Health Care Fraud

No one likes to be ripped off.  Whether you got less than you thought you purchased, or poorer quality, or found out that the seller was in a scheme and you were the pawn, these things make people angry, and rightfully so.  This is fraud.

About 150 years ago, in March of 1863, President Abraham Lincoln was hacked off because, while somewhat busy in the middle of the Civil War, he learned that unscrupulous people were selling to the government broken down mules, faulty rifles, rancid food, and other war supplies that were discovered to be substandard.

Prompted by President Lincoln’s aggravation, the government enacted the first False Claims Act (“FCA”).  In simplistic terms, the FCA is a law that says two basic things.  First, it makes it unlawful to submit a false claim for payment to the federal government.  Second, it says that the federal government will pay a bounty to citizens who report fraud committed against the government.

Over almost 150 years this law has remained fundamentally unchanged.  What has changed,  however, is how the law is applied, and a massive growth in the size of the potential bounty.

Today, healthcare represents approximately one out of every eight dollars spent every day.  An enormous portion of healthcare dollars are paid by the government as a result of claims being submitted by healthcare providers to Medicare and Medicaid.  Accordingly, the government today is keenly interested in finding any and all instances of false medical claims.

There are a number of common ways that false healthcare claims are submitted to the government, each of which results in violations of the law.  The more common methods of today’s healthcare fraud are outlined below:

1.         False claim for service not provided.  This occurs when a medical provider submits a code for payment for a service that was not provided.  Medical coding is tremendously complex, and this type of fraudulent coding is especially difficult to detect because the code for a service that was not provided is associated with another code for a service that actually was provided; so the bill doesn’t look obviously wrong.  Therefore, it is virtually impossible for the federal government to recognize this type of fraud without input from the patient themselves.

2.         Upcoding.  This type of fraud occurs when a medical provider performs a particular service on a patient but upcodes the service on the bill, indicating that the service was provided at a higher level than it actually was.

3.         Kickbacks.  When a medical provider, typically a doctor, tells a patient to go get another service (e.g., diagnostic MRI or physical therapy), the patient is probably going to go get it done.  If the doctor refers the patient to another organization and that organization gives the referring doctor a payment for the referral, both the referring doctor and the referred-to service have violated the anti-kickback law.  The claim that is submitted is considered a false claim.  Of particular importance to medical providers, the anti-kickback law is a criminal law, which can result in not only monetary fines but also jail time.

4.         Self-referrals.   The law recognizes that doctors have incredible power in their ability to refer patients for other services.  In an effort to stop doctors from abusing this power, there is a body of law referred to as the “Stark Law.”  Stark says basically that a doctor cannot refer a patient to an organization that the doctor owns.  This law was put in place because, during the 1970′s and 1980′s, doctors were flocking to own laboratory service companies.  Not surprisingly, once the doctor owned a laboratory service, the doctor referred most if not all of patients to the lab to receive for example, blood work.  The Stark law was put in place to stop this practice.

5.         False certification.  A medical provider (e.g., doctor or hospital) must meet certain qualifications before accepting Medicare and Medicaid.  The medical provider must certify to the government that it is in full compliance with all laws affecting healthcare.  This includes, specifically, certification that the provider is not submitting false claims, upcoding, engaged in kickback activities or self-referral activities.  If a medical provider falsely makes this certification, every claim submitted to the federal government from that point forward may be considered a false claim.

The federal government is very serious about these laws.  The penalties for violation of include financial penalties which are generally calculated as three times the amount paid by the government, plus individual fines for each false claim ranging from $5,000.00 to $25,000.00.  In healthcare, these penalties add up very quickly, often reach into the tens and hundreds of millions of dollars.

The government knows that every claim cannot be audited to detect every instance of fraud.  Because of this, just like President Abraham Lincoln knew 150 years ago, the federal government needs citizens to recognize and report fraud against the government.  The bounty, or reward, generally ranges from 10-30% of the total amount recovered.  Accordingly, there are many individuals who have become quite wealthy as a result of their reporting fraud against the government.

People who report fraud against the government are often called “Whistleblowers”, or “Qui Tam relators.”  These people are often employees of an organization that is committing the fraud.  Recognizing that the whistleblower will likely be afraid of losing their job if they report fraud, the laws provide not only huge financial incentive to report, but also very strict protections for the whistleblower so the employer does not retaliate against them.

If there is a downside to whistleblower lawsuits, it is the complexity of understanding specifically which laws apply to a certain situation, and the procedural and jurisdictional navigation required.

The Obama Administration has, in March 2009, attempted to simplify this area of law and significantly broaden and strengthen the ability of a whistleblower to bring a claim.  The Fraud Enforcement and Recovery Act of 2009 (“FERA”) has the potential to eventually result in many more whistleblowers receiving many more sizable bounties.

If you believe you may have information which would support a whistleblower lawsuit, your best advice is to find an attorney who is familiar with federal law, federal courts, the False Claims Act, the special laws dealing with healthcare, and the specialized knowledge of understanding medical coding and finance.  Although there are a number of areas in law that an individual can indeed do-it-themselves, this area of law is most certainly not one of them.  The time, effort and costs involved in pursuing a whistleblower lawsuit can be sizable, and wrong steps along the way can lead to the government pursuing the claim, but the whistleblower not getting the bounty.  Attorneys familiar with this area of law will usually take a case on a contingent basis, and will have to work extremely hard to make their money.  However, the rewards are potentially enormous, and at the heart of the matter, the whistleblower is doing the right thing.

Wayne Allison is a partner in the firm of Meyer, Leonard & Allison, PLLC, located in Oklahoma City, Oklahoma, a firm comprised of only seasoned, experienced attorneys practicing and litigating in a variety of areas, including government fraud, small-medium business representation, federal matters, complex contracts, executive relations, and individual/business representation.  With an extensive network of experts and specialized expertise, the firm provides its clients, businesses and individuals, with personalized service and zealous advocacy.  Mr. Allison is also a member of the LawGuru Attorney Network.

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