Federal Officials Ramp Up Healthcare Fraud Violation Investigations

Federal enforcement of the anti-kickback statute and other laws has increased over the past decade. In the 2016 fiscal year, the Department of Justice (DOJ) opened 930 new civil healthcare fraud investigations and had 1,422 civil healthcare fraud matters pending.¹

Healthcare providers paid the federal government more than $2.5 billion in fraud judgments and settlements. Federal investigations also resulted in 765 criminal actions and 690 civil actions, including false claims and unjust enrichment lawsuits. The Department of Health and Human Services (HHS) prohibited 3,635 people and organizations from participating in Medicare, Medicaid, and other federal healthcare programs.¹

The trend of increased healthcare fraud enforcement will continue, according to experts.

“The anti-kickback statute is as wide as it is long. It is so broad that the government has recognized that certain business arrangements may constitute a technical violation of the statute, but may not represent a significant risk to the Medicare Trust Fund as long as certain requirements are met,” says Robert W. Liles, JD, MS, MBA, managing partner with Liles Parker in Washington, DC. Liles previously worked as a federal prosecutor in healthcare and was the first national healthcare fraud coordinator. He now represents healthcare providers and is asked to speak regularly about healthcare fraud issues at national conferences.

“The statute is so broad that practically anything you might consider to be standard business courtesies could run afoul of the anti-kickback statute,” Liles says. “Whenever you are dealing with Medicare, Medicaid, and other federal and state health benefit programs, you have to be careful. It’s not business as usual, and things have gotten a lot more complicated because of the Affordable Care Act [ACA] and the significant changes they’ve made to the anti-kickback statute.”

The ACA contains provisions that strengthen federal fraud and abuse laws in healthcare, and these provisions likely will continue, even if lawmakers eventually dismantle the ACA, according to Scott Grubman, JD, partner with Chilivis, Cochran, Larkins, & Bever in Atlanta. Grubman was a federal prosecutor, focused on healthcare fraud, and served on a healthcare fraud task force for the DOJ. Now, he speaks about healthcare fraud and abuse and represents healthcare organizations, including ambulatory surgery centers (ASCs).

The old version of the anti-kickback statute required someone to have specific knowledge that their actions violated the statute, and they had a specific intent to violate the law. The new version took out “specific” knowledge and intent wording, making it easier for federal prosecutors to allege a violation, Liles says.

“Fraud and abuse enforcement in the healthcare space skyrocketed under the previous administration, and all indications thus far are that this will not change under the new administration,” Grubman says. “Confirmation hearings for Attorney General Jeff Sessions and HHS Secretary Tom Price showed that both of them have a strong commitment to continuing strong enforcement in healthcare.”

That said, there are additional safe harbors to the anti-kickback statute, as amended in December 2016 and effective on Jan. 2, 2017. These include a change that protects certain cost-sharing waivers that pose a low risk of harm.² (See anti-kickback statute table in this issue.)

What many ASC administrators and surgeons might not understand is that there is no “de minimis” amount that must be met for the anti-kickback statute to be triggered. Technically speaking, sending a Christmas fruit basket to a referral source, or receiving one from a vendor of supplies that are reimbursed by Medicare, can be a violation, Liles says.

“To be clear, it is highly unlikely that such a gift would be pursued as a criminal violation by a federal prosecutor, but you need to be aware that such a practice is problematic,” Liles says.

“Don’t confuse OIG’s [Office of Inspector General’s] 2002 guidance on the ‘Offering of Gifts and other Inducements to Beneficiaries’ with the general prohibition against providing anything of value to a party in an effort to induce Medicare referrals,” Liles adds.

Under the 2002 OIG guidance, the agency indicated that it would permit Medicare and Medicaid providers to offer beneficiaries inexpensive gifts or non-cash or cash-equivalent items that are valued at no more than $10 individually and not more than $50 total in a year. That OIG guidance was aimed at beneficiaries, not at providers, who are actual or potential referral sources. ASCs should not assume that they’re immune from prosecution simply because their services save Medicare money, Liles warns.

“ASCs are created as a cost-saving measure, making it cheaper to do outpatient surgeries when appropriate,” Grubman says. “So, the government has encouraged the use of [ASCs] and the safe harbor dealing with ASCs. But like everything else, it’s prone to potential fraud and abuse.”

Another change under the ACA is that the government can pursue violations of the anti-kickback statute as violations of the False Claims Act, which can result in high-dollar civil penalties and pays whistleblowers.

