Fraud and Abuse Compliance

Topics Covered on This Page

False Claims Act
Anti-Kickback Statute
Stark Law
Other Federal Laws
Vermont Laws
Preventive Action
About the Author & Editor
Footnotes

By Eileen Elliott

Shems, Dunkiel, Kassel & Saunders, PLLC

Chapter Editor:
Anne Cramer
Primmer, Piper, Eggleston & Cramer, P.C.

The regulatory enforcement atmosphere for health care providers has been steadily intensifying since the early 1990s, roughly paralleling the growth in the nation’s government-funded health care programs. A wide variety of business arrangements and payment practices may constitute health care fraud, resulting in criminal penalties (fines and imprisonment), civil monetary penalties, and exclusion from Medicare, Medicaid, and other federal programs.

Health care enforcement action is disruptive and expensive to defend, even if no wrongdoing is found. It is essential that providers become familiar with the basic tenets of the federal fraud and abuse laws to understand the pitfalls associated with certain business activities and avoid liability wherever possible. 

The most common enforcement tools are the federal False Claims Act, the federal health care program anti-kickback law, the physician self-referral law (Stark), and the state Medicaid fraud law. A number of other criminal statutes may be implicated by conduct triggering these health care fraud and abuse laws, and these are outlined briefly later in the chapter. 

False Claims Act

What is the False Claims Act?[1]
The False Claims Act (FCA) was enacted in 1863 to combat defense procurement fraud during the Civil War. Congress made changes in 1986 that shifted the Department of Justice’s primary enforcement focus from defense to health care. 

What does the FCA prohibit?
The FCA prohibits a person from “knowingly” presenting a claim (or causing someone else to present a claim) for payment to the United States government that is false or fraudulent. “Knowing” and “knowingly” are specifically defined in the law to mean that a person:

• has actual knowledge of the information; or
• acts in deliberate ignorance of the truth or falsity of the information; or
• acts in reckless disregard of the truth or falsity of the information.

This means that no specific intent to defraud the government is required to violate the law.

If intent to defraud is not relevant, what factors determine whether a practitioner “knowingly” submitted a false claim?
The Department of Justice considers the following:

• Did the provider have either actual or constructive knowledge of rules or policies governing the submission of the particular claim? Were there Medicare or Medicaid bulletins or advisories on point?
• How clear is the policy that was violated? Is there room for reasonable mistake?
• How many false claims were submitted? Reckless indifference can be inferred from a large number of claims.
• Does the practitioner have a compliance plan, and is it being followed?
• Does the practitioner have a record of reporting suspected compliance problems and attempting to fix them?
• Did the provider seek guidance on billing issues from CMS or a third party carrier, and was any guidance given clear?

What are the penalties for a violation?
The civil penalty for each false claim is not less than $5,500 and not more than $11,000. The civil monetary penalties are mandatory for each false claim, whether or not the government proves it sustained an actual financial loss. If the government proves it suffered a loss, the provider is liable for three times the loss, called treble damages, or two times the loss if the provider self-reported the false claim and was cooperative during the enforcement action.

Does the FCA have a statute of limitations?
Yes. The statute of limitations is either six years, or three years after a violation becomes known, or should have been known, provided no more than 10 years have elapsed since the violation occurred. 

What is the whistleblower provision in the FCA?
This is the provision that allows a private person to sue to enforce the FCA, and potentially recover a portion of any judgment or settlement that results. The U.S. Department of Justice reviews each case that is initiated by a private person, who is called a qui tam relator, and decides whether or not to intervene. 

If the government intervenes, the share the qui tam relator may ultimately recover is lessened somewhat, from approximately 25 percent to 30 percent without the government, to 15 percent to 25 percent if the government joins. The qui tam relator can share in the recovery even if he or she participated in the false claim.

A relator can be anyone – staff, patients, former employees, third-party billing companies or one of their employees, competitors, auditors working on behalf of CMS, or state government. 

