Jennifer Short is based in our Northern Virginia office.
For more than 15 years, health care companies have been prime targets of government enforcement efforts to combat fraud, waste and abuse. At the same time, health care costs and government spending on health care services has continued to rise. Now, with health care reform on the horizon, Congress, the Department of Justice (DOJ), the Department of Health and Human Services (HHS) and a variety of state enforcement authorities are pulling out all the stops to increase transparency, oversight and enforcement activities involving providers of health care services, drugs, devices and supplies. Outlined below are just a few of the developments in recent weeks that signal the government's increasing commitment to pursue participants in virtually every segment of the industry.
Congress Amends The Civil False Claims Act To Expand Its Reach
At relative lightning speed, Congress considered and passed Senate bill 386, the Fraud Enforcement and Recovery Act of 2009 (FERA).1 The bill was signed into law by President Obama on May 20, 2009. In addition to addressing specific enforcement and oversight issues related to the financial crisis and the government's economic recovery programs, FERA significantly amends the civil False Claims Act, 31 U.S.C. § 3729 et seq., to expand the risk of liability for those who receive (directly or indirectly) federal funds.
As many in the health care industry already know, the False Claims Act is one of the government's principal tools for combating fraud, waste and abuse in federally funded programs, including Medicare and Medicaid.2 Since the Act was last amended in 1986, more than $21 billion has been recovered; in 2008 alone, $1 billion was recovered in cases involving health care companies.
FERA's amendments to the Act will enhance the ability of enforcement agencies to pursue health care fraud cases in several ways, including the following:
- Revising the definition of "claim" to include demands for payment made by subcontractors and subgrantees to the primary recipients of government funds. For example, providers who contract with Medicaid or Medicare managed care plans can be held liable under the Act for their submissions to the plans.
- Expanding the reach of the so-called "reverse false claim" provision to include the retention of overpayments (and even, possibly, the failure to pay administrative fines). The Medicaid Inspector General for the State of New York has said that this change "allows the government and whistleblowers to pursue violations of regulatory statutes with penalty provisions as False Claims Act cases and to pursue false documents which are 'material to an obligation to pay'. . .regardless of whether a false claim has been submitted."3
- Affirmatively allowing the federal government to share information collected pursuant to its Civil Investigative Demand authority with False Claims Act whistleblowers as well as state agencies that are named as co-plaintiffs in a False Claims Act case.
(For more information on FERA's amendments to the False Claims Act, see Holland & Knight's May 27, 2009 Health Law & Life Sciences Alert, President Obama Signs Landmark Anti-Fraud Bill Into Law.)
DOJ Announces A Wave Of FCA Settlements And Cases Involving Health Care Companies
Roughly coinciding with the passage of FERA, the Department of Justice announced several False Claims Act (FCA) settlements with healthcare providers during the last few weeks. The largest of these was a $95.5 million settlement with Aventis Pharmaceutical to resolve allegations of misreporting drug prices.4
In addition, two settlements were announced on May 21, 2009 – one involving Texas-based Regency Nursing and Rehabilitation Centers on allegations of billing for medically unnecessary services,5 the second involving three Minnesota-based HealthEast Care System hospitals accused of overcharging Medicare for certain spinal fracture treatments.6
In early June, the government settled False Claims Act allegations with the University of Medicine and Dentistry of New Jersey, which was accused of double-billing Medicaid by submitting claims for physician services that had previously been submitted by the treating physicians themselves.7
In addition to these settlements, the government announced in mid-May that it (along with 16 states) was intervening in two False Claims Act cases filed against the pharmaceutical manufacturer, Wyeth.8 Wyeth is accused of failing to give Medicare and Medicaid the same discounts on drugs that it was offering to private purchasers of the same products. Another pharmaceutical company, AstraZeneca, has disclosed in its most recent SEC filings that the U.S. Attorney in Philadelphia is investigating the company's marketing practices of an antipsychotic drug; the company is already facing several state actions brought on behalf of Medicaid programs regarding alleged off-label marketing activities.
As these cases and settlements demonstrate, 2009 already has been an active year for health care fraud enforcement activities – and the trend is likely to continue.
DOJ And HHS Form Health Care Fraud Prevention And Enforcement Action Team
On May 20, 2009, Attorney General Eric Holder and HHS Secretary Kathleen Sebelius announced the creation of a Health Care Fraud Prevention and Enforcement Action Team (HEAT). HEAT will consist of senior-level officials from both DOJ and HHS acting in coordination to take "the fight against Medicare and Medicaid fraud to a new level."9
HEAT will undertake a variety of anti-fraud efforts, including the following:
- creating and using "Strike Force" teams in major cities, including Miami, Los Angeles, Detroit and Houston, to investigate health care fraud
- assisting state Medicaid officials with provider audits and other monitoring activities
- analyzing electronic data to look for patterns and indicia of fraud and abuse
- building demonstration projects focused, initially, on durable medical equipment
- increasing training and data and information sharing efforts to help providers and law enforcement identify patterns of fraud
- strengthening monitoring activities, particularly for providers under Medicare Parts C (Medicare Advantage plans) and D (prescription drug programs)
- improving citizen access to fraud hotlines and websites
HEAT members plan to meet every two weeks and will announce developments and new initiatives on a dedicated website.
