toc_119-181 5/25/04 11:03 AM Page 175
Legal Matters
A Legal Audit for Integrative
Practice
Recognizing and Working with Legal Issues—Part II
Alan Dumoff, J.D., M.S.W.
n the last issue, I introduced the concept of a legal audit for
I integrative or alternative and complementary medical
(ACM) practices. An audit is an important tool for protect-
ing legal health, as practitioners are too often unaware of the
reach and complexity of requirements that affect all aspects of
practice. This heightened risk is primarily true for physicians
who incorporate ACM practices into their offerings, but non-
physician practitioners face a considerable amount of regulation
as well, and are more likely to operate in blissful ignorance of
their legal obligations.
Misconceptions about legal compliance are frequent, in part
because these issues are inadequately taught in most practitioner
training programs. Finding legal counsel that is experienced in
ACM practice is also a fairly daunting task, and while profession-
al associations can be good sources of legal advice, the quality of
these recommendations can be uneven. The checklists provided
in this two-part article are intended to help to identify and at
least call attention to areas that may require evaluation and
improvement.
In some instances, merely adding language to a form, such as
authorizing treatment or noting limitations upon the scope of
care that will be provided, can add significant protections. Sim-
ple changes in office procedure, such as how chart notes, orders,
or follow-ups on referrals are done, can also improve a practice’s
legal health. Other areas are, of course, more complicated, and
may require thoughtful review, such as changes in how practi-
tioner contracts are structured or how experimental treatments
are billed.
An advantage of having an attorney or health care consultant
conduct an audit of a practice is that it can not only help identify
areas of risk that require improvement, but documentation of the
audit can show that the practice is making an effort to practice
legally. This can be useful if questions are raised by a medical or
professional board, a federal regulatory agency, or even in some
malpractice actions. It can also be helpful in some Medicare situa-
tions, in which a good faith belief that a billing practice is appro-
priate can not only provide a defense against a fraud claim, but
actually entitle a practitioner to keep payments received until
notice is given that a practice is not covered.
Part I provided checklists for three areas: (1) therapeutic prac-
tices, including medical/professional board concerns; scope of
practice and standard of care issues; food, drug, device and sup-
plement regulation; (2) risk management, including the use of
informed consent forms, quality assurance considerations, appro-
priate referral practices, malpractice coverage; and (3) collegial
interaction, including primary care obligations and the delegated
authority.
The checklists provided in Part II focus on issues of business
structure, billing practices, and medical recordkeeping. Many of
these issues have been discussed in some detail in this column in
previous issues. Business structure, for example, can effect obvi-
ous matters such as how profits and liabilities are shared, and
less obvious issues such as whether payments to practitioners
can violate kickback and self-referral prohibitions.1 A wide array
of arrangements can raise kickback issues, such as marketing
contracts based upon increases in patient volume or discounts to
patients for referring other patients. Referral to laboratories in
which a physician has an ownership interest can also raise legal
problems.
Self-Referral to Laboratories
To provide a sense of the complexity in this area, one busi-
ness arrangement that potentially violated Stark self-referral
prohibitions for laboratory work was an integrative clinic that
set up an internal laboratory as a separate entity, referred to it
themselves, and contracted out its services to physicians who
were independent contractors at the center. If the physicians
who owned the clinic and the laboratory received fees as a per-
centage of work sent to the laboratory, would this violate the
Stark self-referral prohibition? I called the attorney at the Cen-
ter for Medicare and Medicaid Services (CMS, formerly Health
Care Financing Administration) responsible for enforcing Stark,
and her answer was: “I don’t have the slightest idea!” These
kinds of situations are too common when applying hundreds of
pages of regulations aimed at institutional medicine to ACM
practice settings.
175
toc_119-181 5/25/04 11:03 AM Page 176
176
Nonphysician Practitioners’
Common Disciplinary Areas
Nonphysician practitioners, ranging from those who diagnose and
treat within a scope of practice defined by state law—such as
acupuncturists, chiropractors, homeopaths, naturopaths, nutritionists or
nurse practitioners—to those whose services are constrained to
delivery of a technical service, such as colon hydrotherapists or massage
therapists, do not face the same degree of legal exposure as do medical
physicians. Nonetheless, these practitioners still face a considerable level
of regulatory concern or potential exposure to civil liability.
For nonphysicians whose scope of practice includes an independent
ability to diagnose and treat conditions, areas of key liability include:
• Missed diagnosis, including failure to detect a medical diagnosis if
