15th Annual Cardiovascular & Medicine Symposium St. Augustine, Florida – May 15, 2014

1. 15th Annual Cardiovascular& Medicine SymposiumSt. Augustine, Florida – May 15, 2014 Rick M. Reznicsek, Esquire RezLegal, LLC 4230 Pablo Professional Court, Suite 200 Jacksonville, Florida 32224 Telephone: (904) 567-1179 Facsimile: (904) 567-1066 Email: rick@rezlegal.com www.rezlegal.com

2. Physician Compensationin Private Practicevs.Hospital Employment The Impact of the Federal Stark Law and Florida Law

3. The Impact of the Federal Stark Law & Florida Law STARK LAW A Physician having an ownership interest in, or financial relationship with an entity may not make a referral to the entity for furnishing Designated Health Services reimbursable by Medicare of Medicaid.

4. The Impact of the Federal Stark Law & Florida Law Penalties: • Denial of payment • $15,000 per service • Exclusion from Medicare and Medicaid • $100,000 for entering into a “circumvention scheme” • Violation of False Claims Act • Treble damages

5. The Impact of the Federal Stark Law & Florida Law Ownership: • Stock, units, percentage interest, etc. • Secured debt • Unsecured debt is considered compensation

6. The Impact of the Federal Stark Law & Florida Law Financial Arrangement: • Employment • Independent contractor • Anything of value (tickets, meals) • $300 non-cash exception Referral: • Request, ordering, certification for the establishment of a plan of care, including the request for a consult and the tests or procedures derived from that consult

7. The Impact of the Federal Stark Law & Florida Law DHS: • Clinical lab • Physical therapy • Radiology (including MRI, CT, ultrasound) • DME • Home health • Prosthetics, orthotics • Outpatient prescription drugs • Inpatient and outpatient hospital services • Radiation therapy

8. The Impact of the Federal Stark Law & Florida Law Florida Law: • Covers DHS plus any other health care item or service • Not limited to Medicare/Medicaid Stark Exceptions: • Ownership and compensation exceptions • Physician services (personally performed) • In-Office ancillary • Nuclear medicine • Cardiac catheterization • Lithotripsy

9. The Impact of the Federal Stark Law & Florida Law • Ownership exceptions • Publicly traded securities • Compensation Exceptions • Office space lease • Equipment lease • Employees • Personal service arrangements • Physician recruitment • Fair Market Value compensation • Non-monetary gifts/compensation up to $300

10. The Impact of the Federal Stark Law & Florida Law Halifax Hospital Case – November 2013: • 6 employed physicians – medical oncologists [employed through hospital subsidiary] • Base compensation plus bonus • Bonus is a pool shared by the 6 physicians • Pool is 15% of the profit for the Medical Oncology Program • Medical Oncology Program consists of professional fees (from physician services) plus outpatient oncology pharmacy charges plus outpatient services not performed by the physicians

11. The Impact of the Federal Stark Law & Florida Law Halifax Hospital Case – November 2013 (cont’d): • Court • The physicians participated in the profits generated from their referrals for prescriptions and work performed by others • The employment exception to the Stark Law prohibits compensation based on the volume or value of referrals • The incentive bonus was not based solely on “services personally performed” • This arrangement violates the Stark Law

12. The Impact of the Federal Stark Law & Florida Law Tuomey Hospital Case – May 8, 2013: • Jury verdict • 21,000 improper claims totaling $39 million • Per US Government, minimum recovery is $237 million (max of $357 million) • CEO, VP and law firm have all resigned • Settlement discussions ongoing

13. The Impact of the Federal Stark Law & Florida Law Tuomey Hospital Case – May 8, 2013 (cont’d): • Gastroenterology physicians considering performing outpatient surgical procedures in their offices and not at Hospital • Other specialists said “us too” • Hospital signed contracts with 19 doctors • Required physicians to provide outpatient procedures exclusively at hospital (or hospital ASC) • The 19 physicians were part-time employees of hospital only when they performed outpatient procedures at the hospital

14. The Impact of the Federal Stark Law & Florida Law Tuomey Hospital Case – May 8, 2013 (cont’d): • Compensation to physicians: base salary plus bonus • Bonus = 80% of collections, from both professional fees and facility fee (technical component) • Jury determined this arrangement violated Stark; did not meet employment exception • Payment of a portion of the facility fee to doctor is inappropriate

15. The Impact of the Federal Stark Law & Florida Law Net result of Tuomey and Halifax: • Employed physicians of a hospital system cannot share in any DHS ancillary revenues • What if the ancillary revenues were generated within the physician offices (ultrasound)? • Can the in-office ancillary exception be applied to physicians employed by a hospital-owned subsidiary? • Language from the Halifax court indicates not (bonuses were not based solely on “services personally performed”)

16. The Impact of the Federal Stark Law & Florida Law Net result of Tuomey and Halifax (cont’d): • Does this reasoning extend to non-hospital employees? • Private equity • Publicly traded (Sheridan, Mednax)

17. The Impact of the Federal Stark Law & Florida Law Private Practice - Physician owned • In-office ancillary services exception • Applies to group practice • Physicians in the group practice can share in the profit generated by DHS

18. The Impact of the Federal Stark Law & Florida Law Private Practice - Physician owned (cont’d) • Acceptable distribution methods: • Even split • Split based on ownership % (based on investment) • Number of hours worked • Seniority • Generation of non-DHS revenue or RVUs • Other methods not directly related to the volume or value of the physician’s referrals for DHS

19. The Impact of the Federal Stark Law & Florida Law Private Practice - Physician owned (cont’d) • Not acceptable distribution methods: • Based on number of patients sent for DHS • Based on revenue of DHS referred • Any method that considers the volume or value of DHS referrals

20. The Impact of the Federal Stark Law & Florida Law • Profits from non-DHS have no restrictions under Stark But… State Laws have impact. • Florida Anti-Fee Splitting Law • It is impermissible to pay or receive any commission, bonus, kickback or rebate, or engage in any split fee arrangement, either directly or indirectly, for patients referred to providers of health care goods and services

21. The Impact of the Federal Stark Law & Florida Law • Crow case • Physician sold his practice to an HMO • Physician employed by the HMO • Physician owns no interest in the HMO • Physician compensation based on total revenues generated by physician for the HMO • Including laboratory, radiology, diagnostic testing • Court • Bonuses may not be paid for patient referrals. Therefore it is inappropriate to pay employed physician a bonus based on ancillary revenues generated by the physician.

22. The Impact of the Federal Stark Law & Florida Law • Bottom line • Sharing in ancillary revenues