Inattention to detail and other mistakes cost me my business and my freedom. Sentenced to a Federal Prison Camp in 2005, I mulled over the circumstances that lead to my downfall. You will be surprised to learn that many of the mistakes I made are embedded in the average medical practice. Additionally, the legal arena does not operate the way you think it does. You are at risk. Learn three principles which, if applied, will reduce your risk of legal problems. With the increase in Recovery Audit Contractor (RAC) audits and Zone Program Integrity Contractor (ZPIC) audits, you need to know: “Are you ready?”

1. Lessons Learned
the Hard Way
Speaker: Frank Margulis
President, Margin Consultants LLC
www.MarginConsultants.com
Avoiding Legal Landmines

2. If you anticipate business in the background, please
“mute” your phone. Remember to take it off mute
when you want to speak. Thank you.
Copyright © 2014

3. Also do not put the phone on “hold”; sometimes
there is MUSAK or a recorded message and it
blocks all the other callers. Thank you.
Copyright © 2014

4. This Is My Story
• I have no desire to “clear the record”
• I was guilty of some things, innocent
of others
• I want you to know the good, the bad,
and the ugly
• I want you to learn from my mistakes
• I want you to understand how the investigative and
legal system works
• I want you to increase your chances of doing well in
an audit by responding to red flags proactively

5. True or False?
• Medicare sends you a letter explaining that you owe
them over $4,000 on a particular previously paid
claim because, during a recent audit, the prescribing
physician failed to produce a copy of the CMN you
sent him for the item.
• No problem, you have the original CMN and it’s
perfect. Send them a copy for their files, the
recoupment process will stop.
• Problem solved.

6. True or False?
You own 3 HME/DME stores in 3 different counties.
You are being investigated. Evidence of wrong-doing
has piled up against one of the store managers. She
confesses to acts of fraud, admitting to investigators
that you had no knowledge of her actions. Further
investigation substantiates she acted as a lone wolf
without the involvement of others. You personally are
in no serious trouble.

8. $4,000 Recoupment
• You have the original CMN and all supporting
documentation
• Prescribing physician has supporting documentation
except for a copy of the CMN
• Will Medicare still recoup?
YES. The physician, patient, and patient’s family all contacted
Medicare to explain the need for the equipment but Medicare
still recouped the money. HHS and FBI investigators visiting the
patient did not flag this as a fraudulent claim apart from the
missing paperwork from the doctor.

9. Take-Away
• The investigative process is highly subjective
• Inexperienced claims processors at Medicare
can give you headaches
• Medicare can out-last you
• In my case, the business
folded before I could
jump through the
hoops and win
this issue

10. Unmanageable Manager
• 3 DME stores in 3 counties
• Manager in question supervised a low income
producing store in a sleepy town I visited about 6
times per year
• In testimony with her lawyer present, she exonerated
me even though FBI and HHS investigators pressed
her hard to make things easier on herself by
implicating me
• Punishment. Her = $100 fine. Me = $25,000 fine.

11. Take-Away
• Company owners and supervisors can be held
to a higher standard
• Investigator will pressure line employees to
implicate management
• The investigative and prosecutorial
process his highly subjective
• It’s sexier to nail a CEO than a
line employee

12. At the end of this session, you will be able to
Identify areas of risk within your
organization
Understand the dynamics of
fraud and abuse
Understand the legal
climate
12
Objectives

13. Value the importance of accountability,
education and organizational structure
Conceive and implement specific steps to
reduce your threat of adverse legal action
13
Objectives

14. A Story in Three Parts
1. My Story
2. Who I Am
3. Lessons Learned

15. Informed by the media I had been indicted
“Opelika company charged with fraud”
165 count indictment
20 months from indictment to sentencing
Plea bargain, 164 counts dismissed
“Obstruction of a Medicare audit”
Part 1: What Happened?

