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Shaw Chiropractic
A Medical-Legal Newsletter for Personal Injury Attorneys
by Dr. Steven W. Shaw

MD/DC Offices: The Appearance of Impropriety

With the revolutionary changes taking place in the managed care world it’s no wonder that chiropractors have developed ways to circumvent the limits imposed upon them by carriers. The most recent of these, and probably the most heavily scrutinized, has been the development of the MD/DC practice. This newsletter will examine the MD/DC practice and the inevitable appearance of impropriety when it relates to the personal injury patient.
What is the MD/DC practice? An understanding of the MD/DC practice begins with a brief review of the relative laws in Connecticut. Most states in the U.S. do not allow doctors with “inferior” licenses to hire doctors with “superior” licences. This medical doctrine law prevents doctors of chiropractic (DCs) from hiring medical doctors (MDs). In most states it also prevents DCs from being partners with MDs To circumvent the law, some very saavy healthcare lawyers have developed a series of corporate layers that effectively function to allow the DC to indirectly “hire” the MD.

DC owned management companies sign management contracts with MD owned corporations which essentially divert all revenues from the MD owned corporation to the DC owned company. Only those funds necessary to pay the MD staff are maintained in the MD corporation thereby allowing the DC to realize the profits, if any.

Three market factors have contributed to the need for chiropractors to explore pursuing the MD/DC practice. The first and, in my opinion, most reasonable factor is to allow access to care for those patients who would otherwise not have access. This access issue is usually due to socioeconomic limitations. The second two reasons seem to be the most popular. They are to build a better mouse trap for patient referrals and to obtain reimbursement beyond what carriers allow for chiropractic services. It is the abuse of these last two reasons which have sparked the fraud investigations which are occurring around the U.S..
Right or wrong, most patients and attorneys would rather have an MD directing care. MDs are usually covered for more services with less limitations than chiropractors. Also, more services fall within the scope of medical licensees than do chiropractic licensees. For attorneys, the MD specialist’s opinion carry more weight than the DC opinion with carriers and jurors. As a result, attorneys are more likely to refer their clients to the MD specialist. No surprise to anyone so far.

It all sounds good on the surface. But what happens in the MD/DC practice. Well, perhaps nothing out of the ordinary. Ideally, DCs and MDs work cooperatively as a health care team providing necessary and appropriate care to patients in need. Unfortunately, this has too often not been the case.

Around the country, these MD/DC relationships have been heavily scrutinized and investigated. What often occurs is that billing practices change. Patients start to receive more care and procedures than necessary because they are now potentially reimbursable. Scams between attorneys and MD/DC clinics become evident and fraudulent activities develop. Sometimes the MD owner is not present to treat patients. Other times the attending MD is there only once a week or once a month leaving “standing orders” for patients. There have been circumstances when the DC is doing all exams and reports but the MD’s name is on the report even though the patient was never seen by the MD.

The result has been that carriers, including Allstate and Medicare, have hired fraud and abuse investigators to examine these relationships. Their investigations have resulted in convictions which have resulted in significant return on their investment. As you might suspect, this has resulted in more funds being applied towards the fraud investigations.
Why should this concern you? Over the past several years several of the MD/DC clinics have surfaced in Connecticut. Some have both the MD and DC in the forefront. Others have a less transparent appearance and present themselves as MD only groups with the DCs playing the role as therapist or office manger. I have no reason to suspect that any fraudulent activity exists. In fact, I highly doubt it. However, it only takes one bad apple...

The attached reprints, taken off the Internet, are examples of the bad apples and the resulting investigations. It shows how some of the bad apples have ruined it for the good chiropractors who are looking to help their patients and provide a better service. The bottom line is that the MD/DC arrangement carries too much baggage to offset the benefit. This is exactly why many of the MD/DC groups have voluntarily chosen to dissolve, before the $#@% hits the fan. In speaking with a well respected Hartford lawyer about the MD/DC relationship he said that: “It’s not that anything is illegal about the relationship. The problem is that there is the appearance of impropriety and that’s all it takes to lose a case”
OK some cases may initially settle better. But what happens to the hundreds of outstanding cases when the MD/DC clinic treating your client is investigated?

