Outpatient Procedure Coding

Hospital Outpatient Prospective Payment System (OPPS) coding errors may lead to overpayments and subject a hospital to liability for the submission of false claims. The Guidance recommends that hospitals pay close attention to coder training and qualifications. Hospitals are urged to review their outpatient documentation practices to ensure that claims are based on complete medical records that support the level of service claimed. It is worthwhile to review the specific areas of billing and coding mentioned in the Guidance because these areas obviously have caught the attention of regulators. Specific problems identified in the Guidance include:

• Billing on an outpatient basis for inpatient-only procedures
  
  
• Submitting claims for medically unnecessary services by failing to follow the fiscal intermediary’s local medical review policies
  
  
• Submitting duplicate claims or otherwise not following the National Correct Coding Initiative guidelines
  
  
• Submitting incorrect claims for ancillary services because of outdated Charge Description Masters
  
  
• Circumventing the multiple procedure discounting rules
  
  
• Failing to follow the Centers for Medicare and Medicaid Services (CMS) instructions regarding the selection of proper evaluation and management codes
  
  
• Improperly billing for observation services

Admissions and Discharges

Risk areas with respect to the admission and discharge processes include:

• Failure to follow the "same-day rule"
  
  
• Abuse of partial hospitalization payment
  
  
• Same-day discharges and readmissions
  
  
• Violation of Medicare’s post-acute care transfer policy
  
  
• Churning of patients by long-term care hospitals co-located in acute care hospitals

Supplemental Payment Considerations

Many hospitals receive add-on payments to their PPS payments. Examples of specific associated risks that the OIG says hospitals should address include:

• Improper reporting of the costs of pass-through items
  
  
• Abuse of DRG outlier payments
  
  
• Improper claims for incorrectly designated provider-based entities
  
  
• Improper claims for clinical trials
  
  
• Improper claims for organ acquisition costs
  
  
• Improper claims for cardiac rehabilitation services
  
  
• Failure to follow Medicare rules regarding payment for costs related to educational activities

Use of Information Technology

OPPS requires heightened attention to detailed and accurate billing, coding, and record keeping. Hospital billing computer programs have the potential to omit or mischaracterize certain data, thus creating problematic claims. Such problems can be particularly difficult because an error in the system can be replicated hundreds of times before it is detected.

The Physician Self-Referral Law (“Stark”)

The Stark law prohibits hospitals from submitting claims for designated health services provided to Medicare patients referred from a physician with whom the hospital has a prohibited financial relationship. According to the Guidance, the Stark law should be viewed as a “threshold statute” from a compliance perspective. Hospitals face “significant financial exposure unless their financial relationships with referring physicians fit squarely in statutory or regulatory exceptions to the Stark law.” The OIG recommends that hospitals pay particular attention to the following areas:

• Physician contracts and the contracting and leasing process
  
  
• Policies and procedures to address the reporting requirement under the Stark law
  
  
• Appropriate processes for making and documenting reasonable, consistent and objective determinations of fair market value
  
  
• The total value of non-monetary compensation provided annually to each referring physician
  
  
• The provision and value of medical staff incidental benefits and professional courtesy

The Federal Anti-Kickback Statute

The federal anti-kickback statute prohibits payments made purposefully to induce or reward referrals of federal health care program business. The Guidance acknowledges that liability under the anti-kickback statute ultimately turns on a party’s intent and reiterates the OIG’s long-held position that neither a legitimate business purpose nor fair market value payment will legitimize an arrangement if one purpose for the transaction is to induce federal health care program business. Notably, the OIG continues to ignore the fact that courts in some jurisdictions (e.g. the Ninth Circuit, which covers most of the western states and Arizona) have interpreted the statute to require a more stringent intent standard than that articulated by the government. This may signal the OIG's willingness to use a lower intent standard as the basis for investigation and prosecution.

In reviewing arrangements or practices under the anti-kickback statute, the OIG recommends that hospitals ask the following questions about any potentially problematic arrangements:

• Does the arrangement have a potential to interfere with, or skew clinical decision-making?
  
  
• Does the arrangement have a potential to increase costs to federal health care programs, or beneficiaries?
  
  
• Does the arrangement have a potential to increase the risk of over utilization or inappropriate utilization?
  
  
• Does the arrangement raise patient safety or quality of care concerns?

Positive responses to these questions can help identify those arrangements that pose the greatest risk of prosecution.

