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NEW YORK’S HIGH COURT ISSUES LANDMARK NO-FAULT DECISION RAISING FAR-REACHING ISSUES OF CRIMINAL AND CIVIL LIABILITY FOR MEDICAL PRACTICES

In a response to pervasive accusations of No-Fault insurance fraud involving alleged staged collisions, and longstanding rumors of interference by non-professionals in the formulation of therapeutic management plans, the State’s highest court recently held that No-Fault claims submitted by medical providers may be denied when the medical service corporation is owned or actually controlled by non-physicians. The court held that, since state law prohibits non-physicians from owning or controlling such entities, regulations promulgated by the Commissioner of Insurance permitting No-Fault carriers to withhold payment based upon corporate structure alone are, in fact, legal – even when no dispute exists concerning the legitimacy of the injury or the propriety of the treatment actually rendered. It is expected that the decision will result in a flood of No-Fault litigation, related federal civil racketeering (“RICO”) claims and renewed criminal investigations by state and local prosecutors pertaining to the structure and ownership of professional medical service corporations.

U.S. ATTORNEY OPENS INVESTIGATION INTO KICKBACKS TO PHYSICIANS BY MANUFACTURERS OF ORTHOPEDIC SURGICAL EQUIPMENT

The United States Attorney for the District of New Jersey has opened an investigation into allegations of kickback payments by various manufacturers of reconstructive orthopedic products to orthopedic surgeons who perform replacement surgery upon Medicare patients. While the investigation was initiated in New Jersey, it is expected to include orthopedists throughout the country. In a press release issued by Smith and Nephew, one of the targeted manufacturers, it revealed that its Orthopedics division had received a subpoena from the United States Attorney for the production of consulting, professional service and remuneration agreements with various orthopedic surgeons.

CMS ANNOUNCES AGGRESSIVE NEW AUDIT PROGRAM

The Center for Medicare and Medicaid Services has announced the commencement of pilot programs in New York, Florida and California (the states with the highest Medicare expenditures) in which one private entity in each state will be awarded a Recovery Audit Contract (“RAC”) authorizing the investigation and recovery of overpayments that were not previously identified in audits undertaken by Medicare affiliated contractors. The contractors will be paid a percentage of the overpayments recovered and it is expected that audits will begin next month.

REGISTRATION TO RECEIVE FORGERY PROOF PRESCRIPTIONS BEGINS

As of April 19, 2006, physicians in New York State are required to utilize new “forgery proof” prescription forms. Physicians must now register to receive the new prescription pads and may do so by calling the New York State Department of Health at (866) 811-7957.

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