The punishment of "health care fraud".

• Author: Mastin, Yvette M.

1. INTRODUCTION

   Skyrocketing health care costs have remained an issue of national concern for most of this decade. (2) Many Americans have come to believe that one of the primary causes for the substantial increase in the cost of health care is fraud and abuse within the health care industry. (3) The United States government reports that federally funded programs, such as Medicare, (4) are fraught with fraud and abuse. (5) The facts presented by the federal government seem to support this public belief. The federal government estimates that seven percent of all billings submitted by the country's Medicare providers are fraudulent. (6) As a result, the government believes that the Medicare program lost an estimated $12.6 billion in 1998 due to fraudulent and improper billing. (7)

   In 1995, public outcry for reform and cost-cutting measures in the federal budget led the federal government to declare "war" on "health care fraud;" Janet Reno, the Attorney General of the United States at the time, announced that the prosecution of "health care fraud" would be the number one priority of the Department of Justice [hereinafter "DOJ"] after the prosecution of violent crimes. (8) Soon after the DOJ's declaration, in August of 1996, Congress passed the Health Insurance Portability and Accountability Act of 1996 [hereinafter "HIPAA"], which significantly strengthened enforcement efforts. (9)

   The government has made a mark in its campaign against "health care fraud." In the last two years, the federal government has dramatically increased the number of health care fraud investigations initiated. (10) Thus, the number of criminal prosecutions has more than tripled since the government declared "war" on "health care fraud" with health care providers going to prison in record numbers. (11) Additionally, federal prosecutors opened 4010 civil health care fraud matters in 1997, (12) which represented the majority of the DOJ's civil fraud workload for the first time in history. (13) By the end of 1998, the government reported that there were 3471 civil "health care fraud" matters pending. (14) Finally, more than 2700 health care providers were excluded from participation in the Medicare program in 1997, (15) almost double the number of providers excluded in 1996. (16) The number of exclusions continued to rise in 1998 with the government reporting that it excluded 3021 health care providers. (17) These governmental efforts netted a record $1.087 billion in judgments, settlements and fines in 1997 (18) and the collection of $480 million in 1998. (19) The government states that it will maintain this return on its actions as settlements and fines are collected in future years. (20)

   Clearly, the government's "war" on "health care fraud" continues to rage. (21) But what is "health care fraud?" How should it be defined? How "health care fraud" is defined is especially significant to health law practitioners in light of a recent case in which two Kansas lawyers were indicted in a Medicare kickback case. (22) Although the federal government asserts that billions of dollars are lost to "health care fraud," these numbers include situations that result from honest mistakes. (23) The government has admitted that in its reporting of "health care fraud," it is unable to distinguish situations where honest mistakes were made from acts of intentional fraud. (24) In fact, the False Claims Act [hereinafter "FCA"], the most commonly utilized civil statute under which health care providers are sued for "health care fraud" includes health care providers that have merely made mistakes. (25)

   The FCA requires that the act be committed "knowingly." (26) However, proof of intentional wrongdoing is not required to successfully bring a civil action under the FCA. (27) As a result, a health care provider can be found strictly liable for an act of "health care fraud." (28) The government's failure to distinguish between intentional acts and mistakes in its war against "health care fraud" allows health care providers who have made mistakes to be accused of committing "health care fraud" and sanctioned when in reality their conduct does not represent an act of fraud. (29) A definition of "health care fraud" that disregards the mens rea of the provider has a devastating effect on the provider's ability to deliver quality health care services to the American people. (30) This reckless way of defining "health care fraud" at best brings an element of adversarial tension into the patient-health care provider relationship that fosters distrust between patients and their health care providers. (31) At worst, health care providers that have dedicated their lives to providing quality health care services will lose their ability to pursue their livelihood, their reputations amongst their peers and even their freedom.

   Although the definition of "health care fraud" is only one of the numerous issues of concern to health law practitioners and health care providers, the language that defines the conduct in question is the foundation of all other concerns related to "health care fraud." This Article will demonstrate the need for a narrowly construed definition of "health care fraud." The Article begins by providing a scenario to explain how a situation involving potential "health care fraud" can arise in the delivery of health care services. The Article then addresses how "health care fraud" is defined through a discussion of the process of the applicable proceedings and the penalties that may result. The Article concludes by proposing a way to define "health care fraud" that will result in a system of sanctions that is equitable and proportional to the conduct committed by the health care provider.

2. THE ACT: MISTAKE OR FRAUD?

   "Health care fraud" is predominantly discerned by the government in some form of billing practice; this fraudulent billing practice usually involves the submission of many small claims, some of which are legitimate services to the payor of the delivered health care service or product. (32) The following hypothetical demonstrates how many health care providers may end up being investigated and prosecuted for activities involving health care fraud. (33)

   After completing nine months of employment, Dr. G terminated Nurse Black without notice from her position as program manager at the Twilight Mental Health Center [hereinafter "Center"], an outpatient psychiatric clinic for mentally ill senior citizens located in a low-income urban neighborhood. The three-year old Center, owned and operated by corporation H, is staffed by two psychiatrists, a family physician, a program manager, a clinical social worker, a licensed vocational nurse, two mental health technicians, and two clerical workers. The physicians are majority shareholders of the corporation and are on the Board of Directors. The average monthly patient census at the Center is about twenty-eight patients with ninety percent of them being funded entirely by the Medicare program.

   Angry about being laid-off, Nurse Black decided to file a lawsuit for wrongful termination. During the initial consultation, she told her attorney that she believes the Center is operating in violation of federal law. She stated that when she first became aware of the Center's inappropriate business practices she did not say anything because she was afraid of losing her job. Two months before she was fired, she decided to make the medical director aware of her concerns. At the meeting with Dr. G, Nurse Black told the physician that she believed that some of the billing and referral practices of the Center did not comply with federal law and certain Medicare regulations. In addition, she told him some of the patients were inappropriately referred to the Center because they did not demonstrate a mental condition that could be successfully treated by the Center's existing clinical services. Dr. G thanked her for the information and told her that he would investigate her allegations. Nurse Black did not speak to Dr. G further about this matter. Two months later, Dr. G told her that she was being laid-off because her position was being eliminated due to budgetary constraints.

   Nurse Black explained to her attorney that the Center had been inappropriately soliciting new patients for the Center by paying local family physicians a fee of $100 for every elderly patient referred to the Center for psychiatric care, regardless of the mental status of the prospective patient. Additionally, Mrs. Black believed that approximately one third of the claims submitted to Medicare were upcoded. (34) Furthermore, she believed that rather than billing the services provided in the program in one daily rate, the Center was billing for each service individually. (35)

   Additionally, Nurse Black revealed that the other psychiatrist who usually had about thirteen patients admitted to the outpatient program would come to the Center at lunchtime and chat with all of them for about five minutes once a week. Often, the doctor would simply ask the nurse on duty how the patients were and then write psychotherapy notes in their individual charts. (36) For these five-minute visits and non-existent visits, Nurse Black believed that the psychiatrist billed Medicare for fifty-minute psychotherapy sessions.

   After carefully considering the situation, her attorney agreed to take her case and shortly thereafter filed a formal suit against the Center and the doctors for wrongful termination. After this initial suit was filed, the attorney filed a qui tam (37) complaint in the appropriate United States District Court which remained under seal for sixty days while the DOJ determined if the cause of action was viable and whether or not DOJ would take over the prosecution of this case for Nurse Black. Four months after discharging Nurse Black, Dr. G received a letter from the DOJ informing the corporate owner that an investigation had been initiated to determine...