The Maze – Part 5
Medical Coding: Compliance Penalties

This is a continuation of a series on medical coding, billing, and reimbursement.

Previous posts are here:


As most folks still drawing breath know, health care spending is rising at an alarming rate. The reasons for these spiraling costs are manifold: the introduction of expensive new technologies; an aging population; the detachment of financial responsibility for health care from the individual and positing it with employers and the federal government–just to name a few. The health care system in the U.S. is highly complex–scientifically, socially, and financially–and therefore finding workable solutions to such problems would be daunting even in a perfect world. But in a political world, creating functioning complex compromises, or fundamental redesign of programs, payment methodologies, and incentives, has become an utterly unachievable goal. So when constituents demand an instant, painless “fix” for skyrocketing budgets and health insurance premiums, there is one apparition which can always be called forth like Hamlet’s Ghost: stamping out fraud and abuse.

Fraud and abuse, of course, is the universal bogeyman: it is an unassailably noble deed to eradicate it from the face of the earth. Who can argue against eliminating fraud? The politicians look righteous (no small feat, this), and the public smiles with smug satisfaction, knowing that somewhere, someone richer and smarter (and luckier) than they is getting nailed. Stereotypes get trotted out like costumed revelers on Mardi Gras: greedy cigar-smoking corporate CEOs; smarmy, scheming tobacco executives; Gucci-shoed lobbyists larding campaign war chests; and of course, rich, greedy doctors. Nothing gets the national pulse up quite as nicely as a well-publicized perp walk.

And anti-fraud measures–especially ones powered by the bottomless pockets of the federal government–work. They work wonders, in fact. Not in stamping out fraud, mind you–to stamp out fraud you’d need to eliminate the human race–but financially, they are gold mines.

Consider this:

Total False Claims Act recoveries since the 1986 amendments now total over $17 billion, with nearly $1 billion recovered in the first quarter of FY 2006 alone…

In the health care arena alone, the U.S. Government is recovering $13 back for every $1 invested in False Claims Act health care investigations and prosecutions. About 80 percent of all False Claims Act cases are now filed in the health care arena [emphasis mine]

Think about that for a moment: $1 billion recovered in the 1st quarter 2006 (the article is from January 2006), with 80% of new claims filed in health care alone.

Keep in mind that the False Claims Act deals with fraud involving every entity doing business with the Federal government. That includes military contracts, research grants, educational subsidies, job training programs, government consultants, companies providing office supplies and paper to the millions of bureaucrats in government, all the badzillions of folks getting federal subsidies and other financial perks from the Feds under contract. Yet 80% of all new claims are filed in the health care arena. Do you really think that health care has such a disproportionate percentage of the fraud in Federal financial relationships?

Obviously some fraud exists–many of the settlements involve cases where less-than-ethical or outright fraudulent behavior is obvious. The Columbia/HCA investigation found such major issues as corporate fraud: anti-competitive behavior, major accounting malfeasance, inappropriate relationships with doctors, and systematic “upcoding” (billing a higher service code than warranted by the care given). No heartburn about going after this sort of thing, to be sure.

But the Federal Rottweiler is hardly restricting his attack mode to big corporate evildoers: the little guy is very much in his line of sight. The complexity of the law make them even easier targets than the big guys–since they do not have the resources to expend on mastering and complying with this maze of regulatory gibberish. And the dog’s got very big, very sharp teeth: here’s some potential penalties for those found in violation of the law:

  • Civil sanctions may be imposed when an individual “knowingly” submits a claim that he or she “knows or should know” will fall into a prohibited category. Civil sanctions may be imposed for each inappropriate claim submitted for payment. Civil sanctions may be as much as $10,000 for every claim ($50,000 for an anti-kickback violation) plus an assessment of up to three times the amount improperly claimed.
  • Criminal penalties may be imposed when an individual “knowingly and willfully” defrauds the Medicare, Medicaid, or other federal health care benefits program. If there is a determination that even a single claim was submitted fraudulently, sanctions may include: imprisonment for up to five years; a fine of up $250,000 per claim; and a five-year exclusion (lifetime exclusion for a third conviction) from participation in the Medicare and Medicaid programs.

Yes, that’s right: $10,000 for every false claim. That’s every line item charge the Feds decide was incorrectly coded, to your benefit.

