1. Medicare Fraud & Abuse/Stark Laws and Regulations Presented to University of Virginia Department of Ophthalmology September 7, 2011 By Philip M. Sprinkle II, Esquire Balch & Bingham, LLP

2. Part I History and Development of Government Activity History and Development of Government Activity Current Enforcement Activity Current Enforcement Activity

3. Focused enforcement Attorney General Holder Speech at the Detroit Health Care Fraud Prevention Summit 3/15/2011 Attorney General Holder Speech at the Detroit Health Care Fraud Prevention Summit 3/15/2011 “In just the last fiscal year, we obtained settlements and judgments amounting to more than $2.5 billion in False Claims Act matters alleging health care fraud – the largest annual figure in history and an increase of more than 50% from fiscal year 2009. We also opened more than 2,000 new criminal and civil health care fraud investigations, reached an all-time high in the number of health care fraud defendants charged, stopped numerous large-scale fraud schemes in their tracks, and returned more than $2.5 billion to the Medicare Trust Fund and more than $800 million to cash-strapped state Medicaid programs.” “In just the last fiscal year, we obtained settlements and judgments amounting to more than $2.5 billion in False Claims Act matters alleging health care fraud – the largest annual figure in history and an increase of more than 50% from fiscal year 2009. We also opened more than 2,000 new criminal and civil health care fraud investigations, reached an all-time high in the number of health care fraud defendants charged, stopped numerous large-scale fraud schemes in their tracks, and returned more than $2.5 billion to the Medicare Trust Fund and more than $800 million to cash-strapped state Medicaid programs.”

4. Focused Enforcement (cont.) New Investigative Bodies (RACs, ZPICs, etc.) New Investigative Bodies (RACs, ZPICs, etc.) $250 Million Dedicated to Increased Enforcement $250 Million Dedicated to Increased Enforcement

5. PART II The History and Development of Fraud and Abuse in the United States

6. What is Medicare Fraud? Submitting false claims for, or making misrepresentations related to, reimbursement. Submitting false claims for, or making misrepresentations related to, reimbursement. Providing remuneration to induce or in exchange for referring, arranging for, or recommending healthcare items or services. Providing remuneration to induce or in exchange for referring, arranging for, or recommending healthcare items or services. Making improper referrals of healthcare business between persons or entities having certain pre- existing financial relationships with each other. Making improper referrals of healthcare business between persons or entities having certain pre- existing financial relationships with each other. Providing inducements to beneficiaries to influence the selection of a healthcare provider or service. Providing inducements to beneficiaries to influence the selection of a healthcare provider or service. Providing inducements to providers to limit or reduce service to beneficiaries. Providing inducements to providers to limit or reduce service to beneficiaries.

7. What is Medicare Fraud? In 1972, Congress first outlawed referral fees in its amendments to the Social Security Act. The law stated: Whoever furnishes items or services to an individual for which payment is or may be made under this title and who solicits, offers, or receives any -- (1) kickback or bribe in connection with the furnishing of such items or services or the making or receipt of such payment, or (2) rebate of any fee or charge for referring any such individual to another person for the furnishing of such items or services, shall be guilty of a misdemeanor and upon conviction thereof shall be fined not more than $ 10,000 or imprisoned for not more than one year, or both. (1) kickback or bribe in connection with the furnishing of such items or services or the making or receipt of such payment, or (2) rebate of any fee or charge for referring any such individual to another person for the furnishing of such items or services, shall be guilty of a misdemeanor and upon conviction thereof shall be fined not more than $ 10,000 or imprisoned for not more than one year, or both.

8. Limitation On Referrals 42 U.S.C. § 1320a-7b(b)(1)-(2): The current statute essentially prohibits individuals or entities from knowingly and willfully offering, paying, soliciting, or receiving remuneration in order to induce business reimbursed under the Medicare or Medicaid programs. Violation of the statute is a felony punishable by up to five (5) years imprisonment, a $ 25,000 fine, or both. The statute also gives the Office of Inspector General of the Department of Health and Human Services the power to exclude violators from participation in the Medicare or Medicaid programs.