treatment was conducted in a manner in which a reasonable patient
could have relied upon the practitioner for a broad range of care
• Failure to refer to a medical physician, or to follow up in a referral
that was made, where signs or symptoms raised an issue that
would have alerted a similarly trained practitioner that medical
attention might be indicated
• Recommending treatments that conflict with the advice of the
patient’s physician
• The use of medical devices that have not been approved by the
Food and Drug Administration
• Poor documentation in progress or SOAP [Subjective Objective
Assessment Plan] notes, due to illegible writing, the use of indeci-
pherable shorthand phrases, lack of explanation as to the basis for
treatment, or poor follow-through on troubling signs or symp-
toms, laboratories.
These practitioners, along with those whose offer a technical
service such as body work, most commonly face the following areas
of liability:
• Inappropriate sexual contact with patients/clients, or other
social/dating activity with clients
• Exceeding scope of practice, such as a massage therapist perform-
ing range-of-motion techniques reserved for physical therapy.
Another question this scenario raises is whether the independent
physicians in such a practice can receive a percentage of the labora-
tory tests that they order. The answer here is clearer; the better
practice is to pay the physicians a commercially reasonable flat rate
for interpretation of tests, in which case the payment is for work
completed rather than a volume-based inducement to refer to the
laboratory. This also highlights the impact that structure has upon
regulatory compliance. Where practitioners are all employees of a
physician practice with its own laboratory, rather than a laboratory
organized as a separate entity, this concern is easier to manage.
Business Structure and Contracting
Business structure and contracting matters for the solo non-
physician practitioner is of course much simpler, but can raise
issues as well. One misperception is that incorporating a prac-
tice insulates a practitioner from malpractice liability. Malprac-
tice is an action against an individual who causes harm in his or
her professional capacity, and is always against the individual
regardless of whether that person works within a professional
or other corporation. What the corporation may be able to do,
however, is to protect assets that are held by the corporation in
the event of a judgment.
ALTERNATIVE & COMPLEMENTARY THERAPIES—JUNE 2004
Managed Care
Another tricky situation often overlooked arises when a practi-
tioner has signed an agreement to participate in a preferred
provider organization (PPO) or other arrangement with a third-
party payor in a conventional setting. When the practitioner then
wishes to branch out into delivering ACM services, the PPO con-
tract can restrict whether care can be delivered to patients who
belong to that PPO. For physicians, this raises a problem because
the contract requires that the physician only offer medically nec-
essary services to PPO patients.
If the ACM services are considered by the PPO to be unneces-
sary care, this can preclude such services. This can even prevent
physicians from going to other sites, even part-time, to offer such
services, as the PPO contract can reach encounters with its bene-
ficiaries no matter where the service is delivered. This is one
instance in which incorporating can help; where the PPO will
allow it, contracting as a P.C. rather than personally can allow
the physician to work outside the PPO agreement when under a
different corporate entity.
Medicare and Insurance Claims
The proper submission of Medicare and insurance claims is
another area of major importance to practice success, and is cor-
respondingly one of the greatest areas of exposure. There are a
number of areas of concern; some, such as problems with proce-
dure coding, have been addressed in this column in some detail.2
Improper use of codes can cause outright denials or requests for
extensive records and justification. Codes can also demonstrate
that a practitioner is exceeding scope of practice, such as would
97110 (range of motion therapy) by a massage therapist. This can
both be a basis for denial of payment, and in egregious cases, for
referral to the professional board.
The Health Care Record
An audit of the medical or health care record is the primary tool
when looking for legal problems. This is not just the first place a
professional board or plaintiff’s attorney will look, but as noted in
Part I, it provides a good snapshot of many of the issues in the
practice. This is the third checklist in Part II, not only completing
the six lists provided in this two-part article, but also providing a
good place to start when conducting a self-audit of one’s practice.
Conducting a Self-Audit
While the ideal course of action would be to locate a health
care attorney, preferably one with some experience with the rele-
vant practices, a practitioner can provide some improvement in
his or her legal outlook by performing a self-audit. A self-audit
can be done by reviewing all available forms, randomly chosen
health care records, insurance claim submissions, practitioner
contracts, and other paperwork in the office, as well as an inven-
tory of all of the therapies, devices, products for sale, and any
other practices provided to patients.
toc_119-181 5/25/04 11:03 AM Page 177

