National healthcare fraud is on the upswing, with a 400% increase in annual takedowns since 2013—and this, despite sequestration of mandatory funding for the Department of Justice (DOJ), the Department of Health & Human Services (HHS), the Office of Inspector General (OIG), and the FBI.
Take warning—limited resources or not, the feds are winning the fight against noncompliance.
Under the joint direction of the Attorney General and the Secretary of the Department of Health and Human Services (HHS), acting through the Inspector General, the Healthcare Fraud and Abuse Control Program (HCFAC) is a far-reaching initiative designed to coordinate federal, state and local law enforcement activities to combat fraud and abuse in healthcare, including both public and private health plans.
Based on a three-year average (2015-2017), the HCFAC recovered $4.20 for every dollar in program costs, thereby confirming the effectiveness of a collaborative approach to identify and prosecute instances of healthcare fraud.
In 2017, the Federal Government won or negotiated over $2.4 billion in healthcare fraud judgments and settlements, which only accounts for federal recoveries and not state Medicaid monies recovered as part of global federal-state settlements. As a result of these efforts, $2.6 billion was returned to the Federal Government or paid to private persons.
The DOJ opened 967 new criminal healthcare fraud investigations in 2017. Federal prosecutors filed criminal charges in 439 cases involving 720 defendants. A total of 639 defendants were convicted of healthcare fraud-related crimes during the year. Also in 2017, DOJ opened 948 new civil healthcare fraud investigations and had 1,086 civil healthcare fraud matters pending at the end of the year. In 2017, the FBI investigative efforts resulted in over 674 operational disruptions of criminal fraud organizations and the dismantlement of the criminal hierarchy of more than 148 healthcare fraud criminal enterprises.
2017 investigations conducted by HHS’ Office of Inspector General (HHS-OIG) resulted in 788 criminal actions against individuals or entities that engaged in crimes related to Medicare and Medicaid, and 818 civil actions, which include false claims and unjust-enrichment lawsuits filed in federal district court, civil monetary penalties (CMP) settlements, and administrative recoveries related to provider self-disclosure matters.
HHS-OIG also excluded 3,244 individuals and entities from participation in Medicare, Medicaid, and other federal healthcare programs. Among these were exclusions based on criminal convictions for crimes related to Medicare and Medicaid (1,281) or to other healthcare programs (309), for patient abuse or neglect (266). HHS-OIG also issued numerous audits and evaluations with recommendations that, when implemented, would correct program vulnerabilities and save program funds.
Using advanced data analysis techniques to identify aberrant billing levels, fraud hot spots, and suspicious patterns, the Strike Force succeeded in 2017 to file 253 indictments, informations and complaints involving charges filed against 478 defendants who allegedly billed federal healthcare programs more than $2.3 billion. It also obtained 290 guilty pleas and 33 jury trials litigated, with guilty verdicts against 40 defendants. In total, 305 defendants were sentenced to imprisonment with an average of more than 50 months of incarceration.
2017 Highlights of Criminal and Civil Investigations
Ambulance and Transportation Services: In January 2017, Medstar Ambulance, Inc. and its two owners agreed to pay $12.7 million to resolve allegations in the District of Massachusetts that from January 2011 through October 2014, Medstar submitted false claims to Medicare for ambulance transport services. Specifically, the United States alleged that Medstar routinely billed for services that did not qualify for reimbursement because the transports were not medically reasonable and necessary, billed for higher levels of services than were required by patients’ conditions, and billed for higher levels of services than were actually provided.
Clinics: In July 2017, a grand jury sitting in the Eastern District of New York returned a 2-count indictment against 5 high-billing medical professionals who worked at a network of Brooklyn-area clinics where patients were paid illegal kickbacks in return for subjecting themselves to purported physical and occupational therapy, diagnostic testing, and other medical services. The defendants—a medical doctor, a physical therapist, a chiropractor, and 2 occupational therapists—paid recruiters and others in return for the referral of patients to their clinics, which submitted fraudulent claims to Medicare for approximately $100 million.
Device Companies: In March 2017, two salesmen who admitted they bought expired and nearly expired weight loss gastric bands, which doctors later surgically implanted into patients in southern Florida, were sentenced to 1 year and 6 months and 7 months in prison, respectively. Between June 2014 and October 2015, the defendants, both senior account executives for Apollo Endosurgery, Inc., engaged in a scheme to unlawfully enrich themselves by misbranding LAP-BAND Adjustable Gastric Banding Systems, changing the serial number and expiration date in order to sell expired medical devices for profit. The defendants purchased expired and nearly expired LAP-BANDS through the internet and created false labels with fraudulent serial numbers and expiration dates to hide the true expiration date of the LAP-BANDs. They then sold the misbranded LAP-BANDs to local physicians. At least seven of these misbranded LAP-BANDS were subsequently implanted into patients.
Diagnostic Services: In June 2017, AMI Monitoring Inc., also known as Spectocor, Spectocor’s owner, Medi-Lynx Cardiac Monitoring LLC, and Medicalgorthmics SA agreed to pay approximately $13.5 million to resolve civil FCA allegations that they billed Medicare for higher and more expensive levels of cardiac monitoring services than requested by the ordering physicians. The government alleged that Spectocor and its owner, and later Medi-Lynx, marketed the Pocket ECG as capable of performing three separate types of cardiac monitoring services. When a physician sought to enroll a patient for Pocket ECG, however, the enrollment process allegedly only allowed the physician to enroll in Pocket ECG for the service, which provided the highest rate of reimbursement provided by a patient’s insurance, thus steering the ordering physician to a more costly level of service.
