Proposal Would Extend EHR Donation Rules

The U.S. Department of Health and Human Services (HHS) has released proposed rules to amend the electronic health record (EHR) donation exception and safe harbor under the Stark Law and Anti-Kickback Statute.  The exception and safe harbor permit certain entities to share costs associated with EHR-related items and services with other entities.   Under the regulations, the receiving party must pay at least 15 percent of the donor’s cost for the items and services.

The current language of the regulations has a “sunset” provision that requires a donor to transfer EHR items and services on or before December 31, 2013.  Under the proposed rules, HHS would extend the sunset provision three years to December 31, 2016.

Without the rule change, existing donation arrangements would have to convert to a “fair market value” model for shared services and technology.  The existing sunset provisions also provide a significant barrier to the development of new arrangements. 

The rules also include the following proposed revisions to the regulations: (1) changes to the requirements for when EHR software is deemed “interoperable, (2) removal of the requirement related to electronic prescribing capability, and (3) limits on the types of entities that are allowed to make EHR donations.

HHS also seeks suggestions on how to achieve the following goals under the exception and safe harbor: (1) preventing the misuse of donated EHR technology in a way that results in data and referral lock-in, and (2) encouraging the free exchange of data created by donated software.

You can view the proposed rule for the Anti-Kickback Statute here and the proposed rule for the Stark Law here.

HHS will accept comments to the proposed rules until June 10, 2013.

If you have any questions about donating EHR technology under the Anti-Kickback Statute and Stark Law, please contact David Schoolcraft or Casey Moriarty.


On March 26, 2013, the Office of Inspector General (“OIG”) issued a Special Fraud Alert regarding physician-owned entities or distributorships (referred to as “PODs”) that generate revenue from the use of implantable medical devices ordered by their physician-owners for use in procedures performed by such physician-owners at hospitals or ambulatory surgery centers (“ASCs”).

While the Special Fraud Alert focuses on certain characteristics of PODs that create substantial risk of fraud and abuse and potential danger to patient safety, the OIG cited other prior pronouncements and guidance it issued over the past twenty-four years regarding its long-standing concern over physician investments in entities to which they refer.  Prior OIG guidance cited included the 1989 Special Fraud Alert on joint Venture Arrangements, published in 1994  and a letter dated October 6, 2006, regarding physician investments in the medical device industry.

It is clear that the OIG believes that significant risk of patient or program abuse, including but not limited to potential violations of the Federal Anti-Kickback statute, may flow from arrangements between and among physicians, device manufacturers and other device vendors.  The Anti-Kickback statute makes it a criminal offense to knowingly and willfully offer, pay, solicit, or receive any remuneration to induce, or in return for, referrals of items or services reimbursable by a Federal health care program.

In its current Special Fraud Alert regarding physician-owned entities, the OIG recounted its view of certain questionable features regarding selection and retention of investors, solicitation of capital contributions, and distribution of profits, all of which potentially raise four general concerns typically associated with kickback arrangements:

1.  Corruption of medical judgment;

2.  Over-utilization;

3.  Increased costs to the Federal health care programs and beneficiaries; and

4.  Unfair competition.

The OIG is particularly concerned in this arena because the physician may play a significant role in the selection of the type of device and which manufacturer to use.  The OIG cautions that disclosure of financial interest may not be sufficient to cure what would otherwise amount to fraud and abuse, and identifies the following specific characteristics of arrangements that would cause concern:

— The size of the investment offered varies with anticipated volume or value of devices used by the physician.

— Distributions are made on the basis of volume as opposed to ownership interest.

— Conditioning referrals based on the use of certain devices on entities to which physicians refer.

— Arrangements that incentivize a physician’s use of certain devices or penalizes the physician for the failure to use certain devices.

— PODs ability to buyout physicians interests on favorable terms based on physician’s failure to meet certain volume requirements.

— The POD is a shell entity that is not truly engaged in the business, or provides no oversight related to distribution functions.

— Physicians fail to identify conflicts of interest through their involvement with PODs related to Hospital or ASC conflict of interest processes.

