David C. Marshall, Esq. 6085721. Nursing facilities depend on ancillary providers to furnish needed services to their residents. Those relationships

608572 1

Physician and Ancillary Provider Contracting Issues

for SNFsDavid C. Marshall, Esq.

608572 2

Nursing facilities depend on ancillary providers to furnish needed services to their residents.

Those relationships must be structured in compliance with applicable law, and tailored to address the business and service needs of the facility.

We’ll discuss: (a) basic contractual requirements; (b) Anti-Kickback Statute issues for all agreements; and (c) Stark considerations for physician arrangements.

Introduction

608572 3

Parts of a (binding) contract◦ Offer◦ Acceptance◦ Consideration◦ No Defense

mutual mistake misrepresentation or fraud capacity unconscionability

Services◦ Specifically list the obligations of both parties and the services to

be provided, including: Duty to act in accordance with law and facility policies Recordkeeping requirements Licensure/certification requirements Criminal Background checks

Basic Contractual Provisions

608572 4

Compensation and Billing◦ Contract must specifically spell out all forms of

compensation to be provided in exchange for services Fair Market Value for services rendered Compliance issues (discussed later)

◦ Contract should explicitly address which party has the responsibility for billing any residents, third party payors, governmental agencies Federal regulations require for SNFs in order to avoid

“duplicate billing” issues


608572 5

Term and Termination◦ Establish a timeframe – 1 year minimum (per

AKS) This doesn’t mean that the services owed can’t be

completed in less than 1 year◦ Will the contract automatically renew?

If so, make sure to calendar dates, to meet any notice of termination deadlines

◦ How can the parties “get out” of the agreement? While we have the best of intentions entering a

relationship, it is wise to plan for the eventual end of the arrangement.


608572 6

Term and Termination◦ Terminations with and/or without cause

Termination without cause is the “cleanest” way to get out of an arrangement

What constitutes “cause?” ◦ Breach issues

Notification to breaching party Is there an opportunity to “cure” the breach and

continue? Who gets to determine whether the breach is cured? Parties can easily find themselves in litigation over

whether a breach has occurred which authorizes termination of the agreement


608572 7

Indemnification◦ Means of being made whole because of other

parties’ actions.◦ At a minimum, should be reciprocal.◦ Should contain notice requirements◦ Limitations on liability◦ What standard –

“gross negligence” – higher standard acts or omissions breach of duty Fraud provision must be clear and unambiguous


608572 8

Other Issues to Address◦ Appeal Issues◦ Arbitration◦ Independent Contractor◦ Confidentiality/HIPAA

if applicable, business associate addendum◦ Nondiscrimination◦ Miscellaneous Terms

Assignment Governing Law Notice


608572 9

Basic Prohibition ◦ Prohibits offering, paying, soliciting, or receiving

anything of value to induce ore reward referrals or generate Federal health care program business.

◦ Referrals can be from anyone, for any items or services.

◦ Intent: knowing and willful (i.e. specific intent)◦ Penalties

criminal: fines up to $25,000 per violation, up to a 5 year prison term per violation

civil/administrative: FCA liability, civil monetary penalties and program exclusion, potential $50,000CMP per violation, civil assessment of up to three times amount of kickback.

Anti-Kickback Issues

608572 10

“Any One Purpose” Test◦ The third Circuit has held that the Anti-Kickback

Statute is violated when any one purpose of a transaction is prohibited, regardless of other legitimate motivations the parties may have. See United States v. Gerber, 760 F.2d 68 (3rd Cir. 1985).

Swapping◦ Providing an impermissible discount in order to

secure Medicare covered business◦ Ambulance example: Discount of Part A covered

services with no corresponding discount on Part B transports


608572 11

CMS has promulgated numerous “Safe Harbors” to the AKS◦ An arrangement that fits within a Safe Harbor is

automatically deemed in compliance with the AKS◦ An arrangement that doesn’t, is not automatically

considered in violation of the AKS◦ In those cases, a facts/circumstance test is

applied When contracting, the parties should strive

to structure the agreement in compliance with a Safe Harbor (or as close as possible)


608572 12

Pertinent Safe Harbors◦ Personal/Management Services◦ Investment◦ Space and Equipment Rental◦ Discounts◦ Employee◦ Group Purchasing

Arrangements can be covered by/trigger multiple Safe Harbors


608572 13

Safe Harbors – Key concepts◦ Compensation set in the aggregate, in advance,

and not indexed to the volume/value of business or referrals What does this mean, practically speaking?

◦ Contract term set for at least 1 year; If terminate early, can’t re-enter relationship on different terms

◦ Must spell out services to be provided, and, if periodic, specifically address when services will be provided, or space will be rented/used


608572 14

Personal Services Safe Harbor◦ Will apply to most SNF/Ancillary provider

arrangements◦ Note that compensation arrangements which are

based on a “per unit, per evaluation, per diem, . . . etc.” basis will not satisfy this Safe Harbor. As a practical matter, this means that most therapy, lab, pharmacy, medical supply, and other fee-for-service contracts will not fit within this Safe Harbor.

◦ Can’t adjust payment terms based on volume of services/units ordered


608572 15

Discount Safe Harbor◦ Discounts are not discouraged by the Medicare Program. ◦ However, discounts must be earned based on purchases of the same

good or service during a single fiscal year, and the discount must be passed on to the Medicare Program during the cost reporting process.

◦ The seller is required to disclose the discount offered on the invoice provided to the buyer.

◦ A discount is defined as a reduction in the amount a buyer (who buys either directly or through a wholesaler or a group purchasing organization) is charged for an item or service based on an arms-length transaction. A discount does not include a cash payment or supplying one good or service without charge or at a reduced charge to induce the purchase of a different good or service, unless the goods and services are reimbursed by the same Federal health care program using the same methodology and the reduced charge is fully disclosed to the Federal health care program and accurately reflected where appropriate, and as appropriate, to the reimbursement methodology.


