The government's war on health care fraud: what every physician executive needs to know

Physician Executive, Sept-Oct, 2006 by Christopher Spevak

The prevention of fraud in the health care industry is a top priority of federal, state and local law enforcement officials, legislatures and judiciaries.

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With the projected increases in expenditures and the rising number of Medicare and Medicaid program participants, the United States Department of Justice (DOJ), the Office of the Inspector General of the United States Department of Health and Human Services (OIG) and state Medicaid Fraud Control Units (MFCU) continue to expend significant resources pursuing fraud and abuse.

In its 2005 Report summarizing Medicare and Medicaid Expenditures, the Centers for Medicare and Medicaid Services (CMS) projected national health expenditures to reach $3.6 trillion by 2014, an average annual growth rate of 7.1 percent. (1)

As recently as March 28, 2006, CMS alone requested an additional $5 million for fiscal year 2006, $50 million for 2007 and 2008, and $75 million for each year thereafter to support its efforts to establish a Medicaid Integrity Unit to combat health care fraud and abuse in the Medicaid program. (2)

The government addresses allegations of fraud or misconduct in the health care system in a variety of ways. They include administrative, civil and criminal remedies. The particular circumstances of the misconduct determine which of these remedies, or combinations, are utilized.

Other factors include the perceived egregiousness of the fraud or misconduct, the likelihood of a recovery or conviction, the government resources available to handle the case, and what agency or entity developed or received the information about the wrongdoing.

The agencies that investigate health care fraud and abuse include the OIG, MFCU, the Federal Bureau of Investigations (FBI), the Internal Revenue Service (IRS), the Postal Inspection Service, the Department of Defense (DOD), and State Insurance Departments (DOI).

Fraud statutes

There is a broad array of criminal statutes available to the government in health care fraud cases. They may be divided into substantive offenses and conspiracy offenses. Some of the most frequently prosecuted include false statements, false claims, mail fraud, health care fraud and the multiple inchoate offenses of conspiracy.

Just as multiple factors are considered when deciding to prosecute, so are multiple factors considered in deciding which statute to prosecute. These include familiarity and past experience with the statutes, evidentiary considerations and likelihood of success. Which statute is ultimately used will depend on the nature of the fraud and the preferences of the prosecutor handling the case.

New statutes applicable to health care fraud offenses were enacted as part of the Health Insurance Portability and Accountability Act of 1996. Several other notable additions came about as part of the Sarbanes-Oxley Act of 2002.

The False Statements Statutes prohibit the making or using of a materially false statement or document in a matter within the jurisdiction of a federal government agency. Also included are false statements or documents in connection with the delivery or payment of health care items or services.

Both sections of the statute have broad application in health care fraud, as most fraudulent schemes involve the use of false statements or documents. Virtually any materially false statement or document made or presented to the government will suffice to support a prosecution.

To establish materiality, the government must prove that the statement or document had a natural tendency to influence, or be capable of influencing, the decision of the decision making body to which it was addressed. It is not necessary, however, that the department or agency be actually misled or deceived.

Furthermore, the document need not actually be presented to the government. In many cases, the creation of the document alone violates the statute. An example would be making false entries in treatment notes required to be prepared and maintained to justify a service billed to the government or a private payer. (3)

Likewise, government prosecutors frequently utilize the False Claims Statute. This is the criminal analog of the Civil False Claims Act. The statute makes it a crime to knowingly make or present a false, fictitious, or fraudulent claim to a department of the United States. Violations are punishable by up to 5 years in prison, and a fine of up to $250,000 or twice the amount of the fraud. (4)

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The Mail and Wire Fraud Statutes criminalize the use of the mails, common carriers, or interstate wire communications in the execution of a scheme or artiface to defraud. Mail fraud has two elements:

* Having devised or intending to devise a scheme to defraud (or to perform specified fraudulent acts)

* Use of the mail (or commercial interstate carrier, or interstate wire communications in the case of wire fraud) for the purpose of executing, or attempting to execute, the scheme (or specified fraudulent acts.) It is not necessary that the scheme contemplate the use of the mails as an essential element. It is sufficient for the mailing to be incident to an essential part of the scheme.