California Sues To Block Alleged Fraudulent Workers' Compensation Scheme By Employers And Companies

On February 25, 2009, the State of California Attorney General’s Office filed a civil lawsuit to stop a company known as the Contractors Asset Protection Association, Inc. (ConAPA) and its its founder-president, Eugene Magre, from engaging in an alleged “sophisticated and fraudulent scheme” to cheat the state workers' compensation system.

The lawsuit alleges that ConAPA sought to exploit a legal exception to the workers' compensation law (Labor Code Section 3351(c), where directors of a corporation who are also the sole shareholders can exempt themselves from workers’ compensation coverage.

The lawsuit alleges that ConAPA targeted high risk industries as clients and falsely promised them that if they (1) incorporated (if not already done), (2) provide their employees with a corporate title, and (3) give the employees nominal stock – the company would no longer be obliged to provide those employees with workers' compensation insurance.

The lawsuit alleges that ConAPA failed to advise its clients what type of employees are eligible or appropriate to become officers or shareholders. Attorney General Brown issued a press release claiming that ConAPA clients named housekeepers, cooks, security guards, maintenance men, roofers, and construction laborers as “vice-presidents” and issued worthless shares of non-negotiable stock. Attorney General Brown also stated that despite the titles, many workers were not assigned any managerial or administrative duties and performed the same rank-and-file duties for the same pay that they performed prior to their “promotion.”

Brown contends that ConAPA has approximately 40 active clients, and has had as many as 200 clients in the past that employed their business model. The lawsuit alleges that this was a scheme to utilize false and misleading statements and engage in the unauthorized practice of law “to facilitate a common scheme to profit by promoting the unlawful evasion of workers compensation obligations.”

This lawsuit seeks a permanent injunction barring ConAPA and Eugene Magre from engaging in unfair and deceptive business practices in violation of Sections 17200 and 17500 of the California Code. The lawsuit also seeks restitution and civil penalties of no less than $300,000. For a copy of the complaint:
http://ag.ca.gov/cms_attachments/press/pdfs/n1685_conapa_complaint.pdf

Commentary: It is more common to hear about employee workers’ compensation fraud but employers can also be charged with workers’ compensation fraud. We have represented employers accused of workers’ compensation fraud.

High workers’ compensation premiums have been an issue in California for years – especially during times of economic turmoil where employees may use the workers’ compensation system to supplement unemployment benefits and a means of obtaining medical treatment.

We have represented employers who fabricated payroll records or altered employee titles to obtain classifications which carry a lower premium rate. Sometimes employers (especially those in the construction business and other high risk industries) were desperate to reduce their premiums. Businesses need to be careful in making any false representations or hiring companies that make promises that seem to good to be true.

Although these ConAPA clients may be characterized as “victims” in this civil lawsuit, there is civil and criminal exposure for these companies. The State has a mandatory workers’ compensation system and is aggressive about enforcing it. In addition, since employees are frequently prosecuted for fraud, when there is an opportunity to charge an employer – they often do so. If your company is considering making changes to your workers’ compensation classification system or taking action that affects which employees are covered by workers’ compensation, seek independent legal advice.


Any questions or comments should be directed to: tgreen@greenassoc.com. Tracy Green is a principal at Green and Associates. They focus their practice on the representation of individuals, licensed professionals and businesses in civil, administrative and criminal proceedings.

Recent Arrests Spark Debate Over Assisted Suicide Debate

There have been two recent cases that resulted in arrests for assisted suicide. Neither case involved a physician but involved laypeople.

Arrests in Georgia. The first case involved arrests last week in Georgia. The case was addressed in a February 27, 2009 article in the Los Angeles Times entitled "Georgia Arrests Revive Assisted Suicide Debate." The article addresses recent arrests in Georgia for assisted suicide and the debate over assisted suicide and the right-to-die. The president of an organization known as Final Exit Network was one of the persons arrested.

Oregon and Washington allow physician assisted suicide for people judged to have no more than 6 months to live. In Montana the state is appealing a judge's decision to allow physician assisted suicide. Several other states are in the process of enacting legislation legalizing assistent suicide (New Hampshire, Massachusetts and New Mexico). In many states such as Georgia and California, assisting a suicide remains a criminal act punishable up to 5 years in prison.

See: http://www.latimes.com/news/printedition/front/la-na-assisted-suicide27-2009feb27,0,3727578.story

Arrest in California. On February 27, 2009, a woman in Lodi, California was arraigned in San Juaquin Superior Court and plead not guilty to charges that she assisted in the suicide of her brother who was a well-known blues musician in the Central Valley of California. The case has some facts that are similar to the case in Georgia in that a helium tank was used to assist the suicide and a copy of an instructional book by Derek Murphy, the chairman of Final Exit's advisory board. There is an article in February 28's Los Angeles Times about the case.

See: http://www.latimes.com/news/local/la-me-lodi-assisted-suicide28-2009feb28,0,5508597.story

Any questions or comments should be directed to: tgreen@greenassoc.com. Tracy Green is a principal at Green and Associates in Los Angeles, California.

AIDS Doctor Pleads Guilty To Healthcare Fraud

On February 24, 2009, AIDS doctor Dr. George Steven Kooshian pleaded guilty to two federal counts of health care fraud and two counts of making false statements. The charges related to allegations that he "subdosed" patients by administering doses of medicine that contained less than the prescribed amount of medication that the patients were supposed to receive.

Dr. Kooshian operated Valley View Internal Medicine Group and Ocean View Internal Medicine Group at four locations in Los Angeles and Orange Counties. Problems came to light in 2001 after a medical malpractice case was filed. The case turned criminal when a former medical technician, Virgil Opinion -- who was Dr. Kooshian's assistant for more than 10 years -- also sued him in a civil case and described diluted dosages in an article in OC Weekly. The statements triggered an investigation by the FBI and the U.S. Department of Health and Human Services.

Four years later in 2005, the U.S. Attorney's office charged Dr. Kooshian with 29 counts of healthcare fraud, conspiracy and making false statements to insurance companies. In addition, the technician Virgil Opinion was charged and he has already pleaded guilty to participating in the scheme.

By pleading guilty, Dr. Kooshian specifically admitted that he and Opinion improperly billed patients' health insurance providers for medications used to treat problems relating to AIDS, HIV and hepatitis. The medications involved included Epogen, which is used to treat anemia; Interferon, which is used to treat Kaposi's sarcoma; and Immunogammaglobulin, which is used to treat peripheral neuropathy or numbness of the extremities.

The false billings in this case included: (1) bills submitted for a full dose of the medication when the patient was subdosed,(2) continuing to bill for administering the medication when the patient was no longer taking it, and (3) billing as if the medication had been administered in the office by medical personnel when the patient had been self-injecting the medication at home.

Dr. Kooshian admitted that health insurance providers, including Medicare, suffered losses of at least $350,000 in fraudulent claims relating to these medications, and the government has alleged that the losses could be as high as $660,955. There was also an agreement in the plea that a failure to provide a full dose of these medications would not necessarily shorten the life or cause the death of a patient.

Virgil Opinion is scheduled to be sentenced by United States District Judge Alicemarie H. Stotler in Santa Ana on May 4. Dr. Kooshian is scheduled to be sentenced by Judge Stotler on May 11.

See article in the Los Angeles Times:
http://www.latimes.com/news/local/la-me-doctor27-2009feb27,0,1645216.story

Related court documents and information may be found on the website of the District Court for the Central District of California http://www.cacd.uscourts.gov/ or on Pacer at
https://ecf.cacd.uscourts.gov/cgi-bin/login.pl (where you will need to set up an account).

Commentary: This case shows that even a physician who is well known and successful can be subject to these claims. This case had a number of facts present that we see in many of our cases.

First, the genesis of this criminal case can be traced to a civil medical malpractice suit. That 2001 civil suit snowballed and landed Dr. Kooshian in criminal court. Bryan Noble, an AIDS activist and former Dr. Kooshian patient, filed a malpractice claim alleging, among other things, that the doctor committed fraud by repeatedly lying about the contents of IVs. It is too common for a doctor to go into total defense and fight mode on a malpractice case even where there is some exposure not considering how it can grow. Many of these cases do not get better with time -- they get worse. Damage control at an early stage is important.