608572 16

STARK◦ Prohibits a physician from referring Medicare patients for

designated health services to an entity with which the physician (or immediate family member) has a financial relationship, unless an exception applies. “Referral” includes signing a Plan of Care which includes DHS

◦ Prohibits the designated health service entity from submitting claims to Medicare for those services resulting from a prohibited referral.

◦ No intent standard for overpayment (strict liability), intent required for civil monetary penalties for knowing violations.

◦ Penalties: civil: overpayment/refund obligation, FCA liability, CMP and program

exclusion for knowing violations, potential $15,000 CMP for each service, and civil assessment of up to three times the amount claimed.

Physician Contract Issues

608572 17

STARK◦ Designated Health Services are:

clinical laboratory services; physical therapy, occupational therapy, and outpatient

speech-language pathology services; radiology and certain other imaging services; radiation therapy services and supplies; DME and supplies; parenteral and enteral nutrients, equipment, and supplies; prosthetics, orthotics, and prosthetic devices, and

supplies; home health services; outpatient prescription drugs; and inpatient and outpatient hospital services.


608572 18

STARK◦ Personal Services Exception – to satisfy it must:

be in writing, be signed by the parties to the agreement, and specify the services covered by the agreement;

cover all of the services to be furnished by the physician under the agreement;

cover aggregate services that do not exceed those that are reasonable and necessary for the legitimate purposes of the arrangement;

be for a term of at least one year; provide for compensation to be set in advance. not to exceed fair

market value and not be determined by the volume or value of any referrals or other business generated between the parties; and

not involve counseling or promotion of a business arrangement or other activity that violates any state or federal law, such as the federal Anti-Kickback Statute.


608572 19

Medical Director Relationship◦ A SNF/Medical Director relationship triggers the Stark law,

and must be structured consistent with the Personal Services Exception.

◦ This relationship is also critical to ensure the delivery of quality care at the facility.

◦ American Medical Director’s Association Medical Directors should “supervise the medical staff” at the

facility Medical Director must inform the “medical staff” of relevant

policies and procedures Medical director organizes, coordinates, and monitors the

activities of the “medical staff” and helps ensure that the quality and appropriateness of services meets community standards


608572 20

Regulatory Requirements◦ 42 CFR 483.75(i)

(1) The facility must designate a physician to serve as medical director.

(2) The medical director is responsible for – (i) Implementation of resident care policies; and (ii) The coordination of medical care in the facility.

◦ 42 CFR 483.40 Resident must be admitted to facility on orders of

physician and must remain under the care of a physician When attending physician is unavailable, another

physician must be available to supervise resident’s care Visitation requirements


608572 21

State Operations Manual◦ Very detailed in expectations of Medical Director

Assist facility in the development and implementation of policies and procedures and that these are based on current standards of practice

Interacts with the physician supervising the care of the resident if requested by the facility to intervene on behalf of the residents

Be available to surveyors to clarify clinical questions or information about the care of specific residents, request surveyor clarification of citations on clinical care, attend the exit conference to demonstrate physician interest and help in understanding the nature and scope of the facility's deficiencies, and help the facility draft corrective actions.


608572 22

State Operations Manual◦ Very detailed in expectations of Medical Director

Be involved in facility level issues, even if working at a multi-facility organization with corporate or regional offices.

Help the facility obtain and maintain timely and appropriate medical care that supports the healthcare needs of the residents, that is consistent with current standards of practice and helps the facility meet its regulatory requirement.

Establish a framework for physician participation, and physicians should believe they are accountable for their actions and their care.

Recommendation – share the SOM text with your Medical Director; incorporate provisions into your agreement with the Medical Director


608572 23

Compensation Issues◦ Bonus/Incentive Compensation Issues

Currently no Exception to cover such compensation programs (except under current Medicare Advantage Plan)

2008 Proposed Exception (never finalized) for shared savings plans

OIG issue with gainsharing/incentive plans that have the effect of reducing services to beneficiaries

Tie to quality indicators/improvement, ensure no reduction in services, not indexed to financial status of the facility


608572 24

Compensation Issues◦ Stark Recruitment Exception

In addition to “the basics”: The physician must relocate his/her practice to the

hospital’s geographic area, which is the area composed of the lowest number of contiguous zip codes from which the hospital draws at least 75% of its inpatients, as evidenced by the physician moving his/her practice at least 25 miles,

or physician deriving 75% of his revenues from professional

services furnished to patients not previously seen by the physician during the previous 3 years.


608572 25

Compensation Issues◦ Recruitment

Note that the Stark Exception applies to “hospitals” Currently is no Exception for SNF’s to make

payments to recruit physicians Absent changes in law, would probably need to seek

an advisory opinion from CMS to see if they would agree to extend the current Exception to SNFs, in light of the reform measures being pushed


608572 26

Imperative that those with contracting authority understand the compliance issues that overlay these relationships

Goal is to enter into contractual relationships that are beneficial from a service and business perspective, while achieving compliance with governing law.

Advice – develop a contract policy and checklist to ensure achievement of these goals

Conclusions

608572 27

David C. Marshall, Esq. Latsha Davis & McKenna, P.C.

1700 Bent Creek Blvd., Ste. 140 Mechanicsburg, PA 17050

[email protected] web site: ldylaw.com

(717) 620-2424

CONTACT:

mailto:[email protected]

Documents

David C. Marshall, Esq. 6085721. Nursing facilities depend on ancillary providers to furnish needed services to their residents. Those relationships