Fraud and Abuse Enforcement; Go Back to the Fundamentals

by Stephen Siegel

December, 2016

The following article was published on December 22, 2016 by South Florida Hospital News.

By Stephen H. Siegel

The great basketball player Michael Jordon observed:

The minute you get away from fundamentals-whether it is proper technique, work ethic or mental preparation- the bottom can fall out of your game, your schoolwork, your job, or whatever you are doing.

In federal fiscal year 2016, the Department of Justice recovered $4.7 billion as the result of judgments and settlements under the Civil False Claims Act ("FCA", the so-called "Whistleblower" statute). Over half of this amount, $2.5 billion, was collected from defendants involved in the healthcare industry. Paying attention to "fundamental" issues, such as coverage requirements, accurately billing for items and services rendered, and avoiding referral arrangements that implicate the Federal Kickback Prohibition or Self-Referral Restriction are fundamental aspects of doing business in this industry. However, as the issues, examples and lessons forgotten/ignored discussed below illustrate, there seems to be a significant gap between what should be and what certain healthcare providers and professionals actually are doing.

Issue #1 - One reason Whistleblowing is popular.

The fact that the Department of Justice collected $2.5 billion last year is clear evidence that a significant number of organizations and professionals are ignoring these fundamentals. No group seems to be more aware of this than the Whistleblowers who initiated many of these cases and received approximately 20% of that amount, $519 million.

Fundamental lesson forgotten/ignored #1. Whistleblowing is alive, well and can be very profitable.

Issues #2 and 3 – How large and where do not matter.

A significant number of the DOJ settlements in 2016 involved relatively small organizations that forgot/ignored fundamental principles. For example:

  • A two person dermatology practice in north Georgia agreed to pay $1.9 million in order to settle allegations that they billed for evaluation and management services that were not covered by Medicare. (All of the settlement amounts are exclusive of legal and consulting fees incurred in defending these defendants.)
  • A psychiatrist in solo practice improperly billed for telehealth services; in order to settle this allegation, the physician agreed to pay $36,704.


Fundamental lessons forgotten/ignored #2 and #3.

2. Before submitting claims for payment, make sure that the items/services rendered meet the requirements of Medicare/Medicaid.

3. No provider of healthcare items and services is too small or too remote to avoid scrutiny.

Issue 4- Exercising critical judgment is fundamental.

21st Century Oncology and its wholly-owned subsidiary, South Florida Radiation Oncology, LLC, settled allegations of performing unnecessary services. Under the FCA these defendants will pay $34.7 million, and the Whistleblower (a former 21st Century physicist) will receive $7 million.

Fundamental lesson forgotten/ignored #4. Physicians must always exercise their medical judgment and ask whether the items and services they provide/order are medically reasonable and necessary.

Issue # 5 – Do not overlook potential collateral consequences.

A New Jersey physician (an OB-GYN) settled false claims allegations for $5.25 million and will be excluded from participating in the Federal health care programs (including Medicare and Medicaid) for 20 years. Whether the relevant state licensing boards will seek to revoke this physician's license or take other actions remains to be seen.

Fundamental lesson forgotten/ignored #5. Healthcare organizations and professionals that submit claims for fraudulent services may find themselves facing both financial and professional disaster, even if they avoid imprisonment.

Issue #6 - No one is immune.

Toumey Healthcare, which faced a $237 million judgement under the FCA, finally settled this Whistleblower case for $72 million. Less well reported was its former chief executive officer's settlement with the DOJ. In addition to paying a $1 million fine, he will be excluded from participation in the Federal health care programs for 4 years.

Fundamental lesson forgotten/ignored #6. Non-physicians, like CEOs, COOs, CFOs, and practice administrators, may be sanctioned too.

Other fundamental lessons forgotten/ignored that are common to FCA settlements include:

a. Nothing is secret. Many of these cases originate with individuals who are/were employees or contractors and know how an organization's internal operations.

b. No organization is immune. The size of the organization, the location, or whether it is a for-profit or not-for-profit entity is of no consequence to Whistleblowers or the Department of Justice.

c. Professionals have more to lose. In addition to financial penalties, licensed healthcare professionals may face disciplinary sanctions and serious reputational damage.

d. Ignorance is not a defense. Organizations and professionals that do not maintain robust compliance programs, or do not seek or chose to ignore advice from experienced healthcare counsel may be assuming more risk than they recognize.

e. Fundamentals are key. No matter what happens with healthcare reform, you cannot ignore the fundamentals.

If, after considering this article, you are concerned about your organization or have questions, please consult with an attorney who has experience representing healthcare organizations and professionals in these types of matters.