Crisis: When the FBI Calls Your Client

May 22, 2024

In this episode, hosts Brad and Michael are joined by series regular and ByrdAdatto partner, Jay Reyero. Tune in as we share how an unsuspecting physician learned of his unintentional involvement in an insurance fraud scheme. We discuss the importance of due diligence when vetting new partnerships, along with strategies for protecting your practice from unforeseen liabilities.

Listen to the full episode using the player below, or by visiting one of the links below. If you have any questions or would like to learn more, email us at info@byrdadatto.com.

Transcript

*The below transcript has been edited for readability.

Intro: [00:00:00] Welcome to Legal 123s with ByrdAdatto. Legal issues simplified through real client stories and real-world experiences, creating simplicity in 3, 2, 1.

Brad: [00:00:00] Welcome back to Legal 123s with ByrdAdatto. I’m your host Brad Adatto, with my co-host, Michael Byrd.

Michael: As a business and health care law firm, we meet a lot of interesting people and learn their amazing stories. This season, we are riding the emotional roller coaster of crisis that arise in the operating season of a business. Our theme this season is Running a Business.

Brad: All right, Michael, before we get really going today, please remind the audience what are the other seasons?

Michael: There are four seasons of a business, and as we’ve said, we’re going to dedicate an entire podcast season to each season. We’ve already done the building season, starting a business, and we’re in the operating season now. Next season, we [00:01:00] will talk about the scaling season or growing a business, and the buying and selling season will be how we finish out this podcast year.

Brad: Awesome. And our audience, once again today, we welcome back our series, regular and partner Jay Reyero.

Michael: Alright, Jay, since you’ve been here before you know the drill, do you have a mini story for us today?

Jay: I do. I do, but first I have to share a story. So we’re in the middle of kid activity season, and this happened a couple weeks ago, and I’m sure you guys can relate. So Katie and the older girls, they had already been off. It was like any day for school, getting up early out the door. So I’m left with the dog and the young one, and we got to make a soccer game. So I get her breakfast and she finishes, and I’m like, all right, go get ready for soccer and I’ll do everything, and I go into attack mode. So, I go shower, get dressed, gather my stuff, I’m getting the stuff for the dog. I’m bringing it all out into [00:02:00] the counter, and I go to check on her. And in that entire time, she’s brushed her teeth, allegedly, she’s got her soccer shorts on, and she has her soccer shirt on, but she has the T-Rex arms, hadn’t even completely got the shirt on.

And I’m like, “All right, come on. We got to move. We got to move.” So I let her finish. I go and I get the water jugs filled. I get the dog’s collar on, I get my breakfast to be made because I hadn’t even eaten breakfast, gathering all this stuff. By this point, all she has is her shin guards on, and she’s struggling with one sock. So I’m like, fine, I’ll do it. I get her socks on. And mind you, this is not the first season she’s played soccer. This is the middle of the season. She’s played for years. She’s gotten dressed, she knows what she’s doing, but it’s like having a pet sloth. So I’m sitting there, I’m getting her socks on, getting her shoes on. I’m tying them, I’m getting her ready. I even brush her hair. I get her ponytail together. We’ve got all this stuff going. I get her, I get the dog, we’re getting in the car. We get in the car, it’s like five minutes later than when we needed to leave. [00:03:00] And if you have kids, that’s a parenting win. And so I’m sitting there and I’m already, and I reach in my pocket and there’s nothing, no keys. The keys are still sitting there on the hook behind the door that I had locked on my way out behind me. And I’m just sitting there, and you might’ve heard the saying, in the eye of a hurricane there is silence for a moment. For five seconds I just sit there not saying anything, not doing anything. And it was just like, really? Of everything that has to happen. And so, I know you guys could probably relate, it ended up working fine. We ended up making it and all that, but it was one of those things that I was just like, of all days, of all situations of all the hard work, and the one thing I forget was my keys.

