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Heightened Enforcement of Fraud & Abuse Under Healthcare

Krugliak, Wilkins, Griffiths & Dougherty Co., L.P.A.

The recently-enacted Patient Protection and Affordable Healthcare Act, H.R. 3590 (the "Act") drastically modifies and expands the federal Anti-Kickback Statute (the “AKS”) and the False Claims Act (the “FCA”) with the apparent goals of expanding the government’s efforts and ability to prevent fraud and abuse, enforce the laws and regulations, and punish violators.  The Act attempts to accomplish these goals in the following ways:

(1) The Act increases the level of scrutiny of providers or suppliers by the Department of Health and Human Services (“HHS”) by requiring that HHS screen all providers and suppliers, including advanced screening procedures for certain types of at-risk providers and suppliers.

(2) The Act creates a condition to participation in Medicare and Medicaid that providers and suppliers establish fraud and abuse compliance programs containing certain core elements as established by the Secretary of the Department of Health and Human Services (the “Secretary”).  Under the Act, the Secretary has the authority to not only develop the elements of these compliance programs, but also the timeline for implementation.  Prior to the Act, fraud and abuse compliance programs were not mandated by law, nor was there any guidance from the federal government on what should be contained within such programs.

(3) The Act drastically increases fraud and abuse enforcement and detection efforts by increasing funding for healthcare fraud and abuse enforcement by $250 million over ten (10) years, expanding the Recovery Audit Contractor program to Medicaid, and allowing the IRS to share tax return information with HHS to help screen and identify fraudulent providers (as contained in the Reconciliation Bill).

(4) With respect to any providers who are subject to an investigation of a credible allegation of fraud, the Act allows the Centers for Medicare & Medicaid Services (“CMS”) to suspend Medicare payments to such providers pending such investigation.

(5) The Act makes it easier to prove a violation of the AKS.  Prior to the enactment of the Act, the AKS contained an elevated standard of proof with respect to mens rea or intent to violate the statute, requiring knowing and willful violation, which federal courts have interpreted to require that the defendant knew that specific conduct was prohibited by the AKS and engaged in that conduct with the specific intent to violate the law.  The Act adds the following to the AKS:  “[W]ith respect to violations of this section, a person need not have actual knowledge of this section or specific intent to commit a violation of this section.”  As a result of this addition, the Act removes a protective barrier or defense for health care providers under the AKS and eases the federal government’s ability to prove a violation of the AKS.

(6) The Act clarifies that services performed and billed as a result of prohibited kickbacks are false claims under the FCA.

(7) The Act requires providers to report and return overpayments within sixty (60) days of identifying the overpayment (or the date any corresponding cost report is due).  Such reports must state in writing the reason for the overpayment.  Retaining an overpayment after such 60-day period is defined as an “obligation” under the FCA and the failure to discharge an obligation violates the FCA. 

(8) The Act empowers the Secretary to impose civil monetary penalties, including the exclusion of a provider or supplier, if an individual or entity (a) knowingly retains and fails to report an overpayment, (b) knowingly makes a false statement, omission or misrepresentation of material fact in any application, agreement, bid or contract to participate or enroll in a federal health care program, (c) is an excluded provider and orders Medicare/Medicaid services, or      (d) fails to grant timely access to the Office of Inspector General for the purpose of audits, investigations, evaluations or other statutory functions.

The above-referenced changes in the law, and the regulations to be created as a result thereof, are consistent with the federal government’s efforts over the last few years to increase both government audits and investigations and the likelihood of successful identification and recovery of fraud and abuse in healthcare.  To avoid the potentially disastrous consequences, financial or otherwise, of a federal audit or investigation, providers should, among other things, review and strengthen their compliance programs.

NOTE: This general summary of the law should not be used to solve individual problems since slight changes in the fact situation may require a material variance in the applicable legal advice.

This information provided by Attorney Jason F. Haupt (jhaupt@kwgd.com) at the law firm of Krugliak, Wilkins, Griffiths & Dougherty Co., L.P.A.  Feel free to contact your attorney at the firm or Attorney Jason F. Haupt with questions at 330.497.0700.

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