Regulatory Challenges and Opportunities for Georgia’s Rural Hospitals: Anti-Kickback Law & Safe Harbors Stark Law & Exceptions April 27, 2007 Penny.

Regulatory Challenges and Opportunities for Georgia’s Rural Hospitals: Anti-Kickback Law & Safe Harbors Stark Law & Exceptions April 27, 2007 Penny welcome cont’d. David Winkle Bill Boling Meredith Mlynar © 2006 Powell Goldstein LLP. All Rights Reserved.

What’s the Big Deal? Physician financial relationships with hospitals and other health care providers to which they refer patients are heavily regulated under federal and state law If these relationships are improperly structured, documented or implemented, these laws can subject a hospital, its management and the physicians to civil, administrative and criminal penalties

Federal Anti-Kickback Statute
Prohibits a person or entity from knowingly and willfully offering, paying, soliciting or receiving any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind, with the intent to induce referrals for federal health care program reimbursable items or services Can implicate immediate family members

The statute applies to physician – hospital financial relationships of all types, including common arrangements: Service and supply contracts Ancillary services Imaging Equipment Leases (space, equipment) Ambulatory surgery centers

Criminal Penalties $25,000 Five years’ imprisonment Civil Money Penalties $10,000 per item or service 3 times amount claimed for each item or service Exclusion Federal and State healthcare programs False Claims Act Liability Treble damages; penalties

“Safe Harbors” protect conduct that otherwise might be found to violate the statute The conduct or arrangement must fully satisfy all of the safe harbor’s conditions to claim safe harbor protection from sanctions Safe harbor conditions are detailed, narrow, and difficult to satisfy consistent with common business practices

Safe Harbors commonly relied upon in hospital-physician arrangements: Personal services/management contracts Physician Recruitment Employment Space leases and equipment leases Electronic Health Records (EHR) & E-Prescribing *NEW* Certain investment interests: “small entity” Investments in Ambulatory Surgery Centers

Services/Management Agreement Safe Harbor Written agreement signed by the parties; must be at least for a one-year term Services are specified; terms are commercially reasonable Aggregate compensation is set in advance, is FMV, and is not related to the volume or value of referrals or business otherwise generated between the parties Percentage, “per-click” or “per service” fees are not protected, but not specifically prohibited If services provided on part-time basis, agreement specifies the exact schedule, length and charge for such services; time logs must be maintained

Physician Recruitment Safe Harbor Safe harbor protection limited to recruitment into a health professional shortage area (HPSA) (Document community need if not a HPSA) Written agreement; benefits not exceeding 3 years At least 75 percent of revenues of new practice must be from new patients No requirement to make referrals to or practice exclusively at hospital; physician to treat federal patients in non-discriminatory manner Benefits may not vary with referrals or be provided to any other person or entity in a position to make or influence referrals to hospital

Employment Exception/Safe Harbor Anti-Kickback statutory exception and safe harbor protect amounts paid by an employer to a bona fide employee “Employee” defined with reference to IRS guidelines

Space and Equipment Lease Safe Harbor Written lease signed by the parties; at least a one-year term Aggregate rent set in advance, is FMV, and not determined in a manner that takes into account the volume or value of referrals or business otherwise generated by the parties No adjustment for proximity to referral sources Percentage, “per click” or “per use” rent not protected Aggregate space/equipment leased must not exceed commercially reasonable business purpose of Lessee/Tenant

Summary: General Anti-Kickback Problem Areas
Offering terms or returns based on referrals Loans to investors for capital Investors have little or no risk No legitimate business purpose; No “Value Added” Departure from contract terms Service fees not FMV Payments Changed to Reflect Referrals Increased Program Costs Overutilization Quality of Care Compromised Rewards for limiting or withholding of care Patient Choice Restricted

Stark Law Stark law prohibits a physician from making referrals for Medicare/Medicaid designated health services (“DHS”) to an entity with which the physician (or a member of the physician’s immediate family) has a financial relationship Strict Liability: No intent or knowledge necessary DHS includes inpatient and outpatient hospital services Financial relationships covered by Stark law can be: A direct or indirect ownership interest, or A direct or indirect compensation arrangement

Stark Law Stark Law’s prohibition is absolute:
If the financial relationship exists and no exception applies, the physician may not refer patients to the entity (in the case of a hospital for inpatient or outpatient hospital services or other designated health services) If the financial relationship exists, no exception is met, and a referral is made, the hospital may not bill for the services it provides as a result of that referral

