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Physician Beware

It is easy for physicians to run afoul of numerous federal and state laws when operating or selling their medical practice. The purpose of this article is to briefly discuss the False Claims Act (FCA), and the Anti-Kickback Statute (AKS), the Physician Self-Referral Law (Stark law). The Government agencies charged with enforcing these laws include the Department of Justice, the Department of Health & Human Services Office of Inspector General (OIG), and the Centers for Medicare & Medicaid Services (CMS).

The civil FCA shields the Government from being overcharged or sold inferior goods or services. It is illegal to present claims for payment to Medicare or Medicaid you know or should know are false or fraudulent. If a claim results from a kickback, or is made in violation of the Stark law, that alone may render it false or fraudulent creating liability under the civil FCA and the AKS or Stark law. No specific intent to defraud is required. The civil FCA defines “knowing” to include not only actual knowledge but also instances in which the person acted in deliberate ignorance or reckless disregard of the truth or falsity of the information. The penalties are severe; Physicians have gone to prison for submitting false health care claims.

A few case examples of FCA violations from the U.S. Department of Health & Human Services Office of Inspector General’s publication, “Avoiding Medicare and Medicaid Fraud and Abuse” include:

  • A psychiatrist was fined $400,000 and permanently excluded from participating in the Federal health care programs for misrepresenting that he provided therapy sessions requiring 30 or 60 minutes of face-to-face time with the patient, when he had provided only medication checks for 15 minutes or less.
  • A dermatologist was sentenced to 2 years of probation and 6 months of home confinement and ordered to pay $2.9 million for falsifying lab tests and backdating letters to referring physicians to substantiate false diagnoses to make the documents appear that his patients had Medicare covered conditions when they did not.
  • A cardiologist paid the Government $435,000 and entered a 5-year Integrity Agreement with OIG to settle allegations he knowingly submitted claims for consultation services not supported by patient medical records and did not meet the criteria for a consultation.

The AKS [42 U.S.C. § 1320a-7b(b)] is a criminal law that prohibits the knowing and willful payment of compensation to (1) encourage or reward patient referrals or (2) generate business involving any item or service payable by the Federal health care programs including drugs, supplies, or health care services for Medicare or Medicaid patients. Compensation includes anything of value such as cash, free rent, expensive hotel stays and meals, and excessive payment for medical directorships or consultancies. The statute covers the payers of kickbacks; those who offer or pay remuneration and the recipients of kickbacks; those who solicit or receive remuneration. Criminal penalties and administrative sanctions for violating the AKS include fines, jail terms, and exclusion from participation in the Federal health care programs.

Physicians are attractive targets for kickback schemes because they are naturally a great source of referrals for fellow physicians or other health care providers and suppliers. Physicians choose what drugs their patient’s use, which specialists they see and what health care services and supplies they receive. Many people and companies want the physician to steer their patients to them and will pay to send that business their way. And remember, it’s a two-way street and it is just illegal for the physician to take money from providers and suppliers in return for the referral of Medicare and Medicaid patients as it is for the physician to pay others to refer those patients to them.

A few case examples of kickback violations from the U.S. Department of Health & Human Services Office of Inspector General’s publication, “Avoiding Medicare and Medicaid Fraud and Abuse” include:

  • Nine cardiologists paid the Government over $3.2 million for engaging in a kickback scheme. The cardiologists received salaries under clinical faculty services agreements with a hospital under which, the Government, they did not provide some or the services. In exchange, the cardiologists referred their patients to the hospital for cardiology services.
  • A physician paid the Government $203,000 to settle allegations he violated the physician self-referral prohibition in the Stark law for routinely referring Medicare patients to an oxygen supply company he owned.
  • Four orthopedic device manufacturers paid $311 million to settle kickback and false claims allegations that the companies bribed surgeons to recommend their hip and knee surgical implant products. The companies allegedly would award physicians with vacations, gifts, and annual “consulting fees” as high as $200,000 in return for the physicians’ endorsements of their implants or use in operations.

The Stark Act prohibits physicians from referring patients to receive designated health services payable by Medicare or Medicaid from entities with which the physician or an immediate family member has a financial relationship, unless an exception applies.  Its terms can be a complicated trap for the unwary, particularly in circumstances where physicians are selling their practices, but intend to refer patients or provide services to the purchaser.

As stated: it is easy for physicians to run afoul of numerous federal and state laws when operating or selling their medical practice. An experienced health care lawyer can analyze your issues and provide a legal evaluation and risk analysis of the proposed venture, relationship, or arrangement.

Written by John Messina

John Messina heads Messina & Hankin's Temecula Valley Office and is a litigation attorney with top executive-level, hands-on experience as a broker, real estate developer, and mortgage banker. He is also a published author,

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