HMGT 372 DISC3

CHAPTER

567

FRAUD LAWS AND CORPORATE COMPLIANCE

A s we all know, healthcare is a multitrillion-dollar industry, and it grows every year. According to the Centers for Medicare & Medicaid Services (CMS), total national health expenditures were $3.5 trillion in 2017—

nearly 18 percent of our gross domestic product. Under current law, this spending is projected to grow at an average rate of 5.5 percent per year and reach nearly $6.0 trillion by 2027.1 Given the astronomical dollar sums involved, it is no wonder that this sector of the economy is a prime target for malefactors who want to defraud the government and health insurance companies.

This chapter discusses the most significant laws aimed at curbing healthcare fraud, and it gives examples of how those laws are enforced. The chapter also explores briefly the Foreign Corrupt Practices Act (FCPA), a statute intended to prevent bribery of foreign officials for business purposes and which has become more significant for healthcare because of medical tourism and international commerce.

The chapter concludes with a review of corporate integrity programs; that is, efforts to promote legal compliance and business ethics. Upright organizations must be sensitive to the potential for their employees to be involved in fraud, abuse, and other illicit conduct. They must work to main- tain high ethical principles not only because an image of moral respectability is good for business but also because such conduct is simply the right thing to do.

15 After reading this chapter, you will

• understand the basic federal laws relating to healthcare fraud and abuse and how the Affordable Care Act has affected them,

• be able to identify the most significant statutes relating to fraud and abuse in federal healthcare payment programs,

• know how the concepts of kickback and self-referral affect hospital operations, and

• recognize the benefits of maintaining an active corporate integrity program.

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C o p y r i g h t 2 0 2 0 . H e a l t h A d m i n i s t r a t i o n P r e s s .

A l l r i g h t s r e s e r v e d . M a y n o t b e r e p r o d u c e d i n a n y f o r m w i t h o u t p e r m i s s i o n f r o m t h e p u b l i s h e r , e x c e p t f a i r u s e s p e r m i t t e d u n d e r U . S . o r a p p l i c a b l e c o p y r i g h t l a w .

EBSCO Publishing : eBook Collection (EBSCOhost) - printed on 5/24/2022 5:09 PM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS AN: 2361947 ; Stuart Showalter.; The Law of Healthcare Administration, Ninth Edition Account: s4264928.main.eds

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The Enforcement Climate

“Follow the money” is an oft-heard catchphrase used in the context of corruption scandals, but it could also be the mantra of those who commit healthcare fraud: they wish to follow the money to its source, which in large measure is government health programs. For example, in 2017 Medicare spending totaled $705.9 billion and Medicaid spending was $581.9 billion. These numbers are expected to continue to rise due to the aging of the popu- lation, increased demand for treatment of chronic diseases, and the high cost of new drugs and technology.

The government is an obvious target for fraud because of these num- bers, and elimination of fraud is therefore a high priority for law enforcement and policymakers. Each year, more resources are allocated to the Depart- ment of Justice (DOJ), the Federal Bureau of Investigation, the Offices of the United States Attorneys, the Department of Health and Human Services (HHS) Office of Inspector General, and other enforcement agencies. State attorneys general conduct their own investigations and prosecutions, often working closely with federal officials. Private individuals who have firsthand knowledge of fraud are permitted to sue on behalf of the government and to collect a percentage of any proceeds recovered.

The Affordable Care Act (ACA) placed additional emphasis on fraud prevention by adding numerous provisions aimed at enhancing the integrity of government programs, including a title of more than a hundred legislative pages under the heading “Transparency and Program Integrity.” The impact of this legislation is considered in the ensuing discussion. The most signifi- cant changes affect the False Claims Act (FCA), the antikickback statute, and the Stark physician self-referral law, about which more later.

Settlements Can Be Huge Verdicts and settlements in civil fraud cases can amount to tens or even hun- dreds of millions of dollars (see exhibit 15.1), and offenders convicted of criminal offenses can receive massive fines and lengthy jail terms. In United States v. Lorenzo, for example, a dentist billed Medicare for “consultations” on nursing home residents. Medicare does not cover dental services, and Dr. Lorenzo’s examinations, according to the court, “were nothing more than the oral cancer screening that previously had been done as part of a routine dental examination. None of these examinations had been conducted at the request of an attending physician or because of a specifically identified medical concern.”2 The government proved that Dr. Lorenzo had submit- ted 3,683 false claims and, as a result, had received overpayments totaling $130,719.20. The court assessed damages of approximately $19 million, nearly 150 times the amount of the fraud.

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A second example involved Dr. Krizek, a psychiatrist trained at the Charles University in Prague (former Czechoslovakia) and Beth Israel Hos- pital in New York City. Dr. Krizek had been practicing in Washington, DC, for 21 years when the government brought a false claims case against him. According to the court, Dr. Krizek was a “capable and competent physician,” many of whose patients suffered from “horribly severe psychiatric disorders and often suffered simultaneously from other serious medical conditions.”3 The prosecution could not prove that Dr. Krizek rendered inappropriate care, but numerous false claims allegations were his downfall.

The evidence showed that the doctor charged the government for a full face-to-face session—45 to 50 minutes—regardless of whether he spent 20 minutes or two hours with a patient. He argued that even if he spent only half an hour with the patient in person, he considered related services—such as medication management and discussions with other staff—to be part of patient care and therefore thought he had not harmed the government. One piece of evidence showed that his practice submitted 23 claims for full ses- sions in a single day, so the court was impressed with neither Dr. Krizek’s argument nor his management skills: “While Dr. Krizek was a dedicated and competent doctor . . . his billing practices, or at a minimum his oversight of [the] billing system, was seriously deficient. Dr. Krizek knew little or nothing of the details of how the bills were submitted [on his behalf].”4 The court concluded that

Dr. Krizek must be held accountable for his billing system along with those who

carried it out. . . . The Court . . . will hold the defendants liable under the False

Claims Act on those days where claims were submitted in excess of the equivalent

of twelve . . . claims (nine patient-treatment hours) in a single day and where

Defendant’s Name Allegation Settlement

AmerisourceBergen Corp. Drug repackaging $625 million

Actelion Pharmaceuticals US, Inc.

Kickbacks (illegally paying copays)

$360 million

A subsidiary of DaVita, Inc. False billing $270 million

Health Management Associates

Kickbacks; false claims $260 million

William Beaumont Hosp., Detroit

Kickback $84.5 million

Source: John Commins, Top 5 Healthcare Sector Fraud Settlements for 2018, Health Leaders (published December 26, 2018), at https://www.healthleadersmedia.com/top-5-healthcare- sector-fraud-settlements-2018.

EXHIBIT 15.1 Top Five Healthcare Fraud Settlements of 2018

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the defendants cannot establish that Dr. Krizek legitimately devoted the claimed

amount of time to patient care on the day in question.5

Among the many interesting aspects of the various Krizek court opin- ions (four in all), perhaps the most noteworthy is the trial court’s displeasure with how the government handled the case. After more than four years of litigation, the judge slammed the door in 1998 with this parting shot:

The Government insists on pursuing a case that should long have been over. If the

Court acceded to all of the Government’s requests, this litigation would proceed

well into the next century. The Government has won its case and gained a sub-

stantial recovery. Dr. Krizek is now retired and is no longer practicing psychiatry.

Although apparently a fine physician, he is now a broken man. Not only is he out

of the medical profession, but also he is suffering from the advanced stages of

cancer. The Government refuses to let go of this case. When it began its case, the

Government was seeking over $80 million worth of damages, a figure that the

Court of Appeals declared was “astronomical.” Despite the fact that Dr. Krizek is

incapable of paying such a sum, the Government continues to relentlessly pursue

Dr. Krizek, who is at this point a broken and sick man. The Government’s pursuit of

Dr. Krizek is reminiscent of Inspector Javert’s quest to capture Jean Valjean in Victor

Hugo’s Les Miserables. While the Government’s vigor in pursuing violators of the

law is to be commended, there comes a point when a civilized society must say

enough is enough. That point has been reached in this case.6

Notwithstanding the overly zealous prosecution of Dr. Krizek, his and other cases demonstrate the seriousness with which the government views fraud and abuse. Under the joint direction of the attorney general and the secretary of HHS, the federal Health Care Fraud and Abuse Control Program recovers more than $8 for every $1 spent on its investigations and returns more than $4 billion dollars to the US Treasury every year.7

As these statistics show, prevention of fraud and abuse should be a top priority for healthcare administration, and a basic understanding of the major criminal and civil fraud statutes is therefore essential. The following are some of the most obvious types of healthcare fraud and abuse:

• Filing claims for services not rendered or not medically necessary • Misrepresenting the time, location, frequency, duration, or provider of

services • Assigning a higher payment than the procedure or diagnosis warrants

(upcoding) • Billing a battery of services (e.g., laboratory tests) separately

(unbundling)

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• Violating the “three-day rule,” which states that outpatient diagnostic procedures performed on any of the three days before hospitalization are deemed part of the Medicare diagnosis-related group payment and are not to be billed separately

• Paying kickbacks to induce referrals or the purchase of goods or services • Billing for services said to have been “incident to” a physician’s services

but that were not provided under the physician’s direct supervision • Referring patients to entities in which the physician has a financial

interest (self-referral)

The major statutes that these kinds of activities may violate include the civil and criminal FCA, the antikickback law, and the physician self-referral statute (known as the Stark law). Depending on the facts of the case, other statutes that may be implicated include mail fraud and wire fraud statutes; the Racketeer Influenced and Corrupt Organizations Act; money-laundering statutes; the FCPA; and various criminal statutes relating to theft, embezzle- ment, bribery, conspiracy, and obstruction of justice. Whereas this chapter focuses on the major healthcare fraud statutes and does not address viola- tions of the other laws mentioned, myriad legal standards (both state and federal) apply to healthcare organizations, and the importance of compe- tent legal counsel and a process for preventing criminal activity cannot be overemphasized.

