“Firewall Safety” of MD Regulations

to Avoid Jail Time

Presentation to Healthcare Workforce 2nd Annual Conference

November 8, 2013

Peter J Plantes, MD, FACP Christus Provider Network – CEO Peter.Plantes@ChristusHealth.org

•5th largest Catholic health care system in

the country

• Operates 35 Hospitals • U.S. - 7 states

- 300 Physicians

• Mexico - 6 states - 8 facilities

• Chile • Management Agreement

with large Catholic Academic Health Care System

• 800 Physicians

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I: Anti-Kickback & Stark Regulation

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Anti-Kickback & Stark Timeline

• Anti-kickback statute-enacted 1972

• Anti-kickback Safe Harbors-1991

• Stark law adopted-1992 (Clinical lab services) • Stark law expanded-2005

(Designated health services)

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U.S. Congressman Pete Stalk

“What is needed is what lawyers call a bright line rule to give providers and physicians unequivocal guidance as to the types of arrangements that are permissible and the types that are prohibited. If the law is clear and the penalties are severe, we can rely on self-enforcement in the great majority of cases”.

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COMPARISON OF THE ANTI-KICKBACK STATUTE AND STARK LAW* THE ANTI-KICKBACK STATUTE

(42 USC § 1320a-7b(b)) THE STARK LAW (42 USC § 1395nn)

Prohibition Prohibits offering, paying, soliciting or receiving anything of value to induce or reward referrals or generate Federal health care program business

• Prohibits a physician from referring Medicare patients for designated health services to an entity with which the physician (or immediate family member) has a financial relationship, unless an exception applies

• Prohibits the designated health services entity from submitting claims to Medicare for those services resulting from a prohibited referral

Referrals Referrals from anyone Referrals from a physician Items/ Services

Any items or services Designated health services

Intent Intent must be proven (knowing and willful)

• No intent standard for overpayment (strict liability) • Intent required for civil monetary penalties for knowing violations

Penalties Criminal: • Fines up to $25,000 per violation • Up to a 5 year prison term per violation • Civil/Administrative: • False Claims Act liability • Civil monetary penalties and program exclusion • Potential $50,000 CMP per violation • Civil assessment of up to three times amount of kickback

Civil: • Overpayment/refund obligation • False Claims Act liability • Civil monetary penalties and program exclusion for knowing violations • Potential $15,000 CMP for each service • Civil assessment of up to three times the amount claimed

Exceptions Voluntary safe harbors Mandatory exceptions Federal Health Care Programs

All Medicare/Medicaid

*This chart is for illustrative purposes only and is not a substitute for consulting the statutes and their regulations. Health Care Fraud Prevention and Enforcement Action Team (HEAT)

Office of Inspector General (OIG)

COMPARISON OF THE ANTI-KICKBACK STATUTE AND STARK LAW* THE ANTI-KICKBACK STATUTE

(42 USC § 1320a-7b(b)) THE STARK LAW (42 USC § 1395nn)

Prohibition Prohibits offering, paying, soliciting or receiving anything of value to induce or reward referrals or generate Federal health care program business

• Prohibits a physician from referring Medicare patients for designated health services to an entity with which the physician (or immediate family member) has a financial relationship, unless an exception applies

• Prohibits the designated health services entity from submitting claims to Medicare for those services resulting from a prohibited referral

Referrals Referrals from anyone Referrals from a physician Items/ Services

Any items or services Designated health services

Intent Intent must be proven (knowing and willful)

• No intent standard for overpayment (strict liability) • Intent required for civil monetary penalties for knowing violations

Penalties Criminal: • Fines up to $25,000 per violation • Up to a 5 year prison term per violation • Civil/Administrative: • False Claims Act liability • Civil monetary penalties and program exclusion • Potential $50,000 CMP per violation • Civil assessment of up to three times amount of kickback

Civil: • Overpayment/refund obligation • False Claims Act liability • Civil monetary penalties and program exclusion for knowing violations • Potential $15,000 CMP for each service • Civil assessment of up to three times the amount claimed

Exceptions Voluntary safe harbors Mandatory exceptions Federal Health Care Programs

All Medicare/Medicaid

*This chart is for illustrative purposes only and is not a substitute for consulting the statutes and their regulations. Health Care Fraud Prevention and Enforcement Action Team (HEAT)

Office of Inspector General (OIG)

• Prohibits the designated health services entity from submitting claims to Medicare for those services resulting from a prohibited referral

• Prohibits offering, paying, soliciting or receiving anything of value to induce or reward referrals or generate Federal health care program business

►False Claims Act liability

Stark Exceptions

• Bona Fide Employment

o Fair market value

o Agreement would be commercially reasonable even if no referrals

o Remuneration is not determined in a manner that takes into account the volume or value of any referrals

o Productivity bonus based on personally performed services is okay

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II. Recent Prosecutions Employment

