Chapter 25 Medicare Compliance

MEDICARE CARRIERS………….. 25:2

THE AUDIT PROCESS………….. 25:3

Selection for an Audit and Avoiding an Audit….. 25:3

Notice of the Audit………….. 25:4

The Audit….. 25:4

POTENTIAL DEFENSES………….. 25:5

OTHER AUDIT ISSUES. 25:6

MEDICARE REASSIGNMENT.. 25:7

RELATED ASSIGNMENT ISSUES………….. 25:9

Independent Contractors………….. 25:9

Billing Companies………… 25:10

Partnerships.. 25:10

SIDE AGREEMENTS WITH PATIENTS………… 25:10

The Requirements of the Written Contract 25:10

The Affidavit Requirement………… 25:12

Limited Exception for Emergency or Urgent Treatment 25:13

The Effect of Opting Out of Medicare………… 25:14

Compliance, Termination, and Partial Opt-Outs………… 25:14

SAMPLE LETTER TO OBTAIN INFORMATION AND EVIDENCE THAT WILL BE USED DURING AN AUDIT 25:17

SAMPLE PRIVATE CONTRACT BETWEEN A PHYSICIAN AND A MEDICARE BENEFICIARY……. 25:18

SAMPLE AFFIDAVIT FOR A PHYSICIAN ENTERING INTO A PRIVATE

AGREEMENT WITH A MEDICARE BENEFICIARY…… 25:20

MEDICARE ADVANCE BENEFICIARY NOTICE………… 25:21

BENEFICIARY AGREEMENT……… 25:21

THE FALSE CLAIMS ACT…. 25:22

A physicians response to a Medicare carrier audit depends on whether the audit is a routine audit or one conducted as part of an investigation. Generally, the identity and function of the carrier representative requesting the information, for example, Special Investigator or Integrity Unit, will be displayed on the demand letter. Although many audits are routine, not investigative, a prudent physician will contact his attorney for specific legal advice when an audit request is received.

Carrier audits are most often performed to determine whether a provider has been reimbursed by Medicare for services that are properly reimbursable by the federal government. Routine audits are based on the Medicare Act, which requires carriers to conduct prepayment and postpayment medical reviews to identify inappropriate, excessive, or medically unnecessary services and take appropriate corrective action.

Audits for reasons other than routine oversight purposes may be undertaken to curb Medicare fraud and abuse. Medicare carriers are required to establish integrity units to implement written procedures to identify fraud and abuse and search for instances of potential abuse or fraud. Medicare payment audits can lead to an investigation by the Office of the Inspector General (OIG), a unit of the Department of Health and Human Services that is charged with identifying and eliminating fraud, abuse, and waste in federal health care programs. The consequences of an OIG investigation could include criminal penalties, licensure revocation, civil fines, and exclusion from federal health care programs.

MEDICARE CARRIERS

Medicare law requires that the Secretary of Health and Human Services delegate, to the extent possible, many administrative responsibilities of the Medicare program, including conducting audits of the records of Medicare service providers to assure that proper payments are made. 42 U.S.C. 1395u(a);1395u(b). The Medicare Carriers Manual provides that a primary role of carriers is to identify cases of suspected fraud and abuse and refer these cases for investigation. Carriers are required to establish a Medicare Fraud Investigations Branch led by a Program Integrity Coordinator. Carriers are required to have written procedures to identify fraud and abuse and are required to evaluate completed billing forms to detect inconsistencies. They must also maintain documentation in provider files for seven years of the details of any telephone calls or personal contacts involving fraud and abuse issues discussed with providers or their staff. Carriers must also maintain communications with providers to keep them informed about fraud and abuse issues. See Medicare Carriers Manual 14002.4. Based on these requirements, the fact that a physician is chosen for an audit does not automatically mean that he is suspected of fraud; it may in fact be a required routine audit.

THE AUDIT PROCESS

Selection for an Audit and Avoiding an Audit

Carriers conduct prepayment and postpayment reviews to identify medically inappropriate, medically unnecessary, or excessive services, and conduct reviews when a questionable pattern of practice is discovered. This process of identification is termed medical review. Carriers then conduct a more targeted review of questionable services or payments, called a Medical Review. Using proprietary methods, carriers can generally, using the procedures billed in a geographic region by a particular medical specialty as a benchmark, compare the billing practices of the targeted physician. Claims that were submitted beyond the frequency usually submitted by physicians in the same specialty will be reviewed and the physician will be sent an inquiry letter. At this point, any misunderstandings can be clarified, for example, the physician has an unique patient load or his practice patterns do not closely correspond to those of other physicians in his specialty. The Medical Review may reveal that no impropriety was involved in the billing practice because of these or other special factors within a physicians practice.

