Compliance Sales & Marketing Training

Why is Compliance Important to Sales & Marketing Training? The government has put the spotlight on uncovering healthcare fraud and abuse and protecting consumers. The Department of Justice’s budget increases every year by millions of dollars for health care fraud and sales enforcement efforts. The Laws There are key laws that you must understand before engaging in sales related conversations. These laws are the Anti- Kickback Statute, Antitrust Laws, the Fair Housing Act, freedom of choice and applicable state laws. While this training is not an exhaustive compliance overview, it will familiarize you with a few key points with which sales individuals should be fully cognizant.

Part 1: Anti-Kickback Statute The federal Anti-Kickback Statute (“AKS”) is a criminal statute that prohibits the exchange (or offer to exchange), of anything of value, in an effort to induce (or reward) the referral of federal health care program business. The AKS protects residents/consumers and federal health care programs from fraud and abuse. I.e. overutilization of resources, influencing health care decisions This is broadly drafted and establishes penalties for individuals and entities on both sides of the prohibited transaction. Some specific “safe harbor” exceptions exist.

Violation of the AKS is a felony, punishable with up to five years imprisonment and/or $25,000 fine. Additionally, a violation can result in exclusion from federal health care programs, including Medicare and Medicaid, and loss of licensure.

One Purpose Test Courts have held that to establish a AKS violation either the primary purpose or one purpose of a payment must be to induce an illegal referral even if other legitimate purposes exist. The “one purpose” test states that a payment is illegal under the AKS where one purpose of the payment is to wrongfully induce referrals. The Affordable Care Act (“ACA”) stated that a person need not have actual knowledge of AKS or specific intent to commit a violation. Defenses do not include “everyone else is doing it” or “I didn’t know.” This includes gifts to referring practitioners or program beneficiaries to encourage or reward their business.

Items of Value Gifts, complimentary items, and other incidental benefits and business courtesies such as: Free parking Meals Flowers Continuing medical education (CME) Entertainment Courtesy discounts Simply put, anything of value directly or indirectly provided to a physician (or their family members and office staff) may implicate the AKS. There is no bright line tests in this area, but there are general guidelines and guidance by the Office of Inspector General (“OIG”).

Gifts of Nominal Value OIG suggests that “nominal” gifts would not create much AKS risk. The OIG does permit inexpensive gifts to program beneficiaries if: (1) they are not cash or cash equivalents; and (2) they have a retail value of no more than $10 individually and $50 in the annual aggregate. Examples: Gift basket may be delivered to employees of a health care provider, to be shared by the employees, so long as the purchase price of the gift basket does not exceed $50. Breakfast may be delivered to employees of a physician not more than four times per year so long as the purchase price of the breakfast does not, in the aggregate, exceed $50. Make sure to track gift giving!

Even with gifts of nominal value, avoid the appearance that something of value was given in exchange for a referral. Examples of What NOT to Do: Indicating that gift is for “for referrals” or that say words to the effect of “thanks for referrals.” Examples of inappropriate justifications for expenditures include: “This is the largest referral source in the region.” “We are hoping to enter into a contract with this person.” “This person has always sent residents to ABC.” Appropriate justifications for nominal expenditures may include a holiday gift or one for recognition of high quality care.

Senior Lifestyle prohibits the acceptance of gifts including those of nominal value from potential referral sources.

AKS: Senior Living Referrals An OIG Advisory Opinion (No. 14-01) responds to a nonprofit senior housing provider’s question of whether it may pay an independent placement agency a fee for referring new residents to its facilities. OIG opinion stated it would NOT impose sanctions in connection with the fact-specific arrangement. The placement fee is calculated only considering initial rent and services. Initial rent did not include government funding. The contracts underlying the arrangement prohibit both placement and acceptance of potential residents who are known to rely on government funding for their health care. Neither of the residential communities using the referral arrangement provide services reimbursed by Medicare. The senior care provider does not track referrals or common residents or patients nor do they limit their residents’ choice of providers.

AKS: Fair Market Value With any agreement with a potential referral source (i.e. lease, medical director, consultant), there is a presumption that payment above or below of the fair market value (FMV) is a payment for a referral. Safe Harbor Requirements Written agreement describing the area covered Fixed rate At least one year agreement Commercially reasonableness FMV Not taking into account referrals We require a community obtain an independent appraisal (i.e. from a real estate broker) to ensure we meet the FMV exception.

Remember: The Anti-Kickback Statute is very fact specific Remember: The Anti-Kickback Statute is very fact specific. A violation can result in civil penalties, criminal penalties, and exclusion from federal health care programs, including Medicare and Medicaid.

