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5 Currently, the government is extremely focused on cracking down on health care fraud. The government created the Health Care Fraud Prevention and Enforcement Action Team ( HEAT ) in May 2009 as a way to increase coordination among government entities and optimize enforcement efforts. Fighting Medicare fraud has become a top priority for both the Department of Justice and HHS with the creation of HEAT. There are two main purposes of HEAT: (1) to assemble and strengthen significant resources across government entities to prevent waste, fraud and abuse in the Medicare and Medicaid programs, and crack down on individuals committing fraud, abusing the system, and stealing billions of dollars; and (2) to reduce increasing health care costs and improve the quality of health care delivered to individuals by eliminating perpetrators from the system who prey on beneficiaries and harm the solvency of Medicare and Medicaid programs. The HEAT initiative attempts to stop fraud before it happens and eliminate fraudulent individuals from participating in the Medicare program. Recently, HEAT posted a series of 11 short training videos to the OIG website. The videos cover high priority compliance topics, including the False Claims Act. In addition, in June 2011, President Obama launched the Campaign to Cut Waste. This campaign is focused on increasing accountability and transparency in government spending. The Campaign to Cut Waste includes two key initiatives: (1) create a new Oversight and Accountability board; and (2) hold regular cabinet meetings to report progress to the Vice President. The establishment of a new oversight and accountability board will help federal agencies improve their performance and reduce waste, fraud, and abuse across government. 5

6 The board will allow taxpayers the ability to track where their dollars are being spent and have confidence that the dollars are not being lost to waste, fraud, or abuse. The board will consist of 11 members, including agency Inspectors General, agency Chief Financial Officers or Deputy Secretaries, an official from the Office of Management & Budget, and any other members designated by President Obama. In addition, the campaign to cut waste requires cabinet members to report progress in cutting waste directly to the Vice President through regular meetings. Chief Operating Officers and Chief Financial Officers must also regularly report progress to the Office of Management and Budget. The Department of Justice is also extremely focused on using the False Claims Act as the primary tool to fight fraud. Whistleblowers (also known as qui tam relators) are private individuals who may receive 30% of any successful recovery when bringing an action on behalf of the government. In 2011, whistleblowers initiated 638 of 762 new matters (84%), which is more than in any previous year. Whistleblowers in 2011 earned more than $532 million from bringing these claims. More than $2.4 billion of the $3.03 billion recovered in FY 2011 came from settlements and judgments involving fraud against federal health care programs. 5

7 Whistleblowers (also known as qui tam relators) are private individuals who may receive 30% of any successful recovery when bringing an action on behalf of the government. In 2011, whistleblowers initiated 638 of 762 new matters (84%), which is more than in any previous year. Whistleblowers in 2011 earned more than $532 million from bringing these claims. More than $2.4 billion of the $3.03 billion recovered in FY 2011 came from settlements and judgments involving fraud against federal health care programs. 6

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11 Bottom line: FCA revisions make FCA suits more likely and easier for the government to bring. President Obama signed the Patient Protection and Affordable Care Act ( PPACA ) into law on March 23, Part of the reform law included provisions that will make it easier for the government to prosecute and prevent fraud and abuse in the health care market in order to control rising health care costs. PPACA broadened the FCA in three ways: (1) the law narrowed the scope of the public disclosure bar; (2) it increased liability for the retention of overpayments; and (3) it made all antikickback violations potential FCA violations. Overpayments PPACA also increased potential liability for the retention of overpayments. Overpayments are any funds that a person receives or retains under Title XVIII or XIX to which the person, after applicable reconciliation, is not entitled under Titles XVIII or XIX. 42 U.S.C. 1320a-7k(d)(4)(B). Overpayments can result from otherwise innocent acts, including: Payment when benefits have been exhausted, or during a period of non-entitlement; Incorrect calculation of deductible or coinsurance; Payment for noncovered or medically unnecessary items and services; Duplicate charges or duplicate claims; Incorrectly coded services; and Primary payment in violation of Medicare as Secondary Payer rules. 42 U.S.C. 1320a-7k(d)(4)(B) states that [t]he term overpayment means any funds that a person receives or retains under subchapter XVIII or XIX to which the person, after applicable reconciliation, is not entitled under such subchapter. The False Claims Act prohibits knowingly and improperly avoiding or decreasing an obligation to pay or transmit money or property to the government. 31 U.S.C. 3729(a)(1)(G). Section 6402 of PPACA makes overpayments not returned AND reported to the government within 60 days of their identification or when the next cost report is due, whichever is later, obligations that cannot be knowingly and improperly retained under the FCA. 42 U.S.C. 1320a-7k(d)(2); Patient Protection and Affordable Care Act, Pub. L. No , 6402(d)(2). Any overpayment that has been retained after the deadline is considered an obligation under the False Claims Act. 42 U.S.C. 1320a-7k(d)(3); 6402(d)(3). FERA defined knowingly as (1) actual knowledge of information; (2) deliberate ignorance of the truth or falsity of the information; or (3) reckless disregard of the truth or falsity of the information. Fraud Enforcement and Recovery Act, Pub. L. No , 4(a)(1)(G), 123 Stat. 1617, 1622 (amending 31 U.S.C. 3729(a)). 31 U.S.C. 3729(a)(1)(G) (1) IN GENERAL Subject to paragraph (2), any person who -... (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.... is liable to the United States Government for a civil penalty of not less than $5,000 and not more than $10,000, as adjusted by the Federal Civil Penalties Inflation Adjustment Act of , plus 3 times the amount of damages which the Government sustains because of the act of that person. 42 U.S.C. 1320a-7k(d)(2) An overpayment must be reported and returned under paragraph (1) by the later of (A) the date which is 60 days after the date on which the overpayment was identified; or (B) the date any corresponding cost report is due, if applicable. 42 U.S.C. 1320a-7k(d)(3) Any overpayment retained by a person after the deadline for reporting and returning the overpayment under paragraph (2) is an obligation (as defined in section 3729(b)(3) of title 31) for purposes of section 3729 of such title. Pub. L. No , 4(a)(1)(G), 123 Stat. 1617, 1622 the terms knowing and knowingly (A) mean that a person, with respect to information (i) has actual knowledge of the information; (ii) acts in deliberate ignorance of the truth or falsity of the information; or (iii) acts in reckless disregard of the truth or falsity of the information. In addition, prior to PPACA, the FCA required a person to make an affirmative act to conceal an overpayment in order to be found liable of a FCA violation. However, an affirmative act of concealment is no longer required after PPACA. Therefore, FCA liability can now be based on merely not reporting and repaying an overpayment after a certain amount of time from identifying the overpayment. Liability includes penalties plus treble damages. 10