One issue we see is that the physician's attorney for malpractice cases is the attorney chosen by the malpractice carrier. That attorney has a dual representation: he or she represents the carrier and the physician. Often the attorney fears telling the attorney of any wrong doing or "bad" facts since it will get reported to the carrier. We suggest in sensitive cases that physicians hire us (or their own attorney) to independently represent them and help craft the strategy since we have only one loyalty: the physician.

Second, there was an apparent failure to assess the potential criminal charges in the civil case. In April 2002, Dr. Kooshian was deposed and admitted criminal conduct rather than asserting the 5th Amendment. In his deposition, Dr. Kooshian admitted that he secretly ordered his nurse to inject an AIDS patient with liquid vitamins rather than an expensive and medically critical drug.

Riddle me this: Why did not the doctor either assert the 5th Amendment or settle this case before making such an admission? Often professionals fear asserting the 5th Amendment even when it is necessary -- however we persuade them (often after much heated discussion) of the perils of admitting criminal conduct or lying about it. We have had numerous cases where we have asserted the 5th Amendment and obtains stays of civil cases where criminal allegations are alleged. This has often been a necessary strategy.

Third, a former employee, the technician Virgil Opinion, had complained about the illegal practices while he was employed. After he quit, guess what? He hired the attorney representing the patient in the malpractice case to sue for emotional distress. Then Opinion went to the press and became a cooperating witness and co-defendant in the federal criminal case. As an aside, I doubt that Opinion thought he would also be charged criminally after he was a whistleblower -- but he made all these statements without any immunity agreement. His civil lawyer may have not seen that coming either. One of the signs that Opinion cooperated against Dr. Kooshian criminally is that his sentence is scheduled after Dr. Kooshian's.

Fourth, it appears that Dr. Kooshian was in denial and thought he could simply aggressively defend the civil cases. Dr. Kooshian even went to the press in 2001 and accused the patient and Opinion of blackmail. Often we understand that professionals do not want to admit wrongful conduct for a variety of reasons. But they need to understand the need for being completely honest with their attorney (especially when all communications are covered by the attorney-client privilege).

Conclusion. The only logical way a global strategy can be formed which considers the civil lawsuit, the professional board and criminal liability is to know all the facts. Sometimes people naively assume attorneys will not fight as hard if they know there was wrongdoing. Our saying is: "There is no such thing as a bad fact. Only a fact we don't know."

We do our best to be somewhat Zen about it -- we are California attorneys after all -- and persuade our client: "it is what it is." Clients are not in the best position to figure out what's a bad fact and what's a good fact. Over the years it is very difficult to keep out all the negative facts especially when witnesses are deposed or interviewed. But if your attorneys don't know about these facts at an early stage -- or they have not seen a civil case turn into a trainwreck like we have -- you will get bushwacked at some point. Early and honest assessment is key to helping professionals make intelligent, well-informed and strategic decisions that consider every angle.

Any questions or comments should be directed to: tgreen@greenassoc.com. Tracy Green is a principal at Green and Associates in Los Angeles, California.  They focus their practice on the representation of individuals, businesses, licensed professionals, including health care professionals and providers including individual physicians, corporate providers and group practices.

Mistrial Declared In Fraud Case Against Teacher

As a follow-up on a prior posting, a mistrial was declared Wednesday in a fraud case against a former Los Angeles Unified School District math teacher who prosecutors said conned the district into placing a $3.7-million order to buy math textbooks he wrote. After deliberating for eight days, the jury was unable to reach a unanimous verdict. The panel was hung 11 to 1 in favor of acquitting Matthias Vheru, 53. The U.S. attorney's office has until March 23 to decide whether to retry Vheru.

The toll on Mr. Vheru as someone accused of fraud and having to go to trial was evident in this case. The trial lasted 5 weeks which meant he could not work during that time and the trial preparation time. The L.A. Times reports that due to all the legal fees over 3 years, he and his wife are about to lose their home and had to file for bankruptcy.

See Los Angeles Times article:
http://www.latimes.com/news/local/crime/la-me-mathteacher26-2009feb26,0,2184613.story

See prior post:
http://greenandassociates.blogspot.com/2009/02/fraud-trial-for-teacher-conflict-of.html

DME PROVIDER SENTENCED IN MIAMI HEALTH CARE FRAUD CASE

On February 24, 2009, U.S. District Judge Altonaga in Miami sentenced Jimmy A. Soto to 140 months' imprisonment for his participation in an alleged health care fraud and money laundering scheme. He was found guilty in December 2008 after a week long trial before a Miami jury.

The evidence at trial established that Soto conspired with others in operating a durable medical equipment (DME) known as Med-Pro of Miami, Inc ("Med-Pro"). Med-Pro submitted $5.4 million in durable medical equipment (DME) claims during 2005 and 2006, and were paid approximately $1.3 million. The government contended that the claims were fraudulent and were for DME items that were neither prescribed by doctors nor delivered to Medicare patients, most of whom resided in the Treasure Coast area of Florida.

The money laundering conviction was based on evidence that Soto recruited his customers and friends to cash several hundred thousand dollars worth of checks for Med-Pro during 2006. The case came to the attention of the government after numerous Treasure Coast residents contacted the FBI to complain about Med-Pro's submission of fraudulent claims to Medicare.
Judge Altonaga previously sentenced Soto's co-conspirators as follows: (1) Eliades Diaz was sentenced to 80 months in prison; (2) Leonardo Lozada was sentenced to 46 months in prison; and (3) Jose D. Claro was sentenced to 31 months in prison.

Related court documents and information may be found on the website of the District Court for the Southern District of Florida at www.flsd.uscourts.gov or on http://pacer.flsd.uscourts.gov/

Commentary: Most of our clients are honest health care providers who are not concocting fraudulent schemes to defraud the government. These extreme cases, however, are good to remind us of the following.

First, sentences for health care fraud cases have gotten much longer. It is therefore critical to avoid ever being charged since the exposure for criminal charges is harsh. If charges are brought it is important to completely assess the issues at the very outset. If there is billing for services not provided or for medically unnecessary services, those cases do not usually get better with time. 1 word of advice: compliance. Put a compliance plan in place and make it operative.

Second, these fraud cases create pressure on the health care system where the government assumes that there is a layer of fraud in billing and services provided to beneficiaries. The government sees so many extreme cases that there is a jaded view of what is being provided to patients. This affects, for example, the way they approach honest providers during audits and interviews.

Third, do a background check on who you do business with in healthcare. If there were doctors who wrote prescriptions for DME and the doctors referred them to a company like Med-Pro – the doctor would be under investigation. It is important to deal with reputable businesses and individuals with a long history. The old saying of “if you lie down with dogs you’ll get fleas” applies here and can at least cause administrative problems. This is especially true in cities like Los Angeles, Miami and New York which have the highest concentration of health care fraud and where organized crime has infiltrated to a certain extent.

Any questions or comments should be directed to: tgreen@greenassoc.com.  Tracy Green is a principal at Green and Associates in Los Angeles, California. They focus their practice on the representation of individuals, businesses, licensed professionals, including health care professionals and providers, including individual physicians, corporate providers and group practices.

Physician Charged With Misdemeanor: Case Study

One of the best teaching tools in law and business is to look at actual case studies. In representing professionals, they may learn more from someone else’s mistakes about what can go wrong when there is not a forward looking and comprehensive strategy. This particular example is an actual case. It illustrates how one or two wrong moves can snowball into a series of problems. The point is to learn from this and even though a client’s case may be very different, some of the same basic principles apply.

Dr. X came to our office. He was a board certified OB-GYN. He came to us with a series of problems that needed to be unwound and solved after making two years of uninformed decisions. His biggest problem was that the hospital wanted to revoke his privileges which would destroy his practice. Here is his story.

