Kitch Drutchas Wagner Valitutti & Sherbrook One Woodward Avenue, Suite 2400 Detroit, MI

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1 Kitch Drutchas Wagner Valitutti & Sherbrook One Woodward Avenue, Suite 2400 Detroit, MI Detroit Lansing Mt. Clemens Marquette Toledo Chicago

2 Disclaimer These materials have been prepared by Kitch Drutchas Wagner Valitutti & Sherbrook PC for informational purposes only and are not legal advice. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. Readers should not act upon this information without seeking professional counsel. Photographs, articles, records, pleadings, etc., are for dramatization purposes only.

3 Trends & Strategies for Effective Corporate Compliance Programs Margaret A. Chamberlain, Principal Kitch Drutchas Wagner Valitutti & Sherbrook 2379 Woodlake Drive, Suite 400 Okemos, MI Karen Berkery, Principal Kitch Drutchas Wagner Valitutti & Sherbrook One Woodward Avenue, Suite 2400 Detroit, MI

4 WHY CORPORATE COMPLIANCE?

5 EFFECTIVE CORPORATE COMPLIANCE PROGRAMS HAVE REDUCED SETTLEMENTS WITH THE FEDERAL GOVERNMENT BY AS MUCH AS 95%. The Kitch Firm 2008

6 Patient Protection and Affordable Care Act (PPACA) Public Law Any provider that chooses to enroll in or stay enrolled in the Medicare/Medicaid programs, will have to establish a Corporate Compliance Program that meets certain core elements to be established by the Secretary, in consultation with the Inspector General of the Department of Health and Human Services. Within 36 months after enactment (March 23, 2010), Skilled Nursing Facilities will have to have in operation, a compliance and ethics program that is effective in preventing and detecting criminal, civil, and administrative violations under this Act and in promoting quality of care.

7 The Program Initially, HIPAA established a national Health Care Fraud and Abuse Control Program (HCFAC) to fight Medicare fraud through a joint effort between the Attorney General and HHS to coordinate federal, state, and local law enforcement efforts against health care fraud and abuse Beginning 2007, Medicare Fraud Strike Force teams deployed to various regions to aggressively investigate and prosecute fraud cases. The Detroit Metro region received a strike force team in March, Health Care Fraud Prevention and Enforcement Action Team (HEAT) created in May 2009, making Medicare Fraud a Cabinet-level priority for both the DOJ and HHS.

8 THE PROGRAM BIG MONEY During Fiscal Year (FY) 2014, the Federal government won or negotiated over $2.3 billion in health care fraud judgments and settlements As a result of these efforts, as well as those of preceding years, in FY 2014, approximately $3.3 billion returned to the Federal government or paid to private persons.

9 THE PROGRAM BIG MONEY Of this $3.3 billion, the Medicare Trust Funds received transfers of approximately $1.9 billion during this period, and over $523 million in Federal Medicaid money was similarly transferred separately to the Treasury as a result of these efforts. The HCFAC account has returned over $27.8 billion to the Medicare Trust Funds since the inception of the Program in 1997.

10 THE PROGRAM ENFORCEMENT In FY 2014, the Department of Justice (DOJ) opened 924 new criminal health care fraud investigations. Federal prosecutors filed criminal charges in 496 cases involving 805 defendants. A total of 734 defendants were convicted of health care fraud-related crimes during the year.

11 THE PROGRAM ENFORCEMENT In FY 2014, DOJ opened 782 new civil health care fraud investigations and had 957 civil health care fraud matters pending at the end of the fiscal year. In FY 2014, the FBI investigative efforts resulted in over 605 operational disruptions of criminal fraud organizations and the dismantlement of the criminal hierarchy of more than 142 health care fraud criminal enterprises.

12 THE PROGRAM ENFORCEMENT In FY 2014, HHS Office of Inspector General (HHS-OIG) investigations resulted in 867 criminal actions against individuals or entities that engaged in crimes related to Medicare and Medicaid, and 529 civil actions, which include false claims and unjust-enrichment lawsuits filed in Federal district court, civil monetary penalties (CMP) settlements, and administrative recoveries related to provider self-disclosure matters.

