DEPARTMENT: Legal / POLICY DESCRIPTION: Physician-Owned Vendor Relations
PAGE:1 of 9 / REPLACES POLICY DATED: 3/15/08, 6/1/08, 8/1/08, 11/1/08, 6/15/09
EFFECTIVE DATE: August 1, 2010 / REFERENCE NUMBER: LL.027
APPROVED BY: Ethics and Compliance Policy Committee
SCOPE: All Company-affiliated facilities, including but not limited to, hospitals, ambulatory surgery centers, home health agencies, physician practices, service centers, and all Corporate Departments, Groups and Divisions and HealthTrust Purchasing Group, and particularly the following Departments and individuals:
Supply Chain Pharmacy
Accounts Payable Reimbursement
Education and Training Controllers
PURPOSE: The Office of Inspector General (“OIG”) has expressed concern that physician investments in medical device and distribution entities should be closely scrutinized under the fraud and abuse laws. Any of the following factors may indicate a problematic venture:
1.Measurable revenues generated directly or indirectly by physician investors;
2.A substantial portion of a venture’s gross revenues is derived from physician owner-driven referrals;
3.Investors are selected in any manner that takes into account their ability to make referrals, including the following:
  1. physicians who are expected to make a large number of referrals are offered a greater investment opportunity in the venture than those expected to make few referrals,
  2. physician investors are encouraged to make referrals to the venture and to divest their interest if they fail to sustain a certain level of referrals or if they cease to practice in the service area, or
  3. the venture tracks its sources of referrals and distributes this information to investors;
4.The venture actually has little or no operations and is merely a shell investment company;and
5.Financing and Profit Distributions are disproportionately large in comparison to the capital invested or in comparison to the risk involved, often well over 50 to 100 percent per year, including where
  1. physician investors invest only a nominal amount, such as $500 to $1,500, or
  2. physician investors are permitted to borrow the amount of the investment from the entity and pay it back through deductions from profit distributions.
This policy is intended to prevent HCA-affiliated facilities from entering into relationships with such businesses, by providing guidance for identifying potentially problematic business relationships with vendors, and by providing guidance to maintain compliant vendor relationships with other vendors consistent with the fraud and abuse laws.
POLICY:
  1. General. The Company discourages its affiliates from purchasing items or services for use in patient care, including but not limited to pharmaceuticals, implants, instruments and other medical devices, fromPhysician-Owned Vendors.
  1. One Purpose Test. No Company-affiliated entity will ever purchase medical devices, supplies, pharmaceuticals or any other item or service if any one purpose of the purchase is to generate or maintain referrals from a physician who has, directly or indirectly, a financial interest in the utilization of the item purchased.
  1. Contract. Where relationships with Physician-Owned Vendors are necessary, the relationship shall be consistent with the guidelines of the General Statement on Agreements with Referral Sources; Approval Process policy, LL.001. As such,a contract setting out a fair market value payment rate shall be executed between the entity, individually or as part of a purchasing organization, and the Physician-Owned Vendor.
  1. Implants. Company-affiliated entities which utilize the services of the Supply Chain Organization [or Supply Management Action Team]must receive approval from the SCO [or SMAT] before purchasing any medical implantable device used in patient care. Any member of SCOwith a Financial Relationship to the product in question, through its manufacturer, distributor, or vendor, must disclose that relationship and abstain from the final purchase decision. Facilities will not separately reimburse a physician for such implants when the product is included in the payment for service to the physician by the third party payor or patient. Company-affiliated entities that do not utilize the services of the SCO or SMAT shall develop separate procedures to confirm that all implants are approved in advance for patient care services by the administrator of that entity or by a designated committee approved by the administrator.
  1. Exceptions. Any exceptions to this policy must be approved in writing by the facility’s Division President and the SVP and Chief Ethics and Compliance Officer. Contracts entered through HealthTrust Purchasing Group (“HPG”) are not exempt from this policy without such approval.
  1. Other Policies. In addition to this policy, relationships with physician-owned vendors are expected to comply with the Vendor Relationships Policy, MM.002.
DEFINITIONS:
Approving Authority,for purposes of this policy, is the Division President or the Market President, except where the Division or Market President is also the CEO of the facility, in which case approval should come from the next highest position.
Financial Relationship means a direct or indirect ownership, investment interest or compensation arrangement between two parties. Investment interests include limited partnerships and stock options paid in exchange for consulting services. Compensation takes the form of anything of value, including but not limited to cash, items, travel expenses, discounted rates, and other services. Financial Relationships include Joint Ventures.
