Fighting the battle against health care fraud: federal enforcement actions.

• Author: Few, Adelaide

On June 18, 1815, Napoleon Bonaparte received a crushing military defeat at Waterloo, ending 23 years of warfare between France and the other European powers. Leading to Napoleon's crushing defeat was his overly ambitious plan to get between the British and Dutch on one side, and the Prussians on the other, creating for the French a war to be fought simultaneously on two fronts. Today, military strategists and historians generally acknowledge the futility of such a strategy.

Those who choose to engage in health care fraud and those who choose to defend them should keep in mind Napoleon's experience at Waterloo. Engaging in health care fraud litigation with the United States will probably result in -- at a minimum -- a battle waged on two fronts. More likely, the battle will be waged on three fronts: criminal, civil, and administrative. In addition, those who challenge the enforcement power of the government risk finding their ammunition frozen and ineffective.

This article is written from an enforcement vantage point. Therefore, it focuses on the "weapons" available to the government in its battle against the perpetrators of health care fraud. Several new weapons were created through the enactment of the Health Insurance Portability and Accountability Act of 1996. In order to wage the health care war most effectively, a concerted and organized effort is being made to combine use of the new weapons, such as endorsed use of 18 U.S.C. [sections] 1345, with long available procedures known as parallel proceedings.

Parallel Proceedings

Almost any set of facts involving large scale federal health care fraud lends itself to parallel proceedings. "Parallel proceedings" in "government-speak" refers to the simultaneous or successive investigation or litigation of separate criminal, civil and administrative actions involving a common set of facts. For example, a typical health care fraud case might involve the fraudulent filing of claims by a hospital for various health care services with Medicare, Medicaid, and/or CHAMPUS. In addition to those working in hospital administration, such a scheme could involve physicians and even paramedical agencies. If different components of the government institute parallel proceedings in this type of case, the potential defendants' exposure might include criminal prosecution of various individuals, in which incarceration of individual defendants for their criminal acts would be the goal; a civil action under the False Claims Act, probably against the institutional hospital defendant, where treble damages and large civil monetary penalties for each illegal claim would be sought; and administrative claims by one or more government agencies, separate and apart from Department of Justice entities, seeking retribution from all defendants by way of suspended payments, compliance, and debarment actions.

Facing this diverse group of adversaries, the health care attorney had best be knowledgeable and prepared to defend on all fronts. Parallel criminal and noncriminal proceedings are a growing trend, as the United States increasingly looks to criminal prosecution, as well as affirmative civil and administrative remedies, for health care fraud offenses committed against the United States. The Attorney General of the United States has thrown down the gauntlet: "For the last four years the Department has made significant progress against unscrupulous health care providers.... [O]ur efforts are sending a message to those who would rip-off our health care system that we have the know-how, we have the resources, and we will come after you."

Despite what defense attorneys might argue, parallel proceedings are not inherently "bad." Civil and regulatory laws frequently overlap with the criminal laws, creating the possibility of parallel civil and criminal proceedings, either successive or simultaneous. "As long ago as 1912 the Supreme Court ... held that the government could initiate such proceedings either `simultaneously or successively,' with discretion in the courts to prevent injury in particular cases."[1] Furthermore, many cases have held that parallel criminal and civil trials or investigations do not raise questions of constitutional magnitude with respect to the privilege against self-incrimination.[2]

Double Jeopardy Issues and Parallel Proceedings

Recently, in Hudson v. U.S., 118 S. Ct. 488 (1997), Chief Justice Rehnquist, speaking for the majority of the Court, stated that only if a civil or administrative sanction was criminal on the face of the statute imposing it -- which for statutes involving health care fraud appear to be nonexistent -- would a double jeopardy problem be created. Otherwise, Rehnquist continued, double jeopardy protects only against "the imposition of multiple criminal punishments for the same offense, and then only when such occurs in successive proceedings." Thus, the Supreme Court significantly narrowed any double jeopardy protections for individuals or entities prosecuted civilly and criminally for the same or similar conduct.

The Hudson opinion clarified any confusion caused by United States v. Halper, 490 U.S. 435 (1989), in which the Supreme Court previously held that civil penalties can constitute a second punishment for the same offense in violation of the double jeopardy clause of the Constitution if the penalties assessed are not reasonably related to the amount of actual damages. In Halper, the defendant was convicted of filing 65 false Medicare claims (each of which overcharged $9), and sanctioned criminally. The judicial decision was that the defendant could not be assessed additionally under the civil False Claims Act $2,000 for each false claim. The Court acknowledged that the government is entitled to "rough remedial justice." Nonetheless, the Court determined that the civil fines imposed were so overwhelmingly disproportionate to the harm that they could not fairly be characterized as remedial when imposed in addition to a criminal sanction.[3] The Supreme Court noted that its ruling in Halper was not "far reaching or disruptive of the Government's need to combat fraud," but was instead "a rule for that rare case... where a fixed-penalty provision subjects a prolific but small-gauge offender to a sanction overwhelmingly disproportionate to the damages he has caused.

The Hudson decision appears to render Halper issues extinct. So, while it still is legally possible to have parallel proceedings which violate the double jeopardy clause,[4] practical realities dictate that in the health care fraud arena the clause does not bar parallel proceedings in any meaningful way.

Who Are the Troops?

The first line of offense is composed of the Department of Justice criminal prosecutors. In today's climate, the U.S. attorney for any district will prosecute vigorously any individual or entity who breaks the law by engaging in health care fraud. Highly trained health care fraud investigators will conduct the criminal investigation. The investigators will be connected with one or more investigative agencies of the government,[5] Office of the Inspector General of HHS, and the U.S. Attorney's Office, represented by one or more criminal assistant U.S. attorneys (AUSAs). The investigation probably will involve the use of grand jury subpoenas, ultimately will result in indictments, followed by negotiations and a plea or a trial. If convicted, individual defendants can expect to be sent to prison. Additionally, the imposition of criminal monetary penalties is likely, such as a forfeiture, fine, and/or restitution to the victims, including remuneration to the government agency (Medicare, CHAMPUS, and the like) which suffered the loss.

If the case is of an appropriate nature, the Department of Justice, civil fraud division and/or the U.S. attorney, civil division can and probably will prosecute it. Civil AUSAs do not focus on criminal punishment, but instead on recovery of the money that has been lost -- times three, plus heavy fines. The civil fraud litigation will be conducted in a manner similar to a case in which opposing parties dispute causation and damages. Although the civil AUSA will not use grand jury subpoenas and may choose not to use investigative help from the FBI, extensive discovery will take place. In the civil cause of action, the defendant may be the same defendant being charged criminally; however, the civil defendant is more likely to be an institutional or corporate defendant rather than an individual.

Regarding administrative actions, one agency always involved with health care fraud cases is the Department of Health and Human Services through its Office of the Inspector General, otherwise known as the OIG/HHS.[6] The investigation and the involvement...