Pharmacy owner faces up to 130 years in prison for his part in $3m Medicare fraud
A Miami jury found Gustavo Smith, 43, guilty of all 17 counts charged against him in the September 2007 indictment, including: conspiracy to defraud the U.S. government, to commit health care fraud, and to submit false claims to the Medicare program; seven counts of health care fraud; seven counts of submitting false claims to the Medicare program; conspiracy to commit money laundering; and one count of money laundering. Sentencing has been scheduled for July 2, 2008.
Smith used patients names from his Medstar pharmacy to bill the Medicare program for durable medical equipment. At the six day trial, patients testified that they never received any equipment from Medstar and had no medical need for the equipment. Several doctors also testified that they never wrote prescriptions for the equipment being billed by Medstar and never prescribed the types of equipment being billed by Medstar. Such equipment included negative pressure wound pumps, wound care supplies and pharmaceuticals. Through this fraudulent billing, Smith billed Medicare approximately $3 million over a one year period.
The jury also heard evidence that Smith also owned and operated Orthotics Fitters. This second company was used to bill Medicare program for the same equipment being billed through Medstar. During 2006, Smith caused Orthotics Fitters to bill another roughly $2.9 million in fraudulent claims for negative pressure wound pumps and wound care supplies that were never actually provided.
Smith's co-defendant, Friedhelm Schock, the nominal owner of Medstar, was acquitted on all charged counts.
The case was prosecuted by Trial Attorneys Hank Bond Walther and John K. Neal of the Criminal Division's Fraud Section, with the investigative assistance of the FBI and U.S. Department of Health and Human Services, Office of the Inspector General. The case was brought as part of the Medicare Fraud Strike Force that has been operating in the Miami area since March 2007. The Medicare Strike Force is led by Deputy Chief Ogrosky of the Criminal Division's Fraud Section and the office of U.S. Attorney R. Alexander Acosta of the Southern District of Florida. Since March 1, 2007, the Strike Force has brought charges against 120 defendants, resulting in more than 100 convictions to date.
http://quitamlawyer.clarislaw.com/settlements-and-verdicts/pharmacy-owner-faces-up-to-130-years-in-prison-for-his-part-in-3m-medicare-fraud.php
Wednesday, April 30, 2008
Tuesday, April 29, 2008
guilty of stealing more than $600,000 in Medicare
ATLANTA (Map, News) - A federal jury on Monday found a former medical supply company executive guilty of stealing more than $600,000 in Medicare funds and more than $360,000 from her company.
Angela D. Isley, 44, former chief operating officer of Orthoscript Inc., was found guilty of health care fraud, mail fraud and money laundering.
According to U.S. Attorney David Nahmias, Isley assigned incorrect product codes to wrist braces and walking boots in the Alpharetta-based medical supply company's inventory to receive higher payments from Medicare. The fraudulent bills totaled more than $600,000, according to Nahmias.
Isley also used company checks to pay personal credit card bills.
"Those who cheat Medicare are cheating the American taxpayers who ultimately bear the financial loss," Nahmias said.
Isley, of Atlanta, faces a maximum sentence of 40 years in prison and fines of up to $250,000 for each of 14 counts of health care fraud, up to $250,000 for each of 35 counts of mail fraud and up to $250,000 for each of three money laundering counts.
Sentencing is scheduled for July 28 by U.S. District Judge Charles A. Pannell Jr.
Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Angela D. Isley, 44, former chief operating officer of Orthoscript Inc., was found guilty of health care fraud, mail fraud and money laundering.
According to U.S. Attorney David Nahmias, Isley assigned incorrect product codes to wrist braces and walking boots in the Alpharetta-based medical supply company's inventory to receive higher payments from Medicare. The fraudulent bills totaled more than $600,000, according to Nahmias.
Isley also used company checks to pay personal credit card bills.
"Those who cheat Medicare are cheating the American taxpayers who ultimately bear the financial loss," Nahmias said.
Isley, of Atlanta, faces a maximum sentence of 40 years in prison and fines of up to $250,000 for each of 14 counts of health care fraud, up to $250,000 for each of 35 counts of mail fraud and up to $250,000 for each of three money laundering counts.
Sentencing is scheduled for July 28 by U.S. District Judge Charles A. Pannell Jr.
Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Wednesday, April 23, 2008
Strike Force is about 10 years too late!!!! What about the past culrpits that really has cause the Health Care Crisis?
DOJ Medicare Fraud Strike Force to Arrive in Texas This Summer - What Healthcare Providers Should Know
April 21, 2008
Formed in early 2007 to target suspected fraudulent Medicare billing in Southern Florida, the United States Government's Medicare Fraud Strike Force has zealously pursued its mandate. In fact, published reports claim that the Strike Force was responsible for almost 25% of the Medicare fraud charges brought nationwide in 2007. Touting the Strike Force as a resounding success, the United States Department of Justice has said that it will bring its operations to Texas by summer of 2008. The Strike Force is coming to Texas at the same time that Texas and federal authorities are increasing their civil, criminal, and administrative enforcement activities. Unfortunately, many law-abiding healthcare providers will almost certainly find themselves swept into the Government's increasingly aggressive investigations.
The Strike Force primarily selects its targets through billing data analysis of information provided by Medicare Program Safeguard Contractors and review of claims data taken from the Health Care Information System. Even innocent statistical anomalies resulting from unique aspects of a particular patient base or practice can trigger investigations. Erroneous billing practices that do not reach the level of criminal fraud may still subject the provider to significant civil and administrative penalties including exclusion from participation in federally funded healthcare programs.
Ensuring that providers have both a specific program in place to prevent erroneous billing and a comprehensive compliance program are usually the most important steps in avoiding or mitigating potential risk. Many Government actions are based on allegations that the provider miscoded its services. Effective and enforced compliance programs can both minimize the risk that miscoding will occur and provide a defense against allegations that the provider knowingly or recklessly submitted claims for miscoded services.
Providers should have procedures in place for responding to investigative demands, subpoenas, and search warrants. It is sometimes possible to obtain favorable resolution before a criminal, civil, or administrative action is begun. However, such result is usually only possible when the provider's response is timely and well-coordinated.
While the Strike Force has, to date, concentrated on the infusion therapy and durable medical equipment industries, the Justice Department and Centers for Medicare and Medicaid Services have stated that their goal is to increase accountability and decrease the presence of fraudulent providers in the Medicare system. Therefore, healthcare providers should not assume that their particular practice area is at any lower risk of audits, investigations, or prosecutions.
April 21, 2008
Formed in early 2007 to target suspected fraudulent Medicare billing in Southern Florida, the United States Government's Medicare Fraud Strike Force has zealously pursued its mandate. In fact, published reports claim that the Strike Force was responsible for almost 25% of the Medicare fraud charges brought nationwide in 2007. Touting the Strike Force as a resounding success, the United States Department of Justice has said that it will bring its operations to Texas by summer of 2008. The Strike Force is coming to Texas at the same time that Texas and federal authorities are increasing their civil, criminal, and administrative enforcement activities. Unfortunately, many law-abiding healthcare providers will almost certainly find themselves swept into the Government's increasingly aggressive investigations.
The Strike Force primarily selects its targets through billing data analysis of information provided by Medicare Program Safeguard Contractors and review of claims data taken from the Health Care Information System. Even innocent statistical anomalies resulting from unique aspects of a particular patient base or practice can trigger investigations. Erroneous billing practices that do not reach the level of criminal fraud may still subject the provider to significant civil and administrative penalties including exclusion from participation in federally funded healthcare programs.
Ensuring that providers have both a specific program in place to prevent erroneous billing and a comprehensive compliance program are usually the most important steps in avoiding or mitigating potential risk. Many Government actions are based on allegations that the provider miscoded its services. Effective and enforced compliance programs can both minimize the risk that miscoding will occur and provide a defense against allegations that the provider knowingly or recklessly submitted claims for miscoded services.
Providers should have procedures in place for responding to investigative demands, subpoenas, and search warrants. It is sometimes possible to obtain favorable resolution before a criminal, civil, or administrative action is begun. However, such result is usually only possible when the provider's response is timely and well-coordinated.
While the Strike Force has, to date, concentrated on the infusion therapy and durable medical equipment industries, the Justice Department and Centers for Medicare and Medicaid Services have stated that their goal is to increase accountability and decrease the presence of fraudulent providers in the Medicare system. Therefore, healthcare providers should not assume that their particular practice area is at any lower risk of audits, investigations, or prosecutions.
United Health - The largest HMO/Healthcare insurerreceived subpoenas from NY Attorney General Andrew Cuomo
On and on and on............
HEALTH MAINTENANCE ORGANIZATIONS (HMO)
United Health - The largest HMO/Healthcare insurer. Three of their subsidiaries just received subpoenas from NY Attorney General Andrew Cuomo, who is investigating their billing practices and various other forms of fraud against the government. - Cuomo to Sue UnitedHealth Over What’s Reasonable Payment - - Cuomo to Sue UnitedHealth, Probe Reimbursement Policy - Attorney General Andrew Cuomo issued subpoenas to 16 insurers in his probe into reimbursement practices. He’s alleged that the HMOs have cheated customers out of hundreds of millions of dollars.
WellCare - A relatively small HMO, but 100% of their business comes from Medicaid and Medicare programs. My opinion on the 200 federal agent raid on their Tampa facility? An exercise to gather information that will help federal and state governments investigate this entire corrupt industry.
Other HMOs include: Aetna, Cigna, WellPoint, and Humana.
GROUP PURCHASING ORGANIZATIONS (GPO) - These folks negotiate prices on products for the institutional sector, but they also have considerable exposure to drugs destined for the retail class of trade. They negotiate prices for institutional buyers, but much of the products they buy are diverted straight to retail pharmacies or to the grey market, where they earn huge profit margins by defrauding various government healthcare programs. All sorts of rebate, fee, and bundling agreements can be used by companies in this sector to defraud the government and increase their own profits, and the profits of their commercial sector customers.
GPOs include companies like Novation, Broadlane, Consorta, Innovatix, and GeriMed.
April 22, 2008
Categories: Antitrust, Capitalism, Pharma Litigation . . Author: Ima Misfit
HEALTH MAINTENANCE ORGANIZATIONS (HMO)
United Health - The largest HMO/Healthcare insurer. Three of their subsidiaries just received subpoenas from NY Attorney General Andrew Cuomo, who is investigating their billing practices and various other forms of fraud against the government. - Cuomo to Sue UnitedHealth Over What’s Reasonable Payment - - Cuomo to Sue UnitedHealth, Probe Reimbursement Policy - Attorney General Andrew Cuomo issued subpoenas to 16 insurers in his probe into reimbursement practices. He’s alleged that the HMOs have cheated customers out of hundreds of millions of dollars.
WellCare - A relatively small HMO, but 100% of their business comes from Medicaid and Medicare programs. My opinion on the 200 federal agent raid on their Tampa facility? An exercise to gather information that will help federal and state governments investigate this entire corrupt industry.
Other HMOs include: Aetna, Cigna, WellPoint, and Humana.
GROUP PURCHASING ORGANIZATIONS (GPO) - These folks negotiate prices on products for the institutional sector, but they also have considerable exposure to drugs destined for the retail class of trade. They negotiate prices for institutional buyers, but much of the products they buy are diverted straight to retail pharmacies or to the grey market, where they earn huge profit margins by defrauding various government healthcare programs. All sorts of rebate, fee, and bundling agreements can be used by companies in this sector to defraud the government and increase their own profits, and the profits of their commercial sector customers.
GPOs include companies like Novation, Broadlane, Consorta, Innovatix, and GeriMed.
April 22, 2008
Categories: Antitrust, Capitalism, Pharma Litigation . . Author: Ima Misfit
Monday, April 21, 2008
Health Care Fraud and Abuse Control Program FY 2004
The Department of Health and Human Services
And
The Department of Justice
Health Care Fraud and Abuse Control Program
Annual Report For FY 2004
SEPTEMBER 2005
Monetary Results
During 2004, the Federal Government won or negotiated approximately $605 million in judgments and settlements, and it attained additional administrative impositions in health care fraud cases and proceedings. The Medicare Trust Fund received transfers of more than $1.51 billion during this period as a result of these efforts, as well as those of preceding years, and an additional $99 million in federal Medicaid money was similarly transferred to the Centers for Medicare and Medicaid Services (CMS) as a result of these efforts. The HCFAC account has returned over $7.3 billion to the Medicare Trust Fund since the inception of the program in 1997.
Enforcement Actions
In FY 2004, U.S. Attorneys' Offices opened 1,002 new criminal health care fraud investigations involving 1,685 potential defendants. Federal prosecutors had 1,626 health care fraud criminal investigations pending, involving 2,361 potential defendants, and filed criminal charges in 395 cases involving 646 defendants. A total of 459 defendants were convicted for health care fraud-related crimes during the year. Also in FY 2004, the Department of Justice opened 868 new civil health care fraud investigations, and had 1,362 open civil health care fraud investigations. The Department of Justice filed complaints or intervened in 269 civil health care cases in 2004.
ACCOMPLISHMENTS
Overall Recoveries
During this fiscal year, the Federal Government won or negotiated approximately $605 million in judgments and settlements, and it attained additional administrative impositions in health care fraud cases and proceedings. The Medicare Trust Fund received transfers of more than $1.51 billion during this period as a result of these efforts, as well as those of preceding years, and an additional $99 million in federal Medicaid money was similarly transferred to CMS as a result of these efforts. Note that some of the judgments, settlements, and administrative actions that occurred in 2004 will result in transfers in future years, just as some of the transfers in 2004 are attributable to actions from prior years.
In addition to these enforcement actions, numerous audits, evaluations and other coordinated efforts yielded recoveries of overpaid funds, and prompted changes in Federal health care programs that reduce vulnerability to fraud. HHS agreed in FY 2004 to recover more than $601 million in OIG recommended refunds – the largest amount in the past 10 years.
Program Accomplishments
Working together, HHS/OIG, DOJ and their law enforcement partners have brought to successful conclusion the investigation and prosecution of numerous health care fraud schemes. In addition to these, numerous audits, evaluations and other coordinated oversight efforts yielded recoveries of overpaid funds, and prompted changes in Federal health care programs that reduce vulnerability to fraud. During FY 2004, the many significant HCFAC Program accomplishments included the following:
Fraud Issues
Pharmaceutical Companies Fraud
Pfizer, a division of the Warner-Lambert Company, paid $430 million in fines and settled its FCA liability for illegal marketing conduct and fraudulent promotion of the drug Neurontin for uses that were not approved by the U.S. Food and Drug Administration (FDA). Neurontin was approved by the FDA in December 1993 solely for adjunctive or supplemental anti-seizure use by epilepsy patients. Under the provisions of the Federal Food, Drug and Cosmetic Act, 21 U.S.C. § 301, et seq., a company must specify the intended uses of a product in its new drug application to FDA. Once approved, the drug may not be marketed or promoted for so-called "off-label" uses - any use not specified in an application and approved by FDA. However, Warner-Lambert's strategic marketing plans, as well as other evidence, showed that the company aggressively marketed Neurontin to treat a wide array of ailments for which the drug was not approved. The company promoted Neurontin for the treatment of various pain disorders, Amyotrophic Lateral Sclerosis (ALS, a degenerative nerve disease commonly referred to as Lou Gehrig's Disease), attention deficit disorder, migraine, drug and alcohol withdrawal seizures, and restless leg syndrome.
Warner-Lambert promoted Neurontin for unapproved uses even when scientific studies did not demonstrate effectiveness. For example, the company promoted Neurontin as effective for use as the sole drug (monotherapy) for epileptic seizures, even after the FDA specifically had not approved monotherapy use. Similarly, Warner-Lambert falsely promoted Neurontin as effective for treating bipolar disease, even when a scientific study demonstrated that a placebo worked as well or better than the drug. As a consequence of the unlawful promotion scheme, patients who received Neurontin for unapproved and unproven uses had no assurance that their doctors were exercising their independent and fully-informed medical judgment, or whether the doctor was instead influenced by misleading statements made by, or inducements provided by, Warner-Lambert.
Warner-Lambert pleaded guilty to felony violations of the Federal Food, Drug, and Cosmetic Act, and paid a criminal fine of $240 million, the second largest criminal fine ever imposed in a health care fraud prosecution. The company also settled its Federal civil FCA liabilities by paying the United States $83.6 million, plus interest, for losses to the Federal portion of the Medicaid program, and resolved its civil liabilities to the fifty states and the District of Columbia by paying $68.4 million, plus interest, for losses to the state Medicaid programs. In addition, Warner Lambert paid $38 million to fund a remediation program, to be administered by state consumer protection offices, to address harm caused to consumers. Finally, Pfizer Inc, Warner-Lambert's parent company, agreed to comply with the terms of a corporate compliance program, designed to ensure that the changes Pfizer, Inc. made after acquiring Warner-Lambert in 2000 are effective, and that the company will detect and correct any future off-label marketing conduct on a timely basis. In addition, Warner-Lambert agreed to a state court injunction barring the improper conduct that was the subject of the state's Consumer Protection Division's investigation.
Schering Sales Corporation, a sales and marketing subsidiary of drug manufacturer Schering-Plough Corporation, pleaded guilty and paid a $52.5 million fine on charges that it paid a health maintenance organization (HMO) a kickback to induce the HMO to keep Schering's drug, Claritin, on its formulary (a list of drugs that the HMO covers for its beneficiaries). Schering-Plough also settled its FCA liability and paid the United States, 50 state Medicaid programs, and certain Public Health Service (PHS) entities, approximately $293 million for failing to report the company’s true best price for Claritin to the Medicaid programs. At the same time, Schering-Plough entered into a Corporate Integrity Agreement, or CIA with the HHS/OIG to correct its government pricing and Medicaid rebate reporting failures.
In the late 1990s, Claritin was Schering’s best-selling drug. Claritin was substantially more expensive, however, than its biggest competitor, Allegra. When one of Schering’s best customers demanded a price reduction in Claritin -- because it cost the HMO millions of additional dollars a year to purchase Claritin instead of Allegra -- Schering refused, in part, because it knew that it then would have to lower the Claritin price for the Medicaid programs. Under the Medicaid Drug Rebate Statute, drug manufacturers are required to report their “best prices” to the Federal Government and to pay quarterly rebates to Medicaid to ensure that the nation’s insurance program for the poor receives the benefit of favorable drug prices offered to other large purchasers of drugs. As a participant in the Medicaid Rebate Program, Schering was required to report its “best price” for and to pay rebates on Claritin. Similarly, under the provisions of the PHS drug pricing program, Schering was required to charge PHS entities such as AIDS drug programs and community health centers a discounted price, based in part on the Medicaid price.
After the HMO removed Claritin from its formulary, Schering offered to make up the difference in price between Claritin and Allegra by offering the HMO a $10 million package of added value, in lieu of an actual price reduction on Claritin. The United States alleged that, as part of this “value added” package, Schering offered to provide $3 million worth of deeply discounted Claritin Reditabs, health management services at far below fair market value, and an interest free loan in the form of prepaid rebates. Schering also offered to pay an annual fee of 2% of the annual gross sales of Schering drugs to the HMO, or approximately $2.4 million, disguised as a “data fee” in order to give the appearance that the fee was a fair market value transaction rather than a hidden inducement to the HMO to keep Claritin on its formulary.
Schering also provided, to another HMO, a risk share arrangement in which Schering covered a portion of the managed care customer’s respiratory drug costs, provided deep discounts on other Schering products, provided payment and services for Internet development, and provided an interest free loan in the form of prepaid rebates. Because of Schering’s failure to account for these discounts in its reported best price for Claritin, the Medicaid program and PHS entities paid far more for Claritin from 1998-2002 than Schering’s two managed care customers.
In an unrelated matter, Schering-Plough Corporation, Schering Corporation, and Warrick Pharmaceuticals paid the United States and the state of Texas $27 million to settle allegations that Warrick, a division of Schering-Plough, submitted false pricing information for its generic line of allergy and respiratory drugs. The government alleged that Warrick's manipulation of wholesale acquisition costs resulted in inflated claims for Federal and Texas Medicaid funds.
Misbranded Pharmaceutical Fraud
Two defendants in Idaho who ran clinics purporting to treat spinal injuries and other illnesses, were sentenced to 51 months in prison, and more than $800,000 in restitution. The Idaho residents were indicted on 28 counts of conspiracy, wire fraud and misbranding drugs. One of the defendants fled to Mexico and was a fugitive for almost two years before turning himself in and pleading guilty. The other defendant pleaded guilty and was sentenced to serve 33 months imprisonment. The defendants owned a clinic in Nampa, Idaho, and operated a website that promoted a product called Neuralyn. More than 150 patients, mostly paraplegics or quadra-plegics, paid up to $10,000 to come to Nampa or affiliated clinics in Utah and Colorado to be treated. Patients were told that Neuralyn was 85 to 95% successful and could enable them to move or even walk again by regrowing nerve cells. They were told, falsely, that the defendant was a medical doctor with training in biochemistry, that Neuralyn had undergone clinical studies, and that a patent application and FDA approval were pending. Neuralyn contained a topical anesthetic that gave temporary relief and led patients to believe they were improving. The defendants charged $300 to $500 for a vial of Neuralyn, which cost them only $15. The pharmacist who made the Neuralyn pleaded guilty to conspiracy to deliver a misbranded drug in interstate commerce with intent to defraud. The pharmacist cooperated, was given five years probation, and paid restitution.
The participating states, also victimized by this scheme, consisted of Alabama, Arizona, California, Colorado, Connecticut, Delaware, Georgia, Idaho, Indiana, Kentucky, Louisiana, Maine, Maryland, Michigan, Mississippi, New Hampshire, New Jersey, New York, Ohio, Pennsylvania, Tennessee, Texas, Utah, Virginia, Vermont, Washington, West Virginia, Wyoming; and the District of Columbia. The settlement covered the time period from January 1, 1997 to December 31, 2001. This settlement was reached through the efforts of Federal investigators and prosecutors, and the state Medicaid Fraud Control Units in the affected states.
Pharmaceutical Distribution Fraud
Eleven defendants and two companies, including five physicians, were convicted of conspiracy to distribute controlled substances and related offenses, in the Eastern District of Virginia, in connection with their operation of illegal internet pharmacies. Many of the defendants had the proceeds of their unlawful activity seized. Over $2.3 million has been ordered to be seized, and approximately $4 million in cash and assets are subject to a final order of seizure. The defendants operated a number of websites through which they unlawfully distributed and dispensed millions of pills, including phendimetrazine, a Schedule III weight loss stimulant sold by its brand name Bontril, phentermine and Meridia (Schedule IV weight loss drugs), and Viagra, Xenical, and Celebrex. Customers who ordered drugs from the websites were not required to provide a prescription before receiving the controlled substances. Instead, customers filled out an on-line questionnaire and chose the type, quantity, and dosage they wanted. The prescriptions were dispensed under the authorizations of co-conspirators through pharmacies owned by other co-conspirators. For a prescription to be valid, it must be issued for a legitimate medical purpose by an individual acting in the usual course of the professional practice. The prescriptions authorized by the physicians were not valid because they did not result from a legitimate doctor-patient relationship. Other than the on-line questionnaires, the physicians did not have any contact with the people ordering the medication, and did not monitor, or provide any means to monitor, medication response, weight loss or weight gain.
Two pharmacists were convicted on charges in Texas, related to the operation of an internet pharmacy and the illegal dispensing of controlled substances. Online customers of the internet pharmacy could simply access the website, complete a questionnaire, and pick their controlled substance of choice. The pharmacy found doctors willing to sign prescriptions without examining the patient in exchange for “per prescription” payments. More than 38,000 prescriptions for controlled substances were written or filled in defendants’ pharmacies, with roughly $5.6 million in pharmacy income from the sale of controlled substances. Although a Texas State Board of Pharmacy Inspector advised one of the defendants that prescriptions written without a valid doctor/patient relationship were invalid, the defendant moved to Oklahoma and set up a similar internet pharmacy there.
Neways, Inc., distributor of BioGevity - an oral spray with human growth hormone (HGH), was sentenced to pay a $500,000 criminal fine and to forfeit $1.25 million. Although sale of HGH for human consumption is illegal without a prescription, Neways distributed HGH without a doctor’s order, touting it as having a rejuvenating effect. The sentencing of Neways concludes the first prosecution in the United States of a company that distributed an oral spray containing HGH. HGH is a hormone produced by the pituitary gland that regulates growth. An adult misusing HGH is at risk of developing symptoms of the disease acromegaly such as enlargement and distortion of facial features, hands and/or feet, excessive growth of parts of the skull, thickening of the skin, development of hypertension, muscle weakness, enlargement of internal organs (including the heart, liver and spleen) and other syndromes, some of which are irreversible and possibly fatal.
False Prescriptions
Rite Aid Corporation, a national retail pharmacy chain, paid the United States $5.6 million and $1.4 million to participating states (a total of $7 million) to settle allegations that the company submitted false prescription claims to government health insurance programs. The United States alleged that Rite Aid billed government health care programs (Medicaid, TRICARE and the Federal Employee Health Benefits Program (FEHBP)) for drugs that were never delivered to beneficiaries of the government health care programs and were later returned to stock.
Durable Medical Equipment Fraud
Abbott Laboratories, Inc. paid the Federal Government $382 million and the 50 states and the District of Columbia a total of $32 million to resolve claims that its Ross Products Division defrauded the Medicare and Medicaid program over a 10-year period in connection with enteral feeding equipment. CG Nutritionals, Inc. (CG), a part of the Ross Products Division, pleaded guilty to obstructing a criminal investigation of health care offenses, paid a $200 million criminal fine, and was placed on 5-years of probation. In the settlement agreement resolving FCA liability, the United States alleged that Ross provided enteral infusion pumps at no charge to some of its customers, primarily nursing home suppliers, then advised the suppliers how to disguise the true cost of the pumps when the suppliers billed the government.
The United States also contended that up-front payments, signing bonuses, conversion bonuses, and education bonuses were offered to its customers to induce them to sign long term contracts for enteral products that were ultimately reimbursed by Medicare. The Medicare and Medicaid Anti-kickback Statute forbids the payment of remuneration to induce the referral of Medicare or Medicaid patients. As part of the settlement, CG will be permanently excluded from participation in the Medicare and Medicaid programs. Abbott also entered into a 5-year CIA with the HHS/OIG, which required Abbott to reform the sales and marketing practices of its enteral feeding operations. The case arose out of “Operation Headwaters,” a 3-year investigation into the illegal practices of durable medical equipment (DME) manufacturers.
The president and owner of an Indiana DME and pharmaceutical supplier was sentenced to 51 months imprisonment and ordered to pay over $1.9 million in restitution for health care fraud, mail fraud and unlawful kickbacks. The defendant is currently undergoing criminal forfeiture of assets, including a $1 million home and assets of two related businesses. The defendant had billed Medicare, Medicaid, and TRICARE for injectable solutions, intravenous (IV) therapies, and other selected services and supplies in grossly excessive quantities.
St. Francis Hospital, Inc., a South Carolina hospital, agreed to pay $9.5 million to resolve Medicare billing improprieties in its home health, hospice, and DME programs. After conducting an internal investigation and audit, St. Francis discovered significant error rates and documentation lapses in its claims submitted to Medicare. The hospital subsequently disclosed these findings to the HHS/OIG under its Provider Self-Disclosure Protocol. This settlement represents the largest to date brought solely under the Civil Monetary Penalties (CMP) Law.
Seven individuals in Miami, Florida were sentenced for their participation in a multi-million dollar conspiracy to defraud Medicare and launder the proceeds of the fraud. The scheme resulted in approximately $5 million in false claims to Medicare for power wheelchairs. Kickbacks were paid to patients to induce them to act as fictitious power wheelchair recipients. In some cases, the conspirators staged deliveries of wheelchairs to the patients, and, after photographing the patient in his or her new wheelchair, took away the chair or retrieved it later. All seven defendants pleaded guilty prior to trial. The two organizers of the conspiracy were sentenced to prison terms of 87 months and 53 months, respectively. The other five received prison terms ranging from 1 year and 1 day to 78 months. The organizers and their top patient recruiter were ordered to pay $1.7 million in restitution. The four other defendants were held responsible for paying restitution in amounts ranging from $406,000 to $867,000, as a portion of the joint restitution figure.