What preventive measures are advisable to reduce the risk of an FCA violation?
There are a number of important steps to take to reduce the risk of filing a false claim or being a target of a qui tam suit. The bottom line in any measures taken, however, is making sure that all employees and business colleagues understand that you take the FCA and fraud and abuse issues seriously and will not condone non-compliance.

1. Integrate false claims and qui tam issues into your corporate compliance plan.
2. Clearly communicate that there is an affirmative duty to report any potential false claim to you.
3. Make sure there is a clearly-warned system of punishment for failure to report.
4. Require compliance as a condition of employment.
5. Conduct random employee interviews to talk about claims and billing issues.
6. Require an annual certification by employees that they know of no compliance issues.
7. Do exit interviews and ask whether the departing employee knows of any compliance issues.
8. In general, create an office environment that will ensnare a qui tam relator who continues to work for you while building his or her case.
9. If you have a human resource director, make sure he or she is part of the compliance loop.
10. Review third-party billing contracts.
11. Periodically review your corporate compliance plan to ensure everything possible is being done to prevent employees from becoming whistleblowers. For instance, employers should verify that:
    1. Employee input is being sought, and the compliance program creates safe and convenient mechanisms to collect input.
    2. Concerns are in fact being brought forward. If you are hearing nothing, redouble your efforts to solicit input.
    3. Employees are satisfied with action taken to address concerns they raise. Employers should speak to anyone reporting a compliance issue to understand his or her perception of the employer’s commitment to respond meaningfully to employee input.
    4. Employee input is being investigated thoroughly and appropriate action is being taken. 
    5. No employee is retaliated against for raising concerns. Again, employers should speak with anyone reporting a possible compliance issue to make sure he or she did not experience retaliation.
    6. All instances of retaliation are documented and the retaliator is disciplined appropriately.

 What happens if there is retaliation against a whistleblower?
The whistleblower may include a count alleging retaliation in his or her qui tam suit. If retaliation is successfully proven, the whistleblower may be reinstated at the same seniority level, awarded two times the amount of back pay plus interest, as well as  compensation for any special damages he or she incurred that resulted directly from the retaliation, attorneys fees, and the costs of bringing the suit.

There is also a state Healthcare Whistleblower’s Protection Act[2] that applies to employees of hospitals and nursing homes. This is a Vermont law that is unrelated to the federal false claims act. It is discussed in detail later in this chapter in the section devoted to state laws.

If a health care provider is found to have submitted a false claim, has he or she broken other laws as well?
Yes. The federal government may pursue a health care offense under HIPAA,[3] or a violation for using false records,[4] providing false statements,[5] mail or wire fraud,[6] or possibly conspiracy if more than one person was involved. The other criminal laws that may apply to false or fraudulent claims are set forth more fully below.

Anti-Kickback Statute

What is the anti-kickback statute?
The federal anti-kickback statute[7] prohibits knowingly and willfully soliciting, receiving, offering, or paying anything of value to induce referrals of items or services paid for by a federal health care program. It is a criminal statute, and the Department of Justice must prove beyond a reasonable doubt that the parties had unlawful intent. 

What kinds of business activities are permissible under the anti-kickback law?
The statute and regulations specify a number of “safe harbors.” If a business arrangement fits precisely within a safe harbor, the arrangement is presumed not to violate the statute and will not be subject to an enforcement action.

A business arrangement that does not fit within a safe harbor is not automatically illegal.  In an enforcement action, the provider would have the burden of proving that the transaction was not a kickback received in exchange for a referral.

