Sam Crocker of Gardere & Wynne, Alan Meisel,
Rep. Dianne White Delisi, Dean Stephen
Zamora, and Mark A.Rothstein
Special Section on Health Care Fraud and Abuse
Institute Launches New Web Site Featuring Health Law Perspectives: Analyses of Recent Developments in Health Law
In February 1998, the Health Law & Policy Institute launched its new web site. The web site features the Institute's Health Law Perspectives: Analyses of Recent Developments in Health Law. Health Law Perspectives is continually updated with articles prepared by the Institute's faculty and scholars.
Some of the articles currently available in Health Law Perspectives include: Casey Martin and the ADA; Court Upholds Right of Genetic Privacy in Workplace; Prohibitions on Genetic Discrimination in Insurance and Employment; OIG's Compliance Program Guidance for Hospitals; Proposed Missouri Bill Would Allow Inmates to Avoid Death Penalty by Donating Organs; Supreme Court to Decide Whether Asymptomatic HIV-Positive Status is Disability Under the ADA; and Texas Department of Health Considers Including Patient Names in Confidential HIV Case Reports.
The web site also contains information about the Institute's academic programs, faculty, research, publications, and other activities. Health Law News is available on the web site, as are the executive summaries of studies conducted by the Institute.
The web site can be found at http://www.law.uh.edu/healthlaw.
Ken Bentsen will be Keynote Speaker at Health Law Teachers Conference Hosted by Institute
U.S. Representative Ken Bentsen will be the keynote speaker at the National Health Law Teachers Conference of the American Society of Law, Medicine & Ethics, which will be held June 4-6, 1998 in Houston, Texas and hosted by the Health Law & Policy Institute.
Congressman Bentsen was first elected to Congress in 1994 and was re-elected in 1996. Bentsen has focused on federal health policy as it relates to both increasing access to health care for working families and children and maintaining the federal commitment to academic medical centers. The Balanced Budget Act of 1997 included provisions implementing two separate pieces of legislation introduced by Congressman Bentsen, requiring Medicare managed care plans to contribute to the cost of graduate medical education in the same way as traditional Medicare and ensuring that senior citizens can purchase supplemental insurance, called Medigap, if they switch from a Medicare managed care plan to traditional Medicare. During the 104th Congress, Bentsen sponsored the Kennedy-Kassebaum health care bill during debate in the House.
The conference will feature a wide range of presentations and discussions on current issues in health law, health policy, and bioethics. For more information, please e-mail us at crupf@uh.edu. .
Health Law Program Ranked #1
U.S. News and World Report, in its March 2, 1998 issue, has ranked the University of Houston Law Center as the top law school in the country for the study of health law. The University of Houston health law program includes legislative research projects, interdisciplinary study, an LL.M. program, a J.D./Ph.D. program, a J.D./M.P.H. program, and various publications and lectures. The ranking is based on the opinions of deans and faculty at peer institutions.
Institute's First Annual Gardere & Wynne Health Law Lecture Held
On February 24, 1998, Alan Meisel of the University of Pittsburgh School of Law delivered the first annual Gardere & Wynne Health Law Lecture. Professor Meisel spoke on "Managed Care and Decision-Making at the End of Life." The lecture was underwritten by the law firm of Gardere Wynne Sewell & Riggs.
UH Students Awarded First and Third Place in Health Law Writing Competition
University of Houston law
students won first place and third place in the 1997 State Bar of Texas
Health Law Section Student
Writing Competition. This
year marked the 7th consecutive year that University of Houston students
captured first place in this competition.
Leslie V. Holland won top honors and $1000 for her paper entitled "The Ethical Debate Regarding Fetal Tissue Research and Transplantation." Frederick R. Parker's paper on "Genetic Testing and the Use of Genetic Test Results in the Managed Care Environment" placed third, and he won $500.
Mark Rothstein Presents University of Houston President's Lecture
On
February 11, 1998, Mark
A. Rothstein, Director of the Health Law & Policy Institute, presented
the University of Houston President's Lecture on "Genetic Secrets: Protecting
Privacy and Confidentiality in the Genetic Era." This lecture was
a part of the Elizabeth D. Rockwell Discover UH Lecture Series.
Health Law Organization Hosts Speakers
On February 26, 1998, the University of Houston Law Center's Health Law Organization (HLO) sponsored a presentation by Dax Cowart, an attorney from Corpus Christi, Texas, who addressed whether a competent patient should be allowed to refuse life-sustaining medical treatment. He spoke from personal experience as a severely burned and disfigured patient in the health care system. HLO is hosting a speaker on children's health issues on March 26, 1998.