Four defendants, including a physician, were convicted in Los Angeles, California of charges of participating in a health care fraud scheme that sought approximately $2.6 million from the Medicare program for DME, including motorized wheelchairs, wheelchair accessories and hospital beds that were not medically necessary and, in many cases, were never delivered. One of the defendants, the owner of a Santa Monica wheelchair repair shop, paid patient recruiters, or “cappers,” a fee to identify and bring Medicare beneficiaries to a local physician’s clinic. The physician convicted as part of the scheme would have his physician’s assistant examine the patients brought by the “cappers” in exchange for kickbacks up to $500 from the repair shop owner, and would sign Certificates of Medical Necessity authorizing Medicare payment for a motorized wheelchair, hospital bed, or other equipment for the patients. The repair shop owner would then use the Medicare beneficiary information and the Certificates of Medical Necessity to bill Medicare for unneeded medical equipment, which frequently was never delivered to patients. The shop owner billed Medicare primarily for motorized wheelchairs, for which Medicare typically reimbursed the seller approximately $4,000 to $8,000 per chair.
Five defendants were convicted in the Northern District of Texas as a result of “Operation Roll Over,” an investigation of a multi-million dollar Medicare fraud scheme that involved the fraudulent billing of motorized wheelchairs to Medicare. Recruiters working for the suppliers told Medicare beneficiaries that, in exchange for their Medicare information, they could receive free scooters and electric wheelchairs. The suppliers then used the patients' Medicare information to file fraudulent claims. Some of the Medicare beneficiaries understood they were getting scooters, and actually received scooters, but the wheelchair suppliers billed Medicare for the substantially more expensive motorized wheelchairs. Sometimes Medicare beneficiaries received written notification from Medicare that they had received a motorized wheelchair when, in fact, they had never asked for one nor received one. Typically, the defendant wheelchair suppliers would bill Medicare from $8,000 to $10,000 for motorized wheelchairs, for which they would receive approximately $5,000 from Medicare. The defendants were charged with health care and mail fraud, and money laundering. Several luxury vehicles and $7 million in proceeds were seized in connection with the fraud scheme.
A defendant in Florida was sentenced to 37 months in prison and ordered to pay $1 million in restitution for health care fraud. The defendant operated and controlled four different DME companies using “straw nominee” owners to conceal the defendant’s true identity. The defendant submitted claims to Medicare for power wheelchairs that were either not provided, were used or refurbished but billed as new, or were exchanged for less expensive scooters. The defendant also billed for the equipment repairs and paid kickbacks for wheelchair referrals. In 1997, the defendant was convicted in state court of Medicaid provider fraud in connection with using the same DME scheme.
Physician Fraud
An Indiana physician was sentenced to 7-years incarceration (with 3 years suspended) for a scheme involving intimidating Medicaid beneficiaries by telling them they would lose their benefits if they did not make cash payments.
A Norwalk, Connecticut pediatrician pleaded guilty to charges of health care fraud and tax evasion as a result of "Operation Free Shot," an investigation coordinated by the FBI’s and HHS/OIG’s Health Care Fraud Task Force which focuses on Connecticut health care providers who bill Medicaid and other insurance programs for childhood vaccines the providers received free-of-charge from the joint federal/state Vaccines For Children (VFC) program. The physician also entered into a civil settlement agreement with the United States and the State of Connecticut to resolve the civil liability for submitting claims to Medicaid for vaccine doses received free from the VFC program from 1997 through 2002. As part of the civil settlement, the defendant agreed to pay double damages in the amount of $318,000 to the United States and the State of Connecticut to reimburse the Medicaid program, and to reimburse the private insurance companies improperly billed (in the amount of approximately $230,000). In order to resolve the tax evasion charges, the defendant also agreed to pay all back taxes, penalties, and interest, totaling approximately $700,000.
After a three and a half week trial, a Federal jury convicted a California psychologist of health care fraud, mail fraud, and making false statements for billing Medicare more than $1.3 million in services he did not provide to developmentally disabled patients. The psychologist, who had fired his attorney on the first day of trial and represented himself, failed to appear in court for the jury verdict, and was taken into custody the next day on a bench warrant. The psychologist submitted false claims for fictitious psychological services to a Medicare insurance carrier, and then engaged in an elaborate scheme to launder the money and conceal the fraud from the Medicare program. After the Medicare carrier challenged the validity of his claims, the psychologist began billing in the name of a corporation, which he alleged was a group practice with two other psychologists. The two psychologists testified at trial that they were not part of a group practice corporation. The psychologist set up a series of six entities through which he passed fraudulently obtained Medicare funds.
Home Health Care Fraud
A Cleveland doctor who operated a medical practice named “House Calls Unlimited” was convicted of health care fraud for billing Medicaid and Medicare for in-home visits he did not make from 1999 through 2001. The defendant claimed to have made house calls on days the defendant was out of state, and billed for more than 24 hours of care in a single day. In addition, the defendant charged higher rates for private house calls when, in fact, patients were seen in group homes or in the defendant’s home. The defendant also claimed to have made visits that were actually made by an unlicenced individual.
Three defendants and a Michigan home health agency (HHA) were ordered to pay $866,000 in restitution for conspiracy to commit health care fraud and mail fraud. Two of the defendants, the president of the HHA and a director for the HHA, billed Medicare and a private insurer for the construction of their luxury home, including contractors’ salaries and building materials and included these costs on the HHA’s cost report. The two defendants were sentenced to respective terms of 48 months and 30 months in prison, and each was ordered to pay a $100,000 fine. The general contractor, who was listed as a ghost employee on the HHA’s cost reports, was also sentenced to 15 months in prison. The HHA was ordered to pay a $10,000 fine.
Banner Health, headquartered in Phoenix, Arizona, paid the United States $6.1 million to settle allegations that the company submitted false claims to Medicare to obtain reimbursement for home health care visits by employees at its Wyoming facilities. The government alleged that Banner Health, formerly known as Lutheran Health Systems, filed claims that were either not reasonable and necessary, or for which the amount, frequency and duration of services were not reasonable and necessary. The settlement is one of the largest recoveries by the United States in Wyoming.
Clinical Laboratory Fraud
The owner of a clinical laboratory in Decatur, Illinois, received a sentence of five years imprisonment for mail fraud related to the lab's fraudulent billing to Medicare and Medicaid and was ordered to pay restitution of $2.5 million. The defendant admitted programming the laboratory’s billing computer to bill Medicare and Medicaid for a urinalysis test at a higher rate than the rate for the test that was actually performed. Additionally, each time the test was performed, four additional tests were billed under separate codes, even though none of these tests were performed. The defendant admitted that the billing fraud continued for over three years.
The owner of a medical testing laboratory extradited from the Philippines pleaded guilty to defrauding the Medicare program by submitting bills for blood testing that was never performed. The lab owner admitted the lab submitted fraudulent bills to the Medicare and California Medicaid programs for tests for RBC Protoporphyrin (a test that detects iron deficiency and lead poisoning), Thin Layer Chromatography (a test used to detect drug metabolytes), Chemiluminescent Assay (a test useful in the identification of chlamydia and tuberculosis), and Sedimentation Rate (a test used to measure inflammation and infection in rheumatism patients). The laboratory did not have the ability to perform these tests. In the course of seventeen months, the lab submitted approximately $2.2 million in fraudulent bills. Medicare paid approximately $1.3 million of those claims.
Ambulance Services Fraud
A Georgia patient ambulance transport company, First Med EMS, Inc., and its owner and director were sentenced on charges of conspiracy to defraud Medicare and Medicaid. The defendants submitted claims for emergency transport on behalf of individuals who did not qualify to receive such transportation. Moreover, multiple patients were transported at the same time, sometimes “stacking” patients in the front seat, but were billed as individuals. Patients were also transported in vehicles that were not licensed as ambulances, and accompanied by individuals who were not licensed EMS personnel. One of the defendants was sentenced to 30 months in prison, and the other was sentenced to 21 months in prison. The company was ordered to pay a $650,000 fine. All were ordered to pay $959,000 in joint and several restitution.
Physical Therapy Fraud
Eight defendants in Houston, Texas were convicted for their roles in a scheme to defraud Medicare and the Texas Medicaid program at physical therapy clinics. Several of the physical therapy technicians were not licensed and had little or no experience in providing physical therapy treatments. A physician convicted in connection with the scheme approved Medicare/Medicaid beneficiaries to receive therapy without examining the patients to determine if they qualified for physical therapy, and failed to supervise the therapy treatments as required under Medicare and Medicaid guidelines. The physician was sentenced to 5 years in prison and ordered to pay restitution to the Texas Medicaid program in the amount of $1.39 million.
Medicare Contractor Fraud
Highmark, Inc. entered an agreement to pay $1.5 million to resolve its liability under the civil FCA. The company’s Veritus division, a Medicare contractor, allegedly altered Medicare claims information to inflate its scores during performance evaluations of the contractor by Medicare. Highmark disclosed the wrongdoing to the Government.
Teaching Hospital Physicians’ Fraud
A four year investigation into billing practices in the University of Washington Medical System ended with the University's physician practice plans agreeing to pay $35 million in restitution, damages and penalties to the state and federal governments for overbilling Medicare and Medicaid. This FCA settlement is the largest ever paid by a practice group related to a teaching hospital for failing to comply with Federal billing regulations. As a result of the investigation, two University physicians were convicted of criminal charges in connection with the fraud, and a former University neurosurgeon pleaded guilty to obstruction of a Federal criminal health care investigation. In addition, a University-affiliated nephrologist pleaded guilty to health care billing fraud and admitted engaging in fraudulent conduct spanning approximately 11 years during which the defendant wrote notes in patients’ dialysis records indicating that he was present when he was not.
Nursing Home Registry Fraud
In Maryland, a registered nurse pleaded guilty to operating a scheme to defraud area nursing homes by making false representations to the nursing homes that the defendant provided them with state-licensed and certified employees from the defendant’s health care staffing company. The nurse’s company had provided temporary nursing staff to nursing homes, hospitals, patients’ homes and doctors’ offices, including licensed practical nurses (LPNs), registered nurses (RNs), certified nursing assistants (CNAs), and geriatric nursing assistants (GNAs). Under Maryland law, the company was required to verify the licensure and status of the LPNs, RNs, and GNAs before dispatching these workers to health care facilities to render temporary nursing support. In fact, many of the licenses the company provided to its client nursing homes were falsified, altered, or forged. When law enforcement agents executed search warrants at the defendant’s home and business, they found more than 60 “cut and paste” documents containing the names of several of the company’s employees that had been altered, blocked out, or “corrected” with white-out to make the documents appear as bona fide licensing and certification documents from the State of Maryland.
Podiatry Fraud
An Orange County, California podiatrist was convicted on 26 charges of fraudulently billing Medicare for more than $800,000 in procedures that were never performed. The evidence presented at trial showed that the podiatrist used the names and Medicare beneficiary numbers belonging to a few elderly patients to create and submit false claims for services that were never performed. The defendant submitted claims for daily or almost-daily surgical procedures and casting on these same patients for months at a time. The investigation began when a Medicare beneficiary reviewed a Medicare statement, noticed that the podiatrist had billed Medicare for more than 70 procedures never performed, and called Medicare’s hotline number to complain. When these patients were interviewed, they stated that they only saw the defendant once every two weeks or once a month, and then they only received toenail clippings.
Medicare Cost Report Fraud
Tenet Healthcare Corporation, one of the largest hospital companies in the country, agreed to pay the United States $22.5 million to resolve FCA allegations that North Ridge Medical Center, one of its facilities in Fort Lauderdale, Florida, improperly billed the Medicare program for millions of dollars for referrals provided by doctors with whom the hospital had prohibited financial arrangements. The settlement also resolved the government's allegations that the hospital had requested improper reimbursements on the cost reports it submitted annually to the Medicare program. The settlement was the largest FCA recovery the United States has obtained to date from a single hospital arising out of alleged violations of the “Stark Statute,” which prohibits hospitals from billing Medicare for services rendered to patients by doctors with whom the hospital has a financial relationship, unless the financial relationship falls within specified exceptions.
And
The Department of Justice
Health Care Fraud and Abuse Control Program
Annual Report For FY 2004
SEPTEMBER 2005
Monetary Results
During 2004, the Federal Government won or negotiated approximately $605 million in judgments and settlements, and it attained additional administrative impositions in health care fraud cases and proceedings. The Medicare Trust Fund received transfers of more than $1.51 billion during this period as a result of these efforts, as well as those of preceding years, and an additional $99 million in federal Medicaid money was similarly transferred to the Centers for Medicare and Medicaid Services (CMS) as a result of these efforts. The HCFAC account has returned over $7.3 billion to the Medicare Trust Fund since the inception of the program in 1997.
Enforcement Actions
In FY 2004, U.S. Attorneys' Offices opened 1,002 new criminal health care fraud investigations involving 1,685 potential defendants. Federal prosecutors had 1,626 health care fraud criminal investigations pending, involving 2,361 potential defendants, and filed criminal charges in 395 cases involving 646 defendants. A total of 459 defendants were convicted for health care fraud-related crimes during the year. Also in FY 2004, the Department of Justice opened 868 new civil health care fraud investigations, and had 1,362 open civil health care fraud investigations. The Department of Justice filed complaints or intervened in 269 civil health care cases in 2004.
ACCOMPLISHMENTS
Overall Recoveries
During this fiscal year, the Federal Government won or negotiated approximately $605 million in judgments and settlements, and it attained additional administrative impositions in health care fraud cases and proceedings. The Medicare Trust Fund received transfers of more than $1.51 billion during this period as a result of these efforts, as well as those of preceding years, and an additional $99 million in federal Medicaid money was similarly transferred to CMS as a result of these efforts. Note that some of the judgments, settlements, and administrative actions that occurred in 2004 will result in transfers in future years, just as some of the transfers in 2004 are attributable to actions from prior years.
In addition to these enforcement actions, numerous audits, evaluations and other coordinated efforts yielded recoveries of overpaid funds, and prompted changes in Federal health care programs that reduce vulnerability to fraud. HHS agreed in FY 2004 to recover more than $601 million in OIG recommended refunds – the largest amount in the past 10 years.
Program Accomplishments
Working together, HHS/OIG, DOJ and their law enforcement partners have brought to successful conclusion the investigation and prosecution of numerous health care fraud schemes. In addition to these, numerous audits, evaluations and other coordinated oversight efforts yielded recoveries of overpaid funds, and prompted changes in Federal health care programs that reduce vulnerability to fraud. During FY 2004, the many significant HCFAC Program accomplishments included the following:
Fraud Issues
Pharmaceutical Companies Fraud
Pfizer, a division of the Warner-Lambert Company, paid $430 million in fines and settled its FCA liability for illegal marketing conduct and fraudulent promotion of the drug Neurontin for uses that were not approved by the U.S. Food and Drug Administration (FDA). Neurontin was approved by the FDA in December 1993 solely for adjunctive or supplemental anti-seizure use by epilepsy patients. Under the provisions of the Federal Food, Drug and Cosmetic Act, 21 U.S.C. § 301, et seq., a company must specify the intended uses of a product in its new drug application to FDA. Once approved, the drug may not be marketed or promoted for so-called "off-label" uses - any use not specified in an application and approved by FDA. However, Warner-Lambert's strategic marketing plans, as well as other evidence, showed that the company aggressively marketed Neurontin to treat a wide array of ailments for which the drug was not approved. The company promoted Neurontin for the treatment of various pain disorders, Amyotrophic Lateral Sclerosis (ALS, a degenerative nerve disease commonly referred to as Lou Gehrig's Disease), attention deficit disorder, migraine, drug and alcohol withdrawal seizures, and restless leg syndrome.
Warner-Lambert promoted Neurontin for unapproved uses even when scientific studies did not demonstrate effectiveness. For example, the company promoted Neurontin as effective for use as the sole drug (monotherapy) for epileptic seizures, even after the FDA specifically had not approved monotherapy use. Similarly, Warner-Lambert falsely promoted Neurontin as effective for treating bipolar disease, even when a scientific study demonstrated that a placebo worked as well or better than the drug. As a consequence of the unlawful promotion scheme, patients who received Neurontin for unapproved and unproven uses had no assurance that their doctors were exercising their independent and fully-informed medical judgment, or whether the doctor was instead influenced by misleading statements made by, or inducements provided by, Warner-Lambert.
Warner-Lambert pleaded guilty to felony violations of the Federal Food, Drug, and Cosmetic Act, and paid a criminal fine of $240 million, the second largest criminal fine ever imposed in a health care fraud prosecution. The company also settled its Federal civil FCA liabilities by paying the United States $83.6 million, plus interest, for losses to the Federal portion of the Medicaid program, and resolved its civil liabilities to the fifty states and the District of Columbia by paying $68.4 million, plus interest, for losses to the state Medicaid programs. In addition, Warner Lambert paid $38 million to fund a remediation program, to be administered by state consumer protection offices, to address harm caused to consumers. Finally, Pfizer Inc, Warner-Lambert's parent company, agreed to comply with the terms of a corporate compliance program, designed to ensure that the changes Pfizer, Inc. made after acquiring Warner-Lambert in 2000 are effective, and that the company will detect and correct any future off-label marketing conduct on a timely basis. In addition, Warner-Lambert agreed to a state court injunction barring the improper conduct that was the subject of the state's Consumer Protection Division's investigation.
Schering Sales Corporation, a sales and marketing subsidiary of drug manufacturer Schering-Plough Corporation, pleaded guilty and paid a $52.5 million fine on charges that it paid a health maintenance organization (HMO) a kickback to induce the HMO to keep Schering's drug, Claritin, on its formulary (a list of drugs that the HMO covers for its beneficiaries). Schering-Plough also settled its FCA liability and paid the United States, 50 state Medicaid programs, and certain Public Health Service (PHS) entities, approximately $293 million for failing to report the company’s true best price for Claritin to the Medicaid programs. At the same time, Schering-Plough entered into a Corporate Integrity Agreement, or CIA with the HHS/OIG to correct its government pricing and Medicaid rebate reporting failures.
In the late 1990s, Claritin was Schering’s best-selling drug. Claritin was substantially more expensive, however, than its biggest competitor, Allegra. When one of Schering’s best customers demanded a price reduction in Claritin -- because it cost the HMO millions of additional dollars a year to purchase Claritin instead of Allegra -- Schering refused, in part, because it knew that it then would have to lower the Claritin price for the Medicaid programs. Under the Medicaid Drug Rebate Statute, drug manufacturers are required to report their “best prices” to the Federal Government and to pay quarterly rebates to Medicaid to ensure that the nation’s insurance program for the poor receives the benefit of favorable drug prices offered to other large purchasers of drugs. As a participant in the Medicaid Rebate Program, Schering was required to report its “best price” for and to pay rebates on Claritin. Similarly, under the provisions of the PHS drug pricing program, Schering was required to charge PHS entities such as AIDS drug programs and community health centers a discounted price, based in part on the Medicaid price.
After the HMO removed Claritin from its formulary, Schering offered to make up the difference in price between Claritin and Allegra by offering the HMO a $10 million package of added value, in lieu of an actual price reduction on Claritin. The United States alleged that, as part of this “value added” package, Schering offered to provide $3 million worth of deeply discounted Claritin Reditabs, health management services at far below fair market value, and an interest free loan in the form of prepaid rebates. Schering also offered to pay an annual fee of 2% of the annual gross sales of Schering drugs to the HMO, or approximately $2.4 million, disguised as a “data fee” in order to give the appearance that the fee was a fair market value transaction rather than a hidden inducement to the HMO to keep Claritin on its formulary.
Schering also provided, to another HMO, a risk share arrangement in which Schering covered a portion of the managed care customer’s respiratory drug costs, provided deep discounts on other Schering products, provided payment and services for Internet development, and provided an interest free loan in the form of prepaid rebates. Because of Schering’s failure to account for these discounts in its reported best price for Claritin, the Medicaid program and PHS entities paid far more for Claritin from 1998-2002 than Schering’s two managed care customers.
In an unrelated matter, Schering-Plough Corporation, Schering Corporation, and Warrick Pharmaceuticals paid the United States and the state of Texas $27 million to settle allegations that Warrick, a division of Schering-Plough, submitted false pricing information for its generic line of allergy and respiratory drugs. The government alleged that Warrick's manipulation of wholesale acquisition costs resulted in inflated claims for Federal and Texas Medicaid funds.
Misbranded Pharmaceutical Fraud
Two defendants in Idaho who ran clinics purporting to treat spinal injuries and other illnesses, were sentenced to 51 months in prison, and more than $800,000 in restitution. The Idaho residents were indicted on 28 counts of conspiracy, wire fraud and misbranding drugs. One of the defendants fled to Mexico and was a fugitive for almost two years before turning himself in and pleading guilty. The other defendant pleaded guilty and was sentenced to serve 33 months imprisonment. The defendants owned a clinic in Nampa, Idaho, and operated a website that promoted a product called Neuralyn. More than 150 patients, mostly paraplegics or quadra-plegics, paid up to $10,000 to come to Nampa or affiliated clinics in Utah and Colorado to be treated. Patients were told that Neuralyn was 85 to 95% successful and could enable them to move or even walk again by regrowing nerve cells. They were told, falsely, that the defendant was a medical doctor with training in biochemistry, that Neuralyn had undergone clinical studies, and that a patent application and FDA approval were pending. Neuralyn contained a topical anesthetic that gave temporary relief and led patients to believe they were improving. The defendants charged $300 to $500 for a vial of Neuralyn, which cost them only $15. The pharmacist who made the Neuralyn pleaded guilty to conspiracy to deliver a misbranded drug in interstate commerce with intent to defraud. The pharmacist cooperated, was given five years probation, and paid restitution.
The participating states, also victimized by this scheme, consisted of Alabama, Arizona, California, Colorado, Connecticut, Delaware, Georgia, Idaho, Indiana, Kentucky, Louisiana, Maine, Maryland, Michigan, Mississippi, New Hampshire, New Jersey, New York, Ohio, Pennsylvania, Tennessee, Texas, Utah, Virginia, Vermont, Washington, West Virginia, Wyoming; and the District of Columbia. The settlement covered the time period from January 1, 1997 to December 31, 2001. This settlement was reached through the efforts of Federal investigators and prosecutors, and the state Medicaid Fraud Control Units in the affected states.
Pharmaceutical Distribution Fraud
Eleven defendants and two companies, including five physicians, were convicted of conspiracy to distribute controlled substances and related offenses, in the Eastern District of Virginia, in connection with their operation of illegal internet pharmacies. Many of the defendants had the proceeds of their unlawful activity seized. Over $2.3 million has been ordered to be seized, and approximately $4 million in cash and assets are subject to a final order of seizure. The defendants operated a number of websites through which they unlawfully distributed and dispensed millions of pills, including phendimetrazine, a Schedule III weight loss stimulant sold by its brand name Bontril, phentermine and Meridia (Schedule IV weight loss drugs), and Viagra, Xenical, and Celebrex. Customers who ordered drugs from the websites were not required to provide a prescription before receiving the controlled substances. Instead, customers filled out an on-line questionnaire and chose the type, quantity, and dosage they wanted. The prescriptions were dispensed under the authorizations of co-conspirators through pharmacies owned by other co-conspirators. For a prescription to be valid, it must be issued for a legitimate medical purpose by an individual acting in the usual course of the professional practice. The prescriptions authorized by the physicians were not valid because they did not result from a legitimate doctor-patient relationship. Other than the on-line questionnaires, the physicians did not have any contact with the people ordering the medication, and did not monitor, or provide any means to monitor, medication response, weight loss or weight gain.
Two pharmacists were convicted on charges in Texas, related to the operation of an internet pharmacy and the illegal dispensing of controlled substances. Online customers of the internet pharmacy could simply access the website, complete a questionnaire, and pick their controlled substance of choice. The pharmacy found doctors willing to sign prescriptions without examining the patient in exchange for “per prescription” payments. More than 38,000 prescriptions for controlled substances were written or filled in defendants’ pharmacies, with roughly $5.6 million in pharmacy income from the sale of controlled substances. Although a Texas State Board of Pharmacy Inspector advised one of the defendants that prescriptions written without a valid doctor/patient relationship were invalid, the defendant moved to Oklahoma and set up a similar internet pharmacy there.
Neways, Inc., distributor of BioGevity - an oral spray with human growth hormone (HGH), was sentenced to pay a $500,000 criminal fine and to forfeit $1.25 million. Although sale of HGH for human consumption is illegal without a prescription, Neways distributed HGH without a doctor’s order, touting it as having a rejuvenating effect. The sentencing of Neways concludes the first prosecution in the United States of a company that distributed an oral spray containing HGH. HGH is a hormone produced by the pituitary gland that regulates growth. An adult misusing HGH is at risk of developing symptoms of the disease acromegaly such as enlargement and distortion of facial features, hands and/or feet, excessive growth of parts of the skull, thickening of the skin, development of hypertension, muscle weakness, enlargement of internal organs (including the heart, liver and spleen) and other syndromes, some of which are irreversible and possibly fatal.
False Prescriptions
Rite Aid Corporation, a national retail pharmacy chain, paid the United States $5.6 million and $1.4 million to participating states (a total of $7 million) to settle allegations that the company submitted false prescription claims to government health insurance programs. The United States alleged that Rite Aid billed government health care programs (Medicaid, TRICARE and the Federal Employee Health Benefits Program (FEHBP)) for drugs that were never delivered to beneficiaries of the government health care programs and were later returned to stock.
Durable Medical Equipment Fraud
Abbott Laboratories, Inc. paid the Federal Government $382 million and the 50 states and the District of Columbia a total of $32 million to resolve claims that its Ross Products Division defrauded the Medicare and Medicaid program over a 10-year period in connection with enteral feeding equipment. CG Nutritionals, Inc. (CG), a part of the Ross Products Division, pleaded guilty to obstructing a criminal investigation of health care offenses, paid a $200 million criminal fine, and was placed on 5-years of probation. In the settlement agreement resolving FCA liability, the United States alleged that Ross provided enteral infusion pumps at no charge to some of its customers, primarily nursing home suppliers, then advised the suppliers how to disguise the true cost of the pumps when the suppliers billed the government.
The United States also contended that up-front payments, signing bonuses, conversion bonuses, and education bonuses were offered to its customers to induce them to sign long term contracts for enteral products that were ultimately reimbursed by Medicare. The Medicare and Medicaid Anti-kickback Statute forbids the payment of remuneration to induce the referral of Medicare or Medicaid patients. As part of the settlement, CG will be permanently excluded from participation in the Medicare and Medicaid programs. Abbott also entered into a 5-year CIA with the HHS/OIG, which required Abbott to reform the sales and marketing practices of its enteral feeding operations. The case arose out of “Operation Headwaters,” a 3-year investigation into the illegal practices of durable medical equipment (DME) manufacturers.
The president and owner of an Indiana DME and pharmaceutical supplier was sentenced to 51 months imprisonment and ordered to pay over $1.9 million in restitution for health care fraud, mail fraud and unlawful kickbacks. The defendant is currently undergoing criminal forfeiture of assets, including a $1 million home and assets of two related businesses. The defendant had billed Medicare, Medicaid, and TRICARE for injectable solutions, intravenous (IV) therapies, and other selected services and supplies in grossly excessive quantities.
St. Francis Hospital, Inc., a South Carolina hospital, agreed to pay $9.5 million to resolve Medicare billing improprieties in its home health, hospice, and DME programs. After conducting an internal investigation and audit, St. Francis discovered significant error rates and documentation lapses in its claims submitted to Medicare. The hospital subsequently disclosed these findings to the HHS/OIG under its Provider Self-Disclosure Protocol. This settlement represents the largest to date brought solely under the Civil Monetary Penalties (CMP) Law.
