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Avoid Self-disclosure to CMS: Plan an Annual Legal Audit at Your Practice

Avoid Self-disclosure to CMS: Plan an Annual Legal Audit at Your Practice

Most providers are fairly familiar with the Stark law, which prohibits physicians from self-referring federal patients for certain “designated health services” unless an exception to Stark is met. Designated health services include items such as diagnostic testing (MRI, ultrasound, physical therapy, in-patient and out-patient hospital services, DME, etc.). Unfortunately, many physicians fail to comply with Stark, and find out too late that arrangements into which they have entered violate the law.

Like most healthcare lawyers, I always recommend that my clients self-audit regularly. This includes not only an audit of medical records (which I discussed previously), but a review of the various financial and ownership relationships in which the physician and/or the medical practice might be involved. Are you subletting space in your office? Has your partner taken on a medical director position at a hospital? Are you now a part owner of an MRI facility down the street? Have you hired a new marketer? What new contracts have been executed?

Whatever arrangements are in place, they should be reviewed by counsel. Just as patients need an annual check-up, medical practices need one as well. Additionally, it is the responsibility of the provider to alert counsel of new and existing arrangements within the practice on a regular basis in order to assure that changes in the law, opinions issued by government agencies and case law have not impacted the arrangements which were previously reviewed and approved. No physician should be relying on a dated legal opinion!

If a provider meets with counsel and discovers that a violation has occurred, the issue is what to do next. To help answer this question, CMS has come out with a federal voluntary self-referral disclosure protocol (“Protocol”). This Protocol is intended to establish a process that providers and suppliers can use to self-disclose actual or potential violations of the Stark law to Medicare. Although the concept of self-reporting generally goes against human nature, correcting the problem and moving forward is not considered adequate.

In order to comply with the Protocol, providers first meet with counsel to assure a violation has actually occurred and how best to address it. If counsel determines that other federal laws have also been implicated (i.e. Anti-Kickback Statute), an assessment as to which government agency should be informed must be made. The submission to the government under the Protocol requires a detailed disclosure setting forth an analysis of every element of the particular arrangement in which the provider was engaged and the Stark violations. Counsel should assist with this detailed submission.

The process of self-reporting can open a provider to undesirable publicity and creates a risk that a greater violation will be found than originally believed to exist. Additionally, legal fees involved in the self-disclosure, as well as the settlement demand from CMS, can be expensive. While costs are unavoidable, an effective lawyer should be able to argue the provider’s inability to pay the compromised amount, and any other mitigating factors, to hopefully ease the financial burden.

As part of the disclosure process, the government will also look to see if the provider and his or her practice have a compliance program, whether the compliance plan is in effect and what remedial action was taken in light of the alleged violation giving rise to the disclosure. In light of the emphasis placed on compliance plans, providers should talk with counsel to create and/or amend compliance plans as a preventative measure.

In my own practice, I regularly come into contact with providers who have unknowingly been engaged in interactions that violated Stark. Though I work with these providers to correct the issues, it is always safer and more cost-effective to make sure contracts and business arrangements are established correctly from the start. The government’s emphasis on self-disclosure of Stark violations should be a reminder to physicians that once you have violated the law, the breach cannot be undone. Minimize the risks facing your practice sooner than later by engaging in a complete legal audit with your health care lawyer. Self-disclosure to your counsel is a far better option than self-disclosure to the government.

Find out more about Ericka L. Adler and our other Practice Notes bloggers.

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