Health Care Investigations
The Federal Bureau of Investigation, the U.S. Postal Service, and the Office of the Inspector General are charged with the investigation of health care fraud. Since its inception in March 2007, the Federal Strike Force has charged more than 1,500 defendants who collectively have falsely billed the Medicare program for nearly $5 billion.
Health Care Law Enforcement Agencies:
- Federal Bureau of Investigation (FBI)
- Office of Inspector General (OIG)
- Medi-Cal Fraud Control Unit
- United States Attorney’s Office (AUSA)
- Department of Justice (DOJ)
According to the U.S. Government Accountability Office, medical clinics and suppliers of durable medical equipment are most commonly investigated and prosecuted for Medicare fraud, accounting for 37 percent of all successful Medicare fraud prosecutions. In this statistics, hospitals account for about 20 percent and individuals for about 11 percent of convictions.
Our Firm represents health care companies, hospitals, pharmacies, national toxicology groups, spinal hardware and implant companies, individual medical providers as well as entrepreneurs. Routinely, we advise on physician self-referral laws, safe harbor laws, SEC compliance with private placement memoranda, and conduct legal analysis for business’ anti-kickback and Health Insurance Portability and Accountability Act (HIPAA) compliance. Our extended experience allows us to rely on proven protocols that allow us to quickly and efficiently respond to the particular need of each client.
- Medicare & Medicaid Fraud
Targets charged with health care violations are typically accused of violating one of the following prominent statutes:
- Anti-Kickback Statute (42 U.S.C. § 1320a-7b)
- False Claim Act (31 U.S.C. §§ 3729-3733)
- False, fictitious or fraudulent claims (18 U.S.C. § 287)
- Physician Self-Referral Laws (§ 1877 Social Security Act)
- Patient Protection and Affordable Care Act (PPACA)
- Health Care Fraud (18 U.S.C. § 1347)
- Social Security Act (§ 1128B, Medicare and Medicaid laws)
Anti-kickback laws provide civil and or criminal penalties for individuals or entities, licensed or unlicensed, who knowingly and willfully offer, pay, solicit, or receive money or favors for referrals that will be paid for by the Medicare or Medicaid programs, 42 U.S.C. 1320a-7b. Often overlooked, the statute is extremely broad in scope and considers the transfer of anything of value, directly or indirectly, overtly or covertly, in cash or in kind to constitute remuneration and thus a kickback: e.g. bribes, rebates, gifts, discounts, above and below credit arrangement or lease payments, waivers of payments but also, to name some real life examples, the offering of frequent flyer miles, dubious consulting agreements etc. The statute has been interpreted to cover any arrangement where one purpose of the remuneration was to obtain money for the referral of services or to induce further referrals. See, United States v. Greber, 760 F.2d 68 (3d Cir. 1985), cert. denied, 474 U.S. 988 (1985); United States v. Borarasi, 639 F.3d 774 (7th Cir. 2011).
The physician referral law prohibits a physician from referring patients to an entity for a designated health service if the physician or a member of his or her immediate family has a financial relationship with the entity, unless an exception pursuant to 42 CFR Part 411, Subpart J, applies. The law also prohibits an entity from presenting a claim to Medicare or to any person or other entity for such designated services provided under a prohibited referral. It should be noted that Stark is a strict liability law and may be violated regardless of good intentions.
Fraud under the False Claims Act means that a contractor has knowingly presented a false claim for payment to the United States or by conspiring to defraud the government by getting a false claim allowed or paid. By contrast, the level of culpability in 18 U.S.C. § 287 false, fictitious, or fraudulent claims do not require knowledge or reckless disregard, but the intentional conduct.
Should a Facility file false claims for Products in violation of the False Claims Act, the Facility could be prosecuted, and the Company could be involved in the resulting investigation. It also could possibly face charges that it “caused to be presented” the claim by the Facility, which would be a violation of the False Claims Act. Fraud may occur in various forms.
- Billing Fraud (unperformed tests, double billing)
- Coding Fraud (up-coding, code jamming, unbundling)
- Testing Fraud (reflex and defective testing)
- Improper Cost Reports (unnecessary procedures, phantom equipment)
- Offering free services
- Routine waiver of patient co-payments
The Patient Protection and Affordable Care Act (PPACA) strengthens enforcement remedies for perceived health care fraud and abuse. A key feature of the PPACA is its revision of the evidentiary standard under the anti-kickback statute by eliminating the requirement of actual knowledge of, or specific intent to commit a violation of the statute. Consequently, it is now significantly easier for the government to initiate enforcement procedures and to prevail in battles over the intent of the perpetrators. To be clear, the government must still show that a defendant acted “knowingly and willingly” in offering or paying remunerations in exchange of patient referrals. However, the government is no longer required to show that a defendant specifically knew that his behavior was unlawful. See, United States v. Mathur, 2012 WL 4742833 (D. Nev. 2012).
