United States: In Testimony Before The House Oversight And Government Reform Subcommittee On Health

In testimony before the House Oversight and Government Reform Subcommittee on Health Care in April 2011, the now-pending nominee for U.S. Attorney General, Loretta E. Lynch, stated in no uncertain terms that "fighting health care fraud is a priority of the Department of Justice." She succinctly explained that "[w]ith the rising cost of medical care, every dollar stolen from our health care programs is one dollar too many" and that "Medicare and Medicaid fraud can also corrupt the medical decisions health care providers make with respect to their patients, placing them at risk of harm from unnecessary or unapproved treatments." Ms. Lynch advised the subcommittee that the Department of Justice ("DOJ") had "enhanced its efforts to protect the public fisc from health care fraud and to help ensure the integrity of patient care," providing examples of successful efforts by the Health Care Fraud Prevention and Enforcement Action Team ("HEAT") and Medicare Fraud Strike Force (the "Strike Force").

In 2014, DOJ, together with the Department of Health and Human Services' Office of Inspector General ("HHS-OIG") and other federal and state agencies, methodically continued this approach, once again exacting steep monetary penalties and settlements from companies and imposing lengthy prison terms, fines, forfeiture, and restitution on individuals.

Ms. Lynch's words, echoed by DOJ's new Assistant Attorney General for the Criminal Division ("AAG"), Leslie R. Caldwell, and evidenced by DOJ's enforcement actions this past year, make plain that health care enforcement remains a top priority. Below, we recap some of DOJ's words and actions in 2014, and forecast what to expect in 2015.

I. Criminal Prosecutions

A. AAG Caldwell Announces Greater Focus on Health Care Fraud Going Forward and Coordination with Qui Tam Relators

In remarks at the Taxpayers Against Fraud Education Fund Conference in September 2014, AAG Caldwell lauded the "courageous efforts by relators to bring criminal and civil misconduct to light [as driving] many of the largest and most important health care fraud investigations over the last several decades," and promised that the Criminal Division would "redouble [its] efforts to work alongside" qui tam relators. See September 17, 2014 comments of AAG Caldwell at Taxpayers Against Fraud conference.

Specifically, AAG Caldwell announced that the Criminal Division had:

recently implemented a new procedure so that all new qui tam complaints are shared by the Civil Division with the Criminal Division as soon as the cases are filed. Experienced prosecutors in the Frauds Section are immediately reviewing the qui tam cases when we receive them to determine whether to open a parallel criminal case. Those prosecutors then communicate swiftly with the Civil Division and U.S. Attorney's Offices about the best ways to proceed in the parallel investigations.

AAG Caldwell emphasized that skilled prosecutors and investigators are available to work these cases and that they have a "wealth of experience successfully bringing parallel investigations." She encouraged relators to reach out to criminal authorities in appropriate cases. See id.

In addition to announcing the new qui tam process, AAG Caldwell highlighted the kinds of cases the Medicare Fraud Strike Force brought in 2014 and continues to prioritize, including cases against medical professionals like doctors and against "executives at health care providers such as hospitals," and noted they would be "stepping up [their] prosecutions of corporations involved in health care fraud." See id.

B. Prosecutions of Medicare Fraud and Related Offenses in 2014

As DOJ reported in a recent press release, "[s]ince its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged nearly 2,000 defendants who collectively billed the Medicare program more than $6 billion. In addition, the HHS Centers for Medicare and Medicaid Services, working in conjunction with HHS-OIG, is taking steps to increase accountability and decrease the presence of fraudulent providers." See DOJ press release 14-1373.

Take-aways from 2014 include:

  • Venues of Prosecution – DOJ and its partners continued to bring cases across the country in jurisdictions that see a high number of health care enforcement actions, including California, Florida, Louisiana, Michigan, New York, and Texas. The Southern District of Florida (Miami) and the Eastern District of Michigan (Detroit) remain particularly active venues for these cases.
  • Variety of Health Care Providers Targeted – DOJ and its partners are bringing home the message that doctors, nurses, and other medical practitioners will be prosecuted to the fullest extent of the law for their involvement in these cases.
  • Types of Crimes Charged – DOJ and its partners are using an expanding array of charges to include not only health care fraud, anti-kickback statute violations, and false statements, but also identity theft, money laundering, tax violations, structuring (e.g., making cash deposits in amounts less than $10,000 to avoid reporting requirements), and obstruction of justice.
  • Wide-ranging penalties – Sentences imposed included lengthy prison terms, fines, restitution, and forfeiture. Collateral consequences included exclusion from Medicare, Medicaid, and other federal and state health programs.

Below, we discuss some examples of these trends.

1. Medicare Fraud Strike Force Continues to Conduct Nationwide Takedowns

In May 2014, the Strike Force conducted the seventh nationwide takedown in its history, continuing what appears to be an annual initiative. Specifically, on May 13, DOJ and HHS-OIG announced charges against 90 individuals in six cities for allegedly participating in Medicare fraud schemes involving approximately $260 million in false billings. The government emphasized that 27 of those 90 individuals were doctors, nurses, and other medical professionals. Summarizing the charges, the government stated:

The defendants charged are accused of various health care fraud-related crimes, including conspiracy to commit health care fraud, violations of the anti-kickback statutes and money laundering. The charges are based on a variety of alleged fraud schemes involving various medical treatments and services, including home health care, mental health services, psychotherapy, physical and occupational therapy, durable medical equipment and pharmacy fraud.

These cases were brought in Miami, Houston, Los Angeles, Detroit, Tampa, and Brooklyn. See DOJ press release 14-503.

