OIG Alert On Reassignment of Claims By Physicians 

The OIG recently issued and advisory alert to physicians cautioning them to exercise caution before reassigning their right to bill the Medicare program and receive Medicare payments.  Physicians may be liable for false claims submitted by entities to which they reassigned their Medicare benefits.  The OIG statements encourages physicians to use heightened scrutiny of entities prior to reassigning their Medicare payments.   The OIG alert described recent cases where physicians have been entangled in cases that were caused by third parties who improperly use reassignment authority.

OIG recently reached settlements with eight physicians who violated the Civil Monetary Penalties Law by causing the submission of false claims to Medicare from physical medicine companies. The physicians reassigned their Medicare payments to various physical medicine companies in exchange for Medical Directorship positions. While serving as Medical Directors, the physicians did not personally render or directly supervise any services. There was evidence that the services the physical medicine companies claimed the physicians performed were not actually performed or were not performed as billed.

 Other physical medicine companies falsely billed Medicare using the physicians’ reassigned provider numbers as if the physicians personally rendered the services or directly supervised a “technician” rendering the services. Many of the owners and operators of the physical medicine companies were criminally prosecuted. OIG determined that the physicians were an integral part of the scheme and pursued their liability under the Civil Monetary Penalties Law.

 As described in the OIG alert, physicians need to exercise due diligence whenever they reassign their ability to obtain reimbursement.  Physicians have the right to access billing information of the provider t0 whom reassignment is made concerning the services the physician is alleged to have performed and for which the entity billed Medicare. Physicians have unrestricted access to claims submitted by an entity for services that the entity billed using the physicians’ reassigned provider numbers.  Physicians should exercise this authority provide added assurances that the services for which the entity billed Medicare were, in fact, performed and were performed as billed.

Failure to provide this type of due diligence can expose the physician to possible penalties in the event that the reassigned provider misuses the physician’s billing rights.

View the OIG Special Alert

Physician Compensation – A Look In Time At The Covenant Healthcare

Waterloo, Iowa.  Population 70,000 (give or take).  Who would expect that this town would be the focal point of one of the biggest physician compensation/Stark Law settlements in history.

In 2009, Covenant Medical Center in Waterloo agreed to pay the Federal government $4.5 million to settle charges that it had overpaid five doctors.  The Stark Law is violated if a physician is paid in excess of fair market value for services or if the compensation is not commercially reasonable.

The Affordable Care Act made it clear that Stark Law violations can trigger liability under the Federal False Claims Act.  The result is that amounts that are billed under the “cloud” of Stark can lead to treble damages plus up to $11,000 per claim.  If the Stark Law violation involves payment in excess of fair market value to a physician, the basis for assessing damages can be three times the amount of the physician’s billing plus up to $11,000 for each claim.  The application of the False Claims Act to Stark Law violations has placed a renewed focus on physician compensation issues.

In the Covenant care, the government alleged that the five physicians were paid commercially unreasonable compensation, far in excess of fair market value.  The hospital denied any wrongdoing but paid the government $4.5 million plus interest to settle the claims.

 Physician compensation has become a more sensitive issue than it ever was in the past.  The Waterloo, Iowa case demonstrates that smaller towns are not immune from the impact of the Stark Law and False Claims Act.

Responsible Corporate Officer Doctrine – New Focus On Application To Health Care

Recent enforcement actions and public comments by enforcement officials make it clear that parties who are responsible for health care fraud enforcement plan, to focus more on the Responsible Corporate Officer Doctrines (“RCO Doctrine”) as a tool to fight health care fraud.  Comments by Wisconsin Bar Health Law Seminar are just one example of the new focus on the RCO Doctrine.

            The RCO Doctrine was derived from the United States Supreme Court’s decision of U.S. v. Park.  The RCO Doctrine permits corporate officers to be held personally responsible for the criminal acts committed at the corporate level.  The RCO Doctrine is a draconian measure that can hold corporate officers liable as long as they were in a position to prevent a legal violation.  Park permits application of the doctrine even in cases where the corporate officer does not have actual knowledge of, or has not actually participated in, the alleged violation.

            Health care is one area where the RCO Doctrine is being increasingly used as an enforcement tool.  The doctrine is being actively used to pursue corporate officers who are in a position of authority regarding the alleged violation.  Some cases have even upheld the application of the RCO Doctrine against a corporate officer even when the corporation itself is acquitted of the charges.

            The RCO Doctrine can be used against virtually any corporate officer, including the CEO, president, vice president, secretary, treasurer, general counsel or virtually any other management-level functionary.  Health care is particularly susceptible to the use of the RCO Doctrine.  In many cases, enforcement officials do not want to take action that could adversely affect availability of health care services to the community.  This causes officials to focus on individuals in management.  In fact, some officials take the position that where health care fraud occurs, someone must be criminally charged.  This is a growing enforcement trend that makes health care management particularly vulnerable.  In fact, some recent cases have gone so far as to charge legal counsel with criminal violations, raising issues regarding the role of in-house legal counsel in compliance roles.

            The emergence of the RCO Doctrine places a spotlight on the duty of corporate officers to be certain that systems are in place to ensure that legal violations do not occur.  Systems should also focus on promptly remedying compliance concerns before they spin out of control.