- OIG and FBI Investigations
Most individuals never contemplate being investigated until government agents from the OIG, FBI, the Secret Service, the U.S. Postal Service, ATF, or DEA appear at their doorsteps, or, in case of an administrative subpoena, serve notice of a federal investigation.
Governmental investigations can be administrative, civil, and criminal in nature. The two clearest indications that the investigation is criminal in nature are search warrant and grand jury subpoena. A search warrant must be issued by a judge based on probable cause, a very high standard. Subpoenas, on the other hand, do not require a judge’s approval and are used to obtain evidence primarily from those that are believed to have pertinent information about the crimes of others.
On the one hand, cooperation with lawful governmental requests is mandatory and non-compliance can result in severe sanctions and fines. On the other hand, the danger of panicked and overly talkative staff can quickly lead to inapt and non-reversible statements. Unnecessary self-incriminations occur frequently. Thus, it is a fine line between polite and courteous cooperation and skillful protection of a client’s interests.
Estimates suggest that legal fees in case of contumacy or refusal to obey governmental requests exceed the imposed penalties about 3-5 times. Since very few would disagree that legal assistance is in order when facing federal government enforcement agencies, the decision to choose competent and experienced health care fraud defense lawyers should be one of good investment. Our proven protocols to respond quickly and efficiently to governmental requests or enforcement events depend on the stage of the proceedings:
- Standby Legal Counsel
- Organized Filing System with Backup Copies
- Staff Role Assignment
- Document Retention Policy
- Proper Instructions to Employees & Staff
- Corporate Compliance Program
- Initial Assessment with the Client
- Identification of Attorney-Client Privileges
- Document Preservation Notice
- Contact Federal Agency to Start a Dialogue
- Immediate Implementation of Compliance Elements
- Disclosure Considerations
- Physician Liability
Physicians are exposed from a plethora of sources. Liability can result from:
- Patients (malpractice claims)
- Staff (wrongful termination; sexual harassment)
- Competitors (trade mark, non-compete, tortious interference)
- Landlord-tenant issues
- Corporate failure (corporate practice of medicine)
- Partnership Disputes (e.g. hospital investments)
- the Medical Board (disciplinary rules)
- the Government (Stark Law, Anti-Kickback)
Physicians are particularly vulnerable in joint ventures with non-physicians because of the central role referrals play in these arrangements. Thousands of business contracts across the United States are based on physician participation. Whether it is physician syndicated surgery centers, toxicology joint ventures, or physician owned distributorships, each model depends on the physician’s ability and willingness to produce business.
The prohibition against the corporate practice of medicine means that laypersons and general-purpose corporations may not employ physicians to practice medicine—effectively confining the delivery of medical services to entities owned and controlled only by licensed medical professionals and precluding the sharing of professional fees between physicians and non- licensed entities.
The ban on the corporate practice of medicine may be found in state statutes, attorneys general opinions, medical practice acts or a combination of these. The purpose of the prohibition is to ensure that licensed health care professionals maintain independence over the care of their patients without the undue influence of unlicensed corporations and laypersons.
In some states, such as New York, violating the prohibition on the corporate practice of medicine is a felony. See N.Y. Educ. Law § 6512. In California, corporate practice of medicine violations are punishable by imprisonment from six months to five years, and a fine of $50,000 or double the amount of the fraud, whichever is greater. See Cal. Bus. & Prof. Code § 2417.5, as amended by Assembly Bill 2566.
- Administrative Subpoena
An administrative subpoena is the power vested in various administrative agencies to compel either testimony or the production of documents or both to support an agency’s investigation or adjudication.
In recent past, administrative subpoenas have become a very powerful and effective tool of the federal government. Nowadays, more than 300 departments have administrative subpoena authority in the United States.
Three reasons exist to explain this development. First, administrative subpoenas, despite ample academic and congressional criticism, do not require the approval by a judge or other judicial officer. At least initially, administrative subpoenas can bypass judicial scrutiny. Second, if challenged, courts rarely grant objections. As long as the requested information is relevant— an arguably open-ended term— courts will not impede the subpoena’s enforcement. Third, many recipients of administrative subpoenas are misguided by the word “administrative” and tend to underestimate this powerful governmental sword. To be clear, although marked “administrative,” administrative subpoenas are often harbingers of serious criminal investigations.
