SOHA Officers and

Board 2008

President: Rob Gerberry, Summa Health System, Ak-ron

Vice President: Susan Blasik Miller, Freund, Freeze & Ar-nold, Dayton

Secretary: Jeff Kapp, Jones Day, Cleveland

Immediate Past President: Tim Krugh, Robison, Curphey & O’Connell, Toledo

District Representatives: Northeast: Patricia Jacobson, Stark & Knoll Co., LPA, Akron

Tom Onusko, Vorys, Sater, Seymour & Pease, Cleveland

Northwest: Gary Sommer, Watkins, Bates & Carey, LLP, Toledo

Julia Smith Wiley, Robison, Curphey & O’Connell, Toledo

Southwest: Geoff Walker, Good Samari-tan Hospital, Dayton

Theresa Zimmerman, Catho-lic Healthcare Partners, Nor-ton

Central: Rhonda Comer, Nationwide Children’s Hospital, Colum-bus

Allen Killworth, Bricker & Eck-ler, LLP, Columbus

OHA Representatives: Mary Gallagher, Vice Presi-dent & General Counsel Rick Sites, General Counsel and Senior Director of Health Policy

Thank you to all of the SOHA members who recently participated in the OHA An-nual Meeting and the SOHA Luncheon. Special thanks to SOHA Board Mem-bers Rhonda Comer, Nationwide Children’s Hospital and Pat Jacobson, Stark & Knoll, who put together a con-structive and informa-tive panel discussion entitled, “Never Say Never: Quality, Risk and Payment Issues of ‘Never Events.’” Participating on the panel were SOHA Member Frank Pan-dora, OhioHealth, along with Barry Mali-nowski, Medical Director for Anthem, and Richard McClead, MD, Nationwide Chil-dren’s Hospital. Other SOHA members who presented at the OHA Annual Meeting include: Rob Gerberry, Summa Health System; Tim

Krugh, Robison, Curphey & O’Connell; Chet Porembski, OhioHealth; Darrell Ranum, OHIC/The Doctors Company;

Jim Flynn, Allen Killworth, Cath-erine Ballard, Diane Signoracci, Mike Gire, Mark Chilson and Karen Smith of Bricker & Eckler; Jim King, Jones Day; and Steve Eisenberg and Chris Swift,

Baker Hostetler. View handouts for each session at ww.ohanet.org/annualmeeting/ handouts-08.asp. And be sure to join SOHA at the Ohio breakfast at this year’s AHLA Annual Meeting in San Francisco. SOHA Board member Tom Onusko will lead the group in a state health law discussion on Tues. July 1 from 7:00 a.m.—8:00 a.m. in Si-erra A at the San Francisco Marriott.

Volume 8, Issue 2 Summer 2008

OHA Luncheon a Success; AHLA Meeting Approaching

NEWSLETTER

SOHA Society of Ohio Healthcare Attorneys

Recently, the United States District Court for the Southern District of Ohio unsealed a whistler-blower suit naming The Christ Hospital, The Health Alliance of Greater Cincinnati and The Ohio Heart Health Center as defendants. The Department of Justice, after conduct-ing an investigation by the U.S. Attorney’s Office in Columbus, announced it has in-tervened in the lawsuit. See the DOJ Press Release at www.usdoj.gov/usao/ohs/Press/04-01-08-Wash.pdf.

One of the whistleblower’s claims ties fraud

and abuse laws to the federal False Claims Act. Attached to this issue of SOHANews is an analysis of the inter-face among the Medi-care and Medicaid

Anti-Kickback Statute, Stark II Law and the federal False Claims Act by SOHA mem-ber William Mack Copeland, Esq., FACHE.

Interface Among AKS, Stark and False Claims Act

Mark Your Calendar Now: √ AHLA Annual Meeting

June 30-July 2, San Francisco Marriott √ SOHA Fall Conference

Sept. 18-19, Hilton Easton, Columbus

“Violation of the anti-kickback statute is a sufficient basis for an action under the False Claims Act.”

Page 2 SOHA News

by the physician and by the hospital, the court reviewed the statutory peer review protection of Ohio Rev. Code Sec. 2305.252, which had recently been found constitutional by the appellate court. The court reversed the trial court with respect to documents prepared by the physician and provided to health care entities for purposes of peer review processes for accreditation, credentialing and privileges, finding those documents protected by Ohio Rev. Code Sec. 2305.252. However, the appeals court upheld the disclosure order for documents submitted to non-hospital entities such as the Na-tional Practitioner Data Bank, the Joint Commission, the Foundation of State Medical Board’s Physician Disciplinary Data Bank and the Ohio State Medical Board. The record did not establish those filings were submitted to entities with peer review committees. In addition, those documents are not privileged merely be-cause they are “of a type that usually makes up a peer review committee file.” Finally, the court determined the order re-quiring various health and professional liability carriers to produce documents was not a final, appealable order because it ordered in camera review. Therefore, the court declined to consider that assignment of error.

