Hospitals: Your Government Wants To Help You - Again

The U.S. Department of Health and Human Services, Office of Inspector General (OIG) has issued a variety of compliance program guides for health care entities beginning in the 1990s. These guides are intended, as the OIG has said, to “engage the private health care community in preventing the submission of erroneous claims and in combating fraud and abuse in the Federal health care programs through voluntary compliance efforts.” Most health care entities have found these guides to be helpful – particularly because the feds identify the types of conduct currently in their investigative gun sites.

The hospital industry was the beneficiary of one of the earliest compliance program guides, issued by the OIG in 1998. The OIG identified several “risk areas,” (translation: conduct more likely than not to result in unwanted attention by federal auditors or investigators) including billing for services not actually rendered, “upcoding,” failing to refund credit balances, and patient dumping. Many hospitals instituted review and remediation programs after this guide was released, focusing on identifying and rectifying any problems falling within this list of identified risk areas. Commendably, many hospitals substantially reduced or eliminated the incidence of conduct falling within the OIG list of risk areas.

By 2002, though, the feds noted that there had been significant changes in the ways hospitals delivered, and were reimbursed for, the care they provided. The OIG had also begun to identify new “risk areas” associated with these changes. Additionally, the OIG may have believed that it either hadn’t explained certain risk areas very well in 1998, or some hospitals had simply ignored the OIG’s previous shot across the hospitals’ bows. For these reasons, the OIG decided to either revise or supplement the 1998 hospital compliance program guide.

The OIG released the draft “Supplemental Compliance Program Guidance for Hospitals” on June 8, 2004. Public comments on the draft are due by July 23, 2004, with final guidance to follow. As expected, the feds have identified a new crop of regulatory risk areas for the nation’s hospitals. Additionally, the OIG provided expanded commentary on risks previously identified in 1998.

Newly Identified Risk Areas
The most significant newly identified risk area is the “Submission of Accurate Claims and Information” for outpatient services. Prior to 1991, hospitals were reimbursed for services they provided to their outpatients based on their charges for those services. With the implementation of the new Hospital Outpatient Prospective Payment System (OPPS) in 2002, hospitals began receiving payment from Medicare for outpatient services at a fixed amount corresponding to a code (the “Ambulatory Payment Classification, or “APC” code) describing the services received by the patient. This new billing system created several new opportunities for fraudulent or abusive Medicare billings, and many of those are identified as new “risk areas” in the draft compliance guide. These new risk areas include:

  1. Billing on an outpatient basis for “ inpatient-only” procedures;
  2. Submitting claims for medically unnecessary services by failing to follow Medicare’s local medical review policies;
  3. Submitting duplicate claims or not coding claims correctly;
  4. Submitting incorrect claims because the hospital didn’t update its master billing form (the Charge Description Master) to account for changes created by OPPS;
  5. Circumventing the multiple procedure discounting rules;
  6. Failing to follow Medicare’s instruction regarding how to bill services by physicians (using so-called Evaluation and Management codes); and
  7. Improper billing for patient observation

The OIG also identified a plethora of new risk areas involving billing and payment issues not directly related to the new OPPS system. These risk areas include:

  1. Failing to bill properly for patient admissions and discharges;
  2. Improper “churning” of patients by long-term care hospitals co-located in acute care hospitals;
  3. Billing improperly for new technology and drugs;
  4. Incorrect billings for patients participating in clinical research trials;
  5. Improper attempts to claim payment above and beyond amounts Medicare routinely pays for patient care (so-called “ outlier” payments);
  6. Incorrect billings for organ acquisition costs for patients receiving organ transplants

Previously Identified Risk Areas (Or, This Time We Mean It!)
In relatively succinct fashion, the OIG told hospitals in the 1998 compliance guide that they shouldn’t engage in conduct or financial relationships that violate the federal anti-kickback law or the so-called “Stark” prohibitions on physician self-referral practices.

In the current draft, the OIG devotes many pages of discussion to the evils caused by violations of the anti-kickback law and Stark law and, in effect, shoots another warning shot across hospitals’ bows – but this time with a VERY large caliber cannon!