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Tuomey Healthcare System

Stark Prosecution —Employment

Original Qui Tam Allegations

• 2004: Group announces it intends to perform

outpatient surgery in locations other than hospital

• Tuomey offered part-time employment agreements o Compensation structure presented by Tuomey and consulting firm

• Dr. Drakeford and others in his group offered employment contracts

• Drakeford does not sign agreement; Drakeford initiated whistleblower suit under False Claims Act; Government took over the action

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Employment Contracts

• Exclusivity: All out-patient surgical procedures to be performed at Hospital

• Non-Compete: Physician not to compete with Hospital during term and for 2 years following term, including practicing surgery within 30 miles

• Initial Term: 10 years

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Tuomey Contract Details

• Part-time employment agreements for outpatient

surgery services at the Hospital with 18 physicians

• Base salary on sliding scale based on physician’s collections

• Productivity bonus: 80% of physician’s net collections

• Quality incentive bonus: 7% of physician’s incentive bonus

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Example: Collections of $300,000

Base salary = $35,000 Productivity bonus = $240,000

(80% of collections) Quality incentive bonus = $16,800

(7% of productivity bonus)

Total compensation for part-time employment

= $291,800

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Employment Contracts

• Employee benefits

o Health insurance o Dental insurance o Vision insurance o Physician’s malpractice liability insurance (not pro-rated to

Physician’s activities for Hospital)

• Dr. Drakeford alleged: o Total package represented as “net gain” of 31%

over physician’s out-patient collections

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Outcome

• On retrial jury found that violation FCA & Stark; compensation was not FMV and reflected referrals

• 21,730 Medicare claims were tainted (2005-2009) Value of $39 million

• Court to hear damage arguments—potentially triple the total damages, plus $11,000 per claim —could total $357 million

• FINAL settlement 9/30/2013: “Tuomey Healthcare Ordered to Pay $276 Million”

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III: Safety “Firewall” in Development of Physician

Contracts

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Physician Practice

Physician Alignment

Summary Outcomes Included in Business Plan

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P&L Forecast – 5 Year: Revenues Expenses

NOI

Cash Flow – 5 Year: NPV IRR

Incremental Hospital Impact

P&L Forecast – 5 Year: Revenues Expenses

NOI

Cash Flow – 5 Year: NPV IRR

Consolidated Impact Total NOI by Year

Total Cash Flow by Year Combined NPV Combined IRR

Physician Alignment

Strategy & Business Planning Process

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Regional Strategic Objectives (SMS Process)

Incremental Hospital Impact

Support Group Region: CFO

CPN: Practice Liaison/Manager CH: Business Development

Physician Compensation and Practice Forecast

CPN Negotiating Unit

Physician Alignment & Employment Strategy

Specific Alignment Initiatives

Support Group Region: Leadership Team

CPN: CEO, CAO CH: Strategy & Business Development

Support Group Region: Leadership Team

CPN: CEO, CAO, Practice Liaison CH: Business Development

Firewall Policy prohibits communication of hospital impact with any individual establishing or negotiating physician compensation

Initiative Business Plan

CPN Negotiating Unit (Firewalled Unit): • Build practice forecast and establishing physician compensation. • These individuals sit behind a firewall. Practice history data may be provided to

this team directly by physicians, region, or external agent, but no information should be shared to communicate incremental hospital impact of initiative.

CPN - CEO and CAO (Leader-dyad): • Responsible for establishing employment strategy, leading growth of CPN, and

building successful physician leadership teams. • Oversight and leadership of employed medical group operations. • Evaluation and review of a specific initiative’s business plan and strategy.

CHRISTUS HEALTH Business Development: • Responsible for applying risk-based inputs to calculate Net Present Value of

initiative – NPV includes both the physician practice forecast and incremental hospital impact.

• -- Evaluation and review of a specific initiative’s business plan and strategy. 24

Physician Alignment

System Roles and Responsibilities

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Questions

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“Firewall Safety” of MD Regulations to Avoid Jail Time Peter J. Plantes, MD, FACP

Christus Provider Network -CEO • The presentation will review the history of Anti-kick back and

Stalk Regulations and define their key components. • The recent Toumey Case that violated Stalk Regulations and

resulted in False Claims Act (FCA) penalty of $276 Million will be outlined.

• Christus Health has developed a Physician Development process that evaluates and determines Physician Compensation isolated from any hospital downstream knowledge. This unit is considered “firewalled” from any data related to referrals, value of referrals, or other downstream evaluation.

• The presentation encourages Physician groups and recruiters to be vigilant in separating Physician Compensation determination from any financial analysis of favorable impact of the practice on hospital/health system financials.

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