Physicians Must Comply With Fraud and Abuse Statutes

February 1, 1995

The second part of this three-part series discusses the various types of fraud and abuse laws, reviews the laws on false claims, and provides suggestions for limiting a physician's exposure to fraud and abuse claims. Part 1, which appeared in the January, 1995, issue of Oncology News International (page 18), discussed the Stark statute, which prohibits self-referrals for certain services covered by Medicare and Medicaid, while the final article will review the Medicare and Medicaid anti-kickback statute.

ABSTRACT: The second part of this three-part series discusses the various types of fraud and abuse laws, reviews the laws on false claims, and provides suggestions for limiting a physician's exposure to fraud and abuse claims. Part 1, which appeared in the January, 1995, issue of Oncology News International (page 18), discussed the Stark statute, which prohibits self-referrals for certain services covered by Medicare and Medicaid, while the final article will review the Medicare and Medicaid anti-kickback statute.

It should not surprise any physician that more resources are nowbeing spent on fraud and abuse enforcement than ever before. Ashealth-care reform has hit the political forefront, various studieshave indicated that fraud, waste, and abuse have taken tens ofmillions of dollars from the health-care system. These studiesmake it easy to justify increased spending on detection and enforcementprograms.

Oddly enough, the end of the Cold War has also contributed toincreased health-care enforcement. FBI agents previously assignedto counterintelligence are now enforcing health-care laws.

Though they may not be familiar with complex third-party paymentissues such as upcoding, miscoding, and unbundling, they bringwith them a plethora of law enforcement techniques that have beenused only rarely in health-care enforcement. These may includeundercover agents--often with hidden tape recorders--who entera physician's office to talk to employees and locate files forfuture search warrants or subpoenas.

Computers and 'Whistle Blowers'

Similarly, Medicare carriers (and private third-party insurers)have developed sophisticated computer programs to detect aberrantbilling patterns, and carriers are now assisted by special fraudcontrol units. Government agencies are also the beneficiariesof private law enforcement activities.

Under the qui tam provisions of the False Claims Act, privatecitizens, including patients, employees (and ex-employees), andcompetitors may be paid a bounty of up to 30% of the government'stotal recovery for advising the government of the identity ofphysicians or other health-care providers who have submitted falseclaims. Well-publicized stories of individuals making millionsof dollars by "blowing the whistle" have significantlyincreased physicians' exposure for these types of claims.

Congress has enacted several types of fraud and abuse laws, eachof which has a specific purpose. Penalties for filing false claimsare intended to discourage health-care providers from billingfor services not provided or for services that are different fromthose actually provided.

Statutes precluding payments for referrals and indirect financialrewards for referrals, such as the anti-kickback statute (to bediscussed in part 3 of this series) and the federal self-referralprohibition (discussed last month), reflect the government's viewthat such practices create an inappropriate incentive to orderunnecessary items or services.

Statutory provisions intended to protect Medicare beneficiariesinclude those requiring refund of payments for ser-vices foundto be medically unnecessary. Similarly, Medicare wants to makesure that physicians--not patients--bear the brunt of paymentreductions. As a result, various laws encourage physicians toaccept assignment (or, in cases such as clinical laboratory services,require assignment) and limit the amounts that a physician whodoes not accept assignment may bill a patient.

The government frequently pursues physicians who have filed falseclaims for payment, eg, claims that do not reflect the servicesactually provided or that contain other incorrect information.The civil monetary penalty statute can be used to impose significantfinancial penalties against a physician who knows or should knowthat a Medicare or Medicaid claim for payment is false.

New Penalty for Each False Claim

Penalties of $2,000 per item or service incorrectly claimed maybe assessed. As a result, a physician who files 100 false claimsmight be penalized $200,000, even if the total amount of the falseclaims is minimal. In addition, he or she may be excluded, andthus prohibited, from submitting Medicare and Medicaid claimsfor 3 years or more.

The prospects of civil monetary penalties are particularly frightening,since Congress has determined that physicians should be held responsiblefor false claims filed by their employees.

