Health care fraud.

• Author: DeBry, Kristine
• Position: Eleventh Survey of White Collar Crime

1. Introduction II. Prosecuting Medicare and Medicaid Fraud

   1. Traditional Fraud Statutes

      1. False Claims

         1. Elements of the Offense

         9. Presentation of a claim

            ii. False, fictitious, or fraudulent nature of a claim

            iii. Intent requirement

         2. Defenses

         3. Penalties

      2. False Statements

         1. Elements of the Offense

         2. Defenses

         3. Penalties

      3. Mail and Wire Fraud

      4. State Enforcement of Medicaid Fraud III. Statutes Specifically Enacted to Address Medicare and Medicaid Fraud

   1. False Claims Section: 42 U.S.C. [sections] 1320a-7b(a).

      1. Elements of the Offense

      2. Penalties

   2. Anti-Kickback Prohibition: 42 U.S.C. [sections] 1320a-7b(b)(1)

      1. Elements of the Offense

      2. Defenses

      3. Penalties

   3. Self-referral/Stark Amendments: 42 U.S.C. [sections] 1395nn

      1. Elements of the Offense

      2. Penalties

   4. Safe Harbor Provisions

      1. Introduction

         1. The Need for Safe Harbors

         2. The Development of Safe Harbors

         3. Level of Compliance Necessary

         4. Relationship with Other Laws

      2. The Safe Harbor Provisions

         1. Investment Interests

         2. Space and Equipment Rental

         3. Personal Services and Management Contracts

         4. Sale of Practice

         5. Referral Services

         6. Warranties

         7. Discounts

         8. Employees

         9. Group Purchasing Organizations

         10. Waiver or Beneficiary Coinsurance and Deductible Amount

         11. Increased Coverage, Reduced Cost-Sharing Amounts, or

         Reduced Premium Amounts Offered by Health Plans IV. Enforcement

   1. General

   2. Policy

1. Introduction

   The investigation and prosecution of Medicare and Medicaid fraud has become a critical law enforcement issue for the Department of Justice ("DOJ")(1) and the Secretary of the Department of Health and Human Services ("HHS")(2) because of rising medical costs,3 a national focus on fraud, waste and abuse in federally-funded programs,(4) and research demonstrating that illegal self-referral practices increase unnecessary utilization, leading to higher costs.(5) As of early 1996, DOJ was conducting approximately 1000 health care fraud investigations.(6) The General Accounting Office has estimated that waste from health care fraud and abuse amounts to $100 billion annually.(7)

   Regulatory monitoring and enforcement of health care fraud are provided by the DOJ, HHS and the Federal Bureau of Investigations ("FBI").(8) Within HHS, the Office of Inspector General ("OIG") in the Health Care Financing Administration ("HCFA")(9) instigates and pursues investigations of Medicare and Medicaid fraud.

   Medicare and Medicaid are federal health care insurance programs. Medicare reimburses health care providers for the costs of services and equipment for elderly and disabled people, while Medicaid supplies individual states with federal funds to subsidize the distribution of medical services and equipment to indigent people.(10) Persons and organizations certified by HHS to receive payment under the Social Security Act may be subject to Medicare and Medicaid fraud investigations.(11) These include entities such as hospitals, nursing and rehabilitation centers, Health Maintenance Organizations ("HMOs"), intermediate carriers such as private insurance companies, private and public clinics, medical laboratories, durable medical equipment ("DME") providers, physicians, physician practice groups and other health care organizations certified to accept Medicare and Medicaid assignments and payments.(12)

2. Prosecuting Medicare and Medicaid Fraud

   To successfully convict a defendant of Medicare or Medicaid fraud, a prosecutor may bring charges under a variety of statutes. Criminal prosecution can based on the Social Security Act,(13) the False Statements Act(14) or generic criminal fraud statutes,(15) as well as specific Medicare and Medicaid fraud statutes which target complex kickback arrangements and other sophisticated schemes.(16) The penalties available to the DOJ are monetary fines, in a civil case, and imprisonment or fines in criminal cases.(17) Additionally, the OIG has the administrative authority to impose monetary sanctions or more seriously, to exclude the provider from participation in Medicare and Medicaid programs.(18)

   1. Traditional Fraud Statutes

   Providers who falsify claims reimbursement submissions are generally subject to two statutes: the False Claims Act(19) and the False Statements Act.(20) Since most Medicare and Medicaid fraud is veiled within legitimate business, the federal mail fraud(21) and wire fraud(22) statutes provide additional options for prosecutors.

