Number 878 June 8, 2009 Client Alert Latham & Watkins Health Care Practice This initiative represents a continuation and expansion of interagency efforts begun more than two years ago and illustrates an ongoing course of commitment to health care fraud enforcement activity. Recently Announced Interagency Medicare Fraud Initiative Expands Ongoing Enforcement Activity On May 20, 2009, US Department of Justice (DOJ) Attorney General Eric Holder and Health and Human Services (HHS) Secretary Kathleen Sebelius announced the creation of a new interagency effort, the Health Care Fraud Prevention and Enforcement Action Team (HEAT), to battle fraud in the Medicare and Medicaid programs. 1 This initiative represents a continuation and expansion of interagency efforts begun more than two years ago and illustrates an ongoing course of commitment to health care fraud enforcement activity. As such, the department heads also announced the expansion of HEAT strike force team operations, currently ongoing in south Florida and Los Angeles, to Detroit and Houston. Such teams are deployed to fight Medicare fraud on a targeted local level. In order to call attention to certain issues likely of interest, this Client Alert (1) describes past interagency efforts and successes in fighting health care fraud; (2) outlines the recently announced initiative, highlighting changes from previous endeavors; (3) anticipates what may be developing on the horizon in the fraud and abuse arena; and (4) offers considerations for health care organizations that may be impacted by this enhanced interagency program. Recent History of Interagency Health Care Fraud Collaboration The agencies began collaborative discussions around Medicare antifraud enforcement activities years ago. Given that the traditional model for criminal investigations is lengthy and long-term, HHS and DOJ sought tools and pursued coordinated efforts that would facilitate working in realtime data to effect quick, targeted and timely prosecutions of health care fraud offenders. Aggressive enforcement actions were and continue to be perceived as effective means to achieve deterrence, promote fiscal soundness in the Medicare program and illustrate the agencies commitment to rigorous enforcement consistent with concurrent health care reform proposals. To this point, Secretary Sebelius stated, I believe a targeted civil and criminal enforcement strategy will have a substantial impact on deterring fraud and abuse, protecting patients and the elderly from scams, and ensuring that taxpayer funds are not stolen. 2 The agencies announced in 2007 the implementation of an initial strike force team in south Florida principally focused on issues particular to the Latham & Watkins operates as a limited liability partnership worldwide with affiliated limited liability partnerships conducting the practice in the United Kingdom, France and Italy and an affiliated partnership conducting the practice in Hong Kong. Under New York s Code of Professional Responsibility, portions of this communication contain attorney advertising. Prior results do not guarantee a similar outcome. Results depend upon a variety of factors unique to each representation. Please direct all inquiries regarding our conduct under New York s Disciplinary Rules to Latham & Watkins LLP, 885 Third Avenue, New York, NY 10022-4834, Phone: +1.212.906.1200. Copyright 2009 Latham & Watkins. All Rights Reserved.
region and traditionally known to be rife with fraud and abuse. Specifically, the strike force investigated and prosecuted cases of Medicare fraud involving infusion therapy, home health services and durable medical equipment (DME) reimbursement. Following some success in south Florida, DOJ and HHS expanded phase two of the program to Los Angeles, focusing on DME fraud issues. During these initial phases, the agencies convicted 146 defendants and recovered $186 million in criminal and civil fines resulting from cases brought in south Florida. In Los Angeles, the strike force teams charged 37 defendants and secured the order of more than $55 million in restitution to the Medicare program. 3 Overall, DOJ reports that last year the Agency filed 502 criminal health care fraud cases involving charges against 797 defendants, obtained 588 convictions for health care fraud offenses [and] working with [HHS], has obtained more than $14 billion in total recoveries, including criminal and civil settlements, since 1997. 4 Continued and Expanded Enforcement Efforts The HEAT initiative is funded in part by the Omnibus Appropriations Act of 2009, which allocates $198 million specifically for joint HHS-DOJ health care antifraud programs, and the promise of $311 million in the President s Budget to strengthen Medicare program integrity activities. With these funds, the agencies plan to invest in new technology and to expand the scope of anti-fraud efforts. Strike force teams will continue work in south Florida and Los Angeles, as well as operationalize units in Houston and Detroit. The agencies intend to continue in the pursuit of using real-time, data-driven approaches to identifying unexplained billing patterns and investigate providers in these enumerated locations for possible fraudulent activity. As part of the expanded anti-fraud program, HHS and DOJ plan to offer increased training for health care providers on Medicare compliance and resources to help with the identification and prevention of fraud. Additionally, the agencies announced plans to hold outreach meetings with the private sector and efforts to highlight best practices in fraud prevention. These elements of the initiative have not yet been fully articulated and it remains to be seen what specific training will be provided, who the outreach meeting stakeholders will be, what format the meetings will take, or what process will be employed to identify best practices. Similarly, HHS and DOJ state that the initiative will involve improved data sharing between the Centers for Medicare and Medicare Services (CMS) and DOJ, alluding to the use of more robust technology, but without yet providing specifics. Investigators are implementing state-of-the-art, cutting edge technology to identify and analyze potential fraud with unprecedented speed and efficiency. Using this technology, federal law enforcement officials are completing in a matter of days analysis of electronic evidence that previously took months to analyze using traditional investigative tools. 5 Additional, new elements of this iteration of the anti-fraud initiative include the launch of a new Web site and hotline enabling the public to report suspected fraud 6 and efforts aimed at strengthening and monitoring program integrity in Medicare Parts C and D. The original initiative focused on fraud abuse in Medicare Part B. As such, focus on Medicare Parts C and D, which will be implemented through expanded use of Medicare Drug Integrity contractors, represents an expansion to Medicare programs that were not historically emphasized. Lastly, other elements of the HEAT initiative will include building 2 Number 878 June 8, 2009
