new partnerships create increased compliance and patient financial services risk september 2013

New Partnerships Create IncreasedNew Partnerships Create Increased Compliance and Patient Financial

Services RiskServices Risk

23rd Annual HFMA Southern California and San Diego/Imperial Chapter Fall

ConferenceSeptember 8 – 10, 2013

jmahealthcare.comjmahealthcare.com1

From Transactional to Operational C liCompliance

• Significant attention and resources have been focused on ensuring creation of hospital/physician collaboration models comply with various regulations.

• Less attention has focused on ensuring operational or g pimplementation compliance.

• Does your new “integrated delivery system” have the infrastructure to implement and comply with theinfrastructure to implement and comply with the myriad of new requirements?

• This session focuses on increased risks organizations assume in implementing various health care reformassume in implementing various health care reform managed care approaches, discusses key issues and critical success factors for implementation.


False Claims Act

• Federal False Claims Act (31 USC § 3279‐3733)The False Claims Act establishes liability for any person who– The False Claims Act establishes liability for any person who KNOWINGLY presents false or fraudulent claims to the US government for payment.

– The Act includes “Qui Tam” provisions that allow privateThe Act includes Qui Tam provisions that allow private citizens (relators) to sue violators on behalf of the government.

• California False Claims Act (CFCA)– Enacted in 1987 (Gov’t Code 12650 et. Seq)Enacted in 1987 (Gov t Code 12650 et. Seq)– Modeled after the Federal False Claims Act.– Allows the government or individual (relator) to bring civil

actions to recover damages, penalties, and costs when g , p ,government contractors, vendors or others defraud the government.


Federal False Claims Act

• The Act prohibits:l b d f l l– Knowingly presenting, or causing to be presented a false claim

for payment or approval.– Knowingly making, using, or causing to be made or used, a

f l d i l f l f d lfalse record or statement material to a false or fraudulent claim.

– Conspiring to commit any violation of the False Claims Act– Falsely certifying the type or amount of property to be used by

the Government.– Knowingly making, using, or causing to be made or used a false

record to avoid, or decrease an obligation to pay or transmit property to the Government.


Strengthening Federal False Claims Act• Section 6402. Patient Protection and Affordable Care

ActE h d M di d M di id i t it i i– Enhanced Medicare and Medicaid program integrity provisions

– Allows OIG and Attorney General access to claims and payment data of the DHHS and its contractors

– Anti‐Kickback Statute• AKS violation that results in submission of a claim = False Claim

– Reporting and Returning Overpayments• Overpayments from the Medicare or Medicaid programs must be reported and returned with in 60 daysp y

• Retention of any overpayment after the 60 day period may lead to liability under the False Claims Act


Reverse False Claim: Retention of OverpaymentsOverpayments

• Affordable Care Act added a new provision i i bli i id dimposing an obligation on providers to report and return identified overpayments within 60 days– Overpayments broadly defined ‐‐ funds received thatOverpayments broadly defined funds received that provider is not entitled to

– 60 day clock starts running when the provider has “identified” the overpaymentidentified the overpayment

• No clear definition of “identified”• Failure to investigate might trigger the 60 day clock if the circumstances suggest deliberate disregard or dilatory tactics


Reverse False Claims

• If a provider fails to return the overpayment within h 60 d i d i b bli i ithe 60 day period it becomes an obligation creating exposure under the False Claims Act

• This means a claim might be fine when submitted• This means a claim might be fine when submitted but become a false claim when facts are later discovered, for example: – Bills submitted in good faith that did not meet coverage requirements

– Bills submitted in good faith for services providedBills submitted in good faith for services provided pursuant to a referral prohibited by the Stark law


Reverse False Claims

• Huge potential liability– Discovery of a systemic billing error– Discovery of a longstanding contract with a physician gro p that does not compl ith Starkgroup that does not comply with Stark

• Government proposed regulations for 60 day rule10 year look back period proposed???– 10 year look back period proposed???

