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

Edited by Steven Babitsky, Esq. and James J. Mangraviti, Esq. (©2005 SEAK, Inc.)

Download Free 646 Page E-book: The Biggest Legal Mistakes Physicians Make and How to Avoid Them

Executive Summary

The U.S. government contends that of the $1.3 trillion spent on health care during 2000, more than $100 billion was lost to fraudulent health insurance claims. Thus, even in the wake of the terrorist attacks of Sept. 11, 2001, the U.S. Department of Justice continues to make the investigation and prosecution of health care fraud a top priority. Not to be outdone by their federal counterparts, local prosecutors have redoubled their efforts to fight healthcare fraud. In New York, the district attorneys and the New York state attorney general have has established active insurance fraud or health care units to scrutinize the activities of physicians.

Accordingly, the time has long since passed when a physician’s legal issues could be handled by a general practitioner or a malpractice lawyer. Today, the most important tasks facing even the most scrupulous physicians may be recognizing a problem that requires the expertise of a criminal lawyer and choosing an attorney who can both recognize the potential for criminal exposure and deal with it decisively.

Mistake 1      Not Recognizing the Problem

Almost overnight, the legislative landscape that governs the practice of medicine has undergone a hostile sea change. Business relationships that were once commonplace have been branded criminal and forbidden under penalty of imprisonment. Investigators are focusing, with increasing regularity, on the relationships between physicians and their referral sources in search of transactions they will seek to describe as illegal kickbacks. They are examining relationships between physicians, testing labs, pharmaceutical manufacturers, suppliers of durable medical equipment and others for evidence of illegal relationships.

Action Step     Before entering a business relationship, physicians should consult a criminal lawyer experienced in health care issues who can scrutinize the arrangement. 

Mistake 2     Assuming That All Counsel Can Handle All Billing-Related Issues

Collection lawyers are zealous in helping to maximize their clients’ profits, but they may be ill equipped to handle broader inquiries into their billing and coding practices. In recent years, the insurance industry has also used the veil of “health care fraud” to conceal its concerted effort to balance the industry’s books at the expense of physicians. Indeed, as the economy flattened and the stock market dropped, insurers began to pour more money into fraud and abuse investigations. Both the federal government and private insurance companies have developed sophisticated software that identifies aggressive billing and coding patterns, thereby targeting particular physicians for audit. In certain cases, insurance investigators may work in tandem with state and federal prosecutors, who may then target a physician for criminal investigation and prosecution.

Accordingly, when facing repeated requests for chart entries or an audit by a third-party payer, many physicians mistakenly rely on collection counsel or the practice’s regular civil attorney to deal with these requests. Unaccustomed to the ways of criminal prosecutors, these attorneys may fail to perceive the threat posed by such inquiries. Similarly, they are ill equipped to implement a strategy designed to show that the issues at hand do not suggest an intent to defraud. Finally, the wrong lawyer may mistakenly provide investigators with information about the physician’s practice that may later be used against the physician.

Action Step   Physicians should not delegate responsibility for corresponding with entities requesting audits without ensuring that staff are fully cognizant of what has been requested and by whom. If a physician’s billing and coding practices are called into question, the physician should consult an appropriately trained and skilled attorney.

Mistake 3      Using Collection or Civil Counsel as the First Line of Defense in a

Response to No-Fault Insurance Denial of Payment

Over the last 10 years, state and local prosecutors, in concert with the insurance industry, have targeted dishonest practitioners who “grind their grist” in Medicare and no-fault insurance “mills.” In law enforcement parlance, a “mill” is a concern whose business is the mass generation of medical bills for treatment that was either not indicated or never rendered. Over the last decade, these mills have become a multi-billion-dollar illicit industry. While some physicians make their living defrauding both government and private health care insurers, many honest physicians place themselves in harm’s way simply by seeing a perceptible volume of no-fault patients.

Prosecutors working in tandem with insurance investigators have targeted certain physicians and use the statutorily required examination under oath to obtain sworn statements that may be used against a physician in an insurance fraud or a perjury prosecution. The failure to perceive or appropriately deal with such dangers may prove problematic. 

Action Step     Physicians should avoid practices that concentrate on the treatment of soft-tissue injuries and whose patients, by and large, do not have objective evidence of injury. Practices that treat “no-fault” patients exclusively are inviting scrutiny. Physicians should consult an appropriately trained and skilled lawyer before agreeing to appear at an examination under oath.

Mistake 4        Shopping for the Lowest Price Legal Advice

Physicians should not be “penny wise and pound foolish.” While there is nothing wrong with shopping around for an attorney, quite often, as the saying goes: “You get what you pay for.” The practice of law is a business. If an attorney quotes a physician a bargain basement retainer that drastically undercuts the retainer fees quoted by other attorneys the physician has consulted, it is likely that the lower priced attorney does not have a grasp of the task at hand, is planning to render a “bargain basement” defense, or is simply unqualified to handle the matter.

Action Step     Physicians should beware of publicity hounds that may sacrifice their best interests in exchange for some good media attention. They should consider calling other capable attorneys, physicians, and state or county medical societies for a good reference.

