United States: OIG Offers Stark Guidance — CMS/DOJ Keep Mum

On April 25, 2006, the Office of Inspector General of the Department of Health and Human Services (OIG) issued "An Open Letter to Health Care Providers" (Open Letter) offering helpful, but limited, guidance to providers on Stark enforcement. The Open Letter is a step in the right direction that, unfortunately, addresses only a subset of the enforcement issues raised by Stark violations.

Stark is the name commonly used for the federal physician self-referral law, which prohibits a physician from referring Medicare patients to entities for certain "designated health services," if the physician (or an immediate family member of the physician) has a financial relationship with the entity, unless an exception applies. The basic penalty for a Stark violation is the provider is not entitled to payment (and must refund payment previously received) for services provided pursuant to a prohibited referral. This penalty applies even if the provider has no wrongful intent, and even if the provider has no knowledge of the Stark violation. Jurisdiction over this penalty, as well as primary jurisdiction for Stark, generally, rests with the Centers for Medicare and Medicaid Services (CMS).

To date, one of the biggest problems with self-disclosing Stark violations to CMS has been CMS’ position that it does not have authority to negotiate a settlement that reduces the amount of the provider’s non-payment or refund obligation. Accordingly, a minor and inadvertent Stark violation can result in an enormous repayment obligation, especially if the violation involves many physicians, expensive services and/or the violation lasted for awhile before being discovered and corrected.

In addition to this basic non-payment or repayment penalty, Stark provides that for "knowing" violations, anyone submitting or causing the submission of claims for Medicare services provided pursuant to prohibited referrals may be subject to civil money penalties of up to $15,000 per service billed. Penalties for "knowing" violations are under the OIG’s jurisdiction. Unlike CMS, however, the OIG has been, for some time, taking the position that it can negotiate reduced settlement amounts with providers who self-disclose violations.

The Open Letter confirms the OIG’s willingness to negotiate settlement amounts, and suggests that providers use the OIG’s "self-disclosure protocol" when reporting Stark violations. (This protocol can be found on the OIG’s website at http://www.oig.hhs.gov.) Furthermore, on a particularly hopeful note, the Open Letter states that those who selfdisclose (depending on the circumstances) will generally be able to settle the violation by paying the OIG an amount based on the amount of remuneration paid to the physician( s), rather than one based on the amount of Medicare payments received by the self-disclosing provider. This potentially means much lower settlement payments with the OIG, especially if the Stark violation itself was minor (e.g., the remuneration paid to the physician(s) was relatively modest), yet substantial Medicare payments were received by the provider.

In addition to requiring a settlement payment, the OIG generally will require the provider to enter into a corporate integrity agreement (CIA) or a certification of compliance agreement (CAA). The latter is a more recent offshoot of CIAs, and is preferable from the provider’s standpoint. This is due to the fact that CCAs are typically shorter in duration (e.g., 3 years instead of 5 for CIAs) and do not require an outside organization to conduct compliance reviews or verify audits or claims reviews. Rather, the provider is permitted to self-monitor and certify its compliance.

Unfortunately, because the Open Letter emanates only from the OIG, the basic non-payment or repayment penalty (which is under the jurisdiction of CMS), is not addressed.. Without additional guidance, substantial uncertainly remains regarding a provider’s ability to achieve a complete resolution of its Stark violations by disclosing to the OIG. Furthermore, as the Open Letter points out, the Department of Justice (DOJ) has jurisdiction over the False Claims Act and the anti-kickback statute, both of which may potentially be implicated in situations involving Stark violations, and the OIG does not have authority to settle on behalf of the DOJ.

Accordingly, although the Open Letter perhaps signals greater flexibility by the OIG in resolving self-disclosed Stark violations, uncertainty remains regarding the roles of DOJ and CMS. In the near term, providers who selfreport Stark violations may very well approach the OIG first, in hopes of taking advantage of its seemingly more flexible policies. However, pending guidance by CMS and DOJ, providers should proceed with caution, because the decision of whether and how to self-disclose Stark violations remains a difficult and sensitive area, calling for a careful and well considered approach, with assistance from experienced counsel.

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