Michael: Other than the keys, you just described a day of me trying to get my daughter to school.

Jay: It’s every morning.

Michael: Unfortunately, she’s a freshman in high school.

Brad: I might have similar stories with my sophomore.

Michael: Alright, well, Jay, [00:04:00] what do you have today for our mini story?

Jay: Yeah, so when this happened, it actually reminded me of a client, and we’ll call her Dr. Me, and Dr. Me is a physician that started just a small aesthetics practice on the side. Nothing big, just part-time, couple days a week type of thing.

Brad: Okay. So you said small aesthetic practice was like concierge or a mobile, which route?

Jay: No, she had wanted a physical space, and so luckily for her, she had some friend from residency that had a small practice already, and this friend had a rented medical office suite, we’ll call her Dr. Kind. And Dr. Kind was willing to allow Dr. Me to use her space.

Michael: I think you’re still in machine mode from getting ready to soccer. You’re very literal with your names today. So Dr. Me and Dr. Kind, well, that does sound perfect for what you just described for Dr. Me.

Jay: I mean, it was, until one morning I get a frantic call from Dr. Me and she [00:05:00] had arrived at the space, and that morning she couldn’t get in.

Brad: Ah, no, it makes sense, so she locked the keys inside, and that’s what remind you about her story?

Michael: Brad, if you lock yourself out, will the first person you call be an attorney?

Brad: Well, it depends. I’m guessing it was amplified for some reason.

Jay: Well, Brad, you’re right that she got locked out, but it wasn’t because she left her keys inside. She actually had the keys in her hand. No, actually Dr. Kind had changed the locks.

Brad: Well, that was not very kind of her. Why did she do that?

Jay: Well, so Dr. Me called Dr Kind to find out what was going on. And Dr. Kind immediately began demanding a pretty substantial sum of money because to her, Dr. Me had never paid her rent, and she started threatening to call the police if Dr. Me tried to get in.

Michael: Wow. Well, what did the lease say?

Jay: Well, you see, that was the issue. There was no lease. [00:06:00] There was no contract. When they discussed using the space, they were friends from residency, and so it was just done on a handshake, good faith basis. Sure, you can use one of my rooms, one part of my suite. So, they never negotiated anything specific, no specific terms, rights, nothing was ever agreed to in writing about rent. And this was Dr. Kind’s demand for money. It was based on this kind of vague verbal agreement that she claimed had happened about the rent. So at the end of the day, I mean, Dr. Me for one good part didn’t have a contract, so wasn’t obligated to pay rent. But on the other side, and on the other hand, really, Dr. Me, had no rights to the space and no contractual rights to get in.

Michael: Well, on a side note, not related at all, Brad, you owe me some money.

Jay: Verbal agreement?

Brad: Oh, no.

Michael: Yes. Okay. Well, so what ended up happening?

Jay: Well, so Dr. Me’s primary concern was not the space itself, it was actually her [00:07:00] property and the information that belonged to her that was inside the lock space. So we had to go through a period of negotiations to get that stuff out for her and get it back. But at the end of the day, this experience was just way more than Dr. Me had planned or even considered for a part-time side business, and so she ended up just kind of shutting that down and going back to focusing on her full-time practice.

Michael: Oh, man. Okay. Well, that’s not a very bright and cheery way to start our day.

Brad: No, but I’m going to go back. I’m curious. We actually never established, why’d you call her Dr. Me?

Jay: Well, because her first name was F*#!. So, Dr. F*#! because that’s exactly what I thought the moment that I locked myself out, out of the house.

Michael: I think that’s code for the F word.

Brad: I believe so, Mr. Byrd. [00:08:00]

Michael: Okay. Well, let’s turn our attention to the main story now.

Jay: All right. So today’s main character is a pain management physician with a very busy practice here in Texas. Michael, I promised you before that I wouldn’t go with an eighties movie reference, so very unoriginal. We’ll just call our character, Dr. Payne.

