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Important CMS Alert

February 17, 2012

The Office of the Inspector General has put out an alert (.pdf file) reminding physicians that they are still liable for false claims made to Medicare when the physicians assign their rights for payment to other entities.

In the case cited in the alert, eight physicians reassigned their Medicare payments to a physical medicine company in exchange for Medical Director positions. The physicians did not provide services or supervise the services being provided under their Medicare number.

CMS stated that because the physicians failed to “monitor the services billed using their reassigned provider numbers,” the companies were able to fraudulently bill Medicare and Medicaid as if the physicians personally rendered services or directly supervised the services when they had not done so.

Owners of the companies were criminally prosecuted. The physicians were pursued for for liability under the Civil Monetary Penalties Law.

The CMS Alert made it clear that any physician who assigns rights to bill in his or her name has the right to access all billing information and claims made on the physician’s behalf.

This notice is especially important for hospital-based physicians in the “ERAP” specialties: Emergency Medicine, Radiology, Anesthesiology, and Pathology. Unless they practice and bill independently, which is exceedingly rare, every “ERAP” specialist signs an assignment of rights agreement as part of his or her contract with the hiring entity.

If the hiring entity (or a subcontractor) fraudulently bills Medicare or Medicaid for the physician’s services, then the physician could end up being solely liable for the fraudulent billing.

At least the government can get the money from the hiring entity for their fraud, though, right?

Maybe not.

It is not uncommon for small physician groups to go out of business if they lose a hospital contract. Hospitals may close as well. Twenty seven percent of hospitals in the United States have closed in the past 20 years. If the hospital or the group who billed for a physician’s services goes out of business before CMS discovers fraudulent activity, the physician may be the only one left the government can pursue for overpayments and penalties.

For this reason, I like to add to the assignment of rights clauses in the contracts I review that the hospital, group, and/or its agents agree to bill “in good faith” for all services physician performs pursuant to the agreement. Some people may argue that the clause has little effect if the hospital or group has gone bankrupt. I like to think that it gives the physician additional avenues of recourse if a hospital or group does bill fraudulently.

What can a physician do if the hospital or group does bill fraudulently and then goes bankrupt? One possibility may be to file a claim against each individual member of the board of directors and the hospital executive committee for breach of fiduciary duty. Another possibility may be to file a claim against the person who submitted the bills and the person who signed the contract for fraud – especially if the contract promised that billing would be done in good faith. Similarly, failure to bill in good faith when the contract contained such a promise could give rise to a breach of contract claim. Creative attorneys might even allege civil conspiracy or RICO claims against the hospital/group/board members if a physician is pursued by the government for false claims that were made by contracted billing entities.

While physicians in the “ERAP” specialties don’t have a practical alternative to signing an assignment of rights agreement in an employment contract, it bears noting that these seemingly innocuous terms can carry a large liability.

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