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TECHNICAL FRAUD: THE MEDICARE STATUTE

Physicians and institutions that deal with the Medicare and Medicaid (hereafter referred to jointly as Medicare) programs are subject to the Medicare fraud and abuse statute and regulations. The relevant provisions are short and simple:

42 USCA 1320a-7b(b) Illegal remunerations

(1)
whoever knowingly and willfully solicits or receives any remuneration (including any kickback, bribe, or rebate) [defined broadly as anything of value] directly or indirectly, overtly or covertly, in cash or in kind--

(A)
in return for referring an individual to a person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part under subchapter XVIII of this chapter or a State health care program, or

(B)
in return for purchasing, leasing, ordering, or arranging for or recommending purchasing, leasing, or ordering any good, facility, service, or item for which payment may be made in whole or in part under subchapter XVIII of this chapter or a State health care program,

shall be guilty of a felony and upon conviction thereof, shall be fined not more than $25,000 or imprisoned for not more than five years, or both.

This is a criminal law that subjects violators to fines and imprisonment. Since criminal prosecutions are not covered by malpractice or general indemnification insurance, physicians must pay attorneys' fees for contesting charges brought against them. These fees can easily exceed $100,000. Physicians convicted under the law can also lose their license to practice medicine.

Given the clarity of the law and the severity of the penalties, it would seem that physicians and their attorneys would be scrupulous in adhering to the requirements of the law. This is not the case:

"I've talked about it with a lot of laboratory clients, and the reasoning almost always comes back, 'The competition is doing it, so we have to do it to stay in business.'"

The "it" in that observation by a Washington health care attorney refers to financial considerations built into business relationships between clinical labs and physician/hospital referral sources.[32]

To be more specific, the "it" is a renumeration prohibited under the Medicare fraud and abuse law. A substantial percentage of medical businesses engage in prohibited practices, and most of these prohibited practices occur in business arrangements structured and approved by lawyers. The interesting question is not that physicians might unknowingly violate the provisions of a given law but that their attorneys would counsel them to violate the law.

[32]Column: Caution advised in relations with laboratory referral sources. Med Lab Observer 1986 Jul; 18:23.

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