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.
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.
A North Carolina-based physician and part owner of a proposed medical center in southern Chesapeake is facing allegations of involvement in a kickback scheme.
The U.S. Attorney’s Office in Minnesota is pursuing a civil action against Jitendra Swarup, an ophthalmologist at Albemarle Eye Center in Elizabeth City, N.C., a spokeswoman said Friday. She said the government’s complaint would be filed by a court-mandated mid-November deadline.
Swarup was among more than a dozen physicians and four companies listed as defendants in a 2015 complaint lodged by a “whistleblower” and former executive of Sightpath Medical. The lawsuit alleges physicians were bribed through travel, entertainment and “sham consultancy agreements” to use Sightpath products and services.
The company and its former CEO, James Tiffany, settled with the government and the whistleblower recently for $12 million, according to the U.S. Attorney’s Office in Minnesota and court documents. The 2015 complaint, which was originally filed in 2013, claimed, among other things, that Sightpath paid Swarup consulting fees to induce referrals.
“We intend to vigorously defend Dr. Swarup, and we believe he will be completely exonerated,” Swarup’s lawyer, Marc Raspanti, said Friday. Raspanti said no criminal charges have been filed, and there is no criminal investigation. The spokeswoman in Minnesota wouldn’t comment on the existence of a criminal investigation, but to date, there has not been a criminal charge issued, she said.
Raspanti, a Philadelphia-based attorney, said he is “cautiously optimistic” the government can be persuaded to “spend their time elsewhere.”
Swarup and Chesapeake ophthalmologist Paul Griffey want to build an outpatient surgery center on about 1.5 vacant acres off Carmichael Way in Edinburgh. Twelve surgeons are committed to what’s being called the Center for Visual Surgical Excellence, Griffey told council members last week. Services would include cataract, retinal and other surgeries, city planning documents say.
According to a certificate of public need issued for the center last month by the Virginia Department of Health, the capital costs of the project are $3.7 million, with financing costs of $1.4 million. It’s scheduled for completion by October 2018. A condition of the state’s certificate is that the center must provide “an appropriate level” of charity services, according to department documents.
City staff and the Planning Commission have recommended approval of a conditional-use permit. City Attorney Jan Proctor said Friday the City Council is aware of the civil lawsuit, but it is not a factor in the land-use issue.
“Dr. Swarup vigorously denies the allegations, and they provide no basis to deny the (permit) whether or not true,” Grady Palmer, the attorney for the project, wrote in an email to council members Sept. 1. The council will consider the proposal tonight.
Swarup, a Suffolk resident, told council members last week that he’s been practicing for 20 years in northeastern North Carolina, where Albemarle Eye Center has five offices, including two on the Outer Banks. He is licensed in Virginia and North Carolina, according to state medical board websites, and is affiliated with hospitals in both states.
Settlement documents say Sightpath Medical supplies medical facilities with products that ophthalmologists use for surgeries in ambulatory surgical centers and hospitals.
Federal payers, including Medicare, reimburse the facilities and the physicians, documents said. Sightpath offered and paid illegal remuneration to physicians to promote the use of its products and services, which resulted in the submission of false claims, the settlement documents said.
The 2015 complaint contends that Swarup began receiving $8,000 a month around 2002 as a consultant for Sightpath, but that he “does not perform commercially reasonable services for these payments.”
Instead, the payments were made to gain Swarup’s business in North Carolina and induce referrals, the documents say. Swarup sought these payments, which continued until at least 2008, as a “quid pro quo for arranging for hospital administrations to utilize Sightpath’s services and equipment,” court documents say.
Swarup was also a guest of a company executive on at least one “luxury” fishing trip to Budd’s Gunisao Lake Lodge in Manitoba, Canada, in 2006, according to the 2015 complaint.
Raspanti said Swarup was a consultant for Sightpath from 2002 or 2003 to late 2014, but Sightpath is still contracted with hospitals in which Swarup operates. He said most of those facilities had contracts with the medical service provider before Swarup came to North Carolina to practice.
Swarup made roughly $80,000 a year in consulting fees with Sightpath, Raspanti said, which included discussions on ways to improve products and services and the training of technicians who assisted Swarup with his procedures.
“The contract, as far as we’re concerned, was legal and honored for many years by both sides,” Raspanti said. It was neither unusual nor inappropriate, he said, and contracts like it exist in other medical disciplines.
