Compliance Issues for Medical Fitness Centers, Gyms, and Wellness Centers – Part 2. Drugs, CBD oil, Certifications, False Claims Act, Stark Law, and the Anti-Kickback Statute
This article is the second in our discussion of the compliance requirements for gyms, wellness centers, and fitness centers. The first part focused on many FDA requirements. This part focuses on more FDA requirements and other legal obligations including certifications, false billing claims, and the proper and improper way to set up referrals.
The third part will focus on physician recruitment and employment, digital health, Management Service Organizations (MSOs), and FTC and consumer advertising rules.
Compliance with the FDA’s regulation of drugs
The Federal Food Drug and Cosmetic Act and the FDA regulations define drugs as:
“articles intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease”
“articles (other than food) intended to affect the structure or any function of the body of man or other animals.”
“Therefore, almost any ingested or topical or injectable product that, through its label or labeling (including internet websites, promotional pamphlets, and other marketing material), is claimed to be beneficial for such uses will be regulated by the FDA as a drug. “
New drugs need to be approved through a New Drug Application (NDA) – a very rigorous scientific review. Generic drugs are approved through an Abbreviated New Drug Application (ANDA). The FDA may require that some drugs be approved as an Investigational New Drug (IND) before they can be imported in the United States.
The goals of the NDA are to provide enough information to permit an FDA reviewer to reach the following key decisions:
- Whether the drug is safe and effective in its proposed use(s), and whether the benefits of the drug outweigh the risks.
- Whether the drug’s proposed labeling (package insert) is appropriate, and what it should contain.
- Whether the methods used in manufacturing the drug and the controls used to maintain the drug’s quality are adequate to preserve the drug’s identity, strength, quality, and purity.
The documentation required in an NDA is supposed to tell the drug’s whole story, including what happened during the clinical tests, what the ingredients of the drug are, the results of the animal studies, how the drug behaves in the body, and how it is manufactured, processed and packaged.
The FDA will verify that drugs sold or used by the gym, wellness center, or fitness center are properly registered and properly listed. Drugs are also subject to truthful labeling requirements.
Dietary supplements and drugs
As mentioned previously, dietary supplement products and dietary ingredients are regulated under the Dietary Supplement Health and Education Act of 1994 (DSHEA). Supplements and ingredients must be evaluated for safety and their labels must be accurate.
The FDA may warn your company that the dietary supplements you prescribe or offer customers have been misbranded – that they are drugs and must meet the FDA drug oversight regulations.
CBD oil as a drug
One very popular new product that gyms, wellness centers, and medical fitness centers are offering is CBD oil. CBD products come in a variety of forms including oils, wax, crystals, sheets, E-liquids, and supplements. There are edibles, capsules, and other formats. There are also disposable vape pens, vape cartridges, water soluble hemp power, tinctures, and other products. The two main forms are extracts and isolates. Isolates, in theory, don’t contain any THC which is the ingredient that makes people feel high. The isolate form is generally less expensive than the extract form.
Makers and consumers of THC and CBD products need to understand which federal and state laws apply. While there may be health benefits, there are legal risks.
The recently approved Farm Bill approves CBD products made from hemp which have less than .3 percent THC.
As we mentioned previously:
“Investors, developers, and businesses need to understand, on a federal and state level, whether the production, development, and sale of their products are:
- Legal for medicinal use
- Legal for recreational use
- Legal if manufactured according to specific laws.
Generally, hemp has little THC while marijuana has a lot of THC. THC is psychoactive. “
The FDA’s position on CBD product is evolving. The FDA looks at CBD products from the point of view of – are the CBD products drugs, foods, dietary supplements, cosmetics, or animal health products. Currently, only one CBD product has been approved as a drug – Epidiolex – which is a treatment for epilepsy.
The FDA will generally examine CBD products (including all labels, websites, marketing materials, and promotions) for the following issues:
- False or inaccurate labeling
- Marketing that is dishonest
- Misbranding – the product IS really a drug, dietary supplement, or some product the FDA does monitor
- Whether the produce complies with the FDA regulations for current good manufacturing practices (CGMP)
Already, the FDA has issued warning letters to companies that sell CBD products claiming that their products can prevent, diagnose, or cure diseases such as cancer, diabetes, and Alzheimer’s disease.
“The FDA has also tested the chemical content of cannabinoid compounds in some of the products, and many were found to not contain the levels of CBD they claimed to contain. We have also heard reports of CBD potentially containing contaminants (e.g., pesticides, heavy metals).”
Gyms, wellness centers, and fitness centers should, at a minimum, review the certifications of all their employees. If certifications have lapsed, the gym or center may be in violation of state laws which regulate businesses and medical professionals. They may also be in violation of truth in advertising laws if they represent that their staff is certified. Experienced healthcare compliance lawyers help fitness companies:
- Develop protocols for tracking the certifications and potential lapses of certifications of their employees and staff
- Explain the legal consequences for failure to keep certifications current
- Understand the right certifications and licenses for the right positions
Additional concerns – emergencies and the ADA law
Gyms and health fitness centers should also have procedures for handling emergencies. They will need to comply with the Americans with Disabilities Act which governs what adjustments the facility should make to accommodate people with disabilities.
