Anti-Kickback

June 27, 2024

Posted on by Courtney Patterson

QUESTION:
Is there any evidence that offering free trips or other freebies to a physician induces that physician to order the product sold by the person or entity that offered the freebie?

OUR ANSWER FROM HORTYSPRINGER ATTORNEY HENRY CASALE:
The federal government thinks so and so did the jury in a recent case.

In a qui tam case that was brought against the Cameron-Ehlen Group, Inc., d/b/a Precision Lens (“Precision Lens”), and its owner Paul Ehlen, the qui tam relator, and ultimately the federal government, alleged that Precision Lens and Mr. Ehlen provided kickbacks to ophthalmologists in various forms, including travel and entertainment, to induce those physicians to order Precision Lens’ Intraocular Lens (“IOLs”).

The unlawful “remuneration” in this case was alleged to consist of Precision Lens and Mr. Ehlen transporting certain physicians who had a history of using Precision Lens’ IOLs to luxury vacation destinations on a private jet – which was typically flown by Mr. Ehlen. The alleged remuneration included multiple trips, high-end skiing, fishing, golfing, hunting, sporting, and entertainment vacations, often to exclusive destinations such as New York City to see a Broadway musical, the College Football National Championship Game in Miami, and the Masters golf tournament in Augusta, Georgia.

Mr. Ehlen claimed that he was personal friends with these physicians and that the trips were gifts from one friend to another.  Mr. Ehlen and Precision Lens argued that the Antikickback Statute (AKS) does not prohibit a friend from providing a gift to another friend, even if the friends happen to do business with each other. Armed with this “friends” defense, Mr. Ehlen and Precision Lens rolled the dice, and risked a jury trial.

Unfortunately for Precision Lens and Mr. Ehlen, the government was able to convince a jury that the various “gifts” that Precision Lens, and its owner, Mr. Ehlen provided to the ophthalmic surgeons constituted unlawful remuneration that was intended to induce the physicians to order Precision Lens’ IOLs in cataract surgeries that were reimbursed by Medicare. It didn’t help that the government was also able to prove that Precision Lens maintained a fund, referred to internally at Precision Lens as a secret fund or slush fund, that was used to finance many of these multiple physician trips.

Another interesting aspect of this case that helps to explain the jury’s verdict was the government’s expert witness.  In order to convince the jury that the intent of the free trips was to induce the physicians to order Precisions Lens’ IOLs rather than IOLs manufactured by another company, the government presented a medical device marketing expert who provided testimony on how companies use gifts and incentives to influence physicians to use their products.  The expert witness provided research that showed that gifts and other incentives trigger the impulse to reciprocate, even if it was just subconsciously, and even at levels disproportionate to the gift.

This expert also testified that although doctors generally claim that their medical decisions are not influenced by the financial benefits they receive from product manufacturers, these benefits do in fact have a strong influence on medical decision making.

Apparently, the jury believed this expert witness along with the other evidence presented by the government because the jury concluded that the free trips were unlawful kickbacks provided to the ophthalmic surgeons with the intent to induce their use of the Precision Lens’ IOLs in cataract surgeries reimbursed by Medicare.  The jury then entered a judgment against Precision Lens and Mr. Ehlen in the amount of $487,048,705.13, which in early 2024 was reduced to a mere $216.7 million.

The OIG and DOJ believe that the fraud and abuse laws level the playing field for all competitors. They argue that a company such as Precision Lens should be competing with the manufacturers of similar products, on price and quality, not by giving the physicians who order their products lavish gifts.  The expert testimony in this case supported this argument.  That expert testimony should be kept in mind any time a referral source considers providing something of value to a referring physician.

If you have a quick question about this, e-mail Henry Casale at hcasale@hortyspringer.com.

If you want to learn more about the OIG, the Anti-Kickback Statute, the Stark Law, the False Claims Act, exclusive agreements, the recent FTC regulations on noncompete agreements, and much more, check out our latest episode of The Kickback Chronicles podcast and also join us at the Hospital-Physician Contracts and Compliance Clinic Seminar in Las Vegas from November 14-16, 2024!

