Practice Economics

Could value-based care raise False Claims Act liability?



As you begin to consider the switch to value-based care systems, be sure to safeguard against risks that could fuel false claims scrutiny by the government, legal experts advise.

A primary consideration is arrangements that include shared savings through coordinated care, said George B. Breen, a Washington-based health law attorney. For example, he said that the Stark Law could be implicated if a physician within a shared savings model receives a bonus payment for referring patients to specific providers. The Stark Law prohibits a physician from referring Medicare patients for designated health services to an entity with which the physician has a financial relationship.

George B. Breen

George B. Breen

“While there are a number of exceptions and safe harbors which would validate any such relationship, it’s something that needs to be thought through” from the start, Mr. Breen said in an interview. “You have to look at each factual circumstance separately because each is fact and circumstance dependent.”

The Anti-Kickback Statute also could come into play if value-based arrangements generate renumeration. The Anti-Kickback Statute prohibits offering, paying, soliciting, or receiving anything of value to induce or reward referrals or generate federal health care program business. Exceptions to the statute can be applied and should also be examined during arrangement development, Mr. Breen said.

Data collection and reporting also may present a problem, according to Seattle-based health law attorney Robert G. Homchick. Inaccurate data that become the basis for quality-based payments could lead to overpayment liability and indirect False Claims Act (FCA) exposure, he said.

In addition, “If the facts support that you were acting with intentional or deliberate ignorance or reckless disregard for how the data were gathered and reported that supported your value-based comp kicker, there could be direct False Claims Act liability,” Mr. Homchick said in an interview.

But Mr. Homchick stressed there are still many unknowns when it comes to how data-driven measurements will unfold.

“With MACRA, this is such a moving target as to exactly what type of data is going to form the basis for the metrics, and how the data need to be gathered and reported,” he said. “Many of those issues are still in play or still being developed at the agency level in terms of regulatory guidance.”

Current lawsuit could influence future cases

While it is too early to know every legal theory that could intersect with quality-based care, legal experts are closely watching a case that could offer insight into future claims.

In Duffy v. Lawrence Memorial Hospital, a former employee turned whistle-blower alleges that the Lawrence, Kan.–based hospital inflated its performance scores under the Hospital Value-Based Purchasing Program to increase federal incentive payments. Hospital leaders deny they falsified data and claim the allegations are based on the whistle-blower’s “improper understanding of acceptable reporting times for patient arrival,” according the hospital’s court response. The FCA lawsuit is before the U.S. District Court for the District of Kansas.

Notably, the government has declined to intervene in the lawsuit twice, Mr. Breen said. The case is continuing without government intervention, a trend that has become more common in recent years, he said. In 2015, whistle-blower cases in which U.S. Department of Justice declined to intervene led to $1.1 billion in recoveries for the government and $335 million in rewards for whistle-blowers, according to government data.

Mr. Homchick called the Lawrence Memorial lawsuit “troubling.”

“Providers are struggling with the complexity of the reporting requirements imposed by the layers of value-based payment programs implemented by both government and private payers,” he said. “The Lawrence Memorial case illustrates that the whistle-blower community will likely exploit the inevitable mistakes or missteps of providers attempting to comply with the increasingly byzantine quality-reporting requirements.”

The outcome of the Lawrence Memorial case could influence similar lawsuits involving value-based programs, Mr. Breen said.

“I think this theory that there is some false reporting, or false certification, is a theory that you will see being pursed in connection with some of these quality-based programs,” Mr. Breen said.

Early steps can curb legal risk

Asking questions and being proactive as new value-based models develop is key to mitigating legal dangers, experts said.

Ensure that new arrangements are analyzed for fraud and abuse risk exposure before finalizing, Mr. Breen advised.

“Have a comfort level about the arrangement” that’s being entered into, he added, and “have those arrangements vetted.”

Pay attention to data, added Michael E. Paulhus, an Atlanta-based health law attorney who specializes in FCA cases.

“The more data they collect, the more the government is paying attention to where you are in the range,” he said in an interview. “If you stick out on either end, that would be a risk profile that, as a physician, I would want to know. I would want to know where I sit in the data.”


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