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Medical Societies, Counties of Oneida,Herkimer, Madison, Chenango, Oswego,Cayuga and St. Lawrence

The Medical Societies of the Counties of Chenango, Oneida, Oswego, Herkimer, and Madison and Cayuga derive our strength and influence from the physician members who we serve. Our new web site is designed to aid our members in adopting new information technologies in furtherance of the central role that the physician occupies in the professional practice of the medical arts.

Medical Societies News


OIG-Roadmap for New Physicians Avoiding Medicare and Medicaid

Fraud Abuse




Table of Contents


............................................................................................................. 2

Fraud and Abuse Laws

False Claims Act [31 U.S.C. §§ 3729–3733]

Anti-Kickback Statute [42 U.S.C. § 1320a-7b(b)]

Physician Self-Referral Law [42 U.S.C. § 1395nn]

Exclusion Statute [42 U.S.C. § 1320a-7]

Civil Monetary Penalties Law [42 U.S.C. § 1320a-7a]

............................................................................................ 3.......................................................3............................................... 4............................................. 6............................................................. 7....................................... 8

I. Physician Relationships With Payers

Accurate Coding and Billing

Physician Documentation

Enrolling as a Medicare and Medicaid Provider With CMS

Prescription Authority

Assignment Issues in Medicare Reimbursement

...................................................................... 9................................................................................ 9.................................................................................. 12............................. 12........................................................................................13............................................... 14

II. Physician Relationships With Fellow Providers: Physicians, Hospitals, Nursing Homes, Etc.

Physician Investments in Health Care Business Ventures

Physician Recruitment

Tips for Medical Directors

............................................................................16................................. 16....................................................................................... 19................................................................................. 20

III. Physician Relationships With Vendors

Free Samples

Relationships With the Pharmaceutical and Medical Device Industries

Transparency in Physician-Industry Relationships

................................................................ 21......................................................................................................21............ 22............................................24

Conflict-of-Interest Disclosures

Continuing Medical Education

......................................................................... 24.......................................................................... 25

Compliance Programs for Physicians

................................................................... 26

Where To Go for Help

.......................................................................................... 26

What To Do If You Think You Have a Problem

....................................................... 28

What To Do If You Have Information About Fraud and

Abuse Against Federal Health Care Programs

...................................................... 29



Most physicians strive to work ethically, render high-quality medical care to their patients, and submit proper claims for payment. Society places enormous trust in physicians, and rightly so. Trust is at the core of the physician-patient relationship. When our health is at its most vulnerable, we rely on physicians to use their expert medical training to put us on the road to a healthy recovery.

The Federal Government also places enormous trust in physicians. Medicare, Medicaid, and other Federal health care programs rely on physicians’ medical judgment to treat

I. Relationships with payers, II. Relationships with fellow physicians and other providers, and III. Relationships with vendors. The key issues addressed in this brochure are relevant to all physicians, regardless of specialty or practice setting.

beneficiaries with appropriate services. When reimbursing physicians and hospitals for services provided to program beneficiaries, the Federal Government relies on physicians to submit accurate and truthful claims information. CAUTION The presence of some dishonest health care providers who exploit the health care system for illegal personal gain has created the need for laws that combat fraud and abuse and ensure appropriate quality medical care. This brochure assists physicians in understanding how to comply with these Federal laws by identifying “red flags” that could lead to potential liability in law enforcement and administrative actions. The information is organized around three types of relationships that physicians frequently encounter in their careers:

Fraud and Abuse Laws

The five most important Federal fraud and abuse laws that apply to physicians are the

False Claims Act (FCA), the Anti-Kickback Statute (AKS), the Physician Self-Referral

Law (Stark law), the Exclusion Authorities, and the Civil Monetary Penalties Law

(CMPL). Government agencies, including the Department of Justice, the Department

of Health & Human Services Office of Inspector General (OIG), and the Centers for

Medicare & Medicaid Services (CMS), are charged with enforcing these laws. As you

begin your career, it is crucial to understand these laws not only because following

them is the right thing to do, but also because violating them could result in criminal

penalties, civil fines, exclusion from the Federal health care programs, or loss of your

medical license from your State medical board.

False Claims Act [31 U.S.C. §§ 3729–3733]

The civil FCA protects the Government from being overcharged or sold shoddy

goods or services.

Medicaid that you know or should know are false or fraudulent.

It is illegal to submit claims for payment to Medicare orFiling false

claims may result in fines of up to three times the programs’ loss plus $11,000 per claim

filed. Under the civil FCA, each instance of an item or a service billed to Medicare or

Medicaid counts as a claim, so fines can add up quickly. The fact that a claim results

from a kickback or is made in violation of the Stark law also may render it false or

fraudulent, creating liability under the civil FCA as well as the AKS or Stark law.

