Health care fraud.

• Author: Colbert, Daniel
• Position: I. Introduction through II. Statutes Addressing Medicare and Medicaid Fraud B. Anti-Kickback Statute, p. 1315-1348 - Annual Survey of White Collar Crime

1. INTRODUCTION II. STATUTES ADDRESSING MEDICARE AND MEDICAID FRAUD A. 42 U.S.C. [section] 1320a-7b(a) 1. Elements of the Offense a. Statement of Material Fact b. False Representation c. Knowing and Willful 2. Penalties B. Anti-Kickback Statute 1. Elements of the Offense a. Knowing and Willful b. Solicitation or Receipt of Remuneration c. For the Purpose of Inducing Referral of Business 2. Defenses a. Unconstitutional Vagueness b. Entrapment by Estoppel c. Good Faith 3. Penalties 4. Safe Harbor Provisions a. Purpose b. Uncertainty in the New Regulations c. Enumerated Safe Harbors i. Investment Interest ii. Sale of Physician Practices, Practitioner Recruitment, and Obstetrical Malpractice Insurance Subsidies iii. Contracts for Space, Equipment, Services, and Employment iv. Advertisements and Promotions v. Electronic Prescription Systems vi. Referral Services vii. Relationships Between Providers viii. Arrangements Between Providers and Health Plans ix. Relationships Between Providers and Suppliers x. Ambulance Replenishing C. Self-Referral/Stark Amendments I. Elements of the Offense a. Financial Relationship b. Referral c. Submission of a Claim for Services 2. Absence of an Exception or Safe Harbor 3. Penalties D. The Health Insurance Portability and Accountability Act of 1996 1. Offenses a. Health Care Fraud b. Theft or Embezzlement in Connection with Health Care c. False Statements Relating to Health Care Matters d. Obstruction of Criminal Investigations of Health Care Offenses 2. Defenses 3. Exemptions 4. Penalties III. PROSECUTING HEALTH CARE FRAUD WITH GENERAL FEDERAL STATUTES A. False Claims Act 1. Elements of the Offense a. Presentation of a Claim b. False, Fictitious, or Fraudulent Nature of a Claim c. Intent 2. Defenses 3. Penalties B. False Statements 1. Elements of the Offense a. Statement to a Governing Agency b. Falsity of Statement c. Intent 2. Defenses 3. Penalties C. Mail and Wire Fraud 1. Elements of the Offense a. Scheme or Artifice to Defraud b. Use of the Mails or Wire in Furtherance of the Scheme 2. Defenses 3. Penalties IV. ENFORCEMENT A. Introduction B. Entities Responsible for Enforcement 1. Federal Enforcement a. Department of Justice b. Department of Health and Human Services i. Health Care Financing Administration ii. Office of the Inspector General c. Private Parties and Qui Tam Actions 2. State Level Enforcement 3. Federal and State Cooperation 4. Compliance Programs I. INTRODUCTION

   The Centers for Medicare and Medicaid Services ("CMS"), formerly the Health Care Financing Administration ("HCFA"), estimates that by the year 2021, health care spending will account for 19.6% of gross domestic product, 0.3% higher than projected before reform. (1) With federal spending for the Medicare and Medicaid programs projected to reach $1.09 trillion in 2013, (2) Medicare and Medicaid comprise the largest single purchaser of health care in the world. (3) Thus, it is no surprise that criminals view health care fraud as a lucrative field for illicit profit. (4) The National Health Care Anti-Fraud Association ("NHCAA") estimates that health care fraud accounts for at least 3% of total health care expenditures, or more than $60 billion each year. (5) Because about $36 billion of that is fraud against public health care programs, (6) federal and state agencies have made health care fraud prosecution a primary focus. (7) In fiscal year 2012, the federal government negotiated or won approximately $3 billion in judgments and settlements, plus additional administrative measures in health care fraud cases and proceedings. (8) In addition, the Department of Health and Human Services ("HHS") is referring more health care fraud cases for criminal prosecution. (9) Even before the recent comprehensive health care reform, countering fraud and abuse remained a priority. (10) Implementation of the Patient Protection and Affordable Care Act will allow government agencies and private insurers to "better detect, investigate and prosecute suspected fraud," as well as provide substantial additional funding for the Health Care Fraud and Abuse Control Program. (11) A major change may come when the government begins to use predictive modeling techniques to help combat fraud. These techniques have often been used in the private sector and can increase efficient identification of fraud. (12)

