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Health Care Fraud Prosecutions: even good providers are at risk
Posted in Litigation

As the federal government expands its pursuit of health care fraud cases, even good providers are at risk of becoming targets. Consider, for example, these federal health care fraud cases in 2013:

  • Three cardiologists, including one in Kentucky, were indicted for implanting stents that the government alleged were not “medically necessary.”
  • A physician was indicted and convicted because his “medical director” fees from a home health care hospice company were “above fair market value.” The federal government alleged this extra money was intended to induce referrals of patients in violation of the Anti-Kickback Statute.
  • An Evansville, Ind., pulmonologist was sued under the False Claims Act for allegedly performing too many bronchoscopies.
  • A chiropractor was prosecuted for billing Medicare for custom-molded ankle-foot orthotics because patients could have allegedly benefited equally from less expensive devices.
  • An Ohio surgeon was indicted because he billed three times as many anterior lumbar fusion surgeries than the second highest Ohio biller, thus suggesting he was billing for “medically unnecessary” procedures.
  • Seven Cincinnati oncologists were indicted for prescribing non-FDA approved cancer medications for their patients.

These cases are part of an ever-expanding assault on health care providers to deter fraudulent billing and recoup monies the government believes were obtained by fraud. The joint task force of the Department of Justice and Office of Inspector General at the U.S. Department of Health and Human Services recovers in excess of $2 billion each year from health care fraud cases, and that number continues to rise as the number of cases and their breadth expand. While you work hard to practice ethically and legally, being aware of the potential pitfalls of health care fraud is simply smart business.

Criminal Health Care Fraud Statutes

Scheme to defraud health care programs and false statement statutes
Federal criminal health care fraud can be prosecuted using a number of federal statutes, but most are brought under Title 18 United States Code Section 1347, which makes it a federal crime to engage in a scheme to defraud a health care benefit program. Any willful or intentional misrepresentation of a fact material to payment by a federal health care benefit program – typically Medicare and Medicaid – violates the law. Federal prosecutors also rely on Section 1035 of Title 18, which criminalizes knowingly or willfully making any materially false, fictitious or fraudulent statement or representation in connection with the delivery of or payment for health care benefits, services, or items.

Anti-Kickback Statute
One of the most prosecuted federal statutes isthe Anti-Kickback Statute, which prohibits giving or receiving anything of value to induce a referral for health care services, benefits or items. Courts have interpreted the statute to prohibit financial or other arrangements that may be intended to serve entirely legal purposes even if “one purpose” of the relationship is to induce referrals. Thus, even if the primary purpose of a payment is to fairly compensate the provider for services, if “one purpose” of the payment is to induce a referral, the law is violated.

State Criminal Statutes
Health care fraud is almost always prosecuted federally. However, physicians in Indiana have come under attack recently for prescribing opioids for chronic pain when the prosecutors believe the prescriptions are given outside the scope of medical practice. Four physicians were charged in Kokomo, Ind., with illegal “dealing in a controlled substance” – the same statute used to prosecute street dealers. Under the laws in Indiana and most other states, physicians are exempted from the controlled substances laws when they prescribe, administer or dispense controlled substances within the proper scope of medical practice. If, however, there is no medical necessity for the controlled substance, or the physician has reason to believe the patient intends to sell or deliver the controlled substances to others, writing a prescription may violate the criminal laws.

The Civil False Claims Act
In 1863, after a series of sensational congressional investigations into the sale of provisions and munitions to the Union Army during the Civil War, the False Claims Act was adopted. Although the federal government used the FCA for the first 100 years of its existence to recoup fraudulent payments to U.S. Department of Defense contractors, its use has shifted to health care fraud against the Medicare and Medicaid programs over the last 50 years.

Today, almost 90 percent of the recoveries under the FCA are from health care providers. The FCA is powerful. If the government is successful, it is entitled to three times the actual damages (i.e., the amount Medicare and Medicaid paid that they should not have paid) plus between $5,500 and $11,000 per claim.

To violate the act, one must “knowingly” submit a false or fraudulent claim. However, “knowingly” is defined under the law to include more than actual knowledge. The FCA defines “knowingly” to include reckless disregard for the truth or falsity of the facts, and deliberate ignorance of the truth or falsity of the facts. Thus, even if one did not actually know the claim was false, if the provider should have known, that is sufficient.

The proliferation of FCA cases over the last several years is due in large part to the whistle-blower, or “qui tam,” provisions of the law. By statute, a whistleblower can file an FCA lawsuit on behalf of the United States. If there is a recovery, the whistle-blower is entitled to a statutory percentage of the recovery ranging from a minimum of 15 percent to a maximum of 30 percent. In recent cases, particularly in FCA cases filed against the pharmaceutical industry, whistle-blowers have received tens of millions – and in some cases hundreds of millions – of dollars. With such enormous financial incentives, it is little wonder that the number of FCA cases has skyrocketed in recent years.

Congress amended the False Claims Act in 2009 to include a “reverse” false claims provision. Under this new section of the law, a provider who believed claims were proper when they were submitted and paid but who later discovers they were in error or wrongly submitted, has 60 days from the discovery of the “overpayment” to notify the Centers for Medicare and Medicaid Services of the overpayment and to repay the overpayment. Failure to do so constitutes a violation of the FCA and entitles the government to treble damages plus $5,500-$11,000 per claim.

Exclusion from Participation in the Medicare and Medicaid Programs

If a provider is convicted of a “program related offense,” they are barred from participating in Medicare and Medicaid programs for a statutory minimum of five years. Even if the provider is not “convicted,” a finding of liability under the civil False Claims Act could result in “permissive” exclusion. Furthering the punishment, the law prohibits a provider who participates in the Medicare and Medicaid programs from employing or contracting with a person or entity that has been excluded.

What to Do if an Investigation Occurs

So, how do you know if you are under investigation for health care fraud? In most cases, it’s not difficult to tell. You may not know for some period of time, but sooner or later you will find out. You might receive a subpoena for documents from the Office of Inspector General at the U.S. Department of Health and Human Services. Agents could show up to execute a search warrant. You might even hear from patients, contractors, employees or others that federal or state law enforcement agents interviewed them about you. Or you might receive a summons and civil complaint filed under the FCA.

No matter how the news is broken, you should know and exercise your rights! The first thing to do when you discover you are under investigation for health care fraud is to contact legal counsel — not just any legal counsel, but a lawyer experienced in representing clients in health care fraud cases.

In addition to the right to counsel, you have the right to remain silent. This is an important constitutional right, and a right you should exercise. You do not have to answer questions if law enforcement agents attempt to interview you during a search, or if they show up at your front door. Just tell them you want to talk with a lawyer before deciding whether to answer questions. There will be plenty of opportunities to talk with the agents or prosecutors if you and your lawyer decide it is in your best interest. Responding to questions when you are not prepared, when you are caught off guard, and when you were not expecting agents to show up is the worst time to answer questions. It will almost always result in you being quoted as saying things that help the prosecution and hurt you.

J. Richard Kiefer concentrates his practice in complex criminal and civil litigation, with a focus on white collar criminal defense and long-term care. He has more than 35 years of experience practicing in both state and federal court.

Eric L. Ison concentrates his practice in commercial litigation in state and federal courts at the trial and appellate levels.

  • Senior Partner

    Eric concentrates his practice in commercial litigation. He is experienced in state and federal courts, at both the trial and appellate levels. His clients include a broad range of public companies, private companies ...

  • Partner

    Dick is the Chair of the White Collar Practice Group, and he concentrates his practice in complex criminal and civil litigation, with a focus on white collar criminal defense and long-term care. He has more than 30 years of experience ...



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