12 Health care providers must document the medical necessity of services rendered before submitting claims for reimbursement to the government. Any false or even deficient statement in documenting the medical necessity of a procedure can lead to FCA investigations and liability. 11

13 Health care providers are required to document the medical necessity of services provided to patients prior to submitting claims for reimbursement to the government. Any false claim in documenting this medical necessity could lead to liability under the FCA. In January 2011, seven hospitals announced that they would pay the government more than $6.3 million to settle claims they had improperly billed Medicare for kyphoplasty procedures. These hospitals were located in six different states, including Florida, Mississippi, Texas, South Carolina, North Carolina, and Alabama. Kyphoplasty procedures are minimally invasive procedures that are used to treat certain spinal fractures that are often due to osteoporosis. The government argued that the hospitals had overcharged Medicare between 2000 and 2008 when performing kyphoplasty procedures. The government had alleged in these cases that the hospitals billed Medicare for admitting patients receiving these procedures on an inpatient basis instead of admitting them on an outpatient basis. It has been shown that kyphoplasty procedures can be performed safely and at a cheaper rate when performed on an outpatient basis. The government argued that it was not medically necessary to admit the patients on an inpatient basis for these procedures; the hospitals performed the procedure on an inpatient basis in order to increase their Medicare billings, which was in violation of the False Claims Act. The settling facilities include the following: Lakeland Regional Medical Center in Lakeland, FL ($1,660,134.49) The Health Care Authority of Morgan County City of Decatur dba Decatur General Hospital in Decatur, AL ($537,892.88) St. Dominic-Jackson Memorial Hospital in Jackson, MS ($555,949.35) Seton Medical Center in Austin, TX ($1,232,955.91) Greenville Memorial Hospital in Greenville, SC ($1,026,764.01) Presbyterian Orthopaedic Hospital in Charlotte, NC ($637,872.57) The Health Care Authority of Lauderdale County and the City of Florence, AL ($676,038.00) The settlements with these states followed settlements the government reached with 18 other hospitals in 2009 and 2010 related to other kyphoplasty claims. In total, the government has recovered $15.7 million in kyphoplasty-related claims. 12

14 Re the TMF Collaborative TMF, Medicare s QIO contractor, sponsored a series of collaborative efforts to improve inpatient versus outpatient status assignments. TMF s focus was to reduce the number of One Day Stays at participating hospitals. A New Reality; Care is the same but reimbursement is different; Scott & White voluntarily collaborated with TMF through these programs beginning in 2001 and continuing through TMF was Medicare s auditor in Texas, and this is how they chose to handle One Day Stay issues. Participation in TMF s collaborative programs included: Review of aggregate One Day Stay totals (specific DRGs); Identification of baseline rates for appropriate admissions; Monthly audits of admissions, with results shared with TMF; Feedback reports from TMF; and Educational seminars and on-site training. Claims were rebilled as necessary. Never asked to extrapolate or expand review further. Other steps taken as needed (e.g., additional pre-bill reviews). This monthly auditing and collaboration program covers majority of time period for this case. 13

