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Lessons Learned the Hard Way
Speaker: Frank Margulis
President, Margin Consultants LLC
www.MarginConsultants.com
Avoiding Legal Landmines
If you anticipate business in the background, please “mute” your phone. Remember to take it off mute
when you want to speak. Thank you.
Copyright © 2014
Also do not put the phone on “hold”; sometimes there is MUSAK or a recorded message and it
blocks all the other callers. Thank you.
Copyright © 2014
This Is My Story
• I have no desire to “clear the record”
• I was guilty of some things, innocent of others
• I want you to know the good, the bad, and the ugly
• I want you to learn from my mistakes
• I want you to understand how the investigative and legal system works
• I want you to increase your chances of doing well in an audit by responding to red flags proactively
True or False?
• Medicare sends you a letter explaining that you owe them over $4,000 on a particular previously paid claim because, during a recent audit, the prescribing physician failed to produce a copy of the CMN you sent him for the item.
• No problem, you have the original CMN and it’s perfect. Send them a copy for their files, the recoupment process will stop.
• Problem solved.
True or False?
You own 3 HME/DME stores in 3 different counties.
You are being investigated. Evidence of wrong-doing
has piled up against one of the store managers. She
confesses to acts of fraud, admitting to investigators
that you had no knowledge of her actions. Further
investigation substantiates she acted as a lone wolf
without the involvement of others. You personally are
in no serious trouble.
$4,000 Recoupment
• You have the original CMN and all supporting documentation
• Prescribing physician has supporting documentation except for a copy of the CMN
• Will Medicare still recoup?
YES. The physician, patient, and patient’s family all contacted Medicare to explain the need for the equipment but Medicare still recouped the money. HHS and FBI investigators visiting the
patient did not flag this as a fraudulent claim apart from the missing paperwork from the doctor.
Take-Away
• The investigative process is highly subjective
• Inexperienced claims processors at Medicare can give you headaches
• Medicare can out-last you
• In my case, the business folded before I could jump through the hoops and win this issue
Unmanageable Manager
• 3 DME stores in 3 counties
• Manager in question supervised a low income producing store in a sleepy town I visited about 6 times per year
• In testimony with her lawyer present, she exonerated me even though FBI and HHS investigators pressed her hard to make things easier on herself by implicating me
• Punishment. Her = $100 fine. Me = $25,000 fine.
Take-Away
• Company owners and supervisors can be held to a higher standard
• Investigator will pressure line employees to implicate management
• The investigative and prosecutorial process his highly subjective
• It’s sexier to nail a CEO than a line employee
At the end of this session, you will be able to
Identify areas of risk within your organization
Understand the dynamics of fraud and abuse
Understand the legal climate
12
Objectives
Value the importance of accountability, education and organizational structure
Conceive and implement specific steps to reduce your threat of adverse legal action
13
Objectives
A Story in Three Parts
1. My Story
2. Who I Am
3. Lessons Learned
Informed by the media I had been indicted
“Opelika company charged with fraud”
165 count indictment
20 months from indictment to sentencing
Plea bargain, 164 counts dismissed
“Obstruction of a Medicare audit”
Part 1: What Happened?
The Infamous CMN
Motorized Wheelchair CMN, Section C
A. K0011 WHEELCHAIR, MOTORIZED 1 $5,533.50 $5,270.00
ITEM HCPCS DESCRIPTION QUANTITY SUP CHARGE MC FEE SCHD
K0021 WHEELCHAIR – ACC, ANTI-TIP 2 $61.30 $53.30
K0031 WHEELCHAIR – ACC, SAFETY BLT 1 $38.71 $24.97
But the CMN was already signed by the doctor! I rationalized that I was being expedient and it could not
possibly be a big deal. I could explain if I had to …
• Prison• The loss of my company• Poverty
– Sole wage-earner for last 18 years
– 3 children at home
– 3 months of savings
– Wife blacklisted
Denial
• 5 months incarceration, followed by 5 months of home confinement
• 3 years probation
• Restitution: $77k
• Fine: $25K
My Sentence
This is gonna hurt …
Prison
• 13 Sep 2005 thru 10 Feb 2006
• Montgomery Federal Prison Camp (Alabama)
– “Club Fed”
• 1,000 inmates
• 40,000 square feet
• Business folded within 3 weeks of incarceration• Felony conviction puts a damper on interviews• Restitution owed, but no income or ability to file
old claims• Legal restrictions on business• No agreement among the
authorities as to what the restrictions are
Consequences
Montgomery FPC: Visitation
Visiting hours were from 8a to 3p, Saturday and Sunday. The “VR” was cramped and noisy … but every visit was precious.
• Entered DME in 1992
• Built three companies from scratch– Small, local companies serving 6 counties
– Total DME
Part 2: Who Am I?
• Revenues: Medicare (1), BCBS (2), Medicaid (3), other
• Eventually began to specialize in mobility products
• Attended meetings and training often– Medicare and various billing seminars, Medtrade,
State Association meetings
– Requested annual site visits from Medicare ombudsman
Part 2: Who Am I?
1. Accountability (“Trust but verify”)
• Meet with employees regularly, review their work
• MBWA: Management By Walking Around
• Organized and structured
• Weekly staff meetings
• Random chart checks
• Peer review
Part 3: Lessons Learned
1a. Personal accountability
– Meet with friends, others
– Lunch visits with non industry-related peers
– Generates “out of the box” ideas
Part 3: Lessons Learned
2. Evaluate your organization
– Tight job descriptions
– Solid Policy and Procedures Manual
– Assess employees’ skills, interests, abilities
– Personnel weaknesses?