The Stark County Court of Appeals re-cently considered a trial court’s order of the disclosure of privileged peer review docu-ments in a medical malpractice and negli-gent credentialing case. Huntsman v. Aultman Hosp., Case Nos. 2006 CA 00316, 2006 CA 00331 (Ohio Ct. App., May 27, 2008). The case, Huntsman v. Aultman Hosp., has an extensive history of discovery dis-putes. In 2005, the appellate court re-versed the trial court’s order of discovery of a list of documents from the hospital’s peer review and credentialing files, finding them privileged. However, the court found the documents were discoverable from original sources and remanded the case to the trial court for further proceedings. On remand, the plaintiff sought discovery of the documents directly from the defen-dant physician and from several health in-surance and professional liability insurance carriers. The subpoena requested incident reports, applications for medical privileges at hospitals, National Practitioner Data Bank filings, Ohio State Medical Board fil-ings, Joint Commission filings, applications for professional liability coverage, health insurance credentialing applications, and other documents. The trial court ordered production of the documents for in camera inspection. In companion cases considering appeals

The Fifth District Court of Appeals of Ohio recently ordered a doctor to disclose infor-mation regarding a patient and the treat-ment the patient received. In a unanimous decision, the court held that disclosure of privileged information was permitted when the claim was originally filed by the plaintiff to whom the information pertains. Banks v. Ohio Physical Medicine & Rehabilitation, Inc., 2008 WL 1970832 (Oh. Ct. App. 5th Dist., 2008). Mark Banks was terminated from his posi-tion at Ohio Physical Medicine and Reha-bilitation, Inc., and he sued the company for unlawful termination. The defendant countersued and alleged that Banks was terminated because he used and abused

prescription drugs while on the job, among other claims. To support its defenses and counterclaims, the defendant requested records relating to Banks’ previous medi-cal services and treatments for chemical dependency. The appellate court agreed with the trial court, holding that privileged information relevant to a case may be discovered in a civil action if a medical claim or any type of civil action is filed by a patient, personal representative of a patient, or patient’s guardian as long as the information is rele-vant to the subject matter of the pending case. The court permitted the defendant to acquire Banks’ medical records pertain-ing to his drug-related treatment.

Plaintiff’s Treatment Records Discoverable

Physician’s Credentialing Documents Protected

Page 3 SOHA News

viously been found responsible for injuries due to substandard care. Oral argument in the case will be held later this year and a decision can be expected early next year. SOHA members Catherine Ballard and Anne Marie Sferra of Bricker & Eckler, Columbus, represent OHA in the case. View the brief on the OHA Web site at http://www.ohanet.org/med-mal/resources/050709amicus.pdf

OHA and the Ohio Osteopathic Hospital Association filed an amici curiae brief in a case pending before the Ohio Supreme Court. The case, Schelling v. Community Hospitals of Williams County, involves negli-gent credentialing lawsuits and is an appeal from the Williams County appellate court. The appellate court ruled that a plaintiff may sue a hospital for negligent credentialing, even when the allegedly negligent physician is not a party to the lawsuit and has not pre-

Objective, Not Subjective Expert Testimony Permitted The Second District Court of Appeals of Ohio recently considered the role of expert testimony in a medical malpractice case. In Moore v. Kettering Memorial Hospital, 2008 WL 1921642 (May 2, 2008), the court held a patient was permitted to use expert testi-mony to show that a physician’s actions fell below the standard of care. Before labor, Dr. Liesner failed to inform the patient that in addition to inducing labor, the option of performing a caesarean section to deliver the baby existed. Due to the induced labor, the child was born with a birth defect, and the patient sued arguing the doctor negligently delivered the baby and negli-gently failed to offer the option of a c-section. The trial court relied on an expert’s subjective testimony, that he too would have induced labor even though a c-section was available, to determine that the patient failed

to provide evidence showing Dr. Liesner’s actions fell below the standard of care owed. The court of appeals disagreed with the trial court’s reliance on a subjective opinion to determine the standard of care. In Ohio, in order to establish medical malpractice, it must be shown that the injury was caused by the actions of the defendant physician, actions that other physicians of ordinary skill would not reasonably commit under similar circumstances, and that the injury was directly caused by such actions. The court remanded the case holding that the jury should have used the expert’s objective testimony stating doctors should offer alter-native birthing methods, such as c-sections, rather than his subjective testimony on the method he would personally use in a given situation.