The Misdemeanor Vandalism Case

Dr. X got into an altercation over a parking space at an amusement parking lot while he was with his family. After he left his car and went into the park, the other person called the local police and accused Dr. X of vandalizing his car. Dr. X was subsequently charged with the misdemeanor charge of vandalism. Dr. X denied the vandalism and wanted to fight it. Dr. X was very busy and the charges were pending in Orange County far from his office and home. Dr. X hired a criminal attorney from the phone book. This attorney was young and had little experience representing professionals who could be have serious consequences from a misdemeanor conviction.

After failing to have the case dismissed, the case was set for trial. Dr. X did not want to miss several days or a week of work going to court and being in trial so he told the attorney to settle the case. The attorney told Dr. X it was a good deal, there would be no jail time, a small fine and that the case would be expunged after the summary probation was completed. The attorney never tried to settle with the complainant or reach a civil compromise. Instead, Dr. X plead “no contest” to a misdemeanor which has the same force and effect as a guilty plea. Dr. X thought that was the end of it.

The Medical Board Gets Involved

Dr. X did not report the misdemeanor conviction to the Medical Board. He did not think that he had to do so. The court reported the conviction. One day, a Medical Board investigator appeared at Dr. X’s office. Dr. X spoke to the investigator without having an attorney present. The investigator asked about the vandalism incident. The investigator did not believe Dr. X’s version of events and took the "no contest" plea as an admission. The investigator decided that Dr. X was not being honest. The investigator referred the case to the Attorney General’s Office who filed an Accusation against him accusing him of unprofessional conduct including allegations that he lied to the investigator about the criminal case. Dr. X hired an attorney who his insurance carrier chose and with whom he did not have any pre-existing relationship. The insurance company’s attorney told Dr. X to simply accept probation as part of the settlement before the Medical Board and that it would not have any effect on his hospital privileges.

They Forgot About Dr. X's Expired New York License

Dr. X did his residency in New York and had a license there that he had never surrendered. The attorney who represented Dr. X before the Medical Board did not analyze what effect, if any, having a New York license would have or what would happen to that New York license. It was never discussed with Dr. X. If the issue had been analyzed, Dr. X could have surrendered his New York license early on before there was an Accusation filed in California. This obviously was not done.

Once California put Dr. X on probation, New York issued a notice to Dr. X indicating that because his California license was on probation, New York was going to put his New York license on probation. The problem is that because Dr. X was not practicing in New York he could not comply with probation. Dr. X decided, without the advice of counsel, that because he was not going to practice in New York he would agree to have New York suspend his medical license.

How Does This Affect Dr. X's Medi-Cal Provider Number?

Dr. X’s patients were almost entirely private pay. After New York suspended Dr. X’s New York license, Dr. X received a letter from Medi-Cal. Medi-Cal informed him that because another state had suspended his license, they were going to automatically suspend his Medi-Cal provider number. Dr. X discussed this issue with his office manager. Dr. X did not hire an attorney or even call one for a 15-minute quick consultation. Dr. X and his office manager decided that since they did not see Medi-Cal patients, it was not worth appealing or spending the time on this issue.

What Happens Now To Dr. X's Hospital Privileges?

After Medi-Cal suspended Dr. X’s provider number, Dr. X received a letter from the hospital. The letter stated that because he had been suspended by a federally funded health care program, its bylaws required that his privileges be suspended. The hospital was very supportive of Dr. X, considered him an excellent practitioner and did not want to take any action against him.

At this point, the hospital referred Dr. X to our office. We filed an appeal from Medi-Cal’s suspension on the ground that the New York suspension was based solely upon the California Medical Board’s imposition of probation – which in itself was not a ground for Medi-Cal to suspend Dr. X’s provider number. In addition, we obtained a stay from the hospital and wrote a detailed letter explaining how these circumstances arose. We further worked with the hospital while they sought to revise the bylaws in order to keep Dr. X on staff. Ultimately, we reached a settlement with Medi-Cal and obtained his reinstatement since on occasion Dr. X might see a Medi-Cal beneficiary in the emergency room when he was on call.

Lessons To Learn

1. There is no such thing as a small criminal case for licensed professionals. Even if a criminal case seems small and completely unrelated to the practice of medicine or your profession, you need to understand that there is a form of double jeopardy when it comes to the licensing boards. “Moral turpitude” is a broad term and it is important to treat even misdemeanor cases aggressively and avoid a conviction at all costs. The cost of an excellent legal defense is small in comparison to the potential lost income over the years.

2. In criminal cases, the license "tail" often wags the dog. Even experienced criminal defense attorneys are not knowledgeable about the collateral consequences that can occur to a professional’s license. A great plea bargain in a criminal case can still be a “bad” deal for a professional if there are elements of fraud in the count. For example in Dr. X’s case, an early attempt to pay a civil settlement and obtain a civil compromise might have resulted in the dismissal of the case. Even if Dr. X did not vandalize the other party’s car, it would have been in his best interest to obtain a certain result that could not have any adverse impact on his license.

3. Analyze all licenses, contracts and privileges and potential effects of a criminal conviction on them. In analyzing the licensed professional’s exposure, the attorney needs a list of all licenses in all states. The licensed professional and the attorney need to work out the goals, prioritize them and consider every possible consequence. It is important to be able to make the best decision at the moment but also look ahead and anticipate what can flow from decisions made in the criminal case.

4. Consider involving the Board at an early stage. This is often an excellent approach in order to have “damage control” and show that the licensed professional is honest and forthcoming. If Dr. X's attorney had contacted the Board, reported the arrest, and sent a letter of representation, an investigator would not have made a surprise visit to Dr. X. Dr. X was not prepared for the interview, he came off as defensive and made a poor first impression. Often a misdemeanor conviction will not result in probation but it needs to be negotiated to the extent possible and seeking the coordination and cooperation of all involved (alleged victim, prosecuting agency, etc.) makes it easier. Often, the licensed professional fails to self-report and this does not lead to a favorable impression.

5. Your provider numbers are important. Anytime a governmental health care program is taking administrative action like a suspension against a licensed provider, it is important. Most hospitals have emergency rooms and take Medicare and Medi-Cal. In addition, Medi-Cal is the insurer of last resort and what appears to be a private patient in a hospital can turn into a Medi-Cal patient if the insurance is cancelled or lapsed.

6. Hire a specialist. Who would hire a surgeon that operates on 3 different body parts? This area of law requires an attorney who specializes. Resist the temptation to use your real estate or family law attorney to handle the licensing board. If you have a relationship with an attorney you trust, let that attorney bring in the specialist attorney to assist him or her. With business and regulatory work becoming increasingly complex it is not unusual to use a team approach. Specialists in these areas also have relationships with the governmental agencies and know best the tactics that work with them. Be prepared to pay for quality and watch out for someone who charges a low flat fee since it may be that they do not plan on doing much work. A lengthy professional board hearing with expert witnesses can be costly. We have worked on cases, however, where the client stood to lose millions of dollars over their lifetime if they lost the licenses and the investment of legal fees which saved or minimized the damage to their licenses was an important and excellent investment.

7. Be prevention-minded. If an issue arises regarding your business or license – even it seems small – call a lawyer. Particularly where there is a judgment call and it involves the government or a disgruntled client, patient or employee. Having objective and expert advice is important. The cost of a consultation will save significant amounts at the end of the day. Clients’ legal bills are significantly higher when they call too late or after the fact. Good lawyers who value their clients – such as our firm – would much rather prevent problems than clean them up. Professionals who know when to make a quick call to their lawyer are the best type of client and they keep their legal fees down in the long run. We seek long-term relationships with clients where we work on keeping them compliant with law, rules and regulations and simultaneously prevent litigation and other costly legal issues. This is simply sound risk management.

Any questions or comments should be directed to: tgreen@greenassoc.com. Tracy Green is a principal at Green and Associates in Los Angeles. They focus their practice on the representation of professionals, particularly health care professionals and providers, including individual physicians, corporate providers and group practices in criminal, civil and administrative cases.