Federal False Claims Act

The federal government’s main weapon in the so-called war on fraud and abuse is the FCA,8 which provides that a person is liable for penalties if he

• “knowingly presents, or causes to be presented, to an officer or employee of the United States . . . a false or fraudulent claim for payment or approval”;

• “knowingly makes, uses, or causes to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the Government”;

• “conspires to defraud the Government by getting a false or fraudulent claim allowed or paid”; or

• “knowingly makes, uses, or causes to be made or used, a false record or statement to conceal, avoid, or decrease an obligation to pay or transmit money or property to the government.” (This provision was added in 1986 to deal with reverse false claims—attempts to avoid paying money owed to the government.)

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Civil penalties under the federal law can be as much as $11,000 per claim plus three times the amount of damages sustained by the government. (The statute sets a penalty range of $5,000 to $10,000 per claim, but it also allows for periodic adjustments. As of 2019 the amounts were $5,500 to $11,000.) In addition, the costs of the prosecution are charged to the defendant. If the claim is found to be false, penalties and costs may be assessed even if the claim was not paid and the government suffered no damages.9

Interestingly, the FCA was enacted during the Civil War to stem the practice of overcharging the Union Army for goods and services. Apparently the term claim was better understood then than it is now because it is not defined in the statute. In healthcare, the definition of “claim” has been a matter of some dispute. For example, each procedure code on a billing form could be considered a separate claim. Therefore, up to $10,000 in penalties could be assessed for each false code. By this line of reasoning, as much as $200,000 plus damages and court costs could be assessed for 20 false codes.

The definition of “claim” was addressed in the appeal of Krizek, in which the court of appeals held that each billing form was one claim, irre- spective of the number of false codes it contained. The court asserted that the form was merely one request for payment of the total sum it represented.10 This definition seems logical and is consistent with other cases defining a claim as “a demand for money or for some transfer of public property.”11

Another interesting question is that of scienter: Did the defendant deliberately and willfully break the law? Or, in the words of the FCA, did the defendant do so “knowingly”? First-year law students are painfully aware of the Socratic dialogue that could attend the definition of knowingly. For example, consider the following conversation:

Professor Kingsfield. Mr. Showalter, what if I sign a claim form, put it in a stamped

envelope, and mail it to Medicare? Have I knowingly submitted that claim?

student showalter. I guess so. Unless you were drunk or mentally incompetent, you

knew what you were doing. You were mailing a claim form and expecting to get

paid.

Kingsfield. How much did I expect to get paid?

showalter. Whatever amount is on the form.

Kingsfield. What if I didn’t look at the amount but just signed a bunch of forms my

staff gave me at the end of the day and those forms had errors on them?

showalter. Well . . . [shifting in his seat and beginning to sweat]

Kingsfield. Well, what? Are the forms that have errors on them false claims?

showalter. Well, they’re erroneous. But if you didn’t know they had errors and just

assumed that your staff were doing their jobs correctly . . .

scienter Knowledge by a defendant that their acts were illegal or their statements were fraudulent.

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Kingsfield. Assumed? Never assume anything in this class or any legal matter!

showalter. Sorry.

Kingsfield. Let’s consider another case. Suppose that I know my claims contain the

occasional error—some are over, some are under—but I think they will all balance

out in the end, sort of the “no harm, no foul” approach to billing. And suppose I

think that the False Claims Act applies only to overbilling the government on pur-

pose, which I haven’t done. What say you now?

showalter. Hmm. You knew you were submitting a bill, but you didn’t know that the

particular bill was wrong, and you didn’t know that submitting incorrect bills is illegal

when you should have had a system in place to check them for errors. Good question!

So goes this uncomfortable exchange for a few more minutes. In 1986, Congress addressed the issue of scienter by amending the FCA to say that “no proof of specific intent to defraud” is required. Instead, the person must either (1) have actual knowledge that the information is false, (2) act in deliberate ignorance of the truth or falsity of the information, or (3) act with reckless disregard of whether it is true or false.12 As stated in the committee report accompanying the 1986 amendment,

The Committee is firm in its intentions that the act not punish honest mistakes

or incorrect claims submitted through mere negligence. But the Committee does

believe the civil False Claims Act should recognize that those doing business with

the Government have an obligation to make a limited inquiry to ensure the claims

they submit are accurate.13

The Krizek case (discussed earlier) shows how this standard is used. Although Dr. Krizek was not personally involved in the billing process, the court found that he and the other defendants had submitted the claims knowingly: “These were not ‘mistakes’ [or] merely negligent conduct. Under the statutory definition of ‘knowing’ conduct, the court is compelled to con- clude that the defendants acted with reckless disregard as to the truth or falsity of the submissions” [italics added].14

This standard requires healthcare providers—and their top manage- ment and governing board members—to have mechanisms in place to verify the accuracy of their organization’s claims. A further incentive to comply is the threat of exclusion from participation in Medicare and Medicaid because the government may exclude from participation any individual who (1) has a direct or indirect ownership or control interest in a sanctioned entity and has acted in “deliberate ignorance” of the information, or (2) is an officer or a managing employee of a convicted or excluded entity, irrespective of whether the individual participated in the offense.15 Any excluded person who retains ownership or control or who continues to serve as an officer or a managing

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employee in such entity may be fined $20,000 for each day the relationship continues.16 This threat and the potential for criminal convictions and mas- sive fines have been the major forces motivating healthcare organizations to adopt corporate compliance programs (discussed later in this chapter).

FCA cases are usually investigated by the Office of Inspector General and brought by a US attorney or the DOJ. An unusual feature of the statute, however, allows private citizens to sue on their own behalf and, as stated earlier, on behalf of the government to recover damages and penalties. These qui tam (whistle-blower) lawsuits have become an important factor in FCA enforcement because, if successful, the plaintiff (a relator in legal parlance) can share in the amount of the award (see exhibit 15.3 and Legal Brief).

It must be noted that at least 31 states also have false claims statutes that authorize qui tam whistle-blowers to file suit. These laws are a separate basis for liability, independent of the federal FCA, and they can be used for recovery in cases of Medicaid and other fraud. The standards and defenses under state law differ from those under the federal statute.

Any person with information about healthcare fraud can be a whistle- blower. Person is defined as “any natural person, partnership, corporation, association, or other legal entity, including any State or political subdivision of a State.”17 The relator must file the complaint, which is immediately sealed and thus not made public pending an investigation, and file a copy with the US attorney general and the appropriate US attorney. The government then has 60 days, plus extensions for good cause, to determine whether to pursue the case. If the government decides to take over the case, the relator will receive 15–25 percent of the amount recovered. If the government declines, the rela- tor may still pursue the matter and, if successful, will receive up to 30 percent of the recovery.

To file suit, the potential qui tam plaintiff and the allegations must meet certain conditions. Substantially, the same allegations or transactions must not have been disclosed publicly at an earlier date— unless the qui tam plaintiff is the original source of the previously disclosed informa- tion. Original source means someone who gave the government the information in the first place or who has information addi- tional to that previously disclosed.18 If the jurisdictional barriers are met and the facts of the case warrant recovery, the qui tam plaintiff can proceed to assist the govern- ment or pursue the case individually, often to significant financial advantage.

Legal Brief

Qui tam (“he who”) is shorthand for a Latin phrase that means “he who sues for the king as well as for himself.” In such a case, the plaintiff (relator) files suit as a kind of private attorney general on behalf of the government. The government can choose to take over the prosecution, but if it declines to do so the relator can proceed alone.

Federal qui tam cases are cited as United States ex rel. [name] v. [name of defendant]. Ex rel. means “by the relation of ” (or, more loosely, “at the request of ”) and indicates the name of the relator.

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Federal law provides a remedy for whistle-blowers who are discharged, demoted, harassed, or otherwise discriminated against because they filed a qui tam case.19 Given the financial incentives and the protection against employment-related retaliation, the qui tam lawsuit has become a commonly used and effective means of combating fraud and abuse.

Occasionally, qui tam plaintiffs in healthcare cases argue that a claim involving a kickback or an illegal physician self-referral (described in more detail in the following sections) violates the FCA, even though the claim is otherwise legitimate.20 For example, in United States ex rel. Woodard v. Coun- try View Care Center, Inc.,21 the defendants had submitted Medicare cost reports that included among their expenses some payments to “consultants” that were actually kickbacks for referrals. Because the defendants’ reimburse- ment was based on the cost reports, the court held that the FCA applied. United States v. Kensington Hospital,22 filed after the advent of the prospec- tive payment system, brought a new twist to the argument. The defendants asserted that because their Medicaid reimbursement was a set amount, the government could not have suffered a loss and the cost of the kickbacks did not make the claims false. Citing United States ex rel. Marcus v. Hess and other cases, the court disagreed, holding that the government was not required to show actual damages to prove an FCA violation.

In neither Country View nor Kensington Hospital did the plaintiffs specifically base their claim of FCA liability on the antikickback or self-referral statutes. Some subsequent cases did so, however, and they have survived scrutiny by the courts. For example, in United States ex rel. Pogue v. American Healthcorp,23 a trial court refused to dismiss an FCA case based on violations of the antikickback and the Stark self-referral laws. The court agreed with the relator’s contention that “participation in any federal program involves an implied certification [emphasis added] that the participant will abide by and adhere to all statutes, rules, and regulations governing that program.”24 It held, in effect, that Stark violations create prohibited financial relationships that taint the Medicare claims and that the FCA therefore applies.

In 2016, the US Supreme Court held the implied certification ratio- nale to be valid in certain circumstances, and the theory has been followed in some cases and questioned in others.25 Thus, though the concept that an FCA case can be based on violation of the antikickback or self-referral laws appears to be consistent with the 1986 amendments, it remains to be seen in what situations it will be applied.

