The Federal Government Takes Aim at Medicare Fraud

by Sheppard Mullin Richter & Hampton LLP

[author: Joseph Barton]

On May 2, 2012, Federal agents with the Department of Justice's (“DOJ”) special task force made the biggest Medicare bust in U.S. history, and a splash in the media, when it cracked down on a number of unrelated Medicare fraud schemes across the country that resulted in an alleged $450 million in false claims being submitted to Medicare over the past six years. A total of 107 people were arrested, including doctors, nurses, social workers, office managers, and patient recruiters. Charges ranged from submitting false billing for home healthcare, mental health services, HIV infusions, and physical therapy, to money laundering and receiving kickbacks.

With the President and Congress under pressure to ensure Medicare's fiscal sustainability, DOJ has committed itself to vigorously investigating and prosecuting Medicare fraud. The FBI currently has 500 agents and analysts investigating 2,600 cases of alleged healthcare fraud and has charged 1,300 people since 2007 for submitting false claims to Medicare. In addition, Lanny Breuer, the head of the DOJ's criminal division, has commented that the recent Medicare busts should serve as a reminder to health care providers that they “risk prosecution and prison time every time they submit a false claim.”

With the Federal Government taking aim at Medicare fraud, here are few things for which healthcare providers should be on the lookout:

  • Kickbacks: The federal Anti-Kickback Statute, 42 U.S.C. §1328-7b(b), prohibits any offer, payment, solicitation, or receipt of money, property, or remuneration to induce or reward the referral of patients or healthcare services payable by Medicare. These improper payments can come in many different forms, including: referral fees, finder’s fees, productivity bonuses, discounted leases, discounted equipment rentals, research grants, speaker’s fees, excessive compensation, and free or discounted travel or entertainment. Kickbacks can also constitute a violation of the federal False Claims Act (“FCA”), 31 U.S.C. §§ 3729-3733.
  • Up-Coding: Billing Medicare involves a complex series of codes that assign a dollar value to the procedures and services performed based on their complexity. Up-coding occurs when a claim is submitted for a more complex procedure than was actually performed. Up-coding is a favorite target of health care- related FCA claims.
  • Unbundling and Bundling: Medicare has special reimbursement rates for groups of procedures that are typically performed together, such as laboratory tests. “Unbundling” occurs when bundled procedures are billed separately in order to exceed the group reimbursement rate. Conversely, “bundling” refers to the artificial combination of tests and procedures in such a manner that they are not separately available, which results in the performance of and billing for unnecessary tests. Unbundling and bundling can constitute violations of the FCA.
  • False Certifications: When physicians, hospitals, and other health care providers submit bills to Medicare, they are required to include a number of certifications, including that the services were medically necessary, were actually performed, and were performed in accordance with all applicable rules and regulations. False certifications are easy prey for whistleblowers under the FCA.
  • Improper Financial Interests: The federal Stark law, 42 U.S.C. §§ 1395nn and 1396b, generally prohibits physicians and members of their immediate families from having financial interests in entities that perform certain designated health services to which they refer patients or from which they order goods and services paid for by Medicare.

By keeping an eye out for these types of practices, which are commonly targeted for Medicare fraud allegations, healthcare providers can avoid substantial liabilities.


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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