Government Investigations of Ambulatory Surgical Center Fraud

Key Points:

  • ASCs (Ambulatory Surgical Centers) and rural hospitals have recently become subject to intense government scrutiny.
  • What started as out-of-network private payor insurance audits in connection with toxicology billing fraud has now turned into a national Justice Department effort to investigate federal healthcare fraud violations.
  • Owners and operators of ASCs must be up to date with their compliance policies and procedures and should consider a number of steps to eliminate any impression of fraudulent intent.

Chronology of ASC and Hospital Investigations

Ambulatory surgical centers have recently come under attack – various commercial health insurance companies have targeted hospitals and ASCs for years in their unfair battle against out-of-network billing. Over the last five years, ASCs were forced to pay back hundreds of millions of dollars that commercial carriers like Aetna, Blue Cross, United Health, Anthem, and other health insurance companies considered subject to recoupment due to alleged overpayments.

These audits and recoupment requests have now reached a new—federal— level. In a number of metropolitan areas, the U.S. Attorney’s Office and the FBI have taken over investigations to assess to what extent ASCs in Florida, Mississippi, Phoenix, Northern California, Southern California, South Texas, West Texas, and Louisiana have violated federal laws.In 2019, the U.S. Department of Justice, globally, collected more than $3billion trough their healthcare fraud investigations. That number is expected to rise in 2020 and 2021.

Toxicology billing fraud in these ASCs caused the government’s interest originally. Especially financially struggling rural hospitals that entered into questionable arrangements with big-city laboratories to run urine drug screens under the hospital credentials to increase and maximize their revenue. The result of these arrangements: the FBI has arrested dozens of individuals and physicians, with many still awaiting the possibility of an indictment and incarceration.

Importantly, some outpatient surgery center and hospital “bad actors” have catapulted an entire industry onto the FBI’s radar. Today, agents from the U.S. Department of Health and Human Services and the Office of Inspector General in connection with local U.S. Attorney’s Offices have begun to take a closer look at surgical centers, their billing practices, their physician investments, and their business joint ventures.

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Dr. Nick Oberheiden
Dr. Nick Oberheiden

Founder

Attorney-at-Law

John W. Sellers
John W. Sellers

Former Senior Trial Attorney
U.S. Department of Justice

Local Counsel

Joanne Fine DeLena
Joanne Fine DeLena

Former Assistant U.S. Attorney

Local Counsel

Joe Brown
Joe Brown

Former U.S. Attorney & Former District Attorney

Local Trial & Defense Counsel

Amanda Marshall
Amanda Marshall

Former U.S. Attorney

Local Counsel

Aaron L. Wiley
Aaron L. Wiley

Former Federal Prosecutor

Local Counsel

Roger Bach
Roger Bach

Former Special Agent (OIG)

Gamal Abdel-Hafiz
Gamal Abdel-Hafiz

Former Supervisory Special Agent (FBI)

Chris Quick
Chris Quick

Former Special Agent (FBI & IRS-CI)

Kevin M. Sheridan
Kevin M. Sheridan

Former Special Agent (FBI)

Ray Yuen
Ray Yuen

Former Supervisory Special Agent (FBI)

Dennis A. Wichern
Dennis A. Wichern

Former Special Agent-in-Charge (DEA)

This article examines the goals of these investigations and presents recommendations how ambulatory surgical centers and hospitals can protect themselves against intrusion from federal law enforcement.

The FBI Has Jurisdiction Over Private Insurance Medical Billing

One of the largest paradigms shifts in recent history in the area of healthcare fraud is the rise of federal prosecutions of non-federal programs. Now, the U.S. government has begun to serve as an enforcement arm of private health insurance companies like United Healthcare or Aetna. Previously, the Justice Department and federal law enforcement, such as the FBI limited their investigations, with few exceptions, to violations of federal law. Any entity that accepted Medicare, Tricare, Medicaid, Department of Labor funds or other federally reimbursed money was subject to federal regulation and those entities that only dealt with commercial payors were relived of federal oversight. Today, this distinction no longer exists.

The central federal law, 18 U.S.C. 1347, governs criminal healthcare fraud, and includes all healthcare programs to be subject to federal jurisdiction by explicitly pointing out that a violation of the rules of “any healthcare program” can turn a seemingly private and commercial matter into a federal law enforcement case.

The “any healthcare program” clause is important. Over the past five years, all private pay health insurance carriers have built close relationships with local federal agents, often through the use of specially appointed liaisons whose job it is to put together and hand over packages of alleged schemes of fraud against insurance to their FBI counterpart. These close relationships allows the government to easily accesses allegations of healthcare fraud concerning private pay insurers.

Once allegations of fraud are given to the government, the local U.S. Attorney’s Office then reviews the files and decides whether or not to spend federal resources and to open a federal investigation, be it civil or criminal in nature. As private health insurances have become more familiar with what constitutes a “good” case versus a “bad” case in the eyes of federal prosecutors, health insurance investigators have adopted federal standards and nowadays act more and more like FBI agents. These investigators want penalties and punishment for their uncovered overpayment schemes and lost dollars. Lucrative ASCs, physician-owned surgical centers, and hospitals are on top of their priority list for potential case referrals to the government.

The FBI’s Focus on Medical Billing Fraud & Physician Investors

In addition to private insurance carriers alleging overpayments, the federal government is trying to recoup monies from surgical facilities as well. Among the roughly 6,000 ambulatory surgical centers in the United States, federal experts believe that quite a few will not financially survive the type of intense CMS and OIG billing review and corresponding demand for penalties in cases of non-compliance. While many surgical centers have focused on building and maintaining business, compliance measures, to this day, remain neglected, and insufficient. Preventive measures should be seen as one of the best and most effective policies to protect against overwhelming government audits. The consequences of not doing so can be extremely damaging. Here are some recent examples.

  • An ambulatory surgical center in California had to pay the government over $30 million to settle allegations that it engaged in an improper payment incentive scheme with physicians performing services at the center.
  • Am ambulatory surgical center in Georgia paid the government over $1 million to settle allegations that it improperly induced Medicare beneficiaries to receive treatment at the ASC by offering free anesthesia and other ancillary services.
  • A jury in California awarded a private insurance carrier $37 million in damages to be paid by the defendant ambulatory surgical center after the ASC was found guilty of paying its physicians to invest in the ASC and then to refer patients to be treated at the ASC.
  • The owner of several Illinois based ambulatory surgical centers was found guilty of federal healthcare fraud due to his paying bribes and kickbacks to physicians to refer patients to be treated at the ASCs. The owner had to forfeit over $2 million to the federal government.

The issues addressed in this article are avoidable. Real, effective, and implemented compliance policies and procedures allow ASC operators and investors to stay out of newspapers while simultaneously achieving their business goals. Given the characteristic merger and acquisition culture of surgical centers, any owner is well-advised to invest into medical billing compliance and regulatory compliance to proactively preempt federal investigations and audits. After all, who would want to buy or take over a surgical center with a history of government attention levied monetary penalties? In the healthcare industry, as regulated as it is, compliance truly is one of the best investments into your long-term goals. Contact Oberheiden P.C. today.

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