Under the civil FCA, no specific intent to defraud is required. The civil FCA defines

“knowing” to include not only actual knowledge but also instances in which the

person acted in deliberate ignorance or reckless disregard of the truth or falsity of

the information. Further, the civil FCA contains a whistleblower provision that allows

a private individual to file a lawsuit on behalf of the United States and entitles that

whistleblower to a percentage of any recoveries. Whistleblowers could be current or

ex-business partners, hospital or office staff, patients, or competitors.

There also is a criminal FCA (18 U.S.C. § 287). Criminal penalties for submitting false

claims include imprisonment and criminal fines. Physicians have gone to prison for

submitting false health care claims. OIG also may impose administrative civil monetary

penalties for false or fraudulent claims, as discussed below.



Anti-Kickback Statute [42 U.S.C. § 1320a-7b(b)]

For additional information on safe harbors, see “OIG’s Safe Harbor Regulations”

available at

The AKS is a criminal law that prohibits the knowing and willful payment of

“remuneration” to induce or reward patient referrals or the generation of business

involving any item or service payable by the Federal health care programs (

supplies, or health care services for Medicare or Medicaid patients). Remuneration

includes anything of value and can take many forms besides cash, such as free

rent, expensive hotel stays and meals, and excessive compensation for medical

directorships or consultancies.

reward those who refer business to you. However, in the

Federal health care programs, paying for

referrals is a crime.

of kickbacks—those who offer or pay remuneration—

as well as the recipients of kickbacks—those who

solicit or receive remuneration. Each party’s intent is a

key element of their liability under the AKS.

Criminal penalties and administrative sanctions for

e.g., drugs,In some industries, it is acceptable toThe statute covers the payers

violating the AKS include fines, jail terms, and exclusion

from participation in the Federal health care programs. Under the CMPL,

physicians who pay or accept kickbacks also face penalties of up to $50,000

per kickback plus three times the amount of the remuneration.

Safe harbors protect certain payment and business practices that could otherwise

implicate the AKS from criminal and civil prosecution. To be protected by a safe harbor,

an arrangement must fit squarely in the safe harbor and satisfy all of its requirements.

Some safe harbors address personal services and rental agreements, investments in

ambulatory surgical centers, and payments to

bona fide employees.

As a physician, you are an attractive target for kickback schemes

you can be a source of referrals for fellow physicians or other health care providers

and suppliers. You decide what drugs your patients use, which specialists they see, and

what health care services and supplies they receive.

Many people and companies want your patients’ business and would pay you to send

that business their way. Just as it is illegal for you to take money from providers and

suppliers in return for the referral of your Medicare and Medicaid patients, it is illegal

for you to pay others to refer their Medicare and Medicaid patients to you.

The kickback prohibition applies to all sources

of referrals, even patients. For example, where the

Medicare and Medicaid programs require patients to

pay copays for services, you are generally required to collect that money from your

patients. Routinely waiving these copays could implicate the AKS and you may not

advertise that you will forgive copayments. However, you are free to waive a copayment

if you make an individual determination that the patient cannot afford to pay or if your

reasonable collection efforts fail.

services to uninsured people.

becauseIt is also legal to provide free or discounted

Besides the AKS, the beneficiary inducement statute (42 U.S.C. § 1320a-7a(a)(5)) also

imposes civil monetary penalties on physicians who offer remuneration to Medicare

and Medicaid beneficiaries to influence them to use their services.

The Government does not need to prove patient harm or financial loss to the programs

to show that a physician violated the AKS. A physician can be guilty of violating

the AKS even if the physician actually rendered the service and the service was

medically necessary.

Taking money or gifts from a drug or device company

or a durable medical equipment (DME) supplier is not justified by the

argument that you would have prescribed that drug or ordered that

wheelchair even without a kickback.

Kickbacks in health care can lead to:




Increased program costs


Corruption of medical decisionmaking


Patient steering


Unfair competition


Physician Self-Referral Law [42 U.S.C. § 1395nn]

The Physician Self-Referral Law, commonly referred to as the Stark law, prohibits

physicians from referring patients to receive “designated health services” payable by

Medicare or Medicaid from entities with which the physician or an immediate family

member has a financial relationship, unless an exception applies. Financial relationships

include both ownership/investment interests and compensation arrangements. For

example, if you invest in an imaging center, the Stark law requires the resulting

financial relationship to fit within an exception or you may not refer patients to the

facility and the entity may not bill for the referred imaging services.

“Designated health services” are:

clinical laboratory services;

pathology services;

physical therapy, occupational therapy, and outpatient speech-language

radiology and certain other imaging services;

radiation therapy services and supplies;

DME and supplies;

equipment, and supplies;

parenteral and enteral nutrients,

devices and supplies;

prosthetics, orthotics, and prosthetic

home health services;

outpatient prescription drugs; and

inpatient and outpatient hospital services.

The Stark law is a strict liability statute, which means proof of specific intent to

violate the law is not required. The Stark law prohibits the submission, or causing

the submission, of claims in violation of the law’s restrictions on referrals. Penalties

for physicians who violate the Stark law include fines as well as exclusion from

participation in the Federal health care programs.