Seven individuals in Miami, Florida were sentenced for their participation in a multi-million dollar conspiracy to defraud Medicare and launder the proceeds of the fraud. The scheme resulted in approximately $5 million in false claims to Medicare for power wheelchairs. Kickbacks were paid to patients to induce them to act as fictitious power wheelchair recipients. In some cases, the conspirators staged deliveries of wheelchairs to the patients, and, after photographing the patient in his or her new wheelchair, took away the chair or retrieved it later. All seven defendants pleaded guilty prior to trial. The two organizers of the conspiracy were sentenced to prison terms of 87 months and 53 months, respectively. The other five received prison terms ranging from 1 year and 1 day to 78 months. The organizers and their top patient recruiter were ordered to pay $1.7 million in restitution. The four other defendants were held responsible for paying restitution in amounts ranging from $406,000 to $867,000, as a portion of the joint restitution figure.
Four defendants, including a physician, were convicted in Los Angeles, California of charges of participating in a health care fraud scheme that sought approximately $2.6 million from the Medicare program for DME, including motorized wheelchairs, wheelchair accessories and hospital beds that were not medically necessary and, in many cases, were never delivered. One of the defendants, the owner of a Santa Monica wheelchair repair shop, paid patient recruiters, or “cappers,” a fee to identify and bring Medicare beneficiaries to a local physician’s clinic. The physician convicted as part of the scheme would have his physician’s assistant examine the patients brought by the “cappers” in exchange for kickbacks up to $500 from the repair shop owner, and would sign Certificates of Medical Necessity authorizing Medicare payment for a motorized wheelchair, hospital bed, or other equipment for the patients. The repair shop owner would then use the Medicare beneficiary information and the Certificates of Medical Necessity to bill Medicare for unneeded medical equipment, which frequently was never delivered to patients. The shop owner billed Medicare primarily for motorized wheelchairs, for which Medicare typically reimbursed the seller approximately $4,000 to $8,000 per chair.
Five defendants were convicted in the Northern District of Texas as a result of “Operation Roll Over,” an investigation of a multi-million dollar Medicare fraud scheme that involved the fraudulent billing of motorized wheelchairs to Medicare. Recruiters working for the suppliers told Medicare beneficiaries that, in exchange for their Medicare information, they could receive free scooters and electric wheelchairs. The suppliers then used the patients' Medicare information to file fraudulent claims. Some of the Medicare beneficiaries understood they were getting scooters, and actually received scooters, but the wheelchair suppliers billed Medicare for the substantially more expensive motorized wheelchairs. Sometimes Medicare beneficiaries received written notification from Medicare that they had received a motorized wheelchair when, in fact, they had never asked for one nor received one. Typically, the defendant wheelchair suppliers would bill Medicare from $8,000 to $10,000 for motorized wheelchairs, for which they would receive approximately $5,000 from Medicare. The defendants were charged with health care and mail fraud, and money laundering. Several luxury vehicles and $7 million in proceeds were seized in connection with the fraud scheme.
A defendant in Florida was sentenced to 37 months in prison and ordered to pay $1 million in restitution for health care fraud. The defendant operated and controlled four different DME companies using “straw nominee” owners to conceal the defendant’s true identity. The defendant submitted claims to Medicare for power wheelchairs that were either not provided, were used or refurbished but billed as new, or were exchanged for less expensive scooters. The defendant also billed for the equipment repairs and paid kickbacks for wheelchair referrals. In 1997, the defendant was convicted in state court of Medicaid provider fraud in connection with using the same DME scheme.
Physician Fraud
An Indiana physician was sentenced to 7-years incarceration (with 3 years suspended) for a scheme involving intimidating Medicaid beneficiaries by telling them they would lose their benefits if they did not make cash payments.
A Norwalk, Connecticut pediatrician pleaded guilty to charges of health care fraud and tax evasion as a result of "Operation Free Shot," an investigation coordinated by the FBI’s and HHS/OIG’s Health Care Fraud Task Force which focuses on Connecticut health care providers who bill Medicaid and other insurance programs for childhood vaccines the providers received free-of-charge from the joint federal/state Vaccines For Children (VFC) program. The physician also entered into a civil settlement agreement with the United States and the State of Connecticut to resolve the civil liability for submitting claims to Medicaid for vaccine doses received free from the VFC program from 1997 through 2002. As part of the civil settlement, the defendant agreed to pay double damages in the amount of $318,000 to the United States and the State of Connecticut to reimburse the Medicaid program, and to reimburse the private insurance companies improperly billed (in the amount of approximately $230,000). In order to resolve the tax evasion charges, the defendant also agreed to pay all back taxes, penalties, and interest, totaling approximately $700,000.
After a three and a half week trial, a Federal jury convicted a California psychologist of health care fraud, mail fraud, and making false statements for billing Medicare more than $1.3 million in services he did not provide to developmentally disabled patients. The psychologist, who had fired his attorney on the first day of trial and represented himself, failed to appear in court for the jury verdict, and was taken into custody the next day on a bench warrant. The psychologist submitted false claims for fictitious psychological services to a Medicare insurance carrier, and then engaged in an elaborate scheme to launder the money and conceal the fraud from the Medicare program. After the Medicare carrier challenged the validity of his claims, the psychologist began billing in the name of a corporation, which he alleged was a group practice with two other psychologists. The two psychologists testified at trial that they were not part of a group practice corporation. The psychologist set up a series of six entities through which he passed fraudulently obtained Medicare funds.
Home Health Care Fraud
A Cleveland doctor who operated a medical practice named “House Calls Unlimited” was convicted of health care fraud for billing Medicaid and Medicare for in-home visits he did not make from 1999 through 2001. The defendant claimed to have made house calls on days the defendant was out of state, and billed for more than 24 hours of care in a single day. In addition, the defendant charged higher rates for private house calls when, in fact, patients were seen in group homes or in the defendant’s home. The defendant also claimed to have made visits that were actually made by an unlicenced individual.
Three defendants and a Michigan home health agency (HHA) were ordered to pay $866,000 in restitution for conspiracy to commit health care fraud and mail fraud. Two of the defendants, the president of the HHA and a director for the HHA, billed Medicare and a private insurer for the construction of their luxury home, including contractors’ salaries and building materials and included these costs on the HHA’s cost report. The two defendants were sentenced to respective terms of 48 months and 30 months in prison, and each was ordered to pay a $100,000 fine. The general contractor, who was listed as a ghost employee on the HHA’s cost reports, was also sentenced to 15 months in prison. The HHA was ordered to pay a $10,000 fine.
Banner Health, headquartered in Phoenix, Arizona, paid the United States $6.1 million to settle allegations that the company submitted false claims to Medicare to obtain reimbursement for home health care visits by employees at its Wyoming facilities. The government alleged that Banner Health, formerly known as Lutheran Health Systems, filed claims that were either not reasonable and necessary, or for which the amount, frequency and duration of services were not reasonable and necessary. The settlement is one of the largest recoveries by the United States in Wyoming.
Clinical Laboratory Fraud
The owner of a clinical laboratory in Decatur, Illinois, received a sentence of five years imprisonment for mail fraud related to the lab's fraudulent billing to Medicare and Medicaid and was ordered to pay restitution of $2.5 million. The defendant admitted programming the laboratory’s billing computer to bill Medicare and Medicaid for a urinalysis test at a higher rate than the rate for the test that was actually performed. Additionally, each time the test was performed, four additional tests were billed under separate codes, even though none of these tests were performed. The defendant admitted that the billing fraud continued for over three years.
The owner of a medical testing laboratory extradited from the Philippines pleaded guilty to defrauding the Medicare program by submitting bills for blood testing that was never performed. The lab owner admitted the lab submitted fraudulent bills to the Medicare and California Medicaid programs for tests for RBC Protoporphyrin (a test that detects iron deficiency and lead poisoning), Thin Layer Chromatography (a test used to detect drug metabolytes), Chemiluminescent Assay (a test useful in the identification of chlamydia and tuberculosis), and Sedimentation Rate (a test used to measure inflammation and infection in rheumatism patients). The laboratory did not have the ability to perform these tests. In the course of seventeen months, the lab submitted approximately $2.2 million in fraudulent bills. Medicare paid approximately $1.3 million of those claims.
Ambulance Services Fraud
A Georgia patient ambulance transport company, First Med EMS, Inc., and its owner and director were sentenced on charges of conspiracy to defraud Medicare and Medicaid. The defendants submitted claims for emergency transport on behalf of individuals who did not qualify to receive such transportation. Moreover, multiple patients were transported at the same time, sometimes “stacking” patients in the front seat, but were billed as individuals. Patients were also transported in vehicles that were not licensed as ambulances, and accompanied by individuals who were not licensed EMS personnel. One of the defendants was sentenced to 30 months in prison, and the other was sentenced to 21 months in prison. The company was ordered to pay a $650,000 fine. All were ordered to pay $959,000 in joint and several restitution.
Physical Therapy Fraud
Eight defendants in Houston, Texas were convicted for their roles in a scheme to defraud Medicare and the Texas Medicaid program at physical therapy clinics. Several of the physical therapy technicians were not licensed and had little or no experience in providing physical therapy treatments. A physician convicted in connection with the scheme approved Medicare/Medicaid beneficiaries to receive therapy without examining the patients to determine if they qualified for physical therapy, and failed to supervise the therapy treatments as required under Medicare and Medicaid guidelines. The physician was sentenced to 5 years in prison and ordered to pay restitution to the Texas Medicaid program in the amount of $1.39 million.
Medicare Contractor Fraud
Highmark, Inc. entered an agreement to pay $1.5 million to resolve its liability under the civil FCA. The company’s Veritus division, a Medicare contractor, allegedly altered Medicare claims information to inflate its scores during performance evaluations of the contractor by Medicare. Highmark disclosed the wrongdoing to the Government.
Teaching Hospital Physicians’ Fraud
A four year investigation into billing practices in the University of Washington Medical System ended with the University's physician practice plans agreeing to pay $35 million in restitution, damages and penalties to the state and federal governments for overbilling Medicare and Medicaid. This FCA settlement is the largest ever paid by a practice group related to a teaching hospital for failing to comply with Federal billing regulations. As a result of the investigation, two University physicians were convicted of criminal charges in connection with the fraud, and a former University neurosurgeon pleaded guilty to obstruction of a Federal criminal health care investigation. In addition, a University-affiliated nephrologist pleaded guilty to health care billing fraud and admitted engaging in fraudulent conduct spanning approximately 11 years during which the defendant wrote notes in patients’ dialysis records indicating that he was present when he was not.
Nursing Home Registry Fraud
In Maryland, a registered nurse pleaded guilty to operating a scheme to defraud area nursing homes by making false representations to the nursing homes that the defendant provided them with state-licensed and certified employees from the defendant’s health care staffing company. The nurse’s company had provided temporary nursing staff to nursing homes, hospitals, patients’ homes and doctors’ offices, including licensed practical nurses (LPNs), registered nurses (RNs), certified nursing assistants (CNAs), and geriatric nursing assistants (GNAs). Under Maryland law, the company was required to verify the licensure and status of the LPNs, RNs, and GNAs before dispatching these workers to health care facilities to render temporary nursing support. In fact, many of the licenses the company provided to its client nursing homes were falsified, altered, or forged. When law enforcement agents executed search warrants at the defendant’s home and business, they found more than 60 “cut and paste” documents containing the names of several of the company’s employees that had been altered, blocked out, or “corrected” with white-out to make the documents appear as bona fide licensing and certification documents from the State of Maryland.
Podiatry Fraud
An Orange County, California podiatrist was convicted on 26 charges of fraudulently billing Medicare for more than $800,000 in procedures that were never performed. The evidence presented at trial showed that the podiatrist used the names and Medicare beneficiary numbers belonging to a few elderly patients to create and submit false claims for services that were never performed. The defendant submitted claims for daily or almost-daily surgical procedures and casting on these same patients for months at a time. The investigation began when a Medicare beneficiary reviewed a Medicare statement, noticed that the podiatrist had billed Medicare for more than 70 procedures never performed, and called Medicare’s hotline number to complain. When these patients were interviewed, they stated that they only saw the defendant once every two weeks or once a month, and then they only received toenail clippings.
Medicare Cost Report Fraud
Tenet Healthcare Corporation, one of the largest hospital companies in the country, agreed to pay the United States $22.5 million to resolve FCA allegations that North Ridge Medical Center, one of its facilities in Fort Lauderdale, Florida, improperly billed the Medicare program for millions of dollars for referrals provided by doctors with whom the hospital had prohibited financial arrangements. The settlement also resolved the government's allegations that the hospital had requested improper reimbursements on the cost reports it submitted annually to the Medicare program. The settlement was the largest FCA recovery the United States has obtained to date from a single hospital arising out of alleged violations of the “Stark Statute,” which prohibits hospitals from billing Medicare for services rendered to patients by doctors with whom the hospital has a financial relationship, unless the financial relationship falls within specified exceptions.
Health Care Fraud and Abuse Control Program FY 2003
The Department of Health and Human Services
And
The Department of Justice
Health Care Fraud and Abuse Control Program
Annual Report For FY 2003
DECEMBER 2004
ACCOMPLISHMENTS
Overall Recoveries
In 2003, the Federal government won or negotiated more than $1.8 billion in judgments and settlements in health care fraud matters. As a result of enforcement actions, judgments, settlements, and administrative proceedings, the Federal government was able to distribute during 2003 $1.03 billion of the funds collected. Approximately $723 million of this amount was returned to the Medicare Trust Fund, and $151.6 million was recovered as the Federal share of Medicaid restitution. Some of the judgments, settlements, and administrative impositions in 2003 will result in distributions in future years, just as some of the distributions in 2003 are attributable to actions from prior years. As noted previously, over $500 million collected in fiscal year 2003 was distributed early in fiscal year 2004.
This fiscal year, HHS and DOJ have brought to successful conclusion the investigation and prosecution of numerous health care fraud schemes. These achievements confirm once again the importance of coordination between HHS and DOJ to maximize recoveries for taxpayer-funded health care programs victimized by fraud and/or abuse, and to promote prompt detection, punishment and deterrence of those who exploit health care programs for personal or corporate gain. In addition to the enforcement actions described in this report, numerous audits, evaluations and other coordinated efforts have yielded substantial recoveries of overpaid funds, protected vulnerable beneficiaries, and prompted changes in Federal health care programs that reduce susceptibility to fraud. During FY 2003, the many significant accomplishments of the HCFAC Program included the following:
Pharmaceutical Companies
AstraZeneca Pharmaceuticals and Zeneca, Inc. (AstraZeneca), a major pharmaceutical manufacturer, pled guilty and agreed to pay $355 million to resolve criminal and civil fraud allegations arising from its marketing of Zoladex, a drug used to treat prostate cancer. As a result of an investigation conducted by the United States Attorney for the District of Delaware, working with the HHS/OIG, the Food and Drug Administration (FDA), the Defense Criminal Investigative Service and the FBI, AstraZeneca pled guilty to violating the Prescription Drug Marketing Act by causing false claims to be filed for Zoladex that was furnished to urologists as free samples. In addition, the company agreed to pay more than $265 million to settle allegations that it caused false claims to be filed with Medicare, Medicaid, TRICARE and the Railroad Retirement Board, and another $24.9 million for failing to pay proper rebates owed to states under the Medicaid Drug Rebate Program. AstraZeneca also entered into a rigorous 5-year Corporate Integrity Agreement (CIA) with the HHS/OIG, under which the company agreed to affirmatively report certain drug prices to Medicare and Medicaid, and to take other steps to promote proper billing practices.
Bayer Corporation paid more than $257 million in global settlement of the FCA and criminal allegations that it attempted to evade paying required rebates to state Medicaid programs for sales of two drugs, Cipro (an antibiotic) and Adalat (an anti-hypertensive). In what is known as a "lick and stick scheme," Bayer allegedly sold re-labeled drugs to a large HMO at significant discount, then concealed the discounts and so avoided having to pay millions of dollars in rebates to Medicaid. Bayer also pled guilty to charges filed by the United States Attorney for the District of Massachusetts that it violated the Federal Food, Drug and Cosmetic Act by failing to notify FDA that it was producing private label Cipro. The company also agreed to extend an ongoing CIA with the HHS/OIG, and strengthen its terms to ensure that Bayer will accurately report its best price information to the government.
GlaxoSmithKline (GSK), In a similar case, GSK settled its civil liability under the FCA for repackaging Paxil (an anti-depressant) and Flonase (a nasal spray) for sale at deep discounts to the same large HMO. Again, the company concealed these discounts, and so underpaid rebates due to the Medicaid program. GSK agreed to pay more than $87 million, and to comply with the terms of a CIA designed to ensure that GSK will accurately reports its "best price" information to the government in the future.
The monies recovered in the AstraZeneca, Bayer and GlaxoSmithKline settlements were shared among the Federal Government, 49 states, the District of Columbia, and the Public Health Service.
Pfizer Corporation and Subsidiaries, Warner-Lambert and Parke-Davis (Pfizer), agreed to pay $49 million to resolve alleged false claims arising from sale of the cholesterol-lowering drug, Lipitor. The company allegedly failed to report accurately to CMS its "best price" as required under the Medicaid Drug Rebate Program. By overstating its price, the company allegedly retained more than $20 million in rebates owed to the Medicaid program. Pfizer also entered into a five-year CIA under which Pfizer must certify its process for determining best price, and adopt internal safeguards to prevent improper reporting in the future.
Prescription Drug Fraud
A South Florida defendant was sentenced after conviction at trial to 10½ years' incarceration for her role as the mastermind behind a conspiracy that fraudulently billed Medicare for over $20 million worth of prescription drugs. The conspiracy centered around four Miami pharmacies that illegally manufactured prescription aerosol drugs. The pharmacies sold the illegally manufactured drugs although in some cases, only labels or half-portions were actually delivered to DME companies that billed Medicare directly under Medicare rules that allow for payment for drugs taken by way of medical equipment. The fraudulently manufactured drugs were intended for bogus patients who had been paid for use of their Medicare numbers; approximately 1400 patients in the Miami area were involved in the scam. To enable the fraud, physicians were paid to sign blank prescriptions, and, in almost every case, the physicians never examined the patients or even looked at fraudulent charts that were concocted to fool Medicare inspectors. Five other individuals were also convicted at trial and sentenced to terms of incarceration for their participation in the conspiracy; eighteen other defendants entered pleas of guilty and were sentenced in connection with the scheme.
A South Florida urologist pleaded guilty to 59 counts of health care fraud and unlawful distribution of prescription drugs. Between July 2000 and November 2001, he prescribed Lupron, a drug used for the palliative treatment of advanced prostatic cancer, to a number of patients, and undertook to administer it to the patients in the form of injections. However, the defendant did not administer the prescribed and requisite dosages of Lupron to at least 32 patients who came to him for treatment. The physician billed the patients and their health insurance carriers for the cancer treatments, regardless of whether the drug was actually administered. In addition, he unlawfully distributed Lupron wholesale through a series of sales totaling more than $1.5 million. In pleading guilty, he was sentenced to 51 months of incarceration and 3 years of supervised release in addition to also surrendering his medical license.
Internet Pharmacy Fraud
In October 2003, a Texas pharmacist was convicted of a drug king-pin count and for money laundering for his role in conspiring to illegally dispense hydrocodone in an Internet pharmacy operation he ran. The pharmacist, who owned Friendly Pharmacy located in Texas and MainStreet Pharmacy located in Oklahoma, employed three doctors and paid them $40-100 per signed prescription. Customers of the internet websites would fill out a simple questionnaire, request their drug of choice (in most cases, hydrocodone - a Schedule III controlled substance) and then pay both a "doctor consultation fee" and the fee for the prescription drugs. The doctors reported they never declined a prescription, and never examined the patients. One doctor admitted at trial that he never reviewed the questionnaires filled out by the customers and another doctor fell asleep while signing the prescriptions. Neither of the online pharmacies had any way of verifying the age of the recipient. Unlike when the patient sees the doctor, a minor can easily log onto a website and fill out an inaccurate age. Tragically, a La Mesa, California high school honors student and athlete died at home from an overdose of Vicodin ordered from one of the pharmacies.
The pharmacist faces a mandatory 20 year to life sentence. All of the other participants were either found guilty by a jury or pled guilty. The government also obtained a $5.6 million asset forfeiture judgment against the pharmacist.
A South Florida husband and wife were sentenced to terms of 37 months and 24 months imprisonment, respectively, after being convicted by a jury of unlawfully distributing prescription drugs through the Internet. The defendants sold powerful prescription pain killers through web sites operated from their home without requiring a physician's review or a prescription and placed no restrictions on the quantities or frequency with which customers could purchase drugs. In an effort to evade detection by law enforcement, the defendants cut out the manufacturer's lot numbers placed on each of the drug containers they sold, thereby making the drugs untraceable; concealed their identities through using false names; used 32 variations of false return addresses on packages; and advertised that they were an overseas company. In little over a year, the defendants earned in excess of $1.2 million in gross revenues, all of which went to an off-shore bank account in the Cayman Islands.
Hospitals
HCA Inc. (formerly known as Columbia/HCA and HCA-The Healthcare Company), entered a settlement agreement with the Federal government, marking the end of the most comprehensive multi-agency health care fraud investigation of a provider ever undertaken by federal enforcement authorities. Under the agreement, HCA paid $631 million plus interest to resolve civil liability for alleged false claims arising from a variety of practices, including false cost reports to Medicare, Medicaid and TRICARE, and kickbacks. When added to earlier criminal pleas and a 2001 FCA settlement, and a separate settlement with the CMS, the government recovered a total of $ 1.7 billion from HCA. The settlement agreement also incorporates the terms of a Corporate Integrity Agreement with the HHS/OIG, under which HCA will maintain comprehensive compliance measures into the year 2009.
Lovelace Health Systems, Inc. (Lovelace) agreed to pay the government $24.5 million and implement certain integrity requirements to resolve its liability under the FCA. The Cigna-owned hospital and health maintenance organization allegedly falsified its Medicare cost reports for the ten years ending in 1998. Among the allegations, Lovelace improperly shifted costs of its health maintenance organization (HMO) patients to Medicare and otherwise inflated Medicare reimbursement. The investigation stemmed from a qui tam filed by an employee of a financial consultant that prepared cost reports for Lovelace.
St. Luke's Subacute Hospital and Nursing Center, Inc. and its president and CEO were convicted of six counts of Medicare fraud. The officer directed his employees to manipulate the company's books to inflate the amount of reimbursable nursing time spent on Medicare patients. In 1997, 1998 and 1999, he submitted reimbursement claims to Medicare for nursing costs that overstated St. Luke's Hospital's entitlement by nearly $3 million. He then directed an employee to create false nursing schedules in an attempt to hide inflated nursing costs from Medicare auditors, a fraud that was uncovered when law enforcement compared the false nursing schedules to true nursing schedules that were seized during a 1996 search warrant.
Rapid City Regional Hospital paid $6 million to settle civil allegations arising from unlawful patient referrals from oncologists with whom the hospital had financial relationships. The parties allegedly violated the Ethics in Patient Referrals Act, better known as the "Stark" law, which is designed to ensure that patients receive the benefit of unbiased medical judgment from their physicians. The statute prohibits doctors from referring patients to clinical laboratories, diagnostic centers, and other facilities in which they hold financial interests, and prohibits hospitals from paying for referrals from physicians with whom they have financial relationships. The FCA case involved allegations that the hospital had supplied Oncology Associates with office space, staff services, and other benefits to induce the oncologists to refer their cancer patients to the hospital. The physician practice, Oncology Associates, also paid the United States an additional $525,000 for overbilling Medicare for their patients' office visits.
Public Health Trust of Miami-Dade County, d.b.a. Jackson Memorial Hospital paid the United States $16.8 million to settle civil allegations that it had submitted duplicate claims for the same services as both outpatient clinic and inpatient services.
McLeod Regional Medical Center of Pee Dee, Inc. paid the United States $15.9 million to settle civil allegations that it submitted false claims to the Medicare, Medicaid and TRICARE programs for hospital and home health services ordered by physicians with whom McLeod, and its for-profit subsidiary, McLeod Physician Services, had unlawful compensation arrangements. The FCA suit alleged that McLeod's financial relationships with the physicians violated the Stark law and the Anti-Kickback Statute because the hospital had agreed to pay the physicians more than fair market value for their practices, then paid them salaries exceeding fair market value, to induce and maintain referral relationships with the physicians. The Government also alleged that McLeod included false claims for Medicare reimbursement of unallowable costs on the hospital's cost reports as a means to offset losses incurred in acquiring the practices.
Five hospital subsidiaries of Tenet Healthcare Corporation agreed to pay over $4.15 million to settle civil allegations that they "upcoded" Medicare patients' pneumonia and septicemia diagnoses. Hospitals receive Medicare reimbursement by assigning codes that reflect a patient's diagnosis at the time of discharge. Upcoding is the practice of assigning a code that reflects a falsely high level of patient acuity and medical service in order to generate higher reimbursement than the provider otherwise would receive. The five Florida hospitals involved were Coral Gables Hospital, Coral Gables; Florida Medical Center, Fort Lauderdale; Hialeah Hospital, Hialeah; Hollywood Medical Center, Hollywood; and Parkway Regional Medical Center, Miami.
Columbia University paid $5.1 million to settle civil charges that, for more than a decade, the university improperly billed the Medicaid program for deliveries and other obstetrical procedures conducted at New York-Presbyterian Hospital's Allen Pavilion. The Government alleged that the Obstetrics and Gynecology Department at the hospital routinely had physicians whose services would be reimbursed by Medicaid claim they themselves had treated patients when, in fact, the patients were seen by health care providers ineligible for reimbursement, such as midwives.
Durable Medical Equipment
20 defendants pleaded guilty in Arizona to engaging in a fraud scheme in which they falsely billed Medicare for more than $25 million in DME. The defendants created approximately 30 sham DME entities in the western United States. For 3½ years, they used unlawfully obtained Medicare information to falsely bill Medicare for DME either not provided or not ordered by a physician, including expensive motorized wheelchairs, hospital beds with special mattresses, and products used for delivering nutrients directly into the gastrointestinal tract.
A South Florida DME supplier was sentenced to 84 months in prison and ordered to pay nearly $14.5 million in restitution for two schemes to defraud the Medicare and Medicaid programs. The court also entered a more than $14.8 million forfeiture order. The defendant and others fraudulently billed Medicare and Medicaid for items such as motorized wheelchairs and alternating pressure mattresses. To date, 12 corporations and 14 individual defendants have pleaded guilty in connection with the schemes, and one person was convicted after a jury trial. The supplier also entered into a civil settlement agreement with the United States on behalf of himself and 15 business entities, resulting in a consent judgment being entered against him and the entities for more than $29 million.
The Texas owner and operator of two DME companies was convicted at trial, sentenced to 120 months incarceration, and ordered to pay $384,984 in restitution for defrauding the Medicare and Medicaid programs. The defendant billed Medicare and Medicaid for items that were never supplied to patients, including alternating pressure mattresses, hydraulic patient lifts, and lymphedema pumps. In other instances in which items were supplied, she submitted billings with false patient diagnoses for patients who had not been evaluated by a physician and did not qualify for the product. The defendant's husband pled guilty in connection with the same scheme and was sentenced to 12 months and one day of incarceration.
A physician convicted for obstruction of justice and mail fraud was sentenced to nearly 3 years imprisonment, and ordered to pay a $7,500 fine and be deported upon his release. A fugitive since 1988, the physician performed cursory physical exams for a DME company which used these exams to justify prescriptions for transcutaneous electrical nerve stimulation (TENS) units to Medicare beneficiaries. However, the physician never actually performed the thorough examination required, nor did he advise the beneficiaries on the use and risks of the TENS units. The physician also signed blank certificates of medical necessity so that the TENS units could be billed to Medicare. His codefendants were previously sentenced for their roles in the scheme.
