Empowered by ACA, old fraud law puts new scrutiny on doctors

Creating a culture of transparency in a practice and developing strong billing standards are key to complying with a strengthened, civil False Claims Act.

By — Posted Feb. 25, 2013

Print  |   Email  |   Respond  |   Reprints  |   Like Facebook  |   Share Twitter  |   Tweet Linkedin

With the Affordable Care Act giving the government more power and dedicating more money to improving federal efforts against health care fraud, waste and abuse, physicians' business practices are under the microscope like never before.

While only a small fraction of physicians are engaged in fraudulent activity, all doctors face the new reality of increased scrutiny over billing, referral and coding activity, legal experts said.

But recognizing federal False Claims Act risks and enacting a strong compliance program can help doctors come through such reviews unscathed and thwart violations before they occur, said attorney Julie E. Kass, a principal in the Ober|Kaler Health Law Group based in Maryland. She spoke about the FCA and compliance steps for physicians at the American Health Lawyers Assn.'s Physicians and Physician Organizations Law Institute meeting February in Phoenix.

“You've got this hammer that's going against all these physicians when only a small segment are doing what they're not supposed to,” Kass said. “Not all doctors are bad, but [the government has] found some bad doctors, so they've created broad rules, and all doctors must follow those rules.”

Physicians already have become a larger target for federal health fraud investigations, including those brought under the FCA. The statute, enacted in 1863 during the Civil War, protects against the submission of fraudulent claims by government contractors and enforces strict penalties for such violations. The 2010 health system reform law expanded the reach of the law and made it easier for federal investigators to launch FCA cases against alleged violators.

More physicians face charges

Of 2,309 civil and criminal cases — including FCA cases — opened in 2012 by the Dept. of Health and Human Services Office of Inspector General, 21% involved physicians, compared with about 15% in 2010, according to OIG data. Some physicians recently have made headlines for allegations of major FCA violations and other fraud:

  • In February, a Florida dermatologist agreed to pay $26.1 million to settle allegations that he had violated the FCA, the largest settlement ever with an individual under the act. Steven J. Wasserman, MD, was accused of accepting illegal kickbacks and providing medically unnecessary services that he billed to Medicare. He did not admit any wrongdoing.
  • In July 2012, South Carolina family physician James Vest, MD, and his clinics settled FCA allegations for $320,000. The government contended that Dr. Vest and his practices submitted claims to Medicare for physician services that were provided by midlevel practitioners, not by Dr. Vest. He admitted no wrongdoing.
  • In May 2012, Wichita, Kan., cardiologist Roger W. Evans, MD, agreed to pay the government $1.5 million to settle allegations that he and his practice submitted false claims to Medicare. The government said Dr. Evans issued bills for services for which he was not present and did not provide direct supervision. Dr. Evans did not admit any wrongdoing.

Heightened federal focus on individual doctors and physician practices is likely to continue, said George B. Breen, a Washington-based attorney with Epstein Becker Green and part of the firm's health care practice. “Probably the biggest misconception [among doctors] is, 'The government is looking at the hospital and not me individually, or it's looking at another deeper pocket,' ” said Breen, who also presented on the subject of FCA and compliance issues at the AHLA conference.

If the government comes knocking, physicians must be able to show how they are complying with FCA regulations and how they address problem claims, he said. “The only way you are able to defend yourself is to be proactive in engaging in activities where you are compliant.”

Violations can carry significant cost

21% of federal cases of health care fraud involved physicians in 2012, up from about 15% in 2010.

Under the FCA, a violation occurs when a person knowingly presents a false or fraudulent claim for payment; knowingly makes, uses or causes a false record; or conspires with others to issue such a record or claim.

For doctors, a broad range of scenarios can constitute running afoul of the FCA, including filing false codes for payment, making improper referrals and participating in Medicare kickback schemes. Physicians can face treble damages and civil fines for violating the FCA, a percentage of which might go to compensate whistle-blowers who first alerted the government to the alleged fraud. Violations also can bring increased monitoring going forward or exclusion from government programs.

The consequences don't stop there, said Kim Harvey Looney, who co-presented with Kass at the AHLA conference. She is a Nashville, Tenn.-based attorney at the Waller law firm.

“It's not just that you might have to pay money back,” she said. “If your operations have been disrupted, you might lose patients.” Doctors' reputations also can be harmed just by allegations of health care fraud, she said.

While criminal health fraud enforcement has targeted hot spots such as California, Florida, New York and Texas, FCA investigations have not been as geographically focused, Breen said. “Many of the investigations nationwide are largely driven [by] the subject matter.”

For instance, billing for cardiac procedures has been prominent on the government's radar, he said. Back surgeries and the implantation of cardiac defibrillators also are procedures that have gained significant attention from federal investigators, Kass added.

She said hospital-based services are commonly examined. “But of course those services are ordered by physicians. After they look at the hospitals, they can find out who are the larger referring physicians, and then they look at those doctors.”

