Health Care Fraud

Denver, Colorado

Understanding the Risks of Health Care Fraud
By Richard B. Caschette

Contents:

Introduction
On December 14, 2000, then-Attorney General Janet Reno announced a $840 million criminal and civil settlement with the largest for-profit hospital chain in the United States.

That same year, the world’s largest provider of kidney dialysis products and services agreed to pay the United States government $486 million in criminal fines and civil settlements to resolve a sweeping health care fraud investigation. Two of the company’s former vice presidents also pled guilty to felony charges for health care fraud.

In 2000, the nation’s largest operator of nursing homes negotiated a global settlement with the federal government by agreeing to pay a $170 million civil settlement in response to allegations that it fabricated records to make it appear that nurses were devoting much more time to Medicare patients than they actually were. The company also entered into the most comprehensive corporate integrity agreement established to date. Finally, a subsidiary company, which owns 10 nursing homes, entered guilty pleas for wire fraud and false statements and agreed to pay $5 million in fines.

In 2001, a major American pharmaceutical manufacturer agreed to pay $875,000 to resolve criminal charges and civil liability in connection with alleged fraudulent drug pricing and marketing conduct involving Lupron. In addition to settling federal and state civil False Claims Act liabilities, the manufacturer plead guilty to conspiracy to violate the Prescription Drug Marketing Act and agreed to pay a criminal fine of $290,000, the largest criminal fine ever in a health care fraud prosecution. In that case, a federal grand jury indicted one physician and six company managers with conspiracy to pay kickbacks to doctors and other customers, as well as the violation of other Medicare and Medicaid criminal statutes.

These cases are just recent examples of some of the significant settlements in the area of health care fraud. During fiscal years 2000 and 2001, the federal government negotiated close to $3 billion in judgments, settlements, and administration impositions in health care fraud cases and proceedings. This fallout within the health care industry is a direct result of the federal government’s increased vigilance in the area of health care fraud. Given the success of recent federal civil and criminal prosecutions, health care providers, suppliers, and manufacturers can anticipate an even greater shift of federal resources, resulting in an even more aggressive pursuit of health care fraud investigations over the next few years.

This brochure provides an overview of health care fraud and abuse issues for the health care professional, supplier, and manufacturer, including:

  • an overview of the various agencies and individuals that investigate health care fraud and abuse claims;
  • a review of some of the high-risk areas;
  • how you might be contacted in a health care fraud investigation and what to do if that happens;
  • recurring themes used by defense counsel representing health care providers in this area; and
  • a comprehensive list of laws used in federal criminal, civil, or administrative health care fraud enforcement (see Appendices A & B).

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Key Characteristics in Health Care Fraud Investigations
There are a few key characteristics of fraud and abuse investigations of which health care professionals, suppliers, and manufacturers should be aware. First, health care fraud enforcement is a very high priority for both federal prosecutors and investigators. That fact makes it much harder for prosecutors simply to walk away from weak or marginal cases. Next, health care fraud enforcement is done by a number of different agencies in which each has its own agenda. For example, the Criminal Investigation Division of the Internal Revenue Service often assists other agencies in complex health care fraud investigations. This means that the IRS can be expected to push prosecutors to consider charging money laundering violations over which it has jurisdiction. It is important for defense counsel to understand the agendas of the various investigative agencies involved in the particular case.

Another point is that, unlike a number of other kinds of criminal law enforcement, health care fraud cases are prosecuted without firmly established enforcement criteria. Consequently, it becomes critically important for defense counsel to understand the prosecution criteria, written or unwritten, used by Main Justice and a particular United States Attorneys’ Office. Furthermore, the overwhelming majority of health care fraud cases are initiated by present or former company employees through qui tam actions. The fact that a company insider is often the government’s key witness raises a number of sensitive issues and makes it difficult to convince the government that they have their facts wrong. Finally, there is a broad range of sanctions generally available in the health care fraud arena, ranging from criminal conviction and exclusion from the Medicare program to payment of civil penalties. This variance can sometimes make it easier for defense counsel to argue against criminal indictment or exclusion on the grounds that alternative sanctions might be more appropriate.