Physicians
A Coral Gables, Florida, eye surgeon was convicted of 90 counts of Medicare fraud and ordered to pay $812,216 in restitution and $50,000 in fines for billing the Medicare program for services he did not provide. The surgeon fabricated medical charts and billing records, and submitted claims to Medicare, for various diagnostic tests he never conducted and laser eye surgeries that he never rendered. In many instances, elderly Medicare patients were led to believe that they had serious eye diseases that could result in blindness if not treated when in fact they did not have such illnesses. At one of the clinics, the defendant regularly claimed to have performed ophthalmic services when the equipment necessary to perform the procedures was not even present at the medical clinic on the claimed dates of service.
Six Southern California physicians pleaded guilty to health care fraud for engaging in a scheme to defraud United States insurance companies. The defendants, who were Mexican nationals who practiced in Mexico, filed claims with United States insurance companies for medical treatment, services, and supplies supposedly provided to United States citizens in Mexico; in reality, the treatment, services, and supplies were not provided as claimed. The defendants were arrested as part of an FBI undercover operation dubbed "Operation Golden Tooth" in which the undercover agent - posing as a participant in the scam - persuaded the doctors to travel to the United States, where they were arrested upon arrival.
Home Health
Caremark, Rx, Inc. (formerly MedPartners, Inc.) paid the United States $7.5 million to settle civil allegations that false home health care claims had been submitted by a former MedPartners' subsidiary, AmCare, Inc., a Florida home health agency.
Home Health
Dialysis Holdings, Inc. paid $4,102,098 to settle an FCA action alleging that the company knowingly submitted requests to Medicare for medically unnecessary laboratory tests and blood draws. Dialysis Holdings, Inc. and its predecessor corporations provided dialysis services to thousands of terminally ill Massachusetts patients afflicted with end stage renal disease (ESRD), whose laboratory costs are covered by Medicare. Dialysis conspired with a clinical laboratory to perform unnecessary blood draws on ESRD patients, create thousands of referrals for laboratory tests that were not needed, split automated chemistry panels of tests so as to avoid a Medicare rule designed to control lab test costs, and deceive physicians and laboratory employees into unknowing participation in the scheme.
Dianon Systems, Inc. paid $4.8 million to resolve allegations of Medicare and TRICARE billing fraud under the FCA. Dianon, which conducts tests to detect various types of cancer, had billed for medically unnecessary DNA tests and second-opinion consultations and reports it failed to provide.
Mediq, Inc. and its subsidiaries (collectively, Mediq), agreed to pay $1 million to resolve their civil liability under the FCA. The case stemmed from allegations that Mediq billed Medicare for transtelephonic electrocardiograms (ECGs) when no such tests were performed. Instead, Medic performed standard ECGs, a service that is reimbursed at a significantly lower rate.
Ambulance Services
A New York ambulance company operator was sentenced to 78 months in prison, was ordered to pay restitution of more than $57 million, and was subject to an $8 million forfeiture order for health care fraud arising from his fraudulent operation of several ambulance and ambulette services. In March 1990, the HHS/OIG excluded the individual from participation in the Medicare and Medicaid programs for a period of 25 years. In order to evade this program exclusion, he established secret ownership of five ambulance and ambulette companies in Brooklyn, New York, and continued to bill Medicare and Medicaid for patient transportation. He also offered and paid bribes and kickbacks to employees of various hospitals to induce them to order ambulance and ambulette services from his companies.
Physical Therapists
Two former operators of Texas medical clinics pleaded guilty to conspiracy to commit health care fraud, and paying kickbacks for the referral of Medicare and Medicaid patients in connection with several schemes that resulted in more than $11 million of false billings to Medicare and Medicaid. The defendants and others operated six physical therapy clinics in the Houston area, and billed Medicare and Medicaid for claims for physical therapy services never performed, claims using a false diagnosis, and claims for services not ordered by a licensed physician or not performed under the supervision of a licensed physician. As part of the scheme, the defendants hired patient recruiters, known as "marketers," who were paid a kickback for each patient referred to the clinics for physical therapy; clinic employees were also paid kickbacks for referrals. Four co-defendants also pleaded guilty to health care fraud in connection with this matter; three other defendants, including two doctors, have proceeded to trial.
Medicare Contractors
Blue Cross of California (Blue Cross), a former Medicare fiscal intermediary, and its parent company, Wellpoint Health Networks, Inc., agreed to pay $9.3 million to resolve their potential civil and administrative liability for false claims. For ten years ending in 2000, Blue Cross allegedly falsified data regarding its performance of health care provider audits while under contract with CMS. The intermediary primarily falsified audit start and completion dates entered into an audit tracking database. The government alleged that these erroneous entries were intended to mislead CMS regarding its performance of required audit work so as to obtain a favorable annual evaluation, and to ensure renewal of its Medicare contract.
In Missouri, a director and manager for a former Medicare contractor were sentenced for conspiring to falsify and conceal information about errors made by the contractor. The director was sentenced to 27 months in prison and fined $6,000; the manager was sentenced to 3 months in prison. These former executives ordered the falsification of records, beneficiary files, claims and other official documents, which, when reviewed by CMS, gave the contractor the appearance of performing at a higher level of efficiency and quality than was actually the case. This appearance of exemplary performance enabled the contractor to secure and maintain its contract with the government by being ranked for many years as one of the top 10 in the country. In June 2002, the contractor agreed to pay the government $76 million for its alleged misconduct.
Quality of Care
One area in which collaboration among the federal authorities responsible for health oversight has proved most effective has been in enforcement and oversight of issues relating to quality of care, as demonstrated by the following:
Prosecution:
Endo Vascular Technologies, Inc. (EVT), a wholly-owned subsidiary of the medical device manufacturer Guidant Corporation, pled guilty to 10 felonies and agreed to pay $92.4 million as part of a global resolution of charges that it covered up malfunction of its device used to treat aortic aneurysms. These incidents of malfunction included 12 deaths and more than 50 emergency surgeries. Under Federal law, a company must submit a Medical Device Report to FDA every time its device may have caused serious injury or death. EVT filed 172 such reports, but in its guilty plea, admitted to failing to file reports in 2,600 additional incidents. Moreover, the government contended that the company was aware of the incidents, since a company representative was required to be present in the operating room each time the device was inserted.
This global resolution is among the first felony convictions for failing to file Medical Device Reports with the FDA, and represents the largest dollar amount ever paid by a defendant for such failure. The investigation was conducted by the FDA and the FBI. In addition to the settlement agreement, Guidant and EVT agreed to enter into a comprehensive compliance agreement with the HHS/OIG.
Redding Medical Center, Inc. (RMC), a hospital owned by Tenet Health Systems Hospitals, Inc., agreed to pay $54 million in settlement of liability for performing and billing Medicare, Medicaid and TRICARE for unnecessary cardiac services for the time period 1997 through 2002. This represents the government's largest recovery ever in a case alleging lack of medical necessity for surgeries. RMC agreed to implement certain corporate compliance steps; nonetheless, possible exclusion from Federal health care programs was not waived in the settlement.
The University of Chicago and Northwestern Memorial Hospitals, agreed to settle charges in connection with their organ transplant programs. The hospitals agreed to pay $115,000 and $23,587 respectively, to resolve charges that the hospitals falsely diagnosed certain patients as more ill than they actually were. Based on these exaggerated diagnoses, the patients were allegedly moved ahead of others who were waiting for organs in that transplant region. The government also charged that the hospital billed Medicare or Medicaid for medically unnecessary services related to the overstated diagnoses.
Exclusions:
One important mechanism for safeguarding the care provided to program beneficiaries is through exclusions of providers and suppliers who have engaged in patient abuse or neglect or fraud. During 2003, the HHS/OIG excluded more than 3,000 such individuals from participation in Medicare, Medicaid and other Federal health care programs, among them:
A Missouri pharmacist was sentenced to 30 years in prison and ordered to pay more than $10 million in restitution and fines for diluting chemotherapy drugs he prepared for cancer patients. In 2003, both the pharmacist and his pharmacy were excluded from Medicare, Medicaid and other Federal health care programs the pharmacist for 50 years and his pharmacy for 25 as a result of this conviction. Such lengthy exclusions were justified by the pharmacist's reckless disregard for the life-threatening consequences of his conduct.
A Kansas physician was excluded for 25 years based on his conviction for longstanding fraud against Medicare and TRICARE. His scheme involved luring patients into unnecessary surgeries based on false representations. The physician was also convicted of perjury. The court sentenced him to 6 years in jail, and the state suspended and then summarily revoked his medical license.
Nursing Home Studies:
Quality of nursing home care remains an area of intense interest for HHS/OIG. In recent years, the HHS/OIG conducted numerous studies assessing facets of the quality of life and care in nursing homes. In 2003, these studies included the following:
Quality Assurance Committees (QA Committees): QA Committees are internal organizations that provide a key point of accountability for ensuring quality of care. Nearly all nursing homes were found to meet CMS requirements for committee membership and frequency of meetings. QA Committees had access to information they needed to assess care, but were nonetheless hampered by staff shortages, turnover, and members who are inexperienced in committee work.
Pyschosocial Services Oversight: Another inspection examined whether residents receive required psychosocial services, including a comprehensive initial assessment and periodic evaluations. Though most facilities employed a qualified social worker as required, more than one third of residents had incomplete care plans. Where plans existed, 46 percent of residents did not receive all the psychosocial services outlined in those plans. The HHS/OIG recommended enhanced oversight of this aspect of the residential assessment and care plan.
National Ombudsman Reporting System: Data was examined in the National Ombudsman Reporting System. It was found that the data corroborated deficiencies in resident care. Complaints to Ombudsmen are on the rise, with the highest frequency of nursing home complaints involving resident care. Accidents and requests for assistance were the most common. Others in the top dozen were: complaints of personal hygiene, medication administration and symptoms unattended, and categories that include complaints of unexplained bruises, medications not given, or failure to address a resident's changed condition.
The prosecutions and settlements discussed above and throughout this report reflect the culmination of investigations that have been ongoing for several years. A more detailed description of other accomplishments of the major Federal participants in the coordinated effort established under HIPAA follows. While information in this report is presented in the context of a single agency, most of the accomplishments described herein reflect the combined efforts of HHS, DOJ and other partners in the anti-fraud efforts.
And
The Department of Justice
Health Care Fraud and Abuse Control Program
Annual Report For FY 2003
DECEMBER 2004
ACCOMPLISHMENTS
Overall Recoveries
In 2003, the Federal government won or negotiated more than $1.8 billion in judgments and settlements in health care fraud matters. As a result of enforcement actions, judgments, settlements, and administrative proceedings, the Federal government was able to distribute during 2003 $1.03 billion of the funds collected. Approximately $723 million of this amount was returned to the Medicare Trust Fund, and $151.6 million was recovered as the Federal share of Medicaid restitution. Some of the judgments, settlements, and administrative impositions in 2003 will result in distributions in future years, just as some of the distributions in 2003 are attributable to actions from prior years. As noted previously, over $500 million collected in fiscal year 2003 was distributed early in fiscal year 2004.
This fiscal year, HHS and DOJ have brought to successful conclusion the investigation and prosecution of numerous health care fraud schemes. These achievements confirm once again the importance of coordination between HHS and DOJ to maximize recoveries for taxpayer-funded health care programs victimized by fraud and/or abuse, and to promote prompt detection, punishment and deterrence of those who exploit health care programs for personal or corporate gain. In addition to the enforcement actions described in this report, numerous audits, evaluations and other coordinated efforts have yielded substantial recoveries of overpaid funds, protected vulnerable beneficiaries, and prompted changes in Federal health care programs that reduce susceptibility to fraud. During FY 2003, the many significant accomplishments of the HCFAC Program included the following:
Pharmaceutical Companies
AstraZeneca Pharmaceuticals and Zeneca, Inc. (AstraZeneca), a major pharmaceutical manufacturer, pled guilty and agreed to pay $355 million to resolve criminal and civil fraud allegations arising from its marketing of Zoladex, a drug used to treat prostate cancer. As a result of an investigation conducted by the United States Attorney for the District of Delaware, working with the HHS/OIG, the Food and Drug Administration (FDA), the Defense Criminal Investigative Service and the FBI, AstraZeneca pled guilty to violating the Prescription Drug Marketing Act by causing false claims to be filed for Zoladex that was furnished to urologists as free samples. In addition, the company agreed to pay more than $265 million to settle allegations that it caused false claims to be filed with Medicare, Medicaid, TRICARE and the Railroad Retirement Board, and another $24.9 million for failing to pay proper rebates owed to states under the Medicaid Drug Rebate Program. AstraZeneca also entered into a rigorous 5-year Corporate Integrity Agreement (CIA) with the HHS/OIG, under which the company agreed to affirmatively report certain drug prices to Medicare and Medicaid, and to take other steps to promote proper billing practices.
Bayer Corporation paid more than $257 million in global settlement of the FCA and criminal allegations that it attempted to evade paying required rebates to state Medicaid programs for sales of two drugs, Cipro (an antibiotic) and Adalat (an anti-hypertensive). In what is known as a "lick and stick scheme," Bayer allegedly sold re-labeled drugs to a large HMO at significant discount, then concealed the discounts and so avoided having to pay millions of dollars in rebates to Medicaid. Bayer also pled guilty to charges filed by the United States Attorney for the District of Massachusetts that it violated the Federal Food, Drug and Cosmetic Act by failing to notify FDA that it was producing private label Cipro. The company also agreed to extend an ongoing CIA with the HHS/OIG, and strengthen its terms to ensure that Bayer will accurately report its best price information to the government.
GlaxoSmithKline (GSK), In a similar case, GSK settled its civil liability under the FCA for repackaging Paxil (an anti-depressant) and Flonase (a nasal spray) for sale at deep discounts to the same large HMO. Again, the company concealed these discounts, and so underpaid rebates due to the Medicaid program. GSK agreed to pay more than $87 million, and to comply with the terms of a CIA designed to ensure that GSK will accurately reports its "best price" information to the government in the future.
The monies recovered in the AstraZeneca, Bayer and GlaxoSmithKline settlements were shared among the Federal Government, 49 states, the District of Columbia, and the Public Health Service.
Pfizer Corporation and Subsidiaries, Warner-Lambert and Parke-Davis (Pfizer), agreed to pay $49 million to resolve alleged false claims arising from sale of the cholesterol-lowering drug, Lipitor. The company allegedly failed to report accurately to CMS its "best price" as required under the Medicaid Drug Rebate Program. By overstating its price, the company allegedly retained more than $20 million in rebates owed to the Medicaid program. Pfizer also entered into a five-year CIA under which Pfizer must certify its process for determining best price, and adopt internal safeguards to prevent improper reporting in the future.
Prescription Drug Fraud
A South Florida defendant was sentenced after conviction at trial to 10½ years' incarceration for her role as the mastermind behind a conspiracy that fraudulently billed Medicare for over $20 million worth of prescription drugs. The conspiracy centered around four Miami pharmacies that illegally manufactured prescription aerosol drugs. The pharmacies sold the illegally manufactured drugs although in some cases, only labels or half-portions were actually delivered to DME companies that billed Medicare directly under Medicare rules that allow for payment for drugs taken by way of medical equipment. The fraudulently manufactured drugs were intended for bogus patients who had been paid for use of their Medicare numbers; approximately 1400 patients in the Miami area were involved in the scam. To enable the fraud, physicians were paid to sign blank prescriptions, and, in almost every case, the physicians never examined the patients or even looked at fraudulent charts that were concocted to fool Medicare inspectors. Five other individuals were also convicted at trial and sentenced to terms of incarceration for their participation in the conspiracy; eighteen other defendants entered pleas of guilty and were sentenced in connection with the scheme.
A South Florida urologist pleaded guilty to 59 counts of health care fraud and unlawful distribution of prescription drugs. Between July 2000 and November 2001, he prescribed Lupron, a drug used for the palliative treatment of advanced prostatic cancer, to a number of patients, and undertook to administer it to the patients in the form of injections. However, the defendant did not administer the prescribed and requisite dosages of Lupron to at least 32 patients who came to him for treatment. The physician billed the patients and their health insurance carriers for the cancer treatments, regardless of whether the drug was actually administered. In addition, he unlawfully distributed Lupron wholesale through a series of sales totaling more than $1.5 million. In pleading guilty, he was sentenced to 51 months of incarceration and 3 years of supervised release in addition to also surrendering his medical license.
Internet Pharmacy Fraud
In October 2003, a Texas pharmacist was convicted of a drug king-pin count and for money laundering for his role in conspiring to illegally dispense hydrocodone in an Internet pharmacy operation he ran. The pharmacist, who owned Friendly Pharmacy located in Texas and MainStreet Pharmacy located in Oklahoma, employed three doctors and paid them $40-100 per signed prescription. Customers of the internet websites would fill out a simple questionnaire, request their drug of choice (in most cases, hydrocodone - a Schedule III controlled substance) and then pay both a "doctor consultation fee" and the fee for the prescription drugs. The doctors reported they never declined a prescription, and never examined the patients. One doctor admitted at trial that he never reviewed the questionnaires filled out by the customers and another doctor fell asleep while signing the prescriptions. Neither of the online pharmacies had any way of verifying the age of the recipient. Unlike when the patient sees the doctor, a minor can easily log onto a website and fill out an inaccurate age. Tragically, a La Mesa, California high school honors student and athlete died at home from an overdose of Vicodin ordered from one of the pharmacies.
The pharmacist faces a mandatory 20 year to life sentence. All of the other participants were either found guilty by a jury or pled guilty. The government also obtained a $5.6 million asset forfeiture judgment against the pharmacist.
A South Florida husband and wife were sentenced to terms of 37 months and 24 months imprisonment, respectively, after being convicted by a jury of unlawfully distributing prescription drugs through the Internet. The defendants sold powerful prescription pain killers through web sites operated from their home without requiring a physician's review or a prescription and placed no restrictions on the quantities or frequency with which customers could purchase drugs. In an effort to evade detection by law enforcement, the defendants cut out the manufacturer's lot numbers placed on each of the drug containers they sold, thereby making the drugs untraceable; concealed their identities through using false names; used 32 variations of false return addresses on packages; and advertised that they were an overseas company. In little over a year, the defendants earned in excess of $1.2 million in gross revenues, all of which went to an off-shore bank account in the Cayman Islands.
Hospitals
HCA Inc. (formerly known as Columbia/HCA and HCA-The Healthcare Company), entered a settlement agreement with the Federal government, marking the end of the most comprehensive multi-agency health care fraud investigation of a provider ever undertaken by federal enforcement authorities. Under the agreement, HCA paid $631 million plus interest to resolve civil liability for alleged false claims arising from a variety of practices, including false cost reports to Medicare, Medicaid and TRICARE, and kickbacks. When added to earlier criminal pleas and a 2001 FCA settlement, and a separate settlement with the CMS, the government recovered a total of $ 1.7 billion from HCA. The settlement agreement also incorporates the terms of a Corporate Integrity Agreement with the HHS/OIG, under which HCA will maintain comprehensive compliance measures into the year 2009.
Lovelace Health Systems, Inc. (Lovelace) agreed to pay the government $24.5 million and implement certain integrity requirements to resolve its liability under the FCA. The Cigna-owned hospital and health maintenance organization allegedly falsified its Medicare cost reports for the ten years ending in 1998. Among the allegations, Lovelace improperly shifted costs of its health maintenance organization (HMO) patients to Medicare and otherwise inflated Medicare reimbursement. The investigation stemmed from a qui tam filed by an employee of a financial consultant that prepared cost reports for Lovelace.
St. Luke's Subacute Hospital and Nursing Center, Inc. and its president and CEO were convicted of six counts of Medicare fraud. The officer directed his employees to manipulate the company's books to inflate the amount of reimbursable nursing time spent on Medicare patients. In 1997, 1998 and 1999, he submitted reimbursement claims to Medicare for nursing costs that overstated St. Luke's Hospital's entitlement by nearly $3 million. He then directed an employee to create false nursing schedules in an attempt to hide inflated nursing costs from Medicare auditors, a fraud that was uncovered when law enforcement compared the false nursing schedules to true nursing schedules that were seized during a 1996 search warrant.
Rapid City Regional Hospital paid $6 million to settle civil allegations arising from unlawful patient referrals from oncologists with whom the hospital had financial relationships. The parties allegedly violated the Ethics in Patient Referrals Act, better known as the "Stark" law, which is designed to ensure that patients receive the benefit of unbiased medical judgment from their physicians. The statute prohibits doctors from referring patients to clinical laboratories, diagnostic centers, and other facilities in which they hold financial interests, and prohibits hospitals from paying for referrals from physicians with whom they have financial relationships. The FCA case involved allegations that the hospital had supplied Oncology Associates with office space, staff services, and other benefits to induce the oncologists to refer their cancer patients to the hospital. The physician practice, Oncology Associates, also paid the United States an additional $525,000 for overbilling Medicare for their patients' office visits.
Public Health Trust of Miami-Dade County, d.b.a. Jackson Memorial Hospital paid the United States $16.8 million to settle civil allegations that it had submitted duplicate claims for the same services as both outpatient clinic and inpatient services.
McLeod Regional Medical Center of Pee Dee, Inc. paid the United States $15.9 million to settle civil allegations that it submitted false claims to the Medicare, Medicaid and TRICARE programs for hospital and home health services ordered by physicians with whom McLeod, and its for-profit subsidiary, McLeod Physician Services, had unlawful compensation arrangements. The FCA suit alleged that McLeod's financial relationships with the physicians violated the Stark law and the Anti-Kickback Statute because the hospital had agreed to pay the physicians more than fair market value for their practices, then paid them salaries exceeding fair market value, to induce and maintain referral relationships with the physicians. The Government also alleged that McLeod included false claims for Medicare reimbursement of unallowable costs on the hospital's cost reports as a means to offset losses incurred in acquiring the practices.
Five hospital subsidiaries of Tenet Healthcare Corporation agreed to pay over $4.15 million to settle civil allegations that they "upcoded" Medicare patients' pneumonia and septicemia diagnoses. Hospitals receive Medicare reimbursement by assigning codes that reflect a patient's diagnosis at the time of discharge. Upcoding is the practice of assigning a code that reflects a falsely high level of patient acuity and medical service in order to generate higher reimbursement than the provider otherwise would receive. The five Florida hospitals involved were Coral Gables Hospital, Coral Gables; Florida Medical Center, Fort Lauderdale; Hialeah Hospital, Hialeah; Hollywood Medical Center, Hollywood; and Parkway Regional Medical Center, Miami.
Columbia University paid $5.1 million to settle civil charges that, for more than a decade, the university improperly billed the Medicaid program for deliveries and other obstetrical procedures conducted at New York-Presbyterian Hospital's Allen Pavilion. The Government alleged that the Obstetrics and Gynecology Department at the hospital routinely had physicians whose services would be reimbursed by Medicaid claim they themselves had treated patients when, in fact, the patients were seen by health care providers ineligible for reimbursement, such as midwives.
Durable Medical Equipment
20 defendants pleaded guilty in Arizona to engaging in a fraud scheme in which they falsely billed Medicare for more than $25 million in DME. The defendants created approximately 30 sham DME entities in the western United States. For 3½ years, they used unlawfully obtained Medicare information to falsely bill Medicare for DME either not provided or not ordered by a physician, including expensive motorized wheelchairs, hospital beds with special mattresses, and products used for delivering nutrients directly into the gastrointestinal tract.
A South Florida DME supplier was sentenced to 84 months in prison and ordered to pay nearly $14.5 million in restitution for two schemes to defraud the Medicare and Medicaid programs. The court also entered a more than $14.8 million forfeiture order. The defendant and others fraudulently billed Medicare and Medicaid for items such as motorized wheelchairs and alternating pressure mattresses. To date, 12 corporations and 14 individual defendants have pleaded guilty in connection with the schemes, and one person was convicted after a jury trial. The supplier also entered into a civil settlement agreement with the United States on behalf of himself and 15 business entities, resulting in a consent judgment being entered against him and the entities for more than $29 million.
The Texas owner and operator of two DME companies was convicted at trial, sentenced to 120 months incarceration, and ordered to pay $384,984 in restitution for defrauding the Medicare and Medicaid programs. The defendant billed Medicare and Medicaid for items that were never supplied to patients, including alternating pressure mattresses, hydraulic patient lifts, and lymphedema pumps. In other instances in which items were supplied, she submitted billings with false patient diagnoses for patients who had not been evaluated by a physician and did not qualify for the product. The defendant's husband pled guilty in connection with the same scheme and was sentenced to 12 months and one day of incarceration.
A physician convicted for obstruction of justice and mail fraud was sentenced to nearly 3 years imprisonment, and ordered to pay a $7,500 fine and be deported upon his release. A fugitive since 1988, the physician performed cursory physical exams for a DME company which used these exams to justify prescriptions for transcutaneous electrical nerve stimulation (TENS) units to Medicare beneficiaries. However, the physician never actually performed the thorough examination required, nor did he advise the beneficiaries on the use and risks of the TENS units. The physician also signed blank certificates of medical necessity so that the TENS units could be billed to Medicare. His codefendants were previously sentenced for their roles in the scheme.
Physicians
A Coral Gables, Florida, eye surgeon was convicted of 90 counts of Medicare fraud and ordered to pay $812,216 in restitution and $50,000 in fines for billing the Medicare program for services he did not provide. The surgeon fabricated medical charts and billing records, and submitted claims to Medicare, for various diagnostic tests he never conducted and laser eye surgeries that he never rendered. In many instances, elderly Medicare patients were led to believe that they had serious eye diseases that could result in blindness if not treated when in fact they did not have such illnesses. At one of the clinics, the defendant regularly claimed to have performed ophthalmic services when the equipment necessary to perform the procedures was not even present at the medical clinic on the claimed dates of service.
Six Southern California physicians pleaded guilty to health care fraud for engaging in a scheme to defraud United States insurance companies. The defendants, who were Mexican nationals who practiced in Mexico, filed claims with United States insurance companies for medical treatment, services, and supplies supposedly provided to United States citizens in Mexico; in reality, the treatment, services, and supplies were not provided as claimed. The defendants were arrested as part of an FBI undercover operation dubbed "Operation Golden Tooth" in which the undercover agent - posing as a participant in the scam - persuaded the doctors to travel to the United States, where they were arrested upon arrival.
Home Health
Caremark, Rx, Inc. (formerly MedPartners, Inc.) paid the United States $7.5 million to settle civil allegations that false home health care claims had been submitted by a former MedPartners' subsidiary, AmCare, Inc., a Florida home health agency.
Home Health
Dialysis Holdings, Inc. paid $4,102,098 to settle an FCA action alleging that the company knowingly submitted requests to Medicare for medically unnecessary laboratory tests and blood draws. Dialysis Holdings, Inc. and its predecessor corporations provided dialysis services to thousands of terminally ill Massachusetts patients afflicted with end stage renal disease (ESRD), whose laboratory costs are covered by Medicare. Dialysis conspired with a clinical laboratory to perform unnecessary blood draws on ESRD patients, create thousands of referrals for laboratory tests that were not needed, split automated chemistry panels of tests so as to avoid a Medicare rule designed to control lab test costs, and deceive physicians and laboratory employees into unknowing participation in the scheme.
Dianon Systems, Inc. paid $4.8 million to resolve allegations of Medicare and TRICARE billing fraud under the FCA. Dianon, which conducts tests to detect various types of cancer, had billed for medically unnecessary DNA tests and second-opinion consultations and reports it failed to provide.
Mediq, Inc. and its subsidiaries (collectively, Mediq), agreed to pay $1 million to resolve their civil liability under the FCA. The case stemmed from allegations that Mediq billed Medicare for transtelephonic electrocardiograms (ECGs) when no such tests were performed. Instead, Medic performed standard ECGs, a service that is reimbursed at a significantly lower rate.
