Why Healthcare Fraud is Landing More Doctors and Execs in Prison

As a healthcare practice owner or leader, you may not be as protected as you think by your corporate structure. Federal authorities are jailing your peers to deter others from following in their fraudulent footsteps. Have you been lulled into compliance complacency?

Despite the federal government’s ramping up its efforts to stop fraud, waste, and abuse in healthcare, you may still think that the situations on which they are focusing do not apply to your company or practice. It may also be tempting to assume that you, as a corporate leader or healthcare provider, are outside the scope of the government’s attention or can’t be criminally charged.  Or perhaps your practice does not accept Medicare, Medicaid, or TRICARE, so you assume that the government is not looking at you for potential healthcare fraud. 

Unfortunately, the reality is that the federal government is more willing than ever to give company leaders and providers prison time for violating healthcare fraud laws concerning both federal insurance programs and private commercial insurance. The government is prepared to up the ante and pursue anyone who engages in activities that violate these laws. Yes, even you!

Lesson One: Prison time is a genuine possibility

Fraudulent Billing 

Billing is a complex topic for any practice. Proper billing not only helps earn your patients’ trust but also provides your practice with the evidence required to survive audits successfully. 

For example, has your practice billed the CPT code that generates the highest reimbursement? While there are situations in which this is legal, it is not necessarily appropriate as a default. Has your practice ever billed services rendered by one provider under another provider’s name to obtain a higher reimbursement? This may also be legitimate in some situations but is not proper in most circumstances. 

These activities might seem insignificant compared to the massive healthcare fraud cases we see in the news, but they are still illegal. And while financial penalties and repaying the insurer are the chief punishments, prison time is becoming more common for fraudulent billing schemes.

The federal government continues to enhance its approach to how to more strictly enforce fraud, waste, and abuse laws. Most recently, this approach includes sentencing providers and company executives to prison.

For example, a podiatrist in New York was sentenced to a year and a day in prison, in addition to paying over $800,000 in restitution for using fraudulent billing practices when billing Medicare and private insurers. The podiatrist billed for services never performed, billed for work purportedly done by another podiatrist with a higher reimbursement rate, and billed for more expensive procedures than those completed. 

In Massachusetts, a physician received an 8-year prison sentence for activities such as entering false information into patient medical records, performing tests in an unsanitary manner that were contrary to Medicare billing rules, and billing Medicare for 25-minute consultations when the consultation lasted only five minutes.  Because many commercial insurers have billing rules that mirror Medicare, he also fraudulently billed commercial insurers. In the end, the physician pleaded guilty to 27 counts of healthcare fraud.

Fraudulent Billing Through a Third-Party Company

In another case, the CEO and the COO of a preventive wellness and concierge care clinic were sentenced to almost seven years and nearly eight years, respectively. Their clinic hired a market research company to recruit people to participate in allergy testing, telling the patients that there would be no out-of-pocket cost for them and that they could even be paid a small sum for participating, which amounts to bribery. The clinic then billed the patients’ private insurance plans for several procedures that were never done. 

While these examples underscore the extremes of fraudulent billing, they do highlight that no one is safe from harsh punishments for fraudulent billing, not providers, and certainly not executives. 

The overall takeaway: bill fairly, accurately, and ethically. Financial penalties associated with this type of healthcare fraud can potentially be in the millions. However, now more than ever, the government is willing to use prison time to deter people from engaging in healthcare fraud and fraudulent billing.

Lesson Two: The Trend of Jailing Leadership is Rising

Fraud Against Private Insurers

Does your practice exclusively accept private commercial insurance? If so, don’t be fooled into thinking that not providing services to Medicare beneficiaries means that the federal government will not pursue cases of potential healthcare fraud against you. The government has shown that it is willing to use lesser-known federal laws that can implicate state bribery laws to pursue fraudulent patient referral arrangements with private insurers. 

