Fraud and Abuse Presentation

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Fraud and Abuse
I. Overview
Physicians who treat patients insured under a “Federal Health Care Program” must
comply with fraud and abuse laws. This presentation discusses some key federal fraud
and abuse laws, including the False Claims Act, the Stark Law, the Civil Monetary
Penalties Law, and the Anti-kickback Statute. Many states have also promulgated fraud
and abuse laws, and physicians should become familiar with the laws of the jurisdiction
in which they practice.
A. Defining Federal Health CarePrograms:
1. Any plan or program that provides health benefits,
whether directly or indirectly or through insurance, which
is funded in whole or in part by the United States
government.
2. Any State health care program.
Social Security Act, Section 1128B(f).
Key “Federal Health Care Programs”:
 Medicare, which offers health insurance benefits to people age 65 or older, and
people under age 65 with certain disabilities.
 Medicaid or the Children's Health Insurance Program (CHIP), which provide
health care benefits to low income people, families, and children. Both programs
are administered by the states, but jointly funded by the Federal government and
the states.
 TRICARE (formerly known as CHAMPUS), which provides civilian health care
benefits for military personnel, military retirees, and their dependants.
 Black Lung program;
 Indian Health Service.
B. Fraud and Abuse Laws Discussedin This Presentation:
 The False Claims Act (31 U.S.C. §§3729-3733);
 Civil Monetary Penalties Law (42 U.S.C. § 1320a-7a);
 The Physician Self-Referral Law (42 U.S.C. §1395nn) (the “Stark Law”) 1;
 The Anti-kickback Statute (42 U.S.C. §1320a-7b(b)).
1 The Ethics in Patient Referral Act of 1989 (Stark I), as amended by the Omnibus Budget
and Reconciliation Act of 1993 (Stark II), collectively referred to as the Stark Law, codified at 42 U.S.C. §
1395nn. The Stark Law regulations can be found at 42 CFR § 411.350 et seq.

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C. Regulation and Enforcementof Fraud and Abuse Laws:
1. Centers for Medicare and Medicaid Services (CMS)
 CMS is an agency within U.S. Dept. of Health Human Services (HHS);
 CMS regulates fraud and abuse laws and issues regulations, guidance, and
advisory opinions;
 CMS coordinates efforts to prevent and fight fraud, including detecting and
reporting suspected fraud and abuse that is taking place;
 CMS collaborates on anti-fraud initiatives with law enforcement partners,
including the U.S. Department of Health and Human Services Office of Inspector
General (OIG) and the Department of Justice (DOJ).
2. Office of Inspector General (OIG)
 OIG is a unit within HHS whose mission is to protect the integrity of HHS
programs as well as the health and welfare of program beneficiaries;
 OIG conducts criminal, civil and administrative investigations of fraud and
misconduct related to HHS programs, operations and beneficiaries. In conducting
investigations and prosecutions, OIG is assisted by DOJ, FBI, state and local law
enforcement;
 OIG conducts audits of HHS programs and/or HHS contractors;
 OIG offers compliance guidance by developing and distributing resources to
assist the health care industry in its efforts to comply with fraud and abuse laws.
Links to OIG educational materials are provided in the Additional Resources
section of this presentation.
II. False Claims Act
A. Definition:
The False Claims Act prohibits providers, including physicians, from “knowingly”
presenting (or causing to be presented) to the Federal Government or its agents (e.g., a
carrier administering the federal program) a false or fraudulent claim for payment or
approval.
B. Knowingly:
Physicians do not have to intend to defraud the Government to violate the False Claims
Act. The term “knowingly” comprises submission of claims:
a) With actual knowledge of the falsity of the
information in the claim;
b) In deliberate ignorance (physician chooses to
ignore the truth or falsity of the information in a