OHA Weighs In on Negligent Credentialing Case

SOHA, OSHRM, OHA Web Resources Available Have you checked the SOHA, OSHRM or OHA Web sites lately? Previous issues of SOHANews are archived at www.ohanet.org/societies/soha. Also check out the page for the Ohio Soci-ety for Healthcare Risk Managers. OSHRM posts a quarterly newsy message and keeps a list of Ohio Supreme Court opinions of interest to health lawyers. (www.ohanet.org/societies/oshrm) And don’t forget about the OHA Hospital Law Handbook! Available for just $75 for SOHA members, the Handbook is a com-pendium of Ohio statutes and regulations applicable to hospitals, physicians and other

health care providers. The latest edition consists of more than 900 pages organized into eleven chapters with approximately 950 health care statutes and regulations current to January 1, 2008. More than 70 new provi-sions were added and the index was ex-panded, ranging from "abandoned baby" to "x-ray." Handbook purchasers will also receive a copy of an OHA bulletin listing almost 75 hospital reporting obligations under Ohio laws. Ordering information and regular updates to the Handbook are available at www.ohanet.org/med-mal/.

Page 4 SOHA News

Common Sense Nurse Staffing Bill Enacted ing assessments of a unit’s patients and nursing staff; and

√ The hospital’s policy for additional nurses who can provide care when patients’ needs exceed the planned workload for the direct care staff.

The hospital must provide the nursing staff and others a copy of the staffing plan upon request. The Ohio Hospital Association worked with the Ohio Nurses Association on the legis-lation, House Bill 346, sponsored by Jim Hughes (R-Columbus). OHA will continue to work with the ONA to implement the law, while working against proposals of-fered by other organizations which would jeopardize the ability of hospitals to meet patient and community needs. More information on nurse staffing can be found on the OHA Web site at www.ohanet.org/advocacy/state/issues/nursestaffing.htm. To ease the implemen-tation burden, OHA and the Ohio Organi-zation of Nurse Executives (OONE) devel-oped an initial resource packet (www.futurethink.org/resources/draftstaffingresources5-28-08.pdf) to give nurse administrators the information they need to initiate conversations about nurse staffing at their hospitals. It also provides an outline of the requirements of HB 346.

The common sense nurse staffing bill was signed by Gov. Ted Strickland and will take effect Sept. 10, giving hospitals months to prepare for the new requirements. The act requires hospitals to create hospi-tal-wide nursing care committees, charged with developing recommendations for writ-ten nursing care staffing plans. Direct care nurses representing all types of nursing services offered by the hospital, as well as chief nursing officers, will serve on the committees. Each hospital also must develop a staffing plan, giving significant regard to the com-mittee recommendations. The plan must address: √ Whether the hospital has competent

nurses with specialized skills to meet patient care needs in accordance with evidence-based safe nursing stan-dards;

√ Complexity care of care, assessment on patient admission, volume of patient admissions, discharges and transfers, evaluation of the patient’s problems, ongoing physical assessments, plan-ning for a patient’s discharge, assess-ment after a change in patient condi-tion and assessment of the need for patient referrals;

√ Patient acuity and the number of pa-tients receiving care along with ongo-

Grieving Parents Act Signed into Law Gov. Ted Strickland June 11 signed into law the Grieving Parents Act, which addresses medical situations where fetal death has occurred prior to 20 weeks gestation. The act requires hospitals to notify a woman who presents herself at a hospital as a re-sult of a fetal death prior to 20 weeks gesta-tion with information about the hospital pro-cedure for disposing of the product of hu-man conception as well as the right of the woman to apply for a fetal death certificate. Current law does not authorize either death certificates or burial permits for fetal deaths occurring prior to the 20th week of gesta-tion, although some parties ignore existing law in order to accommodate the wishes of the grieving woman or family.

The act, sponsored by Sen. Kevin Coughlin (R-Cuyahoga Falls), specifies that sections of the bill concerning a hos-pital or doctor notification requirement about miscarriage do not apply in the case of an abortion. A substitute version of the bill added that if a father applies for a fetal death certificate, he must also sub-mit a signed and notarized document from the mother attesting she voluntarily provided a copy of a hospital or physician statement confirming the miscarriage. The substitute also added a provision that the cause of death is not to be listed on a certificate for fetal death that occurs prior to 20 weeks of gestation. A memo outlin-ing various negotiated provisions can be found at http://www.ohanet.org/advocacy/state/issues/resources/sb175memo.pdf.

Governor Signs Maternity Licensure Bill Gov. Ted Strickland held a public bill sign-ing on Monday, June 2nd to pen his ap-proval of legislation that will reduce regula-tory burden, lower costs and enhance ma-ternal and newborn care in Ohio. House Bill 331, sponsored by Sen. Mark Wagoner (R-Toledo), will take Sept. 1. Although hospitals are not licensed in Ohio, hospital maternity units have a sepa-rate licensure requirement, enacted in the 1950s. Over 120 Ohio hospitals have ac-tive maternity units. The act combines two current sets of ma-ternity licensure requirements and moves from annual maternity inspections to three-

year licenses and tri-annual inspections. The act also permits random and additional scheduled inspections, consistent with ac-creditation standards. A new maternity ad-visory council has been created to assist the Ohio Department of Health (ODH) in prom-ulgating rules that are evidence-based and reflect best practices. The act is the result of collaboration be-tween the Ohio Hospital Association Mater-nity Licensure Task Force and ODH, and reflects the needs of large and urban hospi-tals as well as small and rural facilities. Read the act at www.legislature.state.oh.us/bills.cfm?ID=127_HB_331.

