New York’s health care market can look like a sure bet — until an investor discovers that the state draws hard lines around who may own, control or profit from the practice of medicine in the state. Because New York closely polices non-physician involvement in physician practices and other clinical operations, investors must structure transactions with care, paying close attention to licensing, ownership, management arrangements, fee-splitting restrictions and who truly controls clinical decision-making.
Compliance concerns arise when a deal operates in a way that regulators view as disguising improper control or remuneration. Failing to follow these rules can invite scrutiny from state and federal authorities and, in serious cases, trigger allegations of health care fraud. Investors who plan early, document roles clearly and obtain experienced legal guidance can pursue opportunities while reducing the risk of enforcement actions and reputational harm.
What could go wrong?
In a recent example, an investor is facing allegations of health care fraud that could cost millions and, depending on how aggressive the prosecution pursues the case, potential imprisonment. The defendant faces allegations he led a complex fraud scheme that involved billing insurance programs to cover medical costs for car accident victims. The prosecution claims he billed these insurance companies for services that were never provided, excessive or medically unnecessary. Furthermore, they state that defendant, a non-physician, illegally owned the medical corporations that were submitting these bills.
In New York, it is illegal for non-physicians to own medical practices. There are some ways that non-physicians can invest in health care, such as through the support of administrative functions like billing or facility management, but physicians must retain full control over the practice of medicine. In this case, the prosecution argues that the defendant was not just an investor in administrative areas of these medical practices but actively impacted health care decisions through the submission of claims for benefits from these private insurers.
If the prosecution builds a successful case, the accused faces decades of imprisonment.
The case serves as a reminder for interested parties to invest carefully when looking at opportunities in the health care sector in New York. When done wisely, these investments can be both profitable and beneficial for local communities. However, a single misstep can trigger allegations of violations of federal and state regulations.
Attorney John Rivas is responsible for this communication.
