1. GEORGIA HOSPITAL ASSOCIATION CENTER FOR RURAL HEALTH ANNUAL SUMMER MEETING August 13-15, CONTRACT COMPLIANCE Daniel J. Mohan Partner Health Law Group

2. CONTRACT COMPLIANCE Presentation will cover the following:
What are we talking about when we talk about “Contract Compliance”?
What types of contracts?
What is “compliance”?
Why is compliance important?
Are your contracts compliant?
Requirements of compliant contracts
Contract compliance audit
What to do if you have non-compliant contracts

3. WHAT TYPES OF CONTRACTS?
Focus on contracts that describe common hospital – physician financial arrangements Any arrangement between a hospital and a physician, physician group practice, entity in which a physician holds an ownership interest, or Any arrangement between the hospital and an immediate family member of the physician Arrangements at issue are any arrangement which involves the payment of money or other “remuneration” by the hospital to the doctor (or an immediate family member), or by the doctor (or an immediate family member) to the hospital

4. COMMON TYPES OF HOSPITAL-PHYSICIAN CONTRACTUAL ARRANGEMENTS
Employment Arrangements
Personal Services Arrangements
Medical Director
Diagnostic Test Interpretation
Call Coverage Arrangement
Department Staffing Arrangement
Consulting Services
Office Leases
Equipment Leases
Management Services Arrangements
Recruitment Arrangements
Practice Acquisitions

5. COMPLIANCE WITH WHAT?
Concerned about ensuring that hospital-physician arrangements do not violate myriad of state and federal healthcare laws, primarily:
Federal Anti-Kickback Statute
Federal “Stark” Law
Federal False Claims Act
Federal Civil Monetary Penalties Act
Other Federal Anti-Fraud Statutes
State Anti-Kickback, Anti-Fraud and Self-Referral Laws

6. FEDERAL ANTI-KICKBACK STATUTE
Federal Anti-Kickback Statute (42 U.S.C. § 1320a-7b(b)) provides that:
Illegal remunerations. (1) Whoever knowingly and willfully solicits or receives any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind –
(A) in return for referring an individual to a person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part under a Federal health care program, or
(B) in return for purchasing, leasing, ordering, or arranging for or recommending purchasing, leasing, or ordering any good, facility, service, or item for which payment may be made in whole or in part under a Federal health care program,
shall be guilty of a felony and upon conviction thereof, shall be fined not more than $25,000 or imprisoned for not more than five years, or both.
Whoever knowingly and willfully offers or pays any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind to any person to induce such person –
(A) to refer an individual to a person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part under a Federal health care program, or
(B) to purchase, lease, order, or arrange for or recommend purchasing, leasing, or ordering any good, facility, service, or item for which payment may be made in whole or in part under a Federal health care program,

7. FEDERAL “STARK” LAW
The federal Ethics in Patient Self-Referral Law, a/k/a the “Stark” Law (42 U.S.C. § 1395nn) provides that
If a physician (or an immediate family member of such physician) has a financial relationship with an entity
(a) the physician may not make a referral to the entity for the furnishing of a “designated health service” for which payment may be made by Medicare, and
the entity may not present or cause to presented to Medicare a claim for reimbursement or bill to any individual for designated health services provided by the entity in connection with a prohibited referral,
unless a specific exception under the Stark Law is met

8. FEDERAL FALSE CLAIMS ACT
The Federal False Claims Act (31 U.S.C. § 3729(a)) provides that
Liability for certain acts. (1) In general. Any person who –
(A) knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval;
(B) knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim; …
(G) knowingly makes, uses, or causes to be made or used, a false record or statement material to an obligation to pay or transmit money or property to the Government, or knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government,
is liable to the United States Government for a civil penalty of not less than $5,000 and not more than $10,000, plus 3 times the amount of damages which the Government sustains because of the act of that person.

9. WHY IS COMPLIANCE IMPORTANT?
Recent judgments and/or settlements of AKS, Stark Law, Civil Monetary Penalties and FCA enforcement actions against hospitals and healthcare systems
Tuomey Healthcare
301 bed hospital in Sumter, South Carolina
Qui tam relator filed suit in October 2005 – physician offered opportunity to participate in arrangement but declined
Qui tam complaint, alleged part-time employment arrangements with 19 surgeons on Tuomey’s medical staff violated Stark Law and FCA
Case went to trial
Jury found in favor of government and qui tam relator
Judge assessed civil fees and penalties against Tuomey in the amount of $ million; later reduced to $237 million