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claim, even though the physician knows, or has notice,
that the information may be false)
Example: claims for non-reimbursable services are
submitted as a result of physician’s failure to update
his/her billing system in accordance with changes to
the Medicare billing practices.2
c) With reckless disregard of the truth or falsity of
the information in the claim.
Example: claims for non-reimbursable services are
submitted as a result of physician’s decision to assign
the billing function to an untrained office person
without inquiring whether that person had the
requisite training and knowledge to file claims.3
In other words, a physician cannot avoid liability by hiding his head in the sand, but
should be proactive and become familiar with coding procedures and medical necessity
standards.
Among other things, a physician should:
 Review CMS manuals, CMS national coverage determinations (NCDs), and local
coverage determinations (LCD) to assure that services are properly coded and
documented.
 Become familiar with CPT® – or current procedural terminology – codes that are
promulgated by the AMA. On January 1 of every year, the AMA implements
new CPT codes incorporating revisions as recommended by the CPT Editorial
Panel. In billing for services, a physician should rely on the current version of the
CPT codes. By using outdated information, a physician may have to return funds
improperly billed. But note: old CPT codes should be preserved for a period
within the statute of limitations to support coding for past services.
 Maintain documentation, such as a patient’s medical records and physician’s
orders, to support the appropriateness of services provided.
C. Examplesof False Claims:
 Billing for services or supplies that were never provided.
 Billing for non-covered services as if covered.
2 OIG Compliance Program for Individual and Small Group Physician Practices,
Federal Register / Vol. 65, No. 194 / Thursday, October 5, 2000 / Notices, available at
http://oig.hhs.gov/authorities/docs/physician.pdf (OIGCompliance Program).
3 Id.

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 “Unbundling” or billing separately for services that should be billed using an all-
inclusive code.
 “Upcoding” the level of service provided.
 Duplicate billing resulting in duplicate payment.
 Special billing regulations apply in teaching settings to teaching physicians,
interns, residents, and fellows. A link to the billing Guidelines for Teaching
Physicians, Interns, and Residents is provided in the Additional Resources section
of this presentation.
 Submitting claims for equipment, medical supplies, and services that do not meet
the Medicare (or other federal health program) standard of being reasonable and
necessary for the diagnosis and treatment of a patient. Example: in
recommending physical therapy for a patient, the physician should verify that
there is a demonstrated improvement to the patient’s condition and not merely
recommend physical therapy to alleviate family concerns or to simply provide the
service with no goal or endpoint in mind.
 Unlawfully giving providers, such as physicians, inducements in exchange for
referrals for services (i.e., violations of Stark and Anti-Kickback laws may trigger
the False Claims Act).
D. Penaltiesfor violatingthe False Claims Act:
 Civil penalties: $5,500 up to $11,000 for each false claim submitted. In addition,
a physician can be fined up to three times the program’s loss (meaning three times
the amount of money that the government paid in error).
 Program Exclusion: A physician can also face exclusion from participation in the
Medicare and Medicaid programs. Exclusion is a very drastic measure. Entities
or individuals who are excluded from participating in the federal health care
programs are barred from employment or any type of relationship with entities or
providers that are not excluded, whether they provide direct patient care or not.
Civil penalties are imposed against those who employ or contract with excluded
providers. Once a physician is excluded, he/she will have to reapply to participate
in federal health care programs.
 Billing in Error? Physicians who discover billing errors, honest mistakes, or
negligence resulting in erroneous claims, should promptly return the funds
erroneously claimed, but penalties may not be imposed depending on
circumstances.
E. Qui tam or whistle blowerprovision:
 Allows any person with actual knowledge of false claims to file suit on behalf of
the federal government.
 Whistleblowers are entitled to additional relief, including employment
reinstatement, back pay, and other compensation arising from retaliatory conduct.
 Whistleblowers may receive a potential award ranging from 15 to 30 percent of
the funds recovered.