Joint Ventures

The Guidance reiterates the OIG’s long-standing concern about joint venture arrangements between those in a position to refer federal health care program business and those providing items or services reimbursable by such programs. The OIG explains that its chief concern in the context of joint ventures is that remuneration from a joint venture might be a disguised payment for past or future referrals to the venture or to one or more of its participants. In analyzing current or future joint ventures, hospitals should examine the following factors:

• Manner in which joint venture participants are selected and retained
  
  
• Manner in which the joint venture is structured
  
  
• Manner in which investments are financed and profits are distributed

The OIG points out that contractual joint ventures “pose the same kinds of risks as equity joint ventures and should be analyzed similarly.” Factors to consider when evaluating a contractual joint venture include:

• Whether the hospital is expanding into a new line of business created predominately to serve the hospital’s existing patient base
  
  
• Whether a would-be competitor of the new line of business is providing all or most of the key services
  
  
• Whether the hospital assumes little or no bona fide business risk

The OIG also cautions that “safe harbor protection may not be available for contractual joint ventures.”

According to the OIG, if a hospital is planning to participate in a joint venture, a hospital should consider (i) barring physicians employed by the hospital or its affiliates from referring to the joint venture; (ii) taking steps to ensure that medical staff and other affiliated physicians are not encouraged in any manner to refer to the joint venture; (iii) notifying physicians annually in writing of the preceding policy; (iv) refraining from tracking in any manner the volume of referrals attributable to particular referrals sources; (v) ensuring that no physician compensation is tied in any manner to the volume or value of referrals to, or other business generated for, the venture; (vi) disclosing all financial interests to patients; and (vii) requiring that other participants in the joint venture adopt similar steps.

Compensation Arrangements with Physicians

Medical director agreements, personal or management services agreements, space or equipment leases, and agreements for the provision of billing, nursing, or other staff services all create compensation arrangements. Many of these arrangements are legal, but the Guidance urges hospitals to structure these arrangements with an eye toward compliance.

The general rule is that any remuneration between hospitals and physicians should be at fair market value for actual and for necessary items or services based upon an arm’s-length transaction. Arrangements under which hospitals provide physicians with items or services for free or less than fair market value, relieve physicians of financial obligations they would otherwise incur, or arrangements that inflate compensation paid to physicians for items or services pose significant legal risk to both the hospital and the physician.

The OIG is particularly concerned about arrangements with physicians that:

• Do not achieve legitimate business purposes
  
  
• Exceed the needs of the hospital
  
  
• Exceed fair market value or do not have a documented basis for the fair market valuation
  
  
• Take into account referrals or business generated between the parties
  
  
• Are not documented in writing
  
  
• Do not document physician services provided
  
  
• Are not monitored by the hospital

Relationships with Other Health Care Entities

Hospitals should review relationships with home health agencies, skilled nursing facilities, durable medical equipment companies, laboratories, pharmaceutical companies, and other hospital and managed care organizations using the principles identified above in the general discussion of the federal anti-kickback statute the specific discussions of joint ventures and compensation arrangements with physicians.

Physician Recruitment

When assessing the degree of risk associated with recruitment arrangements, hospitals should examine the following factors, among others:

• Size and value of the recruitment benefit: Is the benefit extended reasonably necessary to attract a qualified physician to the particular community?
  
  
• Duration of payout: Are total benefit payout periods longer than three years? Periods extending longer than three years should trigger heightened scrutiny.
  
  
• The practice of the recruited physician: Is the physician a new physician (or a physician relocating from a great distance) with few or no patients or an established practitioner with a ready stream of referrals?
  
  
• The need for recruitment: Is the recruited physician’s specialty necessary to provide adequate access to medically necessary care for patients in the community? An assessment of community need based wholly or partially on the competitive interests of the recruiting hospital or existing physician practices would subject the recruitment payments to heightened scrutiny.
  
  
• Joint recruitment: Is the arrangement a joint recruitment arrangement (i.e. recruitment by a hospital in conjunction with other providers such as physicians or medical groups, in which the hospital makes payments directly or indirectly to the other entity)? According the OIG, joint recruitment arrangements present a high degree of fraud and abuse risk and have been the subject of recent government investigations and prosecutions. Suspect arrangements include those in which costs such as overhead and build-out costs for the benefit of the referral source are shifted from the referral source to the recruited physician and then paid by the hospital.

Discounts

The Guidance acknowledges that public policy favors open and legitimate price competition in health care. Thus, the anti-kickback statute contains an exception for discounts offered to customers if the discounts are properly disclosed and accurately reported. However, to qualify for the exception, the discount must be in the form of a reduction in the price of the good or service based on an arm’s-length transaction. Moreover, the regulation provides that the discount must be given at the time of sale or, in certain cases, set at the time of sale, even if finally determined subsequent to the time of sale (e.g., a rebate).

