Home 5 Lab Compliance Advisor 5 CLIA-lca 5 Compliance Perspectives: The Two Faces of Government Advice: Reliance on Agency Counsel May Not Always Be Reasonable

Compliance Perspectives: The Two Faces of Government Advice: Reliance on Agency Counsel May Not Always Be Reasonable

by | Feb 23, 2015

Clinical laboratories and pathologists frequently struggle with issues related to Medicare payment and compliance. It’s no wonder. One court stated recently, “Picture a law written by James Joyce and edited by E. E. Cummings. Such is the Medicare statute, which has been described as ‘among the most completely impenetrable texts within human experience.’”1 The same […]

Clinical laboratories and pathologists frequently struggle with issues related to Medicare payment and compliance. It’s no wonder. One court stated recently, “Picture a law written by James Joyce and edited by E. E. Cummings. Such is the Medicare statute, which has been described as ‘among the most completely impenetrable texts within human experience.’”1 The same might be said about related regulations and interpretations issued by the Centers for Medicare and Medicaid Services (CMS), and legal and regulatory authorities addressing licensure and certification. In many cases, the issue of concern relates to whether a particular type of payment claim is permissible. There may be questions, for example, whether a service provided under particular arrangements can be billed or about the proper code to be included on the claim. In that event, the laboratory or pathologist may have a so-called “duty of inquiry” before submitting claims to Medicare or other federal payer. The False Claims Act (FCA) states that a person who acts in “reckless disregard” of the truth may be determined to have knowingly submitted a false claim.2 Therefore, if incorrect claims are submitted, the failure to make a reasonable and prudent inquiry to determine whether such claims were permissible could result in liability under that statute.3 Compliance advice is available from various sources. The conventional wisdom, however, is that the safest course is to contact the relevant administrative agency or government contractor and then to carefully document the advice that it provides. This approach is encouraged frequently by government agencies. CMS offers that “CMS’ local contractor medical directors are a valuable source of information on Medicare coverage policies and appropriate billing practices.”4 Similarly, CMS’s Clinical Laboratory Improvement Amendments of 1988 (CLIA) Web site states, “If you have any questions regarding CLIA, contact the appropriate State Agency.” Advisory Opinion Process But not all responses to requests for government advice provide the same protection. A request for a legally binding advisory opinion can be submitted to the Department of Health and Human Services (HHS) Office of Inspector General (OIG) regarding application of the federal anti-kickback statute and most other Medicare-related statutory provisions that can lead to criminal penalties, civil monetary penalties, or federal exclusion. However, the OIG requires that the requesting party provide extensive information regarding the arrangement and to certify that related payments reflect fair market value. Additionally, the 60-day statutory deadline for issuance of an advisory opinion is routinely extended by the OIG, and a response typically takes more than one year. As part of a similar process, CMS may be requested to provide a binding advisory opinion regarding application of the physician self-referral prohibition (commonly referred to as the Stark law). This is frequently not a feasible alternative, however; CMS’s determination that an existing arrangement violates the Stark law could result in an obligation to return all payments received for services resulting from impermissible referrals. Informal Requests for Advice Informal advice may be sought from government representatives on many other issues. Federal agencies and Medicare contractors will frequently respond to letters or e-mails or provide telephone advice. However, this advice will not necessarily be correct. For that reason, the OIG’s compliance guidance for clinical laboratories suggests that it may not always be reasonable to rely on it. The OIG states: [W]here a clinical laboratory . . . requests advice from a Government agency (including a Medicare fiscal intermediary or carrier) charged with administering a Federal health care program, the clinical laboratory should document and retain a record of the request and any written or oral response. . . . The laboratory should memorialize its determination as to whether reliance on any such advice is reasonable.5 A laboratory that receives and then relies on such informal advice may have little recourse if it turns out to be incorrect and, as a result, it is later determined that the lab received Medicare payments to which it was not entitled or that it violated laboratory certification requirements. Based on the Supreme Court’s decision in Heckler v. Cmty. Health Servs. of Crawford Cnty., Inc.,6 in which a Medicare fiscal intermediary was permitted to recover Medicare payments that it had advised a home health agency could be properly claimed, HHS administrative law judges (ALJs) have generally rejected arguments based on a Medicare contractor’s or administrative agency’s erroneous advice. In one such recent decision, the ALJ stated that “those who deal with the government are expected to know the law and may not rely on the conduct of government agents contrary to law.”7 Other ALJs have stated that “a provider’s reliance on statements from either the fiscal intermediary or a state employee—even one who . . . could unquestionably be characterized as a ‘responsible government agent’—is simply unreasonable”8 or that “[e]rroneous oral advice is inadequate, as a matter of law, to estop the government from enforcing federal law.”9 Similarly, in Wade Pediatrics v. CMS,10 the Departmental Appeals Board (DAB) stated that a laboratory charged with referral of proficiency testing (PT) samples to another laboratory could not have reasonably relied on oral statements from a CMS investigator to believe that such referrals were permissible. According to the DAB, CMS regulations clearly prohibited a laboratory from sending PT samples to another laboratory for analysis, and the laboratory’s director was responsible for assuring its compliance with applicable regulations. Impact on Penalties In certain instances, however, reliance on incorrect government advice may prevent imposition of penalties, if, based on that advice, the laboratory reasonably believed