Texas State Board of Podiatric Medical Examiners HEALTHCARE FRAUD (a) - CME 7/9/ hrs of CME every 2 years

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1 Donald R. Blum, DPM, JD TPMA ANNUAL MEETING Marble Falls June Ethics in the Delivery of Health Care Services Topics on Healthcare Fraud Rules and Regulations pertaining to Podiatric Medicine in Texas Professional Boundaries Practice Risk Management Podiatric Medicine related Ethics or Jurisprudence Texas State Board of Podiatric Medical Examiners 378.1(a) - CME HEALTHCARE FRAUD 50 hrs of CME every 2 years 2 hrs shall be a course in: 1

2 Defining the Problem The intentional deception or misrepresentation that an individual knows, or should know to be false, or does not believe to be true, and makes, knowing the deception could result in some unauthorized benefit to himself or some other person(s) Whose Problem Is It? The average American household pays $1, every year in out of pocket costs as a result of insurance fraud. Seniors and taxpayers pay up to $1 billion a year in inflated drug prices due to potential fraud and loopholes in Medicare, representing 1/5 of Medicare spending in What is Fraud and Abuse Fraud: To purposely bill for services that were never given or to bill for a service that has a higher reimbursement than the services produced. Abuse: Payment for items or services that are billed by mistake by providers, but should not be paid. Not the same as fraud. Whose Problem Is It? One in four Americans says it is okay to defraud insurers, consumers need to understand this type of thinking is costly. Many of the FBI s 56 field offices rank healthcare fraud as their No. 1 white collar crime. 2

3 Fraud losses: The Cost of Fraud Estimates in 2003 show at least 3% ($51 billion). Other government estimates place the losses as high as 10% ($170 billion) HEALTH CARE FRAUD s VICTIMS While health care fraud is extremely costly, it is important to understand that adding a criminal element to health care creates quality of care issues that can result in patients being exploited and/or put at physical risk. Federal law provides for longer potential prison terms in health care fraud cases that result in a patient s injury or death. The Cost of Fraud What would $170 billion buy? Consumer online spending reached $170 billion in Global spending on HIV.Aids in low and middle income countries was estimated at $6.1 billion in 2004 and at $12 billion in Cancers annually cost the U S $70 billion in direct medical costs. Increase insurance premiums: deductibles/co-pays Healthcare Fraud Increase Taxes to fund government programs 3

4 Creates quality of Care Issues Civil and Criminal Law Differences Healthcare Fraud Creates distrust in in Healthcare Criminal actions are pursued by the government. Example: If a fraud perpetrator violates a criminal law, the government may criminally prosecute the offender. COMMON LAW FACTORS Under common law, four elements are required to prove fraud: A person makes a material false statement; The statement is false, and the person making the statement knows that it is false; The person making the statement intends to deceive or mislead the person to whom the statement was made with the expectation of receiving something of value; The person to whom the false statement is made is expected to rely on the statement to his/her detriment. Civil and Criminal Law Differences Civil matters may be pursued by the government or private industry. Example: If an insurer believes the pertrator s actions have injured it in a way that violates civil law, the insurer can bring a civil action (lawsuit) against the perpetrator. 4

5 Civil and Criminal Law Differences The required level of proof is different in civil and criminal cases. Civil cases require preponderance of evidence. Criminal fraud standard is beyond a reasonable doubt. Example: O J Simpson trial was good example of the difference in criminal and civil standards. Problems in Proving Fraud To proved this defense wrong, it must be determined: Should or could have the person known what she/he did was wrong (reasonable expectations)? Is there a pattern of illegal activity to prove otherwise? Has the issue been addressed before? Problems in Proving Fraud Health care rules are not only complex, but they are constantly changing. The accused may think they have a credible defense: I don t know. What Doctors Think? 39% of doctors surveyed admitted to stretching the truth and even lying in order to administer the treatments needed by patients. 5

6 What Doctors Think? Provider Fraud Schemes Over 80 percent of all suspected fraud cases involve provider fraud. These issues are known as hard fraud. Falsification of Information False Coding, Records Falsification, Altered Claims Doctors sometimes, often or very often exaggerated syptoms or altered diagnosis. Questionable Practices Upcoding, Unbundling, Balance Billing, Cost Shifting, Kickbacks, Prescribing Practices, Clustering, Underutilization, Invalid Place of Service, Rolling Labs, Non-Contracted Providers Overutilization Medically Unnecessary Diagnostics, Office Visit Frequency, Unnecessary Durable Medical Equipment, Prior Authorization Fraud, Inappropriate Procedure for Diagnosis L What Doctors Think? Over 50% of doctors said such gaming was increasing in their practices. Member fraud is referred to as soft fraud. Soft fraud is harder to detect and is often the result of abuse of an insurance process, claim exaggeration, or opportunistic claim filing. This type of fraud is typically done by individuals without a clear criminal history or criminal profile. Schemes perpetrated by this population include: Drug Seeking Behavior and/or Trafficking Collusion Conspiracy Forgery Impersonation Fraud Co-payment Evasion Providing False Information Sharing or Stealing Medicaid Benefits Subrogation/Third Party Liability Fraud Theft Transportation Fraud Member Fraud Schemes *Bingham, K., Lucker, J. & Masud, M. (2006, March ). A Hard Look. Contingencies, p.28 6

