“But Everyone is Doing It!” Is Not a Great Defense to a Compliance Violation

I’m on my way to work. The speed limit on this road is 40. I’m not going to tell you how fast I’m going, but I will say that I’m going with the flow of traffic.

For argument’s sake, let’s assume what you already think: we’re all going a lot faster than 40 mph. Let’s also assume a policeman pulls over the guy in the silver Honda in front of me.

Do you think that Mr. Honda Driver will be successful arguing his way out of a ticket by exclaiming, “but, officer, everyone is speeding!”

Nope, that’s not going to work.

Even if that sort of argument were to work later in front of a judge, Mr. Honda Driver is still going to spend his day in court, and, depending on how far he’s willing to fight until he settles or gives up, hire a “speeding ticket defense lawyer.” And, then there’s the cost of increased car insurance when the ticket hits his driving record.

So, even if he wins, there’s a transaction cost to speeding, potentially a heavy one.

Most people understand that.

But yet, so many people – physicians and business people – engaging in arrangements involving sophisticated federal and state anti-kickback issues and self-referral issues, often simply point to someone else who’s doing what they claim is the same thing, as if that makes it acceptable.

“Everyone is giving up something for referrals.” “My friend from residency says that his group makes a fortune by doing it.” “No one is going to find out because people do it all the time.” “The hospital says we can do it, and they have a department full of lawyers.”

In other words, they point at all the other speeders.

Let’s, for the moment, give the others the benefit of the doubt: Even if it’s true that they are doing the same thing, it’s essential to remember this all-so-true adage in terms of healthcare compliance: “If you’ve seen one deal you’ve seen one deal.”

You don’t know if that deal was properly structured. And, if it were, you don’t know if the pivotal reason why the deal does work applies to your situation.

These days, unfortunately, physicians and other healthcare providers and their ventures have targets painted on their backs in terms of prosecution. There are federal, state, and even local law enforcement task forces aimed at healthcare fraud. Prosecutors are using new tricks to turn state crimes into federal ones. And, the transaction cost of defending against charges related to a questionable deal can easily exceed $500,000 or even $1 million, plus the attendant months or years of limbo, and the damage to your practice, reputation, and business while the wheels of justice turn slowly.

At the same time, changes in healthcare, especially in terms of new ventures that take advantage of the The Impending Death of Hospitals, bring tremendous opportunity to those willing to pursue it.

In pursuing those opportunities, you must think twice, no, thrice, about how those new ventures and other relationships are structured. If not, you’re inviting whistleblowers – enemies, jilted potential partners, former employees and observers – to simply drop the dime on you or even to file a claim against you under the False Claims Act.

Don’t skimp and save, trying to avoid an expense, when it might just be that the only place you have to spend it is in the federal prison commissary.

Comment or contact me if you’d like to discuss this post.

Mark F. Weiss

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Greasy Kickback Residue Is All That’s Left of Pain Cream Fraud

This past week, the U.S. Department of Justice announced the arrest of ten additional defendants – doctors, pharmacy owners, and marketers – charged in connection with an alleged $100 million compounded pain and scar cream scam on TriCare.

The ten join two other defendants charged in the same scheme earlier this year.

The government alleges that the scheme involved the payment of kickbacks by the owners of a marketing/compounding pharmacy business to TriCare beneficiaries, to prescribing physicians, and to marketers.

The illegal payments to TriCare beneficiaries were said to be disguised as “grants” for participating in a (nonexistent) medical study. The government reported that the true purpose of the “study” was to compile a list of TriCare beneficiaries who had filled prescriptions so that the defendants could calculate how much to pay the beneficiaries.

A physician defendant served as the “Chief Medical Officer” for the marketing company and designed the so-called study. Another physician defendant was alleged to have been paid to prescribe compounded drugs to the TriCare beneficiaries. He wrote thousands of prescriptions for compounded drugs for patients he never met in person and for whom he conducted only a cursory consultation via telephone.

The government alleges that the compounding pharmacies paid kickbacks, disguised as employee wages, to individual defendants involved in the scheme in return for the referral of the pain and scar cream prescriptions.

Each of the defendants is charged with one count of conspiracy to commit health care fraud, which carries a maximum statutory penalty of 10 years in federal prison and a $250,000 fine.

Two of the defendants were also each charged with 14 counts of payment and/or receipt of illegal remuneration. Most of the remaining defendants were charged with at least one count of payment and/or receipt of illegal remuneration. The maximum statutory penalty, upon conviction for each of those counts is five years in federal prison and a $250,000 fine.

The court also has the power to order restitution of ill-gained profits, and the government has alleged the right to cause the defendants, upon conviction, to forfeit to the U.S. any property traceable to the offense, including real estate, funds in bank and investment accounts, numerous vehicles, boats and recreational vehicles, firearms, jewelry and artwork.

With lots of money at play (the government claims that more than $100 million was lost to the scamsters) it’s not hard to see how many who might otherwise have legitimate business and medical practice interests become attracted to fast and easy money.

With lots of money at play, it’s not hard to see why the government is motivated to investigate and prosecute in order to obtain huge fines and the benefit of the forfeiture (generally to the investigating agency) of scores of millions of dollars.

The take-away for you:

There are many legitimate ways for physicians to increase their practice income. They include, depending on state law, investments in compounding pharmacies and the direct dispensing of pharmaceuticals.

But any deal must be structured in compliance with the federal Anti-Kickback Statute, Stark, and various state law counterparts and other restrictions.

Go ahead, I encourage you, think entrepreneurially. But please be smart about it.

Comment or contact me if you’d like to discuss this post.

Mark F. Weiss

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