SSI Advo-Kids Training Sessions Held at UH Law Center
The UHLC Public Interest Law Organization ("PILO") is currently participating with the Houston Bar Association in the Houston-area "Advo-Kids" Project. This project has been created to recruit and train volunteers who will provide pro bono representation for children and families that are being notified of the termination of their Supplemental Security Income ("SSI") as a result of recent changes in the federal welfare laws. Houston’s Social Security Office estimates that over 3,400 children in the greater Houston area will have their cases re-evaluated. Of these 3,400 children, the Social Security office estimates that 1,200-1,800 children will have their benefits terminated. Termination of benefits for these children will have a devastating impact for the children and their families, as they may lose their SSI payment and their entitlement to Medicaid.
This past fall, PILO hosted one of the SSI Advo-Kids training sessions at the University of Houston Law Center. Approximately 25 Law Center students and over 50 lawyers and paralegals from the Houston area attended the session. The participants have committed to represent a child who stands to lose his or her SSI benefits.
Publications. . .
S. Van McCrary
S. Van McCrary
Mary Anne Bobinski
Kathleen DeSilva (J.D. '80) has been appointed by Mayor Lee Brown to Houston's Metro Board. Ms. DeSilva, a quadriplegic, will be the first Metro Board member who is a regular user of MetroLift, Metro's services for people with disabilities. She has served as chairwoman of the MetroLift's advisory committee and is an attorney for The Institute for Rehabilitation and Research.
Kristi Schrode (J.D. '95) is an attorney with Fox, Bennett & Turner in Washington, D.C., specializing in health care, particularly legislative and regulatory matters pertaining to food and drug law.
Douglas J. Witten (LL.M. '97) recently had his article entitled "Regulation of "Downstream" and Direct Risk Contracting by Health Care Providers: The Quest for Consumer Protection and a Level Playing Field" published in the American Journal of Law and Medicine, Volume XXIII, Number 4 (1997). He is an associate on the Health Care Team at Long Aldridge & Norman LLP in Atlanta, Georgia.
Alumni, please let us know
what you are doing so we may include your information in future issues.
You can e-mail us at crupf@uh.edu.
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Special
Section on Health Care Fraud and Abuse
Introduction to Special Section on Health Care Fraud and Abuse
Lee Hamel
The arsenal of law enforcement tools available to the federal government to punish health care fraud and to recoup resulting losses is substantial. The existence of punitive sanctions gives the government the leverage to extract substantial settlements from providers. For individuals, criminal prosecution may result in fines, restitution and loss of liberty, license and livelihood. For businesses, criminal prosecution may result in fines, restitution, "probation," "community service," organizational "death," and criminal forfeiture of assets. On the civil side, businesses and individuals may be assessed $5,000 to $10,000 in fines and treble damages for each false billing, as well as the civil forfeiture of assets. Administratively, the HHS Inspector General can impose civil monetary penalties and exclude providers from participating in federal reimbursement programs, a "death sentence" to most providers today. All these potential sanctions influence large institutional providers to settle for large sums.
Today, law firms are adding "white collar" crime defense lawyers to their health care practice groups to help in advising their provider clients. Knowing whether a criminal prosecution is likely or supportable is a key piece of information in settling a dispute when criminal action is threatened. Further, criminal defense lawyers can help in shaping organizational voluntary compliance programs to detect, report, and punish employee fraud. Compliance programs are particularly important because the guidelines of the U.S. Sentencing Commission for sentencing business organizations give substantial credit to businesses with appropriate compliance plans that are seriously enforced.
Within these pages, Attorney General Janet Reno's call for aggressive law enforcement to improve this country's health care system is juxtaposed against J.D. Epstein's warning that much of current law enforcement involves what in the "old days" would have been handled as a routine billing dispute, but which today is being called "fraud" by prosecutors.
Professor Timothy Jost writes about the government's use of the False Claims Act, its qui tam (private whistle-blower) provisions, and the anxiety the 1997 Fifth Circuit decision in U.S. ex rel. Thompson v. Columbia/HCA will cause health care providers. J.D. Epstein observes that Congress's enactments are responsible for an overreaction to the crime problem, but Congressman Pete Stark sees it differently. He finds continuing loopholes to plug as providers maneuver to obtain a larger portion of federal health care dollars.