Mistake 5        Talking About the Problem With Partners or Employees

While the conduct of a physician’s partners or employees may be the subject of scrutiny, the physician’s interests may differ from theirs. When the heat of a criminal investigation intensifies, partners and employees may turn on one another to save themselves. When that happens, secrets are revealed, confidences are betrayed, and anything the physician may have said to once-trusted friends or colleagues may be twisted and used against the physician.

Action Step   Physicians who believe that a criminal investigation may be afoot should gather the relevant documents and quietly consult a criminal lawyer skilled in health care matters. Efforts should be taken by the attorney to conduct a “shadow” investigation to control employees and stem the flow of information into the hands of prosecutors.

Mistake 6     Amending or Rewriting Records When Faced With an Audit

Faced with dwindling reimbursement, physicians are pressured to see more patients in less time. As a result, many physicians make up for lost time by charting sparsely and coding aggressively. When facing an audit of records by a third-party payer, many will be tempted to rewrite notes to meet coding standards or to create notes that may be missing. Such actions may be deemed fraudulent and can result in criminal charges being filed against the physician.

Action Step  Entries in a physician’s office records should not be rewritten; they must be submitted in their original form. An attorney familiar with both health care regulations and criminal law should be consulted before a physician even considers amending the records in any way.

Mistake 7        Believing That an Audit Is Routine and One Can Go It Alone

Given the advances in software technology, by the time physicians have been notified that they have been selected for an audit, they may assume that the audit is anything but routine or random. In fact, the possibility exists that a physician has already been targeted as a potential fraud suspect and his or her response to being notified of an investigation will be scrutinized carefully.

Action Step     A physician’s response to being notified of an audit should be reviewed in conjunction with a lawyer who has the requisite training and experience to analyze the physician’s exposure. If it is determined that the physician’s response may raise suspicions of fraud, the physician and the lawyer may together craft a strategy to identify alleged fraudulent claims and arrange for prompt repayment before an accusation is even levied.

Mistake 8     Hiring a Billing and Coding Expert to Analyze Records After Receiving a Subpoena or Notification of an Investigation 

Despite a physician’s best intention to revamp his or her billing practices, conversations the physician may have had with his or her compliance expert are not privileged. Therefore, prosecutors may subpoena their work papers and they may be forced to reveal the physician’s most candid admissions. Similarly, their written observations and conclusions, which may contain sensitive or damaging comments, may be subpoenaed and used against the physician.

Action Step     Physicians should implement a compliance plan in conjunction with their criminal lawyer. In most jurisdictions, the law permits the attorney to hire compliance experts as legal consultants. As such, a physician’s interactions with them (and their work papers) are protected by the attorney-client privilege and may not be obtained by subpoena or any other means.

Mistake 9        Waiting Too Long

Criminal investigations are often plodding, long-term affairs that may continue for months or years after the physician has been contacted. While they may seem dormant, they usually are not.

Action Step     When a physician retains a criminal lawyer early on, that attorney may be able to meet with prosecutors and explain certain issues before a prosecutorial mindset pervades the investigation. When prosecution cannot seemingly be avoided, early intervention by a criminal lawyer may allow the lawyer to explore areas of possible cooperation and may stave off an indictment. If an indictment cannot be avoided, early intervention by the attorney may help identify the source of the information and thus minimize any damages.

Mistake 10      Believing That Walking Away From a Bad Situation Provides Absolution

Walking away from a situation in which the actions of peers may have been criminal will not necessarily insulate a physician from prosecution. The failure to report misconduct (criminal or otherwise) on the part of colleagues is, in many states, professional misconduct in and of itself and may result in the physician losing his or her license for failing to report it. Furthermore, if a physician has worked in a “no-fault” mill or some other endeavor that raises suspicions, the physician’s actions (and those taken by others in his or her name) will be as closely scrutinized as those of the true criminals by the authorities and may be misconstrued. It is likely that such a physician may also become the subject of a grand jury investigation.

Action Step     Physicians should retain a criminal lawyer capable of assessing their exposure and determining whether they should offer information to law enforcement officials in a way that they will make them understand that the physician is a witness to criminal activity and nothing more. A skillful criminal lawyer may be able to negotiate an agreement in which the physician may avoid both prosecution and professional discipline in exchange for his or her cooperation.


Given the regulatory climate and the “criminalization” of health care, the days of one-stop shopping for an attorney have long since passed. The attorneys who handle real estate purchases or employment contracts will be ill equipped to step into the criminal arena. While these attorneys may be very good at what they do, they do not have contacts in the law enforcement community and may be unable to recognize vital issues. They lack the requisite experience to conduct an appropriate investigation or construct a winning defense. The moral of the story is that one should choose carefully: The career you save may be your own.

Written by:

Douglas M. Nadjari, Esq.

Peer reviewed by:

Rudolph C. Gabriel, Esq.

Download Free 646 Page E-book: The Biggest Legal Mistakes Physicians Make and How to Avoid Them