STARK NAKED, OR WELL PREPARED? Sunday, July 21, 2013 9:00 am – 10:00 am

1. STARK NAKED, OR WELL PREPARED?Sunday, July 21, 20139:00 am – 10:00 am Alan S. Gassman, J.D., LL.M. agassman@gassmanpa.com

2. 2 FROM 20 to 3: THE IRS’ NEW TEST FOR CLASSIFYING INDPENDENT CONTRACTORS – From the Gassman Law Associates Thursday Report – February 28, 2013 We thank Clearwater Johnson Pope tax lawyer Michael Little for pointing out the relatively new IRS SS-8 form used in determining whether an individual is an employee or independent contractor, and our newest Stetson Law student/law clerk Jon DeSantis for assisting with this portion of the Thursday Report. Michael wins a gift certificate for the Kentucky Fried Chicken buffet once he sends us a box top from a Kellogg’s Fruit Loops cereal box and a receipt showing that he purchased the cereal box at Publix. We are also sending Michael a self-addressed stamped envelope for his convenience.  Most tax attorneys are familiar with the IRS’ traditional 20 Factor Test used to determine whether a worker will be classified as an employee or independent contractor for tax purposes. Many tax advisors are not aware that the IRS adopted a new approach in August 2011 by reorganizing the factors into a newly minted 3 Category Test on the most recent revision of the SS-8 Form. The three categories are: a business’ behavioral control over a worker, a business’ financial control over a worker, and the type of relationship between the business and worker. Under each of these categories, there are multiple factual considerations that the IRS will use in gauging how a worker should be classified. Many of the factors in the traditional 20 Factor Test are specifically included within the 3 Category Test, and it is not clear whether the omission of certain factors reflects a material difference between the tests or merely a reorganization.  The IRS has provided substantial guidance regarding the 3 Category Test, including an outline of the test and examples in various industries, in the 2013 version of the Employer’s Supplemental Tax Guide (available by CLICKING HERE). Time will tell whether the evolution of the 20 Factor Test into the 3 Category Test will engender substantive changes in the IRS’ classification of workers as independent contractors or employees.

3. 3 FROM 20 to 3: THE IRS’ NEW TEST FOR CLASSIFYING INDPENDENT CONTRACTORS – From the Gassman Law Associates Thursday Report – February 28, 2013  The categories and factors are set forth below:  I. BEHAVIORAL CONTROL These factors address the degree to which the business is able to direct and control how a worker performs the tasks for which he or she was hired. A. Instructions. When a person is subject to a business’ instructions about when, where, and how to work, the worker is likely an employee. This control can include when to perform the work, where to perform the work, what equipment to use, where to purchase supplies and services, what order of tasks to follow, and which individual is to perform certain tasks. The critical question is whether the business retains the right to control how the work is performed. It is not necessary that instructions are actually given so long as the employer has the right to control how the work is performed.  B. Training. Training a worker by requiring an experienced employee to work with the worker, by corresponding with the worker, by requiring the worker to attend meetings, or by using other methods, indicates that the business wants the services performed in a particular manner and that the worker is an employee. Independent contractors typically utilize their own methods without specific training from the business. II. FINANCIAL CONTROL  These factors address the degree to which the business has a right to control the business aspects of the work to be performed.  A. Unreimbursed Business Expenses. Independent contractors typically have unreimbursed expenses, while employees do not. This is especially true for fixed ongoing costs that are incurred regardless of whether work is performed. If the person or persons for whom the services are performed ordinarily pay the worker’s business and/or traveling expenses, the worker is ordinarily an employee.

4. 4 FROM 20 to 3: THE IRS’ NEW TEST FOR CLASSIFYING INDPENDENT CONTRACTORS – From the Gassman Law Associates Thursday Report – February 28, 2013  B. Extent of Worker’s Investment. Independent contractors frequently have a significant investment in the facilities or tools used in performing services. If the worker invests in facilities that are used by the worker in performing services and are not typically maintained by employees (such as the maintenance of an office rented at fair value from an unrelated party), this tends to indicate that the worker is an independent contractor. On the other hand, lack of investment in facilities indicates dependence on the person or persons for whom the services are performed for such facilities and, accordingly, the existence of an employer-employee relationship. C. Extent worker’s services are available to relevant market. Independent contractors are generally able to seek out other business opportunities. Factors that demonstrate this include advertising, maintaining a viable business location, and availability to work in the relevant market. D. How the business pays the worker. Payment by the hour, week, or month generally points to an employer-employee relationship, provided that this method of payment is not just a convenient way of paying a lump sum agreed upon as the cost of a job. Payment made by the job or on a straight commission generally indi­cates that the worker is an independent contractor. E. Extent to which worker can make a profit or suffer a loss. A worker who can realize a profit or suffer a loss as a result of the worker’s services (in addition to the profit or loss ordinarily realized by employees) is generally an independent contractor, but the worker who cannot is an employee. An employee may be rewarded, disciplined, demoted, or fired depending on job performance, but only an independent contractor can realize a profit or incur a financial loss from his or her work. In other words, an employee will always get paid, while an independent contractor has a financial stake in the work to be performed. III. RELATIONSHIP BETWEEN BUSINESS AND WORKER These factors address the type of relationship between the business and worker. A. Written Contract. If the business and worker have signed a written contract, it should specifically set out the parties’ intent to establish an employer-employee or independent contractor relationship in addition to addressing the factors discussed in this section.

