| Margit Nahra |
The environment in which consultant pharmacists practice their profession has changed dramatically in recent years. The increased role of managed care in the Medicare and Medicaid programs has attracted attention to practices engaged in by consultant pharmacy and, bolstered by new investigative and enforcement tools, federal authorities have pledged to take action against business arrangements that run afoul of the federal fraud and abuse laws. The governmental emphasis on strict compliance is reinforced by the federal qui tam law, 31 U.S.C. § 3729 et seq., and by initiatives such as the "Beneficiary Incentive Program" created by the Health Insurance Portability and Accountability Act, Pub. Law No. 104-191 (1996) (HIPAA), which established monetary incentives for private individuals to pursue claims against those who violate fraud and abuse provisions. In such a climate, pharmacists cannot afford to be naive about the chance that their practices may be scrutinized for suspect activity.
The best protection in such an atmosphere is to stay informed regarding changes in the fraud and abuse laws relevant to pharmacy practice and to continually monitor your compliance. Recent developments in federal fraud and abuse law, and suggestions for how to avoid liability, are described in the following sections.
The law of choice among federal enforcement authorities concerned with pharmacy practices appears to be the Federal Health Care Program Anti-Kickback Act, 42 U.S.C. § 1320a-7b(b) (the Anti-Kickback Act). The Anti-Kickback Act imposes criminal liability for the knowing and willful payment, solicitation, or receipt of remuneration in return for referring an individual to a person for, or in return for purchasing, leasing, ordering or for arranging for or recommending the purchase, lease or order of items or services reimbursable by a federal health care program. Given the potential breadth of the statute, the United States Department of Health and Human Services (HHS) Office of Inspector General (OIG), at Congress' direction, has issued a number of exceedingly narrow regulatory "safe harbors" that describe practices which the OIG deems innocuous and that accordingly "shall not be treated as a criminal offense . . . and shall not serve as the basis for an exclusion." (42 C.F.R. § 1001.952). Activities outside of these safe harbors are not necessarily illegal, but it is often unclear at what point conduct crosses the line between a legitimate practice and a violation of the Anti-Kickback Act.
The ambiguity surrounding the Anti-Kickback Act is exacerbated by recent legislation substantially broadening the act's reach and associated penalties. Formerly known as the "Medicare and Medicaid Anti-Kickback Act," the act was expanded by HIPAA last year to encompass all federal health care payers other than the Federal Employees Health Benefits Program. In addition, the Balanced Budget Act of 1997, H.R. 2015, imposes civil monetary penalties of $50,000 for each violation of the Anti-Kickback Act and damages of up to three times the total amount of remuneration offered, paid, solicited, or received in violation of the Act.
Federal enforcement authorities have indicated that they are presently reviewing application of the Anti-Kickback Act to such practices as physician drug sampling, incentives for therapeutic switches, and the provision of free goods or value-added services to nursing homes. For example, Kevin McAnaney, Chief of the Industry Guidance branch of the Office of Counsel to the OIG, has stated that the provision of free or deeply discounted disease management programs is suspect, even though the programs may benefit patients. OIG staff have stressed that the significant aspect of a kickback violation is the intent to induce referrals, and that no safe harbor exists for conduct that may also benefit patients because enforcement authorities do not believe that such services are provided with only patients' interests in mind. In addition, Assistant United States Attorney James Sheehan told attendees at ASCP's mid-year meeting in Scottsdale that in the absence of a bright line test, federal authorities are applying a "smell" test to determine whether the provision of a free item or service rises to the level of a kickback. By way of illustration, Sheehan said that authorities would have difficulty attacking the provision of computer equipment that merely facilitates the transmission of information regarding residents' medications, but will view such conduct as suspect if the equipment has extraneous software or capabilities unrelated to such transmission.
Such examples may be helpful in extreme cases, but provide little guidance in the middle. Thus, pharmacists may face having their arrangements with facilities, manufacturers and physicians scrutinized under vastly expanded criminal and civil statutory authority without clear direction as to what is and is not permitted.
Acknowledging the ambiguity surrounding the Anti-Kickback Act, Congress included a provision in HIPAA a requiring the HHS OIG to issue advisory opinions regarding the application of the act, the safe harbor regulations, and other OIG fraud and abuse sanctions to existing or proposed arrangements. The procedures for obtaining such an opinion were set forth in an interim final rule published in the Federal Register on February 19, 1997.
