Recently, the government announced that it has entered into two separate settlement agreements with provider organizations and individual physicians to resolve claims of noncompliance with the physician supervision requirements under Medicare. The settlement agreements were entered into with federal agencies and state bodies to resolve claims that the organizations had improperly billed Medicare, Medicaid and Tricare for services provided.

The central allegation of the improper billing claims in both of these cases was that physicians were not overseeing services provided to patients at the appropriate level of supervision required during the course of the testing or treatment. These supervision requirements are set forth as conditions of payment from Medicare and, in turn, resulted in enforcement action for improper billing.

Ultimately, each of the provider entities was required to pay approximately $3.5 million to settle these claims with the governmental bodies. These large settlements serve as salient reminders that compliance with the physician supervision requirements is imperative.

Imagimed LLC

On Aug. 27, 2013, the U.S. Department of Justice announced that a New York-based diagnostic testing company, Imagimed LLC, its former owners and the company's former chief radiologist had agreed to a $3.57 million settlement to resolve allegations that the company submitted false claims for magnetic resonance imaging (MRI) services to federal health care programs.

Allegedly, the company submitted claims to Medicare, Medicaid and Tricare between 2001 and 2008 for the performance of MRI scans with a contrast dye without the direct supervision of a qualified physician. Federal regulations require that a physician directly supervise the administration of contrast dye when used for an MRI as a potential adverse side effect is anaphylactic shock.

The government’s allegations underscore the need for strict adherence to the federal requirements when performing diagnostic services. Such requirements can vary depending on the particular procedure being furnished.

The company was also alleged to have submitted claims between 2005 and 2008 for services referred to it by physicians with whom the company had "improper financial relationships."

Radiation Oncology Providers

The Department of Justice made the second recent settlement announcement on Sept. 13, 2013. The defendants in this action included various oncology services provider organizations — Gulf Region Radiation Oncology Centers Inc., Gulf Region Radiation Oncology MSO LLC, Sacred Heart Health System Inc., West Florida Medical Center Clinic PA and Emerald Coast Radiation Oncology Center LLC — and two individual physicians, Dr. Gerald Lowrey and Dr. Rod Krentel.

Under the settlement agreement, the parties will pay $3.5 million to the federal government and the state of Florida. Further, Gulf Region Radiation Oncology Centers Inc. and the individual physicians entered into integrity agreements with the U.S. Department of Health and Human Services' Office of Inspector General.

The government alleged that the defendants had regularly billed for radiation oncology services that were not properly supervised by a physician. Further, the defendant physicians often were on vacation or were working at another radiation oncology clinic while the services were being performed. The alleged improper billing occurred for several years, between 2007 and 2011.

In addition, the government also alleged that the defendant organizations and physicians had billed for services that were not documented in the patients’ medical records, had billed twice for the same services and had misrepresented the level of a service provided to increase their reimbursement from the federal health care programs.

The allegations addressed in this settlement originally arose from a qui tam, or whistleblower, lawsuit filed under the False Claims Act against the defendants. Under this settlement, the individual whistleblower, Richard Koch, who previously worked at one of the defendant organizations, Gulf Region Radiation Oncology Centers Inc., will receive approximately $609,796 from the federal share of the settlement amount.

In the press release, an assistant attorney general for the Justice Department’s Civil Division, Stuart Delery, reiterated the department’s position by stating: “It is critical that federal health care beneficiaries receive care that is properly supervised.”

Physician Supervision Requirements

As a condition of payment to receive Medicare reimbursement, outpatient therapeutic and diagnostic services must be performed under an appropriate level of physician supervision. The Centers for Medicare & Medicaid Services has established and specifically defined three levels of physician supervision: general, direct and personal.

Each outpatient diagnostic and therapeutic service, therefore, must be performed under the appropriate corresponding level of supervision as set by CMS to properly claim and receive payment from Medicare.

General supervision is the lowest level of supervision and only requires the procedure to be provided under the “overall direction and control” of the physician. Importantly, the physician need not be physically present during the performance of the procedure.

Direct supervision, the intermediate level of supervision, requires the physician to be physically present onsite and “immediately available” to provide assistance and direction throughout the procedure. This requirement has been the subject of much confusion and controversy.

Currently, CMS defines “immediately available” as requiring the physician to be in the “immediate physical presence” and “interruptible.” The physician, however, need not be present in the same room while the actual procedure is being performed.

Personal supervision, the highest level of supervision, requires the physician to be physically present in the room for the entire duration of the procedure.

Conclusion

These recent settlements serve as useful reminders that the physician supervision requirements are and will continue to be enforced. The settlements also emphasize the need to comply with conditions of payment and other regulatory requirements when furnishing services to Medicare beneficiaries.

Government enforcement agencies and qui tam relators take the position that billing Medicare for services not provided in compliance with such requirements is a violation of the False Claims Act. Violation of that law can result in severe financial penalties including treble damages and per-claim assessments. Providers should take this opportunity to reassess their current compliance and ensure their ongoing compliance with these requirements.