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Who Investigates These Claims?
The Department of Health and Human Services (HHS) has perhaps the largest stake in health care fraud, given its responsibility for administering the largest publicly funded health benefit program (Medicare and Medicaid), as well as block grant programs (social services, internal and child health) and health services through the public health service (including the Indian health service). The HHS Inspector General, established in 1976 as the first of the statutory inspectors general, plays a major role in investigating health care fraud, principally against Medicare and Medicaid programs.

Other federal agencies have separate IG offices exercising primary investigator responsibilities over federally funded health care programs which they oversee. These other IG agencies include: Department of Defense; Office of Personnel Management; Railroad Retirement Board, Department of Labor, and the Department of Veterans Affairs. These IG agencies generally have the authority to investigate fraud and abuse in the programs and operations of the respective departments or agencies and the authority to issue administrative subpoenas duces tecum to help in those investigations.

In addition to IG investigations, other federal agencies, such as the U.S. Postal Inspection Service, Federal Bureau of Investigation, Federal Trade Commission, Food and Drug Administration, Drug Enforcement Administration, and Internal Revenue Service, investigate fraud and abuse claims. Furthermore, Medicare intermediaries and carriers are required to have fraud units for the purpose of detecting and investigating potential Medicare fraud and refer fraud cases to the OIG for further development. HHS also contracts with utilization and quality control peer review organizations to determine the medical necessity and appropriateness of health care services to be reimbursed under the Medicare program. Finally, there are state Medicaid fraud control units, comprised of prosecutors, investigators, and auditors, responsible for investigating and prosecuting provider fraud against the State Medicaid programs and cases of abuse and neglected patients.

Private insurers and private citizens have also joined the fight against health care fraud by suing health care providers, medical equipment suppliers, and drug manufacturers directly for alleged fraud and abuse within the health care industry. They are often motivated by financial incentives offered by the Racketeer Influenced and Corrupt Organizations Act (RICO) and the fortified Civil False Claims Act. Increasingly, these companies and individuals are using alleged violations of the Anti-Kickback Statute or the ban on physicians’ self-referral (Stark Act) as predicate acts for qui tam complaints under the Civil False Claims Act. The Civil False Claims Act provides hefty economic incentives for competitors, former business associates, current and former employees, and patients to recover civil penalties and treble damages for those who have allegedly filed false claims with the United States or its agents.

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What Are Investigators Looking For?
The HHS Office of Inspector General has specifically highlighted in its compliance guidance documents areas of “special concern” for the health care industry. While the OIG recognizes that there are different risk areas when considering the various kinds of health care providers such as hospitals, home health agencies, clinical laboratories, nursing facilities, durable medical equipment suppliers, and drug manufacturers, the OIG tends to focus most frequently in the following areas:

Billing and False Claims

  1. Billing for items or services not actually rendered, provided or documented.
  2. Providing and billing for medically unnecessary services, supplies, and/or equipment.
  3. Unbundling.
  4. Upcoding.
  5. Inadequate resolution of overpayments/credit balances/failure to refund.
  6. Duplicate billing in an attempt to gain duplicate payment.
  7. Falsifying information on the claim form, CMN, and/or accompanying documentation.
  8. Knowing misuse of provider identification/certification numbers or supplier number resulting in improper billing.
  9. Billing for services provided by unqualified or unlicensed clinical personnel.
  10. Falsified medical records or plans of care/altering medical records.

Requirements and Standards

  1. Failure to adhere to licensing requirements and Medicare conditions of participation.
  2. Employing persons excluded from participation and federal health programs.
  3. Disenrollment/patient abandonment and violation of applicable statutes, regulations, and federal health care program requirements.

Kickbacks, Inducements, Referrals

  1. Incentives to actual or potential referral sources that may violate the anti- kickback statute or other similar federal or state statutes or regulations.
  2. Compensation programs that offer incentives for a number of visits performed, or for items or services ordered, and such were revenue generated.
  3. Violation of Stark self-referral laws.
  4. Joint ventures between parties, one of whom can refer Medicare or Medicaid business to the other.

Marketing

  1. Improper patient solicitation and high pressure marketing activities.
  2. Violation of Prescription Drug Marketing Act

Quality of Care

  1. Overutilization, underutilization and/or quality of care.
  2. EMTALA

Information, Requirements, Records, Documentation

  1. Insufficient documentation to evidence medical necessity, or services were performed, and/or support reimbursement.

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Warning Signs of Government Investigation
The alert health care provider, supplier, or manufacturer will recognize the warning signs of conduct that could lead to a government investigation. These signals may originate from several sources, both internal and external. Routine business activity of the corporation, such as internal audits, may reveal illegal conduct or discrepancies that should be carefully investigated. Illegal activity may be reported by employees to supervisors, or through an employee hotline, if one has been established. Management must resist any temptation to dismiss or ignore employee complaints of improper conduct. The employee’s next step may be a call to a government law enforcement or administrative agency.