Alternative Heath Care Device Case -- Sale Of Unapproved Medical Device (Rife Machine) -- Attorney Commentary

On February 17, 2009, James Folsom was found guilty by a federal jury in United States District Court in San Diego of twenty-six felony counts relating to his sale of an unapproved medical device known as a Rife-type biofrequency device. For an article on the trial:
http://www3.signonsandiego.com/stories/2009/feb/18/bn18convict-medical-scam/?zIndex=55119

According to evidence presented at trial, from 1997 through 2008, James Folsom conspired with others to ship adulterated and misbranded Rife-type biofrequency devices in interstate commerce. The device, sold under names "NatureTronics," the “AstroPulse,” “BioSolutions,” “Energy Wellness,” and “Global Wellness,” consisted of a micro-current frequency generator with a digital readout, two stainless steel cylinders, two personal application plates with connectors and lead wires connecting the device to the cylinders and the plates. Users were provided with an operating manual that set forth hundreds of digital settings for the device, directed to specific conditions from AIDS, diabetes, stroke, and ulcers to worms. Users were advised to connect the cylinders or plates to the machine and touch them to the body for a recommended run time to treat each condition.

According to testimony at trial, the defendant purchased over 9,000 units, which he sold to distributors for approximately $1000-1200 and to retail customers for $1995, with sales of over $8 million. The devices were manufactured by the defendant and others in a San Diego location, which he failed to register with the Food and Drug Administration (FDA) as a device manufacturing establishment. There were other facts in this case that suggested fraud in that Folsom used the false name “Jim Anderson” when selling the device and used post office boxes, self-storage units, and bank accounts opened in the names of others to conduct his business, all in an alleged effort to avoid detection by the FDA. The defendant also marketed his device “for investigational purposes,” which the government alleged was to deceive consumers into the false belief that he possessed a valid investigational device exemption from the FDA.

The government’s theory at trial was that the devices were adulterated in that they were marketed without a valid investigational device exemption, without pre-market approval, and in violation of an electrical performance standard set by the FDA prohibiting lead wires that come into contact with patients from being able to come in contact with potentially hazardous voltages. The devices were also misbranded in that they were marketed without valid clearance from the FDA, did not bear the name and address of the manufacturer on the labeling, and were produced in an unregistered manufacturing establishment.

Related court documents and information may be found on the website of the District Court for the Southern District of California at http://www.casd.uscourts.gov/ or on http://pacer.psc.uscourts.gov/

Commentary: As attorneys who tried a case in November 2008 in Los Angeles involving a rife machine, other alternative health care issues and the alleged unlicensed practice of medicine, we have the following comments about the case.

First, if you are selling or using any type of "device" as part of alternative health care you need to be very careful about FDA regulation. Seek the advice of an attorney if you use, sell or market any device which could be under FDA regulation.

Second, if you are in alternative or complementary health care that you need to be careful about making any claims that a non-FDA approved device (or vitamins and supplements for that matter) can cure or treat any disease. One of the driving facts in Folsom's case was that marketing material found on several internet sites and promotional material said the device uses electrical frequencies to destroy diseased cells in the body. It also said the device was inspired by the work of San Diego inventor Royal Raymond Rife, who in the 1930s theorized that cells could be destroyed by directing precise radio frequencies at them. Rife believed cancers, viruses and other illnesses could be treated with the technology. Rife type machines have been used by alternative health care providers as an alternative method of promoting wellness for people with AIDS, cancer and other conditions . Seek the advice of an attorney if you are an alternative health care provider especially where you see persons with cancer and other diagnosed diseases.

Third, if you are engaged in alternative health care have all promotional material, including websites, reviewed by an attorney to ensure that there are no false claims and no claims to cure or treat any disease or condition.

Fourth, if you are investigated by the government assess the exposure you have at an early stage by a thorough analysis through counsel. Address the issues early and if the government contends that you are doing something illegal it is important to get an attorney involved immediately. In this case, we were informed that the government investigation went on for years and that early resolution of the case was rejected. Currently, Folsom is facing 15 years in prison.

Any questions or comments should be directed to: tgreen@greenassoc.com. Tracy Green is a principal at Green and Associates in Los Angeles. They focus their practice on the representation of individuals, businesses, licensed professionals, including health care professionals and providers.

Investigations, Search Warrants Or Subpoenas -- Attorney Commentary On What To Do When Government Comes To Your Door

Licensed professionals are in a regulated business. Whether you are an attorney, physician, real estate agent, mortgage broker or nurse -- your license is considered a privilege and government investigators do not always call to make a scheduled appointment. Your office may find itself visited by an investigator from a State Board, state or federal investigator or other regulatory personnel. In certain programs such a Medi-Cal or Medicare, if you do not respond immediately you may be threatened with loss of your provider numbers.

If you have a license, failure to "be cooperative" may harm you but how can you "cooperate" and protect yourself and your license at the same time? You may even find yourself visited by government regulators or investigators who ask for records without a warrant, subpoena or release from clients. You know that they did not show up without a reason. This can be a pressure filled situation for professionals and their staff. How any visit is handled is critical and it is important for the professional business to have a plan on how to handle these visits.

Here are general guidelines -- with the understanding that every case is different based on the facts and circumstances:

1. Do not talk to the investigators without an attorney present except to obtain their business cards so you can later schedule an appointment with them and your attorney. If you feel awkward stating that you want an attorney present, simply say you want your accountant or a third party present. Do not worry about "looking guilty" if you want an attorney or other representative present. Most sophisticated business people or professionals would never meet with a government investigator without an attorney.

2. Remember that anything you say is evidence that can be used against you later -- whether in an audit, a disciplinary proceeding or even a criminal investigation. Usually investigators travel in pairs and if you say something to them without a third party present, the investigators may not record it accurately in their report and you face a risk of being misquoted. Thus, you might later have to defend something that you claim you never said!

3. Before being interviewed, your attorney will want to find out the full purpose and scope of the investigation so both you and your attorney can be fully prepared before being interviewed. If you are caught off guard asking questions about a client or patient you have not seen for two years, you might misremember and will probably not be prepared. You may be asked questions about events that occurred several years prior and if you do not recall correctly, your statements might later be characterized as lies or misrepresentations. Full and complete preparation, including review of all files, is key before any interview. You want to be fully prepared as if you were going to be testifying at a hearing because you may need to live with your statements for the next several years in the event there is an administrative, discipline or criminal case.

4. If you "help" the investigators by speaking to them when they show up at your door without an appointment, this does NOT mean that will not later pursue action against you. These investigators cannot promise immunity. Remember that the reason they came unannounced was to catch you "off guard" and get you without an attorney or other representation.

5. Remember that often the investigators have been working on the case for months or longer by the time they come to your office, have interviewed other people and you need to know whether you are a witness, the target of an investigation or in some other category before you are interviewed.

6. All this said, failure to respond is not an option. Failure to respond could result in the withholding of payments, loss of license or some other discipline depending on the board or agency, and the service of a subpoena for the same (and probably more) records. You can seek extensions for producing records and ask that interviews be scheduled later to give you time to prepare and hire an attorney. Time is your friend. It helps you and your attorney obtain information, evaluate the situation, make a thorough and informed response.

7. To evaluate what to do, you need to know what agency the investigator is from. For example, under state and federal law, the Office of Inspector General and Medi-Cal Fraud investigators are entitled to an unannounced visit to a provider’s office under certain circumstances. The particular agency's regulatory rules need to be reviewed to determine your rights. With OIG and Medi-Cal, there are situations where if you fail to allow them into the office or demand that they leave, it could result in program exclusion or payment withholding. However, this does not mean that records have to be produced immediately. It can often be within 24 hours and this does not mean conducting interviews. In addition, the request for records must be in writing.

8. If you are faced with an unannounced visit, the safest bet is to not answer any substantive questions but to explain that this is a bad time, that there are patients/clients in the office and to schedule a return visit within the next day when your attorney can be present. It is usually a good idea to immediately telephone the attorney and have him or her speak with the investigators and make the subsequent appointment and time for producing records.

The attorney can establish basic rules for the return visit. In medical offices, for example, the attorney can state that there are HIPAA and patient care issues and request that the meeting be during a lunch hour or evening hour when patients are not present. The attorney can also request a list of the records requested. This list will help serve as a road map with respect to the purpose of the investigation. If the investigators decline to produce a list of records requested, this is also telling information. Dealing in this manner is generally difficult for professionals and is usually better left to the experienced attorney.

