Healthcare News & Insights

CMS changing rules on what counts as kickbacks

Amid one of the largest “takedowns” of anti-kickback violations, the feds are changing the rules on what kind of compensation agreements will come under scrutiny. 

ThinkstockPhotos-490926001The Centers for Medicare & Medicaid Services (CMS) has been stepping up its anti-fraud enforcement efforts to cut down on medical waste and abuse.

One of the areas receiving the most scrutiny is illegal referrals, medical directorships and compensation agreements between physicians and larger organizations. The Office of the Inspector General (OIG) recently put out a fraud alert warning providers that it would continue to investigate illegal kickbacks, and prosecute individual physicians in addition to larger facilities.

Now, the feds have announced one of the largest healthcare fraud takedowns in history, and CMS is proposing new rules on what will count as an illegal kickback.

$712 million takedown

U.S. Attorney General Loretta Lynch made an announcement last month about “the largest criminal healthcare fraud takedown in the history of the Department of Justice.” The feds brought charges against 243 medical professionals for their alleged roles in a Medicare fraud scheme for $712 million in fraudulent billing.

According to the Justice Department’s press release, the professionals are being charged with a laundry list of violations including conspiracy to commit fraud, money laundering, identity theft and Anti-Kickback Statute violations.

And indicators point to the feds continuing to pursue illegal kickback and compensation agreements.

The OIG’s recent fraud alert came after it reached settlements with 12 physicians over illegal medical directorships and office staff agreements.

Allegedly, some of the physicians had entered deals where an affiliated facility paid the salaries of the physicians’ office staff. The OIG ruled this was improper remuneration partly because the agreement relieved the doctors of a financial burden they would have had otherwise.

Proposed kickback changes

Meanwhile, CMS has proposed rules for the 2016 Physician Fee Schedule that also would amend many Stark Law and Anti-kickback provisions, according to healthcare attorneys from the firm Hall Render Killian Heath & Lyman.

For one, CMS is looking to clarify the definition of remuneration and what items are excluded from the definition for clinical purposes. The proposed rules will also amend requirements about how agreements are recorded, giving providers more wiggle room.

CMS also acknowledged that timeshare leases and agreements between providers is becoming more common, especially in rural areas where physician practices lack supplies, resources and office space.

In the past, it was tough for these kind of timeshare agreements to comply with the laws’ exceptions for rented office space. As a result, CMS is proposing a new exception allowing timeshare arrangements, so long as:

  • agreements are in writing, signed and specify what resources are covered in the deal
  • the equipment provided meets certain criteria and doesn’t include advanced imaging, radiation therapy or clinical laboratory tools
  • the arrangements and offered compensation aren’t dependent on a certain number of referrals, and
  • the compensation is commercially reasonable, set in advance and is consistent with market value.

Although the proposed rules seem to hint at CMS adding some safeguards for providers and their compensation agreements, you shouldn’t be lured into a false sense of security.

The feds will likely continue to scrutinize these agreements and the parties involved, looking for signs that agreements offer compensation above market value for services and referrals.

As a result, hospitals will want to be especially diligent when creating these arrangements and contact legal counsel to ensure their compliance with CMS’ new rules.

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