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Federal Investigations into Alleged Kickback Schemes between Hospitals and Physicians Increase in Number and Scope

Hospitals and other organizations are finding ways to pay physicians for referrals in ways that don’t always look like kickbacks

Hospitals nationwide are being scrutinized by the federal Office of the Inspector General (OIG) for allegedly violating federal anti-kickback statutes. This will be of interest to clinical pathology laboratories that have been under a similar spotlight for various referral-kickback schemes and arrangements in the last few years, which Dark Daily repeatedly covered.

Kaiser Health News (KHN) recently reported on investigations by the OIG into hospitals allegedly offering unusually high salaries and other perks to specialists because they attract highly profitable business.

In the KHN article, titled, “Hospitals Accused of Paying Doctors Large Kickbacks in Quest for Patients,” Senior Correspondent Jordan Rau describes one investigation of salaries that involved certain high-profile specialists at Wheeling Hospital, in Wheeling, W.Va.

Wheeling, KHN reported, paid one anesthesiologist $1.2 million per year, which, Rau notes, is higher than the salaries of 90% of the pain management specialists around the country. Rau went on to describe how Wheeling also paid one obstetrician-gynecologist $1.3 million per year, and a cardiothoracic surgeon $770,000 per year along with 12 weeks of vacation time.

In each of those cases, the whistleblower who prompted the qui tam investigation reported that the specialists’ various departments were frequently in the red, reported KHN.

“The problem, according to the government, is that the efforts run counter to federal self-referral bans and anti-kickback laws that are designed to prevent financial considerations from warping physicians’ clinical decisions,” wrote Rau.

Wheeling not only contests the lawsuits brought against it, but also has filed a countersuit against the whistleblower. KHN said the hospital claims “its generous salaries were not kickbacks but the only way it could provide specialized care to local residents who otherwise would have to travel to other cities for services such as labor and delivery that are best provided near home.”

“We are confident that, if this case goes to a trial, there will be no evidence of wrongdoing—only proof that Wheeling Hospital offers the Northern Panhandle Community access to superior care, [and] world class physicians and services,” KHN reported Gregg Warren (above), Vice President of Marketing and Public Relations at Wheeling Hospital, saying in a statement. (Photo copyright: LinkedIn.)

OIG’s Fraud and Abuse Laws: A Roadmap for Physicians

The KHN article mentions five laws the OIG lists on its website that are particularly important for physicians to be aware of. They include the:

  • False Claims Act: states that it’s illegal to file false Medicare or Medicaid claims.
  • Anti-Kickback Statute: states that paying for referrals is illegal, that physicians can’t provide free or discounted services to uninsured people, and that money and gifts from drug and device makers to physicians are prohibited.
  • Stark Law(physician self-referral): says that referrals to entities with whom the physician has a familial or financial relationship are off-limits.
  • Exclusion Statue: describes who cannot participate in federal programs, such as Medicare.
  • Civil Monetary Penalties Law: authorizes the Secretary of Health and Human Services, which operates the OIG, to impose penalties in cases of fraud and abuse that involve Medicare or Medicaid.

“Together, these rules are intended to remove financial incentives that can lead doctors to order up extraneous tests and treatments that increase costs to Medicare and other insurers and expose patients to unnecessary risks,” KHN said.

Other Hospitals Under Investigation

Wheeling Hospital is not the only healthcare institution facing investigation. The Dallas Morning News (DMN) reported on a case involving Forest Park Medical Center (FPMC) in Dallas that resulted in the conviction of seven defendants, including four doctors. Prosecutors outlined the scheme in court, saying that FPMC illegally paid for surgeries.

“Prosecutors said the surgeons agreed to refer patients to the Dallas hospital in exchange for money to market their practices,” DMN reported, adding “Patients were a valuable commodity sold to the highest bidder, according to the government.” 

One of the convicted physicians, Michael Rimlawi, MD, told DMN, “I’m in disbelief. I thought we had a good system, a fair system.” His statement may indicate the level to which some healthcare providers at FPMC did not clearly understand how anti-kickback laws work.

“The verdict in the Forest Park case is a reminder to healthcare practitioners across the district that patients—not payments—should guide decisions about how and where doctors administer treatment,” US Attorney Erin Nealy Cox told DMN.

Know What Is and Is Not a Kickback

Both the Wheeling Hospital investigation and the Forest Park Medical Center case make it clear that kickbacks don’t always look like kickbacks. Becker’s Hospital Review published an article titled “Four Biggest Anti-Kickback Settlements Involving Hospitals in 2018” that details cases in which hospitals chose to settle.

These four incidents involved hospitals in Tennessee, Montana, Pennsylvania, and New York. This demonstrates that kickback schemes take place nationwide. And they show that violations of the Stark Law, the False Claims Act, and the Anti-Kickback Statute can happen in numerous ways.

