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Fraud and Abuse. What does the government care about?. Cost Utilization (medical necessity) Quality. Cost. This is controlled directly The feds decide what they want to pay What are the constraints on pricing?. Utilization (Medical Necessity).

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What does the government care about
What does the government care about?

  • Cost

  • Utilization (medical necessity)

  • Quality

Fraud and abuse

  • This is controlled directly

  • The feds decide what they want to pay

  • What are the constraints on pricing?

Utilization medical necessity
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?


  • 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?

Fraud issues
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?

Related laws
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


  • 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?

Why use codes
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


  • 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

Conditions of participation cop
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

Us v krizek
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

What did krizek do wrong
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?

Doc s defense
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

What is the scienter requirement
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?

District court ruling
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

Appeals court
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

Is bad care fraud
Is Bad Care Fraud?

  • US ex Rel Mikes

  • What would make the care fraudulent?

Whistleblower provisions
Whistleblower Provisions

  • Only protection if you bring suit

  • Not a good protection

Interesting issues
Interesting issues

  • Bribes by device and drug companies

  • PATH audits (medical schools)

  • HCA

Qui tam
Qui Tam

  • Standing in the shoes of the government

  • 15-20%

  • Feds can march in

  • May not apply to claims against states

Physicians as fiduciaries
Physicians as Fiduciaries

  • Model Penal Code

  • Informed consent law

  • General principles

    • Knowledge differential

    • Power differential

Fiduciary obligations
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

Why does the federal government care
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

Problems with the federal bias
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

The general self referral laws
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

The lease scam
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?

The recruitment scam
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?

The lab scam
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

The hospital investment scam
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?

The practice purchase scam
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?

The stark law approach
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

Philosophy of stark
Philosophy of Stark

  • Simplify the law by clearly outlining the forbidden areas

  • Create safe harbors that can be used as models

Problems with stark
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

Exceptions to stark
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?

Analyzing stark transactions
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?

The integrated provider exception
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?