A favorable opinion is legally binding on the parties and may be relied on as assurance that the parties will not be prosecuted by HHS-including the OIG-for engaging in the approved conduct that is the subject of the opinion. However, the protection afforded by a favorable opinion extends only to (1) the parties who request the opinion, and (2) the specific facts and circumstances upon which the opinion is based. Unlike a safe harbor provision, an advisory opinion will not protect third parties or hypothetical arrangements. Further, the protection is only from actions by HHS; other regulatory and enforcement agencies are not bound by an OIG advisory opinion. Note, too, that a favorable opinion merely confirms that conduct is legal; it may be that such conduct would not have been prosecuted in the first place.
Within the context of these limitations, parties contemplating requesting an advisory opinion should carefully weigh the advantages and disadvantages of obtaining an opinion before submitting their request. An opinion may: (1) provide comfort to wary business partners; (2) discourage challenges from competitors, regulatory bodies outside of HHS, and other potential adversaries; and (3) give comfort to judicial bodies or enforcement agencies should the arrangement ever be scrutinized in the future. On the other hand, seeking an opinion may subject the parties to scrutiny by their competitors and other regulators, especially since supporting documentation submitted to the OIG by the parties will be publicly available under the Freedom of Information Act. In addition, if the issues involved are complex and are at the edge of legitimate behavior, the OIG may avoid a difficult decision by encouraging the parties to make changes that will yield a favorable opinion but frustrate the practical implementation the transaction.
Given the limitations of and risks associated with obtaining an advisory opinion, parties should seek legal counsel before requesting an advisory opinion and may wish to rely instead on opinions issued to other parties and informal advice from the OIG. While not binding, such guidance may provide sufficient comfort. Advisory opinions are posted on the OIG home page (http://www.dhhs.gov/progorg/oig/) as they are issued, and may be requested in writing from the Office of Counsel to the Inspector General.
Another key federal fraud and abuse provision is the Physician Self-Referral Law, otherwise known as "Stark I" and "Stark II," 42 U.S.C. § 1395nn. That provision prohibits a physician from making referrals to entities for the provision of certain "designated health services," including outpatient prescription drugs and durable medical equipment and supplies, reimbursable under Medicare or Medicaid if the physician or a family member has a direct or indirect financial relationship with the entity, unless the financial interest or the referral falls within a statutory exception to the prohibition. Thus, the provision may be implicated where a referring physician has an ownership or investment interest in the entity providing pharmacy services, or in an entity that itself holds such an interest, or where the referring physician or any of his or her immediate family members receives compensation or other remuneration from the entity providing pharmacy services. The provision also prohibits the entity receiving the referral business from making a claim for payment for such a prohibited referral. Sanctions for violating the provision include denial of payment, refund of monies improperly paid, civil monetary penalties, and exclusion from participation in federal health care programs.
In contrast to the Anti-Kickback Act, Stark I and II describe prohibited conduct in black and white terms. Unlike the Anti-Kickback Act, Stark I and II are strict liability statutes that do not require proof of intent, nor do they have regulatory safe harbors that give rise to gray areas. Still, substantial confusion exists as to the application of their statutory exceptions, perpetuated partly by the lack of implementing regulations for Stark II since its enactment three years ago.
Recent developments may help address this situation. The HHS OIG sent draft Stark II regulations to the Office of Management and Budget (OMB) for review on August 20, 1997. OMB has sixty days to review the regulations. Therefore, assuming OMB is timely, the regulations should be promulgated on or before October 20, 1997. In addition, the Balanced Budget Act requires HHS to issue binding advisory opinions as to whether a referral relating to a designated health service (other than clinical laboratory services) is prohibited under the Stark laws. Thus, further guidance may be available to affected entities soon.
The civil False Claims Act,# 31 U.S.C. §§ 3729 et seq., imposes monetary penalties of $5,000 to $10,000 per claim plus treble damages for the knowing submission of false or fraudulent claims or the making of a false record or statement to secure payment of a false or fraudulent claim. The act's qui tam2 provision, 31 U.S.C. § 3730, permits private individuals to file false claims actions on behalf of the federal government, and to receive 15%-30% of any recovery.
