OASC | INSIGHTS

in•duce•ment noun

1. An advantage or benefit that persuades or influences someone to do something

Make sure your referral-boosting efforts don’t cross the line.

By Virginia Pickles, Contributing Editor

Macy’s can do it. Applebee’s can do it. Even your local barber can do it. In a free market, providers of goods and services can use numerous marketing devices — from frequent-shopper rewards to friends-and-family discounts — to encourage loyalty and referrals. In health care, however, some business-building tactics can land you in hot water with the government.

In the healthcare arena, something of value given to someone to encourage or require a referral is an inducement, and, in this context, inducements may just as easily involve the use of specific drugs and devices as they do the referral of patients. Some actions are clearly illegal — waiving copayments or paying recruitment fees — but others may fall into gray areas requiring legal interpretation. What’s more, the unique nature of ASCs creates an environment susceptible to potentially questionable practices. To find out where ASCs are particularly vulnerable, we spoke with Thomas S. Crane, an attorney who specializes in Medicare and Medicaid fraud and abuse compliance.

Perks for Physicians

Suppose your surgery center is in growth mode, with a goal of increasing case volume by a certain percentage. To that end, you invite a high-volume cataract surgeon in your community to use your facility. The surgeon expresses interest but notes he requires an expensive piece of equipment for his cases. Would the ASC’s purchase of that equipment be considered an inducement? That’s not likely, according to Mr. Crane.

“If the physician has a clinical preference for a piece of equipment, almost always in that kind of situation, that equipment would likely benefit patients and would not be viewed as a financial payment to the physician,” he says. “Every ASC or hospital wants the best surgical suite to attract good medical staff and have the best outcomes for patients. It’s very unlikely, absent other factors, that anyone would put that in the category of an illegal inducement.”

The situation becomes more complicated, however, when the physician has a financial relationship with a manufacturer. “Perhaps a better example would be a physician’s relationship with a device maker, such as an IOL manufacturer,” Mr. Crane says. “More questions are raised about the appropriateness of those kinds of arrangements. Even then, most of the time, any legal challenge would be focused on the device maker or the equipment maker as opposed to the ASC. But the ASC could be swept into the investigation, and that would become very messy. It’s something compliance attorneys spend a good deal of time on.”

Let the Sunshine In

The Physician Payments Sunshine Act, also known as Open Payments, requires manufacturers of drugs, devices, biologicals and medical supplies to report to the Centers for Medicare & Medicaid Services (CMS) certain payments and items of value given to physicians and teaching hospitals. In addition, manufacturers and group purchasing organizations (GPOs) must report certain ownership or investment interests held by physicians or their immediate family members. This information will be submitted annually to CMS, which will aggregate it and publish it on a public website.

To access the American Medical Association’s Toolkit for Physician Financial Transparency Reports, go to www.ama-assn.org/go/sunshine.

The first Open Payments deadline (for reporting data collected between Aug. 1 and Dec. 31, 2013) is March 31, 2014. Physicians and physician owners/investors have 45 days from that date to review their information, dispute anything they feel is inaccurate and work with the manufacturers or GPOs to correct it. CMS will notify the manufacturers or GPOs of any disputes but will not mediate them. After 45 days, the manufacturers or GPOs will have an additional 15 days to submit corrections. Once a dispute is resolved, the manufacturers or GPOs must send CMS a revised report for the correct data and re-attest that it is correct. If a dispute cannot be resolved in the initial 45 days or subsequent 15 days, the parties involved should continue to seek resolution; however, only disputes initiated during the 45-day period and resolved during the subsequent 15-day resolution period will be updated before the information is published. Corrected data for disputes resolved after that 60-day window may not be published until the following year. CMS will release data collected during 2013 by Sept. 30, 2014. In subsequent years, the release date will be June 30.

Although physicians aren’t required to register with Open Payments, CMS encourages registration to enable them to review and dispute data before public release. In addition, physicians may ask a manufacturer or GPO to show them their information before they submit it to CMS.

