Solo and Small Medical Practice Essentials – Part Three

This is third in a series of OIG compliance guidelines for individual and small medical practices. Compliance plans help reduce the possibility that a medical practice will be investigated for charged for improper billing to federal agencies, violations of various federal laws such as self-referral laws and the Anti-Kickback Statute, and other laws.

Enforcing Disciplinary Standards through Well-Publicized Guidelines

While many employees will report violations of federal healthcare program laws because they just want to do a good job, the OIG recognizes that many employees feel uncomfortable disclosing wrongs or possible violations committed by their co-workers. An effective OIG compliance plan for individual and small medical practices does require the inclusion of enforcement and disciplinary procedures for non-compliance with the regulatory compliance program.

The Office of Inspector General recommends that the enforcement/disciplinary procedures be consistent and appropriate for the violation committed. The compliance program should “be flexible enough to account for mitigating or aggravating circumstances” but also understand that some employees and workers may need to be terminated from the practice.

It should be clear that sanctions apply not just to the people who commit any federal healthcare program violations but sanctions also apply to anyone who doesn’t make the proper effort to detect violations and report them to the compliance officer.

In general, disciplinary actions can include:

  • Verbal warnings
  • Written reprimands
  • Probation
  • Demotion
  • Temporary suspension
  • Being fired from the payment

Penalties can also include being required to pay back or provide restitution for any damages and the possible referral of any violations to local or federal law enforcement agencies.

The possible sanctions should be set forth in any training and compliance manuals.

When sanctions need to be communicated to an employee or worker, the communication and reasons for non-compliance should be documented including:

  • When the non-compliance took place
  • Who reported the non-compliance
  • Who was responsible for taking action?
  • What follow-up disciplinary action was taken

Assessing a Voluntary Compliance Program

Compliance standards for a small practice should be an active daily part of the medical practice. They should be part of the medical practice’s culture to achieve the best results. In medical terms, an effective voluntary compliance program is a type of preventive medicine. Many programs, once implemented, shouldn’t take a lot of time away from the daily practice of medicine. The OIG states that many of its suggestions have already been adopted by individual and small medical practices.

Other risk areas

Some risks for federal investigations and complaints depend on the nature of the medical practice and the geographical location of the practice. If these risks apply to your practice, after review and discussion with your healthcare small medical practice compliance lawyer, then the procedures for handling them should be added to the standards part of the compliance plan. The OIG identifies the following additional risks:

  • Reasonable and Necessary Services. Physicians need to understand that what is considered a “reasonable and necessary” service can vary depending on “local medical review policies (LMRPs) among carriers.” Physicians must apply their local LMRP when billing to Medicare – aside from the submission of properly coded claims that are submitted to Medicare “solely for the purpose of obtaining a written denial” The individual or small medical practice should request the applicable LMRPs for their practice and then incorporate the LMRP into their compliance standards.
  • Advanced Beneficiary Notices. Medical practices should explain to their patients when their service or treatment may not be covered by Medicare. This way the patient can make an informed decision about whether to receive the service/treatment and pay through other means than billing Medicare. The ABN informs the patient that Medicare coverage may be denied or uncertain and indicates that the patient agrees to pay the portion of the bill that Medicare does not pay. The patient should have a reasonable idea why Medicare may not pay the bill. ABNs should:
    • Be in writing
    • Indicate the service or treatment that may not be covered
    • State why the doctor believes the service or treatment may not be covered
    • Signed by the patient – indicating his/her informed understanding that the patient will be responsible for the unpaid bills.
  • The OIG guidelines for ABNS for small practices. The OIG also suggests physicians to pay careful attention to diagnostic tests. The medical practice should:
    • Analyze if the test is covered under national coverage rules
    • Analyze if the test is covered under LMRP rules (the doctor’s local carrier should help provider an answer)
    • Review which tests are only covered for certain diagnoses.
  • Certificates of medical necessity (CMN). Doctors are liable for improperly certifying to Medicare that the patient needs certain medical equipment, supplies, and home health services. Your healthcare compliance lawyer can help explain these guidelines. An OIG alert on this topic is available. Physicians need to understand they can face criminal, civil, and administrative penalties for falsely signing a CMN of signing one with reckless disregard to its accuracy. The OIG compliance plan recommendations state that home health services and durable medical equipment orders are especially problematic.
  • Billing for non-covered services. While the OIG understands that some medical practices submit claims to federal agencies for the sole purpose of obtaining a denial (so the patient can then request that an alternate payer be responsible), there is a risk which the OIG phrases this way –

“If the medical services provided are not covered under Medicare, but the secondary or supplemental insurer requires a Medicare rejection in order to cover the services, then would the original submission of the claim to Medicare be considered fraudulent?”

The OIG states that the submission should not be fraudulent. Still, the best course of action is to review these types of submissions with experienced small medical practice healthcare lawyers before the submissions are made.

