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

Rex Healthcare, of North Carolina, has agreed to pay $1.9 million to settle allegations that it fraudulently charged Medicare by improperly classifying patients for inpatient services.

By classifying patients as inpatients the hospital would receive a larger reimbursement from Medicare than if they had been classified as outpatient. Hospitals that make false claims for larger Medicare reimbursements can end up driving the costs of healthcare.

This settlement is in response to procedures done from 2001 to 2007. This case was brought forward under the qui tam provisions of the False Claims Act that allow private citizens to bring forward cases of fraud on behalf of the Federal Government. Theses citizens, called relators, are entitled to a percentage of the settlement amount.

The difference between outpatient and inpatient reimbursement being so great, this case represents what we believe to be a trend in qui tam lawsuits based upon inpatient admissions.

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

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Currently, state Medicaid Fraud Control Units (MFCUs) have limited resources and capabilities to use statistical models and data mining technologies to identify patterns of health care fraud. These limitations have appeared even when whistleblowers have successfully uncovered possible widespread fraudulent business practices. However, this all might soon change under a recently proposed federal rule.

The US Department of Health and Human Services Office of Inspector (HHS-OIG) has proposed to allow MFCUs to use federal funds to conduct data mining on Medicaid claims. Under the proposed HHS-OIG rule, MFCUs would have to clear specific hurdles before receiving the federal funds, including delineating the duration of the data mining.

This would be a huge step forward for our country’s fraud-fighting efforts. Whistleblowers regularly birddog substantial evidence of massive health care fraud schemes. This proposed rule would supply the MFCUs with the necessary tools to fully unearth the identified fraud.

Once federal funding for data mining has been granted, MFCUs will be required to provide information on an annual basis regarding the costs associated with data mining, the total number of fraud cases resulting from data mining, the outcome of the cases, and the amount of recoveries obtained. If the MFCUs effectively utilize these funds to actively investigate qui tam actions, the reported outcomes could be quite substantial.

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

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Our Medicare system relies on contractors to identify fraudulent claims from the Durable Medicare Equipment (DME) industry. However, time and time again, Medicare contractors have dropped the ball when it comes to identifying even the most egregious instances of fraud. To fully protect our Medicare dollars, the Medicare system has regularly turned to whistleblowers and their counsel to supplement the limited capabilities and resources of DME Medicare contractors.

The most recent enforcement blind spot was revealed in an HHS Office of Inspector General audit of Medicare claims for home blood-glucose test strips and lancets. Reviewing a sample of 100 claims paid in 2007, the Inspector General discovered that 83% of the claims were lacking requisite documentation. In other words, only 17% of the claims should have been paid by the Medicare contractor.

Investigating the problem further, the Inspector General learned that the contractor’s claims processing system was unable to detect whether the claims had the necessary supporting documentation. In short, the contractor was simply not capable of detecting fraudulent claims.

Unfortunately, the results of this audit are not an outlier. By and large, our Medicare contractors are only capable of “processing claims,” and the role of fraud recovery falls on law enforcement, who must engage in a game of “pay and chase.”

The incentives and protections afforded whistleblowers under the False Claims Act have never been stronger. Whistleblowers are often handsomely rewarded, and when it comes to the fraud-prone DME industry, there is plenty of opportunity!

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

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Inpatient rehabilitation facilities receive higher Medicare reimbursement payments when patients are discharged, than when the patients are transferred to other facilities. However, according to a recent HHS-OIG report, some facilities have a “difficult time” distinguishing between discharged and transferred patients.

In this audit, HHS-OIG reviewed the records of 41 inpatient rehabilitation facility patients who were supposedly discharged from the hospital. Remarkably, 26 of the 41 patients were actually transferred to another facility. In turn, the Medicare system overpaid an astounding 63% of the time. With an additional price tag of $6,200/patient, these overpayments drained well over $100,000 from the Medicare Trust Fund. If the facilities knowingly submitted these upcoded claims, they could be held liable under the federal False Claims Act.

These results provide a glimpse into a pervasive world of Medicare fraud. Inpatient rehab facilities regularly miscode transferred patients, with the hopes of inflating their bottomlines.

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

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Medical device-maker Kyphon allegedly trained its sales force to coach hospitals how to improperly schedule and bill kyphoplasty as an inpatient procedure. By billing as an inpatient procedure, the hospitals were able to wrongfully obtain additional government health care dollars for inpatient care that was typically a 1- 2-hour day surgery. After two Kyphon exposed this improper practice in a qui tam action, Kyphon settled for $75 million in 2008.

At the time of the Kyphon settlement, questions were raised about the culpability of the hospitals. However, in the ensuing months, hospital after hospital has made its way to the U.S. Justice Department, hat in hand, offering to settle with the government. With another seven hospitals inking settlement checks last week, a grand total of 25 hospitals have now settled FCA allegations, recovering more than $15.7 million for the Medicare Trust Fund.

The American Hospital Association is so troubled by these recent developments that they have sent a letter to U.S. Attorney General Eric Holder and Kathleen Sebelius, Secretary of Health and Human Services, requesting a review of the so-called “kyphoplasty initiative” being pursued by the Office of the United States Attorney for the Western District of New York. The AHA, looking to hide these hospitals behind an “everybody is doing it” defense, is attacking the valiant efforts of this extraordinary U.S. Attorney’s Office. However, instead of attacking those who uphold the law, the AHA should encourage its member-hospitals to abide by the law.