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F. State False ClaimsActs
 Physician should also comply with the False Claims Act of the state where they
practice, if any. State False Claims Acts are directed to discourage frauds
perpetrated against state governments.
 States that have enacted False Claims Acts, include: California, Delaware, the
District of Columbia, Florida, Hawaii, Illinois, Louisiana, Massachusetts, Nevada,
New Mexico, Tennessee, Texas, and Virginia.
III. Civil Monetary Penalties (“CMPs”)
A. Definitionand Examplesof ConductSanctioned
OIG can impose CMPs on any person (including an organization, agency, or other entity,
but excluding a beneficiary) who knowingly presents or causes to be presented to a state
or federal employee or agent certain defined false or improper claims. “Knowingly”
means that the person has actual knowledge that the information is false, or acts in
deliberate ignorance or in reckless disregard of the truth or falsity of the information in
the claim. CMPs prohibit a wide range of fraudulent and abusive activities, including:
 Coding or billing violations;
 Billing for services furnished by a person that was not a licensed physician, or by
a person that was not properly supervised by a licensed physician, or furnished by
a physician who was not certified in the medical specialty that he or she claimed
to be certified in;
 Billing for services furnished by a physician who was excluded from participation
in the Federal health care program to which the claim was submitted;
 Violations of Stark and the Anti-kickback Statute;
 Violations of the Emergency Medical Treatment and Active Labor Act
(EMTALA), 42 U.S.C. 1395dd. OIG may seek a CMP, and in some cases
exclusion, not only against the hospital but also against the responsible physician
including an on-call physician.
 Beneficiary inducements to choose a particular provider;
 Gainsharing arrangements between physicians and hospitals.4 Gainsharing refers
to an arrangement in which a hospital gives a physician a percentage share of any
reduction in the hospital’s costs for patient care attributable in part to the
physician’s efforts. Hospitals and physicians can work together to reduce
unnecessary hospital costs, but the related compensation cannot be based on a
share of cost savings. OIG may instead find acceptable a fixed fee payment from
a hospital to a physician under a personal services contract at fair market value for
services rendered to reduce costs.5
4 42 U.S.C. § 1320a-7a(b) (1).
5 OIG Compliance Program, Appendix A, II C.

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B. Administrative CMP Proceedings and Penalties6
The formal initiation of a CMP case occurs when the OIG issues a demand letter setting
forth the sanctions, and the grounds on which they are based. The physician to whom the
letter was addressed can then request a hearing before an administrative law judge
(“ALJ”) within HHS. The decision of the ALJ may be appealed administratively and to
federal court. Numerous CMP cases settle before a decision of the merits.
OIG may seek different penalties based on the type of violation. For false or fraudulent
claims, for example, OIG may seek penalties of up to 10,000 per item or service and up
to three times the amount unlawfully claimed. OIG may also seek exclusion of the
physician from the affected Federal health care program.
IV. Stark Law:
A. Definition:
The Stark Law imposes limitations on certain physician referrals and many but not all
types of business relationships into which physicians may enter. In particular, the Stark
Law prohibits a physician from referring his or her Medicare or Medicaid patients to an
entity for a “designated health service” if the physician, or immediate family member of
such physician, has a financial relationship with the entity unless a statutory or regulatory
“exception” applies.
To understand whether the elements of Stark are present, physicians can apply the
following 5 Five Steps Analysis7:
Step 1 – Are you a physician currently seeing
Medicare/Medicaidpatients?
The Stark Law applies when the referral concerns a Medicare or Medicaid beneficiary. If
the patient involved is not a Medicare or Medicaid beneficiary, then the Stark Law does
not apply.
Step 2 - Do you “refer” Medicare/Medicaid patients?
In deciding whether or not the Stark Law applies, the physician must ask whether or not
he or she is making “referrals.” As defined in the Stark Law, a “referral” is the request
by a physician for, the ordering of, or the certifying or recertifying of the need for, any
DHS, including the request for a consultation with another physician and any test or
procedure ordered by or to be performed by (or under the supervision of) that other
6 OIG Compliance Program, Appendix C, II. See also
http://oig.hhs.gov/fraud/enforcement/cmp/index.asp
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NOTE: the step-by-step analysis is copied from http://www.ama-
assn.org/ama/pub/physician-resources/legal-topics/regulatory-compliance-topics/stark-law-
rules/ama-stark-law-rules-app.page. Materials and examples in this section are also copied from
the Stark law overview “The Stark Law Rules of the Road” that can be found at http://www.ama-
assn.org/resources/doc/psa/stark-law/stark-law.pdf. Links to the full AMA’s materials are
provided in the Additional Resources section of this presentation.