• If yes, educate, reassign, or terminate
Part 3: Lesson Learned
3. Education – programmed and documentable
• Numerous resources allow you to systematically train employees
• Retain transcripts in employee’s file
• Program cost is usually very reasonable
• Given industry changes, investment in education will produce a good return on investment
• Reduce risk of legal minefield
• Incentivize
Part 3: Lesson Learned
DME Train
The Legal Climate in America Continues to Target Businesses
• Target Stores
• Toyota
• Walmart
• General Electric
• Abercrombie & Fitch
• BP Oil
In 2005, an estimated 378,000 lawsuits filed against businesses
Average cost to defend: $50,000 to $100,000 (not including settlements and judgments)
The Legal Climate
Source: CMBIZINFO.COM
Legal Climate in 2013 Included …
• Idaho inmates' blamed a life of crime on alcohol companies
• Ohio teacher claimed fear of children in a suit against her district
• New Jersey school kicked a student off the track team for excessive absences, and his dad sued the county for $40 million
• West Virginia woman sued over "severe and permanent injuries" despite completing a half-marathon
• Grown man in New York sued his parents for their "indifference" to his problems
• Customer sued a Bob Evan's over a hostess' rude comment
• Two New Jersey men sued Subway because their "foot long" sandwiches fell short
Legal Climate in 2013 Included …
• Grad student who received free tuition sued her Pennsylvania school over a grade
• Injured robber sued an Arizona shop owner
• Tennessee man sued Apple for his porn addiction
Legal Climate in 2013 Included …
Pepsi Stole My Bottled Water Idea
• Two Wisconsin men told someone about their idea for bottled water in 1981
• Alleged Pepsi developed its Aquafina Water based on their idea
• Result?
The Result
A judge granted them a $1.26 billion default
judgment, but later allowed Pepsi to vacate
the ruling. It will be tried again.
Source: Bureau of Justice Statistics - Princeton University Study Group on Criminal Justice Performance Measures Discussion Papers, October 1993, NCJ143505
The Legal Climate
“Over the last decade, States have reformed many of the
criminal sentencing laws, largely aiming to increase the
likelihood of a prison sentence.”
By DUFF WILSONPublished: April 18, 2006
DURHAM, N.C., April 18 — Two Duke University lacrosse players were arrested today and charged with rape and kidnapping in a case involving a woman who has accused three team members of attacking her at a party last month.
2* Duke Athletes Are Arrested and Charged
* A third athlete was later also charged
2 Duke Athletes Are Arrested and Charged
“[The defendants’]
daddies can buy them
expensive lawyers.” –
Mike Nifong
Richard ScrushyFounder and CEO, HealthSouth Corp
•Auditors uncovered $2.7 billion accounting fraud
•$52 million owed for inflated bonuses
•$21 million in legal fees
Source: Los Angeles Times, 30 Nov 2006, “Scrushy Bonus"
And the outcome …
• Almost 7 years in prison
• $417,000 in fines and restitution
• 3 years probation
• 500 hours community service upon release
Scrushy Outcome
Investigation
Indictment Defense
Plea Bargain or Trial
Sentencing
Consequences
Federal Lawsuit Process
With Headlines Like these ….
• 1,013 new criminal health care fraud investigations opened by U.S. Attorneys’ offices
• 137 cases filed
• 345 individuals charged
• 234 guilty pleas
• Average 52 months in prison for those sentenced
• 718 defendants convicted
Enforcement Actions (FY2013)
SOURCE: Dept of Health and Human Services and the Dept of Justice Health Care Fraud and Abuse Control Program Annual Report for FY2013
• $4.3 billion recovered in FY 2013
• $19.2 billion over the last 5 years
• $8.10 recovered for every $1 spent
• Records broken in FY 2013
Enforcement Actions (FY2013)
SOURCE: Dept of Health and Human Services and the Dept of Justice Health Care Fraud and Abuse Control Program Annual Report for FY2013
• 535,000 providers subjected to new screening requirements
• 225,000+ lost the ability to bill Medicare
• 14,663 providers and suppliers revoked
– Felony convictions
– Not operational at listed address
– Not in compliance with CMS rules
Since the Inception of the ACA …
SOURCE: Dept of Health and Human Services and the Dept of Justice Health Care Fraud and Abuse Control Program Annual Report for FY2013
• Federal Government won or negotiated approximately $4.3 billion in judgments and settlements
• 5th consecutive year of increases
• $25.9 billion returned to the Medicare Trust Fund since the inception of the program in 1997
Monetary Results (FY2013)
SOURCE: Dept of Health and Human Services and the Dept of Justice Health Care Fraud and Abuse Control Program
Annual Report for FY2013
A Little Action Within the Last Year
• California Man Who Recruited ‘Patients’ Sentenced in Health Care Scam
• Government announces $12M Medicare fraud settlement
• Woman indicted for fraudulent air mattress sales
• ME provider sentenced to prison
• Allstate Insurance sues slew of DME entities
A Little Action Within the Last Year
• Former HME providers plead guilty to Medicare fraud
• Doctor, HME provider guilty of wheelchair scam
• Maryland man sentenced for Medicaid fraud
• Medical facilities, DME suppliers represent 40% of fraud cases
• Los Angeles DME Company Owner Pleads Guilty to Conspiring to Defraud Medicare and Medi-Cal
• Numerous resources available
• Be proactive – are you prepared?
• Reflect: organizational and personnel weaknesses?
• Network with trusted others
• Invest now
• Legal, educational, efficiency consultants
Bottom Line
Let’s Do This Again
• I am available to speak
– Companies
• On-site
• Via the web
– State Associations
• Visit my website, www.MarginConsultants.com for further information
• Telephone: (609) 521-4446