A Healthcare Compliance Guide for New Physicians – Part One – Physician Relationships with Payers

The US Department of Health and Human Services – Office of Inspector General published a healthcare compliance guide for new doctors. The publication reviews many different issues including:

  • Physician Relationships with Payers
  • Physician Relationships with Fellow Providers – Doctors, Hospitals, Nursing Homes, and other Providers
  • Physician Relationships with Vendors
  • Fraud and Abuse Laws
  • Compliance Programs

HHS states that Medicare, Medicaid, and other Federal health care programs (such as TRICARE) rely on physicians’ medical judgment to provide treatments that are appropriate, accurate, and truthful. The laws on fraud and abuse are aimed at ensuring that those doctors who comply with the rules and act honestly are not disadvantaged by those doctors who are dishonest – and that patients receive care based on the patient’s needs and not the financial interests of the doctors.

The American health care system also relies on third-party payers who pay most of a patient’s medical bills. Third-party payers include commercial payers in addition to the federal programs. If there are no available third-party payers, the patient may be required to pay for his/her healthcare services.

The HHS new practice roadmap should be relevant to all medical practices regardless of medical specialty or practice setting.

In addition to federal laws and regulations, each state has its own healthcare compliance laws that medical practitioners need to understand.


Doctors need to understand the laws and regulations that apply to the way they bill for services, work with insurance companies, submit claims to the government, enter into business relationships […]


Suggested Office of Inspector General guidelines for individuals and small medical practices including overall benefits, auditing, monitoring, and standards creation

Physician Relationships with Payers – Accurate Coding and Billing

New physicians need to understand that payers rely on physicians to provide:

  • Necessary medical services
  • Quality medical care
  • Cost-effective medical care

Physicians influence more than just the services that patients receive. Physicians also control the documentation that describes what services/treatments a patient receives and the basis for the bills that are submitted to the payers.

The federal government, in particular, trusts doctors to submit proper and accurate medical bills. That’s why Congress provides for strong criminal, civil, and administrative remedies when physicians are dishonest. These remedies/powers include the ability to audit and investigate claims of fraud or abuse of the government payment system. Some of the red flags that may prompt an investigation include irregular billing patterns and complaints from others (including patients, competitors, and your own staff).

New and existing physicians who submit medical payment claims to Medicare or Medicaid on behalf of an eligible patient are certifying that the physician has earned payment and complied with the billing requirements. A doctor who knows or should know that a bill is false – may be held in violation of the federal laws.

Examples of false billing claims include:

  • Upcoding. One common type of false billing claim is called “upcoding.” Upcoding refers to “using billing codes that reflect a more severe illness than actually existed or a more expensive treatment than was provided.”
  • Billing for services the doctor did not deliver/render.
  • Billing for services that were not medically necessary.
  • Billing for services that were performed by someone who was not properly supervised or by an unqualified employee
  • Billing for services performed by “an employee who has been excluded from participation in the Federal health care programs”
  • Billing for low-quality services that are essentially worthless
  • Billing “separately for services already included in a global fee, like billing for an evaluation and management service the day after surgery.”

More on the dangers of upcoding

Medicare pays for many physician services using Evaluation and Management (commonly referred to as “E&M”) codes. Generally, the E&M codes for new patients yield higher reimbursement rates for current patients because new patients require more work. Upcoding could include billing for a comprehensive new-patient visit or initial consultation (which commands a higher rate) rather than for a follow-up consultation – if the patient only received a follow-up consultation.

“Another example of upcoding related to E&M codes is misuse of Modifier 25. Modifier 25 allows additional payment for a separate E&M service rendered on the same day as a procedure. Upcoding occurs if a provider uses Modifier 25 to claim payment for an E&M service when the patient care rendered was not significant, was not separately identifiable, and was not above and beyond the care usually associated with the procedure.”


OIG Compliance guidelines for physicians (MDs, Dos) and small medical practices

A few examples of fraudulent billing

HHS lists the following examples of fraudulent billing:

  • A psychiatrist billed for 30-60 minutes of personal time with a patient when he had only provided medication checks that lasted no more than 15 minutes. He also billed for therapy sessions that were provided by a non-licensed person. The doctor was fined $400,000. He was also permanently excluded from participating in Federal health care programs such as Medicare and Medicaid.
  • A dermatologist admitted to false lab tests and backdating letters to referring doctors to support false diagnoses – so that the documentation made it look like patients had health conditions covered by Medicare (when they didn’t). The dermatologist was ordered to pay $2.9 million and was placed on 2 years and 6 months’ probation – after pleading guilty to one count of obstruction of a criminal health care fraud investigation.
  • A cardiologist settled claims by the OIG that he knowingly submitted claims for services that didn’t meet the criteria for a consultation (and weren’t supported by medical documentation).  The cardiologists also “allegedly knowingly submitted false claims for E&M services when he had already received payment for such services in connection with previous claims for nuclear stress testing.” The doctor agreed to pay the Government $435,000 and entered into a 5-year Integrity Agreement with OIG. An OIG Integrity Agreement usually lasts 5 years and requires that the medical practice or business:
    • Hire or appoint a compliance officer
    • Develop written policies
    • Implement a comprehensive training program for employees
    • Hire an independent review organization to conduct yearly reviews
    • Establish a confidential disclosure program
    • Restrict employment of persons who are not eligible
    • Report overpayments, reportable events, and ongoing investigations/legal proceedings
    • Provide an initial report and yearly reports to the OIG about the practice or business’ compliance steps.
  • “An endocrinologist billed routine blood draws as critical care blood draws. He paid $447,000 to settle allegations of upcoding and other billing violations.”

