OIG Allows for Cost Sharing Arrangement between Ambulance Providers and Municipal Dispatch

Recently the OIG issued an advisory opinion in favor of a municipal fire department’s plan to share costs for dispatch-related EMS services with local hospitals’ ambulance providers. OIG explained that this arrangement did not warrant administrative sanctions, although it nonetheless has the potential to generate prohibited remuneration under the Anti-Kickback Statute if the requisite intent to induce referrals was present.

The city’s fire department administers the emergency medical services (“EMS”) component of the 911 dispatch system, including assisting with decisions on critical care for patients and ambulance transport destinations (the “Services”). Historically, the fire department was responsible for all of the costs associated with the Services. However, under the proposed arrangement, the local hospitals would bear a portion of the costs for personnel to administer the dispatch system. Specifically, the fire department would use data from the previous year on the costs for the Services and the number of scheduled tours to each hospital to determine each hospital’s pro rata share of the costs for the coming year.

The proposed arrangement implicates the Anti-Kickback Statute because it requires the hospitals—each potential referral recipients from the dispatch service—to pay a portion of the costs for the dispatch as a condition for providing EMS services in the city, some of which are reimbursable by Medicare and Medicaid. OIG concluded, however, that a number of factors helped to mitigate the risk of fraud and abuse.

First, OIG explained that the sharing of costs was part of a comprehensive scheme by the city to manage EMS services and that the arrangement would ensure that municipalities were flexible enough to organize local EMS systems efficiently and economically. Second, OIG determined that the arrangement would ensure that hospitals paid a proportionate share of the costs and therefore the hospitals would not be overpaying their referral sources.  Third, the amount due from a particular hospital would not be tied, directly or indirectly, to the volume or value of referrals it received because the costs would be pro-rata based on the number of scheduled tours.  Fourth, OIG found that the arrangement did not increase the risk of overutilization of services because it was limited to EMS and would not change the existing dispatch procedures.  Finally, the arrangement would not have an adverse impact on competition because it would permit all hospitals in the area to participate in the dispatch system.

Notably, OIG emphasized that it might have found the arrangement improper if the hospitals were paying the city or fire department anything not directly related to the provision of EMS, such as free or reduced cost equipment.

OIG Posts Health Care Compliance Training Videos

OIG recently posted a video of its Healthcare Fraud Prevention and Enforcement Action Team ("HEAT") training in Washington, D.C. on health care compliance and fraud prevention.  The training provides guidance to health care providers, compliance officers, and their legal counsel regarding health care fraud and abuse requirements and the fundamentals of compliance programs, as well as tips on navigating CMS when facing compliance issues and the government's various health care fraud enforcement initiatives.

Proposed Regs for ACOs Leave Many Questions Unanswered

On March 31, 2011 the Centers for Medicare & Medicaid Services (“CMS”) released the much-anticipated proposed regulations for the creation of Accountable Care Organizations (“ACOs”), which were published in the Federal Register on April 7. ACOs are a key component of the Patient Protection and Affordable Care Act (“PPACA”) and are referenced in PPACA as part of the Medicare Shared Savings Program. Section 3022 of the Patient Protection and Affordable Care Act, Pub. L. 111-148 (Mar. 23, 2010), codified at 42 U.S.C. 1395jjj. Following the launch of the ACO program on January 1, 2012, CMS expects 5 million Medicare beneficiaries to eventually receive care through an ACO. 

ACOs are coordinated healthcare delivery systems in which provider reimbursements are tied to quality measures and overall reductions in the cost of healthcare. In theory, ACOs will be able to maximize value by using a patient-centered team approach to care. In the ACO model, providers regularly communicate and collaborate on various aspects of patient care, ensuring continuity and consistency in care delivery. This approach stands in stark contrast to many current delivery models in which providers operate in silos, often creating disjointed or uncoordinated patient care. 

Structurally, an ACO will consist of a group of healthcare providers – physicians, physician groups, hospitals, and other suppliers of health services or provisions – contracting with each other and with CMS to provide comprehensive care for patients. While providers will still receive Medicare fee-for-service payments, the ACO will share in any savings it achieves for the Medicare program. At the same time, however, ACOs would be liable for any losses to Medicare. This “blended” reimbursement model eliminates incentives for overutilization inherent in a traditional fee-for-service system, yet also disincentivizes underutilization because some fee-for-service reimbursement remains.

