A patient-centered approach to health care fraud recovery.

• Author: Krause, Joan H.
• Position: The Changing Face of White-Collar Crime

This Article begins with a simple premise: Health care fraud hurts patients. From that premise flows a simple corollary: efforts to combat health care fraud should, if possible, remedy this patient harm. Despite its intuitive appeal, this syllogism does not represent current practice. Funds recovered through health care fraud enforcement are distributed to the Medicare Trust Fund, to the federal agencies that investigate and prosecute health care fraud, and to private parties who initiate suits on the government's behalf under the civil False Claims Act (1)--but rarely to patients who may have been harmed by the conduct. While focusing enforcement efforts on returning funds to the Federal Treasury clearly helps to assure that the federal health care programs (2) remain solvent and continue to provide care to beneficiaries in the aggregate, it offers little solace to injured individuals.

This approach stands in marked contrast to efforts to make the United States health care system more "patient-centered." In 2001, the Institute of Medicine's Committee on Quality of Health Care in America identified "patient-centeredness" as one of the six health care aims for the next century, "focus[ing] on the patient's experience of illness and health care and on the systems that work or fail to work to meet individual patients' needs." (3) While advocates initially focused their efforts on clinical practice--emphasizing respect for patients, the provision of honest and complete information, physical comfort, and emotional support for patients and their families (4)--these concepts have grown to encompass systemic structural concerns as well. A patient-centered approach to access to health care makes "serving the practical health care needs of patients (1) the focal point of the health care system, (2) the paramount responsibility of health professionals, and (3) the primary role of private and public-financing [of] health care." (5) A health care fraud enforcement system that assures large monetary recoveries for the Federal fisc but makes no attempt to compensate injured beneficiaries does not achieve these goals. In short, current health care fraud recoveries are not patient-centered.

The reasons for this failure are complex, and derive both from the factual context in which health care fraud occurs and from the traditional white collar crime enforcement framework. In large part, health care fraud recovery is not patient-centered because patients are not viewed as the victims of the fraud; that distinction instead belongs to the federal government, the ultimate payer under the federal health care programs. Consistent with that view, the federal statutes most commonly invoked in fraud cases channel recoveries to the federal coffers rather than directing compensation to injured individuals. Indeed, to the extent the government's primary interest in prosecuting health care fraud derives from its role as a defrauded payer, rather than as the more general protector of its citizenry, individualized compensation would appear to be unnecessary. (6) This focus on financial harm to the government is reinforced by situating health care fraud within the context of white collar crime, an area of law that focuses almost exclusively on economic harm. (7) In short, the recognition that health care fraud harms individual patients in ways that merit compensation--particularly if such harm is non-financial in nature--does not fit into the dominant conceptual model of health care fraud.

Part I of this Article explores the varied ways in which patients are harmed by fraudulent health care activities. Part II analyzes barriers to patient compensation under current law, addressing not only limitations on the disposition of recovered funds but also the conceptual difficulties posed by the white collar crime framework. Part III discusses recent developments at the state and federal levels, and explores compensation mechanisms common in consumer protection cases to determine whether they could be imported into the health care fraud context. The Article concludes that while there may be good reasons not to convert the entire health care fraud enforcement scheme to a patient-centered model, it nevertheless should be possible to reduce existing barriers to compensating patient harm.

1. HEALTH CARE FRAUD AND PATIENT HARM

   Health care fraud encompasses activities by a wide range of actors. It includes fraud by and upon health care professionals, health care institutions, health insurers and managed care companies, manufacturers of prescription drugs and other health care supplies, and even patients. (8) When such activities occur in the federal health care programs, such as Medicare and Medicaid, they are subject to a broad array of civil, criminal, and administrative statutes. (9) Yet, virtually all of these provisions consider the ultimate victim of the fraud to be the federal government, rather than the individual patient. As a result, health care fraud is largely considered a "bloodless" form of wrongdoing, an image reinforced by characterizations of such fraud as a stereotypical white collar crime. (10) White collar crimes are thus the opposite of "street crimes" in which money and property are taken by violence or the threat thereof. (11) In health care, these principles evoke images of highly trained physicians and executives misusing their positions and professional skills for personal financial gain, accomplished through deceptive yet nonviolent tactics such as falsifying bills for services. The victim--if the term even applies--is a hapless federal bureaucracy that serves as easy prey for unscrupulous individuals.