John Molesworth points out that the FBI is a beneficiary of Health Insurance Portability and Accountability Act funding. Such funding is credited for the government's success in recovering $1.2 billion of "receivables" for the last fiscal year and in excluding 2,700 "unsuitable health care providers." Lewis Morris of the Inspector General's Office mentions the February 1998 OIG Compliance Guidance for Hospitals and suggests that effective compliance plans, the adoption of which is encouraged by the OIG, make private enterprise and the government partners in enforcing any fraud and abuse measures. Finally, Robert M. Wolin predicts that recent changes under the Balanced Budget Act effectively eliminate small entrepreneurial providers from the market and are representative of fraud and abuse enforcement efforts. When combined with decreasing Medicare/Medicaid revenues and increasing costs of providing services and assuring regulatory compliance, these efforts will inextricably change the nature of health care in the United States.
Anti-Fraud Strategy of the Department of Justice
Janet Reno
United States Attorney General
Health
care fraud is one of the Department of Justice’s highest priorities. The
Department’s strategy revolves around two complementary components. The
first is a strong civil and criminal enforcement program, which has been
bolstered through new tools provided by Congress in the Health Insurance
Portability and Accountability Act. Second, and equally important, are
our efforts to prevent fraud, by encouraging doctors, hospitals and other
providers to adopt effective compliance programs and encouraging consumers
to be our partners in anti-fraud efforts.
The magnitude of the health care fraud problem is staggering. Each year, scam artists cheat beneficiaries and taxpayers out of billions of dollars. While most providers are law-abiding, the HHS Inspector General recently found that in 1996 the Medicare program alone overpaid hospitals, doctors and other providers by as much as $23 billion. Not all of this is lost to outright fraud, but we are losing billions of dollars each year to fraud.
We must respond aggressively not only to recover squandered taxpayer funds, and to penalize and deter those cheating the system, but also because fraud undermines the public’s confidence in the integrity of the Medicare and Medicaid programs. These programs provide essential medical services to millions of elderly, poor and disabled Americans. To ensure the continued vitality of these programs in the future, we must assure the public that these programs are not rife with fraud and abuse.
However, dollars alone do not tell the full story about the impact of health care fraud. Unscrupulous practices -- done solely to wring more money out of the health care system -- can pose a direct threat to the lives and health of patients. For example, we recently filed a complaint against three Pennsylvania nursing homes and their corporate owners for provision of inadequate care to their patients. Five patients died as a result of the inadequate provision of medical care, such as nutrition, wound care, and diabetes management, as well as placing one patient, who was unable to speak, in a scalding tub of 138 degree water.
The results of our efforts demonstrate how widespread the fraud problem is -- and how much more we must do. Since 1992, criminal health care fraud prosecutions and convictions have increased by over 400 percent. Last year, more than 2,700 individuals and businesses were excluded from federal health care programs -- a 93 percent increase over 1996. In addition, last year we recovered more than $1 billion in criminal fines, civil settlements, and administrative penalties; $968 million of these were returned to the Medicare Trust Fund. Money that would have lined the pockets of scam artists is now going instead to preserve the Medicare Trust Fund and to improve health care for millions of Americans.
Along with our enforcement success, we have increased our efforts to prevent health care fraud from occurring in the first place. In this area we have a two-pronged approach -- first, fostering efforts with the health care industry to develop effective compliance programs and providing guidance to the industry so they can follow the law, and second, empowering patients to be partners in our efforts to root out fraud and abuse.
On the compliance front, the HHS Inspector General is putting the finishing touches on a model compliance plan for hospitals, which included extensive input from the Justice Department. We also assist the HHS Inspector General in preparing advisory opinions on proposed business arrangements -- a mechanism that providers can use to make sure they do not run afoul of federal anti-kickback laws.
Finally, we are supporting efforts to educate and empower consumers. We are notifying patients about the Department of Health and Human Services’ fraud hotline, 1 (800) HHS-TIPS. The President also has proposed legislation that would require that information on how to report suspected fraud and abuse be included on every explanation of medical benefits that a patient receives from the Medicare Program. In this way, patients can be our partners in preventing health care fraud.
Our program in the health care area, then, is a balanced one. We want to prevent fraud before it occurs, but we will punish it when we cannot. Ultimately, we want to have a national health care system that is an international model for its financial efficiency as well as its medical efficacy.
Fighting Medicare Fraud: A Matter of Taxpayer Fairness
Fortney "Pete" Stark
U.S. Representative
From
the FBI’s widening criminal probe of Columbia/HCA to a five-fold expansion
this year of HHS’ fraud initiative known as Operation Restore Trust, signs
are clear: the federal government is moving aggressively to crack down
on health care fraud. Prosecutors believe that some sectors of the U.S.
health industry may be operating in much the same way that defense contractors
did in the early 1980’s -- with little regard for the reimbursement rules
that govern federal programs, and with no thought given to the resulting
gross waste of taxpayer dollars.