The False Claims Act
As more and more seniors and low-income patients use gyms, wellness centers, and medical fitness centers – there is the increased concern that these facilities may violate the False Claims Act. This law gives the government the authority to file civil and criminal complaints against individuals and businesses that submit false bills to the US Government for services the government pays. This includes Medicare and Medicaid bills and other medical payments.
Experienced health care lawyers explain that fitness centers and related businesses:
- Cannot bill for services that are not reasonable and necessary
- Cannot charge Medicare or Medicaid for services they never provided
- Can’t over-bill – submit bills for more than the standard or authorized amounts
- Can’t submit bills for patients who never used the gym or facility
- Can’t up-code – charge for services that are more expensive than the actual services performed
- Can’t charge for individual services that should be bundled under Medicare regulations
- May be liable under the False Claims Act for violations of Stark Law or the Anti-Kickback Statute
- That in addition to having to pay back to the government any unjustified gains, may:
- Have to pay triple damage
- Have to pay a statutory penalty for each false claim – about $11,000 per false claim
Many of the largest False Claims Act awards are in the healthcare sector. The test for a False Claims Act is that the facility that made the false billing knew – or should have known – the bill was false.
Additionally, the federal government may bring criminal charges in addition to filing a civil complaint.
States such as California also have the own False Claims Acts.
Individuals who work for the fitness facility have a strong-incentive to come forward and tell the Justice Department of any wrongs. Whistleblowers are entitled to a percentage of any recovery.
Stark Law and the Anti-Kickback Statute
Medical fitness centers, pretty much by definition, work with physicians who refer patients to them. The centers, often, in return, refer patients back to the physicians. Hospitals are also involved in these referrals. Some gyms also work with doctors who refer patients to their facilities.
While these referrals are good for the doctor’s and the facilities finances, they must comply with the two main anti-referral statutes – Stark Law and the AKS (Anti-Kickback Statute). These laws are designed to protect consumers and patients. Referrals by doctors and hospitals should be made based on merit – on what’s best for the patient. They should not be based on what is good for the health providers who are making the referrals. The referral laws mainly arise when a physician or a family member has a financial interest in the gym or medical fitness center or a financial incentive to work with the gym or center.
Experienced gym and medical fitness lawyers explain what these anti-referral laws are, when the physician may be in violation of the laws, and what exceptions or “safe harbor regulations” apply.
“Stark prohibits self-referrals by doctors who bill Medicare or Medicaid if the referral is to an entity that provides “designated health services.” – if the doctor has a financial relationship with that entity. Stark Law defines the types of designated health services (DHS).
- DHS services includes such things as physical therapy, occupational therapy, radiology services, ultrasound services, different types of medical supplies, clinical laboratory services and other services.
- A financial relationship includes investment interests, ownership, and compensation agreements.
- Stark also forbids referrals to entities the provide the designated health service – if an immediate family member has a financial interest in that entity.”
Physicians whose relationship and referrals to the fitness center may violate Stark Law should review whether any Stark Law exceptions apply. For example, bona fide employment relationships and personal service arrangements may qualify as an approved exception – if they are for fair market value, don’t’ take into account the quantity or value of the referrals, if the arrangements are in writing, and other criteria are met.
The Anti-Kickback Statute:
- Forbids the payment, solicitation, offering, or receiving of anything of value for the purpose of inducing referrals or the generation of health care business through federal agencies. The AKS uses voluntary safe harbors instead of mandatory exceptions.
- Generally, most of the requirements for meeting the Stark Law exception will also qualify for an AKS safe harbor. 42 CFR § 1001.952.
There are civil penalties for violating Stark Law. There are civil and criminal penalties for violating the AKS.
Medical doctors and health care companies who participate in kickbacks for referrals can face severe enforcement penalties.
It’s enticing for hospitals and doctors to create their own medical fitness centers, to work with existing wellness centers, and to recommend patients get exercise at a gym or one of these centers. There are pitfalls though – for the hospital, the medical practice, the individual doctor, and the gym or fitness center. The federal government does regulate and review the bills that are submitted to Medicare and Medicaid. The government will civilly and criminally prosecutor health providers and centers who put their financial interest ahead of what’s best for the patient. The FDA does monitor the products that are used and sold to ensure patient safety.
All health providers and businesses need to have a complete understanding of their compliance requirements. They need to have a compliance plan in place before they begin operations, being working with each other, offer new services or products, and enter into contractual relationships.
Contact Cohen Healthcare Law Group, PC today to learn what your duties and rights are. We help guide gyms, fitness centers, and the medical professional through the maze of complicated federal and state regulations.