Court Upholds Physician Prison Sentence for Medicare Fraud

Posted by Jason Greis on February 10, 2009 under Articles | Be the First to Comment |  Print

The below article was recently written by my colleague, Bart Walker, and was posted on the North Carolina Healthcare Report weblog.  The article provides a cautionary tale to LTACHs and physicians alike of the types of criminal penalties available to the government for committing Medicare or Medicaid fraud. 

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On January 12, the Ninth Circuit Court of Appeals affirmed a California physician’s 180-month prison sentence for defrauding the Federal Medicare and California State Medi-Cal programs. The physician, Aziz F. Awad, was found guilty of illegally billing Medicare and Medi-Cal for certain respiratory services that were in many cases not medically necessary, not properly coded, not properly supervised by Dr. Awad, or in some cases not performed at all. Dr. Awad’s scheme involved the use of a billing company operated by his co-defendant, Herman Thomas. Dr. Awad would supervise the respiratory therapists and Mr. Thomas would bill for the claims through his billing company. Most of the facilities targeted by the defendants were “board and care” facilities that housed mentally ill patients. Once Dr. Awad performed an initial evaluation, he would order respiratory therapy for the patients. Dr. Awad ordered respiratory therapy for nearly 100% of the patients he evaluated. According to his billing records, Dr. Awad claimed to have treated up to 114 patients in a single day and there were numerous instances where over 90 patients were seen. For one particular type of treatment, Dr. Awad ordered 14 times more treatments than the physician who had the second highest number of orders.

In all, Dr. Awad and his accomplice were able to generate illegal payments of over $2mm from Medicare and $584,000 from Medi-Cal. They were each convicted of 24 counts of participating in a scheme to defraud Medicare under 18 U.S.C. § 1347 and 4 counts of money laundering under 18 U.S.C. § 1956(a)(1)(A). Dr. Awad and his co-defendant were sentenced to 180 months in jail, three years’ supervised release; restitution in the amount of $2,625,722; and a $2,800 special assessment.

This case highlights the very real risk facing those who defraud state and federal healthcare programs. We often speak with healthcare providers who are surprised to learn that violation of certain state and federal statutes related to reimbursement and billing fraud carry with them the possibility of not only fraud or civil monetary penalties, but also jail time. There are a few important observations that can be made about this case:

Key Points:

1. Separate Counts.  Each claim submitted to Medicare or Medicaid can be a separate offense or count. The court used this fact to ultimately sentence the defendant to a much longer sentence. Typically, billing fraud activities are conducted frequently and over a period of time. This often results in a large number of counts, each of which can serve as the basis for conviction, fines and even jail time. In its opinion, the court cited United States v. Hickman, 331 F.3d 439, 445-47 (5th Cir. 2003). In Hickman, the court syllogized the health care fraud statute with the banking fraud statute and found its application persuasive in interpreting the health care fraud laws. The Court reasoned that in each claim submitted, the defendant owed a “new, independent obligation to be truthful” to the Medicare or Medi-Cal programs.

2. Failure to Properly Supervise. The physician’s failure to properly supervise the services being performed by the technicians resulted in a sentencing enhancement that lengthened the overall jail time. The sentencing enhancement in question is found at U.S.S.G. § 2B1.1(b)(12)(A) (2005) and allows a judge to increase the jail sentence for creating a risk of serious bodily injury or death. The court found here that a continuous failure to supervise created the necessary risk to life that warranted the sentence enhancement. In many cases, services performed outside a physician’s office require direct, personal supervision in order for Medicare to consider these “incident to” the physician’s services and reimburse for them. Simply being available by phone or “on-call” is often not sufficient in these cases.

3. Services Not Actually Performed.  The purest form of billing fraud is submitting claims for services not actually performed. This is often the easiest to prove and most obvious to the outside observer. In this case, services not actually performed was just one piece of the overall scheme.

4. Services Not Medically Necessary.  More difficult to detect than not performing ordered services at all, performing medically unnecessary services is another form of billing fraud. Here, the physician was caught in part because the frequency with which he was ordering therapy and billing for services was far greater than anyone else in his geographic area.

5. Improper Coding.  Medicare does not reimburse for physician services performed at a “board and care” facility. It does reimburse for services performed in a physician’s office. Here, Dr. Awad used the place of service code “11″ to denote that the services were performed in his office, when in reality the services were performed in a board and care facility (place of service code “33″). As a result, Dr. Awad was not entitled to receive the payments for which he submitted claims. This is a glaring example of the types of practices that can draw scrutiny from federal and state government regulators. It should be noted here that the State of California initiated its audit of Dr. Awad’s billing history before the federal investigation.

Many of these characteristics are cumulative. For example, in many cases, a number of these characteristics are present. Together, they can lead to a more convincing case by the prosecutors and ultimately a worse sentence. Although this is an extreme example of the type of fraud case that is regularly investigated and prosecuted, there are many less obvious but equally dangerous and risky forms of abuse. Providers should be wary of any parties proposing particularly “creative” or “unusual” billing schemes.

A copy of the final opinion in this case can be found here.

Bart Walker
704.373.8923
bwalker@mcguirewoods.com