Physician Documentation

Doctors need to keep complete and accurate medical records and documentation. These records need to comply with patient privacy laws, security laws, and other laws. From the viewpoint of being paid by insurers and government programs, the documentation should be able to support the billing claims. Good documentation helps show the claims are based on the services that were reasonable and necessary based on a patient’s medical history. The HSS recommends that new physicians consider the saying (often used in medical malpractice cases) – “If you didn’t document it, it’s the same as if you didn’t do it.”

For more information on physician documentation, see CMS’s Documentation Guidelines for Evaluation and Management Services available at https://www.cms.gov/outreach-and-education/medicare-learning-network-mln/mlnproducts/downloads/eval-mgmt-serv-guide-icn006764.pdf.

Enrolling as a Medicare and Medicaid Provider

The Centers for Medicare and Medicaid Services (CMS) is the Federal agency that administers the Medicare program and monitors the Medicaid programs that each state runs.

Doctors who wish to be paid from CMS for medical services they provide to eligible program beneficiaries must:

  1. Obtain a National Provider Identifier (NPI). An NPI is a unique health identifier for health care providers. Doctors can apply for an NPI at https://nppes.cms.hhs.gov/NPPES/Welcome.do.
  2. Complete the appropriate Medicare Enrollment Application. CMS will review that the applying doctor is qualified and eligible to enroll in the Medicare Program. For more information about Medicare provider enrollment – click on http://www.cms.gov/MedicareProviderSupEnroll/.
  3. Complete a State-specific Medicaid Enrollment Application. Each state Medicaid agency should have information about Medicaid provider enrollment.

After a doctor becomes a Medicare and/or Medicaid provider, doctors have the duty to ensure that the claims they submit are honest and accurate.

Prescription Authority

The Drug Enforcement Administration (DEA) is part of the US Department of Justice. The DEA enforces the federal Controlled Substances Act. New doctors normally need to apply for DEA approval (and a number) to write prescriptions for controlled substances. Each state medical license agency also requires state approval to write prescriptions.

Examples of misuse of doctor provider and prescription numbers include:

  • A doctor falsely indicated on his application for a provider number that the doctor was running his own practice – when a neurophysiologist was operating the practice – and paying the doctor a salary for the use of his number. The doctor was ordered to pay $50,000 to the Government – in restitution.
  • An osteopathic physician was sentenced to 10 years in prison and ordered to pay $7.9 million in restitution after she accepted cash payments for signing preprinted prescriptions and Certificates of Medical Necessity for motorized wheelchairs for beneficiaries she never examined. Based on the fraudulent prescriptions, more than 60 Durable Medical Equipment (DME) companies received improper Medicare and Medicaid payments.
  • An internal medicine physician allowed employees who didn’t have proper authority and non-medical employees to prescribe drugs on his pre-signed prescription forms. The doctor pleaded guilty to Medicare fraud and conspiring to dispense oxycodone, morphine, hydrocodone, and alprazolam. The prescriptions were also issued without proper physical exams, proper diagnoses, or review of alternative treatment options. The doctor paid $317,000 in restitution to the Government.

Assignment Issues in Medicare Reimbursement

Doctors generally bill Medicare as participating providers, which is referred to as “accepting assignment.” Every year, Medicare creates a fee schedule that sets the amount of reimbursement for each type of medical service. After beneficiaries meet their yearly deductible, Medicare pays 80% of the service amount and the patient pays 20% (unless the patient has supplemental insurance). The doctors who participate in CMS receive Medicare’s 80% directly from Medicare. The doctors then bill the beneficiary (or the supplemental carrier) for the 20%.

The acceptance of an assignment “means that the physician accepts the Medicare payment plus any copayment or deductible Medicare requires the patient to pay as the full payment for the physician’s services and that the physician will not seek any extra payment (beyond the copayment or deductible) from the patient.”

Participating Medicare doctors then can NOT bill the Medicare patient for the services rendered. If a doctor does bill Medicare for the excess amount, that violates the doctor’s assignment agreement and could result in penalties.

Non-participating providers do not receive payment from Medicare. Non-participating providers bill the patient directly and the patient then requests that Medicare pay for the services.

“While non-participating providers are not subject to the assignment rules, they still must limit the dollar amount of their charges to Medicare patients. Generally, non-participating providers may not charge Medicare beneficiaries more than 15 percent in excess of the Medicare fee schedule amount. It is illegal to charge patients more than the limiting charge established for physicians’ services.”

The Health and Human Services Office of Inspector guidelines for new physicians include billing and coding, upcoding, physician documentation, CMS eligibility, prescription eligibility, and Medicare assignment issues. Skilled healthcare lawyers understand what laws and regulations new doctors need to know and what proactive steps can be taken to reduce the risk of compliance infractions.

New and current physicians should contact Cohen Healthcare Law Group, PC to review the federal and state laws and regulations that regulate the practice of medicine. Our experienced healthcare attorneys advise medical practices about the dangers of noncompliance and the strategies to use to help show doctors are in compliance with their health care requirements.

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