2020 AHLA Fraud and Compliance Forum Highlights

The 2020 AHLA Fraud and Compliance Forum provided many COVID and non-COVID related healthcare industry updates. Here we summarize the top trends and developments centered around physician compensation. Be on the lookout for our next blog post where we focus on other important industry updates from the forum.

Trend #1: COVID-19 and Physician Self-Referral Law Blanket Waivers

On March 31, 2020, to provide flexibility for physicians and providers in responding to COVID-19, the Secretary of Health and Human Services (“HHS”) issued blanket waivers to the Physician Self-Referral Law (“Stark”). Several key points to be familiar with:

Subject arrangements must be solely related to COVID-19 purposes (as defined in the waivers) and in good faith.[1]
The waivers exempt 18 types of renumeration and referrals, many of which apply to physician compensation.
The waivers are automatic and retroactive to March 1, 2020 through the remainder of the public health emergency (“PHE”).
Notably, the OIG did not issue similar waivers to the Anti-Kickback Statute (“AKS”), but instead issued a policy statement that AKS sanctions would not be imposed on arrangements complying with the waivers.[2]

Remember: Arrangements must still comply with the non-waived elements of Stark, principally that compensation cannot be based on the volume or value of referrals and must be set in advance.

It is best practice to continue to meet a Stark exception and AKS safe harbor, most of which require the arrangement be at fair market value (“FMV”) and commercially reasonable. Organizations that do utilize the waivers should maintain records documenting the waiver relied upon and the COVID-19 purpose, as well as the particular facts and circumstances for each arrangement. Additionally, organizations should identify, ideally at the start of the arrangement, what will transpire when the waivers expire.

[1] Meaning that while there are no requirements to submit documentation to HHS, Centers for Medicare and Medicaid Services (“CMS”) and the Office of the Inspector General (“OIG”) may examine each arrangement to ensure the arrangements are not made to cover fraudulent behavior.

[2] The OIG has also provided FAQs that are helpful to address the application of the AKS during the emergency period.

Trend #2: Swings in Physician wRVUs and Reimbursement

COVID-19’s impact on physician productivity and the proposed 2021 Medicare Physician Fee Schedule (MPFS) adjustments will likely affect physician compensation and compensation survey data.

In 2020, due to the COVID-19 related suspension of elective procedures and patients choosing to delay care, wRVU production and professional collections declined significantly for many specialties.
Effective January 1, 2021, the proposed MPFS includes a few notable changes:[1]
1. wRVUs for physician services will be reweighted and the value of evaluation and management (“E/M”) encounters in particular will be increased.
2. Proposed office/outpatient E/M[2] wRVU increases range from 7% to 13% for new patient visits and 28% to 46% for established patient visits.
3. Office/outpatient E/M codes[2] represent “20% of allowed charges for PFS services” and E/M services are billed by all specialties.[3]
4. The standard conversion factor applied to all services will be lowered by 10.6% to meet budget neutrality goals.

Given the significant changes in wRVU value for office/outpatient E/M services and the provision these services by all specialties, the impact of the MPFS to physician wRVUs for the same services could be significant, depending upon the specialty. Employers with physicians on a productivity model, who do not adjust the compensation per wRVU rate for their physicians, may find they will pay more in incremental compensation than earned in incremental reimbursement under the 2021 MPFS.

Additionally, utilizing compensation benchmark survey data without consideration of COVID-19 and/or the 2021 MPFS may result in compensation that is not commercially reasonable and/or consistent with FMV.

Organizations should assess the possible impact of the MPFS changes on their reimbursement and the compensation of their physicians to ascertain how the organization’s financial performance will be affected. Contractual changes may be needed to address the changes. Experts in physician compensation and valuation can provide assistance in determining the financial impact of the changes to a particular organization and the appropriate use of compensation benchmark survey data in adjusting or setting compensation.

[1] Comments to the proposed rule closed October 5, 2020. The final rule will likely be issued by December of 2020. CMS may make changes to the rule and comments regarding the proposed rule may no longer apply and/or be accurate.

