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By D. Michael Bush
A couple of weeks ago, I attended a seminar given by a chiropractor on how a chiropractor can expand his own business by setting up a medical corporation. While I am unaware of any pending legislation that addresses this issue, there should be some!
The basic premise is that some chiropractors believe the billings they submit are rejected or reduced, while medical doctors who bill for the same services get paid. In the case of William J. Meyers, D.C. v. US Department of Health and Human Services, 806 F.2d, 995 (11th Cir. 1986), the chiropractor didn’t think it was fair that Medicare wouldn’t pay for chiropractic services unless there was a manipulation and unless it was required because of a subluxation that could be seen on an x-ray. The chiropractor hired medical doctors as employees. His plan worked for a while until he received a criminal conviction.
One California lawyer has developed a plan whereby a management corporation is set up in which the chiropractor is the sole shareholder. The corporation is paid up to 65 percent of the billings for providing the medical facilities and the billing and collection services.
A medical corporation is then established. In California, a medical doctor must own a majority interest in a medical corporation, but certain other professionals, including chiropractors, can hold a minority interest. Under this plan, the medical doctor works as an employee of the corporation and receives a salary, perhaps $60 per hour. The chiropractor is the CEO and he has the total discretion as to how the profits are disbursed.
The net result of this set-up is that a medical doctor gives the stamp of approval to bills that might not otherwise be paid, and the chiropractor reaps the profits.
This would seem to be contrary to the prohibition of non-medical doctors controlling medical doctors as found in the case of Complete Service Bureau v. San Diego County Medical Society, (1954) 43 Cal.2d 201, 208. The relevant language is:
“Professions are not open to commercial exploitation as it is said to be against public policy to permit a ‘middleman’ to intervene for profit in establishing the professional relationship between members of said profession and the members of the public.”
At the seminar, one attendee asked whether the medical doctor would be advised at the time of first contact that he would be involved in setting up a medical corporation. The answer given was that he would not be told in the beginning.
If you get a case like this, you will want to look at all contracts between the various parties. Look for the overt as well as the subtle signs that the medical doctor’s actions are under the control of the chiropractor. One clue is the often heavy use of diagnostic procedures, which can cause the bills to skyrocket.
Finally, consider legislative changes in your state. These type of seminars are being held all over the nation.
The State Bar of California is requesting comments regarding Proposed Formal Opinion 92-0005. The Bar’s position at this time is that an attorney acts unethically where s/he fails to attempt to prevent an ongoing fraud being perpetrated by the client, or assists in the commission of a fraud by implying facts and circumstances that are not true in a context likely to be misleading. Comments are due by September 22, 1995.
Florida: Florida Statute 626.989 was amended with an effective date of July 1, 1995. It includes an immunity provision with respect to sharing of information. However, the Department of Insurance must be given written notice of the insurance company’s designated employees to be protected. Bruce Simberg, of Conroy, Simberg & Lewis, P.A., is a good source of information regarding this bill. Query: Will the plaintiffs’ attorneys have access to the list of designated individuals?
Washington: Since the passage of the new frau law, Insurance Commissioner Deborah Senn will go after body shops offering inducements, such as a waiver of a deductible or free trips to Las Vegas, since the actual cost of these inducements is often passed on to the insurance company in the form of higher repair bills.
The bad news from Washington is that apparently there isn’t any money this year to enforce many of the provisions of the new fraud bill.
New York: Is considering legislation that would allow insurers to recover damages for fraud, with 50 percent of civil penalties going to investigation and prosecution of insurance fraud.
Pennsylvania: Has a new fraud law. Their anti-fraud unit is run through the Attorney General’s office, as opposed to an insurance department. It remains to be seen if this structure will lead to more prosecutions.
New Jersey: Approved a bill that makes it illegal to include false information on an application for insurance. In some states, even if there is a misrepresentation on the insured’s policy, there will be a finding of coverage. This may be true even if the policy would not have been written or would have been written at a higher rate if the facts were known at the time of the application. The rationale is the public policy of finding coverage in order to protect injured third parties.
If you have any developments in your state that you would like to see covered, or if you have any questions, please contact me at:
Bush, Koppel & Schweizer
D. Michael Bush
100 Oceangate 1000
Long Beach, CA 90802
Compuserve: 70413, 2125
© 1995 John Cooke Fraud Report