The Eliminating Kickbacks in Recovery Act of 2018 (EKRA)^[1] was signed into law on October 25, 2018 which included some provisions for laboratories and how they procure patients.  In general, EKRA prohibits knowingly and willfully:

1. Soliciting or receiving any remuneration (including any kickback, bribe or rebate) directly or indirectly, overtly or covertly, in cash or in kind, in return for referring a patient or patronage to a recovery home, clinical treatment facility or laboratory; or
2. Paying or offering any remuneration (including any kickback, bribe or rebate) directly or indirectly, overtly or covertly, in cash or in kind
   • to induce a referral of an individual to a recovery home, clinical treatment facility or laboratory; or
   • in exchange for an individual using the services of that recovery home, clinical treatment facility or laboratory.

Although the language used in EKRA is similar to the language in the AKS (mentioned above), there are some important differences to be aware of. First, EKRA applies to all health care benefit program business, including private payors, while the Federal AKS applies only to the federal health care programs (Medicare/Medicaid). Second, even though the SUPPORT Act focuses on substance abuse treatment, EKRA applies to all laboratory testing, regardless of whether the laboratory tests are related to substance abuse.

EKRA includes several statutory exceptions that describe situations where EKRA will not apply, some of which are similar to the federal Anti-Kickback Statute (AKS) safe harbors. The more significant exception related to laboratories is EKRA’s exception for remuneration paid to employees which is narrower than that the Federal AKS employment exception. 

The Federal AKS employment safe harbor (42 C.F.R. § 1001.952(i)), protects payments, including volume-based commissions, paid to bona fide employees.  In contrast, ERKA will only protect payments made by an employer to an employee or independent contractor if the payment is NOT determined by or DOES NOT vary by:

• the number of individuals referred to a particular recovery home, clinical treatment facility or laboratory;
• the number of tests or procedures performed; or
• the amount billed to or received from, in part or in whole, the health care benefit programs of the individuals referred to a particular recovery home, clinical treatment facility or laboratory.

In other words, even though volume-based commissions may be paid to employees under the Federal AKS, under EKRA, a laboratory that pays volume-based commissions to its employees risks enforcement action.

As a result, many operators of genetic testing labs and their attorneys are re-structuring their independent contractor agreements and devising effective and compliant arrangements to provide management/marketing/advertising services in a legal and compliant manner.  This almost always calls for an FMV opinion on the fees charged/paid.

The most common payment arrangements/models we’re seeing at HVG are separate entities characterized as either marketing/advertising firms, MSO or telemarketing/call center firms. These sales & marketing business are typically either direct-to-consumer (DTC) or physician services channel (PSC) firms. The DTC services are believed to be more problematic from a compliance perspective. These independent “marketing firms” contract with genetic testing labs and other types of labs to perform a number various tasks and strategies to promote the laboratory’s services.  Since the fee charged by the marketing firm cannot be a commission or based on reimbursements or number patients, estimating the FMV fee is more of a challenge.  HVG is seeing many of the services agreements identified as “Marketing/Advertising Services Agreements” or “Management Services Agreements.” From the appraiser’s perspective, it’s important to know the specific scope of services with as much detail as possible.  The most common and appropriate way to arrive at the FMV of such services is a method called “cost plus.”  It’s customary for professional services to be charged to a client based on the actual direct costs (labor and out-of-pocket expenses) plus a certain percentage mark-up. It’s the appraiser’s job to determine the fair and reasonable (i.e. fair market value) mark-up percentage. As such, these “marketing/adverting” arrangements should require the service provider to submit records of actual employee timesheets, payroll roster, employer payroll costs and out-of-pocket expenses each month.

---

[1] Included in Section 8122 (18 U.S.C.§ 220) of the Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment (“SUPPORT”)

Upon completion of cataract or refractive (i.e. LASIK) eye surgery, a series of post-operative exams, evaluations and tests are required. This post-operative care can be performed by the ophthalmologist who performed the surgery or it can be sub-contracted to the patient’s optometrist or another provider.  This type of arrangement is most commonly referred to as clinical “co-management”.