13 THE PROGRAM ENFORCEMENT HHS-OIG also excluded 4,017 individuals and entities from participation in Medicare, Medicaid, and other federal health care programs. Among these were exclusions based on criminal convictions for crimes related to Medicare and Medicaid (1,310) or to other health care programs (432), for patient abuse or neglect (189), and as a result of licensure revocations (1,744).

14 TAKE AWAY While the government has not yet promulgated the rules for compliance programs under the PPACA, it has not stopped the government from expecting facilities to monitor their compliance or from prosecuting them.

15 WHAT IS AN EFFECTIVE COMPLIANCE PROGRAM?

16 In general, a compliance program is the internal set of policies, processes, and procedures that a provider organization implements to help it prevent and detect violations of Medicare laws and regulations. In addition, providers and members of the enforcement community agree that an effective compliance program can demonstrate a provider s intent to comply with Medicare s rules and requirements. GAO Report to Congress April, 1999

17 ELEMENTS OF AN EFFECTIVE CORPORATE COMPLIANCE PROGRAM: Program oversight Delegation of authority with due care A system of monitoring and auditing designed to detect criminal conduct Established compliance standards and procedures Education and training Consistent enforcement and discipline Response and corrective action

18 PPACA Established compliance standards and procedures; A senior-level compliance officer with sufficient resources and authority; Due care in delegating discretionary authority to individuals with a propensity for wrongdoing; Communicating standards and procedures to employee via training, publications, etc.; Reasonable steps to achieve compliance by monitoring and auditing systems as well as a reporting system for employees; Consistent enforcement/discipline, including employee discipline for failing to detect offenses; Reasonable responses to detected misconduct, including program modifications to prevent further similar offenses; and Periodic reassessment of the compliance program.

19 APPLICABLE LAWS & REGULATIONS

20 Fraud & Abuse Laws Federal fraud and abuse laws include: Federal False Claims Act Anti-Kickback Statute Stark Law (Physician Self-Referral Law) Social Security Act U.S. Criminal Code Violations of these laws result in nonpayment of claims, Civil Monetary Penalties, exclusion from all federal health care programs, and criminal and civil liability. Dept. of Justice, Dept. of Health & Human Services, Office of Inspector General, and Centers for Medicare & Medicaid Services enforce these laws.

21 The Federal False Claims Act Enacted in 1863 to combat fraud by government contractors. Used extensively to combat fraud in government health care programs. Amended in 1986 to include nonretaliation (whistleblower) protections. (31 USC )

22 False Claims Act (FCA) FCA protects the Federal Government from being overcharged or sold substandard goods or services. FCA imposes civil liability on any person who knowingly submits, or causes to be submitted, a false or fraudulent claim to the Federal Government. The knowing standard includes acting in deliberate ignorance or reckless disregard of the truth or falsity of the information related to the claim. Civil penalties for violating the FCA may include fines of up to three times the amount of damages sustained by the Government plus $11,000 per claim filed. 31 U.S. Code 3729

23 Liability under the Federal FCA The FCA establishes liability for any person who KNOWINGLY presents false or fraudulent claims to the US government for payment. The Act includes Qui Tam provisions that allow private citizens (relators) to sue violators on behalf of the government.

24 What is Knowingly? The person has actual knowledge; or The person does the following: Acts in deliberate ignorance of the truth or falsity of the information. Acts in reckless disregard of the truth or falsity of the information. Proof of specific intent to defraud is not required. 31 USC 3729(a)(2)

25 Claim A claim is: any request or demand, whether under a contract or otherwise, for money or property which is made to a contractor, grantee, or other recipient if the United States Government provides any portion of the money or property which is requested or demanded, or if the Government will reimburse such contractor, grantee, or other recipient for any portion of the money or property which is requested or demanded. 31 USC 3729(c)

26 Qui Tam Actions Allow private citizens ( relators ) to bring civil actions on behalf of the Government in return for an incentive. Promote the practice of private persons coming forward and aiding the government in pursuing fraud and waste. 31 USC Section 3730

27 Whistleblower Protections The Federal FCA protects whistleblowers who initiate, assist with, or testify for a false claim action. (31 USC 3730(h)). This section protects employees against discharge, demotion, suspension, threats, harassment, or discrimination by the employer because of lawful acts done by the employee in cooperating with the FCA.

