Lessons for Providers and Practice Entities

Ophthalmology Groups Pay Millions to Settle Co-Management, Optometrist Relationship Allegations

November 6, 2023

Recently, two ophthalmology practice groups — Kleiman Evangelista Eye Centers of Texas (KEEC) and SouthEast Eye Specialists, PLLC (SEES) — reached large settlements with the U.S. government over allegations that the groups’ cataract arrangements violated several healthcare laws, including the Anti-Kickback Statute (AKS) and the False Claims Act (FCA). Collectively, the two settlements under the FCA led to payments of nearly $20 million and offer vision providers further guidance with respect to the government’s focus on ophthalmology-optometry relationships.

Background

KEEC and SEES are medical practice groups that perform thousands of cataract surgeries each year. KEEC and SEES, like many vision practices, engage in co-management arrangements, which generally allow cataract patients to receive certain post-surgical care from their primary optometrist instead of their surgeon.

The United States alleged that KEEC and SEES each entered into remunerative agreements with referring optometrists who co-managed the post-operative care for the groups’ patients. While co-management arrangements are not per se problematic — indeed, the Centers for Medicare & Medicaid Services (CMS) provides guidance to allow providers to split their bills for post-surgical care — the recent settlements indicate that the government has a lower tolerance for arrangements that exhibit specific characteristics, as discussed in detail below. With respect to KEEC’s and SEES’s alleged conduct, the government expressed concern with the groups’ practices, which allegedly included a guarantee to referring optometrists that the group would return patients to the optometrists for post-operative care, and the presentation of gifts to the optometrist referral sources.

On March 23, 2023, it was announced that KEEC settled with the United States, agreeing to pay $2,902,505 to resolve AKS and FCA allegations that KEEC offered and paid kickbacks to optometrists to induce referrals for cataract surgery. Similarly, on May 1, 2023, it was announced that SEES settled with the United States, agreeing to pay $17 million to resolve AKS and FCA allegations that SEES offered and paid kickbacks to optometrists to induce referrals for cataract surgery.

The underlying arrangements, as described in the settlements, are similar, indicating that the government may be increasing focus on such arrangements. The key details of the arrangements as described in the allegations against KEEC and SEES are as follows:

  1. KEEC and SEES sold tiers of lenses to cataract patients (conventional or traditional intraocular lens (IOL) and premium IOLs). The referring optometrist received a portion of the fees, with more paid based on the IOL type chosen by the patients, incentivizing the referring optometrist to recommend the more expensive lens even when it may not be medically necessary. Notably, patients were unaware that the referring optometrists received a fee when the patients selected their lenses.
  2. If patients could not afford “higher tiered” lenses, they would be “upsold” and presented with options to purchase other lens packages not covered by Medicare, for which the referring optometrist also received payment. It was alleged that KEEC and SEES induced their referring providers to encourage medically unnecessary cataract procedure enhancements.
  3. KEEC and SEES allegedly had co-management agreements with optometrists that put their providers’ financial interests ahead of patients’ interests because (i) patients were not alerted that referring optometrists received payment based on the IOLs patients selected and (ii) co-management agreements were the default option for patients of both practice groups, regardless of the patient’s individual desires or needs. KEEC and SEES allegedly guaranteed the automatic return of patients referred.
  4. The relators contended that KEEC and SEES provided additional remuneration to referring optometrists. It was alleged that (i) KEEC and SEES provided optometrists free continuing education courses, a topic McGuireWoods addressed in a Sept. 9, 2022, alert after the Office of Inspector General (OIG) released an advisory opinion on ophthalmology-provided continuing education events, (ii) KEEC and SEES rewarded top referring optometrists with expensive dinners, (iii) KEEC invited referring optometrists, their families and staff to Texas Rangers stadium games at the company suite and SEES provided tickets to sporting events to referring optometrists, and (iv) KEEC and SEES invited referring optometrists to golf tournaments.

In the recent settlements, the scrutinized co-management agreements and associated activities were between ophthalmologists and optometrists, but similar arrangements are commonly found among other provider types (e.g., orthodontists and dentists, orthopedists and physical therapists, primary care physicians and pain management physicians). While co-management agreements are not per se illegal, they should be carefully tailored to reduce risk under applicable law. Below are several key takeaways and best practices for providers and practice entities, with a focus on vision practices but with potentially broader applicability, based on the two settlements.

I. Federal acceptance of certain co-management agreements does not equate to a federal “green light” for all co-management agreements.

