We begin this part of the compliance program discussion with the federal Anti-Kickback Statute. This statute focuses on referrals of residents or services which are paid for, in whole or in part, by any federal health care program, including Medicare and Medicaid. The key here is referrals, how you receive them or make them, and whether you give, receive, solicit or help arrange anything of value as part of the process of obtaining or making referrals.
Nursing facilities make and receive referrals of federal health care program business in a wide variety of ways. Some of the obvious places from which nursing facilities may receive referrals of residents include:
- Other health care professionals;
- Hospitals and hospital discharge planners;
- Home health agencies; and
- Other nursing facilities.
In addition to direct referral of residents, nursing facilities may receive referrals for services and items for which the Federal government reimburses the facility from a wide variety of sources, including physicians, pharmacists and other health care professionals.
Nursing facilities also make referrals (or potentially influence referrals) for services paid for by the federal government to other health care providers. This can include, for example:
- Durable medical equipment;
- Diagnostic testing facilities;
- Long term care pharmacies;
- Other nursing facilities; and
- Speech, physical and occupational therapy companies.
All of these referrals must comply with the federal Anti-Kickback Statute. The statute places limits on business arrangements that relate directly or indirectly to items or services paid for by any federal health care program and often restricts business arrangements which in any setting other than health care may be considered appropriate.
The Anti-Kickback Statute is a criminal statute which prohibits the giving, accepting, soliciting (i.e., asking for) or arranging items of value in any form (gifts, certain discounts, cross-referrals between parties), either directly or indirectly for the purpose of inducing or rewarding another party for referrals of services paid for by a federal government health care program. The statute is very broad and, in addition to the obvious referrals of residents or services residents need, it also covers purchasing, ordering, leasing or arranging for or recommending the purchase, leasing or ordering of services paid for by a federal health care program in exchange for any item of value.
Because this statute is criminal in nature, violations of it can result in jail time, criminal money penalties and exclusion from federal health care programs, including Medicare and Medicaid. These penalties can apply to anyone involved in a prohibited transaction, including the giver or receiver of prohibited benefits for referrals. Complying with the statute is also a condition of participation under Medicare. Because of this, a facility which claims payment for a transaction prohibited by the Anti-Kickback Statute can also be violating a separate civil statute, the federal False Claims Act, which permits payment only for items and services which are reasonable, necessary and provided consistent with federal law.
To be found guilty of violating a criminal statutes, including the Anti-Kickback Statute, the party or parties engaged in a transaction must have “intended” their actions. The parties do not have to intend to break the law. They just have to intend to engage in a transaction prohibited by the law. In the context of the Anti-Kickback Statute, this means the parties have to intend to give, receive, solicit or arrange for some item of value in exchange for referrals in a manner prohibited by the statute.
This gets complicated because under the Anti-Kickback Statute, if even one purpose of a transaction is remuneration for referrals, that is enough. Having an otherwise valid business purpose, in addition to a prohibited remuneration, for referrals will not keep the transaction from violating this statute. In addition, there are certain features of a transaction which may cause the OIG to essentially presume that one purpose of a transaction was for prohibited payment for referrals. The OIG refers to business arrangements with these characteristics as presenting “a significant potential for abuse” and so they will be scrutinized very carefully. The burden on a provider engaged in such an arrangement to demonstrate no illegal intent will be great. Here are some questions the OIG has suggested to help identify arrangements which will incur substantial scrutiny from the OIG:
- Does the facility or its representatives or affiliates provide anything of value to persons in a position to influence or generate federal health care program business for the facility, or its affiliates, either directly or indirectly?
- Does the facility or its representatives or affiliates receive anything of value from persons for which the facility generates federal health care program business, either directly or indirectly?
- Could one purpose of an arrangement be to induce or reward the generation of business paid for in whole or in part by a federal health care program?
When the answer to any of these questions is “yes,” there are several “aggravating factors” the OIG may consider in determining whether to prosecute the parties engaged in the transaction. These include:
- Does the arrangement have a potential to interfere or skew objective clinical decision-making?
- Does it have the potential to increase costs to a federal health care program or beneficiaries?
- Does it have the potential to increase the risk of overutilization or inappropriate utilization (for example, services or items which are not medically necessary)?