Whether in a clinical laboratory or an enterprisewide health network, violating laws written to prevent money—rather than appropriate patient care—from being the primary motivator in hiring decisions, may result in investigation, charges, fines, and even conviction.

“If we’re going to solve the healthcare pricing problem, these kinds of practices are going to have to go away,” Vikas Saini, MD, President of the Lown Institute, a Massachusetts nonprofit that advocates for affordable care, told KHN.

Though these recent OIG investigations target hospitals, clinical laboratory leaders know from past experience that they also must be vigilant and ensure their hiring practices do not run afoul of anti-kickback legislation.

—Dava Stewart

Related Information:

Hospitals Accused of Paying Doctors Large Kickbacks in Quest for Patients

A Roadmap for New Physicians: Fraud and Abuse Laws

Surgeons, hospital owner convicted in massive kickback scheme involving Forest Park Medical Center

Four Biggest Anti-Kickback Settlements Involving Hospitals in 2018

Clinical Laboratory Compliance Practices Under Pressure as Federal Spotlight Is Aimed at Common Fraud and Abuse Schemes; Penalties for Violations Surge

Biodiagnostic Laboratory Services Leaders Sentenced to Prison in $100-Million Lab Test Kickback Scheme That Also Led to Convictions of 38 Physicians Does New Opioid Law Require Clinical Laboratories to Change How They Pay Sales Employees?

DOJ Pursues Organizations That Falsely Claim Compliance with Medicare’s EHR Incentive Programs

Clinical laboratories that interface with hospital EHR systems under scrutiny by the DOJ could be drawn into the investigations

Officials at the federal US Department of Justice (DOJ) continue to pursue fraud cases involving health systems that allegedly have falsely attested to complying with the Medicare and Medicaid electronic health record (EHR) adoption incentive programs (now known as the Promoting Interoperability Programs).

This is important for clinical laboratory leaders to watch, because medical labs often interface with hospital EHRs to exchange vital patient data, a key component of complying with Medicare’s EHR incentive programs. If claims of interoperability are shown to be false, could labs engaged with those hospital systems under scrutiny be drawn into the DOJ’s investigations?

Violating the False Claims Act

In May, Coffey Health System (CHS), which includes Coffey County Hospital, a 25-bed critical access hospital located in Burlington, Kan., agreed to pay the US government a total of $250,000 to settle a claim that it violated the False Claims Act.

CHS’ former CIO filed the qui tam (aka, whistleblower) lawsuit, which allows individuals to sue on behalf of the government and share in monetary recovery. He alleged that CHS provided false information to the government about being in compliance with security standards to receive incentive payments under the EHR Incentive Program.

According to a DOJ press release, “the United States alleged that Coffey Health System falsely attested that it conducted and/or reviewed security risk analyses in accordance with requirements under a federal incentive program for the reporting periods of 2012 and 2013. The government contended that the hospital submitted false claims to the Medicare and Medicaid Programs pursuant the Electronic Health Records (EHR) Incentive Program.”

“Medicare and Medicaid beneficiaries expect that providers ensure the accuracy and security of their electronic health records,” said Stephen McAllister (above), United States Attorney for the District of Kansas, in the DOJ press release. “This office remains committed to protecting the federal health programs and to hold accountable those whose conduct results in improper payments.” (Photo copyright: US Department of Justice.)

How Providers Receive EHR Incentive Program Funds

The original EHR Adoption Incentive Program was part of the Health Information Technology for Economic and Clinical Health (HITECH) Act. The federal government enacted the program as part of the American Recovery and Reinvestment Act of 2009 (the Recovery Act), which was an amendment to the Health Insurance Portability and Accountability Act (HIPAA). 

The Recovery Act allocated $25 billion to incentivize healthcare professionals and facilities to adopt and demonstrate meaningful use (MU) of electronic health records by January 1, 2014. The federal Centers for Medicare and Medicaid Services (CMS) released the incentive funds when providers attested to accomplishing specific goals set by the program.

The website of the Office of the National Coordinator for Health Information Technology (ONC), HealthIt.gov, defines “meaningful use” as the use of digital medical and health records to:

  • Improve quality, safety, efficiency, and reduce health disparities;
  • Engage patients and their families;
  • Improve care coordination and population and public health; and
  • Maintain privacy and security of patient health information.

The purpose of the HITECH Act was to address privacy and security concerns linked to electronic storage and transference of protected health information (PHI). HITECH encourages healthcare organizations to update their health records and record systems, and it offers financial incentives to institutions that are in compliance with the requirements of the program.

When eligible professionals or eligible hospitals attest to being in compliance with Medicare’s EHR incentive program requirements, they can file claims for federal funds, which are paid and audited by the Department of Health and Human Services (HHS) through Medicare and Medicaid.

