Summary of Fraud and Abuse Provisions of the Patient Protection and Affordable Care Act

The Patient Protection and Affordable Care Act (“PPACA”), signed into law on March 23, 2010, contains many provisions that address fraud and abuse issues. The following is a brief synopsis of some of the major fraud and abuse law changes.

Stark Law Changes

Establishment of Medicare Self-Referral Disclosure Protocol

Section 6409 of the PPACA primarily requires that the Secretary of HHS, in cooperation with the HHS Office of Inspector General (“OIG”), establish a self-referral disclosure protocol to permit providers and suppliers to voluntarily disclose potential Stark Law violations. The protocol must, at a minimum, set forth the contact person/office to whom disclosure may be made and the impact of the protocol on corporate integrity agreements/corporate compliance agreements. The Secretary must enact the protocol within six months of enactment of the PPACA and have the new protocol published on the CMS website.

Section 6409 of the PPACA also grants the Secretary of HHS the authority to reduce amounts owed for violations of the Stark Law. The Secretary may consider the following factors in assessing the amount owed for a Stark Law violation:

• Nature and extent of impermissible practice
• Timeliness of self-disclosure
• Cooperation in providing additional information related to the disclosure
• Other factors that the Secretary considers appropriate

Disclosure Requirements for In-Office Ancillary Services Exception

As discussed in previous correspondence, Section 6003 of the PPACA imposes a new requirement for sole practitioners and physician group practices that qualify to use the in office ancillary services exception under the Stark Law.

Specifically, with respect to magnetic resonance imaging, computed tomography, positron emission tomography, and any other designated health services in the “radiology services” category that the Secretary of HHS determines appropriate, the referring physician must:

• Inform the patient in writing at the time of the referral that the patient may obtain the services for which the individual is being referred from a person other than the referring physician, a physician who is a member of the same group practice as the referring physician, or an individual directly supervised by the physician or by another physician in the group practice, and
• Provide the patient with a written list of suppliers who furnish such services in the area in which the patient resides.

The change was technically effective for services furnished on or after January 1, 2010.

Limitations on Physician-Owned Hospitals

Section 6001 of the PPACA narrows the Stark Law “whole hospital” exception, which addresses hospital ownership by referring physicians. While physician-owned hospitals that have their provider agreement in place by December 31, 2010 are grandfathered, the PPACA effectively prohibits new physician-owned hospitals, or expansions thereof, after December 31, 2010. This section also prohibits grandfathered hospitals from increasing aggregate physician ownership or expanding certain licensed beds, operating rooms or procedure rooms after March 23, 2010. Furthermore, grandfathered hospitals must meet certain additional requirements by September 2011 in order to remain in compliance with the Stark Law “whole hospital” exception. It should be noted that this amendment applies to physician ownership interests in all hospitals, including acute care hospitals, long-term acute care hospitals and specialty hospitals.

In addition, those physician-owned hospitals that are permitted under the narrower Stark Law exception (by meeting the requirements discussed above) must also, among other things:

• Submit a detailed annual ownership report to the Secretary of HHS
• Adopt procedures to disclose a referring physician’s ownership interest to patients
• Publically disclose that the hospital is partially owned and/or invested in by physicians
• Take various patient safety measures
• Ensure that physician ownership is not conditioned on referrals or generation of business

Section 6001 also narrows the Stark Law physician ownership exception for rural entities. Beginning 18 months after the enactment of the PPACA (September 2011), hospitals otherwise qualifying for the rural exception must also meet the new “whole hospital” requirements discussed above, including the limitations on expansion and increase in aggregate physician ownership as well as the requirement that both physician ownership and a provider agreement be in place by December 31, 2010. The requirement will effectively end the use of the Stark Law rural provider exception for new physician-owned hospitals.

Anti-Kickback Statute Changes

Lowered Criminal Intent Standard

Section 6402(f) of the PPACA clarifies that, for purposes of Anti-Kickback Statute violations, “a person need not have actual knowledge of [the Anti-Kickback Statute] or specific intent to commit a violation of [the Anti-Kickback Statute].”

Prior to the PPACA, the intent requirement under the Anti-Kickback Statute was unclear, with some courts requiring knowledge of the statute and specific intent to violate it. Ultimately, this revision clarifies that specific intent is not required to prove an Anti-Kickback Statute violation, lowering the government’s prosecutorial burden.

Violation Triggers False Claims Act

Section 6402(f) of the PPACA also clarifies that a violation of the Anti-Kickback Statute can also result in a violation of the False Claims Act. Specifically, items or services resulting from a violation of the Anti-Kickback Statute constitute a false or fraudulent claim for purposes of the False Claims Act.

Prior to the PPACA, most courts required some nexus between an Anti-Kickback Statute violation and the government’s decision to pay a claim (e.g., condition of payment) in order for the violation to be used as the basis for a False Claims Act violation. Under the amended language, the government or a whistleblower could potentially bring a False Claims Act claim by demonstrating that the defendant knowingly submitted a claim to the government for items or services that involved an underlying Anti-Kickback Statute violation.

Violation a Federal Health Care Offense

Section 10606 of the PPACA provides that a violation of the Anti-Kickback Statute is a “federal health care offense.” Federal health care offenses are subject to certain procedures for investigation, freezing of assets, injunctions and sentencing of parties suspected of committing such an offense. As a result, healthcare practitioners suspected or convicted of violating the Anti-Kickback Statute could face increased scrutiny, more detailed and onerous investigations and stiffer penalties.

