When Profitability Leads to Million-Dollar Payouts & Prison

By Connor D. Jackson

As health care practices seek to increase profits and productivity, the federal government has maintained a steady and active interest in investigating and penalizing fraud.

As most health care attorneys can tell you, the government makes about $4 in fines for every $1 it spends investigating or prosecuting fraud.

FRAUDULENT BILLING REMAINS HIGH PRIORITY FOR THE JUSTICE DEPARTMENT

Medicare fraud–often taking the form of up-coding or billing for services rendered by a lesser-licensed or unlicensed professional–is one of the top reasons that practices find themselves at the receiving end of a government subpoena (or worse). The government also focuses heavily on billing fraud in the Medicaid, TRICARE, and CHAMPVA programs. State governments sometimes have their own versions of anti-fraud laws that penalize fraud against private insurers like Blue Cross in the same way.

In 2020, the federal government recovered approximately $2.2 billion from False Claims Act (FCA) cases—the bulk of which represented fraud in the health care industry.¹ Because COVID-19 has lawmakers and news personalities alike talking in the trillions of dollars, it’s useful to compare this to other government line-items. As a point of reference, $2.2 billion is about the same amount of money that the 2020 omnibus spending bill allocated to the Space Force. It’s about a quarter of the EPA’s annual budget. It’s about half of SAMSA’s annual budget. With that kind of money in your pocket, you could buy the Miami Marlins and the Kansas City Royals baseball teams.

THE FALSE CLAIMS ACT HAS TEETH

Violating the FCA Isn’t That Hard to Do

The FCA prohibits knowingly submitting a false or fraudulent claim for payment; and knowingly making a false record or statement related to that claim.² Under the government’s definition, a provider can “knowingly” submit a false claim if they recklessly disregard the truth or falsity of the information contained in the claim.³ They don’t need to specifically intend to defraud the government.⁴ Insufficient oversight or training, sloppy billing and recordkeeping, or delayed charting can create an environment in which providers are acting with reckless disregard for whether the information contained in the claim is accurate. And when the government is the only one who’ll get hurt from an up-coded bill, it may not even feel very wrong to fudge the numbers a bit. This is especially true if providers face penalties at work for falling short on practice-imposed benchmarks for patient visits and productivity.

The Penalties Will Sting – Except for the Whistleblower

A person or practice that violates the FCA can be fined $5,000 to $10,000 (as adjusted for inflation) plus three times the amount of damages that the government incurs from the violation (these are called “treble damages”).⁵ These damages can be reduced or eliminated entirely for a person who rapidly alerts the government that a practice or person has filed a false claim and assists with the investigation.⁶ Often called a “whistleblower,” this person can receive up to 25% of the government’s recovered money.⁷ Whistleblowers are one of the government’s strongest tools in finding and penalizing fraud—they are typically current or former employees with extensive knowledge of practice operations.

THE WHY, WHO, AND HOW OF “GETTING CAUGHT”

Justice Department is Clear That Patients Must Take Priority Above Profits

At the root of all healthcare fraud laws and efforts is the concern that, left unregulated or unchecked, healthcare practices could elevate profits above patient needs. In a press release about a healthcare fraud settlement, Acting Assistant Attorney General Brian Boynton⁸ said, “[t]he [Justice Department] is committed to ensuring that federal health care program providers do not place their own financial gain over patients’ clinical needs….When medical professionals and companies knowingly commit fraud to maximize their profits, we will hold them accountable for their unlawful conduct.”⁹ These concerns are exacerbated–as indicated by heightened enforcement–when the violations occur in those health care programs impacting the elderly or military.

The government uses credentialling as both a carrot and a stick; being credentialed with Medicare constitutes the lifeblood of many practices, and it expands Medicare beneficiaries’ provider network. But CMS also wields this power as a stick and will suspend a practice or provider from the Medicare program for certain legal violations. Armed with extensive data about practices’ patients and conduct, the government is able to quickly turn off the payment spigot on anyone whose claim-filing behavior raises an alarm. The most egregious cases include providers billing for more than 24 hours of patient visits in a day, but the bulk of cases are more subtle and reveal that practices are getting caught for more common (yet illegal) coding and billing behavior.

Illustrative Cases: Who Gets in Trouble and for What

All of the following cases were brought to the government’s attention by a whistleblower—most of whom were current or former employees of the practice.