Institutions receiving funds must demonstrate meaningful use of EHR records or risk potential penalties, including the delay or cancellation of future payments and full reimbursement of payments already received. In addition, false statements submitted in filed documents are subject to criminal laws and civil penalties at both the state and federal levels.

EHR Developers Under Scrutiny by DOJ

EHR vendors also have been investigated and ordered to make restitutions by the DOJ. 

In February, Greenway Health, a Tampa-based EHR developer, agree to pay $57.25 million to resolve allegations related to the False Claims Act. In this case, the government contended that Greenway obtained certification for its “Prime Suite” EHR even though the technology did not meet the requirements for meaningful use.

And EHR vendor eClinicalWorks paid the government $155 million to settle allegations under the False Claims Act. The government maintained that eClinicalWorks misrepresented the capabilities of their software and provided $392,000 in kickbacks to customers who promoted its product. 

Legal cases such as these demonstrate that the DOJ will pursue both vendors and healthcare organizations that misrepresent their products or falsely attest to interoperability under the terms laid out by Medicare’s EHR Incentive Program.

Clinical laboratory leaders and pathology groups should carefully study these cases. This knowledge may be helpful when they are asked to create and maintain interfaces to exchange patient data with client EHRs.

—JP Schlingman

Related Information:

DOJ Pursues More Electronic Health Records Cases

Electronic Health Records Vendor to Pay $57.25 Million to Settle False Claims Act Allegations  

Electronic Health Records Vendor to Pay $155 Million to Settle False Claims Act Allegations

Kansas Hospital Agrees to Pay $250,000 to Settle False Claims Act Allegations

EHR Sales Reached $31.5 Billion in 2018 Despite Concerns over Usability, Interoperability, and Ties to Medical Errors

‘Death by 1,000 Knives’ Could Be in Store for Clinical Laboratories, Pathology Groups Not Prepared to Comply with New Medicare Part B Regulations

Medical laboratory leaders and pathologists must be fully aware of the coming legal and regulatory changes taking place starting January 1, 2018, or risk fines and decreased reimbursements

January 1, 2018, marks the start of new Medicare Part B price cuts for clinical laboratory  and anatomic pathology testing. But decreasing reimbursement rates is just one issue facing medical laboratory leaders. The other is the increasingly rigorous regulatory environment poised to ensnare labs and pathology groups unprepared to navigate the dark waters of government compliance.

Tougher payer audits, higher recovery demands, and enforcement policies that increase the personal liability of CLIA lab directors and lab executives, are reasons why attorney David W. Gee, JD, a Partner at Davis Wright Tremaine LLP in Seattle, argues that laboratories need to step up their focus on compliance and due diligence. He notes laboratories must guard against “death by 1,000 knives” in this new landscape.

Insufficient Focus on Compliance Brings Consequences to Clinical Laboratories and Their Management

“There are more and more people and agencies whose focus it is to regulate and watch the dollars and make sure there is integrity in the system,” noted Gee in an interview with Dark Daily. “That includes not only the formerly regular players—the OIG [Office of Inspector General, US Department of Health and Human Services] and DOJ [Department of Justice]—but you’ve got an increasing number of states with their own False Claims Acts. You’ve got state agencies looking at opportunities to clean up the system and to tag along with other investigations going on, as well as commercial payers who have become more active in pursuing litigation and other measures against practices they allege to be fraudulent.”

Faced with these emerging trends, Gee stresses that labs must:

1.     Recognize the increased personal liability facing lab directors, owners, and management, and take steps to mitigate risk of enforcement actions that not only expose executives to potential penalties but also jeopardize the financial health of lab organizations.

2.     Understand the importance of meaningful and sustained investment in compliance (including providing compliance officers with the resources to manage an increasingly complex job) and leverage OIG guidance to assess gaps and risks in compliance programs.

3.     Be aware of risks inherent in third-party marketing agreements, which can result in short-term spikes in order volume, but which also could reduce “lines of sight” to clients, making it even more difficult to adhere to compliance standards.

Gee believes the emphasis labs place on cost control and “running lean” often results in a lack of attention being paid to compliance. He argues today’s competitive environment increases the need for laboratory directors to ensure proper business practices are followed and “compliance fundamentals are not overlooked in the haste to compete for the business of referral sources.”

Healthcare attorney and Partner, David W. Gee, JD, of Davis Wright Tremaine, LLP, in Seattle will be one of three featured speakers during a new Dark Daily webinar on the Medicare Part B price cuts, and the critical legal and compliance issues clinical laboratories and pathology groups face starting in 2018. (Photo copyright: Davis Wright Tremaine, LLP.)

