Hypothetical

Teton Regional Healthcare (TRH) is healthcare system located in Jackson, WY. It consists of a main hospital (200 beds), a small critical access hospital (25 beds), an ambulatory surgical center, a freestanding imaging center, skilled nursing facility, a mental health and substance abuse facility, and 20 primary and specialty physician clinics. A subsidiary of TRH is Teton Physician Network (TPN), which consists of 220 employed physicians covering several different specialties including primary care, orthopedics, cardiology, oncology, and neurology to name a few.

Steven Moffitt (Steve) is the Chief Financial Officer for TPN. He was hired six months ago, having relocated from the Midwest. His wife grew up near Jackson, WY. To fulfill a promise to one day return to the area, Steve applied for, and was offered, this CFO position with TPN.

Steve contacts Jennifer Cohen (Jen), TRH's Chief Compliance Officer (CCO) to meet and discuss some concerns he recently identified. After meeting with Steve, Jen learns of four potential Stark law issues regarding TRH's financial relationships with some of its physicians (TPN employed and independent contractor specialists).

Assumptions

• Assume TRH is enrolled and participates in Medicare and Medicaid.
• Assume TRH has a compliance department that consists of the CCO (Jen), and four compliance specialists.
• Assume that fair market value compensation can be determined from hiring a third-party consultant, or consulting periodicals that publish such data.
• Assume the Federal Stark law governs all financial relationships mentioned below between TRH and the physicians.

Under each issue, you have been provided a modified version of the applicable regulation for you to use in responding. As such, when responding to a question, consider where in the applicable regulation, the language supports your position. You may also consider other operational concerns. For example, if the allegation were true, how would that impact a particular department or the organization?

• Issue One - Physician Gifts/Nonmonetary Compensation (NMC)
• Issue Two - Employed Physician Compensation
• Issue Three - Contracted Physician Compensation
• Issue Four - Contracts Database and Compensation Policies

Please limit discussion to Stark only. Though the fact pattern above could also implicate the Anti-kickback Statute and the False Claims Act, please limit your discussion to analysis under the Stark law. When we get to the False claims act, we will tie in the relationship between that law, the Stark law and Anti-kickback Statute.

Issue One: Physician Gifts / Nonmonetary Compensation

Physician Gifts / Nonmonetary Compensation (NMC)

Steve tells Jen he has concerns with certain gifts being given to physicians that he thinks may be in violation of Stark. More specifically, Steve explains that yesterday some of TPN's practice managers came to him requesting him to authorize five $150 visa gift cards to be given to five different physicians as a thank you for their service.

In another separate instance, Steve mentions that while going through the expense reports for last month, he noticed two items that concerned him. One is an expense for 2 box seats to an upcoming extreme skiing competition called, "The King and Queen of Corbets." Steve explains the box seats were reportedly given to Dr. Johnson and tickets to the event are valued at $200 per person. Dr. Johnson is an independent contractor radiologist. When Steve questioned Brett Jones, TRH's Director of Imaging Services, he explained that Dr. Johnson asked for the seats, but he wanted to provide them to him. According to Steve, Brett said he knew that Dr. Johnson's wife just passed away from cancer and he thought taking his son to the competition would be much needed quality time together.

Separate from the box seats expense, Steve mentions to Jen that he noticed that Andy Christensen, one of TPN's practice managers, gave Dr. Laura Thompson, an oncologist, a weekend getaway in Sun Valley, ID valued at $4,000.00. When Steve confronted Andy about this, he said that it was a grand prize giveaway to celebrate Doctor's Week. According to Steve, Andy explained that the medical staff office put all the physicians names in a hat and Dr. Thompson's name was selected.

Finally, Steve reports concern that he does not believe there is any individual or department at TRH actually tracking NMC gifts given to physicians to ensure the total amount is not exceeded.

Issue One: Nonmonetary Compensation Specialist (NMC)

Guidance: The Stark Law's exception for Nonmonetary Compensation (NMC) will be your authority (42 C.F.R. 411.357(k)). For purposes of discussion, please use the following regulatory language and not the actual regulatory language. The language below has been intentionally paraphrased to allow your work, and our discussion, to flow more smoothly.

