Government and Health Care

Health care fraud proves troublesome locally

Effective enforcement recovers $3.3B in fraud nationwide.

March 27, 2015
Text Size:

National, regional and local efforts to combat fraudulent activity in the health industry have returned more than $27.8 billion in taxpayers’ dollars to the system since 1997.

The U.S. Department of Justice and Department of Health and Human Services announced recently the recovery of approximately $3.3 billion in the fiscal year ended 2014 in taxpayers’ dollars related to health care fraud. More than $27.8 billion has been returned to the Medicare Trust Fund since the Health Care Fraud and Abuse Control Program was established in 1997.

Jointly directed by the Attorney General and the Secretary of the Department of Health and Human Services, the HCFAC is a collaborative program that coordinates federal, state and local law enforcement to identify and prosecute instances of health care fraud and abuse.

The HCFAC’s 2014 annual report indicated the Department of Justice opened 924 new criminal health care fraud investigations during the year, and 734 defendants were convicted of health care fraud-related crimes.

Patrick A. Miles, U.S. Attorney for the Western District of Michigan, said the government’s health care fraud prevention and enforcement efforts are a direct result of the multi-prong approach of the parallel proceedings and of educational outreach to providers and the community the office has been implementing for the last five years.

“The significance is these efforts are bearing fruit; we are saving taxpayers money and helping to lower costs on health care consumers,” said Miles. “Over the past few years, we have had 20 criminal convictions from civil proceedings, we’ve obtained recoveries of $5.5 million, we’ve had total exclusions from the Medicare government health insurance program of 50 years, which is effectively a death sentence for a health care provider … and there has been a $100 million decrease in home health care expenditures in the Western District alone.”

Recent cases investigated by the U.S. Attorney’s Office for the Western District of Michigan included violations of the False Claims Act, receiving illegal health care kickback payments, and billing Medicare, Medicaid and private insurance plans for misbranded and adulterated drugs.

The office announced Feb. 25 that Agility Health and Oceana County Medical Care Facility agreed to pay the federal government $1 million due to false claims submitted to Medicare. The settlement resulted from a civil lawsuit filed by three whistleblowers who worked at OCMCF and will collectively receive more than $200,000, according to the press release.

Portage Health Home Care and Hospice submitted false claims to Medicare, and Portage Hospital, located in Hancock, on March 23 agreed to pay more than $4.4 million to settle allegations, which were self-disclosed by the hospital.

As part of the educational outreach effort, Miles said Raymond E. Beckering III, Assistant U.S. Attorney and health care fraud taskforce coordinator, and Adam T. Townsend, Assistant U.S. Attorney and civil enforcement coordinator for health care fraud, speak to industry groups and the public about the types and indicators of fraud activity.

Townsend said there are two messages that are important for West Michigan businesses: Fraudulent activity is occurring in West Michigan, and it distorts the playing field for providers.

“This is not just a Detroit problem. I think there is a perception out there, because the problem is so bad in Detroit, that it must be focused there, but it is here. The fraudsters are active,” said Townsend.

“We have been telling the legitimate providers the paying of illegal kickbacks and bribes for businesses, for providers who are illegitimate takes the business away from the providers who are playing by the rules. That has been very effective for us in engaging the provider community here in West Michigan.”

One example of illegal kickbacks involves physician referral of patient lab testing to specific companies. In exchange, Townsend said lab companies conducting the test could compensate providers with cash, taking care of an employee’s salary under the table, or point of care testing.

The impact of illegal referral compensation can force legitimate providers who are playing by the rules to lose their business and put a burden on the entire health system, according to Beckering.

“In a sense, we are trying to engage the practitioners to advise the scope of this problem, to let them know if there is $100 million of unnecessary services or $140 million in excessive pharmacy costs; it is money unavailable for the rest of the system for legitimate expenditures,” said Beckering. “We are trying to encourage other practitioners to step over the white line and say if something is going on in the profession that is not serving the medical community.”

Lamont Pugh III, special agent in charge in the Chicago Regional Office of the U.S. Department of Health and Human Services, Office of Inspector General, said the implementation of the Affordable Care Act brought a number of tools into the anti-fraud prevention arena, including: additional funding, resources, better provider enrollment screening, enhanced penalties and access to data to identify fraudulent trends.

“We all kind of work in concert with each other to cooperate and exchange information, so the data was a good tool given to us through ACA,” said Pugh. “We use the data to identify fraud trends, focus our resources so we can be more proactive and less reactive … so we can combat it and try to lessen the impact it might have overall on Medicare programs in terms of dollar amount lost.”

As law enforcement continues to examine transactions between big health care providers and private practices, which may carry an inherent pressure to pay more than market price due to the value of referral volume and ancillary revenue, Townsend said there is another emerging trend regarding private equity.

“Something we weren’t particularly familiar with until the last six months was the role of private equity and third-party financiers in health care. We are seeing there is a lot of pressure by those third-party financiers to have these providers engage in risky behaviors, because the financiers are not in it out of altruism — they want to see a return on the investment,” said Townsend. “We have seen it as part of the Agility Health case that we resolved right here in Grand Rapids. It is important to know it is not just the hospital acquisitions but the increased role of private equity causing these problems.”

The two other areas to highlight for 2015 for potential fraud include laboratory testing and prescription drugs. Prescription drug expenditures in West Michigan total close to $900 million on an annual basis, according to Townsend.

The overall impact of health care fraud essentially taxes everyone due to the increase in costs, but there is a very high rate of return from enforcement efforts, according to Miles.

“When you have people essentially stealing money out of the system, the money isn’t going toward effective and necessary care. It is going for unnecessary purposes, services that weren’t provided, for example,” said Miles. “It is money by effective enforcement we can put back into the system. The Department of Justice reported for every one dollar of enforcement expenditures, there is a return of $7.70 and in our district — it might be closer to $8.”

Recent Articles by Rachel Weick

Editor's Picks

Comments powered by Disqus