Health care fraud still main focus of False Claims Act

Whistle-blowers continue to drive false claims recoveries. But increased federal scrutiny of health care fraud could have physicians playing defense.

By Amy Lynn Sorrel — Posted Dec. 14, 2009

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Health care fraud remains a key target of the federal False Claims Act, according to the Justice Dept.'s annual report on recoveries made under the statute. The study, along with recent legislative developments, indicate that the government is stepping up its enforcement activities in this area, experts said.

Health care cases made up the lion's share of false claims settlements and judgments in the fiscal year ending Sept. 30, bringing in $1.6 billion, or two-thirds of the total $2.4 billion recouped. The statute gives federal officials authority to prosecute fraudulent billing of any government program.

This year's haul from the health care sector alone is just above that for total false claims recoveries in 2008, when the government took in $1.54 billion, and 30% higher than the $1.12 billion that came from health care fraud cases last year.

The government registered its biggest returns from the pharmaceutical and medical device industries, which accounted for $867 million in settlements over alleged illegal off-label marketing. A record settlement involving Medicaid false claims recovered $540 million from the state and city of New York.

The numbers still represent only a fraction of the scope of health care fraud activity, said George B. Breen, an attorney with Epstein Becker & Green PC in Washington, D.C. For example, the figures do not include criminal false claims cases or the portion of recoveries returned to the states.

"The numbers are actually much larger if you take into consideration other sources of potential recovery. But the government is following the money, which shows that pursuing False Claims Act cases against health care providers is a substantial revenue generator," said Breen, who defends clients accused of health care fraud. "When you look at what additional steps the government has taken, it suggests [these cases] will only continue to grow in the coming years."

The Justice Dept.'s Nov. 19 report said fighting health care fraud is a "top priority" and one that has been facilitated, in part, by a newly formed joint task force with the Dept. of Health & Human Services -- known as the Health Care Fraud Prevention and Enforcement Action Team, or HEAT.

In a Dec. 3 report, the HHS Office of Inspector General said the HEAT initiative contributed to the $21 billion the agency was able to save various federal health care programs in the second half of fiscal 2009 alone.

Meanwhile, the Fraud Enforcement and Recovery Act, enacted in May, also made it easier for the government to pursue false claims cases, Justice Dept. officials noted. The bill was co-sponsored by Sen. Chuck Grassley (R, Iowa) who was responsible for amending and strengthening the False Claims Act in 1986.

The biggest change among the 1986 revisions empowered and rewarded whistle-blowers who help root out fraud, a role physicians can play. The Justice Dept. report showed that a majority of recoveries under the False Claims Act -- $2 billion worth, or 83% -- were initiated by whistle-blowers, consistent with figures from previous years.

"We will see a continuation of whistle-blower suits driving [federal] resources. The question now is whether the Dept. of Justice will be able to address fraud and abuse issues with other increased resources," said Kathleen McDermott, a former federal health care fraud prosecutor in Maryland and a partner with Morgan Lewis & Bockius LLP in Washington, D.C.

Playing defense

Although false claims settlements and judgments rarely involve cases against physicians, that does not mean doctors are off the hook, experts warn. Physicians going forward may have to do more due diligence in their billing and business activities.

Under the Fraud Enforcement and Recovery Act, for example, physicians now face false claims liability for failing to disclose or return overpayments promptly to the government, said Michael A. Sullivan, who has prosecuted and defended against health care false claims cases.

"It would not be a violation to have an inadvertent mistake. But once the mistake is discovered, physicians really need to pay attention and closely evaluate whether an overpayment needs to be returned," said Sullivan, a partner with Finch McCranie LLP in Atlanta. "And it's a big deal, because there are treble damages and civil penalties."

Grassley introduced, on Nov. 16, the Fighting Medicare Payment Fraud Act, which would allow HHS to withhold Medicare payments in instances involving suspected fraud, waste and abuse while those issues are being investigated.

Meanwhile, in its false claims report, the Justice Dept. said it intends to shine a brighter light on the pharmaceutical industry.

Such cases historically have not involved widespread prosecution of physicians, even those who may be recipients of financial inducements to use a drug. Still, "the government has signaled its intent to go after individual physicians for their participation even if they settle" with a drug company, McDermott said. "That means doctors are going to see more subpoenas, and their relationships with industry are going to be scrutinized."

In addition, the Health Care Fraud Enforcement Act, pending in the Senate Judiciary Committee, would allow prosecutors to pursue illegal kickbacks under the False Claims Act as well as through current federal anti-kickback statutes, presenting a potential double threat for physicians, Breen said.

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Focus on fraud

Health care fraud recoveries, much of it through the help of whistle-blowers, continue to make up the bulk of the government's recoupment under the federal False Claims Act. With additional resources being allocated to fight health care fraud, experts expect that to continue.

2006 2007 2008 2009
Total recoveries $3.1 billion $2.0 billion $1.3 billion $2.4 billion
Health care recoveries $2.2 billion $1.5 billion $1.1 billion $1.6 billion
Whistle-blower case recoveries $1.3 billion $1.5 billion $1.0 billion $2.0 billion

Note: Health care cases and whistle-blower cases can overlap, thus adding up to more than the total.

Source: U.S. Dept. of Justice

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External links

U.S. Dept. of Justice briefing on 2009 False Claims Act cases (link)

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