MD/DC Practices Targeted by Federal Investigators
by Rob Sherman,Esq., and Dan Osborne,MS,DABFE

The new Health Insurance Portability Accountability Act (HIPAA) has poured billions of dollars into prosecuting health care fraud. All insurance health care plans - not just federal plans - fall under the new law. Every chiropractic doctor should be concerned because many so-called "common" practices are now the subject of fraud investigations, especially multidisciplinary (MD/DC) practices.

Q. Why are federal investigators targeting MD/DC clinics?
A. MD/DC practices are easy targets for federal investigators because many of these clinics have not taken the necessary steps to ensure that they have complied with the vast number of health care laws. Many earlier clinics, for instance, brought in MDs who never saw patients, issued "suspect" standing orders for chiropractic care, and were merely designed to avoid limited chiropractic coverage.
Q. What are the typical "red flags" over the MD/DC clinics that investigators are targeting today?
A. One target of investigators is a doctor's failure to indicate anywhere on the HCFA 1500 that a chiropractor is performing services. Although there is some controversy over this issue among attorneys, fraud investigators are seeking prosecutions regarding this so-called "concealment."
Another target is the improper use of coding, such as billing for E&M services that are not substantiated through documentation. There are numerous examples of this type of activity that investigators consider fraudulent.
The list of potential pitfalls is extensive even if the MD/DC office was set up for the "right" reasons. It includes potential violations on both the DC and MD sides of the practice in areas such as Medicare and Medicaid billing; workers' compensation; personal injury; health insurance; and especially a clinic's billing companies. Proper documentation today is a critical fraud avoidance strategy.
Q. Why will my MD/DC practice be reviewed more closely than other clinics?
A. The new federal HIPAA law makes it easier for federal law enforcement officials armed with documentation from insurance companies to investigate and prosecute these clinics. HIPAA defines health care fraud as "any misrepresentation that deals with any health care plan." The law covers all types of insurance coverage - not just federal programs. It covers billings for PI, workers' compensation, health benefit plans, state plans - all third-party billings. So providers cannot escape the federal law by staying away from federal programs.
Significantly, providers can be found guilty of violating fraud laws if the doctor "should have known" that illegal activities were taking place within the clinic. Actual intent to defraud, or having knowledge of the fraudulent activities is not required. Providers can fall victim of federal fraud law if they are found to "recklessly disregard" illegal activities.
Q Why are compliance plans especially important for the MD/DC clinic?
A. Third-party payers believe that MD/DC practices are set up for one purpose - to circumvent the rules on payment criteria. They base their perception on much of the advertising contained in chiropractic journals to demonstrate that an MD/DC clinic's only purpose is to circumvent limits on chiropractic care. For that reason, these clinics are a target of law enforcement officers. If you are part of an MD/DC clinic, you may be reviewed.

New Jersey MD/DC Practices charged with Fraud

Chiropractor promoting MD/DC practice in New Jersey charged with Insurance Fraud.
According to an October 21, 1999 Associated Press article, "An Atlantic County chiropractor is among 20 people named in a lawsuit by Allstate Insurance Company for allegedly setting up dummy medical corporations to boost the profits of chiropractors and physicians and defraud insurance companies.

" The lawsuit, filed in Superior Court in Morris County (New Jersey) on Wednesday, alleges that Dr. J. Scott Neuner tried to circumvent a state regulation that limits the fees that chiropractors may charge by having a Connecticut doctor pretend to own his practice, Northfield Medical Center. Chiropractors can bill at higher rates and for more services when they work in a multidisciplinary medical center run by a licensed physician.

" Allstate also filed two other lawsuits on Wednesday against 258 people that, the insurer claims, participated in staged accident rings in Camden and Perth Amboy. The three lawsuits seek to recoup $43.8 million, triple what the company claims it lost to the alleged frauds, said Maureen Sullivan, a spokeswoman for Allstate New Jersey Insurance Co., in Bridgewater. "Allstate, based in Northbrook, Ill., claims that Neuner converted his practice, Tilton Chiropractic, in June 1997 into Northfield Medical Center with Dr. Robban A. Sica as its alleged owner. The conversion cam after Neuner attended a seminar by Dr. Daniel H. Dahan [a chiropractor from] Long Beach, Calif. Dahan allegedly arranged, for a fee, for Sica, of Trumbull, Conn., to pose as the owner of the Northfield center and helped set up the bogus company. In New Jersey, it is illegal for a chiropractor to hire a medical doctor as an employee. " In testimony to Allstate, Neuner admitted he never met Sica, nor had she ever visited the practice or invested in the corporation. Officials believe Sica has or had financial interests in at least 14 other similar corporations in New Jersey.
[Excerpted from: Rizzo N. NJ chiropractor named in insurance fraud suit. The Associated Press, October 21, 1999.]