Ambulance Services
A New York ambulance company operator was sentenced to 78 months in prison, was ordered to pay restitution of more than $57 million, and was subject to an $8 million forfeiture order for health care fraud arising from his fraudulent operation of several ambulance and ambulette services. In March 1990, the HHS/OIG excluded the individual from participation in the Medicare and Medicaid programs for a period of 25 years. In order to evade this program exclusion, he established secret ownership of five ambulance and ambulette companies in Brooklyn, New York, and continued to bill Medicare and Medicaid for patient transportation. He also offered and paid bribes and kickbacks to employees of various hospitals to induce them to order ambulance and ambulette services from his companies.
Physical Therapists
Two former operators of Texas medical clinics pleaded guilty to conspiracy to commit health care fraud, and paying kickbacks for the referral of Medicare and Medicaid patients in connection with several schemes that resulted in more than $11 million of false billings to Medicare and Medicaid. The defendants and others operated six physical therapy clinics in the Houston area, and billed Medicare and Medicaid for claims for physical therapy services never performed, claims using a false diagnosis, and claims for services not ordered by a licensed physician or not performed under the supervision of a licensed physician. As part of the scheme, the defendants hired patient recruiters, known as "marketers," who were paid a kickback for each patient referred to the clinics for physical therapy; clinic employees were also paid kickbacks for referrals. Four co-defendants also pleaded guilty to health care fraud in connection with this matter; three other defendants, including two doctors, have proceeded to trial.
Medicare Contractors
Blue Cross of California (Blue Cross), a former Medicare fiscal intermediary, and its parent company, Wellpoint Health Networks, Inc., agreed to pay $9.3 million to resolve their potential civil and administrative liability for false claims. For ten years ending in 2000, Blue Cross allegedly falsified data regarding its performance of health care provider audits while under contract with CMS. The intermediary primarily falsified audit start and completion dates entered into an audit tracking database. The government alleged that these erroneous entries were intended to mislead CMS regarding its performance of required audit work so as to obtain a favorable annual evaluation, and to ensure renewal of its Medicare contract.
In Missouri, a director and manager for a former Medicare contractor were sentenced for conspiring to falsify and conceal information about errors made by the contractor. The director was sentenced to 27 months in prison and fined $6,000; the manager was sentenced to 3 months in prison. These former executives ordered the falsification of records, beneficiary files, claims and other official documents, which, when reviewed by CMS, gave the contractor the appearance of performing at a higher level of efficiency and quality than was actually the case. This appearance of exemplary performance enabled the contractor to secure and maintain its contract with the government by being ranked for many years as one of the top 10 in the country. In June 2002, the contractor agreed to pay the government $76 million for its alleged misconduct.
Quality of Care
One area in which collaboration among the federal authorities responsible for health oversight has proved most effective has been in enforcement and oversight of issues relating to quality of care, as demonstrated by the following:
Prosecution:
Endo Vascular Technologies, Inc. (EVT), a wholly-owned subsidiary of the medical device manufacturer Guidant Corporation, pled guilty to 10 felonies and agreed to pay $92.4 million as part of a global resolution of charges that it covered up malfunction of its device used to treat aortic aneurysms. These incidents of malfunction included 12 deaths and more than 50 emergency surgeries. Under Federal law, a company must submit a Medical Device Report to FDA every time its device may have caused serious injury or death. EVT filed 172 such reports, but in its guilty plea, admitted to failing to file reports in 2,600 additional incidents. Moreover, the government contended that the company was aware of the incidents, since a company representative was required to be present in the operating room each time the device was inserted.
This global resolution is among the first felony convictions for failing to file Medical Device Reports with the FDA, and represents the largest dollar amount ever paid by a defendant for such failure. The investigation was conducted by the FDA and the FBI. In addition to the settlement agreement, Guidant and EVT agreed to enter into a comprehensive compliance agreement with the HHS/OIG.
Redding Medical Center, Inc. (RMC), a hospital owned by Tenet Health Systems Hospitals, Inc., agreed to pay $54 million in settlement of liability for performing and billing Medicare, Medicaid and TRICARE for unnecessary cardiac services for the time period 1997 through 2002. This represents the government's largest recovery ever in a case alleging lack of medical necessity for surgeries. RMC agreed to implement certain corporate compliance steps; nonetheless, possible exclusion from Federal health care programs was not waived in the settlement.
The University of Chicago and Northwestern Memorial Hospitals, agreed to settle charges in connection with their organ transplant programs. The hospitals agreed to pay $115,000 and $23,587 respectively, to resolve charges that the hospitals falsely diagnosed certain patients as more ill than they actually were. Based on these exaggerated diagnoses, the patients were allegedly moved ahead of others who were waiting for organs in that transplant region. The government also charged that the hospital billed Medicare or Medicaid for medically unnecessary services related to the overstated diagnoses.
Exclusions:
One important mechanism for safeguarding the care provided to program beneficiaries is through exclusions of providers and suppliers who have engaged in patient abuse or neglect or fraud. During 2003, the HHS/OIG excluded more than 3,000 such individuals from participation in Medicare, Medicaid and other Federal health care programs, among them:
A Missouri pharmacist was sentenced to 30 years in prison and ordered to pay more than $10 million in restitution and fines for diluting chemotherapy drugs he prepared for cancer patients. In 2003, both the pharmacist and his pharmacy were excluded from Medicare, Medicaid and other Federal health care programs the pharmacist for 50 years and his pharmacy for 25 as a result of this conviction. Such lengthy exclusions were justified by the pharmacist's reckless disregard for the life-threatening consequences of his conduct.
A Kansas physician was excluded for 25 years based on his conviction for longstanding fraud against Medicare and TRICARE. His scheme involved luring patients into unnecessary surgeries based on false representations. The physician was also convicted of perjury. The court sentenced him to 6 years in jail, and the state suspended and then summarily revoked his medical license.
Nursing Home Studies:
Quality of nursing home care remains an area of intense interest for HHS/OIG. In recent years, the HHS/OIG conducted numerous studies assessing facets of the quality of life and care in nursing homes. In 2003, these studies included the following:
Quality Assurance Committees (QA Committees): QA Committees are internal organizations that provide a key point of accountability for ensuring quality of care. Nearly all nursing homes were found to meet CMS requirements for committee membership and frequency of meetings. QA Committees had access to information they needed to assess care, but were nonetheless hampered by staff shortages, turnover, and members who are inexperienced in committee work.
Pyschosocial Services Oversight: Another inspection examined whether residents receive required psychosocial services, including a comprehensive initial assessment and periodic evaluations. Though most facilities employed a qualified social worker as required, more than one third of residents had incomplete care plans. Where plans existed, 46 percent of residents did not receive all the psychosocial services outlined in those plans. The HHS/OIG recommended enhanced oversight of this aspect of the residential assessment and care plan.
National Ombudsman Reporting System: Data was examined in the National Ombudsman Reporting System. It was found that the data corroborated deficiencies in resident care. Complaints to Ombudsmen are on the rise, with the highest frequency of nursing home complaints involving resident care. Accidents and requests for assistance were the most common. Others in the top dozen were: complaints of personal hygiene, medication administration and symptoms unattended, and categories that include complaints of unexplained bruises, medications not given, or failure to address a resident's changed condition.
The prosecutions and settlements discussed above and throughout this report reflect the culmination of investigations that have been ongoing for several years. A more detailed description of other accomplishments of the major Federal participants in the coordinated effort established under HIPAA follows. While information in this report is presented in the context of a single agency, most of the accomplishments described herein reflect the combined efforts of HHS, DOJ and other partners in the anti-fraud efforts.
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.
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.
Health Care Fraud and Abuse Control Program FY 1999
The Department of Health and Human Services
And
The Department of Justice
Health Care Fraud and Abuse Control Program
Annual Report For FY 1999
January 2000
These resources supplement the direct appropriations of HHS and DOJ that are devoted, in part, to health care fraud enforcement. Separately, the FBI received an additional $66 million in funding which is discussed in the Appendix to this Report.
Accomplishments
Collections
During this year, the federal government won or negotiated more than $524 million 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 1999 collected $490 million in cases resulting from health care fraud and abuse, of which nearly $369 million was returned to the Medicare Trust Fund, and $4.7 million was recovered as the federal share of Medicaid restitution. It should be emphasized that some of the judgments, settlements, and administrative impositions in 1999 will result in collections in future years, just as some of the collections in 1999 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.
NO NAMES ARE MENTIONED in Many of these....hmmmmmm
A major provider of home health services and one of its subsidiaries entered into a global settlement totaling $61 million, including approximately $10 million in criminal fines, to resolve the corporation's criminal, civil, and administrative liability arising from Medicare fraud investigations in Georgia, Florida, and New York. In Georgia and Florida, the investigation examined a series of transactions in which the home health services corporation paid another large health care corporation for the right to provide Medicare-reimbursable management services to that corporation. These payments included large cash contributions to the other corporation, enabling it to purchase home health agencies of third parties. In consideration of these payments, and of an agreement by the defendant to sell its own home health agencies to the other corporation at a reduced price, the defendant received the right to manage the visits resulting from these transactions for a management fee which was fully reimbursed by Medicare. The effect of these transactions was to disguise non-reimbursable acquisition costs as management fees, which Medicare does not reimburse. As a result of this investigation, the subsidiary pled guilty to conspiracy, mail fraud, and violation of the Medicare anti-kickback statute in three districts. In New York, a separate investigation focused on allegations that the corporation submitted unallowable expenses on its Medicare cost reports, including personal expenses of executives, gifts and entertainment, and merger costs. In addition to paying $61 million, the corporation entered into a comprehensive corporate integrity agreement with the Government.
In Pennsylvania, a company providing end-stage renal disease (ESRD) services through a network of subsidiary corporations it had acquired, agreed to pay the Government $16.5 million to resolve allegations of false Medicare claims submitted by one of the subsidiaries. The claims arose from the sale of Medicare-reimbursable noninvasive diagnostic tests between 1992 and 1995. The subsidiary companies provided financial inducements to primary care physicians and to renal dialysis facilities in exchange for the referral of patients for diagnostic testing. As a result, a percentage of the tests performed by the subsidiaries were medically unnecessary. The final settlement resolved three different qui tam lawsuits which had been brought against the subsidiaries and/or the parent company.
A key component of the HCFAC effort to protect the integrity of the Medicare trust funds is the investigation of allegations of fraud by contractors enlisted by HCFA to process and pay Medicare claims. Stemming from a qui tam complaint filed in New Mexico, two former Medicare contractors agreed to settle their False Claims Act, criminal, and administrative liability for misrepresenting their performance. In order to resolve allegations of manipulating certain computer files to obtain a better score on the Contractor Performance Evaluation Program, one of the corporations agreed to pay the Government $6.84 million. On or after May 1, 2001, the United States may, at its sole discretion, demand that the other corporation pay the Government $5.86 million, after considering the corporation's financial condition, for attempting to conceal evidence of poor performance on their audits of Medicare Part A providers. In addition, both corporations will forgo contract claims for overbudget and termination costs totaling $3.1 million. Both corporations also entered into a 5-year corporate integrity agreement with the OIG. In addition, as part of the global settlement, the former contractors pled guilty to obstruction of a Federal audit and conspiracy to obstruct a Federal audit. A third corporation, co-owned by the contractors to provide them with management services, pled guilty to conspiring to obstruct a Federal audit as well. The United States should ultimately receive $15.8 million in criminal fines, the civil settlement, and the contract claims.
On October 15, 1998, the United States reached an agreement with a major metropolitan fire department and a local hospital corporation to resolve allegations in a qui tam complaint that the defendants routinely had submitted false claims to the United States to obtain reimbursement for medically unnecessary ambulance transportation. The city agreed to pay the Government $9.5 million. Among other things, the complaint alleged that the fire department misrepresented the diagnosis of patients in order to receive reimbursement from Medicare for ambulance transportation. As part of the settlement, the company entered into a comprehensive institutional compliance agreement which will be monitored and enforced by the HHS/OIG for the next 5 years.
These and other settlements reflect the culmination of investigations that have been ongoing for several years. Though settled in 1999, the fines and restitution generated by some of these cases will not be credited to the Medicare Trust Funds until 2000.
Collaboration
Effective health care fraud and abuse control requires close collaboration and regular exchanges of information among federal, state and local law enforcement entities. Shown here are a few of the many instances of collaborative effort between DOJ, HHS, and many other organizations involved in combating health care fraud.
National Health Care Fraud Task Force. In 1999, the Administration launched a new National Health Care Fraud Task Force, chaired by the Deputy Attorney General, in which HHS/OIG, HCFA, DOJ and State and local prosecutors will work together in formulating strategies to combat health care fraud and abuse and safeguard the well-being of Medicare and Medicaid beneficiaries. While the task force will focus on a wide range of health care fraud and abuse policy issues, particular attention will be devoted to fighting nursing home fraud and abuse and excluding dishonest and abusive providers from participation in Medicare, Medicaid and other Government-funded health care programs.
Nursing Homes. The destructive impact of fraudulent billing is not measured in dollars only. During 1999, the Program continued to pursue investigations, prosecutions, audits and evaluations that directly affect not only financial losses, but also the quality of care provided to Medicare, Medicaid and other beneficiaries of government funded health care programs. Quality of care in nursing homes has been identified as a priority for both DOJ and HHS; and in October 1998, DOJ launched a major new initiative to crack down on fraud, abuse and neglect in nursing homes and other residential care facilities. The Nursing Home Initiative, coordinated by the Civil Division, focuses on enhanced enforcement; training; outreach to industry, resident advocates, medical professionals, academics and others; new legislation to address gaps in federal law; an analysis of the applicable state laws and improved inter-agency and governmental coordination, use of data, and services to victims.
DOJ began a series of regional training conferences in 1999 that brought together representatives of federal, state, and local law enforcement, regulatory, survey, oversight and advocacy entities. During the conferences, State Working Groups (SWG) were formed (or expanded where they existed), including representatives of the many entities that play a role in nursing home quality of care. These SWGs provide an on-going opportunity to promote quality of care by establishing a forum for key players to meet, share information and skills, identify problem facilities, best practices, and ways to address quality of care given the unique situations in the various states.
These and other investigative initiatives complement HCFA's ongoing Nursing Home Initiative, which has already resulted in significant improvements to nursing home oversight, enforcement and quality monitoring. Communication and coordination are facilitated by monthly Nursing Home Steering Committee meetings attended by the Civil Division, Criminal Division, Civil Rights Division, FBI, HHS/OIG, HCFA, HHS/OGC as well as in Senior Staff and Executive Level policy meetings during which nursing home fraud, abuse and neglect are among the health care issues addressed.
Examples of investigations of nursing homes for false claims relating to the quality of care provided to their residents that were brought to successful conclusion in 1999 include:
A survey by the state Department of Health of a Pennsylvania nursing home disclosed inadequate wound care, incontinence care and nutrition. After investigation, the nursing home entered a settlement agreement with the government, agreeing to pay $195,000, to implement specific quality of care protocols, and to appoint a monitor to oversee the quality of patient care.
In Kansas, a therapy service provider agreed to pay the Government $688,996 to settle allegations of impropriety in providing services to nursing home patients. It was alleged that the provider billed for therapy that was medically unnecessary and excessive, as well as billed for staff education inappropriately, and overbilled for applications of splints and positioning of patients. As part of the settlement, the provider agreed to adhere to a 3-year comprehensive corporate integrity agreement.
Beneficiary Outreach. On February 24, 1999, the HHS/OIG, DOJ, HCFA, and the Administration on Aging (AoA) joined with the American Association for Retired Persons (AARP) to launch an initiative against Medicare fraud, waste, and abuse. The educational campaign -- entitled "Who Pays? You Pay. Report Medicare Fraud" -- was held in 31 cities throughout the country, and was attended by approximately 10,000 Medicare beneficiaries. Outreach materials developed for the campaign include a brochure, entitled "What You Can Do To Stop Medicare Fraud" in English and Spanish, a drain-image poster entitled "Medicare Fraud is Money Down the Drain", and a 30-second public service announcement. The award-winning announcement was produced by AARP and is shown under the logos of AARP and HHS.
Since the campaign kick-off, the collaborative partnership between HHS/OIG, HCFA, AoA, DOJ, and AARP has continued. Monthly meetings are held to update partners on the activities of each respective partner and to plan for future collaborative activities. Since the event, the HHS/OIG Hotline 1-800-HHS-TIPS, has served as an educational and reporting resource to approximately 300,000 callers (up from 76,000 calls in 1998). The Hotline has also experienced a spike in calls from Puerto Rico and has established an active monitoring and evaluation system to ensure that concerns of the Hispanic community are addressed. To address this call increase, the Hotline has hired an additional Spanish-speaking representative and has increased the number of Spanish representatives at the contractor site in Chicago.
Data Sharing. In 1999, efforts continued to share information both general data about trends in health care fraud and emerging investigative and prosecutorial techniques -- and to communicate and coordinate with respect to specific investigations. A general data sharing process was instituted between the FBI and the HHS/OIG to ensure that complete, accurate and current information on Federal health care fraud investigations is maintained and readily accessible by both agencies.
Preventing Health Care Fraud
The Program also continues to focus on prevention of health care fraud and abuse through inclusion of rigorous corporate integrity provisions in settlements with alleged offenders, industry-specific program compliance guidance, formal advisory opinions, special fraud alerts, beneficiary outreach, and exclusions from program participation. These activities, coupled with the overall sentinel effect of our heightened enforcement efforts have netted real results. Perhaps the most concrete evidence of the success of anti-fraud and oversight efforts is the significant reduction in the error rates in Medicare fee-for-service payments an overall 45 percent reduction in improper payments in just 2 years. As part of the HHS/OIG audit of HHS's 1996 financial statements, HHS/OIG developed a statistically valid estimate of improper payments amounting to $23.2 billion, or about 14 percent of the total payments made in the fiscal year. Just 2 years later, improper payments dropped by $10.6 billion to $12.6 billion, or about 7 percent of the fiscal year total.
According to Treasury Department and Congressional Budget Office statistics, Medicare spending rose at an average annual rate of about 9 percent from 1994 to 1997, then dropped to 1.5 percent in 1998 -- the smallest increase in the history of the program. 1998 also marked the first year that Medicare spending grew more slowly than the Federal budget as a whole, which increased by 3 percent. This downward trend is continuing; during 1999, Medicare spending actually declined 0.7 percent. Even home health care expenditures, which experienced explosive growth during most of the 1990's, declined. The Medicare Trustees recently announced that the solvency of the Trust Fund had been extended 7 years to 2015, after also being extended 7 years the prior year.
A more detailed description of these and other accomplishments of the major federal participants in the coordinated effort established under HIPAA follows. While information in this report is presented in the context of a single agency, most of these accomplishments reflect the combined efforts of HHS, DOJ and other partners in the anti-fraud efforts. The continuing accomplishments of the DOJ and HHS and our partners in the coordinated anti-fraud effort, as well as prevention efforts, demonstrate that the increased funds to battle health care fraud and abuse continue to be sound investments, as well as good public policy.
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FUNDING FOR DEPARTMENT OF HEALTH AND
HUMAN SERVICES
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Office of Inspector General
Certain of the funds appropriated under HIPAA are, by statute, set aside for Medicare and Medicaid activities of the HHS/OIG. During the third year of the Program, the Act provides that between $90 and $100 million be devoted to these purposes. The Secretary and the Attorney General jointly allotted $98.2 million to the HHS/OIG in 1999, an increase of $12 million over 1998.
With these increased resources, HHS/OIG conducted or participated in 942 prosecutions or settlements in 1999. A total of 2,976 individuals and entities were also excluded, many as a result of criminal convictions for program-related crimes (550), criminal convictions for patient abuse or neglect (323), and others were excluded based on licensure revocations (1,416).
In addition to the HHS/OIG's role in bringing about the judgments and settlements described in the Overview of Accomplishments, the Department of Health and Human Services acted on HHS/OIG recommendations and disallowed $113.5 million in improperly paid health care funds in 1999. HHS/OIG continues to work with HCFA to develop and implement recommendations to correct systemic vulnerabilities detected during HHS/OIG evaluations and audits. These corrective actions often result in health care funds not expended (that is, funds put to better use as a result of implemented HHS/OIG initiatives). In 1999, such funds not expended on improper or unnecessary care amounted to approximately $11.8 billion -- about $10.8 billion in Medicare savings, and nearly $1 billion in savings to the Medicaid program.
HHS/OIG moved closer to its goal of extending its investigative and audit staffs to cover all geographical areas in the country, particularly those that were previously underserved. During 1999, overall HHS/OIG staff levels increased from 1,258 to 1,363 by the end of the year, and HHS/OIG opened 2 new investigative offices. The HHS/OIG also significantly increased its staffing resources devoted to ensuring health care providers' compliance with Federal health care program rules.
Fraud and Abuse Prevention
The increased resources made available under HIPAA have enabled the HHS/OIG to expand activities designed not just to uncover existing fraud and abuse, but to prevent it. Vital prevention initiatives, such as those listed below, inform and assist the health care industry, and patients. Equally important, these prevention activities reduce the government's enforcement costs and program losses.
Compliance Guidance. A key element of HHS/OIG's prevention efforts has been the development of compliance program guidance to encourage and assist the private health care industry to fight fraud and abuse. The guidance, developed in conjunction with the provider community, identifies steps that health providers may voluntarily take to improve adherence to Medicare and Medicaid rules. In 1999, the OIG developed and released final compliance program guidance for third party medical billing companies, hospices and the durable medical equipment, prosthetics, orthotics, and suppliers industry.
Corporate Integrity Agreements. Many health care providers that enter agreements with the government in settlement of potential liability for violations of the False Claims Act also agree to adhere to a separate "corporate integrity agreement." Under this agreement, the provider commits to establishing a compliance program or undertaking other specified steps to ensure its future compliance with Medicare and Medicaid rules. The duration of most corporate integrity agreements is 5 years, during which time the provider must submit periodic reports to HHS/OIG. These agreements require a substantial effort by the provider to ensure that the organization is operating in accordance with Federal health care programs rules and regulations and the parameters established by the corporate integrity agreement. Breach of the agreement may result in a variety of sanctions, including exclusion of the provider. At the close of 1999, HHS/OIG was monitoring more than 425 corporate integrity agreements.
Industry Guidance. The centerpiece of the HIPAA guidance initiatives is an advisory opinion process through which parties can obtain binding legal guidance as to whether their existing or proposed health care business transactions run afoul of the Federal anti-kickback statute, the civil money penalties laws, or the exclusion provisions. The advisory opinion process has become an integral part of the Inspector General's ongoing commitment to preventing health care fraud. During 1999, the HHS/OIG accepted 39 requests for advisory opinions and issued 15 opinions. Many requests are still being processed; others were withdrawn or rejected as outside the scope of the advisory opinion process.
The advisory opinion process also serves to enhance the HHS/OIG's understanding of new and emerging health care business arrangements and informed the development of new safe harbor regulations, fraud alerts, and special advisory bulletins. Topics so addressed in 1999 include hospital payments to physicians to reduce or limit services to beneficiaries (commonly known as "gainsharing" arrangements); the effect of exclusion from Federal health care programs on excluded providers and those who employ or contract with them; physician liability for certifications of medical necessity in the provision of medical equipment and home health services; and the effects of exclusion from Federal health care programs on current and prospective employees.
The HHS/OIG made significant strides toward resolving pending safe harbor regulations. Formal clearance was begun for a proposed anti-kickback safe harbor for ambulance restocking arrangements between hospitals and ambulance providers who transport patients to hospital emergency rooms and a proposed safe harbor under the civil money penalty law for inducements to beneficiaries to protect certain payments by ESRD facilities of insurance premiums for their patients. Two final anti-kickback statute safe harbor rules were finalized for issuance in early 2000 -- one promulgating eight new safe harbors and a series of clarifications to existing safe harbors (originally proposed in 1993 and 1994), and another addressing the statutory exception for shared risk arrangements.
In addition, HHS/OIG has made frequent presentations to industry groups on areas of suspected fraud and abuse and measures they can take to avoid trouble.
Medicare Error Rate: The HHS/OIG's annual audit of the Department's financial statements included a statistically valid review of the error rate in Medicare fee-for-service payments. This year's estimate is $7.7 billion less than last year's estimate of $20.3 billion and $10.6 billion less than the previous year's estimate of $23.2 billion--a 45 percent drop. While there is no empirical evidence supporting a specific causal relationship between the error rate decline and particular corrective actions, we believe that among the important causes for the reduced error rate are the fraud and abuse prevention and detection initiatives, the Medicare Integrity Program administered by HCFA and the cooperative efforts of major provider groups.
Recommendations for Systemic Improvements: Frequently, investigations (and resulting civil settlements or criminal prosecutions), audits and evaluations reveal vulnerabilities or incentives for fraud in agency programs or administrative processes. As required by the Inspector General Act, the HHS/OIG makes recommendations to correct these vulnerabilities, and thereby promote economy and efficiency in HHS programs and operations. Relying on the independent factual information generated by HHS/OIG, agency managers fashion legislative proposals and other corrective actions that, when enacted or implemented, close loopholes and avoid ineffective expenditures or improper conduct. The net savings from these joint efforts toward program improvements can be substantial.
An example of an HHS/OIG study that provided evidence and ideas supporting proposals for significant cost savings issued during 1999 was the series of reports on the early effects of the prospective payment system (PPS) on access to skilled nursing facilities and the appropriateness of Medicare payments for physical and occupational therapy in skilled nursing facilities. The studies found that there are no serious problems in placing Medicare beneficiaries in nursing homes; however, nursing homes are changing their admission practices in response to the new PPS. One-fifth of the hospital discharge planners say that it has become more difficult to place patients who require extensive services while it has become easier to place patients who need rehabilitation services. Most nursing home patients were appropriate candidates for and benefitted from the physical and occupational therapy they received. However, 13 percent of the therapy was improperly billed to Medicare. In terms of dollar amounts, Medicare reimbursed skilled nursing facilities almost $1 billion for improperly billed physical and occupational therapy and almost $331 million for undocumented physical and occupational therapy.
The reports recommended that HCFA instruct Medicare fiscal intermediaries to provide more training to facility and therapy staff on Medicare coverage criteria and guidelines, local medical review policies, and monitoring procedures for therapy and adequately fund Medicare contractors to perform medical reviews of therapy.
Focus on Collaboration
Federal-State Audit Partnership. In 1994, the HHS/OIG initiated a partnership between federal and state auditors to enhance and provide broader audit coverage of the Medicaid program. Collaboration among HHS/OIG, State auditors, inspectors general, Medicaid agencies and HCFA maximizes scarce resources at both the Federal and State levels. The focus of the partnership effort is not on the traditional identification and recovery of unallowable Medicaid costs; rather the program focuses on identifying program improvements and reducing the cost of providing necessary services to Medicaid recipients. HHS/OIG auditors provide computer support, audit programs and guides, training, information-sharing and other specialized assistance to State auditors, as well as direct audit support.
To date, active partnerships flourish in 22 states. This partnership effort has been a resounding success. State auditors have shown a great interest in creating partnerships and we continue to get inquiries on other potential joint projects. By the end of 1999, these State partnerships generated approximately $145 million in Federal and State savings since the partnership began. Many of these recommendations related to Medicaid prescription drugs.
Roundtable on Compliance. In conjunction with the health care industry, the HHS/OIG conducted a joint roundtable on health care compliance to gain new insights into the challenges of creating effective compliance programs. The event reflects HHS/OIG's commitment to engage in ongoing discussions with the health care compliance industry about practices and policies related to compliance programs, including the impact of compliance recommendations advanced by HHS/OIG. More than 125 compliance officers, government representatives and others attended the event.
Self-Disclosure Protocol. In October 1998, the HHS/OIG implemented a self-disclosure program, to assist providers and suppliers in investigating and reporting potential violations of Federal health care laws. The program offers providers an opportunity to police themselves, correct underlying problems and work cooperatively to resolve these matters. Since issuance of the protocol, 40 health care providers have submitted self-disclosures to the HHS/OIG. Two of these were successfully resolved through the return of overpayments to the Federal Government; the others are under investigation.
