Lessons Learned the Hard Way

Speaker: Frank Margulis

President, Margin Consultants LLC

www.MarginConsultants.com

Avoiding Legal Landmines

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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