The safe harbors include but are not limited to:

• certain investment interests;

• rental of space and equipment;

• personal services and management contracts;

• sale of a practitioner’s practice;

• referral services;

• warranties;

• discount arrangements that are properly disclosed and reflected in the costs claimed or charges made by the provider;

• payments made to bona fide employees;

• group purchasing organizations;

• coinsurance and deductible waivers;

• investments in ambulatory surgical centers;

• joint ventures in Medically Underserved Area (MUA);

• practitioner recruitment in Health Professional Shortage Area (HPSA);

• physician practice sales to hospital in HPSA;

• malpractice subsidy for obstetrical care in HPSA;

• ambulance restocking arrangements;

• referral for specialty services.

What are the penalties for violating the anti-kickback law?
Violations constitute federal felonies punishable by up to five years imprisonment and/or fines up to $25,000. 

While the Department of Justice has criminal enforcement authority, the Office of Inspector General (OIG) of the Department of Health and Human Services (HHS) has civil enforcement authority. The OIG is responsible for investigating suspected fraud and abuse in any of HHS’s programs. It may bring a separate administrative action to exclude an individual from participating in federal health care programs and recover civil monetary penalties up to $50,000 per act and three times the remuneration offered.

Discipline imposed under a federal health care program may be the basis for state unprofessional conduct charges and license suspension.

What are some guidelines for avoiding illegal activities?
In general practitioners should always pay fair market value for equipment, space, and services. Practitioners should never pay for referrals, either directly or indirectly.

Is there any way to find out in advance whether a proposed business activity would violate the anti-kickback law?
The anti-kickback law authorizes the OIG to issue advisory opinions about the arrangement in question.[8] The opinions may address (1)what constitutes prohibited remuneration, and (2)whether an arrangement fits within a safe harbor.

Advisory opinions are made public, and are helpful for understanding how the OIG views a particular situation or transaction. The advisory opinions from 1997 forward are available online at the OIG’s website, http://oig.hhs.gov/fraud. Only parties to the advisory opinion can rely on it as evidence in an enforcement action.

The decision to request an advisory opinion should be carefully made. Although the requesting party is entitled to rely on the OIG’s advice, that advice may not be what the requesting party wanted to hear. It is also expensive, as the requesting party must pay a fee equal to the OIG’s costs in responding, including any outside experts’ fees. Finally, the OIG bases its opinion exclusively on the facts presented by the requesting party and does no independent investigation. Consequently, if the situation changes and facts develop slightly differently, the advisory opinion may be of limited value.

The OIG also issues more generalized Special Fraud Alerts that are distributed to the health care industry and identify conduct the OIG determines is impermissible. The OIG began publishing these Special Fraud Alerts in 1994 in the Federal Register, and HIPAA has since required HHS to solicit ideas on new Special Fraud Alerts through notices in the Federal Register.[9]

What are the proposed changes to the anti-kickback law relating to E-prescribing ?
In October 2005, the Department of Health and Human Services proposed rules for e-prescribing and electronic health records in an effort to establish an interoperable electronic health care system. The proposed rules would allow hospitals and certain health care organizations to furnish hardware, software, and related training services to physicians. In a coordinated approach, CMS has proposed exceptions to the Stark self-referral laws and the OIG has proposed safe harbors for arrangements involving the donation of technology for e-prescribing and electronic health records.

The criteria for permissible donations to physicians are proposed to be narrow until nationwide product certification criteria are established and approved by the secretary of health and human services. At that point, hospitals and certain other entities could donate a broader array of technology to physicians if the technology meets the product certification criteria. CMS is also considering capping the value of the technology that may be donated by a single donor to minimize the potential for illegal arrangements designed to pay physicians for referrals.

Stark Law

What is the Stark law?
The federal Stark law[10] is the physician self-referral ban. Named after Representative Pete Stark who introduced the legislation, it was originally aimed at preventing physicians from referring Medicare beneficiaries for clinical laboratory services to entities in which the physicians or members of their families had a financial interest (Stark I). The law went into effect in January, 1992. 

It was expanded effective January 1, 1995 to cover referrals for a wider array of health care services (Stark II) that were considered to be especially susceptible to over- utilization resulting from physicians’ financial interests. The law was also expanded to include referrals made to Medicaid beneficiaries.