9. Punishment Sanctions for violations of the Medicare Fraud & Abuse laws include imprisonment, criminal and civil monetary penalties, denial of reimbursement, and exclusion from government health programs. Sanctions for violations of the Medicare Fraud & Abuse laws include imprisonment, criminal and civil monetary penalties, denial of reimbursement, and exclusion from government health programs. This statute is a criminal statute. This statute is a criminal statute. Financial penalties arise out of the Federal False Claims Act Financial penalties arise out of the Federal False Claims Act

10. History United States v. Greber (1985): Alvin Gerber was a cardiologist in Pennsylvania. Alvin Gerber was a cardiologist in Pennsylvania. Formed Cardio-Med, which provided physicians with diagnostic services such as Holter-monitors. Formed Cardio-Med, which provided physicians with diagnostic services such as Holter-monitors. Cardio-Med billed Medicare for the monitor service and then forwarded 40% of the Medicare payment to the referring physician. Cardio-Med billed Medicare for the monitor service and then forwarded 40% of the Medicare payment to the referring physician. Standard: If a fee is paid and any purpose of that fee is to induce referrals, the statute is violated. This is true even if part of the fee is intended to compensate for professional services. Standard: If a fee is paid and any purpose of that fee is to induce referrals, the statute is violated. This is true even if part of the fee is intended to compensate for professional services.

11. History United States v. Kats (1989): Medical diagnostics lab contracted with a medical services company to process lab work. The lab billed the services company which then billed Medicare. The lab agreed to pay the services company 50% of the payment it received from Medicare. Medical diagnostics lab contracted with a medical services company to process lab work. The lab billed the services company which then billed Medicare. The lab agreed to pay the services company 50% of the payment it received from Medicare. One (1) Purpose Standard: If even one (1) purpose of a payment is to induce future referrals, there is a violation of the statute even if the payments were also intended to compensate for professional services. One (1) Purpose Standard: If even one (1) purpose of a payment is to induce future referrals, there is a violation of the statute even if the payments were also intended to compensate for professional services.

12. Additional Enforcement Vehicles 1. Federal False Claims Act (Tied to Civil Monetary Penalties Law) Qui Tam Litigation: qui tam pro domino rege quam pro se ipso in hac parte sequitur, meaning "[he] who sues in this matter for the king as [well as] for himself." Qui Tam Litigation: qui tam pro domino rege quam pro se ipso in hac parte sequitur, meaning "[he] who sues in this matter for the king as [well as] for himself." Who are these “Relators?” Who are these “Relators?” Finder’s Fee of 10-30% of total collected Finder’s Fee of 10-30% of total collected $5,500-11,000 penalty for each violation (beware the low-cost but repeated error—each single bill is a separate violation) $5,500-11,000 penalty for each violation (beware the low-cost but repeated error—each single bill is a separate violation) Treble damages (computed after assessing all amounts due plus all penalties) Treble damages (computed after assessing all amounts due plus all penalties) Plus Attorneys’ Fees Plus Attorneys’ Fees 2. Benefits of Self-Reporting 3. Some Licensure Regulations Require Practitioners to Self Report 4. “Health Care Offense” under 18 U.S.C. Section 24

13. DO NOT FORGET STATE LAW VIOLATIONS Anti-Brokering Statute Anti-Brokering Statute Professional Licensure Anti-kickback Provisions Professional Licensure Anti-kickback Provisions Active Board of Medicine in Florida and other jurisdictions Active Board of Medicine in Florida and other jurisdictions

