review showed potential violations of the Anti-Kickback Statute. A subsequent independent investigation found Ms. Grant “ran afoul” of federal anti-kickback law when awarding emergency room contracts to orthopedic physicians seeking to participate in Broward Health North’s on-call emergency department rotation.

5. Following her ouster, Ms. Grant sued Broward Health, accusing the system’s general counsel and four board members of violating the Florida open-meetings law to bring about her termination.

 

Dallas lab company accused of paying kickbacks fights to keep its federal licenses

https://www.dallasnews.com/news/crime/2017/09/04/dallas-lab-company-accused-paying-kickbacks-fights-keep-federal-licenses

Erik Bugen, defendant in medical kickback scam case.(Linkedin/Linkedin)

Erik Bugen, defendant in medical kickback scam case.

An embattled Dallas laboratory company accused of masterminding a $100 million fraud through bribes and kickbacks is fighting to keep its licenses to stay in business, according to a federal civil lawsuit.

Lawyers for Next Health and Medicus Laboratories filed a lawsuit on Aug. 18 against state and federal officials and agencies, seeking a temporary restraining order and injunction to stop them from suspending or revoking the company’s federal laboratory licenses.

Such a move would effectively put them out of business, the lawsuit says. Federal inspectors said they found regulatory violations without offering specifics, according to Next Health’s lawsuit.

That’s not the company’s only concern.

Two of Next Health’s principals, Andrew Hillman and Semyon Narosov, are currently facing federal bribery and kickback charges along with 19 others in connection with the former doctor-owned hospital chain Forest Park Medical Center. Prosecutors say the hospital paid about $40 million in bribes and kickbacks in exchange for patient referrals that generated $200 million in paid claims.

The $100 million fraud allegation against Next Health comes from a lawsuit UnitedHealthcare filed in February against the company, with allegations similar to those in the criminal case. The insurer alleges that Next Health paid bribes and kickbacks to doctors and other providers between 2011 and 2016 for overpriced and unnecessary drug and genetic tests.

Legal observers say laboratories are under intense federal scrutiny due to concerns that some are paying doctors to order genetic and drug tests that aren’t medically necessary.

Four Austin men, for example, were indicted in Dallas in July, accused of paying kickbacks to physicians for ordering bogus urine tests at North Texas labs. Another Texas lab company, Sky Toxicology, is fighting similar allegations from UnitedHealthcare in a lawsuit in San Antonio. Sky lawyer David Navarro said, “We intend to pursue our claims and vigorously defend against United’s counterclaims.”

Jeffrey Baird, a health care attorney in Amarillo, said many new testing labs have opened across the nation over the past two years. He said he advises his clients not to pay marketers any commissions to find specimens for testing due to the federal anti-kickback law.

“Anytime somebody figures out that a government program is paying money for something, you’re going to have folks try to figure out how to access that money,” he said.

Once federal authorities shut down one abusive practice, fraudsters figure out another way to bill for unnecessary medical services, he added. “It’s whack-a-mole. It’s almost this cat-and-mouse game,” Baird said.

Next Health is the majority owner of Medicus, a clinical testing laboratory that became a Medicare provider in 2010, court records say. UnitedHealthcare says in its lawsuit that Hillman and Narosov control Next Health.

Medicus in 2014 paid $5 million to settle a federal civil complaint that it defrauded Medicare over urine testing services. Next Health says Medicus has stopped certain testing “out of an abundance of caution” and also ceased operations at four other labs it owns because of the latest controversy.

Government overreach?

Next Health and Medicus allege that state and federal officials have a “premeditated intent to shut down the plaintiff’s business operations” and are not following their own rules and procedures.

Company representatives could not be reached for comment. But in court documents, they say they were not given time to correct “alleged deficiencies.”

A team of state and federal inspectors arrived at Medicus’ laboratory in April for a five-day inspection, reportedly in response to an anonymous complaint, the lawsuit said. The team also inspected five other labs owned in part by Next Health, the lawsuit said.

