Fraud and Abuse Laws

The Office of Inspector General (OIG) identifies the five most important fraud and abuse laws to physicians on their website HERE. The following is a summary of those laws.

  1. The False Claims Act makes it illegal to submit claims for payment to Medicare or Medicaid that providers know or should know are false or fraudulent. No specific intent to defraud is required. Fines can be up to three times the loss plus $11,000 per claim. Imprisonment and criminal fines may apply for criminal violations of the False Claims Act.
  2. The Anti-Kickback Statute (AKS) prohibits “knowingly and willfully” providing something of value to induce referrals for Medicare or Medicaid patients. The AKS requires showing an intent to induce referrals covering a broad range of activities and applies to those in a position to arrange or recommend medical services. Fines can be up to three times payments received and $50,000 per kickback. In addition, claims submitted to Medicare or Medicaid as a result of AKS violations are automatically deemed to be violations of the False Claims Act.
  3. The Physician Self-Referral Law (“Stark Law”) prohibits physicians from referring patients to receive “designated health services” (DHS) payable by Medicare or Medicaid from entities with which the physician or an immediate family member has a financial relationship, unless an exception applies. DHS are explicitly defined. The Stark Law prohibits a broad range of financial relationships with physicians, except for “safe harbors,” such as in-office ancillaries, group purchasing organizations and fair market value agreements for space, equipment or services not based on the volume or value of business generated, with agreements spelled out in advance of service. Violations of the Stark Law does not require proof of intent to induce referrals. Fines and exclusion from participation in the Federal health care programs may apply to Stark Law violations.
  4. The Exclusion Statute excludes individuals and entities convicted of criminal offenses including Medicare or Medicaid fraud; patient abuse or neglect; felony convictions for other health-care related fraud, theft or other financial misconduct; and felony convictions for unlawful manufacture, distribution, prescription, or dispensing of a controlled substance from billing Medicare or Medicaid for services. Physicians also may not bill Medicare and Medicaid indirectly through an employer or group practice. Penalties may include civil monetary penalties and repayment of any amounts attributable to the services of the excluded individual or entity.
  5. The Civil Monetary Penalties Law allows the OIG to seek civil monetary penalties and possible exclusion from Medicare and Medicaid for a variety of violations, including presenting false or fraudulent claims, presenting claims for an item or service which payment may not be made, violating the AKS, violating Medicare agreement and violating the Medicare physician agreement.

The focus of each of these regulations is to protect patients and federal programs from over-utilization, increased cost, compromised care decisions and unfair competition. A qualified healthcare attorney should help providers review areas of exposure, but providers should be alert to each of the following:

1. Scrutinize every business relationship. Remember that troubles arise from appearing to “induce” referrals for “something” of value. Consider how these two factors apply to every business relationship. How might the relationship affect patient steerage? What might the perceived benefit be to the provider? If a physical therapy practice offers a sublease to a provider, it is very likely that the provider subleasing in the physical therapy office could be seen as inducing patients to use that physical therapy service. The question would then be what the provider could have received as a benefit. If the sublease is a written agreement at fair market value without regards to referrals, it could be that the provider may not have received anything of value, but both parties would need to be very careful to maintain this position.

2. Watch in-coming and out-going referrals. Don’t forget that providers are not just exposed to fraud and abuse laws when they refer patients; providers are also exposed when patients are referred to them. If a provider office is providing anything of value to receive referrals from another healthcare provider, they could be in violation of fraud and abuse laws. Providers also need to know where their referrals are going. If a staff member is accepting something of value for directing referrals, the provider could be exposed, even if they are unaware of the arrangement.

3. Understand obligations for all relevant agreements. While this is certainly a necessary step of the first suggestion to scrutinize every business relationship, some agreements should receive special attention, starting with the Medicare provider agreement, Medicare assignment provisions and any business that results in a claim for designated health services, such as laboratory services, imaging services and outpatient prescription drugs. The Medicare provider agreement and assignment provisions set forth regulations regarding services that if violated expose the provider to fraud and abuse laws. Special consideration should be paid to moonlighting where the provider works for both a participating entity and a non-participating entity. Incorrectly billing Medicare in this situation could violate both the False Claims Act and the Civil Monetary Penalties Law.

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