Recently, I attended a program at North Shore Hospital on establishing an office compliance program for Medicare fraud and abuse. The contents of the discussion by the attorneys appeared, on first impression, to be both a gross exaggeration of the true risk to physicians as well as an attempt to create mass hysteria. Was this a charade for frightening physicians into yet another dollar-draining cottage industry for our already financially strapped practices or a genuine warning? I am afraid it is more real than contrived.

The aggressive investigation of Medicare fraud and abuse in now being driven by multiple concerns. Janet Reno and the prior administration viewed medicare fraud to be "the crime of the nineties," second only to violent crimes. The Medicare fraud program gave new life to a number of FBI agents scheduled to be axed from the department after John Gotti was arrested. The Organized Crime Division shrunk dramatically in need and size after his conviction. Fortunately for the FBI agents, they now have abundant work identifying and prosecuting, along with the Attorney General, our "fraudulent" colleagues. This is also a big dollars issue in two ways. The investigation of physician fraud recovered billions of dollars and has terrified physicians into undercoding - which actually is fraud as well.

The main area being targeted is physicians' coding practices. Filing a claim with Medicare under an improper code is punishable by the False Claims Act and the penalties are enormous. Kickbacks from vendors that result in financial gain are being targeted as well. Self referrals to physician-owned facilities have likewise been under the microscope for years.

To add to our sleepless nights. The usual whistleblowers to Medicare regarding fraud are your office staff and patients. The patients are being bombarded with numerous letters from HCFA encouraging them to scrutinize and evaluate every explanation of benefits they receive from Medicare and offering financial rewards for turning in their physicians if suspicious signs are seen.

So is it just time to shut your eyes, dig your head in the sand and hope for the best? Unfortunately, you still need to preserve your practice and income and practical things can be done to increase your awareness and reduce your liability: MSSNY has a legal counsel that is available to answer some basic questions regarding your responsibilities. NCMS, on request to Mark Cappola (516-832-2300), will provide a binder with an overview of Medicare Fraud and Abuse.

A compliance plan will be your best defense if an investigation is initiated at your office. For small practices with limited vendor contacts and uncomplicated lease agreements, you may decide to write your own compliance program. For larger groups, it may be worth the expense (which can exceed $10,000) to have a legal consultation in this area. A list of reputable attorneys in this field is available through the NCMS as well.

You can learn more about fraud and abuse by viewing an on-line program by HCFA to educate physicians : www.medicaretraining.com. In my next President's Message, I will discuss the minimum requirements for a compliance plan.

Beginning December, 2002, physicians in New York State, with very limited exceptions, will be prohibited from referring patients to physical therapy services in which they maintain a financial or ownership interest.

Pushed by strong opposition from the medical society, Gov. Pataki vetoed a similar measure in 1995, stating that the restrictions did not provide physicians with sufficient time to divest themselves from physical therapy practices. The medical society continued to oppose the proposal during the 2000 Legislative Session, noting that Congress had recently considered the repeal or substantial modification of federal self-referrals laws (Stark I and II) as the rapidly growing managed care sector limited the need for government regulation of self-referral practices.

The law, effective December, 2002, generally provides for a blanket prohibition of patient referrals to physical therapy services in which the referring physician maintains any type of financial interest. Similar to current prohibitions on laboratory, pharmacy, and imaging self-referral, limited exceptions to the ban on physical therapy self-referral, such as in-office ancillary services or services provided in a hospital, may be allowed. Physicians with any financial or ownership with any physical therapy service are strongly encouraged to retain counsel regarding the applicability of exceptions to the statute to their particular arrangement.