Part 2: Antitrust Laws Antitrust laws promote and protect competition under a free market system. The presumption is that antitrust law will result in better quality products and services at lower prices, encourage innovation, and protect consumers. This is applies to all industries. Antitrust laws involve the buying or selling of products or services at a fixed price OR to manipulate market conditions so that price is maintained.

Antitrust violations involve criminal and civil penalties and can lead to large corporate and individual fines and prison time for individuals under state and federal statutes. Criminal Penalties: Corporation A corporation may be fined up to $100 million per violation, or courts may impose fines equal to twice the monetary gain or twice the loss resulting from the offense. Criminal Penalties: Individual Individuals convicted of antitrust crimes can be subjected to fines up to $1 million per violation and sentenced to as many as ten years in federal prison.

Civil Penalties Individuals and businesses harmed by an antitrust violation may recover three times their actual damages, plus attorneys' fees. Private antitrust damage awards can be significant. The expense and disruption of an antitrust investigation and litigation can result in substantial costs and lost time.

Antitrust: Prohibited Behavior Agreeing to buy or sell at a fixed price (control, raise, lower or stabilize) Exchanging “competitively sensitive” information even without agreement on price or price information Antitrust law does not require an actual agreement. It can involve parallel conduct with “plus factors” including facts such as pricing discussions, communication between competitors, membership in a trade association where pricing is discussed, and the lack of a business justification for conduct. Courts often infer the existence of anticompetitive agreements merely from circumstances.

What is considered “competitively sensitive” information What is considered “competitively sensitive” information? This is nonpublic information that involves pricing, pricing strategy, costs, wages, revenue, profits, margins, capacity, occupancy, closures, expansions, advertising promotions or discounts. Competitively sensitive information may be subject to safe sources

But, everyone else is doing it But, everyone else is doing it! It is NOT a defense in criminal or civil antitrust cases that “everyone else is doing it” or “I didn’t know.” Antitrust laws penalize all parties involved. If a competitor inquires about your competitively sensitive information, remove yourself from the discussion.

Antitrust: Safe Sources Public Sources(i.e. websites, newspapers) Mystery Shopping Conducted by an employee not recognized as an employee during the mystery shop or a third party Phone calls must be from number not associated with company or person affiliated with company Cannot ask about future pricing or information Be aware when mystery shopping in small markets Third Party Information

Part 3: Fair Housing Act Anti-Steering Under the Fair Housing Act (“FHA”), communities cannot automatically "steer” residents or prospective residents towards specific levels of care or areas of the Community based on protected class status. Protected class includes but is not limited to race, color, religion, national origin, sex/gender and disability. Additional state law may apply. The decision on level of care and unit choice is at the discretion of the resident or personal representative. Reasonable accommodations including adjust of policy and exceptions may apply.

FHA: Level of Care The Community should educate the resident on the services provided within each level of care and areas within the Community. The Community shall utilize the assessment process to provide guidance on the appropriate level of care placement within Community. Note that a resident can provide for his or her own care with the aid of outside caregivers and reasonable accommodations may apply.

FHA: Level of Care Assessments The assessment recommends the appropriate level of care for the resident. The assessment is NOT the sole factor in determining level of care placement within Community. Assessments should be done when requested by a resident or prospective resident or when required by law in a licensed setting. If the family asks for our input after going through the assessment, it is permissible to offer our opinion understanding that the decision is for the resident or family to make.

Can the Community deny housing to a resident or prospective resident Can the Community deny housing to a resident or prospective resident? The FHA potentially allows denial of housing if a resident is a threat to the health or safety of others, exhibits disruptive or abusive behavior, impacts licensure, or would cause substantial damage to the property of others. Please consult with corporate legal counsel regarding exceptions and reasonable accommodations.

Part 4: Freedom of Choice Community must notify resident of their freedom to choose among health care providers and must not limit resident choice of qualified providers. Outside provider examples: therapy, home health, podiatry A resident may change providers at any time, and Community will assist them to do so upon request. When a resident expresses a health care provider preference, the preference must be honored despite any preferred provider agreement. If Community does not refer to resident’s provider preference, Community must document in the medical record the reason the preference was not fulfilled and explain that reason to the resident. Independent Living communities may not represent or market themselves as a care provider regardless of any agreements with outside providers.

What is your responsibility What is your responsibility? Contact Brittany Pape or corporate management if you have any AKS, antitrust, FHA or freedom of choice related questions, if you are aware of any situations that might lead to AKS, antitrust, FHA or freedom of choice concerns, or if you are concerned about whether certain actions or activities may become risky from an AKS, antitrust, FHA or freedom of choice standpoint.