HI545 Unit 2 Fraud and Abuse Analysis Example

One Directorship, Four Laws: A Unit 2 Fraud and Abuse Analysis of an Expired Pulmonary Rehabilitation Contract and an Unsigned Raise

[Student Name]

Purdue University Global

HI545: Health Care Compliance

Unit 2 Fraud and Abuse Analysis

[Instructor Name]

[Date]

Esterline Health, the physician and every figure are composite; the statutes, rules and sources cited are real. This is coursework, not legal advice.

The Facts

Esterline Health, a two-hospital system, runs an outpatient pulmonary rehabilitation program at its main hospital. Since 2021 the program's medical director has been a pulmonologist in a private group that Esterline acquired last quarter. Her directorship agreement, signed in March 2021, ran for three years at 4,000 dollars a month for about twenty hours of documented work, a rate set by an outside valuation. It expired in March 2024 and was not renewed. She kept working and kept being paid. In September 2024 the program manager, citing a larger caseload, raised the stipend to 6,500 dollars a month by an email to accounts payable. No amendment was written, no one signed anything, and no new valuation was done. During the twenty-one months from the raise to the acquisition review, she referred 214 Medicare patients to the program, and Esterline billed for their sessions as hospital outpatient services. The acquisition's compliance review found the arrangement. This analysis asks which federal laws apply, what each would require, and what Esterline should do first.

Authority One: The Physician Self-Referral Law

Under the self-referral statute known as Stark, when a physician has a financial tie to a hospital, the hospital may not bill Medicare for designated health services she refers to it unless the tie fits an exception (42 U.S.C. § 1395nn, 2024). Outpatient hospital services are designated health services, and a directorship stipend is a compensation arrangement. So the question is whether an exception covers the arrangement. The personal service arrangements and fair market value exceptions both require pay fixed ahead of time at a rate an outside valuer would call fair market value, and terms written down and signed by both sides. The regulations also allow an expired arrangement to continue as a holdover, but only on the same terms as before. From March to September 2024 the holdover rule likely protects the arrangement, because nothing changed. The raise in September changed the compensation, and the holdover protection ended with it. The 2020 rule gives parties ninety days to obtain missing signatures or writings if the arrangement otherwise meets an exception (85 Fed. Reg. 77492, 2020), but no writing ever set the new amount, and ninety days have long passed. The Stark question does not turn on what anyone intended; from the September raise onward, the arrangement fits no exception, so every claim from her referrals in that period was not payable. That strict-liability result is what makes Stark the authority that settles the billing question. It does not ask whether the raise bought referrals; it asks only whether an exception was met.

Authority Two: The Anti-Kickback Statute

This second statute reaches anyone who knowingly and willfully pays, or asks for, any form of remuneration meant to bring in federal program referrals, and a violation is a felony (42 U.S.C. § 1320a-7b, 2024). Unlike Stark, it turns on intent, and its reach is not limited to doctors. A directorship can be protected by the personal services safe harbor, which requires a signed written agreement and compensation set in advance at fair market value, but missing a safe harbor does not by itself prove a violation. The record here is mixed. The raise came from a program manager, not from anyone tracking referrals, and the email cites caseload rather than volume of referrals. But a 62.5 percent increase with no valuation, paid to the program's main referral source, is the kind of fact that a prosecutor or relator would use to argue that one purpose was to keep her referrals. The analysis cannot settle intent from documents alone. It can say that the arrangement has lost the protection that would have made intent irrelevant, and that interviews with the program manager and finance staff are needed before Esterline decides how to disclose.

Authority Three: The False Claims Act

Liability under this statute attaches to anyone who knowingly presents a false claim to the government for payment, or who knowingly holds on to money it is obliged to give back (31 U.S.C. § 3729, 2024). Knowing includes reckless disregard, so actual intent to defraud is not required. Claims submitted in violation of Stark can be treated as false, and claims tainted by a kickback are false by statute. Before the review, Esterline arguably did not know the arrangement was noncompliant, though an expired contract on a list of physician arrangements is the sort of thing a functioning compliance program should catch. After the review, the analysis is different: Esterline now knows. Continuing to bill for her referrals without fixing the arrangement, or keeping the money already paid, would move the system from a technical violation toward knowing conduct. False Claims Act liability can bring treble damages plus per-claim penalties, and the statute allows private whistleblowers to file on the government's behalf (Kalb, 1999).

Authority Four: The Overpayment Rule

After a provider learns it holds an overpayment, it has sixty days to report the money and send it back, and anything still kept after that window can be pursued under the False Claims Act (42 U.S.C. § 1320a-7k, 2024). The 2016 implementing rule explains when an overpayment counts as identified, allowing time for a reasonably diligent investigation to quantify it, and sets a six-year lookback period (81 Fed. Reg. 7654, 2016). Here, the review has identified a likely overpayment: Medicare payments for the 214 patients' sessions billed after September 2024. The work now is to quantify that amount with reasonable diligence. Once it is quantified, the sixty-day clock matters, though disclosure through a formal protocol may change the timing of repayment.

Recommended Sequence

1. Stop the noncompliance going forward: a new written agreement, signed by both parties, with compensation supported by a current fair market value opinion and a duty log.

2. Quantify the claims for designated health services she referred from the September raise onward.

3. Hear from the program manager, accounts payable and the physician herself before deciding whether the facts suggest intent.

4. With counsel, choose a route: the CMS self-referral disclosure protocol if the issue is Stark alone, or the OIG self-disclosure protocol if the facts point to a possible kickback.

5. Add a contract expiration alert to the physician arrangements database, so the next expiration is caught by the program rather than by a buyer.

Conclusion

One arrangement engages four authorities in different ways. Stark settles that the claims after the raise were not payable. The Anti-Kickback Statute raises a question of intent that the record does not yet answer. The False Claims Act turns knowledge into liability, which is why the response must be prompt now that Esterline knows. The overpayment rule sets the clock. The common cause is a contract that expired without anyone noticing, which is a monitoring failure the program should fix as well.

References

81 Fed. Reg. 7654 (2016). Medicare program; reporting and returning of overpayments (final rule).

85 Fed. Reg. 77492 (2020). Medicare program; modernizing and clarifying the physician self-referral regulations (final rule).

Kalb, P. E. (1999). Health care fraud and abuse. JAMA, 282(12), 1163-1168. https://doi.org/10.1001/jama.282.12.1163

31 U.S.C. § 3729 (2024). https://www.law.cornell.edu/uscode/text/31/3729

42 U.S.C. § 1320a-7b (2024). https://www.law.cornell.edu/uscode/text/42/1320a-7b

42 U.S.C. § 1320a-7k (2024). https://www.law.cornell.edu/uscode/text/42/1320a-7k

42 U.S.C. § 1395nn (2024). https://www.law.cornell.edu/uscode/text/42/1395nn