5. 5 FROM 20 to 3: THE IRS’ NEW TEST FOR CLASSIFYING INDPENDENT CONTRACTORS – From the Gassman Law Associates Thursday Report – February 28, 2013 B. Provision of Benefits. When the business provides benefits such as insurance, pension plans, vacation pay, and sick pay, it is more likely that the worker is an employee. C. Permanency of Relationship. An expectation that the relationship will continue indefinitely demonstrates intent to create an employer-employee relationship. D. Importance of services performed. When a worker performs services integral to a business’ regular operations, it indicates an employer-employee relationship. Conversely, it is more likely that a worker is an independent contractor when the work performed is not part and parcel of the business. For example, compare a law firm retaining an attorney to perform legal work with retaining a carpenter to repair a door. For more information, see Renee Inomata, Perils of Misclassification of Workers as Independent Contractors, 2012 WL 3279180 (ASPATORE).

6. 6 What You Should Know if You Are Contacted by a Government AgencyCompliments of Gabe Imperato, Broad and Cassel Many times the government will investigate clients and their health care entities, and questions arise as to what to communicate to employees, and whether to offer them legal counsel or advice. It is important not to interfere with a governmental investigation, but getting the right information and advice to the right people can be very important, and we are very thankful to Gabe Imperato, Esq. of the Broad and Cassel firm for the following memo that is very well written. Gabe’s practice and contact information is as set forth below: Gabriel L. Imperator is the Managing Partner of the Fort Lauderdale office of Broad and Cassel and serves on the Firm’s Executive Committee. He is a member of the Health Law Practice Group and is the co-chair of the Firm’s White Collar Defense and Compliance Practice Group. Mr. Imperato’s personal practice includes representing individuals and organizations accused of health care fraud and assisting and advising health care organizations on corporate governance and compliance matters. Mr. Imperato is board certified as a specialist in health law by the Florida Bar. He is also certified in Health Care Compliance (HCC) by the Health Care Compliance Association, where he sits on the Board of Directors and is the Second Vice President. He has served as Deputy Chief Counsel, Office of the General Counsel, United States Department of Health and Human Services, Dallas, Texas. He advised and represented various agencies of the Department of Health and Human Services, including the Center for Medicare and Medicaid Services, the Public Health Service, the Social Security Administration and the Office of the Inspector General. Mr. Imperator can be reached at Broad and Cassel, 954-745-5223 or via email at gimperato@broadandcassel.com. Below is his memorandum: • A government investigator has the right to contact you and request to speak with you. • You have the right to choose whether or not to speak with any investigator. In all situations you have the right to consult with legal counsel before you decide whether or not to talk to an investigator. • The government investigator does not have the right to insist upon an interview, and it is improper for him or her to pressure you in an attempt to obtain an interview, because it is completely your choice whether or not to speak with any investigator.

7. What You Should Know if You Are Contacted by a Government AgencyCompliments of Gabe Imperato, Broad and Cassel 7 • If you decide to refuse an interview, you should politely, but firmly decline the investigator’s request, but ask him or her for agency and contact information. • Since you are not required to submit to an interview, if you decide that you are willing to submit one, you have the right to insist upon any precondition you desire. For example, you may require that the interview be conducted only in the presence of legal counsel. In some situations, your employer will pay for the cost of an attorney to represent you. • Regardless of your decision, if you are contacted by a government investigator, it is extremely helpful if you immediately contact your supervisor at your place of employment and/or legal counsel. You have every legal right to tell your employer about the government contact. The agent may request or suggest that you keep the contact confidential, but there is no law that would prevent you from disclosing any detail of your discussion with the agents. An employer should expect employees to advise of such government contacts. • Employees often wonder what their employer would prefer. The answer is that the decision is truly yours. However, most employers (and their lawyers) would strongly encourage you to conduct the interview with legal counsel present. • Under all circumstances, remember that you must tell the truth to government agents. Failure to do so may, in and of itself, be a violation of the law. • Do not destroy any documents or attempt to hide evidence under any circumstances.

