Health Care Fraud and Enforcment Trends December 12, 2014 Paul W. Shaw Verrill Dana LLP
2014 Retrospective • Justice Department opened 1,013 new criminal health care fraud investigations and 1,083 new civil health care fraud investigations. • In Massachusetts, federal health care fraud prosecutions and resolutions were dramatically lower than previous years. • Likely will be an increase in both criminal prosecutions and civil False Claims Act cases during 2015.
2014 Retrospective • Nationally, robust prosecutions of providers by “HEAT Teams” and Medicare Strike Forces. • In FY 2013, HEAT had record in the number of cases filed (137), individuals charged (345), guilty pleas secured (234) and jury trial convictions (46).
Affordable Care Act Realities • Mandatory return of “identified” overpayments • Expands RAC reviews to Part C, Part D and Medicaid • Suspension of payments during an investigation of a “credible allegation of fraud” • Increased criminal penalties (20% to 50% longer sentences for fraud involving $1 million or more). • New crime: obstructing a health care investigation or audit • Expanded use of Civil Investigative Demands (CIDs) to investigate allegations of civil fraud • Stark self-disclosure protocol • Anti-Kickback expansion
Affordable Care Act (continued) Additional strategies: • Health Care Fraud Prevention Partnership (collaboration with private health insurers) • Fraud Prevention System – all fee for service Medicare claims now run through predictive analytic software to look for patterns or aberrations. • CMS “Help Prevent Fraud Campaign.”
Monetary Recoveries, Sanctions and Penalties • In FY 2013, the federal government recovered $4.3 billion due to False Claims Act judgments and settlements related to Medicare, Medicaid, and TRICARE. – Highest recoveries came from pharmaceutical companies • Recovered $333 million from hospitals.
Monetary Recoveries, Sanctions and Penalties • The fifth consecutive year in which government has recovered in excess of $2 billion in FCA cases involving federal health care. • $19.2 billion recovered over the last 5 years. • For every $1 spent on health care fraud and abuse investigations in the last 3 years, government recovered $8.10.
Monetary Recoveries, Sanctions and Penalties HHS OIG Semi-Annual Report (March 2014): • For the first half of FY 2014, OIG reported expected recoveries of about $3.1 billion consisting of nearly $295 million from audits and $2.83 billion from investigations. • 465 criminal actions, 266 civil actions, and exclusions of 1,720 individuals and entities. • Total of 14,663 providers have been excluded from the Medicare program.
HHS OIG Hospital Compliance Reviews 2014 • OIG Published 36 Reports in 2014 (with the latest issued October 27, 2014). • Most dealt with reviews conducted in 2009- 2011. • Including reports on Massachusetts General Hospital and UMass Memorial Medical Center.
Civil False Claims Act Common issues in False Claims Act cases over the past several years: • Pharmaceutical and medical device manufacturers, especially off-label promotion and kickbacks • Financial relationships between hospitals and physicians (kickbacks and Stark Law, especially in Medicaid)
Developments Under the False Claims Act • Increased FCA filings in federal court for health care fraud continue. • DOJ reported more than 700 additional FCA whistleblower lawsuits in FY 2013. • State False Claims Act enforcement is exploding around the country.
Developments Under the False Claims Act Failure to Timely Return Overpayments Within 60 Days • ACA requires provider to return an “identified” overpayment within 60 days. • June 2014, DOJ intervened in a qui tam FCA action alleging that certain New York hospitals failed to refund Medicaid payment within 60 days of identifying them. • Government does not allege the hospitals were responsible for causing the overpayments; in fact, the overpayments were caused by errors of a Medicaid managed care administrator.
Developments Under the False Claims Act Failure to Timely Return Overpayments Within 60 Days • This is an enforcement priority by the DOJ. • Other similar cases are being investigated by DOJ, including one here in Massachusetts involving a hospital. • • The Government’s intervention illustrates the need for health care providers to diligently investigate potential Medicare and Medicaid overpayments that come to their attention and to take appropriate remedial action.
Developments Under the False Claims Act Hospital Compensation Arrangements with Physicians as Stark Law Violations • A number of high profile cases have been brought by DOJ. • The DOJ appears to contend that a hospital’s compensation to an employed physician is commercially unreasonable if the compensation paid the physician exceeds the net income of the physician’s practice. • DOJ’s litigation position recognizes limited exceptions (e.g.,large indigent or Medicaid caseload; required service for hospital licensure or certification purposes)
Developments Under the False Claims Act Hospital Compensation Arrangements with Physicians as Stark Law Violations • U.S. ex rel. Drakeford v. Tuomey. The 4th Circuit found: • that the hospital charge generated by a personally performed service by a physician is a “referral.” • that physicians should be compensated for the services performed and not for referrals
Developments Under the False Claims Act Hospital Compensation Arrangements with Physicians • In Tuomey , the 4th Circuit defined the issue for the jury as whether the contracts between the hospital and physicians “on their face ” took into account the volume or value of referrals. • DOJ argued that physician compensation that is based on a percentage of collections for personally performed physician services takes into account the volume/value of DHS referrals • A potential issue for all hospitals.
Developments Under the False Claims Act Quality of Care Deficiencies as a Basis for FCA Liability Who is in Harm’s Way From Quality Deficiencies? • Patients of hospitals for medically unnecessary procedures and services • Residents of nursing homes. • Residents of personal care homes and assisted living facilities. • Pediatric facilities.
Developments Under the False Claims Act Quality of Care issues Trends in Asserted Liability • Inadequate Staffing. • Quality Metrics Substandard (Falls, Nutrition, Wound Care, Geri ‐ Psyche services, Medication Errors). • Quality of life issues: activities, social services. • Poor Survey Performance. • Unqualified or Incompetent Managers and Health Care Professionals. • Medical Director Issues.
Developments Under the False Claims Act Quality of Care FCA Legal Theories • Worthless Services = False Certification on Claim Forms • In a judicial flux, with trend favoring defense arguments that quality deficiencies, as regulatory or condition of participation violations are generally not actionable. • Bar is very high to prove “worthless” services.
Stark Law Developments Application of Stark to Medicaid • Historically, neither CMS, industry nor experienced counsel thought the Stark self ‐ referral prohibition applied to Medicaid absent a state law. • Stark law itself only prohibits Medicare referrals. • CMS self disclosure protocol does not require disclosure of Medicaid referrals • DOJ has taken an opposite position. • A number of recent cases finding Medicaid referrals from tainted Stark relationships violate FCA
HHS OIG Work Plan for FY2015 Hospitals: • Review Medicare outlier payments to hospitals • New inpatient admission criteria • Review Medicare costs associated with defective medical devices • Analysis of salaries included in hospital cost reports • Medicare oversight of provider-based status • Comparison of provider-based and free-standing clinics • Critical access hospitals – payment policy for swing-bed services • Inpatient claims for mechanical ventilation • Duplicate graduate medical education payments
HHS OIG Work Plan for FY2015 Hospitals: • Outpatient dental claims • Outpatient evaluation and management services billed at new-patient rate • Nationwide review of cardiac catheterizations and endomyocardial biopsies • Payments for patients diagnosed with Kwashiorkor • Bone marrow or stem cell transplants • Oversight of pharmaceutical compounding • Review of hospital wage data used to calculate Medicare payments (new) • Inpatient rehabilitation facilities – adverse events in post-acute care for Medicare beneficiaries • Long-term care hospitals – adverse events in post-acute care for Medicare beneficiares (new)
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