Abuse & Fraud

6 June 2016

In the present health care system, hospital practitioner joint ventures make all the interested parties subject to a complex network of regulations and law and to the scrutiny by many federal agencies including:

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·         The United States Department of Health and Human services (HHS)

·         The Office of the Inspector General (OIG)

·         The Federal Bureau of Investigation and the General Accounting Office (GAO)

·         The Federal Trade Commission (FTC)

·         The department of Justice (DOJ)

·         The Internal Revenue Service (IRS)

In addition to this, many hospital financial managers must thoroughly understand the complex laws and regulations that normally affect their relationship with the physicians or doctors.

The Medicaid and Medicare abuse and fraud statute provides that a person who willfully and knowingly pays, offers, receives or solicits any remuneration in exchange of referring a person to the for the furnishing of any service or item, or recommending any facility paid for in whole by Medicare shall be guilty of a felony (Goldsmith, 2010). In most cases, this provision is referred to as the ‘anti kickback statute’.

Compensation is defined in this statute as including bribes, rebates, kickbacks whether made indirectly or directly, covertly or overtly, in kind or in cash (McWay, 2003). The penalties for violating the anti-kickback statute are quite severe and include criminal penalties, imprisonment for up to five years and fines of up to twenty five thousand dollars (Morrison, 2009). Additionally, the office of the Inspector General, which is the investigative agent for the HHS, has the authority to enforce money penalties on any violators and to prohibit them from participating in any medical programs (Bauman, 2002).

Given the extent of the abuse and fraud statute, there are many details of the law that have been stipulated in the courts that have broadly interpreted the statute (Bauman, 2002). According to the Center for Medicare & Medicaid services (2005), the leading cases indicate that if one several objectives of payments is to stimulate referrals, it is a violation of the abuse and fraud statute. Furthermore, when referrals must be the main reason of a transaction in orders to amount to a breach, referrals still need to be the sole purpose. In the year 1991, HHS released the safe harbor regulations that described eleven exemptions from the abuse and fraud statute (Altshuler, Creekpaum & Fang, 2008). Furthermore, the arrangements that satisfy the safe harbor provisions are normally protected from the scrutiny.

The vast majority of arrangements between different providers, suppliers and practitioners will normally fall outside of the safe harbors because it is somewhat difficult to structure the arrangements that comply with all the conditions of the drawn provisions (Bauman, 2002). For the medial practitioners who are unfamiliar with abuse and fraud law, the practical effect of the rules may hamper the development of some innovative arrangements and practices that can be beneficial to medical programs such as Medicaid and Medicare enrollees.

In addition to this, the infinite majority of health providers, suppliers and physicians who serve people with Medicare are committed to providing high quality care to their patients as well as billing the medical program only for the payments that the physicians have earned (Bauman, 2002)

Many health practitioners in the health industry are of the view that any kinds of arrangements that fall outside the safe harbor provisions are illegitimate (Altshuler, Creekpaum & Fang, 2008). On the other hand, the failure to comply with these safe harbor provisions may signify that:

The arrangement is not intended at all to stimulate the referral of business reimbursable under medical programs such as Medicaid or Medicare.
The arrangement infringes the statute and does not meet the criteria for safe harbor protection.
The arrangement may breach the statute in a less serious way.
Discussion based on the applicable statutes, the Feldstein case and other cases

The most known safe harbors mainly deal with investments by practitioners and providers. There are two safe harbors for investment interests: one for investments in large businesses and one for small businesses. In the large business safe harbor, the entity possesses over fifty million dollars in undepreciated net tangible assets, which are related to certain medical programs such as Medicaid.

In the Feldstein’s case, there is an issue of whether physician or doctor recruitment can be immune from any legal attack because of a possible violation of abuse of laws and federal fraud. Unlike other abuse opinions and federal fraud cases, the facts of this case did not involve any kind of corruption. In addition to this, the facts of the Feldstein case are significant because they are a common occurrence in the medical field.

Additionally, in this case, when the defendants acquired the control of the hospital, they had attempted to terminate the doctor’s contract because they were of the view that the doctor’s physician recruitment agreements had violated the federal fraud stipulations as well as abuse law. The doctor had refused to come to a settlement with the defendants and he then sued them for a breach of contract. In the court’s ruling, the court decided to decline all the recruitment arrangements illegal and stated that some arrangements may be permissible at some point. The issue of safe harbors arises in this point.

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