Presenting a live 90-minute webinar with interactive Q&A Structuring Physician Compensation Arrangements Meeting Legal Requirements, Ensuring FMV and Commercial Reasonableness, Lessons from Recent Enforcement, Mitigating Fraud and Abuse Risks TUESDAY, MAY 9, 2017 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: Anna M. Grizzle, Member, Bass Berry & Sims , Nashville, Tenn. Tizgel K.S. High, Vice President, Associate General Counsel, Legal, LifePoint Health , Brentwood, Tenn. Albert D. (Chip) Hutzler, Partner, HealthCare Appraisers , Delray Beach, Fla. The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .
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Structuring Compliant Physician Compensation Arrangements in the Current Enforcement Environment Tizgel High | Vice President & Associate General Counsel LifePoint Health Anna Grizzle | Member Bass Berry & Sims Albert “Chip” Hutzler, JD, MBA, CVA | Partner HealthCare Appraisers, Inc.
Presentation Overview 1. Analysis of recent cases and settlements highlighting the risks associated with physician compensation arrangements 2. Discussion of the regulatory framework and trends for structuring physician compensation arrangements, including applicable Stark and AKS requirements 3. Practical advice related to establishing and maintaining fair market value and commercial reasonableness 4. Suggestions for structuring and managing physician compensation arrangements to ensure ongoing compliance 5. Q&A 5
Recent Trends & Activity: Recent Cases and Settlements 6
Recent Cases & Settlements: The List Keeps Growing… Lexington Medical Center ($17 million settlement) allegations that up to 28 physicians were overpaid based on an inherently flawed compensation structure. Columbus Regional Health Healthcare System (up to $35 million settlement) and Dr. Andrew Pippas ($425k settlement) Clinical and medical director compensation arrangements with a referring medical oncologist challenged Adventist Health – ($115 million settlement) allegations of payments in excess of FMV. Broward Health – ($69 million settlement) allegations of intentional payments for referrals tracked with secret books, absent which, transactions resulted in substantial losses Tuomey Case – ($237.5 million verdict upheld, then settled for $70 million) Hospital’s part - time employment of 19 physicians for outpatient surgeries challenged. New in 2016 - Recent settlement with former CEO Halifax Hospital – ($85 million settlement) Multiple compensation arrangements with employed oncologists and neurosurgeons challenged Citizens Medical Center – ($21.75 million settlement) Compensation arrangements with cardiology and emergency department physicians challenged Westchester Medical Center – ($18.8 million settlement) Consulting and fellowship arrangements with referring cardiologists challenged King’s Daughters Medical Center – ($40.9 million settlement) FMV of compensation arrangements with referring cardiologists challenged 7
Recent Cases & Settlements: The List Keeps Growing … New York Heart Center ($1.33 million settlement) Internal compensation formula challenged (nuclear and CT scans) ► All Children’s Health System ($7 million settlement) - clarified Stark’s relationship to Medicaid; FMV of compensation challenged ► Infirmary Health System ($24.5 million settlement) - compliance with in-office ancillary services definition challenged ► Bradford Case – November 2010 Opinion Hospital paid independent physicians for use of a nuclear camera and a non-compete ► United Shockwave Settlement – July 2010 Urologists use referral threats to win lithotripsy contract at hospital ► Covenant Settlement – August 2009 Iowa doctors on a PCE deal allegedly overpaid – expenses questioned ► Kosenske Case – Appellate Opinion - January 2009 FMV is hypothetical, not what actual parties can negotiate ► Villafane Case – April 2008 FMV unsuccessfully challenged in academic medical center case in Kentucky ► Derby Case – IRS case from 2008 IRS intangible assets case from 2008 ► OIG Advisory Opinions with Valuation Implications: 12-22 – Favorable opinion on co-management transaction ► 12-15 – Favorable opinion on call coverage arrangements ► 12-06 – Negative opinion on two ASC-Anesthesia transactions ► 10-16 – OIG questions requestor's survey method for determining FMV ► 09-09 – Footnote questions the viability of the income approach 8 ►
Tuomey Settlement in 2015 - $72MM, after a long, winding road… Two Long Trials 1 st Trial (March 2010) found that Tuomey had violated Stark but not FCA 2 nd Trial (May 2013) resulted in large verdict ($237MM) against Tuomey 1 st Appellate opinion (March 2012) – two key rulings: Facility component of personally performed services are referrals. Fixed compensation that considers anticipated referrals “ by necessity takes into account the volume or value of such referrals” under Stark. 2 nd Appellate opinion (July 2015) Advice of Counsel defense rejected by the Court Base vs. Bonus language in employment exception questioned Court said Congress deemed services rendered in violation of Stark to be “worthless” Concurring opinion: “This case is troubling. It seems as if, even for well -intentioned health care ► providers, the Stark Law has become a booby trap rigged with strict liability and potentially ruinous exposure -- especially when coupled with the False Claims Act.” Activity Since Settlement Settlement with former CEO – Impact of Yates Memo Malpractice lawsuit against law firm that advised hospital about the transactions 9
Citizens Medical Center Settlement in 2015 - $22MM But before settlement, Court ruled on motion to dismiss: Key court statement: ► “Even if the cardiologists were making less than the national median salary for their profession, the allegations that they began making substantially more money once they were employed by Citizens is sufficient to allow an inference that they were receiving improper remuneration. This inference is particularly strong given that it would make little apparent economic sense for Citizens to employ the cardiologists at a loss unless it were doing so for some ulterior motive – a motive Relators identify as a desire to induce referrals.” The Court did not rule that the compensation was inconsistent with FMV or commercially unreasonable. ► But Court denied the motion to dismiss, ruling sufficient questions of fact existed for a jury to decide ► Settlement of the case left those questions ultimately undecided 10
Lexington County Health Services District Hospital agreed to pay $17 million to settle allegations that it violated the Stark Law based on improper financial arrangements with 28 physicians Allegations that the employment agreements were not commercially reasonable and compensation was above FMV Relator’s proposed employment agreement included the following terms ► 7- year “no cut” employment agreement ► Base compensation of $318,758 (above the 75th percentile for neurologists) when historical production was at the 60th percentile ► Productivity bonus that would revalue every wRVU one productivity crossed established threshold 11
Lexington County Health Services District ► Physician’s productivity incentive include wRVUs produced by midlevel practitioners under the physician’s supervision ► Productivity incentive was contractually based on wRUV values established in 2010 Medicare PFS, rather than allowing for revised wRVU values as established by CMS from time to time. Complaint alleges that the physician earned $650,000 during first year of employment, inclusive of $40,000 signing bonus, which is more than 150% of the 90th percentile compensation for 75th percentile wRVU productivity (based on MGMA data) Complaint alleges that the physician’s compensation in private practice was $250,000 12
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