The specific health services to which Stark applies are called Designated Health Services (DHS). 

What are the Designated Health Services (DHS)?
There are 11 categories of DHS:   

1.      clinical laboratory services;

2.      physical therapy services;

3.      occupational therapy services;

4.      radiology services/imaging services (MRI, CT, ultrasound);

5.      radiation therapy services;

6.      durable medical equipment (DME) and supplies;

7.      parenteral and enteral nutrients, equipment, and supplies;

8.      prosthetics, orthotics, and prosthetic devices and supplies;

9.      home health services;

10.  outpatient prescription drugs;

11.  inpatient and outpatient hospital services.

What is considered to be a referral?
The Stark law’s broad definition of a referral is a request by a physician for an item or service for which payment is made under Medicare. It is not necessary for the physician to actually refer a patient to a prohibited DHS provider – it is enough that the physician orders the service and the patient obtains it at an entity with which a physician or family member has a financial relationship. In other words, there is no intent required to violate the Stark law.

How does the Stark law define a “financial relationship?”
A “financial relationship” is defined to be a “direct or indirect ownership interest or compensation arrangement.” A “compensation arrangement” includes any arrangement involving remuneration between a physician (or immediate family members) and an entity/DHS provider. 

An “ownership or investment interest” includes stock, partnership shares, limited liability company memberships, loans, bonds and other financial instruments secured by an entity’s property or revenue. Also prohibited are ownership or investment interests in an entity that has an ownership or investment interest in the DHS provider entity. Not included are interests in retirement plans, stock options, or unsecured loans.

Who are immediate family members under Stark II?
Immediate family members are defined as a spouse, child (birth and adopted), sibling, parent, stepparent, stepchild, stepbrother or sister, in-law (father, mother, sister, brother, son and daughter), grandparent and spouse, and grandchild and spouse.

Are there any exceptions to the Stark law?
Yes. Some exceptions apply to both ownership interests and compensation arrangements; some apply only to compensation arrangements, and some only to ownership interests.  They generally require a written agreement establishing the terms of the arrangement in advance and providing for fair market value compensation that does not depend on the amount or value of any referral business.

Unlike the anti-kickback law, where conduct that does not fit squarely in a safe harbor may still be legal, referrals that do not exactly conform to a Stark exception will violate the statute.

The exceptions applicable to ownership interests and compensation arrangements are:

• physician services;
• group practice and in-office ancillary services;
• services furnished by an organization (or its contractors or subcontractors) to its enrollees;
• services performed by academic medical centers;
• implantation of devices at ambulatory surgical centers;
• erythropoietin (EPO) and other prescription drugs furnished in or by an end-stage renal facility;
• preventive screening tests, immunizations, and vaccines;
• eyeglasses and contact lens following cataract surgery;
• intra-family rural referrals.

The exceptions applicable to ownership exceptions are:

• publicly-traded securities and mutual funds;
• hospitals in Puerto Rico;
• rural providers (physician-owned entities providing services to rural residents);
• hospital ownership.

The exceptions applicable to compensation arrangements are:

• rental of office space and equipment, where there is a written lease for at least one year and fair market value is paid;
• bona fide employment relationship;
• fair market value personal services arrangements;
• physician recruitment;
• isolated financial transactions;
• arrangements with hospitals for services unrelated to DHS;
• certain group practice arrangements with a hospitals;
• payments by physicians for items and services;
• charitable donations;
• non-monetary compensation up to $300 annually;
• fair market value compensation;
• medical staff incidental benefits;
• risk-sharing arrangements;
• compliance training;
• indirect compensation arrangements;
• referral services that meet anti-kickback safe harbor rules;
• obstetrical malpractice insurance subsidies;
• professional courtesy;
• retention payments in underserved areas;
• community-wide health information systems.

