How Do Recent Settlements Give Insight into Effective FMV and CR Compliance Programs?

As discussed frequently in compliance and health care conferences and forums and on this page, fair market value (FMV) of payments to referring physicians is an essential compliance requirement of the Stark law and federal anti-kickback statute. Physician compensation in excess of FMV is at the crux of much health care enforcement activity. As noted by Richard Kusserow, former Inspector General, “Arrangements with physicians are the highest compliance risk area in 2017” (“Kickback Cases Remain Top DOJ and OIG Priority in 2017,” Strategic Management Services, LLC; Jan. 2017). Mr. Kusserow further explained that whistleblowers are a significant source of enforcement activity.

In today’s post-Tuomey environment, once a whistleblower complaint emerges, it is likely that a case will move to settlement rather than litigation. Thus, pro-compliance organizations should focus their risk management efforts on reducing the risk of qui tam actions and government intervention and, in case of government intervention, limiting the False Claims Act (FCA) claim to the extent possible. Also of note is the increasing trend in qui tam civil FCA cases for the relator to continue pursuing the case even without government intervention.

We have written on the subject of effective enterprise risk management (ERM) as a means to address FMV/CR compliance risk in hospital-physician arrangements. Recent major settlements with the DOJ involving physician arrangements are instructive when formulating ERM around FMV and commercial reasonableness (CR).

Aside from allegations that defendant hospitals overpaid physicians, a common thread in several recent qui tam complaints is of hospital losses on physician practices. Although losses are not per se illegal, the allegations advanced by the plaintiffs follow a theme: the hospital system loses money on physician practices, due in large part to physician payments in excess of FMV, and practice losses are deemed payment for referrals and not CR. We address the issue of practice losses in an earlier blog series. This is worth significant attention in the compliance-minded organization’s ERM efforts.

We often recommend creation and independent testing of processes as if subjected to investigatory scrutiny. In other words, based on what is known about how relators and enforcement agencies pursue cases, would an arrangement stand up under scrutiny? This involves monitoring of arrangements to ensure the processes are in place and functioning properly. This also entails contract auditing at all points in the administration process, from inception through the final payment.

Be pro-compliance by capturing all financial arrangements with referral sources in a central repository with testing and monitoring to help ensure the following:

Any of the above must be capable of being selected, monitored, and stress-tested at any point in time and regulatory non-compliance self-reported on advice of counsel.

At the Health Care Compliance Association’s 21^st Annual Compliance Conference, Daniel Levinson, the U.S. Inspector General, noted the new Measuring Compliance Program Effectiveness: A Resource Guide is now available online. The Resource Guide provides measurement options to a wide range of diverse organizations. The pro-compliance organization looks to documents such as this to guide compliance monitoring and measurement. Pro-compliance organizations see FMV and CR as enterprise risks and not as one-and-done, check-the-box activities, with processes that contemplate fluid facts and circumstances. 

Not all health systems are identical, and resources available for FMV/CR ERM are quite different. Hospitals and systems with limited compliance budgets must make do with all available compliance tools, including seeking outside resources skilled in FMV/CR processes and auditing. When considering the size of recent settlements, the ROI could speak for itself.

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