Based on its analysis of the physicians practice, the carrier may also take the following actions:

1. a) initiation of an educational program to correct the problem identified;
2. b) further analysis of the provider or group on a postpayment basis;
3. c) development of new or revised prepayment screens;
4. d) development of local medical review policies; or
5. e) referral of the case to the fraud and abuse unit.

Carriers can use several sources for the Medical Review, including the National Claims History Database, in which carriers can compare their claims to national data; carriers medical review cost data; and shared data from other federal programs. Physicians can also be targeted by complaints from a beneficiary or a disgruntled employee or ex-employee, or by an advertisement that contains potentially questionable billing practices.

There is no single formula or practice that will help a physician avoid an audit. Instead physicians should have an office policy to ensure that all Medicare billing requirements are in strict compliance. Office staff should fully understand and comply with all Medicare billing rules and should immediately refer all Medicare inquires that could signal an audit to the physician. An internal audit should be conducted once or twice a year and any irregular or questionable billing should be corrected. All Medicare bulletins should be carefully read and the information disseminated to the staff. All documentation, particularly concerning the medical necessity of care rendered and billing instructions from the carrier, should be scrupulously maintained. Documentation guidelines from HCFA are also available on the HCFA web site at http://www.hcfa.gov/

Notice of the Audit

Generally a physician will receive advance written notice of an audit that will include the date of the audit. Carriers will usually give a physician an extension if necessary to compile documents and consult an attorney, but the physician should request that the extension be given in writing. A physician can also appeal, in writing, the denial of an extension.

The Audit

The physician should first obtain the auditor’s name, and if possible, his card or other identification. It is important to try to determine if the auditor is simply conducting a routine audit, or if he is from a fraud unit or the Office of the Inspector General.

A physician should not engage in unnecessary discussions with the auditor or volunteer unrequested information. Simply respond with caution and common sense to any general questions, and ask that specific questions, especially those concerning billing practices or billing policies be put in writing so that an attorney can be consulted. Office staff should be directed to furnish requested information but to refrain from answering specific substantive questions about billing policies, and should refer these to the physician.

Usually only a limited number of files or records are initially examined. These are reviewed by the carrier’s medical consultant. If any questions about billing practices arise, the physician is requested to produce a larger number of files for examination. Federal law requires that the physician provide the records of Medicare patients to the federal government upon request. Failure to do so invokes a myriad of penalties, ranging from denial of payment to exclusion from federal health care services and more serious action. The OIG has specific statutory authority to exclude from Medicare any individual or entity that fails to provide information requested by the appropriate government agency. 42 U.S.C. 1320a-7(b); 1395l(e).

Physicians generally do not need to obtain a patients consent before releasing a Medicare patient’s medical records, as patients sign an authorization for release of these records when they seek Medicare coverage. Even highly sensitive information, such as alcohol or drug abuse records, may be released without subjecting the physician to criminal or civil liability.

Medicare law is unclear as to whether the physician or the government bears the burden of paying for photocopying. Usually when there are a large number of records involved the agency will bring its own photocopy machine, although this is not always the case, particularly when fewer records are involved. It is critical that the physician retain the originals of the records and only allow copies to leave the premises (except in certain circumstances, such as when a warrant is presented), even if this means that the physician bear the cost of the copying at his office or through an outside service.

POTENTIAL DEFENSES

The Medicare Act contains an express statute of limitations that prohibits any action against a physician with respect to any claim or request for payment that took place more than six years before the present. 42 U.S.C. 1320a-7a(c)(1). Other special rules prohibit finding a physician liable for an overpayment if the physician is without fault (as defined by Medicare) and the overpayment is discovered after the third calendar year in which the overpayment was made. Audit periods usually encompass the period from one to five years before the audit.

If a physician receives an overpayment letter from the carrier and wishes to contest it, several potential defenses are available. The physician can show that the services rendered were medically necessary and reasonable. The physician could use scientific articles, treatises, or evidence from other physicians to bolster his assertions. In addition, the statistical analysis used by the carrier in conducting the audit can be challenged, perhaps reducing the amount of the claimed overcharge.

Physicians who follow the written billing practices of their carriers may, of course, argue that Medicare is prohibited from collecting the disputed amounts. When a physician relies on representations from Medicare officials as to proper billing procedures, often no recovery of an overpayment can take place. 42 U.S.C. 1395gg. Therefore it is critical that physicians retain and document billing instructions received from carriers and Medicare. Other potential defenses, such as the important concept of waiver of liability exist, but the rules are extremely complex and require the assistance of an attorney.