There is also an exception that allows for temporary non-compliance for physicians and entities that are normally compliant but have fallen out for reasons beyond their control.  It is a very limited exception that gives a reprieve for up to 90 days and is available only every three years. 

What are the sanctions for violating Stark II?
Violations are punishable with civil monetary penalties up to $15,000 for each bill or claim presented for a service that a person knew or should have known violates the Stark prohibition, and up to $100,000 for each arrangement or scheme that the physician or entity knew or should have known has the principal purpose of assuring referrals in violation of the Stark prohibition. 

Claims will not be paid for any DHS provided in violation of the law, and reimbursement is required for any payments already collected. Violations may also result in exclusion from Medicare, Medicaid, and any other federal health care program, and may provide the basis for False Claim Act prosecutions and whistleblower actions.

What is the effect of excluding individuals and entities from participation in Medicaid and other federal health care programs?
The practical effect of exclusion is to preclude employment of excluded individuals in any capacity in any entity that receives federal health care program reimbursement. Health care providers face civil monetary penalties for submitting claims for items or services provided, directly or indirectly, by excluded persons or entities. The Department of Health and Human Services Office of Inspector General (OIG) has the authority to impose civil monetary penalties against health care providers or entities that employ or enter into contracts with excluded individuals or entities to provide items or services to federal program beneficiaries.

Health care providers have an affirmative duty to check the OIG’s List of Excluded Individuals before hiring or contracting with anyone. The list is on the OIG website, www.oig.hhs.gov. If a provider contracts with or hires an excluded individual, it faces penalties of up to $10,000 for each item or service furnished by the excluded individual and submitted in a claim for federal program reimbursement, plus three times the amount claimed, and program exclusion.

For more information, there is a OIG Special Advisory Bulletin, “The Effect of Exclusion from Participation in Federal Health Care Programs,” issued in 1998 and available on the OIG website.

Other Federal Laws

Are there other federal laws that may be triggered by health care fraud and abuse charges?
Yes. There are a number of pertinent federal laws that pose a threat of criminal liability.  Although several are specific to health care claims, there are also general federal criminal statutes that punish false or fraudulent conduct that deprives the federal government of money or property. 

1. The Health Insurance Portability and Accountability Act of 1996 (HIPAA) contains two criminal provisions. Health care fraud[11] consists of knowingly and willfully executing or attempting to execute a scheme or artifice:

a.   to defraud any public or private health care benefit program; or

b.   to obtain, by means of false or fraudulent pretenses, representations or promises, any money or property owned or controlled by a health care benefit program in connection with the delivery of or the payment for health care benefits, items or services.

Health care fraud violations are punishable by fines or imprisonment of up to 10 years, or both.

HIPAA also prohibits theft or embezzlement in connection with health care.[12] This provision prohibits embezzling, stealing or otherwise, without authority, converting to the benefit of any other person, or intentionally misapplying money, funds, securities, premiums, credits, property, or other assets of a health care benefit program.

HIPAA substantially strengthened health care enforcement authority and established a Fraud and Abuse Control Program to coordinate federal, state, and local health care anti-fraud investigation and enforcement, which is jointly administered by the U.S. Attorney General and the U.S. Department of Health and Human Services Office of the Inspector General. It also authorized the Fraud and Abuse Data Collection Program, a nationwide database reporting final adverse actions taken against health care providers, practitioners, and suppliers by federal and state enforcement authorities.  

2. The Social Security Act (SSA)[13] makes it a felony to knowingly and willfully make or cause to be made any false statement of a material fact in any application for payment, or for use in determining rights to payments, under a federal health care program.
    

3. The SSA also makes it unlawful for a person to knowingly and willfully make or cause to be made any false statement of a material fact about the operation of any institution, facility or entity to qualify for certification or recertification (if certification is required) or when responding to any required disclosure of information.
    

