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HEALTH CARE INDUSTRY PERSPECTIVES ON HEALTH CARE REFORM

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Title: HEALTH CARE INDUSTRY PERSPECTIVES ON HEALTH CARE REFORM


1
HEALTH CARE INDUSTRY PERSPECTIVES ON HEALTH CARE
REFORM

Mississippi Chapter Healthcare Financial
Management Association 2010 Ethics, Accounting
Auditing and PFS Workshop June 11, 2010 Hilton
Hotel, Jackson MS
2
STRATEGIC OPPORTUNITIES FOR HOSPITALS
3
Health Care Delivery System Reform
The Senate Finance Committee Legislation Will
Include Payment Reforms Aimed at Improving the
Delivery System
The Goal
1.
Tactics
2.
Prerequisite
3.
4
A Roadmap to Reform
Most of President Obamas Ambitious Health Care
Goals Depend on Bending the Cost Curve
Causal Relationship Between the Presidents
Health Care Goals
Primary Outcome
Secondary Outcome
Tertiary Outcome
Catalyst
Maintain Coverage During Job Transitions
Protect Families from Medical Bankruptcy
Reduce Cost Growth
Assure Affordable Coverage
Guarantee Choice of Docs and Health Plans
End Barriers for Pre-Existing Conditions
Invest in Prevention and Wellness
Improve Safety and Patient Care
Source 1) http//www.whitehouse.gov/issues/health
_care/
5
Selected Provisions
  • Administrative Simplification
  • Moving to standardized processes by evaluation of
    systems every 3 years using input from the
    National Committee on Vital Statistics, the
    Health Information Technology Policy Committee,
    the Health Information Standards Committee,
    standard setting organizations and stakeholders
    -Public Health Services Act Sec. 399HH(a)), as
    added by Act Sec. 3011 of the Patient Protection
    and Affordable Care Act (P.L. 111-148)).
  • Delivery System Changes
  • Bundling beginning 2013 pilots thru 2015
    (Social Security Act Sec. 1866D, as added by Act
    Sec. 3023 of the Patient Protection and
    Affordable Care Act (P.L. 111-148)).
  • Readmissions 2013 penalties for excessive
    re-admissions (SSA Sec. 1886(q)(3), as added by
    Act Sec. 3025 of the Affordable Care Act).
  • Hospital acquired conditions -Act Sec. 2702
  • Accountable Care Organizations 2012, allows
    hospitals and physicians to provide leadership in
    voluntary ACOs. Some savings to be shared
    Section 3022 of the Patient Protection and
    Affordable Care Act (P.L. 111-148) adds Social
    Security Act Sec. 1899
  • Innovation Center 2011 creates a Center for
    Medicare and Medicaid Innovation designed to
    improve quality and reduce program expenditures-
    Section 3021 of the Patient Protection and
    Affordable Care Act (P.L. 111-148) amends Title
    XI of the Social Security Act by adding the new
    SSA Sec. 1115A

6
Global Payments
The Legislation Will Include Expanded Bundled
Payment Demonstration Projects
Sample Inpatient Stay
Current Payment Methodology
1
30 Day Episode of Care
Proposed Bundled Payment System
2
MAC
Payment
Hospital Negotiated Pmts
7
Selected Provisions
  • Independent Payment Advisory Board (IPAB) Section
    3403 of the Patient Protection and Affordable
    Care Act (P.L. 111-148)
  • Binding payment recommendations on Medicare and
    non-binding on private insurers payments to
    providers
  • Exclusion such as hospitals (except CAH) until
    2019
  • 340B drug program extended Act Sec. 7101(a) of
    the Patient Protection and Affordable Care Act
    (P.L. 111-148), amending Public Health Service
    Act Sec. 340B(a)(4) by adding subparagraphs (M)
    through (O)
  • Market basket update adjustments -Affordable Care
    Act Sec. 3401
  • RAC expansion -Affordable Care Act Sec. 6411
  • Graduate Medical Education no reductions in IME
    payments but re-distributes 65 percent of unused
    residency to primary care and surgeons SSA Sec.
    1886(h)(8)(B), as added by Act Sec. 5503(a)(4) of
    the Affordable Care Act