Generally, administrative subpoenas fall in one of two categories: OIG subpoenas and subpoenas authorized under 18 U.S.C. § 3486.
1. OIG Subpoena
With the Inspector General Act of 1978, Congress tasked newly created federal government departments to root out corruption and fraud to the detriment of the United States by performing audits, inspections, and investigations. An OIG investigation typically begins with the receipt of a complaint alleging wrongdoings. Often, these complaints come anonymous and are acts of revenge by competitors and former employees.
Investigations start with an internal factual review before interviewing witnesses and issuing document requests. Once the OIG concludes that it has discovered sufficient evidence of a civil or criminal wrongdoing, the OIG must refer the matter to the Department of Justice, and, specifically, to the U.S. Attorney’s Office in the federal district in which the investigation is taking place.
The Department of Justice may decline or accept this mandatory delegation. In case of rejection, the OIG will finalize its investigation resulting in administrative or civil penalties. Should the Department of Justice consider the matter worthwhile pursuing, the matter will likely come before a grand jury. Witnesses and documents will be subpoenaed to decide whether or not the required probable cause standard can be met. If the grand jury finds probable cause to believe that a crime was committed, it will return an indictment against the targets of the investigations and the case will go to trial or other disposition.
Each Inspector General is authorized to request the production of all information necessary to remediate or prevent fraud, waste, abuse, and mismanagement in federal government programs. As of today, with few but growing exceptions, the Inspector General Act solely authorizes subpoenas duces tecum or documentary requests. The Inspector General’s administrative subpoena authority is mainly used in criminal investigations and courts have held that the Act gives the Inspectors General both civil and criminal investigative authority.
OIG subpoenas are enforced by United States district courts and prosecuted by the Department of Justice at the request of the relevant Inspector General as part of the Department’s obligation to conduct litigation in which the United States is interested.
Although the law allows for objections, courts have firmly established the general enforceability of administrative subpoenas unless some very narrow exceptions exist. Recognized instances include constitutional concerns (vagueness, breadth, Fifth Amendment) as well as the general standards governing judicial enforcement of subpoenas such as relevance of information, unreasonable burden, and issuance in bad faith.
Experience shows that without proper legal representation subpoenaed companies routinely commit one of two mistakes: they either attempt to fight the subpoena or they act over-compliant and produce even the most confidential and privileged information.
Both mistakes are fatal. In the first scenario, the subpoenaed entity will quickly face the broad enforcement power of the involved federal agency. Almost guaranteed, the agency will refer the case to the Department of Justice and open criminal investigations against the individuals behind the subpoenaed company. In the second example, when companies are overly compliant and produce records without careful review by experienced fraud defense attorneys, these companies will almost naturally unearth adverse information that will form the basis for future criminal prosecution.
Thus, responding to an administrative subpoena is a delicate balancing act between being compliant and protecting the client’s interest. In fact, it is a skillful bargaining game that is not won by aggressive and atrocious litigators but by diplomatic and respectful and respected legal advisers.
Our strategic advantage is twofold. First, we have the experience and reputation because we have appeared before governmental agencies and established a trustworthy climate. Second, we closely work with former agents, FBI supervisory special agents, certified fraud examiners, former government lawyers, and reputable compliance officers who all have been on both sides of the table.
2. Subpoenas under 18 U.S.C. § 3486
Prime application of 18 U.S.C. § 3486 is the criminal investigation of federal health care offenses. The statute affords those served a reasonable period of time to respond. In addition to a judicial enforcement provision, 18 U.S.C. § 3486 specifically authorizes motions to quash and ex parte nondisclosure court orders. Under this section, the custodian of subpoenaed records or documents may be compelled to testify concerning them, but there is no indication that the section otherwise conveys the power to issue testimonial subpoenas.
Administrative subpoenas under 18 U.S.C. § 3486 need not satisfy a probable cause standard. The Fourth Amendment only demands that the subpoena be reasonable, a standard that requires that (i) the subpoena complies with the terms of its authorizing statute, (ii) the documents requested were relevant to the investigation, (iii) the information sought is not already available, and (iv) enforcing the subpoena will not constitute an abuse of process.
Contact us today. Our Firm understands that it is often a fine line between criminal intent and an honest mistake.