PATTON BOGGS SECURES SUMMARY JUDGMENT FOR MEDICAL CLINIC ACCUSED OF FRAUD IN CONNECTION WITH MEDICARE “INCIDENT TO” RULES
In a landmark ruling that provides much needed guidance to outpatient clinics and physicians on the application of Medicare’s “incident to” rules, the United States District Court for the District of Hawaii dismissed fraud charges brought against the Kauai Medical Clinic (“KMC”). The United States and Dr. James Lockyer, a physician-whistleblower, charged that KMC defrauded Medicare by submitting claims for Dr. Lockyer’s services in supervising the administration of chemotherapy despite the fact that Lockyer (1) is not an oncologist; (2) never saw the patients; (3) claims that he was unaware he was supervising; and (4) was unaware the Medicare was being billed for his services. Patton Boggs lawyers Harry Silver and Susan Baldwin, with invaluable assistance from Larry Freedman, persuaded the United States District Court for the District of Hawaii to grant summary judgment and dismiss the fraud charges against KMC. U.S. ex rel. Lockyer v. Hawaii Pacific Health et al., Civ. No. 04-00596 (D. Hawaii April 17, 2007). The decision is an important one for outpatient clinics and physicians that must deal with the confusing billing issues raised by Medicare’s rules governing the billing of services, performed by auxiliary personnel, “incident to” a physician’s services. The decision also has significance for all health care providers and government contractors subject to the False Claims Act. KMC is an outpatient clinic located in Lihue, Kauai. Because the entire population of Kauai is only about 60,000, the clinic has employed no more than one oncologist at any given time. Cancer patients are initially examined and evaluated by the oncologist. If chemotherapy determined to be the appropriate course of treatment, the oncologist prescribes the dose, strength and frequency of the chemotherapy, which is written in the patient’s chart. The chemotherapy is administered by oncology nurses after they draw blood, send it to the on-site laboratory for testing, and evaluate the results. If the red and white cell count is within the range prescribed by the oncologist, the nurse administers the chemotherapy. If the blood work is not within the prescribed range, the nurse consults a physician. Ninety-five to ninety-eight percent of the time, the oncologist is on-site when chemotherapy is being administered. When the oncologist is not present, the nurse consults an internist covering for the oncologist. Chemotherapy is administered in a large room that is within the clinic’s internal medicine suite. Medicare permits a physician to bill for services, “incident to” the physician’s services, performed by auxiliary personnel and supervised by the physician. An example of an “incident to” service is a flu shot administered by a nurse under the direction and supervision of a physician. Another example is chemotherapy administered by a nurse under the direction and supervision of a physician. In the case of KMC, there was no problem the vast majority of times when the oncologist was present to supervise. This case involves those occasions when the oncologist was not present and an internist was covering. Under the applicable Medicare regulations, services performed by auxiliary personnel “incident to” a physician’s services must be under the “direct supervision” of the physician (or other practitioner). The regulations expressly provide, however, that the “physician (or other practitioner) directly supervising the auxiliary personnel need not be the same physician (or other practitioner) upon whose professional service the incident to service is based.” Thus, if the chemotherapy was administered by oncology nurses “incident to” the professional services of the Clinic’s oncologist, an internist employed by the clinic may supervise the nurses. The term “direct supervision’ is defined by the regulations to mean: “present in the office suite and immediately
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available to furnish assistance and direction throughout the performance of the procedure.” If assistance is not needed, the supervising physician would never see the patient. The regulations also require that reimbursement claims use the Medicare identification number of the supervising physician. Lockyer claimed, however, that he never agreed to cover chemotherapy and that he was never aware he was the supervising physician. Because he may have left the internal medicine suite during the course of the day, leaving chemotherapy uncovered during his absence, Lockyer contended that billing for chemotherapy listing him as the supervising physician constituted fraud. The Court disagreed for three reasons. First, the Court determined that the regulations did not require Lockyer to be aware that he was covering. KMC meets the definition of a “physician directed clinic” found in the Medicare Benefit Policy Manual in that, among other things: “A physician (or a number of physicians) is present to perform medical (rather than administrative) services at all times the clinic is open.” In such clinics, according to the manual, “direct physician supervision may be the responsibility of several physicians as opposed to an individual attending physician. In this situation, medical management of all services provided in the clinic is assured.” Thus, according to the Court, a physician who is on the premises at the time may be deemed the supervising physician, whether or not he or she is aware of this. Second, the overwhelming evidence demonstrated that Lockyer did, in fact, cover chemotherapy. He had countersigned the charts, prepared by the nurses, showing that chemotherapy had been administered. He treated chemotherapy patients who had adverse reactions to the treatment. Oncology nurses, internists and one of the oncologists submitted declarations stating that Lockyer had covered. Finally, there was an email setting out a coverage schedule, with a designated date for Lockyer, and a subsequent email stating that Lockyer was eligible for a stipend because he covered on his assigned date. Finally, the Court ruled that KMC did not have the requisite scienter to support an allegation of fraud. KMC has an expert’s opinion that, under the Medicare Benefit Policy Manual guidance on physician directed clinics, the supervising physician need not be aware that he or she is supervising. While Lockyer produced a contrary opinion from another expert, the Court ruled that this merely set up a dispute regarding the meaning of the regulations, which is inconsistent with fraud. While one or two other decisions may have touched on Medicare’s “incident to” rules, this is the first decision to interpret these controversial and confusing rules, and the first decision to provide much needed guidance to healthcare providers on the billing of “incident to” services. As such, this is an important decision for all outpatient clinics and physicians.
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