NCAHRMM EDUCATION SESSION DISCUSSION AND CLARIFICATION OF SAFE HARBOR ACT Shirley Ham, CMRP September 15-16, 2016

Learning Objectives Review the history of the Safe Harbor Act Discuss key components of the Act Review implications of violations of the Act Discuss “best practices” for ensuring compliance

Anti-Kickback Statute Under the Anti-kickback Statute, it is illegal to knowingly or willfully: Offer, pay, solicit, or receive remuneration Directly or indirectly In cash or in kind In exchange for Referring an individual or Furnishing or arranging for a good or service and For which payment may be made under Medicare or Medicaid

What is Remuneration? Extremely Broad Scope, whether in cash or in kind and whether made directly or indirectly including: Kickbacks Bribes Rebates Gifts Above or below market rent or lease payments Discounts Furnishing of supplies, services or equipment either free, above or below market Waivers of payments due

Anti-Kickback Statute - Penalties Criminal penalties and administrative sanctions for violating the AKS include: Felony Crime Up to 5 years imprisonment and/or $25,000 fine And can include exclusion from participation in the Federal health care programs

Anti-Kickback Statute - Penalties Civil penalties for violating the Statute can: Cost as much $50,000 per kickback and Three times the amount of damages sustained by the government

Real Life Examples of Illegal Conduct Pharmaceutical company offers 1,000 frequent flier miles every time physician starts patient on certain drug and completes a marketing questionnaire; after 50 patients, physician has free plane ticket anywhere in U.S. (OIG Special Fraud Alert, August 1994) Pacemaker Manufacturer offers doctor $250 for each of its pacemakers doctor implants; a competitor offers $400--in the end, doctor receives $238,000 from two firms and implants scores of unnecessary pacemakers. (Excerpted from Marc. A. Rodwin, Medicine, Money, and Morals, 57 - 63 (1993)) Ambulance service seeking exclusive contract with city hires city employee who is part of bid committee to be a “consultant,” reimbursing him with cash, cars, and trips. (United States v. Bay State Ambulance, 874 F.2d 20 (1st Cir. 1989))

Safe Harbor Provisions Describe various payment and business practices that, although they potentially implicate the Federal anti-kickback statute, are not treated as offenses under the statute Were developed “to limit the reach of the statute somewhat by permitting certain non-abusive arrangements, while encouraging beneficial or innocuous arrangements” 56 FR 35953, 35958 (July 29, 1991)

Safe Harbor Act To fit into an Anti-Kickback safe harbor, you must fit squarely within the requirements. If the safe harbor or exception contains multiple elements or conditions, you must satisfy each element or condition.

SAFE HARBOR PROVISIONS 42 C. F.R. 1001.952 Investment Interests Space and equipment rental Personal services and management contracts Sale of medical practice Referral services Warranties Employees GPOs and discounts Waiver of beneficiary co-insurance and deductible amounts Health Plan/Managed care

SAFE HARBOR PROVISIONS 42 C. F.R. 1001.952 Investment in Ambulatory Surgical Centers Joint ventures in underserved areas Sales of physician practices to hospitals in underserved areas Subsidies for Obstetrical malpractice insurance in underserved areas Investments in group practices Specialty referral arrangements between providers Cooperative Hospital Services Organization

Best Practices for Compliance & Investigation Responsiveness

Best Practices: Minimizing Exposure Reasonable measures, not perfection: A strong internal compliance program may not prevent a rogue employee from committing fraud, but it may defeat scienter Adopt a formal business ethics compliance program and internal control system Develop standards and procedures to prevent, detect, and respond to improper conduct Monitor compliance through regular internal and external audits Create a compliance hotline and conduct formal investigations into complaints Conduct employee compliance training and consistently inform employees of outlets for grievances

Best Practices: Risk Assessment Monitor government interactions Understand express certification in government contracts and programs Account for use of government contract funds and grants Evaluate business partners, especially government subcontractors Take care in responding to billing inquiries as incorrect explanations may be used as evidence of fraud Documentation and transparency are key

Best Practices: Investigation Responsiveness Critical to know of FCA complaints as soon as possible Whistleblower warning signs: HR issues; exit interview statements Unexpected audits Requests for billing explanations Increased web activity Former employees contacted Contact and present your case to DOJ and USAO The most critical juncture is the government’s intervention decision

Best Practices: Investigation Responsiveness Once in litigation: File motion to dismiss Consider privilege and potential waiver issues early on Identify “sources of corporate knowledge”: Whose scienter matters? Conduct a damage analysis If government declines intervention, keep lines of communication open Ability to settle often depends on the government

Best Practices: Privileged Internal Investigation Internal investigation must include an attorney to preserve privilege Work should be performed at the direction of the attorney Employees should receive Upjohn warning in interviews Consider retaining independent counsel for employee-witnesses and employees who may face individual exposure.

QUESTIONS?