An Active Summer of Healthcare Fraud Enforcement Actions

Alanna J. Kroeker
Executive Editor
Loyola University Chicago School of Law,  JD 2017


Unprecedented DOJ Healthcare Fraud Takedown:

On Wednesday June 22, Attorney General Loretta Lynch and Department of Health and Human Services (HHS) Secretary Sylvia Burwell announced the largest healthcare fraud takedown in history.  This action was led by the Medicare Fraud Strike Force and resulted in criminal and civil charges being filed against 301 individuals who allegedly submitted over $900 million in fraudulent claims to Medicare and Medicaid.

Among the 301 individuals were 61 doctors, nurses, pharmacists, and other licensed medical professionals.  In addition to the healthcare providers charged, many alleged schemes also entailed charges being filed against patient recruiters, Medicare beneficiaries, and other co-conspirators.  The uncovered fraudulent schemes stretch across various specialties including durable medical equipment, psychotherapy, home health care, and prescription drugs.  Over 50% of the alleged fraud involved some form of home health care and 25% involved pharmacy fraud.  The allegations against the 301 individuals range from violations of the Anti-kickback Statute, money laundering, conspiracy to commit healthcare fraud, and identity theft.

What is being done to combat fraud?

When fraud headlines such as the one above become common, it is clear why fraud and abuse continues to be a top priority for enforcement agencies.  Healthcare fraud costs the government billions of dollars every year, dollars that should be dedicated to meeting the healthcare needs of the elderly, the poor, and the disabled.  Even more troubling is the staggering increase in fraudulent claims being paid out.  According to a report issued by Deloitte, in 2015 alone the federal government paid out $137 billion in improper payments as compared to just $38 million in 2005.  In light of the newest round of enforcement actions, it is easy to see why the focus on fraud is so important.  As healthcare costs continue to rise, the government has responded by passing legislation such as the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 and by including anti-fraud provisions in the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA).

Included in the Bipartisan Budget Act of 2015 , the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 requires federal agencies to update their civil monetary penalties to account for inflation and also allows for annual adjustments on January 15th of each subsequent year (False Claims Act penalties had not been adjusted since the 1996 Debt Collection Improvement Act).  These adjustments were to be announced by each agency through an interim final rule no later than July 1, 2016 and will apply to violations that occurred after November 2, 2015 and assessed after August 1, 2016.  The first agency to put this into action was the Railroad Retirement Board (RRB) which announced staggering numbers that will more than double the current penalties.  Currently, the False Claims Act imposes treble damages, plus penalties ranging from $5,500-$11,000 for each false claim filed.  The RRB announced that penalties for false claim actions that are within their jurisdiction will increase to $10,781-21,563 and other federal agencies are expected to follow suit (however, agencies do have discretion to implement a lower penalty increase).  On June 30, 2016, the DOJ issued its interim final rule which mimicked the penalty increases seen in the RRB rule, dramatically increasing the potential penalties for providers submitting claims to the federal government.  In addition to these federal increases, states with False Claims Acts are also likely to increase their penalties in order to qualify for additional Medicaid funds that are conditioned on states having FCA provisions that contain civil penalties that are no less than the federal regulation.

FCA penalties are about to skyrocket and there will be steep implications felt in the healthcare industry.  Healthcare providers are unique amongst those that submit claims to the federal government due to the sheer volume of claims submitted.  These penalty increases will likely give the government a stronger leg to stand on in settlement negotiations once providers face greater liability.  The greater penalties will also encourage whistleblowers to pursue suspected fraud in hopes of a sizeable payout.  However, supporters of the dramatic increases in penalties argue that they will hopefully carry with them a deterrence effect.  With more money on the line, some may think twice before engaging in a fraudulent scheme.

In addition to penalty increases, MACRA has included provisions that are aimed at reducing the number of improper payments being paid out.  MACRA requires Medicare Administrative Contractors (MACs) to establish outreach and education programs regarding improper payments.  MACs will send reports out to providers highlighting the most expensive and most frequent billing errors and how to correct them.  These reports effectively put providers on notice of improper claims and could potentially be used to satisfy the knowledge requirement of the False Claims Act.  Furthermore, Congress has required CMS to evaluate incentives for encouraging individuals to report fraud.  One suggestion was to provide rewards to those individuals who offer information that leads to administrative actions, effectively expanding the avenues an individual has available to them to be a whistleblower and still recoup some money for themselves.  Both of these provisions show a continued effort to deter fraud.

The compliance response?

As healthcare fraud and abuse continues to be an enforcement focus, it is imperative that compliance programs implement proactive measures to protect against potential fraud.  Entities should assess what their highest risk areas are and then tailor programs to address these risks.  First and foremost, training and education are key to promoting a compliant environment.  All parties involved in the reimbursement cycle (from physicians to billing to internal audit) need to be made aware of the seriousness of these penalties and how to actively prevent fraudulent billing.  Employees must be effectively trained on applicable regulations such as the Anti-Kickback Statute, the Stark Law, and the 60 Day Overpayment rule and how they can remain in compliance.  Proactive auditing and monitoring programs are also necessary to have an effective compliance program.  Proactive audits can help to prevent fraud and/or minimize the severity of any suspected fraud by catching it before it escalates out of control.  It is evident from recent headlines and legislation that the focus on fraud is not going away and compliance programs must respond to meet these demands.