Kate Taylor, Associate Principal, ECG Management Consultants, Caleb Knight, Member, Flaherty Sensabaugh Bonasso PLLC, and Marc Goldstone, Executive Vice President and General Counsel, Wellpath, discuss how the Department of Justice (DOJ) uses its enforcement mechanisms to ensure providers are complying with health care laws and regulations. They cover the current regulatory structure, including the DOJ’s Health Care Fraud Unit, and they share stories from the trenches. Kate, Caleb, and Marc spoke about this topic at AHLA’s 2024 Advising Providers: Legal Strategies for AMCs, Physicians, and Hospitals, in New Orleans, LA.
To learn more about AHLA and the educational resources available to the health law community, visit americanhealthlaw.org.
Kate Taylor, Associate Principal, ECG Management Consultants, Caleb Knight, Member, Flaherty Sensabaugh Bonasso PLLC, and Marc Goldstone, Executive Vice President and General Counsel, Wellpath, discuss how the Department of Justice (DOJ) uses its enforcement mechanisms to ensure providers are complying with health care laws and regulations. They cover the current regulatory structure, including the DOJ’s Health Care Fraud Unit, and they share stories from the trenches. Kate, Caleb, and Marc spoke about this topic at AHLA’s 2024 Advising Providers: Legal Strategies for AMCs, Physicians, and Hospitals, in New Orleans, LA.
To learn more about AHLA and the educational resources available to the health law community, visit americanhealthlaw.org.
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Speaker 2:This episode of A HLA speaking of health law is brought to you by A HLA members and donors like you. For more information, visit american health law.org.
Speaker 3:Hi, everyone. Thank you for listening today. Uh , my colleagues and I are excited to chat about some of the presentation we provided in February at the ALA's Advising Providers Program. But before we get started, we wanted to take a few minutes to introduce ourselves. I'll kick it off and then pass it over to Caleb and Mark thereafter. My name's Kate Taylor. I'm an associate principal at ECG Management Consultants. I perform fair market value and commercial reasonableness assessments for physician practice groups and also hospitals and health systems across the country. I'm a CPA, licensed in Tennessee Go Balls , and I'm also accredited in business valuation from the A-S-C-P-A and an accredited senior appraiser of the American Society. Appraisers, she couldn't tell by my shout out . I do live in Knoxville, Tennessee, so I am a proud volunteer. Volunteer and wear of the color orange. Caleb ?
Speaker 4:Yeah . Hi, listeners. I'm Caleb Knight. I'm a a 14-year-old, a 14-year-old, 14 year healthcare and business law here in Charleston, West Virginia , um, here in Charleston. I work at the Flaherty since Bob Naso law firm, and I provide a variety of legal services to , uh, a really a variety of clients. Uh, everything from small businesses all the way through , uh, hospitals and major health systems. And , uh, you know, when I graduated law school back in , uh, from West Virginia University back in 2010, healthcare was really big news because the Affordable Care Act had had just passed. And so I jumped kind of feet first into a career as a healthcare focused lawyer, and it's been very busy ever since. Mark ,
Speaker 5:Hello everybody. My name is Mark Goldstone. I am a 30 year health law attorney, hospital law mostly. I currently serve as executive vice president, general Counsel at Well Path here in Nashville. We are the largest provider of somatic behavioral and dental healthcare to patients in custody. It's really challenging population to care for, but it's, it's really meaningful work. I'm a fellow of the American Health Law Association, very gratified and pleased by that honor. And if we're doing college shout outs , I'm a two-time graduate of Rutgers University Ghost Scarlet Knights.
Speaker 3:Thanks, mark. Uh, thank you, Caleb , too . As I said, we, we presented at the ALA's Advising Providers Program in February in New Orleans. It was a great time. Lots of purple and green and gold across the city. Um, our topic was be curious, not judgmental things. The DOJ quote believes you should consider. Uh, today we wanted to share just a few elements of our presentation that we think will be of interest to those listening. Uh, to start though, I would like to ask Caleb to provide some, some context around why we chose this theme specific to this topic. Um, other than the fact that, of course , uh, we love the television show at Lasso.
