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Health Care e-Alert
May 28, 2009



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Turning Up the Heat:
New False Claims Act Law and Medicare/Medicaid Fraud Developments Will Impact Health Care Providers

By:  Carla Cox

New Medicare Fraud Prevention Team Announced

Attorney General Eric Holder and Health and Human Services (HHS) Secretary Kathleen Sebelius announced on May 27 the creation of a new interagency effort, the Health Care Fraud Prevention and Enforcement Action Team (HEAT), to combat Medicare fraud. HEAT will expand the joint DOJ-HHS Medicare Fraud Strike Force teams that have been fighting Medicare fraud in South Florida and Los Angeles since 2007. "Today, we are turning up the heat on perpetrators who steal from the taxpayers and threaten the future of Medicare and Medicaid," said Secretary Sebelius. The HEAT team will include senior officials from DOJ and HHS who will build upon and strengthen existing programs to combat fraud while also investing new resources and technology to prevent fraud, waste, and abuse before it happens.

The HEAT initiative will include the expansion of joint DOJ-HHS Medicare Fraud Strike Force teams such as those in South Florida and Los Angeles. Established in 2007, these teams use a "data-driven" approach to identify unexplainable billing patterns and investigating these providers for possible fraudulent activity. The Medicare Fraud Strike Force team operating in South Florida has already convicted 146 defendants and secured $186 million in criminal fines and civil recoveries. The Medicare Fraud Strike Force expanded in May 2008 to Los Angeles, where 37 defendants have been charged with criminal health care fraud offenses. To date in the Los Angeles cases, more than $55 million has been ordered in restitution to the Medicare program.

The HEAT team will also build on demonstration projects by the HHS Inspector General and CMS that focus on suppliers of durable medical equipment (DME). These projects increase site visits to potential suppliers to prevent imposters from posing as legitimate DME providers. Other HEAT initiatives will include increasing training for providers so they can identify and prevent fraud, improving data sharing between CMS and law enforcement to identify patterns that lead to fraud, and strengthening Medicare Parts C and D compliance and enforcement.

Fraud Enforcement and Recovery Act of 2009 (FERA)

On May 20, President Obama signed into law, the Fraud Enforcement and Recovery Act (FERA) of 2009. FERA is primarily intended to bolster the federal government's ability to investigate and prosecute financial fraud, especially any misuse of government stimulus and Troubled Asset Relief Program (TARP) funds. However, FERA also has significant implications for health care providers.

FERA increases funding for federal financial fraud enforcement and amends sections of the United States Criminal Code related to fraud against the government. FERA also expands liability under the False Claims Act (FCA), which imposes liability on those who make false statements or claims for reimbursement to the government. Of particular interest to health care providers, FERA explicitly makes it a violation of the FCA to "improperly" avoid repaying money owed to the U.S. government even if the overpayment was not based on a false claim.

FERA also amends the FCA to overturn a number of recent court decisions that have narrowed its reach. In particular, FERA clarifies that:

  • liability attaches for fraud perpetrated against contractors and grantees of the U.S. government, not just for fraud directly committed against the U.S. government
  • intent is not necessary for FCA liability to attach
  • the scope of FCA applies to funds administered by the U.S. government
  • conspiracy liability can arise from any violation of the FCA
  • a valid receipt from the U.S. government is not necessary in order for FCA liability to attach
  • liability exists for conduct to conceal, avoid, or decrease an obligation owed to the U.S. government

Texas Medicaid Integrity Contractors Selected

On May 7, 2009, the Texas Department of Aging and Disability Services (TDADS) announced that two Medicaid Integrity Contractors have been hired for the State of Texas. Medicaid Integrity Contractors (MICs) will perform reviews of providers furnishing items and/or services through Medicaid in order to identify potential inappropriate or unnecessary Medicaid expenditures and potential fraud, waste, and abuse.

CMS has hired Health Management Systems (HMS) and AdvancedMed to conduct audit activities of Medicaid providers in Texas. If the MIC identifies conduct that it reasonably believes constitutes a violation of state or federal law concerning health care fraud, the MIC must submit a fraud referral to the CMS-Medicaid Integrity Group (CMS-MIG) and the federal Health and Human Services Office of the Inspector General (HHS-OIG). The HHS-OIG will notify the State Medicaid Fraud Control Unit of the fraud referral by providing it with the same audit information.

The authority for the creation of the CMS-MIGs and the MICs is derived from the Deficit Reduction Act that became effective January 1, 2007. Now the CMS-MIG and MIC programs are being rolled out with dramatic increases in federal funding and incentives. For that reason, Medicaid providers need to prepare for the increased oversight and enforcement activities that will be undertaken by the CMS-MIGs, MICs, and the Texas Medicaid Fraud Control Unit.

The federal certification requirements that are required as a condition of receiving payment under the Medicaid program can form the basis for a state or federal FCA prosecution. All Medicaid provider claim forms contain a certification that the information provided on the forms is "true, accurate, and complete" and that any falsification or concealment of material facts may be prosecuted under state or federal law. When enforcement agents believe that the information on the certification forms is incorrect, the certification can form the basis for an allegation that the provider submitted the incorrect information while certifying to its truthfulness and, thereby, "knowingly" submitted a false claim.

If you have any questions regarding this e-Alert, please contact Carla Cox at 512.236.2040 or

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