Health care fraud.

• Author: Altschuler, Aaron M.
• Position: Thirteenth Survey of White Collar Crime

1. INTRODUCTION

   Annual health care expenditures in the United States exceed $1 trillion.(1) With that much money involved, "there will always be individuals or companies that attempt to game the program purely for their own profit."(2) Indeed, estimates that such fraud costs taxpayers nearly $100 billion dollars annually(3) have made health care fraud prosecution a primary focus of federal and state agencies. Attorney General Janet Reno, aided by a budget-conscious Congress, has made prosecuting health care fraud a top priority at the Department of Justice ("DOJ"), second only to violent crime.(4)

   Regulatory monitoring and enforcement of health care fraud are provided by both DOJ and the Department of Health and Human Services ("HHS"). In prosecutions of fraud, DOJ utilizes the resources of its own criminal and civil divisions, as well as of the offices of the United States Attorneys and the Federal Bureau of Investigation ("FBI").(5) Within HHS, the Office of the Inspector General ("OIG") and the Health Care Financing Administration ("HCFA"),(6) aided by the individual states, initiate and pursue investigations of Medicare and Medicaid fraud.

   Medicare and Medicaid are federal health care insurance programs. Medicare primarily reimburses health care providers for the costs of services and equipment for the elderly and disabled, while Medicaid supplies individual states with federal funds to subsidize the distribution of medical services and equipment to low income people.(7) Persons and organizations certified by HHS to receive payment under the Social Security Act may be subject to Medicare and Medicaid fraud investigations.(8) These include 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 certified health care organizations.(9)

   This Article explores the current state of the law covering federal health care fraud and the enforcement thereof. Section II of this Article discusses the general federal statutes used to prosecute health care fraud, including the False Claims, False Statements, and Mail and Wire Fraud Acts. Elements of the offenses, available defenses, and penalties applicable for each statute are also discussed. Section III examines statutes specifically enacted to address Medicare and Medicaid fraud, by reviewing the elements, defenses, and penalties for each statute, and concludes with a thorough discussion of available statutory safe harbor provisions. Section IV reviews health care fraud enforcement by providing an overview of federal and state government agencies that investigate and prosecute health care fraud as well as of their enforcement strategies and priorities. Finally, Section V briefly discusses several recent developments in this field.(10)

2. PROSECUTING HEALTH CARE FRAUD WITH GENERAL FEDERAL STATUTES

   When the government suspects health care fraud, it can bring charges under a variety of statutes.(11) Criminal prosecution can be based on the Social Security Act,(12) the False Statements Act,(13) or generic criminal fraud statutes,(14) as well as on specific Medicare and Medicaid fraud statutes which target complex kickback arrangements and other sophisticated schemes.(15) The penalties available to DOJ are civil fines and, in criminal cases, imprisonment and/or fines.(16) Additionally, OIG has the administrative authority to impose monetary sanctions or, more seriously, to exclude the provider from further participation in Medicare and Medicaid programs.(17)

   Providers who falsify claim reimbursement submissions are generally subject to prosecution under two statutes: the False Claims Act(18) and the False Statements Act.(19) Further, since most Medicare and Medicaid fraud is camouflaged within legitimate business contacts between providers, insurance companies. and the federal government, the federal mail fraud(20) and wire fraud(21) statutes can provide additional prosecutorial options.

   1. False Claims: 18 U.S. C. [sections] 287

      The False Claims Act is a federal fraud statute frequently used in prosecuting Medicare and Medicaid fraud, and due to its success, will likely remain a favorite choice of prosecutors.(22)

      1. Elements of the Offense

         To obtain a conviction for Medicare or Medicaid fraud under the False Claims Act, the government must prove three elements: (1) the defendant presented a claim (demand for money or property) to the government seeking reimbursement for medical services or goods; (2) the claim was false, fictitious, or fraudulent; and (3) the defendant had both knowledge of the claim's falsity and the intent to submit it.(23) In addition to bringing a criminal action, the government may also bring a parallel civil action seeking relief.(24)

         1. 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 by either (1) showing that the presented claim directly sought payment from the government for services or equipment,(25) or (2) demonstrating that a defendant presented a claim by causing an intermediary business, such as an insurance carrier, to submit a false claim.(26)

            The presentation element does not apply solely to the person who prepared 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.(27) 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.(28)

         2. 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.(29) 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.(30)

         3. Intent Requirement

            Intent to submit a false claim and knowledge of its falsity are usually required for a False Claims conviction under [sections] 287.(31) Requisite intent can be inferred from the circumstances based on office records or testimony.(32) Also relevant is the provider's duty to know and understand the proper billing procedures and regulations for Medicare and Medicaid.(33) Knowledge and intent are often still difficult to prove, even with the "duty to know" standard.(34) Under [sections] 287, a "knowledge" standard must be met to establish intent.(35) When the government cannot prove intent to defraud or the fraud is based on an illegal self-referral, it is instead possible to prosecute under specific health care fraud statutes.(36) Furthermore, if the prosecutor can establish that the provider violated the anti-kickback provisions, then it is still possible to impute to the provider all activities flowing from the ill-gotten business under the False Claims Act.(37)

      2. Defenses(38)

         Ambiguity in administrative or statutory requirements may be a viable defense to a False Claims charge.(39) While a bare claim of invalidity or vagueness in the language of a statute is not considered 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 defense. A health care provider, regardless of her titular status, has a duty to know and understand Medicare and Medicaid billing procedures before she may accept payments and provide services under these programs.(43)

      3. Penalties

         Each count for 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) Under the Federal Sentencing Guidelines, violations of the False Claims Act are treated as "Offenses Involving Fraud and Deceit" which are governed by [sections] 2F1.1.(46)

   2. False Statements: 18 U.S.C [sections] 1001

      The False Statements Act(47) is a companion statute to the False Claims Act. The False Statements Act criminalizes false statements made to the government, either directly or through a third party. 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.(48)

      1. Elements of the Offense

         To obtain a conviction the government must prove that within the jurisdiction of any department or agency of the United States: (1) the defendant submitted a statement to a governing agency;(49) (2) the statement was false;(50) (3) the statement was material;(51) and (4) the statement was made knowingly and willfully.(52)

      2. Defenses

         The general defenses to a false statement prosecution may be used by one charged with health care fraud.(53) In the health care arena, a defendant may not escape liability because she makes a false statement only to a state agency or intermediate carrier.(54)

      3. Penalties

         A defendant convicted under [sections] 1001 shall be fined under Tide 18 or imprisoned not more than five years, or both.(55)...