The public’s losses due to fraudulent billing schemes which bilk Medicare and Medicaid are finally being quantified. Unfortunately, they are staggering. In a recent nationwide audit, the HHS Inspector General estimated that Medicare lost $23 billion in claims that never should have been paid…in 1996 alone. But the times are a’ changin’.
Armed with more than $200 million in additional fraud control funding for FY 1997-98 that was provided by the bipartisan Health Insurance Portability and Accountability Act, HHS is joining efforts with the Department of Justice and other agencies overseeing federal health programs to recover taxpayer dollars. Using a series of effective regulatory and statutory tools that include the qui tam "whistleblower" private right of action, the government reported in January that it recovered more than $1 billion in criminal fines, civil judgments and settlements, and administrative impositions in 1997.
Nearly all of the money was returned to the Medicare hospital insurance trust fund -- a clear victory for the public. Yet providers are already trying to halt the federal government’s stepped-up fraud control program, claiming that "hospital billing mistakes" are being "inaccurately labeled…as intentional fraud." The facts simply don’t support that contention. For example, in one nationwide scheme known informally as the "72-hour window project," Department of Justice officials moved to recover tens of millions of dollars in overbilling for outpatient services only after hospitals had been warned on three separate occasions that the charges violated Medicare law.
In addition, hospitals are now trying to convince Congress to roll back the False Claims Act enacted during Abraham Lincoln’s administration to thwart contractor fraud, which is one of our most effective tools in bringing fraud schemes to the government’s attention.
Another important fraud-fighting tool, the physician self-referral statute that I helped to write, is also under attack. But the law -- which prohibits doctors from referring their patients to facilities in which they have an ownership or compensation interest and then billing Medicare for certain high-volume services -- may be central to the ongoing Columbia/HCA investigation in El Paso, Texas. An expanded FBI affidavit made public in mid-February noted that the for-profit hospital chain is under scrutiny for: billing fraud; cost report fraud; and "providing monetary and non-monetary compensation to physicians by Columbia administrators as a specific inducement for patient referrals to Columbia facilities which patient services were and continue to be paid for in part, or in whole by Medicare and/or Medicaid."
Additional and expanded indictments in the nationwide Columbia probe are expected soon, according to prosecutors. In one particularly troubling charge, the FBI says it has uncovered evidence suggesting that Columbia employees routinely worked with consultants to prepare shadow cost reports setting aside "reserves" for expenses billed to Medicare that the company apparently knew were non-reimbursable. According to the affidavit, "the purpose of the ‘reserve’ calculation is to permit Columbia to set aside funds to repay the Medicare program for the nonallowable overcharges included in the ‘as filed’ cost reports, in the event that the false claims were to be ‘caught’ by Medicare."
If the news reports are true, then the conduct of Columbia’s accounting firm in Florida is highly unethical. In December, I wrote to the U.S. General Accounting Office and the Financial Accounting Standards Board to highlight the firm’s possible role in helping to hide questionable billings. Indeed, the operation of a consultancy that suggests "creative" and aggressive billing by the same professional firm that certifies the accuracy of those charges appears unethical on its face.
Our current voluntary system to oversee hospitals and other health care facilities is appallingly weak. For example, the Joint Commission on Accreditation of Healthcare Organizations’ rate of denial of accreditation is less than one percent. Recently, a watchdog group reported that JCAHO has placed Columbia North Houston Medical Center on preliminary non-accreditation status -- but only after an anonymous hotline call convinced JCAHO that its routine review several months earlier had overlooked a high proportion of incomplete patient records. I favor a far stronger oversight system -- one that is run by and responsible only to HHS.
To that end, I have introduced legislation to require hospitals, home health agencies, skilled nursing facilities and other entities contracting with Medicare and Medicaid to fund annual independent compliance audits. This legislation is all the more critical in light of a declining administrative budget for the Health Care Financing Administration, and the higher costs to the agency of coordinating new managed care options for Medicare beneficiaries that will begin contracting with the program later this year.
Another legislative loophole that I am working to close concerns the now-common practice among hospitals to open freestanding clinics in far-flung locations, thereby availing themselves of Medicare’s more generous payment rates applicable for outpatient procedures. To curb this practice, a bill I am sponsoring would require hospital outpatient departments to be located on the same campus as an inpatient, acute-care hospital.
The savings that can be gained from anti-fraud proposals such as those outlined here are substantial. A measure that I have long backed would gear Medicare reimbursement rates for pharmaceutical drugs to the price actually paid by physicians rather than the average wholesale "sticker price" quoted by drug companies. That provision could save as much as $1 billion over five years. In 1996 alone, Medicare paid nearly half a billion more than it should have for 22 of the most common and costly drugs administered in inpatient settings, according to the HHS Inspector General.