– Current reopening rules provide for a 4 year look back period


C False Claims Amendment

• 2012 California’s False Claims Act Amended0 California s False Claims Act Amended– California Government Code sections 12650 through 12656

– The Amendment took effect January 1, 2013

• The Amendment largely conforms the CFCA to the f d l F l Cl i A ("FCA") b difederal False Claims Act ("FCA") by expanding liability under the CFCA and the rights of qui tamplaintiffs (called relators)plaintiffs (called relators).


False Claims Amendment

• States have a financial incentive to enact state false claims laws that are at least as effective as the FCA

• By doing so, states qualify under the federal Deficit Reduction Act of 2005 ("DRA") for an additional 10

h f h d i hpercent share of the amount recovered using the state law.


Key Amendments to CFCAy• Increases penalties.

– Penalties increased to $5,500 to $11,000 for each false claim.

• Broadens the definition of "claim."– The definition includes claims submitted to a "contractor, grantee, or other recipient, if the money, property, or service is to be spent or used on a state or any politicalservice is to be spent or used on a state or any political subdivision's behalf or to advance a state or political subdivision's program or interest . . . ."


Key Amendments to CFCA (cont)y ( )• Defines "obligation."

– The CFCA incorporates the federal FCA's definition of anThe CFCA incorporates the federal FCA s definition of an "obligation."

– An obligation includes retention of an overpayment, thereby giving rise to liability under the CFCA forthereby giving rise to liability under the CFCA for retention of an overpayment

• Amendments favorable to relators– Make relators eligible for an award even if they planned and initiated the violation upon which the CFCA action was based

– Eliminate the requirement that a claim must have been presented to an officer, employee, or agent of the state


Key Amendments to CFCA (cont)y ( )

– Clarify that the CFCA's anti‐retaliation provisions apply when relators are discriminated against for furthering anwhen relators are discriminated against for furthering an action under the CFCA or for trying to stop a violation of the CFCA (currently, these provisions apply only after a relator disclosed information about the false claim to therelator disclosed information about the false claim to the government)

– Expand the anti‐retaliation provisions to include d dd lcontractors and agents in addition to employees

– Grant relief to relators who are discriminated against, including reinstatement with the same seniority status, g ytwice the amount of back pay plus interest, and compensation for special damages.


What is a False Claim?• Liability under the federal False Claims Act occurs where

a defendanta defendant 1. Knowingly presents (or causes to be presented) a false or

fraudulent claim for paymentl k b d d f l2. Knowingly makes, uses, or causes to be made or used, a false

record or statement material to a false or fraudulent claim3. Conspires with others to commit a violation of the False

Claims Act 4. Knowingly makes, uses, or causes to be made or used, a false

record or statement to conceal, avoid, or decrease anrecord or statement to conceal, avoid, or decrease an obligation to pay money or transmit property to the Federal Government.


What is “Knowingly”?g y

• Any person with respect to the information does any of the following:– Has actual knowledge of the information

d l b f h h f l f h– Acts in deliberate ignorance of the truth or falsity of the information

– Acts in reckless disregard of the truth or falsity of theActs in reckless disregard of the truth or falsity of the information.

• Proof of specific intent to defraud is not required


False Claims Act: Potential Areas

• Include – Coding false claims– DRG false claims fraud– PPS false claims fraud– Some Medicare kickbacksOutpatient PPS false claims fraud– Outpatient PPS false claims fraud

– Stark law violations– DME fraudDME fraud– DRG fraud


False Billingg1. Billing for services not rendered or products not delivered2. Misrepresenting services rendered or product provided

( )(e.g., upcoding, inappropriate coding)• Misrepresenting the nature of the patient’s condition (e.g., DRG fraud, DRG creep).