This Special Fraud Alert reiterates the OIG’s longstanding position that a physician’s ability to profit from referrals may lead to violations of the Federal Anti-Kickback statute.  Finally, the OIG reminds concerned parties that the OIG Advisory Opinion process is available.   For more information about physician-owned entities, the applicability of the Anti-Kickback statute, and the OIG Advisory Opinion process, please contact Adam Snyder or Don Black at (206) 447-7000.


Under the terms of a settlement agreement signed earlier this month, Dr. Nicholas L. DePace should receive approximately $2,400,000 as his portion of a settlement of the qui tam False Claims Act lawsuit he filed in 2008.  In addition, defendant Cooper Health System agreed to pay $430,000 to the law firm that represented Dr. DePace in the qui tam action.

The essence of the 60 page complaint filed by Dr. DePace is that Cooper Health System made improper payments to physicians to induce referrals by recruiting high volume referring physicians and paying them $18,000 annually to sit on its heart institute advisory board formed in 2002.    According to the complaint, the advisory board was staffed with two categories of members:  physicians employed by the Health System or related entities and local physicians who were recruited to the board to advise the heart institute.  Dr. DePace was employed by one of the Health System related entities for slightly more than five months in 2007 and alleged that he served as an advisor to the heart institute during 2007 and 2008.

In his complaint filed in 2008, Dr. DePace alleged that the only responsibility required of the advisory members was attendance at bi-monthly meetings of the board which were to last approximately 17 hours each.  According to the complaint, although the function of the advisory board was to provide advice to the heart institute, the selection process for recruiting members to the board was governed by the volume of new business the member could provide regardless of the member’s academic credentials or professional experience.  The complaint recites in great detail the agendas at several meetings (largely unrelated to cardiology), the five-star cuisine served at one such meeting, and the duration of the meetings which allegedly fell far short of the 17 hours mentioned.  The complaint calculates that the advisors were paid in excess of $550/hour to attend these meetings and were required to attend only four such meetings a year to earn their $18,000 in advisory compensation.

The complaint estimated that  from the formation of the advisory board in 2002 until the complaint was filed in 2008, Cooper Health System paid at least $2,268,000 in illegal kickbacks in the form of advisory fees.  According to the complaint, these payments allowed Cooper Health System to “lock-in” valuable referrals from general practitioners and cardiologist and solidify dominance in the healthcare market in southern New Jersey.

The total amount to be paid by Cooper Health System under the terms of the settlement agreement was in excess of $12 million.  The settlement agreement does not constitute an admission of liability by Cooper Health System or a concession by the United States or Dr. DePace that any of the claims were not well founded.

If you have questions regarding OIG settlements please contact Greg Montgomery.


OIG Approves Gift Card Program for Medicaid Patients

According to a new advisory opinion issued by the U.S. Department of Health & Human Services’ Office of Inspector General, healthcare providers may be able to use free gift cards to encourage patients in capitated Medicaid managed care plans to receive clinical services.

In the opinion, a federally qualified health center (FQHC) asked the OIG whether it could offer free grocery store gift cards to certain patients in capitated Medicaid managed care plans.  The goal of the gift card program was to incentivize patients to receive health screenings and other clinical services at the FQHC.

The OIG stated that, in general, the Anti-Kickback Statute prohibits Medicare and Medicaid providers from providing “giveaways” to patients in order to induce them to receive clinical services.  However, the OIG approved this specific gift card program because the only eligible patients were enrolled in capitated Medicaid plans.  Under these plans, the FQHC’s reimbursement would not be based on the nature or number of services that the FQHC provides to the patients. Thus, the gift card program would not result in increased costs to the Medicaid program.

The opinion represents an interesting exception to the general rule that providers should not provide free goods and services to patients to  incentivize them to receive clinical services.  View the full opinion.

OIG Approves Electronic Interface Arrangement

In a recent advisory opinion, the Office of Inspector General DHHS (“OIG”) approved an arrangement under which free access to an electronic computer interface is provided by a hospital to local physicians.  The opinion provides an important contemporary analog to earlier guidance published by the OIG as part of the preamble to the Federal anti-kickback statute safe harbor regulations (see 56 Fed. Reg. 35952, 35978, July 29, 1991).   At the same time, the OIG reinforced its long-standing position that in order for such arrangements to pass muster under the Federal anti-kickback statute, the parties must validate that the technology is limited to facilitating hospital-physician communications, and that it will not have independent value to the physicians. 

