Federal Stark v. Patient Self-Referral Act, s. 456.053, F.S., (“Florida Stark”)
A physician makes a referral for a non-DHS payable by a commercial insurance plan to an entity in which the physician has a direct investment interest. Does Florida’s Patient Self-Referral Act apply? Explain why or why not.
Answer: Yes.
Explanatory Blurb:
Florida: A health care provider may not refer a patient for the provision of DHS to an entity in which the health care provider is an investor or has an investment interest; and he or she may not refer a patient for the provision of any other health care item or service to an entity in which the health care provider is an investor unless that referral meets the requirements of an exception.
Florida: Applies to all referrals for any health care items or services (including, but not limited to, DHS) regardless of payor.
If between the referring physician and the entity furnishing DHS there exists an unbroken chain of persons and entities having an ownership or investment interests, what knowledge must the entity furnishing DHS have in order to establish that an indirect ownership or investment interest exists?
Answer:
The entity furnishing DHS has actual knowledge of, or acts in reckless disregard or deliberate ignorance of, the fact that the referring physician (or immediate family member) has some ownership or investment interest (through any number of intermediary ownership or investment interests) in the entity furnishing the DHS
Explanatory Blurb:
Knowledge that some ownership or investment interest exists through any number of intermediaries is sufficient to establish that an indirect ownership or investment interest exists. The entity providing DHS does not need to know the precise composition of the unbroken chain or the specific terms of the ownership interest.
An indirect ownership or investment interest exists even though the entity furnishing DHS does not know (or acts in reckless disregard or deliberate ignorance of) the precise composition of the unbroken chain or the specific terms of the ownership or investment interests that form the links in the chain.
42 CFR 411.354 (b)(5)
In the Halifax case, medical oncologists received incentive compensation in the form of a percentage of the medical oncology program’s operating margin, which was used as a bonus pool. The program’s operating margin included revenue from items and services not personally performed by the referring physicians, such as outpatient prescription drugs, which are DHS. The medical oncologists received a percentage of the bonus pool based on their personally-performed services.
Why did the U.S. District Court of the Middle District of Florida find that the arrangement violated Stark Law?
Answer:
The size of the bonus pool varied based on the volume or value of referrals by the medical oncologists.
Explanatory Blurb:
The court found that the arrangement violated the Stark Law because the size of the bonus pool varied based on the volume or value of referrals by the medical oncologists. While the bonus pool was divided among the physicians based upon their personally-performed services, the pool was comprised of a percentage of operating margin which includes revenue from DHS, and is not based upon the physicians’ personally-performed services. Because the physicians could directly increase the overall size of the bonus pool based upon their DHS referrals, the court determined that the incentive compensation did not comply with the Stark Law’s employment exception.
A physician makes a referral for X-Rays payable by Medicare to an entity in which the physician has a compensation arrangement and in which the physician’s brother-in law is an investor in. Explain the 3 reasons why Florida’s Patient Self-Referral Act does not apply here.
Answer:
1. X-Rays are not DHS under Florida’s Patient Self-Referral Act. [cite]
2. Stark: applies to referrals to entities with which the physician has a “financial relationship” through ownership or investment interests or through compensation arrangements. Florida: limited to referrals to entities with which the physician is an investor or has an investment interest.
3. Brother-in law is an immediate family member under Stark, but is not one under Florida’s Patient Self-Referral Act, but is
Explanatory Blurb:
Florida: A health care provider may not refer a patient for the provision of DHS to an entity in which the health care provider is an investor or has an investment interest; and he or she may not refer a patient for the provision of any other health care item or service to an entity in which the health care provider is an investor unless that referral meets the requirements of an exception.
Florida: Applies to all referrals for any health care items or services (including, but not limited to, DHS) regardless of payor.
Dr. Seuss is a physician owner of Blue Fish Physician Practice. Hooville Hospital leases office space to Blue Fish Physician Practice. Dr. Seuss refers patients for DHS to Hooville Hospital. Assuming Dr. Seuss has no other arrangements with Hooville Hospital, what type of financial relationship (as defined by Stark regulations) exists between Dr. Seuss and Hooville Hospital?
Answer:
Direct Compensation Arrangement
Explanatory Blurb:
A direct compensation arrangement exists if remuneration passes between the referring physician (or a member of his or her immediate family) and the entity furnishing DHS without any intervening persons or entities. 42 CFR 411.354©(1)(i). In this case the remuneration is passed between Hooville Hospital and Blue Fish Physician Practice. Thus, Blue Fish Physician Group is an intervening entity between Hoovile Hospital (the entity furnishing DHS) and Dr. Seuss (the referring physician).
