DOJ Tallies FY 2014 Fraud Recoveries

The U.S. Department of Justice (DOJ) has announced a record $5.69 billion in civil False Claims Act settlements and judgments for FY 2014, including almost $3 billion in recoveries related to qui tam lawsuits. The DOJ reports $2.3 billion in health care fraud recoveries in FY 2014, primarily involving the Medicare and Medicaid programs.

Will Physician Payment Sunshine Act Data Usher in a New Era of False Claims Act Litigation?

This post was authored by Scot Hasselman, Elizabeth Carder-Thompson, Katie Pawlitz and Jillian Riley.

While attention has been focused on Medicare physician payment data released by CMS yesterday, upcoming Sunshine Act data will shine a new spotlight on financial relationships between physicians and pharmaceutical and medical device companies – with potential FCA implications.

Last week marked the deadline for pharmaceutical and medical device manufacturers and group purchasing organizations (GPOs) to register with and submit aggregate 2013 payment and investment interest data to the Centers for Medicare & Medicaid Services (CMS) on certain financial relationships between themselves and physicians and teaching hospitals, as required by the Physician Payment Sunshine Act.1 In May, manufacturers and GPOs will be required to submit to CMS detailed 2013 payment data. With some exceptions, CMS will be making these data public by September 1, 2014. While the publicly available data are intended to provide more transparency for patients – to allow them to have a better understanding of the financial relationships between physicians and pharmaceutical and medical device companies – patients will certainly not be the only group interested in this public information. The Department of Health and Human Services (HHS) Office of the Inspector General (OIG), Department of Justice (DOJ), and relators’ attorneys will likely utilize these data to initiate investigations and support complaints under the federal False Claims Act (FCA). As with the recent release of the 2012 Medicare Part B Physician Fee Schedule data, members of the media will likely make inferences about certain financial relationships.

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RACs Correct $2.4 Billion in Medicare Claims in FY 2012

CMS has released data on Recovery Audit Contractor (RAC) operations fiscal year 2012. Key findings included the following:

  • In FY 2012, Medicare fee-for-service (FFS) RACs collectively identified and corrected 1,272,297 claims for improper payments, which resulted in $2.4 billion in improper payments being corrected ($2.3 billion in overpayments/$109.4 million in underpayments). Subtracting fees, costs, and first level appeals, the Medicare FFS Recovery Audit Program returned over $1.9 billion to the Medicare trust funds.
  • The Part D RAC’s initial review focused on identifying improper payments for prescriptions written by excluded prescribers or filled by excluded pharmacies beginning with contract year 2007. Recoupment of approximately $2 million in overpayments began in the first quarter of FY 2013 for those plans identified in the Part D RAC's initial audit review. The Part D RAC is continuing its review of excluded providers and pharmacies for contract years 2008 and 2009. In addition, CMS posted a notice on April 4, 2013, seeking potential contractors to perform Part C RAC activities.
  • As of September 30, 2012, 36 states had implemented Medicaid RAC programs, and other states are in various stages of preparation. For FY 2012, the states have recovered a total federal and state share combined amount of $95.64 million. CMS expects recoveries to increase as more states have fully operational State Medicaid RAC programs.

As previously reported, CMS has “paused” its RAC audits in preparation for the procurement of new RAC contracts and to “allow CMS to continue to refine and improve the Medicare Recovery Audit Program.”

DME MACs Warn Doctors About DMEPOS Supplier "Marketing Schemes"

The four Durable Medical Equipment (DME) Medicare Administrative Contractor (DME MAC) medical directors have issued a joint open letter to physicians warning about “various marketing schemes” perpetrated by DME suppliers. Such methods cited by the DME MACs in a March 5, 2014 “Dear Physician” letter include unsolicited orders for medical equipment or supplies; advertisements that Medicare will provide the doctor with payment for patient referrals; or pre-completed medical necessity forms with instructions to just “Sign and Date Here.” The DME MACs note that doctors “are under no obligation to support or justify these supplier solicitations,” or to sign orders for items not initiated by the doctor or that were provided by the supplier without prior consultation. The letter suggests that physicians review the patient’s medical record before signing orders, and view with skepticism unsolicited orders for patients no longer in their care or who have not been seen in a long period of time. Physicians should document in the patient’s medical record the medical justification for any DME ordered. The letter also asks doctors to report suspected abuse to the OIG, which we note has long-standing concerns about DMEPOS supplier marketing practices. Particularly in light of tightened CMS requirements related to physician documentation of DMEPOS orders, the DME MACs’ open letter provides another reminder for suppliers to review their policies and practices in this area.