8
Something To Think About
  • Be proactive, explore how to make the new
    legislation work in your organization
  • Ignoring the delivery and payment system changes
    will be detrimental
  • Most importantly, understand totally where your
    revenue comes from and how this will change
  • Tax Exemption

9
Financially Positive or Negative for Health Care
Providers
  • Modeling
  • Market Basket Update
  • DSH-UPL
  • Hospital Acquired Conditions
  • Physician Payment Revisions
  • Contracts with other payers

10
Being Pro Active
  • Model impacts of Medicare and Medicaid
  • Estimate income/ volume levels of new patients
  • Evaluate service lines
  • Evaluate costs
  • Direct care
  • Support

11
Know the margins The Driving Forces
12
Model of Governmental Payers
13
Non Governmental Payers
  • Impact of Health Insurance Exchanges on
    traditional insurance
  • Impact of family coverage and shifts to employers
  • Impact of pay the penalty un or under insured
  • Remember bend the cost curve

14
Being Pro Active
  • Model impacts of Medicare and Medicaid
  • Estimate income/ volume levels of new patients
  • Evaluate service lines
  • Evaluate costs
  • Direct care
  • Support

15
Reviewing Service lines
  • Outpatient Rehabilitation Services
  • Primarily two services Occupational Speech
    Therapy
  • Determined the payer mix was unable to sustain
    the current level of expense.
  • Due to the competition and availability in the
    service area, the Hospital elected to discontinue
    service.
  • Net increase to contribution margin 600,000
    annually.

16
Being Pro Active
  • Model impacts of Medicare and Medicaid
  • Estimate income/ volume levels of new patients
  • Evaluate service lines
  • Evaluate costs
  • Direct care
  • Support

17
Analysis of Costs
  • The Cost structure
  • Direct patient care
  • Components of Overhead
  • Identified areas for cost savings
  • Invested in premier database to benchmark both
    cost and quality
  • Expended Information Technology funds for
    capturing data and developing standardized
    processes

18
Labor Costs
  • Productivity standard which was an integration of
    standards established by a proprietary database
    and adapted Hospitals culture
  • Review of standards began with a bi-weekly
    process which was historical and reactionary
  • Moved to a daily matrix which was successful due
    to the step transition (key moving from
    reactionary to integrated)
  • Savings as a result of the intense use of
    standards
  • FTEs decreased from 4.5 to 3.9 per adjusted
    occupied bed
  • Reduction of salary costs of 6.8 million
  • Other considerations including freezing merit
    increases and elimination of contract staffing

19
Purchased Services
  • Retirement Plan Hospital operated under a
    defined benefit
  • Freeze implemented with alternative retirement
    plan
  • With matching mechanism through 403(b) savings of
    700k annually
  • Real Estate and other rental agreements
  • Negotiated through consolidations and space
    eliminations resulted in 270k savings
  • Management of professional services
  • Hired a director for key areas including IOP, BIO
    Med, Rehab and Housekeeping - savings of 1million

20
Quality Efficiency
  • Chief Medical Officer established a work group to
    evaluate the clinical effectiveness of the
    following programs
  • Cardiology
  • Pediatrics
  • Orthopedics
  • Behavioral Health
  • Womens Health Services including Nursery
  • General medical Surgical

21
Key Finding
  • Length of Stay too high
  • With 60 of total expense representing labor
    costs, the Hospital began an intense review of
    daily activities and labor hours
  • Greatest opportunity Review standards and
    protocols for delivery of patient care
  • Intensified use of Hospitalist program
  • Indexed length of stay _at_ 100 of standard

