Featured Health Business Daily Story, March 2, 2011

First Stark Case Is Resolved Through CMS Self-Disclosure; Is the OIG Option Gone?

Reprinted from REPORT ON MEDICARE COMPLIANCE, the nation's leading source of news and strategic information on Medicare compliance, Stark and other big-dollar issues of concern to health care compliance officers.

By Nina Youngstrom, Managing Editor
February 21, 2011Volume 20Issue 7

CMS has resolved the first Stark self-disclosure case through its new protocol. Although CMS spokeswoman Ellen Griffith confirmed that a settlement was reached, no additional details were available.

However, according to sources, the hospital that is first out of the gate with CMS’s self-referral disclosure protocol is Saints Medical Center in Lowell, Mass. The center’s alleged Stark violation reportedly concerned night coverage, stipends and medical directorships, sources say.

Through the self-disclosure, the hospital paid $578,000 to resolve its Stark liability, according to the Lowell Sun. The liability could have gone as high as $14 million, the newspaper says. The violation was identified during preparations for a merger with Covenant Health Systems, which never went through, the newspaper notes.

“It’s encouraging to see a protocol participant complete the process and come out on the other side with what appears to be a good result,” says Washington, D.C., attorney Lisa Ohrin, former director of the CMS Division of Technical Payment Policy. “No doubt there were growing pains on the part of the government and the hospital.”

Ohrin notes that Saints Medical Center executives thanked two members of Congress from Massachusetts, Sen. John Kerry (D) and Rep. Niki Tsongas (D), for their help in resolving the hospital’s liability. “It would be interesting to know what impact, if any, congressional intervention had in the outcome of this disclosure and what that could mean for other protocol participants.”

The CMS self-referral disclosure protocol was mandated by Sec. 6409 of the health reform law to resolve “actual or potential” violations of the Stark law. CMS is required to consider reducing penalties when providers come forward and follow the CMS guidelines posted on its website. CMS officials recently said that cases resolved through the self-referral disclosure protocol would be made public (RMC 1/24/11, p. 1), the way the HHS Office of Inspector General posts settlements on its website.

CMS or OIG: The Plot Thickens

The Stark law bans Medicare payment to an entity for “designated health services” (DHS) when they’re referred by physicians who have a financial relationship with the entity, unless an exception applies. If, for example, an agreement between a hospital and physician violates Stark, the hospital must return all reimbursement from the DHS referred by the physician and is potentially subject to fines and penalties.

As of early February, CMS had received about 50 applications to its self-referral disclosure protocol. But there’s a twist to this self-disclosure business that worries Washington, D.C., attorney Kevin McAnaney, former chief of the OIG’s Industry Guidance Branch. It looks like all Stark violations will have to be resolved through CMS, even though the Office of Inspector General has a longstanding self-disclosure protocol. OIG’s version used to be for Stark-only violations, but now it’s just for providers whose conduct ran afoul of both the Stark and anti-kickback statutes, he says.

According to McAnaney, providers will have to separately resolve Stark violations through the CMS self-referral disclosure protocol and kickback violations through the OIG protocol. That’s a sea change from the way things have been done. The catalyst is the health reform law, which requires providers to return Medicare and Medicaid overpayments (within 60 days of identification), and the Fraud Enforcement and Recovery Act (FERA), which makes it a False Claims Act violation to retain overpayments.

“Up until those [legislative] changes, you could go to OIG and you would reach an agreement” under the Stark-related civil monetary penalty law, he says. Even though OIG lacks the authority to settle overpayments, “you knew it was run past CMS and people were willing to take the chance that CMS would not come after you. Since there was no clear overpayment obligation, you were fine and besides, you disclosed it.” But now we have the health reform law and FERA. With these statutory obligations, McAnaney says, providers cannot rely on the OIG self-disclosure protocol alone. “I hear people say if we have [a Stark issue], maybe we will go to OIG. But I think that is potentially a terrible mistake,” he says. “OIG has no authority to settle overpayments.” Even if people in government want OIG to resolve Stark and kickback issues in a single disclosure, their hands are tied, he says. Providers will have to go to CMS “because there is now a legal obligation to repay the overpayment,” McAnaney says.