In addition, the ACA codifies the implied certification rationale, at least insofar as the antikickback statute is concerned. The ACA states that “a claim that includes items or services resulting from a violation of the [anti- kickback statute] constitutes a false or fraudulent claim for purposes of [the civil False Claims Act].”26 Thus, compliance with the antikickback statute is a precondition for payment, and noncompliance with the antikickback statute

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will support an FCA claim. The Medicare claim form adds weight to this position (see Legal Brief).

A separate provision of federal law makes filing false claims a criminal offense.27 If convicted, an organization will be sub- ject to huge monetary penalties, perhaps in the millions of dollars depending on the amounts falsely claimed. An individual who is convicted of submitting a criminal false claim may likewise be given a huge fine and may be sentenced to up to five years in prison. Of course the standards of proof are higher in criminal prosecutions than in civil cases. In a civil FCA action, the standard is merely “a preponderance of the evidence”— in other words, it is more likely than not that the defendant did what is alleged. In criminal FCA cases, the government must prove beyond a reasonable doubt that the defendant knew the claim was false. For this reason, and because the penalties in civil actions are already severe, fewer criminal false claims cases are brought than civil cases.

Antikickback Statute

Federal law that has come to be known as the “antikickback statute” (AKS) imposes severe criminal penalties for fraudulent acts involving federal health- care programs. Except for certain state plans and the health plan of federal employees, both of which are dealt with separately, the AKS applies to “any plan or program that provides health benefits, whether directly, through insurance, or otherwise, which is funded directly, in whole or in part, by the United States Government.”28

A key portion of the AKS reads as follows:

(1) Whoever knowingly and willfully solicits or receives any remuneration (includ-

ing any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash

or in kind—

(A) in return for referring an individual to a person for the furnishing or arrang-

ing for the furnishing of any item or service for which payment may be made

in whole or in part under a Federal health care program, or

Legal Brief

When the government wants to make regulatory compliance a precondition for payment, it certainly knows how to do so. The Medicare claim form (CMS-1500) states in boldface: “Any person who knowingly files a statement of claim containing any misrepresentation or any false, incomplete or misleading information may be guilty of a crimi- nal act punishable under law and may be subject to civil penalties.” It also includes the following language:

NOTICE: This is to certify that the foregoing information is true, accurate and complete. I understand that payment and satisfaction of this claim will be from Federal and State funds, and that any false claims, state- ments, or documents, or concealment of a material fact, may be prosecuted under applicable Federal or State laws.

This notice appears to turn what would otherwise be an implied certification into an express condi- tion for payment.

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(B) in return for purchasing, leasing, ordering, or arranging for or recommend-

ing purchasing, leasing, or ordering any good, facility, service, or item for

which payment may be made in whole or in part under a Federal health care

program,

shall be guilty of a felony and upon conviction thereof, shall be fined not more than

$100,000 or imprisoned for not more than ten years, or both.

(2) Whoever knowingly and willfully offers or pays any remuneration (including

any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or

in kind to any person to induce such person—

(A) to refer an individual to a person for the furnishing or arranging for the

furnishing of any item or service for which payment may be made in whole or

in part under a Federal health care program, or

(B) to purchase, lease, order, or arrange for or recommend purchasing, leas-

ing, or ordering any good, facility, service, or item for which payment may be

made in whole or in part under a Federal health care program,

shall be guilty of a felony and upon conviction thereof, shall be fined not more than

$100,000 or imprisoned for not more than ten years, or both.29

Thus, both sides of the transaction—the one who offers or provides the remuneration and the one who solicits or receives it—are potentially liable. In addition to huge fines and prison time, offenders may be excluded from participation in the Medicare and Medicaid programs.

Certain types of remuneration are exempt from the statute. In other words, the following are not considered illegal remuneration:

• Discounts reflected in Medicare cost reports • Amounts paid by an employer to an employee to provide healthcare

services • Certain amounts paid by a vendor to agents of a group purchasing

entity • Waivers of coinsurance for Public Health Service beneficiaries • Certain remuneration through risk-sharing arrangements (e.g., under

capitation)30

In addition, HHS regulations outline certain other activities that will not be subject to prosecution. Known officially as “safe harbors” (or as “loopholes” to the more sardonic among us), these exceptions are:

• Fair market value leases for rental of space or equipment • Commercially reasonable personal services (e.g., consulting, peer

review) and management contracts • Purchase of physician practices by hospitals

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• Payments to referral services for patients, so long as the payment is not related to the number of referrals made

• Properly disclosed warranties • Properly disclosed discounts contemporaneous with the original sale • Bona fide employment relationships • Discounts available to members of a group purchasing organization • Waivers of coinsurance and deductibles for indigent persons • Marketing incentives offered by health plans to enrollees • Price reductions offered by providers to health plans

The point of these exceptions and safe harbors is to decriminalize legitimate activities that might otherwise seem to induce referrals or pur- chases. For example, the very purpose of a manufacturer’s warranty is to induce purchase of the product. If that product is a medical device that will be paid for by “a federal health care program,” it would seem to offend the literal language of the AKS; a safe harbor for legitimate warranties is thus eminently reasonable.

These regulations are quite technical, and an in-depth analysis of their provisions is beyond the scope of this chapter. Suffice it to say that although the AKS is one of the most important laws affecting healthcare today, it is also one of the most complicated and ambiguous. Congress recognized the statute’s complexity when it wrote in 1987 that “the breadth of the statutory language has created uncertainty among health care providers as to which commercial arrangements are legitimate, and which are proscribed.”31 Although the 1987 amendments specifying safe harbors were intended to provide guidance and clarity, much uncertainty remains.

What Is a “Referral”? One point of uncertainty in the AKS is the meaning of referral, one of the law’s key terms. For example, when one member of a multispecialty group practice sends a patient to another member of the same group, has she made a referral? If the referring physician’s compensation depends in part on the volume of services she orders from other group members, a literal reading of the statute would call the practice into question. A group practice safe harbor under the Stark self-referral law (discussed in the next section) seems to sug- gest that regulators believe a referral has been made in those circumstances. If such action is not a referral, why have a safe harbor for it? Because intragroup referrals are not Stark violations, the government is unlikely to take enforce- ment action under the AKS for such referrals, but the uncertainty remains.

Ownership of a hospital by a medical group presents a similar situation. Under traditional indemnity insurance plans, the physicians benefit financially if they admit patients to their own hospital, yet distribution of the hospital’s

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profits to the physician owners appears to violate the statute. A proposed regulatory safe harbor for such situations was abandoned in 1993. The ACA bars physician groups from opening new hospitals after December 31, 2010, and prevents expansion of existing ones except under limited circumstances.32

What Is “Remuneration”? Another uncertainty lies in the meaning of remuneration. The AKS merely hints at a definition. The passage quoted earlier indicates that remuneration includes kickbacks, bribes, and rebates. A later paragraph states that remu- neration “includes the waiver of coinsurance and deductible amounts . . . and transfers of items or services for free or for other than fair market value.”33 The same section (as amended by the ACA) then lists a number of arrange- ments that are not considered remuneration:

• The statutory exceptions described earlier • Certain waivers and differentials of coinsurance and deductibles • Incentives for preventive care • Retailers’ coupons available to the general public • Certain items or services provided to persons in financial need • Waivers of first copayments under a Medicare prescription drug plan • “Other remuneration which promotes access to care and poses a low

risk of harm to patients”

Lacking a precise definition from which to work, the courts are left to divine the AKS’s import and apply this indistinct concept to real-life situations. Hanlester Network v. Shalala provides an example.34

In Hanlester, certain physicians were limited partners in a network of clinical laboratories to which they referred their patients. The network contracted with Smith Kline Bio-Science Laboratories (SKBL) to manage the laboratory facilities for a fee of $15,000 per month or 80 percent of the laboratories’ collections, whichever was greater. (The 80 percent figure was usually higher than the fixed monthly fee.) Because performing the tests at SKBL’s own laboratories was more economical, 85 to 90 percent of the Hanlester labs’ testing was done at the main SKBL lab rather than at the network’s satellite facilities (see Legal Decision Point).

The Ninth Circuit held that even though the cash payments under the arrangement flowed from the Hanlester Network labs to SKBL, the arrangement was a scheme by which SKBL offered a 20 percent discount—the prohibited kickback

Legal Decision Point

Before reading further, refer to exhibit 15.2 and try to determine where the kickbacks and referrals are located in the Hanlester Network scenario.

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or remuneration—for the physicians’ referrals. In other words, but for the existence of the Hanlester Network, SKBL would have received 100 percent of the lab fees and the physicians would not have earned their 20 percent share. (Today, the arrangement would also violate the physician self-referral law, discussed later in this chapter.)

Although the AKS and regulations do not define remuneration, the law clearly applies to the provision of anything that has a value. The 20 per- cent “discount” in Hanlester is one example. Likewise, the provision of free goods or services has an economic value and is prohibited.35 Remuneration of minimal amounts is not an exception; in one case, a physician was excluded from the Medicare program for receiving a kickback of $30.36

Consider provision (1)(B) of the AKS quoted earlier. The AKS prohib- its payments “in return for purchasing, leasing, ordering, or arranging for or recommending purchasing, leasing, or ordering any good, facility, service, or item for which payment is made in whole or in part by a Federal health care program.”37 For example, a company that provides patient transportation would clearly be acting illegally if it bribed a hospital employee to choose the company’s services. The inducement is seldom that obvious, however. For example, the question might arise whether a hospital or clinic violates the AKS if it provides free transportation for patients as an encouragement for them to select the provider.

