Whistleblower Rewards Available When Physician Compensation Violates Medicare Rules
Many anesthesiologists serve as the paid medical director of their operating room suite or ambulatory surgical center (ASC). Sometimes surgical centers will form their own anesthesiology companies (the “company model”). There is nothing per se improper with these arrangements if they don’t involve illegal kickbacks.
In this post we will look at several compensation models commonly used to pay anesthesiology services with special emphasis on the so-called “Company Model.” (More on that below.)
Medical Directorships and Anesthesiologists
In 2015, Health and Human Services’ (HHS) Office of the Inspector General issued a Fraud Alert entitled “Physician Compensation Arrangements May Result in Significant Liability”.
According to HHS,
“Physicians who enter into compensation arrangements such as medical directorships must ensure that those arrangements reflect fair market value for bona fide services the physicians actually provide. Although many compensation arrangements are legitimate, a compensation arrangement may violate the anti-kickback statute if even one purpose of the arrangement is to compensate a physician for his or her past referrals of Federal health care program business. OIG encourages physicians to carefully consider the terms and conditions of medical directorships and other compensation arrangements before entering into them.”
A surgery center or hospital that offers a bogus medical directorship to a physician simply to disguise referral payments (kickbacks) is engaged in an illegal kickback scheme. We sometimes see these arrangements with anesthesiologists that run pain clinics.
Kickbacks and Anesthesiology
Not all kickbacks involve medical directorships. In fact, most don’t. Kickbacks can take place in all kinds of ways and they don’t even have to involve cash.
The anti-kickback statute is criminal. It prohibits offering, paying, soliciting or receiving any remuneration to induce or reward referrals of any healthcare services payable by federal funds. The law includes Medicare, Medicaid, VA and Tricare.
Normally when we think of kickbacks we think of bonus monies or some other mechanism to funnel back cash to the referring doctor. While those arrangements still exist, they are relatively rare with anesthesiologists.
The one exception, however, are pain management clinics which are often run by anesthesiologists.
Why? Traditionally anesthesiologists get business from hospitals. They rarely are in a position to refer business. When you are ill or need surgery, you see your internist or orthopedist depending on what is wrong. You don’t call an anesthesiologist first, if at all.
In a 2016 case, the Justice Department prosecuted a nurse anesthesia group. Sweet Dreams Nurse Anesthesia Group was actually a group of anesthesia businesses located in Georgia. In August 2016, Sweet Dreams agreed to pay $1 million in penalties to resolve anti-kickback allegations.
Sweet dreams involved two distinctive schemes.
The first scheme involved the group’s alleged provision of free anesthesia drugs to ambulatory surgery centers (ASCs) in exchange for the ASCs granting Sweet Dreams an exclusive contract to provide anesthesia services at those ASCs. Although there was no cash kickback, the surgery center received something of value in return for referring all patients to Sweet Dreams.
A second alleged scheme concerned the agreement of an affiliate of Sweet Dreams to fund the construction of an ASC in Marietta, Georgia, in exchange for contracts for Sweet Dreams’ selection as the exclusive anesthesia provider at that facility and a number of other podiatry-based ASCs affiliated with the Marietta ASC. This is a new one for us, the kickback was actually a building!
In another case, Medicare recently took action against several physicians who were receiving kickbacks disguised as free office staff. If you referred all or most of your patients to the clinic, the clinic would provide your front office staff. Although no cash exchanged hands, the doctors were still receiving a benefit by being relieved of the obligation to pay for staff.
Government Says No to Company Model
One of the biggest controversies in the world of anesthesiology is the use of the “company model.” Before define that term, let’s look at a Medicare opinion letter that addressed both traditional kickbacks and the company model.
In 2012, HHS issued Advisory Opinion 12-06 and directly considered two proposed business arrangements involving anesthesiologists.
In the first scenario, “the Requestor would continue to serve as the [ambulatory surgical center’s] exclusive provider of anesthesia services and to bill and retain all collections from patients and third party payors, including Medicare, for its services. In a departure from current practice, however, the Requestor would begin paying the center for ‘Management Services.’ The Management Services would include:
- Pre-operative nursing assessments;
- Adequate space for all of the Requestor’s physicians, including their personal effects;
- Adequate space for the Requestor’s physicians’ materials, including documentation and records; and
- Assistance with transferring billing documentation to the Requestor’s billing office…”
Under the proposed arrangement, the surgical center would charge the anesthesiologist a per patient fee but not if the patient was a Medicare or Medicaid recipient.
No way said HHS. Although no fee would be charged for Medicare patients, regulators have long disfavored these so called “carve out” arrangements that seek to exclude Medicare patients from the payment structure.
Even though no payment would be made to the center when Medicare patients were involved, the exclusive provider relationship and the payments made on other patients still gave the center a financial incentive to refer all patients to the same anesthesiologists. And that incentive constitutes a kickback.
The Company Model
In a second scenario, the surgical center’s physician owners would establish a separate company to perform anesthesia services. Once again, these separate companies would have an exclusive arrangement for anesthesia services. There would be a fee schedule established for these services and any profits would be retained by the company and not the surgery center.
CMS likes ambulatory surgical centers. They almost always save money over having the same medical service performed in a hospital. In encouraging more doctors to perform minor surgical procedures outside of hospitals, regulators enacted several so-called “safe harbors” that allow doctors to have an interest in companies providing surgical services.
Once again, the other proposed arrangement was also flagged. HHS correctly noted that the safe harbors are quite narrow and related to companies that operate “exclusively for the purposed of providing surgical services to patient not requiring hospitalization.” The rub is that anesthesia services are not surgical services.
