False Claims Counsel

In testimony March 9 before the United States Senate Committee on Homeland Security & Governmental Affairs, Subcommittee on Federal Financial Management, Government Information, Federal Services, and International Security, HHS Inspector General provided an overview of the Administration’s efforts to combat health care fraud. Among those areas he stressed:

Task Forces:

Medicare Fraud Strike Forces are an essential component of HEAT and have achieved impressive enforcement results. Strike Forces are designed to identify and investigate fraud, and prosecute the perpetrators quickly. Strike Force teams are composed of dedicated prosecutors from DOJ and U.S. Attorneys Offices and Special Agents from OIG; the Federal Bureau of Investigation (FBI); and, in some cases, State and local law enforcement agencies. These “on the ground” enforcement teams are supported by data analysts and program experts. This coordination and collaboration have accelerated the Government’s response to criminal fraud, decreasing by roughly half the average time from the start of an investigation to its prosecution.

OIG and DOJ launched their Strike Force efforts in 2007 in south Florida to identify, investigate, and prosecute DME suppliers and infusion clinics suspected of Medicare fraud. Building on the success in Miami, Strike Force teams have been established in eight more locations—Los Angeles; Detroit; Houston; Brooklyn; Baton Rouge; Tampa; and, most recently, Dallas and Chicago.

The Affordable Care Act:

The ACA, as amended by the Reconciliation Act, promotes program integrity by addressing program vulnerabilities, strengthening law enforcement resources and authorities, and encouraging greater coordination among Federal agencies. Consistent with OIG’s recommended program integrity strategy, the ACA:
• strengthens provider enrollment standards;
• addresses payment vulnerabilities;
• promotes compliance with program requirements;
• enhances program oversight; and
• fortifies the Government’s arsenal of fraud-fighting tools and penalties.

The ACA includes numerous provisions that address vulnerabilities in CMS program operations and payment methodologies. To address the need for more upfront oversight, the ACA authorizes more robust provider and supplier screening procedures, temporary enrollment moratoria when the Secretary identifies fraud “hot spots,” provisional periods of enhanced payment oversight for newly enrolled providers and suppliers, heightened disclosure and transparency requirements, and mandatory compliance programs.

The ACA also addresses particular fraud, waste, and abuse risks by altering program requirements. The following examples are illustrative. The law requires physicians to document that the physician (or a designated health professional) has had a face-to-face encounter with a patient for whom the physician is certifying the need for DME or home health services. The law requires community mental health centers that provide partial hospitalization services to provide at least 40 percent of their services to non-Medicare beneficiaries, which should help reduce fraud by centers that set up shop to prey on Medicare. The ACA addresses misaligned payments by, for example, rebasing home health payments, and the law will produce cost savings by increasing the Federal Medicaid rebate for generic drugs. The ACA addresses quality-of-care vulnerabilities through provisions that create incentives for hospitals to reduce readmissions and prevent hospital-acquired conditions.

The ACA strengthens the Government’s ability to respond rapidly to health care fraud and hold perpetrators accountable. Increased HCFAC funding will support important fraud-fighting resources, including new technology for detecting suspected fraud more effectively and “boots on the ground” for our vital oversight and enforcement efforts. The ACA provisions that strengthen cross-agency collaborations and information sharing will aid our program integrity efforts. Enhanced authority to suspend payments pending the investigation of credible allegations of fraud will help ensure that the Government can effectively stop perpetrators from absconding with ill-gotten program funds. Important changes to the False Claims Act, the Federal anti-kickback statute, OIG’s administrative authorities, and the Federal Sentencing Guidelines, among others, will help the Government more effectively prosecute those who defraud or abuse Federal health care programs.

Personal exposure for executives:

One way to address this problem is to attempt to alter the cost-benefit calculus of the corporate executives who run these companies. By excluding the individuals who are responsible for the fraud, either directly or because of their positions of responsibility in the company that engaged in fraud, we can influence corporate behavior without putting patient access to care at risk. To that end, in 2008, we excluded three executive officers of the pharmaceutical company Purdue Frederick based on their convictions for misbranding the painkiller OxyContin. Each of the executives was convicted based on his status as a responsible corporate officer.

OIG also has the discretionary authority to exclude certain owners and the officers and managing employees of a sanctioned entity (i.e., an entity that has been convicted of certain offenses or excluded from participation in Federal health care programs) even if the executive has not been convicted of a crime. This authority, section 1128(b)(15) of the Social Security Act, allows OIG to hold responsible those individuals who are accountable for corporate misconduct. OIG has used this exclusion authority in more than 30 cases since it was added to the statute in 1996. But until recently, we had typically applied this exclusion authority to individuals who controlled smaller companies, such as pharmacies, billing services, and DME companies and not to executives of large complex organizations such as a drug or device manufacturer.

Moving forward, we intend to use this essential fraud-fighting tool in a broader range of circumstances. For example, in addition to excluding the Purdue Frederick executives, we recently excluded an owner (and former executive) of Ethex Corporation Company under our section (b)(15) exclusion authority. Ethex operated manufacturing facilities in St. Louis. In March of last year, Ethex pled guilty to felony criminal charges after it failed to inform the FDA about manufacturing problems that led to the production of oversized tablets of two prescription drugs. The owner was excluded for a period of 20 years.