8. 8 Lester Perling’sHypotheticalsHypothetical #1 Your client is the administrator of a group practice. The practice has decided that because of the administrative burden and costs associated with collections, it would just waive copayments and deductibles for its insured patients but continue to charge the insurer the usual and customary charge for the service. In addition, the practice is establishing a prompt payment discount for patients that fulfill their cost-sharing obligations at the time of service. This prompt payment discount would be applied contemporaneously to the services provided to the patient.

9. 9 Lester Perling’sHypotheticalsHypothetical #1Florida Law • It is considered a “material omission” and “insurance fraud” for a health care provider to waive copayments and deductibles as a general business practice (Fla. Stat. 817.234(7)(a)). • Under Fla. Admin. Code r. 69B-153.003 and 69O-153.003, “The submission or presentation for payment to an insurer, health maintenance organization or third party of a claim form, bill, or other statement for services rendered, prepared or signed by a health care provider or health care facility which does not disclose a pre-provision of services agreement between the health care provider or health care facility and the patient to accept less for the health care services rendered than is reflected on the claim form, bill or statement is an example of a false claim.”

10. 10 Lester Perling’sHypotheticalsHypothetical #1Florida Law (continued) • Fla. Admin. Code r. 69B-153.001 and 69O-153.001(5): Pre-provision of services agreement” means an agreement made or understood to exist in advance of the provision of health care services between the health care provider or health care facility and the patient to waive in whole or in part that patient's payment of the co-payment or deductible amount provided for in the contractual agreement otherwise known as the “policy”, or “health maintenance organization coverage document” between the patient and the insurer, health maintenance organization or third party, or an agreement to give the patient a discount for the immediate payment of fees for services rendered. • A health care provider is required to disclose pre-provision agreements to the insurer in accordance with Fla. Admin. Code r. 69O-153.004.

11. 11 Lester Perling’sHypotheticalsHypothetical #1Kickback Issues • Florida Law - It is a violation of the Florida Patient Brokering Statute (Fla. Stat. § 817.505) for anyone to solicit referrals by providing rebates, commissions or bonuses. So if the waiver of the copayments and deductibles is considered inducement for referrals, there could be a patient brokering issue here. • Federal Law – The federal Anti-kickback statute is a criminal statute that prohibits the exchange of anything of value, in an effort to induce (or reward) the referral of federal health care business (42 U.S.C. § 1320a-7b). • There is a safe harbor for waivers of beneficiary coinsurance and deductible amounts but it only applies to inpatient services (42 CFR § 1001.952(k)). • However, HHS-OIG opined in its 2008 advisory opinion that prompt payment discounts are generally allowable as long as the discount is not a means to induce patients to self-refer. Advisory Opinion 08-03 (Feb. 8, 2008), https://oig.hhs.gov/fraud/docs/advisoryopinions/2008/AdvOpn08-03A.pdf.

12. 12 Lester Perling’sHypotheticalsHypothetical #2 Your client is a solo physician practice. A police officer comes to the practice and asks questions about the treatment provided to a particular patient. The police officer explains that he is conducting a preliminary investigation involving that patient and explains that he needs to know what medication the physician has prescribed to the patient. The police officer does not have a court order or subpoena for the medical records. How should you advise the physician to respond to the police officer’s request?

13. 13 Lester Perling’sHypotheticalsHypothetical #2Federal Law • HIPAA: The Privacy Rule permits health care providers to comply with court orders or court-ordered warrants, subpoenas or summons, grand jury subpoenas, and administrative summons or civil investigative demands. (45 CFR 164.512(f)(1)(ii)). Cannot turn over PHI if the police officer does not have the appropriate order. • In the case of an administrative summons or civil investigative demand, if de-identified information cannot reasonably be used, the information sought must be relevant and material to a legitimate law enforcement inquiry, and the request must be specific and limited in scope to the extent reasonably practicable in light of the purpose for which the information is sought.

14. 14 Lester Perling’sHypotheticalsHypothetical #2Florida Law • Allows medical records to be furnished in any case or criminal action, unless otherwise prohibited by law, upon the issuance of a court order or subpoena from a court of competent jurisdiction. The party seeking such records pursuant to a subpoena must give proper notice to the patient or the patient's legal representative. (Fla. Stat. 456.057(7)(a)). • Search warrant? • There is case law to support that medical records can be obtained through a search warrant allowing law enforcement to seize records so long as those records remained sealed pending notice to the patients. See State v. Rattray, 903 So. 2d 1015 (4th DCA, 2005).