OTHER AUDIT ISSUES

In calculating overpayment, carriers can base the amount of overpayment on “extrapolation.” For instance, if 100 office visits were reviewed over a period of three years, and 25% of them were found to have overcharges requiring downcoding, and the physician billed for 2000 such office visits over the three year period, then the overpayment claimed by the carrier can be for as many as 500 office visits (25% of 2000 visits). Although often challenged, statistical extrapolation has usually been upheld if it is statistically valid. If however, the total number of erroneous claims is small, the carrier will adjudicate each claim rather than engage in extrapolation.

Physicians are entitled to a hearing before the Medicare carrier, including, ultimately, a Fair Hearing before a disinterested carrier representative. The physician may, however, be expected to pay or offset overpayments before exercising his right of appeal. Physicians also have certain due process rights in the context of a Fair Hearing. They may access all evidence on record that will be considered during the hearing including claims information and carrier regulations that will be used. Guidelines used by the carrier to deny services it deems not medically necessary should be available for review, as should guidelines from HCFA on administering the claims review process. Physicians should submit a written request asking for the above information, under the guidelines of the Federal Freedom of Information Act.

At the hearing, physicians may be represented by legal counsel. They may present medical information that is relevant to the case, including the opinions of other physicians. They may question the carrier’s representatives who participated in the determination that the services provided were not medically reasonable and necessary.

The hearing officer must send the physician a notice of his decision within 120 days of the date of the hearing. If a physician receives an adverse decision, and the amount involved is at least $500, the physician is entitled to a hearing before an administrative law judge. The hearing must be requested within 60 days of the receipt of the notice of the Fair Hearing decision. If the physician receives an adverse decision before the administrative law judge, he may request an appeal, if the amount involved is over $1000, by the Appeals Council of the Office of Hearings and Appeals, Social Security Administration. Physicians are advised to consult with an attorney before taking any of the above steps. See 42 U.S.C. 1395u.

MEDICARE REASSIGNMENT

Medicare will generally pay assigned benefits to the physician who provided the service and may not pay to any other person amounts that are due to a physician. 42 U.S.C. 1395u(b)(6). Although exceptions exist, this basically requires that physicians either receive payment for their own services, fall within an exception, or take action to ensure compliance with the law. Medicare carriers are moving to ensure that physicians do not reassign their claims in violation of the law, and are requiring that entities that are not eligible to receive direct payment become in compliance with the law. Failure by an entity ineligible for direct payment to comply or furnish necessary information could result in the revocation of the right to receive assigned benefits. See 42 C.F.R. 424.82.

Medicare allows payment to the physician and to the following entities:

424. a) The physicians employer: The employer of the physician may be paid, if the physician is required as a condition of his employment to turn over the fees for his services to his employer. 42 C.F.R. 424.80(b)(1).
425. b) An inpatient facility: Medicare may pay an inpatient facility in which the service was furnished if there was a legal and valid contractual agreement between the facility and the physician under which the facility bills for the physicians service. 42 C.F.R. 424.80(b)(2).
426. c) An Organized Health Delivery System: Medicare may pay an organized health care delivery system if there is a contractual agreement between the organization and the physician under which the organization bills for the physician. 42 C.F.R. 424.80(b)(3).
427. d) A Physician, for Purchased Diagnostic Tests: Medicare may pay a physician or a physicians group for diagnostic laboratory tests (other than clinical diagnostic laboratory tests) that the physician purchases from an independent physician, medical group, or other supplier. The charges for the tests cannot be marked up by the physician.
428. e) A Supplier of Diagnostic Tests for Purchased Interpretations: A person or entity that provides diagnostic tests or diagnostic test interpretations that the person or entity purchases from an independent physician or medical group, if:

1)            the tests are initiated by a physician or medical group which is independent of the person or entity providing the tests and of the physician or medical group providing the interpretations;

2)            the person or entity providing the tests and purchasing the interpretations submits either an assigned or unassigned claim for both the tests and the interpretations; and

3)            the physician or medical group providing the interpretation does not see the patient.

1. f) To a Substituted Physician Under a Reciprocal Billing Arrangement: Medicare may pay the a physician for regular physician services provided to his patients by another physician on an occasional reciprocal basis. These payments will only be made if:

1)            the regular physician is unavailable to provide the service;

2)            the Medicare patient has arranged or sought to receive the visit services from their regular physician;

3)            the substitute physician does not provide the visit services to Medicare patients over a continuous period of longer than 60 days;

4)            the regular physician identifies the services as substitute physician services by entering the appropriate modifier (Q5) in Item 24d of Form HCFA 1500 HCPCS; and

5)            the regular physician keeps in file a record of each service provided by the substitute physician, associated with the substitutes UPIN, and makes this record available to the carrier upon request. 42 U.S.C. 1395u(b)(6).

