You and your staff are caroled onto chairs in a corner of your waiting room where are you instructed to sit silently, as patients are chased away. Men in blue windbreakers with guns strapped to their ankles searches through every nook and cranny of your office. Three others rifle through your records and stow both your laptop and your server into boxes along with reams of patient and billing records.

While this might sound like a robbery in progress, it is nothing of the sort. It is the picture of modern law enforcement agents executing a warrant that grants them broad authority to search a suite of medical offices and seize records they think might evidence various health care crimes. It is an endeavor that could ruin your practice, destroy your reputation and deprive you of your liberty.

It comes as no surprise to physicians that the legislative landscape governing the practice of medicine has undergone a hostile sea change. Business relationships that were once commonplace have been branded criminal and efforts to maximize profits in an era of dwindling reimbursement have been categorized as fraud. Indeed, it is with alarming frequency that federal, state and local officials first target and then descend upon health care practitioners in the fashion hauntingly similar to that described here.

In some instances, these efforts are legitimate; in others physicians find themselves the victim of insurance companies that now have the ear of law enforcement. Indeed, in the face of withering budget cuts, state and local prosecutors have accepted monetary grants from the insurance industry to fund insurance fraud investigations that would have otherwise fallen by the wayside.

A basic understanding of the weapons employed by law enforcement and their targets will go a long way toward keeping you out of their scopes. While the criminal laws that affect your practice are legion, they are aimed, broadly speaking, at three major targets: business relationships, billing/coding practices and, of course, outright fraud.

Investigation and Prosecution of Classic Medical Fraud

Over the last ten years, state and local prosecutors, in concert with the insurance industry have targeted dishonest practitioners who grind their grist in Medicare and No-Fault insurance “mills. In law enforcement parlance a “mill” is a concern whose business is the mass generation of medical bills for treatment that was either not indicated or never rendered.

Several years ago, prosecutors in Brooklyn shut down the prototypical No-Fault in Brighton Beach. The clinic was operated by an enterprising Russian émigré with no medical expertise and little experience beyond that garnered driving a gypsy cab over the streets of the outer boroughs. Nonetheless, he conspired with a consortium of lawyers and doctors to recruit participants, most of whom were also recent immigrants to participate in phony automobile collisions. Patients would receive one thousand dollars for lending their names to an accident report and allowing phony records of treatment to be made at the clinic. Although treatment was virtually non-existent, patient records indicated that most received a comprehensive history and physical examination, physical therapy, chiropractic massage, psychotherapy, nerve conductivity testing (and, ultimately MRI’s or CT scans at related facilities). Undercover officers penetrated the phony accident ring and ultimately the participants, at all levels, were tried, convicted and imprisoned.

Similar criminal enterprises have become so common that each of the District Attorney’s Offices win the metropolitan area have established insurance fraud units and recently, the Governor appointed the Attorney General to serve as a Special Prosecutor with statewide jurisdiction for automobile insurance fraud.

False and Fraudulent Claims

In order to bring viable criminal cases, prosecutors must prove that the physician acted with the intent to commit a crime. Accordingly, law enforcement now takes its cues from managed care by targeting physicians identified as outliers. In furtherance of these investigations they not only utilize search warrants to seize records and wire tapping orders to record incriminating conversations, they also obtain by way of grand jury subpoena, various banking, business and personal records.

However, capable prosecutors will not rely solely upon “paper” to prove their cases. Instead, in exchange for promises of leniency, they will seek cooperation from others involved—people who are lower on the “food-chain” or whose guilt may be more easily proven. Additionally, they will interview present and former (preferably disgruntled) employees, even former spouses or lovers, to gain additional evidence or leverage that can be used to secure the physician’s cooperation or ensure a plea of guilty. In one case, prosecutors were able to secure, in exchange for a promise of leniency, the cooperation of an employee who had down loaded “kiddy-porn” from the internet while at work.