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physician. A “referral” does not include DHS personally performed or provided by the
referring physician.
Step 3 - Do you refer your Medicare/Medicaid patients for
any of the following “Designated Health Services”(DHS)?
 Clinical laboratory services;
 Physical therapy, occupational therapy, and outpatient speech-language pathology
services;
 Radiology and certain other imaging services;
 Radiation therapy services and supplies;
 Durable medical equipment and supplies;
 Parenteral and enteral nutrients, equipment and supplies;
 Prosthetics, orthotics, and prosthetic devices and supplies;
 Home health services;
 Outpatient prescription drugs;
 Inpatient and outpatient hospital services. Please note that health care services
that are not DHS when furnished outside of inpatient or outpatient settings may be
transformed into DHS when furnished in those settings. Example: diagnostic
cardiac catheterization services are not DHS when provided outside of the
hospital outpatient or inpatient context. Such services do become DHS when they
are furnished in a hospital inpatient or outpatient setting because inpatient and
outpatient hospital services are DHS.
Step 4 – Do you refer to an “entity” that performs DHS or
bills Medicare/Medicaid for the provisionof DHS?
The Stark Law does not apply unless the DHS are furnished by an “entity” that furnishes
DHS. The term “entity” itself is defined broadly and could include a physician
professional association, a hospital, a nursing facility, an independent diagnostic
treatment facility.
What does it mean to perform a DHS?
CMS has not defined the word “performs.” CMS has stated, however, that “[w]e do not
consider an entity that leases or sells space or equipment used for the performance of the
service, or furnishes supplies that are not separately billable but used in the performance
of the medical service, or that provides management, billing services, or personnel to the
entity performing the service, to perform DHS.”
Step 5 - Do you, or an immediate family member, have an
ownership or investment interest in an entity that performs
DHS or bills Medicare/Medicaidfor DHS?
Types of financial relationships:
1. Direct/indirect ownership/investment interests:
A direct ownership/investment interest exists when there is no intervening
ownership/investment interest between the physician (or immediate family member) and

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the entity. Example: A physician shareholder in a physician group would have a direct
ownership/investment interest in an entity if the group practice billed the Medicare
program for providing DHS services, e.g., physical therapy services. A physician would
also have a direct ownership/investment interest in an entity if the physician owned stock
in a for-profit general acute care hospital that served Medicare beneficiaries.
An indirect ownership or investment interest exists if the following two requirements are
satisfied: (a) an unbroken chain of ownership/investment interests exist between the
physician and the entity, and (b) the entity must “know” that the referring physician or
the physician’s family member has an ownership or investment interest in the entity.
Example of an unbroken chain of ownership/investment interests: Suppose a physician’s
step-daughter has an ownership interest in a local nursing home. The nursing home in
turn owns a portion of a corporation that provides durable medical equipment (DME). An
unbroken chain of ownership/investment interests exists between the step-daughter and
the DME corporation, because the stepdaughter has a direct ownership/investment
interest in the nursing home, and the nursing home has an ownership/investment interest
in the DME corporation.
2. Direct/indirect compensation arrangements:
A “compensation arrangement” is any arrangement involving remuneration, between a
physician (or family member) and an entity. The term "remuneration" includes any
remuneration, directly or indirectly, overtly or covertly, in cash or in kind. The Stark
statute and regulations list a few limited circumstances that do not constitute
“remuneration” for purposes of the Stark Law.
A direct compensation arrangement exists if remuneration passes between the referring
physician (or family member) and the entity furnishing DHS without any intervening
persons or entities. Example: a nursing home paying a physician via an independent
contractor relationship to serve as the nursing home’s medical director or a physician
renting office space from a hospital.
An indirect compensation arrangement exists between a referring physician (or family
member) and an entity if there is (a) an unbroken chain of any number of financial
relationships between the physician and the entity, (b) the physician (or family member)
receives aggregate compensation that varies with, or takes into account, the volume or
value of referrals or other business generated by the referring physician for the entity, and
(c) the entity has actual knowledge of, or acts in reckless disregard or deliberate
ignorance of, the fact that the referring physician (or family member) receives aggregate
compensation that varies with, or takes into account, the volume or value of referrals or
other business generated by the referring physician for the entity furnishing the DHS..