   1. False Claims

      The False Claims Act is the federal fraud statute most commonly used in prosecuting Medicare and Medicaid fraud, and due to its success, will likely remain a favorite choice of prosecutors.(23)

      1. Elements of the Offense

         To obtain a conviction for Medicare or Medicaid fraud under the False Claims Act, the government must prove that: i) the defendant presented a claim (demand for money or property) to the government seeking reimbursement for medical services or goods; ii) the claim was false, fictitious or fraudulent; and, iii) the defendant had knowledge of the claim's falsity and had the intent to submit it.(24) In addition to bringing a criminal action, relief may also be granted in a civil action filed in a timely manner.(25)

      9. Presentation of a claim

         For the purposes of proving health care-related fraud under the False Claims Act, the government can demonstrate that a defendant presented a claim in either of two ways. First, the prosecution can show that the presented claim directly sought payment from the government for services or equipment.(26) Alternatively, the government can demonstrate that a defendant presented a claim by causing an intermediary business, such as an insurance carrier, to submit a false claim.(27)

         The presentation element does not necessarily apply to the person who actually prepares documents submitted for reimbursement, such as an office manager or bookkeeper, but rather to any person who caused the false claims to be submitted or who had knowledge of their falsity.(28) Physicians, practitioners or directors of a corporate entity are personally responsible for the internal procedures by which bills are submitted to the government. Additionally, presentation of evidence or information to prevent the government from pursuing an investigation of erroneous overpayments is treated as a false claim for purposes of the statute.(29)

         ii. False, fictitious, or fraudulent nature of a claim

         To prove the false, fictitious or fraudulent nature of a Medicare or Medicaid claim, it is necessary to prove that the medical procedures or the provision of equipment described by the provider either did not occur did not occur as stated, or were not medically necessary.(30) While these types of schemes may seem obvious and easily detectable, health care providers are entrusted with such a high level of self-monitoring that outside evaluation of their business practices may be very difficult.(31)

         iii. Intent requirement

         Intent to submit a false claim and knowledge of its falsity are usually required for a [sections] 287 conviction.(32) Requisite intent can be inferred from the circumstances based on office records or testimony.(33) Additionally, the provider's duty to know and understand the proper billing procedures and regulations for Medicare and Medicaid are relevant to determining the provider's knowledge and intent.(34) Even with the "duty to know" standard, knowledge and intent are often still difficult to prove.(35) Under [sections] 287, a "knowledge" standard must be met to establish intent.(36) When the government cannot prove intent to defraud or the fraud is based on an illegal self-referral, it is possible to prosecute under specific health care fraud statutes.(37) Furthermore, if the prosecutor can establish that the provider violated the anti-kickback provisions, then it is still possible to impute all activities flowing from the ill-gotten business under the False Claims Act.(38)

      2. Defenses

         Ambiguity in administrative or statutory requirements may be a viable defense.(39) While a bare claim of invalidity or vagueness in the language of a statute is not considered to be a defense,(40) health care agencies or administrators may in some cases give instructions to defendant practitioners contrary to the applicable regulations, or the regulations on their face may be too difficult or complicated to follow.(41) Where such misunderstandings occur and can be proven, a provider may use them as a defense.(42) Ignorance of regulations, however, is no defence. Regardless of the titular status, health care providers have a duty to know and understand Medicare and Medicaid billing procedures if that provider is accepting payment and providing services under these programs.(43)

      3. Penalties

         Each count on which the defendant is convicted is considered a separate offense carrying its own sentence.(44) When convicted of presenting false claims, defendants may be imprisoned for up to five years and fined subject to the amount established in Title 18.(45) Violators of [sections] 287 are sentenced under [sections] 2F1.1, "Offenses Involving Fraud and Deceit" provisions of the Federal Sentencing Guidelines.(46) Where the false claim has resulted in a loss of $2,000 or less, the base level sentence or the offense is six.(47) As the monetary loss resulting from the crime increases, so does the sentencing level, up to an increase of eighteen levels for crimes involving more than $80,000,000.(48)

   2. False Statements

      A companion statute to the False Claims Act which criminalizes false statements made to the government, either directly or through a third party, is 18 U.S.C. [sections] 1001. Prosecutors may bring charges relating to Medicare or Medicaid fraud under the False Statements Act instead of, or in addition to, other anti-fraud statutes.(49)

      1. Elements of the Offense

         The government must prove that within the jurisdiction of any department or agency of the United States: (1) the defendant submitted a statement in the form of a representation to a...