15. 15 Lester Perling’sHypotheticalsHypothetical #2Disclosure of Substance Abuse and/or Mental Health Records? • Federal Law – Under 42 U.S.C. § 290dd-2, records pertaining to substance abuse treatment are deemed confidential. These records can be disclosed if authorized by a court order. Court order must be issued if “good cause” is shown. Good cause means that disclosure is require to “avert a substantial risk of death or serious bodily harm.” 42 U.S.C. § 290dd-2(b)(2)(B). Absent such court order, these records cannot be used to “initiate or substantiate” any criminal charges against a patient or to conduct an investigation of the patient. • Florida Law – Mental health records are confidential (Fla. Stat. § 394.4615). A specific court order is necessary for the release of this type of information. Similarly substance abuse records are also deemed confidential (Fla. Stat. § 397.501(7)) and can only be released to law enforcement personnel under very limited circumstances.

16. 16 Lester Perling’sHypotheticalsHypothetical #3 You represent a physician practice that is enrolled in the Medicare and Medicaid programs. During a routine internal audit the practice’s billing manager discovered that certain claims submitted to and reimbursed by the Medicare and Medicaid programs were “upcoded.” The billing manager brings this error to your attention. What are the practice’s obligations under state and federal law?

17. 17 Lester Perling’sHypotheticalsHypothetical #3Federal Law • - Liability under the Federal False Claims Act (31 U.S.C. § 3729 et. al). • - Reporting and Returning Overpayment (added by the Affordable Care Act): • “If a person has received an overpayment, the person shall (A) report and return the overpayment to the Secretary, the State, an intermediary, a carrier, or a contractor, as appropriate, at the correct address; and (B) notify the Secretary, State, intermediary, carrier, or contractor to whom the overpayment was returned in writing of the reason for the overpayment.” 42 U.S.C. § 1320a-7k(d) • 60-day deadline to report and return overpayment: “An overpayment must be reported and returned under paragraph (1) by the later of (A) the date which is 60 days after the date on which the overpayment was identified; or (B) the date any corresponding cost report is due, if applicable.” 42 U.S.C. § 1320a-7k(d) • Any overpayment that is retained after the deadline for reporting and returning the overpayment is considered “an obligation” for purposes of the federal False Claims Act liability under 31 U.S.C. § 3729(b)(3).

18. 18 Lester Perling’sHypotheticalsHypothetical #3Florida Law • Liability under the Florida False Claims Act (Fla. Stat. § 68.081 et. al). • Medicaid requires providers ensure that the claims that it submits to the Medicaid program are true and accurate (Fla. Stat. § 409.913). Each day that the provider retains a payment to which she is not entitle, constitutes a separate and sanctionable violation (Medicaid Provider General Handbook, p. 5-5). The Medicaid agreement also requires providers to refund any monies received from the Medicaid program in error or in excess of the amount to which the provider was entitled within 90 days of receipt.

19. 19 Lester Perling’sHypotheticalsHypothetical #4 You represent a hospital that has a lease rental arrangement with an orthopedic physician’s practice. Under the arrangement, the physician pays the hospital a fair market value monthly rent to lease office space from the hospital. The rental agreement expired 8 months ago but the physician has continued to occupy the space and continues to pay the rental amount outlined in the expired agreement. What are the implications under the STARK law?

20. 20 Lester Perling’sHypotheticalsHypothetical #4STARK Law • The lease exception to the STARK law (42 CFR § 411.357(a)) requires: • That the agreement be set out in writing, signed by the parties and specifies premises covered; • The space rented does not exceed those that which is reasonable and necessary for legitimate business purpose of the rental; • Term must be for at least one year; • The rental charges over the term of the agreement must be set out in advance; • The rental charge must not be determined in a way that takes in account the volume or value of referrals or business generated between the parties; • The agreement must be commercially reasonable even if no referral were made between the parties; • A month-to-month holdover is allowed for a period of 6 months. • In this hypo, the fact that the lease agreement expired more than 6 months ago means that there is a STARK issue.

21. 21 Lester Perling’sHypotheticalsHypothetical #4STARK Law (continued) • Application of temporary non-compliance provision (42 CFR § 411.353(f)) for arrangements that have fallen out of compliance with STARK. A 90-day period of non-compliance is allowed if [1] the arrangement was in compliance with STARK for at least 180 days prior to when it fell out of compliance; [2] the arrangement has fallen out of compliance for reasons beyond the control of the entity and the entity took prompt steps to rectify the noncompliance; [3] the financial relationship does not violate the Anti-kickback statute or other state/federal regulations. • STARK Self-Disclosure Protocol (Section 6409, Affordable Care Act). • Potential violations of the federal and Florida FCAs. • What if the physician stopped paying rent?

