Tag Archives: Stark

The Feds Get Creative Prosecuting Kickbacks

In various health care law blogs and posts, lawyers across the country have been writing about the “Eliminating Kickbacks in Recovery Act” (EKRA) which was adopted as part of the SUPPORT Act of 2018 (the “Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities Act”). Most if not all of the writings, opinions, and lectures lawyers have been giving are understandably all based upon conjecture, since the federal government has not (to anyone’s knowledge) brought a prosecution yet pursuant to that law.

As a general premise, and much like Florida’s Patient Brokering Act, EKRA prohibits kickbacks between providers of services or between third parties and service providers. The reason for the importance of this law is: (1) many states, aside from Florida, did not have a state-level “anti-patient brokering” law to address the fraud and corruption epidemic amongst various treatment providers and their marketing arms; (2) existing federal law addressed only federally-funded plans such as Medicare, Medicaid and TriCare.  EKRA was viewed as bridging that gap to capture similar criminal behavior amongst persons who obtain reimbursement from private insurance.

Most of the concern expressed is that the law, as drafted, is not (in their opinion) not as clearly articulated as the federal Anti-Kickback Statute (AKS) which has Safe Harbors and other regulatory interpretations which have guided health care lawyers since adoption.  Their concern is in their inability to counsel clients as to what behaviors are allowed under EKRA and which would violate that law.

While Congress may have had its own intent, it comes down to the Justice Department to enforce the law, and health care lawyers have been sounding the alarm that governmental overreach in prosecuting what is not otherwise a kickback but “looks” like a kickback is certain to happen, if for no other reason, but due to the constant negative publicity that addiction treatment providers regularly receive in the press.

In contrast, what does not occur in the press with much frequency is the daily arrest, indictment, conviction and plea deals struck with MEDICAL health care providers who violate the AKS (or its similar counterparts, the Stark Law and the False Claims Act).

However, a “tip of the cap” is to be given to the Dallas Morning News and reporter Kevin Krause, who revealed the federal government’s novel attempt to address kickbacks in health care – the federal Travel Act.

In his story published on 4/14/19 entitled “Here’s why doctors should worry about the feds’ novel approach to prosecuting health care kickback cases,” he write the following (with our editorialization in BOLD within):

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Texas doctors who cut business deals with hospitals thought they were in the clear, as long as they avoided Medicare patients and those covered by other federal health insurance programs.

That way, they couldn’t run the risk of violating the federal anti-kickback law. That’s the way it’s always been.

Not anymore.

Using a 60-year-old law, federal prosecutors have found a way to target health care kickback schemes that involve private insurance. The guilty verdicts against surgeons and others in the Forest Park Medical Center case are sending shock waves throughout the U.S. medical community and could upend many doctor-hospital relationships. The trial also revealed just how important doctors are to the financial survival of hospitals, and how far hospitals will go to attract them.

Some attorneys are crying foul, saying the government has moved the goalposts by using the Travel Act, which was passed to crack down on organized crime. Many attorneys are scrambling to advise their clients accordingly. A lot of money is at stake. Marketing agreements, in particular, are suddenly in the hot seat. But consulting agreements, medical directorships and office leasing arrangements are all in the mix, too.

“I think there is a lot of worry,” said Carolyn McNiven, a San Francisco health care lawyer who, like others, was closely watching the seven-week trial in Dallas. “I think a lot of people are walking into a buzz saw that they don’t know is coming.”

The Travel Act gives federal jurisdiction to a wide range of crimes, including bribery, if state lines are crossed using mail or electronic communications. But until recently, it’s never been used in health care fraud cases.

Federal prosecutors used it in Dallas successfully for the first time, in the Forest Park trial that wrapped up last week.

The jury found that Forest Park paid lucrative benefits to surgeons in the form of free advertising in exchange for them bringing their expensive surgeries to the hospital. Such quid pro quos are considered illegal kickbacks.

Dr. Michael Rimlawi, one of the convicted Forest Park surgeons, appeared stunned by the guilty verdict against him last week. He faces up to 15 years in prison.