Please contact David Schoolcraft  ( or 206.447.7000) you have any questions about the scope and applicability of this OIG advisory opinion.

OIG Opines Favorably on Hospital Emergency Department Call Coverage Arrangement

On October 23, 2012, the Office of Inspector General (“OIG”) issued a favorable response to a hospital’s request regarding its payment of per diem fees to various physician specialties in exchange for emergency department call coverage and related services.  Based on the facts as certified by the hospital-requestor, the OIG concluded that, although the arrangement could violate the federal anti-kickback statute if the parties intended the arrangement to induce or reward referrals of federal health care program business, it would not impose administrative sanctions.  While only the requestor may rely on this advisory opinion, it represents the third time the OIG issued a favorable Advisory Opinion regarding hospital pay for call arrangements.  The OIG similarly reached favorable conclusions in Advisory Opinion No. 07-10 and Advisory Opinion No. 09-05.

In the Opinion, the requestor is a tax-exempt hospital that operates a full time emergency department.  Under the arrangement, the hospital pays per diem fees to physicians to provide call coverage.  The physicians on call are required to be available and respond to calls from the ED within 30 minutes and must provide follow up care, regardless of a patient’s ability to pay.  The Hospital certified to the OIG that 19% of its patients seen in its ED receive uncompensated care, that it offers the arrangement to all specialists on its medical staff who are required to participate in call coverage, that it sets an annual allocation per specialty based on various “burden” factors, that it experienced shortages in the availability of physicians to take call, and that it monitors ongoing performance under the program.  Based on an independent consultant’s review of the per diem rates, the requestor certified to the OIG that the rates are consistent with fair market value and do not take into account the volume or value of referrals or other business generated between the parties.

The OIG concluded that the arrangement fails to qualify for the safe harbor under the federal anti-kickback statute for personal services and management contracts because aggregate compensation is not set in advance (See Safe Harbor, 42 C.F.R. 1001.952(d))    In addition, the arrangement failed to precisely specify a schedule of part-time service intervals.  Because the arrangement does not fit squarely within the safe harbor, the OIG analyzed the totality of the facts and circumstances to determine if the arrangement presents minimal fraud and abuse risk.

Just as it did in the previous Advisory Opinions, the OIG applied the following general “rule of thumb”:

“The general rule of thumb is that any remuneration flowing between hospitals and physicians should be at fair market value for actual and necessary items furnished or services rendered based upon an arm’s-length transaction and should not take into account, directly or indirectly, the value or volume of any past or future referrals or other business generated between the parties.”  70 Fed. Reg. 4858, 4866 (Jan. 31, 2005).

While the OIG generally recognized that hospitals may properly structure pay for call arrangements within the general “rule of thumb,” it also generally identified the same problematic compensation structures that it listed in previous opinions:  (1)  Arbitrary “lost income” compensation, (2) payment for no identifiable service, (3) aggregate on call payments disproprotionately high compared to regular practice income, and (4) payment for services for which the physician already receives separate reimbursement from payors or patients.

The OIG concluded that, overall, the arrangement presents a low risk of fraud and abuse for the following reasons:

  1. The requestor certified that, based on an independent valuation, the per diem rates are fair market value and the hospital meaningfully contemplated call burden to set rates;
  2. Uniform administration of per diem payments without regard to referrals or volume of business generated;
  3. Physicians required to provide actual and necessary services for which they are not otherwise compensated;
  4. The arrangement is offered on a consistent basis to all specialists who are required to take call; and
  5. Costs are not passed on to federal health programs.

The OIG was ultimately convinced that this arrangement contains sufficient safeguards to reduce the risk that the per diem fees are intended to generate referrals of Federal health care business.

For more information about ED call coverage or the Anti-Kickback and Stark rules in general please contact Adam Snyder.