22
Other Considerations
  • Mindset review of expense
  • Formulary review of Pharmacy - 200k
  • Courier alignment with outpatient - 175k
  • Benefit plan sync with industry - 1.5 mil
  • Overall, everything is matched up with
  • Board Policy and Mission
  • Rating Agency Capital Access
  • Budget constraints

23
Analysis of PPACAs Impact on Employers
24
September 23, 2010 Plan Changes
  • UNAVOIDABLE AND/OR NON-GRANDFATHERABLE PROVISIONS
  • 1. No Lifetime Limits on Essential Benefits
  • 2. Restrictions on Annual Limits for Essential
    Benefits
  • 3. No Pre-Existing Conditions Exclusions for
    Children Under 19
  • 4. If a child under 26 is not eligible for
    enrollment in a separate employer sponsored
    plan, then plan already providing coverage to
    children must extend coverage through age 25
    regardless of student/marital/dependent status
  • 5. Existing Coverage cant be rescinded absent
    fraud
  • 6. Large Employers (200 FTEs) must auto-enroll
    new employees
  • 7. Non-prescription, over the counter drugs
    (excluding insulin) cant be included in a
    Flexible Spending Account (FSA) deduction For
    tax years beginning after 12/31/10

25
September 23, 2010 Plan Changes
  • AVOIDABLE AND/OR GRANDFATHERABLE PROVISIONS FOR
    PLANS EXISTING BEFORE MARCH 23, 2010
  • 1. Certain Evidence-Based Preventive Care
    (Including Well-Child Care) and Immunizations
    Cant Be Subject to Cost-Sharing
  • 2. Insurance Based/Non-Self Funded Plans Must
    Comply with Requirements Preventing Favorable
    Treatment of Highly Compensated Employees
  • 3. Internal/External Appeals Processes
  • 4. Enrolled Employees May Select Any
    Participating Primary Care Doctor
  • 5. No Pre-Authorization or Increased Out of
    Network Cost Sharing for emergency services
  • 6. No Pre-Authorization or Mandatory Referral
    for OB-GYN Services

26
Small Employer Tax Credit (2010-2013)
  • SMALL EMPLOYER (25 FTEs) TAX CREDIT FOR 35 OF
    HEALTH CARE COVERAGE COST
  • In order to receive, employer must subsidize at
    least 50 of employee premiums
  • 50 Credit Is Available for Tax Years 2014-2015
    Technically its available for any two years
    beginning after 12/31/13-presumably the 2014-15,
    but not necessarily.

27
2011 Calendar Year Changes
  • 1. Aggregate Value of Employer Sponsored Coverage
    Must Be Identified on 2011 W-2
  • 2. Value of coverage to be identified on W-2 will
    be determined in the same manner as the 40
    excise or Cadillac tax, namely, through use of
    current COBRA valuation and will include employee
    paid premiums and FSA contributions but exclude
    stand-alone dental/vision.

28
2013 Calendar Year Changes
  • 1. Annual Employee Pre-Tax Contributions to FSA
    Capped at 2,500
  • 2. Hire-Date/Annual Enrollment Distribution of
    Standardized Summary of Plan Benefits/Coverage
  • 3. Mandatory Employee Notice of Rights to Health
    Insurance Exchange Subsidy (Including Free
    Choice Voucher)

29
2014 Calendar Year Changes
  • 1. No Pre-Existing Conditions Exclusions or
    Limitations
  • 2. No Coverage Waiting Period Greater Than 90
    Days

30
Grandfatherable/Avoidable Changes For Plans
Existing Before January 1, 2014
  • 1. Group Insurance Coverage Is Guaranteed for
    Issue and Renewal (Subject to Annual/Special
    Enrollment Periods)
  • 2. Group Plans Became Subject to Modified
    Community Rating Rules
  • Gender/Health Status Cant Be Used for Premium
    Calculation
  • Age Premium Variations Limited to 31
  • Tobacco Premium Variations Limited to 1.51
  • 3. Essential Health Benefits Must Be Offered
    for small group plans Does not apply to large
    groups or to self-insured plans
  • 4. Limits on Out of Pocket Expenses/Deductibles
  • Individual (5,950) and 2,000
  • Family (11,900) and 4,000

