CLIENT ALERT, April 2, 2010
On March 23, 2010, President Obama signed into law the Patient Protection and Affordable Care Act (P.L. 111-148) (“Act”). Healthcare providers should pay particular attention to provisions of this Act that affect the federal physician self-referral (“Stark”) law, 42 U.S.C. § 1395nn, and the federal Anti-Kickback Statute, 42 U.S.C. § 1320a-7b(b).
I. Key Changes to Stark Law
1. Disclosure Requirements for Certain Imaging Services (§ 6003)
Section 6003 of the Act amends the Stark law in-office ancillary services exception by adding a new disclosure requirement. A group practice that makes a referral under this exception for MRI, CT, or PET services is now required to inform the patient in writing at the time of the referral that the patient may obtain the same service(s) from another supplier outside the group practice. The physician must also provide the patient with a written list of suppliers who furnish such services in the area where the patient resides. The Act gives the Secretary of Health and Human Services (“HHS”) authority to expand this disclosure requirement to “any other designated health service…that the Secretary determines appropriate.”
While the effective date of Section 6003 is January 1, 2010, the disclosure requirement appears to have taken effect on March 23, 2010, the date that the bill was signed into law. Although it is hoped that the Secretary will delay enforcement of this provision while providers implement it, there remains uncertainty as to the potential exposure of providers for failing to satisfy this notice requirement in the interim.
2. Stark Self-Disclosure Protocol (§ 6409)
The Act mandates the creation of a long-awaited formal self-disclosure protocol for actual or potential violations of the Stark law, and instructs the Secretary, in cooperation with the Department of Health and Human Services Office of Inspector General (“HHS-OIG”), to develop and implement a protocol within six months (late September 2010). Importantly, the new protocol will also provide HHS-OIG with discretion to resolve Stark violations and reduce the amount due and owing for violations based on the nature and extent of the improper practice, the timeliness of the disclosure, and cooperation.
3. Strict Limitations to Physician-Owned Hospitals (§ 6001)
The Act significantly restricts the ability of physicians to have ownership interests in hospitals under the whole hospital exception and essentially prohibits such investments going forward. Existing physician ownership of hospitals as of December 31, 2010 remains permitted, although the law now prohibits physicians from increasing the total value of their percentage of ownership interest beyond that held as of March 23, 2010. The interplay between these dates creates inherent ambiguity over the parameters of this grandfather clause.
To prevent conflicts of interest, Section 6001 expands disclosure requirements relative to physician ownership, severely limits the physical expansion of physician-owned hospitals (e.g., increasing the number of beds or procedure rooms), and imposes additional requirements to ensure bona fide physician investment (e.g., ownership returns must be proportionate to the physician’s ownership interest). The new restrictions also apply to any physician-owned hospital qualifying under the rural provider exception.
II. Expansion of Scope of Anti-Kickback Statute
The Anti-Kickback Statute makes it a criminal offense to “knowingly and willfully” offer, pay, solicit, or receive any remuneration in connection with referring an individual for medical items or services for which payment may be made by any federal health care program, including Medicare and Medicaid. 42 U.S.C. § 1320a-7b(b). Section 6402(f) of the Act makes the following two significant changes to this law that expand the application of the statute:
1. Actual Knowledge of Illegality and Specific Intent to Violate the Law Not Required to Establish Liability
Until now, the Anti-Kickback Statute did not specifically define the intent required to establish a violation of the law. In an interpretation widely perceived as making prosecution under the law more difficult, the Ninth Circuit Court of Appeals held that a person could not be liable under the law unless he or she (1) subjectively knew that the statute prohibited offering or paying remuneration to induce referrals, and (2) engaged in the prohibited conduct with the specific intent to disobey the law. In a move likely to cheer prosecutors, the Act effectively overturns this interpretation by providing that, in order to establish an offense, “a person need not have actual knowledge of [the Anti-Kickback Statute] or specific intent to commit a violation of this section.”
2. Violations Can Automatically Generate False Claims
The Act also provides that any claim submitted resulting from a referral made in violation of the Anti-Kickback Statute automatically “constitutes a false or fraudulent claim” under the False Claims Act. 31 U.S.C. § 3729 et seq. This, in conjunction with a loosening of the intent requirement, may encourage the filing of more FCA cases with kickback components.
If you have any questions regarding this Client Alert, please contact David Robbins, Renee Howard, or Jill Scott at 206-622-5511.