14. Safe Harbors In response to demands by the industry for guidance, the Officer of Inspector General issued the first safe harbor exclusions to the anti-fraud statute in 1991. Those exclusions were codified by Congress in August, 1993, as 42 U.S.C. § 1395nn. The accompanying regulations are located at 42 C.F.R. § 1001.952. The most common safe harbors are: 1. Personal Services 2. Bona Fide Employees 3. Small Investments 4. Equipment Rental 5. Leases

15. Safe Harbors What are safe harbors? If you comply with all elements of a safe harbor, you will not be scrutinized for prosecution. If you comply with all elements of a safe harbor, you will not be scrutinized for prosecution. Failure to comply with the safe harbor provisions does not mean you are breaking the law. It simply means that you may be scrutinized for a violation of the Fraud and Abuse laws. Failure to comply with the safe harbor provisions does not mean you are breaking the law. It simply means that you may be scrutinized for a violation of the Fraud and Abuse laws. If any action is taken to induce a referral fee, it is a violation of the law. This is true even where inducement of the referral fee was not the primary purpose of the action. If any action is taken to induce a referral fee, it is a violation of the law. This is true even where inducement of the referral fee was not the primary purpose of the action.

16. Safe Harbors Personal Services: The agreement must be set out in writing, signed by the parties, and specify the services to be covered by the arrangement. The agreement must be set out in writing, signed by the parties, and specify the services to be covered by the arrangement. The agreement must cover all services provided by the physician to the entity. The agreement must cover all services provided by the physician to the entity. The services provided to the entity must be reasonable and necessary. The services provided to the entity must be reasonable and necessary. The term of the agreement is at least 1 year. The term of the agreement is at least 1 year. The compensation is set out in advance and does not exceed the fair market value of the services. The compensation is set out in advance and does not exceed the fair market value of the services. The services provided cannot include promotion of a business arrangement. The services provided cannot include promotion of a business arrangement.

17. Safe Harbors Bona Fide Employees: An employer may pay a physician who has a bona fide employment relationship with the employer for the provision of services if: An employer may pay a physician who has a bona fide employment relationship with the employer for the provision of services if: The employment is for identifiable services. The employment is for identifiable services. The amount paid to the physician is consistent with the fair market value of the services and is not determined in a manner that accounts for the volume or value of referrals made by the referring physician. The amount paid to the physician is consistent with the fair market value of the services and is not determined in a manner that accounts for the volume or value of referrals made by the referring physician. The agreement between the physician and employer would be commercially reasonable even if no referrals were made to the employer. The agreement between the physician and employer would be commercially reasonable even if no referrals were made to the employer.

18. Safe Harbors Equipment Rental: Payments made for use of equipment do not violate the statute if: Payments made for use of equipment do not violate the statute if: The lease is set out in a written agreement signed by the parties which specifies the equipment to be covered by the lease. The lease is set out in a written agreement signed by the parties which specifies the equipment to be covered by the lease. The equipment leased does not exceed what is reasonable and necessary for the business purposes of the lease. The equipment leased does not exceed what is reasonable and necessary for the business purposes of the lease. The equipment is used exclusively by the person leasing the equipment. The equipment is used exclusively by the person leasing the equipment. The term is more than one year. The term is more than one year.

19. Safe Harbors Equipment Rental (continued): The rental charges are set out in advance and are consistent with the fair market value of the equipment. The rental charges are set out in advance and are consistent with the fair market value of the equipment. The rental charges are not determined in a manner that accounts for the volume or value of referrals made between the parties. The rental charges are not determined in a manner that accounts for the volume or value of referrals made between the parties. The lease would be commercially viable even if no referrals were made between the parties. The lease would be commercially viable even if no referrals were made between the parties.