Michael: Well, you are on brand for today with your literal name. So we have Dr. Me, Dr. Kind, and now Dr. Payne.

Jay: Yep. So I got another urgent email from Dr. Payne telling me he had to talk to me right away. And so naturally I called him back to find out what was going on, and Dr. Payne told me that his front desk person had just gotten a call from someone claiming to be with the FBI and wanting to speak with him.

Brad: Yeah. I mean, whenever someone hears about some badge trying to speak with you, I think including most doctors, there’s a lot of anxiety that comes with that.

Jay: Yeah. So as you can imagine, I mean, Dr. Payne was [00:09:00] freaking out, and the FBI agent had left his contact information. But first I wanted to kind of explore – what in the world could this be about before we call them back.

Michael: Well, I do appreciate that you are getting right to the crisis for this season. Did Dr. Payne have any ideas?

Jay: Actually he did. So, Dr. Payne is an in-network physician through what’s called an IPA.

Michael: Brad, you ready? It’s our first vocabulary word for the today. Do you know what an IPA is?

Brad: Yeah, it’s a beer actually. It’s Indian Pale Ale. It’s a type of like beer. That’s kind of how…

Michael: Brad, you’re kind of right. I’ll give you that, but you’re also so wrong. Let’s try this again. Use your context clues. We’re recording a podcast right now on health care-related matters and compliance, so that kind of IPA.

Brad: This drink I’m having over here is maybe not helping. Okay. And a medical IPA. Got it. Yeah, you’re right. [00:10:00] I’m back on brand here for medical. An Independent Physician Association or IPA, is the word, this is an association of independent physician practices. Now, these IPAs offer ways for physicians to build strength in numbers, but still remain independent. For example, they can collectively participate in these contracts, so they’re basically collectively bargaining, and it allows these independent physicians to enjoy financial incentives, enhance abilities to negotiate these contracts, and other such benefits.

Jay: Yeah. And so, for Dr. Payne’s IPA, this IPA participated in arrangements with several major insurance payers, including the federal programs, and it was delegated to pay the claims and to determine medical necessity when those claims and claim documentation review had been completed. And so Dr. Payne had gotten a call from the IPA’s medical director several months back about some of his claims.

Michael: Okay. Well, what was the problem?

Jay: Well, so the IPA had done their routine audit of claims that they had [00:11:00] paid, and they had discovered that within a six month period, they had paid out approximately $200,000 for 60 claims that involved confirmatory drug testing, and Dr. Payne’s patients made up 56 of those claims.

Brad: Oh, wow. Jay, now I think it’s your turn. You said a very long word there, a vocabulary word confirmatory drug testing. What does that mean?

Jay: Say that five times real fast. So in pain management, urine drug testing is utilized to detect the presence of either a prescribed medication or an illegal substance, or sometimes both. And so, when conducting the testing, there’s usually an initial screening test, which is done onsite at the point of care. And then depending on those results, there may be a need for a second test to be conducted by an outside laboratory. And this is the confirmatory test, confirming the results of the initial screen. And there’s actually a lot of fraud and abuse surrounding this particular area.

Michael: Oh, okay. How so?

Jay: So, it usually [00:12:00] stems around the confirmatory testing and a medical necessity issue. So for example, a confirmatory test being ordered based on standing orders. So what that means is that this test is being ordered without regard to medical necessity, or sometimes even without regard to what the result of the initial screening was. There’s actually one case where the confirmatory test was being ordered before the initial screening results had even been received.

Michael: Is that frowned upon?

Jay: It sounds problematic, right? And then another example would be the confirmatory test requesting to run what we call a full panel instead of a limited panel, basically saying, Hey, run a test to test for everything, as opposed to running a limited test to detect something very specific. And so as you can imagine, more panels, more money.

Michael: So was this Dr. Payne’s issue?

Jay: Actually, no. The issue here was that the IPA’s payments were being made to a county hospital out in Kentucky.