Joint Venturemeans any arrangement between an individual or entity in a position to refer business, such as physicians, and those providing items or services for which Medicare or Medicaid pays, such as clinical diagnostic laboratories, durable medical equipment, and other diagnostic services. Joint ventures may take the form of a contractual arrangement between parties, such as an investment or distribution interest or a consulting agreement. Alternatively, joint ventures may involve the creation of a new legal entity by the parties, such as a closely held corporation or limited partnership, or may take any other form in which the parties agree to provide a service together.
Physician includes a doctor of medicine or osteopathy, a doctor of dental surgery or dental medicine, a doctor of podiatric medicine, a doctor of optometry, or a chiropractor. For purposes of this policy, the term includes any immediate family member of such persons as well.
Physician-Owned Vendor, for purposes of this policy, is defined as any non-exemptVendor in which a physician or more than one physician holds any ownership interest, directly or indirectly as well as any Vendor with a compensation relationship with a physician. The list of exempt vendor categories is available on the Supply Chain website.
Physician Owner, for purposes of this policy, is defined as any physician who holds a direct or indirect ownership interest in any Physician-Owned Vendor as well as any physician with a compensation relationship with any Physician-Owned Vendor.
Referralincludes any patient referral as well as any order for tests or services. Thus, a Referral Source includes any individual who refers patients to a given facility or orders any test or service from that entity. In contrast, a Potential Referral Source is any individual who could refer patients to a given facility or order tests or services from an entity, even if the individual has never done so.
Vendor,for purposes of this policy, is defined as an entity doing or seeking to sell items or services to HealthTrust Purchasing Group (HPG), the Company, or any of its affiliated facilities.
PROCEDURE:
A. Determining Ownership
1.Vendor Inquiry. At the initiation of any new Vendor relationship with any Company hospital, surgery center, imaging center, or physician practice, or as of March 2007 if the relationship was established before then, the appropriate version, National or Local, of the attached Supplier Ownership Certification Form will be sent to the Vendor. The Supply Chain Division CFO is responsible for sending the Local Supplier Ownership Certification Form to any local (non-“9 series”) vendors. The Corporate Regional Director of Contracting (“CRDC”) will distribute the National Ownership Certification form to national (“9 series”) vendors. The Administrator or appropriate designee of any AmbulatorySurgeryCenter (“ASC”) or ImagingCenter (“IC”) will distribute the Local Supplier Ownership Certification form to vendorswith which the ASC or IC places orders, if the vendor is not already part of a national agreement. The distribution shall occurregardless of whether the Vendor is owned in part or in whole by one or more physicians. Vendors which are publicly held and traded on either the New York Stock Exchange (“NYSE”) or the National Association of Securities Dealers Automated Quotation system (“NASDAQ”) and which reported at least $75 million in stockholder’s equity at the end of the Vendor’s most recent fiscal year are exempt from the ownership certification required by this policy, but are not exempt from the compensation certification required herein.
2.Following Up on the Certificate. When a Vendor returns an Ownership Certificate with box 4 or 5 checked, or indicates “Yes” in box 7, the Supply Chain will determine the facility with which the Vendor does business and will contact the CFO of that facility with a request for a copy of the contract and fair market valuation. If no contract exists, Supply Chain will notify the facility that a contract and fair market value certificate are necessary and no purchases are to be made until a written contract and fair market value certificate are obtained. Supply Chain will save a copy of the ownership certificate in OnBase. The DCSD will forward National and Division-level contracts with the corresponding fair market value certification, or the reasons no contract is available,to Operations Counsel for confirmation that the agreement meets all required elements. The facility CFO will forward facility level contracts with the fair market value certification, or the reasons no contract is available, to Operations Counsel, for confirmation that the agreement meets all required elements. The Administrator or Administrator’s designee will forward ASC or IC level contracts with the fair market value certification, or the reasons no contract is available, to Operations Counsel, for confirmation that the agreement meets all required elements.
3.Failure to Respond. Until the certificate is returned to Supply Chain, no new relationship will be established with the Vendor. If an existing Vendor fails to respond within eight weeksof the initial delivery of the certificate, the Supply Chain Division CFO(for local vendors), the Corporate Regional Director of Contracting or a designee (for national vendors), and the Administrator or designee (for ASC and IC vendors)will recommend to Corporate, Division or facility leadership the appropriate action to take and will suspend all future payments to the vendor until an appropriate response from the Vendor is obtained.
4.Refusal to Respond. If a Vendor refuses to provide ownership information, it will be assumed to be owned by physicians who refer to one or more HCA-affiliated entities. No facility may order from such vendors unless and until a contract is executed between the Vendor and the facility with compensation terms at fair market value.
