Anti-Kickback Statute

The federal anti-kickback statute proscribes the offering, payment, solicitation or receipt of any remuneration in exchange for a patient referral or referral of other business for which payment may be made by a federal health care program, including Medicare and Medicaid. Violations of the Anti-kickback statute can result in significant criminal penalties, civil penalties of up to $50,000 for each violation, as well as imprisonment.

OIG has historically taken the position that under certain circumstances, gifts, free items and fees for hollow consulting services could result in a violation of the anti-kickback statute. The argument is that the transfer of anything of more than nominal value to a physician may induce the physician to recommend to his patients the purchasing or ordering of federal health care program reimbursed items or services. Since physicians are in a position of recommending medical devices to their patients, any value transferred by a manufacturer of such devices to physicians with the expectation of a recommendation from such physician could present significant risk to the parties. Given the severity of the criminal and civil sanctions under the anti-kickback statute, physicians need to be very careful when accepting gifts and free items and ensure that any consulting services arrangement is consistent with the personal services safe harbor of the anti-kickback statute.

Stark

Generally, Stark prohibits a physician (or immediate family member) who has a financial relationship with an entity from making referrals to that entity for the furnishing of designated health services for which payment may be made under the federal health care programs, unless an exception or safe harbor is satisfied. Stark is often implicated in the medical device context because physicians (who have some form of financial relationship with the medical device manufacturer) are in a position to influence their patients’ purchasing of federal health care program reimbursed designated health services. For example, physicians may enter into a consulting or other form of services arrangement with the supplier such as to provide educational or training services to the physicians’ patients, which could implicate Stark. Although suppliers have a responsibility to make product training and education available and the U.S. Food and Drug Administration mandates such training and education to facilitate the safe and effective use of certain medical technology, any services agreement with physicians for the provision of such services would have to satisfy the requirements of the personal services safe harbor under Stark in order to avoid any risk to physicians. Violations of Stark could result in denial of payment, civil penalties, disgorgement of reimbursements received and exclusion from federal health care program participation.

When entering into any services arrangement with a medical device manufacturer, physicians should also be mindful of the prohibitions concerning telemarketing of medical equipment and supplies. In March 2003, OIG issued a special fraud alert regarding telemarketing by DME suppliers, reminding suppliers of the general prohibition concerning unsolicited telephone calls to Medicare beneficiaries. Federal law generally prohibits suppliers of durable medical equipment (DME) from making unsolicited calls to Medicare beneficiaries regarding the furnishings of a covered item. OIG indicated that suppliers cannot do indirectly what they could not do directly and, therefore, could not use independent marketing firms or other third parties, such as physicians, to make such solicitations. Physicians should review their consulting arrangements with suppliers to ensure compliance with these laws. Violation of the federal anti-solicitation provisions could result in denial of payment for any item furnished pursuant to an improper solicitation.

False Claims Act

The False Claims Act prohibits a physician from submitting or causing to submit a false or fraudulent claim for payment to the government. The False Claims Act could be implicated when claims for DME payment are submitted based on false certifications. In January 1999, OIG issued a special fraud alert concerning physician liability for certifications in the provision of medical equipment and supplies and home health services. OIG was concerned with the physicians’ laxity in reviewing and completing certifications of medical necessity for DME in home health care and reminded them of the substantial criminal, civil and administrative penalties for knowingly signing a false certification or acting with reckless disregard as to the truth of the information being submitted. Violations may occur when physicians sign a certification as a courtesy to a patient or DME supplier, causing a false claim to be submitted or when receiving any financial benefit in return for signing the certification. Sanctions for violating the False Claims Act include treble damages, fines and administrative penalties.

Civil Money Penalties Law

Generally, the Civil Money Penalties Law prohibits a supplier from offering or transferring remuneration to any individual eligible for Medicare or Medicaid that such supplier knows or should know is likely to influence the individual to order or receive from such supplier any item or service for which payment may be made under Medicare or Medicaid. Violation of the Civil Money Penalties Law can result in fines of up to $10,000 for each wrongful act.

