The 10 Biggest Legal Mistakes Physicians Make When Being Investigated for or Charged with Civil or Criminal Fraud

Excerpted from The Biggest Legal Mistakes Physicians Make: And How to Avoid Them

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Executive Summary

The rising increases in the cost of health care have led to all-out efforts to contain such costs. An important component of those efforts is a strategy to minimize the losses resulting from fraud and abuse in billing for health care services. It is therefore no wonder that thousands of physicians each year face investigations for real or imagined billing and related fraud. Such investigations, whether by regulatory agencies, law enforcement, or private insurers, can be costly, since they usually involve voluminous medical and billing records, and the costs associated with such investigations include not only legal fees, but also substantial staff and professional time, disruption of office routines, and expert fees. Physicians who are not prepared can make substantial, sometimes career-threatening, mistakes when facing an investigation or charges of civil, or worse yet, criminal fraud. Physicians facing fraud investigations need to explore all available rights, develop an action plan, and prepare family and staff for the rocky road ahead.

Mistake 1 Trying to Respond without Counsel

Physicians often forgo consulting with an attorney at the start of an investigation, and wait too long to engage experienced counsel. Convinced they have done nothing wrong, they decide (incorrectly) that they do not need professional legal advice. Or they assume that, as highly educated and intelligent professionals, they are equipped to handle legal issues on their own. Investigations can take months or even years to complete. The passage of time, especially the periods of relative inactivity, give the impression that the matter is resolved or dropped. Physicians may conclude (again, incorrectly) that they can put the matter off rather than confront the problem. Thus, physicians may wait to seek competent legal advice until the problem magnifies itself and the investigation reaches a critical point, such as the filing of litigation, adverse license action, or even worse, an arrest.

Action Step Physicians should consult with an experienced attorney as soon as notice of an investigation is received, especially if it involves law enforcement and the risk of criminal charges. Physicians must keep in mind that fraud investigations put career and even liberty at stake.

Mistake 2 Sparing Counsel Some of the Details

When trying to determine a course of action in a particular matter, physicians sometimes fail to appreciate the legal implications of seemingly unimportant facts, and therefore may conclude that they can spare counsel from some of the details surrounding an event or occurrence. Experienced counsel can help the physician to wade through potential legal claims and evaluate the degree of exposure, if any, but only when all facts are presented and analyzed. Physicians need not fear that what they tell their counsel may hurt them; subject to very limited exceptions, the attorney-client privilege protects a physician’s communications with an attorney from disclosure, in much the same way that communications between physician and patient are protected. Physicians should be aware that they can and should discuss matters freely and without reservation with their counsel, who can be their best ally in times of need.

Action Step Physicians should present all details and documents relating to the matter at hand to their counsel so that a complete analysis and informed decisions on strategy can be made at the earliest possible date.

Mistake 3 Talking Too Much or to the Wrong People

Physicians should exercise caution when communicating with individuals who may be witnesses in an investigation. Such individuals may misinterpret the physician’s statements or modify their own statements based on the physician’s recollection of the events. Witnesses may also be called on to testify not only about a specific event, but also about what the physician may have said about it. This could lead to even greater exposure for the physician. In the worst case, an innocent statement could subject an unknowing physician to allegations of witness tampering.

Action Step Physicians should consult with experienced counsel before speaking with witnesses in a pending matter. In many cases, those witnesses have engaged their own attorneys and have responded to questions by the authorities. The safe and conservative route is to avoid talking too much, or talking to the wrong people. Seeking counsel’s advice first will protect all parties involved in an investigation.

Mistake 4 Failing to Understand Physicians’ Roles as Employers and Supervisors

Physicians sometimes do not fully appreciate their potential exposure when a subordinate or an employee acting at the physicians’ behest engages in improper, illegal, or fraudulent conduct. To be sure, the subordinate or employee may indeed be acting on his or her own behalf, engaging in potentially wrongful or fraudulent acts outside the scope of employment. But, in routine work situations, such as the completion and submission of insurance forms, physicians are presumed to be aware of their subordinates’ conduct and are responsible for it.

Action Step Physicians should be sufficiently familiar with all business aspects of their practices, including office procedures, preparation and retention of medical records, and, especially, the billing and collection systems. Each of these systems should include sufficient and reasonable checks and balances to ensure compliance with all applicable regulations. When important issues arise involving a subordinate, physicians should consult with an experienced attorney, who can advise on potential exposure and employment and related issues.

Mistake 5 Failing to Cooperate with the Authorities

Some physicians, certain that they have done nothing wrong and feeling put upon by intrusive authorities, fail or refuse to respond to or cooperate with the authorities conducting an investigation. Usually investigators view such conduct, however innocent, as evidence that the physician is misleading, interfering with, or stalling in an inquiry or investigation. Failure to cooperate with investigations may result in additional allegations or charges.

Action Step Physicians should consult with experienced counsel as early in the investigation process as possible. Counsel can field and address questions and advise on the best way to present the information investigators are seeking. In some cases, investigators’ demands can be overly burdensome and objectionable. Counsel can assist in distinguishing between a proper and routine inquiry and an improper demand for documents or information.

