Fraud and Abuse

July 10, 2015 | Ambulatory Care Risk, Quality, & Safety Guidance

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Compliance activity for the physician office practice covers a wide range of complex and evolving laws and regulations. Increasing demands on federal and state budgets have led to intense and aggressive efforts by the federal government to prevent fraud and abuse and to recover funds allegedly lost to these practices in federal and state health programs.

The most frequent kind of fraud arises from a false statement or representation that is material to entitlement or payment under the Medicare program by a practitioner, physician supplier, contractor employee, or beneficiary. Activities or practices of providers, physicians, or suppliers of services and equipment that are inconsistent with accepted sound medical, business, or fiscal practices may be treated as abuse. Improper payment—payment for healthcare services that fail to meet professionally recognized standards of care or that are deemed medically unnecessary—results in avoidable costs to a federally funded healthcare program.

The federal Health Care Fraud and Abuse Control Program, under the direction of the U.S. Attorney General and the Secretary of the Department of Health and Human Services (HHS), acts through the Office of Inspector General (OIG) to coordinate federal, state, and local law enforcement activities related to healthcare fraud and abuse committed against all health plans, both public and private. In 2009, the federal government launched the Health Care Fraud Prevention and Enforcement Action Team (HEAT), designed to prevent waste, fraud, and abuse in the Medicare and Medicaid programs and to prosecute healthcare fraud and enforce antifraud laws. HEAT comprises top-level law enforcement agents, prosecutors, attorneys, auditors, and evaluators, who apply sophisticated tools and resources to their enforcement activities.

Violating federal statutes may lead to exclusion from participation in federal healthcare programs (e.g., Medicare) as well as civil or criminal sanctions—including civil monetary penalties or criminal fines and imprisonment. Some statutes to be aware of include the False Claims Act, which prohibits knowingly submitting false claims, such as billing for services that were not provided, or engaging in other fraudulent billing activities (31 USC §§ 3729‑3733); the Medicare/Medicaid antikickback statute, a criminal statute that prohibits the exchange of anything of value in an effort to induce referral of federal healthcare program business (42 USC § 1320a-7b); and the civil Stark law and regulations, which largely ban physicians from referring patients to healthcare services or entities in which they have a financial interest (Social Security Act § 1877). States have also enacted laws that support the prosecution of fraud and abuse in healthcare.

With the formation of ACOs, certain waivers have been established regarding Stark and antikickback laws. Legal counsel should be sought to ensure that the requirements of...

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