If all the physicians in a medical group bill under their own names and numbers, they are considered independent physicians for substitution purposes and must follow the above procedures. The requirements do not, however, apply to substitution arrangement among physicians in the same medical group that submits claims in the name of the group, as long as the physician who actually performed the service is identified on claim forms. Medicare Carriers Manual 3060.

1. g) To a Governmental Agency: Medicare may pay benefits due to supplier to a governmental agency or entity.
2. h) Pursuant to a Court Order: Reassignment established by, or ordered by, a court may be honored by Medicare.
3. i) To a Billing Agent: As long as the following circumstances are met, Medicare can make payment in the name of the physician eligible to receive payment to an agent who furnishes billing or collection services:

1)            the agent receives the payment under an agency agreement with the physician;

2)            the agents compensation is not related in any way to a dollar amount billed or collected;

3)            the agents compensation is not dependent on the actual collection of payment;

4)            the agent acts under payment disposition instructions that the provider may modify or revoke at any time;

5)            the agent, in receiving the payment, acts only on behalf of the physician; and

6)            payment to the agent is always made in the name of the physician.

42C.F.R. 424.80; 424.73.

The rules governing payments to billing agents are fairly strict. Although in general an arrangement providing for an entity to receive a standard percentage of revenues or collections will run afoul of Medicare law, a physician could compensate a billing agent under these circumstances if the Medicare payment is sent directly to the physician and not to the agent. In other words, a billing service may claim Medicare payments in the name of the physician as long as the service does not receive and negotiate the checks payable to the physician. Physicians who have billing agencies are required to submit a copy of the contract or agreement with their Medicare provider application to ensure that the agent has no financial interest in how much is collected from Medicare.

RELATED ASSIGNMENT ISSUES

Independent Contractors

A medical group may bill and receive payment for the services of an independent contractor, under the exception relating to an organized health care delivery system, which includes, for these purposes, clinics, which may include physicians office. A clinic may establish its qualifications to receive payment for the services of independent physicians in the clinic by submitting a written statement certifying that it will bill for their services only per its contractual agreement with the independent physicians. Independent contractors may still bill under their own names for services provided outside the clinic. See Medicare Carriers Manual 3060.3C.

Billing Companies

Physicians who enroll with Medicare must submit a copy of their billing agreements with a billing company to Medicare. Under certain conditions, such as when the checks are made out in the name and billing number of the physician, Medicare may make payment to a billing agent. Physicians receive a copy of the remittance notice, and the billing agreement must ensure that physicians have unrestricted access to this information. Since the physician is accountable for everything that was billed and paid on his behalf, he has the right to request a copy of any remittance notice.

Although Medicare may, under certain specified conditions, allow payment to a billing agent, it would not approve of an arrangement where the billing agent pays a staffing or other practice management company which Medicare believes has an influence on the amounts being billed and collected.

Partnerships

If a partnership meets state law requirements for a valid partnership, it is considered to be the supplier of services, and it is allowed to bill for services and receive Medicare payments for its partners. If the partnership uses independent contractors who are not partners, reassignment would be permitted only if the relationship fell within a specific exception.

SIDE AGREEMENTS WITH PATIENTS    

The Requirements of the Written Contract

Recent federal legislation allows physicians to enter into private contracts waiving certain rights and obligations under the Medicare program with Medicare beneficiaries. Medicares billing limits will not apply to these contracts, and physicians will be able bill patients more than the limits imposed by Medicare. However, the law imposes strict requirements upon physicians who take advantage of this legislation, such as disallowing them from filing a claim for any Medicare patient for a prescribed opt-out period (usually a two year minimum).

Before 1997, physicians were prohibited from entering into private contracts with Medicare patients, with exclusion and civil fines imposed for physicians who violated the law. Since 1998, a physician has been allowed to enter into a private contract with a Medicare patient if these rules were followed: a) no claim for payment is submitted to the Medicare program; b) the physician receives no reimbursement from Medicare, either directly or through a capitated basis (or through an organization that receives reimbursement); c) the contract meets certain requirements (see below); and d) the physician files an affidavit with the Secretary of DHSS containing specific information (see below). Any private contract that fails to meet all applicable law is void. See 42 U.S.C. 1395a.

The private contract must be in writing and in print large enough that the patient can read the writing. It must be signed by the Medicare beneficiary and the physician before any service included in the contract is provided. It may not be entered into when the beneficiary is facing an urgent or emergency health care situation. In addition the contract must:

1. a) clearly state whether the physician is excluded from the Medicare program;
2. b) state that the beneficiary or his legal representative accepts full responsibility for payment of the the physicians charges for all services furnished;
3. c) state that the beneficiary understands that Medicare limits do not apply to the physicians charges;
4. d) state that the beneficiary agrees that he will not submit a claim to Medicare or ask the physician to do so;
5. e) state that the beneficiary understands that no Medicare payment will be made for any items or services furnished by the physician, even if those items would have been covered by Medicare if there had not been a private contract;
6. f) state that the beneficiary enters the contract knowing that he has the right to obtain Medicare covered services and items from physicians who have not opted out of Medicare;
7. g) state the expected or known effective date and expected or know expiration date of the opt-out period;
8. h) state that the beneficiary of his legal representative understands that Medi-gap do not, and other supplemental plans may not, make payment for items or services that are not paid for by Medicare.

