BILL COPELAND’S HEALTH LAW INSIGHTS

In last month's issue, I discussed arrangements between providers that have resulted in convictions, settlements, or civil monetary penalties. One would hope that providers would get the message that paying for referrals is not a good idea, and worse it is illegal.

Now we have a qui tam case in Chicago, joined by the Illinois Attorney General, involving imaging centers paying kickbacks for referral to physicians. A competitor brought the case under the Illinois False Claims Act.

According to the Complaint, several Chicago area radiology centers entered into sham "lease" agreements with physicians under which the physicians pay a reduced rate for MRI and CT. The physicians then bill for the scans at a higher rate, and then keep the difference.

The Complaint alleges that the scheme involved:

. . . [T]he unlawful kickback scheme here involves the Defendants and referring physicians working together to bill patients and their insurers for MRI scans performed by the Defendants, with the payments from patients and insurers divided between the physician for making a referral and a Defendant for performing an MRI scan services. The scheme is a kickback because the physician provides no services, but receive [sic.] a payment for services rendered by a Defendant.

. . . [T]he Defendants in fact perform all of the services in doing the MRI scans; the Defendants' employees direct the scheduling of the scan with the patients; the Defendants supply all personnel, and perform the scans at Defendants' facility and with Defendants' equipment. The Defendants also employ the services of radiologists, who read the scans and provide the diagnosis relative to each patient's scans.

In many cases, Defendants help bill the patient. . . . [A]fter a physician refers a patient to one of the Defendants, and the defendant renders the MRI scan services, the referring physician receives from the Defendant an invoice for the patient and the patient's insurance carrier made in the physician's name, but prepared by the Defendants. The referring physician then bills/invoices the patient and her insurer under the physician's medical provider number for the work of Defendants. This is done even though none of the MRI scan services were [sic.] done by the physician. Thereafter, the physician collects the insurer's payment and divides the payment with the Defendant who did the MRI scan service.

. . . [T]he amount billed by the physician is divided between the physician and the Defendant that performed the MRI scan by the terms the parties arrange and agree to as part of the scheme. For example in certain areas, the typical amount billed for an MRI scan is $800, under the kickback scheme the fee is split $400 to the MRI center and $400 to the referring physician.

. . . [T]he Defendants have marketed and recruited physicians to join this arrangement, enticing them to be a part of the scheme by offering them a large and substantial portion of the fees charged for the scan work and they continue to solicit and entice physicians into joining into the kickback arrangements related herein.¹

This situation is a perfect example of the one purpose test. In the leading case applying the anti-kickback statue, Greber,² the court found that the statute prohibited any financial incentives to physicians that might induce unneeded services, "...if one purpose of the payment is to induce future referrals, or Medicare statute has been violated."³

Kats and Bay State further expanded this broad interpretation of the statute. In Kats, citing Greber, a federal appeals court held that if one of the purposes of the payment was to induce future referrals, even for professional services, the payment violates the Anti-Kickback Statuue⁴ .

In Bay State, the court found the clear aim of the Anti-Kickback Statute is the inducement factor, stating, "The gravamen of Medicare fraud is inducement."⁵

Simply stated, any payment for a referral whether it is tangible or intangible or in-cash or in-kind is illegal, and any attempt to solicit referrals is illegal. Attempts to disguise the payment as a lease or some other form of legitimate remuneration do not change the fact that it is a kickback.

It is unclear why there has been no federal enforcement in this action, but such is not the case in another Chicago area action. This action targets the former CEO of the now closed psychiatric facility Rock Creek Center, and a contract physician at the facility. In a press release on January 16, 2007, U.S. Attorney for the Northern District of Illinois announced that they, in addition to two others previously indicted, were charged with participating in an alleged bribery and kickback conspiracy that involved making payments to physicians for patient referrals.

According to the release, Rock Creek made illegal payments totaling more than $565,000 to the physician and his medical group, disguising the payments as employment compensation. Actually, the payments were for patient referrals to the facility⁶

In another case, from the Eastern District of Louisiana, the owner of a durable medical equipment ("DME") company in Houston, Texas, received a sentence of eight years and one month federal imprisonment followed by 3 years supervised release for healthcare fraud and conspiracy charges. He must also pay $3,292,345.92 in restitution. His wife received a sentence of 4 months home confinement and 5 years supervised release. She must also pay $461,294.91 in restitution.

The husband and wife were involved in a scheme to provide motorized wheelchairs and scooters to people who did not have a legitimate medical reason to have them. To assist in their scheme, they hired "marketers" to recruit Medicare beneficiaries in the south Louisiana area. The marketers told Medicare beneficiaries that the government was giving away free wheelchairs and/or scooters. The marketers copied the Medicare beneficiary's paperwork and forwarded it to the DME company for processing. The DME company paid a kickback to the marketers for each Medicare beneficiary referred.

One of the marketers pled guilty of conspiracy to commit healthcare fraud, and the court sentenced her to 15 months imprisonment followed by 3 years supervised release. She must also pay restitution of $2,276,876.50. The other marketer pled guilty to violating the Anti-Kickback Statute, was sentenced to 3 years supervised release, and restitution of $10,311.⁷

¹People of the State of Illinois ex rel. Donaldson v. Midi, LLC, et al., No. 06CH02513, Cir. Ct. of Cook County, IL, Feb. 7,2006, Complaint at 8-10.
²United States v. Greber, 760 F.2d 68 (3d Cir. 1985), cert. denied 474 U.S. 988 (1985).
³Id. at 69.
⁴U.S. v. Kats, 871 F.2d 105,110 (9th Cir. 1989).
⁵United States v. Bay State Ambulance and Hospital Rental Service, Inc., 874 F.2d 20,2930 (1st Cir. 1989).
⁶U.S. Attorney for the Northern District of Illinois, "Former Chief Executive Officer Of Rock Creek Psychiatric Hospital and Physician Charged In Bribery and Kickback Conspiracy Superseding Indictment," Press Release, January 16, 2007.
⁷ United States Attorney for the Western District of Louisiana, "Couple Sentenced For Healthcare Fraud," Press Release, December 13,2006.

Copyright 2007 William Mack Copeland. You can reprint any part of this newsletter by providing the following acknowledgement: "Reprinted with permission. William Mack Copeland, www.wmcopeland.com."