“Please Tell Me you Didn’t. . . How to Keep Client’s Out of the Jailhouse, Poorhouse and Lawyers Out of the Nuthouse” -Blog
Chris Williamson’s podcast gave me a new rule of thumb: “Don’t imagine someone is acting with ‘malicious intent’ over ‘simple stupidity.’” I am going to attempt to describe the “mailbox money trap,” which can cost doctors their careers, under the assumption that people don’t realize what they are getting themselves into.
Suppose some businessperson, often a competing ancillary provider, shows up at a doctors office and pitches a physician on a new way to make money, in which all the physician really has to do is lend his NPI number to a plan, then go to the mailbox and retrieve the check each month.
There are two main ways these things can turn out badly: (1) pass-through billing, and (2) suspect joint ventures. Precisely how much trouble a doctor can get into often depends upon what type of insurance is billed.
Commercial Payers vs. Government Payers. All health plans use a claims payment manual (both federal and commercial health insurance tend to use CMS Medicare rules). The difference being— the people who show up in a doctor’s lobby to talk about governmental displeasure with a provider’s behavior, frequently have “badges and guns.”
While commercial health insurance plans don’t have law enforcement powers, they do have impressive titles such as “special fraud investigation unit” and have two things going for them. Like “mall cops,” special fraud units are able to “observe and report” suspicious activity to medical boards and law enforcement. They can also get doctors kicked out of their PPO insurance contracts for not playing nice in the money-making sandbox.
“Pass Through” Billing Schemes. As a general rule, each provider must bill only for services the provider actually rendered. If you happen to be a doctor’s office, for example, you can usually bill for any work done by yourself, your partners, and employees, including any in office ancillary services, lab tests, drugs and x-rays, imaging and other items—provided that your group owns all the equipment and the people doing the work are bona fide employees. Your group can also have as many offices as you need.
But what if an independent contractor sonographer offers to wheel in sonogram equipment to a doctor’s office, run the machine, the doctor bills under his NPI (billing number) and the two split the payment 50/50 when insurance pays?
On March 8, 2019, Harris Brooks CEO of Palo Pinto General Hospital in Texas pleaded guilty to multi-million-dollar healthcare fraud due to pass through billing involving labs. (The hospital didn’t have a lab, but billed as if it did.) According to his plea agreement, Mr. Brooks will face up to five years in prison and will be required to pay restitution to those he defrauded.
The logic for the rule lies in the idea that the payment from insurance anticipates the clinic is at risk of loss due to overhead, the cost associated with buying the equipment, employee benefits, and of course, the group must pay the W-2 technician, even when there is no work to do. Not so with a 1099. The clinic only pays money when work is needed, and escapes the overhead.
Suspect Joint Ventures. Suspect joint ventures are best conceptualized as pass through billing “writ large.” Instead of rolling a simple sonogram machine into a doctor’s office, the suspect joint venturer will offer to finance a second clinic, specializing in one kind of ancillary service, which will be fed by the doctor’s existing patients. As before, the doctor doesn’t pay for anything, nor do anything. He just sends patients to the new venture. Usually, the doctor pays a management fee, but only for the new venture clinic, not his existing one.
The OIG has been warning physicians since 1989 that certain of these “suspect joint ventures” could violate the Anti-kickback statute, even if structured lawfully under Stark law’s ancillary services exception.
According to the 2003 OIG Special Advisory Bulletin[ I added the numbers to make it easier to read]:
“[Q]uestionable contractual arrangements where (1) a health care provider in one line of business (hereafter referred to as the “Owner”) (2) expands into a related health care business (3) by contracting with an existing provider of a related item or service (hereafter referred to as the “Manager/Supplier”) (4) to provide the new item or service to the Owner’s existing patient population, including federal health care program patients. (5) the Manager/Supplier not only manages the new line of business, but may also supply it with inventory, employees, space, billing, and other services.
In other words, the Owner contracts out substantially the entire operation of the related line of business to the Manager/Supplier – otherwise a potential competitor – receiving in return the profits of the business as remuneration for its federal program referrals.
The “kickback” lies in the fact that the physician really doesn’t have to do anything except send patients and collect “mailbox money.” This “money without risk,” or financial investment by the physician is the “kickback.” The reason the “manager/supplier” is in this arrangement, is because it doesn’t have any patients of its own.