Brad: [00:13:00] Okay. Jay, this sounds like you may, taking us all the way back to season 10. Our episode was MSO Breaking Bad, which a good episode. But was Dr. Payne like in an MSO or something like that?

Jay: Nope. In fact, Dr. Payne had never heard of this hospital, let alone had a financial relationship or really any affiliation or involvement with it.

Michael: Well, I’m getting confused. So how did his patient claims end up getting paid to a hospital in Kentucky?

Jay: All right, well, stop me if you’ve heard this one. A lab rep walks into a medical office.

Brad: Oh, no, we have heard this one before. The lab rep has this great idea.

Jay: Yeah. So several years ago, a young lab rep had approached Dr. Payne about sending his laboratory samples for testing to a laboratory she was representing, and let’s call her Miss Gain for today. And being in the network, it was very important for his patients and for his practice that any lab that Dr. Payne worked with had to be also in network. And Miss Gain assured [00:14:00] him, yes, the lab I worked for is an independent in-network lab.

Michael: Well, I’m just glad with Miss Gain, that you’re at least not going to the lowest common denominator and doing a movie thing for Brad to get him all fired up for this episode. So we’ll accept that the name, the literal name, Miss Gain. So you said this was several years ago, I’m assuming things had been fine.

Jay: Yeah, they had been, and that was because it was a different lab then. At some point during this period Miss Gain had come to Dr. Payne, letting him know, “Hey, I’m working for a new lab out in Florida. It’s better, it can produce results faster. It’s still in-network.” We’ll call it Sun Lab for today. And so she said, “Hey, you should start sending your samples there, it’ll be better for you and your patients.” And so he did, he started sending his samples out to Sun Lab in Florida.

Brad: Okay. Jay, let’s get back to Michael’s question real quick. How did [00:15:00] Dr. Payne patient’s claims end up getting paid to a hospital in Kentucky, though?

Jay: Well, that was the puzzling part. So Dr. Payne went back to Miss Gain and discovered that in fact, she did not work directly for Sun Lab. Instead, she worked for a different organization, which is known in the industry as a distributor. And they bring about their own compliance issues, which is not for today, but Miss Gain no longer worked for them when this issue arose.

Brad: Miss Gain, she’s seated on the throne of lies.

Jay: So what we uncovered was that Sun Lab was in fact an independent lab that was testing Dr. Payne’s patient samples. Good. The problem was that Sun Lab was one of many who were involved in a multi-state scheme to fraudulently bill through rural hospitals in several states, including Kentucky, rather than billing through the independent laboratories [00:16:00] where the testings were taking place. So going back to Brad, just like Little River and the MSO Breaking Bad, the hospitals were being used to bill under their contracts to take advantage of the higher reimbursement rates than what these out-of-network labs could actually get, and so the claims were being submitted falsely to appear that the hospital was the one performing the test, when actually it was Sun Lab that was performing the test.

Michael: Here’s the big question. How did the FBI come into play?

Jay: Yeah, great question. So, kind of one of those Pandora’s Box things, right? So when the IPA had kind of uncovered these initial claims, they started doing their own investigation. This hospital in Kentucky popped up on their search, and they found that they were being investigated for fraud by state agencies. Well, this suspicion of fraud made the IPA feel like they had a duty to disclose what they had uncovered. And so, they notified state and federal law enforcement agencies as well as letting the Center for Medicare and Medicaid services know about what they had uncovered. [00:17:00]

Brad: And I’m getting dizzy just keeping up with those interwoven relationships of all these different organizations. What about you, Michael?

Michael: Well, I think it’s just you, Brad. Do we need to talk slower for you? Okay, we can slow it down when you listen to it. I’m kidding. Yes, it is a lot. Well, I’m interested to hear what happened, but let’s first go into commercial and then circle back and hear more and kind of get into the legal side.