ALTERNATIVE & COMPLEMENTARY THERAPIES—JUNE 2004 177

When performing a self-audit, a practitioner should attempt to
clear his or her mind of the preconceptions followed in the prac-
tice, and approach these materials as an “outsider” to the prac-
tice. If done honestly, the most frequent, immediate reaction will
be a recognition of the limited ability to decipher the progress
notes in patient records. This can be a matter of penmanship, a
matter of shorthand phrases known only to the practitioner, or
simply missing information.
Even more critically, the records may show a lack of the coher-
ence that is central to good recordkeeping. A sign or symptom that
could suggest a significant medical condition may be noted with-
out follow-up or referral, a problem for nonphysicians as well as
physicians. A laboratory outside of normal limits may go unmen-
tioned in the progress note. Treatment might be started and then
discontinued without any comment about its effectiveness or why
it was discontinued. A third party reviewing the notes should be
able to tell what story is told by the course of the patient’s care,
from the presenting issues through diagnosis and treatment.
The rationale for the diagnoses and treatment should be clear
from the chart. Generally, the expectation that a third party could
decipher a health record refers to a reviewer with the same cre-
dentials as the practitioner. This can be clouded in practice, how-
ever, by differences in training. An osteopath might be reviewed
by an allopathic physician, a five-element acupuncturist by a col-
league whose training is in Traditional Chinese Medicine, or a
massage therapist specializing in neuromuscular therapy could
be reviewed by a State board member whose training was in
What Part 1 Covered
In Part I of this article, published in the last issue of Alternative &
Complementary Therapies (Volume 10, Number 2, 2004; pages 115),
checklists were provided for the following areas:
• Therapeutic Practices Review
Inventory Practitioners, Procedures, Services, Drugs, Supplements,
Devices, Laboratories
• Risk Management Assessment
Review Practice Risks ,Malpractice Insurance, Informed Consent Prac-
tices, Marketing Materials, Quality Assurance Efforts; History of Com-
plaints, Referral Practices, Practitioner and Credentials
• Scope of Patient Care/Collegial Interaction
Review Delegation, Supervision, Orders, Information Sharing, Referral
Practices

Checklist 4: Business Structure Review

Review Organizational Structure; Track Payments from Patients to Center and Practitioners; Review Practitioner
and Payor Agreements and Participating Provider Agreements

Sources of regulation: CMS, federal fraud statutes, state health care, corporation, insurance and contract law

✔Organizational structure, including ownership, practitioner/supplier contracting: Organizational structure and contracts between clinic
owners and providers need to protect both parties and conform to a number of regulatory requirements:
• Limitations of liability/risk management
• Liability insulation via separate structures, as appropriate
• Quality management to reduce risk of adverse incidents
• Steps to prevent negligent hiring, including credential review, other due diligence.

✔Kickback and self-referral prohibitions: These concerns are often overlooked, but may affect the legality of:
• Employee ownership, profit-sharing arrangements
• Percentage/volume-based payment arrangements with practitioners
• Percentage/volume-based payment arrangements with marketing companies
• Percentage/volume-based payment arrangements with off-site billing companies
• Organization of internal laboratory services
• Discount arrangements with laboratories
• Discount arrangements with supplement and device manufacturers
• Referrals for laboratory/physical therapies, etc., where physician has an ownership interest (Stark liability).

✔Organizational entity concerns (Corporation, Partnerships, LLC, etc.): The organizational structure should be accomplished to ensure:
• Compliance with doctrine prohibiting corporate practice of medicine (structured to avoid claim that the corporation is overseeing medical
decisions)
• Entity structure to ensure minimal exposure to liability
• Contracting with staff in manner that reduces liability.

✔Participating provider agreements with payors: Practitioners who enter such agreements may have conflicts when:
• Operating a cash practice for ACM services when seeing patients who are members of the plan.

✔Steps to minimize these concerns, such as:

• Careful review of flow of ownership, money, contracts for red flags
• Careful structure, such as use of management service organization
• Meeting group practice exception to avoid Stark concerns.