3. Ungrouping or unbundling services or products billed4. Billing for medically unnecessary services

• Furnishing services in excess of the patient’s needs, based on theirFurnishing services in excess of the patient s needs, based on their diagnosis

• Furnishing a battery of diagnostic tests, where, based on the diagnosis, only a few were needed

• Misrepresenting the diagnosis to justify the services or products.5. Duplicate billing


False Billing (cont)g ( )

6. Falsifying records to meet or continue to meet the conditions of participationconditions of participation• Alteration of dates• Forging of physicians’ signatures• Adding of additional information after the fact. g

7. Increasing units of service, which are subject to a payment rate.

8. Billing procedures over a period of days when all treatment8. Billing procedures over a period of days when all treatment occurred during one visit (i.e. split billing)

9. Billing Medicare improperly based on a higher fee schedule or unit schedule than that used for non‐Medicare patients.or unit schedule than that used for non Medicare patients.

10. Submitting bills to Medicare that are the responsibility of other insurers under the Medicare Secondary Payer rule.


FCA and Quality of Care? Q y

• DOJ attorney– “We are starting to look at quality of care cases as potential FCA cases.” E er claim to a federall f nded health care program– Every claim to a federally funded health care program impliedly certifies that the services provided meet the standard of care

– Therefore, services that fail to meet the standard of care are false.


False Claims Act: Key Issuesy• Who is coding, billing and collecting for integrated

delivery system?– Hospital?Hospital?– Physician?– Upcoding, inappropriate coding, unbundling, double billing,

etc.etc.– Integration and accuracy of hospital and physician information

systems• Providers must establish policies/processes forProviders must establish policies/processes for

preventing fraud• Organizations must have ongoing internal audits and

processes for timely reporting of irregularities to ensureprocesses for timely reporting of irregularities to ensure compliance


Physician Owned Distributorshipsy p

• PODs are physician owned entities that sell or• PODs are physician owned entities that sell or arrange for the sale of devices, including physician owned entities that purport to design orowned entities that purport to design or manufacture their own devices– In some cases all of the POD’s sales are the result of orders from the POD’s physician owners for use in procedures that the physician owners perform on their own patients at hospitals or ASCsown patients at hospitals or ASCs


POD: Controversyy

• PODs have always been controversial • Several years ago the OIG expressed concerns about the business model

• Despite these concerns‐‐‐ no government enforcement

• Number of PODs multiplied– Organized in a variety of ways– Some PODs included safeguards to address concerns of OIG


Special Fraud Alertp

• March 2013 OIG issued a Special Fraud Alert– PODs characterized as “inherently suspect” under the Anti‐kickback Statute

– Concerns:• Corruption of medical judgment• Overutilization• Increased costs to Federal Programs and Beneficiaries• Unfair competition

• Fraud Alert included warning to hospitals/ASCs• Fraud Alert included warning to hospitals/ASCs using PODs— potential AKS liability


PODs: Red Flagsg

• Some red flags– Investor selection based on potential to refer– Requiring divestment if referrals not made– Disproportionate distributions– Physicians tying use of hospital to purchase of POD devicesdevices

– POD is sham– no real business activities

• Implantable devices particular concern becauseImplantable devices particular concern because they are “physician preference items”


Sunshine Act

• Affordable Care Act included new reporting obligations• Starting August 1, 2013 manufacturers and Group

Purchasing Organizations (GPOs) must track all: – Direct or indirect transfers of value to Physicians or Teaching irect or indirect transfers of value to Physicians or Teaching

Hospitals (or to third parties at the request of a physician or teaching hospital)

– Ownership interests held by a physician or an immediate p y p yfamily member (other than an ownership interest in a publicly traded security of mutual fund)

• First report on transfers of value and ownershipFirst report on transfers of value and ownership interests due March 31, 2014; annually thereafter


Sunshine Act

• Manufacturer (which include distributors who take title to goods) is an entity that produces, prepares, propagates, compounds or converts a covered drug de ice biological or medical s ppl nless soleldevice, biological, or medical supply, unless solely for the entity’s own use

• Group Purchasing Organization is any entity that• Group Purchasing Organization is any entity that operates in US that purchases or arranges for the purchase of a covered drug, device, biological orpurchase of a covered drug, device, biological or medical supply not solely for the GPO’s own use


Sunshine Act

• Covered drug, device, biological or medical supply means any such item that is payable under Medicare/Medicaid or SCHIP, including as a part of a b ndled pa ment and is either a prescribed dr ga bundled payment, and is either a prescribed drug or a device that requires premarket approval


Sunshine Act

• Physicians: as defined under Medicare, except a bona fide employee of the manufacturer

• Teaching Hospitals: Any hospital that receives IME or DGME. CMS will publish a list annually.