[2] Currently 99201-99205 for new patients and 99210-99215 for established patients. In 2021 code 99201 will be deleted due to low utilization.

[3] According to CMS, those most affected will be primary care practitioners and medical specialists including neurologists, endocrinologists, and rheumatologists.

Trend #3: CMS’s Proposed Stark Rule Changes

CMS representatives emphasized that proposed Stark updates will likely work toward defining the “Big Three” terms of Fair Market Value (“FMV”), Commercial Reasonableness, and Volume or Value. However, finalization of the Sprint to Coordinated Care proposed changes have been delayed until at least August 2021. A few key items which may be addressed by the rule next year include:

The distinction of FMV from the Volume or Value term.[1]
Modifications to the definitions of FMV for general application, office space and equipment. Additionally, CMS proposes modifications to the definition of general market value.[2]
Further guidance for defining Commercial Reasonableness. In the proposed rule CMS clarified that arrangements may be commercially reasonable even if the arrangements do not result in a profit for one or more of the parties. In the final rule CMS is expected to consider either 1. whether a “legitimate business purpose” is required to be commercially reasonable or 2. that the arrangement makes “commercial sense.”
A potential bright line objective test or mathematical formula approach to determine whether compensation takes into account the volume or value of referrals.[3]

Organizations should ensure they have a comprehensive understanding of the proposed changes and definitions to remain compliant. It is important to note while the rule could change before it is finalized and the publication of the final rule was extended to August 2021, now is the time to prepare in advance for the anticipated changes.

[1] That an arrangement cannot take into account the volume or value of referrals.

[2] The term general market value is within the definition of FMV. CMS proposes that FMV relates to hypothetical transactions and General Market Value relates to actual transactions, contending that the hypothetical value and the actual transaction of a transaction should be consistent. The proposed definition of General Market Value provides an allowance for specific party circumstances that is not provided under the current definition and may require consideration of data currently generally accepted by the valuation community.

[3] For example, is there a positive correlation between a physician’s referrals and the amount of compensation received such that the physician receives additional compensation as the number of value of referrals increases?

Trend #4: Recovery Trends

The OIG and the Department of Justice (“DOJ”) continue to make substantial recoveries:

$5 billion [1] in investigative recoveries from criminal and civil actions, which is significantly more than the $2.9 billion in recoveries the prior year.
$3 billion [2] from False Claims Act (“FCA”) cases, while more than the $2.8 billion in fiscal year 2018, it is less than 2017’s $3.7 billion in recoveries.
$2.6 billion of FCA recoveries were specifically healthcare-related cases.
The majority of healthcare FCA recoveries ($2.1 billion) were from qui tam cases where whistleblowers brought forth cases in which the government intervened.

To reach its strategic goals of protecting people, funds, and infrastructure while promoting effectiveness, the OIG is partnering with CMS, the DOJ, and other organizations to share data. The OIG and DOJ have access to large amounts of data and data analytics allows these agencies to track various areas of focus (including lab billing, pharmaceuticals, diagnostics codes, and telemedicine billing) and to continue to achieve record recoveries based on their use of data.

[1] For the fiscal year ending September 30, 2019.

[2] For the fiscal year ending September 30, 2019.

Trend #5: Enforcement Trends

Recent cases highlight enforcement trends related to physician referrals:

“Individual accountability for corporate wrongdoing” (the Yates Memo) continues to be an area of emphasis. An FCA whistleblower suit recently added non-profit Health First’s executives and highest paid physicians as defendants, alleging kickback schemes rewarding physicians for referrals.
Outsourcing management does not outsource responsibility. Wheeling Hospital, despite being under the direction and control of a management company, will pay $50 million to settle an FCA whistleblower suit alleging the hospital violated Stark and AKS by compensating physicians in excess of FMV to influence the physicians’ referrals.[1]
Multiple parties to an arrangement can be held responsible. A Tenet-affiliated hospital, its management company, a physician group, and two physicians, will pay $72.3 million to settle an FCA whistleblower suit alleging kickbacks to physicians for referrals.[2]

Enforcement activity in 2020 demonstrates the government and whistleblowers continue to look beyond the primary offender and hold other parties and individuals accountable. Every party to an arrangement between referral sources should be aware of, and recognize their responsibility for adherence to, regulatory requirements.

