HEALTHCARE FRAUD: SELF-DISCLOSURE PROTOCOL UPDATE

By Mathew J. Levy, Esq. & Seth A. Nadel, Esq.
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What is healthcare fraud? There are the obvious cases of greed, such as physicians billing for fictitious patients, services never performed, and the rendering of unnecessary medical procedures.  However, there is more to healthcare fraud than the obvious. This includes widely practiced rule-bending to assist patients, such as exaggerating either the severity of a patient’s condition, changing a patient’s billing diagnosis, or reporting signs or symptoms that a patient did not have to help the patient secure coverage for needed care.  Recent events make clear that these infractions can result in serious legal issues. The truth is that even well-meaning practitioners who bend the rules are placing their careers, and indeed their very freedom, at risk. 

On November 8, 2021, for the first time since 2013, the United States Department of Health & Human Services Office of the Inspector General (OIG) made substantive revisions to its Self-Disclosure Protocol (SDP).

The SDP – now officially known as the “Health Care Fraud Self-Disclosure Protocol,” pursuant to the recent updates – is intended to allow providers to voluntarily disclose evidence of fraud or improper billing practices to avoid the costs and business disruptions associated with government investigations and possible litigation. In other words, if a provider discovers that it has been previously reimbursed for claims which it knows or should have known to be legally improper (such as claims involving upcoding, overbilling, violations if the Anti-Kickback Statute, and others), it can choose to voluntarily disclose the impropriety in the interest of a more expedient and favorable resolution rather than wait for the government to discover, investigate and possibly sanction the provider.

list of recent enforcement actions on OIG’s website illustrates just some of the types of claims which are commonly the subject of disclosures. In several cases, providers paid penalties  based on having disclosed that they employed individuals they knew or should have known were excluded from the Medicare or Medicaid programs. Other settlements came about as a result of disclosing instances of upcoding, billing for services provided by unlicensed individuals, or submitting claims for incident-to services not covered by Medicare. In one instance, a durable medical equipment company was required to pay $7.1 million for dispensing equipment from unenrolled locations while representing the services were being performed at a different enrolled location.

Other than alleviating the anxiety inherent in knowing that a possible government enforcement action could strike at any time, the self-disclosure process has several notable benefits for providers which avail themselves of it. One key benefit is that penalty calculations in SDP cases tend to be lower than in other government enforcement actions. Although there is no firm standard, the government’s general practice is to require damages in a minimum amount of 1.5 times the actual damage rate (i.e. the amount of the improper claims), whereas the False Claims Act and Civil Monetary Penalties Law can authorize up to triple damages in other cases. Providers who self-disclose also enjoy a presumption by OIG that they will not be required to enter into a Corporate Integrity Agreement, and a suspension of the provider’s requirement to report and return overpayments under CMS regulations until a settlement of the disclosed matter is reached.

For 2021, there are several notable updates to the SDP. First, as mentioned, is the name, which has been amended to “Health Care Fraud Self-Disclosure Protocol” (previously the “Provider Self Disclosure Protocol”), presumably to clarify that the protocol applies to any “person,” rather than merely providers. OIG also published updated statistics, showing that between 1998 and 2020, OIG resolved over 2,200 disclosures, resulting in over $870 million in recoveries to the federal healthcare programs.

To focus its enforcement efforts and more efficiently allocate OIG’s resources, the 2021 updates also provide for higher minimum settlement amounts required to resolve matters which come about as a result of SDP disclosures. Previously, resolutions under the SPD required minimum settlements of $50,000 for disclosed violations of the Anti-Kickback Statute, and $10,000 for all other violations. Under the 2021 updates, the minimum settlements for both have been doubled, to $100,000 and $20,000, respectively.

The 2021 updates also brought several logistical changes to the SDP process. Whereas previously the self-disclosing party could submit an SDP either by mail or through OIG’s online portal, all disclosures must now be sent through the portal. There is also a new requirement that the self-disclosing party must identify the estimated damages to each federal healthcare program as well as the sum of all estimated damages. The updates further clarify additional requirements for use of the SDP for entities subject to existing Corporate Integrity Agreements, and require the disclosing party to state that it is subject to a CIA, and send a copy to the party’s assigned OIG monitor.

