Life Science Compliance Update

July 31, 2015

Avoiding Medicare Fraud & Abuse: A Roadmap for Physicians


The Centers for Medicare and Medicaid Services (CMS) published a “roadmap for physicians” to submit proper claims for reimbursement. The guide, which walks through pertinent fraud and abuse laws and certain best practices for physicians, in turn provides manufacturers a helpful, convenient compliance tool as well.

View: Avoiding Medicare Fraud & Abuse: A Roadmap for Physicians

The Federal False Claims Act (FCA) protects the Federal Government from being overcharged or sold substandard goods or services . The FCA imposes civil liability on any person who knowingly submits, or causes to be submitted, a false or fraudulent claim to the Federal Government . The “knowing” standard includes acting in deliberate ignorance or reckless disregard of the truth or falsity of the information related to the claim . An example may be a physician who knowingly submits claims to Medicare for medical services not provided . Civil penalties for violating the FCA may include fines of up to three times the amount of damages sustained by the Government as a result of the false claims plus $11,000 per claim filed . Under the Federal criminal statutes, FCA criminal penalties for submitting false claims may include fines, imprisonment, or both.

The Anti-Kickback Statute makes it a criminal offense to knowingly and willfully offer, pay, solicit, or receive any remuneration to induce or reward referrals of items or services reimbursable by a Federal health care program . Where a provider offers, pays, solicits, or receives unlawful remuneration, the provider violates the Anti-Kickback Statute . Remuneration includes anything of value such as cash, free rent, expensive hotel stays and meals, and excessive compensation for medical directorships or consultancies . If an arrangement, however, satisfies certain regulatory safe harbors, it may not implicate the Anti-Kickback Statute . Civil penalties for violating the Anti-Kickback Statute may include penalties of up to $50,000 per kickback plus three times the amount of kickback . Criminal penalties for violating the Anti-Kickback Statute may include fines, imprisonment, or both

The Physician Self-Referral Law (Stark Law) prohibits a physician from making a referral for certain designated health services to an entity in which the physician (or an immediate member) has an ownership/investment interest or with which he or she has a compensation arrangement, unless an exception applies. Penalties for physicians who violate the Stark Law may include fines as well as exclusion from participation in all Federal health care programs.

The Criminal Health Care Fraud Statute prohibits knowingly and willfully executing, or attempting to execute, a scheme or artifice in connection with the delivery of or payment for health care benefits, items, or services to: Defraud any health care benefit program; or Obtain (by means of false or fraudulent pretenses, representations, or promises) any of the money or property owned by, or under the custody or control of, any health care benefit program. Penalties for violating the Criminal Health Care Fraud Statute may include fines, imprisonment, or both.

The Exclusion Statute requires OIG to impose exclusions from participation in all Federal health care programs on health care providers and suppliers who have been convicted of: 1. Medicare fraud, as well as any other offenses related to the delivery of items or services under Medicare; 2. Patient abuse or neglect; 3. Felony convictions for other health care-related fraud, theft, or other financial misconduct; or 4. Felony convictions for unlawful manufacture, distribution, prescription, or dispensing of controlled substances. OIG also has discretion to impose permissive exclusions on a number of other grounds. Excluded physicians may not bill directly for treating Medicare and Medicaid patients, nor may their services be billed indirectly through an employer or a group practice.

The Civil Monetary Penalties (CMP) Law imposes CMPs for a variety of health care fraud violations, and different amounts of penalties and assessments may be authorized based on the type of violation at issue . Penalties range from $10,000 to $50,000 per violation . CMPs can also include an assessment of up to three times the amount claimed for each item or service, or up to three times the amount of remuneration offered, paid, solicited, or received

In addition to outlining the various fraud and abuse laws, CMS provides insight into a number of areas of physician practice. The guide includes information on physician relationships with payers; physician relationships with other providers; and physician relationships with vendors.

CMS provides recommendations about a number of common situations involving industry-physician interaction. These are reprinted below.

Free Samples

CMS states: Many drug and biologic companies provide physicians with free samples that the physicians may give to patients free of charge. It is legal to give these samples to your patients for free, but it is illegal to sell the samples. The Federal Government prosecutes physicians for billing Medicare for free samples. If you choose to accept samples, you will need reliable systems in place to safely store the samples and ensure that samples are not commingled with your commercial stock.


“Some pharmaceutical and device companies use sham consulting agreements and other arrangements to buy physician loyalty to their products,” states CMS. “As a practicing physician, you may have opportunities to work as a consultant or promotional speaker for the drug or device industry.”

“ For every financial relationship offered to you, evaluate the link between the services you can provide and the compensation you will receive.” CMS recommends that physicians “test the propriety of any proposed relationship by asking the following questions”:

  • Does the company really need your particular expertise or input?
  • Does the company’s monetary compensation represent a fair, appropriate, and commercially reasonable exchange for your services?
  • Is it possible the company’s monetary compensation is for your loyalty so you will prescribe its drugs or use its devices?

“If your contribution is your time and effort or your ability to generate useful ideas and the payment you receive is fair market value compensation for your services without regard to referrals, then, depending on the circumstances, you may legitimately serve as a bona fide consultant,” states the guide. “If your contribution is your ability to prescribe a drug or use a medical device or refer your patients for particular services or supplies, the proposed consulting arrangement likely is one you should avoid as it could violate fraud and abuse laws.”