To its enormous credit, the Clinton Administration is calling for Congress to enact a package of 10 fraud and abuse proposals that would save Medicare an estimated $2.4 billion over five years. Some of those savings are targeted to offset the start-up costs of a bill that I will shortly introduce, which is designed to give qualified early retirees and displaced workers over the age of 55 an opportunity to buy into Medicare. Regardless of whether Congress chooses to act on Medicare buy-in legislation this year, all of the pending fraud and abuse proposals should be swiftly approved -- or the U.S. treasury will be repeatedly, and needlessly, raided by Columbia clones.
The Criminalization of Medicare Payment Disputes
J.D. Epstein
Vinson & Elkins, LLP
For
30 years, the provider industry and the Medicare agencies, first under
HEW and now HHS, have engaged in the resolution of thousands of disputes
pertaining to the payment of Medicare dollars. Those disputes have been
far ranging, but have usually involved disagreements over the interpretation
of statutes, regulations, or general instructions involving either allowable
costs or medically necessary services. In the beginning, providers and
others participating in the program were confronted by minimal pages of
statutes, regulations, and general instructions. The entire compendium
of Medicare law and regulations was easily contained in a single volume
of the Commerce Clearing House Medicare & Medicaid Guide. Today, providers
would need a U-Haul trailer to carry the statutes, regulations, general
instructions, Intermediary and Carrier pronouncements, etc., to which they
are required to adhere. Not only does this make it impossible for providers
to be conversant and compliant with every requirement, but the Health Care
Financing Administration ("HCFA") has also proven to be woefully noncompliant
with its own provider payment requirements, as evidenced by the OIG audit
of HCFA’s 1996 payments to providers released on July 17, 1997. That audit
found that 14% of HCFA’s payments to providers were not appropriate under
Medicare rules and regulations.
Yet, despite all of this, the Department of Justice, through the FBI and the U.S. Attorney’s offices and the HHS Office of Inspector General, are turning virtually every alleged incorrect or inappropriate payment into a criminal matter, or at best, a civil fraud claim. None of these organizations has any apparent understanding of, or experience in, the daunting task health care providers routinely face in attempting to understand and comply with the regulatory complexity of Medicare/Medicaid payment methodology. Two of the most noteworthy examples of this wrong-headed position are found in the hospital outpatient lab unbundling project dubbed "Project Bad Bundle" and in some of the statements attributable to the FBI in the Columbia/HCA investigation.
First, as to the hospital outpatient lab unbundling project, the DOJ, through its various assistant U.S. attorneys, is attempting to extort millions of dollars from the provider industry for its purported failure to comply with unclear and, to some extent, contrary or inapplicable lab "payment" rules. By threatening each and every hospital in the country with sanctions, including up to treble damages and other False Claims Act penalties (i.e., an additional $5,000 or more per claim), the DOJ has coerced many of the targeted hospitals to pay two or three times the amount billed to the program for certain outpatient lab tests. A proper interpretation of the Medicare regulations and general instructions suggests that these hospitals might be liable, at the very worst, for a partial overpayment by the Intermediary or carrier. However, no individual hospital can risk mounting a direct challenge to the DOJ’s position with the threat of False Claims Act sanctions and the possibility of exclusion from the program (i.e., the death sentence).
Second, as to the investigation of Columbia/HCA, while the facts and allegations of wrong-doing are yet to be disclosed, statements attributed to the FBI equating the allocation of hospital overhead costs to hospital-based home health agencies, the claiming of certain "advertising or marketing" costs as allowable costs, and the maintenance of a "reserve" cost report to criminal fraud appear to be further examples of bureaucratic overkill. These first two issues are the types of reimbursement disputes that are subject to a now well-established administrative and civil judicial process and have been the subject of numerous Provider Reimbursement Review Board appeals and hundreds of intermediary/provider disputes that have been resolved through the courts or compromised. Yet, these same issues are now being characterized by federal law enforcement authorities as potential fraud commissions. "Reserve" cost reports are an industry-wide norm. In order for a provider to justify the establishment of reserves for financial reporting purposes to its auditors, the provider will run a second cost report that removes those allowable cost items that are either under appeal or that the Intermediary might be expected to challenge. In no way does the mere existence of such reports equate to fraud! (That’s not to say that if the provider claimed a cost which it knew was unallowable and attempted to hide such a claim, that act would not rise to the level of fraud. Yes, it would and should.)
