The 10 Biggest Legal Mistakes Physicians Make That May Lead to Criminal Investigations or Charges

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

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Executive Summary

Beginning as far back as the U.S. Civil War, the False Claims Act, a law that to this day is little known to physicians, imposed civil and/or criminal liability on any person who defrauded the federal government. In 1986, the stated focus of the law became health care fraud. With the considerable weight of the federal government now shifting to target any physician or practice across the country, this law was further potentiated in 1992 when a separate unit within the Financial Crimes section of the FBI began coordinating its investigations with other law enforcement agencies and even individual state regulatory agencies, officials at Medicare and Medicaid, all of the state boards of medical examiners, and a host of other federal and state agencies. As a result, the number of agencies that have the legal authority to investigate, prosecute, and refer physicians for prosecution has grown immeasurably in the last decade, and there are no signs that this situation will abate.

While this section outlines 10 mistakes, the common thread that runs through the fabric of almost all of the criminal charges against physicians today, and the tie that binds for successful prosecutions, is the physicians’ lack of understanding of “fraud” in all of its forms and permutations. Punishment does not depend on the conduct of the doctor being intentional; even if it is simply committed recklessly, it can mean fines for each billing instance, incarceration, loss of licensure, or any combination thereof. It is against this backdrop that the following advice is offered.

Mistake 1 Upcoding of Evaluation and Management Patient Visits (CPT Codes 99211-99215)

One of the easiest ways to become ensnared in a fraud investigation is to bill inaccurately, or fail to document, for the range of evaluation and management (E&M) office visits. Strict guidelines have been established for each of the five levels of service of established patient visits. Not only must the visit have all the elements of the billed code (e.g., a comprehensive history and medical decision making of high complexity for a 99215 visit), but also documentation must exist that demonstrates that the visit has met the requirements of the billed code. A physician or practice that cannot provide adequate proof of compliance (i.e., documentation) will certainly face adverse scrutiny. Determining who is cheating and “upcoding” the level of the visits for financial gain is a readily available allegation in this age of computers. Simply tallying each physician’s number of 211 to 215 visits each year and the number of 99215 visits for that year allows a carrier or an agency to calculate the percentage of level 5 visits that were billed. While such investigation is not confined solely to the 99211-99215 series (consultation coding or CPT 99261-99265 and 99271-99275 receives extremely high scrutiny by Medicare in particular), this is the most common trigger of auditing, particularly of internists and pediatricians, the majority of whose practice day is composed of patient office visits. Results that are any higher than the established range of below 5% guarantees that the doctor will be processed as an “outlier” (billing that “lies outside of the norm”) and will be referred to the fraud or special investigations unit of the carrier or agency. In most states, once this determination is made by a carrier, the state law may require that the physician be reported to that state’s medical board, the respective insurance fraud prosecutor, or both for further investigation and potential prosecution.

Action Step Physicians should educate themselves as to the requirements for each level of service, faithfully adhere to the guidelines, unfailingly document compliance with each element required for the level of service billed, and routinely monitor their office statistics as to E&M billings. Practices may consider using technological advances, such as an electronic medical records (EMRs), which can bring to the practice the means to build such documentation required for producing overly burdensome administrative reports.

Mistake 2 Inflating or Misstating Medical Necessity for Cosmetic Procedures

Cosmetic procedures, plain and simple, are not covered by insurance. It is only when what is normally a cosmetic procedure becomes “medically necessary” that coverage is available to the patient. The arbiter who has the authority to gauge when a procedure is medically necessary is the physician. However, health plans provide enhanced scrutiny of billed procedures that are generally considered cosmetic. For example, injecting Botox into the forehead area for wrinkles is strictly cosmetic and cannot be claimed by the physician or patient under medical insurance coverage. A vastly different scenario is one in which the patient is diagnosed with a condition known as essential blepharospam and the Botox injections are used to reduce or eliminate the muscle spasms. Due to the noncosmetic pathology, the very same treatment becomes compensable. However, any health plan providing coverage for such services will carefully scrutinize the validity of the diagnosis and audit patient charts for clues that the diagnosis is not valid. If there is no detailed history, no diagnostic tests to corroborate the pathology, minimal treatment notes, and no plan of action for the future, the allegation will unquestionably be made that the billing was submitted as a vehicle to entice patients who might not otherwise be financially able, or desire, to pay cash for cosmetic treatments.