Unlike HIPAA and the Balanced Budget Act, the False Claims Act is not new, having been enacted in 1863 and most recently amended in 1986. What is new is the explosion in the use of the act's qui tam provision in general, and its application to the health care industry in particular. In 1988, only 60 qui tam suits were filed; in 1996, 360 qui tam suits were filed, and 144 of them were health-related. Indeed, health-related qui tam suits accounted for $138.6 million in recoveries in fiscal years 1995-96. Another disturbing development in the application of the False Claims Act is the filing of suits asserting that a violation of the Anti-Kickback Act or Stark laws renders claims "false or fraudulent" for purposes of the False Claims Act. In United States ex rel. Pogue v. American Health Corp., 914 F. Supp. 1507 (M.D. Tenn. 1996), a federal district court reversed itself to find that kickback or self-referral violations are actionable under the False Claims Act so long as the defendant acted with the intent of inducing payment from the government. Should other courts agree, the reach of the False Claims Act will be substantially broadened.
In addition to the provisions mentioned above, HIPAA contains a number of other provisions that substantially affect fraud and abuse investigations and prosecutions. Specifically, HIPAA:
HIPAA also authorized the exclusion of any individual who:
The law provided a minimum one year period of exclusion from Medicare and Medicaid for practitioners sanctioned for failure to comply with professionally recognized standards and repealed the requirement that such practitioners be unwilling or unable to meet such standards before they can be sanctioned (§ 214); it also created intermediate sanctions for Medicare HMOs (§ 215); amended the Anti-Kickback Law to create a statutory exception for certain risk-sharing arrangements (§ 216); and imposed criminal penalties for nursing home residents who dispose of their assets in order to obtain Medicaid eligibility (§ 217); HIPAA amended the Civil Monetary Penalties Law, 42 U.S.C. § 1320a-7a, to:
The full impact of many of these provisions will become evident in the future, as investigations now underway lead to prosecutions and settlements. The impact of the increased resources made available for health care fraud investigations and prosecutions, however, is evident today. According to Sheehan, there are now 100 Assistant United States Attorneys whose sole job is to prosecute health care fraud, and they will soon be supported by over 500 FBI and over 300 HHS OIG agents assigned exclusively to health care fraud investigations. These resources have provided federal enforcement authorities with the time, information and data analysis needed to tackle subtle and complicated issues which heretofore were ignored.
The Balanced Budget Act added even more enforcement tools for federal authorities.
In addition to those provisions mentioned above, the act:
As with HIPAA's provisions, the full impact of the Balanced Budget Act's fraud and abuse provisions will become known only in the future. However, many of the provisions require current, significant changes in the day-to-day operations of entities providing pharmacy services.
The best insurance against fraud and abuse liability is to implement an effective fraud and abuse compliance program. The June 1997 issue of The Consultant Pharmacist contains helpful tips as to how to develop such a program. In addition, pharmacists should:
(1) Stay informed about applicable payment rules and developments in the fraud and abuse laws and liberally use the resources offered by ASCP and other professional associations. Being overwhelmed by the onslaught of changes is not a defense to liability.
(2) Exercise appropriate oversight of staff and scrutinize contractual relationships. Guilt by association has reached new heights under HIPAA and the Balanced Budget Act.
(3) Encourage open staff communication. Employees who feel comfortable discussing possible violations with management are less likely to file qui tam suits.
(4) Enlist outside assistance as necessary and appropriate. Realistic assessment of what can and cannot be accomplished in-house is critical; potential issues should not be ignored just because you are busy or assistance is costly. The cost of legal defense in a governmental investigation or prosecution is likely to be far greater than the cost of obtaining help to take the steps necessary to avoid such scrutiny.
Under 18 U.S.C. § 287, the knowing submission of false claims for payment with federal funds is also a crime punishable by fines and up to five years in prison.
"Qui tam" is Latin for "who as well," and is used to indicate that the plaintiff is bringing the action "as well" for the government as for himself.
1 Blowing the Whistle Louder: Ruling Could Increase Fraud Claims Against Government Contractors, ABA Journal, April 1997, at 38.
2 Whistleblower Cases Yielded 49.5% of Civil Monetary Penalties for Health Fraud, Health News Daily, August 15, 1997, at 5.
3 Basic Steps to Corporate Compliance, The Consultant Pharamacist, Vol. 12, No. 6 at 723-25 (June 1997).
Copyright © 1997, American Society of Consultant Pharmacists, Inc. All rights reserved.