Page 5 SOHA News

Hospitals Applaud Newly-Passed Energy Bill Ohio’s hospital community supports the final version of Ohio’s comprehensive energy bill passed by the General Assembly, hopeful it will improve reliability and help Ohio avoid sharp increases in electricity rates begin-ning next year. Senate Bill 221, sponsored by Robert Schuler (R-Cincinnati) was signed into law by Gov. Ted Strickland May 1. Overall, electric rates under the bill are expected to increase moderately during the next 2-3 years under electric security plans, although FirstEnergy rates may increase more significantly if it makes good on ear-lier statements that it planned next year to go to high market-based electric rates. The final bill also includes net metering lan-guage that will enable Ohio hospitals with appropriate electric generating equipment to use on-site electric generating facilities in times of peak demand to sell electricity back the utility's power grid. Another provision in

SB 221 permits a utility and a commercial or industrial customer, or group of custom-ers, to file a special rate schedule with the Public Utilities Commission of Ohio. This may provide an opportunity for hospitals to obtain lower electric rates if they are will-ing, for example, to have their power inter-rupted during times of peak demand. A detailed analysis of the bill is available at http://www.ohanet.org/Bulletins/2008/08-004.htm. Passage of SB 221 is considered a success because electric rates after this year were expected to increase, with the potential to jump dramatically as in states with deregulated electric rates. OHA is a member of the Ohio Coalition for Affordable Power, which supported SB 221 in its advo-cacy for a framework to ensure affordable and reliable power. For more information, visit OHA’s energy Web page at http://www.ohanet.org/energy/.

The Ohio Department of Health (ODH) is-sued the results of its 2007 survey of pro-posed rule changes that would require hos-pitals to report lab-confirmed influenza-associated hospital admissions. A majority of hospitals responding to the survey agreed there is public health benefit to such reporting, and most also agreed they are able to make such reports. About half of responding hospitals cited barriers to

reporting, including insufficient staff, time constraints and lab or information technol-ogy equipment deficiencies. ODH says it is still working on the draft communicable disease rule changes, which are expected to be circulated in the near future. View the report at http://www.ohanet.org/flu/doc/042508odh_survey.pdf and a cover letter from State Epidemiologist Forrest Smith, M.D. at http://www.ohanet.org/flu/doc/042508flu_letter.pdf.

ODH Issues Flu Reporting Survey Results

Page 6 SOHA News

Society of Ohio Healthcare Attorneys

155 East Broad Street, 15th Floor Columbus, Ohio 43215-3260

614.221.7614•614.221.4771(fax) www.ohanet.org/societies/soha/

SOHA News

Mary L. Gallagher, Editor maryg@ohanet.org

Message from the President

Check out the following health law attorney opportunities: Akron General Health System: Associate General Coun-sel. http://www.akrongeneral.org/portal/page?_pageid=153,171654&_dad=portal&_schema=PORTAL&job_id=487694 Cincinnati Children’s Medical Center: Tax Compliance Officer. http://sh.webhire.com/servlet/av/jd?ai=361&ji=1957804&sn=I University Hospitals, Cleveland: Associate General Counsel. http://www.uhhospitals.org/tabid/1280/Default.aspx University Hospitals, Cleveland: Associate Chief Compli-ance Officer. http://www.uhhospitals.org/tabid/1280/Default.aspx Jones Day, Chicago & Washington, DC: Health Care As-sociate. http://selfapply.jonesday.com/apply/redefault.aspx?FilterREID=2&FilterJobCategoryID=1

Health Law Attorney Openings

A s we inch closer to the up-coming Presidential elec-tion, many candidates con-tinue to call for change in

our nation’s delivery of health care. SOHA’s goal is to track and analyze pro-posed and existing legislation to assist our membership with the opportunities and challenges presented by these changes. As part of this effort, SOHA will continue to strive to interpret and shape the laws and regulations that impact our profession. As part of this mission, SOHA will be sponsoring several upcoming events. SOHA hosted a luncheon presentation on Tuesday, June 12 at the OHA Annual Meeting. The presen-tation, titled “Quality and Payment Issues involved with Never Events” included panelists from OhioHealth, OSU Medical Center and Nationwide Children’s Hospital. In ad-dition, on Tuesday July 1 at the AHLA Annual Meeting, SOHA will sponsor a breakfast meeting for all Ohio atten-dees with an Ohio Case Law update presented by SOHA Board member Tom Onusko of Vorys, Sater. Finally, Allen Killworth has been working with OSHRM to put together an excellent Fall Conference which will be held at the Hilton Easton in Columbus on Thursday, September 18 and Fri-day, September 19. Through these educational events and networking within our membership, SOHA members will continue to seek to improve the health care system in Ohio by providing high quality legal and policy counsel to health care entities throughout the state.

