The Federal Trade Commission (FTC), the Department of Justice’s Antitrust Division, and the U.S. Department of Health and Human Services jointly announced a cross-government inquiry into the impact of private equity investment and other forms of “corporate greed” in the health care sector. As part of the announcement of this effort, the agencies produced a

In an advisory opinion released on October 13, the Department of Health and Human Services (HHS) Office of Inspector General (OIG) approved a plan by a muti-specialty practice to pay its employed physicians bonuses related to outpatient procedures performed by those physicians at ambulatory surgical centers (ASCs) operated by the physician practice entity requesting the opinion (the Requestor).

According to the facts as presented by the Requestor, the practice employs a group of physicians across a range of specialties. The Requestor also operates two ASCs as corporate divisions of the practice’s legal entity and not as subsidiaries or affiliates. The Requestor plans to pay each employed physician who performs a procedure at either of the ASCs a quarterly bonus equal to 30% of the net profits generated by the facility fees that are directly attributed to that physician’s procedures performed at the ASCs during the preceding quarter.

Notably, there is no indication in the request that the bonus payments would be based solely on the professional component of services personally performed by the physicians; the measurement of profit per physician would be expected to include the technical component of the procedures.Continue Reading OIG Permits Multi-Specialty Practice to Pay Doctors Bonuses for Outpatient Procedures

The Department of Health and Human Services’ Office of Inspector General (“OIG”) issued an unfavorable advisory opinion (the “Opinion”) last Friday in which it refused to bless a proposed arrangement involving an intraoperative neuromonitoring (“IONM”) company (the “Requestor”) and various surgeons who perform procedures for which IONM is used, desiring to form a physician-owned entity (“Newco”) that would arrange to provide both the technical and professional components of IONM services (the “Proposed Arrangement”).

The Proposed Arrangement would essentially create a “turn-key” entity owned by the surgeons (the “Surgeon Owners”) that would subcontract to the Requestor and its affiliated physician practice (the “Practice”) “virtually all of the day-to-day requirements of an IONM business.” The Surgeon Owners would be responsible for forming Newco, preparing Newco’s internal governance documents, and determining the methodology for distribution of Newco’s profits amongst themselves. However, the Surgeon Owners would be passive investors, with limited involvement in Newco’s day-to-day operations.Continue Reading OIG Issues Unfavorable Advisory Opinion, Upholding Longstanding Contractual Joint Venture Concerns

The Senate Finance Committee recently called for federal agencies to begin investigating physician owned distributors’ (PODs) alleged noncompliance with the U.S. Physician Payment Sunshine Act (Sunshine Act, or Open Payments). The letter is addressed to the head of the Office of Inspector General (OIG) and the Administrator of the Centers for Medicare & Medicaid Services (CMS). If acted upon, the OIG/CMS investigations could change the landscape of the Sunshine Act in an important way: any resulting public enforcement would most likely be a first.

How the Sunshine Act Applies to PODs

The Sunshine Act requires applicable manufacturers and group purchasing organizations (GPOs) to annually disclose payments or transfers of value to covered recipients (physicians and teaching hospitals), as well as to disclose ownership or investment interests held by U.S. physicians or their immediate family members (with an exception for publicly traded companies).

PODs, which distribute revenue to their physician owners in a variety of ways, generally have obligations to file such reports under the Sunshine Act in one of two ways:

  1. The POD falls within the definition of a “GPO.” CMS defines a GPO as “an entity that (1) Operates in the United States; and (2) Purchases, arranges for or negotiates the purchase of a covered drug or device, biological, or medical supply for a group of individuals or entities, but not solely for use by the entity itself.”1 CMS has been clear that it intends this definition to include PODs.2
  2. The POD qualifies as an “applicable manufacturer.” To the extent that a POD takes title to a product, the Sunshine Act implementing regulations make clear that PODs are “subject to the same requirements as all other applicable manufacturers.”3

Sunshine Enforcement Landscape

Under the Sunshine Act, the knowing failure to disclose reportable payments or ownership interests is punishable by a civil monetary penalty of up to $10,000 for each item not timely reported. However, despite nearly a decade since enactment and five cycles of data reporting (this year will be the sixth), there have been no public enforcement actions. (We must acknowledge, however, the possibility that investigations may be ongoing and merely not yet publicly disclosed, or were resolved without penalty and therefore not publicly announced.)

