Fraud and Abuse
What does the government care about?
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Cost
Utilization (medical necessity)
Quality
Cost
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This is controlled directly
The feds decide what they want to pay
What are the constraints on pricing?
Utilization (Medical Necessity)
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What are the issues we have seen on medical
necessity?
 Is the treatment needed?
 Is it experimental?
 Is it effective?
 Is it covered by the policy
What are the political constraints on the
government in setting utilization rules?
Quality
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Does the government care about costs?
What about when quality and cost colide?
Should patients have a right to cheaper, lower
quality care?
Does the federal government directly control
quality?
 States?
 JCAHO?
Fraud Issues
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Was the care delivered at all?
 Durable medical equipment scams
 Billing for more care that was actually delivered
Was the care necessary?
Was the care unbundled?
 (Charging separately for care that should be
one charge)
Where kickbacks paid?
Related Laws
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General government contracting laws
Mail and wire fraud
RICO
False Claims Act
 Statutory penalties - $5-11,000 per claim
 Treble damages (whichever is higher)
Qui tam - private enforcement
Coding
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CPT codes - AMA
Some are time based, like in the Krizek case
Others are work-based
 You get paid more for doing more
 It does not matter how long you take
 Levels 1-5
Is it better to see a lot of patients or do a lot to
each you see?
Why use Codes?
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Uniform billing for all claims
Equalize billing across specialties
Provide incentives for more comprehensive care
Allows computerized payment
Allows tracking of medical information derived
from claims forms
Upcoding
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Anything that increases the payment for the
encounter
Can be legal
 Optimizing coding
Can be illegal
 Work that was not do, or work that was not
properly documented
 Misstating the patient's medical condition
Conditions of Participation (COP)
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The contract between the providers and CMS
If you do not comply with the COP you can be
denied payment or excluded from the program
If you knowingly violate the provisions of COP it
can be grounds for false claims and criminal
prosecution
US v. Krizek
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The judge thinks the doc is a good guy
Criticizes the crazy reimbursement system
Lets the doc put on evidence of standard billing
practices to refute fraud charges
Thinks the law is crazy because the feds can
assess $81,000,000
What did Krizek do wrong?
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Did he actually treat the patients?
Was his treatment medically necessary?
What were the issues in billing?
Billed for 40-50 minute time code for everyone
 Who did this
 What was the justification?
 Did the doc know?
Doc's Defense
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He really did spend the time, he just did not spend
it all on the patient
Lots of stuff you do in the office as part of the
care
What is the Scienter requirement?
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Intent to defraud?
Knowing that the claim is wrong but submitting it
anyway?
Why does the statute specifically say that there is
no need to prove intent to defraud?
What is the doc's certification problem?
District Court Ruling
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Found liablity on the days when there were more
than 12 codes for 50 minutes
Thought that the doc was liable, but an
unfortuante system
Appeals Court
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Makes it clear that reckless ignorance is wrong
and grounds for liability under the Act
Is not sympathetic to the doc's claimed slipshod
accounting
Is Bad Care Fraud?
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US ex Rel Mikes
What would make the care fraudulent?
Whistleblower Provisions
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Only protection if you bring suit
Not a good protection
Interesting issues
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Bribes by device and drug companies
PATH audits (medical schools)
HCA
Qui Tam
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Standing in the shoes of the government
15-20%
Feds can march in
May not apply to claims against states
What do you tell clients about False
Claims?
Understanding Self-Referral Laws
Physicians as Fiduciaries
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Model Penal Code
Informed consent law
General principles
 Knowledge differential
 Power differential
Fiduciary Obligations
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The physician acts as purchasing agent for the
patient
Self-referral laws target incentives that encourage
the physician to make certain decisions contrary
to the patient's interests
 Order unnecessary care or tests
 Choose providers based on criteria other than
the best interests of the patient
Why Does the Federal Government Care?
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They claim to care about quality
 FTC undermines this with talk about the right to
buy cheap, crummy care
They care a lot about costs
 Unnecessary care is wasted money and bad for
the patient
 It is assumed that if a kickback is necessary,
the care is either worse or more expensive
Problems with the Federal Bias
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The feds are only concerned with incentives to
order more care or to steer care
They do not care if there are incentives to deny
care
 Big issue with HMOS and other structured
plans
 Underlines the problem with consumer directed
care
The General Self-Referral Laws
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There is broad statutory authority banning deals
that create incentives to refer business
These deals have to be analyzed to map out the
cash flow to determine what incentives the
physicians see
The Lease Scam
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Hospitals often own professional buildings
Physicians in the professional are more likely to
admit patients to the hospital
 Proximity
 Shared services
Is the hospital providing incentives for physicians
to be in their professional building?
How do you put a fair market value on proximity?
The Recruitment Scam
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The hospital sees that there is a need for physicians with
specific skills in the community
The hospital recruits a physician with a relocation
package
 Moving expenses
 Salary support for a period of time
Does any of this obligate the physician to refer to that
hospital?
What if it is the only hospital in the community?
The Lab Scam
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There is a huge amount of money in medical lab tests
 Hence my skepticism about the real causes of
defensive medicine
Is the lab providing incentives to the physician?
 Direct kickbacks
 Subsidized services, like renting space in the
physician's office
 Gifts - trips to the fishing camp
The Hospital Investment Scam
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Hospital wants to increase the flow of surgical
patients
Hospital sets up surgical suite as a separate
corporation and sells surgeons shares
Earnings are based on the capital contribution
What is the impact of a admitting patients on the
physician's return on investment?
The Practice Purchase Scam
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Hospital buys the physician's practice
Hires the physicians to deliver care in the new
hospital practice
Is this really a sale or just a kickback scheme?
How was the business valued?
What are the terms for payment?
 Is any of the payment contingent on referrals?
The Stark Law Approach
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Start has a list of 11 defined services
Any deals that influence the ordering of these
services are banned
There are a series of safe harbors for transactions
that are not thought to be abusive
Philosophy of Stark
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Simplify the law by clearly outlining the forbidden
areas
Create safe harbors that can be used as models
Problems with Stark
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Too much money in the forbidden areas
Doc and hospitals go the extra yard to game the
system
Spotty to non-existent enforcement
 No clear boundaries
 Puts complying entities at a completive
disadvantage
Exceptions to Stark
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Physician controlled ancillary services
 If the doc runs the lab and it is part of the
practice, it is not covered by Stark
 What is the incentive?
 Is it even worse than for an outside lab?
Analyzing Stark Transactions
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Is it a covered service?
Does it met the ancillary service exception?
Is there any financial linkage between the provider
and the referring doc?
The Integrated Provider Exception
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Integrated providers provide both medical and
hospital and other services
It is OK to tell employees where to refer patients
You cannot pay employees a bonus for referrals,
but they can share in the profits (gain share)
Does this exception make any sense?
Does it just provide a way for hospitals to avoid
self-referral laws by buying physician's practices?