5.Conflicting Responses. If a national Vendor provides more than one Ownership Certificate and the separate responses indicate different physician ownership status, then the Central Supply Chain will notify any facilities that order from that Vendor that a contract is required before any further services are ordered or provided. The ordering facility is responsible for drafting and executing a contract with that Vendor prior to placing future orders. Until such contract is executed, paymentswill be placed on hold for that Vendor. If a local Vendor provides more than one Ownership Certificate and the separate responses include different ownership status, then a contract will be required for any further business with the Vendor, unless the Division ECO or Division Operations Counsel otherwise approves.
6.Current List. Consistent with LL.001, Corporate Supply Chain Accounts Payable will maintain a Contract Control Log on the Supply Chain web-site to listany contracts entered into between a Division and a Vendor. The Control Log will include a box which should be marked for any Vendors which have returned the Ownership Certificate and, if box 4 or 5 was checked, or box 3 was not checked but box 7 indicated “Yes,”were confirmed to have a contract and fair market valuation by Legal Operations. The ConsolidatedServiceCenter (“CSC”) will maintain an electronic file of Division contracts with physician-owned vendors. Contracts between physician-owned vendors and individual facilities will be listed in the contracting facility’s Contract Control Log. Administrators or their designees will forward information regarding contracts between ASCs and ICs to their CSC for inclusion in the Division contract control log.
B. Verifying a Contract has been Executed.
1.Interim Agreement.
a.Division Level: When an active Vendor’s response, or refusal to respond, to the inquiry indicates that the Vendor is a Physician-Owned Vendor, and the vendor provides items or services to more than one hospital in any one Division, the Director of Contracting and Supplier Diversity(“DCSD”)or CRDC willmanage execution of an Interim Agreement between the Vendor and the Division, as appropriate based on current purchasing practices. The DCSD and CRDC will coordinate the completion of fair market value assessments for each service or item included in the contract with each Vendor.
b.Facility Level: When an active Vendor’s response, or refusal to respond, to the inquiry indicates that the Vendor is a Physician-Owned Vendor, and the vendor provides items or services to only one hospital in any Division, the facility CFO or designee will manage execution of an Interim Agreement between the Vendor and the facility, as appropriate based on current purchasing practices. The CFO will coordinate the completion of fair market value assessments for each service or item included in the contract with each Vendor.
c.ASC or IC Level: When an active Vendor’s response, or refusal to respond, to the inquiry indicates that the Vendor is a Physician-Owned Vendor, and the vendor provides items or services to an ASC or IC, the Administrator or a designee will manage execution of an Interim Agreement between the Vendor and the facility, as appropriate based on current purchasing practices. The Administrator or designee will coordinate this process through Operations Counsel.
2.Referral Source Review. If no contract has been executed, the CRDC, DCSD, Supply Chain Director or facility Controller shall refer the issue to the Division, the local facility’s CFO or designee, or the Administrator or designee who will review the owner names and identify any physician owners who refer to the entity or any physicians with compensation relationships with the facility who refer to the entity.
3.No Referral Source Owners. If the Facility CFO, Division ECO or Operations Counsel confirms that no physician owners ofor physicians with compensation relationships withthe Physician-Owned Vendor refer to an HCA-affiliatedentityor are likely to refer to the entity in the future, then payments to the Vendor may be released without a contract so long as no physician owners or compensated physicians refer. For purposes of this policy, there are only three explanations for a Physician-Owned Vendor being labeled as non-referral source. They are (i) for national vendors, no physician owners are in the same community as any HCA-affiliated entity or for local vendors, no physician owners are in the same community as any HCA-affiliated entity ordering from the vendor, (ii)all physician owners are retired from medical practice, or (iii) for local vendors only, that Operations Counsel confirms the non-referral sources status for any other reason. The reasons for concluding that physician owners of a vendor or physicians compensated by a vendor do not refer shall be documented and stored in a manner available to any facility ordering from that vendor. Supply Chain is not responsible for making the determination of whether a Vendor is owned by or compensates referring physicians. If the Vendor later notifies CorporateSupply Chain, Division Supply Chain, the hospital Supply Chain or the Administratorthat a physician owner has or will likely refer health services to the entity, a contract is required.
4.Contract. If a Vendor is Physician-Owned and the CFOor Administrator or designee concludes that any physician owners or compensated physicians are Referral Sources to the entity, the DCSD(for Division contracts), CRDC (for national contracts) or facility CFO or Administrator or designee (for facility contacts) will coordinate or manage execution of a final contract immediately, but this should be no later than 120 days after the interim agreement is executed, usually in the form of a Purchasing Agreement, and shall follow appropriate procedures, outlined in the Self-Reporting Policy, EC.003, for reporting any potential violations of law from the previously existing relationship without a contract. If a Vendor provides more than one Certificate in any period and the responses conflict as to physician ownership, then a contract will be required consistent with this section, unless the Vendor provides specific information explaining the responses and confirms there is in fact no physician ownership, and Operations Counsel approves.