Fraud and Abuse

1
Fraud and Abuse
2
What does the government care about?

• Cost
• Utilization (medical necessity)
• Quality

3
Cost

• This is controlled directly
• The feds decide what they want to pay
• What are the constraints on pricing?

4
Utilization (Medical Necessity)

• What are the issues we have seen on medical
  necessity?
• Is the treatment needed?
• Is it experimental?
• Is it effective?
• Is it covered by the policy
• What are the political constraints on the
  government in setting utilization rules?

5
Quality

• Does the government care about costs?
• What about when quality and cost colide?
• Should patients have a right to cheaper, lower
  quality care?
• Does the federal government directly control
  quality?
• States?
• JCAHO?

6
Fraud Issues

• Was the care delivered at all?
• Durable medical equipment scams
• Billing for more care that was actually delivered
• Was the care necessary?
• Was the care unbundled?
• (Charging separately for care that should be one
  charge)
• Where kickbacks paid?

7
Related Laws

• General government contracting laws
• Mail and wire fraud
• RICO
• False Claims Act
• Statutory penalties - 5-11,000 per claim
• Treble damages (whichever is higher)
• Qui tam - private enforcement

8
Coding

• CPT codes - AMA
• Some are time based, like in the Krizek case
• Others are work-based
• You get paid more for doing more
• It does not matter how long you take
• Levels 1-5
• Is it better to see a lot of patients or do a lot
  to each you see?

9
Why use Codes?

• Uniform billing for all claims
• Equalize billing across specialties
• Provide incentives for more comprehensive care
• Allows computerized payment
• Allows tracking of medical information derived
  from claims forms

10
Upcoding

• Anything that increases the payment for the
  encounter
• Can be legal
• Optimizing coding
• Can be illegal
• Work that was not do, or work that was not
  properly documented
• Misstating the patient's medical condition

11
Conditions of Participation (COP)

• The contract between the providers and CMS
• If you do not comply with the COP you can be
  denied payment or excluded from the program
• If you knowingly violate the provisions of COP it
  can be grounds for false claims and criminal
  prosecution

12
US v. Krizek

• The judge thinks the doc is a good guy
• Criticizes the crazy reimbursement system
• Lets the doc put on evidence of standard billing
  practices to refute fraud charges
• Thinks the law is crazy because the feds can
  assess 81,000,000

13
What did Krizek do wrong?

• Did he actually treat the patients?
• Was his treatment medically necessary?
• What were the issues in billing?
• Billed for 40-50 minute time code for everyone
• Who did this
• What was the justification?
• Did the doc know?

14
Doc's Defense

• He really did spend the time, he just did not
  spend it all on the patient
• Lots of stuff you do in the office as part of the
  care

15
What is the Scienter requirement?

• Intent to defraud?
• Knowing that the claim is wrong but submitting it
  anyway?
• Why does the statute specifically say that there
  is no need to prove intent to defraud?
• What is the doc's certification problem?

16
District Court Ruling

• Found liablity on the days when there were more
  than 12 codes for 50 minutes
• Thought that the doc was liable, but an
  unfortuante system

17
Appeals Court

• Makes it clear that reckless ignorance is wrong
  and grounds for liability under the Act
• Is not sympathetic to the doc's claimed slipshod
  accounting

18
Is Bad Care Fraud?

• US ex Rel Mikes
• What would make the care fraudulent?

19
Whistleblower Provisions

• Only protection if you bring suit
• Not a good protection

20
Interesting issues

• Bribes by device and drug companies
• PATH audits (medical schools)
• HCA

21
Qui Tam

• Standing in the shoes of the government
• 15-20
• Feds can march in
• May not apply to claims against states

22
What do you tell clients about False Claims?
23
Understanding Self-Referral Laws
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Physicians as Fiduciaries

• Model Penal Code
• Informed consent law
• General principles
• Knowledge differential
• Power differential

25
Fiduciary Obligations

• The physician acts as purchasing agent for the
  patient
• Self-referral laws target incentives that
  encourage the physician to make certain decisions
  contrary to the patient's interests
• Order unnecessary care or tests
• Choose providers based on criteria other than the
  best interests of the patient

26
Why Does the Federal Government Care?

• They claim to care about quality
• FTC undermines this with talk about the right to
  buy cheap, crummy care
• They care a lot about costs
• Unnecessary care is wasted money and bad for the
  patient
• It is assumed that if a kickback is necessary,
  the care is either worse or more expensive

27
Problems with the Federal Bias

• The feds are only concerned with incentives to
  order more care or to steer care
• They do not care if there are incentives to deny
  care
• Big issue with HMOS and other structured plans
• Underlines the problem with consumer directed care

28
The General Self-Referral Laws

• There is broad statutory authority banning deals
  that create incentives to refer business
• These deals have to be analyzed to map out the
  cash flow to determine what incentives the
  physicians see

29
The Lease Scam

• Hospitals often own professional buildings
• Physicians in the professional are more likely to
  admit patients to the hospital
• Proximity
• Shared services
• Is the hospital providing incentives for
  physicians to be in their professional building?
• How do you put a fair market value on proximity?

30
The Recruitment Scam

• The hospital sees that there is a need for
  physicians with specific skills in the community
• The hospital recruits a physician with a
  relocation package
• Moving expenses
• Salary support for a period of time
• Does any of this obligate the physician to refer
  to that hospital?
• What if it is the only hospital in the community?

31
The Lab Scam

• There is a huge amount of money in medical lab
  tests
• Hence my skepticism about the real causes of
  defensive medicine
• Is the lab providing incentives to the physician?
• Direct kickbacks
• Subsidized services, like renting space in the
  physician's office
• Gifts - trips to the fishing camp

32
The Hospital Investment Scam

• Hospital wants to increase the flow of surgical
  patients
• Hospital sets up surgical suite as a separate
  corporation and sells surgeons shares
• Earnings are based on the capital contribution
• What is the impact of a admitting patients on the
  physician's return on investment?

33
The Practice Purchase Scam

• Hospital buys the physician's practice
• Hires the physicians to deliver care in the new
  hospital practice
• Is this really a sale or just a kickback scheme?
• How was the business valued?
• What are the terms for payment?
• Is any of the payment contingent on referrals?

34
The Stark Law Approach

• Start has a list of 11 defined services
• Any deals that influence the ordering of these
  services are banned
• There are a series of safe harbors for
  transactions that are not thought to be abusive

35
Philosophy of Stark

• Simplify the law by clearly outlining the
  forbidden areas
• Create safe harbors that can be used as models

36
Problems with Stark

• Too much money in the forbidden areas
• Doc and hospitals go the extra yard to game the
  system
• Spotty to non-existent enforcement
• No clear boundaries
• Puts complying entities at a completive
  disadvantage

37
Exceptions to Stark

• Physician controlled ancillary services
• If the doc runs the lab and it is part of the
  practice, it is not covered by Stark
• What is the incentive?
• Is it even worse than for an outside lab?

38
Analyzing Stark Transactions

• Is it a covered service?
• Does it met the ancillary service exception?
• Is there any financial linkage between the
  provider and the referring doc?

39
The Integrated Provider Exception

• Integrated providers provide both medical and
  hospital and other services
• It is OK to tell employees where to refer
  patients
• You cannot pay employees a bonus for referrals,
  but they can share in the profits (gain share)
• Does this exception make any sense?
• Does it just provide a way for hospitals to avoid
  self-referral laws by buying physician's
  practices?