An integrated recovery provider is a company with single common ownership that provides counseling, housing, billing and lab services. An integrated recovery provider would own its own lab, and own or rent its own offices and homes from unrelated parties. Licenses for the operations, including DCF and CLIA, would be in a single name. The provider might contract with outside managers, consultants and independent contractors in order to assure quality control and supply necessary expertise or guidance. This might include lab managers, physicians and physiatrists. The provider would only test its own patient base, not work for others.

This model might be based solely upon the good intentions to provide quality services and have nothing to do with patient brokering or any intention to unlawfully increase reimbursements for care. In fact, the intentions are most likely related to quality control. The question becomes: is this integrated system alone in violation of any law? Unfortunately, the way the laws are written, you are guilty until proven innocent.

Below is a summary of some of the laws and challenges to which an integrated recovery provider should pay special attention.

A. Stark Act

The Stark Law, 42 U.S.C. § 1395nn (also known as the “Physician Self-Referral Statute”), generally prohibits the referral of Medicare and Medicaid beneficiaries by a physician to an entity for the provision of “designated health services” if the physician, or the physician’s immediate family member, has a financial relationship with the entity, unless a statutory exception applies to that financial relationship. For purposes of the Stark Law, a “financial relationship” can include an ownership interest, an investment interest, and/or a compensation arrangement. The Stark Law is a strict liability statute and thus, no proof of bad intent is required to violate the Stark law. As a result, any arrangement that does not satisfy all of the criteria of a statutorily-defined Stark Law exception is illegal.

It is important to note that the Stark law prohibits physicians from referring patients to receive “designated health services” unless an exception applies. “Designated health services” include clinical laboratory services. This is not a “doctors” only statute. The Stark law prohibits the submission, or causing the submission, of claims in violation of the law’s restrictions on referrals. So, in discussing integration of ownership, the statute is not discussing your ownership, but the relationship of your particular doctor to this system. The doctor’s relationship could trigger the Stark Act, which has been amended on more than one occasion and remains complex. If your physician runs afoul of it, it could involve you as well.

B. Anti-Kickback Statute and Related Laws

The Federal Anti-Kickback Statute (42 U.S.C. § 1320a-7b) prohibits providers of services or goods covered by a federal healthcare program (“Federal Healthcare Program”) from knowingly and willingly soliciting or receiving or providing any remuneration, directly or indirectly, in cash or in kind, to induce either the referral of an individual, or furnishing or arranging for a good or service for which payment may be made under a Federal Healthcare Program. The Federal Anti-Kickback Statute is an intent-based statute. For purposes of the Federal Anti-Kickback Statute, a “Federal Healthcare Program” is defined as “any plan or program that provides health benefits, whether directly through insurance, or otherwise, which is funded directly, in whole or in part, by the United States Government; or any State health care program . . .” (42 U.S.C. § 1320a-7b(f)). The Medicare, Medicaid, and TRICARE (military coverage) programs are all Federal Healthcare Programs.

The Anti-Kickback Statute is a criminal law involving any item or service payable by the Federal Healthcare Programs (e.g., drugs, supplies, or health care services). This gets tricky because everyone interprets this to mean the programs I mentioned above, but this is just a “short hand.” It could be that the new insurance programs receiving Federal subsidy under the Affordable Health Care Act are also covered by the statute. While the government has made certain pronouncements that the new insurance programs are not covered by the Anti-Kickback Statute, this issue is not yet settled by any court case.

Under the Anti-Kickback Statute, paying for referrals is a crime. Prohibited remuneration includes anything of value, which can take many forms besides cash, such as free rent, expensive hotel stays and meals, and excessive compensation for medical directorships or consultancies. The statute covers those giving as well as those receiving kickbacks. Criminal penalties and administrative sanctions for violating the law include fines, jail terms, and exclusion from participation in the Federal Healthcare Programs.

Safe harbors protect certain payment and business practices that could otherwise violate the statute. Some safe harbors address office leases, personal service and management contracts, and appropriate payments to bona fide employees. To be protected by a safe harbor, an arrangement must fit squarely in the safe harbor and satisfy all of its requirements.

C. The False Claims Act

The False Claims Act, 31 U.S.C. § 3729, imposes liability upon any person who knowingly submits or causes the submission of false or fraudulent claims for payment or approval. Under the False Claims Act, a person with evidence of fraud (a “whistle-blower”) is authorized to file a case in federal court and sue on behalf of the government. In the healthcare context, examples of conduct that can arguably lead to charges of violations of the statute include, but are not limited to: billing for medical services not rendered; misrepresenting the level of services rendered; and submitting a claim for payment that is contrary to Federal Healthcare Program payment requirements. You have already heard of this statute in connection with the “medical mobility scooter” cases, but it is applicable to a number of health related items.