on existing HHS demonstration projects focused on DME reimbursement via increased site visits during the provider enrollment period and helping state Medicaid officials conduct provider audits to detect fraud. Developments on the Health Care Anti-Fraud Horizon As described previously, much remains to be defined in the newly announced HEAT initiative. Health care organizations must await elaboration on the manner and method of increased provider training, outreach meetings and identification of best practices, as well as definition of the real-time data tools that the agencies will employ. Also in the pipeline is a new HHS-DOJ Web site that will track the progress of these efforts and new strategies for informing and involving the public. Other developments on the horizon may include increasing the scope of the HEAT program beyond the four enumerated localities. Assistant Attorney General (AAG) Breuer, in his statement and testimony before Congress, acknowledges that past strike force team success has been largely attributable to targeted, local investigations by experienced agents familiar with the treatment practices unique to a particular region. Based upon these successes, AAG Breuer advised Congress that the HEAT program may be expanded to all districts. 7 If such a broad-based rollout of this enforcement program can be accomplished, it will have a significant impact upon rooting out health care fraud in this country. Another development to monitor will be the frequency with which DOJ and HHS pursue criminal versus civil sanctions against fraudulent actors under this enforcement program. The same day the HEAT initiative was announced, the President signed into law the Fraud Enforcement and Recovery Act of 2009, which amends and expands the federal civil False Claims Act (FCA). While DOJ may place emphasis on criminal prosecutions to punish and deter health care fraud activities, both DOJ and HHS will have a newly strengthened civil FCA enforcement tool as an attractive alternative. Notably, it remains unclear how the civil/criminal line will be drawn. 8 Beyond civil and criminal penalties, it appears the agencies are also prepared to aggressively pursue exclusion from federal payment programs for providers who commit serious Medicare fraud violations. AAG Breuer states that one of the Agency s goals is to seek exclusion for convicted providers and ensure swift and certainty of punishment, and that exclusion is much more likely to occur. 9 As professionals and organizations in the health care industry are almost invariably dependent on Medicare and Medicaid dollars for financial viability, exclusion often tolls a death knell for providers. Thus it will be important to watch as enforcement trends develop. Practice Considerations Although the HEAT initiative will focus on the most egregious offenders, companies in general should assess the continued validity of current compliance plans in order to ensure conformity with the new program and help mitigate the risk of any enforcement actions. In particular, we recommend that organizations consider taking the following steps: Affirmatively engage on best practices, training and technical issues in order potentially to influence the agencies development of these program components. Re-evaluate existing compliance plans and consider an internal audit with regard to Medicare and Medicaid billing practices, especially where business operations exist in Houston 3 Number 878 June 8, 2009
or Detroit, or the company has reason to interact with entities in south Florida or Los Angeles. Monitor developments in certain elements of the initiative yet to be articulated, and enforcement trends with regard to the agencies choice of targets and remedies. Endnotes 1 See Department of Justice Press Release, Attorney General Holder and HHS Secretary Sebelius Announce New Interagency Health Care Fraud Prevention & Enforcement Action Team (May 20, 2009), available at http://www. usdoj.gov/opa/pr/2009/may/09-ag-491.html. See also Health and Human Services Press Release, Attorney General Holder and HHS Secretary Sebelius Announce New Interagency Health Care Fraud Prevention & Enforcement Action Team (May 20, 2009), available at http://www. hhs.gov/news/press/2009pres/05/20090520a. html. 2 HHS press release supra note 1. 3 DOJ press release supra note 1. 4 Criminal Prosecution as a Deterrent to Health Care Fraud: Hearing Before the Subcommittee on Crime and Drugs of the Senate Committee on the Judiciary, 111th Congress (May 20, 2009) (prepared statement of witness Lanny A. Breuer) 5 Department of Health and Human Services Stop Medicare Fraud Web site, Turning Up the HEAT to Stop Medicare and Medicaid Fraud, http:// www.hhs.gov/stopmedicarefraud/background. html (last visited May 29, 2009). 6 Department of Health and Human Services Stop Medicare Fraud Web site, Turning Up the HEAT to Stop Medicare and Medicaid Fraud, http:// www.hhs.gov/stopmedicarefraud/ (last visited May 29, 2009). 7 Criminal Prosecution as a Deterrent to Health Care Fraud: Hearing Before the Subcommittee on Crime and Drugs of the Senate Committee on the Judiciary, 111th Congress (May 20, 2009) (statement of witness Lanny A. Breuer). 8 Id. 9 Id. If you have any questions about this Client Alert, please contact one of the authors listed below or the Latham attorney with whom you normally consult: Barry M. Sabin +1.202.637.2263 barry.sabin@lw.com Alice S. Fisher +1.202.637.2232 alice.fisher@lw.com Daniel Meron +1.202.637.2218 daniel.meron@lw.com 4 Number 878 June 8, 2009
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