Online Coupon Advertising Gets Thumbs Up From The OIG

On March 27, 2012 the Department of Health and Human Services Office of Inspector General (“OIG”) released Advisory Opinion No. 12-02.  The opinion stated that a proposed website that would display coupons and advertising from health care providers, suppliers, and other entities would not lead to administrative sanctions or civil monetary penalties under the federal anti-kickback statute or the prohibition against providing inducements to beneficiaries.
A corporation would operate the proposed website that would contract with providers, suppliers, and other health care entities who wish to provide coupons and advertisements on the website.  The coupons can offer discounts on services or items through either percentage or dollar-off amounts; however, the coupons cannot offer free services and any coupon must apply to the entire service cost, not just the patient’s cost-sharing obligation.  Any provider who wishes to pay a membership fee may post coupons on the website.  Additionally, health care providers and suppliers may choose to purchase advertising space on the website.
The OIG noted that the proposed arrangement involved two activities that could implicate the anti-kickback statute:  (i) selling advertising space on the website to health care providers and suppliers that may bill federal health care programs, and (ii) posting providers’ coupons for health care items or services.  The OIG further noted that the coupons could also implicate the civil monetary penalty provision prohibiting inducements to beneficiaries.
The OIG found the proposed website to have a permissibly low risk of fraud or abuse because:
• The website operator is not a healthcare provider or supplier.  Although one of the members is a practicing physician, his name would not appear anywhere on the website, nor would the site claim to be operated by a doctor or other healthcare provider or supplier.
• The payments from providers and advertisers to the operators would not depend on customers using the coupons.  Instead, the providers and advertisers would pay a set fee, consistent with fair market value in an arms-length transaction.  Thus, the fee would not take into account the volume or value of any referrals.
• The advertising could take the form of banner or pop-up advertisements on a publicly accessible website.  The website would not require customers to register, and any customer information voluntarily gathered would not be shared with providers or advertisers.
• The types of coupons decreases risk under the anti-kickback statute because they are not pre-paid coupons for services that might not be medically appropriate for the customer.  For example, a coupon could include 50% off of a mammogram or $100 off of a memmogram surgery, but could not be a coupon for a free mammogram or a Groupon-style prepaid coupon for a mammogram for $10 prepaid to the coupon service.  The latter two examples could cause a customer of the website to seek care they might not need because the service is either free or was paid for before consulting with the healthcare provider to determine whether the service is appropriate for the customer.
The OIG also noted that the advertising and coupons involved are similar to accurate and non-deceptive print advertising in general circulation media that does not typically raise concerns.
For more information regarding this OIG opinion or if you have questions regarding the anti-kickback statute please contact Laura Carlsen.

CMS Proposed Rule on Overpayments – A 10 Year Burden

CMS recently published its proposed rules on reporting and returning overpayments.  These rules are intended to implement the 60 day overpayment reporting requirement pursuant to the Affordable Care Act (the “ACA”).  The ACA created a new section 1128J(d) of the Social Security Act requiring a person who receives an overpayment to return and report the overpayment to HHS, the State, a carrier or a contractor and notify the recipient of the reason for the overpayment.  The statute requires that all  overpayments be refunded within 60 days after the date the overpayment was identified or the date of any corresponding cost report (as applicable), whichever is later.

The proposed regulations only relate to Medicare Parts A and B.  Medicaid, Medicare Advantage, Part D, and managed care organizations are not covered by the proposed rules; however, the 60 day shot clock noted in the statute still applies.

Reporting Overpayments

The proposed rules rename the current voluntary refund process the “self-reported overpayment refund process” (described more fully in the Medicare Financial Management Manual).  Providers will use voluntary refund forms currently on the websites of their Medicare contractors.  Reports of overpayments will require the inclusion of the following information:

1)      Name;

2)      TIN;

3)      How the error was discovered;

4)      The reason for the overpayment;

5)      The health insurance claim number, as appropriate;

6)      Date of service;

7)      Medicare claim control number, as appropriate;

8)      NPI;

9)      Description of the corrective action plan to ensure the error does not occur again;

10)   Whether the person has a corporate integrity plan with the OIG or is under the OIG Self-Disclosure Protocol;

11)   The timeframe and the total amount of the refund for the period during which the problem existed that caused the refund;

12)   If a statistical sample was used to determine the overpayment amount, a description of the statistically valid methodology used to determine the overpayment; and

13)   A refund in the amount of the overpayment.

