Physician Law Blog

On June 18, 2015, the US Attorney announced two investigations resulting in a number of accusations of Medicare and Medicaid fraud and abuse. The “Home Alone IV” take-down and the largest national health care fraud take-down to date involving more than 200 subjects accused of defrauding Medicare and Medicaid of more than $700 Million in 14 states. Each of these takedown operations demonstrate just how seriously the Health Care Fraud Prevention and Enforcement Action Team (HEAT) is in its efforts to reduce fraud and abuse in healthcare operations.

Building upon the bundled payment demonstration programs currently underway for Medicare, the Centers for Medicare and Medicaid Services (CMS) announced a proposal for a major shift in the way hospitals will be paid for hip and knee replacements. In an effort to incentivize hospitals to encourage quality and care improvements as patients transition from surgery to recovery, CMS proposed a change in the manner of payment to focus on episodes of care, rather than a piecemeal system.

On May 7, 2015, the Department of Justice reported settlement with 16 separate hospitals for medically unnecessary or unreasonable psychotherapy services. The claims under scrutiny were Intensive Outpatient Psychotherapy (IOP) services, which represent a variety of treatment methods. The services, while billed to Medicare by the providers, were performed on the providers’ behalf by Allegiance health Management, a post-acute healthcare management company. 

Hospitals and physicians need to be alert when entering management agreements to ensure that the relationships require sufficient bonafide services to justify those management agreements. In this latest case, allegations related to violations of Stark Statute and Anti-Kickback Statute led to significant penalty payments, Ten Million Dollars. Hospitals and physicians need to ensure that any management service agreements they enter do not violate the Stark Statute and/or Anti-Kickback Statute.