Data Sharing. With the increased focus on investigations that are national in scope, close collaboration among investigative and prosecutive agencies has become critical. To this end, the HHS/OIG Office of Investigations and the FBI have initiated an efficient information sharing system. Copies of all healthcare fraud referrals and allegations received by HHS/OIG are sent to the FBI Health Care Fraud Unit at FBI Headquarters. The FBI then serves as an informational contact and dissemination point for DOJ and its prosecutors nationwide. In turn, the FBI provides information on their health care investigative matters to HHS/OIG. All such cases, wherever generated, are entered into the HHS/OIG Case Information Management System, which serves as a comprehensive data base for Federal health care investigations. This prompt information sharing system fosters efficient investigative teamwork, supports criminal prosecutions and deters health care fraud.
Beneficiary Outreach. The HHS/OIG's outreach efforts are not limited to industry; equally important is enlisting the beneficiary population in the fight against fraud and abuse. The HHS/OIG continues to distribute hundreds of its Medicare fraud educational materials to beneficiaries through AoA grantees, the AoA network, AARP regional offices, and to public libraries in each State. HHS/OIG has developed a working relationship with national Asian American and Hispanic organizations to seek advice on translating and printing HHS/OIG Medicare fraud materials into Chinese, and to distribute these materials and those already printed in Spanish, respectively, to Chinese Americans and a wider Spanish-speaking population.
Focus on Quality of Care
Some of the HHS/OIG's most important investigations, audits and evaluations focused on the quality of care furnished to program beneficiaries. These include the investigations described in the Overview section of this report, as well as the following activities:
Patient Anti-Dumping Enforcement. Both HCFA and the HHS/OIG continue to vigorously pursue potential violations under the patient anti-dumping statute. Federal law requires that an emergency medical screening examination and stabilizing treatment be provided by the emergency department of a Medicare participating hospital. In 1999, HHS/OIG entered 61 settlement agreements with hospitals and physicians and collected civil monetary penalties of $1.7 million. This is an increase from the previous high of 53 settlements in 1998, and reflects the commitment of both HCFA and HHS/OIG to ensure patient access to appropriate emergency medical services.
Quality of Care in Nursing Homes. The HHS/OIG released a series of inspection reports concluding that serious problems with quality of care continue to exist in nursing homes. This is demonstrated by an increase in survey and certification "quality of care" deficiencies as well as an increase in ombudsman complaints, especially about resident care. Other findings include inadequate nursing home staffing levels; weaknesses in the survey system; inadequate resources in the ombudsman program; and inconsistent and unreliable State systems to safeguard nursing home residents. The problems described in this inspection will require continuing attention. An effective strategy would include actions to enhance the survey and certification process; strengthen the ombudsman program with increased resources; improve nursing home staffing levels; and improve coordination between State survey agencies and ombudsmen. Additionally, further evaluation and performance measurement of the Omnibus Budget Reconciliation Act 1987 and the conditions in nursing homes would make an important contribution to efforts to advance nursing home care.
Hospital Quality Oversight. A two-year study by the HHS/OIG found major deficiencies in the external oversight system intended to make sure the nation's hospitals are safe and recommended how those agencies responsible for oversight can provide leadership in improving quality and accountability. The study received significant national media attention when it was released. Four evaluation reports assessed the key roles in hospital quality oversight played by the Joint Commission for Accreditation of Healthcare Organizations, the State survey and certification agencies, and HCFA, which oversees Medicare. Overall, the reports concluded that while the system of oversight that HCFA relies upon has some strengths, it also has deficiencies that warrant serious attention. The HCFA does little at present to hold either the Joint Commission or the State survey agencies accountable for their performance.
The reports called for HCFA to exert leadership in addressing the shortcomings. The HHS/OIG urged HCFA to steer the external review process so that it represented a balance between the educationally oriented approaches of the Joint Commission and the enforcement-oriented approaches of the State agencies. In recommendations, the HHS/OIG presented a number of steps HCFA should take to hold both the Joint Commission and the States more fully accountable for their performance in reviewing hospitals. In addition, the HHS/OIG called for HCFA to determine the appropriate minimum cycle for conducting certification surveys of non-accredited hospitals. Since the publication of the final report, the Joint Commission has made several changes to its review and accreditation process, based on HHS/OIG recommendations, that have made the process more meaningful and more accountable.
Mental Health Services. A settlement agreement was reached with a university to resolve its civil liability for the submission of false claims to Medicare, Medicaid and other Federal health care programs from 1992 through 1997. At issue were claims for mental health services rendered at its clinics by non-paid, unsupervised students. The university submitted the claims and was reimbursed as if qualified mental health providers (psychologists or psychiatrists) had provided the services. The university agreed to enter a 5-year comprehensive corporate integrity agreement with the HHS/OIG. It also agreed to pay the government a total of over $4 million. Monetary payment will be made to the federal government for both the Medicare damages and the federal portion of Medicaid damages. However, the State agreed that the university could satisfy its liability for the state share of the Medicaid damages through the provision of services rather than through a cash payment.
The HHS/OIG also completed a five-State study of partial hospitalization program services provided in community mental health centers. This program is an intensive outpatient psychiatric program which provides services to acutely ill individuals in order to prevent their hospitalization. Medical reviewers found that over 90 percent of the Medicare payments ($229 million of $252 million) were for unallowable or highly questionable services. Cost reports at selected centers contained significant unallowable and nonreimbursable items. Further, HCFA's enrollment initiative in nine States found that a high percentage of the nearly 700 centers covered did not meet certification requirements to qualify for Medicare payments. To address these problems, HCFA developed a 10-point plan under which approximately 150 centers have already been terminated (this includes voluntary terminations and cessation of business). Instructions were issued to fiscal intermediaries on intensified medical review and provider education. HCFA is also implementing a prospective payment system for partial hospitalization program services, and has started the process of deactivating billing numbers for centers that have not billed Medicare within 6 months.
Health Resources and Services Administration
The Act mandates that the HHS/OIG and DOJ establish a national health care fraud and abuse data collection program for the reporting and disclosure of certain final adverse actions (excluding settlements in which no findings of liability have been made) taken against health care providers, suppliers, and practitioners. The Health Resources and Services Administration (HRSA) has been authorized to design, implement and operate this program, currently named the Healthcare Integrity and Protection Data Bank (HIPDB). In 1999, HRSA received $4.4million from the Account to continue development of the HIPDB as an all electronic system that will collect, store and disseminate reports to the law enforcement community and health plans upon request.
The Act requires Secretarial rulemaking for certain features of the HIPDB, including access, information dissemination, disclosures to the subjects of reported information and report corrections, and any other optional reporting elements that the Secretary chooses to request. Decisions were made jointly by HHS and DOJ to continue the development of the data base in 1999 in anticipation of the publication of the Final Rule. Final regulations were published in the Federal Register in October1999 and plans are underway to open the data bank in early 2000.
Development of the HIPDB has included activities related to data base design specifications, reviews of required hardware and software, modification of physical facilities, and the procurement and installation of equipment. The forms and methods of information to be collected to populate the data base has also been part of the HIPDB development process. Most of the information reported to the HIPDB will come from Federal agencies and State licensing authorities. Data acquisition activities have included working with: DOJ, HCFA, HHS/OIG, the Departments of Defense and Veterans Affairs, and various health care related and health professional organizations, including those representing Nursing and Chiropractic Licensing Boards.
Operations will be supported by charging a fee for searching the data base. When the HIPDB becomes operational, the query fee payment will be collected via an interface with Mellon Bank. To date, more than 2,300 entities have registered to query the HIPDB in anticipation of its opening for operation.
Office of the General Counsel
The Office of the General Counsel's (OGC) headquarters divisions (the Health Care Financing Division and the Business and Administrative Law Division) as well as its 10 regional offices provide legal support consistent with the statutory authority of the HCFAC Program. These OGC components, in partnership with other HHS components --- including HCFA, HHS/OIG and DOJ, work jointly to combat health care fraud and abuse.
OGC was allocated $2.3 million in HCFAC funding for 1999. These funds were used primarily for litigation activity, both administrative and judicial. OGC continues to experience an increase in the number of new Program Integrity Litigation items: an approximate increase in new cases for fiscal years 1998 and 1999 of 17 and 18 percent, respectively. Pending cases for those fiscal years increased 34 and 14 percent respectively. It is our anticipated new litigation and pending litigation that drives OGC's activities. The bulk of the administrative (non-court) litigation involved: (1) Civil Money Penalties (CMPs) and other sanctions imposed on nursing facilities; (2) revocations, terminations or denials of provider status (especially nursing facilities, home health agencies, as well as Community Mental Health Centers (CMHCs) under the Operation Restore Trust CMHC Initiative); (3) Medicare Secondary Payor (MSP) cases; and, (4) suspensions of Medicare payments to providers and suppliers. The bulk of the court litigation involved MSPs or bankruptcies. The dollars reflected here are not included in the Monetary Results section of this report.
Accomplishments
Within this year's framework of prominent HCFAC themes such as civil and criminal enforcement actions; exclusions from federally sponsored programs; initiatives for preventing health care fraud; administrative penalties for Emergency Medical Treatment and Active Labor Act (EMTALA) violations; and collaborative and outreach efforts, OGC had the following HCFAC accomplishments:
OGC's HCFA Division worked with OIG to draft a Special Advisory Bulletin to clarify the applicability of the EMTALA to managed care organizations. That Division also assisted HCFA in its efforts to draft a regulation to clarify the scope of EMTALA so that hospitals will know when their obligations under EMTALA begin and end and whether the obligations under EMTALA apply to hospital inpatients. Other EMTALA efforts included a presentation by Region X staff to the Washington State Bar Association on EMTALA requirements.
Region V staff assisted in successfully defending against federal district court and bankruptcy court suits seeking to enjoin recoupment of overpayments from a home health agency in Indiana ($5 million) and from a nursing facility ($1 million).
Region VI's collaborative and outreach efforts are plentiful and significant: for example, in ongoing collaborative efforts with HCFA, the Texas Department of Human Services and the Texas Attorney General's Office, an action plan to preserve patient health and safety when nursing home chains become insolvent or file for bankruptcy was coordinated. These efforts arose out of the bankruptcy of a Texas nursing home chain where issues of fraud, suspension of payments, patient safety and bankruptcy were all present. As a result, this model will be used in similar OGC efforts in the future.
Region VI also was successful in protecting HCFA's interests when a nursing home chain in Texas (90 facilities) filed for bankruptcy. Through the efforts of Region VI's staff, HCFA was able to recoup a $3 million cost report overpayment over a 12-month period. Additionally, they were able to arrange for continued repayment of a $885.9 thousand settlement of 29 civil monetary penalty cases.
OGC's Region III and Region X offices collaborated with efforts to sustain denial of $4.8 million in payments to a Medicare supplier, headquartered in Pennsylvania, of orthotics and lymphedema pumps. The supplier filed for bankruptcy protection which most likely would have resulted in HCFA (as an unsecured creditor) receiving pennies on the dollars for its claims. However, OGC was able to convince the unsecured creditors' committee that the debtor's claims were fraudulent, and that the appeal of the denial of claims would be fruitless. Medicare was able to retain the $4.8 million as a result of these offices' efforts.
Administration on Aging
In 1999, the Administration on Aging (AoA) was allocated $1.4 million in HCFAC funds to train and educate both paid and volunteer aging network staff to recognize and report potential practices and patterns of fraud, waste, and abuse in the Medicare and Medicaid programs. These activities were focused on training nursing home ombudsmen, health insurance counselors, state and area agency on aging staff, senior center directors, social workers, eldercare information specialists, and other professionals in 18 states how to identify and report potentially fraudulent practices.
This funding also helped to support the technical assistance and nationwide infrastructure for educating beneficiaries to be the "eyes and ears" of the Medicare system. The AoA and its network agencies engaged in coordinated outreach and educational activities designed to assist older persons and their families to recognize and report fraudulent and abusive situations and to prevent or minimize victimization of such behavior.
Accomplishments
The 18 grantees trained more than 10,000 staff and volunteers to be Medicare resources and educators in their communities.
With the collaboration and assistance of HCFA, the HHS/OIG, health care providers, and other professionals from around the country, the projects developed more than 150 community-based training manuals, educational brochures, and public information documents designed to recruit volunteers, involve providers in the campaign, and inform beneficiaries of what they should do if they have questions regarding their Explanation of Medicare Benefits Statement or Medicare Summary Notice. Educational materials were developed in a variety of languages, and outreach initiatives were targeted to high-risk populations. The AoA entered into a contract to develop culturally sensitive videos and brochures targeted to the African American, Hispanic, and Chinese communities.
The AoA grantees convened more than 1,500 community education events which educated and informed over 200,000 individuals through public forums and education and training sessions to identify and report health care waste, fraud, and abuse. Special initiatives were undertaken to include local health care providers in these activities. Two examples of these efforts include the assistance of physicians in developing a personal health care journal that beneficiaries can use to record the services they receive during a doctor or hospital visit, and a collaboration with hospitals in developing and distributing an informational brochure on waste, fraud, and abuse that individuals receive when they are discharged from the hospital.
With the assistance of the HHS/OIG and HCFA, the grantees developed and tested telephone screening systems and tracking mechanisms designed to trace the outcomes of inquiries made by beneficiaries. Of the more than 9,800 calls concerning potential cases of health care fraud, waste, and abuse which were screened by the projects, approximately half were referred to Medicare carriers, intermediaries, or regional durable medical equipment carriers for follow-up, thirty percent were referred to providers, and one-fifth were referred to the HHS/OIG Hotline, State Medicaid Fraud Control Units, State Attorney General's Offices, or other fraud and abuse agencies.
HCFAC funding also provided vital technical assistance to support AoA's Senior Medicare Patrol Projects which have been highly successful in recruiting and training retired professionals to report waste, fraud, and abuse.
Departmental Appeals Board
The Secretary delegated to the Departmental Appeals Board (DAB) responsibility for conducting hearings and reviewing appeals in administrative sanction cases initiated by the HHS/OIG. The HHS/OIG administrative sanction cases may result in exclusion from participation in Medicare and State health care programs imposed under sections 1128 and 1156 of the Social Security Act, and imposition of CMP pursuant to section 1128A of the Act. Another substantial category of HHS/OIG administrative sanction cases involve violation of the Patient Anti-Dumping Statute, section 1867 of the Social Security Act. With enhanced HHS/OIG resources resulting from HIPAA, the HHS/OIG has processed an ever-increasing number of administrative sanction cases.
The DAB Civil Remedies Division received $138,000 in 1999 in HCFAC funds. These funds supported the work involved in issuing 33 decisions, dismissing 73 cases, and closing 106 cases in 1999. All of these cases were generated by the HHS/OIG.
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FUNDING FOR DEPARTMENT OF JUSTICE
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United States Attorneys
Health care fraud involves a variety of schemes that defraud public and private insurers and providers nationwide. In addition to Medicare and Medicaid, a number of federally funded health benefit programs have been the targets of these schemes. The fraudulent activity may include double billing schemes, kickbacks, billing for unnecessary or unperformed tests, or may be related to the quality of care provided to patients. In addition to monetary losses, in some instances these improper activities endanger patient safety. United States Attorneys' offices (USAOs) are responsible for civilly and criminally prosecuting health care professionals, providers, and other specialized business entities who engage in health care fraud and abuse.
USAOs continue to strengthen cooperative efforts with federal, state and local law enforcement agencies involved in the prevention, evaluation, detection, and investigation of health care fraud and abuse. In addition to the FBI, HHS/OIG and HCFA, USAOs offices work with State Medicaid Fraud Control Units, Offices of Inspectors General for a number of federal agencies, the Drug Enforcement Administration, and the Department of Defense Criminal Investigative Service and TRICARE Support Office. Each USAO has appointed both a civil and criminal health care fraud coordinator to assist in coordination and facilitate communication between federal, state and local law enforcement groups.
Over the past year, USAOs have diligently worked to enhance provider understanding of the Department's enforcement responsibilities and efforts. A number of outreach presentations have been made to health care professionals, provider organizations, and beneficiary groups around the country in this regard.
Prior to the enactment of HIPAA, USAOs dedicated substantial resources to combating health care fraud and abuse. HIPAA allocations have supplemented these efforts.
Training
The Executive Office for the United States Attorneys' Office of Legal Education (OLE) is tasked with the responsibility for providing health care fraud training for USAO and DOJ attorneys, investigators, and auditors. During 1999, OLE conducted a number of courses and presentations on health care fraud, including:
Affirmative Enforcement for Investigators (including a health care fraud training component)
Civil Health Care Fraud for Attorneys
Criminal Health Care Fraud for Attorneys
Basic Health Care Fraud for Attorneys - Criminal and Civil
Basic Affirmative Civil Enforcement for Attorneys (includes a health care fraud component)
While the primary participants in OLE sponsored courses were DOJ employees, agency counsel and investigative personnel were also invited to participate as presenters and students. In addition to OLE sponsored training a number of USAO attorneys, auditors and investigators participated in multi-agency health care fraud training courses over the last year.
Accomplishments - Criminal Prosecutions
The primary objective of criminal prosecution efforts is to ensure the integrity of our nation's health care programs and to punish and deter those who, through their improper activities, adversely affect the health care system and the taxpayers.
Each time a criminal case is referred to a USAO from the FBI, HHS/OIG, or other law enforcement agency, it is opened as a matter pending in the district. A referral remains a matter until an indictment or information is filed or the case is declined for prosecution. In 1999, the USAOs had 1,994 criminal matters pending involving 3,158 defendants, a 6.9 percent increase in the number of criminal matters over 1998. During 1999, 371 cases were filed involving 506 defendants. This represents a 16.3 percent increase over cases filed in 1998. A total of 396 defendants were convicted for health care fraud-related crimes in 1999. Health care fraud convictions include both guilty pleas and guilty verdicts.
In one case, 20 individuals were convicted for their involvement in a massive and sophisticated scheme to defraud Medicare. The convictions arose from an almost five-year investigation (conducted by HHS/OIG, FBI, the Internal Revenue Service, and the Department of Labor) of a home health agency, which from 1991 to 1994 was the largest Medicare-certified home health agency in Miami. During that time, the home health agency was paid approximately $120 million by Medicare for reimbursement of services, including nursing and home health aide visits, which either had not been provided, were not necessary, or were provided to persons who were not eligible. In some cases, Medicare was billed for services provided to persons who were already deceased when the billed services were supposedly rendered. The two highest level home health agency administrators admitted to illegal hidden partnerships in literally hundreds of subcontractor groups and the conspirators' involvement in hundreds of thousands of dollars in illegal payoffs to everyone from "professional beneficiaries" to home health aids, nurses and doctors. The convicted defendants, in what eventually became two separate federal court cases, arising from two separate series of indictments, received sentences ranging from 18 months imprisonment to, in the case of the highest level administrator, 12 years imprisonment. A single defendant returned $1.1 million in fraudulently obtained assets.
Accomplishments - Civil Cases
Civil health care fraud efforts constitute a major focus of Affirmative Civil Enforcement (ACE) activities. The ACE Program helps ensure that federal laws are obeyed and that violators provide compensation to the government for losses and damages they cause. Civil health care fraud matters ordinarily involve the United States utilizing the False Claims Act, as well as common law fraud remedies, payment by mistake, unjust enrichment and conversion to recover damages from those who have submitted false or improper claims to the United States.
Each time a civil referral is made to a USAO it is opened as a matter pending in the district. Civil health care fraud matters are referred directly from federal or state investigative agencies, or result from filings by private persons known as "relators," who file suits on behalf of the Federal Government under the 1986 qui tam amendments to the False Claims Act. Relators may be entitled to share in the recoveries resulting from these lawsuits. At the end of 1999, the USAOs had 2,278 civil health care fraud matters pending. A matter becomes a case when the United States files a civil complaint, or intervenes in a qui tam action, in United States District Court. The vast majority of civil health care fraud cases and matters are settled without a complaint ever being filed. In 1999, 91 civil health care fraud cases were filed.
A multimillion dollar settlement was reached with one of the largest home health care companies in Texas, which agreed to pay the Government $10 million to resolve allegations involving its subsidiary, a provider of home health care and infusion therapy services. Allegedly, the subsidiary improperly charged Medicare for unallowable costs including salaries, travel, and legal fees. In addition, the subsidiary allegedly conspired with and caused skilled nursing facilities to overcharge Medicare for infusion therapy drugs, supplies, and nursing services. As part of the settlement, the subsidiary also entered into a comprehensive corporate integrity agreement with HHS/OIG.
Civil Division
Civil Division attorneys vigorously pursue civil remedies in health care fraud matters, working closely with the USAOs, the FBI, the Inspectors General of HHS and Defense, as well as other federal and state law enforcement agencies. Cases involve health care providers, carriers and fiscal intermediaries that defraud Medicare, Medicaid and other federal health care programs.
The Department's Nursing Home Initiative, launched in October 1998 to crack down on fraud, abuse and neglect in nursing homes and other residential care facilities, is coordinated by a Civil Division attorney, and focuses on eight key areas: (1) stepped up enforcement; (2) improved coordination among federal agencies and among federal, state and local law enforcement, regulatory agencies and resident advocates; (3) development and use of data systems to target facilities that provide inadequate care; (4) focused training, particularly training that brings together prosecutors, investigators, regulators, surveyors, advocates and others;(5) outreach efforts to industry to promote compliance and to patient advocates, medical professionals and academics; (6) new legislation to address gaps in federal law; (7) improved services to victims of fraud, abuse and neglect; and (8) analysis of state laws to identify effective or promising state abuse and neglect statutes and enforcement practices. This Initiative complements the efforts being undertaken at HCFA and HHS/OIG, communication and coordination are facilitated by monthly Steering Committee meetings attended by the Criminal Division, FBI, HHS/OIG, and HCFA.
The financial crisis in the nursing home industry has to date resulted in bankruptcy filings by two of the ten largest nursing home chains and several smaller chains. These bankruptcy cases, the largest ever involving health care providers, raise both financial and quality of care issues, and require significant on-going coordination between the Civil Division's Corporate Finance (bankruptcy experts) and Civil Fraud sections, the Criminal Division, HCFA, and HHS/OIG.
The Civil Division continues to chair the Managed Care Fraud Working Group, which meets quarterly and coordinates the managed care enforcement activities of DOJ, FBI, HHS/OIG, HCFA, TRICARE Management activity of the Department of Defense, Office of Personnel Management Office of Inspector General, The National Association of Attorneys General, the National Association of Medicaid Fraud Control Units, and the Internal Revenue Service.
Accomplishments
In 1999, 182 new health care fraud matters were initiated. In addition to pursuing more health care fraud allegations, the Civil Division is pursuing an increasing number of health care fraud cases in which the apparent single damages are particularly high. Following is a discussion of some of the significant cases the Division has been involved in during 1999.
A $32 million payment was received from a university -- the largest recovery ever in a case involving either the Food and Drug Administration or the National Institutes of Health (NIH). The case established favorable new case law and its settlement resolved allegations that, for more than two decades, the University had illegally profited from selling an unlicensed drug, failed to report the sales income to NIH, improperly tested the drug on patients and improperly used grant funds.
The Civil Division, in conjunction with 39 USAOs, is handling a qui tam action alleging that 100 hospitals located nationwide upcoded pneumonia diagnosis codes to falsely obtain higher Medicare reimbursements. Thus far, settlements have been reached with eight defendants for a total recovery of $15.4 million.
A $15 million settlement resolved a case against a billing service and its physician founder, for submitting false claims on behalf of emergency physicians around the country. The settlement with the United States and twenty-eight states was reached after a trial on liability in which the court found both the company and the owner liable for violating the False Claims Act. In addition to the civil settlement, the owner was excluded from participation in all federal health care programs for fifteen years.
A drugstore chain paid nearly $8 million to settle allegations of submitting false prescription claims to state Medicaid and other federally-funded health programs. The case was the first to address a common practice of billing insurance programs for the full amount of prescriptions which were only partially filled.
Vital resources were made available from the Account to provide the Civil Division with Automated Litigation Support (ALS), auditors and consultants. These resources supplemented other Civil Division funds. During 1999, ALS was provided to 14 cases while auditor/consultant support was provided to 21 cases. Four of the supported cases have settled, yielding more than $44 million. Recoveries in the remaining cases are expected to reach hundreds of millions of dollars.
Criminal Division
The Fraud Section of the Criminal Division develops and implements white collar crime policy and provides support to the Criminal Division, DOJ and other federal agencies on white collar crime issues. The Fraud Section supports the USAOs with legal and investigative guidance and, in certain instances, provides trial attorneys to prosecute criminal fraud cases. For several years, a major focus of Fraud Section personnel and resources has been to investigate and prosecute fraud involving federal health care programs.
The Fraud Section has provided guidance to FBI agents, AUSAs and Criminal Division attorneys on criminal, civil and administrative tools to combat health care fraud, and worked on an inter-agency level through:
providing frequent advice and written materials on confidentiality and disclosure issues arising in the course of investigations and legal proceedings regarding medical records.
reviewing and commenting on numerous requests for advisory opinions submitted by health care providers to the HHS/OIG and consulting with the HHS/OIG on draft advisory opinions per the requirements of HIPAA.
sponsoring a national Nursing Home Fraud and Abuse conference to address the problems of financial fraud and resident abuse and neglect. The conference brought together key officials from DOJ, USAOs, HHS/OIG, HCFA, and other federal, state, and local agencies, to develop a plan of action for combating fraud, abuse, and neglect in nursing homes across the nation. The national conference helped lead to the development of DOJ's Nursing Home Initiative and the development of regional nursing home training conferences that will be held in Los Angeles, Philadelphia, and Des Moines.
preparing and distributing to all USAOs and FBI field offices a quarterly electronic newsletter summarizing recent developments on major issues, interagency initiatives, and significant activities of DOJ's health care fraud component organizations as well as periodic electronic newsletters summarizing recent cases.
participating on interagency working groups and task forces formed to address fraud in health care and managed care as well as newly emerging problem areas involving illicit online sales of drugs and medical products and nursing home fraud and resident abuse.
Justice Management Division
The Justice Management Division, Debt Collection Management Staff continues to perform for the program various administrative and coordination duties. The duties of this office include: budget formulation, oversight and coordinating with the Office of Management and Budget and HCFA; development and data collection for the internal program evaluation; coordinating with HHS/OIG and the Department of the Treasury on the tracking of collections; coordinating with the GAO on required audits; and preparation and coordination of the annual report.
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APPENDIX
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Federal Bureau of Investigation
Mandatory Funding
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"There are hereby appropriated from the general fund of the United States Treasury and hereby appropriated to the Account for transfer to the Federal Bureau of Investigation to carry out the purposes described in subparagraph (C), to be available without further appropriation-- (I) for fiscal year 1999, $66,000,000".
Successful health care fraud enforcement cannot be achieved by any one agency alone. Investigations must be a cooperative effort if they are to be successful in combating the increasing problems of health care fraud. The FBI is involved in this cooperative effort. The FBI works many health care fraud cases on a joint basis with other federal agencies, including the HHS/OIG. These two federal agencies collaborate through attendance at health care fraud working groups, attend each other's training conferences, and have a liaison program between the two organizations. In addition, the Health Care Fraud task forces represent the coordinated efforts of the FBI, state and local law enforcement, investigative agencies such as Inspectors General, and private industry. The FBI and HHS/OIG share a common commitment to ending fragmented health care fraud enforcement.
In addition to providing new statutory tools to combat health care fraud, HIPAA specified mandatory funding to the FBI for health care fraud enforcement. In 1999, $66 million was provided by HIPAA for 651 positions (380 agents). The FBI used this funding, in large part, to fund an additional 40 agents and 42 support positions for health care fraud and to create several new dedicated Health Care Fraud Squads. This increase in personnel resources along with the direct FBI funding increased the number of FBI agents addressing health care fraud in the fourth quarter of 1999 to approximately 493 agents as compared to 112 in 1992.
