August 20, 2013 /24-7PressRelease/
-- The government has a heavy fist when it comes to violations of state and federal healthcare fraud laws, such as the Stark Law, Fraud and Abuse Statute, Anti-Kickback Statute and the Texas Patient Solicitation Act. More and more physician joint ventures and other health care joint ventures are facing governmental scrutiny.
How can you properly structure a physician joint venture
to avoid sanctions under state and federal health care laws? What should you do if you receive a communication from the Office of the Inspector General or Texas Attorney General's Office requesting information?
How Can My Business Properly Structure A Physician Joint Venture?
There are many legitimate business needs for a physician joint venture, such as hiring a medical director, leasing equipment or office space and forming certain management agreements. However, if the physician joint venture is not set up correctly -- if just one purpose of the agreement is to induce a reward or referral, then the entire agreement breaks the law. The government carefully scrutinizes joint venture agreements to determine if all purposes of the agreements are valid. If you are setting up a joint venture, it is important to make sure you get it exactly right.
In order to determine if the business relationship violates federal health care fraud laws, the OIG will ask: Was the second business really needed or was it set up to influence referrals? Were all the investors in a position to make referrals? Did the investors offer a low contribution with a high potential for reward? Was at least one purpose of the arrangement to induce or reward referrals?
How, then, can you structure a physician joint venture in a way that complies with the federal Stark Law and Anti-Fraud and Abuse Statute? The key is that your joint venture must meet an exception under the Stark Law/Texas Patient Solicitation Act, and be included as a safe harbor under the Fraud and Abuse Statute. Furthermore, the agreement must not induce referrals in any way (there must not be a single purpose to induce referrals).
Note: This is a highly technical and complex area of the law that requires the help of an attorney who has extensive experience with physician joint ventures and health care fraud laws. Even if your health care business has an in-house business lawyer, we strongly recommend consulting with outside counsel experienced in this area of law.
Exceptions Under The Stark Law, 42 U.S.C. 1395nn
The Stark Law
, or Physician Self-Referral Law, prohibits physicians from referring patients to another health care entity for designated health services if they have a financial relationship with that entity. Services that fall under the law include, but are not limited to, clinical labs, physician therapy services, radiology, radiation therapy, occupational therapy, home health services and hospital services, among others.
There are, however, exceptions to the Stark Law. They include:
- Services provided by a physician in the referring physician's group practice
- Certain in-office services that are ancillary to the original treatment and are provided by the referring physician, a physician in the same group practice or individuals supervised by one of those physicians
- Certain lease agreements
- Certain personal service arrangements
- Bonafide employment relationships
- Certain group practice/hospital arrangements
- Services involving out-patient prescription drugs
The Stark Law provides important detail regarding these exceptions. Not all group practices will fall under the Stark Law's definition of "group practice." A group practice under the Stark Law is a practice that is a single legal entity consisting of at least two physicians, both of whom provide the "full range of patient care services." At least 75 percent of the physician/patient encounters provided must be billed by the group, not the individual physician, you must determine how you will allocate income and overhead in advance, and no physician can receive compensation for services based on referral numbers. These are just a few of the examples of the strict requirements for compliance.
This last point is particularly important for physician joint ventures and deserves repeating: It is not OK to distribute profits based on the number of referrals received. Most compliant joint ventures choose, instead, to distribute profits based on ownership interest in the joint venture.
Finally, there are specific reporting requirements under the Stark Law that you must follow if you have a physician joint venture.
Safe Harbors Under The Anti-Kickback Statute
Physicians and health care facilities that would like to enter into joint ventures must also pay attention to the Federal Fraud and Abuse Act, or Anti-Kickback Statute. Common safe harbors are similar to the exceptions under the Stark Law and include:
- Equipment or space rental
- Investment interests
- Personal service contracts
- Sale of health care practices
- Group purchasing organizations
- Group practice investments
- Referral arrangements for specialty services
- Price reductions for health plans and managed care organizations
Note: Although these are the broad areas covered by the safe harbors, each one has very specific elements that you must comply with completely in order to avoid governmental scrutiny.
Health Care Fraud Investigations: Contractual Joint Ventures
When properly structured to meet the Stark Law exceptions and safe harbors under the Anti-Kickback Statute, a contractual joint venture will still face scrutiny from the federal and/or state government but can be sustained as long as it also passes the one purpose test. Under this test, if just one purpose of an arrangement is to reward referrals, then the entire arrangement is subject to federal health care fraud sanctions.
Unfortunately, even when a joint venture is properly structured, the government has been known to make mistakes. What should you do if you have received a letter from the OIG indicating you are under investigation for violating federal health care fraud laws?
Before you answer the government's subpoena or document request or speak to anyone else about the investigation, call an attorney experienced in physician joint venture health care fraud investigations. It is absolutely critical that you properly document and present evidence that you are in compliance with federal health care laws. In many cases, that means showing that you set compensation, in advance, at fair market value and did not take into account the value of referrals.
Article provided by Kerr, Hendershot & Cannon, P.C.
Visit us at www.k-hpc.com