Several recently reported cases highlight the growing risk physicians face if they succumb to competitive pressures, especially offers of remuneration from labs, pharmacies, home health agencies and other providers to whom they refer. In many cases, the effort to recoup fees may come years after the physician received and spent the fees, with no insurance coverage for the defense of the claim and/or to satisfy any potential liability.

Bankruptcy Trustee Recoups Specimen Handling Fees Paid to Physicians

The bankruptcy trustee for a diagnostic laboratory (Lab) filed over 1,000 lawsuits against physicians attempting to recoup, for the benefit of the Lab’s creditors, what he claimed to be excessively large specimen processing and handling fees paid to physicians. In 2015, the Lab agreed to pay $47 million to the U.S. Department of Justice (DOJ) to resolve allegations that it paid kickbacks to physicians in connection with these fees and the waiver of patient co-pays and deductibles. As a result, the trustee maintained that each physician payment also constituted a fraudulent transfer under the Bankruptcy Code and sued to recover the payments. Similar allegations were also made by the trustee to recover payments under state fraudulent transfer laws.

In the pleadings, the trustee characterized the physicians’ acceptance of the fees as “knowingly assisting [the Lab’s] insiders in perpetuating their illegal scheme … that exposed [the Lab] to catastrophic penalties and fines” and alleged that the enormous penalties and fines caused the Lab to be “catastrophically insolvent throughout its history.” The trustee further contended that the physicians receiving the payments:

–Aided and abetted breaches of fiduciary duty by certain officers and directors of the Lab;

–Engaged in a conspiracy with the Lab;

–Committed fraud related to unnecessary testing; and

–Received unjust enrichment and improperly converted the funds paid by the Lab for their own benefit.

As the federal government continues to impose large fines and penalties for violations of the False Claims Act and the anti-kickback statute, physicians receiving income supplementation from vendors are likely to see more of such actions by creditors and trustees of bankrupt providers. Care must be taken when defending and settling claims brought by bankruptcy trustees and creditors to avoid admissions that can be used by the DOJ or the Office of Inspector General. Further, as the DOJ seeks to hold individuals responsible for criminal violations, it is likely these same physicians may also have to defend civil and/or criminal claims asserted by federal authorities, including civil monetary penalties in excess of $74,000 per claim.

Prescription Fraud – The Pen that Scribes Prison Blues

  • A pediatrician prescribed opioids and other drugs in volumes so large the patients could not physically take all of the prescribed drugs, ignored drug tests indicating that patients were not taking the medications and submitted claims for back injections up to 17 times a year for patients who did not complain of back pain. Based on these acts, the pediatrician pleaded guilty to conspiracy to commit fraud related to medically unnecessary treatments and drugs. The pediatrician currently awaits sentencing, along with six other individuals, in connection with the $19 million Medicare fraud scheme.
  • A New Jersey osteopath recently entered a guilty plea for conspiracy to defraud a healthcare benefit program with an out-of-state pharmacy in a 15-month-long insurance scheme. Allegations include that the physician accepted $25,000 and other gifts for providing pre-printed, signed blank prescriptions to pharmacy sales representatives and that he prescribed medically unnecessary compounded medications for patients he had not examined. The plea agreement requires the physician to pay $25 million in restitution and forfeit $25,000 in criminal proceeds. He faces a maximum prison sentence of 10 years.
  • A Miami doctor was sentenced to eight years in prison and ordered to pay $4.8 million in restitution in connection with a six-year $20 million Medicare fraud scheme involving kickbacks from pharmacies for patient referrals and medically unnecessary prescriptions for controlled substances and home health services. The case, brought by the Medicare Fraud Strike Force, involves a number of healthcare facilities and co-conspirators who have been sentenced to multi-year prison terms.

When Hand-signed Fraud isn’t Fast Enough – Automate!

  • A Chicago podiatrist was sentenced to seven and a half years in prison and ordered to pay $7 million in restitution for creating an electronic medical record (EMR) system to defraud Medicare. The doctor’s customized EMR system used “automated language” that required the treating podiatrist to click on a service description that mirrored “the Medicare billing requirements for podiatry services.”

On each screen, the podiatrist had to select one of the options and could not move forward to the next screen if they did not make a selection. When the podiatrist made a selection, the EMR software auto-populated the patient record with pre-determined language. When the podiatrists entered specific billing codes in the EMR, the system automatically populated the assessment part of the progress note with … canned language.

At times, “practice employees, who were not podiatrists, would create progress notes by simply entering billing codes into the EMR system, which would automatically populate the progress notes with templates. These employees prepared these progress notes at the direction and with the approval of [the doctor].”

  • The podiatrist’s wife is currently serving a one-year prison term. Four other podiatrists involved in the scheme are awaiting sentencing.•A physician-owned chain of family medicine clinics recently agreed to pay the government $1.56 million. Its principal owner and former chief executive officer along with his wife, the practice’s former laboratory director, agreed to pay $443,000 to resolve whistleblower allegations that they:

–Programmed the billing system to systematically change or flip billing codes to codes that would be paid;

–Paid employed physicians a direct share of their laboratory tests as a bonus in violation of Stark Law;

–Created custom laboratory panels that included medically unnecessary tests;

–Used standing orders to set testing frequency rather than clinical need; and

–Billed for office visits for patients having blood drawn when no evaluation and management services had been performed.

According to federal authorities, the former laboratory director “manipulated the billing software so that any time [when] CPT code 86141 was entered” the software would substitute another code for which Medicare would provide reimbursement.

The couple’s personal liability for a significant portion of the settlement reflects the DOJ’s continuing efforts to hold individuals accountable for corporate fraud. The settlement also provides that the principals will have no management role in the clinics for five years and obligates the clinics to undertake internal compliance reforms, including hiring an independent review organization to conduct annual claims reviews.

I Kinda Sorta Saw the Patient

In another case, brought as part of the Medicare Fraud Strike Force, a Texas physician with an ownership interest in a home health company was sentenced to 16+ years in prison and ordered to pay $34 million in restitution for Medicare fraud. According to the plea, the physician had allowed the home health company to use his provider number to bill Medicare for services performed by others, including physicians, nurse practitioners and physician assistants. Additional allegations include billing Medicare for 90-minute physician visits when the actual visits took 20 minutes in most cases, improper certifications for home health care and on occasion, submitting claims for more than 24 hours of service in a single day.