False Claims Act Changes

Changes in Requirements/Definitions

Section 10104(j) of the PPACA makes various amendments to provisions under the False Claims Act, which amendments, as a whole, make it easier for qui tam relators to initiate and sustain actions under the False Claims Act.

First, this section now requires courts to dismiss qui tam actions “if substantially the same allegations or transactions as alleged in the action or claim were publicly disclosed” through specified forums, except in situations where the qui tam relator is an “original source” or where opposed by the government. Before the PPACA, the law completely cut off the court’s jurisdiction to hear such claims (unless the “original source” exception applied) and did not allow the government to oppose the dismissal.

Second, the amendment limits public disclosure to only include disclosure through federal investigations, reports, audits, hearings and proceedings and through the news media. Formerly, public disclosure also included state proceedings. This change limits the situations in which a False Claims Act defendant can assert the public disclosure defense.

Third, the amendment expands the definition of “original source” to include persons who: (i) voluntarily disclosed to the government “the information on which allegations or transactions in a claim are based” prior to the public disclosure; or (ii) have knowledge independent of and that “materially adds to the publicly disclosed allegations or transactions” and have voluntarily provided such information to the government before filing an action. This amendment will allow more qui tam relators to argue that the public disclosure defense is inapplicable to them.

Applicability to Health Insurance Exchange Payments

As you know, the PPACA seeks to create Health Insurance Exchanges to provide additional health insurance coverage options to the American public. As a result, Section 1313(a)(6) of the PPACA specifically states that “[p]ayments made by, through, or in connection with an Exchange are subject to the False Claims Act . . . if those payments include any Federal funds.”

Other Fraud and Abuse Enforcement Changes

Disclosure/Repayment Requirements for Overpayments

Section 6402(a) of the PPACA now expressly requires healthcare providers, suppliers or other applicable entities to promptly report and return Medicare and Medicaid overpayments. “Overpayment” is defined broadly to include any funds retained or received under the Medicare and Medicaid programs to which the entity or individual is not actually entitled. Moreover, the party returning the overpayment must also provide an explanation of the reason for the overpayment. The deadline for returning and reporting overpayments is the later of 60 days from the date the overpayment was identified or, if applicable, the date any corresponding cost report is due. Determining when the 60-day period begins to run may be difficult in practice because the statute does not define when a provider or supplier has “identified” an overpayment; is it when an overpayment is discovered or when the amount of the overpayment has been quantified to a reasonable certainty? Arguably, it would be difficult to make repayment of an overpayment if the amount has not been determined.

This section also states that any overpayment not returned by the applicable deadline is considered an “obligation” under the False Claims Act. Therefore, a party retaining the overpayment past the deadline could face liability under the False Claims Act. In addition, Section 6402(d)(2) of the PPACA imposes a civil monetary penalty on a party who knows of an overpayment and does not return it in accordance with the above described requirements. Finally, Section 6502(d)(1) of the PPACA permits applicable state agencies to exclude from participation in the Medicaid program, providers with unpaid overpayments.

Changes to Civil Monetary Penalties Law

The PPACA makes multiple changes to the civil monetary penalties law. Primarily, Section 6402(d)(2) and Section 6408(a) add several new violations for which the HHS Secretary may impose civil monetary penalties. The following is a list of some new violations implicating civil monetary penalties and the amount of the fine attributed to each violation:

• Ordering or prescribing a medical or other item or service while excluded from a Federal health care program – Up to $50,000 per prohibited order or prescription
• Knowingly making or causing to be made any false statement, omission, or misrepresentation on any application, bid, or contract to participate/enroll as a provider or supplier under a Federal health care program – Up to $50,000 per false statement, omission, or misrepresentation
• Failing to grant timely access to the HHS OIG for the purpose of audits, investigations, evaluations, or other statutory functions – Up to $15,000 per day delayed
• Knowingly making, using, or causing to be made or used, a false record or statement material to a false or fraudulent claim for payment for items and services furnished under a Federal health care program – Up to $50,000 per false record or statement

Lowered Intent Standard for Health Care Fraud

Similar to the revision of the Anti-Kickback Statute, Section 10606(b) of the PPACA clarifies that “a person need not have actual knowledge of [the health care fraud prohibition] or specific intent to commit a violation of [the health care fraud prohibition]” in order to commit “health care fraud.” This lowered intent standard will make it easier for the government to prove health care fraud, as established by HIPAA and defined in 18 U.S.C. § 1347.

Sentencing Enhancements for Federal Health Care Offenses

Section 10606 of the PPACA provides for various enhancements to the Federal Sentencing Guidelines for health care related offenses. Among other things, this section requires that the United States Sentencing Commission amend the Federal Sentencing Guidelines regarding Federal health care offenses “to provide that the aggregate dollar amount of fraudulent bills submitted to the Government health care program shall constitute prima facie evidence of the amount of the intended loss by the defendant.”

Furthermore, the section requires the Commission to adopt the following sentence enhancements for Federal health care offenses based on the amount of loss:

• 2-level increase in offense level if the loss is between $1 million and $7 million
• 3-level increase in offense level if the loss is between $7 million and $20 million
• 4-level increase in offense level if the loss equals or exceeds $20 million

For More Information

For more information, please contact your Stevens & Lee health care attorney.

This News Alert has been prepared for informational purposes only and should not be construed as, and does not constitute, legal advice on any specific matter. For more information, please see the disclaimer.