Kansas City Whistleblower Lawyer Blog

Last summer, the Brady & Associates Whistleblower Blog published an article that described the new Medicare fraud detection system implemented by the government to detect potential health care fraud before it occurs. The statistical modeling system evaluates large amounts of data and recognizes patterns that lead to fraud. By applying this model to individual claims, the system can evaluate the risk associated with each claim. The claim may then be flagged as a potential fraud item prior to payment. Other agencies have improved on their pursuit of healthcare fraud, which has resulted, according to the proponents of the system, in about $4.1 billion in taxpayer money recovered in fiscal year 2011.

Ted Doolittle, Deputy Director of the Center for Program Integrity (CPI), a new department under the Center for Medicare & Medicaid Services (CMS), answered questions about the modeling system in a recent interview with Beckers's Hospital Review. During that interview, the questioner asked Doolittle about the $4.1 billion recovery and his agency's focus. Mr. Doolittle pointed out that a large percentage of this figure represents money recovered from qui tam lawsuits. Qui tam suits are commenced by individuals, private attorneys and the Justice Department on behalf of the U.S. Government. Thus, not all of the recovery can be associated with the Center's efforts.

Procedures have been expanded to detect fraud by providers and suppliers. The predictive model is applied to determine risk. One of the goals of the modeling system is to screen providers likely to commit fraud. Getting the high risk providers out first is essential. Automated public records allow the agency to evaluate providers in the system once they have been enrolled. Any changes, such as changes in business affiliations, are automatically detected. Additional information can then be gathered. Early fraud detection makes it more difficult for questionable providers to get in and to stay in. This is different from how the Medicare system worked in earlier years. Previously, once a provider was enrolled, they had good standing until revalidation, which rarely, if ever, resulted in disenrollment. In addition, new procedures have been implemented to make it easier for good providers to enroll.

Medicare claims processing is another area with enhanced investigation. During this phase, fraudulent claims and providers making them identified. When a fraudulent claim is identified, it is essential that the provider of the claim be eliminated from the Medicare program. The modeling capability allows the agency to detect details about the claims and compare those claims against the algorithms in the model. Mr. Doolittle commented that no one in the health care arena is doing such a large-scale analysis and that CMS continues to add complexity to the system to generate more alerts. This should result in continuous improvement in the probability of identifying undesirable providers and eliminating them from the program for good.

Not everyone, however, is convinced that the new modeling program is a success. According to a recent article in the Huffington Post, the million dollar computer program has not given taxpayers a good return on their investment. Since its inception, the program has saved taxpayers just under $8,000 in claims. Proponents of the program, however, say that it is unfair to judge the soundness of the new modeling software off the small amount it has recovered. Doolittle said, "Suspending payments is only one way of stopping the money. . . There's lots of ways of stopping the money, and we are using them all. Looking at payment suspensions only - that's an unsophisticated view that doesn't give you a full picture of our activities." Other features of the new predictive modeling system must be considered to fully understand the benefit it is providing to the health care industry. Proponents claim that when those other benefits are factored into the analysis, the potential savings in the first six months could reach $20 million.

Others who find the program troubling highlight that the purpose of the predictive modeling program was to stop Medicare's previous "pay-and-chase" method of addressing fraud. Under pay-and-chase, claims were paid, and afterwards the government would attempt to track down and recoup the claims that were paid out erroneously. This was never an effective strategy. The new system allows Medicare to flag suspicious claims and investigate before the claim is paid to the provider. Some, however, do not believe that the new system has been successful in ending pay-and-chase. "The whole idea for creating this technology was they were going to be able to end pay-and-chase," said Hank Walther, formerly the head of the Justice Department's health care fraud division. "But we haven't yet seen evidence of its success."

Though the predictive program has only prevented $7,591 in fraudulent payments so far, it is important to remember that the system is new and contractors are still training those responsible for enforcement, proponents say. Increased familiarity with the system should improve the numbers. However, the ultimate goal of the system is to get rid of providers that are likely to commit fraud.

The proponents of the new system hope to expand it to impact hospital Part A and Part B claims processing. As new mathematical algorithms are developed, operators will be able to target specific types of claims or provider types, such as orthopaedic surgery or other health care sub-groups.

Sources:
Where Does Predictive Modeling Stand? Q&A With CMS Center for Program Integrity Deputy Director Ted Doolittle, by Bob Herman, published at BeckersHospitalReview.com, March 21, 2012.

Anti-fraud effort disappoints, by Kelli Kennedy and Ricardo Alonso-Zaldivar, published at HuffingtonPost.com, February 23, 2012.