9. If the investigators serve a subpoena, there will be time for the production of records. The subpoena should be immediately faxed to the attorney. It is important with a subpoena that the professional not speak to the investigators serving it about any substantive issues unless there has been approval of such communication by an experienced attorney. Nor should the professional call the attorney or agent on the subpoena to find out what the case is about. This is going to lead into an interview which is not prudent for the reasons set forth above. Subpoenas are often the sign of an ongoing investigation. The most logical response is to immediately involve an attorney.

10. If a search warrant is served, the professional should immediately call an attorney. Again, you should never agree to any interviews without your attorney present. Your attorney can advise you on whether to send employees home and how to handle any requests to interview employees as this is a sensitive and complicated issue. Search warrants are serious since they are one of the more aggressive steps the government can take in an investigation. In a search warrant, a professional can either be a suspect or a non-suspect third party. Whether you are a suspect or not will affect the decisions your attorney will make on how to proceed.

Search warrants by their nature are taken seriously since they must be approved by a judge, are based on a sworn affidavit by law enforcement personnel explaining why they believe there is probable cause that a crime has been committed and that evidence of that crime will be found at the professional's office. In health care fraud cases, for example, a search warrant usually means that there is an informant or current or former employee with detailed knowledge of the professional's business.

11. Do not interfere with any search. Be careful though until your attorney arrives and pay attention to what is occurring if possible. And, again, do NOT speak to the investigators without an attorney present (I cannot repeat this enough). The warrant does not allow interviews but it does not prevent them either. It is all too common that most of the adverse evidence that we seen in cases was accumulated during the execution of search warrants or during surprise or unannounced interviews. For some unexplained reason, the professional thought they could help themselves by agreeing to an interview without an attorney being present.

Remember that search warrants do not require you to answer any questions, and no information should be volunteered. Also, search warrants do not authorize government agents to arrest or hold anyone, and you are therefore free to leave. Once the search is finished, the agents are required to leave an inventory of every item seized. This needs to be sent to your attorney since you may want to seal records or take other action based on privilege.

12. Conclusion. Not every government visit, audit, investigation or search warrant results in a penalty, sanction, administrative or criminal case. But the key is not to mishandle these visits. Since there is a lot of nervousness, emotion and confusion during these visits -- it is far too easy for the professional to make a rushed decision without consulting counsel. Put aside any professional ego or the reassuring thoughts that "nothing can happen to me" and "I didn't do anything wrong" and handle these visits intelligently, strategically, and with complete professionalism. It may be that the visit is simply a visit but be careful and let your attorney make that determination from an objective viewpoint.

Any questions or comments should be directed to: tgreen@greenassoc.com.  Tracy Green is a principal at Green and Associates in Los Angeles, California. They focus their practice on the representation of individuals, businesses, licensed professionals in criminal investigations and proceedings.  

Health Care Marketing: Attorney Comments On Wellcare's Sanctions And Suspension

The WSJ Health Blog has an excellent article on the recent happenings to Wellcare, a Florida based publicly traded company, which is a Medicare and Medicaid HMO. CMS has suspended Wellcare from enrolling new beneficiaries due to misleading marketing including door-to-door solicitation and high number of complaints. See:

http://blogs.wsj.com/health/2009/02/20/feds-wellcare-misled-and-confused-medicare-beneficiaries/

The sanction letter from CMS to Wellpoint is posted here and it is educational on the rules and regulations governing marketing by Medicare and Medicaid providers:
http://online.wsj.com/public/resources/documents/wsj090220-healthblog-wellcare.pdf

The advantage of being a publicly traded company is that if these accusations had happened to an individual provider -- criminal charges would have already been filed or the provider number would have been suspended. Or payments would have simply been stopped. Wellcare already had a search warrant executed by the FBI in 2007. They are still in business even if they are limping.

Any questions or comments should be directed to: tgreen@greenassoc.com. Tracy Green is a principal at Green and Assocciates in Los Angeles, California.  They focus their practice on the representation of individuals, businesses, licensed professionals, with an emphasis on health care professionals and providers.

WSJ Article Re: Small Business Facing More Fraud In Downturn

Our clients are primarily small to medium size businesses. They are especially vulnerable to fraud by trusted employees or business partners. In addition, when business times are tough they may be more susceptible to fraudulent business schemes. On February 19, 2009, the Wall Street Journal ran an article entitled "Small Businesses Face More Fraud In Downturn." See:

http://online.wsj.com/article/SB123501158460619143.html#articleTabs%3Darticle

This article is an excellent reminder to our clients that often the largest exposure they have is from their own trusted employees or business partners. As part of a business compliance plan, they should review bank statements every month, review the front and back of cancelled checks, have an accountant or book keeper reconcile bank accounts, keep an eye on business expenses and invoices, review payroll reports, do monthly or quarterly reviews which can be inexpensive and have a team (accountant and lawyer) on board to help advise your business.

Any questions or comments should be directed to: tgreen@greenassoc.com. Tracy Green is a principal at Green and Associates in Los Angeles, California.

Health Care Fraud - Attorney Commentary On Four Potential Empty Chair Defenses

One difference in the defense of health care fraud from traditional financial crimes is the role of integral third parties – the government, insurance companies who process payments for the government, public health agencies who address social problems and patients. Although securities fraud and public works fraud have similar regulatory frameworks that allow the government agencies to be named an empty chair, the complex and personal nature of health care creates more empty chairs for you to point at during pre-filing and pre-trial stages and trial itself. Four potential empty chairs are:

1. INSURANCE COMPANY THAT IS THE FISCAL INTERMEDIARY OR ELECTRONIC BILLING COMPANY FOR MEDICARE/MEDICAID.

The provider does not usually send the electronic/paper billing to the government itself but to these private, for profit companies such as EDS, Transamerica, NHIC, Empire, etc. Look how the contracted companies get paid. Are there bonus or percentage arrangements in the billings paid out and collected? Some companies get paid based upon the amount of billings and then get paid for the amount of money they later seek to recover in overpayment (paying and seeking recovery for same $$ later). There is little incentive for these companies to ensure that the billings are correct. Look at these companies transmittal memoranda, manuals and see if you can find discrepancies or ambiguities that will help your client. The rules can be complicated and often the companies don't understand the rules. So why should your client? Naturally, this goes to intent to defraud. In addition, these companies’ rates of error may be greater than those of your client. Look for public records re: rates of error. Seek such information in discovery.

2. MEDICARE, MEDICAID OR AGENCY THAT CREATED CONFUSING, INCONSISTENT AND CHANGING POLICIES, RULES, TRANSMITTAL MEMOS AND REGULATIONS.

Pull all manuals, transmittal memos, and regulations for years at issue. Pull all website information and publications given to beneficiaries. Talk to billers for the codes at issue. Understand the manuals and rules. If there was a mistake in billing -- understand how it could have occurred in the regulatory world. For example, rules are often different for Medicare than Medicaid. Private insurance is also different. This confusion and complicated rules will go to the heart of the issue of intent to defraud.

3. PUBLIC HEALTH AND SOCIAL ISSUES THAT ARE BEYOND CONTROL OF PROVIDER.

Look at public health policies that are contrary or inconsistent with the government’s position. For example, high incidence of disease and health issues among the poor; large immigrant populations; illegal immigration; high birth rates of certain low-income groups; etc. Wear the public policy and public health hats if you can. Physicians are often the front line between large urban cities and third world diseases, family planning and cost-effective prenatal care that save taxpayers much more money that the programs cost. Use conflict between public health and administrators at Medicare/Medicaid to your benefit.

4. BENEFICIARIES/PATIENTS.

In some cases, the patients are the victims. The empty chair does not apply there. However, some patients are perpetrators of the crime, unindicted co-conspirators or have given false information to the government or their health care provider. In some cases there are "professional patients" who receive money to receive medically unnecessary services.

Understanding the role of the patients will help you understand the case and craft your defense. Some patients know how to manipulate the system and are not truthful to physicians or the government in their quest for services. For example, the patient may not report the existence of other insurance to avoid copays; may lend/borrow ID cards to family and friends; may overutilize medical services because they are free or because culturally they came from a country (former USSR) where they were used to free health care; and may lie to government when interviewed. Patients are usually not charged even if they were involved as a policy decision by the government.