As the FBI has increased the number of agents assigned to health care fraud investigations, the caseload has increased dramatically from 591 cases in 1992, to 3,027 cases through 1999. The FBI caseload is divided between those health plans receiving government funds and those that are privately funded. Criminal health care fraud convictions resulting from FBI investigations have risen from 116 in 1992, to 548 in 1999.
Health care fraud investigations are among those investigations having the highest priority within the FBI. The investigations are generally complex and require specific knowledge, skills and abilities to successfully investigate. Often sophisticated, innovative and creative ideas are needed to combat and eventually prosecute the perpetrators of these crimes. As the complexity and long-term nature of health care fraud investigations increase, the FBI anticipates that the number of FBI investigations and convictions will begin to level off.
As part of the FBI's national strategy to address health care fraud, the Bureau utilizes proactive investigative techniques, to include the use of undercover operations. A major FBI led undercover investigation culminated in 1999 with the last of over 40 subjects either entering guilty pleas or being found guilty at trial as a result of their participation in a fraud scheme that robbed the Medicare Program of millions of dollars. During this investigation the FBI actually purchased a bogus home health agency and through various business dealings with the subjects uncovered a system rampant with fraud from top to bottom.
A considerable portion of the increased funding was utilized to support major health care fraud investigations. In addition, operational support has been provided for FBI national initiatives focusing on pharmaceutical diversion, chiropractic fraud, and medical clinics. Further, the Health Care Fraud Unit, FBI Headquarters, supported individual field offices with equipment and supplies to assist in numerous individual investigations.
The funding made available through HIPAA also made possible two Basic Health Care Fraud training conferences which provided the expertise necessary for an additional 200 FBI agents to address the health care fraud crime problem. A total of 82 additional FBI agents received specialized training on fraud schemes plaguing a particular provider service that has been historically vulnerable to fraud. The HIPAA funding also allowed FBI headquarters staff to conduct specialized training sessions in a number of FBI field offices and to make numerous presentations to various industry groups.
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GLOSSARY
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The Account - The Health Care Fraud and Abuse Control Account
ACE - Affirmative Civil Enforcement
ALS - Automated Litigation Support
AoA - Administration on Aging
AUSA - Assistant United States Attorney
CMHC - Community Mental Health Centers
CMP - Civil Monetary Penalty
DOJ - The Department of Justice
EMTALA - Emergency Medical Treatment and Active Labor Act
ESRD - End-stage Renal Disease
FBI - Federal Bureau of Investigation
GAO - General Accounting Office
HCFA - Health Care Financing Administration
HHS - The Department of Health and Human Services
HIPAA, or the Act - The Health Insurance Portability and Accountability Act of 1996, P.L. 104-191
HIPDB - Healthcare Integrity and Protection Data Bank
HRSA - Health Resources and Services Administration
MSP - Medicare Secondary Payer
NIH - National Institutes of Health
OGC - The Department of Health and Human Services, Office of the General Counsel
OIG - The Department of Health and Human Services, Office of Inspector General
OLE - Office of Legal Education, located within the Executive Office for the United States Attorneys
PPS - Prospective Payment System
The Program - The Health Care Fraud and Abuse Control Program
Secretary - The Secretary of the Department of Health and Human Services
USAO - United States Attorney's Office
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Hereafter, referred to as the Secretary.
Also known as the Hospital Insurance (HI) Trust Fund. All further references to the Medicare Trust Fund refer to the HI Trust Fund.
In 1999, DOJ collected, or continued to hold in suspense, an additional $96,480,614 in health care fraud cases and matters that was not disbursed to the affected agencies and/or the Account in 1999 due to: (i) on-going litigation regarding relator shares in qui tam cases that will affect the amount retained by the federal government; and (ii) receipt of funds late in the year that were then processed in FY 2000.
The original certification was for $137,540,000. However, during the fiscal year a $307,000 recission was taken against the account, leaving $137,223,000 available.
And
The Department of Justice
Health Care Fraud and Abuse Control Program
Annual Report For FY 1999
January 2000
These resources supplement the direct appropriations of HHS and DOJ that are devoted, in part, to health care fraud enforcement. Separately, the FBI received an additional $66 million in funding which is discussed in the Appendix to this Report.
Accomplishments
Collections
During this year, the federal government won or negotiated more than $524 million 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 1999 collected $490 million in cases resulting from health care fraud and abuse, of which nearly $369 million was returned to the Medicare Trust Fund, and $4.7 million was recovered as the federal share of Medicaid restitution. It should be emphasized that some of the judgments, settlements, and administrative impositions in 1999 will result in collections in future years, just as some of the collections in 1999 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.
NO NAMES ARE MENTIONED in Many of these....hmmmmmm
A major provider of home health services and one of its subsidiaries entered into a global settlement totaling $61 million, including approximately $10 million in criminal fines, to resolve the corporation's criminal, civil, and administrative liability arising from Medicare fraud investigations in Georgia, Florida, and New York. In Georgia and Florida, the investigation examined a series of transactions in which the home health services corporation paid another large health care corporation for the right to provide Medicare-reimbursable management services to that corporation. These payments included large cash contributions to the other corporation, enabling it to purchase home health agencies of third parties. In consideration of these payments, and of an agreement by the defendant to sell its own home health agencies to the other corporation at a reduced price, the defendant received the right to manage the visits resulting from these transactions for a management fee which was fully reimbursed by Medicare. The effect of these transactions was to disguise non-reimbursable acquisition costs as management fees, which Medicare does not reimburse. As a result of this investigation, the subsidiary pled guilty to conspiracy, mail fraud, and violation of the Medicare anti-kickback statute in three districts. In New York, a separate investigation focused on allegations that the corporation submitted unallowable expenses on its Medicare cost reports, including personal expenses of executives, gifts and entertainment, and merger costs. In addition to paying $61 million, the corporation entered into a comprehensive corporate integrity agreement with the Government.
In Pennsylvania, a company providing end-stage renal disease (ESRD) services through a network of subsidiary corporations it had acquired, agreed to pay the Government $16.5 million to resolve allegations of false Medicare claims submitted by one of the subsidiaries. The claims arose from the sale of Medicare-reimbursable noninvasive diagnostic tests between 1992 and 1995. The subsidiary companies provided financial inducements to primary care physicians and to renal dialysis facilities in exchange for the referral of patients for diagnostic testing. As a result, a percentage of the tests performed by the subsidiaries were medically unnecessary. The final settlement resolved three different qui tam lawsuits which had been brought against the subsidiaries and/or the parent company.
A key component of the HCFAC effort to protect the integrity of the Medicare trust funds is the investigation of allegations of fraud by contractors enlisted by HCFA to process and pay Medicare claims. Stemming from a qui tam complaint filed in New Mexico, two former Medicare contractors agreed to settle their False Claims Act, criminal, and administrative liability for misrepresenting their performance. In order to resolve allegations of manipulating certain computer files to obtain a better score on the Contractor Performance Evaluation Program, one of the corporations agreed to pay the Government $6.84 million. On or after May 1, 2001, the United States may, at its sole discretion, demand that the other corporation pay the Government $5.86 million, after considering the corporation's financial condition, for attempting to conceal evidence of poor performance on their audits of Medicare Part A providers. In addition, both corporations will forgo contract claims for overbudget and termination costs totaling $3.1 million. Both corporations also entered into a 5-year corporate integrity agreement with the OIG. In addition, as part of the global settlement, the former contractors pled guilty to obstruction of a Federal audit and conspiracy to obstruct a Federal audit. A third corporation, co-owned by the contractors to provide them with management services, pled guilty to conspiring to obstruct a Federal audit as well. The United States should ultimately receive $15.8 million in criminal fines, the civil settlement, and the contract claims.
On October 15, 1998, the United States reached an agreement with a major metropolitan fire department and a local hospital corporation to resolve allegations in a qui tam complaint that the defendants routinely had submitted false claims to the United States to obtain reimbursement for medically unnecessary ambulance transportation. The city agreed to pay the Government $9.5 million. Among other things, the complaint alleged that the fire department misrepresented the diagnosis of patients in order to receive reimbursement from Medicare for ambulance transportation. As part of the settlement, the company entered into a comprehensive institutional compliance agreement which will be monitored and enforced by the HHS/OIG for the next 5 years.
These and other settlements reflect the culmination of investigations that have been ongoing for several years. Though settled in 1999, the fines and restitution generated by some of these cases will not be credited to the Medicare Trust Funds until 2000.
Collaboration
Effective health care fraud and abuse control requires close collaboration and regular exchanges of information among federal, state and local law enforcement entities. Shown here are a few of the many instances of collaborative effort between DOJ, HHS, and many other organizations involved in combating health care fraud.
National Health Care Fraud Task Force. In 1999, the Administration launched a new National Health Care Fraud Task Force, chaired by the Deputy Attorney General, in which HHS/OIG, HCFA, DOJ and State and local prosecutors will work together in formulating strategies to combat health care fraud and abuse and safeguard the well-being of Medicare and Medicaid beneficiaries. While the task force will focus on a wide range of health care fraud and abuse policy issues, particular attention will be devoted to fighting nursing home fraud and abuse and excluding dishonest and abusive providers from participation in Medicare, Medicaid and other Government-funded health care programs.
Nursing Homes. The destructive impact of fraudulent billing is not measured in dollars only. During 1999, the Program continued to pursue investigations, prosecutions, audits and evaluations that directly affect not only financial losses, but also the quality of care provided to Medicare, Medicaid and other beneficiaries of government funded health care programs. Quality of care in nursing homes has been identified as a priority for both DOJ and HHS; and in October 1998, DOJ launched a major new initiative to crack down on fraud, abuse and neglect in nursing homes and other residential care facilities. The Nursing Home Initiative, coordinated by the Civil Division, focuses on enhanced enforcement; training; outreach to industry, resident advocates, medical professionals, academics and others; new legislation to address gaps in federal law; an analysis of the applicable state laws and improved inter-agency and governmental coordination, use of data, and services to victims.
DOJ began a series of regional training conferences in 1999 that brought together representatives of federal, state, and local law enforcement, regulatory, survey, oversight and advocacy entities. During the conferences, State Working Groups (SWG) were formed (or expanded where they existed), including representatives of the many entities that play a role in nursing home quality of care. These SWGs provide an on-going opportunity to promote quality of care by establishing a forum for key players to meet, share information and skills, identify problem facilities, best practices, and ways to address quality of care given the unique situations in the various states.
These and other investigative initiatives complement HCFA's ongoing Nursing Home Initiative, which has already resulted in significant improvements to nursing home oversight, enforcement and quality monitoring. Communication and coordination are facilitated by monthly Nursing Home Steering Committee meetings attended by the Civil Division, Criminal Division, Civil Rights Division, FBI, HHS/OIG, HCFA, HHS/OGC as well as in Senior Staff and Executive Level policy meetings during which nursing home fraud, abuse and neglect are among the health care issues addressed.
Examples of investigations of nursing homes for false claims relating to the quality of care provided to their residents that were brought to successful conclusion in 1999 include:
A survey by the state Department of Health of a Pennsylvania nursing home disclosed inadequate wound care, incontinence care and nutrition. After investigation, the nursing home entered a settlement agreement with the government, agreeing to pay $195,000, to implement specific quality of care protocols, and to appoint a monitor to oversee the quality of patient care.
In Kansas, a therapy service provider agreed to pay the Government $688,996 to settle allegations of impropriety in providing services to nursing home patients. It was alleged that the provider billed for therapy that was medically unnecessary and excessive, as well as billed for staff education inappropriately, and overbilled for applications of splints and positioning of patients. As part of the settlement, the provider agreed to adhere to a 3-year comprehensive corporate integrity agreement.
Beneficiary Outreach. On February 24, 1999, the HHS/OIG, DOJ, HCFA, and the Administration on Aging (AoA) joined with the American Association for Retired Persons (AARP) to launch an initiative against Medicare fraud, waste, and abuse. The educational campaign -- entitled "Who Pays? You Pay. Report Medicare Fraud" -- was held in 31 cities throughout the country, and was attended by approximately 10,000 Medicare beneficiaries. Outreach materials developed for the campaign include a brochure, entitled "What You Can Do To Stop Medicare Fraud" in English and Spanish, a drain-image poster entitled "Medicare Fraud is Money Down the Drain", and a 30-second public service announcement. The award-winning announcement was produced by AARP and is shown under the logos of AARP and HHS.
Since the campaign kick-off, the collaborative partnership between HHS/OIG, HCFA, AoA, DOJ, and AARP has continued. Monthly meetings are held to update partners on the activities of each respective partner and to plan for future collaborative activities. Since the event, the HHS/OIG Hotline 1-800-HHS-TIPS, has served as an educational and reporting resource to approximately 300,000 callers (up from 76,000 calls in 1998). The Hotline has also experienced a spike in calls from Puerto Rico and has established an active monitoring and evaluation system to ensure that concerns of the Hispanic community are addressed. To address this call increase, the Hotline has hired an additional Spanish-speaking representative and has increased the number of Spanish representatives at the contractor site in Chicago.
Data Sharing. In 1999, efforts continued to share information both general data about trends in health care fraud and emerging investigative and prosecutorial techniques -- and to communicate and coordinate with respect to specific investigations. A general data sharing process was instituted between the FBI and the HHS/OIG to ensure that complete, accurate and current information on Federal health care fraud investigations is maintained and readily accessible by both agencies.
Preventing Health Care Fraud
The Program also continues to focus on prevention of health care fraud and abuse through inclusion of rigorous corporate integrity provisions in settlements with alleged offenders, industry-specific program compliance guidance, formal advisory opinions, special fraud alerts, beneficiary outreach, and exclusions from program participation. These activities, coupled with the overall sentinel effect of our heightened enforcement efforts have netted real results. Perhaps the most concrete evidence of the success of anti-fraud and oversight efforts is the significant reduction in the error rates in Medicare fee-for-service payments an overall 45 percent reduction in improper payments in just 2 years. As part of the HHS/OIG audit of HHS's 1996 financial statements, HHS/OIG developed a statistically valid estimate of improper payments amounting to $23.2 billion, or about 14 percent of the total payments made in the fiscal year. Just 2 years later, improper payments dropped by $10.6 billion to $12.6 billion, or about 7 percent of the fiscal year total.
According to Treasury Department and Congressional Budget Office statistics, Medicare spending rose at an average annual rate of about 9 percent from 1994 to 1997, then dropped to 1.5 percent in 1998 -- the smallest increase in the history of the program. 1998 also marked the first year that Medicare spending grew more slowly than the Federal budget as a whole, which increased by 3 percent. This downward trend is continuing; during 1999, Medicare spending actually declined 0.7 percent. Even home health care expenditures, which experienced explosive growth during most of the 1990's, declined. The Medicare Trustees recently announced that the solvency of the Trust Fund had been extended 7 years to 2015, after also being extended 7 years the prior year.
A more detailed description of these and other accomplishments of the major federal participants in the coordinated effort established under HIPAA follows. While information in this report is presented in the context of a single agency, most of these accomplishments reflect the combined efforts of HHS, DOJ and other partners in the anti-fraud efforts. The continuing accomplishments of the DOJ and HHS and our partners in the coordinated anti-fraud effort, as well as prevention efforts, demonstrate that the increased funds to battle health care fraud and abuse continue to be sound investments, as well as good public policy.
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FUNDING FOR DEPARTMENT OF HEALTH AND
HUMAN SERVICES
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Office of Inspector General
Certain of the funds appropriated under HIPAA are, by statute, set aside for Medicare and Medicaid activities of the HHS/OIG. During the third year of the Program, the Act provides that between $90 and $100 million be devoted to these purposes. The Secretary and the Attorney General jointly allotted $98.2 million to the HHS/OIG in 1999, an increase of $12 million over 1998.
With these increased resources, HHS/OIG conducted or participated in 942 prosecutions or settlements in 1999. A total of 2,976 individuals and entities were also excluded, many as a result of criminal convictions for program-related crimes (550), criminal convictions for patient abuse or neglect (323), and others were excluded based on licensure revocations (1,416).
In addition to the HHS/OIG's role in bringing about the judgments and settlements described in the Overview of Accomplishments, the Department of Health and Human Services acted on HHS/OIG recommendations and disallowed $113.5 million in improperly paid health care funds in 1999. HHS/OIG continues to work with HCFA to develop and implement recommendations to correct systemic vulnerabilities detected during HHS/OIG evaluations and audits. These corrective actions often result in health care funds not expended (that is, funds put to better use as a result of implemented HHS/OIG initiatives). In 1999, such funds not expended on improper or unnecessary care amounted to approximately $11.8 billion -- about $10.8 billion in Medicare savings, and nearly $1 billion in savings to the Medicaid program.
HHS/OIG moved closer to its goal of extending its investigative and audit staffs to cover all geographical areas in the country, particularly those that were previously underserved. During 1999, overall HHS/OIG staff levels increased from 1,258 to 1,363 by the end of the year, and HHS/OIG opened 2 new investigative offices. The HHS/OIG also significantly increased its staffing resources devoted to ensuring health care providers' compliance with Federal health care program rules.
Fraud and Abuse Prevention
The increased resources made available under HIPAA have enabled the HHS/OIG to expand activities designed not just to uncover existing fraud and abuse, but to prevent it. Vital prevention initiatives, such as those listed below, inform and assist the health care industry, and patients. Equally important, these prevention activities reduce the government's enforcement costs and program losses.
Compliance Guidance. A key element of HHS/OIG's prevention efforts has been the development of compliance program guidance to encourage and assist the private health care industry to fight fraud and abuse. The guidance, developed in conjunction with the provider community, identifies steps that health providers may voluntarily take to improve adherence to Medicare and Medicaid rules. In 1999, the OIG developed and released final compliance program guidance for third party medical billing companies, hospices and the durable medical equipment, prosthetics, orthotics, and suppliers industry.
Corporate Integrity Agreements. Many health care providers that enter agreements with the government in settlement of potential liability for violations of the False Claims Act also agree to adhere to a separate "corporate integrity agreement." Under this agreement, the provider commits to establishing a compliance program or undertaking other specified steps to ensure its future compliance with Medicare and Medicaid rules. The duration of most corporate integrity agreements is 5 years, during which time the provider must submit periodic reports to HHS/OIG. These agreements require a substantial effort by the provider to ensure that the organization is operating in accordance with Federal health care programs rules and regulations and the parameters established by the corporate integrity agreement. Breach of the agreement may result in a variety of sanctions, including exclusion of the provider. At the close of 1999, HHS/OIG was monitoring more than 425 corporate integrity agreements.
Industry Guidance. The centerpiece of the HIPAA guidance initiatives is an advisory opinion process through which parties can obtain binding legal guidance as to whether their existing or proposed health care business transactions run afoul of the Federal anti-kickback statute, the civil money penalties laws, or the exclusion provisions. The advisory opinion process has become an integral part of the Inspector General's ongoing commitment to preventing health care fraud. During 1999, the HHS/OIG accepted 39 requests for advisory opinions and issued 15 opinions. Many requests are still being processed; others were withdrawn or rejected as outside the scope of the advisory opinion process.
The advisory opinion process also serves to enhance the HHS/OIG's understanding of new and emerging health care business arrangements and informed the development of new safe harbor regulations, fraud alerts, and special advisory bulletins. Topics so addressed in 1999 include hospital payments to physicians to reduce or limit services to beneficiaries (commonly known as "gainsharing" arrangements); the effect of exclusion from Federal health care programs on excluded providers and those who employ or contract with them; physician liability for certifications of medical necessity in the provision of medical equipment and home health services; and the effects of exclusion from Federal health care programs on current and prospective employees.
The HHS/OIG made significant strides toward resolving pending safe harbor regulations. Formal clearance was begun for a proposed anti-kickback safe harbor for ambulance restocking arrangements between hospitals and ambulance providers who transport patients to hospital emergency rooms and a proposed safe harbor under the civil money penalty law for inducements to beneficiaries to protect certain payments by ESRD facilities of insurance premiums for their patients. Two final anti-kickback statute safe harbor rules were finalized for issuance in early 2000 -- one promulgating eight new safe harbors and a series of clarifications to existing safe harbors (originally proposed in 1993 and 1994), and another addressing the statutory exception for shared risk arrangements.
In addition, HHS/OIG has made frequent presentations to industry groups on areas of suspected fraud and abuse and measures they can take to avoid trouble.
Medicare Error Rate: The HHS/OIG's annual audit of the Department's financial statements included a statistically valid review of the error rate in Medicare fee-for-service payments. This year's estimate is $7.7 billion less than last year's estimate of $20.3 billion and $10.6 billion less than the previous year's estimate of $23.2 billion--a 45 percent drop. While there is no empirical evidence supporting a specific causal relationship between the error rate decline and particular corrective actions, we believe that among the important causes for the reduced error rate are the fraud and abuse prevention and detection initiatives, the Medicare Integrity Program administered by HCFA and the cooperative efforts of major provider groups.
Recommendations for Systemic Improvements: Frequently, investigations (and resulting civil settlements or criminal prosecutions), audits and evaluations reveal vulnerabilities or incentives for fraud in agency programs or administrative processes. As required by the Inspector General Act, the HHS/OIG makes recommendations to correct these vulnerabilities, and thereby promote economy and efficiency in HHS programs and operations. Relying on the independent factual information generated by HHS/OIG, agency managers fashion legislative proposals and other corrective actions that, when enacted or implemented, close loopholes and avoid ineffective expenditures or improper conduct. The net savings from these joint efforts toward program improvements can be substantial.
An example of an HHS/OIG study that provided evidence and ideas supporting proposals for significant cost savings issued during 1999 was the series of reports on the early effects of the prospective payment system (PPS) on access to skilled nursing facilities and the appropriateness of Medicare payments for physical and occupational therapy in skilled nursing facilities. The studies found that there are no serious problems in placing Medicare beneficiaries in nursing homes; however, nursing homes are changing their admission practices in response to the new PPS. One-fifth of the hospital discharge planners say that it has become more difficult to place patients who require extensive services while it has become easier to place patients who need rehabilitation services. Most nursing home patients were appropriate candidates for and benefitted from the physical and occupational therapy they received. However, 13 percent of the therapy was improperly billed to Medicare. In terms of dollar amounts, Medicare reimbursed skilled nursing facilities almost $1 billion for improperly billed physical and occupational therapy and almost $331 million for undocumented physical and occupational therapy.
The reports recommended that HCFA instruct Medicare fiscal intermediaries to provide more training to facility and therapy staff on Medicare coverage criteria and guidelines, local medical review policies, and monitoring procedures for therapy and adequately fund Medicare contractors to perform medical reviews of therapy.
Focus on Collaboration
Federal-State Audit Partnership. In 1994, the HHS/OIG initiated a partnership between federal and state auditors to enhance and provide broader audit coverage of the Medicaid program. Collaboration among HHS/OIG, State auditors, inspectors general, Medicaid agencies and HCFA maximizes scarce resources at both the Federal and State levels. The focus of the partnership effort is not on the traditional identification and recovery of unallowable Medicaid costs; rather the program focuses on identifying program improvements and reducing the cost of providing necessary services to Medicaid recipients. HHS/OIG auditors provide computer support, audit programs and guides, training, information-sharing and other specialized assistance to State auditors, as well as direct audit support.
To date, active partnerships flourish in 22 states. This partnership effort has been a resounding success. State auditors have shown a great interest in creating partnerships and we continue to get inquiries on other potential joint projects. By the end of 1999, these State partnerships generated approximately $145 million in Federal and State savings since the partnership began. Many of these recommendations related to Medicaid prescription drugs.
Roundtable on Compliance. In conjunction with the health care industry, the HHS/OIG conducted a joint roundtable on health care compliance to gain new insights into the challenges of creating effective compliance programs. The event reflects HHS/OIG's commitment to engage in ongoing discussions with the health care compliance industry about practices and policies related to compliance programs, including the impact of compliance recommendations advanced by HHS/OIG. More than 125 compliance officers, government representatives and others attended the event.
Self-Disclosure Protocol. In October 1998, the HHS/OIG implemented a self-disclosure program, to assist providers and suppliers in investigating and reporting potential violations of Federal health care laws. The program offers providers an opportunity to police themselves, correct underlying problems and work cooperatively to resolve these matters. Since issuance of the protocol, 40 health care providers have submitted self-disclosures to the HHS/OIG. Two of these were successfully resolved through the return of overpayments to the Federal Government; the others are under investigation.
Data Sharing. With the increased focus on investigations that are national in scope, close collaboration among investigative and prosecutive agencies has become critical. To this end, the HHS/OIG Office of Investigations and the FBI have initiated an efficient information sharing system. Copies of all healthcare fraud referrals and allegations received by HHS/OIG are sent to the FBI Health Care Fraud Unit at FBI Headquarters. The FBI then serves as an informational contact and dissemination point for DOJ and its prosecutors nationwide. In turn, the FBI provides information on their health care investigative matters to HHS/OIG. All such cases, wherever generated, are entered into the HHS/OIG Case Information Management System, which serves as a comprehensive data base for Federal health care investigations. This prompt information sharing system fosters efficient investigative teamwork, supports criminal prosecutions and deters health care fraud.
Beneficiary Outreach. The HHS/OIG's outreach efforts are not limited to industry; equally important is enlisting the beneficiary population in the fight against fraud and abuse. The HHS/OIG continues to distribute hundreds of its Medicare fraud educational materials to beneficiaries through AoA grantees, the AoA network, AARP regional offices, and to public libraries in each State. HHS/OIG has developed a working relationship with national Asian American and Hispanic organizations to seek advice on translating and printing HHS/OIG Medicare fraud materials into Chinese, and to distribute these materials and those already printed in Spanish, respectively, to Chinese Americans and a wider Spanish-speaking population.
Focus on Quality of Care
Some of the HHS/OIG's most important investigations, audits and evaluations focused on the quality of care furnished to program beneficiaries. These include the investigations described in the Overview section of this report, as well as the following activities:
Patient Anti-Dumping Enforcement. Both HCFA and the HHS/OIG continue to vigorously pursue potential violations under the patient anti-dumping statute. Federal law requires that an emergency medical screening examination and stabilizing treatment be provided by the emergency department of a Medicare participating hospital. In 1999, HHS/OIG entered 61 settlement agreements with hospitals and physicians and collected civil monetary penalties of $1.7 million. This is an increase from the previous high of 53 settlements in 1998, and reflects the commitment of both HCFA and HHS/OIG to ensure patient access to appropriate emergency medical services.
Quality of Care in Nursing Homes. The HHS/OIG released a series of inspection reports concluding that serious problems with quality of care continue to exist in nursing homes. This is demonstrated by an increase in survey and certification "quality of care" deficiencies as well as an increase in ombudsman complaints, especially about resident care. Other findings include inadequate nursing home staffing levels; weaknesses in the survey system; inadequate resources in the ombudsman program; and inconsistent and unreliable State systems to safeguard nursing home residents. The problems described in this inspection will require continuing attention. An effective strategy would include actions to enhance the survey and certification process; strengthen the ombudsman program with increased resources; improve nursing home staffing levels; and improve coordination between State survey agencies and ombudsmen. Additionally, further evaluation and performance measurement of the Omnibus Budget Reconciliation Act 1987 and the conditions in nursing homes would make an important contribution to efforts to advance nursing home care.
Hospital Quality Oversight. A two-year study by the HHS/OIG found major deficiencies in the external oversight system intended to make sure the nation's hospitals are safe and recommended how those agencies responsible for oversight can provide leadership in improving quality and accountability. The study received significant national media attention when it was released. Four evaluation reports assessed the key roles in hospital quality oversight played by the Joint Commission for Accreditation of Healthcare Organizations, the State survey and certification agencies, and HCFA, which oversees Medicare. Overall, the reports concluded that while the system of oversight that HCFA relies upon has some strengths, it also has deficiencies that warrant serious attention. The HCFA does little at present to hold either the Joint Commission or the State survey agencies accountable for their performance.