(k)Nonmonetary compensation. (1) Compensation from an entity in the form of items or services (not including cash or cash equivalents) that does not exceed an aggregate of $423 per calendar year, if all of the following conditions are satisfied:

1. The compensation is not determined in any manner that takes into account the volume or value of referrals or other business generated by the referring physician.
2. The compensation may not be solicited by the physician or the physician's practice (including employees and staff members).

(2) Where an entity has inadvertently provided nonmonetary compensation to a physician in excess of the limit, such compensation is deemed to be within the limit if:

1. The value of the excess nonmonetary compensation is no more than 50 percent of the limit; and
2. The physician returns to the entity the excess nonmonetary compensation (or an amount equal to the value of the excess nonmonetary compensation) by the end of the calendar year in which the excess nonmonetary compensation was received or within 180 consecutive calendar days following the date the excess nonmonetary compensation was received by the physician, whichever is earlier. This exception may be used by an entity only once every 3 years with respect to the same referring physician.

Issue One: Nonmonetary Compensation Specialist (NMC)

Instructions:

Your role on Jen's team is to only focus on the allegations related to potential violations of Stark's NMC exception under Stark. In your report, address the following questions:

1. Based on what Steve reported to Jen, do you have any concerns with providing gift cards to these physicians? Why or Why not? What recommendations do you have for Jen to address?

Issue Two: Employed Physician Compensation

Employed Physician Compensation

Steve reports to Jen an allegation of excessive compensation being paid to some of TRH's employed physicians.

According to Steve, after reviewing some of the physician contracts, and other internal documentation, he feels TRH has engaged in a scheme to pay improper compensation to certain employed physicians to reward or induce them to refer Medicare patients to TRH's hospitals and clinics.

More specifically, Steve claims some of the gastroenterologists and neurologists were paid at rates in excess of fair market value. Additionally, some received bonuses for referring patients to TRH facilities, and some were financially penalized in the form of salary decreases, for patients referred outside the system. Steve goes on to tell Jen that some of the physician clinics generated millions of dollars in losses during the same timeframe the physicians were overcompensated by TRH. For example, Steve tells Jen that in the case of Rebound, a sports medicine clinic, the physicians generated net revenues of $60 million, yet TRH paid these physicians $90 million.

Issue Two: Bona Fide Employment Relationship Compliance Specialist

Guidance:

The Stark law exception for a Bona Fide Employment Relationships (BFER) will be your authority 42 C.F.R. 411.357(c)). For purposes of discussion, please use the following regulatory language and not the actual regulatory language. The language below has been intentionally paraphrased to allow your work, and our discussion, to flow more smoothly:

(c)Bona fide employment relationships. Any amount paid by an employer to a physician (or immediate family member) who has a bona fide employment relationship with the employer for the provision of physician services if the following conditions are met:

The amount of the compensation under the employment is consistent with the fair market value of the services; andExcept as provided in (iii below) is not determined in a manner that takes into account (directly or indirectly) the volume or value of any referrals by the referring physician.The compensation is provided under an arrangement that would be commercially reasonable even if no referrals were made to the employer. Commercially reasonable means that the arrangement is one that is reasonable and prudent by both parties absent any physician referrals.This section does not prohibit payment of compensation in the form of a productivity bonus based on services performed personally by the physician (or immediate family member of the physician).

Issue Two: Bona Fide Employment Relationship Compliance Specialist

Instructions:

Your role on Jen's team is to only address Steve's allegations related to violations of Stark specific to compensation paid to employed physicians. In your report, address the following questions:

1.Based on what Steve has reported, do you have any concerns about compensation paid in excess of fair market value? Why or Why not?

Issue Three: Contracted Physician Compensation

Contracted Physician Compensation

Steve reports to Jen an issue relating to excessive physician compensation for some of TRH's contracted physician specialists.

In one example, Steve explains that TRH has rewarded physicians with retroactive increases in their compensation based on referral patterns and not work actually performed. Steve cites to Dr. Jack Anderson's contract as an example. It was amended in September 2020 to increase his base compensation by $50,000, but the amendment language made it effective on January 1 2019.

In another example, Steve mentions concerns related to some of the medical director contracts. More specifically, he tells Jen that last month he objected to payments made to physicians for medical director services without any confirmation or documentation of services actually performed. Steve cites to Dr. Tom Reynolds, the medical director of TRH's cardiac cath lab. Dr. Reynolds was paid $150,000 YTD for medical director services with no documentation of work performed.