- Does it raise patient safety or quality of care concerns?
- To the extent the arrangement involves appropriate and medically necessary services or items, is the payment being made or received for those services or items consistent with fair market value for similar items and services?
Because the Anti-Kickback Statute is so broad, and could potentially capture business arrangements that have legitimate purposes, the OIG has developed a set of regulations called “safe harbors.” These are transactions which are not prohibited by the statute, and will not be prosecuted by the OIG, even though they technically could fall within its parameters. The safe harbors generally prescribe certain elements of a transaction which must be present for the OIG to consider it as being covered by a safe harbor. To take advantage of a safe harbor, the business arrangement must be structured and operated precisely as described in the safe harbor. Some of the primary safe harbors which potentially apply to transactions involving nursing facilities include:
- Investment interests safe harbor;
- Space rental safe harbor;
- Equipment rental safe harbor;
- Personal services and management contracts safe harbor;
- Discounts safe harbor;
- Employee safe harbor;
- Electronic health records items and services safe harbor; and
- Managed care and risk sharing arrangements safe harbor.
Each of these is covered by a separate, detailed federal regulation and, honestly, they are technical enough in nature that most providers cannot be expected to fully understand and comply with them without some legal advice and guidance. Because of that, we will not cover the specifics of the safe harbors in this compliance guidance.
However, if you are considering a business arrangement which does, or potentially could, raise some of the concerns described in this discussion of the Anti-Kickback Statute, you should seek legal advice on whether the arrangement creates an unacceptable risk of prosecution for you and whether you can structure the arrangement within one of the safe harbors.
A business arrangement which does not fit squarely within a safe harbor, and which raises the concerns discussed above, is not necessarily illegal. But it does create the potential for heightened scrutiny by the OIG and you won’t have the safe harbor as a defense against prosecution.
As a general rule, it’s a very good idea to ensure that all business arrangements in which a facility is making or receiving payments or items of value (including discounts, swapping, reduced-cost services or items, and so forth) from any individual or entity in a position to make, receive or influence referrals is described in a written contract which has been reviewed by legal counsel experienced in health care fraud and abuse. Where possible, facilities should develop template contracts covering the most common business arrangements in which they engage, which have been reviewed by legal counsel, and use them consistently. Then, the provider can ask counsel to review those aspects of the arrangement which vary from situation to situation to ensure that those varying contract terms do not implicate the Anti-Kickback Statute.
Finally, the Anti-Kickback Statute is serious business. A good rule of thumb here is this – when in doubt, don’t, at least without the competent professional advice of legal counsel with experience in health care fraud and abuse.
In addition to describing the general features of business transactions involving or impacting referrals which may raise Anti-Kickback Statute concerns, the OIG has identified a number of specific types of arrangements which, in its view, create significant potential risk for providers under this statute. We will address those in the following sections.
For providers looking for sample policy language relating to some of the major issues under the federal Anti-Kickback Statute, we have provided sample policies on Resident Inducements and Resident Referrals. These are provided as samples only and for providers to use as a starting point in developing their own policies.
Free Goods and Services
The OIG has long expressed concern about the provision of free goods and services to an existing or potential referral source and whether such “freebies” are actually disguised remuneration for referrals of federal health care program business. According to the OIG, the provision of free goods and services that have independent value to the recipient, and that the recipient would otherwise have to pay for at its own expense, confers a benefit or a “remuneration” on the recipient which may constitute unlawful payment for referrals.
The OIG, over the years and again in its September 20, 2008 Supplemental Compliance Guidance for Nursing Facilities, has identified several specific types of “freebies” which it views as highly suspect and raising a real potential for prosecution by the OIG under the Anti-Kickback Statute. These include, among others:
- The giving of a free computer to a nursing facility. Where the computer can only be used as part of a service being provided by a vendor to the facility, such as for certain computers that assist in the delivery of IV medications or printing out lab results, then it’s not normally considered to have any independent value to the provider. However, where it can be used for other purposes for which the provider would have to supply its own computer systems (i.e., a regular personal computer), then the OIG views it as having an independent value to the provider which may, depending on the circumstances, constitute a violation of the Anti-Kickback Statute.