For more information, see CMS’s Stark law Web site available at



Exclusion Statute [42 U.S.C. § 1320a-7]

OIG is legally required to exclude from participation in all Federal health care

programs individuals and entities convicted of the following types of criminal offenses:

(1) Medicare or Medicaid fraud, as well as any other offenses related to the delivery of

items or services under Medicare or Medicaid; (2) patient abuse or neglect; (3) felony

convictions for other health-care-related fraud, theft, or other financial misconduct;

and (4) felony convictions for unlawful manufacture, distribution, prescription, or

dispensing of controlled substances. OIG has discretion to exclude individuals and

entities on several other grounds, including misdemeanor convictions related to

health care fraud other than Medicare or Medicaid fraud or misdemeanor

convictions in connection with the unlawful manufacture, distribution,

prescription, or dispensing of controlled substances; suspension,

revocation, or surrender of a license to provide health care for reasons

bearing on professional competence, professional performance,

or financial integrity; provision of unnecessary or substandard

services; submission of false or fraudulent claims to a Federal health

care program; engaging in unlawful kickback arrangements; and

defaulting on health education loan or scholarship obligations.

If you are excluded by OIG from participation in the Federal health

care programs, then Medicare, Medicaid, and other Federal health care

programs, such as TRICARE and the Veterans Health Administration,

will not pay for items or services that you furnish, order, or prescribe.

Excluded physicians may not bill directly for treating

Medicare and Medicaid patients, nor may their services be

billed indirectly through an employer or a group practice.

addition, if you furnish services to a patient on a private-pay basis, no

order or prescription that you give to that patient will be reimbursable by

any Federal health care program.

For more information, see OIG’s Special Advisory Bulletin entitled “The Effect of


Exclusion From Participation in Federal Health Care Programs” available at



For more information, see OIG’s exclusion Web site available at

You are responsible for ensuring that you do not employ or contract with excluded

individuals or entities, whether in a physician practice, a clinic, or in any capacity

or setting in which Federal health care programs may reimburse for the items or

services furnished by those employees or contractors. This responsibility requires

screening all current and prospective employees and contractors against OIG’s List of

Excluded Individuals and Entities. This online database can be accessed from OIG’s

Exclusion Web site. If you employ or contract with an excluded individual or entity

and Federal health care program payment is made for items or services that person or

entity furnishes, whether directly or indirectly, you may be subject to a civil monetary

penalty and/or an obligation to repay any amounts attributable to the services of the

excluded individual or entity.


Civil Monetary Penalties Law [42 U.S.C. § 1320a-7a]

OIG may seek civil monetary penalties and sometimes exclusion for a wide variety of

conduct and is authorized to seek different amounts of penalties and assessments based

on the type of violation at issue. Penalties range from $10,000 to $50,000 per violation.

Some examples of CMPL violations include:


that was not provided as claimed or is false or fraudulent;

presenting a claim that the person knows or should know is for an item or service


for which payment may not be made;

presenting a claim that the person knows or should know is for an item or service


violating the AKS;


violating Medicare assignment provisions;


violating the Medicare physician agreement;


providing false or misleading information expected to influence a decision to



who present to a hospital emergency department with an emergency medical

condition or in labor; and

failing to provide an adequate medical screening examination for patients


participate in the Federal health care programs.

making false statements or misrepresentations on applications or contracts to


I. Physician Relationships With Payers

During residency, you probably are not focused on who pays for your patients’ care.

Once you start practicing, it is important to understand who the payers are. The U.S.

health care system relies heavily on third-party payers, and, therefore, your patients

often are not the ones who pay most of their medical bills. Third-party payers include

commercial insurers and the Federal and State governments.

Government covers items or services rendered to Medicare and Medicaid

When the Federal

beneficiaries, the Federal fraud and abuse laws apply.

Many States also

have adopted similar laws that apply to your provision of care under State-financed

programs and to private-pay patients. Consequently, you should recognize that the

issues discussed here may apply to your care of all insured patients.

Accurate Coding and Billing

Payers trust you, as a physician, to provide necessary, cost-effective, and quality care.

You exert significant influence over what services your patients receive, you control the

documentation describing what services they actually received, and your documentation

serves as the basis for bills sent to insurers for

services you provided. The Government’s

payment of claims is generally based solely

on your representations in the claims


Because the Government invests so

much trust in physicians on the front end,

Congress provided powerful criminal, civil,

and administrative enforcement tools for

instances when unscrupulous providers abuse that trust. The Government has broad

capabilities to audit claims and investigate providers when it has a reason to suspect

fraud. Suspicion of fraud and abuse may be raised by irregular billing patterns or

reports from others, including your staff, competitors, and patients.