Guidelines for Tracking g

• Employed Physicians: A payment provided directly to a physician who is employed by a teaching hospital should be reported in thewho is employed by a teaching hospital should be reported in the physician’s name. If the payment was not passed through the teaching hospital in its entirety, then the report must identify the portion of the payment retained by the teaching hospital and the portion passed through to the physicianportion passed through to the physician.

• Group Practices: Payments provided to a group practice should be attributed to: (a) the individual physician who requested the payment or on whose behalf the payment was made, or (b) the p y p y , ( )physician who is intended to benefit from the payment.

• Indirect Payments: Payments provided to one recipient, but paid through another recipient, should be reported in the name of the

i i t th t lti t l i d th trecipient that ultimately received the payment.


Sunshine Act: Exclusions

• Payments or Other Transfers of Value of Less than $10 l i h d$10, unless in aggregate these payments exceed $100 in a calendar year

• Existing Personal Relationships: Payments or st g e so a e at o s ps: ay e ts otransfers to a covered recipient made solely in the context of a personal, non‐business‐related l ti hi d t d t b t drelationship do not need to be reported.

•Educational Materials that directly benefit patients or are intended to be used by or with patients. Example: y p pModels provided to explain a procedure to patients.


Sunshine Act: Exclusions•Trial Loans of Covered Devices: This exclusion covers loans of devices and devices under development, as well as supplies of disposable or single use devices intended to last no more thandisposable or single‐use devices intended to last no more than 90 days. For a single product, the total number of days for the loan should not exceed 90 days for the entire year.

Discounts or rebates Dividends from publicly traded mutual funds

•Other Exclusions: The following payments do not need to be reported:

[ Discounts or rebates Dividends from publicly traded mutual funds

Warranty services Product samples not intended to be sold and intendedfor patient use

I ki d it f h it bl

[

In‐kind items for charitable purposes


Sunshine Act: Reportingp g

– Name: Provide the physician’s full name as reported in the National Plan and Provider Enumeration System (NPPES).

– Business Address: Provide the full street address of the physician’s primary practice location.

– Specialty and NPI: Provide the physician’s individual NPI. Identify the provider’s specialty by using a single provider taxonomy code, asprovider s specialty by using a single provider taxonomy code, as reported in NPPES.

– Date of Payment: You may report either (a) the total payment on the date of the first payment as a single line item, or (b) each individual payment as a separate line item. Regardless of the methodology youpayment as a separate line item. Regardless of the methodology you choose, use it consistently.

– Third Parties: If the payment was not made to the recipient directly, name the third party that received the payment before passing it through to the recipient.through to the recipient.

– Ownership Interest: Indicate whether the payment was provided to a physician holding ownership or investment interests in your company.


Reporting (cont)p g ( )Context: You may explain each payment by providing brief contextual information. Related Covered Drug, Device, Biological or Medical Supply: You g, , g pp ymust report the product associated with each payment. You may report up to five associated products for each payment. For devices and medical supplies, you may report either the name under which the device or supply is marketed or the therapeuticunder which the device or supply is marketed or the therapeutic area or product category. Form of Payment and Nature of Payment: You must categorize the payment according to its form and nature.F Th t iForm: The categories are:

• Cash or cash equivalent• Stock, stock option or any other ownership interest• In‐kind items or services• Dividend, profit or other return on investment


Reporting (cont)Nature: The categories are:

Consulting fee Grant

Honoraria Travel and lodging (including the specific destinations)

Gift Current or prospective ownership or investment interestGift Current or prospective ownership or investment interest

Entertainment Space rental or facility fees (teaching hospitals only)

Food and beverage Compensation for serving as faculty or as a speaker for an accredited or certifiedcontinuing education programcontinuing education program

Education

Research Compensation for services other than consulting, including serving as faculty or as a speaker at an event other than a continuing education program, or

l kCh it bl t ib ti promotional or marketing activities Charitable contribution

Royalty or license


Reporting: Ownershipp g pAll ownership and investment interests held by a physician or an immediate family member of a physician. For 2013, you only need to report interests held on or after August 1, 2013. The report must include the following information:

• Name: Provide the physician’s full name as reported in the National Plan and Provider Enumeration System (NPPES).

• Who Holds the Interest? Indicate whether the interest is held by theWho Holds the Interest? Indicate whether the interest is held by the physician or an immediate family member of a physician.

• Business Address: Provide the full street address of the physician’s primary practice location.S i lt d NPI M k t th h i i ’ i di id l NPI U• Specialty and NPI: Make sure to use the physician’s individual NPI. Use a single provider taxonomy code, as reported in NPPES, to identify the specialty.

• Size of Investment: Indicate the dollar amount invested.• Value and Terms: Explain the value and terms of each ownership or

investment interest. • Payments: Any payments provided to the physician owner or investor.


Sunshine Act: Research

• Payments made pursuant to a research protocol or research agreement may be postponed until the earlier of 4 years from the date of transfer of value or FDA appro al of the prod ctor FDA approval of the product


Following Submission . . .g

• CMS notifies covered recipients• 45 day period following submission for discussion• Covered recipients can dispute reports • If dispute is not timely resolved data will be published• If dispute is not timely resolved data will be published

with notation – “disputed”• Data released to general public in searchable formatg p

– The Press?– Personal Injury Lawyers?

Public Watch Dogs?– Public Watch Dogs?– Relators?


3 Day Payment Ruley y

• Medicare’s 3‐day (or 1‐day) payment window applies to outpatient services furnished by hospitals and hospitals’ wholly owned or wholly operated ph sician practicesphysician practices.– Bundling of the technical component of all outpatient diagnostic services and related non‐diagnostic servicesdiagnostic services and related non diagnostic services (e.g. therapeutic) with inpatient stay claim.

– Impact on hospital/physician joint venture billing.


Three‐day payment windowy p y

• The three‐day rule defines certain preadmission services as inpatient operating costsinpatient operating costs– They are bundled and billed as part of the inpatient claim– Payment is made as part of the applicable diagnosis‐related group paymentpayment

• All preadmission diagnostic and related non‐diagnostic services occurring three calendar days prior to admission are l t drelated

– Prior to June 25, 2010, outpatient nondiagnostic services were considered related if there was an exact match between the first‐listed diagnosis code and the inpatient principal diagnosis codelisted diagnosis code and the inpatient principal diagnosis code

– CMS now defines "related" as "clinically associated with the reason for a patient's inpatient admission."


3 Day Payment RuleO t ti t S i T t d I ti t S iOutpatient Services Treated as Inpatient Services

• Within 3 days of inpatient admission for hospitals paid under Inpatient Prospective Payment System (IPPS)

• Within 1 day for facilities excluded from IPPS – Inpatient Psychiatric Facilities and units – Inpatient Rehabilitation Facilities and units – Long Term Care Hospital Children’s hospitals– Children’s hospitals

– Cancer hospitals


3 Day Payment RuleOutpatient Services Treated as Inpatient Services (cont)

• Facilities Excluded from Payment Window Provisions– Ambulance

l d l– Maintenance renal dialysis services – Skilled Nursing Facilities Home Health Agencies– Home Health Agencies

– Hospices – Critical Access HospitalsCritical Access Hospitals – Rural Health Clinics/Federally Qualified Health Centers


Three‐day payment windowy p y

• Clinically unrelated non‐diagnostic preadmission services may be separately billedservices may be separately billed

• Condition code 51 (attestation of unrelated outpatient nondiagnostic services)outpatient nondiagnostic services)

–Used to identify those services that are unrelated and for which separate outpatient reimbursement is appropriate.

