Health Law Alert

2012: Issue 2 – Focus on Fraud and Abuse

Providers Beware: OIG Alert Highlights FCA Liability Under Contractual Reassignment

By: Donna J. Senft

A recent OIG Alert highlights potential False Claims Act (FCA) liability for physicians whose services are billed to Medicare under an independent contractor reassignment. The February 8, 2012, Alert titled, "OIG Alerts Physicians To Exercise Caution When Reassigning Their Medicare Payments — Physicians May Be Liable for False Claims Submitted by Entities Receiving Reassigned Medicare Payments [PDF]," discusses recent settlements with eight physicians who were found to have caused false claims to be submitted. Each of the physicians had entered into reassignments with physical medicine companies, which submitted the alleged false claims. The OIG cautioned that "physicians who reassign their right to bill the Medicare program and receive Medicare payments by executing the CMS-855R application may be liable for false claims submitted by entities to which they reassigned their Medicare benefits."

CMS Publishes Self-Referral Disclosure Protocol Settlements

By: Christopher P. Dean

The Centers for Medicare and Medicaid Services (CMS) publishes short summaries of settlements with health care providers as a result of the Self-Referral Disclosure Protocol (SRDP). The SRDP permits health care providers to voluntarily disclose violations of the federal physician self-referral law, also called the Stark law. CMS published the SRDP in September 2010. Since that time, CMS has published the following four settlements:

1. An acute care hospital located in Massachusetts settled potential violations in February 2011 involving the use of the Stark law’s personal services arrangement exception (42 C.F.R. § 411.357(d)) for hospital department chiefs, medical staff leadership positions, and physician groups that provided overnight coverage at the hospital. The settlement amount was $579,000.
2. On November 9, 2011, a Mississippi critical access hospital settled self-reported violations involving the personal services arrangement exception and certain hospital and emergency room physicians. The hospital paid $130,000 to settle the violations.

Blowing the Whistle on Whistleblowers

By: James P. Holloway

The False Claims Act (FCA) creates strong financial incentives for whistleblowers to file lawsuits. Successful whistleblowers have obtained multi–million dollar payouts. Sometimes, however, a whistleblower – in his or her attempt to strike it rich – crosses an ethical line and suffers the consequences.

Such is the case in U.S. ex rel. Frazier v. IASIS Healthcare Corp. , 2012 WL 130332 (D. Ariz. Jan. 10, 2012). In that case, the whistleblower had been the compliance officer of IASIS. The company terminated his employment, but requested him to remain as a consultant for another year to assist with the transition to a new compliance officer. The whistleblower later filed an FCA case against his former employer, alleging that IASIS requested federal payment for medically unnecessary services and for health care services that violated the Stark law and the antikickback statute. The court previously dismissed the whistleblower's case as defective. The court's most recent decision addressed misconduct by the whistleblower and his lawyers.

"Worthless Services" May Create Liability Under False Claims Act

By: James P. Holloway

Health care providers should take note of a recent federal court decision from Kentucky, in which the court refused to dismiss a False Claims Act (FCA) case based on a theory that the provider had billed the Medicare and Medicaid programs for "worthless services." Under this theory, when a provider bills the federal government for a service that the provider knows, or should know, has no value, the provider is liable for making a false claim.

In U.S. v. Villaspring Health Care Center, Inc. , 2011 WL 6337455 (E.D. Ky. Dec. 19, 2011), the court concluded that the federal government could proceed with FCA litigation based on allegations that a nursing home had billed the Medicare and Medicaid programs for worthless services. According to the court, when proceeding under a worthless services theory, "[i]t is not necessary to show that the services were completely lacking; rather, it is also sufficient to show that 'patients were not provided the quality of care' which meets the statutory standard." That decision does not stand alone. The Villaspring court relied on an earlier case that endorsed the use of the worthless services theory against a health care provider, i.e., U.S. v. NHC Health Care Corp. , 163 F. Supp. 2d 1051 (W.D. Mo. 2001). Numerous other courts have recognized the general principle that knowingly billing the government for worthless services is tantamount to billing for services that were not provided, which is a false claim in violation of the FCA.

Supreme Court Endorses Nursing Home’s Use of Pre-Dispute Arbitration Agreement

By: James P. Holloway

The United States Supreme Court recently affirmed – in strong terms – the broad reach of the Federal Arbitration Act (FAA) (9 U.S.C. § 1 et seq.) as applied to pre-dispute arbitration agreements between nursing homes and residents’ families. In Marmet Health Care Center, Inc. v. Brown, ___ S. Ct. ___, 2012 WL 538286 (Feb. 21, 2012) (per curiam), the Supreme Court sharply criticized a decision by West Virginia’s Supreme Court of Appeals that had refused to enforce such arbitration agreements on the ground that they violated state public policy. The Supreme Court’s decision should encourage health care providers to consider pre-dispute arbitration agreements as a risk management strategy.