The Posner Law Firm

Privacy and Surveillance Law for

Attorneys, Businesses, Government, Charities, Trade Organizations, Public Interest Groups and People
Practice Area: Health Care Fraud
by Steve C. Posner

Health care fraud is an enormous problem affecting patients, providers, employees, employers and taxpayers. It has been estimated that the annual loss of health care dollars to fraud and abuse amounts to $90 billion. The problem involves criminal, civil and administrative law, and, naturally, statutes and regulations to prevent health care fraud have proliferated. This page provides a very brief overview of the types of fraud that commonly occur, and of current statutes at the federal level and in Colorado that attempt to address the problem. Provisions of many of the federal statutes have ben modified by HIPAA (Publ. L. No. 104-191) and should be read in conjunction with that statute. Many statutes that can be viewed as "supplementary" -- i.e., that don't actually set out causes of action for health care fraud -- are not covered here. These include general sentencing laws, forefeiture laws, laws pertaining generally to perjury or obstruction of justice, etc. Also, since this is only a brief overview, important interpretive regulations and nearly all case law are not covered.

A. Types of Fraud

Typically, health care fraud falls into four broad categories, in addition to which there are miscellaneous incidence. The categories are: (1) fraudulent billing; (2) kickbacks and/or self-referrals; (3) research fraud; and (4) patient dumping and relevant record fabrication.

1. Fraudulent billing

* Billing for services not provided
* Providing unnecessary services
* Failing to provide necessary or sufficient services
* Making false reports of costs reimbursable under Medicare or Medicaid
* Retaining overpayments
* Bundling/unbundling so as to maximize the number of billable tests and procedures

2. Kickbacks and/or self-referrals

* Referring patients to other providers who offer compensation or incentives for referrals
* Referring patients to health care facilities in which the referring provider owns an interest

3. Research fraud

* Fabricating or deceptively manipulating existing or expecting research data to obtain or retain funding
* Misrepresenting research costs

4. Patient dumping and relevant record fabrication

* Refusal to treat emergency conditions of uninsured patients is illegal, but not health care fraud per se. However, fabricating records of compliance with anti-dumping laws, is.