The reports called for HCFA to exert leadership in addressing the shortcomings. The HHS/OIG urged HCFA to steer the external review process so that it represented a balance between the educationally oriented approaches of the Joint Commission and the enforcement-oriented approaches of the State agencies. In recommendations, the HHS/OIG presented a number of steps HCFA should take to hold both the Joint Commission and the States more fully accountable for their performance in reviewing hospitals. In addition, the HHS/OIG called for HCFA to determine the appropriate minimum cycle for conducting certification surveys of non-accredited hospitals. Since the publication of the final report, the Joint Commission has made several changes to its review and accreditation process, based on HHS/OIG recommendations, that have made the process more meaningful and more accountable.
Mental Health Services. A settlement agreement was reached with a university to resolve its civil liability for the submission of false claims to Medicare, Medicaid and other Federal health care programs from 1992 through 1997. At issue were claims for mental health services rendered at its clinics by non-paid, unsupervised students. The university submitted the claims and was reimbursed as if qualified mental health providers (psychologists or psychiatrists) had provided the services. The university agreed to enter a 5-year comprehensive corporate integrity agreement with the HHS/OIG. It also agreed to pay the government a total of over $4 million. Monetary payment will be made to the federal government for both the Medicare damages and the federal portion of Medicaid damages. However, the State agreed that the university could satisfy its liability for the state share of the Medicaid damages through the provision of services rather than through a cash payment.
The HHS/OIG also completed a five-State study of partial hospitalization program services provided in community mental health centers. This program is an intensive outpatient psychiatric program which provides services to acutely ill individuals in order to prevent their hospitalization. Medical reviewers found that over 90 percent of the Medicare payments ($229 million of $252 million) were for unallowable or highly questionable services. Cost reports at selected centers contained significant unallowable and nonreimbursable items. Further, HCFA's enrollment initiative in nine States found that a high percentage of the nearly 700 centers covered did not meet certification requirements to qualify for Medicare payments. To address these problems, HCFA developed a 10-point plan under which approximately 150 centers have already been terminated (this includes voluntary terminations and cessation of business). Instructions were issued to fiscal intermediaries on intensified medical review and provider education. HCFA is also implementing a prospective payment system for partial hospitalization program services, and has started the process of deactivating billing numbers for centers that have not billed Medicare within 6 months.
Health Resources and Services Administration
The Act mandates that the HHS/OIG and DOJ establish a national health care fraud and abuse data collection program for the reporting and disclosure of certain final adverse actions (excluding settlements in which no findings of liability have been made) taken against health care providers, suppliers, and practitioners. The Health Resources and Services Administration (HRSA) has been authorized to design, implement and operate this program, currently named the Healthcare Integrity and Protection Data Bank (HIPDB). In 1999, HRSA received $4.4million from the Account to continue development of the HIPDB as an all electronic system that will collect, store and disseminate reports to the law enforcement community and health plans upon request.
The Act requires Secretarial rulemaking for certain features of the HIPDB, including access, information dissemination, disclosures to the subjects of reported information and report corrections, and any other optional reporting elements that the Secretary chooses to request. Decisions were made jointly by HHS and DOJ to continue the development of the data base in 1999 in anticipation of the publication of the Final Rule. Final regulations were published in the Federal Register in October1999 and plans are underway to open the data bank in early 2000.
Development of the HIPDB has included activities related to data base design specifications, reviews of required hardware and software, modification of physical facilities, and the procurement and installation of equipment. The forms and methods of information to be collected to populate the data base has also been part of the HIPDB development process. Most of the information reported to the HIPDB will come from Federal agencies and State licensing authorities. Data acquisition activities have included working with: DOJ, HCFA, HHS/OIG, the Departments of Defense and Veterans Affairs, and various health care related and health professional organizations, including those representing Nursing and Chiropractic Licensing Boards.
Operations will be supported by charging a fee for searching the data base. When the HIPDB becomes operational, the query fee payment will be collected via an interface with Mellon Bank. To date, more than 2,300 entities have registered to query the HIPDB in anticipation of its opening for operation.
Office of the General Counsel
The Office of the General Counsel's (OGC) headquarters divisions (the Health Care Financing Division and the Business and Administrative Law Division) as well as its 10 regional offices provide legal support consistent with the statutory authority of the HCFAC Program. These OGC components, in partnership with other HHS components --- including HCFA, HHS/OIG and DOJ, work jointly to combat health care fraud and abuse.
OGC was allocated $2.3 million in HCFAC funding for 1999. These funds were used primarily for litigation activity, both administrative and judicial. OGC continues to experience an increase in the number of new Program Integrity Litigation items: an approximate increase in new cases for fiscal years 1998 and 1999 of 17 and 18 percent, respectively. Pending cases for those fiscal years increased 34 and 14 percent respectively. It is our anticipated new litigation and pending litigation that drives OGC's activities. The bulk of the administrative (non-court) litigation involved: (1) Civil Money Penalties (CMPs) and other sanctions imposed on nursing facilities; (2) revocations, terminations or denials of provider status (especially nursing facilities, home health agencies, as well as Community Mental Health Centers (CMHCs) under the Operation Restore Trust CMHC Initiative); (3) Medicare Secondary Payor (MSP) cases; and, (4) suspensions of Medicare payments to providers and suppliers. The bulk of the court litigation involved MSPs or bankruptcies. The dollars reflected here are not included in the Monetary Results section of this report.
Accomplishments
Within this year's framework of prominent HCFAC themes such as civil and criminal enforcement actions; exclusions from federally sponsored programs; initiatives for preventing health care fraud; administrative penalties for Emergency Medical Treatment and Active Labor Act (EMTALA) violations; and collaborative and outreach efforts, OGC had the following HCFAC accomplishments:
OGC's HCFA Division worked with OIG to draft a Special Advisory Bulletin to clarify the applicability of the EMTALA to managed care organizations. That Division also assisted HCFA in its efforts to draft a regulation to clarify the scope of EMTALA so that hospitals will know when their obligations under EMTALA begin and end and whether the obligations under EMTALA apply to hospital inpatients. Other EMTALA efforts included a presentation by Region X staff to the Washington State Bar Association on EMTALA requirements.
Region V staff assisted in successfully defending against federal district court and bankruptcy court suits seeking to enjoin recoupment of overpayments from a home health agency in Indiana ($5 million) and from a nursing facility ($1 million).
Region VI's collaborative and outreach efforts are plentiful and significant: for example, in ongoing collaborative efforts with HCFA, the Texas Department of Human Services and the Texas Attorney General's Office, an action plan to preserve patient health and safety when nursing home chains become insolvent or file for bankruptcy was coordinated. These efforts arose out of the bankruptcy of a Texas nursing home chain where issues of fraud, suspension of payments, patient safety and bankruptcy were all present. As a result, this model will be used in similar OGC efforts in the future.
Region VI also was successful in protecting HCFA's interests when a nursing home chain in Texas (90 facilities) filed for bankruptcy. Through the efforts of Region VI's staff, HCFA was able to recoup a $3 million cost report overpayment over a 12-month period. Additionally, they were able to arrange for continued repayment of a $885.9 thousand settlement of 29 civil monetary penalty cases.
OGC's Region III and Region X offices collaborated with efforts to sustain denial of $4.8 million in payments to a Medicare supplier, headquartered in Pennsylvania, of orthotics and lymphedema pumps. The supplier filed for bankruptcy protection which most likely would have resulted in HCFA (as an unsecured creditor) receiving pennies on the dollars for its claims. However, OGC was able to convince the unsecured creditors' committee that the debtor's claims were fraudulent, and that the appeal of the denial of claims would be fruitless. Medicare was able to retain the $4.8 million as a result of these offices' efforts.
Administration on Aging
In 1999, the Administration on Aging (AoA) was allocated $1.4 million in HCFAC funds to train and educate both paid and volunteer aging network staff to recognize and report potential practices and patterns of fraud, waste, and abuse in the Medicare and Medicaid programs. These activities were focused on training nursing home ombudsmen, health insurance counselors, state and area agency on aging staff, senior center directors, social workers, eldercare information specialists, and other professionals in 18 states how to identify and report potentially fraudulent practices.
This funding also helped to support the technical assistance and nationwide infrastructure for educating beneficiaries to be the "eyes and ears" of the Medicare system. The AoA and its network agencies engaged in coordinated outreach and educational activities designed to assist older persons and their families to recognize and report fraudulent and abusive situations and to prevent or minimize victimization of such behavior.
Accomplishments
The 18 grantees trained more than 10,000 staff and volunteers to be Medicare resources and educators in their communities.
With the collaboration and assistance of HCFA, the HHS/OIG, health care providers, and other professionals from around the country, the projects developed more than 150 community-based training manuals, educational brochures, and public information documents designed to recruit volunteers, involve providers in the campaign, and inform beneficiaries of what they should do if they have questions regarding their Explanation of Medicare Benefits Statement or Medicare Summary Notice. Educational materials were developed in a variety of languages, and outreach initiatives were targeted to high-risk populations. The AoA entered into a contract to develop culturally sensitive videos and brochures targeted to the African American, Hispanic, and Chinese communities.
The AoA grantees convened more than 1,500 community education events which educated and informed over 200,000 individuals through public forums and education and training sessions to identify and report health care waste, fraud, and abuse. Special initiatives were undertaken to include local health care providers in these activities. Two examples of these efforts include the assistance of physicians in developing a personal health care journal that beneficiaries can use to record the services they receive during a doctor or hospital visit, and a collaboration with hospitals in developing and distributing an informational brochure on waste, fraud, and abuse that individuals receive when they are discharged from the hospital.
With the assistance of the HHS/OIG and HCFA, the grantees developed and tested telephone screening systems and tracking mechanisms designed to trace the outcomes of inquiries made by beneficiaries. Of the more than 9,800 calls concerning potential cases of health care fraud, waste, and abuse which were screened by the projects, approximately half were referred to Medicare carriers, intermediaries, or regional durable medical equipment carriers for follow-up, thirty percent were referred to providers, and one-fifth were referred to the HHS/OIG Hotline, State Medicaid Fraud Control Units, State Attorney General's Offices, or other fraud and abuse agencies.
HCFAC funding also provided vital technical assistance to support AoA's Senior Medicare Patrol Projects which have been highly successful in recruiting and training retired professionals to report waste, fraud, and abuse.
Departmental Appeals Board
The Secretary delegated to the Departmental Appeals Board (DAB) responsibility for conducting hearings and reviewing appeals in administrative sanction cases initiated by the HHS/OIG. The HHS/OIG administrative sanction cases may result in exclusion from participation in Medicare and State health care programs imposed under sections 1128 and 1156 of the Social Security Act, and imposition of CMP pursuant to section 1128A of the Act. Another substantial category of HHS/OIG administrative sanction cases involve violation of the Patient Anti-Dumping Statute, section 1867 of the Social Security Act. With enhanced HHS/OIG resources resulting from HIPAA, the HHS/OIG has processed an ever-increasing number of administrative sanction cases.
The DAB Civil Remedies Division received $138,000 in 1999 in HCFAC funds. These funds supported the work involved in issuing 33 decisions, dismissing 73 cases, and closing 106 cases in 1999. All of these cases were generated by the HHS/OIG.
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FUNDING FOR DEPARTMENT OF JUSTICE
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United States Attorneys
Health care fraud involves a variety of schemes that defraud public and private insurers and providers nationwide. In addition to Medicare and Medicaid, a number of federally funded health benefit programs have been the targets of these schemes. The fraudulent activity may include double billing schemes, kickbacks, billing for unnecessary or unperformed tests, or may be related to the quality of care provided to patients. In addition to monetary losses, in some instances these improper activities endanger patient safety. United States Attorneys' offices (USAOs) are responsible for civilly and criminally prosecuting health care professionals, providers, and other specialized business entities who engage in health care fraud and abuse.
USAOs continue to strengthen cooperative efforts with federal, state and local law enforcement agencies involved in the prevention, evaluation, detection, and investigation of health care fraud and abuse. In addition to the FBI, HHS/OIG and HCFA, USAOs offices work with State Medicaid Fraud Control Units, Offices of Inspectors General for a number of federal agencies, the Drug Enforcement Administration, and the Department of Defense Criminal Investigative Service and TRICARE Support Office. Each USAO has appointed both a civil and criminal health care fraud coordinator to assist in coordination and facilitate communication between federal, state and local law enforcement groups.
Over the past year, USAOs have diligently worked to enhance provider understanding of the Department's enforcement responsibilities and efforts. A number of outreach presentations have been made to health care professionals, provider organizations, and beneficiary groups around the country in this regard.
Prior to the enactment of HIPAA, USAOs dedicated substantial resources to combating health care fraud and abuse. HIPAA allocations have supplemented these efforts.
Training
The Executive Office for the United States Attorneys' Office of Legal Education (OLE) is tasked with the responsibility for providing health care fraud training for USAO and DOJ attorneys, investigators, and auditors. During 1999, OLE conducted a number of courses and presentations on health care fraud, including:
Affirmative Enforcement for Investigators (including a health care fraud training component)
Civil Health Care Fraud for Attorneys
Criminal Health Care Fraud for Attorneys
Basic Health Care Fraud for Attorneys - Criminal and Civil
Basic Affirmative Civil Enforcement for Attorneys (includes a health care fraud component)
While the primary participants in OLE sponsored courses were DOJ employees, agency counsel and investigative personnel were also invited to participate as presenters and students. In addition to OLE sponsored training a number of USAO attorneys, auditors and investigators participated in multi-agency health care fraud training courses over the last year.
Accomplishments - Criminal Prosecutions
The primary objective of criminal prosecution efforts is to ensure the integrity of our nation's health care programs and to punish and deter those who, through their improper activities, adversely affect the health care system and the taxpayers.
Each time a criminal case is referred to a USAO from the FBI, HHS/OIG, or other law enforcement agency, it is opened as a matter pending in the district. A referral remains a matter until an indictment or information is filed or the case is declined for prosecution. In 1999, the USAOs had 1,994 criminal matters pending involving 3,158 defendants, a 6.9 percent increase in the number of criminal matters over 1998. During 1999, 371 cases were filed involving 506 defendants. This represents a 16.3 percent increase over cases filed in 1998. A total of 396 defendants were convicted for health care fraud-related crimes in 1999. Health care fraud convictions include both guilty pleas and guilty verdicts.
In one case, 20 individuals were convicted for their involvement in a massive and sophisticated scheme to defraud Medicare. The convictions arose from an almost five-year investigation (conducted by HHS/OIG, FBI, the Internal Revenue Service, and the Department of Labor) of a home health agency, which from 1991 to 1994 was the largest Medicare-certified home health agency in Miami. During that time, the home health agency was paid approximately $120 million by Medicare for reimbursement of services, including nursing and home health aide visits, which either had not been provided, were not necessary, or were provided to persons who were not eligible. In some cases, Medicare was billed for services provided to persons who were already deceased when the billed services were supposedly rendered. The two highest level home health agency administrators admitted to illegal hidden partnerships in literally hundreds of subcontractor groups and the conspirators' involvement in hundreds of thousands of dollars in illegal payoffs to everyone from "professional beneficiaries" to home health aids, nurses and doctors. The convicted defendants, in what eventually became two separate federal court cases, arising from two separate series of indictments, received sentences ranging from 18 months imprisonment to, in the case of the highest level administrator, 12 years imprisonment. A single defendant returned $1.1 million in fraudulently obtained assets.
Accomplishments - Civil Cases
Civil health care fraud efforts constitute a major focus of Affirmative Civil Enforcement (ACE) activities. The ACE Program helps ensure that federal laws are obeyed and that violators provide compensation to the government for losses and damages they cause. Civil health care fraud matters ordinarily involve the United States utilizing the False Claims Act, as well as common law fraud remedies, payment by mistake, unjust enrichment and conversion to recover damages from those who have submitted false or improper claims to the United States.
Each time a civil referral is made to a USAO it is opened as a matter pending in the district. Civil health care fraud matters are referred directly from federal or state investigative agencies, or result from filings by private persons known as "relators," who file suits on behalf of the Federal Government under the 1986 qui tam amendments to the False Claims Act. Relators may be entitled to share in the recoveries resulting from these lawsuits. At the end of 1999, the USAOs had 2,278 civil health care fraud matters pending. A matter becomes a case when the United States files a civil complaint, or intervenes in a qui tam action, in United States District Court. The vast majority of civil health care fraud cases and matters are settled without a complaint ever being filed. In 1999, 91 civil health care fraud cases were filed.
A multimillion dollar settlement was reached with one of the largest home health care companies in Texas, which agreed to pay the Government $10 million to resolve allegations involving its subsidiary, a provider of home health care and infusion therapy services. Allegedly, the subsidiary improperly charged Medicare for unallowable costs including salaries, travel, and legal fees. In addition, the subsidiary allegedly conspired with and caused skilled nursing facilities to overcharge Medicare for infusion therapy drugs, supplies, and nursing services. As part of the settlement, the subsidiary also entered into a comprehensive corporate integrity agreement with HHS/OIG.
Civil Division
Civil Division attorneys vigorously pursue civil remedies in health care fraud matters, working closely with the USAOs, the FBI, the Inspectors General of HHS and Defense, as well as other federal and state law enforcement agencies. Cases involve health care providers, carriers and fiscal intermediaries that defraud Medicare, Medicaid and other federal health care programs.
The Department's Nursing Home Initiative, launched in October 1998 to crack down on fraud, abuse and neglect in nursing homes and other residential care facilities, is coordinated by a Civil Division attorney, and focuses on eight key areas: (1) stepped up enforcement; (2) improved coordination among federal agencies and among federal, state and local law enforcement, regulatory agencies and resident advocates; (3) development and use of data systems to target facilities that provide inadequate care; (4) focused training, particularly training that brings together prosecutors, investigators, regulators, surveyors, advocates and others;(5) outreach efforts to industry to promote compliance and to patient advocates, medical professionals and academics; (6) new legislation to address gaps in federal law; (7) improved services to victims of fraud, abuse and neglect; and (8) analysis of state laws to identify effective or promising state abuse and neglect statutes and enforcement practices. This Initiative complements the efforts being undertaken at HCFA and HHS/OIG, communication and coordination are facilitated by monthly Steering Committee meetings attended by the Criminal Division, FBI, HHS/OIG, and HCFA.
The financial crisis in the nursing home industry has to date resulted in bankruptcy filings by two of the ten largest nursing home chains and several smaller chains. These bankruptcy cases, the largest ever involving health care providers, raise both financial and quality of care issues, and require significant on-going coordination between the Civil Division's Corporate Finance (bankruptcy experts) and Civil Fraud sections, the Criminal Division, HCFA, and HHS/OIG.
The Civil Division continues to chair the Managed Care Fraud Working Group, which meets quarterly and coordinates the managed care enforcement activities of DOJ, FBI, HHS/OIG, HCFA, TRICARE Management activity of the Department of Defense, Office of Personnel Management Office of Inspector General, The National Association of Attorneys General, the National Association of Medicaid Fraud Control Units, and the Internal Revenue Service.
Accomplishments
In 1999, 182 new health care fraud matters were initiated. In addition to pursuing more health care fraud allegations, the Civil Division is pursuing an increasing number of health care fraud cases in which the apparent single damages are particularly high. Following is a discussion of some of the significant cases the Division has been involved in during 1999.
A $32 million payment was received from a university -- the largest recovery ever in a case involving either the Food and Drug Administration or the National Institutes of Health (NIH). The case established favorable new case law and its settlement resolved allegations that, for more than two decades, the University had illegally profited from selling an unlicensed drug, failed to report the sales income to NIH, improperly tested the drug on patients and improperly used grant funds.
The Civil Division, in conjunction with 39 USAOs, is handling a qui tam action alleging that 100 hospitals located nationwide upcoded pneumonia diagnosis codes to falsely obtain higher Medicare reimbursements. Thus far, settlements have been reached with eight defendants for a total recovery of $15.4 million.
A $15 million settlement resolved a case against a billing service and its physician founder, for submitting false claims on behalf of emergency physicians around the country. The settlement with the United States and twenty-eight states was reached after a trial on liability in which the court found both the company and the owner liable for violating the False Claims Act. In addition to the civil settlement, the owner was excluded from participation in all federal health care programs for fifteen years.
A drugstore chain paid nearly $8 million to settle allegations of submitting false prescription claims to state Medicaid and other federally-funded health programs. The case was the first to address a common practice of billing insurance programs for the full amount of prescriptions which were only partially filled.
Vital resources were made available from the Account to provide the Civil Division with Automated Litigation Support (ALS), auditors and consultants. These resources supplemented other Civil Division funds. During 1999, ALS was provided to 14 cases while auditor/consultant support was provided to 21 cases. Four of the supported cases have settled, yielding more than $44 million. Recoveries in the remaining cases are expected to reach hundreds of millions of dollars.
Criminal Division
The Fraud Section of the Criminal Division develops and implements white collar crime policy and provides support to the Criminal Division, DOJ and other federal agencies on white collar crime issues. The Fraud Section supports the USAOs with legal and investigative guidance and, in certain instances, provides trial attorneys to prosecute criminal fraud cases. For several years, a major focus of Fraud Section personnel and resources has been to investigate and prosecute fraud involving federal health care programs.
The Fraud Section has provided guidance to FBI agents, AUSAs and Criminal Division attorneys on criminal, civil and administrative tools to combat health care fraud, and worked on an inter-agency level through:
providing frequent advice and written materials on confidentiality and disclosure issues arising in the course of investigations and legal proceedings regarding medical records.
reviewing and commenting on numerous requests for advisory opinions submitted by health care providers to the HHS/OIG and consulting with the HHS/OIG on draft advisory opinions per the requirements of HIPAA.
sponsoring a national Nursing Home Fraud and Abuse conference to address the problems of financial fraud and resident abuse and neglect. The conference brought together key officials from DOJ, USAOs, HHS/OIG, HCFA, and other federal, state, and local agencies, to develop a plan of action for combating fraud, abuse, and neglect in nursing homes across the nation. The national conference helped lead to the development of DOJ's Nursing Home Initiative and the development of regional nursing home training conferences that will be held in Los Angeles, Philadelphia, and Des Moines.
preparing and distributing to all USAOs and FBI field offices a quarterly electronic newsletter summarizing recent developments on major issues, interagency initiatives, and significant activities of DOJ's health care fraud component organizations as well as periodic electronic newsletters summarizing recent cases.
participating on interagency working groups and task forces formed to address fraud in health care and managed care as well as newly emerging problem areas involving illicit online sales of drugs and medical products and nursing home fraud and resident abuse.
Justice Management Division
The Justice Management Division, Debt Collection Management Staff continues to perform for the program various administrative and coordination duties. The duties of this office include: budget formulation, oversight and coordinating with the Office of Management and Budget and HCFA; development and data collection for the internal program evaluation; coordinating with HHS/OIG and the Department of the Treasury on the tracking of collections; coordinating with the GAO on required audits; and preparation and coordination of the annual report.
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APPENDIX
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Federal Bureau of Investigation
Mandatory Funding
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"There are hereby appropriated from the general fund of the United States Treasury and hereby appropriated to the Account for transfer to the Federal Bureau of Investigation to carry out the purposes described in subparagraph (C), to be available without further appropriation-- (I) for fiscal year 1999, $66,000,000".
Successful health care fraud enforcement cannot be achieved by any one agency alone. Investigations must be a cooperative effort if they are to be successful in combating the increasing problems of health care fraud. The FBI is involved in this cooperative effort. The FBI works many health care fraud cases on a joint basis with other federal agencies, including the HHS/OIG. These two federal agencies collaborate through attendance at health care fraud working groups, attend each other's training conferences, and have a liaison program between the two organizations. In addition, the Health Care Fraud task forces represent the coordinated efforts of the FBI, state and local law enforcement, investigative agencies such as Inspectors General, and private industry. The FBI and HHS/OIG share a common commitment to ending fragmented health care fraud enforcement.
In addition to providing new statutory tools to combat health care fraud, HIPAA specified mandatory funding to the FBI for health care fraud enforcement. In 1999, $66 million was provided by HIPAA for 651 positions (380 agents). The FBI used this funding, in large part, to fund an additional 40 agents and 42 support positions for health care fraud and to create several new dedicated Health Care Fraud Squads. This increase in personnel resources along with the direct FBI funding increased the number of FBI agents addressing health care fraud in the fourth quarter of 1999 to approximately 493 agents as compared to 112 in 1992.
As the FBI has increased the number of agents assigned to health care fraud investigations, the caseload has increased dramatically from 591 cases in 1992, to 3,027 cases through 1999. The FBI caseload is divided between those health plans receiving government funds and those that are privately funded. Criminal health care fraud convictions resulting from FBI investigations have risen from 116 in 1992, to 548 in 1999.
Health care fraud investigations are among those investigations having the highest priority within the FBI. The investigations are generally complex and require specific knowledge, skills and abilities to successfully investigate. Often sophisticated, innovative and creative ideas are needed to combat and eventually prosecute the perpetrators of these crimes. As the complexity and long-term nature of health care fraud investigations increase, the FBI anticipates that the number of FBI investigations and convictions will begin to level off.
As part of the FBI's national strategy to address health care fraud, the Bureau utilizes proactive investigative techniques, to include the use of undercover operations. A major FBI led undercover investigation culminated in 1999 with the last of over 40 subjects either entering guilty pleas or being found guilty at trial as a result of their participation in a fraud scheme that robbed the Medicare Program of millions of dollars. During this investigation the FBI actually purchased a bogus home health agency and through various business dealings with the subjects uncovered a system rampant with fraud from top to bottom.
A considerable portion of the increased funding was utilized to support major health care fraud investigations. In addition, operational support has been provided for FBI national initiatives focusing on pharmaceutical diversion, chiropractic fraud, and medical clinics. Further, the Health Care Fraud Unit, FBI Headquarters, supported individual field offices with equipment and supplies to assist in numerous individual investigations.
The funding made available through HIPAA also made possible two Basic Health Care Fraud training conferences which provided the expertise necessary for an additional 200 FBI agents to address the health care fraud crime problem. A total of 82 additional FBI agents received specialized training on fraud schemes plaguing a particular provider service that has been historically vulnerable to fraud. The HIPAA funding also allowed FBI headquarters staff to conduct specialized training sessions in a number of FBI field offices and to make numerous presentations to various industry groups.
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GLOSSARY
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The Account - The Health Care Fraud and Abuse Control Account
ACE - Affirmative Civil Enforcement
ALS - Automated Litigation Support
AoA - Administration on Aging
AUSA - Assistant United States Attorney
CMHC - Community Mental Health Centers
CMP - Civil Monetary Penalty
DOJ - The Department of Justice
EMTALA - Emergency Medical Treatment and Active Labor Act
ESRD - End-stage Renal Disease
FBI - Federal Bureau of Investigation
GAO - General Accounting Office
HCFA - Health Care Financing Administration
HHS - The Department of Health and Human Services
HIPAA, or the Act - The Health Insurance Portability and Accountability Act of 1996, P.L. 104-191
HIPDB - Healthcare Integrity and Protection Data Bank
HRSA - Health Resources and Services Administration
MSP - Medicare Secondary Payer
NIH - National Institutes of Health
OGC - The Department of Health and Human Services, Office of the General Counsel
OIG - The Department of Health and Human Services, Office of Inspector General
OLE - Office of Legal Education, located within the Executive Office for the United States Attorneys
PPS - Prospective Payment System
The Program - The Health Care Fraud and Abuse Control Program
Secretary - The Secretary of the Department of Health and Human Services
USAO - United States Attorney's Office
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Hereafter, referred to as the Secretary.
Also known as the Hospital Insurance (HI) Trust Fund. All further references to the Medicare Trust Fund refer to the HI Trust Fund.
In 1999, DOJ collected, or continued to hold in suspense, an additional $96,480,614 in health care fraud cases and matters that was not disbursed to the affected agencies and/or the Account in 1999 due to: (i) on-going litigation regarding relator shares in qui tam cases that will affect the amount retained by the federal government; and (ii) receipt of funds late in the year that were then processed in FY 2000.
The original certification was for $137,540,000. However, during the fiscal year a $307,000 recission was taken against the account, leaving $137,223,000 available.
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