Feds expand fraud investigations; your next threat may come from insiders

Stepped-up fraud campaign encourages individuals to report providers

Buoyed by stunning successes in five states and $139 million in fines and recoveries assessed against providers, the U.S. Department of Health and Human Services (HHS) is once again raising the stakes in its controversial war against health care fraud and abuse.

As part of a stepped-up campaign, the agency is intensifying what amounts to a rear guard action against providers by encouraging patients and employees to report abuses and bring lawsuits against hospitals, whether violations are real or imagined. Experts say coding and billing issues will be key focuses.

As a result, hospitals and other providers are being put on notice: The threat of prosecution could come from unexpected sources — your own medical record and billing staff, and your patients.

Be ready to prove your innocence

According to fraud watchers, whistle-blowing actions against providers are expected to rise sharply, fueled by government policies that encourage and even reward whistle-blowers and recent court cases — including one involving the U.S. Supreme Court — that are testing the limits of such actions.

"This is a very real threat that hospitals should not take lightly. Proving that you’re doing nothing wrong can be expensive and punishing," warns Margit H. Nahra, JD, a health care attorney with Michaels, Wishner and Bonner, a Washington, DC-based law firm.

Hospitals need to boost their sensitivity to their employees and patients and find ways of responding constructively to complaints without intimidating either group, says Nahra.

The use of internal telephone hotlines and candid risk-free gripe sessions for coders and billers to air issues are effective devices. Strong, positive patient relations built on trust and openness regarding treatment information also help.

"They blunt the potential for people to opt for whistle-blowing as a means of reporting problems," says Karl J. Kuppler, vice president of operations and corporate compliance officer with Trumbull Memorial Hospital in Warren, OH. The hospital recently opened an anonymous tipster hotline for employees as part of a broad-based regulatory compliance program.

Trumbull Memorial’s timing couldn’t be better. In May, the HHS announced that it will expand the Clinton Administration’s crackdown on health care fraud and abuse through a program known as Operation Restore Trust, a broad-based initiative that targets independent and hospital-based nursing homes, home health agencies, and durable medical equipment suppliers.

Launched in 1995, the operation has netted some $139 million in fines, recoveries, and penalties, focusing mainly on providers in five states: California, Florida, Illinois, New York, and Texas. It has also resulted in some 51 civil judgments, 72 pending criminal convictions, and 177 cases in which Medicare licenses were revoked.

Expansion planned for 12 states

HHS plans to expand the initiative to 12 additional states: Arizona, Colorado, Georgia, Louisiana, Massachusetts, Missouri, New Jersey, Ohio, Pennsylvania, Tennessee, Virginia, and Washington.

The operation is running concurrently with several separate unrelated HHS initiatives, including the hospital nonphysician outpatient billing probe, which involves the Medicare 72-hour window rule, and the outpatient laboratory bundling initiative, which has been called the "labscam" investigations.

HHS’s total anti-fraud spending in fiscal year 1997 is slated at $599 million. Meanwhile, Operation Restore Trust has cost taxpayers $7.9 million, the agency says.

While the operation does not focus solely on violations of the century-old federal False Claims Act, the initiative and the two separate outpatient billing probes mentioned above have concentrated on fraudulent over-reimbursements.

The False Claims Act exacts civil and criminal penalties against individuals and organizations that defraud the federal government under programs such as Medicare and Medicaid.

Two recent measures, one stemming from the False Claims Act itself, have effectively boosted opportunities for individuals to blow the whistle against fraudulent providers:

Qui Tam.

An important False Claims Act provision, commonly referred to as Qui Tam, allows employees to bring lawsuits against organizations on behalf of the government for alleged wrongdoing.

The U.S. Supreme Court is considering an important Qui Tam case involving a defense contractor and a whistle-blowing former employee. A favorable ruling for the former employee could expose health care providers with Medicare contracts to such suits.


A provision in the Health Insurance Portability and Accountability Act of 1996, also known as the Kennedy-Kassebaum bill, authorizes monetary rewards for individuals who tip off the government about violations of the Medicare anti-kickback laws when they result in penalties.

