Why is the Justice Department Involved in the Birth Tissue Q-code Clawback?

Published on Jan 21, 2023

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If you read this blog, you know about the birth tissue Q-code debacle. Basically, hundreds of millions were billed to Medicare for clinical indications that weren’t covered, prompting one of the largest clawbacks in CMS history. Now that this is in full swing, the really interesting part is that I keep hearing that physicians are hosting meetings where justice department lawyers and their corporate or personal counsel are present. So why would justice be involved at all when there are RACs that can easily claw back this money? Let’s dig in.

The Birth Tissue Q-code Scam

Several years ago, amniotic and umbilical cord tissue vendors applied for and were issued Medicare Q-codes for product reimbursement. Many creative descriptions about the use of these products were snuck into that process, with many suggesting that these products could be used to treat pain or arthritis. The problem was that the FDA, who has a right of refusal over these code approvals, was asleep at the switch, and many were rubber-stamped. These companies then hired sales reps to hawk this stuff to gullible doctors who began using specialized billing companies to get reimbursed from Medicare, typically at about $4,000 per 2 ccs. Many doctors used multiple vials per treatment, so it wasn’t uncommon for doctors to get paid 8-16K from Medicare for these treatments. There was just one little tiny winy problem, Medicare’s guidelines never authorized the use of this stuff for these diagnoses. Hence the payments were authorized by confused clerks at Medicare who only ever read the creative Q-code descriptions or by using the right combination of incorrect or creative codes to fool CMS’s computer systems.

By the time this was all done, and Medicare began issuing clawback notices, hundreds of millions had been paid, making this one of the program’s largest scams ever. CMS initially issued a blanket statement about non-coverage. However, one of the birth tissue companies involved sued CMS to block the clawback based on the grounds that the claims should be adjudicated one by one rather than all denied at once. CMS then changed its position to the stance that it would review (and deny) the claims one by one.

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My Calls

Since I have been standing in the middle of blowing the whistle on this scam for years, I get calls all the time from various players involved in the clawback. One set of calls recently involved attorneys who are representing medical providers in civil cases to claw back the money paid. However, these meetings are very different than what these attorneys have seen in past clawback scenarios involving a RAC. Why? Multiple members of the justice department are also there and asking questions. So why would justice department attorneys take time out of their day if all they want from these providers is the money back? After all, isn’t that what a RAC gets paid to do?

The RACs are Salivating

The average RAC (Reimbursement Audit Contractor) is a private company that reviews the billing of medical providers to determine if claims were overpaid or in error. When they review a doctor’s office notes to see if a follow-up visit should be a 99213 or 99215, they take home a percentage of the $40 difference between the codes. The numbers are similarly small when they decide that a $200 ultrasound fee was billed against CMS guidelines. However, in the case of the Q-code scam, the numbers per claim are MUCH, MUCH bigger.

The RACs are incented financially by getting paid around 14-17.5% of every dollar recovered. With claims that are easily in the 4-16K range a piece, it would be quite profitable for a RAC to hire a small army of nurses to review each claim and deny these Q-code payments one by one. So why would the justice department need to be involved if the clawback can be orchestrated by the RACs? I have a theory.

Why The Justice Department is Present at these Meetings

What happens when a doctor gets a RAC letter? They are certainly freaked out because they may have to pay lots of money back, and maybe they hire an attorney to help. However, what happens when someone from the Justice Department calls the office and wants to question the doctor? That doctor is definitely getting an attorney because there is a potential threat of criminal prosecution.

Now the scenario is very different than the RAC letter. With that threat, the average provider will be very cooperative in answering questions. What kind of things might the justice department want to know in this situation? What kind of claims were made by the birth tissue manufacturer or their representatives? What collateral did they send you? What’s your relationship to this specialized billing company that the manufacturer told you to use? What did they promise you? Can I see the contract that you signed for the manufacturer’s “reimbursement guarantee”? This is just a shortlist.

So IMHO, the reason to involve justice in these civil reimbursement claims is to build a criminal case against the ringleaders. Who is likely on that list? The CEOs and executives of the birth tissue companies, the sales reps, and the billing companies that were specially contracted to submit these fraudulent claims.

The upshot? The attorneys I have spoken to have all said that they expect to see a justice department press conference at some point. You know the scene. Big graphs and charts announcing the criminal charges against the ring leaders with justice crowing about the big money they will be returning to the Medicare system. So it looks like the last chapter of the Medicare Q-code scam will have two parts. The first will be one of the biggest financial recoveries in Medicare history, with some of the bigger clinics likely declaring bankruptcy. The second will be perp walks of birth tissue manufacturers, billing company execs, and hopefully, the guilty sales reps.