Interestingly, the March 19, 2019, letter, written by Senators Chuck Grassley and Ron Wyden (Chairman and Ranking Member, respectively, of the U.S. Senate Finance Committee), appears to imply that the authors have knowledge of specific violations by PODs: “It has come to our attention that some physician owned distributorships (PODs) may be failing to disclose physician ownership or investment interest as required by the Physician Payment Sunshine Act (Sunshine Act).”
Continue Reading Senate Committee Calls for Sunshine Act/Open Payments Enforcement

For some time, we have been reporting on issues involving federal government scrutiny of physician-owned distributors (“PODs”). From the Department of Health and Human Services Office of Inspector General’s (“OIG”) issuance of the March 2013 OIG Special Fraud Alert (“Special Fraud Alert”), to the Reliance Medical Systems challenge to the Fraud Alert, to the

 The Office of Inspector General (OIG) of the Department of Health and Human Services has issued a report on “Overlap Between Physician-Owned Hospitals and Physician-Owned Distributors.”  The OIG reviewed 12 hospitals that self-identified as physician-owned and previously reported having purchased spinal devices from PODs.  The OIG attempted to determine whether physicians had an

On July 14, 2014, the Centers for Medicare & Medicaid Services (CMS) published its proposed rule to update the Medicare Hospital Outpatient Prospective Payment System (OPPS) and the Ambulatory Surgical Center (ASC) Payment System rates and policies for calendar year (CY) 2015. The following are highlights of this major rulemaking:Continue Reading CMS Issues Proposed CY 2015 Medicare OPPS/ASC Rule

The Centers for Medicare & Medicaid Services (CMS) released late today its final rule implementing the physician payment transparency provisions of the Patient Protection and Affordable Care Act (Section 6002), commonly referred to as the “Physician Payments Sunshine Act.” Among other things, the Act requires drug, device, biological or medical supply manufacturers to report

A recent GAO report examines the growing prevalence of physician self-referral (referral to the physician’s own practice) for advanced imaging services (e.g., magnetic resonance imaging (MRI) and computed tomography (CT) services) and its effect on Medicare spending. The GAO reports that while the number of both self-referred and non-self-referred advanced imaging services increased from 2004

The Centers for Medicare & Medicaid Services (CMS), tasked with implementing the Physician Payments Sunshine Act, announced yesterday that it will not require pharmaceutical, device, and other applicable manufacturers and group purchasing organizations (GPOs) to begin collecting reportable data before 2013.
Continue Reading CMS Announces Data Collection for the Physician Payments Sunshine Act Will Not Be Required Before 2013

On March 29, 2012, the New Hampshire House of Representatives recommended for passage HB 1725.  If passed, HB 1725 would prohibit all health care practitioners from prescribing or referring any U.S. Food and Drug Administration class II or class III implantable medical device if the practitioner stands to profit, directly or indirectly, from the

The final CY 2012 Medicare Outpatient Prospective Payment System (OPPS) final rule implemented a statutory mandate that CMS develop an exceptions process related to the ACA’s prohibition on expanding an existing physician-owned hospital’s facility capacity. The rule provided that in order to be eligible for an exception, the physician-owned hospital must satisfy eligibility criteria

On December 19, 2011, the Centers for Medicare & Medicaid Services (“CMS”) published a proposed rule (the “Proposed Rule”) related to section 6002 of the Affordable Care Act, commonly referred to as the “Physician Payment Sunshine Act” (so referenced herein, or as the “Act”). The Physician Payment Sunshine Act requires applicable manufacturers of drugs, devices, biologicals, or medical supplies covered under Medicare, Medicaid, or CHIP to report annually to the Secretary of the Department of Health and Human Services (“Secretary”) certain payments or other transfers of value to physicians and teaching hospitals. Additionally, applicable manufacturers and applicable group purchasing organizations (“GPOs”) must report certain information regarding the ownership or investment interests in them that are held by physicians or their immediate family members.
Continue Reading Overview and Analysis of the Proposed Federal Sunshine Regulations

The Centers for Medicare & Medicaid Services (“CMS”) released today a proposed rule implementing the physician payment transparency provisions of the Patient Protection and Affordable Care Act (Section 6002), commonly referred to as the “Physician Payments Sunshine Act.” Among other things, the Act requires drug, device, biological or medical supply manufacturers to report payments or other transfers of value to physicians and other covered recipients. In addition, the Act requires manufacturers and group purchasing organizations (GPOs) to report certain information regarding ownership or investment interests held by a physician in the manufacturer or GPO.
Continue Reading CMS Releases Long-Awaited Physician Payments Sunshine Act Proposed Rule

The Centers for Medicare & Medicaid Services (CMS) has sent to the White House Office of Management and Budget (OMB) its long-awaited proposed rule to implement the Transparency Reports and Reporting of Physician Ownership of Investment Interests (also called the Physician Payment Sunshine Act) provisions of the ACA. These provisions are intended to encourage greater

On November 30, 2011, CMS is publishing its final rule updating the Medicare hospital outpatient prospective payment system (OPPS) and the ASC payment system rates and policies for CY 2012. The following are highlights of the lengthy rule:

  • The final OPPS update for 2012 is 1.9%, which reflects a 3.0% market basket update reduced by