Use of Hospital-Employed Non-Physician Providers by Private Physicians May Violate the Anti-Kickback Statute

The Anti-Kickback Statute (“AKS”) prohibits any person or entity from offering, making, soliciting, or accepting remuneration, in cash or in kind, directly or indirectly, to induce or reward any person for purchasing, ordering, or recommending or arranging for the purchasing or ordering of federally-funded medical goods or services.

Whoever knowingly and willfully solicits or receives any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind—in return for referring an individual to a person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part under a Federal healthcare program 42 U.S.C. § 1320a-7b(b), Anti-Kickback Statute.

Hospital Medicare Reimbursements

Part A of the Medicare program authorizes payment for institutional care, including hospital care. See 42 U.S.C. §§ 1395c-1395i-4. Hospital inpatient services are reimbursed under the Inpatient Prospective Payment System. This is a system developed for Medicare to classify hospital cases into one of approximately 500 groups, also referred to as diagnosis-related groups (“DRG”), which are expected to require similar hospital resources/costs.

Following the discharge of Medicare beneficiaries from a hospital, the hospital submits claims for interim reimbursement for items and services delivered to those beneficiaries during their hospital stays. 42 C.F.R. §§ 413.1, 413.60, 413.64. Hospitals submit patient-specific claims for interim payments on a CMS Form UB-04 (also known as the CMS Form 1450).

The payments hospitals receive under the DRG system are bundled payments, i.e., the hospital is reimbursed a flat fee for treating the patient for the DRG in question. That fee is intended to reimburse the hospital in full for all of the services provided to an individual patient, i.e., the flat fee is for the cost of running the hospital building itself, the cost of medications provided to patients, and nursing care costs.

Physician Medicare Reimbursement

Physician services and procedures are billed using a series of standardized codes known as Current Procedural Technology (“CPT”) codes. CPT codes are published annually by the American Medical Association. Medicare mandates the use of CPT codes for reporting and billing purposes. CPT codes are five-digit numeric codes (which sometimes include a numeric modifier) used to describe procedures, services and supplies. The CPT codes are primarily used for claims processing and provider reimbursement.

Hospital-Employed Non-Physician Providers

Hospitals may employee non-physician providers (“NPPs”), such as nurse practitioners or physician assistants, to assist in providing healthcare services. As such, costs associated with NPPs’ employment are included in the hospital’s cost reports. Hospital cost reports are used by the government to determine how much the hospital gets paid for providing hospital services to patients.

Private Physicians Engaged to Provide Services at Hospitals

Hospitals also engage private physicians to do “rounds” at the hospital. Private physicians who furnish the surgery and all of the usual pre- and post-operative work may bill for the global package by entering the appropriate CPT code for the surgical procedure only. Separate billing is not allowed for visits or other services that are included in the global package. When different physicians in a group practice participate in the care of the patient, the group practice bills for the entire global package if the physicians reassign benefits to the group.

Violations of the Kickback Statute May Occur If Private Physicians Bill for Work Performed by the Hospital-Employed NPPs

Payment of in-kind remuneration, in the form of the use of hospital-employed NPPs, to private physicians may violate the AKS, and thereby the False Claims Act (“FCA”). In other words, the government or whistleblower could allege that the NPP services were provided in exchange for the private physician’s referrals, if the NPP is providing all services for the private physicians and the private physicians are billing for the professional component of the services provided.

In order to detect if this is occurring, the government or compliance officer could review the patient charts to determine if there is documentation which shows the private physician, rather than the NPP, performed the services for that patient.

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