22. 22 Lester Perling’sHypotheticalsHypothetical #5 Your client is a physician practicing with a group practice. Your client’s first cousin is a minority owner of a home health agency. Your client and the other physicians in the group refer patients to the cousin’s home health agency for care. In addition, your client’s wife is a specialty physician who owns an independent practice to which your client and the other physicians in the group refer patients. Are these referral problematic under state and federal law?

23. 23 Lester Perling’sHypotheticalsHypothetical #5Federal Law • “DHS” and “immediate family” are defined in 42 C.F.R. § 411.351. • Home health services are DHS but a first cousin is not considered “immediate family” and thus referral are not barred by the STARK law. • DHS referrals to the wife’s practice pose a STARK problem because she is considered immediate family. • As far as the other physicians in the group practice are concerned, their referrals are not imputed to the physician unless the physician “directs the group practice” (for example, if he is the medical director of the group practice) [42 CFR § 411.353].

24. 24 Lester Perling’sHypotheticalsHypothetical #5Florida Law • The Florida Patient Self-Referral Act applies to DHS and non-DHS services (Fla. Stat. § 456.053). • Referrals made to the first cousin would be allowable but all referrals made to the wife’s practice would violate Florida law because such referrals would be considered self-referrals.

25. FLORIDA PATIENT SELF-REFERRAL ACT 25

26. 26 FLORIDA PATIENT SELF-REFERRAL ACT

27. 27 FLORIDA PATIENT SELF-REFERRAL ACT

28. Unannounced Medicare Audits: What To Do If Investigators Come To Your Office 28 1. Don’t panic or feel rushed.2. Make sure that you confirm the identity of the individuals and make copies of their identification cards and credentials.3. Contact qualified legal counsel and let the investigators wait while you do this.4. Appoint a buffer person in the office to facilitate communication.5. Even jokes can be misconstrued against you.6. Be polite.7. Be professional.8. Stress that your primary concern is for patients and their privacy.

29. Unannounced Medicare Audits: What To Do If Investigators Come To Your Office 29 9. Say as little as possible.10. “Anything you say can and will be used against you.”11. Do not agree to an interview.12. Don’t seek sympathy from the investigators. 13. You will not get it!14. Let employees know that they are not required to speak to the investigators. 15. Do not obstruct the investigators from approaching employees.16. Do not sign anything not reviewed by legal counsel.

30. 30 What to Tell Clients If and When Investigators Show Up at Their Doorby: Gabe Imperato, Esq. Many times the government will investigate clients and their health care entities, and questions arise as to what to communicate to employees, and whether to offer them legal counsel or advice. It is important not to interfere with a governmental investigation, but getting the right information and advice to the right people can be very important, and we are very thankful to Gabe Imperato, Esq. of the Broad and Cassel firm for the following memo that is very well written. Gabe’s practice and contact information is as set forth below: • A government investigator has the right to contact you and request to speak with you. • You have the right to choose whether or not to speak with any investigator. In all situations you have the right to consult with legal counsel before you decide whether or not to talk to an investigator. • The government investigator does not have the right to insist upon an interview, and it is improper for him or her to pressure you in an attempt to obtain an interview, because it is completely your choice whether or not to speak with any investigator. • If you decide to refuse an interview, you should politely, but firmly decline the investigator’s request, but ask him or her for agency and contact information. • Since you are not required to submit to an interview, if you decide that you are willing to submit to one, you have the right to insist upon any precondition you desire. For example, you may require that the interview be conducted only in the presence of legal counsel. In some situations, your employer will pay for the cost of an attorney to represent you.

31. 31 What to Tell Clients If and When Investigators Show Up at Their Doorby: Gabe Imperato, Esq. • Regardless of your decision, if you are contacted by a government investigator, it is extremely helpful if you immediately contact your supervisor at your place of employment and/or legal counsel. • You have every legal right to tell your employer about the government contact. The agent may request or suggest that you keep the contact confidential, but there is no law that would prevent you from disclosing any detail of your discussion with the agents. An employer should expect employees to advise of such government contacts. • Employees often wonder what their employer would prefer. The answer is that the decision is truly yours. However, most employers (and their lawyers) would strongly encourage you to conduct the interview with legal counsel present. • Under all circumstances, remember that you must tell the truth to government agents. Failure to do so may, in and of itself, be a violation of the law. • Do not destroy any documents or attempt to hide evidence under any circumstances.

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