            Health care organizations are actively using compliance programs to minimize compliance risk.  These programs should be a continued focus of health care organizations as a method to reduce legal risk.  The programs should be flexible to address areas of risk that apply to the specific organization.  Policy changes, training and actions should be taken where areas of risk are identified.

            The Affordable Care Act creates mandatory compliance program obligations on most health care organizations.  Organizations that receive $5 million or more of Medicaid revenues must adopt most elements of a compliance program.  Nursing homes will need to certify that they have compliance programs in place by 2013, with other provider types following thereafter.  Many institutions have already implemented compliance policies, but should take the opportunity to audit their programs for effectiveness.  Smaller providers such as physician practices will need to adopt compliance programs for the first time in response to the Affordable Care Act.

            A well-designed, effective compliance program may be your best defense to the possible application of the RCO Doctrine, in view of the increased focus on that doctrine by law enforcement.  When it comes to the RCO Doctrine, it is what you do not know that can hurt you.  For this reason, it is critical to develop compliance systems to ferret out possible problems and solve them before they grow into larger problems.

The False Claims Act – Application of the Lincoln Law to the Health Care Industry

 When Congress originally passed the False Claims Act (31 USC §§ 3729-3733), no one had the health care system in mind.  The False Claims Act was also commonly referred to as the “Lincoln Law”.  The original law was focused on unscrupulous vendors who provided overpriced and often faulty supplies to the military during the Civil War.

The law was unique in several ways; not least of which was the creation of “qui tam” rights.  Qui tam provisions permit individuals to bring suit alleging false claims and to retain a portion of the award.  The amount of potential award available to a qui tam claimant depends on whether the government chooses to take over the case after it is brought.

The False Claims Act was strengthened in 1986 in response to some of the much publicized $1,000 toilet seats and other abuses with respect to companies supplying the United States military.  The 1986 amendments to the False Claims Act provided for treble damages plus civil penalties of between $5,000 and $11,000 per claim.  These legislative changes were intended to add real incentive for “qui tam” litigants to bring fraud claims.

The health care industry was never the real target of the False Claims Act.  In fact, when the original “Lincoln Law” was passed in the 1860’s, there was no federal health care program in existence.  From the inception of the False Claims Act through the 1986 amendments, the primary target had been the suppliers to the defense industry.  The defense industry generally makes claims on a monthly or other periodic basis for large amounts of supplies.  Although the 1986 amendments added substantial penalties for making false claims, the impact on the defense industry does not come close to matching the impact on health care providers.

In health care, a single hospital may make hundreds of claims to the federal government per day.  False claim allegations can cover a number of years, greatly increasing the number and value of claims that may be at issue.  When treble damages plus $5,000 to $11,000 per claim are applied on top of the actual amount of a “fraudulent” claim, the obligation amount can become staggering.

The extension of the False Claims Act liability to areas such as Stark Law and Anti-Kickback Statute liability indicate how extreme the sanctions can be.  By way of example, take one physician who is determined to have been compensated at significantly over fair market value.  Assume that the excessive compensation creates a violation of the Anti-Kickback Statute and the Stark Law.  The Affordable Care Act clarified that claims made in violation of these laws create a cause of action under the False Claims Act.  Potential damages would be three times the total value of claims attributable to services of the overpaid physician, plus between $5,000 and $11,000 per claim.  You can see that the potential damages would cause grave financial impact on the hospital.  This is the type of thing that keeps compliance officers awake at night.

Even though the False Claims Act was not originally designed to target the health care industry, there does not seem to be any momentum toward making legislative.  To the contrary, the government is quite content to leave these disproportionate penalties in place as part of its effort to reduce cost of health care (and to generate additional revenues) by assessing astronomical fines against health care providers and to hold these penalties over their heads to force health care providers to take extreme actions to prevent compliance problems.  The government is taking a “return on investment” approach to health care fraud enforcement.  The False Claims Act allows the government to put its thumb on the scale in the “return on investment” game.  The qui tam provisions provide the government with “quasi agents” who may be disgruntled employees or others who can scout out potential claims, bring them to the governments attention, and take a piece of the financial reward.

Providers have only one real way to reduce the disproportionate impact of the False Claims Act on their operations.  This is to create an effective compliance program that proactively detects problems so they can be addressed and corrected before they create excessive risk.  Compliance programs are an outgrowth of the federal sentencing guidelines that permit reduced corporate penalties for fraud if an “effective” compliance program will actually reduce the risk of a violation occurring or depending because it forces the organization to proactively look for compliance problems and correct them before they become insurmountable.  An effective compliance program will also include regular training to staff which also reduces the risk of compliance problems.

The Affordable Care Act made compliance programs mandatory for most health care providers.  Nursing homes are the first to be effected in 2013.  Other types of providers will subject to mandatory compliance programs as regulations are rolled out over the next few years.  Providers will be required to maintain an effective compliance program as a condition of participation in the Medicare program.  It is strongly recommended that all providers begin development of compliance programs now.  It will take time to tailor compliance programs to fit the specific risk areas associated with your business.  You will be required to certify not only that you have established a compliance program, but that the program is effective.