While national attention remains riveted on the healthcare reform plans under consideration in Washington, federal investigators are paying more attention to the industry's Medicare and Medicaid billing practices.
As a result of the rising tide of healthcare fraud cases, many providers are feeling increased pressure to justify their once unquestioned business practices. Some are even finding themselves the target of federal probes.
There are several steps healthcare providers can take to ensure a clean bill of legal health, thus avoiding costly Medicare fraud lawsuits and the accompanying negative publicity. These steps include the development of procedures that go beyond the "letter of the law."
Because there are no definitive industry guidelines on billing and marketing practices, and most healthcare delivery systems depend on medical judgment as the means for restraining unnecessary medical procedures, there is great potential for abuse and subsequent federal investigation. Hospitals, physicians and other providers, therefore, need to be more sensitive to the possibility of government prosecution.
Following are five steps that can help prevent investigation:
Avoid appearances of impropriety. Providers should revise previously accepted legal and business practices that might invite investigations in the current atmosphere of stricter enforcement. Practices that have been in place for years and have never been questioned may need to be changed. This is especially true where those practices are driven by marketing-not medical-considerations. For example, when laboratory tests are "bundled" so patients must purchase two tests when only one might be medically necessary, it may be presumed that the bundling is intended to force overutilization. Policies and procedures should be unambiguous and set a standard even higher than the law requires.
Predict areas of investigation. Providers need to consider all the questions an investigator might ask about billing methods, marketing, record-keeping, transfer of Medicare information, and any complaints from patients, employees or competitors. They must review these issues from an investigator's perspective so they can more effectively anticipate the inquiries.
For example, an investigator will look skeptically at any dual-pricing practice that induces physicians to offer lower prices for services that have a direct impact on physicians while subsidizing those lower prices with higher prices for services affecting government or third-party payers.
Research previous investigations. Providers should research federal probes and prosecutions to get an idea of business practices that have drawn scrutiny in the past. A sound knowledge of issues that already have triggered investigations can offer invaluable clues on practices to avoid or clarify.
Be prepared to justify practices. Providers should be prepared to justify all business practices immediately. If they have done their homework and researched all possible areas of vulnerability, and if they keep concise documentation, they may be able to head off investigations. For instance, if the bundling of lab tests is to be justified on medical grounds, the medical basis should be fully documented and any advisory opinions should be based on all factors involved.
Regular examination. As the healthcare industry continues to evolve and change, it's imperative that providers conduct a comprehensive examination of business practices annually to spot potential liabilities. It may be necessary to engage an unbiased outside source to regularly evaluate those practices and to enact policy revisions based on the reviews.
The FBI and the HHS inspector general's office are the primary investigative agencies for the Medicare program. Investigations usually are initiated through tips from the public, competitors or Medicare insurers. Areas that appear to have a significant public impact, such as Medicare fraud, tend to attract a close look. Investigators have the power of administrative subpoena, and the FBI can conduct undercover sting operations.
Once a provider is a target of an investigation, it must immediately compile the facts to defend its business practices. Experienced counsel then must evaluate those practices to determine potential liability.
By cooperating fully and presenting all applicable data, providers in many cases can avert a full investigation early on, saving considerable expense, time and stress.
Often, where convincing evidence can demonstrate the legitimate business or medical rationale for a provider's actions, prosecutions can be avoided. To effectively defend their actions, providers must have a solid understanding of acceptable practices within the industry and a command of the facts in question.
If investigators appear to have a strong case, it may be in the provider's best interest to settle with the government. A settlement can avoid a lengthy and costly court battle and the damaging publicity that can result.
The consequences of a Medicare fraud prosecution and conviction can be severe. A 1992 case against National Health Laboratories in California resulted in the largest healthcare fraud settlement until the recently settled National Medical Enterprises case.
The NHL case led to criminal and civil penalties of $115 million and a jail sentence for the company's CEO. The U.S. Attorney's office charged that fraudulent claims were submitted to the government, and that NHL used deceptive practices and undermined the judgment of physicians.
The NME case, recently settled for $379 million, involved allegations of giving kickbacks for referral of psychiatric patients and keeping patients longer than medically necessary. The sheer magnitude of the settlement underscores how lucrative it can be for the government to target healthcare providers.
It's clear organizations that have planned and put adequate procedures in place to ensure they operate effectively under the law can reduce the chances of a visit by federal investigators. They also will have one less concern as they fight to maintain a competitive edge under healthcare reform.