– Condition code 51 on the outpatient claim for the unrelated services


Three‐day payment window (cont)y p y ( )

• Documenting unrelated services– Providers must clearly document why they provided the outpatient services

– Documentation must also support the fact that these ppservices are not clinically associated with the inpatient stay

– Providers must document that they are treating an– Providers must document that they are treating an unrelated condition

– Care of that condition should not be included in the i ti t d i i if th i ffi i t id th t itinpatient admission if there is sufficient evidence that it is not related


Three‐Day Payment WindowKey IssuesKey Issues

• Who is coding, billing and collecting for integrated delivery system?delivery system?– Hospital?– Physician?Physician?

• Audit patients with 3 day LOS or less– Sample claims and medical records combined due to 3Sample claims and medical records combined due to 3 day rule

– Evaluate appropriateness• Combining services as inpatient• Billing therapeutic services as outpatient


Key Issuesy• What was agreed to during the transactional portion of the

“deal?”• What was promised to further “business development?”• What was promised to further “business development?”• Do the enabling documents articulate

– Objectives• Operational in addition to strategic and financial?• Timing• Responsibilities

– Including key personnel within and outside of hospital?

• Is there a business plan incorporating operational implementation issues?p

• Have the strategic and business plan objectives been communicated to operational personnel?


Critical Success FactorsC T E SCreate Teams to Ensure Success

• Operational Implementation Teamp p– Hospital executives involved in creating transaction

• Chief Strategy Officer–Director of Business Development

• Chief Financial Officer• Chief Medical Officer• Chief Compliance Officer• Risk Manager


Critical Success FactorsC t T t E S ( t)Create Teams to Ensure Success (cont)

– Partner executives involved in creating transaction• Physician leaders• Physician business manager(s)

Ad itti– Admitting• Registration

– Finance• Business Office• Billing/Collecting

– Health Information ManagementHealth Information Management– Information Technology

• CIO


Critical Success Factors• Leverage existing hospital policies and procedures where possiblep– Fraud & Abuse– Corporate Compliance

• Create new polices and procedures for Physician Payment Sunshine Act and Physician‐owned distributorships (‘PODs”)


Critical Success Factors• Operational Implementation Team Functions

– Integrate business plan into operations• Connect strategy to operations

– Develop written policies and procedures– Communicate to relevant departmentsCommunicate to relevant departments– Educate and train staff and physicians

» Have at least quarterly in‐servicesDevelop auditing and monitoring plan– Develop auditing and monitoring plan

• Who• What• When

– Create corrective action policies and procedures


Key Components of O ti l I l t ti PlOperational Implementation Plan

• Determine Objectives and Controls and How TheyDetermine Objectives and Controls and How They Identify Non‐Compliance

• Assess the Risk Level • Identify patterns, practices or specific activities increase risk of non‐conformance

• Determine appropriate response


Key Components of O ti l I l t ti Pl ( t)Operational Implementation Plan (cont)

• Document results of risk assessment• Document results of risk assessment• Prepare communication program to educate executives physicians and staff on performanceexecutives, physicians and staff on performance

• Prepare prevention program and assign responsibility for oversightresponsibility for oversight– CFO, CCO, etc. along with operational director


Joseph Mack, MPAP.O. Box 23Dana Point, CA 92629(949) 481 0602

Robert Homchick, EsquireDavis Wright Tremaine LLPSuite 22001201 Thi d A(949) 481‐0602

[email protected] Third AvenueSeattle, WA 98101(206) 757‐8063roberthomchick&dwt.com


new partnerships create increased compliance and patient financial services risk september 2013

Health & Medicine