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I was pleased to hear that Attorney General Eric Holder and Health and Human Services (HHS) Secretary Kathleen Sebelius recognize that fraud is taking a great deal of money out of government programs. Perhaps someday they will expand their efforts to strike at fraud against private insurers who lose more than the federal government programs. My Zalma's Insurance Fraud Letter notes, with pleasure, that government announced the creation of a new interagency effort, the Health Care Fraud Prevention and Enforcement Action Team (HEAT), to combat Medicare fraud.  Holder and Sebelius also announced the expansion of Strike Force team operations to Detroit and Houston.  Medicare Fraud Strike Force, currently in operation in South Florida and Los Angeles, fight Medicare fraud on a targeted local level. As the HEAT teams move out they will find that medical fraud hits both private and government plans and hopefully will not limit their prosecutorial efforts to those who steal from government programs.

The HEAT teams are designed to include senior officials from DOJ and HHS who will build upon and strengthen existing programs to combat fraud while also investing new resources and technology to prevent fraud, waste and abuse before it happens.  Efforts will include the expansion of joint DOJ-HHS Medicare Fraud Strike Force teams that have been successfully fighting fraud in South Florida and Los Angeles.  Established in 2007, these teams have a proven record of success using a “data-driven” approach to identify unexplainable billing patterns and investigating these providers for possible fraudulent activity.  The Medicare Fraud Strike Force team operating in South Florida has already convicted 146 defendants and secured $186 million in criminal fines and civil recoveries.  After the success of operations in South Florida, the Medicare Fraud Strike Force expanded in May 2008 to phase two in Los Angeles, where 37 defendants have been charged with criminal health care fraud offenses.  To date in the Los Angeles cases, more than $55 million has been ordered in restitution to the Medicare program.

Prevention is critical to reforming the system and the HEAT team will also focus critical resources on preventing fraud from occurring in the first place.  The team will build on demonstration projects by the HHS Inspector General and the Centers for Medicare & Medicaid Services (CMS) that focus on suppliers of durable medical equipment (DME).  These projects increase site visits to potential suppliers to prevent imposters from posing as legitimate DME providers.  Other initiatives include:
 
•  Increasing training for providers on Medicare compliance, offering providers the resources and the knowledge they need to help identify and prevent fraud.

•  Improving data sharing between CMS and law enforcement so we can identify patterns that lead to fraud.

•  Strengthening program integrity activities to monitor and ensure Medicare Parts C (Medicare Advantage plans) and D (prescription drug programs) compliance and enforcement.

The Attorney General and the HHS Secretary also called on the American people to visit a new Web site www.hhs.gov/stopmedicarefraud or call 1-800-HHS-TIPS (1-800-447-8477) to report suspected Medicare fraud.

Fraud prevention efforts are also strengthened in President Obama’s proposed Fiscal Year 2010 budget.  The President’s budget invests $311 million – a 50 percent increase from 2009 funding – to strengthen program integrity activities within the Medicare and Medicaid programs.  Combined, the anti-fraud efforts in the President’s budget could save $2.7 billion over five years by improving oversight and stopping fraud in the Medicare and Medicaid programs, including the Medicare Advantage and Medicare prescription drug programs.

Assisting the effort of HEAT is the fact that on May 20, 2009 President Obama signed the Fraud Enforcement and Recovery Act of 2009, which includes substantial amendments to the False Claims Act, 31 U.S.C. Sections 3729-3733, for the first time since 1986. Health care fraud cases constitute the most prevalent category of False Claims Act actions and have generated approximately two-thirds of all federal recoveries from fraud perpetrators.

Before the Fraud Enforcement and Recovery Act, the reverse false claims provision imposed liability on a person who knowingly made, used or caused to be made or used, "a false record or statement to conceal, avoid, or decrease an obligation to pay or transmit money or property to the [g]overnment." Courts had construed the term "obligation" fairly narrowly, holding that it did not encompass, for example, contingent duties to pay potential fines or penalties, but only fixed obligations. The amendments extend the reverse false claims provision in several ways. First, the new statute eliminates the need for a false record or statement. Instead, liability can be imposed where a person "knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government." It appears likely that “improperly” is intended to replace the word "false" in the other sections of the statute. The amendments now include a definition of "obligation" that expands the types of duties that are actionable.

The term 'obligation' means an established duty, whether or not fixed, arising from an express or implied contractual, grantor-grantee, or licensor-licensee relationship, from a fee-based or similar relationship, from statute or regulation, or from the retention of any overpayment.

The definition of "obligation" also specifies that the "retention of any overpayment" can serve as the basis for reverse false claims liability if it is done knowingly and improperly, or if an overpayment is knowingly concealed. The False Claims Act would require proof of a knowing false record or statement, knowing concealment or knowing and improper acts to avoid or decrease an obligation to pay money to the government.

Liability probably would not attach if a person fails to immediately return an overpayment from the federal government and, instead, takes steps to return the overpayment through an applicable reconciliation process. Liability will attach if a person falsifies information during a reconciliation period or otherwise acts knowingly and improperly to avoid repayment.

The amendments also significantly expand the scope of "direct" liability under the False Claims Act, by providing that liability attaches not only to claims presented directly to the United States, but also to claims presented to entities administering government funds. This change addresses several recent court decisions that had suggested that the False Claims Act did not impose liability unless claims were directly "presented" to the United States. The issue arose in the Supreme Court's decision in Allison Engine Co. v. United States ex rel. Sanders, 128 S. Ct. 2123 (2008), which held that claims presented to intermediaries rather than the government were actionable only if the presenter intended that its false statements be used to get the government to pay the false claims. The Fraud Enforcement and Recovery Act amends the False Claims Act to remove the language on which the Allison Engine decision rested and specifies that liability would attach to any claim submitted to intermediaries "if the money or property is to be spent or used on the government's behalf or to advance a government program or interest."

Moreover, the amendments specify that the seal governing qui tam actions does not preclude the federal government or relators from freely sharing the complaint, other pleadings or the qui tam disclosure statement with state or local investigating authorities that are named as co-plaintiffs along with the federal government.

These new amendments represent major changes to the False Claims Act that will affect all health care companies and other companies doing business with the United States.

This writer may be reached at: zalma@zalma.com ; Zalma's Insurance Fraud Letter is at: http://www.zalma.com/ZIFL-06-15-09.pdf