16. The Infamous CMN

17. Motorized Wheelchair CMN, Section C
A. K0011 WHEELCHAIR, MOTORIZED 1 $5,533.50 $5,270.00
ITEM HCPCS DESCRIPTION QUANTITY SUP CHARGE MC FEE SCHD
K0021 WHEELCHAIR – ACC, ANTI-TIP 2 $61.30 $53.30
K0031 WHEELCHAIR – ACC, SAFETY BLT 1 $38.71 $24.97
But the CMN was already signed by the doctor! I
rationalized that I was being expedient and it could not
possibly be a big deal. I could explain if I had to …

18. • Prison
• The loss of my company
• Poverty
– Sole wage-earner for last 18 years
– 3 children at home
– 3 months of savings
– Wife blacklisted
Denial

19. • 5 months incarceration, followed by 5 months
of home confinement
• 3 years probation
• Restitution: $77k
• Fine: $25K
My Sentence

20. This is gonna hurt …

21. Prison
• 13 Sep 2005 thru 10 Feb 2006
• Montgomery Federal Prison Camp (Alabama)
– “Club Fed”
• 1,000 inmates
• 40,000 square feet

22. • Business folded within 3 weeks of incarceration
• Felony conviction puts a damper on interviews
• Restitution owed, but no income or ability to file
old claims
• Legal restrictions on business
• No agreement among the
authorities as to what the
restrictions are
Consequences

23. Montgomery FPC: Visitation
Visiting hours were from 8a to 3p, Saturday and Sunday. The
“VR” was cramped and noisy … but every visit was precious.

24. • Entered DME in 1992
• Built three companies from scratch
– Small, local companies serving 6 counties
– Total DME
Part 2: Who Am I?

25. • Revenues: Medicare (1), BCBS (2), Medicaid (3),
other
• Eventually began to specialize in mobility
products
• Attended meetings and training often
– Medicare and various billing seminars, Medtrade,
State Association meetings
– Requested annual site visits from Medicare
ombudsman
Part 2: Who Am I?

26. 1. Accountability (“Trust but verify”)
• Meet with employees regularly, review their work
• MBWA: Management By Walking Around
• Organized and structured
• Weekly staff meetings
• Random chart checks
• Peer review
Part 3: Lessons Learned

27. 1a. Personal accountability
– Meet with friends, others
– Lunch visits with non
industry-related peers
– Generates “out of the box”
ideas
Part 3: Lessons Learned

28. 2. Evaluate your organization
– Tight job descriptions
– Solid Policy and Procedures Manual
– Assess employees’ skills, interests, abilities
– Personnel weaknesses?
• If yes, educate, reassign,
or terminate
Part 3: Lesson Learned

29. 3. Education – programmed and documentable
• Numerous resources allow you to systematically train
employees
• Retain transcripts in employee’s file
• Program cost is usually very reasonable
• Given industry changes, investment in
education will produce a good
return on investment
• Reduce risk of legal minefield
• Incentivize
Part 3: Lesson Learned

30. The Legal Climate in America
Continues to Target Businesses
• Target Stores
• Toyota
• Walmart
• General Electric
• Abercrombie & Fitch
• BP Oil

31. In 2005, an estimated 378,000 lawsuits filed
against businesses
Average cost to defend: $50,000 to $100,000
(not including settlements and judgments)
The Legal Climate
Source: CMBIZINFO.COM

32. Legal Climate in 2013 Included …
• Idaho inmates' blamed a life of crime on alcohol
companies
• Ohio teacher claimed fear of children in a suit against
her district
• New Jersey school kicked a student off the track
team for excessive absences, and his dad sued the
county for $40 million
• West Virginia woman sued over "severe and
permanent injuries" despite completing a half-
marathon

33. • Grown man in New York sued his parents for
their "indifference" to his problems
• Customer sued a Bob Evan's over a hostess'
rude comment
• Two New Jersey men sued Subway because
their "foot long" sandwiches
fell short
Legal Climate in 2013 Included …

34. • Grad student who received free tuition sued
her Pennsylvania school over a grade
• Injured robber sued an Arizona shop owner
• Tennessee man sued Apple
for his porn addiction
Legal Climate in 2013 Included …

35. Pepsi Stole My Bottled Water Idea
• Two Wisconsin men told someone about their
idea for bottled water in 1981
• Alleged Pepsi developed its
Aquafina Water based on
their idea
• Result?

