OIG steps up investigations of health care providers

Tags: payment, medicare, medicaid

OIG steps up investigations of health care providers

Physician compensation under the microscope

By Corinne Smith, Strasburger and Price

Headlines like this should make you feel very uncomfortable. If it weren’t already hard enough to follow Medicare billing rules, the government’s scrutiny of physicians and compensation arrangements with health care entities adds an extra layer of complexity (and anxiety). In June the Dallas-based office of the Department of Justice Office of Inspector General boasted that they had issued 61 arrest warrants for the largest criminal health care fraud takedown in the history of the Department of Justice. The focus of this sweep highlighted arrangements between physicians, home health agencies and nursing homes.

In addition to the arrest warrants issued, the OIG has identified an additional 255 health care agencies in Texas for further investigation. In the Dallas area, the report identified 52 agencies and 174 physicians that filed claims showing a lack of documentation, upcoding and a high percentage of care episodes despite the lack of face-to-face meetings between the physician and patient. Home health visits for diabetes and hypertension are particularly suspect, as are multiple home health admissions for the same patient. One report found that a single physician referred the same patient for admission to 10 different home health agencies in one year. In a particularly egregious Texas case, a physician billed claims for services rendered to nursing home residents on dates Where he did not actually render services. In some instances, the claim was submitted for a date after the patient died or was discharged. After investigation, the physician was ordered to pay a fine of $100,000 and sentenced to 71 months in prison.

The new focus on investigations of physicians and physician practices is noteworthy because historically the OIG’s scrutiny has focused on hospitals and large health care providers. Until this past year, physicians have rarely been implicated in these type of investigations – let alone been sentenced to prison for Medicare fraud. Last year, the OIG entered into settlements with 12 Texas physicians who had “questionable” or “sham” medical directorship and office staff arrangements. In each of these cases, the OIG determined the medical director arrangements were not for legitimate purposes but just served as extra compensation to the physician to solicit continued referrals of Medicare or Medicaid patients. The medical directors did not receive prison sentences but were all excluded from participation in federal health care programs for several years. Their settlements with the government ranged from $5,000 to $250,000. Many physicians have medical director agreements with hospitals or other health care providers to develop new programs, provide program oversight or fill administrative positions. You will want to review any compensation agreements you have with hospitals for medical director positions to ensure that they would withstand OIG scrutiny.

While many of these reported cases involved physicians who were “bad actors,” you could still be found to have violated the law if you enter into improper financial relationships even without ill intent. Stark law is not an intent-based statute. This means that any breach of the law is a per-se violation and ignorance is not a defense.

Here’s how you can enter into arrangements with hospitals, home health providers, and other health care entities and comply with the OIG’s directives. As HHS-OIG’s fraud alert discusses, to ensure that an arrangement fully complies with applicable laws and regulations, it is essential that you have an executed written compensation arrangement detailing the services to be provided. To avoid any anti-kickback violations, physician compensation must be at a fair market value for services provided. Absent extenuating circumstances, $150 per hour is considered a ball-park number for reasonable compensation for medical director services. Fair market value is a concept largely determined by industry salary surveys and leaves little room for negotiating compensation rates.

The medical director must maintain written documentation of services provided and should submit a detailed timesheet showing time worked and duties performed. You should be very suspicious of unusual arrangements proposed by home health, hospital, durable medical equipment companies, hospitals, and any other health care providers. Never enter into any arrangement without a written agreement that sets the fee in advance. Payment can never be tied to the value or volume of referrals. Make sure your payments tie back to an invoice and that the invoice matches the terms of the agreement.

Do not EVER allow anyone to bill Medicare or Medicaid using your billing number unless you have control over the billing entity or have an indemnification agreement. Be cautious about supervising mid-level practitioners if they are not your employees or working for you as independent contractors. And while this may seem obvious, never accept cash payments from anyone!

These recent criminal take-downs, coupled with recent CMS Fraud Alerts, clearly signal that the OIG now intends to look more closely at physicians. Hospitals may be one of the few groups that think the focus on physicians is good news, as they have struggled for years to get physicians to recognize the importance of compliance with anti-kickback and Stark requirements. However, these laws limit the ability of physicians and hospitals to partner on new programs and innovative care solutions that are the focus of Medicare’s future payment methodologies.

Many practices are heavily dependent on Medicare and Medicaid patients and cannot risk exclusion from the federal programs. In addition, exclusion from Medicare and Medicaid will result in exclusion from managed Medicare, managed Medicaid and potentially commercial plans as well. Being excluded from Medicare and Medicaid has been called the “economic death penalty” for a physician practice.

Top 10 signs that you may be the target of a criminal investigation
10. You receive notice from a patient that the patient was contacted by an investigator.

9. The OIG, the U.S. Attorney, or the State Attorney General serves you with a subpoena for records.

8. You are approached and questioned by a government agent.

7. You get a demand letter in a Medicare False Claims Act case.

6. Other professionals with whom you do business are arrested.

5. You receive a telephone call from a government agent or local law enforcement.

4. The government executes a search warrant for your records.

3. A government agency seizes your bank accounts.

2. You receive notice from an employee or former employee that he/she was contacted by an investigator.

1. And the number one sign that you may be the target of a criminal investigation …
You receive a target letter from the U.S. Attorney’s Office notifying you that you are a possible target in a criminal investigation.


Corinne Smith, partner in Strasburger & Price LLP’s Austin office, advises health care providers about complex health care transactions, regulatory matters, and reimbursement. Prior to joining Strasburger she served as in-house counsel for Seton Health care Family and UT Medicine San Antonio/UT Health Science Center San Antonio. She is also a former health care administrator and Fellow in the American College of Healthcare Executives.