31
2014 Calendar Year Changes (cont.)
  • HEALTH INSURANCE EXCHANGES
  • List of Qualified Plans becomes available through
    either state/federal Administrator
  • Four Levels of Plans Based on Actuarial Value
    Between 60-90
  • Exchange Plans Must Offer Essential Benefits
  • Exchange-Based Subsidy Eligibility
  • Household Incomes Between 100-400 FPL (88K for
    Family of Four)
  • Ineligible for government healthcare
  • Employer sponsored plan doesnt pay at least 60
    of actuarial value and premium exceeds 9.5 of
    annual household income
  • Exchange Based Employer Penalties
  • Employers With Over 50 FTEs incur 143/month or
    2,000 (annually) per employee (after first 30)
    for failure to offer minimum essential coverage
    to all FTEs/dependents if ONE receives a subsidy
    through an Exchange
  • Employer with Over 50 FTEs incur 250/month or
    3,000 annual tax for each employee who opts for
    Exchange due to Unaffordable Minimum Essential
    Coverage meaning premiums exceeding 9.5 of
    household income or plan has actuarial value of
    less than 60
  • Note Mercer study says 38 of employees will
    meet this threshold

32
Health Insurance Exchanges (cont.)
  • FREE CHOICE VOUCHER ELIGIBILITY
  • 1. Household Income Less Than 400 of FPL
    (43,200-individual) (88,200 family of four)
  • 2. Required to pay between 8 and 9.8 of
    household income for coverage
  • Voucher Amount cost of Coverage Under
    Employer-Based Plan
  • Vouchers are Deductible by Employers
  • Vouchers Are Excluded from Employees Income
  • Vouchers Apply to All Employers, Regardless of
    Size

33
2014 Employer Reporting Duties
IF 5O FTEs, THEN a. declaration that employer
does or does not offer minimum essential
coverage to FTEs/dependents b. disclosure of
coverage waiting period length c. disclosure
of information on lowest-cost option in each
enrollment category d. disclosure of
employers share of total plan costs e. disclosu
re of number and names of employees receiving
health care coverage
34
Consequences
  • Very large employers may drop employer-sponsored
    coverage
  • ATT could save 1.8b annually
  • CBO estimates that employers that drop coverage
    would substitute wages for premium benefits
  • Employees would buy in to the Exchange, where
    reimbursement rates will be lower than with
    employer group plans (not going well in MA)

35
Consequences
  • 2010 average cost for family of 4 is 18k 10k
    funded by employer
  • Other insurance reforms will result in increased
    premiums
  • Credits expire when industry fees escalate

36
  • TAX IMPLICATIONS
  • TAX-EXEMPT HOSPITALS

37
TAX-EXEMPT HOSPITAL IMPLICATIONS
  • Section 9007 of the PPACA added yet another layer
    of requirements that must be met in order to
    maintain tax-exempt status and avoid excise tax
    penalties.
  • Except for the community health needs assessment
    requirement and imposition of excise tax
    penalties, Section 9007 applies to taxable years
    beginning after March 23, 2010.

38
TAX-EXEMPT HOSPITAL IMPLICATIONS, cont.
  • Section 9007 has five primary components
  • 9007(a) adds new requirements for 501(c)(3)
    hospitals through the addition of Section
    501(r)(1)-(7) to the IRC
  • 9007(b) amends IRS Section 4959 to impose an
    excise tax for noncompliance with 501(r)(3)
  • 9007(c) provides for mandatory federal review of
    the community benefit activities of 501(c)(3)
    hospitals
  • 9007(d) adds reporting requirements
  • 9007(e) requires the Secretary of the Treasury
    to make annual reports to Congress.