10. RECENT SETTLEMENTS HALIFAX HOSPITAL MEDICAL CENTER
678 bed hospital in Daytona Beach, Florida
Qui tam relator filed suit in June 2009 – director of physician services
Alleged that hospital established impermissible bonus compensation arrangements with employed physicians that compensated physicians, in part, based on the value or volume of referrals
Halifax settled alleged violations of AKS/Stark/FCA for $85 Million
HARMON MEMORIAL HOSPITAL
72 bed hospital located in Hollis, OK
Qui tam relator, former hospital CEO, filed qui tam suit
Alleged hospital engaged in a variety of impermissible financial relationships with medical staff physicians including
rent-free office space
free office staff and billing and collection services
reimbursement for services provided in Emergency Department that physician also billed for directly
Payment of locums tenens services to cover doctor’s practice
Hospital settled for $550,000; doctor settled for $1 million

11. RECENT SETTLEMENTS JACKSON PURCHASE MEDICAL CENTER
107 bed acute care hospital in Mayfield, Kentucky
Alleged that hospital provided orthopedic surgeon with impermissible financial benefits, including
hospital employed P.A. to work in physician’s practice at no charge to doctor
waived payment of rent on MOB space occupied by doctor
did not collect rent on equipment lease for diagnostic imaging equipment owned by hospital and used in doctor’s space
Hospital settled AKS/Stark/FCA allegations for $850,000
WHEATON COMMUNITY HOSPITAL
25 bed critical access hospital located in Wheaton, Minnesota
Case initiated by qui tam relator, former partner of physician involved in alleged misbehavior
Complaint alleged that physician admitted patients to hospital when admissions were not medically necessary
Hospital settled CMP/FCA allegations for $563,000; doctor settled allegations for $283,000

12. RECENT SETTLEMENTS COMMON THEMES:
Overwhelming number of cases involved impermissible hospital-physician relationships
Most of cases were initiated by “qui tam” relator; i.e., whistleblower
Anyone is a possible whistleblower
Former CEOs, administrators, other senior executives
Disgruntled former employees (nurses, technicians, billing office, front office)
Disgruntled physicians
Competitors
No hospital is too small, too rural, or “too otherwise” to avoid a qui tam complaint and investigation
No hospital is too small, too rural, “too otherwise” to avoid paying fines and penalties if the government believes the conduct is sufficiently egregious
Doctors are often forced to pay, as well

13. COMING INTO COMPLIANCE
COMPLIANCE PLAN
Compliance Plan provisions regarding contract compliance
Maintain “master list” of hospital-physician contracts
System for regularly updating the list
Understanding requirements for compliant contracts
Implement and administer contract control system to confirm compliance

14. CONTRACT COMPLIANCE
How does a hospital determine if contracts are compliant?
SELF-AUDIT!
Step 1: Compile list of existing hospital-physician financial arrangements
How to identify hospital-physician arrangements?
FOLLOW THE MONEY!
Stark Law is implicated whenever a “financial arrangement” exists between a hospital and a doctor
Any arrangement involving hospital paying money to or receiving “money” from doctor (a/k/a “remuneration,” i.e., anything of value) creates a financial arrangement that implicates Stark and AKS
Review hospital records to identify (a) all payments made by hospital to doctor, (b) all payments received by hospital from doctor

15. CONTRACT COMPLIANCE Step 2: Confirm accuracy of list
Once preliminary list of hospital-physician arrangements is compiled, circulate list to senior hospital executive staff to confirm accuracy
Tracking payments made to and from physicians is a good starting point, but imperfect method for identifying all potential relationships
May not pick up
Arrangements where no monetary payments are being made
Joint venture arrangements
Arrangements with companies owned, in whole or in part, by physicians
Arrangements with immediate family members of physicians or companies owned by immediate family members of physicians

16. CONTRACT COMPLIANCE
Step 3: Determine if written agreements are in place for each hospital-physician arrangement
Does the hospital have a copy of a written agreement documenting the terms of each hospital-physician arrangement?