28 Anti-Kickback Statute The Anti-kickback statute provides criminal penalties for individuals or entities who knowingly and willfully offer, pay, solicit or receive remuneration in order to induce business payable by Medicare or Medicaid. A violation of the anti-kickback statute could result in fines of up to $25,000 per kickback plus three times the amount of kickback. Criminal penalties include fines, imprisonment, or both. In addition, a violation could result in exclusion from the Medicare program. 42 U.S. Code 1320a-7b(b)

29 Stark Law Physicians are prohibited from referring DHS payable by Medicare or Medicaid to any entity with which the physician (or an immediate family member) has a financial relationship unless an exception is met. If no exception exists, severe penalties exist including denial of payment, refund of payment, imposition of a $15,000 per service civil monetary penalty and civil assessment of up to three times the amount claimed. 42 U.S. Code 1395nn

30 Anti-Kickback & Stark Law Overview Health Care Fraud Prevention and Enforcement Action Team (OIG)

31 Criminal Health Care Fraud Statute The Criminal Health Care Fraud Statute prohibits knowingly and willfully executing, or attempting to execute, a scheme or artifice in connection with the delivery of or payment for health care benefits, items, or services to: Defraud any health care benefit program; or Obtain (by means of false or fraudulent pretenses, representations, or promises) any of the money or property owned by, or under the custody or control of, any health care benefit program. Penalties for violating the Criminal Health Care Fraud Statute may include fines, imprisonment, or both. 18 U.S. Code 1347

32 Penalties Civil penalties of $5,500 to $11,000 per claim, plus treble damages (i.e., 3 times the amount of the government s damages). Exclusion from Medicare/Medicaid.

33 REPORT: DOES THE FALSE CLAIMS ACT DETER FRAUD?

34 Whistleblowers Win with FCA Employee of a medical device manufacturer filed a civil whistleblower lawsuit for Medicare fraud that she filed on behalf of the US and herself The manufacturer sold radioactive pellets used to treat prostate cancer and suspect they d developed a scheme to overcharge Medicare, which paid for most of the pellets. The manufacturer s sales representatives persuaded customers to use the manufacturer's product. The product was more expensive than the competitors. They did so by giving them free medical equipment, rebates, and grants.

35 Allegations Reported Employee was given instructions to do things that were inappropriate and illegal. She questioned management and they did nothing. She reported her concerns in an ethic complaint to the corporate headquarters who sent investigators to investigate. She was then mistreated by her superiors.

36 Preparing the Lawsuit The employee spent 7 years poring over documents and the contents of a laptop that the manufacturer sold to her in order to gather evidence for the lawsuit. The information was only available from sales records that happened to be on the laptop. The manufacturer settled the case for more than $48 million.

37 Concerns with FCA People are pursuing marginal, frivolous claims because there is potential for a big payday. Vast majority of cases are dismissed or abandoned because so many are meritless. FCA imposes penalties are out of proportion and doesn t give companies enough opportunities to remedy the problems before the fed. gov t gets involved. FCA fails to prevent fraud before it occurs. FCA should give the a company a chance to stop the fraud and report it to authorities If they don t, then big penalties should be imposed.

38 CASE STUDY: EXTENDICARE

39 TOOLS FOR AN EFFECTIVE COMPLIANCE PROGRAM

40 APPLYING THESE ELEMENTS IN THE CONTEXT OF LONG TERM CARE THE OIG HAS PROVIDED THE LONG-TERM CARE INDUSTRY WITH MODEL GUIDANCE FOR DEVELOPING AN EFFECTIVE COMPLIANCE PROGRAM

41 CURRENT PROJECTS Areas under scrutiny expands on a regular basis. Health care providers must stay current on the status of federal investigations and the areas subject to potential fraud.

