California Gets Tough on Healthcare Fraud and Abuse: Are You Protected?

by Nossaman LLP

The industry should take note of new California anti-fraud laws that have recently gone into effect—and the increasing challenges of compliance in a rapidly transforming industry.  Even as lawmakers in Sacramento debate how to extend coverage, California is upping the ante in the nationwide crackdown on healthcare fraud and abuse. 

AB 2492: An Updated State False Claims Act Preserves California’s Share of Litigation Victories

AB 2492, which took effect in January 2013, brings California into alignment with current federal false claims legislation.

The Chamber of Commerce and other groups opposed AB 2492, saying it weakened the “public disclosure bar”—a prohibition on a party bringing a civil false claims action unless they were an “original source” of information.  Indeed, under AB 2492, a suit based on publicly disclosed information will not necessarily be dismissed if supported by the State.  But the legislature’s key goal in enacting AB 2492 was to ensure that California did not lose tens of millions of dollars in shared awards from Medicaid false claim actions.  The bill guarantees that California will continue to reap the benefits of Medicaid-related false claims suits.

SB 1529: Cracking Down on Medi-Cal Abuse

SB 1529, which also took effect in January 2013, adds a host of new requirements implementing portions of the Affordable Care Act aimed at stopping Medicaid fraud.  Key provisions include:

● The California Department of Health Care Services (DHCS) can contract with qualifying Medicaid Recovery Audit Contractors, consistently with federal law, to identify underpayments and overpayments, and recoup overpayments;

● DHCS will implement the “categorical risk level system” already in use in Medicare, conducting a criminal background check on providers or other applicants designed as “high categorical risks” such as durable medical equipment suppliers, or any provider with a history of fraud, waste or abuse;

● DHCS has authority to deny or deactivate the enrollment of any provider for failure to submit accurate information and cooperate with the provider screening process;

● DHCS may not enroll a Medi-Cal provider who has been terminated from a government healthcare program in another state; and

● DHCS must collect an application fee for enrollment, even for an added location or a change in location.

AB 2138: Marshaling Resources Against Insurance Fraud

Another bill, AB 2138, doubles the assessment that California insurers pay toward anti-fraud efforts, increasing it to 20 cents per insured person.  The proceeds will increase funding for local district attorneys to investigate and prosecute health and disability insurance fraud.

Looking Ahead

There is a dramatic transformation in the industry underway—a transformation that strongly emphasizes cost control alongside care quality.  According to the FBI, healthcare fraud costs the country approximately $80 billion every year.  The bills I covered in this blog post are a clear signal that in spite of budgetary problems, California and the country as a whole are prepared to use substantial resources to curb abuse of the system.

More than ever, healthcare entities should maintain the necessary training and other programs to ensure that they do not run afoul of fraud and abuse laws.  They should also ensure they have sound legal advice to keep them up-to-date on the latest developments.  In a transforming industry, compliance is a rapidly moving target.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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