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Federal Crack Down on Medicare Fraud Reaps Record Recovery of $4.1 Billion
$25 Billion Agreement Reached on Mortgage Fraud

New fraud monitoring tools implemented by federal authorities in order to crack down on healthcare fraud are paying off. Reports indicate that a record $4.1 billion was recovered and returned to Medicare Trust Funds, the Treasury and other departments during 2011. The Department of Justice and the Department of Health and Human Services conducted joint programs so that federal, state and local law enforcement agencies were coordinated to better combat healthcare fraud. Compared to 2009, this amount represents a 50 percent increase.

In addition to actually visiting healthcare providers' sites that are in a moderate risk category to assure that a legitimate office exists, the Department of Health and Human Services reports that they are also improving the screening process for providers prior to allowing their entry into the system, along with more stringent enrollment requirements. Those providers that are identified as higher risk are required to go through fingerprint and criminal background checks.

This more proactive approach is beginning to take hold. Authorities screen providers and categorize suspicious providers so that payments can be stopped prior to incurring the cost of fraudulent activities. This puts an end to the old system of paying claims, then going after the suspicious ones, a system by which the fraudsters are able to either flee the country or dump their provider ID to escape liability. Federal health officials report that the sharing of data with other agencies is also improving. It is estimated that Medicare fraud costs the nation in the range of $60 billion to $90 billion annually.

Kathleen Sebelius, Health and Human Services Secretary, said in a statement, "Fighting fraud is one of our top priorities and we have recovered an unprecedented number of taxpayer dollars. Our efforts strengthen the integrity of our health care programs, and meet the President's call for a return to American values that ensure everyone gets a fair shot, everyone does their fair share, and everyone plays by the same rules."

Much of the credit for the increase in recovered funds goes to strike force teams that have been established in cities around the country, including Miami, Detroit and Los Angeles. A total of 323 defendants were charged in 2011, representing more than $1 billion billed to the Medicare program by these criminals. One of the cases involved more than 100 doctors, nurses and physical therapists across nine states.

For those criminal matters related to the pharmaceutical and device manufacturing industry, $1.3 billion in criminal fines, forfeitures, restitution and disgorgement were recovered by the Justice Department by obtaining 21 criminal convictions and under the Food, Drug and Cosmetic Act. Civil healthcare fraud recoveries obtained under the False Claims Act were approximately $2.4 billion dollars.

Officials at the Department of Justice report that the message is now going out with longer sentences levied by judges. Compared to 2010, the average sentence in 2011 increased by 5 months, from 42 months to 47 months.

"These efforts reflect a strong, ongoing commitment to fiscal accountability and to helping the American people at a time when budgets are tight," Attorney General Eric Holder said in a statement.

"Fighting fraud is one of our top priorities and we have recovered an unprecedented number of taxpayer dollars," Health and Human Services Secretary Kathleen Sebelius said.

Sources:

Feds Recover Record $4.1B in Health Fraud, UPI.com, February 14, 2012

Feds Beef Up Screening for Medicare Providers; Agency Recovered $4.1 Billion Last Year, Washington Post, February 13, 2012

Related Blog Post:

Medicare Fraud Detection Goes on the Offense

For the fiscal year ending September 30, 2011, the US Department of Justice (DOJ) recovered more than $3 billion under the False Claims Act. Of this amount, recoveries for fraud against US health care programs amounted to $2.4 billion. This is the 2nd year in a row that justice has recovered greater than $3 billion and the grand total amount recovered for all claims since 2009 was $8.7 billion.

The provisions of the False Claims Act allow individuals to file claims on behalf of the government. These individuals are known as relators and/or whistleblowers who report fraud, oftentimes an act that is fraught with risk and personal sacrifice. Assistant Attorney General West thanked these citizens with the following statement. "We are tremendously grateful to whistleblowers who have brought fraud allegations to the government's attention and assisted us in this public-private partnership to fight fraud."

US healthcare programs that sustained fraud include Medicare and Medicaid programs, health programs for Federal employees and Veterans, as well as the TRICARE program, which is administered by the Department of Defense for the benefit of Uniformed Service members, retirees and their families. Use of the False Claims Act for the recovery of federal health care dollars has yielded in excess of $6.6 billion dollars just since January 2009, which is the most recovered under this act during any previous 3 year period.

This was a top priority for the Obama administration. In support of this goal, the Health Care Fraud Prevention and Enforcement Action Team (HEAT) was created in May of 2009 in order to improve coordination between agencies and to step up enforcement.