By no means am I attempting to whitewash criminal activity in the industry. There are frauds, there are bad actors, there are patterns of provider behavior that rise to that level, but disputes concerning routine payment of claims and cost reimbursement covering three decades of ever changing, broad, and often unclear and sometimes contradictory statutes, regulations, general instructions, and Intermediary and carrier pronouncements should not and do not constitute a basis for criminal or punitive sanctions. Congress has unwittingly encouraged and legislated much of this overreaction, and it will likely be Congress that must act to restore sanity to the process. If Congress is reluctant, then it seems the only viable option left to providers will be redress through the courts.
Qui
Tam False Claims Actions Possible for Enforcing Health Care Anti-Kickback
and Self-Referral Violations: United States ex rel. Thompson v. Columbia/HCA
Corp., 125 F.3d 899 (5th Cir. 1997)
Until recently, however, providers could at least take solace in the apparent fact that the FCA (and its qui tam provisions) did not reach all federal health care fraud and abuse claims, but only applied to false claims and false statements supporting them. In particular, the FCA did not cover violations of the antikickback laws or the Stark self-referral laws. These incredibly complex laws affect a wide variety of health care relationships, but have been enforced relatively infrequently because they only provide criminal and administrative sanctions.
In the mid-1990s, however, a few district court cases refused to dismiss qui tam suits attempting to seek FCA sanctions for antikickback and self-referral violations. See United States ex rel. Pogue v. American Healthcorp, Inc., 914 F.Supp. 1507 (M.D. Tenn. 1996). The health care industry breathed a collective sigh of relief when the district court in UnitedStates ex rel. Thompson v. Columbia/HCA, 938 F.Supp. 399 (S.D. Tex. 1996) rejected this trend, holding that the FCA only applied to false and fraudulent claims, and could not be used to enforce other federal statutes.
The Fifth Circuit opinion in the appeal of this case is the first appellate opinion on this issue, and was eagerly awaited. The Fifth Circuit affirmed much of the district court’s decision, including its holding that "claims for services rendered in violation of a statute do not necessarily constitute false and fraudulent claims under the FCA." However, it vacated and remanded the district court decision on one key aspect of the case.
The Court of Appeals noted that the defendant institutional health providers had to file annual cost reports, upon which they were required to certify their compliance with federal laws and regulations. If payment was, in fact, conditional upon these certifications, and if these certifications were false, as the plaintiff contended, then payments could have been made pursuant to false claims based on false statements, in violation of the FCA. The defendants argued that payment was not conditional on the certification, which is usually filed after interim payments have been made. The Fifth Circuit remanded the case for the trial court to resolve this question. It also remanded for further consideration of the plaintiff’s argument that claims for services rendered in violation of the Stark self-referral act are in themselves false, since the self-referral statute prohibits payments for services rendered in violation of its terms. The court thus steered a middle course: claims for services provided in violation of statutes are not necessarily violations of the FCA, but if claims are paid only if compliance with other statutes is certified, a false certification of compliance might ground an FCA action.
The trial court has yet to resolve, as of this writing, the remanded question. The Department of Health and Human Services could probably resolve this issue by regulation, however, and could change any claim forms that do not already require compliance certification to impose such a requirement. It could also use the certification approach to strengthen FCA authority over Medicare managed care plans, which do not usually file claims for discrete services.
The Supreme Court may ultimately have to resolve the issue of the application of the FCA to fraud and abuse violations other than false claims. Until then the Fifth Circuit’s decision in Thompson gives health care providers one more reason to lose sleep at night.
Health Care Fraud: A High Priority for the Federal Bureau of Investigation
John R. Molesworth
Chief, Healthcare Fraud
Unit
Federal Bureau of Investigation
The
Federal Bureau of Investigation (FBI) places a high priority on investigating
health care fraud and is committed to working with the Department of Justice
and other federal law enforcement agencies to ensure that individuals and
corporations committing health care fraud are identified, investigated,
and prosecuted. The Health Insurance Portability and Accountability Act
of 1996 (HIPAA) specified mandatory funding to the FBI for health care
fraud enforcement, providing the FBI $47 million in FY97 and $56 million
in FY98 for its health care fraud efforts. Increased funding has allowed
the FBI to add 90 agents who are dedicated to work on health care fraud
violations. This increase brought the number of FBI agents addressing health
care fraud in FY97 to the equivalent of 360 agents as compared to 112 in
1992. Funding is slated to increase incrementally to the year 2003, when
it will reach $114 million and remain at that level each year thereafter.
With this additional funding, the FBI will be in a position to continue
to increase the number of agents committed to health care fraud investigations.