Drug Companies: In December 2016, Forest Laboratories LLC, located in New York and Forest Pharmaceuticals Inc. agreed to pay $35.5 million to settle federal civil FCA allegations that Forest paid kickbacks in violation of the Anti-Kickback Statute to induce prescriptions of the drugs Bystolic, Savella, and Nameda. The government alleged that Forest employed speaker program payments and meals as improper inducements. Forest allegedly provided these benefits even when the speaker programs were cancelled, no licensed healthcare professionals attended the programs, the same attendees had attended multiple programs over a short period of time, or the meals associated with the programs exceeded Forest’s internal cost limitations. In addition to the federal recovery, Forest paid $2.5 million to resolve state Medicaid liability.
Durable Medical Equipment (DME): In March 2017, Braden Partners, L.P., doing business as Pacific Pulmonary Services, agreed to pay $11.4 million to resolve allegations against it and its general partner, Teijin Pharma USA LLC, that they violated the civil FCA. The United States alleged that beginning in about 2004, Pacific Pulmonary Services began submitting claims for home oxygen and oxygen equipment without obtaining a physician evaluation and authorization, as required by program rules. Further, beginning in 2006, certain of the company’s patient care coordinators also allegedly agreed to make patient referrals to sleep testing clinics in exchange for those clinics’ agreement to refer patients to Pacific Pulmonary Services for sleep therapy equipment in violation of the Anti-Kickback Statute.
Electronic Health Records: In May 2017, eClinical Works (ECW) agreed to pay $155 million to resolve a civil FCA lawsuit filed in Vermont alleging that ECW had misrepresented the capabilities of its software. The government alleged that to pass certification testing, the company modified its software by “hardcoding” only the drug codes required for testing and thereby concealed from its certifying entity that its software did not comply with the requirements for certification. ECW’s software also allegedly did not accurately record user actions in an audit log, and in certain situations did not reliably record diagnostic imaging orders or perform drug interaction checks. As a result, ECW allegedly caused the submission of false claims for federal incentive payments based on the use of ECW’s software. The United States also alleged that ECW paid unlawful kickbacks to customers in exchange for promoting its product.
Health Maintenance Organization: In May 2017, the government alleged that CareCore National LLC, which performs prior authorization review for diagnostic procedures on behalf of many insurers, failed to review prior authorization requests in a timely fashion, and to avoid contractual penalties for failing to timely process the requests, CareCore instituted a practice of improperly approving the requests. Between 2007 and 2014, CareCore improperly authorized over 200,000 diagnostic procedures. In addition to the federal recovery, CareCore also paid $9 million to resolve state Medicaid liability.
Hospice Care: In April 2017, International Tutoring Services, LLC agreed to pay approximately $12.1 million to settle federal civil FCA allegations that they paid kickbacks in exchange for patient referrals. The government alleged that Hospice Plus, Phoenix Hospice, and Goodwin Hospice, which are now consolidated under the Hospice Plus brand and operate primarily in and around Dallas, Texas, paid kickbacks to a physician house call company and medical providers in violation of the Anti-Kickback Statute to induce referrals of hospice patients. In addition to the federal recovery, the defendants paid approximately $105,000 to resolve state Medicaid liability.
Hospitals and Health Systems: In June 2017, PAMC, Ltd. and Pacific Alliance Medical Center Inc., which owns
California-based Pacific Alliance Medical Center, agreed to pay $31.9 million to settle federal civil FCA allegations that they were involved in improper financial relationships with referring physicians. These relationships allegedly violated the Anti-Kickback Statute and the Stark Law and took the form of (1) arrangements under which the defendants paid above-market rates to rent office space in physicians’ offices, and (2) marketing arrangements that provided undue benefit to physicians’ practices. In addition to the federal recovery, PAMC and Pacific Alliance Medical Center paid $10 million to resolve state Medicaid liability.
Laboratories: In April 2017, Quest Diagnostics agreed to pay $6 million to settle civil FCA allegations that Berkeley HeartLab Inc. made payments to physicians and patients to induce the use of Berkeley for blood testing services for medically unnecessary tests in violation of the Anti-Kickback Statute. The government alleged that Berkeley paid kickbacks to referring physicians disguised as “process and handling” fees. The government also alleged that Berkeley paid kickbacks to patients by routinely waiving copayments owed by certain patients who were legally required to pay for part of their tests. The government further alleged that these illegal practices resulted in medically unnecessary cardiovascular tests being charged to federal healthcare programs.
Nursing Homes and Facilities: In July 2017, Reliant Care Group and affiliated entities agreed to pay $8.3 million to resolve claims in the Eastern District of Missouri under the civil FCA for providing unnecessary physical, speech, and occupational therapy to nursing home residents. The government alleged that from January of 2008 through April of 2014, Reliant billed Medicare for unnecessary physical, speech and occupational therapy provided to nursing home residents who had a relatively high level of independence and who were residing in a skilled nursing facility primarily because of a psychiatric condition. The government further alleged that some Reliant Care Rehabilitative Services management pressured therapists to provide therapy to residents even when the therapists believed that the therapy was not medically necessary.
Physician and Other Practitioners: In October 2016, Hudson Valley Hematology-Oncology Associates, R.L.L.P. (Hudson), agreed to pay $5.3 million to resolve Hudson’s civil FCA liability for improperly submitting claims to Medicare and Medicaid. From June 2010 through June 2015, Hudson allegedly routinely waived co-payments without an individualized determination of financial hardship or exhaustion of reasonable collection efforts and billed Medicare and Medicaid for evaluation and management services, even though Hudson did not provide any significant, separately identifiable services to the beneficiaries.
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The Department of Health and Human Services And The Department of Justice Healthcare Fraud and Abuse Control Program Annual Report for Fiscal Year 2017. Available at: https://oig.hhs.gov/publications/docs/hcfac/FY2017-hcfac.pdf