Pressure Rising: Health Care Businesses Face Tougher Fraud Enforcement Amid Increased Criminal Presence in the Industry

• Author: Stephen H. Grimes
• Position: Currently practices law in Washington, D.C.
• Pages: 43-50

B u s i n e s s L a w B r i e f | S p r i n g / S u m m e r 2 0 1 0 4 3

Since 1950, the Wheaton Community Hospital and

Medical Center has served the small communities

of western Minnesota.

1

In the beginning of 2010, the

Wheaton Community Hospital and Medical Center, together

with Doctor Stanley Gallagher, agreed with the United States

Department of Justice (DOJ) to pay $846,461 to settle claims

that it unnecessarily admitted patients and fraudulently billed

Medicare from 1998 to 2004.

2

The hospital and Doctor Gal-

lagher denied any wrongdoing, and a doctor formerly employed

there will receive over $200,000 as a reward for blowing the

whistle on the hospital’s allegedly improper activity.

3

Stories similar to the one from Wheaton, Minnesota, are

unfolding across the United States as the federal government

escalates its efforts to eradicate health care fraud. Health care

businesses operate within a swiftly changing climate due to new

fraud laws and policies. Over the last few years, Congress has

passed significant legislation relating to fraud and abuse.

4

The

Obama Administration has made fighting health care fraud a top

law enforcement priority.

5

Health care businesses also find themselves among an

increasing number of service providers who purposely defraud

the government.

6

Recently in eastern Michigan, former employ-

ees of Sacred Hope Center (Sacred Hope)—which purported to

provide injection and infusion therapy to patients—pled guilty

to health care fraud.

7

The U.S. District Court in the Eastern

District of Michigan found that three men conspired to bill

Medicare for medications and services that were not necessary or

simply not provided.

8

One co-defendant admitted to purposely

using Sacred Hope’s services to defraud the government.

9

Health care is big business in the United States, as spending

reached about $2.5 trillion last year.

10

Health care fraud funnels

a significant amount of money out of the industry each year: the

Federal Bureau of Investigation (FBI) estimated that fraudulent

billing of public and private health care programs led to the loss

of 3 to 10 percent of health care spending in 2009, or $75 to

$250 billion.

11

The fraud business has become so lucrative that it

has been called “the most profitable crime in America.”

12

In this new climate, any business that benefits from gov-

ernment action in the health care industry has the potential to

face greater scrutiny, especially considering the Obama Admin-

istration’s greater emphasis on prevention.

13

Generally speaking,

two major areas of the industry have captured the government’s

attention: Medicare providers, who receive payments from the

government for providing medical services, and pharmaceuti-

cal companies, who either benefit from a government-approved

product being released to the market or having Medicare pay for

their products. As a result of these new circumstances, health care

businesses need to be attuned to the latest changes in law and

policy, as well as the increased levels of fraud in the industry, so

they can resist criminals who seek to take advantage of legitimate

businesses and patients, while designing a robust compliance

program to prevent fraud from within.

I. LAW AND POLICY OF HEALTH CARE FRAUD AND

ABUSE

The government has a potent set of laws and dedicated

personnel at its disposal for prosecuting health care fraud. It has

focused its efforts on fighting fraud in government entitlement

Pressure Rising: Health Care Businesses Face Tougher

Fraud Enforcement Amid Increased Criminal Presence in

the Industry

By: Stephen H. Grimes†

The Federal Bureau of Investigation (FBI)

estimated that fraudulent billing of public and

private health care programs led to the loss

of 3 to 10 percent of health care spending in

2009, or $75 to $250 billion.