Speaker 4:Yeah. And , and that, that conference was , uh, was particularly great. I mean, being in , in , in New Orleans in , uh, uh, in February was fantastic with the pageantry and the, the , the Mardi Gras going on. Uh, but yeah, to our, to our , uh, our presentation, we, we picked the Ted Lasso theme. Obviously, it's a funny show. Uh, we , and we wanted to try to introduce a little bit of humor to what is a , obviously a very serious topic, right? Uh, healthcare compliance. And so, but kind of underlying that funny feature is the fact that, you know, Ted Lasso embodies doing the right thing. And that's , uh, that's a huge focus of the Department of Justice. Um, and they use their enforcement mechanisms that will get into to make sure that providers are doing the right thing. And so with that in mind, we covered a couple different topics during our, our talk back in February. Um, you know, starting with kind of current regulatory structure that governs providers and provider arrangements , uh, we talked about an overview, and we'll get into that today as well, an overview of the Department of Justice Healthcare Fraud Unit , sort of how it fits within the Department of Justice and how it operates. Uh, we talked about key trends in enforcement actions with some specific examples, and we also talked about the DOJs in , uh, compliance priorities and sort of the things that watch out for , uh, that we've seen from our collective years of, of practicing .
Speaker 3:Thanks, Caleb . Um, good segue to the, to the start of our pod podcast. And as Caleb said, one of the first thing we, we talked about in our presentation , uh, was several different fraud and abuse laws , uh, the False Claims Act, and a Kickback statute, stark Law, the Exclusion Authority Statute, and the Civil Monetary Penalties Law. We covered a lot of different details. We won't be going into those details , uh, for those laws today, but instead, we're gonna keep it a bit more high level . Um , that said, I'm curious , uh, mark, based on your in-house industry experience, which of these do you think is the most prevalent or as we're often known to say in valuation? Does it completely depend?
Speaker 5:It completely depends. Now, the , the way I look at the world after having done this for so long is that the nature, and, and this is a common theme in this presentation and others, is that the nature of the American Healthcare's Reimbursement system and the gamification of reimbursement are both the reason that we have the laws and the reason for most of the enforcement activity under the laws. And so, if you go back to the Ted Knight , uh, excuse me, Ted Lasso theme, I , I often tell clients, just because you can do something doesn't mean you should do something. Let's approach the situation with humility. And, and so when I think about counseling, I think about, yeah, we could probably, probably do that and take some risk, but think about your personal risk in this instance. Think about the entire bundle of risk you've taken under various other arrangements. Think about the continuum of risk that your entire organization has taken. And , and if, if you're not as humble about that level of risk is you need to be, the government takes a very dim view of what you've done, and it can easily go from, you know, an , an error to abuse to fraud. And the government measures their response accordingly, based on how they perceive your intent in the act. So sure, you , you know , no risk, no reward. You have to take some risk in order to conduct a business. And given the way our healthcare reimbursement system is, there's always a little bit of risk in , in billing and collecting for healthcare services. The question is, how much risk do you wanna take? How much reward is there? And then, unlike other facets of business, how much additional risk comes on top of that reward? As I tell people, I like you to get paid for what you do and to be able to keep the money and getting paid for what you do, but not being able to keep the money. And worse, having to pay lawyers to defend, to minimize the amount of money you have to give back or worse to try and avoid jail time is not, to me, a value investment <laugh> .
Speaker 3:Yeah. And real quick, I'll interject. Um, I know Caleb's gonna talk a little bit about some of the trends we saw, but your comment on risk mark really , uh, hit home to me because as a valuation consultant, one question we always get asked is, what would you guys do? And our answer is always, it depends on your risk tolerance level, right? I mean, it's the amount of risk you're willing to accept for the different business judgment factors you've evaluated under the arrangement. Um, Caleb , I know you were gonna, you, in the presentation, you talked a little bit about some of the trends that we saw, which I thought were incredibly important in emphasizing this topic. Could you talk a little bit about that?
