AMARILLO, TX – Approximately 165 million Americans – ½ of the country – have one or more chronic diseases. As the 78 billion Baby Boomers age, there will continue to be an increasing demand for health care. Because federal health care programs pay for a large portion of health care, federal agencies are investing money and other resources to root out fraud.
Each year, the U.S. Department of Health and Human Services and the United States Department of Justice release a Health Care Fraud and Abuse Control Program Report. The most recent Report, released in December 2023, highlights fraud enforcement actions. The balance of this article is taken almost verbatim from the Report for 2022.
The Health Insurance Portability and Accountability Act of 1996 (HIPAA) established a national Health Care Fraud and Abuse Control Program (HCFAC or the Program) designed to coordinate Federal, state, and local law enforcement activities with respect to health care fraud and abuse.
Pursuant to the Program, Health Care Fraud Strike Force Teams (Strike Force) harness data analytics and the combined resources of Federal, state, and local law enforcement entities to prosecute complex health care fraud matters and prescription opioid distribution and diversion schemes. The Strike Force is comprised of inter-agency teams made up of investigators and prosecutors that focus on the worst offenders in regions with the highest known concentration of fraudulent activities.
The Strike Force uses advanced data analysis techniques to identify aberrant billing levels in health care fraud hot spots—cities with high levels of billing fraud—and target suspicious billing patterns, as well as emerging schemes and schemes that migrate from one community to another. First established in March 2007, Strike Force teams currently operate in 27 districts across the United States.
The National Rapid Response Strike Force (NRRSF) located in Washington, D.C. was established in September 2020, as the nature and scope of health care fraud has evolved rapidly over the past few years with the advent of new technologies that have broadened the reach of health care and, consequently, health care fraud. It is comprised of prosecutors who target large-scale and multi-jurisdictional schemes occurring across the country.
Each Strike Force team brings the investigative and analytic resources of the FBI, HHS-OIG, the CMS Center for Program Integrity (CMS-CPI), the Defense Criminal Investigative Service (DCIS), the Federal Deposit Insurance Corporation Office of the Inspector General (FDIC-OIG), the Internal Revenue Service (IRS), and other agencies, together with the prosecutorial resources of the Criminal Division’s Fraud Section and the U.S. Attorneys’ Offices (USAOs) to bring cases in Federal district court.
Since its inception, Strike Force prosecutors and USAOs in Strike Force districts filed more than 2,700 cases charging more than 5,400 defendants who collectively billed Federal health care programs and private insurers approximately $27.0 billion. More than 3,700 defendants pled guilty and over 460 others were convicted in jury trials, and more than 3,300 defendants were sentenced to imprisonment for an average term of approximately 50 months.
In October 2018, the Criminal Division announced the formation of the Appalachian Regional Prescription Opioid (ARPO) Strike Force, a joint effort between DOJ, FBI, HHS-OIG, DEA, and state and local law enforcement to combat health care fraud and the opioid epidemic in parts of the country that have been particularly harmed by addiction.
Opioid Fraud and Abuse Detection Unit
The Opioid Fraud and Abuse Detection Unit (OFAD) AUSA program focuses specifically on opioid-related health care fraud using data to identify and prosecute individuals who are contributing to the prescription opioid epidemic.
Health Care Fraud Prevention and Enforcement Action Team (HEAT)
The DOJ and HHS-OIG established the Health Care Fraud Prevention and Enforcement Action Team (HEAT) in 2009 to build and strengthen existing programs combatting Medicare fraud, while investing new resources and technology to prevent and detect fraud and abuse. HEAT expanded the DOJ-HHS Health Care Fraud Strike Force program, which targets emerging or migrating fraud schemes, to include fraud by criminals masquerading as health care providers or suppliers.
Healthcare Fraud Prevention Partnership (HFPP)
The HFPP is a voluntary public-private partnership among the Federal Government, state agencies, law enforcement, private health insurance plans, employer organizations, and health care anti-fraud associations. The purpose of the partnership is to exchange data and information between the partners to help improve capabilities to fight fraud, waste, and abuse in the health care industry.
COVID-19 Pandemic-Related Enforcement
Since the start of the COVID-19 Public Health Emergency (PHE) in March 2020, CMS has examined how the PHE—and more specifically, the waivers and flexibilities offered by the 14 Agency—may create new fraud risks in Federal health programs.
