Fraud and Abuse Pitfalls

Become familiar with laws and regulations to safeguard your practice.

Without keeping abreast of laws, statutes, rules and the boundaries of state scope of practice regulations, providers can unknowingly commit violations that can devastate a practice. Some unwittingly trust that those they work for comply with all necessary legal requirements and later find themselves implicated for the violations of others.

Governmental agencies, payers and third-party investigators have increased efforts to address the problems of fraud, abuse and waste in both federal and private health care programs. Most recently, the Patient Protection and Affordable Care Act (PPACA) includes special provisions to halt waste, fraud and abuse in Medicare, Medicaid, CHIP and private insurance.

Providers regularly receive business offers that often make promises of earnings (such as entering into purchasing agreements for patient products or services) or include examples that would make instituting certain procedures (such as offering free services/supplies on one’s Web site) appear to be acceptable practice. Such promotions create an environment in which all health care practitioners should be cautious. 

Being alert by making a careful audit of the way health care services are provided, billed and advertised is essential to sound health care practice today. This issue particularly affects doctors of chiropractic due to the sheer number who are also small businesspersons—often without the benefit of a formal compliance department.

Over the years, the Office of the Inspector General (OIG) has issued fraud alerts as a mechanism to identify fraudulent and abusive practices within the health care industry. This article addresses, among others, the OIG view of certain practices such as waiving deductibles, offering discounts and inappropriate advertising, as well as the pertinent statutes and regulations on which the OIG bases its legal position. Also, Congress has broadly prohibited offering remuneration to Medicare and Medicaid beneficiaries, subject to limited, well-defined exceptions.

Federal Anti-Kickback Statute
The federal anti-kickback law provides criminal penalties for individuals or entities that knowingly and willfully offer, pay, solicit or receive payment in order to gain patient referrals and/or business, reimbursed under Medicare, Medicaid and other federally funded health programs. Violation of the anti-kickback statute is a felony, which may result in imprisonment for up to five years, fines up to $25,000, and/or exclusion from the Medicare/Medicaid and other federal health care programs. Civil monetary penalties may also be assessed at $50,000 per violation and damages three times the remuneration involved.

For example, entering into an arrangement with a mobile diagnostics company or similar entity can put providers in jeopardy when the contractual arrangement violates Stark laws¹ or the federal anti-kickback statute. See ACA’s policy on mobile diagnostic services (available at for specific questions to help you assess whether an arrangement poses a problem. However, for specific contractual analysis, always consult your attorney, given the implications of the potential penalties.

Medicare and Medicaid False Claims Act²
Federal law imposes criminal penalties for acts involving federal health care programs with up to five years’ imprisonment and fines up to $25,000. Such acts include knowingly causing any false statement or false representation of material fact to be made in any claim or application for benefits under Medicare or Medicaid. Violations of this section include:

  • billing for services not rendered
  • misrepresenting services actually rendered, such as “up-coding” the level of a particular service
  • offering payments or gifts to induce patients to come in for a consultation or treatment
  • routinely waiving co-payments.?

The government may also target any potential violation utilizing the Civil False Claims Act, which generally prohibits the presentation of “a false or fraudulent request for payment to the government.” Penalties for violations range between $5,000 and $10,000 per false claim, plus three times the amount of damages sustained by the government. Provision of the law also authorize private persons, i.e., “whistle-blowers,” to bring an action in the name of the government.

Civil Monetary Penalties³
The Civil Monetary Penalties law (CMP) gives the secretary of HHS the ability to impose a civil penalty in relation to Medicare and Medicaid fraud and abuse. It is often the preferred method used by enforcement officials to pursue fraud and abuse. 

The following two practices, among others, can subject a doctor to civil monetary penalties of up to $10,000 per line item or service, plus an assessment up to three times the amount claimed and result in an exclusion from Medicare, Medicaid or other federal health benefit programs.

  • False or fraudulent claim. Any person who presents or causes to be presented a claim that the secretary determines is for medical or other items or services that the person knows, or should know, were not provided as claimed; or any person who knows or should know that a claim is false or fraudulent. 
  • Beneficiary inducements. The act establishes CMPs against organizations that provide individuals with remuneration that the organization knows or should know is reasonably likely to influence the individual’s choice of provider, practitioner or supplier.