Obama Administration Cites Record-Breaking Health Fraud Recoveries under Joint DOJ-HHS Program

According to the latest Health Care Fraud and Abuse Control Program (HCFAC) Annual Report, federal health care fraud prevention and enforcement efforts resulted in the recovery of a record $4.3 billion in FY 2013, up from $4.2 billion in FY 2012. In announcing detailed enforcement achievements, the Administration cites new ACA authorities – including enhanced provider screening requirements, limited enrollment moratoria, and authority to suspend Medicare payments during pending investigations -- that have improved the government’s ability to clamp down on health care fraud. The report also notes the successes of coordinated Department of Justice (DOJ) and HHS efforts such as the Health Care Fraud Prevention & Enforcement Action Team (HEAT) and interagency Medicare Fraud Strike Force teams.

CMS Extends and Expands Moratoria on Enrollment of Home Health Agency, Ambulance Suppliers in Designated Areas

Citing significant potential for fraud and abuse, CMS has announced that it is temporarily suspending new home health agency (HHA) and ground ambulance enrollment in Medicare, Medicaid, and the Children’s Health Insurance Program in several geographic areas, and it is extending the current enrollment moratoria for these provider types in separate areas. Specifically, effective January 30, 2014, CMS is establishing a 6-month moratorium on HHA enrollment in the following metropolitan areas: Fort Lauderdale, Detroit, Dallas and Houston. CMS also is temporarily suspending enrollment of new ground ambulance suppliers in the Greater Philadelphia area. In addition, CMS is extending for six-months a current enrollment moratoria (announced in July 2013) impacting HHAs in Chicago and Miami and ground ambulance suppliers in Houston. Note that CMS may lift the moratoria earlier or extend them for another six months through issuance of a Federal Register notice.

While existing providers and suppliers can continue to deliver and bill for services in moratoria areas, no new applications for the designated provider types will be approved, unless the provider’s enrollment application has already been approved, but not yet entered into PECOS or the State Provider/Supplier Enrollment System at the time the moratorium is imposed. According to CMS, the initial moratoria that began in July 2013 resulted in the denial of the enrollment applications of 231 HHAs and 7 ambulance companies in the geographic areas affected by the moratoria. A CMS notice explains the rationale for the imposition and extension of the moratoria.

DOJ Announces Additional Health Care Fraud Recovery Statistics

The Department of Justice (DOJ) has announced that it collected at least $8 billion in civil and criminal actions in FY 2013, including approximately $3.2 billion related to civil health care fraud cases and $450 million in criminal fines associated with health care fraud.  In addition, the DOJ/HHS Medicare Fraud Strike Force had a record number of health care prosecutions in FY 2013, with 137 cases filed), 345 individuals charged, 234 guilty pleas secured, and 46 jury trial convictions in connection with health care fraud cases. The Strike Force, which was launched in 2007, is now operating in the following nine cities: Baton Rouge, LA; Brooklyn, NY; Chicago, IL; Dallas and Houston, TX; Detroit, MI; Los Angeles, CA; and Miami and Tampa, FL.  The DOJ announced previously that it had recovered $3.8 billion in settlements and judgments in civil False Claims Act cases in FY 2013, including health care fraud recoveries totaling approximately $2.6 billion.