In separate unrelated ways, both Qui Tam and Operation Restore Trust empower individuals to blow the whistle on providers, Nahra says. For this reason, they bear watching.

Hotline received 13,000 complaints

Meanwhile, Operation Restore Trust has its own whistle-blower mechanism. In its second phase, HHS wants to increase the use of a telephone hotline, HHS-TIPS, by making the service more accessible to the public and getting groups such as the American Association of Retired Persons, based in Washington, DC, behind the effort.

Since 1995, the hotline has fielded more than 13,000 Medicare beneficiary complaints and has resulted in some $6.1 million in pending recoveries against providers, according to HHS.

The complaints have varied but have included cases of unnecessary utilization and improper billing and reimbursement.

HHS plans to strengthen the hotline and incorporate it into a series of stepped-up technical and organizational innovations designed to help investigators, including the following:

• An enhanced computer software program and statistical methods for analyzing claims by case mix and detecting billing irregularities will lead to tougher audits for hospitals and larger expected recoveries, according to HHS.

Several OIG projects planned

HHS’s Office of Inspector General (OIG) declined to provide details of either the software or the statistical methodology. The agency indicated, however, that both are a part of a series of projects under development contained in a 110-page document entitled the OIG Work Plan for Fiscal Year 1997.

The document outlines HHS’s immediate operational plans for Operation Restore Trust. (To obtain a copy of the OIG Work Plan, see sources, at right.)

• The use of investigatory teams composed of officials from OIG, the Health Care Financing Administration, the Administration on Aging, the Department of Justice (DOJ), and state regulatory agencies will single out facilities with unusually high Medicare reimbursement rates.

• A higher involvement by DOJ officials and other law enforcement agencies in planning and conducting investigations could suggest a higher number of criminal prosecutions than in the past.

• State and local aging organizations and ombudsmen officials will be trained and empowered to detect and report fraud.

• Increased use of state-level Medicare and Medicaid certification officials will monitor care and help identify inappropriate care and fraudulent billing practices.

In all likelihood, whistle-blowing incidents at hospitals will focus mainly on two key areas of interest to fraud investigators, Nahra says, as listed below:

1. The effectiveness of a hospital’s internal policies regarding the accuracy of coding and billing. (For the latest American Health Information Management Association position on the upcoding issue, see story, p. 110. For more information on fraud actions, see story, p. 110.)

2. Questions of medical necessity and appropriateness, both of which inevitably involve an inspection by fraud investigators of patient files and billings.

While some hospital officials believe that internal hospital compliance programs can and should effectively address whistle-blowing concerns through internal employee hotlines and patient relations programs, many believe that in health care, the issue may be overblown.

Some like Kate McComb, Medicare reimbursement analyst with Highline Community Hospital in Seattle, believe that hotlines will serve mainly as outlets for disgruntled employees and will lead to few genuine reports of fraud. "Most hospitals aren’t trying to defraud anyone," McComb says.

Still, open communication reflected in a compliance program is a sign of positive intent. "If there happens to be fraud, then there’s merit in alerting management," McComb adds.

To obtain a copy of the Office of Inspector General’s (OIGs) Work Plan for Fiscal Year 1997, contact the Department of Health and Human Services OIG Web site at: http://www. sba.gov/ignet/internal/hhs/hhs.html.

For further information on Operation Restore Trust and the development of effective internal compliance programs, contact your state hospital association or the following:

Eileen T. Boyd, Deputy Inspector General, Department of Health and Human Services, 330 Independence Ave., Room 5600, Washington, DC 20201. Telephone: (202) 619-0070.

Margit H. Nahra, JD, Attorney, Michaels, Wishner and Bonner, 1140 Connecticut Ave., N.W., Suite 900, Washington, DC 20036. Telephone: (202) 223-5000. Fax: (202) 857-0634. E-mail: mnahra@mwblegal.com.

Karl J. Kuppler, Vice President and Corporate Compliance Officer, Trumbull Memorial Hospital, 1350 E. Market St., Warren, OH 44482. Telephone: (330) 841-9127. Fax: (330) 841-9281.