Over this five-part podcast series, I have visited with Terry L Orr, a Managing Director at Kroll, a division of Duff & Phelps, and the sponsor of this podcast series. We have taken a comprehensive look at state of compliance at the half-year mark of 2019. In the concluding episode, Part V, we consider some of the latest challenges for healthcare compliance, including legislative changes and a recent corruption trial which Orr believes will be seen as a landmark event.

We began by considering some of the recent changes in the healthcare industry which impact compliance and the recent changes in anti-kickback regulations in the healthcare industry. In 2018, the President signed The Support for Patients and Communities Act of 2018. In addition to authorizing $8 billion to combat the opioid epidemic over 5 years, there were additional provisions that specifically dealt with patient brokering that has plagued the healthcare industry. Orr noted that while “some states have addressed the concern of patient brokering, such as Florida, California, Massachusetts and Texas, many had not so the federal legislation was needed.”

Additional new legislation includes the Recovery Kickback Prohibition, which attempts to close some of the gaps in the Federal Anti-Kickback statute. The Recovery Kickback Prohibition law is focused specifically on patient brokering connected to private insurance-based treatment centers and makes it a federal crime to receive or offer illegal remunerations for referrals to recovery homes, clinical treatment facilities and laboratories.

Orr explained the differences in the two laws. He stated, “Whereas the Federal Anti-Kickback statute applies only to the referral of patients who are covered by a Federal Health Care Programs, the Recovery Kickback Prohibition law extends its prohibitions to any and all healthcare benefit programs – defined by the Federal Criminal Code as any public or private plan or contract, affecting commerce, under which any medical benefit item or service is provided to any individual, and includes any individual or entity who is providing a medical benefit, item, or service for which payment may be made under the pan or contract.  In effect, the federal government can now police strictly private market arrangements for conflicts of interest.”

In addition to the all-payor aspects of the Recovery Kickback Prohibition, it is also worth noting that the Recovery Kickback Prohibition applies with respect to the solicitation or receipt of remuneration for any referrals to recovery homes, clinical treatment facilities, or clinical laboratories, whether or not related to treating substance use disorders. The broad application of the Recovery Kickback Prohibition to the treatment of all categories of healthcare treatment, not just substance abuse, makes it even more important for impacted providers – including physician-owned laboratories – to understand and consider the Eliminating Kickbacks in Recovery Act when evaluating their compliance status.

Orr believes that the Recovery Kickback Prohibition law could have a significant impact on physician laboratory arrangements. He explained, “over the past several years, there has been a proliferation of physician-investor laboratory arrangements where physicians invest and become owners in laboratories.  This investment arrangement can provide substantial returns for the physician-investors, as they control their referrals to the laboratories which, in turn, distribute the lab’s profits to the physician-investor that are typically related to the volume or value of the referrals of that physician to the lab.”

This means that the Recovery Kickback Provision materially changes the landscape by expanding the government’s reach to private market payors. Laboratories that previously did not need to structure their business and operations around the Federal Anti-Kickback statute because they did not receive money from federal healthcare programs now need to reevaluate and, perhaps, restructure their arrangements to ensure that they are addressing this new compliance risk.

Orr illustrated this with the recently concluded trial involving the Forrest Park Medical Center, involving allegations of bribery and kickback. Orr believes it will be “recognized as a landmark case.” In this trial 7 of 9 defendants were convicted by a jury in a bribery and kickback scheme. Interestingly, (particularly for Foreign Corrupt Practices Act practitioners), this case was tried under the Travel Act, which makes it a federal crime to promote, manage, establish, carry on, or facilitate any unlawful activity through the use of any means of interstate commerce or by traveling among the states or internationally, or by using US mail.

Federal prosecutors alleged and the jury found that physicians were receiving payments based on the number of patients they funneled to Forest Park, rather than the standard flat fee for co-marketing agreements. The prosecutors said the surgeons agreed to refer patients to the Dallas hospital in exchange for money to market their practices and that advertising revenue helped some of the doctors grow their practices considerably.

Orr concluded by noting, “The Federal Anti-Kickback statue, the Recovery Kickback Prohibition law and the Forrest Park Medical Center’s conviction under the Travel Act clearly should cause hospitals, physicians, clinical laboratories, clinical treatment facilities and recovery homes to take a close look at any type of patient referral payments whether the money is received from Federal or State Health Care Program beneficiaries or not.” Moreover, it is important to note that both the Federal Anti-Kickback statue and the Recovery Kickback Prohibition law make it a crime to offer, pay, solicit, or receive “remuneration (including any kickback, bribe or rebate) in connection with referrals. The Federal government has interpreted the term “remuneration” broadly to cover “anything of value”.

There are some safe harbor exceptions but outside of those exceptions a broad interpretation of value is used. For more information on Kroll, a division of Duff & Phelps, click here. For more information on Terry Orr, click here.

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