Highlights of Significant Criminal and Civil Investigations
Durable Medical Equipment (DME)
In November 2021, the owner and operator of brace suppliers and marketing companies was convicted of one count of conspiracy to commit health care fraud for his role in paying and receiving health care kickbacks and bribes for physicians’ orders of medically unnecessary orthotic braces.
In November 2021, two business owners were sentenced for their roles in a conspiracy to defraud Federal health benefit programs, including Medicare and the Civilian Health and Medical Program of the Department of Veterans Affairs (CHAMPVA). According to court documents, from around October 2016 through around April 2019, the business owners ran a telemarketing company in Tampa that targeted older adults to generate thousands of medically unnecessary physicians’ orders for DME and cancer genetic testing (CGx). The business owners also created and operated a telemedicine company through which they paid physicians to sign the orders regardless of medical necessity. The business owners then sold the signed physicians’ orders to client-conspirators for use as support for false and fraudulent claims submitted to Medicare and CHAMPVA.
In December 2021, owners of two DME suppliers were each sentenced to 151 months imprisonment stemming from a June 2021 conviction following a jury trial resulting from their involvement in a scheme to defraud Medicare. According to court documents, the defendants paid kickbacks and bribes in exchange for signed physicians’ orders for orthotic braces that were not medically necessary. To conceal the kickbacks, the defendants and their co-conspirators executed sham contracts and created fake invoices appearing to be for legitimate “marketing” or “business process outsourcing” services.
In April 2022, a Florida DME company owner was sentenced in Boston to 96 months in prison and required to pay $35.6 million in forfeiture and $30 million in restitution. The defendant instructed his employees to establish shell companies in more than a dozen different states, listing his mother, wife and yacht captain as corporate directors and using fictitious names to register the shell companies as DME suppliers. The defendant purchased Medicare patient data from foreign and domestic call centers that targeted older patients and instructed call centers to contact the Medicare beneficiaries with an offer of ankle, arm, back, knee, and/or shoulder braces “at little to no cost.”
In May 2022, a Florida man was sentenced in Newark to 120 months in prison for his role in a health care fraud and kickback scheme. The defendant and co-conspirators had financial interests in multiple DME companies. The DME companies paid kickbacks in exchange for DME orders, which the DME companies subsequently fraudulently billed to Medicare, TRICARE, CHAMPVA, and other health care benefit programs. Defendants and co-conspirators owned and operated multiple call centers through which they obtained DME orders for beneficiaries of Medicare and other Federal health care programs. The call centers paid kickbacks to telemedicine companies to obtain DME orders for these beneficiaries. The telemedicine companies then paid physicians to write medically unnecessary DME orders.
In August 2022, Philips RS North America, LLC (formerly Respironics) agreed to pay $24.8 million to resolve civil False Claims Act (FCA) allegations that it knowingly provided kickbacks to DME suppliers to induce them to select Respironics’ respiratory equipment. Specifically, the settlement resolves allegations that from November 2014 through April 2020 Respironics caused DME suppliers to submit claims for ventilators, oxygen concentrators, CPAP and BiPAP machines, and other respiratory-related medical equipment that were false because Respironics provided inducements to the suppliers.
In December 2021, an executive who owned and operated two compounding pharmacies was sentenced to three years in Federal prison and ordered to pay more than $3.0 million in restitution to the IRS for evading the payment of approximately $5.5 million in personal income taxes and submitting false reimbursement claims to CVS Caremark. The investigation ultimately revealed that the executive had devised various indirect means of incentivizing health care providers to write prescriptions for compounded drugs and to direct those prescriptions to his pharmacies for dispensing.
In January 2022, a Milwaukee-based pharmacy chain and its two owners agreed to pay $2.0 million to resolve allegations that they violated the civil FCA by submitting false claims to Medicare and Medicaid for prescription medications in 2019. The United States alleged that the pharmacy switched Medicaid and Medicare patients from lower cost medications to the iodoquinol-hydrocortisone-aloe cream and Azesco without any medical need and/or without a valid prescription.
In April 2022, a business owner was sentenced to 77 months in prison for carrying out multiple schemes to defraud health care programs, including obtaining more than $6.5 million from Medicare Part D plans and Medicaid drug plans.
