Physicians, don’t make this big mistake

Medical Economics JournalMedical Economics February 2023
Volume 100
Issue 2

A huge mistake I often see physicians make is carelessly signing up to become medical directors. Becoming a medical director of a facility, a medical device company or some other venture could jeopardize your license and liberty. Although on its face medical directorship is a vehicle for making ancillary income, these contracts often are structured in ways that may be illegal. For example, the agreement:

  • pays physicians for patient referrals;
  • pays physicians for overseeing medical care, when in actuality the provider is not overseeing anything;
  • allows nonclinicians to direct patient care; or
  • pays physicians fees for no work performed.

Instead, if an opportunity to become a medical director is presented to you, review the agreement and business arrangement with your attorney. The attorney should examine rules related to your state’s licensing laws, Medicare and the facility’s payer agreements, and review the organization to ensure it has not been excluded from Medicare and other federal funding.

Additionally, it would not hurt to review recent Department of Justice indictments to have a better understanding of why other medical directors have gotten into trouble. The Office of Inspector General states that to comply as a medical director, the physicians should:

  • actively oversee clinical care in the facility;
  • lead the medical staff to meet the standard of care;
  • ensure proper training, education and oversight for physicians, nurses and other staff members;
  • and identify and address quality problems.

Recent Dallas case highlights issue

The $27 million Novus Health Services fraud case resulted in a combined 84 years in federal prison for 13 defendants. Bradley J. Harris, former CEO of Novus and Optimum Health Services, pleaded guilty in 2021 to one count of conspiracy to commit health care fraud and one count of health care fraud and aiding and abetting. According to plea papers and evidence at trial, Dallas-based Novus defrauded Medicare by making false claims about hospice services, providing kickbacks for referrals and violating the federal law restricting release of medical information to recruit more patients. Novus employees also gave patients Schedule II controlled substances without guidance from health care professionals and later transferred patients to a new hospice facility to circumvent Medicare disciplinary action.

Two doctors who helped Novus in the scheme were sentenced to a combined 23 years in prison for health care fraud. The medical directors were found guilty of conspiracy to commit health care fraud and other charges. The doctors helped defraud Medicare by, among other things, illegally admitting patients who were not appropriate for hospice and submitting materially false claims for hospice services.

“These doctors allowed an accountant with no medical expertise to dispense controlled substances like candy, with little to no medical oversight,” said U.S. Attorney Chad Meacham. “They claimed to have had hands-on experience with hospice patients, when in fact they’d entrusted life-or-death medical decisions to untrained businesspeople.”

The government relied on the doctors to certify that they had examined these patients face-to-face when no such examinations had occurred.

There is no amount of medical director pay that is worth losing your medical license and liberty. I am sure that when these physicians took this job, they never intended to lose their liberty, but sometimes fast money prevents people from thinking clearly.

Doris Dike, Esq., is managing partner of Dike Law Group in Frisco, Texas. A business lawyer for health care clients, she works with doctors, podiatrists, nurses, emergency departments, urgent cares, med spas, hospitals, small independent clinics, rural hospitals and surgery centers. She can be reached at

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