February 2011

U.S. Department of Health and Human Services (HHS) released its required annual Health Care Fraud and Abuse Control Program report. The report showed that the government’s health care fraud prevention and enforcement efforts recovered more than $4 billion in taxpayer dollars in fiscal year 2010. This is the highest annual amount ever recovered.

These results occur partly because the Obama Administration made the elimination of medical fraud, waste, and abuse in the Medicare and Medicaid programs a top priority. In 2009, the Obama Administration created a joint Department of Justice (DOJ) and HHS effort called the Health Care Fraud Prevention & Enforcement Action Team (HEAT). The report described HEAT as follows:

“On May 20, 2009, Attorney General Holder and Secretary Sebelius announced the Health Care Fraud Prevention & Enforcement Action Team (HEAT), a new effort with increased tools and resources, and a sustained focus by senior level leadership to enhance collaboration between the Departments of Health and Human Services and Justice. With the creation of the new HEAT effort, DOJ and HHS pledged a cabinet-level commitment to prevent and prosecute health care fraud. HEAT, which is jointly led by the Deputy Attorney General and HHS Deputy Secretary, is comprised of top level law enforcement agents, prosecutors, attorneys, auditors, evaluators, and other staff from DOJ and HHS and their operating divisions, and is dedicated to joint efforts across government to both prevent fraud and enforce current anti-fraud laws around the country. The Medicare Fraud Strike Force teams are a key component of HEAT.”

The Medicare Fraud Strike Force Teams described in the above quote are located in the following seven cities:

  1. Miami, Florida
  2. Los Angeles, California
  3. Detroit, Michigan
  4. Houston, Texas
  5. Brooklyn, New York
  6. Baton Rouge, Louisiana
  7. Tampa, Florida.

The report boasts that these Strike Force Teams achieved:

…accomplishments from cases prosecuted in all seven cities during FY 2010 include:

    • 140 indictments involving charges filed against 284 defendants who collectively billed the Medicare program more than $590 million;

• 217 guilty pleas negotiated and 19 jury trials litigated, winning guilty verdicts against 23 defendants;

• Imprisonment for 146 defendants sentenced during the fiscal year, averaging more than 40 months of incarceration…”

The U.S. Attorneys Office (USAO) in the DOJ reported additional efforts. Including the amounts reported above for the seven Strike Force Teams, the Department of Justice reported the following results:

“Criminal Prosecutions:

In FY 2010, the USAOs received 1,116 new criminal matters involving 2,095 defendants, and had 1,787 health care fraud criminal matters pending, involving 2,977 defendants. The USAOs filed criminal charges in 488 cases involving 931 defendants, and obtained 726 federal health care fraud related convictions.

Civil Matters and Cases: In FY 2010, the USAOs had opened 942 new civil health care fraud investigations. At the end of FY 2010, the USAOs had 1,130 civil health care fraud investigations pending.”

Interestingly, the report shows that $306.6 million was paid to qui tam plaintiffs who filed suits on behalf of the federal government under the qui tam provisions of the False Claims Act. By comparison, the fiscal 2009 payment total for qui tam plaintiffs was 48.3 million, or 84% less. This would indicate that the record results occurred at least in part because of private efforts, and not the efforts bragged about by HHS and DOJ officials.

The report shows that durable medical equipment (DME) providers received substantial audit and enforcement attention. But, the larger recoveries pertain to pharmaceutical companies. The report identifies the following pharmaceutical recoveries of $100 million or more:

AstraZeneca                 $520 million
Novartis                        $423 million
Allergan                        $375 million
Forest Laboratories         $313 million
Mylan, UDL, & 2 others   $124 million
Teva                            $100 million

In 2008, HHS’ Centers for Medicare & Medicaid Services (CMS) began the process of consolidating all Program Safeguard Contractor (PSC) and Medicare Prescription Drug Integrity Contractor (MEDIC) contracts into Zone Program Integrity Contractors or (ZPIC) contracts. The ZPIC audit program is performed by independent contractors who perform audits on behalf of the federal government.

The ZPIC contractors audit all claim types. To initially identify entities to audit, ZPICs look at billing trends and patterns, concentrating on providers whose billings are higher than other providers in the community. Once a provider has been identified as an outlier, a medical review of a sample of claims occurs. The results of this sample-based audit are expanded or extrapolated to cover the entire population of claims. In so doing, a relatively small potential error is expanded significant to cover numerous claims that were not examined at all. While the process of statistical extrapolation is generally accepted as being valid, each extrapolation is unique and must be performed carefully. Large extrapolation errors can and do occur if proper statistical processes are not followed.

Whether because of qui tam suits, ZPIC audits, or other increased enforcement of the Obama administration, healthcare providers should expect increased scrutiny of their billings. When faced with a statistically-based analysis, providers should not assume that the government’s statistics are performed and interpreted without error.

Fulcrum Inquiry has substantial