20. Safe Harbors Other Safe Harbor Provisions: Investment Interest Investment Interest Space Rental Space Rental Sale of Practice Sale of Practice Referral Services Referral Services Warranties Warranties Discounts Discounts Group Purchasing Organizations Group Purchasing Organizations Waiver of beneficiary coinsurance and deductible amounts Waiver of beneficiary coinsurance and deductible amounts Increased coverage, reduced cost-sharing amounts, or reduced premium amounts offered by health plans Increased coverage, reduced cost-sharing amounts, or reduced premium amounts offered by health plans Price reductions on health plans Price reductions on health plans Practitioner Recruitment Practitioner Recruitment

21. Safe Harbors Other Safe Harbor Provisions (Continued): Obstetrical malpractice insurance subsidies Obstetrical malpractice insurance subsidies Investments in group practices Investments in group practices Cooperative hospital service organizations Cooperative hospital service organizations Ambulatory surgery centers Ambulatory surgery centers Referral arrangements for specialty services Referral arrangements for specialty services Price reductions offered to eligible managed care organizations Price reductions offered to eligible managed care organizations Price reductions offered by contractors with substantial financial risk to managed care organizations Price reductions offered by contractors with substantial financial risk to managed care organizations Ambulance replenishing Ambulance replenishing Transfers from an individual or entity to a health center Transfers from an individual or entity to a health center Electronic prescribing items and services Electronic prescribing items and services Electronic health records items and services Electronic health records items and services

22. New Enforcement Flexibility Returning Medicare overpayments within 60 days of identification of the overpayment is now an obligation under the False Claims Act Providers or suppliers who fail to return an overpayment within 60 days of identification will be guilty of False Claims Act violations The 60 day period commences when a person “knows” of the overpayment

23. Enforcement Flexibility (cont.) Impact of Downstream Contractors Who have no contract with the federal government Impact of Downstream Contractors Who have no contract with the federal government Emphasis on Officer Liability Emphasis on Officer Liability Easing of Burdens of Proof Easing of Burdens of Proof Source: FERA Amendments and Patient Protection and Affordable Care Act Source: FERA Amendments and Patient Protection and Affordable Care Act

24. Useful Tools Officer of Inspector General: Advisory Opinions: http://oig.hhs.gov/fraud/advisoryopinion s.asp Congress established the OIG advisory opinion process as part of HIPAA in 1996. An OIG advisory opinion is a legal opinion issued by the Office of Inspector General to a requesting parties about the application of the OIG’s fraud and abuse authorities to the party’s existing or proposed business arrangement. OIG has sixty days to issue an advisory opinion after it has received all the information it needs to issue such an opinion.

25. Useful Tools Officer of Inspector General: Work Plan: http://oig.hhs.gov/publications/workplan.asp OIG issues a work plan annually, outlining the areas in which it will focus its investigations for the coming year.

26. PART III History of Stark Law and Regulations

27. Background In 1989, Congress passed the Ethics in Patient Referrals Act (“Stark”) as part of the Omnibus Budget Reconciliation Act of 1989. In 1989, Congress passed the Ethics in Patient Referrals Act (“Stark”) as part of the Omnibus Budget Reconciliation Act of 1989. Prohibited physician referrals to clinical laboratories in which the physician had a financial interest. Prohibited physician referrals to clinical laboratories in which the physician had a financial interest. Amended in 1993 to expand the prohibitions from clinical laboratory services to eleven designated health services (“DHS”). Amended in 1993 to expand the prohibitions from clinical laboratory services to eleven designated health services (“DHS”). Amended again in 1994 to expand the prohibitions to services payable by Medicaid. Amended again in 1994 to expand the prohibitions to services payable by Medicaid.

28. What is Stark? The current law, 42 U.S.C. § 1395nn, states: If a physician has a financial relationship with an entity, then the physician may not make a referral to the entity for designated health services payable by the federal government; and If a physician has a financial relationship with an entity, then the physician may not make a referral to the entity for designated health services payable by the federal government; and The entity may not present or cause to be presented a claim or bill to any individual, third party payor or other entity for designated health services furnished pursuant to a prohibited referral. The entity may not present or cause to be presented a claim or bill to any individual, third party payor or other entity for designated health services furnished pursuant to a prohibited referral.