That was the situation in United States v. Recovery Management Corp. III. A psychiatric hospital pleaded guilty to an antikickback violation after it gave patients free airfares to induce them to choose the facility.38 Thus we learn that the AKS applies even in the absence of a literal referral—the “refer- ral” in this case being the patient’s own choice of the facility.

Hanlester Network Referrals for tests

SKBL

Lab 1 Lab 2 Lab 3 Services

$$

Contract

Limited partners

MDMDMDMD MD

EXHIBIT 15.2 Hanlester Network Structure

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The AKS also applies to the provision of anything of value that induces patients or providers to purchase or order services. Waiver of coinsurance and deductibles is such an inducement and is prohibited, except in limited circumstances (such as in documented cases of financial need). Civil money penalties can be assessed against any person who

offers to or transfers remuneration to any individual eligible for benefits under

[Medicare] or a State health care program . . . that such person knows or should

know is likely to influence such individual to order or to receive [goods or services]

from a particular provider, practitioner or supplier.39

Thus, routine waiver of coinsurance and deductibles (especially if advertised in the hope of stimulating business) is considered a violation of the AKS.

A Question of Intent What kind of mens rea—guilty mind—must a defendant have to violate the AKS? This question is another classic, first-year law school issue and is closely related to the concept of scienter, discussed earlier. The Hanlester court answered the question this way: “We construe ‘knowingly and willfully’. . . of the anti-kickback statute as requiring appellants to (1) know that Sec. 1128B prohibits offering or paying remuneration to induce referrals, and (2) engage in prohibited conduct with the specific intent to disobey the law.”40

Three years after Hanlester, the Supreme Court decided Bryan v. United States, in which it stated:

The word “willfully” is sometimes said to be “a word of many meanings” whose

construction is often dependent on the context in which it appears. Most obviously

it differentiates between deliberate and unwitting conduct, but in the criminal law

it also typically refers to a culpable state of mind. As we explained [in a 1933 case],

a variety of phrases have been used to describe that concept. As a general matter,

when used in the criminal context, a “willful” act is one undertaken with a “bad

purpose.” In other words, in order to establish a “willful” violation of a statute,

“the Government must prove that the defendant acted with knowledge that his

conduct was unlawful.”41

The Bryan decision quotes favorably the following statement from a standard jury instruction:

A person acts willfully if he acts intentionally and purposely and with the intent

to do something the law forbids, that is, with the bad purpose to disobey or to

disregard the law. Now, the person need not be aware of the specific law or rule

that his conduct may be violating. But he must act with the intent to do something

that the law forbids.42

mens rea The mental element of a crime; one’s awareness that one’s conduct is criminal.

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Following Bryan, the Eleventh Circuit decided United States v. Starks. Mindful of the preceding language from the Supreme Court, the Starks court phrased the willfulness standard as follows: “The word willfully . . . means the act was committed voluntarily and purposely, with the specific intent to do something the law forbids, that is with a bad purpose, either to disobey or disregard the law.”43 It reminded the parties that “ignorance of the law is no excuse” and stated that the AKS is no exception:

[The AKS] is not a highly technical tax or financial regulation that poses a danger

of ensnaring persons engaged in apparently innocent conduct. Indeed, the giving

or taking of kickbacks for medical referrals is hardly the sort of activity a person

might expect to be legal; compared to the licensing provisions that the Bryan Court

considered, such kickbacks are more clearly malum in se, rather than malum pro-

hibitum.44 [Emphasis added.]

As this discussion shows, “criminal intent” is difficult to define precisely; its meaning depends on the statute and circumstances involved. Congress tried to clarify the concept in a provision of the ACA, which states that “no proof of specific intent to defraud is required” to violate the AKS. There- fore, willfulness under the AKS is established by showing that the defendant (1) consciously committed an illegal act (offered/paid or solicited/received remuneration) and (2) had a nefarious purpose in mind (medical referrals or purchases) even if he was unaware of the exact law he was violating.

The issue of intent raises another question: Assuming remuneration has been solicited or received, must its sole purpose be to induce referrals or purchases? Or is it sufficient for the government to show that such an induce- ment was one of multiple reasons for offering the remuneration?

These questions were at the heart of United States v. Greber and United States v. McClatchey (see the first two The Court Decides features at the end of this chapter). In both cases, payments made for legitimate pur- poses also appeared to have been intended to induce referrals. In both cases, the court held that even if the remuneration was given for legitimate reasons, the statute was violated if another purpose was to induce referrals.

Stark Self-Referral Law

The Ethics in Patient Referrals Act45 was championed by former California Representative Fortney “Pete” Stark. The act’s purpose, like that of the AKS, was to remove conflicts of interest from physician decision-making and to discourage overuse of healthcare services. In summary, the law and its regu- lations prohibit physicians (individuals with MD, DO, DDS, DPM, OD, or DC degrees) from referring Medicare patients for designated health services

malum in se An act that is evil in itself because it violates basic moral principles of society (e.g., murder, rape, burglary).

malum prohibitum An act that is not innately wrong but is illegal because it is prohibited by statute (e.g., tax avoidance or violation of traffic laws).

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to entities with which the physician or an immediate family member has a financial relationship, unless an exception applies. The statute also prohibits the entity to which the referral was made from billing for the requested services. The Stark law is a strict liability statute for the physician, which means that if a prohibited referral was made, liability is automatic regardless of whether the physician intended to break the law (see Legal Brief).

Financial relationship means a compensation arrangement or an own- ership or investment interest. Unless an exception applies (see exceptions listed previously), if a physician or an immediate family member has a finan- cial relationship with an entity, the physician may not refer patients to the entity for any of the following “designated health services”:

• Clinical laboratory services • Physical, occupational, and speech therapy • Radiology and certain other imaging services (e.g., MRIs, CT scans,

ultrasound) • Radiation therapy services and supplies • Durable medical equipment and supplies • Parenteral and enteral nutrients, equipment, and supplies • Prosthetics, orthotics, and prosthetic devices and supplies • Home health services • Outpatient prescription drugs • Inpatient and outpatient hospital services • Outpatient speech-language pathology services

With regard to the penultimate item on that list, physicians originally were permitted to refer to hospitals in which they had an ownership interest (so-called doctors’ hospitals) if that ownership interest was “in the hospital itself (and not merely in a subdivision of the hospital).”46 This exception to the Stark law was eliminated by the ACA, which “grandfathered” physician- owned hospitals that existed on December 31, 2010, but prevented their further expansion; it also barred physicians from opening new doctors’ hos- pitals after that date.

The penalties for Stark violations are severe. They include denial of payment for the services, an obligation to refund any payments made, civil money penalties of up to $15,000 for each illegal referral, and exclusion from the Medicare and Medicaid programs. In addition, a physician or an

Legal Brief

The Stark law applies only to physician referrals. Intent is irrelevant; thus, violations are automatic if the physician has a financial interest in the entity to which she is referring patients. The relevant regulations can be found at 42 C.F.R. §§ 411.350 et seq.

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entity that enters into a scheme to bypass the Stark law may be fined up to $100,000 for each such arrangement and excluded from the programs.

Tuomey and Halifax The draconian nature of the law is exemplified by two cases. The first involved Tuomey Healthcare System, a nonprofit hospital located in a small, rural community in South Carolina. When many of its physicians began performing outpatient surgery in their offices, Tuomey sought to prevent the loss of hospital revenue by offering them part-time employ- ment contracts. The contracts guaranteed an annual salary plus “produc- tivity bonuses” based in part on the “facility fees” that the hospital billed when the physicians performed procedures in the hospital. The more pro- cedures performed at the hospital, the more facility fees Tuomey was able to bill for, and the more compensation the physicians received in the form of bonuses.

Legal counsel, a national consulting firm, and a former inspector general of HHS advised Tuomey about the terms of the proposed employ- ment relationship, and 19 physicians accepted it. One balked, however, citing concerns about the Stark law and False Claims Act. He believed the compen- sation package did not meet Stark’s exception for “bona fide employment relationships” and did not reflect fair market value.

Given those concerns, Tuomey and the reluctant physician jointly consulted Kevin McAnaney, an attorney and former government official who had written a “substantial portion” of the Stark law regulations. McAnaney advised that the proposed contracts raised significant “red flags” and would not pass the “straight-face test.” He also warned that the contracts presented “an easy case to prosecute” for the government.

The physician declined to enter into the agreement and sued under the qui tam provisions of the False Claims Act, alleging that Tuomey had submitted false claims because the contracts with the 19 other physicians were illegal. The government intervened in the case, and a verdict of more than $237 million was the result.

A significant factor in the final outcome on appeal was “evidence indi- cating that Tuomey shopped for legal opinions approving of the employment contracts, while ignoring negative assessments.” The court explained:

The district court noted—and we agree—that a reasonable jury could have con-

cluded that Tuomey was . . . no longer acting in good faith reliance on the advice

of its counsel when it refused to give full consideration to McAnaney’s negative

assessment of the part-time employment contracts and terminated his representa-

tion. . . . Thus, a reasonable jury could conclude that Tuomey ignored McAnaney

because it simply did not like what he had to say.47

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The Tuomey drama evolved coincident with a saga involving Halifax Hospital Medical Center in Daytona Beach, Florida. That case was brought by one of the hospital’s own compliance officials, who had suggested that the bonuses being paid to certain oncologists might be illegal. As in the Tuomey case, the hospital–physician contracts in Halifax were based on an opinion of validity by competent legal counsel. Notwithstanding that opinion, the employee filed suit as a qui tam relator and a settlement in the amount of $85 million resulted.48 (See The Court Decides at the end of this chapter for excerpts from the Halifax case.)

Both Tuomey and Halifax involved huge verdicts and serious conse- quences for the defendant hospitals. Halifax is run by a special taxing district (a government entity), so the taxpaying residents of that part of Florida had to foot the bill. Tuomey was so beleaguered by the verdict that it had to merge with a larger healthcare system or face bankruptcy.