As the FBI has increased the number of agents assigned to health care fraud investigations, the caseload has increased dramatically from 591 cases in 1992 to over 2400 cases in 1998. The FBI caseload is almost equally divided among those health plans receiving government funding and private payer plans. Criminal health care fraud convictions resulting from FBI investigations have risen from 116 in 1992, to 485 in 1997.
While no segment of the health care system is immune from fraud, three areas of the health delivery system are particularly susceptible to fraud: laboratory billings, home health care, and durable medical equipment.
Examples of laboratory billing fraud are numerous. In 1996, Damon Clinical Laboratories Inc. agreed to pay the federal government $119 million in civil and criminal penalties for submitting false claims to the Medicare program and a number of Medicaid programs. Four Damon executives were recently indicted on criminal charges which directly relate to the fraudulent billings. In 1996 the Laboratory Corporation of America agreed to pay the federal government $182 million in civil penalties associated with submitting false claims for medically unnecessary tests.
These multi-agency investigations and settlements were the result of the cooperative efforts of a number of agencies and resulted in significant restorations to the Medicare and Medicaid trust funds. The fraud schemes include bundling certain lab tests with blood panels, causing physicians to order tests that were not medically necessary, billing for hemogram indices each time a complete blood count was ordered, "code jamming" on screening tests to ensure Medicare payment, and providing inducements to physicians to obtain their Medicare business.
The home health industry has grown tremendously during the last few years, and investigations conducted by the Department of Health and Human Services, Office of Inspector General, and the FBI have uncovered fraud schemes in this area involving cost reporting fraud; billing for services not rendered; up-coding visits to a higher reimbursement code, such as a skilled nursing visit; and billing for services rendered to persons not home bound as required by Medicare. Less than 4% of the agencies receive on-site audits by Medicare contractors and the beneficiaries are not required to make a co-payment, making it less likely that a beneficiary will complain about the extent of service or what is being billed to Medicare.
During an audit by the Medicare branch of Blue Cross and Blue Shield of Iowa, known as IASD Health Services Corp., numerous discrepancies were discovered in the cost reports of one home health agency. A subsequent investigation by the FBI revealed that this home health agency had submitted false invoices in support of its cost report. Also, contracts for services totaling over $250,000 were issued to family members and friends, but no actual services were rendered. The owners of this agency, who were reimbursed by Medicare in excess of $10 million from 1993 to 1995, subsequently pled guilty and are presently in a federal prison.
Another area of health care that has been shown to be particularly vulnerable to fraud is durable medical equipment. Recently, five Midwest residents pled guilty to racketeering charges in connection with more than $25 million in fraudulent billings to Medicare through the marketing of durable medical equipment to nursing homes. The defendants were charged with receiving Medicare reimbursement for products they did not provide, receiving payment for non-reimbursable supplies, providing unnecessary items to patients, misrepresenting the quantities of supplies actually provided, and engaging in billing activities to avoid detection by the Medicare contractor.
The list of schemes and types of health care fraud being perpetrated is virtually endless. HIPAA funding will enable the FBI to enhance its commitment to the fight against the health care fraud crime problem. Aggressive enforcement of health care fraud statutes by the FBI and other federal law enforcement agencies is beginning to make a substantial impact on this estimated $100 billion a year crime problem.
Fraud And Abuse: The Cure May Kill Small Providers
Robert
M. Wolin
Baker & Hostetler, L.L.P.
The cure for Medicare and Medicaid fraud and abuse may drive many small health care providers to the same fate as Main Street merchants. Recent trends in Medicare and Medicaid suggest that the government believes that fraud and abuse can be controlled by contracting with fewer but financially stronger providers and suppliers.
Home health and durable medical equipment are two areas characterized by many small suppliers and a high frequency of fraud and abuse. Consequently, it is not surprising that the government focused upon these areas first. Under regulations implementing the Balanced Budget Act (BBA) home health agencies and DME suppliers must annually post a separate surety bond with HCFA and each state Medicaid program in a minimum amount of $50,000 or 15% of the supplier’s annual program revenue.
The collateral requirements imposed by surety bond underwriters will preclude many small entities from participating in these businesses, especially when the cumulative nature of the surety bonds over time is considered. Small multi-state providers will have an especially difficult time posting bonds in each state. Furthermore, the cost of the bonds is non-reimbursable and is likely to be higher for small providers. Thus, small providers may not be able to fund the cost of the bonds, even if they have sufficient collateral. The number of entities that will be impacted appears to be significant. Nearly 60% of the home health agencies have Medicare revenues of less than $1,000,000, more than 90% have Medicaid revenues of less than $1,000,000 and more than 97% of DME suppliers had less than $350,000 in annual Medicare revenues.