42 OIG Workplan 2015

43 OIG Workplan 2015 Medicare Part A billing by skilled nursing facilities OIG will describe changes in SNF billing practices from FYs 2011 to Prior OIG work found that SNFs increasingly billed for the highest level of therapy even though beneficiary characteristics remained largely unchanged. OIG also found that SNFs billed one-quarter of all 2009 claims in error; this erroneous billing resulted in $1.5 billion in inappropriate Medicare payments. CMS has made substantial changes to how SNFs bill for services for Medicare Part A stays. (OEI; ; various reviews; expected issue date: FY 2015)

44 OIG Workplan 2015 Questionable billing patterns for Part B services during nursing home stays OIG will identify questionable billing patterns associated with nursing homes and Medicare providers for Part B services provided to nursing home residents during stays not paid under Part A (for example, stays during which benefits are exhausted or the 3-day prior-inpatient-stay requirement is not met). A series of studies will examine several broad categories of services, such as foot care. Looking for excessive services. (OEI; ; various reviews; expected issue date: FY 2015)

45 OIG Workplan 2015 State agency verification of deficiency corrections OIG will determine whether State survey agencies verified correction plans for deficiencies identified during nursing home recertification surveys. A prior OIG review found that one State survey agency did not always verify that nursing homes corrected deficiencies identified during surveys in accordance with Federal requirements. Federal regulations require nursing homes to submit correction plans to the State survey agency or CMS for deficiencies identified during surveys. (Expected issue date: FY 2015)

46 OIG Workplan 2015 Program for national background checks for longterm-care employees OIG will review the procedures implemented by participating States for long-term-care facilities or providers to conduct background checks on prospective employees and providers who would have direct access to patients and determine the costs of conducting background checks. We will determine the outcomes of the States' programs and determine whether the programs led to any unintended consequences.. (Expected issue date: FY 2015)

47 OIG Workplan 2015 Hospitalizations of nursing home residents for manageable and preventable conditions OIG will determine the extent to which Medicare beneficiaries residing in nursing homes are hospitalized as a result of conditions thought to be manageable or preventable in the nursing home setting. A 2013 OIG review found that 25 percent of Medicare beneficiaries were hospitalized for any reason in FY Hospitalizations of nursing home residents are costly to Medicare and may indicate quality-of-care problems in nursing homes. (Expected issue date: FY 2015)

48 PEPPER REPORTS

49 PEPPER REPORTS Compares a SNF s Medicare claims data statistics with aggregate Medicare data for the nation, MAC jurisdiction and state Program for Evaluating Payment Patterns Electronic Report (PEPPER) Summarizes Medicare claims data statistics for one SNF in areas ( target areas ) that may be at risk for improper Medicare payments.

50 PEPPER REPORTS PEPPER does not identify the presence of improper payments, but it can be used as a guide for auditing and monitoring efforts. A SNF can use PEPPER to compare its claims data over time to identify areas of potential concern and to identify changes in billing practices.

51 SNF Improper Payment Risks Target areas were identified based on a review of literature regarding SNF payment vulnerabilities, review of the SNF PPS, analysis of claims data and coordination with CMS subject matter experts.

52 Target Area Area identified as potentially at risk for improper Medicare payments. Constructed as a ratio: Numerator = RUG days/episodes of care identified as potentially problematic Denominator = larger reference group that contains the numerator

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56 Trends & Strategies for Effective Corporate Compliance Programs Margaret A. Chamberlain, Principal Kitch Drutchas Wagner Valitutti & Sherbrook 2379 Woodlake Drive, Suite 400 Okemos, MI Karen Berkery, Principal Kitch Drutchas Wagner Valitutti & Sherbrook One Woodward Avenue, Suite 2400 Detroit, MI