Even diligent and alert managers are sometimes caught unaware when government actions signal a problem. Unguarded statements by government auditors may provide a tip; results of audits or inspections by a regulatory agency may reveal a discrepancy. More obvious signs include contacts by a government investigator with employees, or service of authorized investigative demands or Inspector General subpoenas on employees.

Grand jury subpoenas for documents or testimony issued to the entity or employees are unmistakable signals of an ongoing criminal investigation, as are government searches of business premises pursuant to a search warrant. A request by government investigators to interview employees on business premises or at their home is another obvious sign of an ongoing investigation. Investigators may act in an intimidating manner and threaten dire consequences if the employee does not immediately agree to answer their questions. These employees are entitled to legal counsel before speaking to government investigators if they wish. The employee should be made aware that any statements they make can be used against them. They should also be told that any statements they do make must be entirely accurate. If their statement is inaccurate, the employee could be accused of lying to a federal officer or obstruction of justice, even though they are not under oath when answering the agent’s questions. The provider’s Compliance Officer, management or legal counsel should be contacted immediately if an employee is contacted by a government investigator or suspects a government investigation.

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Government Right of Access of Documents
The government’s right to demand immediate access to documents during health care investigations is presumed. By directly participating in a government health care program, the health care provider is subject to host of a record-keeping and reporting requirements, and most of the providers’ records are available to government regulatory agencies without compulsory process. Most investigative agencies prefer to obtain records needed for their investigations by the least obtrusive method possible and, if possible, without alerting the provider to the existence of the investigation. Whoever receives the demand for access should request from the government investigator an opportunity to consult with legal counsel before complying. Ordinarily, such requests will be granted.

The right to immediate access does not give the government the right to take the originals of records (although that can be done under a search warrant). All records responsive to the request for immediate access should be made available for inspection, except that communications with an attorney are privileged and should not be produced. Counsel may also advise that other records are privileged and therefore should not be produced. If records are withheld because of claim of privilege, the investigator should be informed. If copies of records are made by or for the investigator, a separate copy should be made and retained in a separate file by the Compliance Officer.

Under the Medicare and Medicaid programs, the burden is on the provider of services to maintain and furnish upon request adequate documentation to demonstrate the items or services for which they claim payment are covered services and have been provided as claimed.

In addition to informal investigations, federal or state health care fraud investigators may resort to issuing subpoenas for documents and/or depositions of employees, grand jury subpoenas, or search warrants when there is probable cause that evidence for the crime might be founded in the place to be searched. While it is essential for the health care provider or supplier to cooperate with law enforcement when receiving a formal request for documentation, it is also prudent to contact your attorney because there are sometimes limitations on the kind of information that law enforcement is entitled to receive through these formal channels.

In the event a search warrant is served and counsel is not immediately available or the investigator will not wait for counsel to arrive, examine the search warrant carefully and direct the investigator to where the requested records are maintained. Under a search warrant, the government will take the original records. Continue to try to reach counsel by telephone and connect counsel to the lead investigator. Do not fail to disclose where responsive records are kept. Monitor the investigators closely and inform them if they try to take privileged records or records that are outside the scope of the search warrant. Do not under any circumstances attempt to physically prevent the removal of records.

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Retention of Outside Counsel
A health care entity facing problems with potential health care fraud implications needs the advice and counsel of an attorney with extensive experience in corporate criminal matters as well as regulatory law and civil litigation. In order to be protected from future disclosures to the government, fact finding must be conducted by counsel for purposes of legal representation. In considering outside counsel, corporations should consider not only the representation for itself, but also separate legal representation for one or more of its employees. Corporate counsel and the attorneys for the employees will frequently enter into what is known as a “joint defense agreement,” which is a mechanism that allows persons or entities with common interests to share confidential information without waiving the attorney-client privilege.