Although the U.S. Department of Health and Human Services has recognized the usefulness of carefully crafted co-management agreements and CMS allows modifiers to split the contract’s professional fee 80/20 between the surgeon and optometrist, where the optometrist provides post-operative care, this should not be read as an endorsement of co-management agreements under applicable fraud and abuse laws.

In the recent suit against SEES, the U.S. District Court for the Middle District of Tennessee stated that the selective allowance of some co-management agreements is “a far cry from endorsing all forms of co-management . . . let alone one that offers improper inducements to others to share in the fees.” Co-management agreements where referral sources are provided remuneration are subject to increased scrutiny due to the increased susceptibility for abuse that accompanies such arrangements.

II. Providers should follow industry guidance with respect to co-management arrangements and not guarantee the automatic return of patients.

Providers should not guarantee the return of patients to a referring provider. The government, in the recent settlements, made clear such arrangements may constitute a quid pro quo arrangement in violation of the AKS. Providers should also attempt to conform co-management arrangements with industry guidance, including guidance from the American Academy of Ophthalmology and 60 additional signatory organizations, including (but not limited to) the requirements that (i) there not be an agreement to automatically refer a patient back to the co-managing optometrist, (ii) the patient always make an informed decision regarding whether to see the non-operating practitioner for post-operative care, and (iii) the operating ophthalmologist determines that the co-management arrangement is clinically appropriate.

III. Co-management should be used when it is in the best interest of cataract patients and not for a provider’s or group’s financial interest.

The OIG has stated that while there are legitimate medical and business purposes for co-management agreements, the agreements must be carefully crafted so as not to prioritize the financial interests of providers over the interests of patients. Specifically, in the preamble to the final regulation for an AKS safe harbor relating to referral arrangements, the OIG addressed referral arrangements between optometrists and ophthalmologists using co-management. The OIG determined that such arrangements must be reviewed “on a case-by-case analysis of all of the facts and circumstances, including”: (a) whether all post-surgical co-managed services are medically necessary, (b) whether the timing of the referral was clinically appropriate and (c) whether the portion of the global fee was commensurate with services performed.

Similarly, in OIG Advisory Opinion 12-22 regarding a cardiac catheterization co-management relationship, the OIG warned that co-management agreements may be susceptible to the following issues: (i) stinting patient care, (ii) cherry-picking healthy patients, (iii) payments to induce patient referrals, and (iv) unfair competition among providers and practice entities. Agreements should be carefully drafted, and informal relationships carefully considered to prevent the potential pitfalls mentioned above.

IV. Providers should avoid the practice of providing gifts and consider continuing medical education programs with referral source attendees carefully.

The recent settlements indicate that the government will point to the provision of gifts as a violation of the AKS. To avoid government scrutiny, providers should review their practices and consider eliminating the practice of providing gifts to referral sources. This includes holiday gifts and other things of value, such as sports tickets, golf tournament participation, and meals and other entertainment.

Providers should guard against funding or subsidizing continuing education programs for referral sources. There may be valid, nonreferral reasons for such programs, but ophthalmology providers should carefully structure them. For more information about such programs, see McGuireWoods’ guidance in a Sept. 9, 2022, alert.

V. Providers should implement internal procedures pursuant to OIG Compliance Program Guidance to enhance AKS compliance.

As a best practice, providers should maintain internal procedures consistent with the OIG’s Compliance Program Guidance document. The OIG recommends providers and practice entities implement seven elements of internal review to strengthen AKS compliance: (i) implementing written policies, procedures and standards of conduct, (ii) designating a compliance officer and compliance committee, (iii) conducting effective training and education, (iv) conducting internal monitoring and auditing, (v) developing effective lines of communication, (vi) enforcing standards through well-publicized disciplinary guidelines, and (vii) responding promptly to detected offenses and undertaking corrective action. These actions can enhance protection from improper relationships at issue in the recent settlements.

McGuireWoods has a dedicated team of attorneys tracking updates on healthcare laws and regulations including the AKS and FCA. For more information about potential AKS, FCA and co-management agreement implications on your practice entity, or for assistance implementing the best practices listed above, contact the authors of this article.

The recent settlements indicate that the government will point to the provision of gifts as a violation of the AKS. To avoid government scrutiny, providers should review their practices and consider eliminating the practice of providing gifts to referral sources. This includes holiday gifts and other things of value, such as sports tickets, golf tournament participation, and meals and other entertainment.

McGuireWoods has a dedicated team of attorneys tracking updates on healthcare laws and regulations including the AKS and FCA. For more information about potential AKS, FCA and co-management agreement implications on your practice entity, or for assistance implementing the best practices listed above, contact the authors of this article.

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