There were “half a dozen trips” over the course of Swarup’s contract with Sightpath, Raspanti said. Swarup paid for some and contributed to others, and most were requested by Sightpath executives and were part of Swarup’s contractual obligation. Executives also visited Swarup at his North Carolina home, Raspanti said.
“Just because you see an allegation doesn’t mean it’s true,” Raspanti said, noting there have been “no allegations of inappropriate surgeries, no allegations of lack of medical necessity, no allegations of bad medical outcomes.” He said Swarup has not been excluded from Medicaid or Medicare or any private insurance company.
Raspanti, a health care lawyer for many years, said his client – the only local doctor named in the 2015 complaint – has been targeted because he is an active and prolific surgeon. Raspanti said he has told Swarup to do whatever he needs to do to run his practice, including his pursuit of a new venture.
“I have told him to move full speed ahead on it,” Raspanti said.
While the CMS has talked negatively about the Affordable Care Act (ACA), CMS Administrator Seema Verma is a big fan of MA. Verma (a candidate for HHS secretary in the wake of Tom Price’s departure) said MA and Medicare Part D “demonstrate what a strong and transparent health market can do — increase quality while lowering costs.”
Payers are enjoying positive financial numbers in the MA market. UnitedHealth Group said recently that it believes eventually half of all Medicare beneficiaries will have an MA plan. Payers are looking at the MA market for growth opportunities. In some cases, payers, such as Humana, are cutting back on ACA plans and investing more in MA.
Despite the CMS’ overall support of MA, the agency still sees one way to improve the program. The CMS wants MA payers to provide current and accurate information about their providers. The CMS found that 45% of MA provider directories had incorrect information, such as listing which providers are taking new patients, or providing the wrong phone numbers and addresses.
Currently, the CMS can only review MA plans’ provider networks when there is a triggering event. This can include when the insurance company starts in MA or extends its coverage, or the CMS receives a complaint about provider network issues. The CMS wants to have more oversight over provider network information, so that it can ensure the information is up to date.
While MA plans have been popular with the CMS, members and payers, there is a concern about a small number of payers monopolizing the market. The Kaiser Family Foundation said UnitedHealth controls nearly one-quarter of the MA market and is a major MA player in 42 states and the District of Columbia. KFF found UnitedHealth, Humana and Blue Cross Blue Shield affiliates make up 57% of MA enrollment and the top eight MA payers comprise three-quarters of the market.
Another issue for MA payers is that federal investigators are concerned about how much MA is paying insurers. The Department of Justice (DOJ) is investigating payments to insurance companies involved with MA.
Two of the bigger cases involve UnitedHealth. The payer is involved in two whistleblower lawsuits that allege MA overpaid the insurer by billions. The DOJ joined the lawsuits, which allege that UnitedHealth changed diagnosis codes to make patients seem sicker, which resulted in higher reimbursements to the insurer.
The CMS estimated that it overpaid $14.1 billion in 2013 to MA organizations. Medicare Advantage payers received about $160 billion in 2014. The CMS estimated about 9.5% of those payments were improper.
United Healthcare Services Inc., which runs the nation’s largest private Medicare Advantage insurance plan, concealed hundreds of complaints of enrollment fraud and other misconduct from federal officials as part of a scheme to collect bonus payments it didn’t deserve, a newly unsealed whistleblower lawsuit alleges.
The suit, filed by United Healthcare sales agents in Wisconsin, accuses the giant insurer of keeping a “dual set of books” to hide serious complaints about its services and of being “intentionally ineffective” at investigating misconduct by its sales staff. A federal judge unsealed the lawsuit, first filed in October 2016, on Tuesday.
The company knew of accusations that at least one sales agent forged signatures on enrollment forms and had been the subject of dozens of other misconduct complaints, according to the suit. In another case, a sales agent allegedly engaged in a “brazen kickback scheme” in which she promised iPads to people who agreed to sign up and stay with the health plan for six months, according to the suit.
Though it fired the female sales agent, United Healthcare concluded the kickback allegations against her were “inconclusive” and did not report the incident to the Centers for Medicare & Medicaid Services, according to the suit.
Asked for comment on the allegations in the suit, United Healthcare spokesman Matt Burns said: “We reject them.”