What Quid Pro Quo Will Providers Get?

The implications are worrisome, McAnaney says. For one thing, it’s unclear at the moment what kind of quid pro quo providers will get for confessing their sins. OIG’s track record is well-established. It usually settled for some amount that was significantly less than the actual amount of reimbursement stemming from referrals prohibited by Stark under the noncompliant arrangement. For example, if a provider self-disclosed an arrangement that was not fair-market value (FMV), OIG “typically settles on some multiple of the difference between FMV and what was actually paid, and that’s substantially less than the amount of claims between the parties,” he says.

Also, CMS has made it quite expensive to carry out the self-referral disclosure protocol, McAnaney says. For example, even though in most cases CMS can only base its recoupment on four years of historical claims under a noncompliant agreement, the terms of the self-referral disclosure protocol require providers to calculate the value of the claims for the entire “look back period,” which could be 10 years or more. “They want to look at the entire period of noncompliance,” he says. By taking a longer view, CMS can make a more informed decision about how much of a break the provider deserves. But for providers, “that’s a fairly expensive procedure and can be burdensome.”

Ohrin confirms that health care providers and their legal representatives think the documentation demands of the CMS self-referral disclosure protocol are “tedious.” But providers should keep in mind that when CMS gives them a break through this process, “the agency is giving up money owed to it and releasing providers from liability, so CMS has to understand the whole arrangement,” says Ohrin, who is with Katten Muchin Rosenman in Washington, D.C. “CMS is not requesting documentation — even large amounts of documentation — to be difficult. They want to make sure they have everything relevant to the potential violation. People should be okay with giving them all the details.” She says providers want the peace of mind of knowing they are safe from future accusations over a particular set of Stark violations — the so-called “release” — because they told the government the truth, the whole truth and nothing but the truth.

But there’s nothing wrong with providers testing the limits in their attempt to get CMS to reduce the settlement amount. “I think you need flexibility and to push the bounds of your creativity in determining overpayments,” Ohrin says. For example, prepare as many theories of overpayment calculations as possible. And don’t expect this to be a quick fix. You will go back and forth with CMS for a while before anything is resolved, as anyone who has ever sought a CMS or OIG advisory opinion knows, she says.

Ohrin says providers are drawn to the CMS self-referral disclosure protocol because they “are getting more and more nervous” about the risk of so-called reverse false claims, which are lawsuits based on the flouting of the overpayment-return mandate. This anxiety is triggering a new level of internal review of Stark compliance, she says. A common Stark problem is expired agreements between DHS entities and their referral sources (e.g., hospitals and physicians).

CMS may not accept every applicant into the program. For example, South Bend, Ind., attorney Bob Wade represents five of the providers who have applied to resolve Stark problems through the CMS self-referral disclosure protocol. In two cases, CMS accepted the submissions but asked for more documentation; in two other cases, CMS asked for additional information, but the jury is still out on their admission. And there has been no word on the fifth, says Wade, who is with Baker and Daniels. If they get through one hurdle — acceptance — another one looms far larger, Wade says. What will the end result be? Will providers get a reasonable settlement? “We have to trust CMS,” he says.

Be Specific in Self-Disclosures

Wade advises providers to be very specific about their compliance programs in self-disclosures. Providers should include in their submissions a separate memo explaining why their compliance programs are effective, with detail about each of the seven elements. A CMS official told Wade that the agency wants to know how providers modified their compliance programs after identifying a problem or violation.

Pre-disclosure questions should be directed to CMS’s physician self-referral call center at (410) 786-4568.

It's quick and easy to sign up for FREE access to AISHealth.com!

Why do I need to register?