When you submit a claim for services performed for a Medicare or

Medicaid beneficiary, you are filing a bill with the Federal Government

and certifying that you have earned the payment requested and complied

with the billing requirements.

claim was false, then the attempt to collect unearned money constitutes a violation. A

If you knew or should have known that the submitted

common type of false claim is “upcoding,” which refers to using billing codes that

reflect a more severe illness than actually existed or a more expensive treatment than

was provided. Additional examples of improper claims include:


billing for services that you did not actually render;


billing for services that were not medically necessary;


billing for services that were performed by an improperly supervised or

unqualified employee;


from participation in the Federal health care programs;

billing for services that were performed by an employee who has been excluded


billing for services of such low quality that they are virtually worthless; and


evaluation and management service the day after surgery.

billing separately for services already included in a global fee, like billing for an



Medicare pays for many physician services using Evaluation and Management

(commonly referred to as “E&M”) codes. New patient visits generally require more

time than follow-up visits for established patients, and therefore E&M codes for

new patients command higher reimbursement rates than E&M codes for established

patients. An example of upcoding is an instance when you provide a follow-up office

visit or follow-up inpatient consultation but bill using a higher level E&M code as

if you had provided a comprehensive new patient office visit or an initial inpatient


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.



Case Examples of Fraudulent Billing

• A psychiatrist was fined $400,000 and

permanently excluded from participating in the

Federal health care programs for misrepresenting

that he provided therapy sessions requiring

30 or 60 minutes of face-to-face time with the

patient, when he had provided only medication checks for

15 minutes or less. The psychiatrist also misrepresented that he provided

therapy sessions when in fact a non-licensed individual conducted the sessions.

• A dermatologist was sentenced to 2 years of probation and 6 months of home

confinement and ordered to pay $2.9 million after he pled guilty to one count of

obstruction of a criminal health care fraud investigation. The dermatologist admitted

to falsifying lab tests and backdating letters to referring physicians to substantiate

false diagnoses to make the documentation appear that his patients had Medicarecovered

conditions when they did not.

• A cardiologist paid the Government $435,000 and entered into a 5-year Integrity

Agreement with OIG to settle allegations that he knowingly submitted claims for

consultation services that were not supported by patient medical records and did

not meet the criteria for a consultation. The physician 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.

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

Physicians should maintain accurate and complete medical records and documentation

of the services they provide. Physicians also should ensure that the claims they submit

for payment are supported by the documentation. The Medicare

and Medicaid programs may review beneficiaries’ medical


your patients receive appropriate care from you and

other providers who may rely on your records for

patients’ past medical histories.

challenges raised against the integrity of your bills. You may have

heard the saying regarding malpractice litigation: “If you didn’t

Good documentation practice helps ensure thatIt also helps you address

document it, it’s the same as if you didn’t do it.” The same can be

said for Medicare and Medicaid billing.

For more information on physician documentation, see CMS’s Documentation

Guidelines for Evaluation and Management Services available at


Enrolling as a Medicare and Medicaid Provider

With CMS

CMS is the Federal agency that administers the Medicare program and monitors the

Medicaid programs run by each State. To obtain reimbursement from the Government

for services provided to Federal health care program beneficiaries, you must:


identifier for health care providers. You may apply for your NPI at

Obtain a National Provider Identifier (NPI). An NPI is a unique health



Complete the appropriate Medicare Enrollment Application. During the

enrollment process, CMS collects information to ensure that you are qualified

and eligible to enroll in the Medicare Program. Information about Medicare

provider enrollment is available at



Complete your State-specific Medicaid Enrollment Application.

Information about Medicaid provider enrollment is available from your State

Medicaid agency.

Once you become a Medicare and/or Medicaid provider, you are responsible for

ensuring that claims submitted under your number are true and correct.


For tips you can share with your patients on how they can protect themselves from

medical identity theft, see OIG’s brochure entitled “Tips to Avoid Medical ID

Theft” available at


Prescription Authority

The Drug Enforcement Administration (DEA) is a Department

of Justice agency responsible for enforcing the Controlled

Substances Act. When you prepare to enter practice, you

probably will apply for a DEA number that authorizes you

to write prescriptions for controlled substances. You also

will apply for your State medical license and any additional credentials your State

requires for you to write prescriptions. You must ensure that you write prescriptions

only for lawful purposes.

Case Examples of Misuse of Physician Provider and

Prescription Numbers

• A physician was ordered to pay $50,000 in restitution to the Government for

falsely indicating on his provider number application that he was running his own

practice when, in fact, a neurophysiologist was

operating the practice and paying the physician a

salary for the use of his number.

• 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. More than 60 DME companies received Medicare

and Medicaid payments based on her fraudulent prescriptions.

to dispense oxycodone, morphine, hydrocodone, and alprazolam. The physician

allowed unauthorized and non-medical employees at his pain center to prescribe

drugs using his pre-signed blank prescription forms. Prescriptions were issued in

his name without adequate physical exams, proper diagnoses, or consideration of

An internal medicine physician pled guilty to Medicare fraud and to conspiring

alternative treatment options. He paid $317,000 in restitution to the Government.