Of the amounts recovered for healthcare fraud, the feds report that claims against the pharmaceutical industry represent the largest source of recoveries. Allegations against drug companies include illegal pricing for the purpose of profit maximization as well as criminal and civil charges against GlaxoSmithKline for adulterated drugs paid for by federal healthcare programs. Unfortunately, industry executives define these payouts, off-the-record, as a cost of doing business. Patrick Burns of Taxpayers Against Fraud, writes, "We are not seeing a decline in pharmaceutical fraud cases. Instead we are seeing the addition of other fraud streams, such as medical devices and pension fraud."

Justice also continues to aggressively pursue fraud in government procurement and financial fraud in the housing and mortgage industries in the aftermath of the financial disaster. To this end, the Financial Fraud Enforcement Task Force was established by President Obama in 2009 and is tasked with the pursuit of individuals and corporations contributing to the crisis. Nearly $358 million of the $3 billion collected in fiscal year 2011 resulted from this effort.

Senator Charles Grassley (R-Iowa) and Representative Howard Berman (D-California) have been leading the way since 1986 when they successfully led Congress to amend the False Claims Act, which included enhanced qui tam provisions that incented individuals to blow the whistle on fraud when they saw it. These individuals, along with Senator Patrick J. Leahy, chairman of the Senate Judiciary Committee, also supported the Fraud enforcement and Recovery Act of 2009. This act made possible additional improvements to the False Claims Act and many other fraud statutes.

Assistant Attorney General West stated that, "Twenty-eight percent of the recoveries in the last 25 years were obtained since President Obama took office. These record-setting results reflect the extraordinary determination and effort that this administration, and Attorney General Eric Holder in particular, have put into rooting out fraud, recovering taxpayer money and protecting the integrity of government programs."

Sources:

Justice Department Recovers $3 Billion in False Claims Act Cases in Fiscal Year 2011, Department of Justice, December 19, 2011.

Pharma Fraud Continues to Fill the US Treasury, by Ed Silverman, Pharmalot.com, December 19, 2011

It is estimated that health care fraud carrys about a $60 billion a year price tag for taxpayers, with Medicare as one of the main targets for fraudsters. The Medicare program now faces huge financial challenges, including possible insolvency. As such, it is more important than ever to battle.

Since the inception of the program, Medicare, the Government health program for retirees, has always paid claims and then later asked questions. The payment of fraudulent claims prior to pursuit of scam artists has been a losing proposition. Medicare announced on June 17 that it will be implementing screening technology to mitigate fraud. The new system is scheduled to begin operation July 1. This technology is similar to what is currently used by credit card companies.

The technology is designed to detect system abuses, such as billing for a particular procedure at a suddenly much higher rate than that of major medical institutions in the same geographical area.

Patrick Burns, of Taxpayers Against Fraud, states that Medicare "is putting in place the kind of computer program it should have had in 1980 or earlier." He goes on to say, "The bad news is that the largest Medicare and Medicaid frauds are designed at the highest levels of companies, with accountants, billing experts and salespeople smoothing over the paperwork so that it will slide past all the proctors."

The routine process that has been employed by Medicare includes basic testing for fraud on an individual claim basis prior to making payment. The new system is designed to analyze large amounts of data in order to recognize patterns and anomalies in claims, which can lead to discovery of potential fraud. The data analysis leads to the development of a predictive model that may then be applied to individual claims. Through this process of data evaluation, the system assigns risk scores to claims. An alert is issued when the risk score indicates a problem. This will allow the claim to be investigated before it is paid out. Medicare claims payers will even be able to customize the new system so that particular types of facilities, geographic areas, services or equipment may be flagged.

The Wall Street Journal article reports that, "United Health Group has said it saved about $125 million over two years using predictive modeling."

The contract for development of the new system, which is valued at $77 million, has been awarded to Northrup Grumman along with a group of companies. Peter Budetti, Medicare anti-fraud czar, said, "We will be able to translate their experience from the private sector into Medicare."

Medicare Administrator Don Berwick said, "We're getting ahead of the game here." Hopefully the new technology will deliver a good process for detecting fraud on the front end, as opposed to tracking down perpetrators after the fact.

Sources:
Medicare goes high-tech to head off fraud, Business Week, The Associated Press, June 17, 2011

Medicare Will Start Flagging Suspicious Claims - Before They're Paid, The Wall Street Journal, June 17, 2011

On Wednesday, March 9, 2011, congressional hearings revealed that officials at the Centers for Medicare and Medicaid Services (CMS) have developed plans for an increase in scrutiny for new providers joining these programs, as opposed to going after fraudulent behavior after the fact. Furthermore, these experts estimate that as much as $70 billion in savings could be achieved per year by going after fraudulent providers.

