Welcome back to MD Ranger’s blog series on risk management! We hope that these articles will help both you and your organization understand the ever-increasing need for strict, internal compliance procedures. Last week, we talked about the changes made by the Department of Justice (DOJ) to policy regarding individual accountability in corporate wrongdoing. This week, we dive headfirst into a discussion about the mediums through which both individuals and organizations can be held accountable for white-collar crime.
Being ‘held accountable’ is a nice way to say that you have been caught defrauding the government. The DOJ’s primary defense mechanism against fraudulent behavior are the Stark Law, the federal Anti-Kickback Statute (AKS), and the federal False Claims Act (FCA).
According to health law firm Barrett & Singal, the FCA imposes liability on individuals and facilities who submit false or fraudulent claims to the government for payment. Less obvious fraudulent behaviors often implicate healthcare organizations under nuanced aspects of this law. A majority of FCA come in response to claims for fraudulent Medicare reimbursements. The FCA has a qui tam provision, meaning that any individual possessing knowledge of a false claim can file suit against an entity on behalf of the federal government. If the suit is successful, the whistleblower is awarded a percentage of the penalties. We’ll talk more about this in the next installment.
To the left of the FCA rests the Stark Law. Stark Law is a civil law restricts physician self-referrals. Anyone who could have a financial stake in a physician’s practice cannot refer patients to to that physician. Stark Law is a strict liability statute, meaning that the government doesn’t have to prove that you intended to break the law. A Stark Law violation does not merit jail time, but offenders often incur devastating penalties. If the law was proven to be intentionally violated, a healthcare provider could be charged up to three times the original penalties–hundreds of illegal arrangements could mean hundreds of millions of dollars worth of fines.
Opposite Stark Law is AKS. The AKS prohibits both the offer and exchange of anything of value in order to entice or reward referral of healthcare services. AKS is a criminal statute–in addition to severe penalties, offenders could face a prison term of up to ten years per violation. The law is clear: it is illegal to solicit or reward referrals for any sort of compensation.
Welcome to MD Ranger’s five-part blog series on risk management! We hope that these articles will help both you and your organization understand the ever-increasing need for strict, internal compliance procedures. This week, we delve into the circumstances surrounding a policy change over at the Department of Justice (DOJ) and how it affects both physicians and medical directors.
Late last year, former US Deputy Attorney General Rod J. Rosenstein announced the Department of Justice’s (DOJ) intent to focus on individual wrongdoers in corporate investigations. The DOJ has made fighting white-collar crime a priority, going as far as to establish a Task Force on Market Integrity and Consumer Fraud.
Rosenstein emphasized that “the most effective deterrent to corporate criminal misconduct is identifying and punishing the people who committed the crimes.” It can be difficult to prosecute white-collar crime. The individual perpetrators of these crimes have nothing to fear. A fine and a slap on the wrist mean little to executives and administrators protected by corporate culpability. Corporate criminal prosecutions rarely deter crime–the decision-makers walk free, while employees and investors bear the brunt of the financial penalty.
Recent changes to DOJ policy reflect the gravity of this situation. Rosenstein explains that companies are now incentivized to identify individual wrongdoing. If an organization wants credit for cooperation, they must identify individuals both behind and aware of the wrongdoing. This revised policy will still impose penalties on the corporations themselves–corporate resolutions offer greater opportunity for restitution and funding toward compliance programs.
These resolutions, however, should not exempt the individual perpetrator from criminal liability. The nature of corporate crime can be likened to that of the many-headed Hydra. When one head is cut off, two more take its place; penalizing a company only as an entity does nothing to deter further criminal activity. DOJ has taken a play out of Hercules’ book, deeming it necessary to cut the head off the beast and then cauterize the stump.
Last week, Moody’s Investor Service reported that a contract dispute between UnitedHealth Group and physician staffing company TeamHealth could indirectly affect hospitals and other providers.
TeamHealth revealed in their second quarter earnings that UnitedHealth Group is planning to cancel in-network agreements in October, impacting their business in 18 states. Moody’s is speculating that if staffing companies such as TeamHealth receive lower reimbursements from payers, firms would likely seek higher subsidies from hospitals. Their analysts are drawing parallels to a similar dispute that UnitedHealth had with Envision Healthcare and are speculating that TeamHealth will eventually agree to lower reimbursements, resulting in lower earnings for TeamHealth.
Why should healthcare organizations with physician staffing company contracts pay attention to this? The financial impacts could be significant for hospitals already operating on razor-thin margins. According to MD Ranger data, hospitals pay $825,180 at the median for annual anesthesia stipends, $1,222,160 for hospitalist stipends, and $488,240 for emergency physician stipends. We’ve observed that hospitals absorb the costs of poorly negotiated payer contracts with physician groups by paying commercially unreasonable stipends. Not only is this financially risky, it may not be compliant.
Moody’s additionally stated that, "Disagreements between insurers and staffing companies could also disrupt hospitals if staffed physicians are no longer in-network. Unless legislation to curb surprise billing is implemented, patients could be on the hook for out-of-network charges, raising reputational and social risk for hospitals".
Big news out of the San Francisco Bay Area Thursday as federal prosecutors charged Amity Home Health Care and Advent Care with paying doctors over $8 million in kickbacks while defrauding Medicare for $115 million.
The FBI alleges that the two companies, both operated by Ridhima Singh, paid doctors in the form of NBA basketball tickets, designer handbags, and envelopes of cash for referring patients. Craig Fair, FBI Deputy Special Agent stated “These doctors and healthcare professionals sold patients like commodities, placing their own financial gains over the wellbeing of their patients and betraying the basic principles of their profession”.
If convicted of violating the Anti-Kickback Statute, the 28 doctors charged along with Singh face a maximum sentence of 10 years and prison and a maximum $100,000 fine. Singh also faces steeper penalties due to facing additional charges.
Even healthcare organizations acting in good faith can sometimes run into issues with the Anti-Kickback Statute, so it’s always important to document your physician contract compliance. Just remember that paying for referrals is always illegal and that the DOJ is focused on pursuing individual accountability for executives and physicians in these illegal kickback schemes in addition to levying fines on the organizations.