29. What is a Financial Relationship? A “Financial Relationship” is A “Financial Relationship” is A direct or indirect ownership or investment interest; or A direct or indirect ownership or investment interest; or A compensation arrangement with any entity that furnishes DHS. A compensation arrangement with any entity that furnishes DHS. Ownership or Investment Interest Ownership or Investment Interest Debt, equity or other means. (i.e., stock ownership in a hospital.) Debt, equity or other means. (i.e., stock ownership in a hospital.) Compensation Arrangement Compensation Arrangement Any arrangement involving remuneration, direct or indirect, between a physician (or a member of a physician’s immediate family) and an entity. (i.e., salary, rent, bonuses.) Any arrangement involving remuneration, direct or indirect, between a physician (or a member of a physician’s immediate family) and an entity. (i.e., salary, rent, bonuses.)

30. What is a Referral? Referral means any written, oral, electronic (or any other form): Referral means any written, oral, electronic (or any other form): Request Request Order Order Certification/Recertification of Need for DHS Certification/Recertification of Need for DHS Request for Consult Request for Consult Tests or procedure ordered by or to be performed by (or under the supervision of) that other physician, but not personally performed by the referring physician Tests or procedure ordered by or to be performed by (or under the supervision of) that other physician, but not personally performed by the referring physician The establishment of a plan of care by a physician that includes the provision of such a DHS, or the certifying or recertifying of the need for such a DHS The establishment of a plan of care by a physician that includes the provision of such a DHS, or the certifying or recertifying of the need for such a DHS

31. What are Designated Health Services? Designated Health Services means any of the following services: Clinical laboratory services Clinical laboratory services Physical therapy services Physical therapy services Occupational therapy services Occupational therapy services Certain radiology services Certain radiology services Radiation therapy services and supplies Radiation therapy services and supplies Durable medical equipment and supplies Durable medical equipment and supplies Parenteral and enteral nutrients, equipment, and supplies Parenteral and enteral nutrients, equipment, and supplies Prosthetics, orthotics, and prosthetic devices and supplies Prosthetics, orthotics, and prosthetic devices and supplies Home health services Home health services Outpatient prescription drugs Outpatient prescription drugs Inpatient and outpatient hospital services Inpatient and outpatient hospital services DHS only refers to services payable, in whole or in part, by Medicare DHS only refers to services payable, in whole or in part, by Medicare DHS do not include: DHS do not include: Services reimbursed by Medicare as part of a composite rate (i.e., SNF Part A payments or certain ASC services). Services reimbursed by Medicare as part of a composite rate (i.e., SNF Part A payments or certain ASC services).

32. What are Designated Health Services? Each year CMS publishes an updated "List of codes" in the Federal Register which contains the list of HCPCS and CPT codes for four (4) of the DHS to which Stark applies. A list of some, but not all, DHS by CPT Code is available: Each year CMS publishes an updated "List of codes" in the Federal Register which contains the list of HCPCS and CPT codes for four (4) of the DHS to which Stark applies. A list of some, but not all, DHS by CPT Code is available: As an addendum to each Physician Fee Schedule (i.e., 72 Fed. Reg. 66222, 66574 (Nov. 27, 2007); and On the CMS website at: http://www.cms.hhs.gov/PhysicianSelfReferral/11_List_of_Codes.asp#T opOfPage As an addendum to each Physician Fee Schedule (i.e., 72 Fed. Reg. 66222, 66574 (Nov. 27, 2007); and On the CMS website at: http://www.cms.hhs.gov/PhysicianSelfReferral/11_List_of_Codes.asp#T opOfPage For example: 72126................... Ct neck spine w/dye. 72127................... Ct neck spine w/o & w/dye. 72128................... Ct chest spine w/o dye. 72129................... Ct chest spine w/dye. 72130................... Ct chest spine w/o & w/dye. 72131................... Ct lumbar spine w/o dye. 72132................... Ct lumbar spine w/dye.