- Placing free staff in a facility who then perform functions not related solely to the service for which the staff’s employee was hired or contracted. The common example is a lab placing a phlebotomist in a facility who, in addition to drawing fluid samples, also performs administrative tasks, takes vital signs, or performs other nursing functions or tasks which are the responsibility of the facility.
- Pharmaceutical consultant services, medication management or supplies offered by a pharmacy free of charge. Nursing facilities are required by federal regulations to provide such items and services to their residents and the OIG has expressed concern that where a pharmacy supplies these things free of charge, this may be a disguised “remuneration” for the referral of business for the pharmacy’s primary function – selling medications.
- Free infection control services, chart review or similar services offered by laboratories or other suppliers.
- Free durable medical equipment or supplies offered by a DME supplier for residents covered by the Medicare Part A benefit, which normally includes reimbursement for such items.
- A hospice nurse providing nursing services in a facility for non-hospice residents.
- A “free” registered nurse provided by a hospital.
Many providers have expressed concern over the OIG’s broad warning about free goods or services, suggesting that prohibiting all “freebies” from suppliers and vendors actually drives up the cost of care to beneficiaries and federal health care programs. Conversely, some suppliers and vendors have argued that all of their competitors offer certain free goods or services and that their own failure to do so will put them at a competitive disadvantage. While these are all valid concerns, and while there are some limited exceptions to the “no free goods or services” rule, this is an area on which the OIG has focused for many years. In general, providers should avoid giving or accepting free goods or services from any current or potential referral source unless that arrangement has been carefully reviewed by legal counsel experienced in health care fraud and abuse.
For providers looking for sample policy language relating to some of the major issues under the federal Anti-Kickback Statute, we have provided below a sample policy on Gifts. This is provided asa sample only and for providers to use as a starting point in developing their own policies.
The OIG has expressed concern that certain services contracts, while they include payment for services covered by the agreement, may actually be disguised remuneration for referrals between the parties to the contract. This is particularly true where the services or goods being provided under the agreement are not paid for based on fair market value for similar goods or services in the open marketplace. The OIG’s discussion of services contracts addresses two broad types of services agreements – non-physician services and physician services.
Non-physician Services Contracts
Non-physician services contracts include a broad array of contracts many nursing facilities routinely have with outside providers of services. They may include, among others: pharmacies, clinical laboratories, DME suppliers, ambulance proviers, parenteral and enteral (PEN) suppliers, diagnostic testing laboratories, rehabilitation companies, psychiatric and psycho-social providers, and therapists (speech, physican and occupational). The OIG has suggested certain elements which should be present in such written agreements, including:
- The services or items being purchased should be described in the agreement and there should be a legitimate need for them;
- They should be actually provided as described in the agreement and adequately documented;
- The compensation paid and received by the parties should be consistent with fair market value in an arms-length transaction; and
- The compensation should not be related in any manner to the volume or value of federal health care program business between the parties to the contract.
In addition, according to the OIG, all of the preceding elements should be in place and documented contemporaneously (at the same time) and prior to any payment flowing between the parties under the agreement. This is designed to prevent parties from setting prices after they have begun transacting business together in a way which is based on the volume of business. Also, where possible, such arrangements should be structured to fit within either the personal services safe harbor and/or management contracts safe harbor (discussed above), as applicable. As noted above, most providers will need the assistance of experienced legal counsel to ensure their contracts, where possible, fit within one of the available safe harbors under the Anti-Kickback Statute.
In its September 30, 2008 Supplemental Compliance Guidance for Nursing Facilities discussion of non-physician services contracts, the OIG dedicated special attention to nursing facility contracts with consulting pharmacists and the pharmacies for which they work. Here is a summary of the OIG’s recommendations and warnings on this issue:
- Facilities should develop policies and procedures to avoid the risk of pharmaceutical decisions tainted by a conflict of interest by a consulting pharmacist or a dispensing pharmacy. For example, a pharmacist or pharmacy may face a conflict of interest in making recommendations about a resident’s drug regimin if a drug that is not on the pharmacy’s formulary is prescribed by the attending physician. Please see the discussion of Medicare Part D Programs under the “Auditing and Monitoring” section of this compliance guidance for more detailed information about this issue.
