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Dynamic Chiropractic – January 1, 2006, Vol. 24, Issue 01

Are You Committing Insurance Fraud By Doing Expensive, Hi-Tech Testing?

By Richard Jaffe, Esq.

For what it's worth, I think some chiropractors are doing way too much diagnostic testing. For some of them, there will be a price to pay - and sooner, rather than later.

As you probably know, in 1996 Congress passed HIPAA (the Health Insurance Portability and Accountability Act).

Most practitioners associate HIPAA with patient privacy. However, HIPAA has had and will continue to have an enormous and adverse impact on practitioners who provide medically unnecessary treatment or testing. There are three reasons practitioners should be wary.

First, HIPAA federalizes all health care fraud. Before HIPAA, federal prosecutors usually would stick to prosecuting health care practitioners who committed fraud against Medicare or some other federal pay program. That would leave nonfederal, third-party health care fraud to state agencies. Most states just did not have the manpower or budget to pursue health care fraud aggressively, so health care practitioners who committed low or moderate types of fraud usually went undetected.

HIPAA changed all that by making it a federal crime for a health care practitioner to commit insurance fraud against a nonfederal third-party payer. That includes even auto accident insurers and state workers' compensation funds, such as Ohio's BWC. So, under HIPAA, fraud against State Farm or the BWC is now a federal crime.

Second, HIPAA specifically criminalizes medically unnecessary treatment and testing. In the pre-HIPAA days, the feds would have to use general statutes such as mail or wire fraud as the jurisdictional basis to bring about a federal health care fraud prosecution. These statutes were cumbersome and unwieldy for prosecutors, in large part because of the requirement to prove fraudulent intent.

But HIPAA defines fraud to include the rendition of medically unnecessary treatment or testing. In my view, this all but eliminates the "intent to defraud" requirement and the "good faith" defense. What's left is the medical question: Is the treatment or testing medically unnecessary? That makes the prosecutor's job much easier, which of course makes the defense counsel's job harder, especially in close cases in which the "fraud" or unnecessary treatment or testing is not egregious.

Now, many of you might be thinking you don't provide unnecessary services and thus have nothing to worry about, but let me give you a sobering federal perspective. In June 2005, the Department of Health and Human Services' Office of the Inspector General issued Chiropractic Services in the Medicare Program: Payment Vulnerability Analysis. The report makes the obvious observation that "lack of medical necessity is directly related to service volume," but here is what the feds think about how many patient visits might constitute medically unnecessary services:

"When chiropractic care extends beyond 12 visits, it becomes increasingly likely that individual services are medically unnecessary. services provided among the first 12 [visits] in a course of treatment to a particular beneficiary by the same chiropractor were approximately 50 percent likely to be medically unnecessary. That likelihood increased to approximately 67 percent for services between the 13th and 24th and to 100 percent for services beyond the 24th."1

So, we have a situation in which the people who control federal prosecutions think that whenever you see a patient more than 24 times, you're committing health fraud, and that two-thirds of the time when you see a patient more than 12 times, you're a criminal. (Don't ask me where they come up with this stuff.2) Some might find the government's analysis troubling.

Third, not only did HIPAA allow the feds to assert jurisdiction over nonfederal health care fraud and specifically target medically unnecessary services; it also allocated a very, very large budget to allow HHS and federal prosecutors to vigorously pursue health care practitioners and others who participate in health care fraud. Some might be worried by all this.

This is all just by way of background. What I really want to focus on is the rendition of medically unnecessary testing by chiropractors. I'm not talking about basic X-rays or manual range-of-motion testing.

I am talking mostly about the expensive nerve conduction-type testing or radiological studies that cost hundreds or thousands of dollars. There are two types of business models for this type of testing.3

Some companies sell testing equipment to chiropractors stand-alone or ancillary to a consulting relationship. The very expensive equipment usually can be financed, so the monthly cost is not excessive. Usually the sale comes with instructions on how to use (and how often to use) the equipment. Usually there are some verbal or written projections showing how much money the chiropractor will make, and how he or she will be able to pay off the entire cost of the equipment 14 minutes after installation (a small exaggeration, perhaps). I'd be very skeptical of this kind of pitch. In my view, there is just not that much legitimate money to be made off of high-end testing that a chiropractor can operate and interpret in a typical chiropractic setting.

The second model involves equipment that requires specialized interpretative skills, most usually expert radiological skills. This model comes in two flavors: mobile diagnostic labs and referrals to outside facilities. Under both flavors, the tests are performed and/or interpreted by some professional outside the chiropractor's office. The testing companies usually handle the billing for these tests. The chiropractor either receives a fee for administering the test or the technical component, or gets a substantial rent or usage fee for the use of his or her office. Whatever the fee is called, most of the time, it is really just a disguised kickback paid to the chiropractor for referring the patient to the testing service.4

Apart from the kickback aspect, the problem is the medical necessity of the testing. Obviously, all or most chiropractors will have occasions when sophisticated and expensive testing will be needed. However, if you have the usual chiropractic practice (i.e., you see the garden variety of lifestyle injuries, together with a mix of workers' comp and auto cases) and you are sending all or even a substantial portion of your patients for high-end testing, and receiving some kind of fee from the testing, then in my opinion, the feds will take the position that you are committing fraud - specifically, that you are violating the HIPAA criminal statute (18 U.S.C. 1347) by engaging in a scheme to perform or obtain compensation for medically unnecessary testing.