Action Step Physicians should ensure that, when a generally cosmetic procedure is performed on a noncosmetic basis, due to medical necessity, the diagnosis can be fully supported. Each office record must contain objective supportive evidence (e.g., diagnostic tests and/or specialist consultative reports) that independently substantiates the diagnosis.

Mistake 3 Not Reporting and Returning Insurance Overpayments

Under federal law, each physician’s office or group practice must review the accuracy of all payments received from a federally sponsored plan, such as Medicare or Medicaid. When a payee determines that it has received an overpayment, by law, the overpayment is considered an immediate debt to the government or carrier. While there is no federal time frame mandated (although for Medicare, there is a time frame of 30 days), a “reasonable” period of time is expected and enforced and any extensive delay in so reporting and repaying may be viewed as an indication that the physician intended to retain the overpayment for economic gain. Overpayments from private insurers are protected by both federal and state criminal statutes. While myriad laws provide for a wide range of punishments, failure to repay any such overpayments can lead to fines and/or imprisonment of up to 10 years for theft, up to 20 years if the health care fraud results in serious bodily injury, and 25 years for insurance fraud. The amount of the monies retained or embezzled will generally determine the level of the punitive action.

Action Step Physicians should educate office staff as to the importance of reviewing all payments received to determine any overpayment. Once an overpayment is discovered, there must be an office procedure in place to notify the physician, who must then promptly authorize a return of the funds to the source.

Mistake 4 Falsifying Records When Confronted With an Audit, an Investigation, or a Malpractice Case

Letters from carriers requesting multiple charts for review, subpoenas in malpractice litigation, and notices from plaintiff’s attorneys requesting a patient’s records all strike fear into the heart of any physician. Severe anxiety can result from each and that is normal. It is also normal, upon reviewing the chart that has to be sent out of the physician’s office, for the physician to wish that he or she had documented better, conducted a more detailed history, ordered more diagnostic tests, and so on. What is not normal (and what exposes the physician to enormous risks) is to translate that wish into reality by altering the chart. While the temptation is enticing, nothing can torpedo the legal well-being of any physician faster than to be caught altering any part of a medical record. Even if the event or conversation actually did happen, including that fact at a later date to make it look like the data were entered at the time of the event is, of itself, fraudulent behavior. Carriers and government agencies are incredibly adept at discerning any signs of alteration: a year’s worth of notes in the same handwriting with no spaces in between entries, notes as to informed consent written in the margins, arrows indicating where notations should be placed, multiple entries that exonerate the physician from liability (“patient acknowledged her responsibility to call if … occurs”) are all red flags indicating alteration of a medical record. No matter the legal arena, the ramifications for such actions are both dramatic and devastating. In every state, it is a crime. In a malpractice case, the finding of adulteration of a chart will lead to a negative jury charge as to the conduct. If found as a result of a payer audit, there will be a referral to appropriate authorities, such as the state medical board for a licensure action and/or the department of insurance fraud for civil or criminal prosecution. In extreme cases, the incident can be referred to the local prosecutor’s office for criminal investigation. No finding of malpractice, or a poorly documented patient chart, is ever worth risking the loss of a physician’s license, facing the prospect of imprisonment, or actually spending time in jail.

Action Step Physicians should routinely perform chart analysis or provide for a staff member to do so. Once any deficiency or inconsistency is noted, any deficient charts should be acknowledged and a vow to correct charting procedures from that time forward should be made. Physicians should not succumb to the temptation to fix perceived or actual charting deficiencies once notice of an investigation or audit is received.