“I’m in disbelief,” Rimlawi told supporters gathered around him at the federal courthouse in Dallas. “I thought we had a good system, a fair system.”

McNiven and other health care lawyers say they believe the government will view the Forest Park case as a green light to launch more prosecutions in similar cases involving private insurance provided by such companies as Aetna and United Healthcare.

“The entire health care industry is looking at Dallas,” said Nick Oberheiden, a Dallas health care lawyer. “I think this is a complete shakeup.”

James A. Fisher, who has represented whistleblowers in health care fraud cases, said the new enforcement effort is a major step forward.

“I am glad the government aggressively prosecuted that case, because this is a serious problem. If the doctor’s decision is influenced by anything other than the patient’s best interest, then that is a corrupted process,” he said. “It will bring more integrity into decision-making by physicians.”

Two of the nine Forest Park defendants on trial were found by the jury to have violated the Travel Act: Wilton “Mac” Burt, a founder and top manager of the hospital, and Dr. Shawn Henry, a Fort Worth spine surgeon who referred patients to the hospital. The Forest Park prosecution also involved some federal insurance programs like Tricare, the military’s health program.

Four of the defendants were acquitted of charges related to the Travel Act, which some lawyers say should temper the government’s enthusiasm for the law.

Tom Melsheimer represented Dr. Nick Nicholson, a bariatric surgeon, the only Forest Park defendant to be acquitted last week of all charges against him.

“The verdict can be viewed as a pretty serious rebuff of the Travel Act theory as applied to the doctors,” he said. “No doctor who participated in the marketing program was convicted of a Travel Act count.”

Two other Forest Park founders and physicians, Dr. Richard Toussaint and Dr. Wade Barker, pleaded guilty to violating the Travel Act.

Most Forest Park defense attorneys declined to comment after the verdicts. Some said they plan to appeal. The convictions are not final until affirmed by an appellate court.

Doctors and their surgeries are critical for a hospital’s bottom line, and thus getting patients in the door and on the operating table has become big business — to such an extent that prosecutors say Forest Park had to bribe doctors for surgeries when it opened and for several years afterward.

Two Forest Park doctors, for example, operated there up to 14 times a day, from early morning until night, according to trial testimony. A recent survey found that doctors legally generate an average of $2.4 million per year for their affiliated hospitals.

The survey shows that doctors “continue to drive the financial health and viability of hospitals,” said Travis Singleton, executive vice president of Merritt Hawkins, a Dallas physician search firm that conducted the survey. The results were released as the Forest Park trial got underway.

Certain medical specialties generate the most revenue. Orthopedic and cardiovascular surgeons, for example, bring in an average of over $3 million for their hospitals each year, according to the survey.

Marketing arrangements between doctors and hospitals are commonplace across Texas, according to testimony during the Forest Park trial. Under such contracts, hospitals pay to advertise the practices of doctors who bring their surgeries to the hospital. But Forest Park picked up 100 percent of the tab even though the ads barely, if ever, mentioned the hospital.

That is a benefit, prosecutors argued — a lucrative one that helped the doctors grow their practices significantly.

The Forest Park surgeons argued there were no strings attached to that money. But prosecutors convinced a jury otherwise, showing that the doctors were being paid to steer their patients to Forest Park — and hiding behind legal contracts to do so.

At least three other Dallas hospitals have paid doctors for patients using marketing agreements, according to federal prosecutors.

Two of them, Vista Hospital and Victory Hospital, have since shut down like Forest Park. The third, Pine Creek Medical Center, paid a $7.5 million fine to the government in 2017 for a scheme similar to the one at Forest Park — paying doctors for patient referrals with free advertising on billboards, radio and TV, and the internet, according to the U.S. attorney.

The Pine Creek case came to light in a whistleblower lawsuit filed by two of the hospital’s former marketers. That scheme, however, involved Medicare and Tricare beneficiaries and did not employ the Travel Act and Texas’ commercial bribery law.

Pine Creek’s new chief executive, Dan Gideon, said his hospital has some new owners and is meeting the terms of its five-year corporate integrity agreement with the government. He said no additional concerns have been raised.

At Forest Park, surgeries meant big bucks.