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If your answer to Steps 1-5 is yes,then the Stark Law
precludesthe referralunless a statutoryor regulatory
“exception”applies.
There are three broadtypes of Stark Law exceptions:
a) Exceptions applicable to both
ownership/investment interests and compensation
arrangements:
 Physician services. This exception allows a physician to refer a DHS service
within a group practice in the following circumstances:
o the referred physician service is personally performed by or under the
personal supervision of another physician in the same group practice as
the referring physician.
Example 1: Suppose Physicians A and B are both members of the same
group practice. Suppose also that Physician A refers Medicare inpatients for
ultrasound services. Under the physician services exception, Physician B
could interpret the result of the ultrasound test and the group practice could
bill the Medicare program for the provision of the professional component of
the DHS.
Example 2: The same result would occur as described in example 1 above if
Physician B supervised the interpretation of the ultrasound by non-group
member, physician C.
 In-office ancillary services. A physician is allowed to refer DHS services that are
ancillary to the physician’s professional services. Physicians in solo as well as
Stark Law group practice settings can avail themselves of the in-office ancillary
services exception. The exception has three general requirements concerning:
o Who can provide the ancillary DHS: the ancillary services must be
personally performed by either (i) the referring physician, (ii) a physician
who is a member of the same group practice as the referring physician, or
(iii) an individual who is supervised by the referring physician, or another
physician in a group practice;
o Where the ancillary DHS must be furnished: the services must be
furnished in the same building where the referring physician or member of
the group practice provides services that are not related to the furnishing
of DHS or in a centralized building exclusive to the group practice; and
o Who can bill for the provision of the DHS: the services must be billed
under a billing number that is assigned to the physician performing or
supervising the service, or the group practice.

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b) Exceptions applicable only to
ownership/investment interests:
A number of Stark Law exceptions apply to ownership/investment interests but not to
compensation arrangements. These include ownership/investment interests in an entity
that a physician or the family member has: (1) though publicly-traded securities; (2)
though mutual funds; (3) in rural providers; (4) in a “whole” hospital; and (5) in a
hospital located in Puerto Rico.
c) Exceptions applicable only to compensation
arrangements:
(1) Direct compensation arrangements:
A number of Stark Law exceptions permit a physician to refer a Medicare/Medicaid
beneficiary to an entity for the provision of DHS notwithstanding the existence of a direct
compensation arrangement between the physician and the entity. Listed below are the
Stark Law exceptions that apply only to direct compensation arrangements:
 Rental of office space;
 Rental of equipment;
 Bona fide employment relationships that satisfy the following requirements:
o Physician’s employment must be for identifiable services.
o The remuneration provided to the physician must be commercially
reasonable even if no referrals were made to the employer.
o The amount of the remuneration must be consistent with the fair market
value of the services provided by the physician.
o Remuneration cannot be determined in a manner that takes into account
(directly or indirectly) the volume or value of any referrals by the
physician, but can include productivity bonuses for DHS that are
personally performed by the physician.
o No writing is required.
 Personal service arrangements structured to satisfy all of the following
requirements:
o The arrangement must be set out in writing, signed by the parties, and
specify the services.
o Comprehensive coverage of all of the services that the physician (or an
immediate family member of the physician) will provide to the entity.
o The aggregate services contracted for must be reasonable and necessary
for the legitimate business purposes of the arrangement.
o The term of the agreement must be for at least one year.
o The compensation to be paid must be set in advance.
o The compensation to be paid cannot exceed fair market value and cannot
reflect the volume or value of referrals.
o The services to be furnished under each arrangement do not involve the
counseling or promotion of a business arrangement or other activity that
violates any Federal or State law.
 Remuneration provided by a hospital to a physician if such remuneration does not
relate to the provision of DHS;

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 Physician recruitment. Remuneration provided by a hospital to recruit a physician
that is paid directly to the physician and that is intended to induce the physician to
relocate her medical practice to the geographic area served by the hospital in
order to become a member of the hospital's medical staff is protected, if all of the
following conditions are satisfied:
o The arrangement is set out in a signed written agreement.
o No condition in the arrangement that the physician refer patients to the
hospital.
o The remuneration paid is not based on the volume or value of referrals.
o The physician is permitted to establish staff privileges at other hospitals
and to refer business to any other entity (except as referrals may be
restricted under an employment or services contract that complies with
certain requirements).
 Isolated transactions;
 Group practice arrangements with a hospital;
 Payments by a physician for items and services;
 Charitable donations by a physician;
 Nonmonetary compensation;
 Fair market value compensation. A physician may make a DHS referral to an
entity even if a compensation arrangement exists between the entity and the
physician, when that arrangement can be structured to satisfy the following
requirements:
o The arrangement must be in writing, and signed by the parties, and must
cover only identifiable items or services, all of which are specified in the
agreement.
o Specified time period, which can be for a term of less than one year.
Note: (i) Only one arrangement for the same items or services can be
made over the course of a year; (ii) Renewal of arrangements for a period
of less than one year is permitted.
o Compensation must be specified.
o Compensation must be “set in advance.”
o Compensation must be consistent with fair market value.
o Compensation cannot reflect the volume or value of referrals.
o The arrangement must be commercially reasonable. The arrangement must
be commercially reasonable (taking into account the nature and scope of
the transaction) and must further the legitimate business purposes of the
parties.
o The arrangement does not violate any other federal or state laws.
 Medical staff incidental benefits. A physician can make DHS referrals to a
hospital if the compensation arrangement between the hospital and the referring
physician can be structured to meet the following requirements:
o The benefits must be offered to all members of the medical staff practicing
in the same specialty.
o The benefits must be provided by the hospital and used by the medical
staff members only on the hospital's campus.