33. Regulations The Centers for Medicare and Medicaid Services (“CMS”) have issued several regulations relating to Stark. These regulations interpret the Stark statute and respond to commentary from the public. Stark I Regulations (Incorporated into Stark II) Stark I Regulations (Incorporated into Stark II) Stark II Regulations Stark II Regulations Phase I : Created several new exceptions, clarified DHS definitions, defined “referral,” and clarified indirect financial relationships. 66 Fed. Reg. 856 (January 4, 2001). Phase I : Created several new exceptions, clarified DHS definitions, defined “referral,” and clarified indirect financial relationships. 66 Fed. Reg. 856 (January 4, 2001). Phase II: Discusses ownership and investment interests, the exceptions for certain compensation arrangements, and the reporting requirements. 69 Fed. Reg. 16054 (March 26, 2004). Phase II: Discusses ownership and investment interests, the exceptions for certain compensation arrangements, and the reporting requirements. 69 Fed. Reg. 16054 (March 26, 2004). Phase III: This rule finalizes, and responds to public comments regarding, the Phase II interim final rule with comment period. 72 Fed. Reg. 51012 (September 5, 2007). Phase III Notice of Delay for “stand in the shoes” and other provisions. 72 Fed. Reg. 64161 (November 15, 2007). REVIEW THIS STATUTE Phase III: This rule finalizes, and responds to public comments regarding, the Phase II interim final rule with comment period. 72 Fed. Reg. 51012 (September 5, 2007). Phase III Notice of Delay for “stand in the shoes” and other provisions. 72 Fed. Reg. 64161 (November 15, 2007). REVIEW THIS STATUTE Anti-Markup Provisions – 2009 Physician Fee Schedule 73 Fed. Reg. 69725, 69799 (November 19, 2008); 42 C.F.R. § 414.50. Anti-Markup Provisions – 2009 Physician Fee Schedule 73 Fed. Reg. 69725, 69799 (November 19, 2008); 42 C.F.R. § 414.50. Other Updates: (e.g.notices to beneficiaries of imaging options) Other Updates: (e.g.notices to beneficiaries of imaging options)

34. Exceptions Exceptions are separated into three (3) categories Exceptions are separated into three (3) categories 1. Exceptions to both Ownership/Investment Interests and Compensation Relationships 42 C.F.R. § 411.355 42 C.F.R. § 411.355 2. Exceptions to Ownership/Investment Interests 42 C.F.R. § 411.356 42 C.F.R. § 411.356 3. Exceptions to Compensation Relationships 42 C.F.R. § 411.357 42 C.F.R. § 411.357 In addition, Stark’s complicated definitions contain exclusions, too In addition, Stark’s complicated definitions contain exclusions, too The definition of “referral” excludes a physician following the patient himself (i.e., physician has his or her own x-ray machine or ultrasound). The definition of “referral” excludes a physician following the patient himself (i.e., physician has his or her own x-ray machine or ultrasound). The definition of “DHS” excludes payments made under a composite rate (e.g., managed care plans). The definition of “DHS” excludes payments made under a composite rate (e.g., managed care plans).

35. Exceptions Most commonly used exceptions Most commonly used exceptions Physician Services Physician Services In-office ancillary services In-office ancillary services Personal Services Personal Services Bona Fide Employment Relationships Bona Fide Employment Relationships Rental of Equipment Rental of Equipment

36. Exceptions Physician Services Physician services that are Physician services that are Furnished by another member of the referring physician’s group or Furnished by another member of the referring physician’s group or Under the supervision of another physician who is a member of the referring physician’s group practice. Under the supervision of another physician who is a member of the referring physician’s group practice.

37. Exceptions In-Office Ancillary Services Services, and some DME, that are: 1. Personally furnished by a member of the group; 2. In the “Same Building” or a “Centralized Location”; and 3. Billed by or through the group practice.