Perhaps the most distressing aspect of these cases is the inability of attorneys, consultants, and even the courts to make sense out of the complex- ities and implications of the Stark law. The concurring judge in the Tuomey case states the conundrum well:

I write separately to emphasize the troubling picture this case paints: An impen-

etrably complex set of laws and regulations that will result in a likely death sen-

tence for a community hospital in an already medically underserved area.

. . . It seems as if, even for well-intentioned health care providers, the Stark

Law has become a booby trap rigged with strict liability and potentially ruinous

exposure—especially when coupled with the False Claims Act.49

Even the author of the original Stark law, former congressman Pete Stark, seems to agree. He has been quoted in a leading health administration jour- nal as saying the law should be repealed.50

Stark’s Applicability to Medicaid On its face, the Stark law applies only to Medicare, and for years, healthcare providers and their attorneys failed to consider its possible effect on Medic- aid claims and the FCA. However, the DOJ now takes the position that the Stark law affects Medicaid-reimbursable services too. The theory is based on a 1993 amendment that prohibits Medicaid payments for services furnished “on the basis of a physician referral that would result in the denial of pay- ment under the Medicare program if Medicare covered the service to the same extent.”51 Thus one of the government’s arguments in the Halifax case was that the alleged false claims in question were not those that the hospital submitted to Medicaid but were the claims that Florida Medicaid submitted to the federal government for Florida’s Medicaid money.

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No definitive ruling was issued in Halifax, the issue has been disputed elsewhere, and it will need to be decided eventually by the appellate courts. The point is that the DOJ and plaintiffs’ attorneys may try to bootstrap the Stark law onto Medicaid and thus stretch the FCA even further. This issue may be purely academic—because compliance with Stark for Medicare pur- poses should prevent Medicaid problems as well—but it will remain a legal and regulatory quagmire until it is resolved.

Statutory Exceptions Congress provided for certain exceptions to the self-referral ban because, with- out the exceptions, the Stark law’s sweeping language would have made illegal many legitimate, laudable, and even necessary arrangements. For example, the law excepts referrals for services provided by other physicians in the same group practice and also most in-office ancillary services furnished “personally by the referring physician, personally by a physician who is a member of the same group practice . . . or personally by individuals who are directly supervised by the physician or by another physician in the group practice.”52 Likewise, because the financial incentive for self-referral does not exist in prepaid health plans (e.g., health maintenance organizations), the statute does not apply when a physician refers beneficiaries of those plans for designated health services.

In addition to exceptions for certain referrals, the following financial relationships do not trigger the Stark law:

• Owning stocks or bonds in a large, publicly traded company or mutual fund

• Owning or investing in certain rural providers or hospitals in Puerto Rico • Reasonable rent for office space or equipment • Amounts paid under bona fide (fair and legitimate) employment

relationships • Reasonable payments for services provided unrelated to designated

health services • Compensation under a legitimate incentive plan (e.g., by withholds,

capitation, or bonuses in managed care) • Reasonable payments to induce a physician to relocate to the hospital’s

service area • Isolated transactions, such as a onetime sale of property or a practice • An arrangement that began before December 19, 1989, in which

services are provided by a physician group but are billed on its behalf by a hospital with which it is affiliated

• Reasonable payments by a physician for clinical laboratory services or for other items or services

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The exceptions to Stark are much more complicated than this list implies. What publicly traded companies qualify? What is a rural provider? How does one determine reasonable rent or salaries? What is an isolated trans- action? This last question is an especially good example of the ambiguities generated by the exceptions. Does the isolated transactions exception apply to the purchase of a physician’s practice made in installment payments rather than in a lump sum? CMS originally took the position that the exception did not apply and that installment payments were prohibited, but eventually the exception was redefined and the regulations now permit “a transaction that involves integrally related installment payments” if certain additional provisos are met.53 Those conditions, however, create other ambiguities.

Each attempt at guidance and clarification—although helpful in some respects—adds new uncertainties, increases healthcare providers’ unease, and makes the practice of law in this area extremely difficult (or profit- able, depending on your point of view). Because of the ambiguities and complexities involved, the importance of expert legal counsel cannot be overemphasized.

Foreign Corrupt Practices Act

In addition to domestic concerns, healthcare is becoming a global sector. Devices, drugs, and other items are increasingly available from the world market, and individuals engage in medical tourism to seek care that is unavail- able or too expensive in the United States. These developments bring into play the possibility of fraud on an international scale, which is addressed by the Foreign Corrupt Practices Act (FCPA).54

The FCPA, according to the Department of Justice, “was enacted for the purpose of making it unlawful for certain classes of persons and entities to make payments to foreign government officials to assist in obtaining or retain- ing business.”55 The law has since been amended to include foreign compa- nies and individuals doing business within the territory of the United States. The DOJ and the Securities and Exchange Commission share enforcement authority (see Catching White-Collar Criminals).

Although few cases to date have involved healthcare providers directly, improper payments to foreign officials can clearly be prosecuted under the FCPA. Healthcare executives should ensure that their practices do not expose them to FCPA liability.

Catching White-Collar Criminals

The DOJ’s Fraud Section maintains a website dedi- cated to investigation and prosecution of white- collar crime throughout the country. The site has information relating to the FCPA, healthcare fraud, and other criminal activity. See www.justice.gov/ criminal-fraud.

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Corporate Compliance Programs

Violations of legal proscriptions can occur in any company, and given the amount of money at stake, healthcare organizations are especially fertile soil for white-collar crime and its resultant criminal convictions and financial penalties. Punishments for fraud and abuse of the payment system can be levied against both the perpetrators and the corporation itself, even if the offense occurred at the lowest levels and was contrary to express company policy. Though they may never have authorized the act or had knowledge of it, officers and managers may be held personally accountable if they deliber- ately or recklessly disregarded the possibility that illegal conduct might occur. Therefore, executives who believe that “what I don’t know can’t hurt me” are mistaken.

One of the most effective tools for minimizing the exposure of an organization and its board and management is a corporate compliance pro- gram (CCP; see Legal Brief). CCPs help healthcare organizations develop internal controls that promote adherence to federal and state laws and the program requirements of federal, state, and private health plans. For many years, adoption and implementation of CCPs was strongly recommended but remained voluntary. Now the ACA makes a CCP mandatory for “providers of services and suppliers” under Medicare, Medicaid, and the Children’s Health Insurance Program.56 All hospitals, nursing homes, rehabilitation facilities, hospice programs, home health agencies, and other healthcare facilities; drug

and device manufacturers; and physicians and other practitioners must have a CCP in place if they wish to participate in federally funded health insurance programs.

Whether voluntary or mandatory, CCPs help significantly in the effort to prevent fraud, abuse, and waste. They promote legal compliance and corporate integrity, they guide the governing body and top management in the efficient man- agement and operation of the entity, and they help healthcare practitioners and all employees achieve and document quality patient care. CCPs are especially critical for regulating reimbursements and payments, because claims and billing operations often are sources of fraud and abuse and subject to governmental scrutiny. Elements essen- tial to an effective CCP are identified in exhibit 15.3.

Legal Brief

The CCP concept gained prominence after the publication of the Federal Sentencing Guidelines for Organizations in 1991. Federal judges use the Guidelines to promote uniform, predictable sen- tencing (see generally US Sentencing Commission at http://www.ussc.gov).

The term corporate compliance program is used in this book because it has gained purchase in the field and has made its way into statutory and regulatory language. However, compliance has a reactive connotation, as if saying, “Fine, we’ll do it if we have to.” A more positive expression that includes words such as integrity, ethics, and responsibility conveys the impression that “we’re on the side of the angels.” In fact, such terms as corporate responsibility and corporate integrity are often seen these days.

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Healthcare organizations, including their governing boards and senior management, must take seriously the possibility that criminal violations (including fraud and abuse) may occur and that civil liability may arise in the course of their business. Although the cost of developing a CCP is significant, substantial benefits may accrue in the form of reduced exposure to whistle- blower lawsuits or criminal prosecution. Furthermore, the consequences of having an ineffective CCP—especially one that is considered a sham—can be dire if illegal or unethical activity occurs because in that case the civil or criminal penalties would be increased.

Element Comment

1. Standards of conduct and written policies/ procedures

These materials demonstrate the organization’s dedication to compliance and address specific topics of concern such as Medicare or Medicaid fraud and abuse, antitrust issues, document reten- tion, employment and employee benefits, etc.

2. Compliance officer and committee

To ensure that the compliance function has the attention and oversight of the highest levels of the organization, the chief compliance officer and committee should have direct access to the CEO and governing board.

3. Training and education All employees and agents must be continually edu- cated about compliance standards and procedures.

4. Effective lines of communication

Lines of communication must be available between employees and the compliance officer; these should include the use of reporting systems (such as hotlines) to make complaints and protections for whistle-blowers against retaliation.

5. Monitoring and auditing

The organization must perform audits and other risk assessment techniques to identify problem areas and rectify violations.

6. Enforcement and discipline

Discipline should include possible termination of employment for those who violate the standards of conduct or fail to report violations.

7. Response and prevention

Process improvement measures must be taken to prevent recurrence of violations.

8. Ongoing reassessment and revision

The organization must continually review and revise its standards of conduct and operational activities to keep pace with legal and regulatory changes.

Note: The elements of a compliance program have been organized and described differently at various times and for different types of organizations. This table captures the essence of the requirements. Experienced compliance professionals and legal counsel should assist in developing an organization-specific program.