Rob Gerberry

Please join SOHA in welcoming the following new mem-ber: √ Shannon DeBra, Baker Hostetler, Cincinnati

Welcome New SOHA Member

Congratulations to the following SOHA members and health lawyers in the news:

Almeta Cooper has joined the Ohio State University Medical Center Office of Health Sciences as Associate Vice President and Associate General Counsel. Mel Rutherford has joined ProAssurance’s West Chester of-fice as a Senior Risk Management Consultant. Dan Glessner has joined the Akron office of Brouse McDowell in the Healthcare Practice Group. Shawn Lyden, Of Counsel to Brouse McDowell, has been named Executive Vice President and General Counsel of Akron Children’s Hospital. Jan Murray has been appointed Deputy Gen-eral Counsel of the Cleveland Clinic Health System. Jeff Kapp, a partner in the Health Care Group of Jones Day has moved from Columbus to the Cleveland office. Dan Hackett has been named General Counsel of the Mount Carmel Health System in Columbus. Don Antrim and fel-low attorneys in the Columbus office of Buckingham Doolittle have joined the Columbus office of Dinsmore & Shohl. Former OHA Staffer Jeff Klingler has been named President and CEO of the new Central Ohio Hospital Council.

SOHA Members in the News

R ecently, the United States District Court for the Southern District of Ohio unsealed a whistler-blower suit naming The Christ Hospital, The

Health Alliance of Greater Cincinnati and The Ohio Heart Health Center as defendants. The Department of Justice, which has intervened in the lawsuit, has indicated it plans to file its own suit. The federal False Claims Act (“FCA”) is a federal statute that prohibits, among other things, anyone from presenting a false or fraudulent claim for payment to the federal government, or causing the use of a false record to get a claim paid by the federal government. In the health care context, this would include billing for work not performed, upcoding, billing for unnecessary services, and even billing for services that were obtained in violation of other regulations (such as the anti-kickback statute). The FCA provides a financial incentive for people with knowledge of false claims against the federal government to come forward. It does so by awarding a successful relator (the plaintiff in a FCA case) with between 15-30% of any recovery from a defendant. The relator files a FCA suit (also called a “qui tam” suit) on behalf of the United States. It is filed under seal (not a public document), along with a disclosure statement providing evidence to the government. While under seal, the government investigates the allegations, and decides whether to intervene. During this period, the defendant may not even be aware of the case. If the government intervenes, the government

is the primary prosecutor (although the relator still has input), and the relator receives 15-25% of any recovery. If the government does not intervene, the relator can still go forward with the suit and, if successful, receives 25-30% of any

recovery. To prove a FCA violation, the relator must show that the defendant was responsible for a false claim to the federal government. The relator initially presents this evidence in a “disclosure statement,” submitted to the government when the complaint is filed. This disclosure statement sets forth all of the evidence the relator possesses regarding the false claim, and generally points the government to additional persons or documents that would substantiate the allegations.

The false claim must be shown by the civil standard -- preponderance of the evidence (more likely than not). It does not have to be shown by the criminal standard — beyond a reasonable doubt. The relator does not have to show specific intent to defraud. The statute defines “knowingly” to include acting with “deliberate ignorance” or “reckless disregard” of the truth or falsity of the information. The 1986 amendments to the FCA clarified and relaxed these burdens of proof, in part to prevent the ostrich or “head in the sand” defense. For example, a physician signing off on a HCFA 1500 form would find it difficult to defend an FCA violation by claiming that he knew nothing of the billing practice and left it all to his staff. Anyone with knowledge of the illegal conduct can bring an FCA suit. This is often a current or former employee of a defendant.

(Continued on page 8)

NEWSLETTER

SOHA Society of Ohio Healthcare Attorneys

THE INTERFACE AMONG THE MEDICARE AND MEDICAID ANTI-KICKBACK STATUTE, STARK II

AND THE FEDERAL CIVIL FALSE CLAIMS ACT

By William Mack Copeland, Esq., F.A.C.H.E.

“Violation of the anti-kickback statute is a sufficient basis for an action under the False Claims Act.”

