APA Medicare Fraud Regulations_Structures_Details

Medicare Fraud/BCM 1 | P a g e

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Medicare Fraud and Business Interruption Effects

Lori Ranzino Renda

Introduction to Business Continuity, Security, and Risk Management

February 19, 2013

Mark Carroll


An overview of the False Claims Act 31 U.S.C. §§3729-33 will be presented. The author

has developed two matrices to clearly outline the regulations and reduced damages criteria. The

justification as to who pays the cost of civil action will be introduced. The agencies that oversee

enforcement introduced and the ramifications from non-compliance are discussed. The Medicare

Strike Force and its capture of government money will be further discussed. A reference will be

made to the Patient Protection and Affordable Care Act 2010 as it pertains to the enforcement of

fraudulent claims, which is consistent with the other governmental regulations. The types of

violations that pose a threat to the business continuity of a healthcare organization and those

medical professionals committed of conspiracy for such crimes will also be explained. The

penalties imposed for Medicare Fraud create business interruptions. A good business continuity

plan is necessary to limit the medical industries' exposure to the potential fines, penalties, and

even imprisonment of key personnel. Several Medicare Fraud schemes will be presented for

their impact, or the long term effect on the industry.


The False Claims Act: 31 U.S.C. §§3729-33

The False Claims Act ("FCA") was enacted as a result of the billions of dollars spent by

the Medicare and Medicaid programs making the U. S. Government the largest consumer of

health-related spending in the world (Staman, 2010). The catalyst for fraudulent claims is

directly related to: (i) the billions of dollars available in government funds; (ii) the years of abuse

without consequences; and (iii) the involvement of unwitting patients (HHS, 2013). The FCA is

the federal law that created public accountability on those individuals or organizational

leadership who knowingly engage in misconduct involving government money or property

(Staman, 2010). FCA is codified at 31 U. S. C. §§3729-33. The context of the law is relevant to

the healthcare industry and its providers (Staman, 2010). Failure to comply with the FCA

establishes regulations shows just cause for investigation (Staman, 2010). Entities or individuals

found liable for violations of certain acts, and knowingly to violating any of portions of 31

U.S.C. §§3729-33 regulations can be held in contempt, causing a business interruption. The

information below is provided by the Federal Government and has been written literally as found

in the regulation itself, but should not be interpreted as plagiarism. A literal quote is necessary

for exact interpretation.

Structure of 31 U.S.C. 3729-False Claims

(1) In general-- Subject to paragraph (2), any person who--

Paragraph Subject to ParagraphA knowingly present, or causes to be presented, a false or fraudulent claim for

payment or approval;B knowingly makes, uses, or causes to be made or used, a false record or

statement material to a false or fraudulent claim;C conspires to commit a violation of subparagraph (A), (B), (C), (D), (E), (F),

and (G);D has possession, custody, or control of property or money used, or to be used,

by the government and knowingly delivers, or causes to be delivered, less than all of that money or property;

E Is authorized to make or deliver a document certifying receipt of property


used, or to be used, by the government and, intending to defraud the government, makes or delivers the receipt without completely knowing that the information on the receipt is true;

F Knowingly buys, or receives as a pledge of an obligation or debt, public property from an officer or employee of the government, or a member of the Armed Forces, who lawfully may not sell or pledge property; or

G Knowingly makes, uses, or causes to be made or used, a false record or statement material to an obligation to pay or transmit money or property to the government, or knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the government. liable to the United States government for a civil penalty of not less than $5000 dollars and not more than $10,000 dollars, as adjusted by the Federal Civil Penalties Inflation Adjustment Act of 1990 U.S.C. 2461; Public Law 104-410, plus triple damages, which the government sustains because of the act of that person (31 U.S.C. §3729, 2008).

Reduced Damages (2)

As per the official regulations…It the court finds

A The person committing the violation of the subsection furnished officials of the United States responsible for investigating false claims violations with all information known to such person about the violation within 30 days after the date on which the defendant first obtained the information;

B Such person fully cooperated with any government investigation of such violation; and

C At the time such person furnished the United States with the information about the violation, no criminal prosecution, civil action, or administrative action had commenced under this title with respect to such violation, and the person did not have actual knowledge of the existence of an investigation into such violation, the court may assess not less than two times the amount of damages with the government sustains because of the act of that person.