MD/DC Clinics and Fraud in New York

January 21, 2001, the paper known for ““All the News that is Fit to Print,”” the New York Times, brought some unfitting news about the activity of a N.Y. chiropractor. According to the Times, the D.C. ran several rehabilitation centers in downstate New York. He hired a medic to “own” the companies and, in his mind, side-stepped the N.Y. law that says a D.C. can’’t own a medical practice. The federal prosecutors are claiming that the D.C.’s program yielded over $10 million in phony billings. The D.C. and the M.D. were arraigned on charges relating to the above. In addition, the D.C. was also charged with helping personal injury lawyers inflate their patient’s claims to achieve higher awards.

The article was thoughtful enough to point out that no patients were harmed, but rather this was a matter of fleecing the public and private sector tills. The article reported that the FBI had been investigating the deal for over four years and that the investigation concluded with a nine-month sting operation. “Our investigation uncovered a sham operation from top to bottom” was the conclusions of the head G-man on the case. The indictment was for 115 counts with each count representing a possible ten-year jail term. You do the math.

Top Five Reasons for a Visit from the Fraud Squad

#1 Failing to effectively deal with employee and patient complaints
#2 Free services
#3 MD-DC practice purpose (i.e. to avoid DC reimbursement limitations)
#4 Failing to follow third party payor rules
#5 Failing to properly code services

Judge says Practice Perfect involved in 'massive fraud'

According to a May 7, 2001, report in the New Jersey Law Journal (NJLJ), the California-based chiropractic consulting firm Practice Perfect and its affiliate, Medical Neurological Diagnostics Inc., are "at the center of a massive fraud." Consultant Daniel Dahan owns both California companies.

Allstate Insurance Co., brought the case to court, alleging insurance fraud. Morris County Superior Court Judge Charles Villaneuva granted a partial summary judgment, categorizing many of the company's practices as "suspicious and specious." Dahan charges $26,000 to teach chiropractors how to set up multidisciplinary practices with M.D.s. He promotes his program on the Internet as a way to "Substantially increase your income," by "Creating the ability to diversify your practice (add such services as blood labs, surgery, injections, and many other medical services)." According to the judge, however, no medical doctor is directly involved in these M.D./D.C. practices. Instead, the NJLJ reported, "the chiropractor 'leases' the name and New Jersey license of a doctor, who purportedly owns the clinic but in reality is a sham owner who never sets foot in the clinic, never treats a patient, and has no say in the clinic's business. The sham ownership arrangement is designed to circumvent the state's regulations that only doctors, not chiropractors, can own a medical corporation, the judge found." Judge Villaneuva referred to the scheme as "Doc-in-a-Box."

Dahan's tele-medicine business -- Medical Neurological Diagnostic, Inc. (MNDI) -- was also criticized by the court. Dahan's clients lease electro-diagnostic equipment and technicians from MNDI and transmit raw data electronically to an MNDI physician in California or Florida, who reads and interprets the test and provides a report to the doctor. However, it was revealed in court that, in one instance, while the per patient cost to the clinic was $106.50, the insurance company was being billed $1,400 to $2,150 for the "technical component" of the test and another $680 per patient to cover the cost of the interpreting doctor. Allstate contended, and the court agreed, that this type of operation was typical of Dahan's clients.
Dahan's attorney Christopher Turcott, said the judge was "dead wrong on the facts" as well as the law. On his website, Dahan challenges the findings of the court, stating that the case was another attempt by the insurance industry to harass and destroy him.