Kass said that when enforcement officers become knowledgeable about a certain medical service or treatment that is involved in potential fraud, they generally start scrutinizing similar procedures ordered by other physicians.

Enabling a strong compliance program

The first step to complying with FCA requirements is knowing what the rules are and how they apply to individual physician practices, Kass said. The OIG provides general compliance guidance to all health professionals, but particular risk areas vary depending on industry circumstances.

“You're not going to have the same compliance plan if you're a three-physician practice compared to a 300-faculty practice,” she said.

Doctors should implement written policies, procedures and standards of conduct related to compliance expectations, Looney said. Such documentation should identify how compliance issues are investigated and resolved, and it should include policies of non-intimidation and non-retaliation for employees who report potential violations, she said.

Promoting overall transparency and a culture of compliance also is important. Physicians should maintain detailed records and report any potential violations to authorities immediately, Kass and Looney said. All levels of employees, from senior management to entry-level workers, should receive regular compliance training.

Breen added that doctors should be aware of the accepted, defined and used markers for demonstration of medical necessity. Developing a process to know proactively when medically necessary care might be diverging from payers' coverage guidelines is essential, he said.

“You can have problems, and you can make mistakes. Everyone does,” he said. “But there's a difference between making a mistake and, in effect, ignoring what the obligations are and submitting a bill despite that.”

Creating a compliance program now, instead of reacting to problems later, will save physicians significant time, money and investigative burden, Breen added.

“Doctors are in the business of trying to protect their patients and trying to provide patients the best possible care, and that's where their focus is, but now it's become a double-edged sword,” he said. “You have to protect yourself and your practice also.”

Back to top


How to stop False Claims Act violations before they start

Doctors increasingly have become the targets of False Claims Act investigations by the federal government. Experts say practices can prevent such violations by developing strong compliance programs:

  • Know general compliance rules and industry-specific ones . Understand that general rules include implementing written compliance policies and procedures, and designating a compliance officer.
  • Identify risk areas . Know that each industry has its own dangerous areas for noncompliance; for many physicians, these include coding and medical necessity issues.
  • Document a compliance program . Detail how issues are investigated and resolved, and describe compliance expectations.
  • Create a code of conduct . State principles and values of the company, and include a commitment to compliance and lawful conduct.
  • Communicate policies . Distribute procedures and conduct standards to employees within 90 days of hiring, every time there are updates, and annually. Practices should ask for a written acknowledgement of the policies.
  • Promote a culture of compliance and transparency . Identify and address conflicts of interest, ensure regular compliance training and report potential violations to the appropriate authorities.
  • Conduct internal auditing . Create an audit plan and update it regularly, review issues proactively and establish corrective plans.
  • Respond promptly . Establish a system to respond quickly to any possible FCA issues, make reasonable inquiries into potential violations and communicate with the person who reported the issue, if appropriate.
  • Maintain and evaluate records . Track potential issues and their resolutions, and disclose issues to the government if necessary. Evaluate and measure program effectiveness regularly.
  • Impose standard discipline . Establish disciplinary procedures and clear consequences for violations, make sure employees are aware of any discipline and apply rules uniformly across the entire practice.

Sources: “A 12-step Program to Better Compliance: A Practical Approach,” American Health Lawyers Assn.'s Physicians and Physician Organizations Law Institute, February

Back to top

External links

“OIG Compliance Program for Individual and Small Group Physician Practices,” Dept. of Health and Human Services Federal Register, Oct. 5, 2000 (link)

Back to top



Read story

Confronting bias against obese patients

Medical educators are starting to raise awareness about how weight-related stigma can impair patient-physician communication and the treatment of obesity. Read story

Read story


American Medical News is ceasing publication after 55 years of serving physicians by keeping them informed of their rapidly changing profession. Read story

Read story

Policing medical practice employees after work

Doctors can try to regulate staff actions outside the office, but they must watch what they try to stamp out and how they do it. Read story

Read story

Diabetes prevention: Set on a course for lifestyle change

The YMCA's evidence-based program is helping prediabetic patients eat right, get active and lose weight. Read story

Read story

Medicaid's muddled preventive care picture

The health system reform law promises no-cost coverage of a lengthy list of screenings and other prevention services, but some beneficiaries still might miss out. Read story

Read story

How to get tax breaks for your medical practice

Federal, state and local governments offer doctors incentives because practices are recognized as economic engines. But physicians must know how and where to find them. Read story

Read story

Advance pay ACOs: A down payment on Medicare's future

Accountable care organizations that pay doctors up-front bring practice improvements, but it's unclear yet if program actuaries will see a return on investment. Read story

Read story

Physician liability: Your team, your legal risk

When health care team members drop the ball, it's often doctors who end up in court. How can physicians improve such care and avoid risks? Read story

  • Stay informed
  • Twitter
  • Facebook
  • RSS
  • LinkedIn