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I. Physician Relationships With Payers

During residency, you probably are not focused on who pays for your patients' care. Once you start practicing, it is important to understand who the payers are. The U.S. health care system relies heavily on third-party payers, and, therefore, your patients often are not the ones who pay most of their medical bills. Third-party payers include commercial insurers and the Federal and State governments. When the Federal Government covers items or services rendered to Medicare and Medicaid beneficiaries, the Federal fraud and abuse laws apply. Many States also have adopted similar laws that apply to your provision of care under State-financed programs and to private-pay patients. Consequently, you should recognize that the issues discussed here may apply to your care of all insured patients.

Accurate Coding and Billing

Payers trust you, as a physician, to provide necessary, cost-effective, and quality care. You exert significant influence over what services your patients receive, you control the documentation describing what services they actually received, and your documentation serves as the basis for bills sent to insurers for services you provided. The Government's payment of claims is generally based solely on your representations in the claims documents.

Because the Government invests so much trust in physicians on the front end, Congress provided powerful criminal, civil, and administrative enforcement tools for instances when unscrupulous providers abuse that trust. The Government has broad capabilities to audit claims and investigate providers when it has a reason to suspect fraud. Suspicion of fraud and abuse may be raised by irregular billing patterns or reports from others, including your staff, competitors, and patients. When you submit a claim for services performed for a Medicare or Medicaid beneficiary, you are filing a bill with the Federal Government and certifying that you have earned the payment requested and complied with the billing requirements. If you knew or should have known that the submitted claim was false, then the attempt to collect unearned money constitutes a violation. A common type of false claim is "upcoding," which refers to using billing codes that reflect a more severe illness than actually existed or a more expensive treatment than was provided. Additional examples of improper claims include:

  • billing for services that you did not actually render;
  • billing for services that were not medically necessary;
  • billing for services that were performed by an improperly supervised or unqualified employee;
  • billing for services that were performed by an employee who has been excluded from participation in the Federal health care programs;
  • billing for services of such low quality that they are virtually worthless; and
  • billing separately for services already included in a global fee, like billing for an
  • evaluation and management service the day after surgery.


Medicare pays for many physician services using Evaluation and Management (commonly referred to as "E&M") codes. New patient visits generally require more time than follow-up visits for established patients, and therefore E&M codes for new patients command higher reimbursement rates than E&M codes for established patients. An example of upcoding is an instance when you provide a follow-up office visit or follow-up inpatient consultation but bill using a higher level E&M code as if you had provided a comprehensive new patient office visit or an initial inpatient consultation.

Another example of upcoding related to E&M codes is misuse of Modifier 25. Modifier 25 allows additional payment for a separate E&M service rendered on the same day as a procedure. Upcoding occurs if a provider uses Modifier 25 to claim payment for an E&M service when the patient care rendered was not significant, was not separately identifiable, and was not above and beyond the care usually associated with the procedure.

Case Examples of Fraudulent Billing

  • A psychiatrist was fined $400,000 and permanently excluded from participating in the Federal health care programs for misrepresenting that he provided therapy sessions requiring 30 or 60 minutes of face-to-face time with the patient, when he had provided only medication checks for 15 minutes or less. The psychiatrist also misrepresented that he provided therapy sessions when in fact a non-licensed individual conducted the sessions.
  • A dermatologist was sentenced to 2 years of probation and 6 months of home confinement and ordered to pay $2.9 million after he pled guilty to one count of obstruction of a criminal health care fraud investigation. The dermatologist admitted to falsifying lab tests and backdating letters to referring physicians to substantiate false diagnoses to make the documentation appear that his patients had Medicarecovered conditions when they did not.
  • A cardiologist paid the Government $435,000 and entered into a 5-year Integrity Agreement with OIG to settle allegations that he knowingly submitted claims for consultation services that were not supported by patient medical records and did not meet the criteria for a consultation. The physician also allegedly knowingly submitted false claims for E&M services when he had already received payment for such services in connection with previous claims for nuclear stress testing.
  • An endocrinologist billed routine blood draws as critical care blood draws. He paid $447,000 to settle allegations of upcoding and other billing violations.

Physician Documentation

Physicians should maintain accurate and complete medical records and documentation of the services they provide. Physicians also should ensure that the claims they submit for payment are supported by the documentation. The Medicare and Medicaid programs may review beneficiaries' medical records. Good documentation practice helps ensure that your patients receive appropriate care from you and other providers who may rely on your records for patients' past medical histories. It also helps you address challenges raised against the integrity of your bills. You may have heard the saying regarding malpractice litigation: "If you didn't document it, it's the same as if you didn't do it." The same can be said for Medicare and Medicaid billing.

For more information on physician documentation, see CMS's Documentation Guidelines for Evaluation and Management Services .