In August 2022, Dunn Meadow LLC, a New Jersey licensed retail pharmacy that sent controlled substances and other prescription medications to patients via mail throughout the United States, pleaded guilty to its role in a conspiracy to distribute prescription opioids, including highly addictive and dangerous transmucosal immediate release fentanyl (TIRF) medications, and to pay kickbacks to health care providers. Dunn Meadow admitted that it conspired to offer kickbacks to health care providers and pharmaceutical company sales representatives in violation of the federal Anti-Kickback Statute, in the form of lunches, dinners, and happy hours to induce them to send TIRF prescriptions to Dunn Meadow, causing a loss to Federally funded health care programs of over $4.5 million.
In November 2021, a business owner was sentenced to 82 months in Federal prison and ordered to pay over $61.0 million in restitution for his role in a $73.0 million conspiracy to defraud Medicare by paying kickbacks to a telemedicine company to arrange for physicians to authorize medically unnecessary genetic testing.
In June 2022, a business owner was sentenced to 14 years in prison for health care and wire fraud resulting in a loss of more than $20.0 million to Medicare, and for evading taxes. According to court documents, the individual owned and operated several telemarketing and telemedicine companies to market medically unnecessary genetic tests to Medicare beneficiaries, and to sell prescriptions (i.e., physicians’ orders) for medically unnecessary genetic tests to laboratories in exchange for kickbacks.
Office of Inspector General
The OIG’s mission is to protect the integrity of HHS programs and the health and welfare of the people they serve. As established by the Inspector General Act of 1978, the OIG is an independent and objective organization that fights fraud, waste, and abuse.
Strike Force Operations
In FY 2022, HHS-OIG continued to staff and support Strike Force operations working in conjunction with the DOJ Criminal Division’s Fraud Section, local USAOs, the FBI, and State and local law enforcement agencies.
Combating the Opioid Epidemic
Opioid-related matters comprise a substantial portion of HHS-OIG’s investigations.
One important mechanism that HHS-OIG uses to safeguard program beneficiaries and help ensure the quality of care provided to them is excluding providers and suppliers who have engaged in crimes related to Medicare or Medicaid, patient abuse or neglect, financial misconduct, or misuse of controlled substances, or who have had their licenses to provide health care revoked.
Civil Monetary Penalties (CMPs) Law
The OIG has the authority to seek CMPs, assessments, and exclusions under the Civil Monetary Penalties Law (CMPL) against an individual or entity based on a wide variety of prohibited conduct.
Affirmative Litigation and Exclusion
The OIG may seek a CMP or exclusion against an individual or entity that presents claims to Federal health care programs that the individual or entity knows or should know are for items or services that were not provided as claimed or were false or fraudulent. The OIG may also seek a CMP or exclusion against an individual or entity that knowingly and willfully violates the AKS.
The OIG may seek a CMP against any hospital that negligently violates its obligations under EMTALA, known as the “patient dumping” statute, which requires a hospital to stabilize and treat, or appropriately transfer, if the hospital lacks the specialized capabilities necessary to stabilize the person, anyone who presents to an emergency department with an emergency medical condition.
The OIG maintains the Self-Disclosure Protocol whereby suppliers and providers may voluntarily identify, disclose, and resolve instances of potential fraud involving Federal health care programs for resolution under the CMPL.
Corporate Integrity Agreements (CIAs)
Many health care providers elect to settle their cases before litigation. The OIG provides information on its website that identifies how it evaluates future risk to Federal health care programs from providers that settle health care fraud cases (called the Fraud Risk Indicator). As part of the settlements, providers often agree to enter into CIAs with the OIG to avoid exclusions from Medicare, Medicaid, and other Federal health care programs.
Under a CIA, a provider commits to establishing a compliance program and taking other specified steps to ensure future compliance with Federal health care program rules. The compliance programs are designed, in part, to prevent future fraud. The OIG monitors providers’ compliance with these agreements.
Audits and Evaluations
The OIG conducts audits and evaluations.
Other OIG Fraud and Abuse Prevention Activities
HCFAC funding supports the OIG’s advanced data analytics initiatives to expand its tools, models, and customized analytics with artificial intelligence (AI) and cloud computing to: (1) proactively monitor and target its oversight of high-risk HHS programs and health care providers; (2) identify trends, outliers, and potential investigative or audit targets; (3) enhance decision making; (4) optimize the OIG processes; and (5) support mission needs.
Outreach and Guidance
HIPAA established an advisory opinion process through which parties may obtain binding legal opinions on the application of the Federal anti-kickback statute and other OIG administrative enforcement authorities to existing or proposed health care financial arrangements.
