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2009 Resolutions for Physician Practices, M.D. News, Vol 2, No 1, 2009

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M.D. News, January 2009, Vol. 2, No. 1
By Lisa English Hinkle, McBrayer, McGinnis, Leslie & Kirkland PLLC

As the nation's economy spirals downward, the health care industry faces increasing scrutiny and sure reform. Physicians have been protected from economic decline by government payment sources and an endless supply of patients as a result of the health care needs of the aging population. Because the federal government has reaped tremendous success as a result of fraud and abuse, physicians can expect increasing scrutiny of their practices from federal, state and even contractor programs. History has demonstrated that an effective way to eliminate fraud, abuse and waste is through vigorous enforcement activity. Despite numerous recent high-profile prosecutions and settlements, a public perception of rampant waste and abuse within the health care industry exists. This public perception will precipitate increasing government investigation of physicians, fueled by our nation's economic crisis in 2009. With these thought in mind, we have written 2009 New Year's resolutions for Kentucky physicians.

Tune Up On Compliance!

Since the OIG published its Model Compliance Plan for Small Physician practices almost 10 years ago, no revision of the model plan has been published despite many new complex developments in the regulatory area. The OIG has not made any changes to this model plan even though it was intended to guide physicians to safety! In 2009, every physician practice needs a compliance tuneup even if the OIG's Model Compliance Plan has been adopted and followed. There are too many important changes in the law to be ignored.

Some of the most significant changes include, of course, the Stark Phase III regulations and the 2008 Medicare Physician Fee Schedule (with its 1,000 pages of comments). Additionally, the OIG publishes its annual work plan, which outlines specific areas for federal investigation that change each year! Another reason that physician practices should commit to 2009 compliance efforts is the fact that there are more entities now than ever before investigation fraud and abuse. The federal government has even created financial incentives for state governments to increase their own Medicaid fraud and abuse prosecutions — a new program exists that permits independently contracted organizations to investigate physicians and to be paid based upon recovery of federal dollars. And, of course, don't forget the qui tam actions that whistleblowers may institute independent of government investigation. The financial windfall earned by whistleblowers for initiation of successful false claims actions creates a huge incentive for disgruntled employees to retaliate against physician employers.

In 2009, physician practices should revisit their compliance plans, update those plans to reflect changes and new laws, and train their employees about these changes. A compliance tuneup should include review of the plan itself as well as policies, procedures and employee training materials, etc., and a sampling of patient billing. At a minimum, updates should address the changes in the Stark Phase III regulations, the anti-markup rules, changes in reimbursement policies and new billing guidance, among other things. We also suggest that physicians incorporate compliance efforts as part of any employee manual. Development of an employee code of conduct and coordination of compliance policies in employment manuals are highly recommended.

Run A Stark Phase III Check!

The Stark Phase II regulations became final on December 2, 2007, and implemented a host of changes that affect every physician practice that makes referrals, provides ancillary services, orders diagnostic tests or has relationships with hospitals, rehabilitation therapy providers or DME companies. In other words, all physician practices are affected by the Stark Phase III changes. The Stark Phase III regulations contained significant changes including elimination of a safe harbor for indirect compensation agreements, addition of a complicated "stand-in-the-shoes" analysis, modification of rules relating to how physician bonuses may be paid, as well as how relationships between hospitals and physicians are to be structured to be protected.

A Stark check should also include a review of all contracts with other health care entities and providers, including employees. This review should, at a minimum, check to see if contracts have not expired. For example, a contact with a hospital for office space should be in writing, for a minimum term of a year and at a rate consistent with fair market value. If the contract has expired, even though the parties may act the same and pay the same amount, referrals between the parties will no longer be protected. The same issues exist with employment contracts. Simply because the parties intend for the contract to continue and act as thought it has, if the contract has expired, the referrals between the parties are no longer protected and violate the Stark Law.

Know What A 'Never Event' Is And How It May Implicate Physicians!

To improve patient safety and quality of care, CMS has handed plaintiffs' attorneys a strong new weapon against hospitals and nursing homes that has significant implications for any physician involved. By identifying eight conditions called "never events," CMS has announced that it will not pay for a patient's care when a never event has occurred. Some commentators, as well as this author, have concluded that CMS has created a strict liability standard for malpractice when a never event is identified. In other words, if the determination is made that a never event has occurred, little other proof is necessary in a legal action. Examples of these never events include (1) unintended retention of an object in a patient after a procedure; (2) patient death of disability associated with medication error; (3) patient death or disability associated with a fall; (4) surgery on the wrong part of the body/patient; and (5) patient death of disability associated with an intravascular air embolism.

Absent one of these conditions on admission, the occurrence of a never event results in no Medicare or Medicaid reimbursement to the hospital for resulting bills and possibly physicians. Hospitals are required to report never events to CMS when they occur. For a physician treating a patient who experiences a never event, this designation creates a tremendous risk of being sued with a strong likelihood of plaintiff success.

For 2009, physicians should know and understand what never events are, become involved, if possible, in determining whether one has occurred, and if a never event is designated, take active steps to reduce the potential of being sued.

Review Your Referrals And Billing For Diagnostics!

Whether a physician practice provides diagnostic tests or refers patients to other providers, physicians should be aware of the new payment rules. Changes in the 2008 Medicare Physician Fee Schedule as well as the Stark Phase III regulations address how and when a physician may bill for tests. While advanced imaging tests like MRI and CT scans are big-ticket items, the new rules even apply to more common services like X-rays and ultrasound. Physician practices should review how all diagnostic services are billed. Particular attention should be paid to whether a test or interpretation is purchased, how much is charged, as well as whether all required information is disclosed on the bill. In the 2008 Physician Fee Schedule, CMS has made clear that a physician billing for a purchased diagnostic test or interpretation may not bill more than charged, with an exception only for a contracted radiologist who performs an interpretation at the same site where the test is performed. While the rule seems simple, it has broad implications for physician practices that perform the technical test but purchase the interpretation. A physician practice may not mark up the charge. As has become common, physician practices often contract or arrange for a radiologist to perform interpretations and then bill Medicare or Medicaid as a global charge for the test. If the radiologist's charge is less than what Medicare reimburses for the interpretation, then the physician practice may unknowingly violate Medicare's anti-markup rule even when simple tests like X-ray and ultrasound are involved.

If a physician practice provides advanced diagnostic services to its patients, even more scrutiny should be undertaken. The OIG has announced in its 2009 work plan that it will investigate business relationships where MRI services are billed under the Medicare Physician Fee Schedule. The OIG will look at the relationships between physicians, billing providers and equipment providers to determine if financial relationships are associated with higher utilization. The OIG has also included ultrasound in its 2009 work plan and announced that it will look at service profiles, provider profiles and beneficiary profiles in areas with high utilization.

For 2009, Kentucky physicians should resolve to (1) tune up compliance efforts, (2) run a Stark check, (3) know what never events are, and (4) review referrals and billing for diagnostic services.

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

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