DOJ Touts $3.8 Billion in FY 2013 False Claims Act Recoveries

The Department of Justice (DOJ) recently announced that it recovered $3.8 billion in settlements and judgments in civil False Claims Act cases in fiscal year (FY) 2013, including health care fraud recoveries totaling approximately $2.6 billion. The DOJ notes that about $1.8 billion in recoveries involved alleged false claims for drugs and medical devices under federally insured health programs (with an additional $443 million recovered for state Medicaid programs). The Department also reports that in FY 2013, a record 752 qui tam/whistleblower suits were filed and $2.9 billion was recovered in such suits (with whistleblowers recovering $345 million).

OIG Identifies Top HHS Management Challenges

The OIG has issued its latest list of top management and performance challenges facing HHS, reflecting “continuing vulnerabilities that OIG has identified for HHS over recent years as well as new and emerging issues that HHS will face in the coming year.”  This year’s list includes the following challenges: (1) Overseeing the Health Insurance Marketplaces; (2) Transitioning to Value-Based Payments for Heath Care; (3) Ensuring Appropriate Use of Prescription Drugs in Medicare and Medicaid; (4) Protecting the Integrity of an Expanding Medicaid Program; (5) Fighting Fraud and Waste in Medicare Parts A & B; (6) Preventing Improper Payments and Fraud in Medicare Advantage; (7) Ensuring Quality of Care in Nursing Facilities and Home and Community-Based Settings; (8) Effectively Using Data and Technology to Protect Program Integrity; (9) Protecting HHS Grants and Contract Funds from Fraud, Waste, and Abuse; and (10) Ensuring the Safety of Food, Drugs, and Medical Devices.

OIG Issues Fall 2013 Semiannual Report

The OIG has issued its Semiannual Report to Congress for the period of April 1 – September 30, 2013, in which it highlights significant investigation, audit, and enforcement activities and achievements across HHS programs. For all of FY 2013, the OIG reports expected recoveries of more than $5.8 billion, consisting of almost $850 million in audit receivables and about $5 billion in investigative receivables (including about $1 billion in non-HHS investigative receivables, such as states’ shares of Medicaid restitution). In FY 2013, the OIG was responsible for: exclusion of 3,214 individuals and entities from participation in federal health care programs; 960 criminal actions against individuals or entities; and 472 civil actions (including false claims and unjust-enrichment lawsuits filed in federal district court, CMP settlements, and administrative recoveries related to provider self-disclosure matters).

OIG Calls for Greater Scrutiny of Clinicians with High Cumulative Medicare Payments

The OIG has issued a report focusing on individual clinicians who generated high cumulative Medicare Part B payments (defined for purposes of this report as more than $3 million in Part B services) in 2009. Out of 303 such clinicians identified by the OIG, 34% had been identified for improper payment reviews, and as of December 31, 2011, they were tied to $34 million in overpayments, three of the clinicians had their medical licenses suspended and two were indicted. Since existing procedures may not always identify clinicians responsible for high cumulative payments in a timely manner, the OIG recommends that CMS: (1) establish a cumulative payment threshold above which a clinician’s claims would be selected for review, and (2) implement a procedure for timely identification and review of clinicians’ claims that exceed the cumulative payment threshold. While CMS noted that “[h]igh cumulative payments are not necessarily indicative of improper payments or fraud,” the agency partially concurred with the OIG recommendations and stated that it would work with its contractors to develop an appropriate, cumulative payment threshold.

OIG Report Addresses Potential Hospital EHR Technology Vulnerabilities

An OIG report released in December 2013 assessed the extent to which hospitals that received Medicare EHR incentive payments as of March 2012 had implemented fraud safeguards for EHR technology previously recommended by an HHS contractor, RTI International, and set forth in a 2007 HHS Office of the National Coordinator for Health Information Technology (ONC) report. The OIG found widespread hospital compliance with RTI-recommended audit functions, user authorization and access controls, and data transfer safeguards, but less than half of hospitals had begun implementing RTI recommendations to include patient involvement in anti-fraud efforts, and only about one quarter of hospitals had policies regarding the use of the copy-paste feature in EHR technology, which potentially could pose a fraud vulnerability. The OIG report includes several recommendations for ONC and CMS to strengthen efforts to address fraud vulnerabilities in EHRs, with which the agencies concurred.

