AMARILLO, TX – All health care providers, DME suppliers included, live in a glass house. If the supplier is doing something it should not be doing, then somebody knows about it. That “somebody” can be the entity (e.g., DME MAC) that pays the supplier; or the “somebody” can be a current or ex-employee.
CMS contractors have a sophisticated system that allows them to determine if a supplier’s claims are “outside the norm.” If a contractor determines that an abnormal billing pattern emerges, then edits will be triggered and the supplier will be subjected to enhanced scrutiny.
Virtually all employees are aware of the existence of whistleblower (or qui tam) lawsuits. The employee is aware that if his employer is doing something it should not be doing, then the employee can hire an attorney who specializes in representing whistleblowers and bring a qui tam lawsuit against the employer. In such a suit, the employee sues the DME supplier in the name of the employee “and in the name of the United States of America.” The qui tam lawsuit will be based on the federal False Claims Act under which the penalties can be massive. If the qui tam plaintiff (or “relator”) is successful, then he will receive about 20% of what the government recovers from the supplier. Note that if a claim arises from a violation of an anti-fraud law, then the claim is “tainted” and is, therefore, a “false claim.” For example, if the DME supplier has a Medical Director Agreement with a referring physician that is, in reality, a sham designed to funnel money to a referral source, then the arrangement is a kickback…….and claims arising out referrals from the physician are “false claims.”
This brings us to the Tenet Hospital case. Tenet Healthcare Corp. and two of its hospitals will pay $513 million and enter criminal pleas to resolve the Department of Justice’s (“DOJ”) assertion that Tenet paid kickbacks for referrals of pregnant immigrants. The guilty pleas will be entered by two Tenet subsidiaries that are pleading to charges of conspiracy to defraud the federal government and conspiracy to pay kickbacks and bribes in violation of the Medicare anti-kickback statute (“AKS”). Under the pleas, the subsidiaries will forfeit $145 million, which is the amount the hospitals netted from Medicare and Medicaid “for services provided to patients referred as part of the scheme,” according to the DOJ.
Another corporate entity, Tenet HealthSystem Medical, Inc., entered a no prosecution agreement that is contingent on cooperation with the DOJ’s investigation and a variety of enhanced compliance and ethics measures. Allegedly, the hospital chain’s wrongdoing violates a corporate integrity agreement (“CIA”) executed by the chain in 2006.
On the civil side, Tenet is paying $368 million to settle alleged False Claims Act violations, with the U.S. receiving $244 million and the state of Georgia receiving most of the remainder. The whistleblower will receive $84 million.
The hospital chain allegedly signed “sham” contracts for interpreter services with clinics that serve Hispanic women, and in exchange, the clinics sent pregnant patients to Tenet hospitals for deliveries that were billed to Medicaid from 2000 to 2013. According to the DOJ, the referrals caused the expectant mothers to bypass other hospitals and travel a longer distance during vulnerable time, and more than 20,000 tainted referrals took place. The contracts were signed with Hispanic Medical Management, Inc., a prenatal services company that does business as Clinica de la Mama. Misconduct allegedly spanned more than 10 years starting in 2000 and encompasses $12 million in kickbacks.
According to a charging document, Tenet’s in-house attorneys and outside counsel reviewed and approved agreements between the hospital chain and Clinica. However, certain Tenet executives “concealed material facts from Tenet lawyers and outside counsel, because they knew that the agreements would not be approved if the true nature of the Clinical arrangements were disclosed to the lawyers,” the charging document said.
Even though the Tenet hospital chain is much larger than DME suppliers, the “takeaways” from the Tenet settlement apply equally to DME suppliers. And so what are the “takeaways?”
1) In “fraud and abuse land,” there is no such thing as a technical loophole. It is substance over form. Said another way: “If it looks like a duck, walks like a duck, and sounds like a duck, then it is a duck. Said yet another way: “You can put lipstick on a pig. However, it is still a pig.”
2) In the Tenet case, it appears that the hospital chain made the decision to pay money to a referral source……and then came up with a reason to pay the money. Unfortunately, the DOJ viewed the interpretation services as “sham” services; they were unnecessary and perhaps not always provided.
3) While it is permissible for a DME supplier to pay money for legitimate services, even if the money is paid to a referral source, such payments need to pass the “duck” test and usually need to fall within safe harbor protection to the AKS.
4) For example, assume that a DME supplier wants to enter into a Medical Director Agreement (“MDA”) with a physician. Assume that the physician is a referral source to the supplier. This type of arrangement needs to comply with (i) the Personal Services and Management Contracts safe harbor to the AKS and (ii) the Personal Services exception to the federal Stark physician self-referral statute. Among other requirements, (i) there must be a written agreement with a term of at least one year; (ii) the physician must provide important/substantive services (not “made up” services) to the supplier; (iii) the physician must actually perform the services; and (iv) the compensation paid by the supplier to the physician must be fixed one year in advance, be the fair market value equivalent of the physician’s services, and not take into account the anticipated referrals from the physician. This is a long way of saying that all aspects of the arrangement must be legitimate (the “duck” test must be met). In other words, the supplier cannot be paying for “sham interpretation services” like we saw in the Tenet case.
5) Lets look at another example. Assume that an RT works for the local hospital. Assume that the hospital refers respiratory patients to the DME supplier. Assume that the supplier would like for the RT to work on his “off hours” for the supplier. The obvious concern is that the RT likely influences referrals from the hospital to the DME supplier. If the supplier is paying money to the RT, then a kickback concern automatically arises. The supplier can contend that it is (i) paying the RT for legitimate services and (ii) not paying the RT for influencing referrals from the hospital. On the other hand, the DOJ can argue that while the “primary purpose” behind the payments is for legitimate services, at least “one purpose” behind the payments is to induce the RT to facilitate referrals from the hospital to the supplier. Enumerated by court decisions, this is known as the “one purpose test.” According to the decisions, if “one purpose” behind a payment, no matter how small that “purpose” is, is to reward a person for referrals, then the AKS is violated notwithstanding that the “primary purpose” behind the payment is to pay for legitimate services. And so the arrangement between the RT and the DME supplier needs to be arranged in one of two ways: (i) the arrangement needs to comply with the Personal Services and Management Contracts safe harbor discussed above or (ii) or the RT needs to be a bona fide part-time employee of the DME supplier. There is an employee exception and safe harbor to the AKS. Even here, the “duck” test applies. The RT needs to be a bona fide employee, not a “sham” employee.
And so the message from the Tenet Hospital settlement is this: If your brain tells you one thing, but your stomach tells you something else, then ignore your brain and trust your stomach. As humans, all of us are capable of rationalizing dishonest decisions. However, our stomach never lies.
Attribution: A portion of this article is attributed to an article written by Jeff Overley for Law360, on October 3, 2016, entitled, Tenet Hospitals to Pay $513M, Admit Kickbacks.
Jeffrey S. Baird, JD, is chairman of the Health Care Group at Brown & Fortunato, PC, a law firm based in Amarillo, Tex. He represents pharmacies, infusion companies, HME companies and other health care providers throughout the United States. Baird is Board Certified in Health Law by the Texas Board of Legal Specialization, and can be reached at (806) 345-6320 or firstname.lastname@example.org.