Mistake 6 Keeping Staff in the Dark

Physicians may not appreciate the importance of appropriately communicating with their entire staff—from secretaries, billing personnel, and other key staff members, to the rest of the professional staff—at the start of an investigation. It is inevitable that staff will become aware that the physician is under investigation. Often investigators will simply show up at the door of a physician’s office and demand that staff provide books and records. Some patients may become aware of the investigation and seek information from the staff. Newspapers may contact the office for information, and news reports may contain unsavory accounts of the inquiry. Well-meaning physicians sometimes try to shield their staff from the uncomfortable details of a pending investigation. But most times this backfires, especially if an employee is questioned by investigators, patients, the media, or others.

Action Step Physicians should plan for the best time and manner to inform key staff members that an investigation is being conducted, and the best way to explain what is happening and what is expected of staff if the office receives an inquiry. Physicians should involve counsel in those meetings and discussions, as appropriate. Staff should know how to address and route all inquiries from investigators, news sources, and patients.

Mistake 7 Producing Records and Other Documents for Investigators without Appropriate Advice or Procedures

Physicians under investigation for civil or criminal fraud are understandably anxious to clear their names. Some may conclude that the easiest and fastest way to do so is by giving the investigators all of the records that, in the physician’s view, will prove that no fraud was committed. In doing so, they allow investigators unfettered access to their patient and billing records and other file materials. Mistakes, such as supplying original data to investigators without retaining copies, are common. At times, physicians turn over original patient records, which investigators may then retain for long periods of time. This becomes even more problematic when a patient needs continuing medical care.

Action Step Physicians should not turn over any materials to investigators unless and until they have contacted experienced counsel who has advised on the appropriateness of the requests. Counsel can help implement a system that tracks every document produced. Later, the physician may require proof that a document has in fact been turned over. If and when a surprise visit from the authorities occurs at home or at the office, physicians should immediately contact their attorneys for advice on how to respond. A physician’s well-meaning but misguided document production could be used in making a case against the physician.

Mistake 8 Failing to Respond Fully to Application Forms

Throughout their professional careers, physicians complete myriad forms, such as license renewals, patient requests for insurance payments, employment applications, and applications for hospital privileges. Often, such applications call for disclosure of information relating to prior or pending civil or criminal investigations. Sometimes, application forms use vague or ambiguous wording that can be confusing even to trained professionals.

Action Step Physicians should err on the side of disclosing pending investigations, subject to the advice of an attorney who specializes in such matters. Often, counsel can advise on the interpretation of the question, can draft an appropriate response to a troubling question, and may serve as a buffer between the physician and the hospital, insurer, or licensing body.

Mistake 9 Relying on the “Advice of Counsel” As an Absolute Defense

Some physicians under investigation inform the authorities that they engaged in a particular course of conduct at the direction of their attorney. This is particularly applicable in kickback investigations because most physicians do consult with counsel before entering into a business arrangement. The “advice of counsel” defense is used to show that the physician did not intentionally violate the law. But this defense is not always applicable, especially if, unwittingly or otherwise, the physician failed to provide counsel with all relevant facts and information. It may also result in a waiver of the attorney-client privilege.

Action Step Physicians should consult with an experienced attorney before taking a position on the theory of defense, especially when considering the “advice of counsel” defense, given the risk of waiver of privilege. Placing the attorney-client communication at issue in the investigation could operate as a waiver of the privilege.

Mistake 10 Clarifying or Changing Information in Existing Records

Some physicians may be unaware of the strict regulations that govern modification and maintenance of patient records. With the best of intentions in mind, some physicians, faced with a fraud investigation, modify or supplement patient records, appointment books, logs, and other materials maintained in the ordinary course of their businesses. They also may make changes to computerized databases and recordkeeping systems and may even delete data that they believe is benign or irrelevant. Less computer-savvy practitioners are unaware that a technical specialist can easily detect these alterations and restore deleted material from a hard drive. Moreover, today’s computer experts can easily make the additions and alterations come to light. Depending on the timing and nature of the modifications, such conduct can subject the physician to even greater scrutiny and charges of tampering with evidence.

Action Step Physicians facing a fraud investigation should be familiar with the rules and regulations governing the changing or amending of medical and related records, and they should consult experienced counsel before making any changes in existing documents, computer materials, logs, and related items, especially if they have been subpoenaed. Innocent modification or destruction of records could lead to evidence tampering allegations.

Conclusion

Physicians must consider the potential ramifications of a fraud investigation as soon as they become aware that they are the subject of such an investigation. They should assemble all data requested, prepare staff, and consult with experienced counsel before responding to investigators. By facing the problem head-on, the physician will have the benefit of a clear and well-thought-out response plan designed to eliminate or minimize exposure and steer the matter to conclusion in as painless a way as possible.

Additional Resources

T. Albert, CMS Revises Rules Limiting Physician Self-Referral (April 19, 2004), www.amednews.com
Gosfield, Health Law Handbook (2003 ed.)
M. Hawryluk, HHS Inspectors Action Plan Reveals Hot Buttons for Fraud (Oct. 20, 2003), www.amednews.com
T. Reardon, Investigations of Fraud and Abuse, Report 27 to the Board of Trustees of the AMA (1997)
T. Reardon, Fraud and Abuse Update, Report 25 to the Board of Trustees of the AMA (1997)
Doctors Deserve Privacy Too: Credentialing Should Not Require Revealing Your Entire Health History (Jan. 20, 2003), www.amednews.com