Attack on Corporate & Health Care Fraud

The U.S. Department of Justice's (DOJ) Criminal Division is positioning itself to put major additional force behind the government's attack on corporate and health care fraud.

DOJ and HHS Form Special Fraud Team

In May 2009, the DOJ and the Department of Health and Human Services (HHS) announced the formation of the Health Care Fraud and Prevention and Enforcement Action Team (HEAT). The team is made up of DOJ and HHS senior officials. HEAT takes a double-barrel approach to combating Medicare fraud: "build[ing] upon and strengthen[ing] existing programs to combat fraud" as well as "investing new resources and technology to prevent fraud, waste and abuse before it happens."

DOJ's fraud division is already the largest litigation unit in its Criminal Division. And the DOJ has won some major victories in health care fraud in the past few years. Since 1997, the DOJ has seen wins in the form of more than $14 billion in criminal fines and settlements. But by adding these additional bodies, they are clearly looking to put more muscle behind the promise to crack down on health care and corporate fraud.

Part of that initiative involved a build-out of the DOJ strike force successes in recent years in Los Angeles and south Florida. The DOJ sent targeted strike forces to Houston and Detroit which worked with local U.S. attorneys offices on health care fraud enforcement. In the past few months, these teams have filed indictments against 85 defendants in those cities for $65 million in Medicare fraud.

DOJ to Hire "Rock Star" Leader for Fraud Division

The DOJ is looking for a "rock star" leader for the fraud division who will bring "cases of extraordinary importance." It will also add 10 fraud focused trial attorneys and fill the vacant position of deputy chief for securities, corporate and investment fraud. Attorney General Eric Holder declared health care fraud a top priority and to back up that statement, five of the 10 new trial attorneys will focus on health care. The others will be assigned as needed.

There are several issues at stake when looking to fill this "rock star" role - and as expected, there are strong sentiments from every side. An outside hire from a big national law firm might not have the fraud prosecution expertise career prosecutors would pull for. However, many defense lawyers would prefer the position be filled by someone who has spent time on both sides of a courtroom.

But regardless of where this new hire comes from, he or she will be backed by the full force of the DOJ and have the resources necessary to lead the charge.

Get Your House in Order Now

With the expected increase in health care fraud focused trial attorneys, the DOJ will have the capability to widen the scope of its attack, meaning more cities, more fines and more indictments. The defense bar is concerned that this increase in force will mean minor infractions of health laws into massive prosecutions and media worthy settlements. Health care providers and insurers need to make sure their houses are in order before the DOJ and its new fraud "rock star" comes to visit.

• RAC Audits: Health care providers need to prepare immediately and in-depth for their national Recovery Audit Contractor (RAC) audits. The first RAC audit targets of the program were unveiled in August 2009. Although the initial RAC targets involved simple, automated reviews, they foreshadow more complex DRG validations, coding reviews and medical necessity reviews that are big-dollar items. These internal reviews need to be conducted with the close involvement of experienced legal counsel.
• Self-Disclosure Protocol: In reviewing claims and physician referral arrangements as part of that process, errors, omissions and other compliance problems and irregularities will invariably be found. Health providers and insurers need to be aware that the OIG's Self-Disclosure Protocol has changed. The OIG will no longer accept self-disclosures of technical Stark Law violations. Since there is no office within either HHS or CMS specifically charged with accepting and resolving these potential violations, an informed legal and regulatory strategy is indispensable for identifying and evaluating alternative courses of action.
• False Claim Act Liability: On May 20, 2009, President Obama signed the Fraud Enforcement and Recovery Act (FERA) into law. FERA not only increases the types of conduct which prosecutors and whistleblowers may attack but will likely add to the costs of litigating or resolving health care and other fraud cases, including "mere" overpayment matters. Health care providers need to analyze carefully FERA's effect on existing compliance programs and repayment strategies and to redouble their efforts to avoid the long reach of this powerful enforcement tool in order to avoid becoming defendants in future False Claims Act cases. Experienced legal counsel can provide an effective and efficient resource in handling these emerging problems.