Cur­ing tech­ni­cal vi­o­la­tions

Stark law ex­cep­tion would let hos­pi­tals dis­close, re­solve pa­per­work in­frac­tions

Modern Healthcare - - LEGAL - Joe Carl­son

As health­care lawyers like to say, there’s al­ways some hos­pi­tal CEO stuck on an air­plane when a deal is fi­nal­ized. In a per­fect world, that CEO signs the con­tract elec­tron­i­cally soon af­ter hit­ting the tar­mac, whether it’s a lease for physi­cian med­i­cal of­fice space, an agree­ment to pay a doc­tor for on-call time or a do­na­tion of elec­tronic health records.

Prob­lem is, if an over­sight al­lows the deals to go into ef­fect with­out ev­ery sig­na­ture in place, they be­come tech­ni­cal vi­o­la­tions of the Stark law, trig­ger­ing mas­sive po­ten­tial li­a­bil­i­ties. The law pro­hibits physi­cians from re­fer­ring pa­tients to fa­cil­i­ties they own and or hos­pi­tals they do busi­ness with, be­cause such ar­range­ments can dis­tort pa­tient­care de­ci­sions with profit.

Even if the con­tracts be­tween doc­tors and hos­pi­tals meet the ba­sic re­quire­ments of Stark—in­clud­ing fair-mar­ket and vol­ume-neu­tral pric­ing, and terms in writ­ing be­fore the deal starts—tech­ni­cal vi­o­la­tions such as miss­ing sig­na­tures or lapsed ex­pi­ra­tion dates can still ren­der them il­le­gal.

Hos­pi­tals com­monly main­tain hun­dreds of con­tracts, while larger health sys­tems of­ten have thou­sands, mak­ing it easy to over­look miss­ing sig­na­tures or lapsed ex­pi­ra­tions. And as many hos­pi­tal ex­ec­u­tives and lawyers know, th­ese can quickly turn into mil­lion-dol­lar headaches.

The Stark law ban­ning physi­cian self-deal­ing doesn’t dis­tin­guish be­tween th­ese tech­ni­cal “pa­per­work” vi­o­la­tions and the more sub­stan­tive is­sues the law was de­signed to pre­vent. Yet both kinds of il­le­gal­i­ties re­quire the hos­pi­tal to re­turn all Medi­care funds paid un­der tainted con­tracts.

Ex­perts say the Stark law’s large penalty for tech­ni­cal vi­o­la­tions has fu­eled a new cam­paign to give hos­pi­tals and their physi­cians a bet­ter way to rec­on­cile the pa­per­work vi­o­la­tions and move on with busi­ness. A bill cre­at­ing a flat-fee penalty that does put the en­tire pay­ment at risk is near­ing in­tro­duc­tion soon, ac­cord­ing to lawyers at Hall, Ren­der, Kil­lian, Heath & Ly­man.

It would be the sec­ond such ef­fort at chang­ing the law to re­move the tech­ni­cal vi­o­la­tions trap. The Pa­tient Pro­tec­tion and Af­ford­able Care Act con­tained a pro­vi­sion or­der­ing the CMS to im­ple­ment a pro­gram to re­duce penal­ties for less-se­vere vi­o­la­tions of the Stark law if providers vol­un­tar­ily re­ported the over­sights. But a surge of self-re­ported vi­o­la­tions has bogged down the pro­gram, al­low­ing the CMS to re­solve only 23 of the more than 250 sub­mis­sions af­ter two years.

The idea of a new tech­ni­cal vi­o­la­tion pol­icy al­low­ing hos­pi­tals and physi­cian prac­tices to cure tech­ni­cal vi­o­la­tions with flat fees, as is be­ing pro­posed now, was praised by Stark’s crit­ics. They in­clude Kevin McA­naney, who helped write the orig­i­nal Stark rules.

McA­naney, an at­tor­ney in pri­vate prac­tice who served as chief of in­dus­try guid­ance for HHS’ in­spec­tor gen­eral’s of­fice from 1997 to 2003, said the rules to­day have been warped into a thicket of reg­u­la­tion with ex­tra­or­di­nary puni­tive im­pact for vi­o­la­tions that don’t af­fect the law’s fun­da­men­tal pur­pose of pro­tect­ing pa­tients from profit-seek­ing physi­cian re­fer­rals.

“What Stark didn’t want was com­pen­sa­tion ar­range­ments that ba­si­cally in­cen­tivized physi­cians to re­fer,” McA­naney said. “Where you can show that the re­quire­ments were met, even if it wasn’t al­ways doc­u­mented, then what harm has been done?”

Cre­at­ing a new Stark ex­cep­tion to dis­close and quickly re­solve pa­per­work vi­o­la­tions is not with­out de­trac­tors. Some crit­ics say lawyers will want to ex­ploit the tech­ni­cal ex­cep­tion to mask ac­tual fraud. And Congress may be wary of tak­ing any steps that could make it ap­pear weak on fraud, even though pro­po­nents note that Stark was not in­tended as an anti-fraud law.

The Stark law—which is ac­tu­ally a col­lec­tion of statutes named for its ar­chi­tect, for­mer Rep. Fortney “Pete” Stark of Cal­i­for­nia—was orig­i­nally in­tended to pre­vent doc­tors from re­fer­ring Medi­care pa­tients to fa­cil­i­ties in which they have a fi­nan­cial stake, in­clud­ing labs and di­ag­nos­tic cen­ters they own and hos­pi­tals they do busi­ness with, be­cause such in­cen­tives can in­flu­ence pa­tient care for fi­nan­cial gains.

