Hospital Self-Discloses False Claims violations, will pay $17.3 million.
Stark Law.
Hospitals are often in a constant battle for patients. A steady stream of referrals from physicians can significantly boost a hospital's revenue and reputation. Here's why:
Because referrals can be so lucrative, there are two laws regulating how those referrals can be made. At a very basic level, the idea is that referrals are made in the best interests of the patient rather than because someone has a financial incentive to make the referral. One of those laws is the Stark Law.
Stark Law (42 U.S.C. § 1395nn)
The Stark Law, also known as the Physician Self-Referral Law, prohibits physicians from referring Medicare or Medicaid patients to entities with which they (or an immediate family member) have a financial relationship for certain designated health services (DHS), unless an exception applies.
Key Elements of the Stark Law:
Financial Relationship: This can be an ownership interest, an investment interest, or a compensation arrangement (e.g., a salary, bonus, or payment of any kind).
Designated Health Services (DHS): These include inpatient and outpatient hospital services, clinical laboratory services, physical therapy, radiology, durable medical equipment, and home health services, among others.
Strict Liability: Stark is a strict liability statute, meaning that no intent to violate the law is required to establish a violation. If a prohibited referral is made, it automatically constitutes a violation, even if the physician was unaware of the prohibition.
Common Exceptions to the Stark Law:
Several exceptions permit otherwise prohibited financial relationships under certain circumstances. These include:
In-Office Ancillary Services Exception: Allows physicians to refer patients for DHS within their own practice group, provided certain conditions are met (e.g., the services are provided in the same building where the referring physician works, and the billing is done by the practice).
Employment Exception: Permits physicians to refer patients to DHS entities that employ them, provided the compensation is consistent with fair market value (FMV) and does not vary based on the volume or value of referrals.
Personal Services Exception: Applies to compensation for personal services (e.g., medical directorships) if the arrangement is in writing, specifies the services, is for at least one year, and the payment is consistent with FMV and does not account for referral volume.
Fair Market Value Exception: Permits financial relationships where compensation is consistent with FMV, not based on the volume of referrals, and complies with applicable federal and state laws.
Rental of Office Space or Equipment Exception: Allows physicians to lease office space or equipment to DHS providers, provided the lease is for at least one year, the space or equipment is reasonable and necessary for legitimate purposes, and the rent is set in advance at FMV.
Isolated Transaction Exception: Covers one-time transactions, such as a sale of property or equipment, provided the payment is at FMV and not tied to future referrals.
Supervision Requirements
Under the False Claims Act (FCA), physician supervision of non-physician practitioners (NPPs) and other qualified assistants providing chemotherapy or other healthcare services is essential to ensure that claims submitted for reimbursement to government healthcare programs like Medicare and Medicaid meet legal and regulatory requirements. The requirement for physician supervision is grounded in several key principles:
Quality of Care and Patient Safety: Chemotherapy and many other healthcare services involve complex medical decisions and high-risk treatments. Non-physician practitioners, while often highly skilled, may not possess the same level of training and expertise as licensed physicians. Physician supervision helps ensure that the quality of care is maintained and that patient safety is prioritized.
Compliance with Medicare and Medicaid Regulations: The Centers for Medicare & Medicaid Services (CMS) and other regulatory bodies require specific levels of supervision for NPPs and healthcare assistants providing certain services, including chemotherapy. For example, under Medicare rules, direct or general physician supervision may be required, depending on the type of service. Failure to comply with these supervision requirements can result in claims for services that are not reimbursable, making any submission of those claims potentially false under the FCA.
Avoidance of Improper Billing: Claims submitted to Medicare or Medicaid must be accurate and reflect the services provided. If a non-physician practitioner provides services that require physician supervision but operates without it, the claim may be considered false or fraudulent under the FCA because it misrepresents the level of care provided. For example, billing for a service under a physician's National Provider Identifier (NPI) without proper supervision is an improper practice that can lead to FCA liability.
Preventing Fraudulent Practices: The supervision requirement helps guard against fraudulent practices, such as upcoding (billing for a higher level of service than provided) or billing for services that should not have been reimbursed without appropriate oversight. These practices can lead to FCA cases if healthcare providers knowingly submit false claims for reimbursement.
These rules change from time to time. This is one that has changed. In 2020, Medicare changed those rules. It cited the lack of supervision-related complaints from beneficiaries and the fact there has been no data showing quality was adversely affected at CAHs and small rural hospitals that have only been required to maintain general supervision. Of course, if a hospital violated those regulations before the rule change, then it was still liable.
The scheme
The scheme here was quite simple. The hospital made payments to a physician group under a contractual arrangement that linked the compensation physicians received to the number of referrals the physicians made for services at the hospital. In addition, the physicians at the infusion center allegedly failed to adequately supervise the chemotherapy services.
The scheme described above and the claims resolved by these settlements are allegations only and there has been no determination of liability. You can read the full Settlement here.
The penalty
The settlement agreement requires New York-Presbyterian/Brooklyn Methodist Hospital to pay $17.3 million to resolve allegations that it paid unlawful kickbacks to physicians at the hospital’s chemotherapy infusion center
The whistleblower
No whistleblower here. Instead, the hospital self-reported the violation that likely saved it millions in the penalty that was assessed.
Under the qui tam provision of the False Claims Act, a private party (also referred to as a whistleblower or relator) may file an action on behalf of the United States and receive a portion of the recovery, typically between 15-30%.
If you think you’ve observed fraud or misconduct, we can evaluate your options. Vivek Kothari is a former federal prosecutor who represents whistleblowers. For a free consultation, contact Vivek by email, phone, Signal, or fill out the contact form.