Enrolling as a Medicare and Medicaid Provider With CMS

CMS is the Federal agency that administers the Medicare program and monitors the Medicaid programs run by each State. To obtain reimbursement from the Government for services provided to Federal health care program beneficiaries, you must:

  1. Obtain a National Provider Identifier (NPI). An NPI is a unique health identifier for health care providers. You may apply for your NPI at .
  2. Complete the appropriate Medicare Enrollment Application. During the enrollment process, CMS collects information to ensure that you are qualified and eligible to enroll in the Medicare Program. Information about Medicare provider enrollment is available at .
  3. Complete your State-specific Medicaid Enrollment Application. Information about Medicaid provider enrollment is available from your State Medicaid agency.

Once you become a Medicare and/or Medicaid provider, you are responsible for ensuring that claims submitted under your number are true and correct.

For tips you can share with your patients on how they can protect themselves from medical identity theft, see OIG's brochure entitled Medical Identity Theft & Medicare Fraud Brochure

Prescription Authority

The Drug Enforcement Administration (DEA) is a Department of Justice agency responsible for enforcing the Controlled Substances Act. When you prepare to enter practice, you probably will apply for a DEA number that authorizes you to write prescriptions for controlled substances. You also will apply for your State medical license and any additional credentials your State requires for you to write prescriptions. You must ensure that you write prescriptions only for lawful purposes.

Case Examples of Misuse of Physician Provider and Prescription Numbers

  • A physician was ordered to pay $50,000 in restitution to the Government for falsely indicating on his provider number application that he was running his own practice when, in fact, a neurophysiologist was operating the practice and paying the physician a salary for the use of his number.
  • An osteopathic physician was sentenced to 10 years in prison and ordered to pay $7.9 million in restitution after she accepted cash payments for signing preprinted prescriptions and Certificates of Medical Necessity for motorized wheelchairs for beneficiaries she never examined. More than 60 DME companies received Medicare and Medicaid payments based on her fraudulent prescriptions.
  • An internal medicine physician pled guilty to Medicare fraud and to conspiring to dispense oxycodone, morphine, hydrocodone, and alprazolam. The physician allowed unauthorized and non-medical employees at his pain center to prescribe drugs using his pre-signed blank prescription forms. Prescriptions were issued in his name without adequate physical exams, proper diagnoses, or consideration of alternative treatment options. He paid $317,000 in restitution to the Government.

Assignment Issues in Medicare Reimbursement

Most physicians bill Medicare as participating providers, which is referred to as "accepting assignment." Each year, Medicare promulgates a fee schedule setting the reimbursement for each physician service. Once beneficiaries satisfy their annual deductible, Medicare pays 80 percent of the fee schedule amount and the beneficiary pays 20 percent. Participating providers receive the Medicare program's 80 percent directly from the Medicare program and bill the beneficiary for the remaining 20 percent. Accepting assignment means that the physician accepts the Medicare payment plus any copayment or deductible Medicare requires the patient to pay as the full payment for the physician's services and that the physician will not seek any extra payment (beyond the copayment or deductible) from the patient. Medicare participating physicians may not bill Medicare patients extra for services that are already covered by Medicare. Doing so is a violation of a physician's assignment agreement and can lead to penalties.

The second, less common, way to obtain Medicare reimbursement is to bill as a nonparticipating provider. Non-participating providers do not receive direct payment from the Medicare program. Rather, they bill their patients and the patients seek reimbursement from Medicare. Although non-participating providers are not subject to the assignment rules, they still must limit the dollar amount of their charges to Medicare patients. Generally, non-participating providers may not charge Medicare beneficiaries more than 15 percent in excess of the Medicare fee schedule amount. It is illegal to charge patients more than the limiting charge established for physicians' services.

Excluded providers may not receive Medicare payment either as participating or non-participating providers.

You may see advertisements offering to help you convert your practice into a "boutique," "concierge," or "retainer" practice. Many such solicitations promise to help you work less, yet earn more money. If you are a participating or non-participating physician, you may not ask Medicare patients to pay a second time for services for which Medicare has already paid. It is legal to charge patients for services that are not covered by Medicare. However, charging an "access fee" or "administrative fee" that simply allows them to obtain Medicare-covered services from your practice constitutes double billing.

Case Examples of a Physician Violating an Assignment Agreement by Charging Beneficiaries Extra Fees

A physician paid $107,000 to resolve potential liability for charging patients, including Medicare beneficiaries, an annual fee. In exchange for the fee, the physician offered: (1) an annual physical; (2) same- or next-day appointments; (3) dedicated support personnel; (4) around-the-clock physician availability; (5) prescription facilitation; (6) expedited and coordinated referrals; and (7) other amenities at the physician's discretion. The physician's activities allegedly violated the assignment agreement because some of the services outlined in the annual fee were already covered by Medicare.

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