In a recent case involving Forest Park Medical Center (FPMC), a surgical hospital in Dallas, FPMC effectively engaged in “patient buying.” FPMC bribed doctors to refer patients to FPMC, promising patients in-network prices for out-of-network services, and then wrote off patient discounts as “bad debt.” 

The federal government used the Travel Act for the first time in the Northern District of Texas to charge FPMC physicians and administrators involved in the scheme with “unlawful activity.” The charge of “unlawful activity” also implicated Texas’ commercial bribery law, which the defendants violated in their healthcare fraud scheme. The surgeons and hospital administrators involved in the scheme face between five and 65 years in prison. 

Company Leadership

Providers are not the only focus in healthcare fraud investigations. More frequently, we have seen that the federal government also prosecutes company leadership for engaging in healthcare fraud. In Tennessee, a healthcare executive paid the CEO of a local pain clinic illegal bribes so that the pain clinic would induce patients to obtain unnecessary Durable Medical Equipment (DME), which were billed to Medicare.  Federal prosecutors charged the healthcare executive with seven counts of violating the Anti-Kickback Statute and sentenced her to 42 months in prison.

Leaders of various healthcare-related companies are also on the government’s radar. In Alabama, a company that provided chronic care management services to patients with two or more chronic illnesses bribed physicians to persuade them to use this chronic care management service. Then the physicians billed Medicare for providing the patients with chronic care management. The CEO of that company pleaded guilty to one count of theft of government property and was sentenced to two years of probation for helping physicians obtain Medicare reimbursements to which they were not entitled. While the CEO and his company were not billing Medicare, they were facilitating other providers to bill Medicare fraudulently, which is also illegal. 

Lesson two shows us that regardless of who you are or what service you provide in the healthcare universe, you are liable for anything that leads back to healthcare fraud. Is your practice not accepting Medicare? That’s fine, just ensure that your arrangements with other physicians, clinics, tech companies are commercially legitimate. Are you not a provider but rather leadership or an administrator? This does not exempt you from becoming wrapped up in a federal healthcare fraud case. 

Lesson Three: You Can Be Jailed for Healthcare Fraud Even if You Don’t Provide Direct Patient Care

So far, the cases that have discussed have involved individuals providing direct patient care. However, even companies that offer ancillary services are facing increased scrutiny. For example, prosecutors sentenced a medical billing company’s executive to 60 months in prison for her role in knowingly billing medically unnecessary procedures to Medicare and private insurers. The scheme involved the executive’s husband, a cardiologist, who recommended unnecessary procedures to vulnerable patients, and his clinic used his wife’s billing company to do the necessary medical billing. 

And this is not a one-off indictment. Prosecutors sentenced the owner of a large Miami medical billing company to eight years in prison for healthcare fraud. Under the scheme, the medical billing company offered to fabricate bills for the clinics with which it worked. The clinics would submit a fake bill with real patient information. Then the billing company would bill the patients’ insurer and keep a percentage of the reimbursement money while sending the majority of the funds back to the clinic. Several additional employees of the billing company received less lengthy prison terms. 

The lesson three takeaway: companies working with healthcare providers and companies are still susceptible to perpetrating healthcare fraud even if they don’t provide patient care. That is, you do not need to be the person rendering professional services to a patient to become entangled in healthcare fraud. 

Further, the leadership of such companies will face consequences matching in severity to those providers and healthcare executives face. Ensuring that your company’s arrangements with healthcare providers comply with fraud laws is the cornerstone to maintaining legal business operations. 

Conclusion

In this era of strict enforcement, the most dangerous mindset is to be complacent in your compliance efforts because you have “always done it this way.” Compliance requires an affirmative approach and the experienced healthcare lawyers at Jackson LLP: Healthcare Lawyers can help.

This blog is made for educational purposes and is not intended to be specific legal advice to any particular person. It does not create an attorney-client relationship between our firm and the reader and should not be used as a substitute for competent legal advice from a licensed attorney in your jurisdiction.

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