15 In other words, medical device manufacturers will invent devices meant to make it so patients don t need to stay in the hospital, but tell hospitals that they should code as if they do based on existing treatment and care guidelines. Health care providers are required to document the medical necessity of services provided to patients prior to submitting claims for reimbursement to the government. Any false claim in documenting this medical necessity could lead to liability under the FCA. In January 2011, seven hospitals announced that they would pay the government more than $6.3 million to settle claims they had improperly billed Medicare for kyphoplasty procedures. These hospitals were located in six different states, including Florida, Mississippi, Texas, South Carolina, North Carolina, and Alabama. Kyphoplasty procedures are minimally invasive procedures that are used to treat certain spinal fractures that are often due to osteoporosis. The government argued that the hospitals had overcharged Medicare between 2000 and 2008 when performing kyphoplasty procedures. The government had alleged in these cases that the hospitals billed Medicare for admitting patients receiving these procedures on an inpatient basis instead of admitting them on an outpatient basis. It has been shown that kyphoplasty procedures can be performed safely and at a cheaper rate when performed on an outpatient basis. The government argued that it was not medically necessary to admit the patients on an inpatient basis for these procedures; the hospitals performed the procedure on an inpatient basis in order to increase their Medicare billings, which was in violation of the False Claims Act. Kyphoplasty is a variation of a vertebroplasty that attempts to stop the pain caused by the bone fracture and attempts to restore the height and angle of kyphosis of a fractured vertebra (of certain types), followed by its stabilization using injected bone cement. The procedure typically includes the use of a small balloon that is inflated in the vertebral body to create a void within the cancellous bone prior to cement delivery. Once the void is created, the procedure continues in a similar manner as a vertebroplasty, but the bone cement is typically delivered directly into the newly created void. In its review of vertebroplasty and vertebral augmentation procedures, Medicare contractor NAS determined that there is no difference between vertebroplasty and kyphoplasty, stating, "No clear evidence demonstrates that one procedure is different from another in terms of short- or long-term efficacy, complications, mortality or any other parameter useful for differentiating coverage. NOTE THAT VETEBROPLASTY HAD PREVIOUSLY BEEN AN OPEN, INVASIVE PROCEDURE. The settling facilities include the following: Lakeland Regional Medical Center in Lakeland, FL ($1,660,134.49) The Health Care Authority of Morgan County City of Decatur dba Decatur General Hospital in Decatur, AL ($537,892.88) St. Dominic-Jackson Memorial Hospital in Jackson, MS ($555,949.35) Seton Medical Center in Austin, TX ($1,232,955.91) Greenville Memorial Hospital in Greenville, SC ($1,026,764.01) Presbyterian Orthopaedic Hospital in Charlotte, NC ($637,872.57) The Health Care Authority of Lauderdale County and the City of Florence, AL ($676,038.00) The settlements with these states followed settlements the government reached with 18 other hospitals in 2009 and 2010 related to other kyphoplasty claims. In total, the government has recovered $15.7 million in kyphoplasty-related claims. 14

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18 Notes re audit design: The OIG standard (from the self-disclosure protocols and CIAs) is that the size of the statistically valid random sample be determined through the use of a probe sample containing at least thirty (30) sample units, and that the full sample be designed to generate an estimate with a 90% confidence level and 25% precision. 63 Fed. Reg (October 30, 1998). Note that many CIAs require the use of so-called "Discovery Samples" of 50 claims, though the 90%/25% parameters are consistent. See, The purpose of conducting a Discovery Sample as part of the Claims Review is to determine the net financial error rate of the sample that is selected. If the net financial error rate equals or exceeds 5%, the results of the Discovery Sample are used to determine the Full Sample size. The Full Sample size is based on an estimate of the variability of the overpayment amount in the population from which the sample was drawn. The results of the Discovery Sample allow the reviewer to estimate how many sample units need to be reviewed in order to estimate the overpayment in the population within certain confidence and precision levels (e.g., generally, a 90% confidence and 25% precision level). Follow up with line employees, audit personnel: 17

19 As RACs continue to be active, line personnel working on claims auditing and review integrally need to be managed so they understand the report/repay process, and don t conclude that the hospital is inappropriately retaining any failed claims or otherwise not beefing up processes moving forward. 17

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24 Note also that almost 80% of the banner-year recoveries were from healthcarerelated actions. 22

25 High returns: In November 2011, Assistant Attorney General Tony West stated that [f]or every dollar Congress has provided for health care enforcement over the past three years, [the government] has recovered nearly seven dollars. Tony West made this comment at the 12 th Annual Pharmaceutical Regulatory and Compliance Congress on November 2, See Medicaid: Now federal dollars available for Medicaid investigation and enforcement efforts. E.g., Medicaid programs get money for data-mining. 23

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