OIG Open Letter to Providers Regarding Self-Disclosure Protocol: Knock and the Door May Not Be Opened

In an Open Letter to Health Care Providers issued March 24, 2009, the U.S. Department of Health & Human Services Office of Inspector General (OIG) announced it would no longer accept providers into the Self-Disclosure Protocol (SDP) if the provider's only issue is a violation of the physician self-referral ("Stark") law. Providers can avail themselves of the SDP if they also have a "colorable anti-kickback statute violation" and are willing to pay at least $50,000 to resolve this matter.

The OIG created the SDP in 1998 for the purpose of encouraging self-reporting by health care providers. Just three years ago, in an Open Letter issued April 24, 2006, the OIG noted that the SDP "is one vehicle to resolve" Stark law violations. So why the narrowing of the admission policy?

Possible OIG Motivations

One reason cited in the letter is the need to more effectively allocate resources, and the OIG believes that kickbacks "pose a serious risk to the integrity of the health care system." This punctuates what the OIG wrote in the 2006 Open Letter when it noted that the SDP was "limited to matters that . . . involve conduct that subjects the provider to CMP liability under the OIG's physician self-referral and anti-kickback authorities—in particular, situations involving a financial benefit knowingly conferred by a hospital upon one or more physicians." (emphasis added)

If the OIG is being inundated with Stark law self-disclosures, then narrowing the scope of the SDP may be necessary to fulfill one of its initial promises to providers—that use of the SDP will facilitate a prompt resolution of the matter. It is interesting that the OIG is being so transparent about the limitations on its resources.

Another reason for the Open Letter may be to tell providers to bring their checkbooks because the SDP is a "pay to play" process with a $50,000 cover charge. Perhaps the OIG was getting too many providers knocking on the door who don't want to pay after they get in, or the volume of modest issues was diverting attention from the bigger fish. Many providers may reasonably believe that where they make a self-disclosure and there is no clear and direct harm to the government, a disclosure under the SDP should be resolved without a financial penalty. The Open Letter unambiguously closes the door on that type of positioning.

The OIG reminds providers that a $50,000 penalty can be assessed for just one violation of the anti-kickback statute, in addition to an assessment of three times the value of the unlawful remuneration. To resolve a matter, the OIG notes that they will generally assess damages below a multiplier of three, "near the lower end of the damages continuum." But, no matter how minor the remuneration involved, the OIG is making it clear that one violation results in a $50,000 penalty, so you have to at least be prepared to pay $50,000 to be accepted into the SDP.

Take Home Message

So what should providers make of the OIG's latest Open Letter?

First, disclosure of potential fraud issues to the government is consistent with the values and ethics of most health care providers.

Second, providers should know that the OIG will not grant admission into the SDP solely on the basis of a Stark Law violation. This may suggest that, just like the provider community, the government is struggling to decide how to deal fairly with Stark Law noncompliance, especially when the noncompliance is technical and there was no genuine harm to Medicare or the integrity of the health care system.

Third, providers should know that the SDP is not the only game in town. One of the key questions that a provider must answer when considering a self-disclosure is: "To whom do I make the disclosure?" The Open Letter should serve as a reminder to providers that they should consider whether a self-disclosure should be made to the Centers for Medicare and Medicaid Services, the U.S. Department of Justice, a State Medicaid agency or their payment contractor.

Fourth, providers should remember that, in certain circumstances, there are still real benefits to self-disclosure. By following the SDP, providers are afforded a process for resolving potential fraud issues in a timely manner, with potentially reduced damage assessments, potential avoidance of a Corporate Integrity Agreement and reduced risk of exclusion from participation in federal health care programs. In addition, disclosure may protect a provider from a potential qui tam action filed after the disclosure. But be forewarned: Admission into the SDP comes with a price—namely a $50,000 cover charge.