Medicare Fraud News, Breaking Headlines and Insight from the Qui Tam Perspective

Recently, the U.S. Supreme Court declined to review a federal appeals court ruling in a closely watched case over whether a defendant can be held liable under the False Claims Act for “causing” health care providers to submit Anti-kickback Statute-violative Medicare claims (Blackstone Medical Inc. v. United States ex rel. Hutcheson, U.S., No. 11-269, review denied 12/5/11). The Supreme Court’s decision not to hear the case lets stand a ruling by the U.S. Court of Appeals for the First Circuit in United States ex rel. Hutcheson v. Blackstone Medical Inc. (1st Cir., 647 F.3d 377 (2011), which correctly held that entities that pay kickbacks are liable under the False Claims Act for the resulting false claims.

Certainly, this sends another powerful message to wayward drug and medical device companies that they cannot bribe their way into the medicine cabinets of Medicare beneficiaries.

For more information about qui tam law and Medicare fraud, contact Nolan and Auerbach, P.A.

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Congressman Chaka Fattah (D-PA) issued a statement today, as the “top Democratic appropriator” for the Department of Justice:

“The Justice Department under Attorney General Eric Holder’s leadership just announced that it has recovered a three-year record of nearly $9 billion for fraudulent claims against the government. A huge amount of that recovery is for healthcare and Medicare fraud. Justice is going after the drug companies, phony equipment purveyors and all those who prey on the sick and the elderly while stealing from the government that insures them ….. [o]n the House Appropriations Committee we are committed to providing Justice and other federal departments involved in this critical recovery effort with the resources they need to fight for the taxpayers against the fraudsters.”

We believe that nearly all of the $9 billion recovery no doubt originated with Medicare fraud qui tam whistleblowers. We applaud the Congressman’s enthusiasm and support of funding for anti-fraud efforts within the Department of Justice and its supporting law enforcement agencies. Funding for anti-fraud efforts has resulted in over ten times the return to the Government, according to past Taxpayers Against Fraud Reports.

For more information about qui tam law and Medicare fraud, contact Nolan and Auerbach, P.A.

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Whether through omission or commission, health care providers regularly overbill Government Health Care Programs. This message has been echoed, time and time again, in audit reports from the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG).

In the most recent audit report, HHS-OIG found that the audited providers overbilled Medicare 75% of the time. In a sample size of 1,290 line item payments involving Medicare outpatient services from January 2006 through June 2009, providers improperly billed Medicare 969 times, for more expensive treatments and for unallowable services.

Interestingly, the Medicare contractor that processed these claims did not flag a single improper payment. In other words, all 969 improper claims sailed through the payment system without a single denial or demand for refund. Indeed, these wrongful claims only came to light during the HHS-OIG claim-by-claim audit. The Medicare System needs courageous whistleblowers to step forward and fill this protective void by identifying Medicare fraud. Otherwise, our Government Health Care Programs are in jeopardy.

For more information about qui tam law and Medicare fraud, contact Nolan and Auerbach, P.A.

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Ancillary revenue streams of physician practices, for example the technical component fees of MRIs, CT scans, etc, are valuable to hospital systems. Hospitals have packaged together compensation packages for physician groups that they simply could not refuse. However, to tiptoe around the Stark and Anti-kickback laws, they have structured these arrangements with fixed payouts, which were not specifically tied to future patient referrals.

A Pennsylvania federal district court has rejected this perceived workaround. In this groundbreaking case, United State ex rel. Singh v. Bradford Regional Medical Center, No. 014-186 (W.D. Pa. Nov. 10, 2010), the government alleges that a hospital sought to gain substantial patient referrals for diagnostic imaging from an area medical group. This particular group had a history of referring patients to the hospital for nuclear imaging until they invested in their own medical imaging camera. With their own camera, they no longer needed to refer patients to the hospital for imaging. The hospital approached the group and offered to sublease the camera from the medical group at a fixed monthly rate, with the tacit understanding that the group would refer its patients to the hospital for medical imaging.

Ultimately, a whistleblower filed a False Claims Act action against the medical group and the hospital, alleging that the financial arrangement violated the Stark and Anti-kickback laws. The court, assessing the legal viability of the Stark claims, granted summary judgment and the government subsequently intervened.

Both the Stark Act and the Anti-Kickback Act prohibit a health care entity from submitting claims to Medicare based on referrals from physicians who have a “financial relationship with the entity, unless a statutory or regulatory exception (or “safe harbor”) applies. 42 U.S.C. §§ 1395nn(a)(1); 1320a-7b(b).  “Falsely certifying compliance with the Stark or Anti-Kickback Acts in connection with a claim submitted to a federally funded insurance program is actionable under the FCA.” United States ex rel. Kosenke v. Carlisle HMA, Inc., 554 F.3d 88, 95 (3d Cir. 2009) (citing United States ex rel. Schmidt v. Zimmer, Inc., 386 F.3d 235, 243 (3d Cir. 2004) (other citations omitted). Section 3729 of the False Claims Act imposes liability, in relevant part, on any person who:

(1) knowingly presents, or causes to be presented, to an officer or employee of the United States Government . . . a false or fraudulent claim for payment or approval;

(2) knowingly makes, uses, or causes to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the Government; . . . .

