Health Care Fraud:

Will I Know It When I See It?

Tom Mills
Marion Kristal Goldberg
March 18, 2015

Brought to you by Winston & Strawn’s Health Care

Practice
Today’s eLunch Presenters

Tom Mills Marion Goldberg

Chair, Health Care Practice Partner, Health Care Practice
Washington, D.C. Washington, D.C.
TMills@winston.com MGoldber@winston.com

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DOJ Qui Tam Recoveries in FY 2014

$2,300,000,000

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OIG Investigative Recoveries in FY 2014

$3,000,000,000

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OIG Audit Recoveries in FY 2014

$834,700,000

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Health Care Violations that Can Lead to
a False Claims Act Case

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Government Focus
Government Focus

•Billing a higher level of service than is

needed
• SNFs – initially coding patients for higher
level of therapy
• Hospice – providing 24-hour care when not
needed
• Ambulances – providing advanced life
support instead of basic life support

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Government Focus

•Billing a higher level of service than is

provided
• Hospitals – coding co-morbidities that are not
appropriate (e.g., use of kwashiorkor)
• Physical Therapy – billing for individual
therapy when group therapy is provided
• Durable medical equipment – billing for power
wheelchairs

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Government Focus

• Providing more services than are needed

• Hospitals –
• Acute care hospitals – coding a patient as
discharged when actually transferred to a post-
acute care facility
• LTAC hospitals – retaining patients until most
beneficial reimbursement is reached

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Government Focus

• Providing more services than are needed

• Home health – providing therapies in a “sweet
spot” of reimbursement
• Hospice – admitting or retaining patients who
are not likely to die within 6 months

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Government Focus

• Providing unnecessary services

• Ambulance – providing ambulance services
when patient can be transferred in an ambulette
• Physical therapy – providing services when
patient cannot benefit
• Dental care for children – providing stainless-
steel crowns when a filling would be sufficient

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Government Focus

• Provision of items or services without a physician

order or a face-to-face encounter
• Home health
• Hospice

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Government Focus

• Insufficient documentation –
• Government view: If it’s not in the records, it
didn’t happen
• Can lead to refusal to pay
• Can lead to accusations of upcoding

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Government Focus

• Pharmaceutical companies
• Improper reporting for rebates

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Government Focus

• Pharmaceutical companies and medical device

companies
• Off-label marketing

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Government Focus

• Improper relationships with physicians

• Cash payments for referrals
• Impermissible payments based on volume or
value of referrals
• Sham agreements
• Lack of fair market value

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Government Focus
• Quality of Care
• Long-term care provider
• $38 Million settlement
• Substandard care
• Inadequate staffing
• Failure to provide necessary services
• Failure to follow protocols
• Government alleged that care was so grossly
substandard that it was effectively worthless
• Medically unreasonable and unnecessary rehabilitation
services
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Recent Enforcement Actions
Exclusion

• Excluded person may not

• provide items or services to any federal or state health
care program beneficiary
• refer any federal or state health care program beneficiary
for any item or service
• work for any individual or entity who receives federal or
state health care program funds
• Exclusion is a professional death sentence

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Exclusion

• Mandatory Exclusion
• Felony conviction of criminal offense related to health
care
• Conviction of criminal offense related to patient neglect
or abuse
• Minimum 5 years

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Exclusion

• Permissive Exclusion
• Misdemeanor conviction for fraud or other financial
misconduct related to health care
• False claims
• Kickbacks
• Entity controlled by an excluded individual
• Individual who owns or controls an excluded entity
• Improper billing
• Failure to pay student loans

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Recent Enforcement Actions

• New Jersey imaging center

• 17 defendants (16 physicians); cash payments to
physicians for referrals
• $75-100/MRI; $25/ultrasound or DEXA scan
• Owner radiologist and referring physicians
received prison sentences

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Recent Enforcement Actions

• New Jersey clinical lab 36 defendants (24

physicians)
• Cash payments for referring patients for tests
• Sham leases and service agreements
• Above-market leases
• Payments through related companies
• Some tests were not needed
• Prison sentences and substantial forfeitures