EXHIBIT 15.3 Eight Elements of an Effective Corporate Com- pliance Program

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CCPs are an important part of most healthcare organizations’ opera- tions. Initially, they emphasized the detection and prevention of fraud and abuse as well as compliance with regulations. As they matured, many became more proactive, focusing on the ethical integrity of the corporation through education and information sharing. The compliance officer should be seen as a valuable resource for questions relating to corporate ethics, conflicts of interest, human subject research, privacy and security of healthcare informa- tion, and other subjects—from antitrust to zoning.

CCPs typically benefit organizations by doing the following:

• Demonstrating the organization’s commitment to honest, ethical, and responsible corporate conduct

• Improving billing practices and thus increasing revenue • Creating a centralized source of information related to healthcare

statutes and regulations • Identifying and preventing criminal and unethical conduct • Identifying weaknesses in internal systems and management • Exposing possible fraud and abuse by employees or contractors • Enabling employees to report potential problems • Facilitating prompt, thorough investigation of alleged misconduct and

appropriate corrective action • Minimizing loss to the government from false claims and thus reducing

the hospital’s exposure to civil damages and penalties, criminal sanctions, and administrative remedies such as program exclusion

• Helping to document improvements in the quality of patient care

Summary

This chapter addresses one of the most salient issues in healthcare today: the prevention of fraud and abuse in governmental healthcare programs. The major fraud laws—the False Claims Act, the antikickback statute, and the Stark self-referral law—are reviewed. The aggressive enforcement activities of federal and state regulators and the severe monetary and criminal penalties that can be imposed for violations of these laws are emphasized. The chapter also discusses some of the changes to the fraud laws occasioned by the passage of the ACA, and it reviews the basics of a corporate compliance program (CCP)—one of the most effective programs a healthcare organization can establish to prevent fraud, promote integrity, and improve billing accuracy. A CCP is both an important preventive measure and a valuable resource for a wide range of legal and ethical issues.

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Discussion Questions

1. What factors motivate healthcare organizations to maintain programs aimed at compliance and corporate ethics?

2. What kinds of fraudulent or abusive behavior related to federal healthcare payment programs can occur in hospital operations?

3. What are the most significant statutes related to healthcare fraud, and how have they been affected by the ACA?

4. What do the terms kickback and self-referral describe in the healthcare setting?

5. Explain the essential provisions of the Stark law, including to whom it applies and what types of transactions it prohibits.

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The Cour t Decides

United States v. Greber 760 F.2d 68 (3rd Cir. 1985)

WEIS, Circuit Judge

[The defendant was convicted of fraud related to his durable medical equipment company’s billing practices. The company supplied Holter monitors—portable devices worn by patients to record their heartbeats for later interpretation. For this service, Dr. Greber’s company, Cardio-Med, billed Medicare and remitted a portion of each payment to the referring physician. For this practice, he was found guilty of having violated the AKS even though the payments were made for consul- tative services rendered. Dr. Greber was also convicted of submitting false statements con- cerning the length of time the monitors were operated (Medicare requires at least eight hours of operation to qualify for payment) and mail fraud (by using the mail to bill for services that were medically unnecessary or were never provided). Only the kickback issue is addressed in the following excerpt.]

On appeal, defendant raises several alleged trial errors. He presses more strongly, however, his contentions that the evidence was insuf- ficient to support the guilty verdict on the Medi- care fraud counts, and that the charge to the jury on that issue was not correct. . . .

I. Medicare Fraud The Medicare fraud statute was amended [in 1977]. Congress, concerned with the growing problem of fraud and abuse in the system, wished to strengthen the penalties to enhance the deterrent effect of the stat- ute. To achieve this purpose, the crime was upgraded from a misdemeanor to a felony.

Another aim of the amendments was to address the complaints of the United States Attorneys who were responsible for

prosecuting fraud cases. They informed Con- gress that the language of the predecessor statute was “unclear and needed clarification.”

A particular concern was the practice of giving “kickbacks” to encourage the refer- ral of work. Testimony before the Congres- sional committee was that “physicians often determine which laboratories would do the test work for their Medicaid patients by the amount of the kickbacks and rebates offered by the laboratory. . . . Kickbacks take a num- ber of forms including cash, long-term credit arrangements, gifts, supplies and equipment, and the furnishing of business machines.”

To remedy the deficiencies in the statute and achieve more certainty, the present version of 42 U.S.C. § 1395nn(b)(2) was enacted. It provides:

whoever knowingly and willfully offers or pays any remuneration (including any kickback, bribe or rebate) directly or indirectly, overtly or covertly in cash or in kind to induce such person . . . (B) to purchase, lease, order, or arrange for or recommend purchasing . . . or ordering any . . . service or item for which pay- ment may be made . . . under this title, shall be guilty of a felony.

[The evidence showed that the defendant had paid physicians “interpretation fees” for the doctors’ consultation services and for explaining the test results to the patients. Some evidence existed that physicians received interpretation fees even though Dr. Greber had actually evaluated the moni- toring data. Moreover, the fixed percentage paid to the referring physician was more than Medicare allowed for such services.]

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The district judge instructed the jury that the government was required to prove that Cardio-Med paid . . . some part of the amount received from Medicare; that defendant caused Cardio-Med to make the payment; and did so knowingly and willfully as well as with the intent to induce Dr. Avallone to use Cardio- Med’s services for patients covered by Medi- care. The judge further charged that even if the physician interpreting the test did so as a consultant to Cardio-Med, that fact was imma- terial if a purpose of the fee was to induce the ordering of services from Cardio-Med.

Defendant contends that the [instruc- tion to the jury] was erroneous. He insists that absent a showing that the only purpose behind the fee was to improperly induce future services, compensating a physician for services actually rendered could not be a vio- lation of the statute. The government argues that Congress intended to combat financial incentives to physicians for ordering particu- lar services patients did not require.

The language and purpose of the statute support the government’s view. Even if the physician performs some service for the money received, the potential for unneces- sary drain on the Medicare system remains. The statute is aimed at the inducement fac- tor. The text refers to “any remuneration.”

That includes not only sums for which no actual service was performed but also those amounts for which some professional time was expended. “Remunerates” is defined as “to pay an equivalent for service.” Webster Third New International Dictionary (1966). By including such items as kickbacks and bribes, the statute expands “remunera- tion” to cover situations where no service is performed. That a particular payment was a remuneration (which implies that a service was rendered) rather than a kickback, does not foreclose the possibility that a violation nevertheless could exist.

In United States v. Hancock the court applied the term “kickback” found in the predecessor statute to payments made to chiropractors by laboratories which performed blood tests. The chiropractors contended that the amounts they received were legitimate handling fees for their services in obtaining, packaging, and delivering the specimens to the laboratories and then interpreting the results. The court rejected that contention and noted, “The potential for increased costs to the Medicare-Medicaid system and misapplication of federal funds is plain, where payments for the exercise of such judgments are added to the legitimate cost of the transaction. . . . [T]hese are among the evils Congress sought to prevent by enacting the kick-back statutes. . . .”

Hancock strongly supports the govern- ment’s position here, because the statute in that case did not contain the word “remunera- tion.” The court nevertheless held that “kick- back” sufficiently described the defendants’ criminal activity. By adding “remuneration” to the statute in the 1977 amendment, Congress sought to make it clear that even if the trans- action was not considered to be a “kickback” for which no service had been rendered, pay- ment nevertheless violated the Act.

We are aware that in United States v. Por- ter the Court of Appeals for the Fifth Circuit took a more narrow view of “kickback” than did the court in Hancock. Porter’s interpreta- tion of the predecessor statute[,] which did not include “remuneration[,]” is neither bind- ing nor persuasive. . . . We conclude that the more expansive reading is consistent with the impetus for the 1977 amendments and therefore hold that the district court cor- rectly instructed the jury. If the payments were intended to induce the physician to use Cardio-Med’s services, the statute was violated, even if the payments were also intended to compensate for professional services.

(continued)

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Discussion Questions

1. How, if at all, can you distinguish Greber from other instances of payments for professional services? Suppose the percentage Dr. Greber paid to the physicians had not exceeded Medicare’s guidelines. Would that payment still amount to prohibited remuneration in this court’s eyes?

2. Suppose you are a lawyer or a compliance officer advising a hospital cardiology department. The department has a contract under whose terms it will pay a certain cardiology group a fixed dollar amount for every electrocardiogram (ECG) it interprets, and the hospital will bill Medicare accordingly. The dollar amount is equal to Medicare’s allowable charge for a basic ECG and report, and all readings are medically necessary. You ask why the hospital does not just let the doctors bill Medicare themselves, and the reply is, “Oh, it’s such a hassle for them. We already have a billing department, and we can do it for them easily.” What is your response, and why?

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The Cour t Decides

United States v. McClatchey 217 F.3d 823 (10th Cir. 2000)

MURPHY, Circuit Judge

[Fifteen years after Greber, the type of intent required to violate the AKS was still an open question. Greber determined that if any purpose of the remuneration was to induce referrals, the act was violated even if other purposes were legitimate. The following case excerpt illustrates some of the difficulties of this interpretation.

The case involved two physicians who were the principals in a group practice (BVMG) that provided care to nursing home patients. In 1984, the physicians approached Baptist Medical Center in Kansas City, Mis- souri, and proposed that they would move their patients from other hospitals to Baptist if the hospital would buy BVMG. Baptist

rejected the proposal, but after much nego- tiation the parties agreed that the physi- cians would provide various services to the hospital in return for $75,000 each per year. (Among other findings, testimony indicated that the fee was determined before the physi- cians had agreed on the services.) The physi- cians then began admitting their patients to Baptist.

The contractual arrangement continued until 1993—though as early as 1986, attor- neys for Baptist’s new owner, the Health Mid- west system, were concerned that it did not comply with the safe harbor regulations that had since been issued by the US government. In addition, in late 1991 or early 1992, Baptist

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learned that the physicians were not perform- ing some of the contractual services, but the fees continued to be paid and the contract was renewed.