The sprawling nationwide takedown of numerous Medicare fraud cases that collectively involve a large dollar amount in false billings has clearly become a staple of the government's strike force approach. They vary little from year to year -- for example, 90 individuals were charged in this year's takedown compared with 89 in last year's, the collective dollar amount of the fraud schemes was $260 million this year as opposed to $223 million last year, and six of the same eight cities hosted both this year's and last year's takedowns. The approach is tried and true, serves to put the public on notice of the government's continuing enforcement efforts, and adds significantly to its coffers, so we can expect to see another nationwide takedown in 2015.

2. Strike Force Fully Exploits Individual Health Care Fraud Investigations to Interdict All Participants

A number of cases demonstrate how DOJ and its partners are seeking maximum impact from each health care fraud investigation by tenaciously following leads to interdict as many participants as possible. Pertinent examples are discussed below.

a. Louisiana and Texas Mental Health Clinics

In 2011, the government began an investigation of three community health centers – two in Baton Rouge and one in Houston – that yielded evidence of a multi-million dollar Medicare fraud. Specifically, over a period of seven years, the centers allegedly billed Medicare for partial hospitalization program services for the mentally ill that were unnecessary or never provided, submitting more than $258 million in claims and causing Medicare to pay approximately $43.5 million. See DOJ Press Release 14-1215. 2014 has seen cases against a number of the individual participants in this fraud scheme come to conclusion. Notably, having been convicted after trial by a jury in May 2014, an owner and operator of the two mental health clinics in Baton Rouge and a patient recruiter were sentenced to 90 months in prison (for health care fraud conspiracy and substantive counts) and 60 months in prison (for health care fraud conspiracy and conspiracy to pay and receive kickbacks), respectively. At their sentencing in October 2014, the co-owner/operator was also ordered to pay $43.5 million in restitution, while the patient recruiter was ordered to pay $3.2 million. See DOJ press releases 14-556, 14-1215. In August 2014, a woman who was an owner of all three centers and a marketer for the two in Baton Rouge was sentenced to 102 months in prison and $43.5 million in restitution after pleading guilty to health care fraud conspiracy and paying and receiving kickbacks. See USAO MD LA release dated August 18, 2014.

To date, this case has resulted in the conviction of 17 individuals, including owners, a medical director, administrators, therapists, and marketers. See DOJ press release 14-1215.

b. South Florida Partial Hospitalization Program

Several years ago, the government began investigating a Medicare fraud scheme involving American Therapeutic Corporation ("ATC"), which operated purported partial hospitalization programs, and its management company, Medlink Professional Management Group, Inc. ("Medlink"). The government reported in a January 2014 press release that ATC, Medlink and various owners, managers, doctors, therapists, patient brokers, and marketers of ATC and Medlink had pled guilty or been convicted at trial of a $205 million Medicare fraud scheme. The ATC owner, viewed as the mastermind of the scheme, was sentenced to 50 years in prison. See DOJ press releases 14-098, 14-1156; see also April 5, 2011 Testimony of U.S. Attorney Lynch to House Oversight and Government Reform Subcommittee on Health Care and September 17, 2014 comments of AAG Caldwell at Taxpayers Against Fraud conference (both mentioning ATC case).

The case did not end there. In that January 2014 press release, the government announced the latest stage of the prosecution, specifically, the indictment of additional alleged participants in the scheme, including a physician's assistant, a patient recruiter and the co-owner of a check cashing business who allegedly "had facilitated the payments of bribes and kickbacks from ATC to various patient recruiters." The co-owner of the check cashing business was charged with conspiracy to pay and receive bribes and kickbacks in connection with a federal health care program, as well as money laundering conspiracy, substantive money laundering, and aggravated identity theft. See id.

In addition to simultaneous takedowns of unrelated smaller dollar-amount frauds in various cities across the country, we can expect 2015 to continue the trend of deep and thorough investigations of high-profile, multi-million dollar fraud schemes, as well as the prosecution of the individuals allegedly responsible for executing them. As AAG Caldwell remarked, DOJ is no longer pursuing just the "low-hanging fruit." See September 17, 2014 comments of AAG Caldwell at Taxpayers Against Fraud conference. Notably, this approach is increasingly resulting in participants beyond the core group of health care providers, medical professionals, and patient recruiters being investigated and charged. Those providing financial services to the core group will also be interdicted, not only for health care fraud conspiracy but for money laundering and similar crimes as well.

3. Professionals Are Being Investigated and Prosecuted to the Fullest Extent of the Law

The cases from 2014 also demonstrate that DOJ is following through on its stated commitment to prosecute professionals, be they doctors, nurses, or other licensed practitioners, whom DOJ believes should be gatekeepers to prevent – not perpetrate - fraud.

For example, in August 2014, a Louisiana psychiatrist was sentenced to approximately seven years in prison and $43.5 million in restitution, as well as forfeiture of proceeds, for his role in the above-discussed Medicare fraud scheme involving mental health centers. See Section I.B.2.a., above, for additional information. See also DOJ press release 14-894. This is notable particularly when considered with the seven- and eight-year sentences imposed on owners of the mental health centers and the five-year sentence imposed on the patient recruiter. The psychiatrist's sentence is consistent with DOJ's view that gatekeepers should prevent these types of fraud from being perpetrated.

Also, in October 2014, the physician's assistant in the ATC-related Medicare fraud scheme discussed above at Section I.B.2.b. was sentenced to 15 years in prison following his conviction after trial for health care fraud, wire fraud, and false statements; he was also ordered to pay more than $85 million in restitution jointly and severally with his co-conspirators. See DOJ press release 1156. In December 2014, a patient recruiter in the same scheme, who was a licensed nursing assistant, was sentenced to over 12 years in prison. See DOJ release 14-1373. Here too, the medical professionals, as gatekeepers, received harsh punishment.

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