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Commonly Raised Defenses to Allegations of Health Care Fraud
Whenever a criminal, civil, or administrative proceeding is initiated against a health care provider, supplier, or manufacturer there are certain recurring themes that can be used to help organize a defense. These include:

  1. Ambiguous government regulations or carrier manual provisions.
  2. Documented reliance on advice provided by carriers and intermediaries.
  3. Lack of “indicia of fraud” including lack of attention to conceal the fraudulent activities; lack or intent to destroy, hide, or alter records; lack of false exculpatory statements to investigators.
  4. Good faith reliance and advice provided by attorneys, accountants, or compliance professionals.
  5. Minimal actual loss or harm to the effective programs or beneficiaries.
  6. Disputes among experts (i.e., as to medical necessity of charge procedure).
  7. The conduct in question occurred as the result of mistakes by lower level employees.
  8. The amount of the alleged fraud is small, relative to large amount of legitimate billings, raising questions as to why the provider would intentionally try to cheat the government on only a small percentage of its billings.
  9. Although there is an admitted pattern of over-billing, there is no accompanying story from insider witnesses about how the over-billing started or who directed it.
  10. As soon as the provider recognized the problem, it voluntarily refunded the appropriate amounts to the affected program.
  11. The conduct in question occurred despite the existence of a good compliance program.

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Conclusion
Health care fraud and abuse is undergoing increased scrutiny at every level. The alarming pace at which health care costs escalated throughout the 1980s has not only sparked interest in health care reform but has led all payers to question whether their health care dollars are being spent legitimately. These concerns have led to the use of traditional criminal, civil, and administrative laws, as well as new legislation designed to discourage and punish health care providers, suppliers, and manufacturers who receive federal or state funding. Given the more aggressive stance taken by law enforcement in the area of health care fraud, it is important for health care providers, suppliers, and manufacturers to be more vigilant in insuring that they comply with relevant laws and immediately take corrective action when fraud or simple errors are discovered through effective compliance programs.

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APPENDIX A: CRIMINAL HEALTH CARE FRAUD LIABILITY
1. TRADITIONAL TITLE 18 CRIMES USED IN
HEALTH CARE FRAUD PROSECUTIONS

False Claims: 18 U.S.C. § 287

18 U.S.C. § 287, prohibits knowingly making or presenting any false, fictitious, or fraudulent claims to any “department or agency” of the United States.

False Statements: 18 U.S.C. §1001

The same HCFA 1500 claim forms and Medicare cost reports that form the basis for many false claims prosecutions under 18 U.S.C. § 287 can also be prosecuted under Section 1001. More important, Section 1001 permits not only false statements to be prosecuted, but also the concealment or covering up of material facts.

Mail Fraud (18 U.S.C. § 1341) and Wire Fraud (18 U.S.C. § 1343)

The mail fraud statute, 18 U.S.C. § 1341, makes it a crime to use the United States mails or any private or commercial interstate carrier in carrying out a scheme to defraud. The wire fraud statute, 18 U.S.C. § 1343, similarly punishes the use of wire, radio, or television communications in interstate or foreign commerce in carrying out a scheme to defraud. Both statutes have been interpreted as requiring proof that the defendant acted knowingly and with the specific intent to defraud.

Conspiracy to Commit a Federal Offense vs. Conspiracy to Defraud the United States Under 18 U.S.C. § 371

Under 18 U.S.C. § 371, it is a federal crime for two or more persons “either to conspire to commit any offense against the United States, or to defraud the United States.” At least one overt act “to effect the object of the conspiracy” must be proven.

Conspiracy to Defraud the United States by Obtaining Payment of False Claims
Under 18 U.S.C. § 286

Under 18 U.S.C. § 286, it is a separate crime to “enter into any agreement, combination, or conspiracy to defraud the United States, or any department or agency thereof, by obtaining or aiding to obtain the payment or allowance of any false, fictitious or fraudulent claim.” Unlike the general conspiracy statute, 18 U.S.C. § 371, no overt act need be proven under Section 286.