However, there are limits; the relator must bring the case within six years from the date of the false claim, or within three years after the government knows or should have known of the false claim, but in no event later than ten years after the false claim. In addition, if the allegations in the FCA suit were already “publicly disclosed,” the relator has to be the “original source” of the allegations who brought the information to the government before filing an action. One cannot bring an FCA suit where the allegations are already the subject of a civil suit or administrative civil monetary penalty proceeding where the government is a party. The original 1863 False Claims Act provided for civil penalties of $2,000 per claim. Adjusted for inflation, that is $41,000 in 2007 dollars. Currently, civil penalties are $5,500 to $11,000 per false claim. Since 1986 when Congress amended the False Claims Act, lawsuits under the False Claims Act have returned $20 billion to the US Treasury, $2 billion in 2007. Whistle-blower lawsuits resulted in $1.45 billion of the 2007 amount. Health care fraud has become one of the primary targets of FCA suits. Not only has the number of FCA cases risen dramatically since 1986, but also there is a distinct trend toward health care fraud cases. In 1994, only 18% of the cases involved health care fraud; of the current cases, in excess of 50% involve health care fraud. The Medicare/Medicaid Anti-Kickback Statute The Medicare/Medicaid Fraud and Abuse Anti-Kickback Statute (the "Statute") provides that the offer or payment, as well as the solicitation or receipt, of "any remuneration" in exchange for referrals of any good, facility, service, or item for which payment may be made in whole or in part under Medicare/Medicaid is prohibited. The prohibited activity is a two way street, and both the payer and the receiver are equally culpable. The definition of remuneration, however, is a gray area. While the Statute provides that remuneration includes "any kickback, bribe or rebate," it does not define these terms. Further, there is a prohibition against remuneration "directly or indirectly, overtly or covertly, in cash or in kind." Clearly, direct cash payments in exchange for referrals violate the Statute. What is less clear, however, is what constitutes "indirect payments." To date, the courts have interpreted the Statute in a very expansive manner. If remuneration flows from one party to

another and if referrals (or the opportunity to provide goods and services) flow back, the potential for criminal prosecution exists regardless of the presence of good business reasons for the venture. Paying for referrals, directly or indirectly, overtly or covertly, violates the Statute. Changing the form of the payment will make it no less a violation. The Medicare and Medicaid Patient and Program Protection Act of 1987 modifies the criminal provisions of the Statute by requiring the promulgation of regulations (the "Safe Harbors") specifying those payment practices that will not be subject to criminal prosecution and that will not provide a basis for civil monetary penalties or exclusion from the Medicare or

Medicaid programs. Strict compliance with the criteria for each applicable Safe Harbor is necessary to obtain immunity under these rules. In other words, to comply with a Safe Harbor and escape enforcement, one must meet all criteria for the particular Safe Harbor. However, it is important to note that failure to comply fully with a Safe Harbor's criteria does not necessarily mean that a particular practice or arrangement violates the Statute. The OIG will evaluate activities that fail to meet Safe Harbor requirements on their own merits

for compliance with the Statute. Please note that under the rules, payment is not the important element. Intent to induce a referral is the key factor. It is very important to be sure one be in strict compliance with the Anti-Kickback Safe Harbors that are appropriate to the transaction. Failure to do so can result in substantial legal penalties (including possible criminal penalties) if the authorities decide to pursue an investigation. In the Alvarado case in San Diego last year, the hospital and its CEO have had to bear the cost of two criminal trials and an exclusion action. In addition, let us not forget civil monetary penalties: in the March 2008 case of Hardeman County Memorial Hospital, Texas, referenced above, the hospital agreed to pay $398,230.56 to resolve its liability under the civil monetary penalties provisions applicable to kickbacks. The hospital leased space to a physician at a rate below fair market value.

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SOHA News Page 8

Violation of the anti-kickback statute is a sufficient basis for an action under the False Claims Act. In the case of McLaren Regional Medical Center, Illinois, a whistleblower brought an action under the Federal False Claims Act, alleging that defendants, McLaren and Family Orthopedic violated the Statute by disguising kickbacks for both physical therapy and occupational therapy as lease payments between the parties. The district court, while finding that the lease agreement was an arms-length transaction and was consistent with fair market value nevertheless held that violation of the Statute was basis for a False Claims Act case. Stark II The Referrals Act as amended, commonly referred to as "Stark II," creates a limitation on certain physician referrals and prohibits physicians from referring any Medicare and Medicaid patients to an entity in which the physician has a financial relationship. This includes referrals for the 11 specifically designated health services. Prohibited financial relationships include (a) ownership and investment interests and (b) compensation arrangements. Ownership or investment interests may be through equity, debt, or other means, and include indirect ownership interests through other entities. Under the regulations, the definition of a compensation arrangement, is extremely broad and includes virtually any form of remuneration. The definition of “physician” includes immediate family members of the physician. Other cases involving the False Claims Act, the Anti-Kickback Statute and Stark II include: University Hospitals of Cleveland In August 2006, University Hospitals of Cleveland (“UHC”) agreed to pay $13,880,000 to settle a False Claims Act lawsuit alleging that the hospital entered into illegal financial arrangements with physicians in order to induce referrals from the physicians to the hospital. The hospital also agreed to a corporate integrity agreement monitored by the Department of Health and Human Services Office of Inspector General (“OIG”). According to the complaint, the hospital allegedly entered into several illegal arrangements with physicians, including: 1) financing physician practice expenses, which enabled physicians to avoid expenses involved in their own private practices;

2) practice plan arrangements where “certain doctors, usually the clinical chairperson of a particular department would own outright the shares of a corporation organized for the practice of medicine.