The beneficiary must be provided a photocopy or original of the contract before items or services are provided. The physician must retain a copy of the private contract during the duration of the opt-out period and must make the contract available to HCFA upon request. 42 C.F.R. 405.415. A sample contract is included in the Appendix.

The Affidavit Requirement

In addition to entering into a private contract with the patient, the physician must file an affidavit with his Medicare carrier no later than ten days after the first contract is entered into. Failure to do so makes the contract inapplicable. The affidavit must:

1. a) Be in writing and be signed by the physician.
2. b) Contain the physicians full name, address, telephone number, National Provider Identifier (NPI) or billing number, if one has been assigned, Uniform Provider Identification Number (UPIN) if one has been assigned, or if neither an NPI nor a UPIN has been assigned, the physicians tax identification number (TIN).
3. c) State that, except for emergency or urgent care services (see further restrictions on emergency services, below) during the opt-out period, the physician will provide services to Medicare beneficiaries only through private contracts and that these services would otherwise have been Medicare covered services.
4. d) State that the physician will not submit a claim to Medicare for any service furnished to a Medicare beneficiary during the opt-out period, nor will the physician permit any entity acting on his behalf to submit a claim to Medicare for services, except as provided below for certain emergency or urgent care services.
5. e) State that during the opt-out period, the physician understands that he may receive no direct or indirect Medicare payment for services that he furnishes to Medicare beneficiaries with whom he has privately contracted, whether as an individual, an employee of an organization, a partner in a partnership, under a reassignment of benefits, or as payment for services furnished to a Medicare beneficiary under a Medicare+Choice plan.
6. f) State that the physician who opts out of Medicare acknowledges that, during the opt-out period, his services are not covered under Medicare and that no Medicare payment may be made to any entity for his services, directly or on a capitated basis.
7. g) State a promise by the physician to the effect that during the opt-out period, the physician agrees to be bound by the terms of both the affidavit and the private contracts that he or she entered into.
8. h) Acknowledge that the physician recognizes that the terms of the affidavit apply to all Medicare covered items and services furnished to Medicare beneficiaries by the physician during the opt-out period (except for emergency or urgent care services furnished to beneficiaries with whom he has not previously privately contracted) without regard to any payment arrangements the physician may make.
9. i) With respect to a physician who has signed a Part-B participation agreement, acknowledge that such an agreement terminates on the effective date of the affidavit.
10. j) Acknowledge that the physician understands that a beneficiary who has not entered into a private contract and who requires emergency or urgent care services may not be asked to enter into a private contract with respect to receiving such services.

A sample affidavit is included in the Appendix.

Limited Exception for Emergency or Urgent Treatment

A physician may not enter into a private contract with a Medicare beneficiary when the patient is facing an emergency or urgent health care situation. If a physician has previously entered into a private contract with a beneficiary before the onset of the emergency or urgent medical condition, service is governed by the terms of the contract. When a physician who has opted out of Medicare treats a beneficiary with whom he does not have a contract in an emergency or urgent situation, the physician may not charge the beneficiary more than the Medicare limiting charge for the service and must submit the claim to Medicare on behalf of the beneficiary. Medicare may make payment for emergency or urgent care services provided by a physician who has properly opted out when the services are furnished and the claim is made for services. 42 C.F.R. 405.440.

Emergency services are defined as covered inpatient and outpatient services that are (1) furnished by a provider qualified to furnish emergency services; and (2) needed to stabilize or evaluate an emergency medical condition. 42 C.F.R. 422.2. Urgent care services are those furnished to an individual who requires services within twelve hours in order to avoid the likely onset of an emergency medical condition. 42 C.F.R. 405.400.

Physicians who have been excluded from Medicare may seek payment from Medicare for the provision of emergency services, though they may not bill and be paid for urgent care services. 42 C.F.R. 405.440. The claim for payment for emergency services must be accompanied by a sworn statement of the person furnishing the services specifying the nature of the emergency and explaining why the services could not be furnished by an individual or entity eligible to furnish or order such items or services. 42 C.F.R. 1001.1901.