[1] https://www.justice.gov/opa/pr/west-virginia-hospital-agrees-pay-50-million-settle-allegations-concerning-improper

[2] https://www.justice.gov/opa/pr/oklahoma-city-hospital-management-company-and-physician-group-pay-723-million-settle-federal

1. Telehealth: The “Last Frontier of Medicine”

“The walls are falling down […] to make telehealth a more robust part of our health system in the United States.”

– Terrence Lewis, Senior Associate Counsel, Univ. of Pittsburgh Medical Center

Telehealth exponentially grew from 2019 to 2020 in response to the COVID-19 pandemic. Panelists discussed several key changes in the rules and regulations governing telehealth which will last, at a minimum, through the public health emergency (“PHE”). Key PHE-related items discussed include the following:

CMS issued temporary COVID-related Section 1135 waivers to ensure continuity of care and reduce the risk of COVID-10 transmission, notably that Medicare can pay for telehealth visits, virtual check-ins, and e-visits and services provided in any setting (i.e. not just limited to rural areas).
135 new CPT codes were added to the Medicare telehealth services list with 89 of those authorized to be furnished via audio-only devices. Since the conference, CMS announced on October 14^th, 11 new telemedicine codes and a State Medicaid and CHIP Telehealth Toolkit.
HHS Office for Civil Rights announced it will exercise enforcement discretion and waive penalties for Health Insurance Portability and Accountability Act (HIPAA) violations against health care providers that serve patients in good faith through everyday communications technologies during the PHE.
The CARES Act contains several measures to streamline telehealth grant programs, established that Federal Qualified Health Centers or Rural Health Clinics may provide telehealth services to Medicare beneficiaries, permits telehealth physician visits for dialysis patient clinical assessments, allows for certification of hospice services via a telehealth rather than a face-to-face encounter, and encourages use of telehealth for home visits.
The OIG issued Policy Statements (issued March 17, 2020 and April 3, 2020) with the intent of making sure health care providers have the regulatory flexibility necessary to respond adequately to COVID-19 concerns.

Panelists additionally noted that the OIG has recognized telemedicine as one of the top fraud schemes related to COVID-19. As the OIG has near real time access to Medicare data, it will be taking a data driven approach, using the Division of Data Analytics (DDA) to closely monitor telehealth services and track numerous items daily (including telemedicine billing by NPI taxonomy, dollar amounts, codes utilized, billed categories, and HCPCS modifiers).

While telehealth is a new frontier, AKS, Stark, CMP still apply and healthcare providers should be careful to keep abreast of telehealth changes, both temporary and permanent, to ensure compliance with all requirements. LBMC’s Healthcare Consulting team assists healthcare providers with the development of their telehealth strategy and in billing compliance matters.

2. Private Equity

“This [healthcare] will continue to be a sector to invest in, notwithstanding the ebbs and flows of the economy, with the caveat that some sectors will do better than others.”

– Phil Watts, General Counsel, OneOncology

Private equity investment in healthcare was upward of $78.9 billion dollars in 2019. Panelists attributed private equity’s investment in the sector as key to the sector’s growth. The PHE ushered in, and will continue to contribute to, changes in market conditions as private equity continues to pursue investments in healthcare.

The panelists also discussed that private equity’s push for profits may run counter to, or supersede, the goal of providing the best patient care or compliance with various regulatory requirements.

“Private equity brings a transition and an intense scrutiny [,,,] to the business.”

