Civil and Criminal Fraud and Abuse Penalties Increase and Stark Law Changes By Barry Barnett & Timothy Fry March 6, 2018 EmailTweetLikeLinkedIn The Bipartisan Budget Act of 2018 (the Act) continues to ratchet up penalties for fraud and abuse violations under the Medicare and Medicaid programs. The Act doubles statutory civil fines and quadruples some criminal fines, including for actions brought under the Anti-Kickback Statute (AKS). It also increases maximum jail time. On the other hand, cognizant of the strict liability nature of the Stark Law, the Act codifies certain regulatory protections. On February 9, 2018, Congress passed the Act by a vote of 240-186 in the House, and 71-28 in the Senate. President Trump signed it into law the same day. The Act funds the government through March 2018 with a two-year budget deal, and increases federal funding for discretionary programs. For healthcare, this increased funding for federally qualified health centers and certain research and public health initiatives. Amongst other reforms, the Act also continued funding the Children’s Health Insurance Program through 2027, extended a number of Medicare payment provisions (often called the “Medicare Extenders”), and repealed Medicare therapy caps. It also gave Congress another chance to address the healthcare fraud and abuse statutes and regulations. Several of the more noteworthy amendments to these statutes and regulations are addressed below: Increasing Civil and Criminal Penalties. Congress doubled the statutory civil fines for certain AKS and Civil Monetary Penalty Law (CMPL) violations. The CMPL operates as a catch-all of sorts as it authorizes the Office of Inspector General to impose civil monetary penalties (and other remedies) for various types of fraud and abuse under the Medicare and Medicaid programs. The Act included a number of adjustments for certain fines. For instance, $10,000 fines increased to $20,000, $15,000-$30,000 and $50,000-$100,000. Notably, many of these increases are not as dramatic as they seem as the prior budget act had mandated inflationary adjustments, and therefore, the amount of the fines had increased in the interim. Under this clarified framework, the increases actually average approximately: $15,000-$20,000, $22,000-$30,000, and between $55,000 and $74,000-$100,000. On the whole, the increase is closer to a 33%-50% than the doubling provided in the statute. The Act also ramped up certain criminal penalties under the AKS. The AKS is an intent-based statute, prohibiting remuneration to induce or reward referrals. Violations can include fines, jail time and False Claims Act liability (the latter of which was not addressed by the Act). The Act increased criminal penalties from no more than a $25,000 fine to a maximum $100,000 fine, and increased the maximum incarceration period from five years to ten years. These penalties became effective upon enactment of the Act. Codification of Stark Law Changes. Section 50404 of the Act also codifies three technical fixes to the Stark Law with respect to writing and signature requirements and holdover arrangements previously addressed in regulations. Commonly known as the Stark Law, the Physician Self-Referral Law, located at 42 U.S.C. § 1395nn, and its regulations at 42 C.F.R. § 411.350 et seq., prohibits a physician from referring a patient for Medicare- and Medicaid-designated health services to an entity where that physician or his or her family has a financial relationship, absent an exception. Because the Stark Law is a strict liability statute, meeting the very technical exceptions is critical as violations can lead to False Claims Act liability and recoupment obligations. Over time, the industry has heavily criticized the technical nature of the Stark Law and policymakers have taken note. Indeed, Centers for Medicare and Medicaid Services (CMS) Administrator Seema Verma recently stated that an inter-agency review would consider reducing Stark Law burdens. Despite passage, the technical Stark Law reality is not changing significantly. The first change codifies that the writing requirement shall be “satisfied by such means as determined by the Secretary, which can consist of a collection of documents, including contemporaneous documents evidencing the course of conduct between the parties involved.” This change comes directly from a statement of CMS’s existing policy with respect to the exceptions with a writing requirement. See 80 Fed. Reg. 71315. Changes to the signature requirement and holdover arrangements are similarly lacking significant change. In 2015, when CMS revised Stark Law regulations, we wrote that “under the personal service arrangement and lease exceptions . . . CMS is considering an indefinite holdover period [as long as] the holdover [is] on the same terms and conditions as the original agreement.” This adopted regulatory language (see 42 C.F.R. 411.357(a), (b), (d)) finds its way directly into the Act. Similarly, CMS adopted language around signatures in 42 C.F.R. § 411.353(g) that provides a 90-day period of temporary noncompliance. This same period and same language is codified by the Act. Overall, policymakers continue to attack healthcare fraud and abuse concerns by ratcheting up punishments for violations. Healthcare providers need to continue to ensure compliance to avoid significant penalties. At the same time, Stark Law changes to modernize and remove technical concerns, largely implements shifts that were already recognized in the regulations. If it is the start of further reforms — as could be suggested through the actions of other members of Congress, Administrator Verma, and others — this could be good news. However, if changes amount to little other than a way for policymakers to declare victory over the technical Stark Law, healthcare providers may be disappointed. The authors of this legal alert are happy to further discuss the implications and potential ramifications from the Bipartisan Budget Act.