[UHC] would supply a [practice guarantee] for the sharehold-ers of these … corporations and also would supply [practice guarantees]” for other shareholders;

3) the advance of millions of dollars under the practice group arrangements. While these arrangements required repayment, there was a tacit agreement that no payment was required. There was no collection effort made to collect most amounts paid;

4) improper recruiting packages where UHC “paid for the cost of recruiting new physicians into the existing [practice plan arrangements] of ‘loyal physicians’ as a reward and induce-ment to the existing [practice plan arrangement] physicians for referring patients to UHHS facilities. These packages some-times carried with them the promise of advances of at least $250,000, paid by [University Hospital Health Services] or UHC in order induce the recruited physician to join the [practice plan arrangements]. The packages offered to re-cruited physicians required them to refer all patients to [University Hospital Health Services] facilities;” and

5) phony directorships that paid a “director fee” for being a “director” at UHC. These arrangements paid approximately $150,000 annually for no substantial services performed. University of Medicine and Dentistry of New Jersey The United States Attorney for the Northern District of

New Jersey has brought an action against two cardiologists, alleging they were paid kickbacks by the University of Medicine and Dentistry of New Jersey for patient referrals. The university, which was subject to a deferred prosecution agreement, was not charged. The univer-sity has significantly restructured its car-diology program following disclosure of the fraud two years ago. Memorial Health University Medical Center Memorial Health University Medical Cen-ter, Georgia Eye Institute and Provident Eye Physicians, Savanna, Georgia, have agreed to pay $5,080,000.00 to settle a False Claims Act case involving Stark violations. According to the press re-lease, the case involved specific viola-tions of the False Claims Act and Stark II, but no quality of care issues.

Beebe Medical Center Beebe Medical Center in Delaware and two Delaware physicians have agreed to pay $1 million to settle a False Claims Act suit alleging kickbacks to the physi-cians. According to the U.S. Attorney’s office, the dis-pute involved an arrangement between the hospital and

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the doctors to use the hospital rather than at a free-standing clinic the doctors owned to perform outpatient procedures. The hospital agreed to pay the two doctors a fee in addition to the reimbursement the Medicare program paid for the services. According to the hospi-tal’s president, the hospital received “incorrect legal advice.” Edgewater This case also involves alleged kickbacks disguised as consulting contracts. On September 29, 2006, the Fed-eral District Court for the Northern District of Illinois or-dered the former owner of Edgewater to pay $64.2 mil-lion in damages and penalties for his role in developing an elaborate kickback scheme that paid physicians and others to admit patients for unnecessary care. Five others, including four physicians, went to federal prison in a fraud investigation that effectively closed the hospital. However, former owner was not criminally charged. The scheme involved luring homeless and elderly people to the hospital for care they did not need. According to the court’s order, the complexity of the overall scheme was enormous and involved an elabo-rate fabric of manage-ment companies, trusts and contract manage-ment to hide the owner’s true involvement and ownership interest. HealthSouth Corpora-tion HealthSouth Corporation agreed to pay $14.2 million to settle allegations that the company submitted false claims to the government and paid illegal kickbacks to physicians who referred patients for care in some of its hospitals, outpatient rehabilitation clinics, and ambula-tory surgery centers. Mt. Vernon Hospital Mt. Vernon Hospital, New York, agreed to settle a case involving alleged kickbacks disguised as administrative service contracts for $2.65 million. In the complaint, the United States alleged Mt. Vernon entered into an illegal patient referral scheme with a consulting firm under the guise of an "administrative services agreement." The consultant was paid $60,000 per month to provide 22 separate administrative services to the hospital’s sub-stance abuse treatment unit, including the referral of patients. According to the complaint, other than patient referrals, the administrative services “were not needed,

were not provided, or were worthless.” Thus, according to the U.S. Attorney’s press release, the administrative services agreement amounted to nothing more than a patient referral contract. McNutt In the McNutt case, a relator, a former employee of Haleyville Medical Supplies, Inc., filed a False Claims Act action against Haleyville, alleging that it had submitted requests to Medicare for reimbursement knowing it was not eligible for payment. The complaint alleged that Haleyville had paid kickbacks cam-ouflaged as rental payments to pharmacists and others in ex-change for referrals. The government intervened, and pointed to the provider agreement with the government. The government alleged that under the terms of that agreement, Haleyville certified that it would comply with all laws and regulations concerning proper practices of Medicare providers, including the Anti-Kickback Statute. Compliance with that certification is a condition for receipt of payments from the Medicare program. The district