However, a physician is deemed to “stand in the shoes” of his or her physician organization and have a direct compensation arrangement with an entity furnishing DHS if (1) the physician has an ownership or investment interest in the physician organization; and (2) if the physician organization is the only intervening entity between the physician and the DHS Entity (except for a physician whose ownership or investment interest is titular only) (42 C.F.R. § 411.354(c)(3)(ii)(C))
Therefore, the lease between Hooville Hospital and Blue Fish Physician Practice must meet an exception applicable to Direct Compensation Arrangements. Meeting only the requirements for the indirect compensation arrangements exception at 42 CFR 411.357(p), would not bring the lease within Stark compliance.
Toumey Health Care System had a judgment entered against it for $237 million dollars for illegally billing Medicare for services referred to it by part-time employed physicians with whom Toumey had improper financial relationships. The U.S. used the following statement from Toumey’s CEO soliciting surgeons and gastroenterologist as evidence that the contracts in question failed to meet which Stark standards?
‘it wouldn’t make any sense for us to do some of the volume-driven things with them[anesthesiologist and radiologist] because they don’t create the volume. Y’all create the volume. They just do the work that’s ordered . . .’”
Answer:
The Stark Law includes exceptions for many common hospital-physician arrangements, but generally requires that:
(1) any payments that a hospital makes to a referring physician be at fair market value;
(2) for the physician’s actual services, and
(3) not take into account the volume or value of the physician’s referrals to the hospital.
Explanatory Blurb:
The government argued in this case that Tuomey, fearing that it could lose lucrative outpatient procedure referrals to a new freestanding surgery center, entered into contracts with 19 specialist physicians that required the physicians to refer their outpatient procedures to Tuomey and, in exchange, paid them compensation that far exceeded fair market value and included part of the money Tuomey received from Medicare for the referred procedures. The government argued that Tuomey ignored and suppressed warnings from one of its attorneys that the physician contracts were “risky” and raised “red flags.”
On May 8, 2013, after a month-long trial, a South Carolina jury determined that the contracts violated the Stark Law. The jury also concluded that Tuomey had filed more than 21,000 false claims with Medicare. On Oct. 2, 2013, the trial court entered a judgment under the False Claims Act in favor of the United States for more than $237 million. The United States Court of Appeals for the Fourth Circuit affirmed the judgment on July 2, 2015.
Cite to DOJ Press Release.
Name two (2) Designated Health Services included under Stark but not under Florida’s Patient Self-Referral Act.
Answer: (1) DMEPOS; (2) parenteral and enteral nutrients, equipment, and supplies; (3) Home health; (4) outpatient prescription drugs; (5) inpatient hospital services.
Note: Florida law does not include x-rays in the definition of diagnostic imaging services.
Explanatory Blurb:
Stark: DHS includes: (1) Clinical lab; (2) PT; (3) RT; (4) other imaging services – includes x-rays; (5) OT; (6) Outpatient speech language pathology; (7) DMEPOS; (8) parenteral and enteral nutrients, equipment, and supplies; (9) Home health; (10) outpatient prescription drugs; (11) inpatient hospital services.
Florida: DHS includes: (1) clinical lab; (2) PT; (3) RT; (4) diagnostic imaging services (not x-rays); (5) OT; (6) outpatient speech-language pathology services.
Note: Florida law does not include x-rays in the definition of diagnostic imaging services.
Centrifuge Labs provides disposable specula for use in the collection of Papanicolaou (“Pap”) smear specimens free of charge to physicians who refer Pap smears to the Centrifuge Labs for testing. Centrifuge Labs bills Medicare for some of the Pap smear tests it conducts. Pap smear specimens are typically collected as part of an extensive gynecological examination of the patient. Such an examination requires the use of a speculum, regardless of whether a Pap smear specimen is collected.
Does this arrangement create a “compensation arrangement” between Centrifuge Labs and the referring physicians?
Answer:
Yes. Providing the referring physicians with free single use specula constitutes remuneration resulting in a compensation arrangement between Centrifuge Labs and the Referring Physicians.
Explanatory Blurb:
Section 42 USC 1395nn(h)(1)(a) defines a compensation arrangement as “any arrangement involving any remuneration between a physician (or an immediate family member of such physician) and an entity other than an arrangement involving only remuneration described in subparagraph (C).” Section 42 USC 1395nn(h)(1)(c )identifies certain types of remuneration which, if provided, would not create a compensation arrangement subject to the physician self-referral prohibition. Such remuneration includes “[t]he provision of items, devices, or supplies that are used solely to…collect, transport, process, or store specimens for the entity.
