SC Lawyer, September 2010, #4. Health Care Reform: Recent Developments in Fraud Enforcement.

AuthorBy Matthew R. Hubbell, Joseph P. Griffith Jr. and E. Bart Daniel

South Carolina Lawyer


SC Lawyer, September 2010, #4.

Health Care Reform: Recent Developments in Fraud Enforcement

South Carolina LawyerSeptember 2010Health Care Reform: Recent Developments in Fraud EnforcementBy Matthew R. Hubbell, Joseph P. Griffith Jr. and E. Bart DanielIntroduction

Notorious bank robber Willie Sutton's advice was, "Go where the money is and go there often." Willie Sutton and Edward Linn, Where the Money Was: The Memoirs of a Bank Robber (The Viking Press 1976). Today no bank could hold the enormous amount of government money spent on health care in just one year. In 2010, combined federal and state health care spending is projected to exceed $800 billion. Acting Deputy Attorney General Gary Grindler, Address at The American Bar Association's 20th Annual National Institute on Health Care Fraud (May 13, 2010). The U.S. Department of Justice (DOJ) cites external studies estimating that the amount of fraud associated with that level of spending is between three and 10 percent, or $27 to $80 billion in 2010 alone. Id. The big money, and hence big-time fraud, is now found in the health care industry.

The recently passed Patient Protection and Affordable Care Act of 2010, Pub. L. No. 111-148, 124 Stat. 119 (2010), and the Healthcare and Education Reconciliation Act of 2010, Pub. L. No. 111-152, 124 Stat. 1029 (2010) (the "Act"), enacted sweeping changes to health care, including important anti-fraud measures that will significantly boost the federal government's prosecution of civil and criminal fraud cases. Although these anti-fraud provisions were largely obscured by the sound and fury of the health care reform debate, health care law practitioners and their clients must be aware of these significant changes in the landscape of health care law. Specifically, the Act provides substantial federal funding to finance fraud enforcement efforts, creates powerful new investigative tools, lowers the bar for prosecutors and qui tam plaintiffs, establishes new criminal offenses, and increases the punishment for violations.

A stimulus package for health care prosecutors

The Act provides an additional $350 million to fight fraud. Pub. L. No. 111-148 §6402(i)(1)(A), 124 Stat. 119, 761 (2010); Pub. L. No. 111-152, §1303(a)(1)(A), 124 Stat. 1029, 1057-8 (2010). These funds supplement a robust $464 million expenditure in fiscal year 2009 for the Health Care Fraud and Abuse Control Account. Dep't. of Health and Human Servs. and Dep't of Justice, Health Care Fraud and Abuse Program Annual Report for Fiscal Year 2009 at 4 (May 2010) (the "Report"). This account, which is administered jointly by the Attorney General and the secretary of the U.S. Department of Health and Human Services (HHS), funds anti-fraud programs. Id. at 3. The programs include aggressive prosecution strike forces operating in Medicare fraud "hot spots" such as Miami and Los Angeles. Id. at 10. Recently these strike forces have made mass arrests, indicted hundreds of individuals and secured more than 250 guilty pleas that resulted in around 200 sentences of imprisonment. Id. at 10-11.

In fiscal year 2009, the combined anti-fraud efforts of the DOJ and HHS provided a fantastic return on the government's investment, including: approximately $2.5 billion in deposits to the Medicare Trust Fund; $1.6 billion in judgments and settlements; more than 1,000 newly opened criminal health care fraud investigations; and nearly 900 new civil health care fraud investigations. Id. at 1.

The proof of the incredible magnitude of health care fraud is in the pudding: record-smashing fines or penalties obtained by the government from pharmaceutical manufacturers, physicians, pharmacies and hospitals. Pfizer, for example, paid $2.3 billion to avoid criminal and civil liability arising out of the alleged illegal promotion of pharmaceutical products. Id. at 15. This was the highest settlement ever for a health care fraud case. Id. Eli Lilly paid $1.4 billion for a global settlement of criminal, civil and administrative liability in connection with the alleged illegal marketing of the antipsychotic drug Zyprexa in violation of the federal Food, Drug and Cosmetics Act (FDCA). Id.

New administrative enforcement tools

To aid the government in administrative proceedings to exclude violators from participation in the Medicare program, the Act authorizes the secretary of HHS to delegate a testimonial subpoena power in exclusion-only cases to the...

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