Originally published in the South Florida Legal Guide
The individual mandate and the other insurance-related
provisions contained in the Affordable Care Act (ACA) have drawn
most, if not all, of the public attention. Virtually unnoticed,
except by those in the industry, are the significant fraud fighting
weapons that the ACA has added to the government's arsenal.
These ACA provisions are not under review in the challenges to the
act currently before the U.S. Supreme Court. If, however, the
entire statute is struck down, it is safe to say that both
Republicans and Democrats will be very upset because much of the
money that was appropriated by the ACA to implement anti-fraud
efforts has already been spent. More significantly, these ACA
provisions are clear money-makers for the government. Should this
baby be thrown out with the bathwater of the individual mandate,
the government will be deprived of significant fraud fighting
tools, as well as a substantial revenue stream.
These fraud fighting provisions in the ACA include the following:
1. Increased Funding to Fight Fraud
The ACA provided mandatory appropriations of $1.7 billion for FY
2010 and $1.7 billion for FY 2011, to fund the fraud enforcement
efforts of the Department of Health and Human Services (HHS), the
HHS Office of Inspector General (OIG), the Department of Justice
(DOJ), and the FBI. The ACA also provided discretionary
appropriations of $311 million for FY 2010 and an estimated $561
million for FY 2011.
Much of this funding has already been used. For example, DOJ's Civil Division has doubled the number of lawyers in its Frauds Section. In addition, the Centers for Medicare and Medicaid Services (CMS), the agency within HHS that administers Medicare and Medicaid, has established an Office of Program Integrity that has heavily invested in personnel, hardware, software, and programming to verify and crosscheck vast amounts of data.
These investments have yielded strong returns. On February 14, 2012, DOJ and HHS announced that their joint Fraud and Abuse Control Program, which was utilizing the resources authorized and funded by the ACA, had recovered nearly $4.1 billion in FY 2011.
2. False Claims Act Amendments
The government's weapon of choice against health care fraud
has been the federal False Claims Act ("FCA"), because it
imposes potentially ruinous civil penalties and because
whistleblowers can initiate an action (and receive a percentage of
any recovery), thus bringing more instances of alleged fraud to the
attention of the government.
The FCA prohibits the submission of false or fraudulent claims, and violations carry civil penalties of $5,500 - $11,000 per claim, plus treble damages. A large urban hospital can submit hundreds of claims per day to Medicare and Medicaid. At $5,500 to $11,000 per false claim, potential liability can be in the hundreds of millions of dollars. Potential liability of this magnitude has proven to be a powerful incentive to settle. The $4.1 billion recovered in FY 2011 is primarily attributable to settlements.
Under the ACA, any person who has received "an overpayment" and fails to report and return it within 60 days of its identification has violated the FCA. This provision is problematic on many levels. One area of concern is when does a provider know that it has received an overpayment? Can a provider identify the overpayment accurately in 60 days? For example, it is not uncommon for a year-end audit to find unidentified revenues on a hospital's books. The determination of the source of these funds, whether they represent an overpayment, if so from whom and how much must be refunded to each payer (private insurance, Medicare, Medicaid), is a labor intensive, time-consuming process that requires more than 60 days.
Another serious change for providers is the ability of the government or a whistleblower to bring a False Claims Act action for a violation of the Anti-Kickback Statute. Under the ACA, any claims for items or services resulting from a violation of the Anti-Kickback Statute will constitute false claims for purposes of the FCA.
The ACA also made it easier for a person to initiate a whistleblower action under the FCA, by expanding the pool of individuals who can qualify as an "original source" of the information about the alleged fraud (a prerequisite for bringing a whistleblower suit) and by easing the ban on using publicly disclosed information as the basis for an action.
3. Enhanced Administrative Powers
The ACA authorizes HHS to impose civil monetary penalties on
anyone who "knows of an overpayment" and fails to report
and return it. Previously, only those individuals who stood
to gain from the overpayment had an obligation to report the
overpayment and the government's only remedy was a criminal
prosecution. Under the ACA, it is a violation to simply know of an
overpayment. Moreover, the imposition of civil monetary
penalties is the result of an administrative proceeding in which
the government does not have to meet the higher burden of proof
required in a civil or criminal judicial proceeding under the
The ACA also authorizes HHS to suspend indefinitely all Medicare and Medicaid reimbursement payments to a healthcare provider "pending an investigation of a credible allegation of fraud." A "credible allegation of fraud" includes allegations from any source, even an anonymous source. Prior notice of a suspension is not required nor is notice of the reason for the suspension. Providers are not required to be informed of the origin or nature of the allegations of fraud or why they are considered to be credible.
Joanne Erde is a partner in the law firm of Duane Morris LLP. She is a board certified healthcare lawyer. She is admitted to practice in both Florida and New York, and is a member of the American Health Lawyers Association and the Health Law Sections of both the Florida Bar and the New York State Bar Association. Harry Silver is special counsel to Duane Morris LLP based in Washington, D.C.
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