The Effect of Opting Out of Medicare

When a physician enters into a private agreement with a beneficiary, the following conditions apply for the period during which the opt-out is effective. The physician, or any entity to which he reassigns his right to receive payments, will not receive payment from Medicare or any Medicare+Choice plan for any services, except for certain limited emergency and urgent care services provided to beneficiaries with whom no private contracts have been made. The physician cannot furnish any item or service (except for emergency and urgent care service) that would otherwise be covered by Medicare to any Medicare beneficiary except through a private contract. Even when Medicare is the secondary payor, the above rules apply. On the other hand, the physician is not subject to the limiting charge provisions on reimbursement, and he is not subject to the prohibition on reassignment provisions, except as provided for certain urgent and emergency services. 42 C.F.R. 405.425.

Participating providers must file an affidavit that meets the proper criteria and which is received by the carrier at least 30 days before the first day of the next calendar quarter, showing an effective date of the first day in that quarter (Jan.1, Apr. 1, July 1, Oct. 1). No services under private contracts may be provided before the effective date of the affidavit. Non-participating physicians may opt out at any time. Although it is not yet a requirement, HCFA advises a physician who opts out of Medicare to notify beneficiaries as soon as possible, in order to prevent the patients from experiencing any inconvenience or delay in receiving medical care if the physicians patients cannot enter into the private contract.

Compliance, Termination, and Partial Opt-Outs

The failure by a physician to properly opt out of the Medicare program renders any private contracts entered into void. The physician must then submit to Medicare all claims for covered items and services. The physician may attempt to opt out again at any time. 42 C.F.R. 405.430.

A physician may fail to comply with his opt-out status if he knowingly or willfully submits a claim for Medicare payment or receives Medicare payment directly or indirectly for Medicare covered services. Failure to enter into private contracts, failure to retain a copy of each private contract, failure to allow HCFA to inspect the private contracts upon request, or failing to comply with the rules regarding emergency or urgent care will likewise be considered a failure to maintain status.

If a physician fails to maintain opt-out status, and fails to demonstrate within 45 days of notice of a violation that he has taken good-faith efforts to maintain his status, the following will apply for the remainder of the opt-out period:

1. a) all of the private contracts between the physician and beneficiaries are deemed void;
2. b) the physicians opt-out of Medicare is nullified;
3. c) the physician must submit claims to Medicare for all covered items and services;
4. d) the physician or beneficiary will not receive payment on Medicare claims for the remainder of the opt-out period;
5. e) the physician is subject to the limiting charges provision; and
6. f) the physician may not attempt to again meet the criteria for properly opting out until the two year opt-out period expires.

42 C.F.R. 405.435.

A physician may renew an opt-out by filing an affidavit with his carrier(s) with whom he would normally file claims (if he had not opted out). The affidavit must be filed within thirty days to the expiration of the current opt-out period. 42 C.F.R. 405.445(a).

A physician may terminate his private contract within ninety days of its effective date by following these steps. A physician must: 1) never have previously (before the present occasion) opted out of the Medicare program; 2) notify the Medicare carrier with which he has filed an affidavit of the termination of the opt-out no later than ninety days after the effective date of the opt out period; 3) refund to each beneficiary with whom he has privately contracted all payment collected in excess of Medicare limiting charge; and 4) notify all Medicare beneficiaries with whom the physician contracted of his decision to terminate the opt-out, and the beneficiaries right to have claims filed on their behalf with Medicare for the services furnished during the opt-out period. 42 C.F.R. 405.445(a).

Partial opt-outs are generally prohibited. Physicians must opt out for all covered services and items, and cannot have private contracts that apply to some covered services but not others. Because suppliers and independent diagnostic testing facilities cannot opt out, the physician owner of such suppliers cannot opt out as a supplier. Physicians may also not attempt to opt out with some beneficiaries while retaining other Medicare-reimbursed beneficiaries.

The decision of a physician to opt out of Medicare does not affect the ability of a group practice of which he is a member to bill Medicare for the services of physicians who have not opted out of Medicare. Medicare will make payment for services that are ordered by a physician who has opted-out, as long as the physician ordering the service has a uniform provider identification number (UPIN) and the services are performed by a physician who has not opted out. In addition, a private contract is not required when billing patients for items and services that are not covered by Medicare. Likewise, patients enrolled in a Medicare HMO who go out of plan to seek a non-covered service are likely liable for the full charge and no contract is needed. Physicians who provide services to beneficiaries enrolled in Medical Savings Accounts are not required to enter into a private contract with those patients or to opt out of Medicare.

