Articles on Compliance Strategies

Contract Problems Pose Risk As Feds Push Stark Enforcement

Reprinted from the July 3, 2006, issue of REPORT ON MEDICARE COMPLIANCE, the nation's leading source of news and strategic information on false claims, overpayments, compliance programs, billing errors and other Medicare compliance issues.

Pressure is mounting on hospitals to review their physician deals for potential Stark law violations and to consider what steps to take when violations are uncovered. Hospitals face the twin challenges of cleaning up common contractual violations and avoiding the danger inherent in not returning money stemming from illegal financial relationships, experts say.

Officials from the HHS Office of Inspector General again have been encouraging providers to use the OIG Self-Disclosure Protocol to bring Stark violations to the government’s attention. This time, Lewis Morris, chief counsel to Inspector General Daniel Levinson, reminded providers of the IG’s April 24 “Open Letter to Health Care Providers” during a June 27 speech at an American Health Lawyers Assn. conference in Philadelphia.

The open letter says that providers who resolve Stark or kickback liability through the Self-Disclosure Protocol will receive good settlement terms, paying “near the lower end” of the Civil Monetary Penalty (CMP) fines and penalties they would face in a regular enforcement action.

Morris’ speech came on the heels of Piedmont Hospital’s $3 million settlement with the U.S. attorney’s office in Atlanta partly for alleged Stark violations. The government contended the Atlanta hospital did not have written contracts with physicians who provided services in the vascular lab, so the arrangement didn’t quality for a Stark exception. As a result, the hospital violated Stark when the five physicians referred patients to the hospital for services, the feds contended. The hospital denied the allegations in the settlement.

Generally, enforcement of the Stark law has kicked into high gear. “In a lot of settlements now, Stark has been a component,” says South Bend, Ind., attorney Bob Wade. “People need to be concerned about Stark compliance. For so long, providers have not been concerned about it.”

Wade, who is with the law firm Baker and Daniels LLP, says many hospitals that look internally for Stark violations are probably finding them. Examples of problems that organizations may discover if they review for Stark compliance, he says:

1. Expired contracts.
   
   
2. Financial relationships where no contract ever existed.
   
   
3. The parties modify the financial terms withoutputting the modifications in writing.
   
   
4. The terms were modified during the first year of the financial arrangement (some Stark exceptions require the terms to be in place for one year).
   
   
5. The agreement incorrectly describes the service (e.g., a lease agreement describes a space of 1,000 square feet but it is really 1,200 square feet, or a medical director agreement calls for a physician to work 100 hours a year but the physician works only 80 hours in a year.)
   
   
6. The hospital gives a gift or benefit to a doctorthat exceeds Stark’s $322 de minimis exception. The exception allows hospitals to give small gifts totaling no more than $322 a year to referral sources without triggering a financial relationship for Stark purposes.

The Risk of Not Making Repayments

When hospitals find these violations, they face a quandary, Wade says. Do they correct the problem (e.g., sign appropriate contracts) and move on, or do they have an obligation to repay the government for any money illegally collected, even if the money was collected pursuant to an illegal contract (e.g., an expired medical directorship) for a very short time? Government officials maintain that under the Social Security Act, it’s a felony for providers to knowingly fail to disclose that they have money that belongs to the government once they become aware they were not entitled to receive it (42 USC Sect 1320 a-7b(a)(3)).

Given the inherent risks, Wade emphasizes the importance of health systems ensuring their payments to physicians are consistent with contract terms. “If you don’t have a robust contract management program, you better implement one, even though there is a cost, because there’s no way to manage your contracts otherwise,” he says.

Advertise With AIS

Privacy

Site Map