Speaker 4:Yeah, yeah. And so, you know, great points by, by Mark and Kate, both , um, you know, the Department of Justice releases an annual report and, and , uh, details a lot of different things. But one of the, the, the figures they include in that, which I think I find interesting is return on investment R-O-R-O-I . And so if you look back at like the past couple of years, the DOJ is reporting like $2 and 90 cents for every $1 spend , which is obviously, I mean, just in terms of, of of straight dollar figures, that's a , that's a huge return on investment. And, and that's actually a lower figure , um, that span years includes kind of post covid. And so there's some carryover impacts from the covid , uh, pan pandemic, such as, you know, delayed and slowed criminal trials and prosecutions. And so that's actually a smaller number than what the healthcare fraud unit was experiencing before some of those, those lasting impacts. And so, you know, this is a priority for the department , um, for , for the unit, rather because it does have such a huge return on investment. Um, also one of the, you know, some of the, the kind of hot trends and enforcement actions, you know, COVID related recoveries is still a big one now, you know, four years post pandemic. Um, you know, we're also seeing a lot of activity in opioid related , um, enforcement actions , um, in West Virginia. And so, you know, the, the , um, there , there's actually a strike force here that's, that's charged with prosecuting opioid enforcement actions. Um, and , and then we've also seen, you know, other hot topics are telemedicine laboratories and DME or durable medical equipment. Those are, have been and will continue to be kind of hot areas of, of enforcement for , uh, for the DOJ . And if you think about, and if you look at kind of their , uh, dollar spend and , and what they've kind of got for the, for the money spent , um, you know, the, the unit tries a lot of cases. They tried 15 in 2021, more than doubled that to 38 in 2022. And those numbers just continue to climb through 23 and now into 24. Um, you know, we, we have there , there's from , again, from the data that the Department of Justice releases, we know that they convicted in 20 22, 217, defendants with 179 guilty pleas in addition to their trial convictions. And then in addition to that, they charged 150 plus defendants with 2.27 billion in alleged losses and, and 5.3 million in prescribed controlled substance doses. And so, I mean, these are , these are really big numbers. Uh , the healthcare fraud unit really, you know, really goes after people in in large numbers.
Speaker 3:Yeah, these are great trends to highlight. Um, our firm actually has a regular deck regulatory deck that we update annually with different stats that I wanted to mention. A couple that, that stuck out to me. Um, one of them was some of the prison sentences for criminal convictions of healthcare fraud. So a KS and FCA , um, that we reviewed included anywhere from five to 20 years in prison, which is significant. Um, another one that I thought was, was really , uh, compelling was 55% , uh, was the increase in FCA settlements from 2022 to 20 23, 50 5% . I mean, that is just huge. Um, and to dig into these stats a little bit further, I think it's helpful to talk a little bit about the government structure and how they facilitate enforcement that leads to these numbers. So Caleb , can you dive into that just a little bit further?
