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By Paul Conway
Recently I came across a document that I will refer to as Counsel for Doctor Sues. This is a bad Doctor Sues – and should not be confused with the good Doctor Seuss of children’s literature fame. I have a certain kinship to the good Doctor Seuss because I have two daughters and I rely on his writings quite heavily during the waning hours of sunlight for relief and education – of my daughters that is. However, the real reason I use the (bad) Dr. Sues reference is because I want the doctor in this story to remain anonymous – since he’s currently under investigation by the local DA and the California Dept of Insurance Fraud Bureau.
The document was discovered as the result of a subpoena. A claims office staff member requested medical records from doctor Sues and, stuck right in the middle, was a memorandum addressed to the medical office administrator advising that the way the clinic was being operated was in direct violation of the California Business and Professions Code (CBPC) and the California Labor Code (CLC).
It appears from reading the document that the medical clinic sought counsel as the result of a clinic inspection performed by two Fireman’s Fund investigators. While this scenario may sound amusing, the main purpose of what follows in this article is reader education.
The document discovered can serve as an awesome training tool, one which can help educate any California investigator on proper compliance with the CBPC and the CLC when medical facilities are involved. What follows is specific to the State of California – readers in other states are urged to review any similar codes that may be in effect in their own jurisdictions and learn to use them to defend against the perpetration of fraudulent insurance claims.
The doctor Sues of this article has operated medical clinics in California for several years. He is one of the individuals who, if his true name and clinic affiliation were to be divulged, it would elicit countless reader cries of, “Oh, I know that doctor/clinic!” The medical practice has long been scrutinized by many an insurance adjuster and fraud investigator. Whether any other insurance carrier took the time to inspect this particular clinic is not known, but Fireman’s Fund reaped large benefits as a result of its investigative efforts.
The Counsel for Doctor Sues memorandum begins by referring to section 2630 of the CBPC which makes it illegal for any person to offer, practice or administer physical therapy (PT) without a license. The single exception to this rule concerns a Physical Therapy Aide (PTA) who is required to work under the supervision of a licensed Physical Therapist. It should be understood that a medical doctor may himself perform PT, but he may not supervise a PTA. In fact, the statutes make it quite clear that the doctor cannot supervise such medical care, which eliminates all other allied medical specialties, including a massage therapist, nurse, etc. On the other hand, the Physical Therapist may be employed by a medical doctor and may administer the PT that is prescribed by that doctor and by other doctors. Dr. Sues was in violation of every section of the aforementioned CBPC statute.
There are caveats, however. If an investigator runs across a doctor in California who is performing the above supervision, the doctor is in absolute and total violation of the law and such violation should be pointed out to him. The statute specifically dealing with this issue is Section 2670 of the CBPC. Under this section, any person who violates the provisions of the chapter shall be guilty of a misdemeanor, punishable by a fine not exceeding $1,000 for each violation, or imprisonment in the county jail not exceeding the six months or by both. In addition to the above, an injunction can be obtained from the courts (by the Division of Allied Health Professionals (DAHP), the Examing Committee or by ten or more Physical Therapists). Such an injunction will prevent the doctor-supervised PT from taking place.
Furthermore, Section 654.2 of the CBPC deals specifically with referrals to an organization in which the referring physician has a financial or beneficial interest. This section makes it unlawful for any person licensed as a physician to refer a patient to an organization in which the physician has a significant financial or beneficial interest unless that interest is first disclosed to the patient and the patient is advised that he or she may choose any other organization for the purposes of obtaining the referred services. Therefore, a physician who owns, runs or has any interest in a physical therapy practice cannot refer any of his patients to this clinic without first advising the patient of his (the doctor’s) ownership interest. There is, however, a way that the physician can get around this statute.. .by placing a “conspicuous” sign in an area likely to be seen by the patient. The California Attorney General Opinion 85-105 has recommended the following language be used when posting this notice: “Under California law, I am required to inform you that (name of practitioner), to whom I am referring you for services,
is a member of the same professional partnership in which I practice and hold a financial interest. There may be other practitioners from whom you can obtain these services. I will discuss alternatives with you. ”
Investigators who do not see a notice similar to the above posted in a California physician’s office, where a known interest in another medical specialty operation or entity to which they refer their patient exists, should consider the possibility that the doctor/clinic may be in violation of California law. It is well worth the time of investigators in other states to study any similar statutes that may be on their own states’ books.
The CLC also has provisions that prohibit the behavior described above. Section 139.2 deals specifically with criteria imposed upon physicians when it comes to the referral of patients for clinical laboratory, diagnostic nuclear medicine, radiation oncology, physical therapy, physical rehabilitation, psychometric testing, home infusion therapy or diagnostic imaging goods or services. The statute applies to both treatment and/or medical/legal purposes in cases where the physician or his/her immediate family has a financial interest with the person or the entity that receives the referral.
As with all legislation or statutes, there are exceptions. Section 139.3 and Section 139.31 deal with the exceptions and, suffice it to say, physicians do have a way around the above statute. They are, however, required to be in compliance with the exceptions. One of the often used ways around the statute is a physician who has financial interest in another specialty clinic but does not indicate such to his patient or to the patient’s insurance carrier, and a check of the license does not indicate the existence of such finan-
cial interest. In this instance, all would appear to be in compliance with the law. Right?