38. Exceptions In-Office Ancillary Services (cont.) “Same Building” means (THIS IS AN ABBREVIATED EXPLANATION): Structures sharing a single street address, excluding exterior areas (i.e., parking lots, courtyards, mobile vehicles). Not necessarily the same part of the building. Structures sharing a single street address, excluding exterior areas (i.e., parking lots, courtyards, mobile vehicles). Not necessarily the same part of the building. Physician has an office open to patients 35+ hrs/wk; OR Physician has an office open to patients 35+ hrs/wk; OR Physician regularly provides services to patients 30+ hrs/wk; OR Physician regularly provides services to patients 30+ hrs/wk; OR Patient receiving DHS usually receives services from the physician, and the physician owns or rents an office open to patients 8+ hrs/wk; OR Patient receiving DHS usually receives services from the physician, and the physician owns or rents an office open to patients 8+ hrs/wk; OR Physician is present and orders the DHS during a patient visit at an office open 8+ hrs/wk and the referring physician sees patients 6+ hrs/wk. Physician is present and orders the DHS during a patient visit at an office open 8+ hrs/wk and the referring physician sees patients 6+ hrs/wk. “Centralized Building” means: All or part of a building, including mobile vehicles/trailers, owned or leased on a full-time basis. All or part of a building, including mobile vehicles/trailers, owned or leased on a full-time basis.

39. Exceptions Impact of Anti-Markup Rules to this and other exceptions Impact of Anti-Markup Rules to this and other exceptions Need to distinguish between PC (Professional Component) and TC (Technical Component) Need to distinguish between PC (Professional Component) and TC (Technical Component) Location vs. Periodicity Requirements Location vs. Periodicity Requirements

40. Exceptions Personal Services: The agreement must be set out in writing, signed by the parties, and specify the services to be covered by the arrangement. The agreement must be set out in writing, signed by the parties, and specify the services to be covered by the arrangement. The agreement must cover all services provided by the physician to the entity. The agreement must cover all services provided by the physician to the entity. The services provided to the entity must be reasonable and necessary. The services provided to the entity must be reasonable and necessary. The term of the agreement is at least one (1) year. The term of the agreement is at least one (1) year. The compensation is set out in advance and does not exceed the fair market value of the services. The compensation is set out in advance and does not exceed the fair market value of the services. The services provided cannot include promotion of a business arrangement. The services provided cannot include promotion of a business arrangement.

41. Exceptions Bona Fide Employees: A compensation relationship is not a financial relationship for Stark purposes if: A compensation relationship is not a financial relationship for Stark purposes if: The employment is for identifiable services. The employment is for identifiable services. The amount paid to the physician is consistent with the fair market value of the services and is not determined in a manner that accounts for the volume or value of referrals made by the referring physician. The amount paid to the physician is consistent with the fair market value of the services and is not determined in a manner that accounts for the volume or value of referrals made by the referring physician. The agreement between the physician and employer would be commercially reasonable even if no referrals were made to the employer. The agreement between the physician and employer would be commercially reasonable even if no referrals were made to the employer. Productivity Bonuses based on services personally performed by the physician are permissible under Stark. Productivity Bonuses based on services personally performed by the physician are permissible under Stark.

42. Exceptions Equipment Rental: Payments by a lessor to a lessee for the use of equipment is not a financial relationship if: Payments by a lessor to a lessee for the use of equipment is not a financial relationship if: The lease is set out in a written agreement signed by the parties which specifies the equipment covered by the lease. The lease is set out in a written agreement signed by the parties which specifies the equipment covered by the lease. The equipment leased does not exceed what is reasonable and necessary for the business purposes of the lease. The equipment leased does not exceed what is reasonable and necessary for the business purposes of the lease. The equipment is used exclusively by the person leasing the equipment. The equipment is used exclusively by the person leasing the equipment. The term is more than one year. The term is more than one year.