Theft and Bribery Concerning Programs Receiving Federal Funds: 18 U.S.C. § 666

18 U.S.C. § 666(a) prohibits any agent of an organization or state or local government agency that receives in any one-year period more than $10,000 in “benefits … under a federal program involving a grant, contract, subsidy, loan, guarantee, insurance, or other form of federal assistance” from (1) embezzling, stealing, obtaining by fraud, converting or misapplying property of that organization or agency valued at $5,000 or more; or (2) corruptly soliciting, demanding, accepting, or agreeing to accept anything of value from any person intending to be influenced or rewarded in connection with any transactions of that organization or agency valued at $5,000 or more. Section 666(b) also prohibits corruptly giving, offering, or agreeing to give anything of value to any person with intent to influence or reward an agent of an organization or agency in connection with any transactions of that organization or agency valued at $5,000 or more.

Embezzlement, Theft, or Conversion of Government Funds: 18 U.S.C. § 641

18 U.S.C. § 641 is a broadly worded statute prohibiting the embezzlement, theft, or conversion of federal government funds or property.

Money Laundering: 18 U.S.C. §§ 1956 and 1957

18 U.S.C. §§ 1956 and 1957 prohibit conducting various types of financial transactions involving the proceeds of “specified unlawful activity,” commonly known as SUAs.

“Specified unlawful activity” under Sections 1956 and 1957 includes the following traditional Title 18 crimes commonly used to prosecute health care fraud:

1. Mail fraud (18 U.S.C. § 1341)

2. Mail fraud (18 U.S.C. § 1343)

3. Theft or bribery concerning programs receiving federal funds (18 U.S.C. § 666)

4. Theft, embezzlement or conversion of federal government funds
(18 U.S.C. § 641)

Misprision of a Felony: 18 U.S.C. § 4

The crime of misprision of a felony has four elements: “that a felony was committed, that [the defendant] had knowledge of the felony, that he failed to notify authorities, and that he took an affirmative step to conceal the crime.

2. The Anti-Kickback Act 42 U.S.C.§ 1320a-7b(b)

Section (b) of 42 U.S.C. § 1320a-7b prohibits knowingly and willfully soliciting, receiving, offering, or paying any “remuneration” in return for or to induce (1) the referral of an individual for the furnishing of any item or service that may be paid for under a “Federal health care program”; and (2) the purchasing, leasing, ordering, arranging for, or recommending of any item or service that may be paid for under a “Federal health care program.” The Anti-Kickback Act is unique in that is the only federal criminal statute that contains provisions for the establishment by regulation of so-called safe harbors, in which specified conduct is exempted from punishment, and it is one of the few federal criminal statutes for which a person can obtain an advisory opinion (Office of Inspector General) concerning the Act’s application to a proposed transaction.

3. Other Criminal Provisions

Making or Causing To Be Made False Statements or Representations: 42 U.S.C. § 1320a-7b(a)

Subsection (a)(1) Offense

Subsection (a)(1) penalizes “knowingly and willfully mak[ing] or caus[ing] to be made any false statement or representation of a material fact in any application for any benefit or payment under a Federal health care program.”

Subsection (a)(2) False Statement Offense

42 U.S.C. § 1320a-7b(a)(2) prohibits “knowingly and willfully mak[ing] or caus[ing] to be made any false statement or representation of a material fact for use in determining rights to such benefit or payment [under a Federal health care program].” Subsection (a)(2) appears to be aimed at any follow-on false statements made following the false statements in “any application for any benefit or payment” covered by the subsection (a)(1) offense.

Subsection (a)(3) Concealment Offense

Section 1320a-7b(a)(3) prohibits anyone who has “knowledge of the occurrence of any event affecting (A) his initial or continued right” to any benefit or payment under a federal health care program, or “(B) the initial or continued right to any such benefit or payment of any other individual in whose behalf he has applied for or is receiving such benefit or payment” from “conceal[ing] or fail[ing] to disclose such event with an intent fraudulently to secure such benefit or payment either in a greater amount or quantity than is due or when no such benefit or payment is authorized.”

Subsection (a)(4) Conversion Offense

Section 1320a-7b(a)(4) prohibits anyone from applying to receive a benefit or payment under a federal health care program for the use and benefit of another and, having received such a benefit or payment, knowingly and willfully converting any part of it to a use other than for the use and benefit of the other person.

Subsection (a)(5) False Claim Offense

Section 1320a-7b(a)(5) penalizes whoever “presents or causes to be presented a claim for a physician’s service for which payment may be made under a Federal health care program and knows that the individual who furnished the services was not licensed as a physician.”

