MMHA 6300 Week 7 Fraud and Abuse Memo Example

Memorandum

To: General Counsel, Riverbend Medical Center

From: Internal Auditor (MMHA student)

Date: Month Day, Year

Re: The outreach program's benefits to Summit Orthopedic Associates may implicate the Anti-Kickback Statute, the Stark Law and the False Claims Act

Purpose

A revenue cycle analyst flagged a rise in imaging and outpatient therapy orders from Summit Orthopedic Associates, a fictional four-surgeon group, beginning about two quarters after Riverbend's physician outreach program began providing the group with several benefits. This memo describes what was provided, explains how each of three federal laws may apply and recommends steps. It does not conclude that any law was violated; intent and valuation questions require counsel's judgment and possibly outside review.

What the Outreach Program Provided

Over 14 months, the outreach program's records show the following: four seats in the hospital's suite at a professional baseball stadium for 11 home games, used by Summit's surgeons and their guests; six dinners at a downtown restaurant for Summit's surgeons and office manager, at which hospital service line leaders attended; and a hospital-employed patient access coordinator assigned to Summit's office three days a week, where she scheduled the group's patients, including their imaging and therapy appointments at Riverbend. The coordinator's salary and benefits were paid by Riverbend and were not billed to Summit. No written agreement covers any of these items.

Over the same period, Summit's orders for MRI at Riverbend rose from an average of 31 to 52 a month, and its referrals to Riverbend's outpatient physical therapy rose by about two-thirds. A meaningful share of these patients are covered by Medicare or Medicaid. These are the figures in the analyst's report; the memo does not draw any inference about medical necessity from them.

The Anti-Kickback Statute

This criminal law reaches anyone who knowingly and willfully gives, or offers, something of value in exchange for, or to encourage, referrals of Medicare, Medicaid or other federally insured patients, whether the value moves openly or through a third party (42 U.S.C. § 1320a-7b). Remuneration means anything of value. Stadium seats, dinners and a free employee are all remuneration.

The central question is intent. Courts have held that the statute can be violated if one purpose of the payment is to induce referrals, even if other purposes exist, and the statute itself now states that actual knowledge of the statute or specific intent to violate it is not required (42 U.S.C. § 1320a-7b). Several facts here would interest an investigator: the benefits went to a high-referring group selected by the outreach program, the coordinator scheduled patients into Riverbend's own services, and there is no written agreement establishing a legitimate purpose or fair market value. Riverbend's likely response is that the program aimed to build relationships and improve patient access. That account may be sincere, but it will need documents behind it.

No safe harbor appears to fit. The safe harbors for personal services and for employees require written agreements, fair market value or a true employment relationship with the party receiving payment. The coordinator is Riverbend's employee, but she works for Summit's benefit in Summit's office.

The Stark Law

Under the physician self-referral law, known as Stark, a surgeon who has any financial tie to Riverbend may not send Medicare patients there for the categories of care the law calls designated health services, and Riverbend may not bill Medicare for them, unless the tie fits one of the law's exceptions (42 U.S.C. § 1395nn). Unlike the Anti-Kickback Statute, Stark does not require intent. If the elements are met and no exception fits, the claims are not payable.

Each element appears to be present. A compensation arrangement exists, because the tickets, dinners and in-kind staff support are remuneration from Riverbend to the surgeons. MRI, physical therapy and hospital services are designated health services. The surgeons referred Medicare patients to Riverbend for them.

The exceptions are narrow. Non-monetary compensation to a physician is excepted only up to a modest annual limit, adjusted each year and amounting to a few hundred dollars per physician, and only if the items are not determined in a manner that takes referrals into account (42 C.F.R. § 411.357). Eleven games in a stadium suite and six restaurant dinners are likely to exceed that limit for each surgeon. A free scheduler worth tens of thousands of dollars a year does not fit any exception the memo has identified, since there is no written agreement and no payment at fair market value. If counsel agrees, the conclusion would be that Riverbend's claims for designated health services referred by Summit's surgeons during the period may not be payable.

The False Claims Act

Civil liability under this act attaches to anyone for knowingly presenting a false claim to the government, or for causing someone else to present one; the government recovers treble its losses and a separate inflation-adjusted penalty on each claim (31 U.S.C. § 3729). Congress closed any gap between the two laws in 2010: when a claim includes services produced by a kickback, that claim is false for purposes of the act (42 U.S.C. § 1320a-7b). Claims submitted in violation of the Stark Law have also been pursued under the act. Because each claim counts separately, a 14-month arrangement producing hundreds of claims creates substantial potential liability.

The act also lets a private person, called a relator, sue on the government's account and collect a share of what is recovered (31 U.S.C. § 3730). Relators are often insiders: billing staff, compliance staff and employees placed in the very arrangements at issue. The analyst who flagged this pattern, and the coordinator who works in Summit's office, both know the facts. Retaliation against either would expose Riverbend to a separate claim under the act's whistleblower protections and would be wrong.

The Analyst's Position

The analyst did what Riverbend's compliance program asks employees to do. Federal guidance on effective compliance programs stresses open lines of communication, protection for people who raise concerns and prompt response to detected problems (Office of Inspector General, 2023). The analyst should be told that the report was received and is being reviewed, should not be asked to stop looking at the data and should be kept out of any conversation with the outreach program staff about the findings. How the organization treats her will tell every other employee whether reporting is safe.

Recommendations

1. Suspend the stadium seats, the dinners and the coordinator assignment to Summit's office now, pending review, and document the suspension.

2. Retain outside counsel to assess intent and an independent firm to value the remuneration provided to each surgeon.

3. Identify every claim for designated health services referred by Summit's surgeons during the period, so that the amount at issue is known.

4. Decide, with counsel, whether to use the government's self-disclosure processes. Riverbend must report and return any identified overpayment within 60 days of identifying it, and an overpayment kept past that point can itself become a false claims problem.

5. Review every other arrangement in the outreach program against the same three laws, since a program that gave these benefits to one group may have given them to others.

6. Tell the analyst in writing that raising the pattern was the right call and that no one may penalize her for it.

References

Civil actions for false claims, 31 U.S.C. § 3730 (2023).

Criminal penalties for acts involving Federal health care programs, 42 U.S.C. § 1320a-7b (2023).

Exceptions to the referral prohibition related to compensation arrangements, 42 C.F.R. § 411.357 (2024).

False claims, 31 U.S.C. § 3729 (2023).

Limitation on certain physician referrals, 42 U.S.C. § 1395nn (2023).

Office of Inspector General. (2023). General compliance program guidance. U.S. Department of Health and Human Services.