4. The mail and wire fraud[14] statute prohibits using the mail to execute a scheme or artifice to defraud or obtain money or property by means of false or fraudulent representation. Mail or wire fraud is a felony punishable by a fine of up to $1,000 and/or up to five years imprisonment for each violation.
    

5. The making false statements statute[15] subjects a person to a fine and/or imprisonment of up to five years when the person, in any matter involving a health care program, knowingly and willfully falsifies, conceals or covers up any trick, scheme or device of material fact, or makes any materially false, fictitious, or fraudulent statement, or makes or uses any materially false document or writing, knowing that the document contains a materially false statement or entry.
    

6. The conspiracy to defraud the government with respect to claims statute[16] prohibits conspiring to defraud any federal agency by obtaining or helping someone else to obtain payment of any false, fraudulent or fictitious claim.
    

7. The conspiracy to commit offense or to defraud the United States statute [17] applies when two or more persons conspire to commit any offense against, or defraud the federal government or any of its agencies, and at least one of the persons acts in furtherance of the conspiracy.
    

8. The theft of government property statute[18] prohibits a person from embezzling, stealing, or knowingly converting to his/her use or the use of another, or selling, conveying, or disposing of anything of value to the United States or any of its agencies. Anyone who receives, conceals or retains any such thing of value, intending to use it to his or her gain, and knowing it to have been embezzled or stolen, is subject to fines or imprisonment or both.
    

9. The Racketeer Influenced and Corrupt Organizations Act (RICO), the application of which is not limited to organized crime, prohibits a person from receiving income, directly or indirectly, from a pattern of racketeering activity. A pattern is two or more occurrences of a “predicate act” over a 10-year period. RICO contains a private right of action for persons injured in their business or property.
    

10. The criminal statute governing money laundering[19] prohibits knowingly engaging or attempting to engage in a “monetary transaction in criminally derived property” valued over $10,000 and derived from “specified unlawful activity.”
     

11. The obstruction of criminal investigation statute[20] prohibits willfully bribing someone to obstruct, delay or prevent communication of information relating to violation of any criminal statute to a criminal investigator.
     

12. The obstruction of criminal investigations of health care offenses statute[21] prohibits preventing, obstructing, misleading, delaying or attempting to do any of those things with respect to communicating information or records relating to a violation of a federal health care offense to a criminal investigator.
     

13. People who aid or abet in the commission of an offense are punishable as if they were principals.[22]
     

14. People who, knowing that an offense against the United States has been committed, assists the offender in order to hinder his or her apprehension or punishment is an accessory after the fact.[23]

Vermont Laws

Are there Vermont laws that apply to health care fraud and abuse?
The three pertinent state laws to be aware of are the Medicaid fraud statutes, the criminal false representation law, and the Healthcare Whistleblower’s Protection Act.

What is Medicaid fraud?
Medicaid fraud is committed when a provider is untruthful regarding services provided to Medicaid beneficiaries to obtain improper payment. Typically, a provider commits Medicaid fraud by submitting false claims and records for services or supplies that were not provided, billing twice or more for the same services or supplies, or billing for services or supplies that were not medically necessary. The Medicaid fraud statute[24] specifically defines fraudulent conduct as:

• knowingly filing, attempting to file, or aiding and abetting in filing a claim for services to a Medicaid beneficiary that were not rendered; or
• knowingly filing a false claim, or a claim for unauthorized items or services under the Medicaid program;
• knowingly billing the Medicaid recipient or family for amounts in excess of the amount allowable by law; or
• failing to credit the state for amounts received from Social Security, insurance or other sources; or
• in any way knowingly receiving, trying to receive, or helping to receive unauthorized payments from Medicaid.

How is Medicaid fraud investigated and enforced?
Medicaid is a joint federal-state program, and states administer their own Medicaid programs within the context of minimum federal requirements. Congress enacted the Medicare and Medicaid Fraud and Anti-abuse Amendments in 1977 to authorize and substantially fund Medicaid Fraud Control Units in the states.

