Healthcare Fraud 101: An Overview of the Key Statutes

Healthcare fraud remains a key target of the United States Department of Justice (DOJ). The DOJ uses civil penalties, as well as criminal charges, to punish healthcare fraud. Plus, federal agencies such as the Department of Health and Human Services regularly employ the administrative penalties in their arsenal against wrongdoers.

This is the first in a series of posts to provide an overview of how the government investigations healthcare fraud and how your practice can avoid coming under investigation.

The numbers alone speak volumes:

• In fiscal year 2016, DOJ obtained $2.5 billion in settlements and judgments from civil cases involving fraud and false claims against the government in the health care industry.
• Between 2009 and 2016, DOJ obtained $19.3 billion in civil settlements and judgments for health care fraud.
• In 2014 alone, the Medicare Fraud Strike Force (made up of DOJ, the FBI, HHS’s Office of Inspector General and individual United States Attorney’s Offices) brought criminal charges against 353 individuals.
• Of the 248 individual defendants sentenced in 2014 for healthcare fraud, the average prison sentence was more than four years.

There is no question that DOJ views healthcare fraud as a major drain on limited Medicare resources and will continue to target individuals, physician practices, and larger healthcare companies. Although DOJ's highest-profile cases are against major drug companies, hospitals, and medical device companies, this does not mean that smaller physicians groups are not at risk.

Here is an overview of the four primary federal healthcare fraud statutes. It can be a challenge for smaller practices to keep up with developments in the law and to ensure that their policies are compliant. I counsel many clients under government investigation who tell me, "I didn't know that was illegal." Unfortunately, that's not an excuse. The Stark Law, for example, is a strict liability statute. You can be held liable for violating it even if you had no idea you were breaking the law.

Civil Laws

DOJ uses two primary statutes to obtain civil penalties from defendants. This means that if you are found liable under these statutes, you are not facing criminal penalties or prison time. However, the financial penalties can be severe.

False Claims Act (FCA)

The FCA is the federal government's primary civil tool in healthcare fraud cases, including combating Medicare fraud. The statute prohibits a person from knowingly presenting (or causing to be presented) a false or fraudulent claim for payment to the federal government. It also prohibits knowingly making a false statement material to a false or fraudulent claim. The FCA covers wrongful conduct like "upcoding" and "unbundling," as well as submitting claims for procedures that were not undertaken at all. The statute allows for treble (triple) damages plus specified civil penalties. The FCA also empowers a private citizen, known as a whistleblower or "relator," to bring a case on behalf of the government. This means that your employees or patients may bring a lawsuit on behalf of the government against you.

Stark Law

The Stark Law prohibits a physician from referring a Medicare patient for certain designated health services to any entity in which the referring physician has a financial relationship. It sounds simple, but the meanings of "referral" and "financial relationship" and are not entirely clear, making compliance with the statute a challenge. If you violate the Stark Law, then you must refund any payments received as a result of the referral. Plus, the statute provides remedies of up to $15,000 per service and possible exclusion from the Medicare program entirely. There are certain exceptions to the Stark Law, however, so you can avoid liability by following one of the exceptions.

Criminal Statutes

The government may also bring a criminal case against you or your practice for violating certain statutes. Generally, these statues require some level of intent (i.e., that you knew your conduct was wrongful), making it more difficult for the government to prevail. That said, the possible penalties are life changing: conviction of a felony and prison time.

Anti-Kickback Statute (AKS)

The AKS is a criminal statute that prohibits offering or providing anything of value to induce the referral of Medicare or Medicaid business. Violating the AKS can result in imprisonment up to five years in prison and a fine of $25,000. Plus, if you are convicted under the AKS, you will be excluded from the Medicare/Medicaid programs for at least five years Like the Stark Law, there are statutory and regulatory exceptions (called "safe harbors"), which provide providers with comfort that their conduct is lawful.

Criminal health care fraud statute

Under this statute (18 U.S.C. § 1347), a person can be held liable for a scheme to intentionally (1) defraud any healthcare benefit program or (2) use false statements to obtain funds held by a federal healthcare program. The penalties are steep: up to 10 years in prison and a fine up to $500,000 or twice the amount of the fraud.

Later in this series we will address issues specific to healthcare fraud, such the details of the False Claims Act and Anti-Kickback Statute, a summary of recent trends in health care fraud investigations, and information about how best to respond to a government subpoena or to handle a possible government investigation.  

_{About the Author}

_{Sara Kropf is an experienced white-collar criminal defense attorney. She regularly represents individuals and small businesses in government investigations and related civil litigation. Before opening her firm in 2013, Sara was a partner at a large international law firm. Her website is www.kropf-law.com.}