Centrifuge Labs furnishes specula to the Referring Physicians upon request and at no cost to the Referring Physicians. The Referring Physicians use the specula to collect Pap smear specimens for referral to Centrifuge Labs for testing, as well to conduct routine gynecological examinations of their patients. Because the specula are not used by the physicians solely to collect, transport, process, or store specimens referred to Centrifuge Labs, the provision of the specula to the Referring Physicians constitutes remuneration that meets the definition of “compensation arrangement” for purposes of the statute’s prohibition on physician self-referral.
See CMS Advisory Opinion No. CMS-AO-2010-01 available at: https://www.cms.gov/Medicare/Fraud-and-Abuse/PhysicianSelfReferral/Downloads/CMS-A0-2017-01.pdf
What hospital district agreed to pay $69.5 million dollars to resolve claims that it entered into compensation agreements with 9 physicians from 2000 to 2014 that exceed fair market value, and took into account the value and volume of referrals by utilizing a “contribution margin report” to monitor whether physicians generated enough referrals to offset compensation?
Answer:
North Broward Hospital District
Explanatory Blurb:
If provider tracks referrals, government may infer intent to compensate based on volume or value of referrals.
There is typically a better way to obtain necessary information without tracking referrals, particularly at individual physician level.
If a health care provider refers a patient to an entity in which the health care provider has an ownership or investment interest under an exception to the Florida Patient Self-Referral Act, the health care provider still must disclose his or her financial interest to the patient prior to making the referral.
What are the requirements applicable to the referring provider’s notice to the patient?
Answer:
The referring health care provider must notify the patient, in writing, of the following:
· The existence of the investment interest;
· The names and address of each entity in which the referring physician is an investor;
· The patient’s right to obtain the referred items or services from another health care provider or at another health care facility; d. The names and addresses of at least 2 alternative providers of the referred items or services.
Explanatory Blurb:
In addition, the health care provider must post a copy of disclosure forms in a conspicuous place in his or her office.
Violating the disclosure requirements constitute a first-degree misdemeanor, punishable by up to one year of imprisonment and a fine of $1,000.
Susan is employed in the Marketing Department of Cedar’s Hospital. Susan’s father, Dr. Smith, is a physician on the medical staff at Cedar’s Hospital who sometimes refers patients for DHS payable by Medicare to Cedar’s Hospital, but he otherwise has no other arrangements with Cedar’s Hospital. Susan has an interest in Cedar’s Hospital that is part of the retirement plan offered by Cedar’s Hospital to its employees.
Based on these facts, does a financial relationship implicating Stark exist between Dr. Smith and Cedar’s Hospital?
Answer:
No. These facts do not create a financial relationship implicating Stark.
Explanatory Blurb:
Even though Susan is an immediate family member of a physician that refers patients to Cedar’s hospital for DHS, the arrangement is not deemed to be a financial relationship under Stark because the Stark regulations specifically carve out interest arising from a retirement plan from the definition of ownership and investment interests.
Ownership and investment interests do not include, among other things -
(i) An interest in an entity that arises from a retirement plan offered by that entity to the physician (or a member of his or her immediate family) through the physician's (or immediate family member's) employment with that entity;
See 42 CFR 411.354(b)(3)(1)
The Halifax settlement stemmed from a relator complaint filed pursuant to the qui tam provisions of the False Claims Act. What was the relator’s relationship to Halifax? How much money did the relator receive from the settlement?
a) The relator was the Chief Compliance Officer for Halifax. She received $900,000 under the settlement.
b) The relator was a Consultant for Halifax. She received $12.8 million under the settlement.
c) The relator was the Director of Physician Services for Halifax. She received $20.8 million under the settlement.
d) The relator was an orthopedic surgeon who was offered but refused to the sign one of the illegal contracts. He received $18.1 million under the settlement.
Answer:
c) The relator was the Director of Physician Services for Halifax. She received $20.8 million under the settlement.
Explanatory Blurb:
The relator was an orthopedic surgeon who was offered but refused to the sign one of the illegal contracts. He received $18.1 million under the settlement. – This was the relator for Toumey.
What exceptions apply under Florida’s Patient Self-Referral Act to referrals for designated health services made by a physician to an entity in which the physician is an investor or has an investment interest?
Answer: Generally, there are no exceptions to referrals for DHS under Florida’s Patient Self-Referral Act.
Explanatory Blurb:
Florida law has a blanket prohibition on referring for DHS (only way around is to fall outside definition of referral by using group practice exception).
