Keep away from authorized pitfalls in creating progressive cost constructions for medical doctors and hospitals

In the current healthcare landscape where patients are reluctant to enter The clinic and the high unemployment make them pay slowly. Doctors are considering all possible ways to protect their practices.

These include growing partnerships with hospitals, management services organizations (MSOs), clinically integrated networks (CINs), private equity investments, and working for primary care companies like OneMedical.

“We’ve seen a lot of consolidation, a lot of people have been talking about that I have a lot of overhead costs, but now that Covid has hit, no more patients are coming into my office for those few months. I survive?” ‘”Said Michele Madison, partner at Morris, Manning & Martin, LLP, in a virtual session organized by the American Bar Association last week.

While consolidation can be a smart business in times of extreme uncertainty, such relationships can also put doctors and providers under heightened government scrutiny, leaving hospitals open to potentially devastating consequences such as antitrust violations, loss of 501 (c) (3) status, and even closure .

Provider system deals can open a Pandora’s liability box under the Stark Act, Federal Anti-Kickback Act (AKS), and False Claims Act (FCA), as well as state law. How can you protect your business from both the Covid economy and the world of health regulation?

Start with a simplified Stark analysis
“The old adage applies here: pigs get fat, but pigs are slaughtered,” said Michael Clark of Baker Donelson in a telephone interview. Evaluate, is this evaluation realistic or not? “

Clark says it is best to first analyze whether your agreement implies the Patient Referrals Ethics Act, commonly known as the Stark Act. Stark is designed to prevent doctors from making money by referring patients to institutions they or their family have a financial relationship with. He’s always involved when a doctor sends business to a practice that is reimbursed by Medicare or Medicaid.

In the ABA presentation last week, Clark explained the primacy of this regulation.

“Strong is the critical point in my book because the near-miss is a total miss,” said Clark. “Some things that are fine in an out-of-hospital setting when taken to a hospital setting can inadvertently be turned into a Stark Law problem, but essentially you are looking at 11 categories of what is mentioned designated health servicesthese are stipulated by law. “

By analyzing these categories, potential medical business partners can determine whether their arrangement falls under one of the law’s many “Safe Harbor” exceptions.

But be careful of abbreviations: Physicians who try to get their practice out of Stark’s application by refusing to accept government payments for services and only accepting private patients become Prof. Bruce Howell, according to Willamette University College of Law.

“The spin-offs may have been okay five, ten years ago, but based on recent case law, court cases and government prosecution, the spin-off is not a 100% guaranteed success. Clark told the audience at the ABA presentation last week.

Carve-outs also do not protect practices from fraud and abuse liability. He explained that a lot of potential customers come through his door and say they don’t attractI do not intend to work with the government as wages are low and there is an increased risk of fraud and abuse. They believe that there is no fraud against a private payert as actionable as against the government. But that is a wrong understanding of the law.

“You know, we have as part of HIPAA [Health Insurance Portability and Accountability Act of 1996] the passing of the Health Care Fraud Act, based on the traditional email fraud model. “

Clark said the law was “very broad” and had represented clients defending themselves in so-called “standalone private payer frauds,” in which courts no longer required prosecution to have a Medicare or Medicaid bill .

Pandora’s box of setbacks and deceit
Even if a business gets a safe haven as part of a Stark analysis, it may not pass the sniff test under federal law against setbacks, especially if a doctor involved in the practice wants to invest in the restructured business. While the receipt of part of the value of the practice by the doctor under Stark represents an “investment relationship”, under AKS this is also a potential “setback”.

Even if the original written and signed agreement falls under the law, regulators may find non-compliance if their day-to-day operations are inconsistent with these terms.

Even if your business is found to be in order under the Anti-Kickback Act, which states that either party “knowingly and willingly” fails to comply with a violation once the False Claims Act is in place, the government will stop looking after you if you voluntarily disobey the law. Instead, the Department of Justice is prosecuted on the basis of “actual knowledge, willful ignorance, or reckless disregard for the truth or falseness of the information on which the allegation is based”.