Coding group therapy as individual therapy

A South Carolina physical therapy practice settled a claim with the government for $790,000. A former employee-turned-whistleblower alleged that the practice submitted claims to Medicare for individually rendered physical therapy services when the services were actually provided to the patients simultaneously in a group setting.¹⁰

Coding Services Rendered by Non-Physical Therapists as Physical Therapy

A New York physical therapy practice billed services to Medicare that they represented were provided or supervised by a Medicare-credentialed physical therapist. In reality, the services were not provided by those whose NPI numbers were included on the claims or even by providers credentialed with Medicare. They were filed using the NPI number of a Medicare-credentialed physical therapist who no longer worked at the practice. The Medicare credentialing process is one of the government’s quality-control checks in the Medicare system, and such deception threatens the quality of patient care.¹¹

An Alabama orthopedic surgery and physical therapy practice settled with the government for $1.2 million after billing Medicare and TRICARE for physical therapy services that were actually rendered by athletic trainers and exercise physiologists. This case was brought to the government’s attention by a former employee, whose share of the settlement totaled $200,000.¹²

Using Inaccurate Patient Complexity Codes That Are Reimbursed at Higher Rates

An Illinois multi-disciplinary therapy practice settled an FCA case with the government for $9.7 million, and the practice was also excluded for five years from participation in federal healthcare programs. The practice up-coded their claims by increasing patients’ Resource Utilization Group (“RUG”) scores; a higher RUG score indicates a higher-complexity patient and thus higher Medicare reimbursement. They also rendered unnecessary therapy to patients who could not benefit from it.¹³

Ordering Medically Unnecessary DME; Receiving Kickbacks

A North Carolina physical therapist paid $152,000 to settle the Justice Department’s allegations that he received illegal kickbacks and violated the FCA by filing fraudulent claims with the VA. His claims contained fictitious statements about a patient’s medical need for a DME device. He was simultaneously receiving illegal kickbacks from the device manufacturer for prescribing them to VA patients.¹⁴

PREVENTING FALSE CLAIMS REQUIRES PROACTIVE POLICIES

Every practice that accepts any kind of insurance should maintain a fraud, waste, and abuse compliance policy. Practices that accept government payers must maintain these policies.

You Cannot Write These Policies Yourself

The list of fraud-related laws with which healthcare practices are required to comply is extensive and includes the False Claims Act, Stark Law, Anti-Kickback Statute, Civil Monetary Penalties Law, and Beneficiary Inducement Statute. These federal laws often have state law counterparts, meaning that the practice could face legal proceedings on multiple fronts. Compounding that complexity, it’s important to recognize that all of these laws are bolstered by thousands of pages of regulations, which have been implemented by agencies like CMS to ensure compliance and articulate standards. And if you think you have all of those bases covered, remember that you can also be sued based on standards set by the common law (the vast body of law that reflects previous court decisions).

Your policies can properly be drafted only by a healthcare attorney who practices in your state and is familiar with your practice. While you’re the expert on your practice, this is not something that can be accomplished without an immersive understanding of this field of law. (Consider it the equivalent of a lawyer attempting one of the most nuanced and sensitive physical therapy modalities where there’s a high chance of injury if you get it wrong.)

If you used a general business attorney to start your practice, it would be wise to seek out a different firm that is specifically tuned into the fast-moving and complex area of healthcare fraud compliance. Most states have a healthcare law association with searchable membership rolls, and the American Health Law Association also maintains a membership database.

Your Team Needs Frequent and Rigorous Training

Policies require training. It’s crucial that you train your staff on your policies and procedures for preventing, identifying, and reporting fraudulent or suspicious conduct. Many providers are unclear as to what specifically constitutes fraud. Further, without proper training, an employee may feel like it’s “tattling” to reveal a colleague’s billing discrepancies. By providing your entire team with a rigorous education about the healthcare laws that impact their practice, the way that claims must be completed and filed, and the manner in which your policies will be enforced, you can create a culture of compliance. It is crucial that your team understands what conduct can land them and the practice, in legal trouble, and that everyone is clear about how to report suspected misconduct.

One portion of your training should also emphasize that an employee who becomes a whistleblower or who reports misconduct will not be subjected to retaliation. These individuals are heavily protected under the law and retaliating against them will only exacerbate your legal woes.

Be Proactive by Auditing Your Patient Charts for Problems

If you’ve heard the slogan for many highly curable diseases “the best protection is early detection”, then you’re ahead of the curve. The best way to identify possible billing errors and fraud at your practice is to regularly review patient charts for compliance. Ideally, the chart review would be performed by a third party (typically your attorney), who performs a random, anonymized sampling of your patient records. They’ll work with you to ensure that all of your providers and payers are represented in that randomized record set. Next, they’ll review the records, the claims, payments, and the practice’s communications around billing. Is the practice underbilling, overbilling, balance billing, improperly waiving co-pays, maintaining adequate records, using the wrong codes, or misconstruing some of the applicable requirements? The process is detailed and laborious, but it can identify issues at an early stage, before they become a legal problem, and you can then address how to remedy them in a way that’s compliant and forthright.