Finally, the 2021 updates also contain minor changes to the provision regarding OIG’s coordination with the United States Department of Justice (DOJ) in civil and criminal matters. Unfortunately, although the SDP can be a useful mechanism for more favorably resolving civil matters involving false claims, and while OIG may advocate for leniency from DOJ based on a party’s self-disclosure, use of the SDP does not preclude a related civil investigation by DOJ unless DOJ chooses to participate in any resulting settlement. This has not changed with the 2021 update. However, the language of the SDP with respect to criminal matters has been amended to reflect that OIG no longer “encourages” parties to disclose potential criminal conduct, but that OIG will no longer advocate for a benefit in any prospective criminal matter based on the disclosing party’s use of the SDP. In other words, OIG seems committed to leaving criminal matters to the DOJ, and a provider cannot rely on its use of the SDP to mitigate the consequences of any potential criminal conduct.

A full copy of the updated SDP may be found on OIG’s website here.

The healthcare attorneys at Weiss Zarett routinely assists physicians in connection with OIG self-disclosure protocols, audits and investigations by governmental agencies and third-party payors, as well as investigations by state and federal law enforcement agencies such as DOJ and New York Medicaid Fraud Control Unit. If you have any questions or require assistance with such a matter, please feel free to reach out to Mathew J. Levy, Esq., at 516-929-3320 or email: mlevy@weisszarett.com or Seth A. Nadel, Esq. at 516-926-3308 or email: snadel@weisszarett.com .

Weiss Zarett Brofman Sonnenklar & Levy, P.C. is a Long Island law firm providing a wide array of legal services to the members of the health care industry, including corporate and transactional matters, civil and administrative litigation, healthcare regulatory issues, bankruptcy and creditors’ rights, and commercial real estate transactions.

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Business Entity Formation: Choosing the Right Business Structure for Your Needs

By Mathew Levy, Esq. & Mauro Viskovic, Esq.
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Are you looking to start a business and getting ready to decide on the business entity? Choosing your business’s legal structure is one of the most critical steps you must take in forming your business.  Often professionals spend too little time considering what business structure would maximize their profit and minimize their exposure to liability.  Sole proprietorships, partnerships, limited liability companies, and corporations are among the most common types of business entities and each poses different advantages and disadvantages. 

Anyone contemplating a new venture would be well advised to assess the needs of the venture and choose the structure that best suits its likely needs.  In doing so, consider how many investors will have an ownership interest in the business and the extent of their respective ownership, control, and liability.  Also, consider the time and cost associated with setting up a business entity, tax consequences, the transferability of ownership and management interest, and the intended lifespan of the entity.

Here’s a quick look at the most common types of business structures you can select from and their characteristics.  

The Sole Proprietorship

A sole proprietorship is the simplest type of business entity and requires minimal paperwork.  It is an unincorporated business that’s owned by the individual running it. A sole proprietorship is the default choice for anyone who runs a business but hasn’t set up another formal business structure like an LLC. As a sole proprietor, there’s no liability separation between your personal and business assets and expenses. You are personally responsible for all your business’s debts and obligations.

Individuals that do a lot of contractual work, such as freelancers, consultants and personal trainers often choose to file their taxes as sole proprietors. This is the easiest way to go if you’re just starting out or you’re not yet making enough profit to justify the costs of an LLC or corporation. However, even if you’ve been in business for decades, a sole proprietorship may still be the best option, depending on the type of business you run. It’s all going to depend on your income, business type, and your personal management preferences.

A sole proprietorship can only have one owner. If you take on a business partner, your unincorporated business will become a general partnership.

The Partnership

A partnership is an organization composed of two or more persons or entities that join forces for the purpose of running a business for profit.  Its owners or “partners” share the ownership and management interest of the partnership.  While a partner can freely assign her profits (ownership interest) to another, she may not assign her control (management interest) without the consent of all of the partners, unless agreed upon in writing.  Partnerships enjoy limited life and dissolve upon the death, bankruptcy, or withdrawal of any partner.  

While a partnership may be formed without a written agreement, the failure to do so is a recipe for disaster.  Written partnership agreements should spell out the financial and managerial responsibilities of each partner, including the requisite capital contributions of each and how profits and losses will be apportioned.  The partnership agreement may also provide guidelines for the transfer of ownership interest and the dissolution of the business.  Despite any such agreement, New York law holds each partner liable for acts performed on behalf of the partnership by any partner or employee.  Partnership liability is unlimited and can place personal assets at risk. 