By now, most suppliers know that giving anything of more than nominal value to a patient or prospective patient with the intent of influencing the individual’s decision in his selection of that supplier is improper. Physicians that have arrangements with suppliers for the offering of such gifts and services need to be aware of these restrictions and structure any such arrangement in compliance with the Civil Money Penalties Law and other applicable laws and regulations.

Ethical Considerations

Generally, the AMA considers many gifts provided to physicians by the medical device and equipment industries as serving an important and socially beneficial function. Recognizing, however, that some of these gifts were becoming lavish, the AMA studied the issue and in 1990, its House of Delegates adopted ethical guidelines to prevent inappropriate gift-giving practices. Code of Medical Ethics 8.061 provides the following guidelines regarding gifts from the medical device and equipment industries to physicians:

· Gifts should primarily entail a benefit to patients and should not be of substantial value.

· Individual gifts of nominal value that are related to the physicians’ work, such as pens and notepads, are permissible.

· Conferences should be primarily dedicated to promoting objective scientific and educational activities, with a main objective to further the attendees’ knowledge of the topic. Any subsidy should be accepted by the conference’s sponsor who can use the funds to reduce the conference’s registration fee.

· Subsidies should not be accepted by physicians to pay for their travel, lodging or personal expense costs or to compensate for physicians’ time. Conference faculty may accept reasonable honorarium and reimbursement for expenses.

· The provision of reasonable gifts should not carry with them any expectation from physicians (such as alteration of the physicians’ prescribing practices).

AdvaMed Code

With increased scrutiny over relationships between physicians and pharmaceutical manufacturers, the Advanced Medical Technology Association (AdvaMed), the largest medical technology trade association, has also updated its ethical code (Code) to assist physicians and medical device companies in identifying appropriate gifts, charitable contributions, hospitality and reimbursement practices.

Key guidance provided by the Code includes the following:

· Consultants may receive reasonable compensation for bona-fide consulting services such as research, advisory board participation and presentations at supplier-sponsored training and product collaboration.

· Suppliers may meet with physicians to discuss products, sales terms and contract negotiations. Payments may be made for occasional hospitality in the form of modest meals and receptions that are conducive to the exchange of information.

· Modest gifts having a fair market value of less than $100 are permissible provided the gifts benefit patients or serve a genuine educational function.

· Suppliers may make donations to a charitable organization for charitable purposes such as medical research, indigent care or public education.

Additionally, the Code provides that any arrangement should encourage ethical business practices and socially responsible industry conduct. Importantly, an arrangement’s compliance with the Code does not, however, necessarily equate to compliance with applicable laws and regulations, which may impose stricter requirements.

Understanding that there will always be gray areas, any physician arrangement with a supplier should, at a minimum, comport with the following guidelines.

· Any services arrangement should be for legitimate services such as the provision of training and education required of patients, provide for reasonable compensation which is set at fair market value and should satisfy the requirements of the personal services safe harbor under Stark and the federal Anti-kickback statute.

· Physicians should not, as part of any consulting arrangement, market a supplier’s product to the physicians’ federal health care program beneficiaries and should not engage in unsolicited telemarketing of a supplier’s products and services to such patients.

· Physicians should not enter into any arrangement with a supplier for the provision of incentives to federal health care program beneficiaries in order to induce to such beneficiaries to order the supplier’s products and services.

· Nominal gifts (e.g., pens and notepads) from suppliers to physicians may be permissible provided that any such nominal gift benefits patients and serves a genuine educational function and, provided further, that there is no quid pro quo arrangement between the parties.

· Physicians should not receive anything of value with the expectation of referring or arranging for the referral of business to suppliers or providing CMNs.

· Physicians should not receive payments or other gifts or inducements to meet with sales representatives (modest meals may be appropriate).

· The sponsoring of conferences by suppliers should be primarily dedicated to promoting scientific and educational activities and any subsidy should be provided to the conference’s sponsor, not payment to physicians.

· Reasonable honorarium to physician faculty members of conferences and their expense reimbursement may be appropriate (subsidies to physician attendees at conferences for cost of travel, lodging and personal expenses would not permissible).