39
TAX-EXEMPT HOSPITAL IMPLICATIONS, cont.
  • Section 9007(a) adds Section 501(r)(1)-(7) to the
    IRC and imposes significant new obligations on
    tax-exempt organizations.
  • Applicability Section 9007 applies to
    organizations that operate facilities required by
    the state to be licensed/registered/recognized as
    a hospital and to other organizations with
    hospital care as a principal function.
  • Must be tax-exempt under 501(c)(3), so
    governmental facilities are not included.
  • For multi-hospital systems, the rules apply
    separately to each facility.

40
TAX-EXEMPT HOSPITAL IMPLICATIONS, cont.
  • New Section 501(r) has four primary components
  • Community health needs assessment - 501(r)(3)
  • Financial assistance policy - 501(r)(4)
  • Limits on charges - 501(r)(5)
  • Changes to billing and collection methods -
    501(r)(6)
  • Treasury has requested comments on the 501(r)
    requirements.

41
TAX-EXEMPT HOSPITAL IMPLICATIONS, cont.
  • New Section 501(r) components
  • Component One Community health needs assessment
    (501(r)(3))
  • Effective date taxable years beginning after
    March 23, 2012.
  • Requirements
  • Must conduct a community health needs assessment
    in the taxable year or either of the two prior
    taxable years.
  • Must have adopted a strategy to implement the
    identified needs.
  • The assessment must take into account the input
    of a broad spectrum of stakeholders in the
    community served by the facility and it must be
    made widely available to the public.

42
TAX-EXEMPT HOSPITAL IMPLICATIONS, cont.
  • and, for not complying with Section 501(r)(3),
    Section 9007(b) imposes an excise tax.
  • Section 9007(b) imposes an excise tax of 50,000
    for failing to meet the CHNA requirements in
    Section 501(r)(3).
  • Effective Date The excise tax technically
    applies for failures to comply occuring after
    March 23, 2010, but the CHNA requirement doesnt
    become effective until taxable years after March
    23, 2012.

43
TAX-EXEMPT HOSPITAL IMPLICATIONS, cont.
  • New Section 501(r) components
  • Component two Financial assistance policy
    (501(r)(4))
  • The organization must have a written financial
    assistance policy and widely publicize the
    policy within the community served.
  • Policy requirements
  • Eligibility criteria, including whether financial
    assistance offered includes free or discounted
    care
  • The basis for calculating patient charges
  • If the organization does not have a separate
    billing and collections policy, the actions that
    may be taken in the event of non-payment (i.e.,
    collections actions, credit reporting, etc.).
  • Additionally, the organization must have a
    written policy requiring the organization to
    provide, without discrimination, care for
    emergency medical conditions to individuals
    regardless of their eligibility for financial
    assistance.

44
TAX-EXEMPT HOSPITAL IMPLICATIONS, cont.
  • New Section 501(r) components
  • Component three Limits on charges (501(r)(5))
  • If a person meets the requirements of the
    financial assistance policy, then their charges
    for emergency or other medically necessary care
    must be limited to not more than amounts
    generally billed to individuals with insurance
    coverage.
  • The use of gross charges is prohibited.

45
TAX-EXEMPT HOSPITAL IMPLICATIONS, cont.
  • New Section 501(r) components
  • Component four Changes to billing and collection
    methods (501(r)(6))
  • The hospital cannot engage in extraordinary
    collection actions until it has made reasonable
    efforts to determine if the individual is
    eligible for financial assistance under its
    policy.
  • Regulations are to be issued to define
    reasonable efforts.

46
TAX-EXEMPT HOSPITAL IMPLICATIONS, cont.
  • Section 9007(c) provides for mandatory federal
    review
  • Section 9007(c) requires that the Secretary of
    the Treasury review the community benefit
    activities of each hospital subject to 501(r) at
    least once every 3 years.
  • Schedule H implications and a new definition of
    community benefit???

