Last week at the Health Connect Partners (HCP) Hospital and Healthcare I.T. Conference in Chicago, we discussed common contracting issues faced by hospital Directors of Materials Management. Materials Management professionals are central to the contracting process and are extremely vigilant about the laws imposed. The Office of Inspector General (OIG) has warned against substantial fraud and abuse issues with Physician-Owned Entities and Hospitals under the federal Anti-Kickback Statue (AKS) and Stark Laws. AKS makes it a criminal offense to knowingly and willfully offer, pay, solicit, or receive any remuneration to induce, or in return for, referrals of items or services reimbursable by a Federal healthcare program. The Stark Law is a civil statute that prohibits physicians from referring Medicare patients for certain designated health services (DHS) to an entity with which the physician has a financial relationship, unless an exception applies. The OIG considers arrangements with Physician-owned entities inherently suspect because the opportunity for a referring physician to earn a profit from the sale or use of a device could be violate AKS and Stark depending upon the intent and the structure of the deal.
Anytime you initiate or renew a business arrangement with any vendor coordinate with your legal department.
For each new vendor, conduct proper analysis to determine whether the entity is Physician-Connected. Since the vendor is in the best position to know its financial relationships, start with a vendor questionnaire.
Implement a Standard Process - Your Facility will likely have a document/process for the vendor to certify whether or not the business has any financial arrangements or connections with a Physician. Follow this procedure strictly EVERY time a new business arrangement is initiated.
All certifications should be re-executed at least annually.
If the vendor fails to certify whether or not it is physician connected within an established period of time, do not order any items or services.
Maintain a current list of physician connected vendors on your active medical staff and consult list during the contracting process.
All arrangements with Physician connected entities must be memorialized in a written contract at Fair Market Value.
The OIG states that purchase of implantable medical devices from physician owned entities are at a particularly high risk for violating the Federal Anti-Kickback Law and will be considered suspect.
When purchasing the following products: implantable medical devices and/or related instrumentation; pharmaceuticals; and biologics, unless an exemption applies.
With respect to exemptions, analyze on a case by case basis.
i. Exemptions include: Publicly traded companies; Physicians not on the active Medical Staff of the Purchasing Entity.
ii. Always involve legal department when analyzing exemptions.