The jury convicted the hospital chief executive officer, the two physicians, and McClatchey (Baptist’s chief operating officer) of violating the AKS. Two attorneys for Health Midwest who were involved in the negotia- tions to renew the contract were charged with conspiracy but were found not guilty by the judge on motions for acquittal. The judge also granted McClatchey’s motion for acquittal on the ground that no reasonable jury could find that he deliberately intended to violate the law. Thus, the issue on appeal concerned the type of criminal intent neces- sary to violate the AKS.]

In Instruction 32, the district court charged the jury as follows:

In order to sustain its burden of proof against the hospital executives for the crime of violating the Anti-Kickback statute, the government must prove beyond a reasonable doubt that the defendant under consideration offered or paid remuneration with the specific criminal intent “to induce” referrals. To offer or pay remuneration to induce referrals means to offer or pay remu- neration with the intent to gain influ- ence over the reason or judgment of a person making referral decisions. The intent to gain such influence must, at least in part, have been the reason the remuneration was offered or paid.

On the other hand, defendants Ander- son, Keel, and McClatchey cannot be convicted merely because they hoped or expected or believed that referrals may ensue from remuneration that was designed wholly for other purposes. Likewise, mere oral encouragement to refer patients or the mere creation of

an attractive place to which patients can be referred does not violate the law. There must be an offer or payment of remuneration to induce, as I have just defined it.

McClatchey contends this instruction was incorrect and warrants a new trial, because a defendant should not be convicted under the Act when his offer or payment of remunera- tion was motivated merely in part to induce referrals, but rather the motivation to induce referrals must be the defendant’s primary purpose. . . .

Whether the “at least in part” or “one purpose” standard applied in the instant case constitutes a correct interpretation of the Act is an issue of first impression in this Circuit. McClatchey urges this court to reject the test set out in Instruction 32 as too broad, because “[e]very business rela- tionship between a hospital and a physician is based ‘at least in part’ on the hospital’s expectation that the physician will choose to refer patients.” This argument, however, ignores the actual instruction given in the instant case, in which the district court spe- cifically informed the jury that “McClatchey cannot be convicted merely because [he] hoped or expected or believed that refer- rals may ensue from remuneration that was designed wholly for other purposes.” Accord- ing to this instruction, therefore, a hospital or individual may lawfully enter into a business relationship with a doctor and even hope for or expect referrals from that doctor, so long as the hospital is motivated to enter into the relationship for legal reasons entirely distinct from its collateral hope for referrals.

The only three Circuits to have decided this issue have all adopted the “one purpose” test. [One of these was Greber, which was set forth earlier.] In Greber, a doctor who owned a diagnostic laboratory was convicted of violat- ing the Act because he paid “interpretation

(continued)

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fees” to other physicians to induce them to refer Medicare patients to use his labora- tory’s services. Defendant Greber asserted that these interpretation fees compensated the physicians both for providing initial consultation services and for explaining the test results to the patients. On appeal, Gre- ber argued that a jury instruction much like Instruction 32 was erroneous, because the Act requires the government to prove that the only purpose for the interpretation fees was to induce referrals and that compensation for services actually rendered could not consti- tute a violation of the Act. Carefully examin- ing the language and purpose of the Act, the Third Circuit rejected Greber’s proposed inter- pretation and instead held that “if one pur- pose of the payment was to induce referrals, the [Act] has been violated.” . . . The Greber court thus concluded that the “one purpose” test is consistent with the legislative intent behind the amended Act.

This court agrees with the sound rea- soning in Greber and thus holds that a person who offers or pays remuneration to another person violates the Act so long as one purpose of the offer or payment is to induce Medicare or Medicaid patient refer- rals. Because the district court accurately informed the jury of the applicable law, McClatchey is not entitled to a new trial based on the jury instructions. . . .

This court concludes that the government presented sufficient evidence from which a reasonable jury could infer McClatchey know- ingly, voluntarily, and purposefully entered into an agreement with the specific intent to violate the Act. . . . We therefore REVERSE the judgment of acquittal and the alternative order for a new trial entered by the District Court for the District of Kansas and REMAND to that court with instructions to reinstate the verdict rendered by the jury.

Discussion Questions

1. Determining difficult questions of fact is the jury’s job. If you had been a juror in this case and had heard “Instruction 32,” where would you have drawn the line between an intent to induce referrals and a mere hope that referrals might ensue?

2. The summary given here leaves out many important facts. What other facts might have been important to you as a juror?

3. Recognizing that physicians are their lifeblood, hospitals have long provided certain amenities to keep them happy. Among these perks are preferred parking, free meals, and “professional courtesy” (discounted care for themselves and their family members). Because the one-purpose test now appears to be the accepted standard under the FCA, and because a purpose of “keeping the docs happy” is to encourage them to refer patients to the facility, are these types of benefits illegal?

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The Cour t Decides

United States ex rel. Baklid-Kunz v. Halifax Hospital Med. Ctr. U.S. Dist. Ct., M.D. Fla., No: 6:09-cv-1002-Orl-31TBS

Nov. 13, 2013 ORDER

This matter comes before the Court without a hearing on the Motion for Partial Sum- mary Judgment filed by the United States of America, the response in opposition filed by the Defendants, and the reply filed by the Government.

I. Background Halifax Hospital Medical Center (“Halifax Hospital”) is a special taxing district that operates a community hospital of the same name in Volusia County, Florida. Halifax Staff- ing, Inc. is an instrumentality of Halifax Hos- pital. Halifax Staffing employs the individuals who work for Halifax Hospital. Halifax Hospi- tal pays all of the expenses and obligations of Halifax Staffing, including payroll, either directly or by transfer of funds into Halifax Staffing’s payroll account.

Halifax Staffing entered into employment agreements with six medical oncologists. . . . The employment agreements provided that the Medical Oncologists would receive a salary and bonuses.

The Medical Oncologists treated patients at Halifax Hospital on both an inpatient and outpatient basis and, inter alia, ordered or requested outpatient prescription drugs for their patients. Whenever one of the Medical Oncologists personally performed a Medicare-reimbursable procedure, Halifax Hospital would submit two claims for pay- ment to Medicare—one for the physician’s services and a second for the facility fee, which would include items such as providing space and equipment. . . .

In fiscal year 2005, the Medical Oncolo- gists became eligible to receive a bonus (henceforth, the “Incentive Bonus” pursuant to the following provision of their employ- ment agreements:

Compensation [Halifax Staffing] shall pay to Employee as compensation for services the following:

. . .

c. Beginning with the fiscal year ending September 30, 2005, an equitable por- tion of an Incentive Compensation pool which is equal to 15% of the operating margin for the Medical Oncology program as defined by the financial statements produced by the Finance Department on a quarterly basis. The amount of the incentive compensation distributed to the Employee shall be determined by the Medical Oncology Practice Manage- ment Group. This compensation shall be paid annually according to the operating margin for the fiscal year.

. . . In response to an interrogatory from the Government, the Defendants stated that the operating margin for the Medical Oncology program was made up of “revenue and direct expenses from outpatient medi- cal oncology services” and that “[r]evenue consisted of outpatient medical oncology services, physician services, and related outpatient oncology pharmacy charges.” The Defendants admit that the revenue at issue included fees for services that were not

(continued)

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personally performed by the Medical Oncolo- gists, such as fees for services related to the administration of chemotherapy.

The Incentive Compensation pool was divided between the six Medical Oncologists based on each individual oncologist’s person- ally performed services. Halifax Staffing paid the Incentive Bonuses to the Medical Oncolo- gists for fiscal years 2005–2008. During this time frame, Halifax Hospital submitted thou- sands of claim forms to Medicare in which one or more of the Medical Oncologists was identified as an attending physician or an operating physician.

The Relator, Elin Baklid-Kunz . . . filed this qui tam action on June 16, 2009, alleging that the Defendants, inter alia, violated the Stark Law by billing Medicare for items provided as a result of referrals from physicians with whom the Defendants had improper financial relationships. On October 4, 2011, the Gov- ernment announced that it had elected to intervene as to certain of the Relator’s claims, including her Stark Act claim involving the Medical Oncologists. By way of the instant motion, the Government seeks summary judgment as to the alleged Stark Act viola- tion; as well as related claims under the False Claims Act, for unjust enrichment and for pay- ment by mistake; plus a number of affirma- tive defenses asserted by the Defendants. . . .

[After reviewing the applicable laws and regulations in considerable detail, the court proceeds with the following.]

III. Analysis A. Stark Law Compliance The Government contends that during the period when the Medical Oncologists were eligible to receive the Incentive Bonus, the Defendants violated the Stark Law by submit- ting Medicare claims resulting from referrals made by the Medical Oncologists for desig- nated health services. The Defendants dispute this contention on two grounds. The Defendants argue that the compensation arrangement with

the Medical Oncologists fit within the Stark Law exception for bona fide employment relation- ships and therefore referrals by the Medical Oncologists were not prohibited by the Stark Law. The Defendants also argue that the Gov- ernment has failed to produce any evidence that the Medical Oncologists actually made referrals of DHS during the pertinent time frame.

1. Bona Fide Employment Relationship It is undisputed that the Medical Oncolo- gists had a financial relationship with Halifax Hospital. Because of this, the burden shifts to Halifax Hospital to show that the com- pensation arrangement with the Medical Oncologists fit within one of the Stark Law’s exceptions. Halifax contends that the Medical Oncologists’ compensation arrangement sat- isfied the exception for bona fide employment relationships, which requires a showing that:

(A) the employment is for identifiable services, (B) the amount of remuneration under the employment— (i) is consistent with the fair market value of the services, and (ii) is not determined in a manner that takes into account (directly or indi- rectly) the volume or value of any refer- rals by the referring physician, (C) the remuneration is provided pur- suant to an agreement which would be commercially reasonable even if no referrals were made to the employer, and (D) the employment meets such other requirements as the Secretary may impose by regulation as needed to pro- tect against program or patient abuse. 42 U.S.C. § 1395nn(e)(2).