47
TAX-EXEMPT HOSPITAL IMPLICATIONS, cont.
  • and Section 9007(d) provides for additional
    reporting requirements
  • Section 9007(d) addresses several issues of
    recent legislative concern by adding to the
    reporting requirements for 501(c)(3) hospitals.
  • This section amends the Form 990 reporting
    requirements to include the following
  • a description of how the hospital is addressing
    the needs identified in the CHNA, a description
    of any needs not being addressed, and an
    explanation as to why not
  • the audited financial statements of the hospital
    or the consolidated financial statement, if
    applicable.
  • Implications

48
TAX-EXEMPT HOSPITAL IMPLICATIONS, cont.
  • To complete the circle, Section 9007(e) requires
    the Secretary of the Treasury to provide annual
    reports to Congress.
  • Section 9007(e) reports will include information
    for private, tax-exempt, and governmental
    hospitals regarding
  • levels of charity care provided
  • bad debt expenses and
  • unreimbursed costs for services provided with
    respect to non-means tested programs.
  • Additionally, 9007(e) reports will include
    information regarding costs incurred by
    tax-exempt hospitals for community benefit
    activities.
  • Morever, 9007(e) requires that this information
    will be compiled into a study on trends and
    submitted to Congress within 5 years.

49
  • OTHER NOTABLE TAX CHANGES

50
OTHER NOTABLE TAX CHANGES
  • Section 9001 Excise tax on Cadillac plans
  • Section 9002 Inclusion of cost of
    employer-sponsored health coverage on W2
  • Section 9003 and 9004 Qualified
    distributions/reimbursements from HSAs, FSAs,
    HRAs and Archer MSAs and increases in taxes on
    non-qualified distributions
  • Section 9005 Limits on health flex spending
    arrangements under cafeteria plans
  • Section 9012 Elimination of deduction for
    expenses allocable to Medicare Part D subsidy
  • Section 9013 Modifies the itemized deduction
    for medical expenses
  • Section 9015 Changes to FICA
  • Section 9017 (nullified and replaced with
    10907(b)) Tax on indoor tanning
  • Section 1402 Tax on net investment income

51
Impact of Health Reform and Fraud Enforcement and
Recovery Act of 2009
52
Health Care Reform A Big Deal
53
Fraud Enforcement and Recovery Act of 2009 (FERA)
  • FERA signed into law May 20, 2009
  • Expands the scope of the False Claims Act (FCA)
  • Increases funding for enforcement

54
False Claims Act Amendments - FERA
  • Fraud Enforcement and Recovery Act of 2009 (FERA)
  • Retention of Overpayments
  • Violation to knowingly and improperly avoid or
    decrease an obligation to pay money to the
    United States, including an obligation based on
    an established duty, whether or not
    fixedarising fromthe retention of any
    overpayment.
  • Must be knowing and improper
  • Whether or not fixed amounts

55
FERA Broadens FCA to Reach More Types of
Transactions
  • Pre-FERA, FCA required that allegedly false
    claims for payment must be presented directly to
    an officer or employee of the government
  • FERA eliminates presentment requirement
  • Extends liability to false claims for payment on
    government-funded projects, regardless of whether
    the claim is presented to or processed by a
    government official
  • Expands definition of a claim under the FCA to
    include any request or demand for money or
    property
  • Regardless of whether government has title to the
    money or property
  • Includes requests for money to a contractor,
    grantee, or any other recipient of government
    funds used to advance a government program

56
FERA Permits Non-Employees to Bring Retaliation
Claims
  • Pre-FERA FCA allowed employees to sue employer
    for damages and other relief if discriminated
    against as a result of their actions in
    connection with a false claims lawsuit or
    investigation
  • FERA makes retaliation claims available to
    contractors and agents who contend that they have
    been discriminated against