LLC, Limited Liability Company; ACM, alternative and complementary medicine.

toc_119-181 5/25/04 11:03 AM Page 178

178 ALTERNATIVE & COMPLEMENTARY THERAPIES—JUNE 2004

Swedish massage. A practitioner need not bend over backward
to make notes generically broad, but should be aware that clarity
is one of the best legal defenses. Striving for such clarity may, in
addition, improve one’s practice.
Given the expense involved in obtaining legal review, and the
paucity of attorneys experienced in ACM issues, it might be use-
ful for nonphysicians in solo practices to try a buddy system
approach, with a trusted colleague who has a similar practice.
After pulling together copies of the practice forms and inventory
of therapeutic practices, and random charts, each practitioner
reviews the other’s practice.
Caution does need to be taken here about client confidentiality,
a matter that is somewhat different depending upon whether the
practice is under the jurisdiction of the Health Insurance Portabili-
ty and Accountability Act (HIPAA) privacy guidelines (most small
allied ACM practitioners are not; see box entitled HIPAA Privacy
Regulations: Who Has to Comply in Part I last issue, on page 110).
If the practice is under HIPAA, it is advisable to have the

Checklist 5: Billing Practices Evaluation

Review Superbills, Medical Records, Claims and EOBs, Medicare Status, Participation Agreements, Claim Submission Methods

Sources of law: Medicare requirements, state insurance law, HIPAA privacy requirements (if applicable), payor participating agreements.
✔Coverage issues: A great many complex issues affect whether ACM services are reimbursable. Legal review first ensures that money is not
collected by means that violate the law, and then determines if there are billable services/methods that are overlooked. Review includes:
• Noncovered and excluded services: many services, such as acupuncture, massage therapy or homeopathy are generally expressly noncovered
• Many services covered with a conventional basis are noncovered when used in functional approaches; for example, vitaminB12 for fatigue is
not generally covered, while it is reimbursed for documented vitamin B12 deficiency
• Medically unnecessary care: differences in viewpoint bring denials for many claims; for example, homeopathic care may be denied as medically
unnecessary even when provided by a physician.
✔Fraud and abuse concerns: Misrepresenting the nature of services performed can lead to insurance audits or fraud and abuse investigation;
practitioners can unwittingly violate these laws:
• E&M codes: Notes support level of office visit; an involved area including complexity of decision-making, morbidity, and extent of systems
review
• Upcoding: Billing for a higher level of office visit than can be justified is a common fraud concern
• Unbundling: Some charges are assumed to be part of a service and cannot be billed separately
• Charges: Discounts, waiving copays, professional courtesies can be considered fraud, as it implies that the practitioner has overstated the
usual charges
• Claims: Submitting claims for payment that the practitioner knows are considered medically unnecessary
• Laboratory discounts: Laboratory discount arrangements need to be correctly structured.
✔CPT code use for ACM services: Nonphysicians can generally use CPT codes within their scope of practice unless specifically reserved for a
physician, but the code must fit the service. Concerns include:
• Codes are frequently misapplied, such as would 95831 (muscle testing) for applied kinesiology
• Codes can exceed scope of practice, such as would 97110 (range-of-motion therapy) by a massage therapist
• E&M coding for ACM consultations can be done, but must fit requirements regarding complexity, morbidity, and systems review
• ICD-9/CPT pairs: Insurance companies scan for medical necessity by checking if procedure codes are appropriate for the diagnosis.
✔“Incident to” billing: Nonphysicians may be able to bill under the name of a physician if requirements are followed, including:
• Physician supervision, initial patient contact, order, countersignatures of notes, physician in-suite
• Billing professional component services requires more care than technical component.
✔Medicare status: Physicians and other Medicare-eligible practitioners are nonparticipating by default, can participate, or opt out and privately
contract with patients. Medicare status should be carefully considered, including:
• Range of covered versus noncovered, medical necessity of services.
• Opt-out must be properly maintained, and Medicare rules followed for referrals to potentially covered services.
✔Medicare issues: Submitting claims to Medicare is complex, and errors or inadvertent fraud are easy to commit. Review should include:
• Submission for claims that fully represent care delivered, whether submitted for payment or denial, and Medicare rulings about any unusual treatment
• Electronic submission of claims unless under 10 full-time equivalent staff
• Adherence to limiting fees unless services are noncovered or the practitioner is opted out
• Notice to beneficiaries when services may be noncovered
• Adherence to “same day rules” and other Medicare-specific requirements.
✔Steps to minimize these concerns, such as:
• Reexamination of coding, billing methods, review of carrier, insurer policies
• Careful consideration of best Medicare status
• Structures such as splitting billing between covered and noncovered services (such as billing smaller, covered office visit and non-coded,
noncovered portion for cash payment.