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o The benefits must be offered without regard to the volume or value of
referrals or other business generated between the parties.
o The benefits must be provided when medical staff members are engaged
in services or activities that benefit the hospital.
o The benefits must be reasonably related to the provision of, or designed to
facilitate directly or indirectly the delivery of, medical services at the
hospital.
o The value of the benefits for 2011 must be less than $30 with respect to
each occurrence of the benefit, but no upward limit to the total value of the
incidental benefits that may be provided to the medical staff. Example: A
hospital offers all physicians on its medical staff free parking in the
hospital parking garage. The value of the parking is $18 per
day. Provision of the free parking would fall under the exception for
medical staff incidental benefits because value of each occurrence of the
free parking is less than $30.
o No violation of any other federal or state laws.
 Risk-sharing arrangements;
 Compliance training;
 Referral services;
 Obstetrical malpractice insurance subsidies;
 Professional courtesy. An entity with a formal medical staff can offer a
professional courtesy (i.e., the provision of free or discounted health care item or
service) to a physician or a physician's immediate family member or office staff if
all of the following conditions are met:
o The professional courtesy is offered to all physicians on the entity’s bona
fide medical staff or in such entity’s local community or service area
without regard to the volume or value of referrals or other business
generated between the parties.
o The health care items and services provided are of a type routinely
provided by the entity.
o The entity has a professional courtesy policy that is set out in writing and
approved in advance by the entity’s governing body.
o The professional courtesy is not offered to a physician (or immediate
family member) who is a Federal health care program beneficiary, unless
there has been a good faith showing of financial need; and
o The arrangement does not violate the anti-kickback statute, or any Federal
or State law or regulation governing billing or claims submission.
 Retention payments in underserved areas;
 Community-wide health information systems;
 Electronic prescribing items and services.
 Electronic health records items and services (set to expire on Dec. 31, 2013).
(2) Indirect compensation arrangements:
A physician may make a DHS referral to an entity if the compensation arrangement
satisfies the requirements of the exception for indirect compensation arrangements.

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 Fair market value. The compensation received by the referring physician (or
immediate family member) represents the fair market value for services and items
actually provided.
 Volume or value of referrals. The compensation cannot be determined in any
manner that takes into account the volume or value of referrals or other business
generated by the referring physician for the entity.
 Written specification of services. The compensation arrangement must be set
out in writing, signed by the parties, and must specify the services covered by the
indirect compensation arrangement. If the indirect compensation arrangement
takes the form of a bona fide employment relationship between an employer and
an employee, the arrangement need not be set out in a written contract, but the
arrangement must be for identifiable services and be commercially reasonable
even if no referrals are made to the employer.
B. PenaltiesunderStark:
 Denial of payment: the Medicare and Medicaid programs are prohibited from
paying for DHS furnished pursuant to a prohibited referral.
 Refund of claims paid: any entity that that collects a payment for DHS that was
performed pursuant to a prohibited referral must timely refund such payment.
 Monetary Penalties: Any person or entity who bills Medicare for DHS that the
person or entity knew, or should have known, resulted from a prohibited referral
is subject to (1) a civil monetary penalty up to $15,000 per service, and (b) an
assessment by the OIG of three times the amount claimed for the DHS.
Physicians can also be subject to a civil monetary penalty of up to $100,000 for
each circumvention arrangement or scheme (such as a cross-referral arrangement)
that the physician or entity knows or should know has a principal purpose of
assuring referrals by the physician to a particular entity which, if the physician
directly made referrals to such entity.
 Exclusion from Medicare/Medicaid.
V. Anti-Kickback Statute
A. Definition:
Similarly to the Stark Law, the Anti-Kickback Statute regulates the financial relationships
that exist between physicians and individuals or entities to which physicians make
referrals or from which physicians receive referrals. Under Anti-Kickback Statute, it is
felony to “knowingly and willfully” offer, pay, solicit or receive directly or indirectly any
remuneration to induce [i] the referral of an individual to a person for the furnishing of an
item or service reimbursed in whole or in part by a Federal health care program; or, [ii]
the purchase, lease, or ordering any good, facility, service or item payable under a federal
health care program. Under the Healthcare Reform Law, violation may be established
without showing that an individual knew of the law’s prohibition and specifically
intended to violate the statute.