There is really no risk to the doctors owning the surgical center as they directly control the referrals to the separate company providing the anesthesia services. In the words of HHS, “the company model is designed to permit the [ambulatory surgical center’s] physician – owners to do indirectly what they cannot do directly; that is, to receive compensation, in the form of a portion of the Requestor’s anesthesia services revenues, in return for their referrals to the Requestor. “
So what exactly is the Company Model?
In the company model, the facility or the referring physicians establish a controlled entity, the “company,” which then purports to employ or subcontract with the providers performing the referred services.
Closely related is the captive model. In this model, the facility or referring physicians purport to employ or subcontract with the providers performing the referred services.
Both types of arrangements are suspect joint ventures. Both of these models are usually just thinly disguised kickback arrangements.
These arrangements are common with anesthesia / pathology / radiology joint ventures. Many involve pain management clinics or endoscopy centers.
Successful Company Model Prosecution in Florida
Last month the Department of Justice settled civil False Claims Act charges against a Ft. Myers, Florida physician, Jonathan Daitch. He must pay $1.7 million. Dr. Daitch’s case is a good example of how anesthesiologists can wind up on the law side of the law.
According to prosecutors, Daitch, an anesthesiologist, was one of two owners of a pain management clinic, Advanced Pain Management Specialists, P.A. (His other partner was Dr. Michael Frey who pleaded guilty to criminal and civil charges and is paying $2.8 million.)
In addition to owning the pain clinic, Daitch also owned a company called Anesthesia Partners of SWFL. When one of his pain management patients needed to be sedated for a procedure, those services were provided by an employee of the anesthesia business. The result was double dipping and a violation of the anti-kickback statute.
Daitch clearly had a financial incentive to send patients needing anesthesia to his own company.
(Dr. Daitch was even more of an entrepreneur, he was also busted for owning the lab where his patient’s urine tests were performed. Although lab tests can be performed in house, the feds say Dr. Daitch was ordering unnecessary testing just to bill more to Medicare.)
Not all Company Model prosecutions have been successful. The Florida Society of Anesthesiologists brought their own whistleblower prosecution against several ambulatory surgical centers for violating Medicare rules by employing the company rule.
The Society claimed that several surgical surgery centers illegally referred patients to affiliated anesthesia companies. The companies all shared common ownership.
The anesthesia companies paid the contractor to provide anesthesia services (an anesthesiologist or nurse anesthetist) at a lower rate than ultimately reimbursed by Medicare. The anesthesia company then used the “spread” or “delta” between the contractor’s rate and the Medicare reimbursement to pay kickbacks to the surgeons. Essentially, this arrangement allowed the surgeons to receive a portion of anesthesia revenues, despite the fact that the surgeons are not anesthesiologists.
The Society rightfully claimed that the alleged kickback scheme resulted in overutilization of anesthesia and attendant harm to patients.
In their words, “[Florida Society of Anesthesiologists] leadership became concerned that company model arrangements could compromise patient care and safety by corrupting the professional judgment of the captive anesthesiologists. Another concern became the financial impact on the system and individual patients with the overutilization of health care resources. Finally, it was recognized that there were a growing number of FSA members that were adversely affected by the scheme in a number of aspects.”
The latter point means that they thought the surgeons were taking money out of their members pockets! The anesthesiologists received less in order to give more to the surgeons.
Anesthesiologists have always been at a competitive disadvantage because they are almost always reliant on others to refer them patients.
Unfortunately for the 2000 anesthesiologists who were members of the Society, the court dismissed their case because they lacked proof of the kickbacks. The anesthesiologists could prove the centers were operating under a company model, could prove they were making less money but couldn’t prove that the difference between what they were being paid and what the anesthesiology company received from Medicare was flowing into the surgeons’ pockets. In other words, they couldn’t prove the kickback.
More on that below.
Call for Medicare Fraud Whistleblowers
The vast majority of anesthesiologists go to work every day and do their best for patients. There are a greedy few, however, who try to game the system and earn more than they should. Same with the surgery centers who try to illegally profit off the anesthesiologists working there.
The federal anti-kickback and Stark law were passed by Congress in an effort to ensure that doctors always make medical decisions based on the best needs of their patients.
When doctors have a financial interest in the referral arrangements, patient care can suffer. That is when some providers begin to put profits before patients.
As we learned in the Florida Society of Anesthesiology case, however, a successful whistleblower case needs some evidence that kickbacks are going to the surgery centers / pain management clinics / endoscopy centers.
Under the False Claims Act, healthcare professionals with inside (direct) knowledge of illegal kickback and self-referral arrangements can receive a reward for stepping forward and reporting the illegal conduct.
Violations of the Anti-Kickback Statute and Stark laws are also violations of the False Claims Act. Under the False Claims Act, the government is entitled to triple damages and large penalties. The whistleblower who brought forward the case can receive 15% and 30% of the recovery.
Even if you took part in the illegal conduct, you may still be entitled to a reward. This means billing clerks and front office staff shouldn’t be afraid to step forward. (If there is an issue of your exposure, we can clear that with the Justice Department or state authorities before reporting.)
The False Claims Act also has strong anti-retaliation provisions.
29 states have similar state laws that cover the state funded portion of Medicaid.
For more information, visit our Anti Kickback and Stark law information page. Ready to see if you qualify for a reward or have questions? Contact us online, by email *protected email* or by phone 414-704-6731 (direct).
Our services are handled on a contingent fee basis meaning you owe us nothing if we don’t help you collect a reward. All inquiries are protected by the attorney – client privilege and kept completely confidential.
Mahany Law – America’s Whistleblower Lawyers
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