Next Health’s chief compliance officer, who accompanied the inspectors, noticed a copy of an email left in plain sight from one team member to others, saying the labs had received ample media attention and that the inspectors needed to find a way to pursue a “complaint investigation,” the lawsuit said.

“Defendants’ employees and agents were instructed to make findings that would close down plaintiffs’ operations before they even went to plaintiff’s laboratories,” the suit says.

The email is proof, the lawsuit says, that the inspection was not due to a complaint but part of an effort to shut down Medicus’ lab and prevent Next Health from running any other labs “through a regulatory ban.”

A May 10 letter from the Centers for Medicare & Medicaid Services to Next Health and Medicus officials — appended in the lawsuit — said inspectors found problems with testing.

“Your laboratory demonstrated systemic and pervasive problems throughout the laboratory which has led to the findings of immediate jeopardy,” the letter says.

A finding of immediate jeopardy allows CMS to suspend, limit or revoke a laboratory’s license to operate without a hearing or opportunity for the lab to refute the allegations, the lawsuit says.

A CMS representative said the agency does not comment on pending lawsuits.

Federal charges

It’s not the first time Hillman has been in trouble with the law over alleged health care fraud.

In 2005, Hillman and his high school friend, Jason White, were indicted on mail fraud and health care fraud charges for an alleged scheme to defraud workers’ compensation insurance companies by getting them to pay for unnecessary medical equipment.

The following year, the U.S. attorney’s office in Dallas dropped the charges against Hillman after White took blame for the fraud and said Hillman had nothing to do with it, according to court records. That came after White had already pleaded guilty to conspiring with Hillman to commit the fraud, court records show.

Hillman was indicted for a second time in November — in the Forest Park Medical case — along with Narosov, a licensed physical therapist.

The indictment says the hospital paid Hillman and Narosov about $190,000 in kickbacks and bribes for referring patients to Forest Park Medical for surgeries and other procedures.

Both men have pleaded not guilty in that case and have filed a motion to dismiss the indictment. Attorneys for Hillman and Narosov said in court filings that their clients are not part of the alleged conspiracy and that the five-year statute of limitations bars charges against their clients in the case.

Narosov’s lawyer declined to comment. Hillman and Next Health and their lawyers could not be reached for comment.

Gift cards for urine

One of Next Health’s former marketing contractors was implicated in an unrelated criminal case involving an alleged laboratory kickback scheme.

Erik Bugen, of Austin, was indicted in July. Prosecutors say a company he co-founded, the ADAR Group, drummed up unnecessary tests for different labs and got the military’s health care system, Tricare, to pay for them. Soldiers were given Wal-Mart gift cards in exchange for providing saliva and urine, the criminal filing said.

Bugen has pleaded not guilty. He and his lawyer could not be reached.

The ADAR Group also found specimens for Next Health by giving people $50 gift cards to urinate in cups at Whataburger restrooms, according to the UnitedHealthcare lawsuit. Next Health labs conducted the tests under the guise of a “wellness study,” the lawsuit alleges.

Next Health lawyers have filed a motion to dismiss the lawsuit, saying UnitedHealthcare has failed to show any evidence of fraud.

“UHC has failed to allege any facts demonstrating a ‘meeting of the minds’ necessary to establish a claim for ‘conspiracy to commit fraud,’” said Ernest Martin Jr., one of the Next Health’s attorneys, in the filing.

Martin said doctors referring specimens for testing at the Next Health labs “exercise independent professional judgment in determining what testing services are appropriate and necessary.”

A Surprising Place to Find Anti-Kickback Rules

http://www.medpagetoday.com/MeetingCoverage/HIMSS/63409?xid=nl_mpt_DHE_2017-02-25&eun=g885344d0r&pos=4

Image result for A Surprising Place to Find Anti-Kickback Rules

Some aspects of EHRs, telemedicine might technically be illegal.