   Not surprisingly, public statements by prosecutors suggest a zero-tolerance approach to those who take advantage of the federal health care programs. In commenting on a recent pharmaceutical settlement, for example, the United States Attorney for the Eastern District of Pennsylvania stated,

   This wasn't a mistake. It was a marketing strategy. The result was that programs created to provide healthcare to the poorest among us were actually paying more for drugs than those who have private health insurance. There is a point at which pursuit of market share crosses the line that separates competition and illegal conduct. This case serves as an example that the consequences of stepping over that line can be costly. (12) Where the federal health care programs are viewed as suffering the greatest losses, it is logical to concentrate enforcement efforts on reimbursing those programs.

   But the federal government is not the only victim of fraudulent activities. Health care fraud also causes significant harm to patients--harm that may be financial, physical, or less tangible in nature. Although initially slow to recognize these effects, prosecutors and policymakers have now embraced the goal of "patient protection" as a key justification for fraud enforcement. Yet despite this rhetoric, the financial model of health care fraud recovery has not changed accordingly. And while returning funds to the federal Treasury helps to assure that the federal health care programs remain able to provide care to beneficiaries in the aggregate, this approach fails to remedy harm to individual patients.

   1. HARM TO THE FEDERAL GOVERNMENT

      Health care fraud became a key priority for federal law enforcement officials in the 1990's. (13) The motivation for these efforts is clear: As the authors of one treatise note, health care fraud is "where the money is." (14) For a sense of just how much money is at stake, note that the first comprehensive audit of Medicare fee-for-service payments found that more than $23 billion had been paid out improperly in fiscal year 1996 alone. (15) Although the numbers have improved each year, auditors estimate that the Medicare program still paid $12.1 billion in improper claims in fiscal year 2005, an error rate of 5.2 percent. (16) Given ongoing concerns over the solvency of the Medicare program, particularly once the so-called "Baby Boomers" become eligible, policymakers may view health care fraud recoveries as a means to offset escalating program costs without raising taxes, reducing the scope of benefits, or otherwise incurring the wrath of the powerful aging lobby. (17)

      Health care fraud is actionable under a wide range of federal criminal, civil, and administrative statutes. Some of these laws, such as the Medicare and Medicaid Anti-Kickback Statute, the "Stark Law" prohibition on physician self-referral, and the provisions governing exclusion from the federal health care programs, specifically target improper health care activities. (18) Others, such as the civil and criminal false claims prohibitions, (19) apply more broadly to all entities that transact business with the federal government. Health care fraud also may be prosecuted under broad federal criminal statutes, such as mail and wire fraud, conspiracy, and the Racketeer Influenced and Corrupt Organizations Act ("RICO"), (20) which prohibit improper conduct regardless of the industry in which it occurs.

      The current centerpiece of the government's anti-fraud efforts is the Civil False Claims Act ("FCA"), a Civil War-era statute that prohibits the knowing submission of false or fraudulent claims to the federal government. (21) Because violators are subject to a civil penalty of $5,500 to $11,000 per claim, plus three times the amount of damages sustained by the government, (22) repeated submission of bills containing small increments of fraud quickly leads to astronomical aggregate liability. (23) Moreover, the FCA's unique qui tam provisions permit private whistleblowers (known as "relators") who sue on the government's behalf to retain fifteen to thirty percent of the proceeds of the suit--creating a powerful incentive for private parties to police their neighbors in the health care market. (24) The number of health care FCA suits has grown exponentially...