GAO Examines Effectiveness of ZPIC Program Integrity Efforts

A recent GAO report assesses the effectiveness of Medicare Zone Program Integrity Contractors (ZPICs) -- contractors that perform program integrity activities designed to fight Medicare fraud, waste, and abuse. While the GAO notes that ZPICs take credit for over $250 million in Medicare savings in 2012 from actions such as stopping payment on suspect claims, the GAO observes that CMS would benefit from more data on whether quicker ZPIC action would lead to greater savings. The GAO therefore recommends that CMS (1) collect and evaluate information on the timeliness of ZPICs' investigative and administrative actions, and (2) develop ZPIC performance measures explicitly linking ZPICs' work to Medicare program integrity performance measures and goals.

Device Manufacturer Files Challenge to OIG Special Fraud Alert on Physician-Owned Distributors

As reported on our sister blog,, Reliance Medical Systems, LLC, filed a complaint in the U.S. District Court for the Central District of California this week that seeks a declaration that an Office of Inspector General (OIG) Special Fraud Alert on physician-owned distributors (PODs) unfairly and unconstitutionally burdens First Amendment rights of free speech and due process. The complaint sets forth Reliance’s legal rationale in support of the lawfulness of the physician-owned model, and it characterizes the Fraud Alert as the result of a multi-year lobbying campaign by “Big Corporations” forced to compete with small physician-owned entities.  For more details, see our full report.

CMS Releases FY 2011 RAC Report, RAC "Myths" Document

CMS has released a report to Congress on “Recovery Auditing in the Medicare and Medicaid Programs for Fiscal Year 2011”.  According to CMS, recovery auditors identified and corrected 887,291 claims amounting to $939.3 million in improper payments in fiscal year 2011; while most of the improper payments ($797.4 million) were overpayments, the auditors also were responsible for $141.9 million in underpayments being repaid to providers and suppliers. After considering all fees (including contingency fees), costs, appeals, and underpayments, the Medicare fee-for-service (FFS) Recovery Audit Program returned $488.2 million to the Medicare Trust Fund in FY 2011. CMS discusses procedural changes adopted to decrease the Recovery Auditors errors, and according to CMS, only 2.9% of all Recovery Auditor determinations were challenged and later overturned on appeal. The report notes that short-stay inpatient hospital admission issues represented a significant portion of the Medicare FFS error rate and also represent a large portion of FY 2011 overpayment collections. The report also includes, among other things, an update on the status of recovery audit contracting in the Medicare Advantage, Medicare prescription drug, and Medicaid programs, along with a RAC prepayment review demonstration. On a related note, CMS has posted a “Recovery Audit Program Myths” document, addressing such issues as claims denial rates and review criteria, presumably to combat persistent provider criticism of the program.

FY 2012 Health Care Fraud and Abuse Control Program Report

On February 11, 2013, the Obama Administration announced that anti-fraud efforts under the Health Care Fraud and Abuse Control Program (HCFAC) recovered a record-breaking amount of $4.2 billion in FY 2012. More specifically, in 2012 the Justice Department opened 1,131 new criminal health care fraud investigations involving 2,148 potential defendants, and a total of 826 defendants were convicted of health care fraud-related crimes. The DOJ also opened 885 new civil investigations, obtained settlements and judgments of more than $3 billion in FY 2012 under the False Claims Act, and collected nearly $1.5 billion in fines and forfeitures under the Federal Food, Drug and Cosmetic Act. Obama Administration officials emphasized that efforts to reduce fraud will continue to expand with new tools and resources provided by the ACA, including enhanced screening and enrollment requirements (which have eliminated nearly 150,000 ineligible providers from the Medicare rolls), increased data sharing across the government, expanded overpayment recovery efforts, and greater oversight regarding private insurance.

