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How to avoid Medicare provider exclusion

By David R. Dearden, Esq.

The success of a medical practice depends on its ability to successfully collect from insurers for the medical services that it provides. In order to receive payments from an insurer, a provider must be credentialed. Insurers routinely de-credential providers who are excluded from the Medicare/Medicaid Program. This article explores the power of the government to exclude providers from the Medicare/Medicaid Program, the reasons used to exclude providers and a new technique being used to avoid provider exclusion.

Sanctions Under Federal Health Programs

The Department of Health and Human Services (DHHS) is responsible for administration of the federal Medicare Program. The Centers for Medicaid and Medicare Services (CMS) establishes guidelines for the Medicare intermediaries (e.g., Blue Cross/Blue Shield entities) to monitor the claims submitted and paid through the program. For the year 2000, the government reported there were 40 million Medicare enrollees and benefit payments totaling $165.9 billion.

Because of the huge number of enrollees and the payments for their medical care, CMS has been working with another government agency, the Office of the Inspector General (OIG), to reduce excessive payments made to providers. The OIG reported that it saved the Medicare Program $15 billion in 2000, through audit disallowances and by civil monetary recoveries from providers. The OIG also claims that in the year 2000, there were 414 criminal convictions for health care fraud, 357 civil actions for health care fraud and 3,350 exclusions of providers from the Medicare Program.

Exclusions from Medicare

In general terms, the OIG will seek to exclude a provider whose conduct has demonstrated a sufficient lack of trustworthiness for the provider to be part of a government program. Under the law and the regulations there are certain offenses that result in mandatory exclusion from the Medicare Program. Less serious offenses may result in exclusion at the discretion of the OIG.

Providers caught up in state or federal health care investigations must keep one eye on the immediate problem at hand and the other eye on the possibility of being excluded from the Medicare Program. For example, a routine scan of a provider’s coding and payment history may cause a Medicaid intermediary to join with a state insurance department to investigate certain provider claims. If the claims submitted by a provider include a particular code that is outside of the expected number for the profile of the provider reviewed, the intermediary may conclude that the provider is routinely over-billing. Upon audit by the carrier, a decision that the medical records do not support certain claims may result. The carrier will often argue that the audited claims represent only a sample of the universe of claims and demand repayment by the provider based upon an extrapolation of the small number of claims actually audited.

If the provider agrees to repay the alleged “overpayments” to the carrier, the provider may then be advised by the cooperating state insurance department that the state is only willing to conclude its own investigation if the provider agrees to a settlement that includes restitution to the carrier and an administrative fine to the state. However, the provider runs the risk that by signing a consent decree with the state and paying a small fine, the OIG will use the admissions in the consent decree to begin a permissive exclusion proceeding. The point is that the potential for exclusion from the Medicare Program is not a collateral consequence that most providers would consider as a possibility simply agreeing to make restitution to a carrier following an audit.

Most providers probably recognize that conviction of a felony for health care fraud or for the unlawful manufacture, distribution, prescription or dispensing of a controlled substance will result in mandatory exclusion from the Medicare Program for a minimum of five years. However, it is less likely understood that a plea of nolo contendere to a sexual battery by a licensed physician would require that the provider be excluded from the Medicare program. Many criminal defense lawyers and even some health care lawyers are unaware of these dire consequences. One physician who was not so advised and agreed to such a favorable plea was able to petition for a writ of habeas corpus, for relief from the plea, by alleging that he was denied the effective assistance of counsel. The court granted the writ and vacated the plea determining that health care counsel should have explained the collateral consequences of such a plea to the physician and the failure to provide this advice deprived the defendant of the effective assistance of counsel.

There are plenty of other acts or omissions that can result in provider exclusion from the Medicare program. Conviction of a misdemeanor relating to fraud, theft, embezzlement or other financial misconduct can lead to exclusion. Suspension of a providerlicense to practice medicine can have the same result. Even a provider’s failure to pay a medical education loan or the default of a scholarship obligation can result in exclusion.

The lesson to be learned from the significant power that the government wields to exclude providers from the Medicare and Medicaid programs is that convictions, license suspensions and fines related to up-coding or other billing problems can sometimes be only the beginning of a provider’s problems. Exclusion from the Medicare system with the possible de-credentialing from all of the major payors that reimburse the provider for the care it provides can be the end of a career in medicine.

Deferred Prosecution Agreement and Deferred Adjudication Agreement

Prosecutors may allow first time offenders accused of certain crimes that would lead to exclusion from the Medicare program to participate in a deferred adjudication program. If the defendant enters the program and successfully complies with the tailored conditions of the program concerning rehabilitation or restitution, the provider will have the charges dismissed and expunged. Unfortunately, in the Medicare laws, Congress has defined the term conviction broadly to include “participation in a first offender, deferred adjudication or other arrangement where judgment of conviction is withheld.” Therefore, while a deferred adjudication program may be a very attractive alternative for a health care defendant facing criminal charges, participation in such a program may still result in Medicare exclusion, depending upon the type and severity of the underlying offenses.

The law is so restrictive that almost any serious charge against a health care provider will result in exclusion. Obviously, the exclusion of a health system provider would adversely affect numerous patients, employees and suppliers. Because of this reality, DHHS and the Department of Justice have created a mechanism for cases involving health care systems that face criminal charges. This mechanism is known as a Deferred Prosecution Agreement. The Deferred Prosecution Agreement is a written contract that imposes certain probationary terms on a provider without the imposition of a criminal conviction or adjudication. By deferring the prosecution and not just the adjudication, the Deferred Prosecution Agreement is an exception to the mandatory exclusion process and allows the health system to continue to operate as a Medicare provider.

The decision to use a Deferred Prosecution Agreement is a matter of prosecutorial discretion. Under such an agreement the government agrees in writing to defer prosecution for a period of time. The provider will be asked to admit to a statement of facts which may be used as an admission if the provider fails to comply with the terms of the agreement. The provider will also agree to a detailed set of corrective actions, similar to the comprehensive obligations found in a government Corporate Integrity Agreement used to resolve civil monetary penalty cases. If the provider complies with the terms of the agreement, the charges are dismissed. If the provider breaches the Deferred Prosecution Agreement, the provider will be subject to criminal prosecution.

The Deferred Prosecution Agreement is a new mechanism. The government designed it for public policy reasons to prevent the destruction of an entire hospital system. However, it is a technique that may be adaptable to certain situations involving smaller health care systems and even individual professionals under the right circumstances. Investigators and prosecutors do not always understand that health care providers facing criminal prosecution and other sanctions can suffer severe collateral consequences that can destroy the entire future for the professional. Early intervention during health care investigations and the use of carefully crafted agreements with state and federal agencies may help providers to limit the collateral consequences of the sanctions that result from provider misconduct.

David R. Dearden, Esq., is a shareholder of and the partner in charge of litigation at the firm of Kalogredis, Sansweet, Dearden and Burke, Ltd. in Wayne, Pennsylvania.

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