57
Patient Protection and Affordable Care Act
Provisions Affecting False Claims Act
  • Patient Protection and Affordable Care Act
    (PPACA) (March 2010)
  • Public Disclosure bar curtailed
  • Enhanced influence of whistleblower plaintiffs
    bar
  • 60-day Period to Report and Return Overpayments
  • Runs from the point at which the overpayment is
    identified or the date any corresponding cost
    report is due, whichever is later
  • After the 60-day period, the overpayment becomes
    an obligation under the FCA
  • Identified is not defined
  • FERA includes expansion of FCA definition of
    obligation to amounts that are not fixed
  • 60-day period for repayment of amounts received
    in violation of Stark law already in place
    (trigger for civil monetary penalties)

58
Patient Protection and Affordable Care Act
Provisions Affecting False Claims Act
Anti-Kickback Statute
  • Claims submitted in violation of Anti-Kickback
    Statute are False Claims, regardless of
    certification
  • The intent element of the Anti-Kickback Statute
    has been revised to explicitly reject 9th Circuit
    case law
  • Under current 9th Circuit case law, the
    government is required to show that a defendant
  • Had actual knowledge that the conduct was
    prohibited, and
  • Had a specific intent to violate the AKS
  • Resolves split among courts
  • The Act revises the AKS to state that, to meet
    the knowing and willing intent element, a
    person need not have actual knowledge that the
    AKS prohibits a particular conduct

59
Practical Considerations
  • Implications of Changes
  • Retention of overpayments/reverse false claims
  • No requirement of falsity or fraudulent conduct
  • No definition of improper avoidance of an
    obligation, so what does it mean?
  • Is knowing retention enough?
  • When is an overpayment identified for purposes
    of the 60-day time period?
  • Does identified mean quantified?
  • Under FERA amendments to the FCA, an obligation
    to return funds need not be fixed

60
PRACTICAL CONSIDERATIONS
  • Public Disclosure Jurisdictional Bar
  • Government now controls whether it applies
  • The bar applies, unless the government objects
  • Enables government to permit private
    whistleblower counsel to file and pursue
    parasitic lawsuits under the FCA
  • Enables government to retain private counsel to
    pursue these cases
  • Enhanced influence of whistleblower plaintiffs'
    bar in government enforcement
  • Former DOJ counsel comment that should expect to
    see arguments that government would not make, and
    tactics the government would not use
  • Profit motive only
  • Lack of government oversight of conduct of
    litigation or of plaintiffs counsel

61
PPACA Amendments To Stark Law
  • In-Office Ancillary Services Agreement
  • Exception revised to require referring physician
    to inform patients that they may obtain specified
    services from a person other than the referring
    physician or his/her practice
  • Applies to MRI, CT PET, Other designated health
    services specified by the HHS Secretary
  • Written list of suppliers who furnish services in
    the area in which the patient resides must be
    provided at the time of the referral
  • Effective January 1, 2010 (actually date law
    signed by President, March 24)

62
PPACA Revisions to Stark Law Whole Hospital and
Rural Provider Exceptions
  • Both exceptions narrowed to apply only to
    physician-owned hospitals that have physician
    ownership and provider agreements in operation on
    December 31, 2010
  • Must now meet certain other requirements
  • Hospitals must now report to HHS annually to
    identify physician owners
  • Hospitals must have procedures in place to
    require physician owner disclosure ownership to
    patients
  • Ownership and investment cannot be conditioned on
    referrals from the physician
  • Limited opportunities for further expansion
  • HHS will conduct audits beginning November 2011
    to determine if hospitals are complying with new
    revisions to the exceptions.

63
Can you syndicate a hospital to physicians now?
! no, you cant!
64
PPACA - Stark Law Self-Disclosures and Settlements
  • Within six months, HHS must develop and implement
    a disclosure protocol for actual and potential
    Stark violations in collaboration with the OIG.
  • Secretary now has authority to reduce the amount
    due for a Stark violation by considering
  • the nature/extent of the improper/illegal
    practice
  • the timeliness of self-disclosure
  • the cooperation in providing additional
    information related to the disclosure