Justice Department Reports Nearly $5 Billion in False Claims Act Recoveries for FY 2012

The Department of Justice recently announced that it secured a record $4.9 billion in settlements and judgments in civil fraud cases in FY 2012, including health care fraud recoveries totaling more than $3 billion. The Department notes that some of the largest recoveries during the year – representing nearly $2 billion -- involved false claims for drugs and medical devices under federally insured health programs (with an additional $745 million returned to state Medicaid programs). The Department also reports that in FY 2012, a record 647 qui tam/whistleblower suits were filed and a record $3.3 billion was recovered in such suits.

GAO Calls for Improvements in Use of Medicare Prepayment Edits

In light of a continued high rate of Medicare fee-for-service improper payments (8.6% in FY 2011), the GAO recently assessed the use of Medicare prepayment edits and CMS's oversight of Medicare Administrative Contractors (MACs) that process claims.  In the report, "Medicare Program Integrity: Greater Prepayment Control Efforts Could Increase Savings and Better Ensure Proper Payment," the GAO estimates that while the use of prepayment edits saved Medicare at least $1.76 billion in FY 2010, it believes savings could have been greater if prepayment edits had been more widely used. For instance, the GAO found more than $100 million in Medicare payments that were inconsistent with a sample of three local coverage determinations (pertaining to monitored anesthesia care, parathormone, and noninvasive cerebrovascular studies) and that could have been identified using automated edits. The GAO also found weaknesses associated with CMS edit processes based on national policies, such as lack of specific time frames for implementing edits, flaws in the structure of some edits, and lack of centralized implementation. GAO recommends that CMS take a series of steps to strengthen its use of prepayment edits, such as implementing medically unlikely edits that assess all quantities provided to the same beneficiary by the same provider on the same day; encouraging more information sharing about effective edits, and assessing the feasibility of increasing incentives for edit use. HHS generally agreed with the recommendations.

GAO Reviews Effectiveness of Medicaid Program Integrity Efforts

A recent GAO report, “Medicaid Integrity Program: CMS Should Take Steps to Eliminate Duplication and Improve Efficiency,” points to a number of shortcomings in CMS Medicaid program integrity efforts. Among other things, the GAO found that Medicaid Integrity Group's (MIG) oversight and support activities had mixed results in achieving the goal of enhancing program integrity efforts. Moreover, the MIG’s hiring of separate review and audit contractors for its National Medicaid Audit Program was inefficient and duplicative. The GAO recommends that CMS: eliminate duplication by merging contractor functions, use comprehensive reviews to better target audits; work with states to ensure reliable reporting of their program integrity recoveries; discontinue state program integrity assessments that overlap other, more current data sources; and reevaluate its return on investment methodology.

OIG Reports Almost $7 Billion in Audit/Investigation Recoveries for FY 2012

On November 27, 2012, the HHS Office of Inspector General (OIG) released its fall Semiannual Report to Congress, which summarizes significant OIG enforcement, investigation, and audit activities for the period of April 1 – September 30, 2012, along with summary information for all of FY 2012. Most notably, the OIG reports approximately $6.9 billion in expected audit and investigative recoveries for FY 2012, consisting of $923.8 million in audit receivables and $6 billion in investigative receivables (of which $1.7 billion represents non-HHS investigative receivables, such as OIG’s work in states’ shares of Medicaid restitution). In addition, the OIG identifies approximately $8.5 billion in FY 2012 savings that result from legislative, regulatory, or administrative actions that were supported by the OIG’s recommendations (such as payment reforms for Part B drugs and biologicals adopted under the Modernization Act of 2003 and a variety of Medicare payment reductions impacting home health agencies, DME suppliers, and clinical laboratory services, among many others). In addition, for FY 2012 the OIG reports: exclusions of 3,131 individuals and entities from participation in federal health care programs; 778 criminal actions against individuals or entities that engaged in crimes against HHS programs; and 367 civil actions (including false claims and unjust-enrichment lawsuits filed in federal district court, civil monetary penalties settlements, and administrative recoveries related to provider self-disclosure matters). The report also highlights significant OIG accomplishments for this period, including various Medicare and Medicaid program reviews and Medicare Fraud Strike Force efforts that resulted in the filing of charges against 305 individuals or entities, 181 convictions, and $151 million in investigative receivables.