Academic Institutions – and the Myriad of Conflict-of-Interest Disclosures

Academic institutions also may impose various restrictions on the interactions their faculty members or affiliated physicians have with industry. Many of the relationships discussed in this document are subject to conflict-of-interest disclosure policies. Even if the relationships are legal, you may have an obligation to disclose their existence. Rules about disclosing and managing conflicts of interest come from a variety of sources, including grant funders, such as states, universities, and the National Institutes of Health, and from the Food and Drug Administration (FDA) when you submit data to support marketing approval for new drugs, devices, or biologics. If you are uncertain whether a conflict exists, ask someone. You always can apply the “newspaper test” and ask yourself whether you would want the arrangement to appear on the front page of your local newspaper.

Continuing Medical Education

You are responsible for your Continuing Medical Education (CME) to maintain state licensure, hospital privileges, and board certification. Drug and device manufacturers sponsor many educational opportunities for physicians. It is important to distinguish between CME sessions that are educational in nature and sessions that constitute marketing by a drug or device manufacturer. If speakers recommend use of a drug to treat conditions for which there is no FDA approval or use of a drug by children when the FDA has approved only adult use, you should independently seek out the empirical data that support these recommendations. NOTE: Although physicians may prescribe drugs for off-label uses, it is illegal under the Federal Food, Drug, and Cosmetic Act for drug manufacturers to promote off-label uses of drugs. VI. Compliance Programs

CMS also outlines the basics of Open Payments and how physicians can register with the system in order to review any payments attributed to them.


By outlining its expectations for physicians, CMS provides a useful guide for companies to understand the appropriate ways to engage with healthcare providers.



July 23, 2015

Congress Holds CMS’s “Feet to the Fire” on Medicare Part D Fraud

Feet to Fire

Last week, the House Energy and Commerce Subcommittee on Oversight and Investigations held a hearing on Medicare Part D program integrity, an increasingly hot topic. Members of Congress are especially concerned about, as Energy and Commerce Chairman Fred Upton phrased it, the “startling increase in Medicare Part D spending on commonly abused opioids.” Shantanu Agrawal of the Centers for Medicare and Medicaid Services and Ann Maxwell, Assistant Inspector General, Office of Evaluation and Inspections, Office of Inspector General, U.S. Department of Health and Human Service provided testimony.

Ann Maxwell, speaking on behalf of OIG, stated that her agency has made “stopping Part D fraud a top priority.” In June, the Department of Justice announced an unprecedented nationwide sweep led by the Medicare Fraud Strike Force resulting in charges against 243 individuals for their participation in fraud schemes involving $712 million in false billings. Almost 50 of the defendants were charged with fraud related to Part D. While Maxwell was pleased with the enforcement efforts, she noted that they do not solve the problem of prescription drug fraud.

To this point, she outlined her agency’s recommendations to CMS and Part D plan sponsors that would more proactively identify questionable billings and prevent fraud. While CMS has “made some progress,” Maxwell stated, it must do more to protect the Medicare Part D program. (View Maxwell’s testimony, pages 5-7 for specific recommendations).

Subcommittee Chairman Tim Murphy (R-PA) agreed, noting that CMS has not implemented nine HHS-OIG recommendations to stem Part D fraud. HHS-OIG recently issued two reports, “Ensuring the Integrity of Medicare Part D,” and “Questionable Billing and Geographic Hotspots Point to Potential Fraud and Abuse in Medicare Part D,” that summarize their recommendations over the past several years. “[T]hese are commonsense recommendations,” Murphy said. “For example, requiring plan sponsors to report all potential fraud abuse to CMS or the Medicare Drug Integrity Contractor. This recommendation was issued in five different OIG reports. Another important recommendation: implement an edit to reject prescriptions written by providers who have been excluded from the Medicare program.” Members of the committee also honed in on OIG’s recommendation for a beneficiary “lock-in.” OIG found in one investigation, for example, that a “complicit beneficiary” received unnecessary prescriptions, filled them at various pharmacies, and sold the pills to drug-trafficking groups. “This could be addressed by restricting beneficiaries to a limited number of pharmacists or prescribers when warranted.” CMS has stated that it would require legislative authority to implement lock-in restrictions.

“CMS hasn’t taken action to implement these recommendations,” Murphy stated. “Just six weeks ago, one of today’s witnesses, Dr. Agrawal testified before this Subcommittee and said, “holding our feet to the fire is appropriate,” when asked about fraud occurring under CMS’s watch, and that’s precisely what we are here to do today.”

Indeed, during his testimony, Dr. Agrawal agreed that work needed to be done, and that CMS is “committed to working with OIG to address its recommendations.” But he also outlined some of the strides CMS has made, citing his agency’s increased sharing of data with Part D plan sponsors to enhance the detections and prevention of fraud and overutilization of Part D drugs, including opioids.  

Agrawal explained CMS’s plans to use the authority granted in the Affordable Care Act to require most prescribers of drugs paid for by Part D to enroll in Medicare. “CMS is actively working to enroll over 400,000 prescribers of Part D drugs by January 2016 and to enforce the requirement that plans deny Part D claims that are written by prescribers who do not meet the necessary requirements by June 2016,” he said. “These prescribers will be subject to the same risk-based screening requirements that have already contributed to the removal of nearly 575,000 provider and supplier enrollments from the Medicare program [and will] “make sure that Part D drugs are prescribed by qualified individuals, and will prevent prescriptions from excluded or already revoked prescribers from being filled.”

Agrawal also noted that efforts to combat should balance the need to ensure that all Medicare beneficiaries are receiving the medications they need.

On the same day as the hearing, CMS announced that its Fraud Prevention System had identified or prevented $820 million in inappropriate payments over the past three years through, including more than $454 million identified in 2014 alone. The “FPS” uses predictive analytics to identify questionable billing patterns in real time. It can also review past patterns that may indicate fraud.




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