Federal Fraud Prosecutions
The greatest legal threat facing medical care practitioners, hospitals, and managed care organizations (MCOs) is prosecution for fraud under the Medicare- Medicaid self- referral laws, [42 U.S.C. § 1395nn. This section prohibits any arrangements that encourage the referral of patients to a specific medical facility:
“…if a physician…has a financial relationship with an entity…then—(A) the physician may not make a referral to the entity for the furnishing of designated health services for which payment otherwise may be made under this subchapter, and(B) the entity may not present or cause to be presented a claim under this subchapter or bill to any individual, third party payor, or other entity for designated health services furnished pursuant to a referral prohibited under subparagraph (A).”] the False Claims Act (FCA), [31 U.S.C. §§ 3729, et seq. (1997).] or the Kassebaum- Kennedy bill. [
These acts include substantial civil penalties, which have resulted in total settlements in excess of a billion dollars, so far, and the imprisonment of many medical care practitioners and administrators. Many medical care practitioners are unaware of the reach of these laws. This confusion arises because these laws criminalize conduct that is not generally illegal when it only involves private pay patients. For example, assume that a hospital has an incentive program for the medical staff to encourage hospital admissions. The three physicians with the highest total of patient admission days get a free trip to Jamaica. If the hospital only treats private pay patients, then this program is legal, assuming that it does not violate any contractual agreements with the patient’s insurance plans, or any specific state laws. If the hospital treats any Medicare patients, then the incentive program is a prohibited kick-back. [United States v. Greber, 760 F.2d 68 (3d Cir. 1985) .]