Virtually any incorrect statement on a claim form can result inallegations of false claims and potential civil or criminal penalties.Use of an incorrect CPT (current procedural terminology) codecan result in significant liability. Examples include billingfor services at a higher level of care than that actually rendered,or otherwise inappropriately increasing reimbursement (ie, consultationversus concurrent care); making a nonreimbursable service appearreimbursable; or billing separately for services that should begrouped ("fragmenting" or "unbundling").

In addition, a physician who files a claim for a service thatis not medically necessary has filed a false claim, even if heor she actually performed the service for which payment is sought.Similarly, a physician who uses a false diagnosis code may besanctioned for submitting a false claim, particularly if use ofthe incorrect code was intended to ensure payment for an unnecessaryprocedure.

A physician may not always be aware that he or she is filing afalse claim. For example, Medicare takes the position that whenservices are provided by nonphys-ician personnel, such as a nurseadministering chemotherapy, a physician must be present in theoffice and immediately available to provide assistance throughoutthe procedure in order for the services to be "covered."Similarly, Medicare has traditionally required that the individualbe a bona fide employee of the physician or medical group--nota leased employee or independent contractor.

Don't Rely on Staff for Compliance

The consequences of a fraud and abuse prosecution are too seriousfor physicians to rely on their office staff to assure compliancewith rules and regulations. As a result, hematologists/oncologistsmust keep well advised of third-party payment rules and fraudand abuse prohibitions under both federal and state laws.

The bad news is that this requires time and effort. The laws areevolving, and physicians will be required to review their financialarrangements periodically, particularly upon promulgation of regulationsinterpreting the federal self-referral prohibition. The good newsis that legal requirements, properly understood, should not preventphysicians from receiving reasonable compensation for their services--andsleeping at night, too.

The 'A' List--Ten Rules for Complying With Fraud and AbuseLaws

1. Assure that your medical practice's billing clerks are familiarwith Medicare payment rules and policies of other third-partypayers. Billing personnel should review carrier bulletins andsimilar information, including information from the physician'smedical or specialty society.

2. Assure that your third-party billing procedures include appropriateinternal controls. Beware of arrangements in which office personnelfile claims using the physician's facsimile signature. Avoid arrangementsthat create a financial incentive for billing personnel to submitimproper claims.

3. Assure that the medical and billing arrangements work in tandem,not independently. Claims should be filed only for medical servicesthat have been actually provided, as reflected in clinical records.

4. Assure that your practice has established and publicized itspolicy that all claim forms should be completed accurately andcomply with the applicable third-party payment rules; employeeswho negligently, intentionally, or recklessly do otherwise shouldbe disciplined or fired.

5. Assure that you and other physicians in your practice are accessibleto employees and patients with billing questions. A billing clerk,unable to obtain physician guidance, may complete a claim formincorrectly. Patients can help identify aberrant billing procedures.Office personnel who are able to shield physicians from patients'billing inquiries may cover up their own errors.

6. Assure that billing personnel carefully review and follow upon claims denials, and questions and complaints from patients.

7. Assure that you have not inadvertently received payments thatmight be considered illegal kickbacks (to be discussed in part3 of this series) or have established a prohibited compensationarrangement under federal or state self-referral laws (see part1, "Self-Referral Statute Requires Self Scrutiny of Practices");payments received from physicians or entities to which your officerefers patients should be carefully analyzed.

8. Assure that your office routinely obtains written confirmationof responses to billing inquiries, and that supporting documentationis maintained. Physicians should insist on written confirmationfrom attorneys, CPAs, consultants, etc. Physicians should confirmin writing advice received from third-party payers.

9. Assure that the physician's office is getting maximum benefitfrom the office computer, for example, by creating reports thatmight identify problematic trends.

10. Assure that you are receiving necessary legal advice. Physiciansengaged in illegal billing and financial practices are subjectto significant monetary and criminal penalties. Consider usinginternal audits (supervised by an attorney to maximize confidentialityunder the law) and corporate compliance programs.

Robert E. Mazer is a partner in the Baltimore-based law firm ofOber, Kaler, Grimes & Shriver, concentrating in the representationof physicians, hospitals, and laboratories, particularly in connectionwith Medicare payment and fraud and abuse laws and related businessissues. He is coauthor of Medicare Anti-Fraud and Abuse--A Guidefor Hospitals, Labs & MDs (Washington G-2 Reports, 1992 RevisedEd.).