Physician Billing Practices

The OIG compliance plan has additional recommendations for the following types of billing practices:

  • Third-Party Billing Services. Doctors need to understand that they are responsible for the accuracy and reasonableness of medical bills that are submitted to Medicare by the practice’s billing service even if “the physician had no actual knowledge of a billing impropriety.” The OIG is especially concerned about medical practices that contract for billing services through a percentage basis. This can lead to the “risk of intentional upcoding” and other “abusive billing practices.” Medicare requires that payments either be made to the beneficiary or to the party (the medical practice) that provided the services.

Payments cannot be made directly into the billing service’s bank account under the service’s sole control. More on this compliance requirement can be found on the OIG’s website. Billing services do not qualify as providers of medical services. At some level, the ability of the billing service to receive payment must be controlled by the individual or small medical practice. Claims should typically be billed through the physician’s name and tax ID number.

  • Billing Practices by Non-Participating Physicians. Solo and small medical practices should review with experienced healthcare billing compliance lawyers of the rules and laws for billing by physicians who did not participate in the practice. For example, there are laws that preclude a

“nonparticipating physician from knowingly and willfully billing or collecting on a repeated basis an actual charge for a service that is in excess of the Medicare limiting charge.”

As an example, the Office of Inspector General, states that “a nonparticipating physician may not bill a Medicare beneficiary $50 for an office visit when the Medicare limiting charge for the visit is $25.”

Doctors who violate the statutes that govern billing by non-participating physicians can be fined up to $10,00 for each violation and can be excluded from participation in Medicare or other federal health care programs for up to five years.

Additionally, there are strict timelines for when overpayments, such as the repeated billing of $50 for a $25 office visit, must be reimbursed. Failure to make reimbursement in a timely manner can subject the medical practice to fines and exclusion from the federal health care programs.

Additional Risk Areas for solo and small medical practices

Two additional areas of concern for small medical practices which physicians should review with experienced healthcare compliance lawyers, according to the OIG are:

  • Renting office space by the medical practice to “persons or entities to which the physicians refer business.” The OIG’s Special Fraud Alert on this topic, summarizes the concerns as follows:
    • A concern arises when “suppliers that provide items or services to patients who are referred or sent to the supplier by the physician-landlord” rent space in the physician’s office. Medical practices that rent, for example, to a durable medical equipment supplier, raise a concern because the durable medical equipment suppliers are likely to benefit from referrals of the medical practice’s patients.
    • The specific OIG concern is that these rental/referral arrangements may violate anti-referral laws and the Anti-Kickback statute. Whether and how arrangements can be created that satisfy the anti-referral law exceptions and the safe harbors to the Anti-Kickback Statute should be reviewed with the medical practice’s healthcare compliance attorney. The OIG recommends the following compliance steps:
      • The agreement is set out in writing and signed by the parties.
      • The agreement covers all the space rented by the parties for the term of the agreement and specifies the space covered by the agreement.
      • If the agreement is intended to provide the lessee with access to the space for periodic intervals of time rather than on a full-time basis for the term of the rental agreement, the rental agreement specifies exactly the schedule of such intervals, the precise length of each interval, and the exact rent for each interval.
      • The term of the rental agreement is for not less than one year.
      • The aggregate rental charge is set in advance, is consistent with fair market value, and is not determined in a manner that takes into account the volume or value of any referrals or business otherwise generated between the parties for which payment may be made in whole or in part under Medicare or a State health care program.
      • The aggregate space rented does not exceed that which is reasonably necessary to accomplish the commercially reasonable business purpose of the rental.
    • Unlawful Advertising. Medical practices should understand that they can’t imply or suggest, in their advertising; through the use of the agency’s names, symbols, or other criteria, that any of the following agencies endorse the advertisement:
      • Medicare
      • Medicaid
      • The Social Security Administration
      • The Department of Health and Human Services
      • The Health Care Financing Administration


The federal Office of the Inspector General (OIG) reviewed a laboratory’s proposal to enter into agreements with physician practices to provide all laboratory services for the practices’ […]

Effective regulatory and billing compliance plans should include an understanding by the medical staff of what constitutes a violation of the plan and how the plan will be enforced. Solo and medical practices need to be careful about what constitutes a reasonable and necessary service and when and how patients should be informed of what Medicare may not pay for a service. Doctors need to properly certify additional services such as home health care and medical equipment. Payment of bills through third-party services should be monitored by the medical practice. Renting office space to non-physicians needs careful review.

To understand how to create a quality compliance risks and the risks that should be examined, contact Cohen Healthcare Law Group, P.C. today. We have the experience and skills to provide quality compliance plans for individual and small medical practices.

Contact Us

Book your Legal Strategy Session now
Cohen Healthcare Law Logo

Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.

Start typing and press Enter to search