The 10 Biggest Legal Mistakes Physicians Make That Could Lead to Liability for Fraud

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

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Executive Summary

The law recognizes a cause of action for fraud in cases in which a party makes a false statement with the intent to deceive and another party relies in good faith on the statement to his or her detriment. Physicians can guard against actions for fraud by being extra careful in their communications with patients, regulators, insurers, and licensing bodies. Clear and complete communications and patience to explain in lay terms when necessary are the best insurance to eliminate or minimize the risk of liability for fraud.

Mistake 1 Failing to Report the Negative Results of Treatment

Physicians who may have deviated from accepted standards of medical care can make mistakes out of fear of serious repercussions, such as negligence or malpractice actions, or even worse, loss of license and their livelihood. But by failing to immediately disclose an error or omission, a physician can cause further pain and suffering, exacerbate an ailment, and prevent the patient from receiving timely medical treatment. Such conduct may give rise to a fraud claim against the physician. In addition, failure to report errors will extend the time within which a patient may take legal action against the physician.

Action Step A physician should consult with counsel immediately upon realizing that he or she has committed an error that may affect a patient’s well-being or lead to exposure. Rather than assuming the worst and worrying about the personal consequences, the physician should seek professional help to evaluate the facts and determine the appropriate cause of action. Failure to report medical errors will only exacerbate the matter.

Mistake 2 Failing to Adhere to Appropriate and Reasonable Billing Procedures

Physicians often delegate to office staff the task of performing and submitting insurance claims for payment for services rendered to insured patients. Often such claims are submitted without the treating physician’s final review and approval. In some instances, physicians review the forms in a cursory manner, missing or ignoring improper entries. Examples of problematic claims include:

Billing for more time than the physician spent treating the patient;
Billing for a service that was never performed, or for a service that was more expensive than the actual service performed;
Billing separately for each component of a service, rather than using a single accepted billing code;
Submitting claims at physician rates for services performed by nonprofessionals;
Billing for the use of nonexisting equipment;
Billing for unnecessary treatment; and
Billing for more hours than an individual could reasonably work in a single day, or, in the most egregious cases, more than 24 hours in a single day.

Such billing practices will expose the physician to federal and state fraud actions.

Action Step Physicians must review all claim forms carefully to ensure that they comply with federal, state, and the insurer’s guidelines before submitting the claims for reimbursement. Experienced counsel and/or billing experts can interpret the applicable guidelines and help educate the physician and the billing staff in the proper methods for completing and submitting claims.

Mistake 3 Failing to Safeguard Prescription Forms and Pads

Physicians are required by rules and regulations to safeguard prescription forms and pads. Failure to comply strictly with these requirements may subject a physician to a fraud investigation if the physician’s prescriptions fall into the wrong hands and are used to defraud third-party payers.

Action Step Physicians should be familiar with the rules that apply to the safekeeping of prescription pads, and they should implement checks and balances in the office procedures to ensure that prescription forms will not be used in schemes that will subject the physician to fraud investigations. If the physician is subject to such an investigation, contacting experienced counsel early is the appropriate step.

Mistake 4 Failing to Make Full Disclosure on Applications

Supplying false, incomplete, or misleading information on application forms could subject a physician to an action for fraud. Physicians complete numerous application forms during their professional careers, including applications for employment, hospital privileges, state licenses to practice medicine, and controlled dangerous substance dispensing. A physician must furnish all data (which may often include any prior criminal charges, convictions, and pleas), even if the physician believes that the information will have a negative effect on the application.

Action Step Physicians should report all information (including credentials, background, criminal history, and administrative actions) accurately and completely, regardless of how negative the information may seem. When in doubt, the physician should review the question with experienced counsel, who can assist in preparing a response that satisfies the inquiry but guards against adverse consequences.

Mistake 5 Failing to Comply with Recordkeeping Requirements

Patient records must contain sufficient detail to satisfy strict legal requirements. Records must contain, at a minimum, a synopsis of the treatment rendered, clinical impressions, vital signs, risks, and related data. Physicians must safeguard these records and protect computer-generated files and diagnostic testing results. Failure to include all pertinent data, misstating information, and altering or discarding records can all give rise to legal action against a physician, including an action for fraud. Most states have guidelines governing the proper method of correcting or modifying a patient chart or a computerized record. Advancements in technology now enable experts to restore data that have been deleted from computer hard drives. Software can track the dates and times that a user accesses a database and/or alters a record. Similarly, experts can analyze handwriting and ink to detect potential malfeasance in handling hard copies of records.

Action Step Physicians should familiarize themselves with the proper recordkeeping requirements of the state in which they practice, consulting with counsel on difficult or close calls as they arise. They should be mindful of the repercussions of modifying or discarding patient records and data other than in strict compliance with legal requirements. If errors or omissions in practice arise, physicians should consult experienced counsel as soon as possible.