CONCLUSION.

These three entities and the beneficiaries are a starting point to examine the health care world in which health care providers operate. Where cases have been filed that do not reflect the actual complicated regulatory world of health care, the analysis of the roles these "empty chairs" play can help you understand potential defenses in your case.

Any questions or comments should be directed to: tgreen@greenassoc.com. Tracy Green is a principal at Green and Associates. They focus a significant part of their practice on the representing health care professionals and providers at trial and in administrative, civil and criminal matters.  

Medi-Cal: Attorney Commentary On Los Angeles Times Article About Increased Demand But Decreased Benefits

Yesterday's Los Angeles Times has an article indicating that 20% of the people in Los Angeles County are on public aid. This includes those who receive health benefits such as Medi-Cal. It does not include those in need of services but who have not applied. See:

http://www.latimes.com/news/local/la-me-welfare22-2009feb22,0,4377048.story?page=1

Thus, at a time when benefits for patients and reimbursement to providers are being cut, the need for services is growing. There will be greater demand on existing providers who are subjected to increased audits, difficulty getting paid and other problems. It has become increasingly difficult to find specialists to treat Medi-Cal patients. There is a public health crisis and we see that in the government's attempt to deal with its budget issues and cut out fraud it is placing the pressure on health care providers.

As attorneys who represent health care providers, we counsel them that a Medi-Cal practice is difficult since the regulations and rules are stricter than those for private insurers and that after you get paid the government can audit for up to three years later and claim an "overpayment." If providers are going to provide services to Medi-Cal patients, a compliance plan is a must and the rules need to be strictly followed. The pressure on the programs and providers will continue. We expect the problems with Medi-Cal to get worse especially with California in its current financial crisis.

Any questions or comments should be directed to: tgreen@greenassoc.com. Tracy Green is a principal at Green and Associates in Los Angeles, California.  They focus their practice on the representation of individuals, businesses and licensed professionals, with an emphasis on health care professionals.

Medicare And Medi-Cal Audits: Attorneys' Comments On Responding To Audits

If you are a health care provider with a Medicare or Medi-Cal provider number -- especially in Southern California --chances are you WILL be audited or have an on-site visit at some point over the years. The audits and on-site visits (sometimes unannounced) have increased dramatically over the past years and will continue to increase as the state and federal governments face budget problems. In addition, the private insurers who administer Medicare are required by their contracts with the government to audit whether they suspect improprieties or not.

Your practice may also be subject to audits from insurance companies and health maintenance organizations (HMOs). The audit must be taken seriously since it can result in an overpayment being assessed and/or adverse administrative history. However, do not panic. Although it can seem like an intimidating event, you can increase your chances of prevailing and not having an unfair overpayment amount assessed if you prepare for any potential audit in advance and handle it properly once the request is made.

Here are some strategies and tips for helping you not only survive your audit but being prepared and prevailing to the greatest extent possible:

1. Prepare Your Staff In Advance For Understanding That Audits Are Part Of The Healthcare Business. Providers and the staff often erroneously assume that if they are being paid for claims that everything is correct and they are doing everything right. Not so. Medicare and Medi-Cal pay the provider on a "good faith" basis and reserve the right to audit. Private insurers, on the other hand, often require pre-approval before payment. Thus, it is critical that your entire staff understand that the best defense against audits is good charting, documentation, proper coding, and avoiding any upcoding, billing for services not provided or documented or anything else that may be characterized as fraud or abuse.

Once everyone understands that audits are part of the process it also helps them take control of the audit process and not let fear prevent them from handling it professionally. Most Medicare and Medi-Cal audits fall into one of three broad categories:

(1) an audit during the application or updating of application process where there is an on-site visit and review of business records and typically only a limited number of claims;

(2) prepayment audits (most common in Medicare), in which a review of claims is conducted before Medicare pays the physician, where carriers typically want to look at only one or two claims from each physician; and

(3) post-payment audits.

In a comprehensive post-payment audit or review, the carrier reviews a small statistical sample of claims and uses the results to calculate a projected overpayment for a period of months or years.

2. Identify In Advance Who Is Authorized To Speak To Auditors And Any Other Person Or Investigator Who Visits The Office In An Announced Or Unannounced Visit. First impressions count and this applies to audits and other visits by regulators or investigators. You will be better prepared if you determine in advance who is permitted to speak to government auditors or regulators. For example, you do not want the receptionist interviewed about your office's policies and procedures since anything he or she says may be used in your audit.

Establish a procedure that only an office manager, the provider or the health care lawyer are allowed to meet and discuss anything with the auditor or regulator. The other staff should be limited to contacts about establishing times and dates available for meeting unless and until they are instructed to do so by the designated persons in charge of the audit. There are many horror stories about staff meeting with auditors or regulators while the provider is out of the office and giving misinformation which was later used against the provider.

3. In Order To Anticipate An Audit Or Prevent An Adverse Audit, Understand Fully How The Medicare Or Medi-Cal Program Operates. Providers often assume that billers and office staff know how the Medicare and Medi-Cal programs operate when this is often not the case. Billers are used to working from superbills and entering codes without analyzing whether all the program rules are being followed. It should be understood by all that these programs will only reimburse "reasonable and necessary" services where there is the required documentation -- even if the services were provided. If the documentation is not present in the file -- it will be presumed that the service was not provided or that it was not medically reasonable and necessary.

We suggest that the providers have the billers and office managers create a thorough notebook regarding each of the procedure codes billed that contains the printed portions of any relevant manuals about what constitutes 'reasonable and necessary services' as defined by Medicare or Medi-Cal and what documentation is required for these services. It is then necessary to have the providers and anyone who sees patients or provides services read and understand these requirements. In addition, the provider needs to be aware of what your local carrier wants claims forms and patient records to contain because the requirements vary.

The provider may have worked in a hospital or private setting where the documentation requirements are different from private Medicare or Medi-Cal and not realize they are failing to properly document the file. For example, state law and private insurers may allow a physical therapist assistant or physical therapy aide to perform certain tasks in phyical therapy while Medicare's billing and reimbursement policies and procedures may not pay for the same treatment by these assistants or aides for Medicare treated patients. Such information typically is contained in the Medicare manual and the local carrier's local medical review policy which are all available online.

Above all else, maintain complete documentation in patient records to substantiate the services billed. Record symptoms and diagnoses, details of the services and level of care provided, and complete progress notes. Medicare considers lack of corresponding documentation as evidence that billed services were not reasonable and necessary. The auditor will consider any related reimbursement as an overpayment and require the provider to refund the applicable amount.

There should be periodic internal reviews of files and education to ensure that the documentation is being done properly. Even if this billing and procedure code notebook and research was not done before the audit, prepare it at the beginning of the audit so everyone at the provider's office is prepared and knows the billing and reimburesment policies. Often during the audit, auditors will be mistaken about documentation or medical necessity requirements.

4. Have A Health Care Attorney To Whom You Can Send Any Audit Letters Or Whom You Can Contact Anytime There Is A Visit And Request For An Interview. If you receive a letter or visit from your Medicare or Medi-Cal carrier requesting a number of charts or records, contact your attorney immediately and fax him or her the letter or business cards of the visitors. Even if the attorney only needs to be minimally involved in most of the audit and file preparation, you need an objective person to ensure that the audit is handled in the best manner possible.

It is often easier for the health care attorney to speak with the auditors and set up a timetable for any interviews or to ensure that there is sufficient time to respond to the request for documentation. In most cases, thirty or sixty minutes of a qualified health care attorney's time at the beginning of the audit is well worth it since it will reduce the risk of overpayment, help reduce the provider's time and help ensure that the audit goes smoothly and that a good impression is made.

Resist the temptation to think that if a health care attorney is involved that an auditor or regulator will think that something is "wrong." In fact, the opposite impression is given: the provider is sophisticated, professional and has an established method for responding to audits. This is especially important in "unannounced" visits where it is easier for a health care attorney to be objective and take control of the situation where an auditor simply shows up and demands records and interviews at that moment. The health care attorney can also address regulatory issues that may be beyond the provider's expertise.

