The Open Letter to Health Care Providers issued by Inspector General Daniel Levinson on April 24, 2006, provides the health care industry with insight into the IG's views on compliance generally, along with specific guidance regarding health care fraud cases, corporate integrity agreements, and the OIG's provider self-disclosure protocol. The Open Letter also announces an initiative to promote the use of the self-disclosure protocol to resolve civil monetary penalty liability under both the antikickback statute and the physician self-referral law.

Voluntary Compliance
The Open Letter provides a general background regarding the OIG's efforts to promote voluntary compliance by the health care industry, such as issuing advisory opinions, special fraud alerts, special advisory bulletins, and compliance program guidance. The Open Letter notes that the OIG has several tools available, including program exclusion, civil monetary penalties, and integrity agreements, in the event a health care provider is alleged to have violated the law. The underpinning of the resolution of any such allegations is the ability of the provider to "demonstrate the requisite level of trustworthiness" along with the existence of, or the willingness to develop, an effective compliance program. The OIG indicates that it is willing to waive its exclusion authority in these cases and that such decisions generally require an integrity agreement between the OIG and the provider. In those cases in which providers fail to demonstrate an appropriate commitment to compliance, the Open Letter notes, the OIG is prepared to enforce stipulated penalties and exclusion from the federal health care programs.

Referring to its November 2001 Open Letter, the OIG notes the creation of Certification of Compliance Agreements (CCAs) as an alternative to CIAs in certain situations in which providers "have independently developed robust and effective compliance programs, which include internal auditing mechanisms." CCAs generally require the provider to continue to operate its existing compliance program rather than to enter into a more extensive CIA. To the provider's advantage, CCAs do not require independent review organizations to conduct or verify audits or claims reviews.

Self-disclosure Protocol
The Open Letter also discusses the self-disclosure protocol (SDP) and reinforces the OIG's view of the program's importance. For example, the OIG notes that, of the 136 self-disclosures resolved with a monetary payment, only 27 required CIAs.

Of particular note, the Open Letter focuses on the issue of hospitals that, upon discovering improper arrangements under the physician self-referral law, also known as Stark II, are seeking to resolve such violations. In an effort to encourage providers to utilize the SDP in these instances, the Open Letter announces a "new initiative" to provide guidance as to how these types of disclosures will be resolved. The Open Letter reminds providers that the SDP is limited "to matters that, in the provider's reasonable assessment, involve conduct that subjects the provider to CMP liability.in particular, situations involving a financial benefit knowingly conferred by a hospital upon one or more physicians." The financial benefit can take various forms, including providing a physician with a good or service for free or at below-fairmarket value.

The Open Letter summarizes the OIG's authority to impose CMPs under both the Stark law and antikickback statute and to seek exclusion under either of those authorities. The Open Letter notes that a provider's liability typically falls along a continuum. Specifically, calculation of CMP damages under Stark II is based upon the number and dollar value of improper claims. By comparison, the CMP damages calculation under the antikickback statute is based on the number and dollar value of improper payments or remuneration. In promoting use of the SDP, the Open Letter indicates that "the OIG will generally settle SDP matters for an amount near the lower end of this continuum, i.e., a multiplier of the value of the financial benefit conferred by the hospital upon the physician(s)." Participation in the SDP, however, hinges upon "full cooperation and complete disclosure of the facts and circumstances surrounding the violation."

It appears that the Open Letter does, indeed, formally announce a new policy which is intended to encourage providers to utilize the SDP. In fact, it follows the OIG's approach to the settlement of an SDP filing in which this firm was involved. Of course, provider concerns relate to the potential disgorgement of all revenue received by the hospital for referrals provided to patients referred by physicians with whom the hospital has a financial relationship which violates the Stark law. This amount would in most, if not all, cases significantly exceed any reasonable calculation of the "harm" to the government. Thus, this approach to settling an SDP which alleges Stark violations is, indeed, a positive development.

At the same time, the following considerations must be noted. First, the Open Letter appears to provide this approach to settlement only when the provider self-discloses both an antikickback issue and a Stark issue. It is not clear whether the OIG would take the same approach in the event that the provider alleges only a Stark issue. Second, the Open Letter notes that an SDP settlement is not binding on the Department of Justice. What is left unsaid is whether the resolution is binding on CMS. In fact, a legitimate argument exists that the OIG's ability to compromise civil monetary penalty claims under Stark would include the underlying overpayment caused by the Stark violation. To date, this theory has been untested, however.

Finally, providers are reminded that the antikickback statute carries with it the possibility of criminal sanctions. Thus, providers filing under the SDP should be careful to avoid making statements that could amount to an admission of criminal liability. Rather, as noted in the Open Letter, the SDP is available in situations where the conduct may "reasonably result in liability" under the statute. In other words, a provider need not "confess" to a criminal violation in order to be accepted in the SDP.

It is clear that the OIG very much wants the SDP to succeed. The Open Letter reaffirms that position. Further, it provides some assurance that, in the proper situation, Stark and antikickback violations can be resolved in a much less formal manner, and at a much lower cost, than under circumstances in which the OIG, or DOJ, learn of the violation before a self-disclosure has been filed.

The SDP is not for everyone and it is not for every situation. However, it is an alternative that should be seriously considered when a provider self-identifies potential antikickback or Stark violations.