– Lisa S. Rivera, Member, Bass, Berry, & Sims

Private equity should expect government scrutiny and should consider the risks of participating in the healthcare sector. Panelists emphasized private equity must look behind strategic, financial, governance, and operational goals to understand the implications of various regulations, exercise due diligence to meet those requirements, and create an effective compliance program. Panelists discussed the following cases at length:

The Department of Justice (“DOJ”) recently announced its $21.36 million settlement with compounding pharmacy Patient Care of America (“PCA”), two of its executives, and a managing private equity firm to settle alleged False Claims Act violations. Allegations included an illegal kickback scheme to generate referrals (notwithstanding patient need) by paying excessive commissions to marketers to recruit beneficiaries and doctors for prescriptions. The panelists noted that the private equity company jointly managed PCA’s operations and the DOJ alleged the private equity firm knew PCA submitted false claims, was advised by counsel of potential AKS violations, and knew that reimbursement was from a government payor (TRICARE). The DOJ additionally alleged measures were not taken to ensure appropriate compliance, such as no effective compliance program in place, no compliance committee, and no qualified chief compliance officer.
Mental health care company, South Bay Mental Health, was accused in 2018 of billing Massachusetts’s Medicaid program fraudulently. Private equity invested in South Bay and the firm knew some employees were unlicensed, unqualified, and unsupervised, but did not make corrections even though the firm made up a majority of the board and participated in operational decisions (e.g., contract approval, strategic planning, budgeting, and earnings considerations). Panelists emphasized that, after the transaction closed, the private equity firm had a majority of seats on board and supervisory roles such that the issues could be fixed but they were not. Per the panel, this case will likely be decided soon.
On September 9^th, the DOJ announced a $50 million settlement with Wheeling Hospital regarding FCA allegations that Wheeling Hospital violated the AKS and Stark. The DOJ alleged that the hospital, under its management company’s control, improperly compensated referring physicians based on the volume or value of referrals. The panelists noted several specific allegations that the management company was involved with management functions at the hospital, financial supervision, legal strategy, regulatory compliance, and staffing decisions such as physician recruitment and physician practice acquisition.

Panelists also pointed to the DOJ’s recent corporate compliance program guidance which outlines specific questions the DOJ will be asking in the evaluation of compliance programs.

Private equity should strive to understand the healthcare regulatory environment, seek competent healthcare counsel, and establish effective compliance programs. LBMC’s Transaction Advisory Services team assists private equity clients in financial, tax, information technology, and human resource/benefit due diligence on both the buy- and sell-side of M&A transactions. LBMC’s Healthcare Compensation Valuation team assists healthcare entities across the nation in designing, assessing and valuing compensation under a wide variety of arrangements, including those with private equity portfolio companies.

3. Government Agencies Increasingly Use Data Analytics

“First and foremost, when we are identifying risk areas, we’re looking specifically at program vulnerabilities. We are utilizing data analytics…we also rely on our hotline, on qui tams and tips that we receive, and, of course, on collaboration. OIG collaborates both across its own different disciplines and with other federal partners as well as with private entities.”

Megan Tinker, US Department of Health and Human Services

Various government agencies (i.e. OIG, CMS, DOJ, FBI and other agencies) are making a concerted effort to work together to identify and investigate areas of fraud, waste, and abuse by utilizing different enforcement tools (such as the Health Care Fraud Strike Force model), sharing data, and leveraging data analytics.

The OIG’s Division of Data Analytics is tracking multiple areas of concern on a daily basis, including lab billing, pharmaceuticals, diagnostic codes, telemedicine billing by NPI taxonomy, dollar amounts, codes utilized, billed categories, HCPCS modifiers, and so forth to identify areas of concern. By using predictive analytics, fraud and errors can be identified before payments are made. Data-mining and matching helps detect fraud or improper payments that have already been awarded. Data analytics is also being used to monitor providers prescribing practices.

It is important that health organizations use data analytics to identify program vulnerabilities, review coding and evaluate specific benchmarks. LBMC’s Healthcare Consulting team assists healthcare providers in developing tailored data analytics reports to support strategic decisions, predict trends, and promote better business management.

4. Cybersecurity

“I cannot emphasize enough that as providers adopt more telehealth, cybersecurity is only going to be a bigger and bigger issue. It’s already a huge issue in healthcare and telehealth is […] going to increase the footprint of risk for providers.”