Mistake 5 Violating Antikickback Laws

The federal antikickback laws prohibit physicians from soliciting or receiving any remuneration in return for referring patients for the furnishing or arranging for the furnishing of any item or service payable under Medicare or Medicaid, or in return for purchasing, ordering, leasing, or arranging for the ordering of any good, facility, service, or item payable by Medicare or Medicaid; and for offering or paying any remuneration to any person to induce such person to refer an individual for the furnishing of or arranging for the furnishing of an item or service payable by Medicare or Medicaid, or to purchase, lease, order, or arrange for or recommend the purchasing, leasing, or ordering of any good, facility, service or item payable by Medicare or Medicaid. Anything of value, not just cash, is prohibited by this statute. Even indirect arrangements, such as having a laboratory as a tenant (to which the physician refers patients) pay a higher than normal rent can be viewed as an illegal kickback scheme. Even referrals that are made for legitimate medical reasons can run afoul of this law if any kind of benefit is obtained by the physician making the referral. Consultations fees, free personal services, free medical supplies, free office spaces, and all other similar benefits could lead to a felony conviction, a $25,000 fine and up to five years of imprisonment, loss of Medicare and Medicaid participation, reporting to the National Practitioner Data Bank, and, potentially, incurring a referral to the state board of medicine for a licensure action. Most states also have wide-reaching antikickback laws that complement and often mirror the federal prohibitions. While each state may vary in the provisions of its laws, violation of the local laws will result in similar professional sanctions.

Action Step Physicians should always pay fair market value for all equipment, space, and services; must secure appropriate documentation of that sum; and must never pay, in any form, for the referral of patients or business.

Mistake 6 Violating Self-Referral “Stark” Laws

The federal physician self-referral, or “Stark,” laws (the name of the congressman who sponsored the legislation) prohibit referrals between physicians and other health care entities that have certain financial relationships. Before 1995, the first phase of this set of laws applied only to clinical laboratories (Stark I). Amendments to the law expanded its reach to include a host of other health care settings. Stark laws prohibit referral of patients to entities for the provision of certain specified health services or items (“designated health services”) that are reimbursable by Medicare if the referring physician or the physician’s immediate family members have a financial relationship with the service entities. Designated health services now include clinical labs, physical therapy services, occupational and speech therapy, radiology (MRI, CAT, and ultrasound included), radiation therapy and supplies, durable medical goods, parenteral (and enteral) nutrients and supplies, prosthetics, home health services, outpatient prescription drugs, and hospital services. States have also enacted local versions of this federal law and have often expanded the list of prohibited designated health service entities. Most notably, common misperceptions cause physicians to violate the proscriptions in this law, since a family member is defined to include even such relatives as a grandchild’s spouse and a grandparent’s spouse. Similarly, the law does not require that one intend to violate the proscribed behavior; the simple act itself implies the intent, and the physician can be held responsible and sanctions can be imposed.

Action Step Physicians should keep informed of the applicable Stark laws and should seek legal advice as to whether an action is a “referral” or a relationship is “family” within the meaning of this law, if there is any relationship at all.

Mistake 7 Speaking With Investigators or Law Enforcement Officials Without Legal Counsel or Advice

While every physician has a duty, by law, to be cooperative with investigations conducted by public agencies and a contractual duty to cooperate with representatives of payers representing patients who are treated, cooperating does not require spontaneous discussions without the benefit of counsel being present or simply being consulted. If the physician is concerned that certain conduct will be detected, no amount of charm or “candid” discussions with the officials or agents will persuade them to “go easy” on a particular physician. Generally, the most damaging admissions are made by physicians in their first contact with authorities and this is the reason that, most times, investigators will present themselves at the office door without warning. Attempts to portray oneself in a favorable light often backfire (“I’m so concerned about my patients’ welfare that I don’t even charge copays”), and investigators are well trained to solicit such admissions. Cooperation is best when tempered by time and the advice of experienced health care counsel.

Action Step Physicians should cooperate with all officials but not interpret that to mean that they must make themselves available for all manner of questioning on an instantaneous basis. If there truly is an emergency, such as federal officials at the door with a subpoena and requesting charts, physicians should not be shy about calling their attorney and, no matter what, not enter into substantive discussions on the scene.

Mistake 8 Treating a High Number of Patients Involved in Motor Vehicle Accidents

While there is absolutely no prohibition against treating personal injury victims, physicians who bill for a high volume of motor vehicle treatments will undergo rigorous scrutiny by automotive insurers. Increasingly, each state has formed a fraud investigation unit that focuses all of its investigative efforts on the abuse of payments to physicians on behalf of accident victims. States also increasingly have enacted stringent reporting requirements. Physicians can become ensnared in motor vehicle accident investigations due to fraudulent behavior, such as “runners” who solicit victims and transportation entities that facilitate and encourage patient visits even if not medically necessary. The best defense to allegations of motor vehicle accident fraud is to perform comprehensive exams, require diagnostic corroboration for the diagnosis, and maintain scrupulously detailed notes regarding the progress of treatment.