Under the proposed rules, providers are required to report the overpayment within 60 days of identification and refund the overpayment within the same 60 day period.  Providers may request a refund extension through the extended repayment schedule.  A person has “identified” an overpayment if that person has actual knowledge of the existence of the overpayment or acts in reckless disregard or deliberate ignorance of the existence of the overpayment.  Providers who retain an overpayment after the 60 day deadline for reporting and returning the overpayment are liable under the False Claims Act.  Additionally, any person who knows of an overpayment and does not report and return the overpayment may be found liable for Civil Monetary Penalties and excluded from participation in federal health care programs.

Significantly, the proposed rules also set a lookback period of 10 years, meaning that if a provider identifies an overpayment within 10 years of the date the overpayment is received it will have to report and refund such overpayment.

SRDP and OIG Self-Disclosure Protocol

CMS attempts to reconcile these proposed regulations with the OIG Self-Disclosure Protocol and the new CMS Self-Referral Disclosure Protocol (“SRDP”) (which allows reports of Stark Law violations).  The reconciliation falls flat and creates confusion which will hopefully be remedied in the final rule.

The 60 day deadline for returning overpayments will be suspended if the OIG acknowledges receipt of submission to the OIG Self-Disclosure Protocol.  This suspension will last until a settlement agreement is entered, the person withdraws from the OIG Self-Disclosure Protocol, or the person is removed from the OIG Self-Disclosure Protocol.  Additionally, a person satisfies the reporting requirements listed above by making a disclosure under the OIG Self-Disclosure Protocol which results in a settlement agreement.

Similarly, the 60 day deadline for returning overpayments is suspended if CMS acknowledges receipt of a submission to the SRDP until such time as a settlement agreement is entered, a person withdraws from the SRDP, or the person is removed from the SRDP.  However, the reporting requirement described above is not tolled by submission to the SRDP.


Regardless of these proposed rules, providers must currently report and refund overpayments within 60 days per the ACA.  CMS has opened public comment on these proposed rules through April 16, 2012.  If you would like assistance on drafting comments or assistance with reporting an overpayment please contact Don Black or Elana Zana.

EHR Contracting Tip: Attestation for AIU

Now that most states have their Medicaid EHR Incentive Program in full swing we have gotten a glimpse of what they are requiring for attesting to “adopt, implement and upgrade” aka “AIU”.  As described in the CMS rules themselves, practices need to show that they have some skin in the game and have actually invested in an EHR product.  Many states are asking that an EP (or group practice) upload the actual EHR software contract (or a redacted version).  Some states (such as California) are requesting a signed vendor statement in lieu of the full contract.  

If you are a practice in the process of negotiating an EHR contract, you may want to consider including a provision in the contract specific to the AIU attestation requirements of the state your practice is in.  For example, requiring in the contract itself that the software vendor execute any documents required by the state to attest to AIU or that the vendor provide a letter acknowledging the practice’s EHR license (if such a letter is acceptable in your state). Similar provisions are recommended in situations where the practice is involved with a Stark donation arrangement or other type of third party contract. 

Setting expectations up front and creating a contractual obligation will help ensure that the software vendor or other third party contractor does not stand in the way of your practice receiving EHR incentive dollars.

For assistance in drafting and negotiating EHR software contracts or the Medicaid EHR Incentive Program in general please contact Elana Zana or Dave Schoolcraft.            

OIG Launches Series on Provider Compliance

In December, the Office of Inspector General (OIG) launched a webcast series on provider compliance. Currently there are six short (approximately five minutes) webcasts on topics such as fraud and abuse, the anti-kickback statutes and the physician self-referral law (aka the Stark law).    These webcasts provide a short overview of these important compliance laws.  The OIG also has sixteen webcast modules that go into further depth on fraud and abuse enforcement.  The OIG plans on posting additional webcasts on a weekly basis over the next few months.

To access the webcasts click here.  Slides and handouts are also available on the OIG compliance training website.