Health Care Fraud, Will I Know It When I See It?
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Government enforcement actions against health care companies are increasing. The Department of Justice has recovered more than $2 billion in health care false claims cases in each of the last five years. In 2014, the DOJ recovery was $2.3 billion. Health care fraud is an issue for any company that deals in health care, as well as for private equity firms, lenders, and underwriters. Winston health care partners Tom Mills and Marion Goldberg led an informative eLunch on what you should be aware of if you are involved in health care. Topics included: • Current government focus • Recent enforcement actions • What you should be alerted to if you are a health care company • What to look for in the diligence process if you are investing, financing, or underwriting a health care company
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Health Care Fraud, Will I Know It When I See It?
- 1. Health Care Fraud: Will I Know It When I See It? Tom Mills Marion Kristal Goldberg March 18, 2015 Brought to you by Winston & Strawn’s Health Care Practice
- 2. Today’s eLunch Presenters Tom Mills Chair, Health Care Practice Washington, D.C. TMills@winston.com Marion Goldberg Partner, Health Care Practice Washington, D.C. MGoldber@winston.com 2
- 3. DOJ Qui Tam Recoveries in FY 2014 $2,300,000,000 3
- 4. OIG Investigative Recoveries in FY 2014 $3,000,000,000 4
- 5. OIG Audit Recoveries in FY 2014 $834,700,000 5
- 6. Health Care Violations that Can Lead to a False Claims Act Case 6
- 8. Government Focus •Billing a higher level of service than is needed •SNFs – initially coding patients for higher level of therapy •Hospice – providing 24-hour care when not needed •Ambulances – providing advanced life support instead of basic life support 8
- 9. Government Focus •Billing a higher level of service than is provided •Hospitals – coding co-morbidities that are not appropriate (e.g., use of kwashiorkor) •Physical Therapy – billing for individual therapy when group therapy is provided •Durable medical equipment – billing for power wheelchairs 9
- 10. Government Focus •Providing more services than are needed •Hospitals – •Acute care hospitals – coding a patient as discharged when actually transferred to a post- acute care facility •LTAC hospitals – retaining patients until most beneficial reimbursement is reached 10
- 11. Government Focus •Providing more services than are needed •Home health – providing therapies in a “sweet spot” of reimbursement •Hospice – admitting or retaining patients who are not likely to die within 6 months 11
- 12. Government Focus •Providing unnecessary services •Ambulance – providing ambulance services when patient can be transferred in an ambulette •Physical therapy – providing services when patient cannot benefit •Dental care for children – providing stainless- steel crowns when a filling would be sufficient 12
- 13. Government Focus •Provision of items or services without a physician order or a face-to-face encounter •Home health •Hospice 13
- 14. Government Focus •Insufficient documentation – •Government view: If it’s not in the records, it didn’t happen •Can lead to refusal to pay •Can lead to accusations of upcoding 14
- 15. Government Focus •Pharmaceutical companies •Improper reporting for rebates 15
- 16. Government Focus •Pharmaceutical companies and medical device companies •Off-label marketing 16
- 17. Government Focus •Improper relationships with physicians •Cash payments for referrals •Impermissible payments based on volume or value of referrals •Sham agreements •Lack of fair market value 17
- 18. Government Focus •Quality of Care • Long-term care provider • $38 Million settlement • Substandard care • Inadequate staffing • Failure to provide necessary services • Failure to follow protocols • Government alleged that care was so grossly substandard that it was effectively worthless • Medically unreasonable and unnecessary rehabilitation services 18
- 20. Exclusion •Excluded person may not • provide items or services to any federal or state health care program beneficiary • refer any federal or state health care program beneficiary for any item or service • work for any individual or entity who receives federal or state health care program funds •Exclusion is a professional death sentence 20
- 21. Exclusion •Mandatory Exclusion • Felony conviction of criminal offense related to health care • Conviction of criminal offense related to patient neglect or abuse • Minimum 5 years 21
- 22. Exclusion •Permissive Exclusion • Misdemeanor conviction for fraud or other financial misconduct related to health care • False claims • Kickbacks • Entity controlled by an excluded individual • Individual who owns or controls an excluded entity • Improper billing • Failure to pay student loans 22