Think again. There are doctors who use a close relative, such as a wife with a different last name, a brother-in-law or a cousin, and register that individual as the owner of the clinic. If an investigator suspects a physician of the aforementioned activity, said investigator would be well advised to bring this information to the attention of the Federal Bureau of Investigation (FBI). The FBI is able to access financial records without alerting the individual under scrutiny that such a query took place.
Additionally, some jurisdictions require that in order to own a medical provider organization or medical office, one must be a licensed physician. Therefore, when a doctor is suspected of owning a financial interest in a referring/referred clinic and the ownership of same indicates that it is not owned by an immediate family member, the listed owner should still be a licensed physician.
Likewise, if an investigator runs across a situation involving a doctor who is referring his patients to any unlicensed individual for the purposes of rendering medical care, the investigator should be aware that it is considered “unprofessional” conduct under Section 2264 of the CBPC. Physicians acting in such a manner should be immediately reported to the California Medical Quality Assurance Board. In other states where a similar statute is in effect, the report should be made to the medical licensing board or other quality assurance entity.
Moreover, CLC Section 3209.5 states in pertinent part that a Physical Therapist must be licensed in order to render treatment.
The CLC is filled with statutes that can be used to help fight against insurance fraud. For instance, Section 3820 deals specifically with workers’ compensation misrepresentations. This section provides for additional civil penalties that would not otherwise be imposed by criminal statutes. This section makes it unlawful to do any of the following:
1. Willfully misrepresent any fact in order to obtain workers’ compensation insurance at less than the proper rate (premium fraud).
2. Present or cause to be presented any knowingly false or fraudulent statement in support of, or in opposition to, any claim for compensation for the purpose of obtaining or denying any compensation, as defined in Section 3207 (which defines compensation under the terms of the CLC).
3. Knowingly solicit, receive, offer, pay, or accept any rebate, refund, commission, preference, patronage, dividend, discount or other consideration, whether in the form of money or otherwise, its compensation or inducement for soliciting or referring clients or patients to obtain services or I^enefits pursuant to Division 4 ** (commencing with Section 3200) unless the payment or receipt of consideration for services other than the referral of clients or patients is lawful pursuant to Section 650 of the CBPC or expressly permitted by the Rules of Professional Conduct of the State Bar.
4. Knowingly operate or participate in a service that, for profit, refers or recommends clients or patients to obtain medical or medical/legal services or benefits pursuant to Division 4 ** (commencing with Section 3200).
5. Knowingly assist, abet, solicit, or conspire with any person who engages in an unlawful act under this section.
(**Division 4 defines the workers compensation and insurance systems scope and operation.)
Penalties under Section 382O are as much as $5,000 for any One violation. Therefore, it is the physician’s best interest to comply with the provisions set forth in the CLC.
The California Insurance Code is another resource at the disposal of fraud investigators. Section 1871 is filled with the legislative tools required to combat insurance fraud. The following is a brief list of the statutes contained in Chapter 12: The Insurance Frauds Prevention Act:
Section 1871- Insurance fraud – generally.
Section 1871.1 – Access to records required to be opened for inspection in fraud claims.
Section 1871.2 – Notice of penalties on claim forms.
Section 1871.4 – Penalties for making false or fraudulent written or oral statements.
Section 1871.5 – Ineligibility to receive or retain compensation.
Section 1871.6 – Provisions of Penal Code Section 781 applicable to prosecutions for violations of Section 1871.4.
Section 1871.7 – Employing persons to procure clients or patients to perform or obtain benefits unlawfully; penalties; bringing action.
In addition to the above, Article 7 Workers’ Compensation Insurance Fraud Reporting Act was instituted at Section 1877. The following is a list of statutes therein:
Section 1877.1 – Definitions.
Section 1877.3 – Insurers release of requested information to governmental agencies: Requirement to notify when fraud committed.
Section 1877.4 – Confidentiality of information acquired; exception to preivilege.
Section 1877.5 – Immunity from civil liability when acting in good faith.
It should be noted that several things prompted Fireman’s Fund to first perform a clinic inspection of Doctor Sues facility: his consistent behavior in violation of the CBPC and CLC; the insurance company’s suspicion that the doctor was billing for services that were not being rendered; his billing for modalities that his office was not equipped to provide and his over-utilization – all “red flags” that indicate a medical provider is fraudulently operating a medical practice.
The real Dr. Seuss has molded our children’s imaginations while helping them learn at the same time. The doctor referred to above, however, may ultimately steal your child’s college money. He, and other similarly unscrupulous health care providers who take dishonest advantage of the system, are a major cause behind sky-rocketing insurance premiums for us all.
The doctor Sues of questionable ethics, on the advice of counsel, has reimbursed Fireman’s Fund some monies he felt were owed with regard to the issues raised above. Also, in cases where he had liens filed, he has “seen the light” and decided to waive the liens and walk away from those bills – which gives this article somewhat of a happy ending. But the story is far from over. In fact, it has only just begun for the not-so-good doctor Sues.
Paul Conway is the Western States SIU Supervisor for Fireman’s Fund Insurance Company.
© 1995 John Cooke Fraud Repor