Lobbying Affiliate: MML&K Government Solutions

Physicians: After Health Care Reform, Will You Know Health Care Fraud When You See It?, Kentuckydoc, Vol. 1, Issue 11, 2010

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Kentucky doc

June 2010, Volume 1, Issue 11

By Lisa English Hinkle, partner with McBrayer, McGinnis, Leslie & Kirkland, PLLC

One of the most important areas that the Patient Protection and Affordable Care Act of 2010 ("PPACA") addresses for physicians is fraud and abuse. With stronger penalties, expanded definitions of what constitutes false claims, increased scrutiny for new physicians seeking provider numbers, new requirements for transparency and soon to be mandatory compliance plans along with several significant changes to the Stark Laws, physicians as well as other providers can expect increasing governmental scrutiny. Today, the Federal Government is armed with new investigative tools created by PPACA and additional funding, as well as a history of successfully prosecuting health care fraud and abuse. During 2009, the Federal Government won or negotiated approximately $1.63 billion judgments and settlements and transferred approximately $2.51 billion to the Medicare Trust Fund and $441 million to Federal Medicaid. Also, in 2009, federal prosecutors opened 1014 new criminal health care fraud investigations and 886 new civil health care fraud investigations. With a focus on increased enforcement as a supplemental way to finance reform, physicians need to understand the new provisions related to fraud and abuse and toe expect oversight. Because of the complexity of the new provisions, knowing what constitutes fraud and abuse becomes even more important for physicians.

Stronger Health Care Fraud Statutes and Penalties

PPACA has strengthened the Anti-Kickback Statute in several important ways including the elimination of the requirement that the government proves that violations were knowingly and willfully committed. This amendment lowers the bar for prosecutors by making violations easier to prove, which means that a physician would not have to have direct knowledge that his or her actions constituted a violation. In addition, activities of staff may be much more easily attributed to the physician.

Violations of the Anti-Kickback Statute now violate the False Claims Act as well. PPACA includes an explicit acknowledgment that claims for services provided in violation of the Anti-Kickback Statute are also false claims subject to the False Claims Act and its treble damage provisions. When an Anti-Kickback violation occurs, physicians can now be prosecuted for filing false claims as well.

PPACA creates new liability for making a false statement, material misrepresentation or material omission on Medicare and Medicaid provider applications in an effort to increase transparency in the application process as well as creating enforcement tools that have significant penalties. A new strong emphasis has been placed on gatekeeping to make enrollment in Medicare and Medicaid more difficult and transparent.

PPACA turns keeping an overpayment for longer than 60 days after discovery into a violation of the False Claims Act subjecting physicians to potential treble damages and Civil Monetary Penalties. Overpayments create a serious new problem for physicians who must be vigilant about overpayments and educate administrative staff about this new liability, as simple errors in billing that come to light may not constitute a false claim that subjects a provider to treble damages and Civil Monetary Penalties kept longer than 60 days.

Penalties have also been increased by PPACA as the secretary may now impose civil monetary penalties when (1) an excluded provider orders Medicare/Medicaid services; (2) a physician makes false statements in an enrollment application; and (3) a physician fails to report and return an overpayment. Additionally, the statute increases the penalty to $50,000 when a false statement is made in connection with a false or fraudulent claim.

PPACA also loosens the requirements for qui tam plaintiffs by lowering the bar for filing suit. Historically, a qui tam case was subject to dismissal if the allegations could be shown to have been publicly disclosed. Under PPACA, activities that qualify as public disclosures now only include federal proceedings where the government is a party. This significantly expands the opportunity for whistleblowers to file lawsuits against providers based on information that is widely known and possibly publicized.

Enhanced Investigative Tools for the Government

PPACA creates new tools for the government that are designed to make it easier to access information from physicians and other providers. This is in keeping with PPACA's intent to strengthen the Federal Government's ability to investigate and successfully prosecute cases. By expanding the ability of the government to issue subpoenas and to suspend payments to providers during an investigation, physicians who find themselves under investigation may face tremendous financial burdens even before an action is actually brought. In addition, new emphasis has been placed on data sharing between programs in order to combat fraud and abuse.

Mandatory Compliance Plans and Activities

PPACA authorizes the secretary of HHS to make compliance plans mandatory for Medicare and Medicaid providers. While no specific providers were identified in PPACA, any provider who has received voluntary compliance guidance should expect to be required to implement a compliance plan as a condition of participating in Medicare or Medicaid. In fact, the Office of Inspector General issued a model compliance plan for small physician practices in 1998. Consequently, physicians should anticipate that their continued participation in the Medicare program will require implementation of a compliance plan.

Stark Laws Changes

PPACA creates a mechanism for physicians to address Stark problems within their practices and directs the secretary of HHS to develop a formal protocol for physicians by September 2010 to disclose actual or potential violations of the Stark Law. PPACA also gives CMS the explicit authority to settle Stark violations for less than the full amount Medicare paid while the prohibited relationship was in effect. This is welcome news for physicians as violation of the Stark Law subjects a physician to a $10,000 per claim penalty. When coupled with the self-disclosure protocol, physicians will have an important tool to reduce their financial liability for Stark violations, which can be so expensive that they are often ignored.

Another important area of change relates to the immediate requirement that physicians providing diagnostic services like MRI, PET and CT scans pursuant to Stark's in-office ancillary services exception provide information to patients in writing about the other area providers where the patient may access the service. Physicians should note that this provision was immediately effective. PPACA also amends the Stark Law to further restrict the ability of physicians to own interest in hospitals to which they refer.

In conclusion, PPACA significantly addresses fraud and abuse concerns by amending the Anti-Kickback Statute, the False Claims Act, the Civil Monetary Penalty Statutes, and the Stark Law to give effect to several important reform themes that are directed at reducing waste, fraud and abuse. With the general themes of strengthening health care fraud investigative tools for the government, making compliance mandatory, and creating rigorous gatekeeping for new providers, PPACA creates a new regulatory environment for physicians who must educate themselves to understand and be aware of these changes and how to conform their practices to the law.

Lisa English Hinkle is a partner with McBrayer, McGinnis, Leslie & Kirkland, PPLC. Mrs. Hinkle concentrates her practice in health care law and is located in the firm's Lexington office. She can be reached at lhinkle.com or at 859-231-8780.

Christopher J. Shaughnessy of the Lexington office also contributed to this article.

This article is intended as a summary of newly enacted federal law and does not constitute legal advice.

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