- 23. Recent Enforcement Actions •New Jersey imaging center •17 defendants (16 physicians); cash payments to physicians for referrals •$75-100/MRI; $25/ultrasound or DEXA scan •Owner radiologist and referring physicians received prison sentences 23
- 24. Recent Enforcement Actions •New Jersey clinical lab 36 defendants (24 physicians) •Cash payments for referring patients for tests •Sham leases and service agreements •Above-market leases •Payments through related companies •Some tests were not needed •Prison sentences and substantial forfeitures 24
- 25. Recent Enforcement Actions • Medical device company • $80 Million criminal and civil penalties • 20-year exclusion • Conduct • Distributed devices without FDA approval • Company was warned that distribution would be a Food, Drug & Cosmetic Act violation • Told physicians that FDA approval was not needed • Encouraged physicians to submit claims for MRIs not reimbursable – performed for company to accumulate data 25
- 26. Enforcement Actions •Florida Hospital •$85 Million civil settlement •Stark Law violations •Bonuses to physicians were tied to referrals to the hospital •Above FMV payments to physicians 26
- 27. Enforcement Actions • South Carolina hospital • $238 Million civil judgment • Stark Law violations underlying a False Claims Act case • Part-time employment contracts with 19 physicians were tied to referrals to the hospital's facilities • Required to perform surgeries at the hospital or a facility owned by it • Base salary, productivity bonus, and incentive bonus were based on hospital’s net collections for procedures (professional and technical) 27
- 28. Enforcement Actions •Home health provider • $150 Million civil settlement •Billed for services not provided •Billed highest level of service •Provision of patient care services to an oncology practice at below-FMV to induce referrals 28
- 29. Enforcement Actions •Institutional pharmacy •$124 Million settlement •Government alleged company provided below cost medication contracts for Part A patients in return for referrals for drugs for patients under Part D and Medicaid 29
- 30. Enforcement Actions •Dialysis provider •$350 Million civil settlement •Government allegations •Company sold interests in Company-owned dialysis centers to physicians at less than FMV •Company purchased interests in physician- owned dialysis centers from physicians at more than FMV 30
- 31. Enforcement Actions •Promotion of off-label use •Medical device manufacturer •$2.8 Million •Pharmaceutical manufacturer •$490.9 Million •Pharmaceutical manufacturer •$20.4 Million 31
- 32. Enforcement Actions •Personal care services provider •$35 Million settlement •Enrolled individuals not qualified for services 32
- 33. What You Should Be Alerted To If You Are A Health Care Company
- 34. Arrangements With Physicians •Is the physician providing a real service or is it “make work” 34
- 35. Arrangements With Physicians •Is the arrangement contingent on the physician referring for items and services 35
- 36. Arrangements with physicians •Is the compensation based on the volume or value of referrals 36
- 37. Arrangements With Physicians •Do you have an opinion from an independent valuation expert or some other benchmark that the compensation is at FMV 37
- 38. Arrangements With Physicians •Is the arrangement commercially reasonable (would you do it if there were no referrals) 38
- 39. Arrangements – Other Referral Sources •Do you give a break on Medicare Part A items or services in order to get referrals for Part B items or services 39
- 40. Arrangements – Other Referral Sources •Do discounts meet the Anti-Kickback discount safe harbor •Easiest safe harbor to meet 40
- 41. Joint Ventures With Physicians •Are all potential investors offered the same amount of interests or if variable interests are offered, are all physicians permitted to decide how much to purchase 41
- 42. Joint Ventures With Physicians •Is each investor making a significant investment 42
- 43. Joint Ventures With Physicians •Is there real risk 43
- 44. Joint Ventures With Physicians •Are distributions based on percentage ownership •Are there any payments based on referrals 44
- 45. Compliance •Do you have a serious compliance plan •Code of conduct •Policies and procedures •Annual training 45
- 46. Compliance •Do you actually enforce your compliance plan •Compliance officer •Hot line •Investigate complaints •Maintain files •Complaints/calls •Records of correction •Protect employees who report issues 46
- 47. Compliance •Do you have rules on salesperson expense accounts •Do you scrutinize expenditures to see if they are compliaint 47
- 48. Compliance •Do you have a culture of compliance • Would employees feel comfortable reporting a suspected violation • Most qui tam suits are filed by “disgruntled employees” • Their concerns are ignored • They are fired for raising compliance issues 48
- 49. Compliance •Are you incentivizing violations 49
- 50. Compliance •Are you willing to walk away from a transaction or arrangement that is not compliant 50