August 30, 2018

Posted on by hortyspringer

QUESTION:        What is the latest formal regulatory guidance from the government on how hospitals are to structure a gainsharing program or a compensation arrangement with physicians who assist a hospital with the hospital’s Value Based Purchasing Program (“VBP”)?

ANSWER:            Currently, there is none – this is why the responses to the June 25, 2018 CMS Request for Information on the Stark Law and the OIG’s August 27, 2018 Request for Information that is described in this week’s “Government at Work” are so important.

Both OIG and CMS have referenced the HHS “Regulatory Sprint to Coordinated Care.”  Both OIG and CMS have recognized that the Fraud and Abuse Laws that are within their jurisdiction (the Stark Law in CMS’s case and the Anti-Kickback Statute and Civil Money Penalty Law (the “CMP”) in OIG’s case) can create real or perceived barriers to achieving clinical and financial integration between hospitals and physicians.  What is unfortunate is that in the past neither CMS nor OIG has shown much of a willingness to address those barriers to hospital-physician integration efforts.

As we pointed out to CMS (and also intend to inform OIG), if removing unnecessary governmental obstacles to care coordination is a key priority for HHS, then the planned HHS “Regulatory Sprint to Coordinated Care” will not get off the starting line without significant revisions to the regulations implementing the Stark Law, the Anti-Kickback Statute and the CMP, which are well within the respective discretion of CMS and OIG to implement.

For example, hospitals need immediate guidance concerning the ability of a hospital to compensate physicians who assist the hospital under Medicare’s VBP.  It is difficult, if not impossible, for a hospital to achieve the desired goals under the VBP without physician input and cooperation.  However, the fair market value of that input and cooperation is difficult to determine and hourly payment rates are often not reflective of the fair market value of the services actually being provided to the hospital by the physicians.

Hospitals need to be assured that utilizing a payment methodology that is based, in whole or in part, on the amount of the payment that the hospital receives under the VBP due to the services provided by the physicians will satisfy an exception to the Physician Self-Referral Law and will not violate the Anti-Kickback Statute or the CMP.

In addition, since 2001, the OIG has provided Compliance Program and Advisory Opinion Guidance on gainsharing arrangements.  (See, OIG Supplemental Compliance Program Guidance for Hospitals, 70 Fed. Reg. 4858, 4869-70 (Jan. 31, 2005); e.g., OIG Advisory Opinions 01-01 (Jan. 11, 2001); 05-01 (Feb. 4, 2005); 05-02, 05-03, 05-04 (Feb. 17, 2005); 05-05, 05-06 (Feb. 25, 2005); 06-22 (Nov. 16, 2006); 07-21, 07-22 (Jan. 14, 2008); 17-09 (Jan. 5, 2018).  However, no safe harbor exists for gainsharing arrangements.

CMS issued a proposed regulation, Incentive Payment and Shared Savings Programs, on July 7, 2008 (to be codified at 42 C.F.R. § 411.357(x)).  However, that proposed regulation did not adequately address VBP and  differed significantly from OIG’s gainsharing guidance.  Rather than publish a final regulation, CMS asked for public comment on 55 aspects of the proposed regulation.  73 Fed. Reg. 69,725, 69,795-98 (Nov. 19, 2008).  Unfortunately, to date, CMS has failed to issue any type of formal (or informal) guidance on the application of the Stark Law to gainsharing or other shared savings programs.

The OIG should turn its gainsharing, compliance and advisory opinion guidance into a safe harbor.  While we would prefer a new Stark gainsharing exception, a new Stark exception may not necessary so long as CMS states unambiguously that a hospital that complies with that OIG gainsharing safe harbor will satisfy the personal services exception to the Physician Self-Referral Law.

CMS and OIG should also propose additional, consistent guidance that will address VBP and other shared savings programs.  Such a position would be consistent with the position taken by CMS and the OIG in adopting parallel Stark exceptions and anti-kickback safe harbors for providing financial assistance to physicians implementing electronic prescribing and electronic health records (See 42 C.F.R. § 411.357(v)-(w); 42 C.F.R. § 1001.952(x)-(y)) and would provide practical guidance that hospitals and physicians could use to achieve clinical and financial integration.