31 U.S.C. § 3729(a)(1)-(2).

“Under the [Stark] Act, a physician has a ‘financial relationship’ with an entity if the physician has ‘an ownership or investment interest in the entity,’ or ‘a compensation arrangement’ with it.” Kosenke, 554 F.3d at 91, citing 42 U.S.C. § 1395nn(a)(2). A “compensation arrangement” is defined as “any arrangement involving any remuneration between a physician . . . and an entity.” 42 U.S.C. § 1395nn(h)(1)(A). “Remuneration,” in turn, is defined under the Stark Act as “any remuneration, directly or indirectly, overtly or covertly, in cash or in kind.” 42 U.S.C. § 1395nn(h)(1)(B).  An “indirect compensation arrangement” exists when the aggregate compensation received by the physician or medical group “varies with, or otherwise reflects [or ‘takes into account’], the volume or value of referrals or other business generated by the referring physician for the entity furnishing the D[esignated] H[ealth] S[ervices].” 42 C.F.R. § 411.354(c)(2)(ii).

Prior to this decision, some health care providers took comfort in structuring fixed payouts, like the one detailed in this case, because the payments did not vary based on the “volume or value of referrals.” The court shut the door on this argument when it held that these arrangements still run afoul of the Stark law, for they are structured to generally take into account the “anticipated referrals” the hospital will receive from the medical group. The court determined that even if there was not a variable payout based on referrals, the compensation arrangement was “inflated to compensate for the [doctors’] ability to generate other revenues.”

Highlighting the federal regulations’ definition for the “fair market value” of a compensation arrangement, the court stressed that the arrangement must be the “result of bona fide bargaining between well-informed parties to the agreement who are not otherwise in a position to generate business for the other party . . . where the price or compensation has not been determined in any manner that takes in account the volume or value or anticipated or actual referrals.” Here, Stark was violated because “one of” the considerations in structuring the deal was to compensate the doctors for lost income from referred medical imaging patients.

For more information about qui tam law and Medicare fraud, contact Nolan and Auerbach, P.A.

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From patient enrollment to equipment delivery, every single stage of the DME supply process has fallen under the False Claims Act microscope. Increasingly, the government has zeroed in on what we call “set it and forget it” Medicare billing schemes. Here, the DME supplier appropriately approves a Medicare beneficiary to receive a particular DME. However, once the Medicare dollars start flowing, the supplier regularly delivers equipment and supplies whether or not the patient’s need for it continues.

The most recent example of the “set it and forget it” billing scheme was revealed in a $41.8 million False Claims Act settlement involving Hill-Rom Company, Inc., one of the nation’s largest DME suppliers. In this intervened qui tam action, the government alleged that the company had a practice of automatically billing for patients over long periods of time without making any reasonable effort to determine if the patients for whom it submitted the claims continued to meet Medicare conditions for payment. This “set it and forget it” approach to Medicare billing caused the company to submit false claims for patients for whom the equipment was not medically necessary, including claims for patients who had died or were no longer using the equipment.

With DME suppliers regularly relying on automated billing systems, other companies are likely engaged in this same “set it and forget it” billing practice. The whistleblowers in the qui tam action against Hill-Rom Company received $8 million, or nearly 20% of the total recovery.

For more information about qui tam law and Medicare fraud, contact Nolan and Auerbach, P.A.

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The current political debate in Washington centers on whether to cut government spending. However, with over $110 billion in improper or erroneous payments flowing out of the government’s coffers in 2010, the real focus should be on cutting improper government spending.

Most importantly, increased scrutiny should be directed at improper government health care spending, which accounts for a whopping 64% of the improper government payments in 2010. By focusing efforts on this sizeable $70.4 billion improper price tag, the government would see its largest return per investigative dollar.

This week, the government took steps to turn off the spigot of improper government health care dollars. Specifically, the U.S. Department of Health and Human Services rolled out its final regulations for a new Medicaid Recovery Audit Contractor (RAC) Program, mandated by the Obama Health Reform legislation of 2010. Modeled after the Medicare RAC program, this new initiative pays contractors 9 percent to 12.5 percent of any improper Medicaid payments they recover.

Undoubtedly, the Medicaid RAC program will up the number of auditors watching the stream of government spending. However, to efficiently and effectively fish out improper payments, the government still needs the inside knowledge and expertise of courageous whistleblowers. Indeed, without the help of whistleblowers to spot these seemingly innocuous claims, improper payments will easily flow by auditors.

Moreover, with a growing river of health care spending and its attendant Medicare fraud, there can be no shortage of individuals willing to suit up under the qui tam provisions of the False Claims Act. For those who successfully recover government funds via a qui tam action, their courageous actions could be worth up to 30% of the funds recovered by the government.

For more information about qui tam law and Medicare fraud, contact Nolan and Auerbach, P.A.