Speaker 4:Yeah, happy to, happy to do that. And, and just to , to add a comment to what you just said, Kate. I mean, it's one thing to talk about like recovering money, right? Like having to pay back money that you have, you know , uh, fraudulently taken from, from , uh, insurance , uh, company, for example. But when you talk about jail sentences, I mean, those are conversations that, that I, you know, I struggle to have with, with clients, right? I mean, you , you don't want your client to be going to jail for, for the terms of years that you, you mentioned. So , uh, I mean, that, that, well , it's certainly attention grabbing when you talk about the length of possible sentences there. But, but yeah, to dive into kind of the, the Department of Justice, I mean, this is something we, we touched on at the , um, at the conference in, in February. So the Department of Justice has a couple of different fraud units, and we're talking about specifically the healthcare fraud unit today. Um, it's been around since the 1990s. Uh , again, once the Department of Justice realized that the fraud unit was going to be healthcare fraud was gonna be a priority of the department, they, they, you know, jumped in with this healthcare fraud unit. And it works kind of alongside the, the other fraud units , including the Foreign Corrupt Practices Unit and the market integrity and major frauds unit . So there , there's kind of the three that make up the DOJ . Um , but specific to healthcare , um, th this unit, it's got , um, they call it a Strikeforce model. And so it's got some different geographic based strikeforce units. And the , the big takeaway about how those units operate is that they use a cross agency approach. And so, you know, it's not as if you're just dealing with the FBI or just dealing with, you know, another agency when the healthcare fraud unit is taking a deep dive into your, you know, into a provider from my perspective, into a client. They're looking at it and they're doing so across all federal and state agencies in a lot of, in most instances. And so they partner with all those agencies. They do great , uh, a great job of , of kind of marshaling data and analytics. In fact , um, one of the other things that they do is they've got , um, a whole data analytics team that's not just investigatory. And so it's not as if they're just reacting to a possible fraud action, but they're also proactively looking at, you know, high numbers of prescriptions at high numbers of, of certain claims. And so, you know, I have data here in 2022, the data analytics team completed 2,500 data requests, which were , were kind of , um, here , here's a possible situation investigated, but they also had 300 non proactive investigative referrals. And so this is the data analytics team finding potential fraud and giving it to the investigators and saying, Hey, go, go look at this. And so, you know, just to , to kind of zoom out, I mean, you got the Department of Justice healthcare Fraud Unit , um, but they've got geographically speaking these strike forces all across the country, and you've got them using both across agency approach, and you've got 'em using these, this , uh, robust data analytics team to to, to process their , uh, their enforcement actions.
Speaker 3:I think that's a another great transition to an element we highlighted in our presentation , uh, back in February, which is of course, the government's self-disclosure protocol. And I'm gonna throw another stat out here for you , A CPA, so I can't help myself, but talk about numbers. Um, there were 104 self-referral disclosure protocol settlements in 2023, or sorry, 2022, which was four times the number of 2021 settlements. And it was actually an all time record. Um, one of the items we covered in our presentation were the two benefits of self-disclosure. One, of course, is providers can resolve the liability issues implicated by the violations at hand. Um, and number two is that there's the potential for those providers to not enter into corporate integrity agreements, which of course we all know are incredibly expensive and incredibly time consuming. Um, but effectively the OIG is , is telling the industry that the outcomes for companies that do not self-disclose and cooperate with investigators will be very, very different from the outcomes of those that do. Um, and actually, I recall from our presentation in February, mark that you told , uh, a little bit of a war story from the trenches, which I, I really liked, and I was hoping you could talk a little bit about it today on the podcast.
Speaker 5:Yeah. One thing I wanna mention is, you know, I talked a little bit about the quantum of risk, and, and I heard I was, I was at a meeting here in, in Middle Tennessee that was convened by the US attorney, who's a , a wonderfully smart and compassionate man, and understands it's difficult to operate a healthcare business and to even run a business that is consistent with the rules and turn enough of positive revenue to stay open because of the way the reimbursement system is constructed. And many of the stakeholders from the various teams that Caleb talked about were there and they said, look, we look at the quantum of risk that somebody is taking when we make these prosecutorial decisions. You know, there's fraud. There were no patients <laugh> , there were no services provided. But there's this activity that they , one coined a wonderful term fraud adja. And the fraud adjacency is how much did the fraud cost the public? Fisk, you may have made an innocent mistake, but if you netted an additional a hundred million dollars, it's tough to say that was just an error. How many total claims were involved? You may have made an innocent mistake, but it may have involved 11 million claims. And then, and this is where you sort of return to the starting point you mentioned, Kate , is did you have an effective compliance plan and did it catch it? And if it did, did you self-disclose? Because if you didn't, you either didn't catch it, in which case you are not an entity that has an effective compliance plan, you won't get credit for it. And what you will get is the presumption that you really don't care about compliance, or you'll say, we had a compliance plan that didn't catch it, in which case it wasn't effective. If it isn't effective, you don't have one. So I guess the , and, and i , I , you know, you , you get a million more stories over <laugh> the course of a career. And, and I think one of the ones that I find most interesting is that , um, and , and , and I'll , and