court denied defendants' motion to dismiss and asked the ap-peals court to determine the is-sue of whether a violation of the Anti-Kickback Act could serve as the predicate for a False Claims Act action. The Eleventh Circuit wasted no time in resolving this issue "When a violator of government regulations is ineligible to partici-pate in a government program and that violator persists in pre-senting claims for payment that

the violator knows the government does not owe, that violator is liable under the Act, for its submission of those false claims: The False Claims Act does not create liability merely for a health care provider's disregard of Government regulations or improper internal policies unless, as a result of such acts, the provider knowingly asks the Government to pay amounts it does not owe." “The government has alleged a valid claim against [Haleyville]. The government has alleged that [Haleyville] violated the Anti-Kickback Statute; compliance with the Statute is necessary for reimbursement under the Medicare program; and [Haleyville] submitted claims for reimbursement knowing that they were ineligible for the payments demanded in those claims. This allegation is not general or speculative: the government has identified as false numerous specific claims [Haleyville] made to the federal government.” Guthrie Clinic, P.C. On March 12, 2008, the U.S. District Court for the Middle Dis-

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trict of Pennsylvania denied a motion to dismiss a qui tam action under the False Claims Act alleging false claims based on illegal referrals violating the Stark Law and the Anti-Kickback Statute. The relator, a former general counsel for the defendant clinic, alleged that Guthrie Clinic, P.C. entered into various illegal financial agreements with Robert Packer Hospital in exchange for referrals of large volumes of patients to the hospital. The relator argued that every claim the hospital submit-ted to the government for payment was the result of these illegal referrals. Defendants moved to dismiss for, among other things, failure to plead with particularly as re-quired by Federal Civil Rule 9(B). The court said that the allegation of vio-lation of the Stark and Anti-Kickback laws was a sufficient basis to meet the particularity require-ment. The court said,“…attachment of some or all of the allegedly fraudulent claims would serve no further purpose consistent with Rule 9(b) because defendants are on notice that the basis of the alleged fraud in each claim is the relationship between defendants, not anything unique to a particular claim … .” The court also held that the relator sufficiently pled a claim for conspiracy under the FCA. Touro Infirmary According to a Department of Justice press release, Touro Infirmary, a New Orleans Hospital, agreed to pay the United States $1.75 million to settle allegations that it submitted false claims to the Medicare program. The government's allegations were that the hospital made unlawful payments to a psychiatrist on staff in order to induce her referrals of patients to the hospital. It contended that a series of consultant and medical director contracts constituted shams intended to dis-guise kickbacks as legitimate contractual payments. The government also pursued criminal charges against the psychiatrist, who was found guilty of 39 counts of healthcare fraud. “Kickbacks are a blight on the health care system,” said Jeffrey S. Bucholtz, Acting Assistant Attorney General for the Department’s Civil Division. “They corrupt physi-cians’ medical judgment and lead to overutilization and misuse of taxpayer dollars. We will continue to be vigi-lant in our efforts to combat this pernicious practice.”

Rock Creek The former CEO of a now closed psychiatric facility in Lamont, Illinois, along with a contract physician at the facility, has been charged with participating in an alleged bribery and kickback scheme that involved making payments to physicians in ex-change for referrals. That now brings the number of individuals charged in the scheme to four. According to a press release by the US attorney for the North-

ern District of Illinois, the pay-ments, totaling more than $565,000, were disguised as employment compensation. Conclusion The lesson from all of these cases is if you are going to en-gage in these activities, it is im-perative that you play by the rules. The San Diego case brings to mind the Kansas City case of not too long ago. In that case, after a nine-week trial in the federal district court, a jury found two physicians and two

hospital executives guilty of violating the Statute. The physi-cians were members of a medical group that provided care to patients in nursing homes. Medicare covered most of these patients. I have seen a definite increase in ventures between parties where there is a referral relationship. It is extremely important that competent counsel practicing in the fraud and abuse area review these ventures to ensure that no violation of the Statute exists. Improper structure can have catastrophic conse-quences.

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SOHA member William Mack Cope-land, JD, PhD practices health care law in Cincinnati. A graduate of Northern Kentucky University Salmon P. Chase College of Law, Bill is a fre-quent author and speaker on health law topics. Copeland is a member of the American Health Lawyers Asso-ciation, American, Ohio and Cincin-nati Bar Associations and was awarded the American College of Health Care Executives Senior-Level Healthcare Executive Regent’s Award in 2007. www.wmcopeland.com