Health Care Fraud and Abuse Control Program Annual Report For FY 2000

The Department of Health and Human Services
And
The Department of Justice
Health Care Fraud and Abuse Control Program
Annual Report For FY 2000



January 2001



Accomplishments
Collections

During this year, the federal government won or negotiated more than $1.2 billion in judgments, settlements, and administrative impositions in health care fraud cases and proceedings. As a result of these activities, as well as prior year judgments, settlements, and administrative impositions, the federal government in 2000 collected $717 million in cases resulting from health care fraud and abuse, of which more than $577 million was returned to the Medicare Trust Fund, and $27 million was recovered as the federal share of Medicaid restitution. It should be emphasized that some of the judgments, settlements, and administrative impositions in 2000 will result in collections in future years, just as some of the collections in 2000 are attributable to actions from prior years.


Judgments/Settlements

Working together, we have brought to successful conclusion the investigation and prosecution of numerous costly health care fraud schemes. Among them, are the following.


The world's largest provider of kidney dialysis products and services agreed to pay the United States government $486 million to resolve a sweeping investigation of health care fraud. The criminal fine and the civil settlement are the largest ever recovered by the United States in a healthcare fraud investigation. Two former Vice Presidents of the company have pled guilty and other executives were indicted and are awaiting trial. Under the criminal plea agreement, the company agreed to pay a record $101 million in criminal fines for submitting false claims to Medicare for nutritional therapy provided to patients during their dialysis treatments, for hundreds of thousands of fraudulent blood testing claims, and for kickbacks. Under the civil settlements, the successor company will pay a record setting $385 million to resolve civil claims relating to nutritional therapy, kickbacks, blood laboratory tests, improper reporting of credit balances, and billing for services that were provided to dialysis patients as part of clinical studies. The civil settlements compensate the United States for damages to five federal health insurance programs -- Medicare, U.S. Railroad Retirement Board Medicare, Tricare, the Veterans Administration and the Federal Employees Health Benefits Program (FEHBP) – and also pay for damages to state Medicaid programs. The company also agreed to a comprehensive eight year corporate integrity agreement. The investigation, audit and prosecution spanned 5 years, and its success was the result of collaboration among many government organizations, including the HHS-OIG, the FBI, the Defense Criminal Investigative Service (DCIS), the Pension and Welfare Benefits Administration of the Department of Labor, Office of Inspector General, Office of Personnel Management, and the U.S. Attorney's Offices and the Civil Division of the Department of Justice.

The government entered a global settlement agreement with the nation's largest operator of nursing homes to resolve allegations that it fabricated records to make it appear that nurses were devoting much more time to Medicare patients than they actually were. Although the company received an estimated $400 million in overpayments from Medicare, the settlement requires the company to pay $170 million in civil settlement, a figure negotiated based on the chain's limited ability to pay. Because of their financial position, repayment of most of this amount will be accomplished through reduction of future Medicare payments. In addition, the company entered one of the most comprehensive corporate integrity agreements established to date, an agreement that will remain in effect until the company has fulfilled all of its payment obligations under the civil settlement (an estimated eight years). In addition, 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. The company must divest the 10 nursing homes to unrelated qualified operators approved by the government. While divestiture is being accomplished, other terms of the agreement will ensure that residents receive high quality care.

A former Medicare fiscal intermediary agreed to pay $74 million to resolve claims that it falsified interim payments on settled hospital cost reports in order to meet HCFA's Contractor Performance Evaluation standards. In so doing, the contractor caused improper Medicare payments or reduced offsets to a number of hospitals, overpayments that exceeded $30 million. Since this settlement, HCFA has opted not to renew this fiscal intermediary contract. The company continues to operate under a corporate integrity agreement. Since 1993, over one dozen investigations of Medicare contractors under the False Claims Act have been resolved, with recoveries exceeding $350 million.


A prominent Texas doctor, his attorney brother, their mutual certified public accountant, a physician's assistant, a physical therapist, office managers and respective patients, and staff as well as clients were engaged in a sophisticated scheme to defraud local, state and federal government health programs, and private insurers, of over $46 million from 1986 to 1998. The conspiracy involved a large cross-referral scheme of auto-accident, personal injury and workers compensation patients/clients between the brothers. Potential auto-accident victims were telephoned using information obtained from police accident reports, which is illegal in Texas. Callers would solicit the accident victims to become clients of the attorney and later patients of his brother. Once the victims were solicited, the medical services were inflated in order to generate higher insurance settlements. Medical and legal services relating to workers compensation claims were also fabricated or inflated. With the assistance of their CPA, the fraudulent proceeds were laundered by diverting them through a series of bank accounts and businesses within the United States, Mexico and the Cayman Islands.

An FBI computer analysis of the billing records indicated that the doctor consistently upcoded his services, falsified medical reports and engaged in multiple billing. He billed for over $1 million in office visits when he was out of town. During 1994, he would have had to work approximately 90 hours a day to accomplish the number of office visits he claimed to perform. As a result of this scheme, the brothers were paid over $34 million and laundered over $31 million. After a five year inter-agency investigation -- with the Justice Department, the Internal Revenue Service, the United States Department of Labor, the United States Postal Inspection Service, the United States Marshals Service, the DCIS, the Cayman Island Government, the El Paso Police Department, the Texas Workers Compensation Commission and private insurance company investigators participating – nine subjects were indicted, and over $2 million in property and cash were seized and forfeited. Of the nine indicted, four pleaded guilty, one was acquitted and on May 12, 2000, four were convicted. Both brothers were convicted and sentenced to steep fines, forfeitures and restitution, and prison.
These and other settlements reflect the culmination of investigations that have been ongoing for several years. Though settled in 2000 the fines and restitution generated by some of these cases will not be credited to the Medicare Trust Funds until 2001.