To­day, the Stark law and re­lated com­men­tary stretches more than 200 pages in the Fed­eral Reg­is­ter, and is the sub­ject of scores of qua­si­bind­ing ad­vi­sory opin­ions by the CMS. A cot­tage in­dus­try of le­gal ad­vis­ers and com­pli­ance ex­perts pre­sides over the rules, ac­count­ing for an un­told num­ber of bill­able hours whose costs could oth­er­wise be de­voted to health­care.

“In terms of just try­ing to com­ply with the law, I don’t think there’s a health­care law at­tor­ney out there that would con­sider this law easy to com­mu­ni­cate to busi­ness folks … It just begs for change,” said Robert Azar, chief le­gal of­fi­cer for Nor­ton Health­care, a five-hos­pi­tal sys­tem based in Louisville, Ky. “The more money you spend on those kinds of things, the less there is to deal with pa­tient care is­sues.”

Pro­po­nents of such a change al­ways note that tech­ni­cal vi­o­la­tions tend to be the re­sults of ad­min­is­tra­tive over­sights re­sult­ing from the sheer vol­ume of con­tracts by hos­pi­tals, and the com­plex­ity of deals that are struck by mul­ti­ple par­ties who of­ten never meet face to face.

“Our clos­ings are all vir­tual. I can’t re­mem­ber the last time I was in the room with some­one for a deal. We just show each other signed pages via scanned doc­u­ments,” said New Or­leans-based physi­cians’ at­tor­ney Kath­leen DeBruhl. “There’s al­ways some CEO who’s on an air­plane and is never avail­able.”

In Septem­ber 2010, the CMS launched its Self Re­fer­ral Dis­clo­sure Pro­to­col through which

it has the power to re­view cases where providers say they have dis­cov­ered non-fraud­u­lent vi­o­la­tions of Stark and are seek­ing to lower their to­tal po­ten­tial li­a­bil­ity by turn­ing them­selves in. As of March, health­care providers had made 258 dis­clo­sures into the pro­gram—less than 10% of which have been re­solved.

“I think it was more pop­u­lar than CMS an­tic­i­pated, and that it has re­ceived more dis­clo­sures than they orig­i­nally cal­cu­lated,” said Troy Barsky, who left his role as CMS di­rec­tor in charge of tech­ni­cal pay­ment pol­icy this year to be­come a at­tor­ney with Crow­ell & Mor­ing in Wash­ing­ton.

Barsky praised the self-dis­clo­sure pro­gram, which was cre­ated at the CMS un­der his watch, for cre­at­ing a “clear av­enue” to dis­close le­gal prob­lems to the govern­ment. But crit­ics say the de­creased penal­ties avail­able through it are off­set by the long re­sponse times and the lack of clar­ity about what re­lief the CMS is grant­ing.

John Wil­liams, a Stark lob­by­ist for hos­pi­tals with In­di­anapo­lis-based Hall, Ren­der, Kil­lian, Heath & Ly­man, said the ex­ist­ing dis­clo­sure pro­gram is in­ad­e­quate to hos­pi­tals’ needs.

“I think CMS has a back­log prob­lem, and yes, there is a de­lay prob­lem,” Wil­liams said. “We have at­tor­neys in our firm that have made dis­clo­sures, and two years down the road, all they can find out is, ‘Yes, we have re­ceived your dis­clo­sures.’ … They have no idea when things are go­ing to be re­solved.”

The hos­pi­tals and health sys­tems say they are seek­ing a quicker and clearer way to re­solve tech­ni­cal vi­o­la­tions of a law so com­plex that lawyers say com­ply­ing with its terms re­quires stand­alone soft­ware pro­grams and teams of lawyers and com­pli­ance of­fi­cials at larger health sys­tems.

The pro­posal, which is be­ing vet­ted with Repub­li­can and Demo­cratic se­na­tors and rep­re­sen­ta­tives, would al­low hos­pi­tals to pay up to $10,000 for self-dis­clos­ing “tech­ni­cal vi­o­la­tions” such as un­signed or ex­pired con­tracts.

The key is that such agree­ments would have to be truly tech­ni­cal, and not sub­stan­tive vi­o­la­tions cloaked in a veil of tech­ni­cal­ity.

Robert Iwrey, a found­ing part­ner with the Health Law Part­ners law firm in Southfield, Mich., said it may be tough to craft def­i­ni­tions tight enough to have their in­tended ef­fect.

“As an at­tor­ney, I’m go­ing to ar­gue that any- thing my client did was a tech­ni­cal vi­o­la­tion,” he said. “I ac­tu­ally think it makes sense for truly tech­ni­cal vi­o­la­tions, but what is con­sid­ered tech­ni­cal?”

For ex­am­ple, Wil­liams said, un­writ­ten, hand­shake agree­ments could be cov­ered by a tech­ni­cal-vi­o­la­tion ex­cep­tion be­cause such deals can be con­sid­ered by state con­tract law. Other le­gal ex­perts said they were less sure that that as­pect would ever pass muster with Congress.

Barsky and McA­naney, who were both lawyers in HHS di­vi­sions over­see­ing Stark com­pli­ance, agreed the Jus­tice Depart­ment may raise ob­jec­tions to a change be­cause it could af­fect how fraud cases are pros­e­cuted un­der the False Claims Act. Al­though the Stark law doesn’t tar­get fraud, such vi­o­la­tions are of­ten the ba­sis for more-se­vere false claims cases when pros­e­cu­tors can show the acts were in­ten­tional.

“The Jus­tice Depart­ment, they don’t want to make their lives harder. They don’t want to go and fight lawyers who are go­ing to say, ‘Wait, this is just a tech­ni­cal vi­o­la­tion,’ ” McA­naney said. “I think it be­comes easy for op­po­nents to say this is go­ing soft on fraud and abuse. And no one wants to be seen as soft on fraud and abuse.”

McA­naney

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