This is exactly what happened in the “Tuomey” case. There the government argued that a hospital made an excellent offer to doctors in exchange for promising future referrals that the court wanted to violate both Stark Act and the FCA in a civil whistleblower case.

Fear the False Claims Act (FCA)
While Stark was clarified to protect many of his previously ignorant victims, the FCA’s navigation has only become more precarious and it’s easy to find liability.

“You need to determine that at least one of the individual employers has all the relevant facts to meet the False Claims Act’s standard of knowledge. That means all you have to do is find one person who knew they made false claims to Medicare, “said Clark. “Quite a light load here.”

In Tuomey, a group of 19 specialists has signed a contract with Tuomey Healthcare Systems to perform operations in the hospital as employees with full hospital benefits while maintaining their practice. A 20th specialist, Dr. Michael Drakeford, turned down the hospitals offer, filing a Qui Tam lawsuit instead. Drakeford successfully argued that the hospitalThe compensation package in this business was above fair value.

In its decision, the federal jury found that Tuomey Healthcare Systems violated the Stark Act and the False Claims Act by filing false claims for Medicare for $ 39 million between January 2005 and November 2006. A federal judge charged fines of $ 237 million – more than the hospital’s annual revenue. Finally, Tuomey agreed to pay the federal government a total of $ 72.4 million and undergo a five-year compliance review to be exempt from further FCA liability. Tuomey merged with nearby Palmetto Health. After other mergers, the company is now called Prisma Health.

In a telephone interview, Clark said, “Doctors are not trained in fraud and abuse laws, which are really traps for the unwary. I’ve had customers trapped in the mirror, what’s wrong with my world? “

In Tuomey, “good lawyers did the analysis, but the court found it was not enough,” said Clark.

Even if your agreement turns out to be Stark compliant and you are inconsistent with the False Claims Act, you can still suffer crippling damage under the Civil Fines Act thanks to the Escobar Fines Act.

“The Escobar case embodies the principle that if an agreement behind a bill to the government is inconsistent, the bill, whether or not it is perfect, is a false claim,” Howell said in his presentation on Wednesday. However, if the government knew of the imperfection of the billing and kept paying, the Supreme Court said, then the lie becomes irrelevant.

“False claims aren’t just health benefits,” Howell said, “they can be government contracts, they can be NIH grants; and if you areI’m looking to see how the courts view false claims lawIt is advisable to cast a wider net. “

Do not forget the state!
State licensing agencies have their own requirements that run in parallel with these. As long as federal law does not preclude their application to your case, they apply.

Some states have blue sky valuation laws that regulate the offer and sale of securities to protect investors from fraud. Many states in which these laws apply use what is known as the “Howey test”. set out by the Supreme Court in SEC v Howey for any contract, system, or transaction, whether or not it has any of the characteristics of typical securities.

“If II am relying on someone elseIf we strive to add value to my investment it will likely be a security, ”Howell said.

If it’s running like a security company and quacking like a security company, it’s a security company under Howey.

How to Protect Your Deal
In a phone interview, Clark said the best way to protect yourself from falling victim to any of these many traps is to market conservatively, assign values, and balance incentives between providers and healthcare providers system – and ask an independent advisory group to provide a written statement on the fair market value of the deal. Even if it feels too good to be true, it probably is.

Given the multitude of state laws that may apply, Clark and Howell recommend that one group of lawyers deal with federal issues and another attack the state before they get engaged or even married.

“There can be many nuances here,” said Clark, “and if you canare not licensed in this jurisdictionA risk that I only attractI think it’s one that I would recommend. “

The cases referred to are:

US ex rel. Drakeford v. Tuomey Hospital System, 976 F. Supp. 776; No. 13-2219 (4th Cir. (2015))

Universal Health Services, Inc. v United States ex rel. Escobar, (579 US__, 136 S.Ct. 1989 (2016))

Securities and Exchange Commission v WJ Howey Co., (328 US 293 (1946))

Photo: JamesBrey, Getty Images

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