Federal anti-kickback laws may be old, but they’re still relevant, even with something very modern like health information technology (IT), Scott Grubman, JD, said here Thursday at the annual meeting of the Healthcare Information and Management Systems Society (HIMSS).

“So much technology in the healthcare space is to facilitate referrals,” such as when one provider transmits information to another, said Grubman, an attorney at Chilivis, Cochran, Larkins & Bever, in Atlanta. “If those referrals wind up being reimbursed by a federal healthcare program, a company can violate the anti-kickback statute.”

An 82-Year-Old Law

The anti-kickback statute, a version of which was first passed in 1935 and has been amended several times since with the introduction of Medicare and Medicaid, prohibits anyone from “knowingly and willfully paying, offering, soliciting, or receiving remuneration” in return for referring patients to services that are paid for by Medicare, Medicaid, and other federal healthcare programs.

The statute not only prohibits payments to providers, but also prohibits remuneration to beneficiaries, which means services like telemedicine and electronic health records (EHRs) might also be involved, Grubman noted.

Although the government says it wants to encourage technology growth in healthcare, “unfortunately sometimes what they don’t realize is that regulations that have been on the books for years — and are still applicable — don’t mesh well with the explosion of healthcare technology.”

There are two ways technology could be implicated in violations of the anti-kickback rule, he continued. The first way is if technology is being given to a provider to be used to actually issue the referrals that are implicated in the act — in bygone days this would mean if physicians are given fax machines to fax referral orders for which they get bonuses.

“There is lots of guidance [in the rule] that’s related to fax machines, so we have to figure out how to apply [the fax machine guidance] to the provision of tablets or electronic health records [to doctors],” he said.

The second way is if a technology that is used in any way to facilitate referrals — such as to provide the medical information to justify a referral order. “So if there’s technology that can facilitate a referral between a physician and a hospital, or between a hospital and pathology lab, that technology potentially implicates the anti-kickback statute.”

Regulatory, Legal Uncertainties Are Barriers To Value-Based Agreements For Drugs

http://healthaffairs.org/blog/2016/11/04/regulatory-legal-uncertainties-are-barriers-to-value-based-agreements-for-drugs/

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The past several years have seen an increasing number of new and innovative therapies entering the drug market. Many of these are precision medicines developed to treat a narrowly defined patient population, often with a previously unmet need. These treatments have demonstrated success in improving quality of life and other important health outcomes among indicated patients in clinical trials, but there is uncertainty about patient response rates in real-world settings. These uncertainties have led payers to express concerns about the costs of some new medicines and to implement policies to control patients’ access to those medicines, such as higher cost sharing, health technology assessments, and step therapy (which requires patients to try certain, often less expensive medications before progressing to costlier drugs). This creates a potential problem, as delays in receiving health care, whether due to step therapy or other factors, can be detrimental to patient health outcomes.

Performance-based risk-sharing arrangements (PBRSAs) and value-based agreements (VBAs) have received attention of late because of the flexibility they give private payers, providers, and biopharmaceutical companies to better understand the value of new medicines and align payment with it. By tying payment to real-world outcomes, these arrangements—collectively referred to in this post as VBAs—have the potential to support patients’ prompt and affordable access to new, innovative treatments while also addressing payers’ cost concerns.

Despite considerable interest from stakeholders on both sides of the negotiations, there were few successful examples of VBAs in the U.S. until very recently: Between 1993 and 2013, there were fewer than 20 VBAs executed in the U.S. However, more of these arrangements have recently been announced, although they remain rare, and payers are expressing increased interest.

The academic literature provides information about some of the existing agreements and suggests possible barriers to their execution, but it leaves many questions unanswered. We conducted two-part interviews with a group of five stakeholders regarding their experience with these types of contracts. All respondents had direct experience developing and negotiating VBAs, four as representatives of private insurers and pharmacy benefit managers, and one on behalf of a large pharmaceutical firm launching branded products.