What can be more problematic, according to Mr. Crane, is when an ASC gives direct payments or things of value — office space, clerical help or billing assistance, for example — to attract or retain a high-volume surgeon. Some of these inducements may not be readily apparent to patients or even to the employees of an ASC or to the physician-partners who aren’t privy to the facility’s business management details.

“Preferred office arrangements based on referral volume are certainly a problem,” Mr. Crane says. “In fact, CMS prohibits ASCs from leasing or providing office space within the four corners of the regulated ASC premises. Of course, an ASC may have a large facility that includes physicians’ office suites that aren’t part of the ASC, but essentially next door as part of the overall campus, which is permissible as long as the rent paid is fair market value and the opportunity to rent space isn’t offered preferentially to high-volume surgeons.”

Another situation that may raise a red flag involves the ASC’s administrative, clerical and nursing staff. “Having any member of the ASC staff made available without compensation to a high-volume referring physician is unquestionably a problem,” Mr. Crane says. “Such an arrangement is generally permissible when the physician and the ASC have a written agreement with clearly defined duties and fair market value compensation. But problems arise when an ASC quietly makes available secretarial or nursing staff that floats in and out of the ASC premises and the physicians’ offices. How do you know if the arrangement is in writing? How do you know if it’s for the full amount of the time? Many things about such arrangements are difficult to detect, and compliance attorneys are very careful in advising clients about such situations.”

Transparency and written agreements are keys to avoiding even a suggestion of impropriety. Mr. Crane recalls a case where an ASC was providing free billing services to a physician for his private practice as an inducement to refer his patients. “If there’s a written compensation arrangement, there’s a way to square the corners and make that legitimate,” he says, “but it’s also completely possible to do that without any compensation, and that’s where you’ve crossed the line.”

Free Rides for Patients

The Office of Inspector General (OIG) is responsible for enforcing the Social Security Act, enacted as part of the Health Insurance Portability and Accountability Act of 1996. In broad-stroke terms, the Act prohibits providers from offering Medicare or Medicaid beneficiaries any remuneration that’s likely to influence their selection of a particular provider, practitioner or medical supplier. Remuneration includes waivers of copayment or deductible amounts and transfers of items or services for free or other than fair market value. Since the Act went into effect, OIG has provided additional guidance, describing safe harbor exceptions. For example, providers may offer inexpensive gifts or services that have a retail value of no more than $10 individually or $50 in total annually per patient.

One question that arises regularly is whether or not a provider may offer free transportation for patients. In 2002, OIG solicited public comment on the possibility of a regulatory safe harbor exception for complimentary local transportation to beneficiaries residing in a provider’s primary service area. Issues of particular interest to the OIG included: forms of transportation; the geographic area in which transportation is offered; eligibility for transportation; type of provider offering transportation; destination; and marketing and advertising. To date, OIG has not adopted an exception for complimentary local transportation. It has issued a handful of favorable advisory opinions to specific providers, namely hospitals and a skilled nursing facility, but it has not provided specific guidance for ASCs. What does this mean for an ASC that would like to provide transportation for patients?

“Regulatory attorneys like myself are going to say, ‘You know, you really should be very careful and follow the guidance from the OIG or run the risk that authorities would look at this as a patient inducement,’” Mr. Crane says. “But enforcement is rare. What makes these types of inducements difficult to deal with is that no one is really hurt. The supposed victim of the fraud is a happy patient who received transportation home.”

Examine Your Compliance

With closer surveillance by Medicare and increased enforcement of healthcare fraud laws, the importance of compliance cannot be overstated. “This is a time when most of my clients are taking compliance much more seriously,” Mr. Crane says. “Some of the penalties can become significant, but equally important is the fact that the cost of an investigation alone can be debilitating.” ■

You may contact him at TSCrane@mintz.com.