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Brad: Welcome back to Legal 123s with ByrdAdatto. I’m your host Brad Adatto, with my co-host, Michael Byrd, and Series regular Jay Reyero is in the house with us. Now, Michael, this season, our theme is Running a Business, and we’re talking about some real stories of our clients and the problems that pop up when they’re in their operating season of a business. Now, Jay just told us a story about Dr. Payne and this brush with the FBI.

Michael: Yeah, and in this world you see bad actors pop up so you just have to be really careful. It really struck me that Dr. Payne had good intentions but he still ended up getting caught up in something.

Jay: Yeah. And I mean, sometimes despite your best intentions, you end up getting kind of swept up into some investigation [00:19:00] or other compliance issues that really have nothing to do with you. I know Brad, you and I have been called before by federal investigators or agencies simply because our name, our emails, our client’s names showed up in one of their investigations.

Michael: That’s what Brad told you.

Jay: That’s what Brad said. But I think there are some things that providers can do to kind of prevent that as much as possible. And so, knowing who you’re doing business with and kind of vetting that process, I mean, the arrangement itself sometimes is easy to know whether it’s going to work for your practice, whether it’s a good idea, whether it’s sounds good or not. But then beyond that, like who are the people involved? What are the downstream providers? What’s the process? Really doing some thorough due diligence to ask a lot of questions, to feel comfortable with who you’re going to be working for. I think that’s really critical on the front end that can help kind of weed out some of those things that just may end up coming back to bite you.

Brad: Yeah. And for those [00:20:00] trying to figure out how do I reach out and figure out, am I hanging out with the, the, the bad actors as Michael just called them earlier. There’s the Office of Inspector General, or code Word, OIG. They have this online exclusion list, and this OIG if you have been excluded, you’re required to register. And typically this happens if you kind of did something with the federal health care program. Maybe you had a criminal offense against Medicare or Medicaid or some other fairly funded service. And often in the industry, we call it the bad boy list. Although there are some bad girls that get on too, but this database can be searched by anyone, and it’s often used by major health care systems to really conduct a background check to make sure that if they are going to do an arrangement with someone, they’re not excluded.

Jay: Yeah. And I think one of the traps that clients also kind of run into is they don’t ask or get the complete picture. And whether that’s out of ignorance and being intentional; health care [00:21:00] professionals are constantly approach with these grand ideas. And it’s really key to kind of understand the details behind it, because that’s where in health care, the regulations get triggered, and people get in trouble. So, for example, in the aesthetic space, a physician being approached to be a medical director. Well, that sounds great, and being paid a medical director fee sounds great, but what is the relationship? Who are you working with? What are they doing? Kind of knowing those details, that’s going to be key in understanding what’s my risk here. And so, you have to know to ask the right questions, to ask questions and more importantly, to make sure that you vet it from a legal perspective, having your health care counsel listen and ask the questions that you may not know about. That’s where a lot of clients sometimes get tripped up because they think, oh, it’s a great business opportunity, let’s just do it.

Michael: And I’ll step back for a second. Each episode this season we’re talking about a different type of crisis. And let’s be clear, this is a capital C type crisis. [00:22:00] So Jay, how should someone handle that situation when the FBI is calling?

Jay: Yeah. Well, I mean, obviously first, you don’t want to give any information. And many times if someone’s calling, they’re not talking to probably the providers themselves, they’re talking to one of the staff members who are answering the phone, and so it’s really key to have them trained up on kind of what to do, and so you’re not giving any information, you’re trying to ask questions to kind of get a sense of what it’s about. Most of the time they’re probably not going to say anything. You definitely want to not only ask for their contact information to return their call, but you want to ask for their badge number and any other identifiable information if that’s the type of person who’s calling so that you can kind of do a check to see is this a real person because not all the times they are. And then most importantly, you’ve got to call your attorney before you call them back. You’ve got to kind of have the right people to protect you from anything [00:23:00] that you’re going to say or think you’re going to say, and really have your attorney kind of lead that discussion.