Costs of Civil Actions (3)

A person violating this subsection shall also be liable to the United States Government

for the costs of a civil action brought forth to recover any funds, penalties or damages.

Causes of False Claims

False claims arise out of billing: (i) billing for services not rendered; (ii) billing for

unjustified procedures; (iii) double billing for the identical services or equipment; (iv) billing for


services at a higher price than were actually provided (also referred to as "upcoding")(Staman,

2010, p. 9). The Government definitions for "knowing" and "knowingly" pertain to a person, in

the matter of information, having genuine understanding of the facts and acting with methodical

ignorance or with reckless abandon of the truth or falsity of the facts; proof of specific intent to

defraud is required (HHS, 2013).

Oversight Agencies

Department of Health and Human Services ("HHS") and Department of Justice ("DOJ")

Agencies oversee the Healthcare Fraud Prevention and Enforcement Action Team ("HEAT"). As

a part of HEAT, the Medicare Strike Force (consisting of nine regional teams) reports its

findings to HEAT (HHS, 2013). The Medicare Strike Force team is directly responsible for the

investigation of alleged offenders (fbi.gov, 2012). The strike force team consists of "…analysts,

investigators, and prosecutors…" who target emerging trends in fraud schemes, including fraud

by criminals pretending to be healthcare providers or suppliers (fbi.gov, 2013). The agencies

oversee Medicare Fraud indirectly by means of analysis and investigation completed by

members not employed by the HHS or DOJ (Healthcare.gov, 2013, p. 1).

Strike Force HEAT Up

According to the Office of Inspector General ("OIG") fiscal year 2010, the U.S.

Government established the right to collect $1.84 billion dollars from Medicare Fraud. The

amounts of funds refer to judicial settlements and judgments, but not actual money collected

(Cheung-Larivee, 2011). The greatest amounts recovered came from the states of: (i) New York;

(ii) Texas; (iii) California; (iv) Florida; and (v) Ohio.

Affecting Business Continuity: Cost of Non-compliance

In 2011, HEAT was responsible for the largest Federal healthcare fraud raid on 155

individuals in nine cities involving $530 million dollars in fraudulent billing. The accused


include "doctors, nurses, healthcare company owners and executives, for alleged participation in

Medicare Fraud schemes involving $240 million in false billing" (Healthcare.gov, p. 1). In

another case, three local doctors in Florida approved group therapy through the American

Therapeutic Corporation and fraudulently submitted $200 million in claims since 2007 (Weaver,

2011). Detroit-18 charged with Medicare Fraud totaling $28 million in false billing claims

(fbi.gov, 2011). These alleged crimes took place in the home healthcare sector and

psychotherapy. Investigators seized 28 bank accounts related to the fraud incidents (fbi.gov,

2011).

In May 2012, the Medicare Strike Force teams disrupted the professional business lives

of 107 healthcare professionals that included "…doctors, nurses, and other licensed medical

professionals in seven cities involving more than $452 million dollars" (fbi.gov, 2012, p.1).

In October 2012, the Medicare Strike Force interrupted the business lives of 91

healthcare professionals in seven U.S. cities. The alleged abusers also included doctors, nurses,

and other licensed medical professionals. These alleged perpetrators are accused of participating

in Medicare Fraud schemes totaling $432 million dollars in fabricated billing claims. Under the

Patient Protection and Affordable Care Act, the Department of Health and Human Services is

capable of interrupting the businesses of these alleged perpetrators by suspending payments to

the accused offenders until the investigation was complete. In Miami, Federal agents seized $4.6

million dollars in assets including houses and bank accounts, of alleged violators (Ingram, &

Morgan, 2012). FY 2012 teams recovered $4.2 billion dollars (HHS.gov, 2013).

Patient Protection and Affordable Care Act

The passing of the Patient Protection and Affordable Care Act ("PPACA") discloses in

greater (than FCA) detail the number of existing regulations as they pertain to fraud in

healthcare. The PPACA provides additional funding for law enforcement agencies to track and


prosecute individuals, clinics, and hospitals who are fraudulently submitting patient

reimbursement claims for services that are either not rendered or are an exaggeration of

procedures submitted for payment.