Group Practice Exception – Referrals do not include recommendations by a health care provider who is the only provider or who is a member of a "group practice" for services performed by, or under the direct supervision of, the provider or group practice if the services are only for the practice’s pts.
Under the PSRA, a physician can refer the physician’s own patients to the physician’s practice. However, those health care items or services must be provided under the direct supervision of the health care provider or group practice. This practically means that in Florida every time a physician refers a patient to their practice for laboratory work, diagnostic imaging, or physical therapy, or other ancillary services, all of those services must be provided under direct physician supervision even if scope of practice or billing rules would not require that level of supervision. This means that a physician must be onsite and immediately available during the time that any of these services is being performed.
Dr. Smith is employed by a Hospitalist Group (“Group”) that provides Intensivist Coverage to Cedar’s Hospital. Cedar’s Hospital provides the Group with a financial subsidy to provide the intensivist coverage. Dr. Smith does not have an ownership or investment interest in the Group. His only compensation from the Group is based on an hourly rate for providing coverage that does not vary based on productivity or referrals.
Based on these facts, does a financial relationship implicating Stark exist between Dr. Smith and Cedar’s Hospital?
Answer:
No. Based on the facts presented a financial relationship does not exist between Dr. Smith and Cedar’s hospital.
Explanatory Blurb:
The definition of ``indirect compensation arrangement'‘ at Sec. 411.354(c)(2) requires three elements:
· Paragraph (c)(2)(i)--an unbroken chain of financial relationships (ownership or compensation) linking the referring physician to the DHS entity;
· Paragraph (c)(2)(ii)--aggregate compensation paid to the referring physician that varies with, or otherwise takes into account, the volume or value of referrals to, or other business generated for, the DHS entity; and
· Paragraph (c)(2)(iii)--knowledge by the DHS entity that the physician receives aggregate compensation that varies with, or otherwise takes into account, the volume or value of referrals to, or other business generated for, the DHS entity
69 Fed. Reg. at 16058
While the first element of an unbroken chain is met, the second element is not. Therefore, and indirect compensation arrangement does not exist.
A direct compensation arrangement does not exist because the Group is an intervening entity between the Physician and the Hospital. The physician does not have an ownership or investment interest in the Group, thus the Physician is not deemed to “stand in the shoes” of the Group so as to create a direct compensation arrangement.
Lastly, there are no facts indicating that the Physician has a direct or indirect ownership or financial interest in the hospital.
According to Tuomey, the civil penalty it was assessed was improperly inflated because it took into account both inpatient and outpatient procedures performed by the contracting physicians, when the contracts giving rise to the Stark Law violations solely addressed compensation for outpatient procedures. Tuomey claimed that the only relevant claims were those Tuomey ‘presented for payment of facility fees generated as a result of outpatient procedures performed pursuant to the contracts that gave rise to the Stark Law violation.
Why was Toumey incorrect in this assertion?
Answer:
All claims submitted for payment to Medicare by a DHS entity with an improper financial relationship with the referring physician on that claim are subject to civil penalties under Stark Law. Civil penalties are not limited to just the claims resulting from the improper financial relationship. {CITE TO BILLING PROHIBITION IN STARK}
Explanatory Blurb:
If a physician has a financial relationship with a hospital, then the Stark Law prohibits the physician from making any referral to that hospital for the furnishing of designated health services. E.g., United States ex rel. Bartlett v. Ashcroft, 39 F.Supp.3d 656, 669 (W.D.Pa.2014) (“Because a ‘compensation arrangement’ existed between Physician Defendants and [the] Hospital, the Stark [Law] prohibited Physician Defendants from making any patient referrals to [the] Hospital for designated health services.” (emphasis added)). Inpatient hospital services are designated health services. 42 U.S.C. § 1395nn(h)(6). And a referral includes “the request or establishment of a plan of care by a physician which includes the provision of the designated health service.” Id. § 1395nn(h)(5). Plainly, then, inpatient services constitute a prohibited referral for the furnishing of designated health services.
A defendant found liable under the FCA must pay the government “a civil penalty of” not less than $5,500 and not more than $11,000 “plus 3 times the amount of damages which the Government sustains because of that person.” 31 U.S.C. § 3729(a)(1); 28 C.F.R. § 85.3(a)(9).15 In this case, the jury found that Tuomey had submitted 21,730 false claims, for which it awarded actual damages of $39,313,065, which the district court trebled. The district court then added a civil penalty of $119,515,000 to that sum, which it calculated by multiplying the number of false claims by the $5,500 statutory minimum penalty.