Peter Budetti, who is director of program integrity at the CMS, told the Senate Homeland Security subcommittee hearing, "We are going to keep out the bad guys without making things worse for honest providers, and cut off payments for things that should not be paid. We want to move from the pay and chase mode to preventing fraud."

The efforts could be cut short, however, due to lack of funding for new software that provides electronic screening that could aid in the identification of fraudulent providers. Much of the funding for the new software was included in the 2010 health care reform law, which is considered for repeal by many Republicans on Capitol Hill. On the other side of the argument regarding funding, Republicans report that the anti-fraud measures in the health care bill do not go far enough and that the Congressional Budget Office estimates that the efforts at fraud prevention would only eliminate $5.8 billion in improper payments over the next decade.

If left to continue, increases in Medicare fraud could limit the funding for the new health care reform law. Funding has also been sought for the special interagency task force that pursues and investigates fraudulent claims submissions and for receipt of kickbacks for referrals to billing for medical services that were never provided.

Source:
Medicare Fraud: A $70 Billion Taxpayer Ripoff, The Fiscal Times, March 10, 2011

At the beginning of February, the Department of Justice, in conjunction with the Department of Health and Human Services, released a number of statistics regarding qui tam cases filed under the false claims act. As of January 4, 2011 there were 1,341 qui tam actions under investigation in the United States; each of them awaiting a decision as to whether or not the government will intervene.

Qui Tam cases are filed "under seal" meaning that the case is filed in secret so that the public and even the defendant are unaware that the case has been filed. This allows the government to investigate the case prior to any allegations being made public.

Just of 66% of all qui tam actions currently on file allege some form of health care fraud. The whistleblowers who have brought these actions come from a wide variety of backgrounds and professions, from hospital administrators to pharmaceutical sales representatives. 98% of all sealed health care cases allege fraud against Medicare or Medicaid.

From October 1, 2006 to January 4, 2011, the government made intervention decisions in 1,644 cases and actually intervened in approximately 1 out of every 5 cases. Of the cases that have had intervention decisions in the past 5 years, the average time under seal is 13 months.

Health Care and Government contractor fraud can potentially bankrupt America's health care benefit programs and defense funds. These actions only enrich those commiting the fraud. The damages can be staggering and the ongoing actions of many perpetrators suggest that these damages are simply a cost of doing business in these industries. The major types of fraud include:

• Medicare and Medicaid Fraud
• Pharmaceutical Fraud
• Defense Contractor Fraud
• Federal Government Contractor Fraud

All of these types of fraud are violations of the False Claims Act. Businesses that provide services for which reimbursement may be sought from Medicare and Medicaid funds are subject to the False Claims Act. Likewise, businesses that enter into contracts with the Government for the procurement of equipment and services are also subject to the False Claims Act. Normally, these businesses are considered to be Government Contractors.

American taxpayers and consumers of medical and pharmaceutical services should pay particular attention to the associated billing for these services. Actions such as billing for services that are not provided, incorrect data on health care provider cost reports, the provision of substandard care, and fully charging for partially filled prescriptions could be violations of the False Claims Act. Other violations can include:

1. Kickbacks to a Medical provider in exchange for prescribing particular drugs.
2. Medicare or Medicaid patients that are charged a higher rate for the same prescription.
3. Substandard products and services that are intentionally provided.
4. Prescribing unnecessary drugs and treatments.
5. Marketing drugs for uses not approved by the FDA.

Equipment and services provided by defense contractors can include everything from computers and vehicle parts to multi-billion dollar weapons systems. Defense contractors provide these products and services via contract with the Government. These contractors can run afoul of the False Claims Act by supplying substandard parts and equipment and by participating in bidding schemes that involve price rigging, to name a few. Additionally, failing to adhere to the terms of the contract can also trigger violations. Contract terms can include billing and labor rates as well as contract performance requirements and provision of equipment and labor that meet federal statutes and regulations.

Indiana Attorney General Greg Zoeller has started a program called "Blow the Whistle on Medicaid Fraud". The program encourages people with knowledge of fraud, especially those working in health care, to come forward with information of wrongdoing.

The US Department of Health and Human Services has similar programs attempting to reign in the estimated 15 to 30 percent of all Medicare and Medicaid billables which are fraudulent. These programs allow private citizens to file a lawsuit on behalf of the government against a provider or company, like a hospital.

In turn for the whistleblower's help, the government can give a substantial finder's fee to the citizen bringing the lawsuit, often as high as 15 to 30 percent.