Stark Law If the hospital bills for its services pursuant to an illegal referral, it must refund the entire amount of the payment If the hospital fails to properly refund illegally billed amounts, the hospital is subject to: A fine of $15,000 per item billed Exclusion from the Medicare program Stark law violation may give rise to liability under the False Claims Act Treble damages, penalties (apply to each transaction)

Stark Law Exceptions related to compensation arrangements
Personal services agreements Fair market value compensation Indirect compensation Physician recruitment Employment Space and equipment leases EHR & E-Prescribing *NEW*

Stark Law Service contracts, space/equipment leases, FMV compensation:
Exceptions have requirements similar to those under the Federal Anti-Kickback Safe Harbors: Contracts in writing, signed, at least one year term All services/space/items must be covered by the written contract Commercially reasonable and necessary for legitimate business Does not violate the Anti-Kickback Statute or other law Compensation must be: Fair market value Set in advance Unrelated to volume or value of referrals or other business generated between the parties

Stark Law Indirect Compensation Arrangement Exception
Any unbroken chain of financial relationships (whether ownership or compensation) may link hospital and physicians in an “indirect compensation” arrangement Exception allowed if: Compensation to physician is FMV for items/services actually provided Compensation is unrelated to volume or value of referrals to or other business generated with the hospital Set out in writing that specifies services covered by arrangement Does not violate the Anti-Kickback Statute or any laws on billing and claims submission

Stark Law Recruitment Exception
Protects payments to physician to induce physician to relocate practice to the area served by the hospital and become a member of the medical staff Must be in writing, no condition that physician refer to hospital and payments cannot be based on volume or value of actual or anticipated referrals Physician must be allowed to establish privileges at and refer to other entities (unless recruited for employment) Physician must either (i) move practice at least 25 miles, or (ii) derive at least 75 percent of revenues from new patients (physicians in practice for less than one year not subject to these requirements)

Stark Law Recruitment Exception
If recruitment payments are made to group which physician joins: Written agreement must be signed by group Payments flow straight through to physician except for actual costs incurred by group in recruiting physician If income guarantee, overhead allocated to physician must be limited to incremental cost increase attributable to that physician Practice may not impose additional practice restrictions on physician Payments must not take into account referrals to hospital from group

Stark Law Employment Exception
Protects payments by hospital to physician with bona fide employment relationship for identifiable services Employment compensation must be fair market value and not determined in a manner that takes into account referrals to the employer Productivity bonuses are permitted based on services personally performed by physician. Use Relative Value Unit (RVU) method; that is, measure of productivity of provider, which reflects time to perform service, technical skill and mental effort of provider. Cannot bonus on volume of ancillaries ordered Agreement would be commercially reasonable even if no referrals were made to employer

Summary: Stark Problem Areas
Complex Business Arrangements: Failure to Bring Every Payment, Financial Relationship under an Exception Agreement Not in Writing; Written Agreement Lapsed Departure from Contract Terms Compensation not FMV Compensation not set in advance Compensation Tied to Referrals, Business Generated between the Parties No Bona Fide Business Purpose

Georgia Self-Referral Law
Applies referral prohibitions similar to Stark law to relationships between hospitals and other health care providers, including physicians Unlike Stark law, applies only to ownership (equity) interests (not compensation [salary] interests) Unlike Stark law, applies to all payors Broad exception for referrals for services performed by referring physician or by member of referring physician’s group practice, and for referrals made to a hospital by a physician holding medical staff privileges Requires notice of ownership interest to patients

Many opportunities remain despite stringent regulation and enforcement
A Positive Outlook Many opportunities remain despite stringent regulation and enforcement

Hospital-Physician Integration Models
Can help rural hospitals stay in compliance under these statutes, especially those centered on: Recruitment Employment Personal Services Medical Directorships Co-Management Leasing Arrangements Equipment, Space, Property

Employment Regulatory issues turn in part on how physicians become employees of the hospital Recruitment Acquisition of existing physician practices Community Need Primary care vs. specialists Coverage

Employment Recruitment Recruit as hospital employee
Satisfy employment exception and safe harbor Recruit to join existing physician practice Satisfy recruitment exception and, if possible, safe harbor Document community need for physicians in that specialty No recruitment benefits to pay overhead of physician practice No restrictions on establishing privileges or referring elsewhere