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Recent Enforcement Actions

• Medical device company

• $80 Million criminal and civil penalties
• 20-year exclusion
• Conduct
• Distributed devices without FDA approval
• Company was warned that distribution would be a
Food, Drug & Cosmetic Act violation
• Told physicians that FDA approval was not needed
• Encouraged physicians to submit claims for MRIs not
reimbursable – performed for company to accumulate
data
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Enforcement Actions

• Florida Hospital
• $85 Million civil settlement
• Stark Law violations
• Bonuses to physicians were tied to referrals to
the hospital
• Above FMV payments to physicians

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Enforcement Actions

• South Carolina hospital

• $238 Million civil judgment
• Stark Law violations underlying a False Claims Act case
• Part-time employment contracts with 19 physicians were
tied to referrals to the hospital's facilities
• Required to perform surgeries at the hospital or a
facility owned by it
• Base salary, productivity bonus, and incentive bonus
were based on hospital’s net collections for procedures
(professional and technical)

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Enforcement Actions

• Home health provider

• $150 Million civil settlement
• Billed for services not provided
• Billed highest level of service
• Provision of patient care services to an oncology
practice at below-FMV to induce referrals

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Enforcement Actions

• Institutional pharmacy
• $124 Million settlement
• Government alleged company provided below
cost medication contracts for Part A patients in
return for referrals for drugs for patients under
Part D and Medicaid

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Enforcement Actions

• Dialysis provider
• $350 Million civil settlement
• Government allegations
• Company sold interests in Company-owned
dialysis centers to physicians at less than FMV
• Company purchased interests in physician-
owned dialysis centers from physicians at more
than FMV

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Enforcement Actions

• Promotion of off-label use

• Medical device manufacturer
• $2.8 Million
• Pharmaceutical manufacturer
• $490.9 Million
• Pharmaceutical manufacturer
• $20.4 Million

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Enforcement Actions

• Personal care services provider

• $35 Million settlement
• Enrolled individuals not qualified for services

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 What You Should Be
Alerted To If You Are
A Health Care Company
Arrangements With Physicians

• Is the physician providing a real service or is it

“make work”

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Arrangements With Physicians

• Is the arrangement contingent on the physician

referring for items and services

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Arrangements with physicians

• Is the compensation based on the volume or

value of referrals

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Arrangements With Physicians

• Do you have an opinion from an independent

valuation expert or some other benchmark that
the compensation is at FMV

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Arrangements With Physicians

• Is the arrangement commercially reasonable

(would you do it if there were no referrals)

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Arrangements – Other Referral Sources

• Do you give a break on Medicare Part A items or

services in order to get referrals for Part B items
or services

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Arrangements – Other Referral Sources

• Do discounts meet the Anti-Kickback discount

safe harbor
• Easiest safe harbor to meet

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Joint Ventures With Physicians

• Are all potential investors offered the same

amount of interests or if variable interests are
offered, are all physicians permitted to decide how
much to purchase

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Joint Ventures With Physicians

• Is each investor making a significant investment

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Joint Ventures With Physicians

• Is there real risk

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Joint Ventures With Physicians

• Are distributions based on percentage ownership

• Are there any payments based on referrals

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Compliance

• Do you have a serious compliance plan

• Code of conduct
• Policies and procedures
• Annual training

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Compliance

• Do you actually enforce your compliance plan

• Compliance officer
• Hot line
• Investigate complaints
• Maintain files
• Complaints/calls
• Records of correction
• Protect employees who report issues

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Compliance

• Do you have rules on salesperson expense

accounts
• Do you scrutinize expenditures to see if they are
compliaint

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Compliance

• Do you have a culture of compliance

• Would employees feel comfortable reporting a suspected
violation
• Most qui tam suits are filed by “disgruntled employees”
• Their concerns are ignored
• They are fired for raising compliance issues

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Compliance

• Are you incentivizing violations

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Compliance

• Are you willing to walk away from a transaction or

arrangement that is not compliant

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Coding

• Do you do periodic coding audits

• What coding error rate is permitted
• 95% compliance or better should be the goal