Co-management is the planned transfer of care during the global period from the operating surgeon to another qualified provider when clinically appropriate. Normally, the operating ophthalmologist makes arrangements before surgery to refer the patient to another ophthalmologist or optometrist for post-operative care with prior approval of the patient.  According to data in Key Metrics: Assessing Optometric Practice Performance (2015 Edition), 12% of optometrist eye care visits are related to post-operative cataract and refractive surgery co-management. The physician or optometrist receiving the patient must be licensed to manage all aspects of the post-operative care, including the ability to diagnose potential complications that may require another operation.

OIG is Looking

Co-management of patient care has been targeted by the Department of Health and Human Services, Office of Inspector General (OIG), as a potential illegal kickback. Specifically, the OIG Fiscal 2003 Work Plan states that the OIG “will determine if relationships between ophthalmologists and optometrists violate anti-kickback laws.” The OIG will examine arrangements where optometrists refer surgical cases contingent upon the surgeon’s referral of the patient back to the optometrist for post-surgical care so that the optometrist shares in the global surgical fee. In addition, the AMA and the American College of Surgeons have expressed disapproval of co-management arrangements that are driven by economic considerations.

It’s common for an optometrist to refer their patients to an ophthalmologist for eye surgery.  Then, the ophthalmologist will contract with the referring optometrist to perform the post-op care for that patient.  This cross-referral relationship causes the need to ensure payments to and from referring physicians to be strictly at fair market value (FMV) and that the post-op procedures are commercially reasonable.

If the patient is covered by Medicare and is getting standard cataract surgery with a traditional lens, then the co-managing provider who is performing the post-op care can bill and collect from Medicare for their portion of the global reimbursement for the covered cataract procedure.

However, if a patient elects to have a laser-assisted cataract procedure and a premium lens, which is not covered by Medicare, then the patient will normally pay out-of-pocket for this upgrade.  In such case, the operating ophthalmologist may require certain additional post-op care, over and above that which is covered by Medicare under a normal cataract surgery case.

The physician performing the surgery will bill and collect from the patient for the elective (non-covered) upgrades and also pay the co-managing provider a fair market value fee for the additional post-op care. 

As such, it is vitally important that the post-op co-management fee paid by the surgeon and collected by the referring optometrist is FMV.  It is advisable to have a third-party appraiser estimate the fair market value of the post-op procedures and protocols that the operating ophthalmologist requires[1]. A qualified appraiser will estimate a fair market value of the professional time, overhead and administrative time incurred in each post-op visit. Each post-op visit typically includes a visual acuity test for near and distance vision, a tonometry test and slit lamp examination (explained later in the report).  However, the post-op care varies based on different patient outcomes and could require additional post-op visits and additional tests and examinations.

In addition, if the surgeon is requiring additional procedures and protocols and or additional post-op visits, then this also must pass a commercially reasonable (i.e. clinically necessary) examination. A third-party appraiser/consultant should be hired to perform this analysis.

The American Academy of Ophthalmology (AAO) and the American Society of Refractive & Cataract Surgery (ASCRS) have published guidelines for health care providers considering co-management relationships.  Both AAO and ASCRS believe co-management is ethical and appropriate in the right circumstances and certain requirements must be met.

The Society for Excellence in Eyecare (SEE), an organization consisting of both ophthalmologists and optometrists, believes that patients should control the co-management decision, subject to the surgeon determining that the decision is in the patient’s best medical interest and they also recommend that post-operative care by a referring optometrist should only occur when the patient is fully informed about co-management.

Chris David

cdavid@healthvaluegroup.com

303-918-3607

---

[1] The operating ophthalmologist has the ultimate responsibility for the preoperative assessment and postoperative care of the patient, beginning with the determination of the need for surgery and ending with completion of the post-operative care.  The post-operative period is the time in which most complications occur and within which stable visual function is achieved.  The operating ophthalmologist has an ethical obligation to the patient that continues until post-operative rehabilitation is complete.

According to data obtained from the physician recruiting firm, The Medicus Firm, starting pay for primary care physicians and family practice physicians was up in 2016.

