Health Law Blog

The Office of the Inspector General of the New York State Department of Health (the “OIG”) has expressed concern with rental arrangements between physicians and other health-related providers.  Specifically, the OIG has issued Special Fraud Alerts noting that the rental payments are frequently disguised kickbacks to induce patient referrals.  The OIG has elaborated on some of not so definitive factors considered when evaluating a specific rental arrangement that include the appropriateness of the agreement, the rental amount as well as time and space referenced, and combination of the factors involved. 

Due to heightened government scrutiny of medical practices in NYS, many physicians and other health care professionals are aware of some of the regulatory requirements pertaining to physician lease agreements such the fact that the rent must be fixed at a fair market value and that the size of the rented premises and the rental period must be reasonably necessary to carry out the renter’s legitimate business purpose for the rented space. However, few are recognizant of the subtleties involved in the specific approach the OIG takes in assessing physician lease agreements.  For instance, it is essential to keep in mind that in the event that a physician-tenant rent that is either above or below the fair market value for the leased premises then the OIG shall assume that some violation of the Anti-Kickback statute is taking place.  Similarly, there are specific warnings issued by the OIG with respect to premises size and rental time referencing a presumption of violations in the event of any discrepancies between the use of the rented space and  its legitimate business usage.  The OIG has issued a specific but complex formula for calculation of what would be considered appropriate rent and all healthcare providers would be well-advised to comply with this regulatory guidance. 

Physicians need to be aware that while numerous safe harbor criteria exist, which if met would render the lease agreement to be immune from prosecution under the anti-kickback statute, application and adequacy of these must be carefully analyzed by a knowledgeable attorney with particular expertise in the healthcare regulatory domain.  This is particularly true in light of the recent sharp increase in governmental audits and investigations of various healthcare providers, and considering the fact that a violation of the federal anti-kickback statute constitutes a serious crime punishable by a fine of up to $25,000, imprisonment or both, in addition to potential exclusion from Federal health care programs, investigations by other third party payors and referral to the Office of Professional Medical Conduct for initiation of disciplinary proceedings.

The complexity of compliance with federal laws and regulations and the potentially devastating consequences of violations should not be ignored.  Physicians who are renting space from or to other healthcare providers are strongly advised to review the details of their rental agreements with an experienced healthcare attorney. 

The Office of Inspector General ("OIG") for the Department of Health and Human Services recently issued an alert warning physician of the risks taken by reassigning the right to bill the Medicare program and receive payments from Medicare.  Specifically, in its alert the OIG officials state that “physicians who reassign their right to bill the Medicare program and receive Medicare payments by executing the CMS-855R application may be liable for false claims submitted by entities to which they reassigned their Medicare benefits.”  The OIG places emphasis on physician liability for claims submitted using his or her provider numbers, even in a situation where the claims are submitted by another party under a contractual arrangement. 

Under Medicare regulations, joint and several (individual and shared) liability is imposed on the physician or other healthcare professional who actually provides the services as well as the entity that bills and receives reimbursement for those services under with the terms of a contractual arrangement. The healthcare provider has a duty to verify that the services were performed as billed and, therefore, must have unrestricted access to all billing and other claims information. Physicians and other practitioners must be forewarned that these requirements must be documented in writing and simply signing the reassignment form is not sufficient, and may subject the provider to liability in the event potential investigation ensues.

Notably, in an adequately documented employer-employee relationship, where the employer reserves the right to receive payments, liability under the False Claims Act for improper billings to or collections from the Medicare program is imposed solely on the employer. However, the OIG clearly stresses the fact that an employee status of the provider must be properly documented to shield that provider from False Claims Act liability. The OIG further and specifically urges all healthcare providers to “use heightened scrutiny” and “carefully consider entities to which they choose to reassign their Medicare payments and ensure that the entities are legitimate providers or suppliers of health care items and services.

If you are a physician or other provider concerned with an arrangement involving reassignment of Medicare payments under an employment or any other legal issue concerning your healthcare practice, do not hesitate to contact Kristina Giyaur, Esq. at 718.787.9500 or by email at This email address is being protected from spambots. You need JavaScript enabled to view it. . 

The New York State Department of Health (“DOH”) has issued a Request for Applications (“RFA”) to establish new or expand existing Certified Home Health Agencies (“CHHAs”) in New York State. This is the first time in many years that CHHA applications will be accepted.  A CHHA is a licensed home health agency allowed to bill the Medicare and Medicaid.

On February 16, 2012, the Centers for Medicare and Medicaid Services ("CMS") published a rule requiring Medicare providers and suppliers to report and return Medicare overpayments by the later of 60 days after the date on which the overpayment was identified. Failure to identify, report and return the overpayment within the 60 day deadline constitutes a false claim under the False Claims Act, which subjects the provider or supplier to additional penalties under the law.  The new rule has wide implications for all Medicare and Medicaid providers.

A critical issue clarified in the rule is when the payment is "identified."  Under the rule, an overpayment is "identified" when the provider "has actual knowledge of the existence of the overpayment or acts in reckless disregard or deliberate ignorance of the overpayment."  Accordingly, under the CMS rule, the 60-day period does not begin until the investigation yields actual knowledge that an overpayment occurred. However, a provider must conduct timely and diligent investigations of all suspected overpayments, and a provider that fails to make reasonable inquiry into an allegation may be found to have acted in reckless disregard or deliberate ignorance. In such an instance, the 60-day period would begin at the time the allegation of overpayment was made.

CMS has imposed a ten-year look back period to correspond to the statute of limitations under the False Claims Act. Therefore, all providers are now faced with the prospect of looking back as far as ten years.

Although CMS states in the rule that its provisions apply only to Medicare Part A providers and Medicare Part B suppliers, CMS is clear that all providers subject to the Patient Protection Affordable Care Act ("PPACA") -- which includes Medicaid providers -- are required to follow the statute. It is expected that CMS will interpret PPACA similarly with respect to other providers, including Medicare and Medicaid managed care organizations. All providers should therefore take heed of the rule and evaluate their compliance programs in light of CMS' position.

Penalties

Providers and suppliers failing to identify, report and return overpayments within the 60 day deadline are deemed to have filed a false claim under the False Claims Act. Liability under the False Claims Act includes treble damages, plus penalties up to $11,000 per false claim. False claims also generate liability of $10,000 per claim under the Civil Monetary Penalties law, and could also result in exclusion from participation in federal healthcare programs.

The new regulation imposes strict new requirements upon providers.  It is highly advisible to contact a professional when dealing with overpayment situations.  Taking advantage of proper mechanisms can potentially limit civil and criminal exposure.