Guest Columns

Government scrutiny with physician contracts

Nick Merkin
Nick Merkin

The government is increasing its scrutiny of skilled nursing facilities that might be tempted to offer a physician a role as a Utilization Review Physician or Physician Medical Director as an inducement to refer residents to a particular facility. For this reason, regulators closely review contractual relationships between SNFs and physicians, and look at things such as the level of compensation a physician receives from the SNF, the type of work that the physician is doing for the SNF, record keeping relating that work, and the number and specialty areas of physicians contracting with the SNF.  

Simply put, if the regulators are unhappy with what they find, the penalties can be severe. Moreover, the OIG has made clear that physician contracting is going to be a matter of increased scrutiny in the coming years.

So, what should you know about the rules to make sure you are in compliance? There are a few overlapping regulations that govern physician contracting issues. The first is the Stark Law, which prohibits a physician from referring Medicare or Medicaid patients to a SNF with which the physician or his family has a financial relationship – such as, for example, a URP or PMD arrangement. Violations of the Stark Law can result in penalties of up to $15,000 per violation and disgorgement.

There are many exceptions to the Stark Law, and the Personal Services Exception is one to watch. This exception allows a URP or PMD relationship between a SNF and a physician if the following conditions are met:

 

  1. there is a written, signed agreement specifying and detailing all the services covered by the agreement;
  2. the services are reasonable and necessary and do not violate any laws;
  3. the term of the arrangement is for at least one year; and
  4. the compensation to be paid over the term of the arrangement is set in advance, does not exceed fair market value, and does not take into account referral volume or other business arrangements between the parties.

In addition to the Stark Law, the Anti-Kickback Statute prohibits the knowing and willful solicitation, receipt, or offer of remuneration in return for a referral of Medicare or Medicaid business (including Medi-Cal). Unlike the Stark Law, AKS is a criminal statute and does not solely apply to physicians – that means anyone can be on the hook. A violation the AKS can result in fines (up to $50,000 per violation), prison (up to five years), disgorgement, and exclusions of individuals and providers.

Notably, courts have found AKS violations even in cases where a referral was not the primary purpose of the kickback.  There is also a state version of the AKS, which is fairly similar. California Welfare and Institutions Code Section 14107.2 prohibits the solicitation or receipt of any remuneration in return for a Medi-Cal referral. Unlike the AKS, there is no requirement that a violator's conduct be willful.

Penalties for violations of this law can also include fines and imprisonment. There is no single bright-line rule that would justify retaining and above normal number of physicians at your facilities. There are a few cases, however, in which this might be reasonable. For example:
  1. Facilities in which internal or external audits have identified them generally as “problem facilities” or where there are “problem areas” within a particular facility. In these cases, the justification may only last until the particular problematic issues are resolved;
  2. Specialized units within a SNF. For example, a URP with a specialty in geriatric psychology in a sub-acute unit. In these situations, there should be enough residents with such special needs to warrant additional or specialized URPs.

Unfortunately, there are no specific “hard line” rules for determining the appropriate number of URPs for a SNF with a given number of beds.  Industry “best practices” recommend that a SNF maintain a maximum ratio of about two URPs per 100 beds (in addition to a PMD).  This number is roughly derived from assuming a chart review of 10% of the resident population per month and adding the number of hours for meetings, trainings, and policy reviews.

Additionally, it is best that not all the URPs at a particular SNF be referring or attending physicians, as this practice is likely to raise red flags. Of course, in some cases, this may be impossible because of the geographic area where a SNF is located.

If there are exigent circumstances – a patient population with a demonstrably higher level of acuity, for example -- a SNF may be able to provide sufficient evidence justifying additional URPs, but pushing the envelope leads to higher levels of risk.

Nick Merkin is the CEO of Compliagent.

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