Moving from the macro level to decision-making for a particular patient, I think there are a couple of fairly obvious guidelines. I guess the most basic rule involves when to perform a test on a patient beyond what is necessary to establish a working diagnosis. I think that absent some highly unusual circumstance, a test should not be ordered unless it will likely modify the course of treatment

Some of you might ask about testing for the purpose of documentation of condition or improvement. Experts tell me that just saying a test is done for the purpose of documentation is not enough. There should be some published credible guideline or a clear, logical basis for the decision to do the testing. I understand that many of the high-tech tests, such as MRIs, have come under scrutiny due to the fact that the findings on these films are inconsequential to the condition at hand, and lead to wrong decisions by practitioners.5

Actually, perhaps the best way to stay away from overtesting is to make sure your testing practices are consistent with some published guidelines. Doing so is about as close as a chiropractor can get to absolute immunity against overtesting.6

Another good defensive rule of thumb is use to the same standard for ordering testing on cash and insurance patients. You have a problem if all or most of your insured patients get the full array of testing, while the cash patients get adjustments, therapies and one full-body X-ray. I have heard the justifications for these discrepancies, but I am here to tell you that the feds don't buy it. This is an invitation to unwanted government attention.

Perhaps the most basic injury amenable to chiropractic treatment is the strain/sprain. I remember one of the chiropractic luminaries (I think it was Brad Hayes, but it might have been Arthur Croft or Dan Murphy) telling me that the body will heal itself of these types of injuries, but that a chiropractor can relieve pain in the short term and shorten the healing time. Because of this, as a lawyer and consumer, I do not see a strong reason for a lot of expensive testing for the usual strain/sprain, especially once the diagnosis has been established and especially if the patient is improving clinically. That is my view, anyway.

You might ask, "What are the chances of the feds catching one little chiropractor in my small town or big city?" Better than you think. I believe that unnecessary testing investigations against chiropractors will come from the top down, rather than from the bottom up. There are already a number of fraud and racketeering civil cases brought by insurance companies against some of the big testing and consulting entities. I think the federales are laying low in the weeds, allowing the plaintiffs in those cases to do the initial legwork. I know the feds are actively looking at some of these companies and quietly building criminal cases against them.

Some time in the next year, I expect there to be one or several massive criminal cases brought against the testing companies and their affiliates. Because of the large amount of money generated by these companies, the "loss" that drives the federal sentencing will be staggering, and these defendants will be looking at serving 20 years or more in federal prison upon conviction. As a result, some of the targets/defendants will cut deals incriminating the practices and their clients in exchange for a more reasonable sentence.

At that point, the feds will just start knocking on the doors of these companies' chiropractor clients. Faced with testimony about illegal kickbacks, payoffs and obvious overtesting, the average chiropractor who participates in this type of scheme likely will plead guilty, rather than face the possibility of substantial incarceration. A guilty felony plea will result in license suspension or revocation; disgorgement and restitution of all monies collected from the testing; and, more likely than not, a prison term of one to three years.

So, the next time you think about ordering that nerve test or radiological study for that cervical strain/sprain patient who has shown continuous clinical improvement, you might want to think again.


  1. Chiropractic Services in the Medicare Program: Payment Vulnerability Analysis. Issued by the Department of Health and Human Services, Office of the Inspector General, June 2005. OEI-09-02-00530, pp. 11-12.
  2. OK, you can ask me. The source, according to the chart, is something called the "Medical Review of Year 2001 Claims by Practicing Chiropractors."
  3. This entire discussion is predicated on the chiropractor's obtaining a direct or indirect financial benefit from the testing of the patient. 'Referral for testing in which the practitioner receives absolutely no financial benefit would not involve insurance fraud; at least, I have never seen such a case.
  4. Kickbacks are of course illegal (in the sense of being criminal) under federal law, but only if a federal pay program is involved. In other words, there is no HIPAA-type "federalization" of kickbacks involving nonfederal payers. That's the good news. The bad news is that some states have anti-kickback laws. The worse news is that if a practitioner receives a $100 payment and $90 of it is for legitimate services, but $10 is determined to be a kickback, it's a kickback. The even worse news is that for federal sentencing purposes, the "loss" that drives the jail terms in sentencing is not only the $10 kickback or the $100 payment, but also includes the full value of the amount billed to the federal pay program for the service. So under federal law, small kickbacks involving federal pay programs have large sentencing consequences.
  5. See, for example, Boden S, Davis D, Dina T, et al. Abnormal magnetic-resonance scans of the lumbar spine in asymptomatic subjects; Jensen M, Brant-Zawadzki M, Obuchowski N, et al. Magnetic resonance imaging of the lumbar spine in people without back pain. N Engl J Med Jul 14, 1994;331(2):69-73.
  6. For example, the American College of Occupational and Environmental Medicine provides testing guidelines that are widely used in workers' comp cases. They recommend electromyography (EMG), including H-reflex tests, to identify subtle, focal neurologic dysfunction in patients with low back symptoms lasting more than three or four weeks. However, discography is not recommended for assessing patients with acute low back symptoms. ACOEM Guidelines, chapter 12, page 303. They have a position on the proper use of most other diagnostic tests.

Richard Jaffe, Esq.
Houston, Texas|


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