5. Read Any Letters Or Lists Carefully And Make Sure You Understand What Is Requested And See If There Are Any Patterns. This is another reason to send an audit or similar letter to your health care attorney so you understand what is requested. For example, assume that records for specific dates of service are requested as to a certain number of patients. Make sure that you also send in any other documentation that would support the services rendered on that day. This could include laboratory results, X-ray reports, photographs, consultations from other physicians, etc.

When reviewing the audit letter, especially if the letter requests multiple charts, see if there seems to be some type of underlying pattern or theme in the chart notes. Were the requested patient charts all billed for one particular code, all referred by a certain physician, or is there some other pattern? This will assist you in better addressing the concerns of the audit -- which may not be told to you directly by the auditors.

6. Determine With Your Health Care Attorney Whether You Need An Expert Witness Or Coding Expert During The Audit Process. Your attorney and you should consider hiring a coding expert to review the charts, preferably before you submit them to the auditor or carrier. If the expert cannot complete the review before the deadline for producing the records, the attorney will ask for an extension or simply have the expert conduct his review at the same time that the carrier does. Your attorney should have the review done under the attorney work product privilege so that the results will be confidential. One excellent preventative measure is to have a coding expert review charts periodically so that you know that your practice is in compliance with billing and record requirements. This can also be part of a compliance plan.

7. Take Control Of The Audit. Make Sure Records Are Complete. Review Charts And Records Carefully Before Copying Them Or Providing Them To Auditors. The auditors or regulators do their best to put the burden on the provider to prove that the services were properly documented and coded. Remember that the auditors are often not medical personnel even if they have some medical training. The auditors will often ask for the charts right away in unannounced visits.

Take your time and ensure that all reports, notes and other information are in the chart before you produce or copy it. Look for other records such as sign in sheets that will also be relevant to the audit. One of the most important things to do in preparing to respond to an audit is to ensure that the records are complete. One of the best ways to do this is to meticulously compare each medical record with its corresponding billing record. Remember, the billings are where the government’s investigation began. You can ensure that there are records for each of the dates billed, identify coding issues and have a better idea how to proceed in the audit.

Another important step is to make sure you produce the complete records. It is not enough to have them but you need to produce them and have records of the production. If you fail to produce records requested, you can be penalized financially or with adverse action against your provider number. If the auditor or regulator agrees you do not need to produce certain records or documentation, you or your health care attorney should document this agreement. It is important to document what is produced since you will be creating an administrative record. All records and documentation produced should be accompanied by a memorandum or letter itemizing the records produced and either delivered in person or with a return receipt or overnight service as proof of delivery.

8. Do Not Alter The Records. If you need to supplement the records, make sure you do not back date or alter the records. Altering records can cause problems much worse than overpayments -- Medical Board complaints and discipline. Seek the advice of counsel when it comes to supplementing records or there is any issue about missing records.

9. Understand What Circumstances Might Can Trigger An Audit. Audits can provide an education. They can be stressful, especially if the outcome is unfavorable. However, they can offer tremendous amounts of information and educational opportunities for your office. Try to remain positive while you go through this process. What are some common triggers of audits?

■ High or excessive use of specific CPT codes. Sometimes excessive use of certain ICD-9 codes may also trigger audits. Generally, doctors who are outside the bell curve with regard to billing practices may get flagged on internal carrier audit screens.

If your practice tends to be more specialized (perhaps you specialize more in geriatric patients), you will, by the nature of your practice, be billing certain codes more frequently than the other doctors in the community who have a more broader-based practice pattern. You will want to explain these issues to the auditors. Do not be afraid to bill for specialized services or think that you will avoid an audit by underbilling or billing at the lower code. Just be extra careful in the documentation. Do not alter proper billing protocols just to try to stay under the radar. Bill for what you did and let the chart defend you.

Importantly, don't stress to the auditors how you provide services for "free" and underbill. That does not help your audit in most circumstances. Are you billing for codes where you are using new technology? Did you change your practice patterns to become more specialized so that your billing patterns changed? Did you add new diagnostic or therapeutic machines to the practice? Did you purchase a practice? If so, you may flag out on a statistical basis. Explain your billing and practice changes to the auditors and the best defense is a well-documented file. Use the research notebook described above to ensure you are complying with all the documentation and medical necessity requirements.

■ Do you have an unhappy patient or patient's family? If you have an unhappy patient, review the bill if the patient had a bad outcome or received an unexpectedly large bill. Sometimes collection practices or a bad outcome can prompt a patient to launch a complaint that generated the audit. To avoid such problems in the future, make sure the patient knows upfront about the costs. Speak with the biller or collection service to alter methods of collections. Consider formulating a payment plan with the patient or allow patients to pay with a credit card. If one of the patients was unhappy, raise this with the auditors.

■ Do you have disgruntled current or former employees? All it takes is a complaint from a current or former employee to trigger a fraud audit or other review. The employee may try to get revenge and the best way to prevent this from occurring is to do the following: have a compliance plan that requires the employee to report suspected fraud and abuse during employment; conduct exit interviews where employees are asked about any suspected fraud or abuse; have written employee policies and maintain personnel files; have regular office meetings to review policies; address small issues before they escalate to large ones; make everyone in the office feel like part of the team; and educate the employees regarding billing and documentation requirements so that they do not mistakenly think that something is being done improperly. If you suspect that a current or former employee triggered the audit, bring the disgruntled employee up in the audit andy why he or she is not credible since the auditor may not identify the complainant.

■ Are You Overusing Pre-Printed Forms Or Template Shortcuts? Be careful with the use of templates especially in electronic records. Although templates are acceptable charting methods, they can look very repetitive, especially when it comes to routine care and services. Each chart note should clearly reflect the chief complaint, history, examination and treatment you rendered on that date for that patient. Cutting and pasting templates/macros from previous dates of service and simply using that language again in subsequent chart notes does not necessarily indicate what happened on that specific date of service. It makes for a bigger charts but once it looks repetitive or like filler, it can cause an issue with the audit where your office might be characterized as a "mill" or you are questioned about the amount of time spent with the patient.

Look for these triggers and others as they will help you defend the audit. Do not be afraid of negative facts or problems that you have found. If there are weaknesses or mistakes, discuss with your health care attorney whether you should concede certain issues at the audit level for credibility reasons. Do not assume that if you admit certain problems that the auditors will be fair to you or not seek overpayment. You need to have a strategy and having an outside objective person such as a health care attorney can be useful so you do not make a tactical mistake that could cause later problems or result in an overpayment.

10. Be Professional. Treat the auditors with respect even when you disagree with them or their position. This is another reason to have an objective health care attorney for you to rely upon. It is easy to get emotional and defensive when your medical services seem like they are under attack and you already feel underpaid by the carriers.

11. Maintain A Notebook Of Administrative And Professional Records. In advance of the audit, have a notebook or file with all the key documents you need for an audit. You will be prepared and then update these on an annual basis at the beginning of the year. These records include but are not limited to the following: --All Medicare and Medi-Cal applications and supplemental applications (see if there is an issue with failure to update these applications); --Malpractice insurance, workers' compensation insurance; liability insurance and any other insurance required by the programs; --Copies of all licenses held by providers and staff; --Other business documentation required by the programs such as office leases, contracts with laboratories, contracts with suppliers, etc. (this will depend upon the type of provider); --Equipment lists where the equipment is diagnostic or used for billing; and --Any other documentation required by the program and its manuals.

12. Request An Exit Conference Or Meeting Upon The Conclusion Of The Audit. Depending on the type of audit or visit, you want to have an exit conference or meeting where you can address any outstanding issues in the audit. You also may want to or submit a letter that is reviewed or drafted by your health care attorney showing that you have fully complied with all record requests and documenting any positions regarding coding, billing, medical necessity or other issues that have arisen. Having an excellent record of your submissions will be important to obaining a favorable result and creating a good record if there is a subsequent hearing.