Assignment Issues in Medicare Reimbursement

Most physicians bill Medicare as participating providers, which is referred to as

“accepting assignment.” Each year, Medicare promulgates a fee schedule setting the

reimbursement for each physician service. Once beneficiaries satisfy their annual

deductible, Medicare pays 80 percent of the fee schedule amount and the beneficiary

pays 20 percent. Participating providers receive the Medicare program’s

80 percent directly from the Medicare program and bill the beneficiary

for the remaining 20 percent. Accepting 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

patient. Medicare participating physicians may not bill Medicare

patients extra for services that are already covered by Medicare.

Doing so is a violation of a physician’s assignment agreement and

can lead to penalties.

The second, less common, way to obtain Medicare reimbursement is to bill as a non

provider. Non-participating providers do not receive direct payment

(beyond the copayment or deductible) from theparticipating

from the Medicare program. Rather, they bill their patients and the patients seek

reimbursement from Medicare. Although 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.

Excluded providers may not receive

Medicare payment either as participating

or non-participating providers.

You may see advertisements offering to help you convert your practice into a “boutique,”

“concierge,” or “retainer” practice. Many such solicitations promise to help you work

less, yet earn more money.

physician, you may not ask Medicare patients to pay a second time for

services for which Medicare has already paid.

If you are a participating or non-participatingIt is legal to charge patients

for services that are not covered by Medicare. However, charging an “access fee” or

“administrative fee” that simply allows them to obtain Medicare-covered services

from your practice constitutes double billing.


Case Example of a Physician Violating an Assignment

Agreement by

Charging Beneficiaries Extra Fees

• A physician paid $107,000 to resolve potential

liability for charging patients, including Medicare

beneficiaries, an annual fee. In exchange for

the fee, the physician offered: (1) an annual

physical; (2) same- or next-day appointments;

(3) dedicated support personnel; (4) around-the-clock

physician availability; (5) prescription facilitation; (6) expedited and

coordinated referrals; and (7) other amenities at the physician’s discretion. The

physician’s activities allegedly violated the assignment agreement because some of

the services outlined in the annual fee were already covered by Medicare.


For more information on physician relationships with:

fellow providers

, see OIG’s “Compliance Program Guidance for Individual and

Small Group Physician Practices” available at



, see OIG’s “Supplemental Compliance Program Guidance for Hospitals”

available at


; and

nursing homes

, see OIG’s “Supplemental Compliance Program Guidance for

Nursing Facilities” available at


II. Physician Relationships With Fellow

Providers: Physicians, Hospitals,

Nursing Homes, Etc.

Any time a health care business offers something to you for free or at below fair market

value, you always should ask yourself, “

Why?” For example, if a DME supplier offers to

give you cash or to pay for your summer vacation, you should suspect that the supplier

is trying to induce you to refer your patients to that vendor. If a laboratory offers to

decorate your patient waiting room, you should suspect that it is trying to induce you

to send your lab business its way.

Physician Investments in Health Care

Business Ventures

Some have observed that physicians who invest in health care business ventures with

outside parties (

clinics) refer more patients for the services provided by those parties than physicians

e.g., imaging centers, labs, equipment vendors, or physical therapy

who do not invest. Maybe this disproportionate utilization partly reflects the physicians’

belief in the value of the services or technology, prompting the investments in the

first place. However, there also is a risk that the physicians’ belief in the value of

the services or technology is less a cause than an effect of the investment interest.

The physician investors’ disproportionate utilization may be motivated partly by the

physicians’ ability to profit from the use of the ancillary services. These business

relationships can sometimes unduly influence or distort physician decisionmaking

and result in the improper steering of a patient to a particular therapy or source of

services in which a physician has a financial interest.

Excessive and medically

unnecessary referrals waste Government and beneficiary money and


can expose beneficiaries to harm from unnecessary services.

investment relationships have serious legal risks under the AKS and Stark law.

If you are invited to invest in a health care business whose products you might order or

to which you might refer your patients, you should ask the following questions. If the

Many of these

answer is “yes” to any of them, you should consider carefully whether you are investing

for legitimate reasons.


Are you being offered an investment interest for a nominal capital contribution?


contributions made to the venture?

Will your ownership share be larger than your share of the aggregate capital


Is the venture promising you high rates of return for little or no financial risk?


make your capital contribution?

Is the venture or any potential business partner offering to loan you the money to


items or services from the venture?

Are you being asked to promise or guarantee that you will refer patients or order


services provided by the venture if you make the investment?

Do you believe you will be more likely to refer more patients for the items and


made the investment?

Do you believe you will be more likely to refer to the venture just because you


Will the venture have sufficient capital from other sources to fund its ongoing



For more information on physician investments, see:

OIG’s Special Fraud Alert entitled “Joint Venture Arrangements” available at;OIG’s Special Advisory Bulletin on contractual joint ventures available at; andOIG’s “Supplemental Compliance Program Guidance for Hospitals” available at Examples Involving Kickbacks for Referrals and Self-Referrals Nine cardiologists paid the Government over $3.2 million for allegedly engaging in a kickback scheme. The cardiologists received salaries under clinical faculty services agreements with a hospital under which, the Government alleged, they did not provide some or any of the services. In exchange, the cardiologists referred their patients to the hospital for cardiology services. Two of the physicians also pled guilty to criminal embezzlement charges involving the same conduct. A physician paid the Government $203,000 to settle allegations that he violated the physician self-referral prohibition in the Stark law for routinely referring Medicare patients to an oxygen supply company he owned.