Michael: Okay. Well, well done. I’m going to turn and test Brad now.

Brad: Oh, no. I wasn’t paying attention.

Michael: Well good. Well, Brad, what if they actually show up to the practice in person?

Brad: Well, first off then I’ll say everything Jay said is correct.

Michael: Very smart. You and I have learned well.

Brad: Well, and to what Jay’s point was, first off, training your staff is actually really important because they are not obligated to answer any of these questions. There is no requirement for that. I agree with Jay. The sooner you can get your attorney on the phone or get them available, it’s going to be helpful. You should also, if someone does show up at your office, to Jay’s point, ask to see their identification, see their badge number, call their main office and make sure that person is with them. If they have a search warrant, you’re allowed to ask for a copy of it to make sure as they’re going through, they’re actually allowed to do certain things. And again, if I haven’t [00:24:00] said this enough, call your attorney.

Michael: Okay, you did well, Brad.

Brad: Okay, C+.

Michael: You redeemed yourself. So, Jay, what happened with the FBI?

Jay: Well, so unlike our first story, this one had a happy ending. So we contacted the FBI on behalf of Dr. Payne. And fortunately for Dr. Payne, he wasn’t the target of the investigation. His name had just naturally come up in the FBI’s investigation of this Kentucky hospital. And they were really just wanting to interview him to see what he knew; did he have any relevant information that could help the case? Just kind of checking to see what his involvement could have potentially been, but he wasn’t the focus or the target. Needless to say, Dr. Payne also found a new lab to start sending his samples to after that.

Brad: Yeah, and so to Jay’s point, first off, it’s terrifying when the FBI calls you or just randomly appears in your office, [00:25:00] and especially in this case with Dr. Payne, hadn’t really done anything wrong. But as we discussed, the more you can learn about the totality of the arrangement as Jay was saying earlier about understanding the due diligence, trying to figure out who you’re getting involved with, asking these kind of questions, and then obviously reaching out to your trusted advisors before you even do it, asking to look into them, get a real clear picture of, of the model that they’re doing. And I always say in this particular case, if someone’s going to lie to you, to your face, it’s a little bit harder because you could have had someone come in and draw it out perfectly, and they said, yes, that’s how we’re doing it. And if they’re not doing it, obviously, as I said earlier, they sit on a throne of lies. Well, Michael what are some of your final thoughts?

Michael: I’m really proud of both of you. I mean, I mentioned this earlier, we made it through an entire episode without eighties movie talk with the two of you. What’d you do this time, Brad?

Brad: Dr. Payne, Miss Gain, Sun Lab, clearly Jay was inspired by a movie from [00:26:00] 2013 Pain and Gain about the activities of Sun Jim Gang, a group of bodybuilders, ex-convicts, Mark Wahlberg and Dwayne Johnson. They were holding some guy hostage for money. Well played my friend, well played.

Michael: I feel like a conspiracy has just been happened to me. I’m so defeated right now.

Brad: Do you feel locked out, Michael?

Michael: No, I feel tricked.

Brad: Well, Michael, next Wednesday show, we will be discussing a story about a crisis at a partner level. Thanks again for joining us today. And remember, if you like this episode, please subscribe, make sure to give us a five-star rating and share with your friends.

Michael: You can also sign up for the ByrdAdatto newsletter by going to our website at byrdaddatto.com.

Outro: ByrdAdatto is providing this podcast as a public service. This podcast is for educational purposes only. This podcast does not constitute legal advice, nor does it establish an attorney-client [00:29:00] relationship. Reference to any specific product or entity does not constitute an endorsement or recommendation by ByrdAdatto. The views expressed by guests are their own, and their appearance on the program does not imply an endorsement of them or any entity they represent. [00:30:00] Please consult with an attorney on your legal issues.

ByrdAdatto founding partner Michael Byrd

Michael S. Byrd

ByrdAdatto Founding Partner Bradford E. Adatto

Bradford E. Adatto

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