Issue Three: Personal Services Arrangements Compliance Specialist

Guidance:

The Stark law exception for a Personal Services Arrangements will be your authority 42 C.F.R. 411.357(d)). For purposes of discussion, please use the following regulatory language and not the actual regulatory language. The language below has been intentionally paraphrased to allow your work, and our discussion, to flow more smoothly.

(d)Personal service arrangements. (1) Compensation from an entity under an arrangement to a physician, or his or her immediate family member if the following conditions are met:

1.Each arrangement is set out in writing, is signed by the parties, and specifies the services covered by the arrangement;2.The arrangement(s) covers all of the services to be furnished by the physician (or an immediate family member of the physician) to the entity. This requirement is met if all separate arrangements between the entity and the physician and the entity and any family members incorporate each other by reference or if they cross-reference a master list of contracts maintained and updated centrally and is available for review by the Federal government upon request. The master list must be maintained in a manner that preserves the historical record of contracts;3.The services covered by the arrangement do not exceed those that are reasonable and necessary for the legitimate business purposes of the arrangement(s);4.The duration of each arrangement is at least 1 year. Any arrangement that expires may be held over (meaning parties can continue on an expired arrangement) for up to 180 days; and5.The compensation to be paid over the term of each arrangement is set in advance, does not exceed fair market value, and is not determined in a manner that takes into account the volume or value of any referrals or other business generated be- tween the parties.

Issue Three: Personal Services Arrangements Compliance Specialist

Instructions:

Your role on Jen's team is to only address Steve's allegations related to violations of Stark specific to compensation to contracted physicians. In your post, address the following questions:

1.Based on what Steve reported, do you have any concerns about the lack of medical director services documentation? Why or Why not? Issue #3 Stark Law Guidance: Personal Services Arrangements.

Issue Four: Contracts Database and Compensation Policies

Contracts Database and Compensation Policies

Steve reports a general concern related to how TRH manages its physician contracts, and lacks policies to outline physician compensation.

In one example, Steve claims that through the course of onboarding and getting familiar with TRHs physician contracts he learned the TRH does not have a centralized contract database to warehouse and manage all of their physician contracts. In another example, separate he has noticed some of the physician contracts are missing signatures, expired, or do not include documentation to indicate how compensation was determined to be fair market value.

Finally, Steve voiced concerns to Jen that TRH does not have a compensation policy related to physician contracts and compensation, though he has recommended one to TRH executive leadership team.

Issue Four: Master Contracts Compliance Specialist

Guidance:

The Stark law exception for a Personal Services Arrangements will be your authority 42 C.F.R. 411.357(d)). For purposes of discussion, please use the following regulatory language and not the actual regulatory language. The language below has been intentionally paraphrased to allow your work, and our discussion, to flow more smoothly.

(d)Personal service arrangements. (1) Compensation from an entity under an arrangement to a physician, or his or her immediate family member if the following conditions are met:

1.Each arrangement is set out in writing, is signed by the parties, and specifies the services covered by the arrangement;2.The arrangement(s) covers all of the services to be furnished by the physician (or an immediate family member of the physician) to the entity. This requirement is met if all separate arrangements between the entity and the physician and the entity and any family members incorporate each other by reference or if they cross-reference a master list of contracts maintained and updated centrally and is available for review by the Federal government upon request. The master list must be maintained in a manner that preserves the historical record of contracts;3.The services covered by the arrangement do not exceed those that are reasonable and necessary for the legitimate business purposes of the arrangement(s);4.The duration of each arrangement is at least 1 year. Any arrangement that expires may be held over (meaning parties can continue on an expired arrangement) for up to 180 days; and5.The compensation to be paid over the term of each arrangement is set in advance, does not exceed fair market value, and is not determined in a manner that takes into account the volume or value of any referrals or other business generated be- tween the parties.

Issue Four: Master Contracts Compliance Specialist

Instructions:

Your role on Jen's team is to only address Steve's allegations related to violations of Stark specific to compensation to contracted physicians. In your post, address the following questions:

1.Based on what Steve has reported, do you have any concerns with how TRH administers contracts? Why or Why not?