- 51. Coding •Do you do periodic coding audits •What coding error rate is permitted • 95% compliance or better should be the goal 51
- 52. Coding •What do you do if a coder’s work is substandard •Intensive scrutiny of coder’s work until target compliance is reached •Ideally, scrutiny should be on a sample before claims submission 52
- 53. Coding •What do you do with submitted claims improperly coded •If overpayments, you need to return the overpayments •Need to review beyond the audit sample •Overpayments retained more than 60 days after discovery become false claims 53
- 54. What To Look For In The Diligence Process If You Are Investing, Financing, or Underwriting A Health Care Company
- 55. •Beware of a company that has found the way to succeed in a field no one else has 55
- 56. Arrangements With Referral Sources and Referral Recipients •Review contracts or a significant sample •Is the contract commercially reasonable •Is a party obligated to receive or provide more than is required for the task 56
- 57. Arrangements With Referral Sources And Referral Recipients (cont'd) •If the referral source is required to provide certain services, does the referral recipient provide it at a reduced cost or at no charge •Is there a trade of one type of reimbursement for another (e.g., low price for Part A items/services in return for Part B items/services) •If there are multiple contracts with the same person, review them as a whole 57
- 58. Contracts with Medical Directors •Is a medical director needed •What services are provided •Is the amount of time appropriate •Is the medical director required to keep track of time and submit time sheets to be paid •How did they decide that compensation is at FMV 58
- 59. Sales Contracts •Discounts are incentives to purchase •Could be an Anti-Kickback violation •Do the discounts meet the Anti-Kickback Statute safe harbor 59
- 60. Joint Ventures •Who gets to invest •Does every investor have the same chance to invest •Do they require non-referrers to divest •Are distributions paid in proportion to ownership •Are significant amounts invested compared to distributions •Is there real risk 60
- 61. Acquisitions •Review transaction documents for health care regulatory issues • What was purchased • What are the continuing relationships • Are there earnouts with referral sources • Are there restrictions on providers 61
- 62. Investigations • Get a list of all investigations and significant audits in the past six years • Get copies of settlement agreements • Review attorney questionnaire letters • Read each subpoena or civil investigative demand for current investigations • Read important litigation documents • Ask questions about what has been provided to the government, who else has received a subpoena, what is the state of meetings with the government or relator • Ask how much money is reserved 62
- 63. Investigations •If there is a CIA, review initial report and all annual reports to the OIG •Review the IRO or monitor’s reports •Review any reportable events •Review any correspondence with the OIG 63
- 64. Committee Minutes •Review minutes of: •Audit Committee •Compliance Committee •Board of Directors/Managers 64
- 65. Compliance • Review Compliance Program (code of conduct, policies and procedures) • Review hot line logs or a significant sample • Who is the compliance officer (it should not be the inhouse counsel) • Has there been a change in compliance officers. If yes, why 65
- 66. Pharma And Device Manufacturers • Get a list of 510k clearances and FDA registrations • Check FDA web site for recalls, warning letters, etc. • If the company has had a negative inspection, ask to see the completed Form 483 66
- 67. Quality Of Care •CMS has a rating system at www.medicare.gov •Hospitals •SNFs •Home health •Dialysis •System is meant for consumers but can be helpful in diligence 67
- 68. If Numbers Are Important, Ask For Them •SNF – Percentage of patients with each number of therapy days •LTAC Hospitals – Average length of stay; percentage of patients transferred from the host hospital •Hospice – Percentage of patients living more than 180 days •IRF – Percentage of patients with qualifying conditions 68
- 69. Additional Issues • Ask about coding and compliance audits • What is the acceptable standard • Frequency, what is done with poor performers • Note, for some types of claims, if physician orders are not obtained prior to claims submission, it cannot be rectified • Review reports of negative inspections • Do they do monthly reviews of the OIG exclusion list and GSA list • Are overpayments returned within 60 days • Do they have an inhouse or outside regulatory counsel 69
- 70. Beware of “Everyone else is doing it” 70
- 71. Questions?
- 72. Thank You. Tom Mills Chair, Health Care Practice Washington, D.C. TMills@winston.com Marion Goldberg Partner, Health Care Practice Washington, D.C. MGoldber@winston.com 72