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Medical fraud/fiduciary explaination

From: Fred Hunt, SPBA President Today: May 24th, 1991 Dear Friends, Some press articles seem to have given the indication that SPBA or I have some magic scanner, checklist, or solution to the growing problem of fraud by doctors, clinics, and hospitals. Unfortunately that's not true. It is a difficult case-by case problem. What I did tell the press (and have tried to tell the medical community) is that there are some very powerful tools at the disposal of those fighting medical fraud...and some very heavy (heretofore ignored) responsibilities of the medical community to employee benefit plans and participants (individuals covered by benefit plans). The major governing law of employee benefits is ERISA (Employee Retirement Income Security Act of 1974, with numerous subsequent amendments). It covers the majority of employee health and pension benefit plans in the nation. See section 4 (a) & (b) for specifically who is covered by ERISA. Section 401 of ERISA includes the ultimate consumer protection rules. It is called "Fiduciary Responsibility". While the fiduciary rules don't give a checklist of specific do's and don'ts, the interpretations are extremely strict in prohibiting almost anything that isn't a completely selfless arm's length relationship. Note that there are specific official Prohibited Transaction Exemptions ("PTEs") for some types of transactions. The fiduciary rules were originally assumed to only apply to the trustees and official "administrator" not to be confused with an outside independent contract Third Party Administration (TPA) firm, who is simply an outside service provider. However, custom within the Department of Labor (DOL), and subsequently codified by the Omnibus Budget Reconciliation Act (OBRA) in December 1989, as section 405 of ERISA, essentially says that anyone who is in a position to know or should have known the plan or participant wasn't getting the best deal has ERISA fiduciary responsibility to disclose or abstain from that activity. This is often nicknamed the "knowing participant" rule. Thus, fiduciary duty applies to not only the "official" fiduciaries (usually the trustees and official sponsor/administrator of the plan)...but also to contract TPAs, attorneys, well as medical providers. The Department of Labor has already successfully brought some cases against both medical providers as well as against plan trustees whom DOL did not feel were vigilant enough in selection and oversight of medical provider costs. Two examples: In one case a dental group changed a type of cleaning (which are normally one visit and one charge) into a four-visit four-charge procedure. Obviously, the plan and participant were being ripped off, and the dentists could not have failed to realize (knew or should have known) that their inflated charges were ripping off the plans. In another example, the trustees of the plan were held to have a breach of fiduciary duty because they had not adequately shopped around for the best deal in a PPO for the plan, and had not monitored the performance adequately. What does fiduciary responsibility require? Let me repeat that ERISA does not have a long list of do's and don'ts. It is like when you tell your children to "be good". You don't tell them specifically not to burn down the house, break windows, etc. "Be good" means be perfect in all respects. That's essentially what fiduciary responsibility does. Fiduciary responsibility requires that your sole goal must be to maximize the size and security of plan assets and the size and security of legitimate plan payments to legitimate plan participants. This is much tougher than normal consumer protection. It means that all self-dealing and tie-ins are disallowed unless provably best for the plan or there is a specific PTE issued. It means that the smallest possible expenditure of plan assets is required, and only payments specifically allowed by the plan language are allowed. If a medical entity knows that he's not giving the plan the best deal or distorting payments to a plan participant (including being a "nice guy" to charge more and then "forget" the deductible), a breach of fiduciary duty has probably occurred. Cases of fraud where someone has lied, cheated, or stolen, are considered as "criminal" and are handled by the Office of Inspector General (OIG) of the U.S. Department of Labor. The DOL OIG 24 hour hotline to report fraud is (800) 347-3756. Nothing here should be viewed as legal advice. It is necessarily a very broad and general explanation of an extremely complex area of law. Also, while ERISA fiduciary duty is not new, there is a new awakening to broader application and enforcement of it. You should consult an attorney well versed in ERISA. The Society of Professional Benefit Administrators (SPBA) is the national association of independent contract Third Party Administration firms...better known as "TPAs". These firms provide a wide range of benefit administration services, such as plan design, claims processing, etc. for client employee benefit plans. It is a relationship much like many firms which hire outside CPA accounting firms to handle their accounting paperwork, or hire an outside law firm to be their general counsel. It is strictly an outside service-provider arrangement. (We emphasize this point because so many people confuse TPAs with insurance companies and other Third Party Payors (TPP). A "payor" is someone who uses his own money to pay the claims or benefits. Thus, and insurance company or an employer in a self-funded plan are "payors" because they own the money being disbursed. The TPA is like your accountant who tells you how much to pay IRS (but the accountant doesn't use his own money to pay the bill).