Employment Acquisition of existing practice/Stark law
Acquisition of practice/isolated transaction exception (requires that subsequent financial arrangements satisfy Stark exception) Employment exception Applies only to employment compensation Places limits on productivity bonuses If doctors maintain investment interests, must satisfy: Personally-performed services exception In-office ancillary services exception Practice must satisfy the Stark definition of “group practice” to fall under these exceptions

Employment Acquisition of existing practice/Anti-Kickback Statute
Purchase of medical practices have been treated as kickbacks (safe harbor extremely limited) Purchase must be FMV, legitimate business purpose, arms length Pay for hard assets, value of ongoing business, covenants not to compete, exclusive dealing arrangements and patient lists/records; not goodwill Do not require seller to refer to hospital Ensure post-purchase compensation to seller is reasonable with no incentives for referrals

Leasing Arrangements Hospital may affiliate with physicians through various leasing arrangements Medical office buildings and other real estate Equipment Service lines (imaging, outpatient surgery, cardiac lab, physical therapy) Likely issues: Commercially reasonable business purpose; short-term leases; FMV; rental that varies with clinical income, referrals, or other business

Leasing Arrangements Space, Real Property Leases: Stark law
Space lease exceptions available May be indirect compensation relationship Space, Real Property Leases: Anti-kickback statute Lease safe harbor “Per use” rent payments do not qualify for safe harbor protection Contractual joint venture?

Leasing Arrangements Equipment Leases: Stark law
Equipment lease exceptions available May be indirect compensation relationships Leased service lines must be structured to comply with in-office ancillary services exception and other reimbursement regulations for lessee to be eligible to bill for services Can compensate on “per use” or “per click” basis Equipment Leases: Anti-kickback statute Lease safe harbor “Per use” rent payments may not qualify for safe harbor protection Contractual joint venture?

Electronic Health Records & E-Prescribing
New Federal Exceptions On August 8, 2006, both the Centers for Medicare & Medicaid Services and the Office of the Inspector General of the Department of Health and Human Services published final rules providing for exceptions from Stark and safe-harbors under the Anti-Kickback law.

New CMS Stark Exceptions
The new CMS final rule contains two exceptions to Stark: Hospitals may provide technology to support EHRs; and Hospitals may provide e-prescribing technology

EHR Stark Exception Hospitals furnishing designated health services may provide “software or information technology and training services” to a physician so long as the technology is used “predominantly to create, maintain, transmit or receive” EHRs. The arrangement must also comply with the anti-kickback law.

EHR Stark Exception Technology covered under the exception:
Software meeting certain conditions; Interfaces and translation software; Rights, licenses and intellectual property related to EHR software; Connectivity services; Clinical support and information services related to patient care; Maintenance services; Secure messaging; and Training and support services. HARDWARE IS NOT COVERED

EHR Stark Exception In donating technology to physicians, hospitals may not take referral volume or value into consideration in choosing who receives the technology. Hospitals may, however, use criteria not directly related to the value or volume of referrals in choosing recipients.

EHR Stark Exception In choosing recipients for EHR technology, hospitals may consider: Total number of prescriptions written; Size of medical practice; Physician’s overall use of technology; or Other reasonable and verifiable criteria not related to volume or value of referrals.

EHR Stark Exception Additional conditions:
Donated items cannot be the “equivalent” of items the physician already has; The arrangement must be detailed in a written agreement; The physician must pay 15% of the donor’s costs; Hospital may not disable or limit interoperability functions that the technology may have; Hospital may not limit the kinds of patients for whom the technology is used; Donation must include an e-prescribing function.

E-prescribing Stark Exception
Under the final rule, hospitals may provide e-prescribing items and services to: Members of their medical staffs; Practices and their physician members; Medicare Part D Prescription Drug Plan sponsors; Medicare Advantage organizations.

E-prescribing Stark Exception
The e-prescribing exception contains limitations similar to those discussed with the EHR exception: Items must be used solely to receive and transmit electronic prescription information; Items must not be equivalent to items the recipient already has; Donor may not limit or disable interoperability functions the technology may have; Donor may not consider volume or value of referrals in deciding who receives the technology; Arrangement must be in writing

OIG Safe Harbors On the same day that CMS published its Stark exceptions for EHR technology and e-prescribing, the OIG published safe harbors for similar EHR and e-prescribing items. The Anti-Kickback safe harbors closely reflect the Stark exceptions previously discussed

EHR Anti-Kickback Safe Harbor
EHR safe harbor allows hospitals to provide “software or information technology and training services” to: Physicians Individuals Organizations

EHR Anti-Kickback Safe Harbor
Donation must be used “predominantly to create, maintain, transmit or receive” EHRs. The covered technology closely reflects that under the Stark Exception. Broad range of protected donors – those who provide health services covered by a federal health program.