36. The Result
A judge granted them a $1.26 billion default
judgment, but later allowed Pepsi to vacate
the ruling. It will be tried again.

37. Source: Bureau of Justice Statistics
- Princeton University Study Group
on Criminal Justice Performance
Measures Discussion Papers,
October 1993, NCJ143505
The Legal Climate
“Over the last decade, States have reformed many of the
criminal sentencing laws, largely aiming to increase the
likelihood of a prison sentence.”

38. By DUFF WILSON
Published: April 18, 2006
DURHAM, N.C., April 18 — Two Duke
University lacrosse players were
arrested today and charged with
rape and kidnapping in a case
involving a woman who has accused
three team members of attacking her
at a party last month.
2* Duke Athletes Are Arrested and Charged
* A third athlete was later also charged

39. 2 Duke Athletes Are Arrested and Charged
“[The defendants’]
daddies can buy them
expensive lawyers.” –
Mike Nifong

40. Richard Scrushy
Founder and CEO, HealthSouth Corp
•Auditors uncovered $2.7 billion accounting fraud
•$52 million owed for inflated bonuses
•$21 million in legal fees
Source: Los Angeles Times, 30 Nov 2006, “Scrushy Bonus"
And the outcome …

41. • Almost 7 years in prison
• $417,000 in fines and restitution
• 3 years probation
• 500 hours community service upon release
Scrushy Outcome

42. Investigation Indictment Defense
Plea Bargain
or Trial
Sentencing Consequences
Federal Lawsuit Process

43. With Headlines Like these ….

45. • 1,013 new criminal health care fraud investigations
opened by U.S. Attorneys’ offices
• 137 cases filed
• 345 individuals charged
• 234 guilty pleas
• Average 52 months in prison for those sentenced
• 718 defendants convicted
Enforcement Actions (FY2013)
SOURCE: Dept of Health and Human Services and the Dept of Justice Health Care Fraud and
Abuse Control Program Annual Report for FY2013

46. • $4.3 billion recovered in FY 2013
• $19.2 billion over the last 5 years
• $8.10 recovered for every
$1 spent
• Records broken in FY 2013
Enforcement Actions (FY2013)
SOURCE: Dept of Health and Human Services and the Dept of Justice Health Care Fraud and
Abuse Control Program Annual Report for FY2013

47. • 535,000 providers subjected to new screening
requirements
• 225,000+ lost the ability to bill Medicare
• 14,663 providers and suppliers revoked
– Felony convictions
– Not operational at listed address
– Not in compliance with CMS rules
Since the Inception of the ACA …
SOURCE: Dept of Health and Human Services and the Dept of Justice
Health Care Fraud and Abuse Control Program Annual Report for FY2013

48. • Federal Government won or negotiated approximately
$4.3 billion in judgments and settlements
• 5th consecutive year of increases
• $25.9 billion returned to the
Medicare Trust Fund since the
inception of the program in 1997
Monetary Results (FY2013)
SOURCE: Dept of Health and Human Services and the Dept of
Justice Health Care Fraud and Abuse Control Program Annual
Report for FY2013

49. A Little Action Within the Last Year
• California Man Who Recruited ‘Patients’ Sentenced
in Health Care Scam
• Government announces $12M Medicare fraud
settlement
• Woman indicted for fraudulent air mattress sales
• ME provider sentenced to prison
• Allstate Insurance sues slew
of DME entities

50. A Little Action Within the Last Year
• Former HME providers plead guilty to Medicare
fraud
• Doctor, HME provider guilty of wheelchair scam
• Maryland man sentenced for Medicaid fraud
• Medical facilities, DME suppliers represent 40% of
fraud cases
• Los Angeles DME Company Owner Pleads Guilty to
Conspiring to Defraud Medicare and Medi-Cal

51. • Numerous resources available
• Be proactive – are you prepared?
• Reflect: organizational and personnel weaknesses?
• Network with trusted others
• Invest now
• Legal, educational, efficiency
consultants
Bottom Line

52. Let’s Do This Again
• I am available to speak
– Companies
• On-site
• Via the web
– State Associations
• Visit my website, www.MarginConsultants.com
for further information
• Telephone: (609) 521-4446