" Anyone can imagine what can happen to the 'greedy' insurance companies if too many doctors become sophisticated enough to learn proper coding and billing, as well as join a very successful, ethical firm such as Practice Perfect," the website proclaims.
Dahan, on the website, emphasizes that his clients are taught legal and ethical ways to set up an M.D./D.C. practice and are advised to consult an attorney to make sure their clinics are in compliance with all state regulations. The case has once again focused attention on M.D./D.C. clinics in general, as well as the Practice Perfect program. The multidisciplinary practice idea has come under fire throughout the country. On his website, Dahan admits, "There are multiple, serious pending investigations in the USA today on multidiscipline centers using MD/DC/PT combinations." Terry A. Rondberg, D.C., president of the World Chiropractic Alliance (WCA) warned D.C.s about becoming involved in such schemes. " While I am sure there are chiropractors who only want to work with medical doctors for the good of the patient, such M.D./D.C. clinics are tainted by the type of scheme the New Jersey judge uncovered,"

“STANDING ORDERS" VERSUS "INCIDENT TO" SERVICE
by Deborah Green - Attorney at Law

In many multi-disciplinary settings, the chiropractor is employed by a medical practice to render chiropractic services. An MD or DO (referred to hereinafter as the "MD") sees the patient when the patient first presents, or in some instances a few visits later, recommends chiropractic care (or approves the chiropractic care that has already been rendered retroactively) and then sees the patient again, if at all, many weeks later. The patient is treated by the chiropractor but the treatment is billed as if the MD were rendering the services to the patient personally or as if the MD was physically present in the office. This scenario is performed under the fiction of the "standing order" and apart from being fraudulent and abusive of the system, it is ripe for a federal or state "False Claims Act" prosecution. The penalties are straight forward. Presenting or causing to be presented a claim for physician's services, knowing that the individual who furnished the services was not a licensed physician will cost you $25,000.00 for each such claim submitted, imprisonment for up to five years, or both, by the federal government. The states have their own set of criminal and civil penalties, however, you do get free television exposure on the evening news when you are arrested. If you think that your operation is too small for the government to take notice, think again. Many actions are brought by disgruntled ex-employees and, if they are successful, they get to share in the fines that the practice will have to pay the government. (Think about that the next time you decide to fire the receptionist). These actions are known as qui tam actions and will be discussed in a future article.

Many of my clients have asked me whether they can rely on "standing orders" to treat patients when the MD is not physically present in the office. My "standing" response is a categorical "NO!!!". My clients then tell me that "everybody is doing it". I then tell my clients that the Federal government has allocated over Two Hundred Million dollars in additional funds towards the eradication of fraud and abuse in the health care industry.

To understand why a "standing order" is inappropriate one must first understand exactly what a "standing order" is. A "standing order" (which include protocols) is an order conditioned upon the occurrence of certain clinical events. All patients who meet those clinical events are treated the same way. "Standing orders" are frequently used in hospitals or public health clinics that treat specific diseases. For example, a venereal disease control program will use protocols for antibiotic dosages promulgated by the Center for Disease Control ("CDC"). Once the medical director has identified the specific type of venereal disease the patient has, the nurse will administer the antibiotics as specified by the CDC protocol and authorized by the physician who has diagnosed the patient. In such a circumstance, the CDC protocol for the administration of the specific antibiotic is considered the "standing order" and the event which sparks the use of this "standing order" is the diagnosis of the specific venereal disease. The nurse is allowed no discretion or judgment.(1)
Therefore, if a chiropractor is employed in a medical office and no MD is present when she is treating patients, she can treat only to the extent of her license limits. If a MD examines the patient before the chiropractor treats the patient but leaves the physical premises before or while the chiropractor is treating the patient, that patient's treatment may not be billed as if the MD performed the treatment but must be billed as having been performed by the chiropractor.

Despite what "everybody is doing", state and federal laws are quite strict with respect to requirements as to who may or may not perform certain functions and under what circumstances. These laws include, but are not limited to, medical practice acts, state and federal controlled substance laws, various administrative rules governing protocol-oriented quality assurance activities and laws and regulations limiting physician reimbursement when the work is in fact performed by physician extenders ("PEs")(This term will be used to describe physician's assistants, nurse practitioners, child health associates, public health nurses, anesthetists, psychologists, technicians, occupational and physical therapists and other aides engaged in medical practice under the MD's authority).