E-prescribing Anti-Kickback Safe Harbor
Similar to e-prescribing exception under Stark. Hospitals may give items and services relating to e-prescribing to members of their medical staffs. Other potential donors and recipients: Group practices and their members; Medicare Part D Prescription Drug Plan Sponsors Medicare Advantage organizations.

Certification Required
Under both Stark and Anti-kickback, interoperability of EHR items must be certified by a recognized body The Certification Commission for Healthcare Information Technology (CCHIT) is the first group to be designated a Recognized Certification Body (RCB) by HHS HHS hopes CCHIT’s seal of approval will accelerate adoption of health IT products by removing uncertainty about the technical capabilities of the products, and thereby limiting the risk associated with investing in health IT for health care providers CCHIT has certified 59 EHR products so far, consistent with published criteria

Reasons for Move to National Electronic Medical Record Grid
According to Rand Corp study, EMR system creates an estimate annual administrative cost savings of $81 billion a year and $346 billion annual savings from a more efficient practice of medicine. Sept – National Academies of Medicine reported: “Medicare payment System encourages volume rather than efficiency and quality.” According to the Advisory Board (study by Penn. Healthcare Council) in-hospital-acquired infections resulted in an average additional cost of all hospital-acquired infections of $60,678.

According to Reinertsen Group (the 100,000 Lives Campaign): Doctors’ treatment helps their patients only 55% of the time, with serious harm 1% of the time. Hospital’s care is defective 10% of time, resulting in over 200,000 annual deaths Tenet’s recent corporate integrity agreement requires quality initiatives based upon evidence-based medicine The federal government’s goals of rapid EMR adoption are: (1) improve quality and reducing errors by connecting patients’ healthcare information across all practices settings, (2) measure and report outcomes, and pay for outcomes to realign financial incentives of healthcare.

Federal Response By Executive order, President has adopted a 10 year plan to create EMR infrastructure and created office of National Coordinator for Health Information Technology Four federal contracts have been entered into: (1) establish IT standards and harmonization; (2) establish compliance certification; (3) establish privacy and security standards; (4) design national health information network August 22, 2006 – Executive order directing federal agencies that administer federal healthcare programs to increase price and quality transparency by January 1, 2007 Require providers of federally financed healthcare adopt quality – measurement tools and uniform standards for health IT Require adoption of EMR and interoperability

National ePrescribing Patient Safety Initiative (NEPSI)
Formed by a coalition of some of the nation’s largest technology and healthcare companies Will provide free e-prescribing software (“eRxNOW”) to EVERY physician in America eRxNow generates secure electronic prescriptions that can be sent computer-to-computer or via fax to 55,000 retail pharmacies Includes instant “harmful interactions” check & real-time notification of insurance formulary status from payors

A t l a n t a ▪ W a s h i n g t o n ▪ Dallas
One Atlantic Center Fourteenth Floor 1201 West Peachtree Street, NW Atlanta, GA 30309 Tel Fax 901 New York Avenue, NW Third Floor Washington, DC 20001 Tel Fax 2200 Ross Avenue Suite 3200 Dallas, TX 75201 Tel Fax David Winkle Bill Boling Meredith Mlynar © 2006 Powell Goldstein LLP. All Rights Reserved.

OUTPATIENT IMAGING Proposed Lease Transaction For 3 + 2 Year Term
Total Equipment Cost $3,587,465 Equity $1,076,240 Percent Financed by Venture % Amount Finance $2,511,226 Assumed LLC Borrowing Interest Rate % Annual Debt Service (3 years only) $1,028,250 Lease Term (Years) Annual Lease Payment (3 years) $1,198,190 (2 years) $444,996 Residual Value of Equipment (3 years) $896,866 (5 years) $358,746 Estimated annual IRR for Investors (3 years) % (Cash on Cash Return) = IRR (5 years) %