Significantly, partnership income is not subject to taxation.  Rather, each partner is taxed individually for his own income.  However, by filing certain forms, a partnership can elect to be taxed like a corporation if this arrangement will create tax savings.  

The Corporation

A corporation is a legal entity owned by one or more persons (or other business entities).  Owners are issued stock (i.e. shares of corporate ownership).  Shareholders elect directors who set corporate policy and appoint officers responsible for the actual operation of the business.  Through its officers or directors, a corporation may enter into contracts, own property, sue or be sued, pay taxes and conduct business.  Shareholders enjoy limited liability and a shareholder’s risk is generally limited to the value of his or her stock.  

Corporations have many rules associated with formation and maintenance.  A corporation must file a certificate of incorporation setting forth its name and corporate purpose.  In order to assure limited shareholder liability, corporations are required to obey a strict set of rules and maintain particular business records.  The filing of a certificate of incorporation in this state designates the secretary of state as the corporation’s agent for the receipt of legal processes, such as a summons or a subpoena.  

Unlike partnerships, corporations are separate and distinct legal entities from their shareholders.  Consequentially, corporations can enjoy perpetual life and their stock may be freely transferred.  Also, corporate income is taxed twice.  A corporation is taxed on its income and its shareholders are taxed on the dividends they receive.  However, shareholders that also work for the corporation may enjoy tax-free fringe benefits such as health and life insurance.  Entities known as “S” corporations are taxed like partnerships but enjoy the limited liability and other advantages of incorporation.  With some exceptions, “S” corporations cannot have more than 100 shareholders, all of which must be U.S. residents, qualifying trusts, or certain tax-exempt individuals.   

The LLC

A limited liability company or LLC is an entity owned by one or more natural persons or entities, known as “members” or “managers.”  It is formed by filing an article of organization with the state in conformance with the requirements of New York’s Limited Liability Company Law.  Significantly, members are not personally liable for the business debts of the company, unless specified by the articles of incorporation.  The entity may elect whether it will be treated like a corporation or a partnership for tax purposes, without being subject to the liability of a partnership or the restrictions imposed on an “S” corporation.  An LLC must adopt a written operation agreement setting forth how and by whom the company is to be managed, how ownership interests may be transferred, the obligations of the members with respect to each other, and the circumstances under which it may be dissolved.  

Formation of an LLC may be expensive and technical.  New York law provides minimum requirements for a business to receive limited liability company treatment.  Like a partnership, an LLC has limited life.  The operating agreement must specify an outside date for the dissolution of the company.  Absent a contrary provision in the operating agreement, an LLC will dissolve upon the death, withdrawal, or bankruptcy of a member.  Like a partnership, unless otherwise provided in the operating agreement, a member’s financial interest in the LLC is freely transferable, but her management interest is not, absent the consent of the other members.

Should you have any questions regarding the implications of choosing your business entity type, please contact Mathew Levy, Esq at 516-926-3320 or email mlevy@weisszarett.com or Mauro Viskovic, Esq at 516-751-6537 or mviskovic@weisszarett.com

Weiss Zarett Brofman Sonnenklar & Levy, P.C. is a Long Island law firm providing a wide array of legal services to the members of the health care industry, including corporate and transactional matters, civil and administrative litigation, healthcare regulatory issues, bankruptcy, and creditors’ rights, and commercial real estate transactions.

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WEISS ZARETT WINS REVERSAL ON APPEAL AND DISMISSAL OF TORTIOUS-INTERFERENCE CLAIMS

By Michael D. Brofman, Esq. & Michael J. Spithogiannis, Esq.
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Imagine winning litigation after being a defendant in a contract dispute and then having the plaintiff start another suit arising out of the same contract but on a different theory.  That is essentially the issue that Weiss Zarett faced recently in its appeal to the Appellate Division Second Department.  The matter in question arose from two cases in the Supreme Court Nassau County.  In the first case, the plaintiff sought to foreclose on a mortgage arising out of a joint- venture agreement.  Weiss Zarett represented the new owner of the commercial real property in question, which it purchased after the foreclosure litigation had commenced.  Weiss Zarett successfully intervened for the new owner in  the pending foreclosure action and asserted a counterclaim to quiet title.  Ultimately, on appeal, the underlying foreclosure action was dismissed, and a judgment was entered in favor of the new owner cancelling and discharging  the mortgage of record.  Immediately thereafter, plaintiff again sued the same joint-venture parties under the same joint- venture agreement and added the new owner as a defendant, asserting  that it tortiously interfered with the joint venture agreement. The new case was assigned to a different Supreme Court Justice.  Weiss Zarett moved to dismiss the case as to the new owner, on the grounds (among others) that the plaintiff could not split its causes of action and was barred from asserting claims it could have asserted in the first action. The Supreme Court  denied the motion to dismiss. On appeal, the Appellate Division, Second Department, reversed and dismissed the case as to Weiss Zarett’s client, effectively reminding parties that they can’t have two bites at the apple!