Primary Care Physicians
• Primary care physician placement salaries were up 11.0% to $227,734
• Signing bonuses for primary care physicians were up 41.0% to $27,799
• Total compensation packages for primary care physicians were up 13.6% to $257,533

Family Medicine Physicians
• Average salary per placement of family medicine physicians was up 5.9% to $222,703
• Average signing bonus for a family practitioner was up 40.2% to $27,191

Internal Medicine
• Average total compensation package for internal medicine physicians was up 5.9% to $273,410
• Average base salary for an internal medicine physician was up 2.2% to $244,186

Many industry insiders believe that the intense competition for primary care physicians is causing employers to offer higher base salaries, extensive benefits and shorter work weeks to attract candidates. According to a recent survey by Merritt Hawkins, family physicians and internists were the top #1 and #3 requested physicians for placement in 2016.

Note: The salary data above includes base salary and signing bonus, where indicated. This salary information does NOT include any additional bonus compensation such as production bonus or quality/outcomes bonus. The base salaries quoted in this report are averages of salaries offered to candidates upon placement, representing the physicians’ minimum, base earnings for the year. Also, this placement salary data does not account for other perks or other benefits.

Many hospitals, physician groups, and consultants use survey data from companies like MGMA, Sullivan Cotter and AMGA as a proxy for fair market value compensation. However, special care must be taken in applying and utilizing this data or you run the risk of developing a compensation that doesn’t meet fair market value.

1. Don’t assume the median compensation is a safe and conservative indication of fair market value compensation. It’s important to consider certain metrics such as services provided, experience, total hours worked, wRVUs and collections. If a physician is producing at levels below the median or they have limited experiences then paying a physician at the median compensation may not support fair market value.

2. Be careful when paying a physician a certain amount per wRVU. Use of wRVUs to measure provider productivity is common. Some people often mistakenly assume that if a physician’s work RVU volume falls within a certain percentile, they can apply the corresponding published percentile compensation per work RVU data and set a compensation level that is consistent with FMV. If you use compensation-per-wRVU above the median, your resulting compensation will likely exceed fair market value. For example, a cardiologist who generates 11,800 wRVUs annually would put him/her at the MGMA 75th percentile of productivity. Multiplying the 75th percentile of compensation per wRVU ($79.06) by the physician’s actual work RVUs produces compensation of nearly $933,000. This amount is 27% more than the 75th percentile compensation benchmark, and not consistent with FMV standards.

3. Don’t assume the 90th percentile compensation cannot be FMV. After all, the survey participants reported this data and we have no reason to believe it is not accurate or untruthful. However, it is worth noting that there is no assurance that the actual compensation being paid to a physician is consistent with FMV. But, if a physician’s productivity is thoroughly analyzed with respect to hours worked, WRVUs, professional collections and the metrics are within or near the 90th percentile, then there is a highly defensible case to pay that physician at the 90th percentile.

4. Finally, don’t rely on just one survey. Depending on the specialty and the survey respondents, there could be a very small number of participant responses for a particular category. Therefore, it is always a good idea to refer to multiple surveys. The larger the sample size and the more data points analyzed, the stronger case you have that your conclusion is representative of the “market”. Plus, there is regulatory guidance suggesting other sources should be considered. The Stark Law recommends that multiple, objective surveys are considered when determining the FMV of physician compensation.

The Physician Payment Sunshine Act puts pharmaceutical and medical device companies under intense scrutiny and exposure. Compensation paid to healthcare professionals (“HCP”) and healthcare institutions for various services, such as speaking, training, product development, R&D, advisory board service and consulting must be at fair market value (“FMV”) or risk being in violation of the Federal Anti-Kickback Statute.

It is paramount to know and remember that FMV compensation is for a specific service, not a specific professional. Therefore, it is essential to match the qualifications and experience of the HCP providing the service to the specific service/task itself.

Healthcare attorneys should encourage their clients to do following:

• Identify and document the specific areas/departments where HCPs are utilized. This may include:
  1. Speaking
  2. Teaching/Training
  3. Product Development and/or R&D
  4. Board Advisor
  5. Strategic consulting
• Define and document the specific duties, responsibilities and tasks for each area.
• Identify and document the specific requirements and qualifications for each position. (i.e. medical specialty, years of specific experience, credentials, etc.)

Healthcare companies can choose to develop FMV rates internally or they can hire an outside third-party consulting firm. The FMV rates can be based on an hourly rate or for a specific activity. It is important that the company follows a consistent approach and methodology for developing the FMV rate for specific services.

More importantly, when the above framework is in place, the FMV rate is much more supportable and defensible.