Action Step Physicians should not respond to solicitations by any individuals or companies that promise to refer motor vehicle accident patients to them for treatment. Physicians should be vigilant in their evaluation of such patients so that any phony “patients” will be potentially identified and measures, such as referrals for consultations and diagnostic testing, can be put in place to triage the fraudulent “victims.”

Mistake 9 Not Having a Compliance Plan for Detecting Errors or Potential Risks

As part of its fraud prevention initiative, the federal government has issued compliance guidelines for particular group sectors of the health care industry, including hospitals, home health care agencies, labs, and billing companies. Moreover, more recent compliance statements have focused on the individual or small-group physician practice. Seven areas of practice are recommended and endorsed: internal monitoring and self-auditing, implementation of compliance standards, designation of compliance officer, provision of training and education, appropriate responses to detected offenses, open lines of communication, and enforcement of standards through well-publicized guidelines. Physicians can protect themselves and their practices by preventing improper conduct on their part, or by those in their employ (which will be imputed to them) or by, at the very least, detecting such improper conduct. Certain areas, such as billing and coding, documentation, referrals, and other contractual agreements, should be periodically reviewed and carefully scrutinized for any violations.

Action Step Physicians should implement a compliance plan in their offices, even single-practitioner offices, since violations do not need to be intentional to cause sanctions and the physician can be implicated even if only by the unsupervised conduct of staff or billing personnel.

Mistake 10 Indiscriminately Disclosing Violations of Conduct or Law

Trust in others is a powerful tool to enhance and foster relationships. Disclosed, confidential information is a powerful weapon against the unwitting. Physicians may supply ill-chosen confidantes with information that could come back to haunt them and result in fines and loss of license to practice medicine. Called “qui tam” actions (“he who” brings the action), their use has escalated with support from the legislature and the judiciary. While trusted long-time employees can be absolutely indispensable to the practice, and provide much-needed support for a stressed-out and overburdened practitioner, confessions of illegal or improper behavior can be devastating. Not many physicians are aware that government agencies have harnessed the power of such disclosures for their own ends. A little-known amendment to the False Claims Act empowers private citizens to become “private attorneys general.” Such individuals can actually prosecute physicians who have defrauded the government. Strong motivation exists for such actions; they get to keep a healthy percentage of the money collected when they prove the case on behalf of the government. Hundreds of such cases have been filed nationally and these private attorneys general are most often employees who have insider knowledge about a physician or a practice (however, disenchanted spouses are another fertile source of claimants and such individuals have been known to exact revenge for all manner of conduct by contacting a variety of agencies, including the Internal Revenue Service). In qui tam actions, the laws have increased the highly motivating return from an amount of “up to 10%” to a minimum 15% recovery.

Action Step Physicians should keep their own counsel, particularly in matters of known or suspected legal violations. They should also confide instances of such conduct only in their legal counsel, who do not disclose or profit by such confidences.

Conclusion

Physicians must be extremely vigilant in their efforts to ensure that their own conduct, and that of their employees and associates, complies with the myriad rules and regulations that are being enforced rigorously. Implementing a compliance plan will deter any punishable behavior, encourage optimal conduct by all concerned, promote better patient care, and provide for the legal safety of the physician.

Additional Resources

Centers for Medicare & Medicaid Services, Medicare Program Integrity Manual, www.cms.hhs.gov/manuals
False Claims Act, 31 U.S.C.
Federal Bureau of Investigation, Mission Statement, Health Care Fraud Unit, www.fbi.gov/hq/cid/fc/hcf/about/jcf_about.htm
Health Care Fraud (American Bar Association 1994 and subsequent years)
Health Care Fraud and Abuse: Legal Implications for Attorneys and Health Care Providers (New York State Bar Association 1998)
Legal Manual for New York Physicians, Fraud and Abuse (New York State Bar Association)
OIG, “OIG Issues Guidance” (news release), ww.oig.hhs.gov/fraud/docs/compliance
“Operation Restore Trust” (HCFA Press Release 5/20/97), www.hhs.gov