Physician Recruitment

A hospital will sometimes provide a physician with a recruitment incentive to induce the physician to relocate to the hospital’s geographic area, become a member of its medical staff, and establish a practice that helps serve that community’s medical needs. Often, such recruitment efforts are legitimately designed to fill a “clinical gap” in a medically underserved area to which it may be difficult to attract physicians in the absence of financial incentives. However, as you begin planning your professional future and perhaps receiving recruitment offers, you need to be aware that in some communities, especially ones with multiple hospitals, the competition for patients can be fierce. Some hospitals may offer illegal inducements to you, or to the established physician practice you join in the hospital’s community, to gain referrals. This means that the competition for your loyalty can cross the line into illegal arrangements for which both you and the hospital can be liable. Recruitment arrangements are of special interest to graduating residents and fellows. Within very specific parameters specified in the Stark law and subject to compliance with the AKS, hospitals may provide relocation assistance and practice support under a properly structured recruitment arrangement to assist you in establishing a practice in the hospital’s community. Alternatively, a hospital may pay you a fair market value salary as an employee or pay you fair market value for specific services you render to the hospital as an independent contractor. However, the hospital may not offer you money, provide you free or below-market rent for your medical office, or engage in similar activities designed to influence your referral decisions. You should admit your patients to the hospital best suited to care for their particular medical conditions or to the hospital your patient selects based on his or her preference or insurance coverage. As noted, if a hospital or physician practice seperately or jointly is recruiting you as a new physician to the community, you may be offered a recruitment package. But, you may not negotiate for benefits in exchange for a promise—implicit or explicit—that you will admit your patients to a specific hospital or practice setting unless you are a hospital employee. You should seek knowledgeable legal counsel if someone with whom you are entering into a relationship requires you to admit patients to a specific hospital or practice group.19

Tips for Medical Directors

delivered at the facility.

As medical director, patients (both your own patients and the

Federal authorities may hold you accountable as well.

To do this job well, you should:

If you choose to accept a medical directorship at a nursing home or other facility, you must be prepared to assume substantial professional responsibility for the care patients of other attending physicians) and their families count on you, and State and actively oversee clinical care in the facility; lead the medical staff to meet the standard of care; ensure proper training, education, and oversight for physicians, nurses, and other staff members; andidentify and address quality problems.

Case Examples of Medical Directorship Issues

A physician group practice paid the Government $1 million and entered into a 5-year Corporate Integrity Agreement to settle alleged violations of the AKS, FCA, and Stark law related to medical the agreements were not in writing, the physicians were paid more than fair market value for the services they rendered, and the payment amounts were based on the value of referrals the physicians sent to the medical center. Two orthopedic surgeons paid $450,000 and $250,000 to settle allegations related to improper medical directorships with a company that operated a diagnostic imaging allegedly provided the physicians with valuable compensation, including free use of the corporate jet, under the medical directorship agreements, which required the allegedly called for redundant services and served to encourage the physicians to refer their patients to the facilities operated by the company.

directorships with a medical center.


center, a rehabilitation facility, and an ambulatory surgery center.

The company

physicians to render limited services in return.

The agreements with the physicians


III. Physician Relationships With Vendors

Free Samples

Some physicians welcome visits from pharmaceutical salespeople, while other

physicians prefer not to directly engage with industry representatives. If you decide to

make your practice accessible to salespeople, you probably

will be offered product samples. Many drug and biologic

companies provide physicians with free samples that

the physicians may give to patients free of charge.

is legal to give these samples to your patients

for free, but it is illegal to sell the samples.


The Government has prosecuted physicians

for billing Medicare for free samples. Opinions

differ on whether sampling practices ultimately

increase or decrease patients’ long-term drug costs. If

you choose to accept samples, you will need reliable systems in place to safely store the

samples and ensure that samples are not commingled with your commercial stock.

Case Example Involving Drug Samples

of thousands of dollars, and received sanctions against their medical licenses for

billing Medicare for injectable prostate cancer

drugs they received for free from two

pharmaceutical companies. The pharmaceutical

Several urologists pled guilty to charges of conspiracy, paid restitution in the tens

companies paid $1.4 billion for their part of the

alleged scheme to give urologists free samples

and encourage them to bill Medicare at an inflated

price. The pharmaceutical companies also provided urologists with

additional inducements to use their drugs over the competitor’s products, including

drug rebates, education grants, volume discounts, free goods, and debt forgiveness.