Andrew VanLandingham, US Department of Health and Human Services

Cybersecurity continued to be an area of emphasis with panelists speculating that cybersecurity concerns will continue to grow as telehealth expands. As part of the OIG’s continued focus on cybersecurity, it has implemented a Computer Crimes Unit to focus on cybercrimes affecting HHS networks and assets in addition to updating the OIG Work Plan as related to the audit of foundational cybersecurity controls for the U.S. Healthcare COVID-19 Portal and Protect.HHS.gov. Other resources panelists provided were the HHS Health Care Cybersecurity Coordination Center (HC3) to provide victim notifications to providers and others, the Office of Civil Rights Cybersecurity Guidance to cybersecurity professionals, and the Office of the National Coordinator for Health Information Technology’s security resources for providers. Panelists suggested organizations continue to be aware of cybersecurity concerns and make efforts to protect against breaches.

LBMC’s cybersecurity services to help providers prevent, defend, and respond to cybersecurity issues. Amid the COVID-19 pandemic, increased vulnerabilities from emerging medical delivery models and changing consumer demands will impact data security and patient care.

5. CARES Act Provider Relief Funds

“We in HHS have been working hard […] to be able to distribute the appropriations that Congress provided […] to help […] those healthcare providers on the front lines.”

Susan Monarez, Health Resources & Services Administration

Panelists discussed the CARES Act and Paycheck Protection Program and Health Care Enhancement Act which supplied $175 in provider relief funds (“PRF”) to healthcare providers. The pre-payment process includes determining eligibility, validating tax ID numbers, and applying for funding. Panelists noted that common issues with the pre-payment process include:

The submission of tax return and revenue information to determine General Distribution payment amounts,
Authentication prior to application when an entity’s tax identification number is not on the General Distribution curated list, and
The submission of admissions data to qualify for High Impact payments.

The post-payment processes includes receiving payment, accepting payment and attesting to certain terms and conditions (i.e. applying the monies received to permissible uses that are not reimbursed by another a sources), and then reporting on the use of funds. Panelists noted that common issues with the post-payment process include:

Change of ownership hurdles,
Peculiarities of using funds within a healthcare system,
Balance billing prohibitions, and
Exclusions on use of funds for salaries above a certain limitations.

Additionally, any PRF recipient may be subject to audit requirements, including Single Audit provisions.

Companies receiving any form of funding under the CARES Act or other federal funding programs should review the program to determine applicable reporting and audit requirements. LBMC can help navigate the CARES Act distribution process. LBMC also helps companies begin to prepare for Single Audits and provides guidance regarding how to maintain compliance while using the payments received.

6. Compliance and Risk Assessments

“The absence of a high‐functioning compliance program may be used to establish [FCA] intent.”

– Thomas Beimers (former Senior Counsel with HHS OIG)s (former Senior Counsel with HHS OIG)

Panelists discussed the DOJ’s evaluation of the effectiveness of corporate compliance programs, recommending that organizations should:

Develop and update risks assessments,
Continuously monitor and update compliance programs, and
Devote appropriate resources to the compliance programs.

Panelists also discussed the OIG Permissive Exclusion Authority and Compliance Program, noting that the existence of a compliance program that includes the U.S. Sentencing Commission Guidelines Manual’s seven elements of an effective compliance program does not affect the risk assessment, but the absence of such indicates a higher risk and if an entity has devoted significantly more resources to the compliance function, this indicates a lower risks.

Summary

Each of these trends and developments must be considered as your organization seeks to meet the three basic regulatory requirements that compensation be at fair market value, commercially reasonable, and determined without taking into account the volume or value of referrals that one party might generate for the other. The design of compensation models, documentation regarding arrangements with referral sources, and related independent assessments of commercial reasonableness and/or FMV are important to remain compliant.

At LBMC, we assist hospitals and health systems across the nation in designing, assessing and valuing compensation under a wide variety of arrangements, including employment, call coverage, medical directorships, professional services agreements, co-management arrangements, and more. We would love to work with you in your compliance process. Contact our Healthcare Compensation Valuation team led by Katie Tarr and Josh Brummett for a more in-depth discussion of these themes or other issues impacting your organization.