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B. Stark and Anti-Kickback Distinguished
 Criminal v. civil: the Anti-Kickback Statute is both a civil and criminal statue
under which criminal as well as civil remedies can be imposed. Stark is a civil
statute providing for civil enforcement remedies.
 Intent: A violation of the Anti-Kickback Statute requires proof of knowledge and
willfulness, while prohibited referrals under Stark are sanctionable regardless of
intent.
 Providers: The Anti-Kickback Statute applies to financial relationships involving
all provider types, while Stark applies to financial relationships relating to
physicians or members of their families.
 Services: The Anti-Kickback Statute applies to all items or services, while Stark
is limited to designated health services.
 Affected health-care programs: the Anti-Kickback statute broadly applies to all
Federal health care programs, while Stark applies to Medicare and Medicaid.
C. Safe HarborsUnder The Anti-Kickback Statute:
Safe harbors immunize certain business or payment arrangements from criminal or civil
prosecution under the Anti-Kickback Statute. If all of the safe harbor criteria are met by
an arrangement, then the physician and other parties to it will be assured that they will
not be prosecuted for the arrangement. By contrast to the Stark law, failure to meet all of
the criteria of any safe harbor does not mean that the arrangement is illegal. Parties who
are uncertain whether their arrangements qualify for safe harbor protection may request
an advisory opinion from OIG. OIG publishes past advisory opinions on its website.
These opinions, however, protect only the requesting entities.
Perhaps the most pervasive theme of the safe harbor regulations is the intent to protect
arrangements in which fair market value consideration is paid for the provision of
commercially reasonable items or services.
Examples of arrangements covered by safe harbors include the following:
 Payments for the use of space and equipment as long as all of the following
standards are met
o The lease agreement is set out in writing and signed by the parties.
o The lease covers all of the premises or equipment leased between the
parties for the term of the lease and specifies the premises or equipment
covered by the lease.
o The lease is intended to provide the lessee with access to the premises or
equipment for periodic intervals of time, rather than on a full-time basis
for the term of the lease, the lease specifies exactly the schedule of such
intervals, their precise length, and the exact rent for such intervals.
o The term of the lease is for not less than one year.
o The aggregate rental charge is set in advance, is consistent with fair
market value in arms-length transactions and is not determined in a
manner that takes into account the volume or value of any referrals or

15
business otherwise generated between the parties.
o The aggregate space rented or equipment rental does not exceed that
which is reasonably necessary to accomplish the commercially reasonable
business purpose of the rental.
 Personal services and management contracts as long as all of the following seven
standards are met:
o The agency agreement is set out in writing and signed by the parties.
o The agency agreement covers all of the services the agent provides to the
principal for the term of the agreement and specifies the services to be
provided by the agent.
o If the agency agreement is intended to provide for the services of the agent
on a periodic, sporadic or part-time basis, rather than on a full-time basis
for the term of the agreement, the agreement specifies exactly the schedule
of such intervals, their precise length, and the exact charge for such
intervals.
o The term of the agreement is for not less than one year.
o The aggregate compensation is set in advance, is consistent with fair
market value in arms-length transactions and is not determined in a
manner that takes into account the volume or value of any referrals or
business otherwise generated between the parties.
o The aggregate services contracted for do not exceed those which are
reasonably necessary to accomplish the commercially reasonable business
purpose of the services.
o The services performed under the agreement do not involve the counseling
or promotion of a business arrangement or other activity that violates any
State or Federal law.
 Investments by physicians in their own solo or group practice if the following
four standards are met:
o The equity interests in the practice or group must be held by licensed
health care professionals who practice in the practice or group.
o The equity interests must be in the practice or group itself, and not some
subdivision of the practice or group.
o In the case of group practices, the practice must meet the Stark Law
definition of “group practice,” operate as a unified business with
centralized decision-making, pooling of expenses and revenues, and a
compensation/profit distribution system that is not based on satellite
offices operating substantially as if they were separate enterprises or profit
centers.
o Revenues from ancillary services, if any, must be derived from “in-office
ancillary services” that meet the definition of such term under the Stark
Law.
 Referral arrangements for specialty services, which apply to any exchange of
value among individuals and entities where one party agrees to refer a patient to
the other party for the provision of a specialty service payable under a Federal
health care programs in return for an agreement on the part of the other party to
refer that patient back at a mutually agreed upon time or circumstance as long as

