Physicians and other healthcare providers are besieged by opportunities to earn passive income from healthcare investments. These investments can land you in a lot of trouble. Better check with the Health Lawyers at Friedman & Feiger before making any decision.
There is a big danger, which isn't limited to simply losing the amount you invest. During the fiscal year ending Sept. 30, 2013, the Department of Justice (DOJ) secured $3.8 billion in settlements and judgments from civil cases involving fraud against the government. As in previous years, the largest recoveries related to healthcare fraud, which reached $2.6 billion, according to the DOJ. The fines pile up because as much as an $11,000-$50,000 penalty can be attached to every patient claim submitted to the government, if you don't follow the rules.
"Fraud,' in the field of healthcare financing and investment, doesn't mean the same thing as fraud in other business ventures. You do not need to intend to cheat. "Fraud" can simply mean certifying compliance with Stark Law and the Anti-Kickback Statute, when there may be some question surrounding your investment arrangement. If the certification is false, then you have a problem.
Simply put, regulations like Stark Law and the AKS have sprung up to fill a gap which otherwise exists in a free market. False certification of compliance with Stark Law and the Anti-kickback Statute, is made actionable by either the False Claims Act or the Civil Monetary Penalties Law, which is where the penalties come into the picture.
Where does the Provider's "certification of compliance" come from? Look on the back of any CMS 1500 claim form (or the electronic equivalent) and you will find it. If a provider submits a claim, the Provider has certified that Stark and the AKS have not been violated.
Why is this such a big deal? Because the government has decided the rules of supply and demand don't always work in healthcare, where a third party like the government, is responsible to pay for the item of service or product. In healthcare, physicians are actually in far greater control of the "supply" side, (goods and services), and in greater control of the "demand" side than in ordinary businesses. Patients simply do what the doctor recommends.
Stark Law and the AKS seek to limit the role a financial interest may play in the referral. How does the government know that the referral is solely based upon patient need, and not influenced by physician investment in the ancillary services provider? The answer is, "the government doesn't know." Instead, the government created a massive set of regulations, which if followed, will protect the arrangement.
These laws contain a mind-numbing array of regulations that must be carefully followed if you are to have any comfort that an investment or other arrangement will arguably pass as legitimate.
How can physicians and providers be certain their certification of compliance is accurate when you do not have control over other's behavior? What happens when the bill is being paid by a private third party or a governmental third party? If this arrangement is legal under federal law, is it also legal under state law? Will the arrangement pass an insurance audit?
This is where a health law opinion letter can be invaluable.
Properly done, a health law opinion letter may help you steer clear of risky investments, or avoid prosecution or penalties, when the matter concerns an uncertain area of the law, or an uncertain application of the law to the facts.
In order for an opinion letter to be properly written, however, all of the facts must be fully disclosed to the health lawyer, and the analysis must be a good faith application of the known law, (to the extent it is knowable) to the known facts. In other words, even if the party got it wrong, it helps if the party did so in good faith after consulting a health lawyer.
A word of caution: As a physician of a provider, it is typically a bad idea for you to rely on someone else to obtain an opinion from an attorney for a group of investors. I am not suggesting there is any bad motive here. I am suggesting that an opinion is only as good as the information provided.
Further, simply having a contract for the purchase of an investment interest, which you may have been told was drafted by a highly respected law firm, does not mean that the certification of compliance with Stark Law or the AKS is accurate. Anyone can invest in a business, and the contract may perfectly create the investment. It is the referral of patients, once the business is up and running, which leads to trouble. Thus, the contract can be perfectly legal when no referrals are made by an investor. If referrals are involved, then a health lawyer needs to look at the entire set of facts.
It is dangerous to rely upon someone else to obtain the health law opinion. If you aren't in control of the information going to the health lawyer, then how do you know you can rely upon the opinion coming out? Remember, "junk in/junk out." As a physician considering making an investment, you would have no idea of the history, or facts provided, which went into the opinion, if you did not obtain the opinion.
The Health Lawyers at Friedman & Feiger are experienced in providing investors with assistance in Stark Law and AKS regulations. If you have a question, we will review the arrangement for compliance, and provide guidance where necessary. Just give us a call at (972) 788-1400, or email Martin Merritt at [email protected].