When the hospital opened in 2009, there was already a healthy competition for patients. Forest Park had another challenge: It wasn’t in any insurance networks and it didn’t accept Medicare patients.

Forest Park’s top administrator, Alan Beauchamp, didn’t mince words about the urgency of patient referrals.

“We need more bodies on the table,” he told Israel Ortiz, a clinic owner and co-defendant who admitted to selling patients to Forest Park.

The question then for hospitals, especially new ones, is how to legally attract patients without offering improper financial incentives.

Jacob T. Elberg, an associate professor at Seton Hall University School of Law in New Jersey, understands those business pressures.

When he was a federal prosecutor, he led a massive kickback prosecution in New Jersey that ultimately resulted in the convictions of over 50 defendants, including 38 doctors. The case, which wrapped up last year, involved a lab called Biodiagnostic Laboratory Services, which paid kickbacks to doctors for patient referrals.

Elberg’s case is believed to be the first time a federal jury convicted someone of violating the Travel Act in a health care fraud case.

The Travel Act was passed in 1961 to crack down on organized crime. The law makes it illegal to use the mail or other forms of interstate commerce to commit any “unlawful activity,” such as bribery. The federal law essentially piggybacks on state commercial bribery laws like the one in Texas, which apply to health care schemes involving private health insurance.

The government doesn’t even have to show patient harm in such cases.

Elberg, who was chief of the District of New Jersey’s health care and government fraud unit, said many states don’t have the resources or the expertise to take on large-scale prosecutions for health care bribes and kickbacks.

Texas has never enforced its commercial bribery law, according to testimony in the Forest Park trial.

“This is an area where there hasn’t been as much enforcement as there should be,” Elberg said.

Certain health care providers have taken advantage of that for years, he said. But Elberg said his case had a major deterrent effect.

“We were aware of misconduct that was ongoing that stopped as a result of this,” he said.

Oberheiden, the Dallas lawyer, said having a marketing contract that on its face complies with the law will no longer suffice for doctors.

“If the motives behind it are not legitimate, then the contract is not worth the paper it’s written on,” he said.

Lawyers, Oberheiden said, will need to be careful about authorizing such contracts and then closing their eyes to what they will be used for. And clients need to understand that “if undisclosed motives don’t match the language of the contract, then it’s useless.”

Jeff Ansley, a Dallas health care lawyer, called the Forest Park case and its use of the Travel Act a creative yet “very aggressive prosecution.”

He said the case will add confusion to the question of which doctor business practices are appropriate. The Justice Department should provide more legal guidance on the matter, Ansley said, particularly since doctors aren’t trained in the business of medicine.

“There is a lot of gray out there,” he said of doctor marketing arrangements. “It’s increasingly unclear where the lines are.”

In the Forest Park case, well-educated and respected practitioners had their business agreements vetted by lawyers and still got convicted, Ansley said. They included surgeons who pioneered techniques that cut down on infection and speed up recovery.

“You wouldn’t think they went to medical school to commit fraud, and here they are,” Ansley said.

McNiven, the San Francisco lawyer, echoed those concerns, saying those in the health care industry rely on “predictability” in enforcement.

“The application of the Travel Act really upended what people thought were the acceptable rules of the road,” she said. “I do feel like this is hiding the ball.”

Most lawyers are familiar with the federal Stark and anti-kickback laws, but they aren’t thinking about state commercial bribery laws like the one Texas has on the books, she said.

Jason Ross, an attorney for Burt, said the government’s prosecution should concern “individuals and companies in the health care industry.” He said it “marks an expansion of federal law enforcement” by “alleging fraud against private insurers by way of the Travel Act’s ability to federalize state laws.”

“The specter of more aggressive federal criminal enforcement of this type could certainly shift the balance of power in favor insurance companies, to the detriment of health care providers,” Ross said.

Ansley and McNiven said the ultimate impact of the Forest Park case might be to discourage many doctors from engaging in any sort of business relationships.

And that would be bad for doctors and patients, they said.