13. Conclusion. Audits happen to all providers. It does not necessarily mean you are a bad provider or that you should immediately leave the Medicare or Medi-Cal programs. With increasing financial pressures on health programs and practices, it is important to be forward thinking and create compliance plans and self-audit so your practice does not get assessed an overpayment. During the audit, do your best to turn a potentially negative situation into a positive learning experience to correct any legitimate problems that the audit may uncover as well as to minimize the chance of future audits. Being stubborn and continuing to bill improperly will not help your practice. The carrier may still monitor your subsequent claims to see if your billing practices have actually changed and comply with the program's rules and regulations. Be proactive, anticipate audits in advance and handle audits intelligently and you will prevail to the greatest extent possible!

Any questions or comments should be directed to: tgreen@greenassoc.com.  Tracy Green is a principal at Green and Associates in Los Angeles, California.  They focus their practice on the representation of professionals, particularly health care professionals including individual physicians, corporate providers and group practices.

Durable Medical Equipment (DME): Attorney Commentary On Adult Diaper Fraud Case

On February 13, 2009, a 10-count indictment was unsealed against the owner and operator of a Houston area durable medical equipment company (DME) in an adult diaper fraud case, and charging him with 10 counts of health care fraud. An indictment is merely a charge and defendants are presumed innocent until proven guilty.

A Houston federal grand jury indicted Ene Etim (“Ernest”) Hogan, the owner and operator of Shanet Medical Source, and accuses him of routinely billing Medicaid for adult urinary incontinence supplies he did not deliver to Medicaid beneficiaries, for supplies in excess of the amount actually provided to the beneficiary and for supplies provided to Medicaid beneficiaries without a proper prescription or who did not need the supplies. Adult incontinence supplies includes adult diapers, underpads, wipes and pull-up briefs.

The indictment alleges Hogan executed the scheme to defraud beginning in June 2004 with the last alleged false claim filed in March 2006. Hogan allegedly billed Medicaid for claims totaling approximately more than $1 million and received payments for those claims totaling approximately $683,360. The case is pending in the Southern District of Texas.

Commentary: We have a few comments about this case. First, in health care, the regulatory system that hospitals and honest providers follow are meant to preclude this type of alleged fraud. For the honest providers, it is useful to look at these extreme cases to understand the rules and what is happening in the “dirty” side of health care. When investigators come to your office, they may have their fraud glasses on and are somewhat jaded due to their work on all these extreme fraud cases.

Second, this case is a reminder for all DME providers, pharmacies, physicians and others to keep good records regarding the provision of services to beneficiaries and patients. Sign-in sheets are a good back-up for offices, have patients sign for products they receive and keep log sheets of any deliveries. These records are critical in an audit or in proving that services were provided.

Third, there are waves or patterns of fraud. In Los Angeles, the adult diaper fraud was common more than 5 years ago and there were many prosecutions. It has still yet to be eliminated. It is complex, however, and we see in our practice that if honest Board Certified physicians prescribe incontinence supplies for their geriatric patients – they may be red-flagged for it and subjected them to an audit even though they do not receive any benefit in prescribing the supplies. Thus, if you are prescribing or providing incontinence supplies realize that you will be subjected to great scrutiny and ensure that you are documenting medical necessity and following all program rules.

For example, there may be a determination of no medical necessity if you have not performed a focused medical history and targeted physical examination to identify possible reversible factors and initiated treatment to manage the incontinence (for example, behavioral, pharmacologic, or surgical intervention). It may be appropriate to refer the case to a urologist or other specialist to treat the underlying medical condition. Realize also that some low-income patients may claim to be incontinent because they are receiving kickbacks from DMEs or are selling the supplies.

Fourth, the claims here go back more than 5 years and the last claim was almost 3 years ago. These indictments are based on past history so if you have any exposure from old claims do your best to address them and be proactive.

Any questions or comments should be directed to: tgreen@greenassoc.com. Tracy Green is a principal at Green and Associates in Los Angeles, California. They focus their practice on the representation of individuals, businesses and professionals, with an emphasis on health care professionals and providers.

Marriage Family Therapist: Attorney Comments On Recent Case Of Billing For Services Not Provided And Overbilling

On February 20, 2009, Carla Gireaux, a licensed marriage and family therapist, was arraigned in Superior Court on charges filed by the Los Angeles County District Attorney’s Office. Ms. Gireau was a former contract therapist with the Los Angeles County Department of Mental Health. Ms. Gireaux is accused of allegedly billing more than $500,000 to the county for mental health services never rendered.

As attorneys who protect peoples' rights under the Constitution, please remember that a felony complaint contains allegations that a defendant has committed a crime. Every defendant is presumed innocent unless proven guilty in court.

The case has been assigned to the Public Integrity Division of the DA’s Office. Prosecutors allege that between October 2002 and December 2007, Ms. Gireaux submitted false claims to the county for services never provided. In other cases, she allegedly provided services but over-billed for more sessions than were provided or continued billing after services ended. In submitting false claims for services not rendered, she allegedly forged the signatures of parents on three occasions.

Ms. Gireaux was charged with multiple counts of grand theft, forgery and other felony tax charges. She is being held on $500,000 bail. If convicted as charged, she faces a maximum term of eight years and four months in state prison.

Commentary: The case brings up many lessons and reminders for professionals who bill the government and insurance companies. Even if you know that you would never commit “fraud” by billing for services not provided – there are things to remember.

First, with the government budget and economic crisis, there is great pressure on government and insurance companies to cut their expenses by focusing on fraud and for seeking reimbursement of funds paid for “overbilling” or billing for services not provided. You need to be extra cautious when billing these entities and set up compliance plans, hire an outside attorney to ensure you are following the rules and conduct periodic audits so that any billing errors will be treated as “mistakes” and not “fraud.”

Second, record keeping is important. We have seen many cases where the alleged overbilling is frivolous and non-existent or is based on the fact that there was bad. Remember to keep excellent records. See our prior post on record keeping: http://greenandassociates.blogspot.com/2009/02/medical-audits-board-defense-and.html

Third, review the billing of other professionals in your office or business. We have seen cases where someone else in the office billed for services not provided. One of our doctor clients was charged criminally when someone in charge of a family counseling program pulled files randomly and wrote notes and billed Medi-Cal in an effort to help the office make more money and to make her appear to be a better office manager. We got the charges dismissed at preliminary hearing and extensive investigation – but if there had been a compliance program and periodic audits of the chart, all of this might have been discovered and prevented.

Fourth, if you or your office has engaged in overbilling, create a plan of action. There are times where services were provided but not billed for or were billed at an upcoded level. Consult an outside attorney (which is protected by the attorney-client privilege unlike consultants or accountants) and see what options are available. If the money is paid back before a government or insurance audit and a record is created of how these errors occurred, it will be much less likely that there will be a criminal fraud case. Having a plan can lessen your personal stress and help you take control of the situation.

Fifth, consider the consequences to a professional license in your strategic plan. If the overbilling or lack of oversight of the office was due to mental health, personal or addiction issues, address these and get your regulatory board or bureau involved if appropriate. Certain boards have diversion programs. If there are other issues, address them and remember that being proactive can help show the regulatory agency that you are essentially an honest professional who made mistakes but have sought to solve them.

This is one of the reasons why having a plan for returning overbilled amounts, rebilling or creating a compliance plan is helpful since it shows lack of intent to defraud. Everyone will want to know how you or your business reacted when the billing errors were discovered. If there was a cover-up, that could be used as evidence that there was intent to defraud. If there was an investigation and plan for taking care of these issues, it is consistent with mistakes and lack of oversight.

We have assisted many professionals in these types of cases. You need to engage in acts that show there was not intent to defraud and that when you discovered the overbilling, you did something about it. It may be financially painful, but criminal charges can destroy your practice and professional life. Take some steps to address these issues at an early stage. If it’s not an early stage, do your best to take care of it since the statute of limitations in these cases is long (4 years from date of discovery of the overbilling in state cases).

Any questions or comments should be directed to: tgreen@greenassoc.com. Tracy Green is a principal at Green and Associates in Los Angeles, California. They focus their practice on the representation of licensed professionals and businesses in civil, business, administrative and criminal proceedings and investigations.