Government

Health care now prime target of federal False Claims Act

More than three-quarters of fraud recoveries in 2003 came from the health sector.

By Markian Hawryluk — Posted May 10, 2004

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Washington -- A series of major settlements against health care companies has boosted the government's fraud recovery rate, and kudos are going to whistle-blower provisions in federal law.

According to the latest figures from the Justice Dept., federal enforcement officials recouped $2.1 billion under the False Claims Act in 2003. Of that total, $1.7 billion came from health care companies and practitioners, up from $500 million only four years earlier.

Four of the 10 largest settlements in the history of the act came in 2003, and all involved health care companies. Hospital chain HCA settled a case for $631 million last year, while pharmaceutical firms Abbott Labs, AstraZeneca and Bayer Corp. each had settlements of $250 million to $400 million.

The settlements are attributed in large part to False Claims Act amendments by Sen. Charles Grassley (R, Iowa) in 1986 that strengthened the qui tam, or whistle-blower, provisions by offering private citizens who report fraudulent claims a share of the recovered funds.

"Without this important legislation strengthening the act and, in particular, the qui tam provisions that give everyone who comes in contact with a federally funded program a stake in reporting fraud, such recoveries would not have been possible," said Peter Keisler, assistant attorney general in the Justice Dept.'s civil division.

Of the $2.1 billion in False Claims Act recoveries in 2003, $1.48 billion came from suits initiated by whistle-blowers.

Grassley said the amendments had become some of the most effective tools against health care fraud. "The fact is, when it comes to health care fraud, we need to empower whistle-blowers more than ever," Grassley said. "Even the most diligent law enforcement efforts cannot root out all the fraud, given the large number of health care providers that bill Medicare."

The senator, known as a staunch anti-fraud hawk, said health care is a frequent target for fraud because of the size of the federal programs.

"The health care industry is 15% of the gross domestic product, and 40% of health care is funded by the federal government through Medicare, Medicaid, Veterans Affairs, etc.," Grassley said. "For 38 years, the federal government has been deeply involved in health care, and it's a growing program."

The tripling of health fraud recoveries has come with little additional investment. An analysis by Taxpayers Against Fraud found that funds collected in 2002 and 2003 had boosted the federal government's recovery rate over the last five years to $13 for every $1 spent in enforcement.

"The reason government investigations and prosecutions are so efficient is that whistle-blowers act like bird-dogs that point out the fraud and flush it to the government attorneys," said James Moorman, president of Taxpayers Against Fraud. "Without the whistle-blowers, the federal government just can't find the fraud."

According to the group's report, the thirteenfold benefit-to-cost ratio likely underestimates the real return to taxpayers on outlays for civil health care fraud enforcement. In addition to actual monetary recoveries, major settlements with large dollar amounts have a ripple effect that reduces the likelihood of similar fraud by other firms.

"Without a doubt there is still a lot of fraud to be found, but the False Claims Act is clearly changing corporate culture in the health care arena," said health economist Jack Meyer, who authored the report.

A few years ago, health care consulting firms were advising companies about how to beat the system by cooking the books, Meyers said. Now those same consulting firms -- some of which were prosecuted under the False Claims Act for encouraging fraud -- are advising the industry on how to comply with the letter of the law and stay out of trouble, he said.

While federal officials have focused on larger corporate offenders, even the smallest of physician practices can be prosecuted under the False Claims Act.

Physician groups battled the Justice Dept. and Grassley for years to make sure doctors making honest mistakes aren't prosecuted for fraud. But furor over the provisions has been quelled by assurances that officials will target only those that set out to defraud the government.

"No place for fraud"

"There is no place for fraud in the practice of medicine," said AMA President-elect John C. Nelson, MD. "However, it is important that as the government investigates health care fraud, there is recognition, and separation, of inadvertent errors by health care professionals from real fraud."

Dr. Nelson said the voluminous, confusing and constantly changing Medicare billing rules create a real fear of overzealous enforcement.

"Physicians should not be subject to civil monetary penalty laws or the False Claims Act for billing errors or honest mistakes," he said.

Mark McClellan, MD, PhD, administrator of the Centers for Medicare & Medicaid Services, said the agency is trying to help physicians and other health care professionals understand billing practices to minimize errors that could be mistaken for fraud.

"Our experience is the vast majority of providers want to do the right thing and try to do the right thing, so we need to be clear about the rules," Dr. McClellan said. "But we also need to focus our efforts on the instances that providers are intentionally manipulating the system."

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ADDITIONAL INFORMATION

Focus on fraud

Health care fraud recoveries accounted for the bulk of the $2.1 billion collected by the federal government through the False Claims Act in 2003.

$1.7 billion - Health care

$299 million - Defense procurement

$49 million - Dept. of Interior gas leases

The amount collected more than tripled since 1999.

Recoveries
1999 $0.5 billion
2000 $0.7 billion
2001 $1.2 billion
2002 $1.6 billion
2003 $1.7 billion

Sources: Justice Dept., Taxpayers Against Fraud

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External links

Taxpayers Against Fraud report, "Fighting Medicare Fraud: More Bang for the Federal Buck," April 22 (link)

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