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In 2009, Congress made an important improvement to the False Claims Act, expanding the “Reverse False Claims” provision to reach those who consciously retain an overpayment of government funds. The impact of this amendment will not be realized for years, but the potential size of the overpayment iceberg is truly remarkable.

For example, an FY 1996 Medicare audit found that Medicare overpayments amounted to $23.2 billion (or 14% of the total program costs), due to fraud, waste and abuse.  Certainly a significant portion of those overpayments were due to fraud (or at least the wrongful retention of overpayments). Recent smaller-scale audits have returned similar percentages.

Another telling sign was revealed in a recent CMS report, which announced that the Medicare Recovery Audit Contractor (RAC) program has collect $575 million in overpayments from October 2009, when the RAC program was expanded nationally, through June 2011. Notably, RAC overpayment collections have grown steadily in fiscal year 2011, from $81 million for the first quarter to $233 million for the third quarter.

Sometimes referred to as “armchair investigations,” Medicare RAC investigations rarely unravel complex overpayment schemes. Corporate insiders are much better positioned to fully expose overpayment schemes. The federal False Claims Act pays substantial whistleblower rewards to do so.

For more information about qui tam law and Medicare fraud, contact Nolan and Auerbach, P.A.

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While the pharmaceutical industry is gradually changing its wayward ways, certain durable medical equipment (DME) counterparts are still cemented in a culture of deceit. This message was, once again, echoed in a scathing HHS-OIG report, Most Power Wheelchairs in the Medicare Program Did Not Meet Medical Necessity Guidelines (OEI-04-09-00260). According to an HHS-OIG investigation of FY2007 power wheelchair claims, 52% of the claims lacked sufficient documentation and at least 9% of the claims were medically unnecessary.

“Of the $189 million that Medicare allowed for power wheelchairs provided in the first half of 2007, $95 million was for power wheelchairs that were medically unnecessary or had claims that were insufficiently documented,” OIG said.

OIG conducted medical record reviews on 375 claims for standard and complex rehabilitation power wheelchairs supplied to beneficiaries in the first half of 2007.

This report comes on the heels of two previews OIG reports that looked at the same sample of claims. “Across all three reports, 80 percent of claims for power wheelchairs supplied to beneficiaries in the first half of 2007 did not meet Medicare requirements,” the report said.

The only way to fully ferret out fraud in the DME industry is to review the medical records from sources, such as the prescribing physician, in addition to the supplier, to determine whether power wheelchairs are medically necessary. It will also take more insiders to expose the ever-prevalent kickback payments which continue to exist within the industry. With inadequate government oversight and thousands of new suppliers entering the market every single year, the DME industry is a breeding ground for fraudsters.

Nolan & Auerbach, P.A. handled a successful whistleblower case regarding unnecessary power wheelchairs over a decade ago. Despite its courageous whistleblower and star Assistant United States Attorney in that case, subsequent cases of the same fraud continue to pop up all over the country.  The federal government needs the assistance of whistleblowers to expose dishonest providers and DME suppliers, and once and for all put an end to these dishonest practices.

For more information about qui tam law and Medicare fraud, contact Nolan and Auerbach, P.A.

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Recently, HHS-OIG was asked to examine a proposed business plan, in which post-acute care providers would pay money to a for-profit online referral service. Under this business arrangement, healthcare providers, such as nursing homes and home health facilities, would pay a fee to electronically receive and respond to referral requests from hospitals. This fee would consist of an initial “implementation fee” and a fixed monthly subscription fee that was not based on the number of referrals. HHS-OIG was asked to opine on whether this arrangement potentially violated the federal Anti-kickback statute.

The federal anti-kickback statute makes it a criminal offense to knowingly and willfully offer to pay, solicit, or receive any remuneration to induce or reward referrals of items or services reimbursable by a federal health care program. Thus, where remuneration is paid purposefully to induce or reward referrals of items or services payable by a federal health care program, the anti-kickback statute is violated.

In a recently released advisory opinion, HHS-OIG determined that the proposed arrangement would implicate the Anti-kickback statute, because the online company would be soliciting and accepting, and providers would be paying, remuneration in return for the company arranging for the post-acute care services for Medicare and Medicaid patients.

This advisory opinion is noteworthy, for it seems to rest on the monopolistic impact of the online service. Specifically, HHS-OIG stressed that non-paying providers would be faced with significant competitive disadvantage, for hospitals tend to discharge patients to post-acute care providers on a first-come, first served basis. In other words, the online system would unfairly move its paying customers to the front of the line, leapfrogging those providers who were unwilling or unable to pay for the online referral service. The end result is that providers would be pressured to pay for the service, regardless of whether they could afford the charge, thus creating incentives to, among other things, “prolong patient stays, provide separately billable, unnecessary services, or upcode resident Resource Utilization Group assignments.”

As evident in this proposed arrangement, emerging technologies are adding a little extra spice to modern-day kickback schemes. However, at their very essence, these illegal practices still consist of the same basic ingredients of bribing others to steer Medicare and Medicaid patients.

For more information about qui tam law and Medicare fraud, contact Nolan and Auerbach, P.A.

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