Subsection (a)(5) False Claims Offense Re: Claims for Services of
Unlicensed Physicians

Section 1320a-7B(a)(5) prohibits anyone from “present[ing] and caus[ing] to be presented a claim for a physician’s services for which payment may be made under a Federal health care program” who “knows that the individual who furnished the service was not license as a physician.”

False Statements or Representations with Respect to Condition or Operations of Institutions,
Facilities, or Entities: 42U.S.C. § 1320a-7b(c)

Section 1320a-7b(c) penalizes anyone who “knowingly and willfully makes or causes to be made, or induces or seeks to induce the making of, any false statement or representation of a material fact with respect to the conditions or operation of any institution, facility, or entity in order that such institution, facility, or entity may qualify (either upon initial certification or upon recertification) as a[n] . . . entity for which certification is required” under the Medicare or Medicaid programs.

Illegal Patient Admittance and Retention Practices: 42U.S.C. § 1320a-7b(d)

Section 1320a-7b(d) prohibits knowingly and willfully (1) charging Medicaid patients amounts in excess of the rates established by the Medicaid program or by Medicaid managed care organizations and (2) soliciting or accepting any consideration, in addition to any amount required to be paid under the Medicaid program, as a precondition for admitting or keeping a Medicaid patient in a hospital, nursing facility, or intermediate care facility for the mentally retarded. The only exception to the ban on seeking or accepting any additional consideration for admittance or retention of Medicaid patients is for “a charitable, religious, or philanthropic contribution from an organization or from a person unrelated to the patient.”

Repeated Violations of Medicare or Medicaid Assignment Terms: 42 U.S.C. § 1320a-7b(e)

Section 1320a-7b(e) prohibits any provider who accepts assignment of Medicare benefits or who agrees to be a participating Medicaid provider from “knowingly, willfully, and repeatedly” violating the terms of such assignments or participating provider agreements.

4. New Criminal Statutes Created By The Health Insurance Portability And Accountability Act (HIPAA) and The Balance Budget Act Of 1997

Statute
HIPAA Section
HIPAA Section
18 U.S.C. § 1347
242
 Prohibits executing or attempting to execute a scheme or artifice to defraud, or to fraudulently obtain money or property of, any health care benefit program.
18 U.S.C. § 699
243
 Prohibits embezzling, stealing, misapplying or converting money, property, premiums, or other assets of a health care benefit program.
18 U.S.C. § 1035
244
 Prohibits making false statements or concealing material facts in connection with the delivery of or payment for health care benefits, items, or services.

Statute
HIPAA Section
HIPAA Section
18 U.S.C. § 1518
245
 Prohibits willfully obstructing, preventing, misleading, delaying, or attempting to do so, the communication of information or records relating to a violation of a federal health care offense to a criminal investigator.
42 U.S.C. § 1320a-7b(a)(6)
217
 Prohibits counseling or assisting a person for a fee to dispose of assets to become eligible for Medicaid if such disposal of assets results in the imposition of a period of ineligibility for Medicaid assistance.

5. Criminal Forfeiture: 18 U.S.C. 982

18 U.S.C. 982 provides for mandatory forfeiture for federal health fraud and money laundering where proceeds of a crime are traceable to the commission of the offense.

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APPENDIX B: Civil And Administrative Health Care Fraud Liability

1. Key Civil False Claims Provisions: 31 U.S.C. 3729(a)

The acts prohibited by the Civil False Claims Act (FCA) which most frequently form the basis for FCA actions are:

1. Knowingly presenting, or causing to be presented, a false or fraudulent claim for payment or approval to an officer or employee of the United States government or a member of the United States Armed Forces.

2. Knowingly making, using, or causing to be made or used, a false record or statement to get a false or fraudulent claim pair or approved by the United States government.

3. Conspiring to defraud the United States government by getting a false or fraudulent claim allowed or paid.

4. Knowingly making or using, or causing to be made or used, a false record or statement to conceal, avoid, or decrease an obligation to pay or transmit money or property to the United States government.

Each violation of the FCA subjects the violator to treble damages, plus a civil penalty of $5,000-$10,000. The violator is also liable to the United States for the costs of a civil action to recover any such penalties or damages.

Qui Tam Provisions

Under 31 U.S.C. § 3730(b), a private party, known as a relator, may bring a civil action alleging violations of the FCA in the name of the United States.

Civil Forfeiture is also allowed where monies traceable to fraud.

