The Business of Healthcare

Special Announcement on AB 72 for California Physicians or Anyone Afraid This Crazy Idea Will Spread

Would any payor pay a physician or medical group more than Medicare plus 25% if they didn’t have to?

Would any payor with the ability to control what its “average” contract rate is, reduce its “average” if that’s all it has to pay to an out-of-network physician or medical group?

California’s law known as “AB 72,” purportedly passed to stop the “evils” of “surprise” medical bills in the nonemergency setting (that’s the situation a patient encounters when he or she gets treatment at an in-network facility from an out-of-network physician or other health care professional) will have an (intended?) disastrous impact on both out-of-network and in-network physicians and medical groups.

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Mark F. Weiss

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Another Physician Guilty of Receiving Insys/Subsys Kickbacks

On October 25, 2017, another physician, Jerrold Rosenberg, M.D., pleaded guilty to charges related to the plethora of kickback prosecutions emanating from Insys Therapeutics, Inc., and its fentanyl drug, Subsys.

Couch and Ruan Sent to Prison

In February of this year, I wrote in my post Pain Medicine Doctors Alleged to Have Received $115,000 in Kickbacks … Plus $40 Million in Illicit Profit, about the cautionary tale of two Mobile, Alabama pain medicine doctors, Drs. John Couch and Xiulu Ruan, both then in the midst of their federal court trial for, as was then alleged, receiving $115,000 in kickbacks from Insys in connection with Subsys.

Among the allegations:

• That Couch and Ruan prescribed, and also sold through their owned pharmacy, large quantities of Subsys, based on misleading diagnoses, defrauding payors.
• That their profit of $40,000,000 from dispensing Subsys and other controlled substances was an illicit profit from a “pill mill.”
• That they received “speaking fees” from Insys based on the number of Subsys prescriptions they wrote.

Subsequently, Couch and Ruan’s trial moved forward to guilty verdicts and then to sentencing: Crouch was sentenced to prison for 240 months and Ruan received an even stiffer sentence, 252 months behind bars.

Neither of the Mobile, Alabama physicians currently reside in the state: Dr. Couch passes (or, does) time at the Federal Correction Institute in Forrest City, Arkansas, while Dr. Ruan enjoys the view from behind bars at the Federal Correction Institute in Oakdale, Louisiana.

In addition to their lengthy prison sentences, the duo was ordered to make restitution of $6,282,023.00 to Medicare, $3,649,092.97 to Blue Cross/Blue Shield of Alabama, $2,285,170.70 to Tricare, and $1,695,929.00 to United Heath Group.

Fanto, Seth, and Gingerich Indicted

In my post dated September 5, 2017, Drugs, Sentencing, and Lock (and Roll on to Another Kickback Prosecution), I wrote about criminal charges brought by the State of Arizona against three pain medicine physicians, Steve Fanto, M.D., Nikesh Seth, M.D., and Sheldon Gingerich, M.D.

The allegations: That the physicians collected sham educational “speaker fees” in exchange for writing prescriptions for Subsys.

The criminal complaint claims that from March 2012 to April 2017, more than $33 million, or 64 percent of Subsys sales in Arizona, came from prescriptions written by Fanto, Seth, and Gingerich.

In additional echoes of the Couch and Ruan prosecution, it was alleged that Drs. Fanto, Nikesh, and Gingerich gave insurers false and misleading information, including that patients had cancer when they did not, to obtain prior authorization for Subsys prescriptions.

Rosenberg Pleads Guilty

And now, in the most recent echo of Subsys “addiction” (addition, that is, to illegally gained money), Jerrold Rosenberg, M.D., a Providence, Rhode Island physiatrist, pleaded guilty last week to federal charges that he committed healthcare fraud and conspired to receive kickbacks in the form of “speakers fees” from Insys in order to induce him to prescribe Subsys.

In their case against Dr. Rosenberg, the United States Attorney General’s office alleged that between 2012 and 2015, he entered into an illegal scheme to take kickbacks from Insys. Specificially the payments were disguised as speaker’s fees from Insys. The “fees” were then a major factor in Rosenberg’s decision to prescribe Subsys to patients.

In an echo of the charges brought against Drs. Couch and Ruan, it was also alleged that Dr. Rosenberg upped his prescriptions of Subsys by fraudulently representing to insurers that his patients suffered from cancer pain when they did not.

Dr. Rosenberg is set to be sentenced to prison in January. Pursuant to a plea deal, the now 63 year old physician could spend up to the next 15 years in prison, perhaps actually a life sentence.

He also agreed to pay $754,736 in restitution to healthcare benefit programs.

Insys Executives Indicted

Just so that you don’t think that physicians were the only targets of Insys/Subsys related prosecutions, in December 2016, the federal government indicted a slew of now-former Insys executives for conspiracy to commit racketeering, mail and wire fraud, and conspiracy to violate the anti-kickback law, relating to what the U.S Attorney alleges was a nationwide conspiracy to bribe medical practitioners to unnecessarily prescribe Subsys and defraud payors.