New home health agencies must also satisfy initial capitalization requirements. New agencies must have enough cash or cash equivalents to operate at projected levels for at least 3 months. No more than 50% of the funds can be borrowed. HCFA acknowledged that this rule would prevent many new home health agencies from entering the Medicare program.
Under another proposed rule, HCFA required DME suppliers to meet several additional standards to "preserve the Medicare Trust fund." For example, DME suppliers must maintain a physical facility on an "appropriate site" (which cannot be a post office or commercial mailbox), a primary business telephone at the physical facility (which cannot exclusively consist of a beeper number, answering service, pager, facsimile machine, car phone, or an answering machine) and comprehensive liability insurance. In proposing these regulations, HCFA acknowledged that these standards would adversely impact small suppliers, such as those operating out of a van, but felt the loss was far outweighed by the fraud and abuse protection.
These Medicare and Medicaid legislative and regulatory provisions make it more difficult for smaller suppliers to survive and are only examples of larger trends. In general, Medicare and Medicaid revenues are being reduced, costs of providing services and assuring compliance with governmental program requirements are increasing and fraud and abuse enforcement efforts are increasing. The combined effect of these factors may eliminate Main Street health care entrepreneurs from the market and inextricably change the nature of health care in the United States.
An Inspector General's
Perspective on Health Care Fraud
From Inspector General
June Gibbs Brown,
Department of Health
and Human Services
Lewis Morris
Assistant Inspector General
for Legal Affairs
The
health care system in this country is facing tremendous challenges as we
move into the 21st century. Advances in medical technology offer
the promise of longer and more productive lives. The growing number of
older Americans will require society to rethink what it means to be "old,"
as well as to grapple with how to provide affordable, quality health care.
While there are many approaches to this challenge and the public debate
must continue, I believe there is one point on which all can agree. Our
health care system cannot survive unless we stop the fraud and abuse that
cheats beneficiaries and taxpayers out of billions of dollars every year.
Over $1 trillion is spent annually on health care in America and government studies estimate that as much as $100 billion is lost to fraud and abuse each year. Earlier this year, the Office of Inspector General (OIG) issued its audit report on the Medicare program, in which we concluded that the Medicare program has overpaid hospitals, doctors and other health care providers by as much as $23 billion in 1997 alone. In another audit of payments made to home health agencies, my office found that 40 percent of the services paid by Medicare did not meet the program requirements and should not have been paid. In addition to diverting billions of dollars from life-saving drugs and medically necessary services, fraudulent schemes also can pose a direct threat to the health of patients. Unscrupulous providers subject patients to unnecessary hospitalizations, surgeries, drugs and tests in pursuit of personal financial gain. To maximize the "bottom line," these providers abuse both the system and its beneficiaries by using unqualified health care workers to deliver substandard care. With alarming frequency, the local news features another story about a health care scam that has been uncovered.
In response to this problem, Congress has provided substantial new resources to fight health care fraud. Statutory changes, including the creation of a health care fraud offense and enhanced penalties, give the government improved fraud-fighting tools. Through the Health Insurance Portability and Accountability Act of 1996, the Departments of Justice and Health and Human Services have increased funding to hire investigators, auditors, program analysts and prosecutors. These men and women are dedicated to detecting, investigating and prosecuting health care fraud schemes and the early results of their efforts are very encouraging. In 1997, our combined efforts obtained over $1 billion in health care recoveries, including restitution from both civil and criminal actions. These monies have been deposited in the Medicare Trust funds instead of lining the pockets of scam artists. We also are doing a better job of keeping unscrupulous providers out of the health care system. In the last year, the OIG has excluded over 2,700 individuals and entities from participation in the Government health care programs. These providers will no longer be able to victimize the system and its beneficiaries.
As critical as enforcement is to the fight against health care fraud, I also believe that we must prevent fraud before it occurs. The OIG is actively working with and encouraging the health care industry to adopt effective compliance programs so providers can take responsibility for policing their own activities. My office recently released detailed guidelines for the hospital industry, setting out voluntary measures these providers should undertake to ensure compliance with the health care statutes and regulations. Similar guidance has been provided to clinical laboratories, and in the future we will be issuing guidelines to all segments of the health care industry. In addition, the OIG issues fraud alerts, advisory opinions and reports that alert providers to potential risks to the integrity of the system. It is my belief that the majority of health care providers want to do the right thing. By fostering a corporate culture emphasizing integrity, providers can transform their relationship with law enforcement to one of cooperation and mutual support. With the support of honest providers, we can have a health care system that is both financially sound and able to provide care for all our citizens.