What I recommend to my clients is that they comply with their state's "incident to" laws. The term "incident to" a physician's professional services means that the services or supplies are furnished as an integral, although incidental, part of the physician's personal professional services in the course of diagnosis or treatment of an injury or illness. The "incident-to" service need not be directly linked to a specific physician action; the service can simply be part of a doctor's "course of treatment". Broadly speaking, under "incident-to" services, Medicare and many other third party payors will pay for the services rendered by PEs who are a MD's employees as if the MD herself actually rendered the service. Coverage of services and supplies "incident to" the professional services of a MD in private practice is limited to situations in which there is direct personal MD supervision. Thus, where a MD employs PEs to assist her in rendering services to patients, directly supervises such PEs and includes the charges for their services in her own bills, the services of such PEs are considered "incident-to" the MD's service. HCFA has set no limits on who can perform services "incident-to" as long as that person is an employee of the MD (this can include a leased employee), the MD directly supervises the services and all other criteria for billing "incident-to" are met. There is no reference to state licensure because the physician is directly responsible for the actions of the PEs treating patients under her supervision. However, the most prudent course of action is to check with both state licensing requirements and your carrier's requirements, as both the individual states and/or carriers do have leeway to impose more stringent requirements than HCFA if they so choose.
Certain rules must be followed in order to be able to bill for "incident to" services. The services (and supplies including drugs and biologicals which cannot be self-administered) must be: An "integral" though "incidental" part of a doctor's diagnosis or treatment;
provided under the "direct supervision" of a doctor; the service must be performed by an employee of the doctor providing the supervision; and the service (and supplies) provided must be customarily performed in a doctor's office, commonly rendered without charge or included in the doctor's bill.

Services include not only services ordinarily rendered by a MD's office staff person (e.g., medical services such as taking blood pressures and temperatures, giving injections, and changing dressings) but also services ordinarily performed by the MD herself such as minor surgery, setting casts or simple fractures, reading x-rays, and other activities that involve evaluation or treatment of a patient's condition.

To be covered, supplies, including drugs and biologicals, must represent an expense to the MD. For example, in a situation where a patient purchases a drug and the MD administers it, or where the supplies in question are usually not found in an office setting or the services rendered are usually not performed in an office setting, the cost of the drug, the supplies and/or the services would not be covered under the "incident-to" provision.

This does not mean that in order to be considered "incident-to" there must be a service rendered or a supply furnished by the MD each time there is a service rendered by the PE. Such a service or supply could be considered to be "incident-to" when furnished during a course of treatment where the MD performs the initial service and subsequent services with sufficient frequency to reflect her active participation in, and management of, the patient's course of treatment. (However, the direct personal supervision requirement must still be met with respect to every non-MD service.)

Direct personal supervision in an office setting does not mean that the MD must be present in the same room with the PE. However, the MD must be present in the office suite and immediately available to provide assistance and direction throughout the time the PE is performing services. Telephone contact is not sufficient.

Services provided by PEs who are not employed by the MD, even if provided on the MD's order or included in the MD's bill, are not covered as "incident- to" since the law requires that the services be rendered by the MD's employee. To be considered an employee for purposes of "incident-to", the PE performing an "incident to" service must be a part-time, full-time, or a leased employee of the supervising MD, MD group practice, or of the legal entity that employs the MD who is providing the direct personal supervision.

A non-MD practitioner such as a physician's assistant or a nurse practitioner may be licensed under State law to perform a specific medical procedure and may be able to perform the procedure without MD supervision and have the service separately covered and paid for by Medicare as a physician's assistant's or nurse practitioner's service. However, in order to have that same service covered as "incident-to" the services of a MD, the service must be performed under the direct personal supervision of the MD as an integral part of the MD's personal in-office service.

Although "incident-to" assistance can help a MD service many more patients than she could were she required to work without such assistance, the MD must ascertain whether the PEs she has hired have been excluded from any federal health care programs. Pursuant to the recently enacted Balanced Budget Act of 1997, any doctor who contracts with a provider that the doctor "knew or should have known" was excluded from a federal health care program for the provision of items or services payable by such a program may be liable for civil money penalties in the amount of $10,000.00 for each "incident-to" service billed to the federal government as well as being required to refund up to three times the amount of such billings. Therefore, it would seem to be expedient for the MD to obtain as much information as possible about her PEs and to obtain sworn statements from them and any agency which referred them, that they have not been excluded from any health care program. The proper credentialing of employees will be addressed in a future issue.

1. Richards III JD, Edward P. and Katherine C. Rathbun, MD. Law and the Physician: A Practical Guide. Boston. Little, Brown and Company. (1993) 215-231.