43. Exceptions Equipment Rental (continued): The rental charges are set out in advance and are consistent with the fair market value of the equipment. The rental charges are set out in advance and are consistent with the fair market value of the equipment. The rental charges are not determined in a manner that accounts for the volume or value of referrals made between the parties. The rental charges are not determined in a manner that accounts for the volume or value of referrals made between the parties. The lease would be commercially reasonable even if no referrals were made between the parties. The lease would be commercially reasonable even if no referrals were made between the parties.

44. Exceptions Other Exceptions: Services furnished by an organization to enrollees Services furnished by an organization to enrollees Investment in Academic Medical Centers Investment in Academic Medical Centers Implants furnished by an ambulatory surgery center Implants furnished by an ambulatory surgery center EPO and EPO dialysis-related drugs EPO and EPO dialysis-related drugs Preventive screening tests, immunizations and vaccines Preventive screening tests, immunizations and vaccines Eyeglasses and contact lenses following cataract surgery Eyeglasses and contact lenses following cataract surgery Intra-family rural referrals Intra-family rural referrals Publicly traded securities Publicly traded securities Mutual funds Mutual funds Specific Providers (Rural, hospitals in Puerto Rico, and whole-hospital investment) Specific Providers (Rural, hospitals in Puerto Rico, and whole-hospital investment) Office space rental Office space rental Physician recruitment Physician recruitment Isolated transaction (i.e., sale of practice) Isolated transaction (i.e., sale of practice) Certain arrangements with hospitals Certain arrangements with hospitals

45. Exceptions Other Exceptions (Continued): Group practice arrangements with hospitals Group practice arrangements with hospitals Payments by a physician Payments by a physician Charitable donations by a physician Charitable donations by a physician Non-monetary compensation less than $300 Non-monetary compensation less than $300 Fair market value compensation Fair market value compensation Medical staff incidental benefits Medical staff incidental benefits Risk-sharing arrangements Risk-sharing arrangements Compliance training Compliance training Indirect compensation arrangements Indirect compensation arrangements Referral services Referral services Retention payments in underserved areas Retention payments in underserved areas Community-wide health information systems Community-wide health information systems Electronic prescribing items and services Electronic prescribing items and services Electronic health records items and services Electronic health records items and services

46. Violations The Stark Law is a “strict liability” statute. The Stark Law is a “strict liability” statute. No knowledge of actual violations required to violate the statute No knowledge of actual violations required to violate the statute A bill can violate Stark even if (a) the patient requested the referral, (b) the work was high quality, (c) the results were favorable for the patient, or (d) the services were cost-effective. A bill can violate Stark even if (a) the patient requested the referral, (b) the work was high quality, (c) the results were favorable for the patient, or (d) the services were cost-effective. Sanctions for violations of the Stark Law include denial of reimbursement, civil monetary penalties, and exclusion from government health programs. Sanctions for violations of the Stark Law include denial of reimbursement, civil monetary penalties, and exclusion from government health programs. Stark Law violations are a civil violation. No intent to violate the law is necessary. Stark Law violations are a civil violation. No intent to violate the law is necessary.

47. What to Watch Out For Danger Areas: State Stark Laws (“Mini-Stark”) – Some state laws are broader than federal laws State Stark Laws (“Mini-Stark”) – Some state laws are broader than federal laws Joint Ventures or questionable contracts with referral sources Joint Ventures or questionable contracts with referral sources Arrangements permitted under the Anti- Kickback Statute, but not Stark Arrangements permitted under the Anti- Kickback Statute, but not Stark Purchased Services that do not comply with Anti-Markup Provisions Purchased Services that do not comply with Anti-Markup Provisions

48. If You Think You Need Help Philip M. Sprinkle II Balch & Bingham, LLP 30 Ivan Allen Jr. Blvd. NW Atlanta, Georgia 30308 (888) 360-9093 psprinkle@balch.com