17. STARK LAW EXCEPTION REQUIREMENT GRID
CONTRACT COMPLIANCE
STARK LAW EXCEPTION REQUIREMENT GRID
Employment
Personal Services
Space
Lease
Equipment Lease
Recruitment
Isolated
Transactions
FMV
Compensation
Written Agreement, signed by parties X
Describes all services covered
Agreement covers all services provided
Aggregate services/items do not exceed reasonably necessary for legitimate business purposes
Term of Agreement at least one (1) year
Compensation paid is set in advance, consistent with FMV, not based on volume or value of referrals
“Commercially reasonable”

18. CONTRACT COMPLIANCE AUDIT CHECKLIST
STEP 4: Review all hospital-physician contract arrangements against Audit Checklist

19. CONTRACT COMPLIANCE AUDIT CHECKLIST
Basic questions to confirm the contract meets applicable Stark exception and AKS requirements
Is there a written agreement?
Was the agreement signed by all the parties?
Does the agreement specifically and adequately describe all of the items and/or services provided?
Are the services/items reasonably necessary for legitimate business purposes?
Does the term of the agreement run for at least one year?
Has the original term expired or contract terminated?
If so, did the term automatically renew, or is there evidence that parties renewed the agreement?
Is compensation/payments made under the agreement
Set in advance
Consistent with FMV
Not based on volume or value of referrals?
Is the arrangement “commercially reasonable”?

20. COMMON CONTRACT COMPLIANCE ISSUES EMPLOYMENT
Common compliance issues arising out of physician employment arrangements include the following:
FMV nature of compensation
Poorly constructed compensation plans that arguably compensate physicians based on volume or value of referrals
“Commercial reasonableness” of arrangement
Full-time services
Compensation based on provision of specified services, but physician not providing services

21. COMMON CONTRACT COMPLIANCE ISSUES PERSONAL SERVICES ARRANGEMENTS
Common compliance issues arising out of personal services arrangements with physicians include the following:
No written agreement
Agreement drafted but not signed by the parties
Agreement does not adequately describe services to be provided
Physician does not perform all services described in the agreement
Lack of documentation to support services provided by physician
Agreement expired and either did not renew automatically or parties failed to act affirmatively to renew
FMV nature of compensation
Evidence in file to support FMV of compensation?
“Commercial reasonableness” of relationship
Need for services provided by physician
Qualifications of physician to provide services
Physician is best person to provide services

22. COMMON CONTRACT COMPLIANCE ISSUES SPACE LEASES
Common compliance issues arising out of medical office lease arrangements include the following:
Lack of written lease agreement
Lease not signed by parties
Lease terminated or expired, no automatic renewal or parties did not affirmatively act to renew the lease
Rent and FMV of rent
If hospital is landlord, collecting rent?
How was rent determined?
Evidence to support FMV of rent (above or below FMV)
How common area costs, utilities, etc. are apportioned or paid for ?
Rent adjust? If long term lease, FMV of rent reviewed after period of years?
Space leased is not commensurate with what is reasonable and necessary for legitimate business purposes of lease
Hospital leasing more space from physician landlord than it needs, intends to fill, or is using?
If physician is tenant, does lease describe all space the physician is using and paying for?
“Specialty clinics”
How is FMV of rent determined?
Rent include all items and services provided?
Lease specifically describe intervals of time physician is occupying space and physician uses space only during that time?

23. COMMON CONTRACT COMPLIANCE ISSUES EQUIPMENT LEASES
Common compliance issues arising out of equipment lease arrangements include the following:
Lack of written lease agreement
Lease not signed by parties
Lease terminated or expired, and not renewed
Rent and FMV of rent
Rent being paid?
How was rent set?
Evidence to support FMV of rent?
Rent based in whole or in part on percentage of revenue or “per click” or per unit charge
Hospital leases more equipment than it needs, or more time than needed
Lessee not using equipment exclusively during time contracted for use

24. COMMON CONTRACT COMPLIANCE ISSUES PHYISICIAN RECRUITMENT ARRANGEMENTS
Common compliance issues with respect to physician recruitment arrangements include the following:
Lack of written agreement
Agreement not signed by parties
If recruiting to an existing practice, lack of written agreement signed by hospital, doctor and group
Physician not meet “relocation of medical practice from outside geographic area served by the hospital” requirement
If Physician is recruited to join an existing practice
“Remuneration” payable by hospital to recruited doctor (i.e., income guarantee) is not passed by the group directly through the group to the employed physician
Improper allocation of practice group expenses attributable to new physician
Hospital may only reimburse “actual additional incremental costs” allocated to the new physician (i.e., no allocation of general overhead expense of practice)

25. CONTRACT COMPLIANCE Step 5: Post-compliance audit action items
You have found no compliance issues – CONGRATULATIONS!
You determine that you have potentially non-compliant physician contractual arrangements

26. CONTRACT COMPLIANCE
ACTION ITEM 1: Fix the non-compliant agreements immediately ACTION ITEM 2: Consider whether to make a self-disclosure to applicable state and/or federal agencies of non- compliant arrangements ACTION ITEM 3: Administer existing compliance policies regarding contract compliance, or develop, adopt and administer new contract compliance policies to ensure compliance in the future and avoid future violations