Prosecutors say states’ role growing in war on fraud

The growing role of state agencies pursuing health care fraud and abuse cases is changing the landscape in fundamental respects that providers should pay close attention to, several federal prosecutors warn.

For one thing, the more agencies that are involved, the slower the process moves as a whole. "With 47 state Medicaid fraud units, plus various federal and state agencies, very often it takes a while," explains Jim Sheehan, U.S. Attorney and chief of the civil division in Philadelphia. "You have to plan for it in advance."

"It is important to understand that just as the feds are not one house, the states are not one house either," Sheehan adds. He cites one settlement in his district that included the state attorney general and the governor’s office but left out the state Department of Health, which subsequently objected to one aspect of the settlement.

Sheehan says, likewise, it is important to understand exactly what states do that the feds don’t. In the past, he says states were looked to primarily for the expertise of their clinicians in areas such as statistical analysis and auditing.

Now, attorneys general have started to figure out that they wield authority that goes beyond Medicaid and beyond Medicare, he says. That may include oversight of nonprofits, managed care organizations, patients’ right to know, as well as responsibility for consumer fraud issues and anti-trust in each state.

"To the extent that attorneys general pick that up and run with it, we are going to see a lot more cases driven with the state in the driver’s seat and the feds along for the ride," he says.

For example, the attorney general in Minnesota recently used his responsibility for overseeing nonprofits to conduct a seven-volume review of Allina Health Systems in Minnesota. The result was a series of allegations regarding problems with cost reports and other issues.

Minnesota also pursued a mental health case against Blue Cross/Blue Shield of Minnesota claiming that it had denied access to mental health services in its managed care program. In addition, Kentucky, Missouri, and Pennsylvania all have pursued their own patient abuse cases in the nursing home arena. Massachusetts has taken the lead in drug pricing and kickback issues, he adds.

Typically, Republicans are more in favor of using states as laboratories for fraud enforcement. "I think we are going to see more of that," he predicts, "especially with an attorney general whose prior life experience was as a U.S. attorney."