Lobbying Affiliate: MML&K Government Solutions

An Antidote to Healthcare Reform for Physicians?, M.D. Update, Vol. 1, Number 5, 2010

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M.D. Update May 2010
By Lisa English Hinkle
Additional Research by Molly Nicol Lewis

During 2008, the AMA projected that physicians incurred $24 billion in charity and uncompensated expense. By expanding health insurance coverage for 32 million uninsured Americans, the Federal Healthcare Reform Law ("Reform Law") should reduce this expense. The AMA also projects that the Reform Law's standardization of administrative processes will create more than $68,000 in yearly savings per physician by reducing the 58 hours a week that physicians and their staff devote to administrative matters. Despite the financial benefits of increased physician utilization and expanded coverage, the Reform Law creates complicated regulator and compliance issues for physicians. With the Reform Law's additional $250 million commitment to enforcement activities starting in 2011 and continuing for the next five years, physicians should take immediate steps to make informed decisions to identify and manage their risks.

The Reform Law significantly impacts the regulatory compliance and enforcement landscape for physicians. Though some of the changes are not slated to occur for year and some might be revised or repealed, what appears certain is that even though payment rates, covered services and insurance reforms may be amended, the Reform Law's commitment to transparency, fraud and abuse, and quality of care for physicians is likely to survive, if not be strengthened. Physicians should pay attention to regulatory compliance, fraud and abuse changes that become immediately effective or require substantial changes for their practices. Focusing on compliance now will allow physicians to address the aspects of the Reform Law that have the most serious penalties. Some important issues that demand physician's immediate attention are highlighted in the following.

Compliance: The Reform Law authorizes the Secretary of HHS to make compliance plans mandatory for Medicare and Medicaid providers. While no specific providers are targeted in the Reform Law, any provider who has received voluntary compliance guidance should expect to be required to implement a compliance plan. As the Office of Inspector General issued a model compliance plan for physician practices in 2000, physicians should anticipate that their continued participation in the Medicare program will require a compliance plan. Implementing or updating a compliance plan with a comprehensive evaluation should be the starting point for addressing the Reform Law's impact and discerning where changes need to be made.

Assess for Stark Compliance: The Reform Law creates a welcome mechanism for physicians to address Stark problems by directing the Secretary of HHS to develop a formal protocol for physicians to disclose actual or potential violations of the Stark Law by September 2010. The Reform Law also give 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 good 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 now have an important tool to reduce their financial liability for Stark violations, which are often so expensive that violations are ignored.

Anti-Kickback Statute strengthened by eliminating the requirement that the government proves Anti-Kickback violations were knowingly and willingly committed, the Reform Law lowers the bar for violations. As a result, Anti-Kickback Statute violations will be much easier to prove as an offense can be committed without specific intent, meaning a physician would not have to know that his or her acts violated the law to be liable for the offense.

Violations of the Anti-Kickback Statute Violate the False Claims Act: The Reform Law includes an explicit acknowledgement that claims or 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 and face significant civil penalties as well.

Return of Overpayments: The Reform Law turns keeping an overpayment for longer than 60 days after it is discovered into a violation of the False Claims Act and subjects physicians to potential treble damages and Civil Monetary Penalties. Overpayments create serious new problems for physicians who must be vigilant and educate administrative staff about this new liability as an affirmative duty to return the overpayment.

False Statement on Applications: The Reform Law creates new liability for any individual or entity that makes a false statement, material omission or misrepresentation on a Medicare or Medicaid application and requires exclusion.

CMPs Extended and Increased Under the Reform Law, the secretary may not impose Civil Monetary Penalties when (1) an excluded provider orders Medicare/Medicaid services; (2) a physician makes false statements in an enrollment application; (3) a physician fails to report and return an overpayment. In addition, the Reform Law increases the penalty to $50,000 when a false statement is made in connection with a false or fraudulent claim.

No New Physician-Owned Hospitals: The Reform Law repeals the Stark exception for new physician-owned hospitals and limited the ability of existing physician-owned hospitals to expand services.

Requires Immediate Disclosure of Ownership of Diagnostic Services: The Reform Law requires physicians, when referring patients for radiology services including MRI and CT scans provided as an ancillary in-office service under the Stark exception, to inform patients in writing of the physician's financial interest and provide patients with a written list of alternative providers in the area. This requirement is effective immediately.

Pre-emptive Suspension of Payment: The Reform Law permits the Secretary to suspend payments to a provider when there is credible allegation of fraud, which is not defined in the statute. Suspension of payment could be devastating to a physician practice during what are usually lengthy investigations.

Physician Payments Sunshine: The Reform Law requires manufactures of drugs and medical devices to report payments and transfers of things of value made to physicians and teaching hospitals to the Secretary by 2013.

Disclosure of Drug Samples: Manufacturers and distributors of covered prescription drugs are required to report the identity and quantity of drug samples that are distributed.

Plan for Quality Initiatives: The Reform Law requires HHS to develop a Physician Compare website by January 2011, which goes hand in hand with the Medicare's Physician Quality Reporting Initiative that establishes incentive payments for voluntary compliance through 2014 with penalties commencing in 2015. Physicians should register as soon as possible and should be aware of the additional 0.5 percent incentive payment for participating in the Maintenance of Certification Program that is to be administered though specialty boards.

The scope of the Reform Law is daunting and vests tremendous rulemaking authority with the Secretary to flesh out what many of the changes will be mean and how they will be implemented. What does appear certain is that physicians can expect transparency, fraud and abuse, and quality of care initiatives to survive changes to the Reform Law. As a result of the serious penalties for violations, physicians should immediately address these areas by initiating compliance efforts within their own practices.

Lisa English Hinkle is a partner in McBrayer, McGinnis, Leslie & Kirkland PLLC. Her practice area is healthcare law. She can be reached at 859-231-8780 or lhinkle@mmlk.com .

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