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Coding

• What do you do if a coder’s work is substandard

• Intensive scrutiny of coder’s work until target
compliance is reached
• Ideally, scrutiny should be on a sample before
claims submission

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Coding

• What do you do with submitted claims improperly

coded
• If overpayments, you need to return the
overpayments
• Need to review beyond the audit sample
• Overpayments retained more than 60 days after
discovery become false claims

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 What To Look For
In The Diligence
Process If You Are Investing,
Financing, or Underwriting
A Health Care Company
• Beware of a company that has found the way to
succeed in a field no one else has

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Arrangements With Referral Sources
and Referral Recipients
• Review contracts or a significant sample
• Is the contract commercially reasonable
• Is a party obligated to receive or provide more
than is required for the task

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Arrangements With Referral Sources
And Referral Recipients (cont'd)
• If the referral source is required to provide certain
services, does the referral recipient provide it at a
reduced cost or at no charge
• Is there a trade of one type of reimbursement for
another (e.g., low price for Part A items/services in
return for Part B items/services)
• If there are multiple contracts with the same
person, review them as a whole

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Contracts with Medical Directors

• Is a medical director needed

• What services are provided
• Is the amount of time appropriate
• Is the medical director required to keep track of
time and submit time sheets to be paid
• How did they decide that compensation is at FMV

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Sales Contracts

• Discounts are incentives to purchase

• Could be an Anti-Kickback violation
• Do the discounts meet the Anti-Kickback Statute
safe harbor

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Joint Ventures
•Who gets to invest
•Does every investor have the same chance
to invest
•Do they require non-referrers to divest
•Are distributions paid in proportion to
ownership
•Are significant amounts invested compared
to distributions
•Is there real risk
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Acquisitions

• Review transaction documents for health care

regulatory issues
• What was purchased
• What are the continuing relationships
• Are there earnouts with referral sources
• Are there restrictions on providers

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Investigations

• Get a list of all investigations and significant audits in the

past six years
• Get copies of settlement agreements
• Review attorney questionnaire letters
• Read each subpoena or civil investigative demand for
current investigations
• Read important litigation documents
• Ask questions about what has been provided to the
government, who else has received a subpoena, what is
the state of meetings with the government or relator
• Ask how much money is reserved
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Investigations

• If there is a CIA, review initial report and all annual

reports to the OIG
• Review the IRO or monitor’s reports
• Review any reportable events
• Review any correspondence with the OIG

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Committee Minutes

• Review minutes of:

• Audit Committee
• Compliance Committee
• Board of Directors/Managers

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Compliance

• Review Compliance Program (code of conduct, policies and

procedures)
• Review hot line logs or a significant sample
• Who is the compliance officer (it should not be the inhouse
counsel)
• Has there been a change in compliance officers. If yes, why

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Pharma And Device Manufacturers

• Get a list of 510k clearances and FDA registrations

• Check FDA web site for recalls, warning letters, etc.
• If the company has had a negative inspection, ask to see the
completed Form 483

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Quality Of Care

• CMS has a rating system at www.medicare.gov

• Hospitals
• SNFs
• Home health
• Dialysis
• System is meant for consumers but can be helpful
in diligence

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If Numbers Are Important, Ask For
Them
• SNF – Percentage of patients with each number
of therapy days
• LTAC Hospitals – Average length of stay;
percentage of patients transferred from the host
hospital
• Hospice – Percentage of patients living more than
180 days
• IRF – Percentage of patients with qualifying
conditions

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Additional Issues

• Ask about coding and compliance audits

• What is the acceptable standard
• Frequency, what is done with poor performers
• Note, for some types of claims, if physician orders are not obtained prior to
claims submission, it cannot be rectified
• Review reports of negative inspections
• Do they do monthly reviews of the OIG exclusion list and GSA
list
• Are overpayments returned within 60 days
• Do they have an inhouse or outside regulatory counsel

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Beware of

“Everyone else is doing it”

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Questions?
Thank You.

Tom Mills Marion Goldberg

Chair, Health Care Practice Partner, Health Care Practice
Washington, D.C. Washington, D.C.
TMills@winston.com MGoldber@winston.com

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