64 Slice Projected Lease Transaction for 3 + 2 Year Term
Terms with Financial Institution Total Equipment Cost $1,910,000 Equity – 30% $ 573,000 Amount Finance – 70% $1,337,000 Assumed LLC Borrowing Interest Rate % Annual Debt Service (3 years only) $ 487,097 Terms with Leasing Company Lease Term (Years) Annual Lease Payment (3 years) $637,928 (2 years) $248,318 Residual Value of Equipment (3 years) $477,500 (5 years) $191,000 Estimated annual IRR for Investors (3 years) % (5 years) %

THE OFFERING Unit Price $1,146 Total Investment Units 500
Maximum Units Available Minimum Units Per Investor Maximum Units Per Investor Unit Price $1,146 Minimum Unit (5) Commitment: $5,730 Maximum Unit (10) Commitment: $11,460

Co-Management Agreement Quality Bonus Indicators
CARDIOVASCULAR MANAGEMENT SERVICES AGREEMENT PERFORMANCE GOALS AND STANDARDS Co-Management Agreement Quality Bonus Indicators Program Indicator Definition Rationale Baseline Target Stretch National Benchmark Interventional Cardiology DRG Ratio - 124/125 %of IP caths in each DRG Case mix for diagnostic caths measures accurate documentation of patient severity 48% 124; 52% 125 55% 124; 45% 125 60% 124; 40% 125 75% 124; 25% 125 Adverse events % of PCI with complication codes Post PCI complications -preventable errors 0% <1% <0.5% NA Budget cost per case Budget cost per interventional case Fiscal management $9,028 $8,250 $8,000 $7,800 AMI ACE/ARB at discharge Med prescribed at discharge of documentation med not indicated JCAHO Core Measure 58% 75% 92% 95% ASA at discharge Med prescribed at discharge of documentation med not indicated JCAHO Core Measure 97% 97% 98% 99% Beta Blacker at discharge discharge of documentation med JCAHO Core Measure 93% 94% 95% 95% Door to PCI time for STEMI Door to PCI; door to thrombolytics CMS 44% 15% 90% 81.8% < 90 minutes CHF ALOS for DRG 127 AMLOS 5.2 GMLOS 4.1 Fiscal management 4.8 4.7 4.2 4 ACE/ARB at discharge LVEF <40%, med prescribed at discharge of documentation med not indicated JCAHO Core Measure 80% 85% 90% 95% Left ventricular function assessment Measurement of LVF through ultrasound or other means during hospital stay JCAHO Core Measure 82% 85% 90% 92% Vascular Percent of patients with perioperative glucose control % of patients with serum glucose less than or equal to 200 mg/dL intro-operatively and during the first 48 hours postoperatively IHl Surgical Infection Rate Reduction Plan 90% Prophylactic antibiotic within 1 hour of surgical procedures % of patients with antibiotic administered 1 hour pre-operatively 98% Electrophysiology Length of stay Utilization of procedure areas National Cardiovascular Data Registry (ACC) 2.8 2.8 Average number of lab visits per admission Utilization of procedure areas National Cardiovascular Data Registry (ACC) 1.5 1.5 Defibrillator implant cost per case Acquisition cost per defibrillator Acquisition costs to national benchmarks Single: $19,500 Dual: $21,000 $18,500 $20,000 $17,500 $19,000 $15,500 $17,500 General Case mix index for MDC 5 Appropriate case mix for all patients within the service line Appropriate documentation of severity of illness; impacts external measures 1.32 1.36 1.4 NA

Regulatory Challenges and Opportunities for Georgia’s Rural Hospitals: Anti-Kickback Law & Safe Harbors Stark Law & Exceptions April 27, 2007 Penny.

Similar presentations

Presentation on theme: "Regulatory Challenges and Opportunities for Georgia’s Rural Hospitals: Anti-Kickback Law & Safe Harbors Stark Law & Exceptions April 27, 2007 Penny."— Presentation transcript:

Similar presentations

About project

Feedback

Log in

Auth with social network:

Regulatory Challenges and Opportunities for Georgia’s Rural Hospitals: Anti-Kickback Law & Safe Harbors Stark Law & Exceptions April 27, 2007 Penny.

Similar presentations

Presentation on theme: "Regulatory Challenges and Opportunities for Georgia’s Rural Hospitals: Anti-Kickback Law & Safe Harbors Stark Law & Exceptions April 27, 2007 Penny."— Presentation transcript:

Similar presentations

About project

Feedback