Should you need the assistance of skilled and experienced counsel to assist you in litigation arising from commercial real estate transactions, do not hesitate to contact Michael D. Brofman, Esq. at mbrofman@weisszarett.com and Michael J. Spithogiannis at mspithogiannis@weisszarett.com.

Courts Enforce Contracts As Written – Except Sometimes

By Michael J. Spithogiannis, Esq. & Floyd Grossman, Esq.
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A lawsuit is the last thing you would expect when signing a real-estate contract.  And if litigation does ensue, you would expect a court to follow established rules of contract interpretation and hold the parties to what they signed.  Here we examine a recent court decision which seems to disregard a basic rule of contract law: a court determining the intent of contracting parties should not look to any evidence outside the contract unless the writing is unclear.

Last year, the Appellate Division, Third Department, decided Prendergast v. Swiencick,[1] based on what the Court perceived was a common practice in residential real-estate sales rather than enforcing the contract as written.  

By statute in New York, all that is necessary to create a binding enforceable real-estate contract is a signed writing clearly describing the property, and specifying the sales price.  There are, however, many other issues covered by real-estate contracts: closing date; how the purchase price will be paid; mortgage-loan contingency; title issues; defaults.  Indeed, many pertinent issues are addressed to reflect clearly the intent of the parties without having to rely on anything outside the contract to determine what they meant.

If the parties’ full intent is ascertainable from the contract, considering evidence outside the writing – parol evidence – is not permitted to explain what the parties meant. Parol evidence can be in the form of oral or written communications evidencing how business was done in the past, or a common practice under similar circumstances.  But here’s the key: only if a court decides, in the first place, that the writing is unclear, may parol evidence be considered.  Although this is a bedrock principle of contract interpretation, we find examples where the rule has been disregarded or overlooked.  

In Prendergast, the seller sued her buyer under a written contract for failing to close on the agreed-upon closing date.  The buyer argued she was not required to close, because mortgages against the property had not been satisfied.  The buyer argued that under their contract the seller was required to deliver title on the closing date free from all mortgages. 

The seller argued that, even though the mortgages were unsatisfied, the buyer’s interests could have been protected.  To this point, the seller made arrangements to satisfy the mortgages by using the buyer’s purchase money, after which the lenders would issue satisfactions for recording.  Indeed, part of the service a title-insurance company can provide is to attend the closing, verify the amounts owed to lenders, pick up checks to satisfy the mortgages, deliver payment to lenders, and obtain mortgage satisfactions.  A title insurer could then insure the buyer’s title as of the closing date, even if the mortgages were satisfied after closing.  These procedures are indeed common practice in real-estate closings.  Accordingly, the sale could have been completed even though the seller did not comply with the contract. 

But the contract had no requirement that the buyer purchase title insurance or avail herself of a title company’s closing services.  

Was the buyer compelled to follow this common practice even though the contract itself did not require her to do so?  Who breached the contract?  Was it the seller who failed to satisfy existing mortgages? Was it the buyer who refused to tender the purchase price, buy title insurance, or consent to post-closing satisfaction of the mortgages?

In Prendergast, four out of the five Justices ruled in favor of the seller, concluding that the buyer could not refuse to close.  The Court reasoned that the parties used a standard-form, real-estate contract, which “reflect[ed] the  parties’ intent to embrace the common practice over the years in the real-estate closing realm” with respect to existing mortgages.[2]  In other words, the buyer was found to have agreed to something that was  not actually stated in the contract.  Not only did the buyer forfeit her down payment, but she was held liable for the difference between the contract price and the lower price the seller received from a subsequent buyer.

What is troubling is that the Court’s majority did not first find any ambiguity in the contract, which would have justified considering parol evidence.  