EDITORS NOTE: We have been reading stories like this for years, and the common answer has always been, “how are we to conduct business if the standard commercial business rules don’t apply?” The answer is very simple – do not engage in any form of quid pro quo, any form of incentive or benefit, or anything that would steer clients as a result of a pecuniary gain, rather than what is in the best interests of the patient. While many providers across all health care paradigms complain that the intent of the laws passed are being abused by law enforcement and causing unreasonable and unpredictable disruption in the health care economy, the issue continues to emphasize the serious conflict between free market enterprise and the public policy regarding healthcare. This issue is clearly going to be a constant theme in the 2020 Presidential election and for many years to come.

The re-posting of this story is for informational purposes only. We are neither endorsing or commenting on any statement made by any lawyer or person in the article. Language inbold letters is for illustration and emphasis purposes only.

Feds Reconsidering Stark and Anti-Kickback Safe Harbors

The concepts of the federal Stark Law and its companion Anti-Kickback Statute (AKS) are often used interchangeably by health care industry providers, though both laws are different in applicability.

A chart detailing the differences has been prepared by HHS and can be found here: https://oig.hhs.gov/compliance/provider-compliance-training/files/starkandakscharthandout508.pdf
Health & Human Services (HHS) and its Office of Inspector General (OIG) HHS has been taking comments from industry as to ways to “update” the rules implementing the Stark Law and the AKS to meet modern evolutions in physician/employee compensation and other financial arrangements which industry believes are outdated and stifle innovation.

According to recent reporting by ModernHealthcare.com:

“Hospitals have urged HHS’ Office of Inspector General to recognize that payments between providers in the same alternative pay models do not violate federal anti-kickback laws, warning they may not participate in the programs otherwise. Alternative pay models can violate anti-kickback laws because they can include incentives and shared savings payment agreements to reduce the cost of care, which could influence a provider to use a certain vendor, refer patients to specific facilities or order more services that are paid for by federal healthcare programs. But providers told the OIG that the laws are too broad and they’re getting in the way of the move to value-based care. Some providers called on the agency to create a so-called safe harbor for payments made between hospitals, physician groups and skilled-nursing facilities in value-based arrangements to allow them to split shared savings payments.”

Relevant to the addiction treatment industry was commentary about forms of “payments” to patients.

“Providers also want to protect payments to patients to address their social determinants of health. These payments may violate anti-kickback statute because a beneficiary could feel obligated to continue receiving care from that provider.  But patients are more likely to lose weight if they have a financial incentive, according to American College of Cardiology President Dr. Michael Valentine. If physicians can pay for food, clothing or even transportation to and from healthcare visits, that could improve patient health. Valentine called for an expanded safe harbor that would allow physicians to pay patients to improve their social determinants of health.  Karen Ali, general counsel at the New Jersey Hospital Association, agreed that OIG should not penalize hospitals for these payments, as they could reduce unnecessary readmissions. ‘Hospital responsibility for patient care no longer begins and ends at the hospital door,’ Ali said. The comments are in response to a Request for Information issued by HHS’ OIG this past summer. The agency asked providers how it could encourage value-based pay arrangements. It received more than 350 responses. The CMS is also looking to soften anti-kickback regulations. It issued its own RFI to determine how it can minimize the regulatory barriers around the so-called Stark law.”

At the local (Florida) level, and now at the federal level with the adoption of the new “Eliminating Kickbacks in Recovery Act” (EKRA), the importance of updates to the AKS is relevant for two main reasons:

  1. Florida’s Patient Brokering Act (PBA), s. 817.505, Fla. Stat., holds out as “defenses” anything that is deemed a “safe harbor” within the federal AKS (meaning, if HHS/OIG says a certain action does not violate the AKS, then Florida law says it also does not violate the PBA); and
  2. EKRA, which passed at part of the SUPPORT Act of 2018, does specifically include certain “safe harbors” but also explicitly contemplates that DOJ and HHS will adopt rules to further clarify those exceptions.

As proposed rules relaxing the AKS are rolled out, we will certainly keep everyone updated.  However, we continue to strongly believe (if not know) that any such benefit given to a patient with the intent to induce patronage will continue to be disfavored as being against public policy.