I'll tell you why I think it's relevant today at the very end of the story , um, I was involved in a , uh, in due diligence for a physician practice acquisition in the Southwest. And it looked like a really good deal for the hospital. It was a rural health clinic, it was an underserved area. Patients were not getting the hospital level care they needed. They wanted to buy the Physicians Rural Health clinic got to financial due diligence, and the multiple would have produced an extraordinary amount of purchase price. Something you would have told me, Kate, there's no way we can sign off on this. So you , what do you do when you see that you , you dive in? Well, why is, why is, why is there EBITDA so high? And what we determined was that it wasn't that they were billing, they got incident two wrong on the mid-levels. It wasn't a software problem. It was that the physician was billing, 90% of the office encounters at level four or five, which are the rarest for those who don't practice in this area very much. CMS expects to see five or 10% of your claims at level four or level five. And one of the reasons is because they take more time to accomplish and CMS pays more. And so we, we spoke to the doctor , said, here's our, here's our stumbling block. Can you help us understand, are you only taking really sick patients? 'cause if you are, we don't know how you're getting 'em through your office because these are encounters that should take half an hour. And he said, well, you know, a consultant told me that we should bill 'em all at four and five, and that it's sort of like a traffic ticket. CMS can't catch everybody. And, and so we said, well, look, you know, we, we would be happy to buy your practice and, and if we bought it, we would not expect to see this distribution of billing codes on a go forward basis, but we'd have to cram down the purchase price. 'cause we can't give you credit for those encounters 'cause we don't think they're supportable. And, and we would like you to file a self-disclosure because we do not want in this stock deal to take all that liability on. He said , I'm not giving it back. He said, okay. We , we , we , we can't do the deal. He got , he got very, very mad at us, which happens sometimes. But the reason that this story is , is relevant is that in my view, there is a whole new world of pain that we're all about to experience related to , um, IT security. And, you know, we're all familiar with the change healthcare hack and, and, and every day healthcare organizations, IT perimeters are assaulted. And I have been told by folks from CMS and DOJ and the FBI , we expect you healthcare providers to be very, very serious about your IT security. And to the extent that you are not when you seek our help. Because a lot of times you seek the government's help, or when we become aware that you have become a victim of a hack, if we don't think you were serious about IT security, we think that you may have committed fraud and abuse with respect to your claims, with respect to the way you safeguard your patient's. PHI and the excuse, well, it was the best system I could get when I bought it seven years ago, is not going to get you there. And I would not be surprised if at some point somebody puts a stake in the ground and says, as part of an effective compliance plan, you have to have state-of-the-art IT security. So, you know, they're , they're all war stories. They're , they're one-offs and , and we hope we don't see them often, but they do reveal a really interesting view into the government's psyche and into the psyche of people who on a daily basis bill federal healthcare programs for their living.
Speaker 4:Kate, I , I know you perform fair market values on, on several specialties. Is, is , um, is there a certain specialty that's a hot topic you could maybe touch on and well , what, what are you kind of seeing on the compensation side?
Speaker 3:Yeah, probably not a surprise to , to anyone listening and piggybacking on Mark's story a little bit , um, one of the specialties that we see probably most commonly is anything related to, to cardiology. Um, but there's several others. Orthopedic surgery is, is another one. Oncology, neurosurgery, general surgery, gastro. Um, you've probably seen a theme here, a lot of , a lot of surgical specialties. Um, but in terms of just individual issues that we're seeing on the compensation side, there are a few that , um, present themselves, I would say more than others. Um, the biggest one being compensation exceeding fair market value, so payments over a million dollars or over the 90th percentile, they'll , they'll raise a red flag , um, in my view. Um, but typically, and you'll see this documented in most cases that you review , um, comp when compensation exceeds fair market value, that's typically not the only issue that that's being highlighted in that case. Um, another big item that we see is increases from year to year , um, and then also different recruitment incentives to get physicians to the area. So large sign-on bonuses , um, or also large retention bonuses to keep a provider in the market. You'll see this probably, and you've probably heard this a million times, medical directorships, you know, making sure there's no duplication , um, of those services by other providers in the market. And then , um, additionally , um, making sure those hours are documented. We all know that documenting hours is not fun. I know , um, Caleb and I and , and Mark, we , we probably all don't enjoy recording our time , um, like most people in the, in the industry. Um, but there has to be a way to document that those services were actually performed. Um, and I also I think spent some time talking about stacking , um, making sure that total compensation as well as the individual elements of compensation are at fair market value. Um, and then from a commercial reasonableness perspective, you know, making sure that the physician actually has time to provide all the services that he or she is required to do. You know, a lot of physicians now, especially these rockstar physicians , they don't just have clinical services. They've got academic services and providing call coverage, and they're likely in leadership positions. Um, and that's what you want from these great physicians, but you also wanna make sure at the end of the day that there's actually time to do everything in their contract and that , um, the patient is, is still being cared for. Um , mark, what are you seeing , um, on from the in-house perspective with regards to compensation issues?