One Justice dissented, pointing out that the majority did not find the contract ambiguous, needing clarification. Moreover, he did not agree that the “standard form real estate contract necessarily incorporate[d] the common practice in the real estate industry such that those practices are given more weight than the language of the contract itself.”[3]  He opined that the contract’s express terms should control even if common practice might have facilitated the transfer of title.  He concluded that the seller was in breach.  

Whether the majority’s decision to rely on parol evidence without first deciding that the contract was ambiguous is simply an anomaly or heralds a departure from long-established, contract-interpretation principles remains to be seen.  So far, no courts have cited Prendergast as authority for the point discussed.

If there be a moral to our story, it is that real-estate contracts – indeed, all contracts – should be carefully considered, negotiated and drafted so as to avoid – as far as practicable – unintended consequences.

Weiss Zarett Brofman Sonnenklar & Levy, P.C. is a Long Island law firm providing a wide array of legal services to the members of the health care industry, including corporate and transactional matters, civil and administrative litigation, healthcare regulatory issues, bankruptcy and creditors’ rights, and commercial real estate transactions.

ATTORNEY ADVERTISING: PRIOR RESULTS DO NOT GUARANTEE FUTURE OUTCOMES.


[1] 183 A.D.3d 945 (3d Dep’t 2020).

[2] 183 A.D.3d, at 947 (emphasis added).

[3] 183 A.D.3d, at 954.

Weiss Zarett & the PAP (Physician Advocacy Program)

Weiss Zarett will continue to offer the PAP (Physician Advocacy Program) for 2022 and we will be providing the same services. The 3 programs offered by the 2022 PAP are as follows:

Premium Program

  • $949 per year 
  • Legal representation in connection with a matter before the OPMC, OPD, OMIG, MAC, OIG, QIO, OSHA or OCR.  
  • Providers WITH administrative coverage from their insurance company will receive legal representation pursuant to the PAP without additional cost until the later of the following: (1) the limits of the administrative coverage under their insurance policy are reached; or (2) through the initial interview/appearance before the applicable governmental authority.
  • Providers WITHOUT administrative coverage from their insurance company receive legal representation without additional cost through the initial interview/appearance before the applicable governmental authority.
  • Legal representation pursuant to the PAP does not include subsequent services during any hearing process following the initial interview/appearance. 
  • FREE review of your medical records by a certified coder and a conference call to discuss.
  • FREE 30-minute consultation on ANY legal matter within the scope of practice of Weiss Zarett.    

Comprehensive Program

  • $649 per year 
  • Legal representation in connection with a matter before the OPMC, OPD, QIO, OIG, OSHA or OCR. 
  • Providers WITH coverage from their insurance company will receive legal representation pursuant to the PAP without additional cost until the later of the following: (1) the limits of the administrative coverage under their insurance policy are reached; or (2) through the initial interview/appearance before the applicable governmental authority.
  • Providers WITHOUT administrative coverage from their insurance company receive legal representation without additional cost through the initial interview/appearance before the applicable governmental authority.  Legal representation pursuant to the PAP does not include subsequent services during any hearing process following the initial interview/appearance.  
  • *Please note that the Comprehensive Program does NOT include a review of your medical records, a conference call between you and the coder and no 30-minute call. 

Basic Program

  • $349 per year 
  • Legal representation in connection with a matter before the OPMC or the OPD.
  • Providers WITH administrative coverage from their insurance company will receive legal representation pursuant to the PAP without additional cost until the later of the following: (1) the limits of the administrative coverage under their insurance policy are reached; or (2) through the initial interview/appearance before the applicable governmental authority.  
  • Providers WITHOUT administrative coverage from their insurance company receive legal representation without additional cost through the initial interview/appearance before the applicable governmental authority.  Legal representation pursuant to the PAP does not include subsequent services during any hearing process following the initial interview/appearance.  
  • *Please note that the Basic Program does NOT include a free review of your medical records by a certified coder and a conference call to discuss the findings related to your documentation and coding or representation in connection with matters before QIO, OIG, OSHA, OCR, MAC or OMIG, or the annual 30-minute consultation. 

If you are interested in enrolling in the 2022 PAP or have any questions, please contact Mathew Levy, Esq. at 516-926-3320 or MLevy@weisszarett.com.

ATTORNEY ADVERTISING: PRIOR RESULTS DO NOT GUARANTEE FUTURE OUTCOMES.