Cleveland Clinic Health System Obligated Group - FMSbonds.com

Federal Regulatory and Contractual MattersAnti-Fraud and Abuse LawsThe federal Anti-Kickback Statute makes it a felony to knowingly and willfully offer, pay, solicit or receiveremuneration, directly or indirectly, in order to induce business that is reimbursable under any federal health careprogram. The statute has been interpreted to cover any arrangement where one purpose of the remuneration was toobtain or pay money for the referral of services or to induce further referrals. Violation of the Anti-Kickback Statutemay result in imprisonment for up to five years and/or fines of up to $25,000 for each act. In addition, the OIG hasthe authority to impose civil assessments and fines and to exclude hospitals engaged in prohibited activities from theMedicare, Medicaid, TRICARE (a health care program providing benefits to dependents of members of theuniformed services), and other federal health care programs for not less than five years. In addition to certainstatutory exceptions to the Anti-Kickback Statute, the OIG has promulgated a number of regulatory “safe harbors”under the Anti-Kickback Statute designed to protect certain payment and business practices. A party may seek anadvisory opinion to determine whether an actual or proposed arrangement meets a particular safe harbor; however,the failure of a party to seek an advisory opinion may not be introduced into evidence to prove that the partyintended to violate the provisions of the statute. Failure to comply with a statutory exception or regulatory safeharbor does not mean that an arrangement is unlawful but may increase the likelihood of challenge.The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) created a new programoperated jointly by HHS and the United States Attorney General to coordinate federal, state and local lawenforcement with respect to fraud and abuse including the Anti-Kickback Statute. HIPAA also provides forminimum periods of exclusion from a federal health care program for fraud related to federal health care programs,provides for intermediate sanctions and expands the scope of civil monetary penalties. The BBA expanded theauthority of the OIG to exclude persons from federal health care programs, increased certain civil and monetarypenalties for violations of the Anti-Kickback Statute and added a new monetary penalty for persons who contractwith a provider that the person knows or should know is excluded from the federal health care programs. Finally,actions which violate the Anti-Kickback Statute or similar laws may also involve liability under the federal civilFalse Claims Act, which prohibits the knowing presentation of a false, fictitious or fraudulent claim for payment tothe United States government. Actions under the civil False Claims Act may be brought by the United StatesAttorney General or as a qui tam action brought by a private individual in the name of the government.Pursuant to the mandates of HIPAA, increased emphasis is being placed on federal investigations andprosecutions of Medicare and Medicaid “fraud and abuse” cases, and increases in personnel investigations andprosecuting such cases have been reported, which will most likely result in a higher level of scrutiny of hospitals andhealth care providers, including the Obligated Issuers.The management of the Cleveland Clinic believes that the Obligated Issuers are in material compliancewith the Anti-Kickback Statute and the state anti-kickback laws. However, because of the breadth of the these lawsand the narrowness of the safe harbor regulations, there can be no assurance that regulatory authorities will not takea contrary position or that the Obligated Issuers will not be found to have violated the Anti-Kickback Statute or thestate anti-kickback laws, and that such contrary position or finding will not have a material adverse effect on thefuture operations or financial condition of the Obligated Issuers.31