The Medicaid Fraud and Residential Abuse Unit of the Vermont Attorney General’s Office is responsible for investigating and prosecuting providers who commit fraud against the Medicaid program. It also is responsible for investigating and prosecuting instances of residential patient abuse and neglect.

What are the penalties for Medicaid fraud?
Medicaid fraud is a felony and conviction can lead to substantial penalties including but not limited to imprisonment up to 10 years, a fine of up to $1,000 or an amount equal to twice the amount of the assistance or benefits wrongfully obtained, or both a fine and imprisonment. Additionally, individuals convicted of Medicaid fraud will be excluded from participating in Medicaid for four years unless the state secretary of human services waives the suspension after finding that the recipients the provider serves would suffer a substantial hardship by being denied medical services that cannot reasonably be obtained through another provider.[25]

There is also a provision that allows the attorney general to bring a civil action against a provider who knowingly violates the fraud statute.[26] The penalties for civil violations include restitution of any amounts wrongfully obtained plus interest, and a penalty of up to three times the amount wrongfully obtained, or $500 per false claim, or $500 for each false document submitted in support of a false claim, whichever is more.

What is the state false claims law?
The state false claims law[27] mirrors the federal law that prohibits making false statements, referred to earlier in this chapter. It prohibits a person from making any false or fraudulent material statements, or falsifying, concealing, or covering up with any trick, scheme or device, any material facts, or falsifying any documents or writings knowing they contain a material fact, regarding any matter within the jurisdiction of a state or local government body. 

The penalty for a violation depends on the amount of the loss sustained by the government entity and the benefit gained by the person. If there is no loss to the government or gain to the person, or if the loss or gain is less than $500, the violator will be imprisoned up to two years and fined up to $5,000, or both. If the government’s loss or the person’s gain exceeds $500, the person will be imprisoned up to five years, fined up to $10,000, or both.

A provider who commits an act punishable under the Medicaid fraud statute discussed above may not be prosecuted under the state false claims law.

What is the Healthcare Whistleblower’s Protection Act?
The act[28] makes it illegal for a hospital or nursing home to fire, threaten, or take any adverse employment action (such as demotion, suspension, failure to make a promotion, discrimination) against an employee because the employee:

• Discloses or threatens to disclose what he or she reasonably believes is a violation of  law or improper quality of patient care by the employer;
• Testifies or provides information to a public body that is investigating whether the employer violated the law or engaged in behavior constituting improper patient care; or
• Objects to or refuses to participate in any activity, policy, or practice of the employer’s that the employee reasonably believes is a violation of law or constitutes improper patient care.

The law gives aggrieved employees the right to bring an action in superior court seeking such relief as reinstatement, back pay, lost wages and benefits, punitive and compensatory damages, and attorney’s fees.

As of mid-2005, hospitals are required to have internal processes that reflect the Magnet Recognition Program quality care and professional standards developed by the American Nurses Credentialing Center. Hospitals and nursing homes are also required to post a notice about the Healthcare Whistleblower Protection Act. The notice is available on the Vermont Department of Labor’s website, www.vermont.labor.gov. An employer’s willful failure to post the notice can lead to a fine of up to $100 per day.

Preventative Action

What preventive action should physicians’ offices take to prevent violating federal and state fraud and abuse laws? 
Every office should voluntarily adopt and scrupulously adhere to a compliance program.  In October 2000, the OIG issued a document entitled “Compliance Program Guidance for Individual and Small Group Physician Practices.” The OIG has issued a number of such compliance program guidelines for different segments of the health care industry, including clinical laboratories, hospitals, home health agencies, third-party medical billing companies, durable medical equipment suppliers, hospices, pharmaceutical manufacturers, ambulance suppliers, Medicare+Choice organizations, and nursing facilities. The most recent guideline issued is a “Supplemental Compliance Program Guidance for Hospitals,” which was published in January 2005. The OIG’s guidances are posted on its website at www.oig.hhs.gov/fraud/docs/complianceguidance.