The indicted executives are Michael L. Babich, the former CEO and President of Insys Therapeutics, Alec Burlakoff, the former Vice President of Sales, Richard M. Simon, the former National Director of Sales, Sunrise Lee and Joseph A. Rowan, both former Regional Sales Directors, and former Vice President of Managed Markets, Michael J. Gurry. Each pleaded not guilty to the charges.

Insys as Target

And, the company itself, Insys Therapeutics, Inc., has already paid $9.45 million to resolve state level investigations into the kickback-related affairs.

The Federal Anti-Kickback Statute and Other Prohibitions

In general terms, the federal Anti-Kickback Statute (“AKS”) prohibits the offer, demand, payment, and acceptance of remuneration—that is, of anything of value—for referrals

The federal government, and many courts, interpret the AKS to apply even when an arrangement may have many legitimate purposes; the fact that one of the purposes is to obtain money for the referral of services or to induce further referrals is sufficient to trigger a violation of the law.

State laws differ in their treatment, scope and interpretation, but generally contain similar provisions barring remuneration for referrals, sometimes expressed as anti-kickback or fee-splitting prohibitions.

In addition, federal laws such as wire fraud statues and the Travel Act turn what are “simple” violations (a huge simplification!) of state laws into federal criminal offenses. The federal Controlled Substances Act permits prescribing and dispensing only for legitimate purposes, not in respect of “pill mill” and other massive prescribing activities. Additionally, the federal statute of healthcare fraud makes it a crime to defraud a healthcare benefits program, including a commercial insurer.

The Takeaways for You:

1. Money: The are many legitimate ways for physicians to increase their practice income. They include, depending on state law, investments in pharmacies and the direct dispensing of pharmaceuticals.

2. Structure: But any deal must be structured in compliance with the federal Anti-Kickback Statute, the Controlled Substances Act, Stark, and numerous other federal laws, as well as with various state law counterparts and other restrictions. Your investment in structuring things correctly is an investment in yourself and your jail-free future.

3. Compliance Auditing: No matter how well structured, it’s essential that you engage in periodic compliance audits coordinated through legal counsel. Laws change and actual behavior impacts all of the structure and planning. Even the best planning can be made worthless if illegal conduct takes place within the context of what was planned to be a proper structure.

4. Investigations: If you learn that you (or any person or entity connected to the operation) are under investigation, immediately engage a team of experienced healthcare attorneys and criminal defense counsel. Many potential prosecutions are resolved at this stage.

5. Indictment and trial: Again, immediately engage a defense team of healthcare and criminal defense counsel.

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Mark F. Weiss

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Aetna Obtains $37-plus Million Judgment Against ASC Manager – Podcast

Earlier this year, a Santa Clara County, California jury awarded the insurer Aetna a $37,452,199.00 judgment in a lawsuit against Bay Area Surgical Management, LLC, a surgery center management company, a number of its managed ASCs, and three of Bay Area’s executives.

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Mark F. Weiss


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Aetna Obtains $37-plus Million Judgment Against ASC Manager

This past Friday, April 15, 2016, a Santa Clara County, California jury awarded the insurer Aetna a $37,452,199.00 judgment in a lawsuit against Bay Area Surgical Management, LLC, a surgery center management company, a number of its managed ASCs, and three of Bay Area’s executives.

The ASCs were out of network as to Aetna plans.

Aetna complained that Bay Area’s centers charged exorbitant prices for out of network procedures. Aetna argued that the oversized amounts paid by it to the ASCs resulted in higher than normal distributions to referring physicians, and were therefore kickbacks for their referrals. Interestingly, no physician was named as a defendant.

Aetna also alleged that Bay Area’s centers failed to disclose the referring physicians’ interests in the facilities and routinely waived co-pays thereby rendering claims to Aetna fraudulent.

For example, a $20,000 charge with a waived 30% co-pay resulted in a $17,000 claim to Aetna. Because the $17,000 was not net as to an actual co-pay, Aetna’s position was that the $17,000 was a fraudulent claim; the “real” claim should have been $17,000 less the 30% co-pay, or $11,900. The routine waiver of co-pays was also an inducement to the insureds to use the higher priced out of network facilities.

Note that although the case was tried in a California state court, does not set a precedent, and will almost certainly be appealed, it signals a number of issues for ASCs and other healthcare facilities and providers everywhere:

1. Out of network facilities and practices are under attack by payors.

2. The routine waiver of co-pays is a dangerous business practice.

Court filings indicate that the defendants will file motions to attack the judgment. If those motions are unsuccessful, it’s highly likely that they will file an appeal.

Comment or contact me if you’d like to discuss this post.

Mark F. Weiss

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