Just when you thought there couldn’t be more problems to deal with, federal prosecutors have resurrected an obscure fraud law and have been bolstered by the new fraud and abuse provisions of the Kennedy-Kassebaum health reform bill (Health Insurance Portability and Ac-countability Act of 1996). Prosecutions for health care fraud have skyrocketed since 1992, when officials intensified their efforts. Recent data suggests that investigations are up 100 percent and we can expect more.
Strict enforcement of civil and criminal laws against fraud remains a politically popular form of health care cost control, one whose support will increase as large managed care systems grow in prominence. As in the defense industry, vigorous anti-fraud enforcement is likely to accompany more general failures in cost containment, particularly if the government is responsible for payment. This process is already being accelerated by “bounty-hunting” suits that can yield large recoveries to private plaintiffs.
Federal False Claims Act
Law enforcement officials are increasingly using the federal False Claims Act and its civil whistle-blower provision to pursue fraud allegations against physicians, hospitals, and other providers. The False Claims Act has only recently been applied to health care. Initially, it was aimed at curbing fraud by contractors who billed the Union Army for shoddy services during the Civil War. Congress amended the law in 1986 in an effort to encourage defense contractor employees to help stamp out fraudulent costs overruns. Congress made it easier for prosecutors to show that defendants “knowingly” acted to defraud the government. They also allowed the government to seek triple damages for false claim violations, or double damages for offenders who voluntarily disclose all information about wrongdoing. The lawmakers also expanded the act’s whistle-blower, or qui tam, provisions to allow whistle-blowers to collect a payoff in cases where the government intervenes.
In health care cases, enforcers typically build these cases around errant claims processing: billing for unperformed services, upcoding, billing for medically unnecessary services, unbundling, and cost report fraud. Prosecutors are becoming increasingly aggressive as they test the limits of the law.
In a first, the False Claims Act was recently applied to quality of care issues. The logic supporting the government’s claim of liability is that any allegation of medical malpractice could give rise to a false-claims prosecution and its counterpart, a qui tam lawsuit. It is predicted that there will be a rash of prosecutions nationwide as doctors and other providers are pursued under this theory. This means that doctors could face new civil and criminal penalties for faulty medical decision-making and poor treatment outcomes.
Fraud and Abuse Provisions of Kennedy-Kassebaum Health Insurance Bill
The government’s fraud-busters got a further boost this summer when President Clinton signed the Health Insurance Portability and Accountability Act into law. This legislation created new fraud laws and expanded the coverage of the anti-kickback statute from Medicare and Medicaid to all payers. It also established a fraud and abuse expenditure account within the Medicare Trust. This account will in part be funded by fines and penalties collected from convictions for health care offenses.
The new law deals with physician-patient transactions of almost every sort, as well as related activities such as quality assurance. The law grants joint authority to the U.S. Department of Health and Human Services Inspector General (HHS/ IG) and the U.S. Attorney General to “coordinate federal, state, and local law enforcement programs aimed at fraud and abuse with respect to health plans,” and authority to “conduct investigations, audits, evaluations, and inspections relating to the delivery of and payment for health care in the United States.” In short,this legislation extends to all patient care activities. Even cash payments by uninsured patients may at least be scrutinized.
The law creates a new “federal health care offense” and expands current federal criminal statutes to apply to health care fraud. For example, the federal mail fraud statute will apply to anyone who knowingly and willfully defrauds, or attempts to defraud, any health care plan “in connection with the delivery of, or payment for, health care benefits, items, or services.” The penalty for a federal health care offense, in addition to fines, may be imprisonment for up to 10 years, or for 20 years if violation results in serious bodily injury. Violation resulting in death authorizes life imprisonment. A “materially false, fictitious, or fraudulent statement or representation, or a materially false writing or document knowingly made or used,” relating to a health benefit program, constitutes a “false statement” punishable by fines or imprisonment of up to five years.
The law also increases the amount of civil monetary penalties that can be imposed in health care fraud and abuse cases from $2,000 to $10,000 for each item or service involved. A civil penalty can be assessed for a claim the Health and Human Services Secretary determines “is for medical or other item or service that the person knows or should know was not provided as claimed, including any person who engages in a pattern or practice of presenting, or causing to be presented, a claim for an item or service that is based on a code that the person knows, or should know, will result in a greater payment to the person than the code the person knows or should know is applicable to the item or service actually provided.” The phrase “know or should know” means that the person acts with either a “reckless disregard for” or in “deliberate ignorance” of the truth. Thus, each incorrectly coded service could be subject to a $10,000 penalty.
Finally, the act establishes a new national health care fraud and abuse data collection program. Under this system, “final adverse actions” against health care providers would be reported to the data bank. This information would be available to federal and state government agencies and health plans.
Implications for the Future
U.S. Attorney General Janet Reno recently announced that the health care fraud and abuse initiative is the Department of Justice’s second highest priority, behind violent crime-related activities. Other recent initiatives by the HHS Inspector General and the Health Care Financing Administration (HCFA), such as the Physicians at Teaching Hospitals (PATH) initiatives, are proving very successful in recovering Medicare funds.
The PATH initiative is a national investigation of improper “upcoding” by teaching physicians of services provided by residents. Last December, PATH returned a $30 million settlement from the University of Pennsylvania and its faculty plan. One medical school, Thomas Jefferson University in Philadelphia, has completed a voluntary compliance program and in August the school and its faculty practice plan agreed to pay the government $12 million in damages. It is reported that five other teaching hospitals are completing similar arrangements, while another 10 have approached federal officials about voluntary disclosure.
Earlier this year, HCFA launched its new “Correct Coding Initiative,” which is aimed at preventing inappropriate unbundling of procedure codes for Medicare services. The Medicare carriers are also increasing their payment audits and are sending physicians payment demand letters requesting immediate refunds of incorrect payments. For example, in California, several neurosurgeons have received such a letter for incorrectly billed and paid services using CPT code 61712 (microdissection, intracranial or spinal procedure).
The bottom line message is that neurosurgeons must keep scrupulous documentation of every service they provide so that there is clear guidance on every claim as to why it has been generated. Neurosurgeons must also give increased attention to how they code each service provided. While physicians should not be penalized for inadvertent behavior such as billing errors or mistakes, the new law leaves a sufficient amount of wiggle room to paint both honest and dishonest physicians with the same brush. Objections by the AMA did result in the inclusion of a “knowing and willful” standard governing criminal violations. However, that does not preclude investigations and harassment in matters that may go nowhere, or in which the physician is acquitted. Physicians need to understand that practices once described as “gaming,” which sometimes were a response to unreasonable restrictions, will be looked at in a new light.