Billing fraud victory called good omen for doctors

A recent court ruling in Texas is being hailed as a major victory for health care professionals who feel persecuted by federal prosecutors. The action suggests that even a single health care provider can indeed stand up to the government and successfully defend against charges rather than having to make a begrudging settlement.

The case offers important lessons for risk managers, suggests the attorney who successfully defended the doctor. First, the verdict shows that health care providers should not assume a settlement is the best way to respond to federal fraud charges. Second, the case illustrates a risk area that could be overlooked by busy risk managers: fraudulent billing in small physician practices affiliated with your hospital or health system.

The case involved Anthony Valdez, MD, a phys ician in El Paso, TX, charged with defrauding a number of health care companies by submitting fraudulent bills. An El Paso jury took only 20 minutes to acquit Valdez of the charges. His attorney, Frederick Robinson, JD, in Washington, DC, says the victory could signal a new attitude in the way some health care providers react to the now common charges of billing fraud.

Health care providers typically settle such cases because they are unable to risk the financial loss that could come with the decision to take the government all the way to court. Pursuing the case in that manner probably would prompt the government to suspend the provider’s participation in Medicare and Medicaid until the case was resolved, and most institutions just cannot afford that kind of financial loss, he explains.

In the Valdez case, however, the government did not charge him with defrauding Medicare or Medicaid, only private insurance companies, so there was no risk of losing participation in the government programs. That freed Valdez to defend himself in court as vigorously as he wished.

"For most providers, suspension of payment is equivalent to a death penalty before you’ve had a trial, so they’re willing to give in to unreasonable demands to avoid even worse outcomes before you can even get to court," Robinson says. "But if you don’t have that threat hanging over your head, remember that you have a chance in court. This case shows that a provider can go up against the government and win."

The case against Valdez, a solo practitioner, began when a former employee of the physician’s practice reported to federal investigators that the doctor was billing for services not rendered. Federal investigators found no evidence of fraudulent billings in the Medicare or Medicaid programs, but they alleged that there was evidence of fraud in bills submitted to private insurance companies and prosecuted the doctor for those.

Robinson says the doctor’s defense hinged on his allegation that the former office manager had been caught embezzling from his office and contacted federal authorities out of revenge, or possibly to cover her tracks. The attorney says the office manager "was able to create money the doctor wouldn’t miss by overbilling the insurance companies without the doctor’s knowledge." She would submit false claims to the insurance company by slipping them into a stack of documents the doctor was to sign, Robinson says. The allegations against the office manager were made in court as part of the defense, but they are unproven; she has not been charged with a crime.

Doctor determined to prove innocence

Valdez signed the false claims and did not provide the services, so at first glance, it may have seemed that the doctor had committed fraud. That first impression may have convinced some providers to settle the case quickly, but Robinson says Valdez was determined to prove that he had no knowledge of the fraudulent claims. In court, the doctor explained that the claims involved in the fraud case represented less than 1% of his practice.

"The jury may have concluded that the amount of claims at issue were so small that the fraud could have been an oversight by the doctor and not a pattern of fraudulent conduct," Robinson says. He says the case illustrates the need for a corporate compliance program even in a small practice. Valdez did not have such a program. If he had, he probably would have caught the billing irregularities before they came to the government’s attention, Robinson says. "This case shows that no matter how large or small your practice, it’s beneficial to have some sort of compliance program in place to protect yourself in case you ever come under investigation," he says.

"Even a solo practitioner can pay an outside organization to come in and audit sample bill ings on a regular basis," Robinson points out. "A solo practitioner doesn’t need the same compliance program as a multistate hospital, but there still are things you can do to show you are being careful in how you conduct business with government health care programs."