Let’s do some math: In my former group–a busy practice with three physicians and a nurse practitioner–we cranked through about 100 patients on a typical busy office day. These 100 patients generated about 250 line items of charges. In a typical month–about 23 such days–that comes to about 5750 line items a month. So if the FBI waltzes in one day, flashes their badges and starts auditing, and finds 1% of the charges “fraudulent” (mind you, this does not imply intentional fraud, but “You coded wrongly and should have known better“–and they will almost certainly find many more than this) That’s $575,000 in penalties for one month’s charges. After auditing, say, one month’s charts, they will then project this percentage retroactively, sometimes for several yearswithout ever auditing those charts. Can you say bankruptcy, boys and girls?

And like the sheriff of old, to catch all the bad guys out there, you just can’t do it alone: you have to deputize–and the deputies have a lot to gain by squealing.

The federal False Claims Act (Qui Tam) is the primary weapon in the fight against Medicare fraud. The largest government recoveries have resulted from the efforts of private persons who alert the government to fraud by filing a “whistle blower” lawsuit. These qui tam actions are brought under a federal law known as the False Claims Act, 31 U.S.C. Sec. 3729 et seq. The Act is intended to encourage people with information about possible fraudulent acts to come forward to help stop Medicare fraud. The qui tam law allows a person who has direct knowledge of anyone who is taking federal money under false pretenses (such as falsely claiming to provide adequate nursing care and being paid federal money for that care) to sue on behalf of the government.

These individuals or whistle blowers are awarded a significant percentage of the money the government recovers as a result of their successful whistle blower lawsuits. Medicare fraud qui tam lawsuits have been responsible for some of the government’s biggest health care fraud recoveries. In 2005, the Justice Department recovered $1.4 billion in fraud and false claims and has recovered more than $15 billion since 1986. In 2005, whistle blowers were awarded $166 million for succeeding in their claims.

That’s right, our government is giving big bonuses to folks who turn you in.

Let’s say your new junior associate, Dr. Mel Feasance, looks good on paper but is a slug. He never answers his pages, sees as few patients as possible, has terrible bedside manner, fights with the other partners: a real loser. But he’s no dummy: he helps the billing specialist code the procedures and visits–always making sure to be very generous, so the group brings in more and his take is higher. After a year or two, you fire the worthless toad. Well, Dr Mel doesn’t take kindly to your falling out, and files a qui tam lawsuit on the government’s behalf–blowing the whistle on his “corrupt” partners. The gumshoes waltz in, find a host of problems–and good ol’ Dr Mel may walk away with up to 30% of the final settlement between the group and the government. Nice work if you can find it.

Or Susan D’Meanor, that charming young thing you’ve just hired to manage medical billing, seems very efficient: there is never a stack of unprocessed claims on her desk. But that’s because you can’t see the pile of unfiled forms in her desk, or the creative coding she does to get those claims paid which do get paid. Well, your bottom line drops like a rock, your books don’t balance at the end of the year due to all the “adjustments,” and Miss D’Meanor’s new car seems a bit too racy for her $15,000-a-year salary. So you fire the thieving wench–and Bingo!–she’s just won the lottery: her qui tam settlement will help pay off that new Porsche in no time.

And, of course, as a physician or health care facility, in such an investigation, you will be treated with the utmost respect and deference to your mission and profession … or maybe not:

  • In August 1999, Dr. Robert Gervais, a cataract surgeon practicing in Arizona, was invited to a public meeting on a HCFA project. Federal agents were hiding behind a one-way mirror at this public meeting to see which doctors were making negative comments about HCFA and the project. Dr. Gervais was critical. A little more than a month later, Dr. Gervais’ clinic was subjected to a “surprise” inspection, where federal authorities found “deficiencies” in his documentation. Dr. Gervais’ plans to remedy the “deficiencies” in the time HCFA required (6 days) were deemed unacceptable, and his clinic was then “de-listed” by Medicare.
  • In another case, in February of 1999, 37 armed, flak-jacketed agents carried out a Medicare raid on East Tennessee Woods Memorial Hospital, a 72-bed hospital in Eastern Tennessee. The invading army of armed federal agents stomped into the hospital, trampling through sterile areas, forced employees into a small room and held them.
  • In another case, at Dr. Danny Westmoreland’s office in West Virginia, three armed federal agents invaded and held everyone at gunpoint, including the physician, his wife, patients, and children.

So, if you’re wondering why doctors are feeling a bit under the gun of late, I hope this helps you get some insight. But I do have some good news (and no, it’s not about my car insurance): the Feds make even the malpractice attorneys seem warm and fuzzy by comparison.

Welcome to health care in the new millennium.

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