16
the following four standards are met:
o The mutually agreed upon time or circumstance for referring the patient
back to the originating individual or entity is clinically appropriate.
o The service for which the referral is made is not within the medical
expertise of the referring individual or entity, but is within the special
expertise of the other party receiving the referral.
o The parties receive no payment from each other for the referral and do not
share or split a global fee from any Federal health care program in
connection with the referred patient.
o Unless both parties belong to the same group practice, the only exchange
of value between the parties is the remuneration the parties receive
directly from third-party payors or the patient compensating the parties for
the services they each have furnished to the patient.
D. PenaltiesUnderThe Anti-KickbackStatute:
Violations of the Anti-kickback Statute may result in:
1. Criminal sanctions:
 Violations constitute a felony, with potential imposition of up to 5 years in prison
and/or $25,000 fine;
 A conviction will also result in automatic exclusion from participation in Federal
health care programs.
2. Civil Sanctions:
 Civil monetary penalties up to 50,000 per violation and three times the total
amount of “remuneration” involved in the anti-kickback transaction;
 Potential exclusion from participation in Federal health care programs;
 Violation constitutes a false claim under the False Claims Act.
VI. Suggested Compliance Practices
 Identify and familiarize yourself with your organization’s compliance operations and
resources.
 Review your organization’s compliance updates and other information on a regular
basis (e.g., community bulletin boards).
 Take advantage on an on-going basis of training and education programs on
compliance and billing.
 Learn about your organization’s communication links for reporting compliance
concerns. Always report concerns to assure there aren’t any substantive issues and to
allow the compliance office to investigate and implement any corrective measures
that may be necessary.
VII. Additional resources:
 www.cms.hhs.gov
 www.oig.hhs.gov

17
 http://oig.hhs.gov/compliance/alerts/index.asp (links to special fraud alerts issued
by OIG)
 http://oig.hhs.gov/compliance/advisory-opinions/index.asp (information relating
to advisory opinions issued by OIG)
 www.taf.org
 http://www.cms.gov/MLNProducts/ (Medicare Learning Network® (MLN)
Products Overview page – MLN products include the billing Guidelines for
Teaching Physicians, Interns, and Residents, which may be found at
http://www.cms.gov/MLNProducts/downloads/gdelinesteachgresfctsht.pdf)
 http://www.cms.gov/Medicare/Coding/NationalCorrectCodInitEd/index.html?redi
rect=/nationalcorrectcodinited/ (National Correct Coding Initiative Policy Manual
for Medicare Services)
 http://oig.hhs.gov/compliance/physician-education/index.asp (education materials
prepared by OIG to assist new physicians in avoiding violations of Fraud and
Abuse Laws)
 http://www.ama-assn.org/ama/pub/physician-resources/solutions-managing-your-
practice/coding-billing-insurance/cpt.page (information regarding CPT codes)
 http://www.ama-assn.org/ama/pub/physician-resources/legal-topics/regulatory-
compliance-topics/health-care-fraud-abuse.page (AMA's educational materials on
fraud and abuse)
 http://www.ama-assn.org/ama/pub/physician-resources/legal-topics/regulatory-
compliance-topics/stark-law-rules/ama-stark-law-rules-app.page (The AMA Stark
Law Rules of the Road)

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