D. State Statutes

The important parts of the state statutes in the context of sober providers are Fl. State Statute Sec. 817.234 and Fl. State Statue Sec. 817.505. The first section makes “insurance fraud” a crime, and the second makes patient brokering a crime. These are in the “CRIMES” chapter of the Florida Statutes and are labeled as such. The important thing to note about state regulation is that it clearly covers a “health care provider or health care facility” that is a community service provider contracting with the Department of Children and Families to furnish alcohol, drug abuse, or mental health services under part IV of chapter 394 or any substance abuse service provider licensed under chapter 397. There is no argument that it would not apply because: 1) you were not a physician; 2) you were not accepting any reimbursement whatsoever from Federal Healthcare Programs; or 3) you were in a “safe harbor.” The reach of these statutes is broad: It is unlawful for any person, including any health care provider or health care facility, to (a) offer or pay any commission, bonus, rebate, kickback, or bribe, directly or indirectly, in cash or in kind, or engage in any split-fee arrangement, in any form whatsoever, to induce the referral of patients or patronage to or from a health care provider or health care facility; (b) solicit or receive any commission, bonus, rebate, kickback, or bribe, directly or indirectly, in cash or in kind, or engage in any split-fee arrangement, in any form whatsoever, in return for referring patients or patronage to or from a health care provider or health care facility; or (c) solicit or receive any commission, bonus, rebate, kickback, or bribe, directly or indirectly, in cash or in kind, or engage in any split-fee arrangement, in any form whatsoever, in return for the acceptance or acknowledgment of treatment from a health care provider or health care facility. When you see language as strong as that, it makes you wonder how any attorney can tell you that you are safe unless there is a case directly on point or an Attorney General’s opinion giving comfort.

If you own a lab, then additional state statutes apply because labs have specific state statutory requirements. Generally speaking, in short hand, recovery providers fall under Chapter 394 as to mental health and Chapter 397 as to substance abuse recovery. Labs fall under Chapter 483.

E. Insurance Companies Generally

The insurance companies have constructed their own approach to the “legality” of an integrated ownership of recovery services. This arose out of an attempted use of an “investment” safe harbor to some of the laws mentioned above. The approach of the insurance companies is important to understand: operations can taint any system, no matter how well planned. So, reviewing one recently filed case, we find that the insurance company asks for federal court jurisdiction and venue because their plans are governed by the Employee Retirement and Income Security Act (“ERISA”). Employer health plans are organized under ERISA. The insurance company exercises its discretion over claims related to those plans as an ERISA fiduciary. Further, the insurance companies have private agreements with the health plans called Administrative Services Agreements. The Administrative Services Agreements assign authority, responsibility, and discretion to the insurance company to determine coverage and claims.

Most of the allegations from the insurance companies have nothing to do with Federal law. They do not need Stark or HIPPA. They use a number of state statutes, including: 1) Florida State Statute Sec. 501.204 dealing generally with unfair methods of competition, unconscionable acts or practices, and unfair or deceptive acts or practices in any industry; 2) Florida State Statute Sec. 456.054 stating that it is unlawful for any health care provider or any provider of health care services to offer, pay, solicit, or receive a kickback, directly or indirectly, overtly or covertly or in cash or in kind, for referring or soliciting patients; 3) Florida State Statute Sec. 483.245 stating that it is unlawful for any person to pay or receive any commission, bonus, kickback, or rebate or engage in any split-fee arrangement in any form whatsoever with any physician, organization, agency, or person, either directly or indirectly, for patients referred to a clinical laboratories; and 4) Florida State Statute Sec. 817.234 relating to false and fraudulent insurance claims against insurance companies. The last one is important: any fraud against an insurance company has its own special state statutory remedy. You can see who has been writing the laws.

The cases then go on to allege your rather ordinary causes of action: negligent misrepresentation, tortious interference with contract (the one between the health plan and the insurance company), and unjust enrichment. Insurance companies need none of the targeted Federal statutes to make their case. It is all based on the operations of the system.

F. Summary

Integrated recovery providers must be aware of numerous federal and state statutes. With the complex regulatory environment, any integrated recovery provider must be cautious to ensure that its business model does not result in any violations of the state and federal laws.

Even clean, well-run providers must be aware of the laws and must ensure that they are in full compliance. As a matter of public policy, integrated systems should be allowed because they can provide improved services to patients. However, a provider cannot rely on a public policy argument, and must be aware of the various regulations. With increased attention to the recovery industry, integrated recovery providers might face additional challenges.