that it was complying with relevant laws and regulations. This is because imposition of penalties—whether civil, criminal, or administrative—frequently requires an intent to violate a law or regulation or recklessness or deliberate indifference as to whether the practice or payment claim was compliant. In a memorandum issued in 1998, then Deputy Attorney General Eric H. Holder Jr. instructed government attorneys to consider the following before alleging an FCA violation: Guidance by the Program Agency or its Agents. Did the provider directly contact either the program agency (e.g., the Health Care Financing Administration) or its agents regarding the billing rule at issue? If so, was the provider forthcoming and accurate and did the provider disclose all material facts regarding the billing issue for which the provider sought guidance? Did the program agency or its agents, with disclosure of all relevant, material facts, provide clear guidance? Did the provider reasonably rely on such guidance in submitting the false claims?11 The corollary to this principle is that proof that an entity engaged in conduct after being advised by a government agency that it was impermissible may result in a determination that there was an intent to violate the relevant legal or regulatory requirement or at least substantial indifference as to whether the conduct was permissible. Application of Principles Application of these principles can be demonstrated using a simple example in which a laboratory asks a Medicare contractor if a particular type of payment claim is permissible. If the contractor states incorrectly that an unlawful type of claim is permissible and the laboratory then submits claims reflecting this advice, it could later be required to return related overpayments. But the laboratory should have a strong basis for asserting that it did not knowingly or willfully violate the law—or that it did not act with deliberate ignorance or reckless disregard for whether the claims were proper—and therefore penalties should not be assessed. By contrast, following a Medicare contractor’s incorrect advice that certain claims were impermissible could result in loss of revenue to which the laboratory was entitled. The consequences of disregarding the contractor’s advice depends on the circumstances. If the contractor said correctly that a particular type of claim was impermissible, a laboratory that nevertheless filed such claims could face substantial penalties (as well as overpayment liability). In the absence of a reasonable, good-faith belief that the contractor’s advice was incorrect, the laboratory may be shown to have knowingly and willfully violated the law or acted in reckless disregard as to whether its payment claims were permissible. Failed Attempts to Obtain Government Advice What if the contractor or agency ignores the request for advice, declines to respond, or sends a reply that does not address the issue about which advice was requested? Although there may be no clear case law addressing this scenario, a recent decision indicates that a laboratory’s failed attempt to obtain government advice could potentially serve as a defense against imposition of penalties. In U.S. ex rel. Williams v. Renal Care Group, Inc.,12 the federal government filed an FCA action against a dialysis provider and related entities for submission of Medicare claims using a payment method that the government asserted was unavailable. The lower court found that in submitting these claims, the defendants acted with “reckless disregard” of applicable Medicare statutes and regulations. The appellate court disagreed based on the specific facts and circumstances presented, finding, among other things, that the dialysis provider had requested advice from its own legal counsel, its counsel had requested clarification from CMS—to which it did not receive a response, its counsel had documentation of a conversation with an individual from CMS that supported her client’s billing, and CMS and the OIG had knowledge of its billing arrangements. According to the court, based on these and other factors, “the defendants were not in reckless disregard of the truth or falsity of their claims”; they had consistently sought clarification on the issue, followed industry practice in attempting to interpret ambiguous regulations, and were forthright with government officials regarding the arrangements.13 Conclusion In many cases it will be appropriate to seek advice from a Medicare contractor or administrative agency regarding compliance with legal and regulatory requirements. However, as the OIG indicated, any such advice should be carefully evaluated before it is relied upon. Robert Mazer, Esq., can be reached at 410-347-7359, remazer@ober.com.
  1. Catholic Health Initiatives-Iowa, Corp. v. Sebelius, 841 F. Supp.2d 270, 271 (D. D.C. 2012) (citations omitted).
  2. 31 U.S.C. § 3729(b)(1)(A).
  3. See U.S. ex. rel., Williams v. Renal Care Group, Inc., 696 F.3d 518, 530 (6th Cir. 2012).
  4. Medicare Learning Network, Avoiding Medicare Fraud & Abuse: A Roadmap for Physicians (March 2012).
  5. Publication of OIG Compliance Program Guidance for Clinical Laboratories, 63 Fed. Reg. 45076, 45085 (Aug. 24, 1998) (emphasis added).
  6. 467 U.S. 51 (1984).
  7. Rodriguez v. CMS, DAB No. CR2869, at 5 (July 24, 2013).
  8. Caretenders Visiting Servs. of Columbus, LLC v. CMS, DAB No. CR2311, at 8 (Jan. 19, 2011).
  9. Sherrod v. CMS, DAB No. CR2463, at 6 (Nov. 8, 2011). Whether and under what circumstances a federal agency may be estopped from asserting a position as a result of a private party’s reliance on its prior statements is not perfectly clear.  A federal appellate court indicated recently that estoppel may be appropriate in the case of an agency’s “affirmative misconduct,” i.e., improper conduct which goes beyond “mere negligence.”  Bartlett v. Dep’t. of Agric., 716 F.3d 464, 475-76 (8th Cir. 2013).
  10. DAB No. 2153, at 21-24 (2008), petition for review denied, 567 F.3d 1202 (10th Cir. 2009).
  11. Memorandum for All United States Attorneys, et al., from Eric H. Holder Jr., Deputy Attorney General, re: Guidance on the Use of the False Claims Act in Civil Health Care Matters (June 3, 1998).
  12. 696 F.3d 518 (6th Cir. 2012).
  13. 696 F.3d at 531.

Associated Data

rob-mazer

This content is exclusive to Lab Compliance Advisor subscribers

Start a Free Trial for immediate access to this article and our entire archive of over 20 years of LCA reports.

This content is exclusive to Lab Compliance Advisor subscribers

Start a Free Trial for immediate access to this article and our entire archive of over 20 years of LCA reports.