“There are a lot of cases where the government might run across examples of technical violations that aren’t safe harbors, but the government doesn’t want to pursue it criminally,” Liles says. “Anti-kickback violations under the ACA can qualify as False Claims Act violations, which are civil, not criminal.”

The False Claims Act raised the amount of penalties twice in the past 12 months, from $10,957 to $21,916, plus treble damages in some cases, Liles says. (See story on False Claims Act in this issue.)

“That’s how you see these multimillion-dollar cases under the False Claims Act,” Liles explains. “When you apply penalties of at least $10,957 per false claim, plus treble damages, the potential exposure for a healthcare provider can be enormous in a False Claims Act case.”

Grubman says that one area of government scrutiny that he has seen involving ASCs focuses on relationships between ASCs and anesthesia providers.

Anesthesiology groups are entirely dependent on referrals, so the industry is highly competitive. They compete in providing value to ASCs, which can cause issues. All it takes is for a service going in one direction and an extra value going in the other, Grubman says.

“It means the statute is implicated, and you’re in dangerous territory,” he explains. “It doesn’t mean the statute has been violated, but it can raise eyebrows.”

One strategy for avoiding an anti-kickback violation is to seek an advisory opinion from OIG prior to any contractual arrangements.

“You can write to them and say you’re thinking of doing this thing, creating this venture or arrangement,” Grubman says.

But it doesn’t always work out in the healthcare organization’s favor.

“Unfortunately, the government takes a very aggressive view,” Grubman says. “Often, there’s a situation where the government looks at something suspiciously, and we don’t necessarily agree that’s the case.”

The OIG publishes advisory opinions online, including one published on Dec. 5, 2016, in which OIG addressed whether labeling test tubes and specimen collection containers at no charge to dialysis facilities constituted a violation of the anti-kickback statute. OIG ruled that the proposed arrangement “could potentially generate prohibited remuneration under the anti-kickback statute.”³

In a 2007 advisory opinion, OIG ruled again that a proposed arrangement potentially could violate the anti-kickback statute. In this case, orthopedic surgeon investors in an established ASC proposed selling a 40% ownership interest to a local hospital. The investors would receive a profit from the sale. The hospital would be in a position to make or influence referrals directly or indirectly to the ASC or its physician investors.⁴

One key to determining a statute violation is whether remuneration for the service or product is fair market value.

“Is it commercially reasonable and not taking into account the value of referrals?” Grubman asks. “Any amount of money paid should be a reflection of work provided and fair market value. So, if an ASC is getting reimbursed by Medicare for something provided by an anesthesiology group, the government will take a negative view of that.

“If the anesthesia group is providing monitors to the ASC, the government will likely take the view that the ASC is double-dipping, and it’s not true reimbursement,” he continues. “And if it’s not true reimbursement, then the government will likely take the view that it’s more likely to be an incentive to encourage referrals, and that’s what the anti-kickback statute is designed to prevent.”

Another arrangement that could violate the statute is if an anesthesia group brings its own employees to the ASC to cover for a receptionist, who is at lunch from noon to 1 p.m.

“The government will view that suspiciously because it is something of value, and if the anesthesia group didn’t provide it, then the ASC would have to pay someone else to do that job,” Grubman explains.

OIG sometimes decides in organizations’ favor. One example is an advisory opinion related to an ASC that was jointly owned by a hospital and group of physicians. The ASC also leased some space from the hospital. The anti-kickback statute contains a safe harbor related to lease agreements — so long as the lease is in writing, the rent is fair market value, and other specific requirements are met.

“There’s not much creativity in healthcare law,” Grubman notes. “The best thing for an [ASC] to do is to hire a healthcare lawyer before they try anything new.”

An attorney can tell them how they could add safeguards to their plan to make it work or how to structure things in a way that will protect against potential liability.

REFERENCES

1. The Department of Health and Human Services and the Department of Justice Health Care Fraud and Abuse Control Program, Annual Report for Fiscal Year 2016. January 2017. Available at: http://bit.ly/2peoPwE. Accessed April 21, 2017.
2. Medicare and State Health Care Programs: Fraud and abuse revisions to the Safe Harbors under the Anti-Kickback Statute and civil monetary penalty rules regarding beneficiary inducements. Fed Reg 2016. Available at: http://bit.ly/2ocbnpr. Accessed April 21, 2017.
3. OIG Advisory Opinion No. 16-12. Office of Inspector General. Dec. 5, 2016. Available at: http://bit.ly/2pzQ6XO. Accessed April 21, 2017.
4. OIG Advisory Opinion No. 07-05. Office of Inspector General. June 19, 2007. Available at: http://bit.ly/2oTyjNz. Accessed April 27, 2017.