The OIG began its discussion with a summary of the anti-kickback and Stark laws and their potential application to various types of relationships hospitals may have with physicians, vendors, and other entities. The OIG also provided a series of questions hospitals should answer in order to determine whether a contemplated practice or relationship may violate federal law.

First, in order to see whether a potential relationship may implicate the federal anti-kickback law, the OIG suggests the following two inquiries:

  1. Does the hospital have any remunerative relationship between itself (or its affiliates or representatives) and persons or entities in a position to generate Federal health care program business for the hospital (or its affiliates) directly or indirectly?
  2. With respect to any remunerative relationship so identified, could one purpose of the remuneration be to induce or reward the referral or recommendation of business payable in whole or in part by a Federal health care program (i.e., Medicare or Medicaid)?

According to the draft compliance guide, if the answer to each of the two questions above is “yes” the arrangement “implicates the anti-kickback statute” and requires “careful scrutiny.” Because so many types of financial relationships potentially implicate the anti-kickback statute, the OIG provides a separate list of questions to identify those arrangements at greatest risk of criminal prosecution:

  1. Does the arrangement or practice have a potential to interfere with, or skew, clinical decision-making?
  2. Does the arrangement or practice have a potential to increase costs to Federal health care programs, beneficiaries or enrollees?
  3. Does the arrangement or practice have a potential to increase the risk of overutilization or inappropriate utilization?
  4. Does the arrangement or practice raise patient safety or quality of care concerns?

If the answer to any of these four questions is “yes,” there is a higher likelihood that the practice or financial relationship in question could capture the attention of federal prosecutors, subjecting those involved to potential criminal charges and the dreaded “perp walk.”

The draft compliance guide set forth five specific anti-kickback-related risk areas viewed as the most ripe for abuse. These five areas are:

  1. Joint ventures
    The OIG said that it will look at how joint venture participants are selected and retained, how the joint venture is structured, and the manner in which the investments are financed and profits are distributed.
  2. Compensation arrangements with physicians
    The $64,000 question will always be: Is any remuneration flowing between hospitals and physicians based on fair market value for actual and necessary items furnished or services rendered, and does not take into account, directly or indirectly, the value or volume of any past or future referrals or other business generated between the hospital and physician?
  3. Relationships with other health care entities
    Sure, hospitals’ relationships with physicians may implicate the Stark and anti-kickback laws. But, the OIG said hospitals must be very careful about their relationships with other entities as well, including home health agencies,nursing homes, laboratories, pharmaceutical companies and durable medical equipment companies.
  4. Recruitment arrangements
    If hospitals pay to recruit physicians or other health care professionals to their area, hospitals must be very careful to structure these recruiting arrangements properly. Hospitals should be paying only to recruit the professional, and not to “ buy” the patient referrals the new physician might bring.
  5. Discounts, Medical Staff Credentialing, Malpractice Insurance Subsidies, Gainsharing Agreements

Clearly, if based only on the percentage of space devoted to it in the draft compliance guide, the OIG views potential violations of the anti-kickback and Stark laws as very significant risks hospitals face. The OIG concluded its draft guidance with a litany of lesser risks faced by hospitals. The list includes patient dumping (also identified as a risk area in the 1998 guidance), substandard care, gifts to patients (including waiving coinsurance and copays, and free transportation), and medical records privacy.

Hospitals worked long and hard to address the risk areas identified by the OIG in 1998. The list of risk areas contained in the current draft compliance guide is longer and more detailed. So, hospitals, roll up your sleeves. You’ve got your work cut out for you.

Founded in Saint Paul in 1943, Felhaber, Larson, Fenlon and Vogt, P.A. has offices in Minneapolis and Saint Paul. With over 55 attorneys, the firm serves clients in the areas of corporate and commercial law, employee benefits, employment law, estate planning, health care, intellectual property, labor law representing management, litigation, real estate, transportation law, and workers' compensation.

Events & Information: Newsletters & Articles: Hospitals: Your Government Wants To Help You - Again