Health care fraud.

AuthorKleiner, Shari G.
PositionFourteenth Survey of White Collar Crime
  1. INTRODUCTION

    Present annual health care expenditures in the United States exceed $1 trillion(1) and are steadily on the rise. The Health Care Financing Administration ("HCFA") estimates that health care spending is expected to reach $2.1 trillion by the year 2007.(2) With so much money involved, it is no surprise that white collar criminals see health care fraud as a lucrative endeavor.(3) Indeed, the General Accounting Office ("GAO") estimates that such fraud accounts for up to 10% of total health care expenditures.(4) Because health care fraud is costing taxpayers nearly $100 billion dollars a year,(5) federal and state agencies have made health care fraud prosecution a primary focus. 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.(6)

    Several government agencies are involved in cutting down on health care fraud. Both DOJ and the Department of Health and Human Services ("HHS") provide regulatory monitoring and enforcement of health care fraud. In prosecutions of fraud, DOJ utilizes the resources of its own criminal and civil divisions, as well as of the United States Attorney offices and the Federal Bureau of Investigation ("FBI").(7) Within HHS, the Office of the Inspector General ("OIG") and the Health Care Financing Administration ("HCFA"),(8) aided by the individual states, initiate and pursue investigations of Medicare and Medicaid fraud. In addition to these resources, the OIG has begun to use its permissive exclusion authority as an incentive for providers to help in the effort through a voluntary disclosure program.(9)

    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.(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) Such persons and organizations 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.(12) Statutes enacted to deal with fraud in these specific programs(13) have become necessities because "[a]s the government's second largest social program, Medicare continues to be an attractive target for fraud and abuse."(14)

    This Article explores the current state of the law covering federal health care fraud and its enforcement. Section II of this Article discusses the general federal statutes used to prosecute health care fraud, which include the False Claims, False Statements, and Mail and Wire Fraud Acts, by describing the elements of the offenses, available defenses, and penalties applicable under each statute. Section III examines statutes specifically enacted to address Medicare and Medicaid fraud, reviews the elements, defenses, and penalties for each statute, and concludes with a discussion of available statutory safe harbor provisions. Section IV reviews health care fraud enforcement by providing an overview of federal and state government agencies' efforts to investigate and prosecute health care fraud. Finally, Section V discusses several recent developments in this field.(15)

  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.(16) Criminal prosecution can be based on the Social Security Act,(17) the False Statements Act,(18) generic criminal fraud statutes,(19) as well as on specific Medicare and Medicaid fraud statutes that target complex kickback arrangements and other sophisticated schemes.(20) Criminal violations can result in fines and/or imprisonment.(21) 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.(22)

    Providers who falsify claim reimbursement submissions are generally subject to prosecution under two statutes: the False Claims Act(23) and the False Statements Act.(24) 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(25) and wire fraud(26) 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. It is favored among prosecutors because of its success as a deterrent.(27)

      1. Elements of the Offense

        The government must prove three elements to obtain a conviction for Medicare or Medicaid fraud under the False Claims Act: (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.(28) In addition to bringing a criminal action, the government may also bring a parallel civil action seeking relief.(29)

        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,(30) or (2) demonstrating that a defendant presented a claim by causing an intermediary business, such as an insurance carrier, to submit a false claim.(31)

          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.(32) 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.(33)

        2. False, Fictitious, or Fraudulent Nature of a Claim

          To prove the false, fictitious, or fraudulent nature of a Medicare or Medicaid claim, the government must show 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.(34) While these types of schemes may seem obvious and easily detectable, health care providers are entrusted with a high level of self-monitoring which makes outside evaluation of their business practices difficult.(35)

        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.(36) Requisite intent can be inferred from office records or testimony.(37) Providers have a duty to know and understand the proper billing procedures and regulations for Medicare and Medicaid.(38) Liability, however, does not extend to providers whose records are incorrect due to good faith miscalculations.(39)

          Knowledge and intent are often difficult to prove, even with the "duty to know" standard in place.(40) Under [sections] 287, a "knowledge" standard must be met to establish intent.(41) When the government cannot prove intent to defraud or that the fraud is based on an illegal self-referral, it is still possible to prosecute under specific health care fraud statutes.(42) Furthermore, if the prosecutor can establish that the provider violated the anti-kickback provisions, it is possible to charge the provider with all violations flowing from the ill-gotten business under the False Claims Act.(43)

      2. Defenses

        The general defenses to a false claims prosecution can also be used by one charged with health care fraud.(44) Ambiguity in administrative or statutory requirements may be a viable defense to a false claims charge.(45) While a bare claim of invalidity or vagueness in the language of a statute is not considered a defense,(46) 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.(47) A provider may use misunderstanding as a defense where it can be proved, but ignorance of regulations is no defense.(48) A health care provider, regardless of her status, has a duty to know and understand Medicare and Medicaid billing procedures before she may accept payments and provide services under these programs.(49)

      3. Penalties

        Each count for which the defendant is convicted is considered a separate offense and carries its own sentence.(50) When a defendant is convicted of presenting false claims, he may be imprisoned for up to five years and fined subject to the amount established in the statute.(51) Under the Federal Sentencing Guidelines, violations of the False Claims Act are treated as "Offenses Involving Fraud and Deceit," governed by section 2F1.1.(52)

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

      The False Statements Act(53) 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...

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