The Government contends that the require- ments of this exception were not satisfied because the Incentive Bonus, and therefore the Medical Oncologists’ remuneration, var- ied based on referrals for designated health

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services. More particularly, the Government points out that the pool from which the Incentive Bonus was drawn was equal to 15 percent of the operating margin of the Medi- cal Oncology program, and the program’s revenue included fees for designated health services such as outpatient prescription drugs and outpatient services not personally performed by the Medical Oncologists. Thus, revenue from referrals made by the Medical Oncologists would flow into the Incentive Bonus pool, and additional referrals would be expected to increase the size of the pool. All other things being equal, this would in turn increase the size of the Incentive Bonus received by the referring Medical Oncologist.

Halifax points out that the requirement in the bona fide employment exception that the remuneration not be “determined in a manner that takes into account (directly or indirectly) the volume or value of any referrals by the referring physician,” is itself subject to an exception. The final sentence of 42 U.S.C. § 1395(e)(2) provides that “[s]ubparagraph (B) (ii) shall not prohibit the payment of remuner- ation in the form of a productivity bonus based on services performed personally by the physi- cian (or an immediate family member of such physician)”. The Incentive Bonus, the Defen- dants argue, was just such a bonus, because “it is undisputed the bonus pool was divided up based on [each] oncologist’s personally performed services.” (Emphasis in original).

This is not enough to bring the Incentive Bonus within the bona fide employment excep- tion. The Incentive Bonus was not a “bonus

based on services personally performed” by the Medical Oncologists, as the exception requires. Rather, as described by the Defen- dants themselves, this was a bonus that was divided up based on services personally per- formed by the Medical Oncologists. The bonus itself was based on factors in addition to per- sonally performed services—including revenue from referrals made by the Medical Oncolo- gists for DHS. The fact that each oncologist could increase his or her share of the bonus pool by personally performing more services cannot alter the fact that the size of the pool (and thus the size of each oncologist’s bonus) could be increased by making more referrals.

During the time period when the Incen- tive Bonus was being paid, the compensation arrangement between Halifax Staffing and the Medical Oncologists did not satisfy the requirements for the bona fide employment exception. As a result, the Medical Oncologists were prohibited from making referrals to Hali- fax Hospital for DHS, and Halifax Hospital was prohibited from submitting Medicare claims for services furnished pursuant to such referrals.

[The court thus held that a violation of the Stark law had been proven but that the extent of the violation—in other words, the amount of damages—was still in question. For these reasons, complete summary judgment was denied and further proceedings were ordered to determine the amount of damages that should be awarded. Reading the handwriting on the wall, Halifax proceeded to negotiate a settlement of $86 million about a year after this decision was announced.]

Discussion Questions

1. What does the judge mean by the “instant motion”? 2. Can you explain the terms of the compensation agreement between Halifax and the

oncologists? 3. Why does the incentive bonus fail to meet the “bona fide employment relationship”

exception? 4. What changes to the agreement should Halifax have made to avoid Stark law liability?

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Notes

1. See Centers for Medicare & Medicaid Services, National Health Expenditure Data (last modified April 17, 2018), at https://www. cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and- Reports/NationalHealthExpendData/.

2. 768 F. Supp. 1127 (E.D. Pa. 1991). 3. United States v. Krizek, 859 F. Supp. 5, 8 (1994). 4. Id. at 11. 5. Id. at 14. 6. United States v. Krizek, 7 F. Supp. 2d 56, 60 (D.D.C. 1998). The

Krizek case appears numerous times in the law reports. In addition to the final decision are these other opinions: 859 F. Supp. 5 (D.D.C. 1994), the original trial court decision; 909 F. Supp. 32 (D.D.C. 1995), a memorandum opinion assessing damages; and 111 F.3d 934 (D.C. Cir. 1997), the appellate decision remanding the case for additional hearings.

7. See, e.g., US Department of Health and Human Services and US Department of Justice, Health Care Fraud and Abuse Control Program: Annual Report for Fiscal Year 2013 (published February 2014), at http://oig.hhs.gov/publications/docs/hcfac/FY2013-hcfac.pdf.

8. 31 U.S.C. §§ 3729–3733. 9. See, e.g., Rex Trailer Co. v. United States, 350 U.S. 148 (1952), and

Fleming v. United States, 336 F.2d 475 (10th Cir. 1964). 10. United States v. Krizek, 111 F.3d 394 (D.C. Cir. 1997). 11. See, e.g., United States v. McNinch, 356 U.S. 595 (1958). 12. 31 U.S.C. § 3729(b). 13. S. Rep. No. 345, 99th Cong., 2d Sess. 7. 14. 859 F. Supp. at 13. But see United States v. Nazon, 1993 WL 410150

(N.D. Ill. 1993). 15. 42 U.S.C. § 1320a–7(b)(15) (permissive exclusions). 16. 42 U.S.C. § 1320a–7a (civil money penalties). 17. 31 U.S.C. § 3733(l)(4). 18. These conditions were loosened somewhat by § 10104 of the ACA,

thus making it easier for a qui tam plaintiff to sustain a lawsuit. See 31 U.S.C. § 3730(3)(4).

19. 31 U.S.C. § 3730(h). 20. See United States ex rel. Marcus v. Hess, 317 U.S. 537 (1943), in

which a government contractor’s claims were based on a contract obtained through collusion. The opinion held, “The government’s

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money would never have been [paid] had its agents known the bids were collusive.” See also United States v. Forster Wheeler Corp., 447 F.2d 100 (2d Cir. 1971) (invoices submitted on contract that was based on inflated cost estimates are false claims) and United States v. Veneziale, 268 F.2d 504 (3d Cir. 1959) (fraudulently induced contract may create liability when the contract later results in payment by the government).

21. 797 F.2d 888 (10th Cir. 1986). 22. 760 F. Supp. 1120 (E.D. Pa. 1991). 23. 914 F. Supp. 1507 (M.D. Tenn. 1996). 24. Id. at 1509. 25. The Supreme Court case was Universal Health Services, Inc. v. United

States ex rel. Escobar, __ U.S. __, 136 S. Ct. 582 (2016). In earlier cases the rationale was followed in U.S. ex rel. Thompson v. Columbia/ HCA Healthcare Corp., 20 F. Supp. 2d 1017 (S.D. Tex. 1998), but it was rejected in U.S. ex rel. Conner v. Salina Regional Health, 543 F.3d 1211 (10th Cir. 2008). In a footnote, the Conner opinion recognizes that “several other courts have followed Thompson’s reasoning,” but it declined to follow it for other reasons. See also U.S. ex rel Spicer v. Westbrook, 751 F.3d 354 (5th Cir. 2004): “A false certification of compliance, without more, does not give rise to a false claim for payment unless payment is conditioned on compliance.”

26. ACA § 6402(f); 42 U.S.C. § 1320a–7b(g). 27. 18 U.S.C. § 287. 28. See 42 U.S.C. § 1320a–7b. 29. 42 U.S.C. § 1320a–7b(b). 30. 42 U.S.C. § 1320a–7b(b)(3). 31. S. Rep. No. 109, 100th Cong., 1st Sess. 27. 32. ACA § 6001 et seq., amending 42 U.S.C. § 1395nn and § 1301 et

seq. 33. 42 U.S.C. § 1320a–7a(i)(6). 34. 51 F.3d 1390 (9th Cir. 1995). 35. Office of Inspector Gen., US Deptartment of Health and Human

Services., Advisory Op. No. 97-6 (October 8, 1997). 36. Levin v. Inspector General, CR No. 343 (HHS Dept. App. Bd.

November 10, 1994). 37. See 42 U.S.C. §§ 1320a–7b(b)(1)(B) and (2)(B). 38. Unreported decision cited in Psychiatric Hospital Firm Pleads Guilty to

Violating Anti-Kickback Statute, 4 HealtH l. Rep. (BNA) 687 (1995). 39. 42 U.S.C. § 1320a–7a(a)(5).

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40. Hanlester v. Shalala, supra note 34 at 1400. 41. 524 U.S. 184 (1998). 42. Id. at 185. 43. United States v. Starks, 157 F.3d 833, 837–38 (11th Cir. 1998). 44. Id. at 838. 45. 42 U.S.C. § 1395nn. 46. 42 U.S.C. § 1395nn(d)(3)(C). 47. United States ex rel. Drakeford v. Tuomey, 792 F.3d 364, 375 (4th

Cir. 2015). 48. United States ex rel. Baklid-Kunz v. Halifax Hospital Medical Center,

No. 6:09-cv-1002-ORL-31TBS (M.D. Fla.) available at http://bit. ly1GbEk5U.

49. Id. at 790. 50. Joe Carlson, Pete Stark: Repeal the Stark Law, ModeRn HealtHcaRe

(published August 2, 2013), at http://www.modernhealthcare.com/ article/20130802/blog/308029995.

51. Medicare and Medicaid Programs: Physicians’ Referrals to Health Care Entities with Which They Have Financial Relationships, Proposed Rule, 63 Fed. Reg. 1659, 1672 (January 9, 1998). This proposed rule was later withdrawn and, as of this writing, has not been replaced.

52. 42 U.S.C. § 1395nn(b). 53. 42 C.F.R. § 411.351. 54. 15 U.S.C. §§ 78dd–1 et seq. 55. US Department of Justice, Foreign Corrupt Practices Act (updated

February 3, 2017), at https://www.justice.gov/criminal-fraud/ foreign-corrupt-practices-act.

56. See ACA §§ 6102 and 6401, amending 42 U.S.C. §§ 1301 et seq. and § 1395cc(j), respectively.

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