The OIG’s motive in issuing guidance is to engage the industry in avoiding the submission of erroneous claims and ferreting out fraudulent conduct through internal controls that monitor adherence to the laws and program requirements. Having a compliance program in place is one of the factors that enforcement authorities will take into account when assessing some violations.

It is important, however, that the compliance policy not be simply a volume on a shelf, but a discernible good faith attitude and set of procedures that are integrated into the fabric of the practice.

What is a summary of the basic recommendations in the “Compliance Guidance for Individual and Small Group Physician Practices?”
The guidance sets forth seven basic elements that should be addressed in every compliance program. The OIG acknowledges that small and solo practices have limited resources to devote to a compliance program. Therefore, the fundamental principle in adopting a compliance program is showing a good faith commitment to compliance, best exhibited by taking reasonable steps to respond to each of the seven elements.

1.   Establish written practice standards and procedures – after doing an initial audit to understand risk areas.

2.   Auditing and monitoring – periodically review the office’s standards and procedures and audit the claims submission process. 

3.   Designate a compliance officer or compliance contacts.

4.   Conduct appropriate training and education in coding, billing and compliance.

5.   Respond to detected offenses and develop corrective action initiatives.

6.   Develop open lines of communication.

7.   Enforce disciplinary standards through well-publicized guidelines.

Besides the OIG guidance, are there other written materials that provide helpful information on fraud and abuse issues?
The OIG publishes a Work Plan for each fiscal year that lists the areas it intends to focus on during the year to protect the integrity of all of the Department of Health and Human Services programs, including Medicaid and Medicare. The Work Plan can serve as an annual guide for reviewing compliance issues and risks. Each year, starting in early October, practices can read the areas of interest in the OIG’s work for the coming year with respect to hospitals, physician practices, home health agencies, and other health care providers. The current and past Work Plans can be found at www.oig.hhs.gov/publications/workplan.html.

In addition, the OIG issues to the public special fraud alerts and special advisory bulletins to inform the health care industry of particular practices that it deems suspect. As mentioned earlier, the OIG responds to requests for formal advisory opinions on the application of the anti-kickback statute and other fraud and abuse statutes to particular business arrangements. All of these materials are found on the OIG’s website, http://oig.hhs.gov.

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About the Author & Editor

Eileen I. Elliott is an attorney focusing on health care and human services legal issues with the Burlington law firm of Shems, Dunkiel, Kassel & Saunders, PLLC.  She was the deputy secretary of Vermont’s Agency of Human Services from 2003-2005 and the commissioner of Vermont’s Social Welfare Department from 1999-2003. From 1993 until 1999, she worked for the Office of the Attorney General, serving as chief of its Human Services Division, and before that as counsel to the Agriculture Department. She spent the first decade of her professional career in private and corporate practice. Eileen graduated with distinction from the University of Colorado with a B.A. in Environmental Conservation (1978) and she has a J.D. from the University of Denver (1981). She serves on the Board of Directors of the United Way of Chittenden County.

Anne Cramer, a partner in the law firm of Primmer, Piper, Eggleston & Cramer, P.C., serves as counsel to hospitals, nursing homes, community mental health agencies, physician groups and other private health care interests in Vermont. Anne and her firm have long served as counsel to the Vermont Association of Hospitals and Health Systems and also provide counsel to the Vermont Health Care Association, and the Council for Developmental and Mental Health Services. She is a member of the American Health Lawyers Association, and the Health Law Section of the American Bar Association. In her health law practice, Ms. Cramer emphasizes compliance with federal and state regulatory requirements, including fraud and abuse prevention, HIPAA regulations on privacy, antitrust compliance and employment law. Ms. Cramer lectures frequently on health law topics generally, and she has been cited in Best Lawyers in America for her health law related work for over ten years.

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