EDITOR’S NOTE: U.S. Attorney General Loretta E. Lynch and U.S. Department of Health and Human Services (HHS) Secretary Sylvia Mathews Burwell yesterday announced an unprecedented nationwide enforcement initiative led by the Medicare Fraud Strike Force in 36 federal districts, resulting in criminal and civil charges against 301 individuals – including 61 doctors, nurses, and other licensed medical professionals – for their alleged participation in healthcare fraud schemes involving approximately $900 million in false billings. Twenty-three state Medicaid Fraud Control Units also participated in making the arrests.


By Edward M. Roche, PhD, JD

There is not a single legitimate healthcare provider, auditor, government administrator, lawyer, or lawmaker in the United States who supports Medicare or Medicaid fraud. All agree that the filing of false claims is a serious problem. It hurts everyone, because it takes money out of everyone’s pocket. But where we find disagreement is in how to stop it.

The United States has developed a complex regime to combat healthcare fraud; here we are using the term “regime” in a political science sense. Stephen D. Krasner, in the scientific journal International Organization in 1982, wrote that a regime is as set of “implicit or explicit principles, norms, rules, and decision-making procedures around which actors’ expectations converge in a given area of international relations.”

So we have also a healthcare “regime” that is concerned with how to stop paying out bad medical claims. We have important principles such as “medical necessity,” norms such as how referrals are made, and rules composed of federal, state, and administrative law.

For enforcement, there are three major focus areas. First, we have a giant privatized industry of contractors that perform audits. This is a huge operation involving thousands of auditors and use of big data. It pays for itself in the same way that tax farmers operated in medieval France: the auditors retain a percentage of what is recovered for the government. Second, the HHS Office of the Inspector General (OIG) has its own enforcement operation that may impose civil monetary penalties (CMPs) under 42 USC 1320a-7a. The OIG is empowered to move if the provider acts in “deliberate ignorance” or in “reckless disregard” of the rules on how to file claims. Third, we have the criminal side, run by the Department of Justice, using what they call a “strike force.” These three groups can be thought of as hunters out roaming around the healthcare countryside, looking for game to kill or capture.

The problem is that we do not have a shared set of “converged” expectations regarding decision-making procedures. In other words, it is not always clear which hunting group will get jurisdiction over a specific provider.

In some cases, the rules are clear. For example, should the government learn that a provider is sending in multiple claims for patients that do not exist, and for services or equipment that were never provided, then there is an automatic default to the criminal side. The Department of Justice will handle the matter. On the other hand, if a provider has been sending in claims that are far outside the statistical pattern of their peers, then a Zone Program Integrity Contractor (ZPIC) or another auditor will look into the matter. If problems are found, then the provider will be asked to pay back the difference.

But the OIG and its CMPs are more problematic. Again, the law states that CMPs may be considered if the provider has either acted in “deliberate ignorance” or in “reckless disregard” of whether or not a claim is proper. So, what does that mean? If a provider subscribes to a service offering coding advice or uses professional coders, then does this mean that they never can be accused of “reckless disregard,” since they are obviously paying for the services of an expert? Does “deliberate ignorance” mean that the provider has not read every single posting on the Centers for Medicare & Medicaid Services (CMS) website regarding their area of healthcare?

And who decides? If a provider has been found to be up-coding or providing unnecessary services, then where should this matter be handled? Should it be a regular audit? Should it go the OIG for consideration of monetary penalties? Should it be a criminal matter for the strike force to handle?

In virtually every other area of law, there are clear rules regarding how a specific problem is handled. Patent disputes are heard in the U.S. Court of Appeals for the Federal Circuit, located in Washington, D.C. Marital feuds are handled in family court. There are bankruptcy courts. Misdemeanors are handled locally. Robbery, assault, and other felonies are handled mostly in state criminal courts, parking disputes in municipal courts. The list goes on and on. In each of these matters, the nature of the offense determines where it will be resolved. 

Not so in healthcare. In our current regime, we have giant areas of overlap, and competing jurisdictions. A provider that has a matter handled by an audit contractor can find that even after it is resolved, the OIG can step in with CMPs. A provider that has problems with arguments over medical necessity for a few claims can find themselves on the radar of the Department of Justice, and with considerably more serious consequences should the government prevail in litigation. Providers that have gone through the criminal side of the process can find that a civil suit might be brought, even if it is for the same matter as the civil affair.

So this raises a few difficult issues: 

Double jeopardy: if a criminal matter is resolved but the matter gives rise to a civil suit over the same issue, then the provider is forced to defend itself twice. The same is true if an audit matter becomes a CMP case.

Uncertainty: providers must live in fear that what might be a standard audit could escalate into something far more serious, leading to jail time. They must worry that even after having resolved things with the auditor, they may face a second wave of litigation for CMP.

Arbitrary: in some cases, it is very difficult to see how decisions made by one of the hunting groups (OIG, DOJ, auditors) are not arbitrary. After all, if a matter could be handled by an auditor, it can still be grabbed by one of the other parties. Perhaps it is who gets there first.

Healthcare in the United States is extraordinarily complex. It is more complicated than NASA or General Motors. It could be the most complex system of service and information processing devised in the entire history of humanity. And every day it is getting more complex. There is a crisis of complexity. 

Yet this complexity poses a particularly dramatic challenge for the provider. The bottom line, all things having been considered, is that it is impossible in some circumstances to evaluate risk. In the long run, the “decision-making” in the regime will be worked out and standardized. But until that time, no one knows who will be knocking at the door: an auditor, the OIG, the FBI, or perhaps all three. 


About the Author

Edward M. Roche is the founder of Barraclough NY LLC, a litigation support firm that helps healthcare providers fight against statistical extrapolations.

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