The Department of Health & Human Services Office of Inspector General (OIG) recently narrowed the circumstances under which health care providers can use its Self-Disclosure Protocol (SDP) to resolve Civil Monetary Penalty (CMP) exposures for federal health care fraud violations and established $50,000 as the minimum settlement amount under the SDP program.  The announcement of modifications to the program corresponds with the OIG’s March 25, 2009 announcement that a Las Vegas, Nevada radiology practice, West Valley Imaging Limited Partnership, and its principals, William L. Boren, M.D., and Luke S. Cesaretti, M.D. must pay $2 million and comply with the terms of an Integrity Agreement for five years to resolve allegations that they submitted false or fraudulent claims to Medicare , under a Civil Monetary Penalty (CMP) settlement agreement.

Under the Civil Monetary Penalties Law (“CMPL”), 42 U.S.C. § 1320a-7a, and other provisions of the Social Security Act, health care providers risk the assessment of CMPs, exclusion from participation in all Federal health care programs or both if they knowingly and willfully:

ü      Offer or pay remuneration to induce the referral of or solicit or receive remuneration in return for the referral of Federal health care program business in violation of the Anti-Kickback Statute (42 U.S.C. § 1320a-7b(b));

ü      Present or cause to be presented a claim that the person knows or should know is for a service for which payment may not be made under 42 U.S.C. § 1395nn, the physician self-referral or “Stark” law. 42 U.S.C. § 1395nn(g)(3); or

ü      Engages in certain other prohibited activities under federal healthcare fraud laws.

For an Anti-Kickback violation, the OIG may seek a penalty of up to $50,000 for each improper act and damages of up to three times the amount of remuneration at issue (regardless of whether some of the remuneration was for a lawful purpose). 42 U.S.C. § 1320a-7a(a).  As part of the federal government’s broader effort to control federal health care spending, OIG and other federal regulators are stepping up enforcement of these and other federal health care laws.

In keeping with this expanding enforcement commitment, the OIG announced in a March 24, 2009 Open Letter To Health Care Providers that health care providers generally will only be able to use the SDP to address health care fraud violations involving a violation of the federal Anti-Kickback Statute.  Effective March 24, 2009, the SDP cannot be used to resolve physician self-referral violations of the Stark law that do not also involve violations of the Anti-Kickback Statute.  The OIG previously allowed health care providers the option to self-disclose and settle self-discovered violations of either the Anti-Kickback Statute or the Stark law under the SDP as a means of avoiding the uncertainty, disruptions and costs associated with a government-directed investigation and prosecution for those violations.  The March 24, 2009 Open Letter announced that OIG will no longer accept disclosure of a matter that involves only liability under the physician self-referral law in the absence of a colorable anti-kickback statute violation. However, OIG will continue to accept providers into the SDP when the disclosed conduct involves colorable violations of the anti-kickback statute, whether or not it also involves colorable violations of the physician self-referral law.

In addition to narrowing the scope of the SDP, the March 24, 2009 Open Letter also announced that the OIG now will require a health care provider a minimum settlement of at least $50,000 to use the SDP. The OIG indicated this minimum settlement amount is consistent with OIG’s statutory authority to impose a penalty of up to $50,000 for each kickback and an assessment of up to three times the total remuneration. See 42 U.S.C. § 1320a-7a(a)(7).  Had this new minimum settlement policy been in effect at the time, it would have more than doubled the $21,025.62 settlement that San Jacinto Methodist Hospital (SJMH) paid in January, 2009 to settle its CMP exposure arising from its self-disclosure to the OIG that it had entered into an arrangement with a physician for a Medical Director position that included the physician occupying hospital space for private use and utilizing hospital personnel for clerical assistance related to the physician’s private practice patient visits without any contractual entitlement to do so.

Reflecting the continuing emphasis of the OIG on vigorous enforcement of federal health care fraud laws, the announcement of the SDP changes were immediately followed by the OIG’s announcement of one of the largest CMP settlements ever negotiated under the OIG’s CMP authority.  On March 25, 2009, OIG announced that West Valley Imaging Limited Partnership, and its principals, William L. Boren, M.D., and Luke S. Cesaretti, M.D. must pay $2 million and comply with the terms of an Integrity Agreement for five years to resolve allegations that they submitted false or fraudulent claims to Medicare.  The settlement resolves OIG charges that the defendants intentionally defrauded Medicare by improperly providing diagnostic tests to Medicare beneficiaries without the required treating physicians’ orders, billing for certain tests under Current Procedural Terminology codes not supported by the medical records, and failing to satisfy certain other Medicare billing and coverage requirements. 

Even prior to the March 24, 2009 Open Letter, OIG habitually has assessed significant penalties against health care providers found to have violated the Anti-Kickback Statute, the Stark Law, and other federal health care fraud laws – including those violations self-disclosed under the SDP.  In December, 2008, for instance King’s Daughters’ Hospital and Health Services in Indiana paid $391,500 to settle alleged violations of the Civil Monetary Penalties Law provisions applicable to kickbacks arising from its self-disclosure of compensation arrangements with employed physicians under which physicians were compensated for services that were not personally performed by them.

Health care providers should seek consult with qualified legal counsel within the scope of attorney-client privilege about the adequacy of their current policies and procedures and the development, implementation and enforcement of appropriate policies and practices to manage exposures to health care fraud or other liabilities taking into account the specific nature and scope of that health care provider’s health care operations.  As part of this process, health care providers should work with their legal counsel within the scope of attorney-client privilege to decide and implement appropriate oversight and audit procedures and processes for investigating and addressing any issues that might arise in connection with an audit. While each health care provider generally should work with their legal counsel to define the scope and other particulars of such audit, every health care provider as part of this effort generally should undergo a periodic assessment by outside counsel of the adequacy of its Stark compliance efforts.

You also can review guidance governing the SDP at: http://oig.hhs.gov/fraud/selfdisclosure.asp.  For examples of past settlements under the SDP law, see http://oig.hhs.gov/fraud/enforcement/cmp/kickback.asp.

For assistance in reviewing and updating your Stark Law, Anti-Kickback Statute, or other health care compliance and risk management policies, practices or programs, assessing the strength of your controls in addressing these laws or other healthcare laws and regulations, or in addressing other compliance or health care concerns, please contact Cynthia Marcotte Stamer at cstamer@solutionslawyer.net or 469.767.8872.   To review  and register to receive other helpful updates or for additional information about Ms. Stamer and her experience, see http://www.cynthiastamer.com/healthcare.asp.