As discussed above, enormous federal resources are being used to uncover and prosecute health care fraud. All health care providers, large or small, located in big cities and small towns, have no choice but to (i) be aware of applicable law and (ii) adhere to the law. It may take time, but “the truth always bubbles to the surface.”
- Government agencies and private sector payors have programs/edits in place designed to spot aberrant billing patterns.
- Government agencies and private sector payors conduct audits to determine if providers are adhering to applicable guidelines.
- And then there is the whistleblower. Virtually all health care provider employees are aware that if they discover that their employer is committing fraud, then the employees can file a whistleblower (qui tam) lawsuit. It will be in the name of the employee and “in the name of the United States of America.” Initially, the lawsuit goes under seal so that the Department of Justice and OIG can investigate the allegations set out in the qui tam Complaint. If the Department of Justice determines that the lawsuit has merit, then the agency will likely intervene and take the lawsuit over. There is a risk to the provider that the Department of Justice will conclude that the facts are so egregious that they warrant a criminal investigation. In fact, most criminal investigations arise from whistleblower lawsuits.
And so the message to health care providers is to follow the law. The federal government has unlimited time and unlimited resources. The truth will eventually come out.
Jeffrey S. Baird, JD, is chairman of the Health Care Group at Brown & Fortunato, a law firm with a national health care practice based in Texas. He represents pharmacies, infusion companies, HME companies, manufacturers, and other health care providers throughout the United States. Baird is Board Certified in Health Law by the Texas Board of Legal Specialization and can be reached at (806) 345-6320 or firstname.lastname@example.org.
AAHOMECARE’S EDUCATIONAL WEBINAR
Copayment Collection and Patient Assistance Programs
Presented by: Jeffrey S. Baird, Esq., Brown & Fortunato & Matthew D. Earl, Esq., Brown & Fortunato
Tuesday, February 13, 2024
1:30-2:30 p.m. CENTRAL TIME
Federal law is clear: a DME supplier must make a reasonable effort to collect copayments. All (or virtually all) commercial insurers, including Medicare Advantage Plan, impose the same requirement. If a DME supplier routinely waives or reduces copayments, it can be held liable under the federal anti-kickback statute, federal beneficiary inducement statute, and federal False Claims Act. In fact, many federal criminal and civil cases brough against DME suppliers (often at the instigation of a whistleblower) are based, in whole or in part, on the failure to make a reasonable effort to collect copayments. In the same vein, insurers will terminate agreements with suppliers on the basis of not making a reasonable effort to collect copayments. This program will (i) discuss what it means to “make a reasonable effort” to collect copayments; (ii) discuss how a supplier can implement a financial hardship policy that allows the supplier to waive/reduce a copayment on a patient-by-patient basis; (iii) point out that the existence of such a financial hardship policy cannot be advertised; (iv) discuss how a DME supplier can implement a patient assistance program; and (v) discuss how a supplier can access charities that may be in the position to assist patients in paying their copayments.
AAHOMECARE’S EDUCATIONAL WEBINAR
Cash-Only Retail: How to Succeed
Presented by: Jeffrey S. Baird, Esq., Brown & Fortunato
Tuesday, April 16, 2024
1:30-2:30 p.m. CENTRAL TIME
The DME industry primarily serves the elderly. This means that most DME suppliers are dependent on traditional Medicare and Medicare Advantage for most of their revenue. But as DME suppliers know from experience, it can be challenging to be so tied to Medicare. This is where retail comes in. There are 78 million Baby Boomers who are retiring at the rate of 10,000 per day. Many Boomers are willing to pay cash for “Cadillac” items rather than being limited to the “Cavalier” items paid for by Medicare. This program will present the legal parameters within which DME suppliers can move into the retail space. The issues to be presented will include the following:
- Whether the retail business should be (i) under the supplier’s existing Tax ID # or (ii) operated by a separate legal entity.
- State DME licensure.
- Selling Medicare-covered items at a discount off the Medicare allowable.
- Obtaining physician prescriptions.
- Collection and payment of sales tax.
- Qualification as a “foreign” corporation.
- Required notification to a Medicare beneficiary even though the supplier does not have a PTAN.
Registration coming soon for Cash-Only Retail: How to Succeed on Tuesday, April 16, 2024, 1:30-2:30 p.m. CT, with Jeffrey S. Baird, Esq., Brown & Fortunato.