Penalties for Medicare Fraud

Persons and organizational leadership found guilty of Medicare Fraud run the risk of

being treated as criminals, imposed with fines, penalties, and convictions that result in their

imprisonment. Lawrence Duran of the American Therapeutic Corporation plead guilty to 38

counts of "healthcare fraud, conspiracy, and money-laundering" (Cheung-Larivee, 2011, p.1).

Duran was charged and convicted of stealing $205 million dollars from Medicare. Duran has

been sentenced to 50 years in prison. His penalty is notably the harshest prison sentence related

to healthcare fraud (Cheung-Larivee, 2011).

While persons or organizations are under investigation, Medicare will suspend all

payments to the individuals or organizations until it has completed its investigation (Ingram &

Morgan, 2012).


In conclusion, an overview of the False Claims Act was presented in detail. The author

developed two matrices to present an account of the regulations and what can be done to reduce

damages. The justification of the cost associated with the civil action as part of the penalty

process is explained. The two agencies that oversee enforcement have been revealed and the

ramifications of non-compliance have been introduced. The Medicare Strike Force and its

capture of government money have been revealed. The Patient Protection and Affordable Care

Act 2010 as it pertains to the enforcement of fraudulent claims was discussed. The types of

violations that pose a threat to the business continuity of an organization and those individuals

found in conspiracy for such crimes have been explained. The penalties for Medicare Fraud

obviously create interruptions in the continuity of any healthcare organization, those penalties

have been given. If Medicare and Medicaid fraud go undetected or unpunished, the long term

effect of the federal government running out of money to fund healthcare will result impacting

every U. S. citizen


References

FBI.gov, (2012, May 02). Medicare Fraud strike force charges 107 individuals foe

approximately $452 million in false billing. U.S. Department of Justice. Retrieved from

https://www.fbi.gov/news/pressrel/press-releases/medicare-fraud-strike-force-cahrges-

107-individuals-for-approximatley-452-million-in-false-billing

FBI.gov, (2011, September 01). Eighteen charged for Medicare fraud schemes in Detroit

involving $28 million in false billing. U.S. Attorney's Office. Retrieved from

http://fbi.gov/Detroit/press-releases/2011/wighteen-Charged-for-medicare-fraud-

schemes-in-detroit-involving-28-million-in-false-billings

Healthcare.gov, (2012). New tools to fight fraud, strengthen Federal and private health programs

and protect consumer and taxpayer dollars. Newsroom. Retrieved from

http://www.healthcare.gov/news/factsheets/2012/02/medicare-fraud02142012a.html

HHS.gov, (2013). Department of Justice and health and human services announce record-

breaking recoveries resulting from joint efforts to combat health care fraud. Retrieved

from hhs.gov/news/press/2013pres/02/20130211a.html

HHS.gov, (2013). Medicare Fraud 7 abuse: Prevention, detection, and reporting. Department of

Health and Human Services; Centers for Medicare & Medicaid Services. Retrieved from

http://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-

MLN/MLNProducts/downloads/Fraud_and_Abuse.pdf

Ingram, D., & Morgan, D., (2012). Authorities charge 91 in $430 million Medicare Fraud.

Thomas Reuters. Retrieved from https://www.reutersreprints.com.

Cheung-Larivee, K., (2011). Healthcare exec swindled Washington, landed heaviest fraud

sentence ever. FierceHealthcare.com. Retrieved from

http://www.fiercehealthcare.com/node/62851/print


Staman, J., (2010). Healthcare fraud and abuse laws affecting Medicare and Medicaid: An

overview. Congressional Research Service. Retrieved from

http://aging.senate.gov/crs/medicaid20.pdf

United States Code, (2008, June 7). 31 U.S.C. §3729. Retrieved from

http://www.law.cornell.edu/uscode/text/31/3729

Weaver, J., (2011, February 17). Feds make Medicare fraud sweeps in Miami, nationwide. The

Palm Beach Post. Retrieved from http://www.palmbeachpost.com/news/news/state-

regional-feds-make-medicare-fraud-sweeps-in-miami-nationwid/nPf6d

Documents

APA Medicare Fraud Regulations_Structures_Details