The simple fact is that these hospitals did not invent the fraud wheel for wrongful one-day inpatient stays. For years, concerns have been raised that hospitals have billed and received payment based upon an inpatient DRG rather than the APC payment, in cases where the beneficiary actually only needed outpatient services, such as kyphoplasty day surgery.  Indeed, the United States has routinely intervened in qui tam cases and/or otherwise recouped monies based upon lack of medical necessity for inpatient services. For example, in December 2007, St. Joseph’s Hospital in Atlanta, Georgia, agreed to pay $26 million to settle allegations concerning lack of medical necessity for certain inpatient care. The hospital falsely claimed Medicare reimbursement for inpatient admissions that were, in fact, less costly outpatient visits.

However, without the assistance of courageous whistleblowers, the government is generally unable to uncover these fraudulent practices. Thankfully for the public fisc, the Kyphon whistleblowers stood up, showed up , and suited up for the American people, exposing a wayward medical-device company and dozens of hospitals that were too eager to implement a fraudulent billing scheme.

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

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Nolan & Auerbach, P.A. Managing Partner Marcella Auerbach will speak at the University of Miami 2011 Law Review Symposium on Friday February 18, 2011. Ms. Auerbach will discuss the topic of health care fraud during the opening panel discussion. She will be joined in her health care fraud panel by David Hyman, Richard W. and Marie L. Corman Professor of Law at University of Illinois College of Law, Joan Krause, Professor of Law at University of North Carolina School of Law, and Eric Bustillo, former Assistant U.S. Attorney and current Regional Director of the Miami Office of the Securities & Exchange Commission.

The Symposium will focus on Corporate Crime and Compliance. Panelists will speak on a range of topics, from health care fraud to the Sarbanes-Oxley Act, to the criminalization of corporate behavior. Other presenters include keynote speaker Robert S. Bennett, co-chair of White Collar at Hogan Lovells, Professor John Coates of Harvard Law, Professor Vic Khanna of Michigan Law, and Professor Jennifer Arlen of NYU Law.

Ms. Auerbach is a respected attorney at the national whistleblower law firm of Nolan & Auerbach, P.A. She is a former federal prosecutor who spent more than twenty-five years at the United States Department of Justice. She has extensive experience in prosecuting corporate providers for health care fraud, Anti-kickback and Stark Law violations, FDA violations, and Medicare fraud.

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

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Two St. Louis-based hospital systems have agreed to shell out more than $2.2 million to quiet allegations that they submitted false Medicare claims for routine foot care procedures. Under the terms of the settlement, St. John’s Mercy Health System and St. John’s Health System have agreed to close the foot clinics and to pay the United States $2.2 million to resolve claims that six system hospitals violated the False Claims Act by submitting claims to Medicare for routine foot care that were not covered by Medicare. Notably, this was a government-initiated False Claims Act case.

While the government was able to piece together this case without the assistance of a whistleblower, the vast majority of False Claims Act recoveries originate from a qui tam action. Indeed, according to recent US Justice Department statistics, nearly 80% of all recoveries in the past year were from qui tam lawsuits.

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

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While investigating a doctor who reportedly implanted hundreds of potentially medically unnecessary stents, Senate investigators may have stumbled across a troubling nationwide practice that drains funds from government health care programs and needlessly places patients’ lives at risk. In their released report, Senate Finance Committee Chairman Max Baucus (D-Mont.) and Ranking Member Chuck Grassley (R-Iowa) not only detail the relationship between this doctor and a medical device manufacturer, but they spotlight a possible pattern of wasteful, medically unnecessary stent implantations.

In this particular case, a Maryland doctor reportedly implanted nearly 600 potentially medically unnecessary stents from 2007 through mid-2009 at St. Joseph Medical Center in Towson, Maryland. According to the Senators’ report, the questionable stent implantations cost the Medicare program $3.8 million during that period.

The Senators especially took note of the relationship between this wayward doctor and the manufacturer of stents, Abbott Laboratories. The report noted that Abbott placed the doctor on its “Project Victory” list of top stent volume cardiologists and paid for at least two social events at the doctor’s home, including a barbeque and crab dinner, in 2008.  After St. Joseph Medical Center barred the doctor from practicing, Abbott Labs hired the doctor to promote and prepare safety reports on its stents in China and Japan.

All too often, pharmaceutical and medical device manufacturers will improperly leverage their relationships with doctors to drive up the companies’ bottom lines. As seen in several recent False Claims Act settlements, these companies will shower doctors with lavish gifts, lofty “Key Opinion Leader” titles, and mounds of cash, all with the intention of increasing prescriptions for their medical products.

The Senators’ findings are a good reminder that all medical specialties are considered fair game when it comes to the bribes of dishonest drug and medical device makers. Unfortunately, most of these practices go undetected, to the detriment of patient safety and the Medicare Trust Fund. However, when a courageous individual steps forward to shine a light on these practices, a clear message is sent to the companies that their profits are not more important than the well-being of the American people.

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

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Last year, Congress amended the federal False Claims Act to close a “finders’ keepers” loophole, which had permitted health care providers to keep Medicare and Medicaid overpayments. Earlier this year, as part of the Health Care Reform Legislation, Congress set a 60-day time limit for providers to return these overpayments. Specifically, Section 6402 of the Patient Protection and Affordable Care Act gives providers a maximum of 60 days after an overpayment is identified to report it, return it, and explain in writing the reason for the overpayment. Thus, an overpayment retained longer than 60 days is now considered a false claim under the FCA.

FCA liability is triggered not by the receipt of overpayment but, instead, by the decision to retain an overpayment. In turn, while these amendments are not explicitly retroactive, potential FCA liability attaches to funds received prior to the amendments.

If you are aware of a health care provider who has made the conscious decision to keep a Medicare or Medicaid overpayment past 60 days, you may receive a substantial reward under the False Claims Act.

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

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