   The federal government concentrates on detecting and prosecuting health care fraud in its health care insurance programs. (13) Statutes enacted to deal with fraud in these programs are necessary because, "[a]s the government's second largest social program, Medicare continues to be an attractive target for fraud and abuse." (14)

   Persons and organizations certified by HHS to receive payment under the Social Security Act are the most likely targets for Medicare and Medicaid fraud investigations. (15) Persons and organizations include hospitals, nursing and rehabilitation centers, managed care entities, health maintenance organizations ("HMOs"), and intermediate carriers such as private insurance companies, private and public clinics, medical laboratories, durable medical equipment ("DME") providers, physicians, and physician practice groups. (16)

   Several government agencies are involved in decreasing health care fraud. The Department of Justice ("DOJ") and HHS provide monitoring and enforcement of health care fraud regulations. (17) Individual states assist the HHS Office of the Inspector General ("OIG") and CMS to initiate and pursue investigations of Medicare and Medicaid fraud. (18) In addition, the OIG uses its permissive exclusion authority to induce providers to help track fraud through a voluntary disclosure program. (19) In prosecutions of fraud, the DOJ employs the resources of its own criminal and civil divisions, as well as those of the U.S. Attorneys' Offices, HHS, and the FBI. (20)

   This Article examines federal and state efforts to combat health care fraud. Section II of this Article discusses the statutes specifically enacted to address Medicare and Medicaid fraud and reviews the elements, defenses, penalties, and safe harbor provisions for each statute. Section III of this Article discusses general federal statutes used to prosecute health care fraud, including those regulating false claims, false statements, and mail and wire fraud. Section III describes the elements of the offenses, available defenses, and penalties applicable under each statute. Section IV provides an overview of federal and state government agencies' efforts to investigate and prosecute health care fraud. (21)

2. Statutes Addressing Medicare and Medicaid Fraud

   Congress responded to increasing Medicare and Medicaid fraud primarily by strengthening existing statutes. (22) The result is a statutory and regulatory scheme that creates civil and criminal sanctions for any person or legal entity that provides health care goods or services in a fraudulent or abusive manner. (23) The federal government may also bring criminal prosecution under the False Claims Act (24) or other criminal fraud statutes, (25) which are addressed in Section III.

   In four parts, this Section discusses statutes enacted to fight Medicaid and Medicare fraud and abuse. Part A discusses the 42 U.S.C. [section] 1320a-7b(a), which criminalizes false statements or representations in connection with federal health care programs. (26) Part B addresses the Anti-Kickback Statute. (27) Part C examines the amendments limiting physician referrals. (28) Finally, Part D discusses relevant provisions of the Health Insurance Portability and Accountability Act of (1996) ("HIPAA"). (29)

   1. 42 U.S.C. [section] 1320a-7b(a)

      Section 1320a-7b(a) criminalizes false statements and representations in connection with any application for claim of benefits or payment (30) under a federal health care program. (31) While [section] 1320a-7b(a) was enacted to target false statements or representations specifically related to health care, the majority of prosecutions related to health care fraud and abuse continue to be brought under other statutes.32 Congressional directives for increased enforcement of health care fraud statutes, including [section] 1320a-7b(a), led the United States Sentencing Commission to increase penalties for health care fraud violations in November 2011. (33) The United States Sentencing Guidelines ("Guidelines") institute a two to four level increase for any "Federal health care offense involving a Government health care program" and resulting in a loss of over $1,000,000 to the program. (34)

      7. Elements of the Offense

      Under [section] 1320a-7b(a), the government (35) must prove four elements to sustain a conviction: (i) the defendant made, or caused to be made, a statement or representation of material fact in an application for payment or benefits under a federal health care program; (36) (ii) the statement or representation was false; (37) and (iii) the defendant knowingly and willfully made the false statement. (38)

      a. Statement of Material Fact

      In most situations, materiality is a mixed question of law and fact requiring a finding of fact, existing where the statement has a natural tendency to make "a difference to the decision[-]making body." (39) Only the potential for a statement to influence a government agency needs to be demonstrated; actual reliance on the false statement is unnecessary. (40)

      b. False Representation

      To meet the statutory requirement, the false claim must have actually been submitted to the federal government for reimbursement. (41) This includes, but is not limited to: (i) billing Medicaid for procedures or tests not...