SAMPLE LETTER TO OBTAIN INFORMATION AND EVIDENCE THAT WILL BE USED DURING AN AUDIT

[Carrier Address]

[Date]

Re: Freedom of Information Act Request Concerning Medicare Audit No. ______

Pursuant to the Freedom on Information Act, 5 U.S.C. 552, I request that you provide me with copies of the following records in your possession:

1. All evidence that will be considered during my Fair Hearing, including medical records, claims information, and any regulations that will be used by you in determining your case.
2. Any internal guidelines you have used to deny payment for my services on the basis that a service is not medically reasonable and necessary.
3. Copies of all instructions from HCFA to you on administering the claims review process with respect to the issues in my case.

I expect you will make a determination on this request within 10 working days of receipt pursuant to 5 U.S.C. 552(a)(6)(A)(i). Further, I note that in the event aspects of the documents requested are exempt from the APA, you are authorized to release all reasonably segregable portions of documents which are not themselves exempt. 5 U.S.C. 552(b).

Thank you very much for your attention to this matter. Please do not hesitate to contact me if you have any questions.

Sincerely,

__________________________

[Physicians Name], M.D.

California Medical Association 1999. Reprinted with permission.

SAMPLE PRIVATE CONTRACT BETWEEN A PHYSICIAN AND A

MEDICARE BENEFICIARY

The beneficiary or his or her legal representative must be provided a photocopy or original of the private contract before items or services are furnished to the beneficiary under the terms of the contract. The physician must retain a copy of the private contract during the duration of the opt-out period. The private contact must be available to HCFA upon request.

The sample contract follows:

This agreement is made between _______________[physician] , whose principal place of business is __________________[physicians address] and ___________________[patient], a Medicare beneficiary, who resides at _____________[patients address].

____________________[physician] agrees to perform the following services:

[List services to be performed]

________________________________________________________________________________________________________________________________________________________________________________________________________________________________

In return for these services, the undersigned patient agrees to provide payment to physician in the amount set forth in Attachment A (fee schedule).

By signing this contract, _____________________[patient] agrees to, and understands the following:

Initial

____    Patient is not currently facing an emergency or urgent health care situation.

____    Patient agrees not to submit a claim (or request that a physician submit a claim) for the services provided pursuant to this agreement, to the Medicare program.

____    Patient agrees to be fully responsible, whether through insurance or otherwise, for payment of the services, and understands to no Medicare reimbursement will be provided.

____    Patient understands that no Medicare reimbursement limits (including Medicares limiting charge) apply to the services in question.

____    Patient understands that Medi-Gap plans do not, and other supplemental insurance plans may not, make payment for the services because payment is not made under the Medicare program.

____    Patient acknowledges that patient has the right to have these items and services provided by other physicians who whom Medicare would make payment.

____    Patient understands that Medicare payment will not be made for any items or services furnished by the physician that otherwise would have been covered by Medicare if there was no private contract and a proper Medicare claim.

____    Patient understands that he/she enters into this contract with the knowledge that he or she has to right to obtain Medicare covered services and items from physicians who have not opted out of Medicare, and that the beneficiary is not compelled to enter into private contracts that apply to other Medicare services furnished by other physicians who have not opted out.

Physician [is not] [is] excluded from participating in the Medicare program. This contract is effective starting ____________ until _____________[expiration of physicians opt-out period].

Executed at ___________________[city], Nevada on ___________________[date].

_________________________                                  ______________________________

[Physicians signature]                                                          [Patients signature]

_________________________                                  ______________________________

[Type of print name], M.D.                                         [Type or print name]

California Medical Association 1999. Reprinted with permission.

SAMPLE AFFIDAVIT FOR A PHYSICIAN ENTERING INTO A PRIVATE

AGREEMENT WITH A MEDICARE BENEFICIARY

[Note: Affidavit must be filed with the Medicare carrier no later than ten days after the first contract to which the affidavit applies is entered into.]

I, _____________________[name of physician], declare the following:

1)         On ______________[date of contract], I entered into a private agreement with my patient, _______________[name of patient] to provide the medical services specified in that agreement.

2)         I agree that, except for emergency or urgent care services to beneficiaries with whom I have no private contract during the opt-out period, I will provide services to Medicare beneficiaries only through private contracts and that these services would otherwise have been Medicare covered services.

3)         I will not submit a claim to Medicare for any service furnished to a Medicare beneficiary during the opt-out period, nor will I permit any entity acting on my behalf to submit a claim to Medicare for services, except as provided below for certain emergency or urgent care services.

4)         That during the opt-out period, I understand that I may receive no indirect or direct Medicare payment for services that I furnish to Medicare beneficiaries with whom I have privately contracted, whether as an individual, an employee of an organization, a partner in a partnership, under a reassignment of benefits, or as payment for service furnished to a Medicare beneficiary under a Medicare+Choice plan.

5)         I acknowledge that, during the opt-out period, my services are not covered under Medicare and that no Medicare payment may be made to any entity for my services, directly or on a capitated basis.