HHS OIG Report Highlights Enforcement Successes And Identifies Initiatives
On June 8, the HHS Office of Inspector General (OIG) submitted its semi-annual report to Congress for the first six months of fiscal year 2009.10 During that period alone, the OIG reported, more than $2.4 billion was recovered through the agency's audit and investigative functions. The report also identified the OIG's "Top Management Challenges," which include Medicare Part D oversight; quality of care; and oversight of food, drugs and medical devices.
In a press release accompanying the report, Inspector General Levinson was quoted as saying, "These recoveries reflect our dedicated efforts to reduce fraud, waste, and abuse in HHS programs. . . .We will continue to employ all of our audit, evaluation, investigation, and legal tools and also to collaborate with OIG's government partners to accomplish this vital and expanding mission."11
Congressional Health Care Reform Proposals Include Transparency and Oversight12
Congress is no doubt taking note of the recent enforcement actions and planned anti-fraud initiatives being touted by the Department of Justice and HHS OIG. The House and Senate are considering a number of different health care reform proposals this summer, and although considerable debate is expected on a variety of issues, there is little doubt that any piece of comprehensive health care legislation will include oversight, compliance, and enforcement provisions. The ideas being discussed include the following:
- Requiring, in some cases, risk assessment screening by HHS before a provider is allowed to participate in Medicare. Providers who are deemed to be high risk may be required to submit to "enhanced oversight" during a probation period of participation or be asked to post a surety bond to cover potential losses to the program.
- Making compliance programs mandatory as a condition of participating in federally funded health care programs.
- Increasing reporting requirements and expanding the use and coordination of databases to track outcomes, quality of care, licensing, and other information that can be used by enforcement authorities.13
Regardless of whether any health care reform initiative succeeds this year, those in the health care industry will continue to face increased scrutiny from regulatory and enforcement authorities. Health care organizations that do not currently have compliance programs in place would be wise to invest now in risk-reducing – and ultimately money-saving – policies and procedures. Even those who have established compliance programs will want to review and adapt their programs to address areas where the risk for investigation and potential liability are increasing, given legislative, regulatory and enforcement trends.
Footnotes
1. Fraud Enforcement and Recovery Act of 2009, Pub. L. No. 111-21, 123 Stat. 1617 (2009).
2. In addition to the federal civil False Claims Act, numerous states, and some cities, have passed or amended their own False Claims Acts in the past few years to allow them to bring fraud actions at the state and local level, even without federal involvement. A number of states have been particularly aggressive in pursuing such actions.
3. N.Y. Office of Medicaid Inspector General Press Release, "The Fraud Enforcement and Recovery Act of 2009 and its Significance to Medicaid Providers."
4. Dept. of Justice Press Release, "Aventis Pharmaceutical to Pay U.S. $95.5 Million to Settle False Claims Act Allegations" (May 28, 2009).
5. Dept. of Justice Press Release, "Texas-Based Regency Nursing and Rehabilitation Centers to Pay U.S. $4 Million to Resolve False Claims Act Allegations" (May 21, 2009).
6. Dept. of Justice Press Release, "Minnesota Hospitals to Pay U.S. $2.28 Million to Settle False Claims Act Allegations" (May 21, 2009).
7. Dept. of Justice Press Release, "New Jersey University Hospital to Pay Additional $2 Million to Resolve Fraud Claims That Facility Double Billed Medicaid" (June 9, 2009).
8. Dept. of Justice Press Release, "U.S. and 16 States Join Suits Against Pharmaceutical Giant, Wyeth" (May 18, 2009).
9. Dept. of Justice Press Release, "Attorney General Holder and HHS Secretary Sebelius Announce New Interagency Health Care Fraud Prevention & Enforcement Action Team" (May 20, 2009).
10. HHS Office of Inspector General, "Semiannual Report to Congress: October 1, 2008 – March 31, 2009".
11. HHS Office of Inspector General Press Release, "OIG Reports More than $2.4 Billion in Expected Recoveries From Fighting Fraud, Waste and Abuse for First Half of FY 2009," (June 8, 2009).
12. For more information about health care reform, please visit the June 5, 2009 webinar presented by Holland & Knight on "The Pathway to Healthcare Reform".
13. See Senate Finance Committee Policy Options Paper, "Transforming the Health Care Delivery System: Proposals to Improve Patient Care and Reduce Health Care Costs" (Apr. 28, 2009); see also Senate Health, Education, and Labor Committee, S. ___, "Affordable Health Choices Act."
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