Stark, Health Care Reform and Updated Compliance Requirements

When the Patient Protection and Affordable Care Act (PPACA) became law, a provision within adds a new dimension to the rules on self-referral and refund requirements of overpayment (Medicare) contained within the Stark Law.  Specifically, the PPACA requires the Secretary of HHS to develop a new self-disclosure protocol whereby health care providers can disclose known (or found) violations of the Stark Law.  The PPACA also gives new authority to HHS to settle claims on a “compromise” basis, creating more reasonable terms and conditions when violations occur and are disclosed.

Stark was created to prohibit a physician from referring patients to entities with which the physician (or physician’s family members) had a financial relationship.  Broadly, Stark sought to control business relationships between referring physicians and other providers furnishing services (inpatient and outpatient hospitals, etc.) when such relationships involved financial gains applicable to the referral for the physician or, when compensation associated with such a relationship for the physician was beyond the normal and customary payment the physician would receive within his/her primary practice.  Over time, Stark’s realm has expanded to include the OIG’s interpretation of applicability with the Anti-Kickback Act (prohibits payments made in exchange for referrals or recommending the purchase of supplies or services reimburseable under a government health program)  where provisions exist in strikingly similar context to the language and intents found in Stark.  The OIG at least realized the problems facing providers and allowed for (actually encouraged) self-disclosure under its Self Disclosure Protocol.  While disclosure to the OIG did not relieve providers of the burden of Medicare refunds, it did provide for a methodology to avoid the imposition of Civil Money Penalties and exclusion from continued participation in the Medicare program.

Adding an additional complication to the provisions for disclosure under Stark is the interpretation on the part of CMS of its obligation to collect 100% of all Medicare payments made in conjunction with the disclosed violation.  According to CMS, it is limited in its authority to compromise the government’s right to full recovery of any and all payments made in conjunction with a Stark violation.  Prior to the passage of the PPACA, CMS claimed that the Federal Claims Collection Act provided that an executive agency may only compromise collection of claims that do not exceed $100,000.  Claims in excess of $100,000 could only be compromised by the Justice Department.  Inserting the provisions found in the False Claims Act and the matter of recovery becomes even more complex.  Under interpretations of the False Claims Act, the government and certain courts, state that it is a violation of the Act for a provider not to disclose Medicare overpayments.  Briefly, the logic is as follows. It is a violation of the act for any person who “knowingly and improperly avoids or decreases an obligation to pay or transmit money to the Government”.  The penalty for such a violation is triple damages.  In effect, a violation of Stark creates a potential violation of the False Claims Act and as such, a de facto requirement that any Medicare payments be refunded.  A False Claims Act violation, if determined as a result of a Stark disclosure, carries the imposition of signficant damages due to the treble damages provision.  The risk therefore, to a provider that reports a Stark violation, is the determination that a violation of the False Claims Act also occurred bringing forth not only the obligation to reimburse the Government for all related Medicare payments but the imposition of the higher damages provided for under the False Claims Act; totals which could be extreme.  Medicare participating providers have always faced the risk that any illegal act involving self-referral or unwarranted excess compensation or benefits could trigger a circumstance where the activity nullifies the right of the provider to receive Medicare reimbursement (Medicare is legally bound to not pay for services provided when the provision of such service is connected to a violation or is a violation, of federal law).

With the passage of the PPACA, providers receive some additional potential relief while remaining subject to many of the same risks and obligations associated with reporting a Stark violation (as discussed above).  For example, the PPACA requires the Secretary along with the OIG, to establish a new self-disclosure protocol.  The purpose of this new protocol is to assist providers and suppliers with disclosure of an actual or potential Stark violation.  Establishment of the protocol is to occur within six months of passage of the PPACA (late-September 2010) and identify a specific official or office where disclosures are directed.  The PPACA also provides the Secretary with an exception to the False Claims Collection Act, allowing the Secretary to take into account certain factors such as the nature of the illegal practice, the duration of the practice, the timeliness of disclosure, etc., when determining the government’s claim.  Providers should note however that the PPACA also requires potential or known disclosures to occur within sixty (60) days of discovery of the violation.  Failure to disclose within 60 days correlates to a False Claims Act violation and as such, the remedies available under the False Claim Act are triggered.

In application, providers today should consider the following.

• The predominant cause for a violation is sloppy administration of contractual relationships between a providers and physicians.  Examples include discounted office space, leases for space that are not at fair-market value, leases that are not signed by the parties, provisions for physicians to use free staff resources, overpayments for services under Medical Director agreements, Medical Director agreements that aren’t signed, etc.  Each of these examples is a potential Stark violation requiring disclosure.
• In light of the point above and the requirements in the PPACA for disclosure of actual or potential violations within 60 days, providers should be fully engaged in routine QA activities to identify, correct and disclose any violations.  Ideally, implementation of solid education, preventative QA activity, and effective use of counsel is already in-place, mitigating the occurence of a violation or at the worst, mitigating the extent of a violation.
• Providers should not wait for the completion of the new disclosure protocol as doing so creates undue peril that a violation extends beyond the 60 day disclosure requirement in the PPACA and results in a False Claims Act violation.  Providers can and should continue to disclose actual or potential violations to CMS even though it is likely that CMS will not resolve any disclosures until implementation of the Secretary’s new protocol.  The best case is that CMS will allow providers to update disclosures made prior to the implementation of the protocol and avail themselves of the new claims resolution system created by CMS and the OIG (an updated disclosure providing more detail sufficient to reduce the liability due to the government).