6)         I promise that during the opt-out period, I will be bound by both the terms of the affidavit and the private contracts I have entered into.

7)         I recognize that the terms of the affidavit apply to all Medicare covered items and services furnished to all Medicare beneficiaries during the opt-out period (except for emergency or urgent care services furnished to beneficiaries with whom I have not previously privately contracted) without regard to any payment arrangements I may make.

8)         I acknowledge that my Part-B participation agreement terminates on the effective date of the affidavit [if the physician has signed a Part-B participation agreement]

9)         I understand that a beneficiary who has not entered into a private contract and who requires emergency or urgent care may not be asked to enter into a private contract with respect to receiving such services.

_______________________[Physicians signature]                                 ________________[Date]

California Medical Association 1999. Reprinted with permission.

MEDICARE ADVANCE BENEFICIARY NOTICE

________________________________[Physicians name]

Medicare will only pay for services that it determines to be reasonable and necessary under section 1862(a)(1) of the Social Security Act. If Medicare determines that a particular service is not reasonable and necessary under Medicare program standards, Medicare will deny payment for that service. In your case Medicare may deny payment for the following procedure(s):

Procedure:             ______________________________________________

CPT Codes:            ______________________________________________

Procedure:             ______________________________________________

CPT Codes:            ______________________________________________

The reason for the denial is likely to be:

__            Medicare does not pay for this service for the provided diagnosis.

__        Other ______________________________________________

…………………………………………………………………………………………………………………………………

BENEFICIARY AGREEMENT

I have been notified by my physician that he/she believes that, in my case, Medicare is likely to deny payment for the services identified above, for the reason stated. If Medicare denies payment, I agree to be personally and fully responsible for my payment.

______________________________                                    ________________________

[Beneficiarys signature]                                                          [Date]

California Medical Association 1999. Reprinted with permission.

THE FALSE CLAIMS ACT

The False Claims Act provides for penalties of up to $ 10,000 per claim plus three

times the amount of damages sustained by the government (three times the amount of the false over-billings). 31 USC 3729 et seq. Private individuals have a right to bring claims in the place of the government. This is known as a Qui Tam action.   31 USC 3730(b). In a successful case, the private individuals attorney fees and costs are paid by the physician- defendant, and the plaintiff receives from 10 to 25% of the total award.

The 1977 Medicare-Medicaid Anti-Fraud and Abuse Amendments made knowing and willful false claim violations a felony with a maximum of five years in prison and/or a $25,000 fine for each offense. Pub. L. No. 95-142, 91 Stat. 1179 (1977). Prohibited false statements or claims include:

1. Knowingly and willfully making or causing to be made any false statement or representation of a material fact in seeking to obtain any benefit or payment;
2. Fraudulently concealing or failing to disclose information affecting ones rights to a payment;
3. Converting any benefit or payment rightfully belonging to another; and
4. Presenting or causing to be presented a claim for a physician service knowing that the individual who furnished the service was not licensed as a physician.

A physician must have actual knowledge or have acted in reckless disregard of the truth. 31 USC 3729(a). The physician can have liability if his or her claims are processed in a sloppy or unsupervised fashion and result in overcharges to the government. United States v. Entin, 750 F. Supp. 512 (S.D. Fla. 1990). Cases are usually brought alleging the physician did not perform the service billed (direct false claim) or the physician did not sufficiently provide the service (the physician up coded).

In a Qui Tam action, the plaintiff^[1] files a lawsuit under seal (in secret). The government has 60 days to determine whether or not to enter the lawsuit as an intervenor. If the government intervenes, the government assumes the case prosecution and the plaintiff simply cooperates with the government and receives a percentage of the ultimate fines/award (usually 5 to 15%). When the government does not intervene, the plaintiff (and his or her attorney) proceeds with the case and receives, ultimately, a higher percentage of the award/fine (from 10 to 30%), plus costs and attorney fees.

Any person, original source or not, may report suspected health fraud involving Medicare or Medicaid by: calling the HHS Inspector Generals hotline at 1-800-447-8477; sending an e-mail to HTips@os.dhhs.gov; or by writing to the Office of Inspector General, Department of Health and Human Services, 330 Independence Avenue, SW, Washington, D.C. 20201.

A physicians best protection (safe harbor) against such lawsuits is to implement and maintain a valid Compliance Program which effectively assists in preventing violations and demonstrates good faith efforts to combat fraud. Due to the severity of the sanctions and the ease of lawsuit initiation, every private practice physician or group of physicians, should strongly consider implementing a Compliance Program. Competent, experienced attorney consultation should be sought to implement a program complying with all the required elements of this safe harbor.

^[1]     Must be an original source of the information.