CLIA-Lab Directors to Be Held Personally Liable for Compliance Failures

Because federal regulators are considering holding CLIA-lab directors personally liable for compliance failures, Gee suggests laboratory executives should be motivated to put effective compliance programs in place.

“The best reason I can give for insisting as a lab director that the company actually has a successful and effective compliance program is that these days they stand to lose,” he argues. “The ability to prove you are not complicit—and that you are not the driver of things that have gone wrong—comes down to having an effective and well-documented compliance program so you are on record. And so there’s evidence that, as an engaged lab leader, you tried to do the right thing.”

Educational Opportunities for Lab Leaders

To help medical laboratory and pathology group leaders prepare for the perils they face, and take proactive steps to navigate the tough lab regulations and legal issues that lay ahead, click here to register for Dark Daily’s upcoming webinar “Tougher Lab Regulations and New Legal Issues in 2018: More Frequent Payer Audits, Problems with Contract Sales Reps, Increased Liability for CLIA Lab Directors, Proficiency Testing Violations, and More,” (or place this link into your browser: https://ddaily.wpengine.com/product/tougher-lab-regulations-and-new-legal-issues-in-2018-more-frequent-payer-audits-problems-with-contract-sales-reps-increased-liability-for-clia-lab-directors-proficiency-testing-violations-and).

This crucial learning event takes place on Wednesday, November 8, 2017, at 1 p.m. EST. Gee will be joined by Jeffrey J. Sherrin, President and Partner, O’Connell and Aronowitz in Albany, New York, and Richard Cooper, Chair, National Healthcare Practice Group, McDonald Hopkins, LLC, in Cleveland.

These three attorneys are among the nation’s foremost experts in issues unique to clinical laboratories, pathology groups, hospital labs, toxicology/pharmacogenomics labs, and molecular/genetic testing labs. Following our speakers’ presentations, there will be a question and answer period, during which you can submit your own specific questions to our experts.

You can’t afford to miss this opportunity. Click here to get up to speed on the most serious regulatory, compliance, and managed care contracting issues confronting all labs today. This webinar will provide solutions to the perils facing labs now and in 2018 by helping you map a proactive and effective course of action for your clinical lab or pathology group.

—Andrea Downing Peck

Related Information:

Tougher Lab Regulations and New Legal Issues in 2018: More Frequent Payer Audits, Problems with Contract Sales Reps, Increased Liability for CLIA Lab Directors, Proficiency Testing Violations, and More

What Every Lab Needs to Know about the Medicare Part B Clinical Laboratory Price Cuts That Take Effect in Just 157 Days, on Jan. 1, 2018

Nation’s Most Vulnerable Clinical Laboratories Fear Financial Failure If Medicare Officials Cut Part B Lab Fees Using PAMA Market Price Data Final Rule

More Doctors to See Jail Time in Biodiagnostic Laboratory Services Case, but Question Remains: Will Federal Prosecutors Send Lab Executives and Doctors to Jail in the Health Diagnostics and Singulex Case?

Recent federal Justice Department memorandum issues guidance designed to seek accountability from individuals and combat corporate misconduct

Pathologists and clinical laboratory managers who want a tougher crackdown on labs and physicians that violate anti-kickback laws welcome the news that in the past year federal courts have sentenced 13 physicians to jail terms of 12 to 63 months for accepting bribes from a discredited medical laboratory company as part of a scheme to defraud the federal Medicare program.

These criminal convictions were part of the federal case prosecuted against Biodiagnostic Laboratory Services (BLS), in Parsippany, N.J..

In addition to those 13 jail sentences, one doctor got 10 months of home confinement, two doctors got 12 months probation, and sentencing for six other physicians is pending. Prosecutors expect more defendants will be sentenced in the coming months. (more…)

DOJ Names Individuals in Suit against Health Diagnostic Laboratory, Sales Consultants, and Two Other Medical Laboratory Companies

In special issue, The Dark Report explains the details of what may be the biggest case of Medicare fraud and abuse in the history of the clinical laboratory business

Many clinical laboratory executives and pathologists know about the settlement last March by the Department of Justice (DOJ) of a whistleblower case involving Health Diagnostic Laboratory and Singulex. But that settlement is just one part of this major fraud case that continues to move forward and in which federal prosecutors alleged that a group of plaintiffs defrauded the federal Medicare and Tricare program out of half a billion dollars, in just 60 months!

In a court filing last summer, federal attorneys described how the lab companies and lab executives were paid $500 million between 2010 and 2014 from lab test claims submitted to the Medicare and Tricare programs. This federal lawsuit named three medical laboratory companies and three individuals as defendants. They are: Health Diagnostic Laboratory, Singulex, Berkeley HeartLab (no longer in business), BlueWave Healthcare Consultants, Tonya Mallory, Floyd Calhoun Dent, III, and Robert Bradford Johnson. (more…)

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