For example, waivers of co-payments and deductible amounts (or any part of these) and transfers of items or services free of charge or for other than fair market value would be considered as “reasonably likely to influence” the individual’s choice of provider.

According to the Office of the Inspector General, “offering valuable gifts to beneficiaries to influence their choice of a Medicare or Medicaid provider raises quality and cost concerns. Providers may have an economic incentive to offset the additional costs attributable to the giveaway by providing unnecessary services or by substituting cheaper or lower-quality services. The use of giveaways to attract business also favors large providers with greater financial resources for such activities, disadvantaging smaller providers and businesses.”  

A recent bulletin from the National Medicare Training Program outlined some of the “do’s and don’ts” of promotional activities. Below are some tips from the bulletin that are intended to assist providers when determining how best to promote their practices. This list, while mostly intended for Medicare Advantage Plan promotion, still gives a good summation of things to keep in mind when developing any marketing strategy.
Providers Can 

  • Provide the names of plans which they contract and/or participate in 
  • Provide information and assistance in applying for the low-income subsidy 
  • Provide objective information on specific plan formularies, based on a particular patient’s medications and health care needs 
  • Provide objective information regarding specific plans, such as covered benefits, cost sharing and utilization management tools 
  • Distribute marketing materials, except for Medicare Advantage Plan enrollment application forms 
  • Refer patients to other sources of information and share information from the CMS Web site 
  • Use marketing materials comparing plan information created by a third party that doesn’t provide benefits or health care services 
  • Display posters or other materials that advertise their relationship with the plans 
  • Help beneficiaries enroll in a plan that “best meets the beneficiaries’ needs” 

Providers Cannot

  • Direct, urge, or attempt to persuade any prospective enrollee to enroll in a particular plan or to insure with a particular company based on financial or any other interest of the provider (or subcontractor)
  • Collect enrollment applications
  • Offer inducements to persuade beneficiaries to enroll in a particular plan or organization
  • Health screen when distributing information to patients, as health screening is a prohibited marketing activity
  • Offer anything of value to induce plan enrollees to select them as their provider
  • Expect compensation in consideration for the enrollment of a beneficiary
  • Expect compensation directly or indirectly from the plan for beneficiary enrollment activities

Next month: HIPAA and OIG regulations

1. 42 U.S.C.S. §1395nn] (§1877 of the Social Security Act) Also, regulations are at [42 C.F.R. §411.350 through §411.389].
2.  (42 U.S.C. § 1320a-7b(a)).
3. (42 U.S.C. § 1320a-7a).

ACA News Extra...

On Behalf of Our Members
For the benefit of our members, ACA’s Insurance Relations department continues to educate insurance personnel about the care provided by doctors of chiropractic, as well as chiropractic’s clinical effectiveness and reasonable cost. Part of this effort involves routinely answering insurers’ questions. We have found this exchange of information to be very valuable. In fact, it has given the profession a voice in areas as specific as an adjuster reviewing a single claim to a national insurer developing a policy that will affect thousands of chiropractic patients.

To further educate insurance personnel, we developed a Guide for Insurance Professionals. This booklet details chiropractic terms, common equipment, acronyms and beneficial research, as well as ACA’s policies on insurance, coding and other helpful topics ( In addition, a quarterly e-newsletter goes out to every insurer contact ACA has on file. Back issues of the e-newsletters, along with other resources for insurers, can be found at

ACA’s Insurance Relations department has also taken a proactive role with special investigative units (SIUs) by exhibiting at the annual International Association of Special Investigation Units conference. We also coordinate educational sessions for SIU trainees in chiropractic clinic settings, where they learn about chiropractic care, equipment, terminology and philosophies.

While there is still much work to be done, ACA is committed to improving insurance and investigative professionals’ understanding of the chiropractic profession—and to ensuring that doctors of chiropractic are treated fairly and appropriately.

For questions about ACA’s outreach efforts within the insurance industry, e-mail