- The facility’s policies and procedures should establish that all prescribing decisions must be based on the best interests of the individual resident at issue.
- Drug switches may only be made upon authorization of the prescribing physician, medical director or other licensed prescriber (except where state law allows for certain limited exceptions, such as generic substitutions or changes under a collaborative practices arrangement between a physician and pharmacist).
- Facility policies should require monitoring drug records for patterns that may indicate inappropriate drug switching or steering.
- Facilities should ensure that all staff are trained on the prohibition against accepting anything of value from a pharmacy or pharmacist to influence the choice of drug or to switch a resident from one drug to another.
For providers looking for sample policy language relating to some of the major issues under the federal Anti-Kickback Statute, we have provided below sample policies on Vendor Agreements and Building and Equipment Leases. These are provided as samples only and for providers to use as a starting point in developing their own policies.
Physician Services Contracts
The OIG has also identified nursing facility contracts with physicians as potential “risk areas” which facilities should address in their compliance programs. Nursing facilities contract with physicians to serve as medical directors, perform certain quality assurance functions and, in some cases, for a variety of other services.
The OIG notes that physicians are also in a position to generate business for nursing facilities which is reimbursed by federal health care programs. According to the OIG, some examples include referring patients to a facility for admission, ordering items and services which result in an increased RUG or that are billable separately by the facility.
As a result, facility contracts with physicians should be carefully structured and closely monitored to ensure that they are not disguised vehicles for paying doctors for such referrals of federal health care program business. Similar to its recommendations for non-physician services contracts, the OIG recommends that, with respect to nursing facility contracts with physicians:
- The facility should ensure there is a legitimate need for the services it contracts with physicians to provide;
- The services are actually provided as described in the contract;
- Compensation for the services is consistent with fair market value in an arms-length transaction; and
- The arrangement is not related in any matter to the volume or value of federal health care program business generated.
The OIG also recommends that facilities maintain contemporaneous documentation (i.e, not after-the-fact documentation created to support a pre-existing arrangement) of the arrangement that may include time logs or other accounts of services rendered, and the basis for determining compensation for those services. Facilities also should not engage more medical directors or other physicians than reasonably needed for legitimate purposes. Where possible, facilities should structure their written agreements with physicians to fit either the personal services safe harbor or management contracts safe harbor.
Given the OIG’s focus on nursing facility – physician contracts, all such contracts should be reviewed by legal counsel experienced in fraud and abuse to ensure they are consistent with the Anti-Kickback Statute and related federal laws.
For providers looking for sample policy language relating to some of the major issues under the federal Anti-Kickback Statute, we have provided below sample policies on Medical Director Contracts and Physician Agreements. These are provided as samples only and for providers to use as a starting point in developing their own policies.
Auditing and Monitoring for Federal Anti-Kickback Statute Violations
We devoted a prior section of this Compliance Guidance to the function of auditing and monitoring your compliance program in the specific context of the risk areas identified by the OIG in its 2008 Supplemental Compliance Guidance and those additional risk areas each facility identifies from its own operations.
In the context of a formal corporate compliance program, auditing and monitoring just means having in place reliable, periodic systems to “audit” or check up on various aspects of facility and corporate operations which are identified in and are a part of your corporate compliance program. The keys to meaningful auditing and monitoring are 1) a workable system that is not overly complex; 2) a reliable system; 3) designated specifics on how the auditing process will work and who will be responsible for making sure it does; and 4) reviewing your auditing processes periodically to ensure that they, like other parts of your operations and business processes, are doing the job they were designed to do.
In the following discussion, we propose a sample auditing and monitoring tool for the risk area of the Federal Anti-Kickback Statute. This is only a sample and is designed to help facilities think about a method of ongoing self-evaluation of their operations regarding the risk area of the Anti-Kickback Statute. Each facility should design an auditing and monitoring mechanism appropriate to its operations, staff and unique compliance program. This sample utilizes the threshold questions we developed and recommended in the section of this Compliance Guidance entitled “Making Auditing and Monitoring Practical: A Step-by-Step Approach to Taking the Pulse of Your Operations and Compliance Program.”