How to avoid getting pulled into healthcare fraud

September 16, 2020

Many fraudulent schemes appear as legitimate business opportunities

I am proud to have represented physicians for more than 25 years. My father is a retired physician and I have the greatest respect for the profession and its practitioners.

Unfortunately, over the past 10 years or so, I have seen many well-meaning physicians pulled into fraudulent schemes disguised as legitimate business models. Usually, the physicians involved were approached by a sophisticated and seemingly well-meaning company with a “shiny” proposal and big law firm opinion of support and assured that dozens or more of their colleagues had signed on. BEWARE. I cannot recount how many times my colleagues and I have seen ill-conceived transactions that, on their face, seemed legitimate. Sometimes we are retained early in the process, when our clients approach us to review the proposal. In these instances, we can either help recraft the business model so that it complies with the law, or, in many cases, warn the client to avoid the transaction entirely.

In other cases, we are contacted after a criminal or civil government investigation has already ensued. Obviously, this severely limits our available options.

In order to avoid transactions that may expose you to serious legal repercussions, make it a practice to do the following:

Do not be influenced by the size or sophistication of the company that approaches you. Many large public companies, their executives and business partners have been prosecuted for illegal schemes;

Do not be influenced by any legal opinions issued by law firms representing the business that has approached you. Legal opinions can be manipulated by even minor factual changes, and, in many, many cases, legal opinions may be just plain wrong. You cannot legally rely upon an opinion from an attorney who does not represent you;

Understand that no matter how much or how little money is at stake, the consequences of “getting it wrong” are severe, and include loss of medical license, criminal sanctions, severe civil monetary penalties, recoupment actions, loss of hospital privileges, termination from the Medicare program and private insurance contacts, and loss of reputation;

Be suspect of any transaction in which you receive any remuneration for anything other than your personal medical services. This includes payment for passive investments in healthcare services, payment for space or equipment, payment for your data, an opportunity to receive patient referrals, meals & entertainment, future business opportunities, etc;

Retain an attorney who has a lot of experience in health care law. A comprehensive analysis of a healthcare business model is extremely complex, as it involves a deep understanding of federal laws such as Stark, Anti-Kickback and the False Claims Act, as well as a variety of state laws. An attorney who looks at a contract as simply another business transaction, and focuses only on the business terms, is not doing his or her job. A fraud and abuse analysis should always be part of the process, even if it is dispensed with quickly.

Here are just some examples of the types of arrangements that should be subjected to a comprehensive regulatory analysis (many may be acceptable, but that conclusion should be reached only after legal review):

Any lease or sublease arrangement with referral sources or referral recipients;

Any contract with a laboratory;

Any contract with a DME manufacturer, wholesaler or distributor;

Any contract with a drug manufacturer, wholesaler or distributor;

Any contract with a diagnostic imaging company;

Any contract with a home health provider;

Any contract with an infusion provider;

Any arrangement whereby you are selling data, or receiving any benefit for the sale of data;

Any arrangement involving waiving copays or relieving patients of any payment obligation;

Any medical director or consulting agreement or other arrangement whereby a physician is paid to do something other than caring for patients;

Any arrangement whereby you are asked to introduce a new treatment modality;

Any arrangement whereby you receive a “speaker fee;”

Any “independent contractor” arrangement or professional services agreement (PSA) – may cause fee-splitting/kickback concerns;

Any arrangement where you are paying or receiving a percentage of professional revenue;

Any part-time employment arrangements – these may not be bona fide employment arrangements;

Any arrangement where you receive profits from ancillary services, such as imaging, laboratory, surgical, etc.;

Any marketing arrangement.

If you have engaged in activities that concern you, do not bury your head in the sand. The government has a self-disclosure program that permits providers to disclose their wrongdoing, and avoid criminal prosecution. It’s a sort of “get out of jail free” card. We have handled dozens of self-disclosures with amazing success.

A final word of caution – it is not necessarily relevant whether or not the arrangement involves Medicare or another government payor. Private-pay and self-pay arrangement can be equally problematic. It also does not matter how many of your colleagues are “doing it.” As my partner, John Morrone, Esq., has said, “ubiquity is not a defense.” In fact, ubiquity increases the likelihood that a government investigation may be imminent. The government likes to prosecute widespread schemes because they can utilize the same knowledge, tactics and resources over a broader number of perpetrators. Also, the more popular a scheme is, the more people know about it, and the more likely that someone will become a “whistle-blower.” Whistle-blowing is one of the primary causes of government investigations.

As medicine has become more corporatized, opportunities for physicians to be pulled into dangerous transactions has increased exponentially. Keep your antennae up, and seek legal advice.

Daniel B. Frier, Esq., is founding partner of Frier Levitt.