1. Ober | Kaler www.ober.com New Pitfalls in Health Care Transactions ~~~ Fraud & Abuse Perspective Bill Mathias 410-347-7667wtmathias@ober.com

2. Ober | Kaler www.ober.com Some Things Don’t Change Medicare and Medicaid regulations remain incredibly complicated

3. Ober | Kaler www.ober.com “There can be no doubt but that the statutes and provisions in question, involving the financing of Medicare and Medicaid, are among the most completely impenetrable texts within human experience. Indeed, one approaches them at the level of specificity herein demanded with dread, for not only are they dense reading of the most tortuous kind, but Congress also revisits the area frequently, generously cutting and pruning in the process and making any solid grasp of matters addressed merely a passing phase.” — Chief Judge Ervin United States Court of Appeals for the fourth Circuit in Rehabilitation Association of Virginia v. Kozlowski, 42 F. 3d 1444, 1450 (4 th Circuit 1994)

4. Ober | Kaler www.ober.com More Things Never Change Government continues to view Fraud, Waste, and Abuse as a significant source of revenue Enforcement remains aggressive

5. Ober | Kaler www.ober.com Have You Seen the OIG’s Website Lately?

6. Ober | Kaler www.ober.com Aggressive Enforcement From new joint DOJ/OIG website www.stopmedicarefraud.gov www.stopmedicarefraud.gov –“A joint effort by HHS and the Department of Justice recovered a record $4 billion from fraudsters in FY2010.”

7. Ober | Kaler www.ober.com Fighting Fraud is Good Investment The return-on-investment (ROI) for Health Care Fraud and Abuse Control (HCFAC) program –Since 1997, $4.9 returned for every $1.0 expended. –3-year average (2008-2010), $6.8 returned for every $1.0 expended

8. Ober | Kaler www.ober.com Federal Fraud & Abuse Laws Anti-Kickback Statute Stark Physician Self-Referral Law Various Civil Monetary Penalties –Prohibition against inducements to beneficiaries –Prohibition against hospitals paying inducements to physicians to limit care False Claims Act

9. Ober | Kaler www.ober.com Areas of Government Concern in Fraud & Abuse Law Additional Cost Over, Under, and Mis-Utilization Quality of Care Access to Care Patients’ Freedom of Choice Competition Exercise of Professional Judgment

10. Ober | Kaler www.ober.com State Fraud & Abuse Laws Don’t forget about state laws –State fraud and abuse laws –State mini-Stark laws –Fee splitting prohibitions –Certificate of Need (CON) –State Licensure –Corporate practice of medicine

11. Ober | Kaler www.ober.com Fraud & Abuse Laws in Healthcare Transactions Beginning Middle End

12. Ober | Kaler www.ober.com In the Beginning... Need to analyze overall structure of the transaction to make sure the deal is consistent with fraud and abuse laws

13. Ober | Kaler www.ober.com In the middle... Need to conduct detailed due diligence to avoid fraud and abuse liability

14. Ober | Kaler www.ober.com In the end... Need to have a plan for operating in compliance with fraud and abuse laws –PPACA to require mandatory compliance program

15. Ober | Kaler www.ober.com Healthcare Industry Feeling Undervalued

16. Ober | Kaler www.ober.com Anti-Kickback Statute Federal anti-kickback law generally prohibits the provision of any economic benefit in exchange for the referral of patients or business that will be reimbursed under any Federal health care program. –42 U.S.C. § 1320a-7b(b).

17. Ober | Kaler www.ober.com What’s New with Anti-Kickback Statute PPACA expressly makes Anti- Kickback violations actionable under the FCA PPACA legislatively overrules Hanlester with respect to intent –“With respect to violations of this section, a person need not have actual knowledge of this section or specific intent to commit a violation of this section.”

18. Ober | Kaler www.ober.com AKS Decision Tree 1. Is there an economic benefit?If No If Yes 2. Is there a referral or recommendation? If No If Yes 3. Is there a statutory exception?If Yes If No 4. Is there a safe harbor?If Yes If No 5. Is there a potential for abuse? If No Go to Stark Analysis If Yes, Problem!

19. Ober | Kaler www.ober.com Stark Self-Referral Law The federal Stark physician self- referral law generally prohibits a physician from making referrals to an entity for any of eleven (11) designated health services if the physician (or an immediate family member) has a “financial relationship” with the entity. –42 U.S.C. § 1395nn

20. Ober | Kaler www.ober.com What’s New with the Stark Law Over past few years, changes to Stark law have limited possibilities for joint venture with physicians –“Stand in the shoes” (10/1/08) –Percentage-based compensation and “per click” (10/1/09) –“Under arrangement” services – revised definition of “entity” (10/1/09)

21. Ober | Kaler www.ober.com PPACA Provisions Affecting Stark Overpayments Stark self-disclosure authority Stark in office ancillary disclosure requirement Restrictions on physician investments in hospitals

22. Ober | Kaler www.ober.com Stark Decision Tree If No If Yes Okay! If Yes 6. Is there a regulatory exception? If Yes 5. Is there a statutory exception? If No 4. Is there a designated health service? If No 3. Is there a referral? If No 2. Is there a direct or indirect financial relationship? If No 1. Is there a physician or immediate family member? If No, Problem!

23. Ober | Kaler www.ober.com False Claims Act Potential liability remains enormous in healthcare context Liability –3X Damages –$5,500 to $11,000 per claim

24. Ober | Kaler www.ober.com DEFENSE CONTRACTOR $100,000 damages X 3 = $300,000 12 (# of claims) X $11,000 = $132,000 Total liability = $432,000 Sample Penalty Calculation

25. Ober | Kaler www.ober.com HEALTH CARE PROVIDER $100,000 damages X 3 = $300,000 2000 (# of claims) X $11,000 =$22,000,000 Total Liability = $22,300,000 Sample Penalty Calculation

26. Ober | Kaler www.ober.com FERA Amendments Revised FCA to codified “reverse false claims” –it is now illegal to “knowingly conceal…or knowingly and improperly avoid…or decrease…an obligation to pay or transmit money or property to the Government…” »31 U.S.C. §3729(a)(1)(G)

27. Ober | Kaler www.ober.com 60-day Overpayment Rule PPACA requires reporting and repayment of overpayments within 60 day of identification (or due date of next cost report, if applicable) –What’s “identification”? Violations actionable under FCA

28. Ober | Kaler www.ober.com Self-Disclosure OIG Voluntary Disclosure Protocol CMS Stark Self-Disclosure Protocol MAC Disclosure

29. Ober | Kaler www.ober.com Risk/Reward of Self-Disclosure Eliminate potential overpayment recoupment and FCA exposure Can be costly –$$$ –Time

30. Ober | Kaler www.ober.com Self-Disclosure Deal Points What to disclose? Who to disclose it to? Disclosure by seller or buyer? Allow sufficient time to resolve disclosure How definitive is your deal?

31. Ober | Kaler www.ober.com “Health Care in the New Millennium”

32. Ober | Kaler www.ober.com Questions? Bill Mathias Ober|Kaler 410-347-7667 wtmathias@ober.com