EOB, Explanation of Benefits; HIPAA, Health Insurance Portability and Accountability Act; ACM; alternative and complementary medicine; E&M, Evaluation & Management; CPT, Current
Procedural Terminology; ICD, International Classification of Diseases.
toc_119-181 5/25/04 11:03 AM Page 179

ALTERNATIVE & COMPLEMENTARY THERAPIES—JUNE 2004 179

Checklist 6: Medical Record Review

Review Medical Record for Proper SOAP Notes, Orders, Authorization to Treat,
Informed Consent Privacy/Release and Other Needed Forms

Note: Many of the concerns about a practice can be detected in the charts.
Sources of law: State medical board requirements, Medicare and state insurance requirements, HIPAA/privacy requirements

✔ Review paperwork for completeness and support of practice:

• Patient name, DOS on each page
• Supporting documentation, note for each DOS billed
• Legible progress notes using SOAP format
• Orders in chart for nonphysician work, laboratories, as needed
• Any necessary countersignatures
• Authorizations to treat, financial responsibility, practice disclosure forms
• Informed consent forms for ACM treatments
• Privacy forms/releases/authorizations, either specific to HIPAA or non-HIPAA practice as appropriate.

✔Review charting for billing concerns, including:

• SOAP entry, orders, for each date for which there is a bill, and vice versa
• ICD-9/CPT pairs reflect medically unnecessary care
• Consistency of charges for CPT codes
• CMS 1500 form correctly filled out.

✔Substantive concerns:
• Follow-up documented for abnormal findings, laboratories
• Documentation of reasonable basis for decisions, particularly for ACM approaches used by physician.

✔Special concerns with shared charts:

• Balancing privacy protection and shared requirements
• Ability of practitioners to decipher each other’s notes.

✔Steps to minimize these concerns, such as:

• Conducting regular internal audits of practitioner charts
• Developing methods of cross-training, cycling charts as needed among practitioners
• Training of staff about privacy concerns.

SOAP, Subjective, Objective Assessment Plan; CPT, Current Procedural Terminology; DOS, Date of Service; ACM, alternative and complementary medicine; HIPAA, Health Insurance
Portability and Accountability Act; ICD, International Classification of Diseases, CMS, Center for Medicare and Medicaid Services

reviewing practitioner sign a business associate contract (note:
this contract is available at: www.hhs.gov/ocr/hipaa/contract
prov.html). If the practice is not under HIPAA, a standard
confidentiality agreement form should be signed instead,
which states that the purpose of the review is to improve the
quality of care provided for the patients. The exception, in
which special care should be taken, is if the health records
include mental health information. In this case, any audit
involving confidential information should be done with the
appropriate professional.
Conclusion
Self-audits will often raise a number of questions whose
answers are not immediately apparent. The process of document-
ing the review and identifying questions as they appear shows
an effort on the part of practitioner to practice legally. A search of
the World Wide Web, particularly of the sites noted in Part I (see
box entitled Web-Based Resources for Legal Matters, on page
111), can often provide some direction. Medicare, insurers, pro-
fessional associations, the State boards and federal regulatory
agencies can all provide assistance, but answers to questions
raised by this exercise may still be difficult to come by. But dis-
covering potential issues through these checklists, and then nar-
rowing the questions that may need to be presented to an
attorney, can be an effective way to prevent unwelcome legal
problems from appearing. ■
References
1. Dumoff A. Regulating professional relationships: Kickback and self-
referral restrictions on collaborative practice. Altern Complement Ther
2000;6:41–46.
2. Dumoff A. CPT coding for ACM services: A short course. Altern Com-
plement Ther 2000;6:152–161.
Alan Dumoff, J.D., M.S.W., is an attorney practicing in Rockville, Mary-
land, specializing since 1988 in the legal issues regarding the delivery of
ACM care. He can be reached at alandlmc@aol.com
To order reprints of this article, write to or call: Karen Ballen, ALTERNA-
TIVE & COMPLEMENTARY THERAPIES, Mary Ann Liebert, Inc., 2
Madison Avenue, Larchmont, NY 10538-1961, (914) 834-3100.