What did the proposed regulations establish?

Broadly, the proposed regulations establish the ground rules for ACOs, although there are still many unknowns. Once formed, ACOs are subject to CMS approval and will be required to enter into a three-year contract. Among the many threshold requirements set forth are the following: each ACO must have at least 5,000 Medicare beneficiaries; ACOs must agree to datasharing provisions with CMS; and ACOs must have 50 percent of their primary care physicians using Electronic Health Records in compliance with the HITECH Act. ACOs must also have systems in place to track 65 quality metrics across five domains: patient care experience, care coordination, patient safety, preventative health, and at-risk population health. 


In exchange for an ACO’s commitment to these provisions, the ACO can select one of two reimbursement “tracks.” In Track 1, the ACO will share in savings only for the first and second year of their CMS contract; in the third year, the ACO will share in both savings and losses. In Track 2, the ACO will share in savings and losses for the duration of the contract. For ACOs in either track, in order for savings to accrue, the ACO must achieve between 2.0 and 3.9 percent savings below the CMS-established benchmark. Each ACO’s precise savings target will be established by CMS on a sliding scale related to ACO size.  


What is still to-be-determined? 


Although the proposed regulations answer many questions regarding ACOs, there is still a significant amount of uncertainty regarding their functionality. In particular, stakeholders are anxious about how ACO provisions will work in the context of tax law, anti-trust law, Stark Law, the Anti-Kickback Statute (“AKS”), and other fraud and abuse law. 


Thus far, CMS has proposed several waivers, exceptions, and safe harbors to deal with the panoply of healthcare laws implicated by ACO formation, financial arrangements, and reimbursement schemes. Although CMS acknowledges that to-date “no clear consensus has emerged on the scope of the waivers necessary to carry out the Medicare Shared Savings Program,” CMS has proposed to waive application of Stark and AKS insofar as the law applies to disbursements and distribution of shared savings within the ACO membership and the arrangement is otherwise compliant with the law or falls within an existing exception. CMS is actively seeking comment in regarding other types of waivers not yet contemplated in the proposed regulations. Specifically, CMS is interested in public perspectives on waivers that may be necessary to achieve compliance in the formation of an ACO, in pursuit of the ongoing goals of the ACO, in contracting with outside entities, and in distributing payments received from private payers.


To further inform public comment and the final regulations, CMS has engaged the Department of Justice (“DOJ”), the Federal Trade Commission (“FTC”), and the Internal Revenue Service (“IRS”) to issue guidance regarding their respective areas of enforcement. Although additional information is forthcoming, the DOJ and FTC have issued a joint statement addressing proposed anti-trust enforcement measures, and the IRS has released a notice regarding implications of the tax code for ACOs.




ACOs have the potential to transform healthcare delivery, and they are a key component in the federal government’s renewed focus on quality of care. However, in order for ACOs to achieve their potential, CMS must ensure ACO implementation is consistent with the policies and objectives of other laws targeting the healthcare industry. Absent increased predictability and certainty regarding application of these laws in the ACO context, healthcare providers and entities will be reluctant to engage in ACO transactions. 

Pharma Giant Agrees to Half-Billion Dollar Settlement for Kickback Claims

The Connecticut Attorney General announced yesterday that the Office of the Inspector General and several states have settled with Novartis, the pharmaceutical giant, for criminal and civil claims that Novartis committed kickbacks and off-label marketing involving several of its drugs.  According to the allegations by the government, Novartis had marketed the drug Trileptal, an anti-epileptic medication, beyond its FDA-approved uses to boost sales and paid physicians compensation for prescribing the drug.

Under the settlement terms, Novartis will pay the states and the federal government a total of $237.5 million in damages and penalties for losses to state and federal health care programs, and another $185 million to resolve criminal allegations.

Novartis must also enter into a five-year Corporate Integrity Agreement with the OIG, ensuring that OIG will be monitoring Novartis' every move going forward.


Negotiating Medical Office Building Leases

Entering into a Medical Office Building (MOB) Lease can often implicate Anti-Kickback and Stark law issues.  In Beware, Negotiating Medical Office Building Leases, which was recently published in the Colorado Real Estate Journal, I discuss how MOB leases can potentially violate Anti-Kickback and Stark laws and provide guidance on how to structure these leases to comply with federal and state law.