October 2020 |
  • Blog

Identifying and Avoiding High-Risk and Potentially Illegal Business Arrangements

Physicians and other industry participants are approached with new business opportunities in the healthcare space all the time. Some of these business opportunities are legitimate and perfectly legal. Many of them are not. Identifying and avoiding opportunities that are high-risk and potentially illegal can be challenging for physicians and non-lawyers, particularly because the healthcare space has seen an increase in fraudulent arrangements masquerading as legitimate business models. Fraudulent arrangements are often presented and pitched in ways that can create the false impression of compliance. If you are a physician or other industry participant, keep the following in mind to help you avoid high-risk and potentially illegal arrangements:

  • First, a business opportunity is not compliant just because many of your colleagues have signed up. Do not be persuaded by an appeal to the masses. Healthcare fraud cases and government enforcement actions regularly involve many defendants as part of the same fraudulent arrangement.
  • Second, if somebody provides you with a copy of a legal opinion as part of a business pitch, you should recognize that it was written by attorneys who do not represent you. Legal opinions provided to you as part of a pitch are marketing materials. Unlike marketing materials, legal opinions prepared for you as a client are complex, nuanced documents that experienced healthcare attorneys are qualified to evaluate – not healthcare providers or other non-attorneys. Do not rely on legal opinions written by attorneys who do not represent you and do not assume they are accurate.
  • Third, people pitching you new opportunities are in the business of selling a product. Do not rely on them to know the whole truth or to tell you the whole truth. Their job is to persuade you. Take what they say with a grain of salt, particularly if they provide assurances of compliance.
  • Fourth, be wary of business models that hang their compliance hat on “carving out federal business” or “not accepting federal business.” It is close to impossible for you to verify these claims. Moreover, even if true, businesses models that successfully carve out federal business are not immune from government enforcement.
  • Fifth, the size of a business does not establish its compliance. Do not assume that a business model complies with relevant healthcare laws just because a large company who appears successful promotes it or backs it. The government routinely prosecutes large companies that peddle non-compliant business models.
  • Sixth, when evaluating a new opportunity, it is better to assume non-compliance until proven otherwise than to assume compliance and risk indictment, severe civil monetary penalties, and losing your license. Due diligence is key. Know what you are getting into before you sign up.
  • Seventh, hire experienced healthcare attorneys to help you.

These suggestions are not foolproof but keeping them in mind will help you avoid high-risk and potentially illegal transactions, including those fraudulent schemes that have the false appearance of compliance. If you are a licensed healthcare provider, your financial well-being, reputation, and license are at stake. We recommend that you hire an experienced healthcare attorney, particularly somebody with an enforcement background, before you sign any contracts or pursue any new business opportunities with other players in the healthcare space. You need help separating the wheat from the chaff and only experienced counsel can truly help you do that. It is a minor cost that can help you avoid catastrophic loss.

If you are a physician or other industry participant and need assistance with conducting a robust compliance review of a new business opportunity, do not hesitate to contact the experienced healthcare attorneys at Elliott Sauter. We can be reached at (469) 758–4150.

Author: Jordan Rose


Elliott Sauter, PLLC

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