Medicare serves about 56 million people, both people with disabilities and those 65 and older. About 19 million have chosen to enroll in Medicare Advantage plans as an alternative to standard Medicare. United Healthcare is the nation’s biggest operator, covering about 3.6 million patients last year.
The whistleblowers accuse United Healthcare of hiding misconduct complaints from federal officials to avoid jeopardizing its high rankings on government quality scales. These rankings are used both as a marketing tool to entice members and as a way for the government to pay bonuses to high-quality plans.
Medicare paid United Healthcare $1.4 billion in bonuses in fiscal 2016 based upon their high quality ratings, compared with $564 million in 2015, according to the suit. CMS relies on the health plans to report problems and does not verify the accuracy of these reports before issuing any bonus payments.
The suit alleges the bonuses were “fraudulently obtained” because the company concealed the true extent of complaints. In March 2016, for instance, the company advised CMS only of 257 serious complaints, or about a third of the 771 actually logged, according to the suit.
The suit was filed by James Mlaker, of Milwaukee, a sales agent with the insurance plan in Wisconsin, and David Jurczyk, a resident of Waterford, Wis., a sales manager with the company.
The suit says Jurczyk had access to “dual” complaint databases, described as “the accurate one with a complete list of complaints and more details of the offenses and the fraudulent, truncated one provided to CMS.”
Jurczyk “has direct, personal knowledge of dozens of cases in Wisconsin alone in which customer complaints raising serious issues were routinely determined and falsely documented as either “inconclusive” or “unsubstantiated” by the company, according to the suit. Overall, about 84 percent of complaints alleging major infractions, such as forging signatures on enrollment forms, were determined to be inconclusive or unsubstantiated, according to the suit.
According to Mlaker, one sales agent faced little disciplinary action even after allegedly forging a customer’s signature on an enrollment form. The customer was “shocked” to learn that the agent had enrolled him because he had told the agent he was “not interested and did not want to enroll,” according to the complaint.
As a result, according to the suit, CMS officials never learned of these customer complaints.
The two men said that in early 2013 they began noticing that investigations of serious customer complaints that previously would have been completed “swiftly” instead “were drawn out; little actual inquiry was made, or even worse, known facts were ignored and discounted to falsify findings,” according to the suit.
Complaints also brought “much fewer and less serious corrective or disciplinary actions,” according to the suit. According to the suit, United Healthcare took steps to encourage any members with complaints to report them directly to the company rather than to complain to CMS.
The unsealing of the Wisconsin cases comes as United Healthcare and other Medicare Advantage plans are facing numerous cases brought under the Federal False Claims Act. At least a half-dozen of the whistleblower suits have surfaced since 2014.
The law allows private citizens to bring actions to recover damages on behalf of the federal government and retain a share. The Justice Department elected not to take over the Wisconsin case, which could limit the amount of money, if any, recovered. United Healthcare spokesman Burns said the company agreed with that decision.
In May, the Justice Department accused United Healthcare of overcharging the federal government by more than $1 billion by improperly jacking up risk scores over the course of a decade.
The Department of Justice has joined a whistleblower lawsuit against UnitedHealth Group and subsidiary WellMed Medical Management, claiming the insurer allegedly defrauded Medicare of hundreds of millions in risk adjustment payments.
UnitedHealth Group is accused of improperly inflating risk scores for Medicare Part C managed care and Part D prescription drug payments by claiming its members were treated for conditions they either did not have or were not treated for, according to the lawsuit.
The suit was originally brought in 2011 by a whistleblower through attorney Constantine Cannon in San Francisco.
The civil case names UnitedHealth Group, WellMed Medical Management, Health Net, Arcadian Management Services, Tufts Associated Health Plans, Aetna, Blue Cross and Blue Shield of Florida, Blue Cross Blue Shield of Michigan, Health, Inc., EmblemHealth, Inc., Managed Health dba Healthfirst New York, Humana, Medica Holding Company, WellCare Health Plans and MedAssurant.
All of the organizations are still named as defendants in the civil case, according to Jessica Moore, co-lead counsel on the case. The DOJ intervened only in the case against UnitedHealth Group and WellMed.
From a Florida hospital settling a whistle-blower lawsuit for $12 million to six pharmaceutical executives being charged in an alleged fentanyl racketeering scheme, here are the latest healthcare industry lawsuits and settlements making headlines.