Speaker 5:You know what I, I, I teach , um, healthcare business and finance law at Belmont Law School here in Nashville, and I raise a lot of these issues with the students who get these really wide eyes. Um, and I , I , I told my favorite, my favorite of all the stories was did hospital acquisition once, and it was doing diligence on the medical directorships and the hospital for a hospital of its size had a really large number of medical directorships. And one physician had the position of medical director of medical directors <laugh> , which I thought he is like the kapo de tutti copy . And, and I like this , it's just not a thing. Um, I've, one thing I've seen a lot is there's this buzz phrase going around that physicians have been asking for this thing called passive income. And when I, I ask what's passive income? You know, ultimately it comes down to we just want money. And like , well , I I can't just give you money. You know, if you are making referrals for programs or goods or services that are paid for in whole or apart by federal healthcare programs, there are rules about this. And they just more so now than ever, they seem to think, yeah, yeah, yeah, yeah, yeah. But , uh, you know, the guy, the guy I went to residency with, the , the, the gal who was my mentor, the person who did this, you know, I was at a conference and everybody says they're dishing out passive income, and I want some . And I'm like, I just, I , I don't know what to say to that except to say, look, I can, I can pay you for identifiable services for which I have a need and there's fair market value, and I document the services. I can't just give you free money. That's that, that exists nowhere in America. And, and if somebody says they're getting it, you should ask them for the details. <laugh> ,
Speaker 3:I think that's a , a really great way to , to wrap up this podcast, mark , document your services and make sure compensation at fair market value. I think those are, are two big takeaways , um, that I'll make sure that, you know, you're compliant with those federal fraud and abuse laws that we referenced at the, at the beginning of the discussion. Um , mark , Caleb , any closing comments from you guys?
Speaker 5:Well, I'll jump in and say, if you don't have a relationship with the US Attorney's Office where you practice, you should, even if the US attorney might not be the person that you connect with, you should certainly connect with the senior career attorney , uh, who handles healthcare fraud abuse cases and, and make their acquaintance and ask them what's on their radar screen and, and, and, and know them and be able to pick up the phone and say, Hey, hypothetically, this is occurring. Can you help me understand where I ought to go? Those relationships are very valuable to you. They're very valuable to your client, but I think in the overall, the feedback you get from them is going to help you be a better counselor with more forethought. You know that when they tell you, Hey, our data are showing X, don't be in the X. That's much better for me to counsel a client than to say, I think XI can tell them the US attorney has seen X, Y, and Z and they are strongly considering enforcement activity. Let's not be X, Y, and Z. Let's be A, B, and C.
Speaker 3:Caleb .
Speaker 4:No , I just wanted to , uh, um, thank HLA for the opportunity to to record this podcast with, with Mark and Katie .
Speaker 3:Yep . Thank you.
Speaker 5:Thank you so much.
Speaker 2:Thank you for listening. If you enjoy this episode, be sure to subscribe to a HLA, speaking of health law, wherever you get your podcasts. To learn more about a HLA and the educational resources available to the health law community, visit American health law org .