B. Relevant statutes

Federal
* 18 USC 287 - Submitting False Claims - Criminal
Prohibits knowingly making or presenting a false, fictitious or fraudulent claim to a department or agency of the United States.
* 31 USC 3729 - False Claims Act - Civil
Creates a civil cause of action for essentially the same acts prohibited by 18 USC 287.
* 18 USC 1001 - False Statements - Criminal
Provides for up to 5 years in prison and fines for falsely representing or concealing a material fact, or using a false writing or document in any matter within the jurisdiction of any U.S. department or agency.
* 42 USC 1320a-7b(a)(1) - Medicare and Medicaid Fraud - Criminal
Provides for up to 5 years in prison and fines of up to $25,000 for knowingly and willfully making a false statement or presentation of material fact in any aplication for any federal health care program benefit or payment.
* 42 USC 1320a-7b(b) - Antikickback Statute - Criminal/Civil
Prohibits knowing and willful solicitation, offer, receipt or giving of kickbacks, bribes or rebates in return for referrals for program-reimbursable services or things, except for discounts, employee or vender payments, certain waivers of co-payments ore deductibles, and certain risk sharing arrangements, and provides for imprisonment and civil money penalties for violation.
* 42 USC 1396(b)(q) Social Security Act Medicare-Medicaid Anti-Fraud and Abuse Amends.
  A federal law particularly relevant to Colorado because it is under the rubric of this statute that the Colorado Medical Fraud Unit of the Colorado Department of Law was held by the Colorado Court of Appeals to be able to execute search warrants not subject to constitutional review because physician-patient privilege is outweighed by the public policy of ensuring an efficiently operating Medicaid system. See In re Search Warrant for 2045 Franklin, Denver, 709 P.2d 597 (Colo. App. 1985).
* Pub L. No 101-239, 103-66 Ethics in Patient Referrals Act ("Stark Acts") --Civil
Prohibits a physician from referring Medicare or Medicaid patients to clinical laboratories in which the physician holds a financial interest, and prohibits such labs from billing for services rendered following a prohbited referral. There are certain enumerated exceptions to the prohibitions. Also requires that entities furnishing items or services paid for under Medicare report to the Health Care Financing Agency concerning their financial relationships; failure to report can result in a civil penalty of up to $10,000 for each day a report is late.
* 42 USC 1320-7b(a)(6) Disposing of Assets to Obtain Medicaid Coverage -Criminal/Civil
Provides for up to 5 years in prison and fines up to $25,000 for knowingly and willfully disposing of assets in order to appear poor enough to qualify for medicaid coverage.
* 18 USC 1956, 1957- Money Laundering - Criminal/Civil
These laws deal with the reporting of cash transactions, and the transporation of illegally obtained money among bank accounts to avoid reporting or tax requirements. Reporting offenses have both criminal and civil penalties, including automatic asset forfeiture. Transportation offenses involve only criminal liability.
* 18 USC 1961 et. seq. - Racketeer Influenced and Corrupt Organizations (RICO) - Criminal/Civil
Allows both criminal and civil prosecution by federal prosecutors or injured parties if a "pattern" of criminal activity is found. A pattern consists of related criminal acts. Numerous state and federal crimes can constitute the predicate acts. The acts must affect interstate commerce and the defendants must either:invest, acquire, control, be employed by, be associated with, or participate in the affairs of an "enterprise," through which monies from the pattern of racketeering activities are received. Criminal penalties can include up to 20 years imprisonment and forfeiture of any interests acquired in or derived from a RICO violation. Civil penalties can include treble damages. In the health care fraud area, RICO has been used to prosecute doctors, attorneys and patients who submit false claims, doctors who dispense unnecessary prescriptions of controlled substances, and doctors who make claims for services not rendered.
* 18 USC 286, 371 Conspiracy - Criminal
* Conspiracy is an agreement between at least two people to commit an illegal act, with intent to actually commit it, and at least one overt act by a conspirator in furtherance of the conspiracy. Sec. 286 prohibits conspiracies to submit false claims to the government. Sec. 371 prohibits conspiracies to defraud the United States or violate a federal criminal statute.
* 18 USC 1341 Mail Fraud - Criminal
Makes it a crime to commit fraud using the mail.
* 18 USC 641 Theft of Government Property - Criminal
Provides for imprisonment of up to 10 years or fines for embezzling or stealing government records, vouchers, money or things of value. If the value of the property is $100 or less, the crime is a misdemeanor (but can still damage business reputation and license renewal prospects).
* 18 USC 1518 Obstruction of Criminal Investigations of Health Care Offenses - Criminal
Provides for imprisonment of up to five years or fines for obstructing a federal criminal investigation of a federal health care offense.
* 18 USC 1347 Health Care Fraud
Imposes up to 10 years imprisonment or fine for knowingly or willfully defrauding or attempting to defraud a health care benefit program. If serious bodily injury results, imprisonment can be for up to 20 years, and if death results, the sentence can be life.
* 18 USC 669 Theft or Embezzlement in Connection with Health Care
Imposes up to 10 years imprisonment or fine for stealing asssets of a health care benefit program, but if the value of what is stolen is less than $100, the crime becomes a misdemeanor.
18 USC 1035 False Statements Relating to Health Care Matters
Imposes up to 5 years imprisonment or fine for knowingly and willfully concealing material facts or making false statements in any matter concerning a health care benefit program.
Colorado
* 12-36-117(1)(a) Unprofessional Conduct
Prohibits, as unprofessional conduct subject to discipline, fraudulently obtaining a medical license or professional liability insurance.
* 26-6-410.5 Prohibition of Certain Referrals
  Prohibits referrals, or billing for services rendered as a result of a referral, if the referring physician or immediately family member has a financial interest in a provider of about a dozen enumerated medical services or items. Also imposes certain reporting requirements at the request of the state department.
* 2001 Colo. HB 1040 Penalties for False Medicaid Claims - Civil
 

This bill will also amend 26-4-1101 C.R.S. to impose civil penalties in the form of fines or restitution for false Medicaid claims. The penalty depends on the state of mind with which the false claim was made. An intentional false claim can lead to a fine of $5,000 per claim or restitution of double the amount obtained by the false claims. A false claim made with reckless disregard can lead to a fine of $1,000 per claim up to a total of $50,000, or double restitution. Cooperation can reduce penalties, and the standard of proof is a preponderence of the evidence. The bill also amends 13-80-103.5 C.R.S. to provide for a six year statute of limitations.

* 26-4-403 C.R.S. Recovery of Overpayments - Civil
Allows county departments to recover from recipients overpayments by Medicare, Medicaid or third-party insurers. If overpayments are fraudulently obtained, the departments may seek interest.
* 26-4-504 C.R.S. IPersonal Needs Benefits ... Funeral and Burial Expenses - Civil/Criminal
Allows the state to include in its medical care benefits personal needs funds for use in nursing or intermediate care facilities for the mentally retarded, as well as funeral and burial expenses. The state can recover fraudulently obtained overpayments by using the procedures established in 26-4-403 C.R.S. It is also illegal to knowingly fail to deposit patient needs funds received from a patient or the state in a patient's personal needs trust account. This statute also establishes the crimes of unlawful retrention of a patient personal needs trust fund, and unlawful use of a patient personal needs trust fund. Unlawful retention is a Class 3 misdemeanor but unlawful use can range from a Class 3 misdemeanor up to a Class 3 felony depending on how much money was converted. Finally, any person convicted may not operate a nursing facility that receives state monies.

 

 
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Copyright 2001-2006 Steve C. Posner

The purpose of this website is to advertise the firm and offer information as a public service. Steve C. Posner is admitted to practice in Colorado, New York and California, he has not practiced in California (inactive status). The firm does not endorse, take responsibility for, or control any information on sites to which links are provided. Nothing in this website is intended as legal advice. You are strongly advised to seek legal counsel regarding any issues you may face.