The interviews focused on respondents’ overall perceptions and expectations of VBAs, barriers to adoption, and possible solutions to those barriers (see note 1). In order to solicit unbiased responses, the interviews were double blinded: the sponsor of the research was not revealed to interviewees, and the identity of respondents is not known by the sponsor. We conducted the initial interviews during the summer of 2015 and followed up with the respondents this fall (2016) to understand how perception of VBAs and the barriers to them may have shifted.

7 ways Stark and Anti-Kickback laws hurt hospital care coordination

http://www.fiercehealthcare.com/healthcare/7-ways-stark-and-anti-kickback-laws-hurt-care-coordination

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Click to access barrierstocare-full.pdf

http://www.finance.senate.gov/imo/media/doc/Stark%20White%20Paper,%20SFC%20Majority%20Staff.pdf?utm_medium=nl&utm_source=internal

Anti-kickback and anti-fraud regulations, such as the Stark Law, have the unintended consequence of major barriers to care coordination, according to a new report from the American Hospital Association (AHA).

The passage last year of the Medicare Access and CHIP Reauthorization Act (MACRA) removed one regulatory barrier to care but called on legislative groups to make recommendations for removing other similar obstacles. The AHA report identifies seven barriers created by the Anti-Kickback Statute and Stark Law. These barriers, according to the report, obstruct:

  • The sharing of electronic health records
  • Incentives for efficiency and effective treatment
  • Collaboration to ensure coordinated care at discharge
  • Assistance for patients to keep themselves healthy after returning home
  • Assistance with discharge planning
  • Alignment of incentives in services of better outcomes
  • Rewards for team-based care that incorporates non-physician clinicians

The report also calls for numerous legislative solutions to these obstacles. For example, Congress should develop “safe harbors” under the Anti-Kickback law, both to protect shared savings and incentive programs and to develop the assistance patients need to recover. Current rules on safe harbors and exceptions, the report states, “are not in sync with the collaborative models that reward value and outcomes.” Legislators should also refocus the Stark Law to align it with its original purpose of regulating compensation agreements, report authors write.

The report comes around the same time as a report from the Senate Finance Committee on ways to improve the Stark Law. The suggestions range from establishing new exceptions and waivers for risk revenue to loosening current restrictions on waivers. Others consulted for the report, however, argued that expanding exceptions would only further complicate the regulatory framework and repealing the law entirely would be a better option.

Tenet Healthcare agrees to plead guilty in Atlanta kickback scheme, will pay $514 million

http://www.bizjournals.com/atlanta/news/2016/08/01/tenet-healthcare-agrees-to-plead-guilty-in-atlanta.html

Atlanta Medical Center, previously one of Tenet Healthcare’s Georgia hospitals, was involved in the scheme.

Tenet Healthcare Corp. (NYSE: THC) said Monday that it believes it has reached an agreement in principle with the government to resolve a long-running criminal investigation and civil litigation about a kick-back scandal involving an Atlanta medical clinic and three of the company’s Atlanta-area hospitals.

Dallas-based Tenet said it has agreed to pay $514 million, has agreed to the appointment by the U.S. Department of Justice of a corporate monitor for a period of three years, and has agreed for two wholly owned subsidiaries that previously operated Atlanta Medical Center and North Fulton Hospital to each plead guilty to a single-count indictment. The settlement will be with the U.S. Department of Justice, the U.S. Attorneys’ Offices for the Northern and Middle Districts of Georgia, and the Georgia Attorney General’s Office.

“The agreement in principle contemplates, among other things, payment by the company of $513,788,345, which is comprised of a civil monetary payment of $368,000,000 and a criminal monetary payment of $145,788,345,” Tenet reported Monday.

The company’s two subsidiaries will plead guilty to a single count of conspiracy to violate the federal anti-kickback statute and defraud the United States, Tenet reported.