2. Civil Monetary Penalty Law: 42 U.S.C. § 1320a-7a

Under the CNPL, up to treble damages and up to $10,000 per item or service may be assessed for violation of seven different categories of false, fraudulent, or prohibited health care claims, including violations of the Anti-Kickback Act and knowing presentation of health care claims to any federal Medicare or state Medicaid agency which the person “knows or shouldn’t know” to be false or fraudulent. A civil monetary penalty action is usually initiated by HHS through service of a notice of intention to impose penalties. The provider has 60 days in which to request a hearing before an Administrative Law Judge.

3. Program Fraud Civil Remedies Act

The Program Fraud Civil Remedies Act (PFCA) is a mini-False Claims Act that permits federal agencies to use administrative procedures to obtain penalties and assessments from persons who submit false, fictitious, or fraudulent claims totaling $150,000 or less. The regulations implementing the PFCRA appear at 45 CFR § 79.

The PFCRA penalizes the making, presenting, or submitting of false, fictitious, or fraudulent claims, or written statements in support of claims, totaling less than $150,000. Like the False Claims Act, the PFCRA requires proof that the claimant acted with either “actual knowledge that the claim or statement is false, fictitious, or fraudulent”; deliberate ignorance of the truth or falsity of the claim or statement”; or “reckless disregard of the truth or falsity of the claim or statement.” As in the FCA, “no proof of specific intent to defraud is required” for liability under the PFCRA, and preponderance of the evidence is the standard of proof.

4. The Stark Statute: 42 U.S.C. § 1395nn(a)(1)

The Stark Statute provides that a physician (or an immediate family member) who has a financial relationship with any entity may not refer Medicare or Medicaid patients to that entity for the furnishing of “designated health services” (and the entity may not bill for such services) unless an applicable exception exists. Referrals and billing in violation of the Stark Statute expose both the physician and the entity to civil sanctions, including penalties, and to exclusion from the Medicare and Medicaid programs.

5. The Anti-Fraud Injunction Statute: 18 U.S.C. § 1345

This statute permits the government to obtain ex parte temporary restraining order (TRO) freezing a defendant’s assets, including assets that are not traceable to the charged fraud, and to extend those restrictions through a preliminary injunction.

6. Suspension of Medicare Payments

The payment of Medicare claims is “suspended” when the intermediary or carrier withholds payment of approved Medicare payment amounts from a provider while determining whether that provider owes money back to the Medicare program from prior overpayments. A suspension may be imposed by the Health Care Financing Administration (HCFA), an intermediary, or a carrier, based on “reliable information that an overpayment or fraud or willful misrepresentation exists or that the payments to be made may not be correct, although additional evidence may be needed or a determination.”

The HCFA may direct an intermediary or carrier to suspend payment of Medicare claims without prior notice when it has reliable evidence of fraud or misrepresentation.

7. Exclusion From the Medicare, Medicaid, And Other Federal Health Programs

Under 42 U.S.C. § 1320a-7(a), HHS “shall” exclude individuals and entities “convicted” of these four types of crimes:

1. A crime “related to the delivery of an item or service” under the Medicare or Medicaid programs. This category is also known as program-related crimes and could include misdemeanors as well as felony offenses.

2. A crime under federal or state law “relating to neglect or abuse of patients in connection with the delivery of a health care item or service."” This category has been broadly interpreted to include criminal record-keeping offenses that do not involve proof of actual neglect or abuse of patients:

[T]here is no requirement that the [HHS] Secretary demonstrate that actual neglect or abuse of patients occurred, nor is there a requirement that the individual or entity be convicted of an actual offense of patient neglect or abuse. The phrase “relating to” clearly encompasses a broader range of conduct than actual neglect or abuse.

3. A felony conviction under federal or state law for an offense “relating to fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct” committed after August 21, 1996 that occurred “in connection with the delivery of a health care item or service or with respect to any act or omission” in a non-Medicare or Medicaid health care program operated or financed in whole or in part by any federal, state, or local government agency.

4. A felony conviction under federal or state law for an offense “relating to the unlawful manufacture, distribution, prescription, or dispensing of a controlled substance” committed after August 21, 1996.

There are also approximately fifteen other grounds for exclusion which is “permissive” or “discretionary” by the HHS. These “permissive” categories include: a conviction relating to fraud, conviction involving obstruction of justice, and license revocation or suspension.

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