Relationships With the Pharmaceutical and Medical Device Industries

Physician-industry collaboration can produce important medical advances. However, some pharmaceutical and device companies have used sham consulting agreements and other arrangements to buy physician loyalty to their products. Such illegal arrangements induce physicians to prescribe or use products on the basis of that loyalty to the company or to get more money from the company, rather than because it is the best treatment for the patient. As a practicing physician, you may have opportunities to work as a consultant or promotional speaker for the drug or device industry. For every financial relationship offered to you, evaluate the link between the services you can provide and the compensation you will receive. Test the propriety of any proposed relationship by asking yourself the following questions: VDoes the company really need my particular expertise or input? VDoes the amount of money the company is offering seem fair, appropriate, and commercially reasonable for what it is asking me to do? VIs it possible the company is paying me for my loyalty so that I will prescribe its drugs or use its devices? A good discussion that assists in distinguishing between legitimate and questionable industry relationships is located in the OIG’s “Compliance Program Guidance for Pharmaceutical Manufacturers” available at

If your contribution is your time and effort or your ability to generate useful ideas and the payment you receive is fair market value compensation for your services without regard to referrals, then, depending on the circumstances, you may legitimately serve as a

bona fide consultant. If your contribution is your ability to prescribe a drug or use a medical device or refer your patients for particular services or supplies, the proposed consulting arrangement likely is one you should avoid as it could violate fraud and abuse laws. For example, if a drug company offers to pay you and a hundred other “thought leaders” to attend a conference in the Bahamas without requiring preparatory work on your part or information about your expertise in the field (other than the fact that you are a licensed physician), you should be suspicious that the company is attempting to influence you to prescribe its drug.Case Example of Kickbacks in the Device Industry Four orthopedic device manufacturers paid $311 million to settle kickback and false claims allegations that the companies bribed surgeons to recommend their hip and knee surgical implant products. The companies allegedly would award physicians with vacations, gifts, and annual “consulting fees” as high as $200,000 in return for the physicians’ endorsements of their implants or use of them in operations. Many of the individual orthopedic surgeons at the receiving end of the kickbacks are the subject of ongoing investigations by the Government. One orthopedic surgeon recently paid $650,000 to resolve allegations that the surgeon accepted payments from device manufacturers to use their hip and knee implants.


Transparency in Physician-Industry Relationships

Although some physicians believe that free lunches, subsidized trips, and gifts do not affect their medical judgment, research shows that these types of perquisites can influence prescribing practices. Recent pharmaceutical company settlements with the Department of Justice and OIG require “transparency” in physician-industry relationships, whether by requiring the pharmaceutical company to provide the Government with a list of physicians whom the company paid and/or by requiring ongoing public disclosure by the company of physician payments. The public will soon know what gifts and payments a physician receives from industry. The Patient Protection and Affordable Care Act of 2010 requires drug, device, and biologic companies to publicly report nearly all gifts or payments they make to physicians beginning in 2013.Academic institutions also may impose various restrictions on the interactions their faculty members or affiliated physicians have with industry. These and other considerations may factor into your decision about whether you want to conduct industry-sponsored research; serve as a consultant or director for a drug, biologic, or device company; apply for industry-sponsored educational or research grants; or engage in other relationships with industry. Both the pharmaceutical industry (through PhRMA) and the medical device industry (through AdvaMed) have adopted codes of ethics for their respective industries regarding relationships with health care professionals. Both codes are available online. Many of the relationships discussed in this brochure are subject to conflict-of-interest disclosure policies. Even if the relationships are legal, you may have an obligation to disclose their existence. Rules about disclosing and managing conflicts of interest come from a variety of sources, including grant funders, such as States, universities, and the National Institutes of Health, and from the Food and Drug Administration (FDA) when data are submitted to support marketing approval for new drugs, devices, or biologics. To “manage” your conflicts of interest, consider the conflicts policies that affect your professional activities, candidly disclose any industry money subject to these policies, and adhere to restrictions on your activities. If you are uncertain whether a conflict exists, ask someone. You always can apply the “newspaper test” and ask yourself whether you would want the arrangement to appear on the front page of your local newspaper.24



Continuing Medical Education

After finishing your formal graduate medical training, you will assume greater responsibility for your continuing medical education (CME) to maintain State licensure, hospital privileges, and board certification. Drug and device manufacturers sponsor many educational opportunities for physicians. It is important to distinguish between CME sessions that are educational in nature and sessions that constitute marketing by a drug or device manufacturer. Industry satellite programs that occur concurrently with a society meeting are generally promotional, even if the primary speaker is a physician who is well known in the field. You should be circumspect about a discussion that focuses on a particular brand drug or device, as opposed to all the treatment alternatives for a specific condition.For example, if speakers recommend use of a drug to treat conditions for which there is no FDA approval or use of a drug by children when FDA has approved only adult use, you should independently seek out the empirical data that support these recommendations. Note that although physicians may prescribe drugs for off-label uses, it is illegal under the Federal Food, Drug, and Cosmetic Act for drug manufacturers to promote off-label uses of drugs. Advertisements and other promotional materials for drugs, biologics, and medical devices must be truthful, not misleading, and limited to approved uses. FDA is requesting physicians’ assistance in identifying misleading advertisements through its Bad Ad Program. If you spot advertising violations, you should report them to FDA by calling 877-RX-DDMAC (877-793-3622) or by emailing you are invited to serve as faculty for industry-sponsored CME, ask yourself the following questions: VDoes the sponsor really need my particular expertise or input? VDoes the amount of money the sponsor is offering seem fair and appropriate for the educational value I will add to the presentation? VIs it possible the sponsor is paying me for my loyalty so that I will prescribe its drugs or use its devices? VDoes the sponsor prepare a slide deck and speaker notes, or am I free to set the content of the lecture?25