Mistake 6 Failing to Understand the Terms of Patient’s Insurance Coverage

Physicians sometimes assist patients in obtaining insurance coverage or reimbursement for treatment or prescriptions for various conditions. Physicians may be asked or, with the best of intentions in mind, tempted to record symptoms or diagnoses so as to facilitate insurance or managed care coverage. In many cases, physicians write letters, complete forms, or make other written and oral representations to insurance companies without fully recognizing the potential exposure, including possible fraud charges, associated with doing so.

Action Step All submissions should accurately reflect the physician’s assessment, opinion, diagnosis, and recommended treatment after careful review of medical records and examination of the patient. When in doubt, the physician should discuss these issues with counsel to avoid denial of coverage or fraud charges.

Mistake 7 Guaranteeing That a Course of Treatment Will Produce a Specific Result

Physicians, having the best interests of their patients in mind, can be overly optimistic about their own abilities and/or particular courses of treatment. In some cases, the physician’s representations concerning the potential for success or likely outcome could be deemed a misrepresentation. For example, in the case of a new or an experimental treatment, the physician may gain significant recognition if a patient responds in a positive manner. A patient receptive to a revolutionary treatment or “miracle cure” may not appreciate the financial burdens of the treatment or the low probability for success. In many cases, the treatment may not produce the desired result, or, even more egregiously, it worsens the patient’s condition. The physician’s communications before and during the treatment phase and the patient’s expectations based on those representations (or lack thereof) could give rise to an action for fraud.

Action Step Physicians should refrain from warranting that a course of treatment will produce a specific result. Physicians should recommend the most intelligent course of treatment in the patient’s best interests, being mindful of financial constraints, risks, and probability for success. Doing so will avoid the potential for fraudulent claims and ensure that the prescribed course of treatment reflects sound choices and good medical judgment in accordance with standard practices in the profession and in the states in which they practice.

Mistake 8 Failing to Detect Overbilling and/or Overpayments

Physicians may be the recipients of overpayments from an insurer. This results from erroneous duplicate billing or an error on the part of the insurer. Physicians should never assume that, given the volume of submissions and payments being made to practitioners, overpayments will go undetected. Overpayments viewed as a windfall could subject a physician to serious legal consequences and even fraud allegations.

Action Step Proper accounting systems will permit physicians and their staff to immediately detect overpayments as they occur. This, in turn, will enable the physicians to return overpaid funds to the appropriate government entity or insurer. By maintaining proper records and adhering to generally accepted accounting procedures, physicians will avoid unnecessary audits or investigations.

Mistake 9 Paying Fees That May Violate Antikickback Regulations

Physicians often refer patients to other physicians, diagnostic testing laboratories, hospitals, or other providers. Accepting payment or other things of value for such referrals could violate applicable antikickback regulations and potentially subject the physician to a fraud action. This prohibition also applies in cases where physicians refer patients to an entity in which they maintain an ownership interest. In many cases, physicians make these recommendations because they are familiar with a practitioner or an entity and are secure in the treatment that the patient will receive. The federal government has determined that these practices could have a deleterious effect on patient health and safety, since referrals may be driven, in whole or in part, by the physicians’ financial interests.

Action Step Physicians must act in the patient’s best interests, and nothing else, when making a referral. Physicians may not accept compensation, be it money or any other thing of value, as an inducement or a reward for making a referral. Counsel experienced in these issues can decode the complicated legal guidelines and help physicians to structure their business deals or arrangements within the confines of the law.

Mistake 10 Failing to Disclose Alternative Treatments or Medications

In assessing the best course of treatment for a patient, a physician is duty-bound to disclose all reasonable alternatives, so that the patient can make an informed decision. Patients often rely solely on the advice of their physicians when choosing a particular treatment, without doing any independent investigation of alternatives. Providing a patient with a single alternative when other viable choices exist could be deemed a misrepresentation of a material fact.

Action Step Physicians should make it a practice to discuss all viable treatment alternatives with their patients before making recommendations. They should respond to all patient questions carefully and in terms the patient understands, and they should clearly outline the benefits and detriments of each option.

Conclusion

Physicians face difficult situations every day, especially because the decisions they make can and do affect human life. Physicians should be familiar with all legal and ethical requirements of their practices, to protect their own interests and the interests of their patients. They must prepare claim forms, professional applications, and all other documents completely and accurately, consulting with experienced counsel on specific areas of concern as needed. To guard against potential fraud claims, physicians must pay careful attention to detail in their recordkeeping and record maintenance practices and in their communications with patients, insurers, and staff about records, reporting, treatment, and options. Appropriate disclosure, with experienced counsel’s guidance and input along the way, is the best policy.

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