65
Presidential Memorandum
66
Presidential Memorandum
  • Finding and Recapturing Improper Payments
  • Issued March 10, 2010
  • To heads of executive departments and agencies
  • References Executive Order 13520, November 20,
    2009, Reducing Improper Payments
  • Obama Administration focuses on hospital billing
    to Medicare
  • Announces expansion of Payment Recapture Audits
  • Directs heads of executive departments and
    agencies to expand use of Payment Recapture
    Audits
  • To the extent permitted by law
  • When cost effective
  • Directs Office of Management and Budget to
    development guidance and coordinate with Council
    for Inspectors General on Integrity and
    Efficiency

67
Expansion of RAC Program
  • Patient Protection and Affordable Care expands
    scope of RAC program to
  • State Medicaid programs by 12/31/2010
  • Medicare Parts C and D by 12/31/2010
  • State Divisions of Medicaid must contract with
    auditing firms by 12/31/2010
  • HHS required to submit annual report on RAC
    program to Congress

68
Stark Law Anti-Kickback Enforcement Under The
False Claims Act
  • Recent cases highlight aggressive DOJ litigation
    policy to seek massive damages
  • PPACA redefined kickbacks (overpayments by the
    government obligations owed to the government)
    as predicates for FCA violations
  • CMS required to offer a self-disclosure protocol
    before the end of 2010
  • WHAT TO DO?
  • Review physician agreement negotiation process
    for
  • Documentation on valuation issues
  • Timeliness of execution
  • Understand the enormous whistleblower risk
    presented by physicians (and disgruntled
    employees)

69
Stark Law Anti-Kickback Enforcement Under The
False Claims
  • Nexus between Stark and False Claims has become
    tighter
  • DOJ and OIG are pursuing Stark and Anti-kickback
    qui tams against hospitals as False Claims cases
    without regard to size of the facility
  • An entity may not present or cause to be
    presented a Medicare claim or a bill to any
    individual, third party payor, or other entity
    for Stark DHS furnished pursuant to a
    Stark-prohibited referral (42 U.S.C. 1395nn(a)(1)

70
Stark Law Anti-Kickback Enforcement Under The
False Claims
  • Excerpt from BNA Health Care Report April 13,
    2010
  • Federal Jury Finds Hospital Violated Stark, Not
    FCA Possible Liability Cut to 45 Million
  • A jury for a federal district court March 29
    reached a split verdict by finding a South
    Carolina hospital violated the Stark physician
    self-referral law but did not violate the False
    Claims Act, which reduced the potential liability
    of defendants from 300 million to about 45
    million (United States ex rel. Drakeford v.
    Tuomey, D.S.C., No. 305-cv-02858-MJP, jury
    verdict 3/29/10).

71
Stark Law Anti-Kickback Enforcement Under The
False Claims
  • Tuomey Takeaways
  • Big case for DOJ
  • Attempt to establish massive FCA damages
    regardless of size of defendants operations
  • Tuomey is 200 bed hospital
  • Strong follow up by DOJ to maximize Stark damages
    to be assessed by Court
  • Physician whistleblower

72
Summary of False Claims Focus
  • No case too small or too large for attention
  • Technical violations do not get a pass but
    focus in moving towards Fair Market Value
  • Importance of understanding Self-disclosure
    options now and in the future
  • Trend toward physician whistleblowers uniquely
    positioned to bring damaging allegations
  • Focusing on Fair Market Value documentation
  • Purpose to create inference that physician had
    incentive to refer patients

73
THANK YOU

1020 Highland Colony Parkway Suite 400 Ridgeland,
MS 39157
401 East Capitol Street Suite 200 Jackson, MS
39201
Dinetia M. Newman, Esq. 601-965-8169 dnewman_at_balch
.com
David A. Williams, CPA, FHFMA 601-326-1000 david.w
illiams_at_horne-llp.com
E. Russell Turner, Esq. 601-965-8159 rturner_at_balch
.com
Eugenia Stark Thomas, Esq. 601-965-8177 gstarkthom
as_at_balch.com
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