1. Stark Reality: Anatomy of a Physician Contract Audit

2. Overview Why should I audit? How do I conduct an audit? What can I do if I find issues during the audit? How can I get more information?

3. Why audit physician contracts?

4. Cautionary Tales Tri-City Medical Center –$3.3 million settlement –97 financial arrangements that did not comply with the Stark Law 5 paid doctors more than fair market value 92 were expired, missing signatures or could not be located

5. Stark Law The Stark law is a civil statute that prohibits physicians from referring Medicare patients for certain designated health services to an entity with which the physician or a member of his/her immediate family has a financial relationship – unless an exception applies. Strict liability Specific exceptions apply Harsh penalties -Payment denial &/or repayment -Civil monetary penalties -Exclusion from Medicare/Medicaid -False Claims Act penalties

6. Anti-Kickback Statute The Anti-Kickback Statute is a criminal statute prohibiting any knowing or willful solicitation or acceptance of any type of remuneration (value) to induce referrals for health services that are reimbursed by the federal government. Requires proof of intent, but can be inferred Prohibits referrals like Stark but also other actions -Arranging for purchase of items/services -Recommending purchase of items/services Applies to all federally funded programs Violation is a felony punishable by fines and prison

7. Tax Exemption Issues Tax-exempt organizations cannot provide excess benefits to “disqualified persons.” Must be organized and operated for charitable purposes and no part of earnings may “inure to the benefit” of any private individual Penalties include: Intermediate sanctions Loss of tax-exempt status Excise taxes (financial sanctions) against the person receiving excess-benefit transactions and managers agreeing to it

8. Higher Stakes False Claims Act liability for the retention of overpayments ACA relaxes the intent requirement of the Anti-Kickback Statute –One purpose test –Requires no specific intent to violate law Payments suspended while investigating “credible allegations” of fraud Exclusion easier than ever

9. How do I conduct an audit?

10. Initial Considerations What will the audit cost? Should you perform the audit under the direction of outside counsel? Are you prepared to – and will your organization have the ability to – follow through based on the results of the audit? What will be your priorities? Do you have your tools in place?

11. The Audit Method Gather Organize Analyze

12. Gather Payments from Check Registry –Pull all checks for physician services –Other checks to physicians or physician practices/organizations –Run queries to identify other potential physician (or family member) payments –Search for possible “hidden” payments to physicians or family members –Eliminate unrelated payments

13. Gather, cont. List of 1099s issued to physicians and/or physician groups List of hospital space and equipment being provided to physicians for their private practice List of non-payment “perks” provided to physicians Others?

14. Consider Family Too! spouse birth or adoptive parent, child or sibling stepparent, child or sibling in-laws grandparent grandchild spouse of a grandparent spouse of a grandchild

15. Organize Organize contracts by the type of arrangement –Recruitment –Medical Director –Leases –Management Services –Professional Services (Independent Contractor) –Etc.

16. Documentation For each contract, pull together and organize: –Agreement itself –Any supporting documentation Fair Market Value documentation Time sheets, etc. –History of all payments

17. Audit Checklist Develop and prepare checklist for every type of arrangement. Each contract resulting in a payment to a physician, physician group or other business owned by a physician should be reviewed – with documentation – using this checklist. Complete the checklist consistently for each contract.

18. Sample Contract Checklist #Independent Contractor Physician Professional Services Agreement YesNoComments 1Agreement is in writing. 2Signed by both parties.Parties. 3In effect? Duration for at least 1 year? Contract term and effective date. 4Have there been amendments?Date and terms of amendment. CAUTION! This is only a partial list.

19. May Also Include … Fair market value documentation? Last FMV review? Commercial reasonableness? –Business justification in contract/documentation Any overlapping duties? Other arrangements with this physician/group? And more …

20. Contract Database Store and manage contracts in a centralized, searchable location Allows electronic storage of supporting documentation Facilitates auditing Allows management of expiration and renewal dates Allows management of contract review and approval process

21. Analyze Match each payment to a contract and to supporting documentation –Contract checklist –Time sheets Flag payments without corresponding contract or documentation for additional review/research

22. What am I looking for? Contract expired or not signed. Payment made without valid agreement. Free space or services. No fair market value support materials. Time sheet or other invoicing materials missing. Payments don’t match contract terms.

23. And … Is physician performing all duties? –Number of hours? –Time logs? Any performance issues? Are payments being made per terms of the agreement? Has FMV been reviewed in last 2-3 years?

24. Work Product Database of financial relationships, contract terms, legal elements, supporting documentation and payment history. Working papers for each contract: –Checklist –Contract and related documentation –Payment history and related documentation

25. The Audit Report Final result typically is a report by type of physician arrangement and by physician that includes a summary of each contract. Corrective Action Plan(s) –Consider whether factual issues should be communicated separately from recommended actions.

26. What can I do if I find issues during the audit?

27. Triage for Establish priorities based upon risk Higher Risk –No written agreement –Free space or services –Expired agreements –Agreement never signed –Clearly not fair market value and/or commercially reasonable

28. Corrective Action Plan Immediately correct going forward Assess risks and options for correcting about past issues –Follow compliance plan –Inform appropriate internal stakeholders –Consider attorney-client privilege –Verify legal finding of violation (there’s a difference between not following best practice and having an illegal contract)

29. Possible Corrective Actions After consulting with legal counsel, disclose to proper government agency Restructure/unwind arrangement Revise policies and procedures –Contract approval process –Payment certification requirements Educate personnel

30. No Signed Contract Consider whether rules for temporary noncompliance will apply. If not, legal counsel may look at all documents and signatures to see if there appropriate contract existed under state law. –Letters, emails, job descriptions, reports of services, invoices/payment requests, check stubs, endorsed checks, etc. But ask your lawyer!!

31. Fair Market Value Required for employed and independent contractor physicians CMS says “based on facts and circumstances,” and appropriate method of determining FMV “will depend on the nature of the transaction, its location, and other factors.”

32. 3 “How's” There are 3 “How's” when looking at physician compensation: –How much? (FMV) –How calculated? (Not based on referrals) –How come? (Commercially reasonable) These overlap –e.g., If comp is fixed and set in advance but more than FMV, government often assumes it’s based on referrals.

33. FMV Methodologies Standard benchmarking surveys –Medical Group Management Association (MGMA) or American Medical Group Association (AMGA), e.g. –Use range of median values to estimate FMV and consider adding cap –Use regional data if possible, but beware small sample sizes

34. FMV in Leases Value in arms-length transactions, consistent with general market value Value of rental property for general commercial purposes – not taking into account its intended use Cannot take into account the value of proximity to hospital

35. While we’re talking… Non-monetary compensation –Goods/services provided to physicians such as meals or entertainment –Up to aggregate of $392 for 2016 Medical Staff Incidental Benefits –Goods/services while on campus –Value is less than $33 per occurrence –Offered to all med. staff and only when engaged in certain activities Must have system to track & value!

36. Have more questions? Elisa White 501-224-7878 elisawhite@arkhospitals.org