Several trends are emerging in health care fraud investigations. Prudence dictates that all health care providers learn from the lessons of other providers and develop plans for responding to any government audit or investigation.


Be aware that current enforcement efforts often begin with what appears to be a routine audit of patient records. Furthermore, billing audits of services provided in hospitals and nursing homes often begin without the physician’s knowledge, based upon the facility’s release of medical records. We have had several cases where Nationwide (the Medicare carrier) referred the audit to criminal prosecutors and the Office of Inspector General (OIG) before notifying the provider of the audit results and providing an opportunity to respond. Such referrals present a one-sided view of the issue without adequate consideration of clinically and legally relevant factors from the provider’s perspective.

The OIG has identified the following projects in its fiscal year work plan:

Medicare Credit Balances

Outpatient Hospital Department/Physician Practice Duplicate Billing

Evaluation and Management (E&M) Visit Coding

E&M Surgical Modifier

Physician Assistant “Incident To” Services

Anesthesia Personally Performed Services

Critical Care Services in Hospitals

Physician Home Health Care Case Management Services

Outpatient Psychiatric Services

We have already seen a majority of these issues under scrutiny via audits performed by Nationwide. There is no question that an adverse audit can lead to a referral to the OIG — the agency authorized administratively to exclude providers from Medicare and extract enormous civil monetary penalties if it determines regulations have not been met.

Lessons Learned:

1. Verbal responses during audits are inadequate. Carrier staff, whether in Provider Relations or Medical Review, maintain written logs of telephone consultations. We have found that these logs often include subjective assessments of a provider’s veracity.

2. Take every opportunity to promptly present the provider and the patient’s perspective in responding to an audit — even if you are not requested to do so. Your written response may be the key document that prevents an escalation of the issue and the referral to an enforcement agency.

3. No audit should be considered “routine”. Consult counsel if the audit letter alleges that you knew or should have known the regulatory requirements, or if the carrier makes an overpayment demand.


Besides relying on referrals from administrative agencies, prosecutors are initiating investigations as a part of a national enforcement effort. For example, a future local initiative is the PATH (Physicians at Teaching Hospitals) audit. This is a national enforcement priority typically handled at the local level based on the Justice Department’s assessment of the extent to which the local carrier placed physicians on notice that the documentation required for Part B services billed by attending physicians must reflect the direct supervision over services performed by residents. Multi-million-dollar settlements have been reached with physician practice groups at teaching hospitals across the country. These settlements represent as much as three times the estimated overpayments.

Two factors tend to influence the multiplier used to settle these cases. First is the clarity with which the local carrier notified physicians of the supervision and documentation requirements. We have been informed that the Justice Department considers the PATH instructions from the Nationwide Medicare carrier to be quite clear. The second important factor is the extent to which the practice followed carrier guidelines concurrent with such notice and self-reported any documentation and supervision problems before an investigation was under way. We have requested the Nationwide instructions under the Freedom of Information Act to develop a time line for our clients who wish to proactively review their potential vulnerability.

We have also confirmed that the U.S. Attorneys are using the recent Justice Department enforcement guidelines reported in our last Health Care Newsletter in deciding whether to bring civil actions under the False Claims Act. We believe that, if used properly, these guidelines provide an appropriate structure within which to assess a provider’s vulnerability.

Lessons Learned:

1. Stay current with Medicare and Medicaid rules and enforcement initiatives. Physicians who bill for supervising services performed by residents or any provider who bills for services that have been deemed a priority are especially vulnerable to scrutiny.

2. Since prosecutors will construe audits, denials, newsletter guidance, and other carrier communications as placing a provider on notice of billing irregularities, consider implementing an audit to ensure compliance with billing regulations in areas of concern or potential vulnerability. Special attention should be placed on having the review performed under the direction of legal counsel to protect the attorney-client privilege to the extent it may be available. The attorney-client privilege will not protect routine business advice, the underlying facts being investigated, or future or ongoing criminal conduct.


A criminal investigation can be under way without your knowledge. We are aware of situations where a government agent, either the FBI, the OIG, or a carrier representative, has contacted providers at their offices or at their homes to obtain background information that ultimately leads to the opening of a criminal matter. Keep in mind that a search warrant, which would clearly indicate an open criminal investigation, is not required to obtain information from you or your employees. Congress gave investigative agencies and prosecutors broad subpoena authority under the Health Insurance Portability & Accountability Act (HIPAA). Further, neither a search warrant nor a subpoena is necessary if the witness freely consents to an interview or the production of documents. These agents are often personable and persistent. Again, written reports are made of all such contacts and can contain the agent’s subjective assessment of the provider’s understanding and knowledge of regulatory requirements. Your statements and documents are subject to misinterpretation if not placed in the correct context.

Lessons Learned:

1. Your staff should be instructed to notify you if they are contacted or receive notices from the carrier, the OIG, or the Justice Department so that the practice can respond properly. Never suggest that an employee will be reprimanded for communicating with the government, but let them know that there is no obligation to meet with investigators without a subpoena, and that a company representative may accompany them.

2. Oftentimes, the scope of a subpoena can be negotiated, and certainly the investigative agent may be contacted to determine the purpose of the request.

3. Consult counsel before submitting documents or making statements pursuant to a subpoena or a search warrant. You have the legal right to be represented by an attorney when making a statement. Waiver of your legal rights can have disastrous consequences.

4. At the same time, never destroy or falsify records during any investigation, and never deliberately impede an investigation. Allegations of obstruction of justice can be more difficult to defend than the underlying conduct itself.


We are handling cases where clients acted without knowing their legal rights and obligations, foreclosing opportunities of which they should have been aware. Do not make that mistake! Maintaining one’s license and Medicare and Medicaid participation is fundamental to having any meaningful involvement in health care.

We believe that the talents and resources of health care providers should better be used designing joint ventures and other business arrangements to promote quality and access or improve the systems through which care is delivered. Please be assured that Waldheger, Coyne will continue to comment on regulations and participate in advocacy efforts to return the focus of health care on issues of quality, cost, and access.

Ron Waldheger, Esq, & Mike Coyne, Esq.
Waldheger, Coyne & Associates Company, L.P.A.
Cleveland, Ohio 44145