Unfortunately, the fact that others were actually responsible for billing and coding is not necessarily a defense to health care fraud charges. Indeed, federal and state laws recognize that prosecutors may prove intent by presenting evidence of what is referred to as “conscious avoidance”. Simply stated, it means that criminal intent may be inferred from evidence demonstrating that the accused intentionally avoided confirming a particular fact (i.e., that treatment was billed for but not being rendered by employees, that billing was false or fictitious or that patients were not actually injured).

Prohibited Business Relationships

In response to the spiraling costs Medicaid and Medicare programs, the federal government attached substantial civil and criminal penalties to the receipt or payment of “kick-backs” allegedly related to the referral of Medicaid or Medicare patients.

The federal Anti-Kickback law was designed to target relationships fostered by such payments and prohibits (a) “the solicitation or receipt” and (b) “the offering or payment of remuneration” in return for referring a patient for goods or services paid for by Medicaid or Medicare. While the drafters recognized the existence of a variety of exceptions, characterized as “safe harbors”, they often defy logic and should not be navigated alone. Indeed, criminal sanctions may attach to relatively benign conduct and it has become increasingly difficult to determine just what the Government will characterize as an illegal kickback.

In 1992, New York State enacted its own anti-kickback statute thereby permitting its Attorney General to prosecute Medicaid kickbacks. Despite the fact that there are no major differences between the state and federal laws, the same cannot be said for the attendant penalties. Violations of New York law are considered misdemeanors, punishable by a fine not exceeding ten thousand dollars and/or up to one in year in prison. However, under federal law, dramatic and severe penalties loom large. Each violation of the federal Anti-Kickback statute is punishable by a $25,000.00 fine, up to five years imprisonment.

Avoiding and Defending Charges of Health Care Fraud

1. The best defense of all entails devising a plan that will keep you out of the Government’s sites in the first place. Audit your own practice, become involved in your billing, review all correspondence from Medicare and be aware of the existence of claims that are routinely rejected and which may establish a pattern leading to an audit. Train your staff to bill properly (or hiring a reputable billing company, one that does not charge on a percentage basis) and institute a compliance plan. By doing so, you can demonstrate a lack of criminal intent by showing the existence of a vital, ongoing and professional effort to identify and report erroneous claim. If a serious problem comes to the fore, a capable attorney should conduct the investigation. By doing so the results will be protected from disclosure by the attorney-client privilege and the information, therefore, cannot be obtained by prosecutors.

2. Have your business relationships and agreements reviewed by a knowledgeable attorney. Exit interviews of all outgoing employees should be conducted. They should be queried, albeit diplomatically, about their awareness of any unusual practices. By memorializing the interviewee’s remarks (which in most cases will be benign) that person’s effectiveness as a potential government witness will be neutralized.

3. If you learn that an investigation is underway, time is of the essence. Retain a capable criminal lawyer with relevant experience and the expertise necessary to avoid indictment and conduct what is referred to as a “shadow investigation” for the purpose of assessing your exposure. Patient charts and billing records must be analyzed. Present and former employees should be interviewed. The investigation should be conducted by auditors and investigators hired by your lawyer, so that the results may be protected from disclosure to the Government. If you do not a criminal lawyer with the requisite experience, contact your county medical society and request a recommendation.

Conclusions

In the final analysis, the best defense lies with awareness and preparation. While counsel should review your business relationships, there is no substitute for intuition and good judgment. Avoid relationships with unscrupulous practitioners, management companies or billing companies. Read all the Medicare bulletins and be keenly attuned to potential “kick-back” situations. A modicum of good judgment tempered with experienced counsel, an active compliance plan and your participation in the business of your practice can go a long way toward keeping you out of the government’s “cross hairs”.

Douglas M. Nadjari, is a partner in the law firm of Ruskin Moscou Faltischek, P.C.where he represents healthcare providers in disciplinary proceedings, criminal and civil litigation matters, before hospital committee and in managed care disputes. Prior to joining his firm, Mr. Nadjari was a partner in a major medical malpractice defense firm and, in the Brooklyn District Attorneys Office he the private sector, he served successively as Supervisor and Deputy Chief of the Homicide, Investigations, Felony Trial and Major Frauds Bureaus. He has substantial experience trying complex civil and criminal cases to successful conclusion. He may be contacted at 1-(516) 222-2330.