7 Increased Regulatory Scrutiny What is the Deficit Reduction Act? Anti-Fraud regulatory requirements have dramatically increased. As of June 2006: Forty states have Insurance Fraud Bureaus; Twenty states require anti-fraud plans; Sixteen states require Special Investigative Units; and, Forty-three states have anti-fraud mandates that apply to managed care organizations. *NHCAA Guide to State Insurance Fraud Bureaus and Health Insurer Anti-Fraud Requirements. On February 8, 2006, President Bush signed Public Law , the Deficit Reduction Act (DRA) of 2005, into law. The DRA is the most sweeping legislation to impact Medicaid in over 30 years. The DRA goes into effect January 1, The DRA aims to cut $11 billion from the Medicare and Medicaid programs. The plan is to realize this savings over the next five years. The DRA plans to save Medicaid monies by deterring and preventing: Fraud Waste Abuse This plan is evidenced in Section 6032 of the act. Medicaid Anti-Fraud Regulatory Agencies Section 6032 What Does it Mean? Medicaid Product Employee Education About False Claims Recovery State Medicaid Fraud Control Unit State Insurance Fraud Bureau State Medical Assistance Division State Human Services Department Office of Inspector General (OIG) State Board of Podiatric Examiners FBI CMS US Health & Human Services OIG US Attorney s Office IRS DEA Any health care entity who receives or pays out $5 million or more in Medicaid funds per year must have written policies in place for the following: EMPLOYEES CONTRACTORS AGENTS 7

8 Policy Requirements Liability Factors Policies must provide detailed information about: The Federal False Claims Act and any state laws pertaining to civil or criminal penalties for false claims and statements, including whistleblower protections granted in these laws; How the provider will detect and prevent fraud, waste, and abuse; and, The rights of the employee to be protected as whistleblowers and reiteration of the entity s policy for detecting and preventing fraud, waste, and abuse in the employee handbook. Under the Federal False Claims Act, any person who engages in the following is liable for his/her actions: 1. Knowingly presents, or causes to be presented, to an officer or employee of the United States Government or a member of the Armed Forces of the United States a false or fraudulent claim for payment or approval; 2. Knowingly makes, uses or causes to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the Government; 3. Conspires to defraud the Government by getting a false or fraudulent claim allowed or paid; Federal False Claims Act Terms Defined Liability Factors, cont. In order to understand the Federal False Claims Act, certain terms need to be defined: Knowing and Knowingly - mean that a person, with respect to information- Has actual knowledge of the information; Acts in deliberate ignorance of the truth or falsity of the information; or, Acts in reckless disregard of the truth or falsity of the information. No proof of specific intent to defraud is required. 4. Has possession, custody, or control of property or money used, or to be used, by the Government and, intending to defraud the Government or willfully to conceal the property, delivers, or causes to be delivered, less property than the amount for which the person receives a certificate or receipt; 5. 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; 6. 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 the property; or, 7. Knowingly makes, uses, or causes to be made or used, a false record or statement to conceal, avoid, or decrease an obligation to pay or transmit money or property to the Government. So, what does this mean??? 8

9 Time to Pay the Piper Exceptions to the Rule, cont. It means be prepared to pay. Persons who have engaged in the acts described are liable to the United States Government for a civil penalty. The penalty is not <$5,000 and not >$10,000 plus three (3) times the amount of damages the Government sustains because of the act of that person. This would result in the court assessing the matter at not less than two (2) times the amount of damages, which the Government sustains because of the act of the person. A person would still be liable to the U.S. Government for the costs of a civil action brought to recover any such penalty or damages. Exceptions to the Rule Article 14- Medicaid False Claims Act The only exceptions made by the court is if it were found: A. The person committing the violation of this subsection furnished officials of the U.S. responsible for investigating false claims violations with all information known to such person about the violation within thirty (30) days after the date on which the defendant first obtained the information. B. Such person fully cooperated with any Government investigation of such violations; and, C. At the time such person furnished the U.S. 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. Due to the government s success with the federal version, Texas and several other states by enacting state qui tam provisions. the Texas Medicaid False Claims Act, into law on Prior to this legislation, people in Texas were only able to file a qui tam lawsuit on behalf of the government as allowed by the federal act. Going forward, the Medicaid Integrity Program (funded by the DRA), will require all states and applicable territories to have their own false claims act. 9

10 Why All These Rules? Anti-Fraud Program Role By making health care entities responsible for putting these laws into practice within their business, these entities can no longer claim they are not aware of False Claims laws and what these laws mean. Health care entities must embrace the law by showing that they have methods for detecting and preventing: Fraud Waste Abuse As directed by regulatory guidelines, the main role of the Anti-Fraud Program is to: Detect Prevent Investigate Report Other roles the program assumes are: Providing Provider Education; Conducting proactive and meaningful investigations; Including generating material evidence to support criminal investigations. Identifying hard and soft $$$ savings; Actively participating in maintaining and analyzing system needs; Working and coordinating efforts with other law enforcement and special investigative units; and, Training employees how to identify potential fraud, waste, and abuse. Facing the Consequences Providers who receive or pay out $5 million or more from Medicaid per year who fail to implement DRA legislative requirements by January 1, 2007 will be at risk of forfeiting all Medicaid payments until compliance is met. Thank you! 10