A chart review or audit is particularly important in the immediate aftermath of making changes to the practice’s productivity standards. If nothing has changed about the practice’s schedule, but the outgoing claims suddenly amount to greater sums of money, a practice may find that its burned-out workforce is “rounding up” or fudging the complexity of patient encounters. This conduct will create major legal problems for all involved, undermines your practice’s dedication to transparency and high-quality patient care, and threatens to subject you to government oversight. Regular chart reviews can help to identify these problems and remedy them in a collaborative, proactive way.

THE TAKEAWAY

As a health care attorney, I don’t favor productivity-driven benchmarks. I much prefer that practices create standards that are correlated with patient satisfaction and thus reward those clinicians who work to build the strongest provider-patient relationships. Providers who are kind, empathic, and patient tend to be sued far less than their brisque, rushed counterparts—even if the kind provider’s patients don’t experience outcomes that are as strong as the crabby clinician’s patients enjoy. The human connection in healthcare is hard to measure, but many practices seek to implement fiscal benchmarks while overlooking a huge source of financial risk—malpractice lawsuits! My experience working with physical therapists suggests that a the most successful practice owner is the one who creates a holistic environment that gives ample opportunities to thrive to their employees (through training, benefits, merit-driven recognition, continuing education) and patients (through opportunities for non-clinical connection, personal space, empathic encounters with support staff, straightforward billing processes). And this practice ethos comes with a few welcome side effects—organized policies, a patient-centered practice where growth results from referrals and goodwill, and the reassurance that their practices lessen, rather than exacerbate, their risk of getting sued.

Note: If any third-party payer requests records or notifies you that you’re being audited or investigated, that is a serious legal matter. You should retain an attorney immediately who is both well-versed in health care fraud matters and who is licensed in your state.

References:

¹ Dept. of Justice, Justice Department Recovers Over $2.2 Billion from False Claims Act Cases in Fiscal Year 2020 (Jan. 14, 2021), https://www.justice.gov/opa/pr/justice-department-recovers-over-22-billion-false-claims-act-cases-fiscal-year-2020

²31 U.S.C. § 3729(a)(1)(A)-(B).

³31 U.S.C. § 3729(b)(1)(A).

⁴31 U.S.C. § 3729(b)(1)(B).

⁵31 U.S.C. § 3729(a).

⁶31 U.S.C. § 3729(a)(2).

⁷31 U.S.C. § 3730(d)(1).

⁸Mr. Boynton was an Acting Assistant A.G. at the time this article was drafted. His title should be confirmed prior to publication.

⁹Dept. of Justice, Florida Businesswoman Pleads Guilty to Criminal Health Care and Tax Fraud Charges and Agrees to $20.3 Million Civil False Claims Act Settlement (Feb. 4, 2021), https://www.justice.gov/opa/pr/florida-businesswoman-pleads-guilty-criminal-health-care-and-tax-fraud-charges-and-agrees-203

¹⁰Dept. of Justice, Carolina Physical Therapy and Sports Medicine, Inc. To Pay $790,000 to Resolve False Billing Allegations (May 9, 2019), https://www.justice.gov/usao-sc/pr/carolina-physical-therapy-and-sports-medicine-inc-pay-790000-resolve-false-billing

¹¹Dept. of Justice, Manhattan U.S. Attorney Settles Civil Fraud Lawsuit Against Physical Therapy Center And Its CEO For Improper Medicare Billing (June 27, 2019), https://www.justice.gov/usao-sdny/pr/manhattan-us-attorney-settles-civil-fraud-lawsuit-against-physical-therapy-center-and

¹²Dept. of Justice, Qui Tam Lawsuit and Federal Investigation Results in Settlement and $1.2 Million Payment by Baldwin Bone & Joint, P.C. (Aug. 15, 2019), https://www.justice.gov/usao-sdal/pr/qui-tam-lawsuit-and-federal-investigation-results-settlement-and-12-million-payment

¹³Dept. of Justice, Chicago-Area Physical Therapy Center and 4 Nursing Facilities to Pay $9.7 Million to Resolve False Claims Act Allegations (June 11, 2019), https://www.justice.gov/usao-ndil/pr/chicago-area-physical-therapy-center-and-4-nursing-facilities-pay-97-million-resolve

¹⁴Dept. of Justice, Southeastern Physical Therapy And Owner To Pay $152,000 To Settle False Claims Allegations For Submitting Claims For Medically Unnecessary Durable Medical Equipment To Veterans Administration (Feb. 5, 2021), https://www.justice.gov/usao-wdnc/pr/southeastern-physical-therapy-and-owner-pay-152000-settle-false-claims-allegations

Connor Jackson is a founding partner of Jackson LLP Healthcare Lawyers, where he focuses his practice on the business side of health care law. Connor is licensed in New York, Illinois, Texas, Michgan, and Wisconsin. He can be reached at Connor@JacksonLLP.com.