Compliance Programs for Physicians

Establishing and following a compliance program will help physicians avoid fraudulent activities and ensure that they are submitting true and accurate claims. The following seven components provide a solid basis upon which a physician practice can create a voluntary compliance program: Conduct internal monitoring and auditing. Implement compliance and practice standards. Respond appropriately to detected offenses and develop corrective action. Develop open lines of communication with employees. Enforce disciplinary standards through well-publicized guidelines.

With the passage of the Patient Protection and Affordable Care Act of 2010, physicians who treat Medicare and Medicaid beneficiaries will be required to establish a compliance program.




Designate a compliance officer or contact.


Conduct appropriate training and education.




For more information on compliance programs for physicians, see OIG’s “Compliance Program Guidance for Individual and Small Group Physician Practices” available at

Where To Go for Help

When you are considering whether or not to engage in a particular billing practice; enter into a particular business venture; or pursue an employment, consulting, or other personal services relationship, it is prudent to evaluate the arrangement for potential compliance problems. The following is a list of possible resources that can help you.

ЈExperienced health care lawyers can analyze your issues and provide a legal evaluation and risk analysis of the proposed venture, relationship, or arrangement.26


The Bar Association in your State may have a directory of attorneys in your area who practice in the health care field. ЈYour State or local medical society may be a good resource for issues affecting physicians and may have listings of health care lawyers in your area. ЈYour specialty society may have information on additional risk areas specific to your type of practice. ЈCMS’s local contractor medical directors are a valuable source of information on Medicare coverage policies and appropriate billing practices. The contact information for local contractors is available at ЈCMS’s “Medicare Physician Guide: A Resource for Residents, Practicing Physicians, and Other Health Care Professionals” available at, provides an overview of the Medicare program and information on Medicare reimbursement and payment policies. ЈThe OIG’s Web site, available at, provides substantial fraud and abuse guidance. ЈAs discussed above, OIG issues Compliance Program Guidance documents that include compliance recommendations and discussions of fraud and abuse risk areas. These guidance documents are available at ЈOIG issues advisory opinions to parties who seek advice on the application of the AKS, CMPL, and Exclusion Authorities. Information on how to request an OIG advisory opinion and links to previously published OIG advisory opinions are available at ЈCMS issues advisory opinions to parties who seek advice on the Stark law. Information on how to request a CMS advisory opinion and links to previously published CMS advisory opinions are available at

What To Do If You Think You Have a Problem

If you are engaged in a relationship you think is problematic or have been following billing practices you now realize were wrong:

ЈImmediately cease filing the problematic bills. ЈSeek knowledgeable legal counsel. ЈDetermine what money you collected in error from your patients and from the Federal health care programs and report and return overpayments. ЈUnwind the problematic investment. ЈDisentangle yourself from the suspicious relationship. ЈConsider using OIG’s or CMS’s self-disclosure protocols. OIG Provider Self-Disclosure ProtocolThe OIG Provider Self-Disclosure Protocol is a vehicle for physicians to voluntarily disclose self-discovered evidence of potential fraud. The protocol allows providers to work with the Government to avoid the costs and disruptions entailed in a Government-directed investigation. For more information on the OIG Provider Self-Disclosure Protocol, see Examples of Physician Liabilities Resolved Under the OIG Provider Self-Disclosure Protocol A Minneapolis physician paid $53,400 and resolved liability for violating his Medicare assignment agreement by charging patients a yearly fee for services, some of which were covered by Medicare. A Florida physician paid $100,000 and resolved liability related to referring patients to a lab owned by his brother. A neurosurgery practice paid $10,000 and resolved liability for employing an individual who was excluded from participation in the Federal health care programs.


What To Do If You Have Information About

Fraud and Abuse Against Federal Health

Care Programs

If you have information about fraud and abuse against Federal health care programs,

use the OIG Fraud Hotline to report that information to the appropriate authorities. The

Hotline allows the option of reporting anonymously.


Phone: 1-800-HHS-TIPS (1-800-447-8477)

Fax: 1-800-223-8164


TTY: 1-800-377-4950

Mail: Office of Inspector General

Department of Health & Human Services


P.O. Box 23489

Washington, DC 20026

For additional information about the Hotline, visit the OIG Web site at


This publication is available on the OIG Web site. You may reproduce, reprint,

and distribute this publication for educational purposes. You may not charge a

fee for this publication.