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“Lack of Medical Necessity”: An Increasingly Utilized and Amorphous Enforcement Tool

This is the first in a series of articles.

As Healthcare attorneys, we begin our day reading press releases from the U.S. Department of Justice (DOJ) and Office of Inspector General in the U.S. Department of Health and Human Services (OIG). These press releases tout recent prosecutions or guilt pleas achieved against  healthcare providers by Assistant United States Attorneys. These crack-of-dawn emails serve as a daily reminder of the immeasurable power of our government and a warning to healthcare providers. We often refer to these examples of bad behavior while counseling clients on proposed arrangements. Digesting these prosecutions over the course of years reveals trends. A disturbing trend has recently emerged, and healthcare practitioners and their counsel must take note. 

Reading DOJ summaries is increasingly disturbing for healthcare professionals. We used to be able to say with confidence that the vast majority of criminal enforcements arose from providers “billing for services or goods not actually provided.” Such conduct meets the “dictionary definition” of fraud and helped set the “bell curve” of prosecutions. The role of the healthcare lawyer in counseling clients to avoid “dictionary” fraud is limited. Everyone knows this conduct is wrong/illegal. Analyzing the healthcare laws relevant to common fraud is easy, and frankly providers do not seek counsel on such topics. 

However, a string of press releases reveals emerging trends in criminal enforcement that is re-shaping healthcare criminal prosecution and civil False Claims Act (FCA) cases. The percentage of prosecutions involving straight “fraud” is shrinking. Healthcare attorneys often speak of the “spectrum of risk” posed by transactions and financial arrangements. Many healthcare transactions fall somewhere on the spectrum of risk. The spectrum concept is a useful and reliable tool, but unfortunately for providers, the spectrum has shifted. On the rise are criminal prosecutions in which the government’s primary allegation is not fraud, but rather a “lack of medical necessity.”  

“Lack of medical necessity” is also being used in a burgeoning number of civil FCA cases. The FCA carries “treble damages,” civil monetary penalties as well as potentially significant attorneys fees. The DOJ has turned both their civil and criminal enforcement focus to cases involving lack of medical necessity.  

But what is “medical necessity”?  “Medical necessity” will be the subject of another article in this series. In short, the government must recognize the rights of physicians and other providers, to differ in treatment regimens and protocols. Danger lurks for providers, however, where prosecutors view the legal standard for FCA and criminal behavior as whether the provider has adhered to community “standards of care.” Physicians and pharmacy owners, practicing in good faith, who provide treatment with the intention of healing or treating patients should not fear prosecution or ruinous FCA cases. However, reading DOJ press releases shows that the lines between community standards/”Medical Necessity” case and criminal/FCA violations has become blurred.  

Healthcare fraud costs the government billions of dollars annually and combatting healthcare fraud is critical to our healthcare system and to protecting the public fisc. However, the government’s power to determine what constitutes illegal fraud must be wielded with great care. Comparisons between healthcare prosecution and McCarthyism should never become commonplace.