Discounts should not be a means of “swapping” government reimbursement for some other benefit. The Guidance states that a hospital may violate this principle by extending an unreasonably low price Part A services that it pays for out of its own pocket in exchange for referring hospital patients for services that are billable by the supplier directly under Part B, such as ambulance services. Suspect arrangements include below-cost arrangements or arrangements at prices lower than the prices offered by the supplier to other customers with similar volumes of business, but without federal health care program referrals.

Medical Staff Credentialing

Conditioning privileges on a particular number of referrals or requiring the performance of a particular number of procedures, beyond volumes necessary to ensure clinical proficiency, raises risks. However, a credentialing policy that categorically refuses privileges to physicians with significant conflicts of interest should not implicate the anti-kickback statute in most situations.

Malpractice Insurance Subsidies

The Guidance reiterates the OIG’s view that hospital subsidies of malpractice insurance premiums for potential referral sources may be suspect under the anti-kickback statute because the payments may be used to influence referrals. The OIG recommends that hospitals review their malpractice insurance subsidy arrangements in light of the following factors:

• Whether the subsidy is being provided on an interim basis for a fixed period in areas experiencing severe access or affordability problems;
  
  
• Whether the subsidy is being offered only to current active medical staff (or physicians new to the locality or in practice less than a year, i.e., physicians with no or few established patients);
  
  
• Whether the criteria for receiving a subsidy is unrelated to the volume or value of referrals or other business generated by the subsidized physician or his practice;
  
  
• Whether physicians receiving subsidies are paying at least as much as they currently pay for malpractice insurance;
  
  
• Whether physicians are required to perform services or relinquish rights, which have a value equal to the fair market value of the insurance assistance; and
  
  
• Whether the insurance is available regardless of the location at which the physician provides services, including, but not limited to, other hospitals.

Gainsharing” Arrangements

The Guidance identifies risks under the Civil Monetary Penalty (CMP) law of “gainsharing” arrangements. The CMP law prohibits a hospital from knowingly making a payment to a physician to induce her to reduce or limit items or services furnished to Medicare or Medicaid beneficiaries under the physician’s direct care. While there is no fixed definition of a “gainsharing” arrangement, the OIG notes that the term typically refers to an arrangement in which a hospital gives physicians a percentage share of any reduction in the hospital’s costs for patient care attributable in part to the physicians’ efforts.

The OIG acknowledges that some gainsharing arrangements may serve legitimate purposes, but cautions that they must be analyzed in light of the CMP and anti-kickback prohibitions.² Consequently, the OIG recommends that gainsharing arrangements should be structured to fit within the personal services safe harbor. That recommendation is of limited value, however, because the safe harbor requires that aggregate compensation be set in advance, and gainsharing arrangements typically will involve a percentage payment.

EMTALA

The OIG urges hospitals to clearly understand their EMTALA obligations and implementing policies and training (particularly of on-call physicians and all individuals working in emergency departments) that accurately reflect those legal responsibilities.

Substandard Care

The OIG has the authority to exclude providers from participating in federal health care programs if the provider fails to meet professionally recognized standards of care. Hospitals are urged to continually measure their performance against comprehensive standards and ensure compliance with all of the Medicare hospital conditions of participation.

Relationships with Federal Health Care Beneficiaries

Under the CMP law, civil monetary penalties may be imposed on hospitals that offer remuneration to Medicare or Medicaid beneficiaries where the hospital knows or should know the offer is likely to influence the beneficiary to order or receive items or services from a particular provider. Simply put, hospitals cannot offer valuable items or services to attract Medicare and Medicaid patients. Examples discussed in the Guidance include: gifts over nominal amounts, cost-sharing waivers (some of which may be acceptable), and free transportation over nominal value.

HIPAA Privacy and Security Rules

The Guidance reinforces the need to comply with the law, but recognizes that some flexibility exists in tailoring a hospital's security plans and procedures in light of the particular hospital’s organization and capabilities.

Discounts to Uninsured Patients

The OIG reminds hospitals that no OIG authority prohibits or restricts hospitals from offering discounts to uninsured patients who are unable to pay their hospital bills. The Guidance notes, however, that discounts offered to underinsured patients potentially “raise a more significant concern under the anti-kickback statute, and hospitals should exercise care to ensure that such discounts are not tied directly or indirectly to the furnishing of items or services payable by a federal health care program.”

Author:
Lisa Rediger Hayward
Seattle, Washington
(206) 628-7666
LisaHayward@dwt.com