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TABLE OF CONTENTS

• Executive Summary
• Introduction
• Monetary Results
• Program Accomplishments
• Department of
  Health and Human Services
  • Office of
    Inspector General
  • Health Resources
    and Services Administration
  • Office of
    the General Counsel
  • Administration
    on Aging
  • Departmental Appeals
    Board
• Department of
  Justice
  • United States
    Attorneys
  • Civil Division
  • Criminal
    Division
  • Justice
    Management Division
• Appendix: Federal
  Bureau of Investigation – Mandatory Funding
• Glossary of
  Terms

GENERAL NOTE: All years are fiscal unless otherwise noted in the text.

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EXECUTIVE SUMMARY

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The detection and elimination of health care fraud and abuse is a top priority
of federal law enforcement. Our efforts to combat fraud were consolidated
and strengthened considerably by the Health Insurance Portability and Accountability
Act of 1996 (HIPAA). HIPAA established a national Health Care Fraud and Abuse
Control Program (the Program), under the joint direction of the Attorney General
and the Secretary of the Department of Health and Human Services (HHS)⁽¹⁾,
acting through the Department’s Inspector General (HHS/OIG), designed to coordinate
federal, state and local law enforcement activities with respect to health
care fraud and abuse. HIPAA brought much needed and powerful new criminal
and civil enforcement tools and financial resources that permitted the government
to expand and intensify the fight against health care fraud.

The third year of operation under the Program saw a continuation of the collaborative
efforts of Federal and state enforcement and oversight agencies to identify
and prosecute the most egregious instances of health care fraud, to prevent
future fraud or abuse, and to protect program beneficiaries.

Civil and Criminal Enforcement Actions

Federal prosecutors filed 371 criminal indictments in health care fraud cases
in 1999 — a 16 percent increase over the previous year. A total of 396 defendants
were convicted for health care fraud-related crimes in 1999. There were also
2,278 civil matters pending, and 91 civil cases filed in 1999.

Monetary Results

In 1999, the federal government won or negotiated more than $524 million
in judgments, settlements, and administrative impositions in health care fraud
cases and proceedings. As a result of these activities, as well as prior year
judgments, settlements, and administrative impositions, the federal government
in 1999 collected $490 million. It should be noted that some of the judgments,
settlements, and administrative impositions in 1999 will result in collections
in future years, just as some of the collections in 1999 are attributable
to actions from prior years.

Nearly $369 million of the funds collected and disbursed in 1999 were returned
to the Medicare Trust Fund. An additional $4.7 million was recovered as the
federal share of Medicaid restitution.

Exclusion from Federally Sponsored Programs

HIPAA expanded and strengthened the government’s ability to prohibit companies
or individuals who have been convicted of certain health care offenses, lost
their licenses, or engaged in other professional misconduct from participating
in Medicare, Medicaid or other federally sponsored health care programs. In
1999, HHS excluded 2,976 individuals and entities.

Collaboration

One of the fundamental principals of the Program is to maximize the effectiveness
and efficiency of law enforcement efforts by promoting information sharing
and collaboration among the many federal, state and local allies in the fight
against health care fraud. Such collaboration has increased
during 1999, through heightened data sharing, establishment of a National
Health Care Fraud Task Force chaired by the Deputy Attorney General (bringing
together federal, state, and local prosecutors and other enforcement officials)
and joint training, to name a few. In addition to the many joint health care
investigations undertaken daily across the country, collaborative efforts
have also produced effective new beneficiary outreach initiatives, and fraud
prevention efforts.

Preventing Health Care Fraud

Preventing health care fraud and abuse is a central component of the Program.
The Program’s prevention efforts include the promulgation of formal advisory
opinions to industry on proposed business practices, industry-specific program
compliance guidance, special fraud alerts, corporate integrity agreements
with providers who settle allegations of fraud, and beneficiary and provider
education and outreach. Fraud prevention and compliance efforts are reaping
significant results; the most recent audit of the Medicare payment error rates
showed a $10.6 billion or 45 percent drop in improper fee-for-service payments
over the last two years.

Administrative Penalties for “Patient Dumping”

The government expanded its efforts under the Patient Anti-Dumping Statute,
which requires hospitals’ emergency departments to provide emergency medical
screening and stabilizing treatment, entering settlement agreements with 60
hospitals and physicians, and received one default judgment for a total of
61 individuals and entities — up from a previous high of 53 settlements in
1998. The Government collected $1.725 million in civil monetary penalties
associated with these cases.

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INTRODUCTION

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ANNUAL REPORT OF
THE ATTORNEY GENERAL AND THE SECRETARY
DETAILING EXPENDITURES AND REVENUES
UNDER THE HEALTH CARE FRAUD AND ABUSE CONTROL PROGRAM
FOR FISCAL YEAR 1999 

As Required by
Section 1817(k)(5) of the Social Security Act
STATUTORY BACKGROUNDThe Social Security Act Section 1128C(a), as established by the Health Insurance
Portability and Accountability Act of 1996 (P.L. 104-191, HIPAA or the Act),
created the Health Care Fraud and Abuse Control Program (the Program), a far-reaching
program to combat fraud and abuse in health care, including both public and
private health plans.

The Act requires that an amount equaling recoveries from health care investigations
— including criminal fines, forfeitures, civil settlements and judgments,
and administrative penalties, but excluding restitution, compensation to the
victim agency, and relators’ shares — be deposited in the Medicare⁽²⁾
Trust Fund. All funds deposited in the Trust Fund as a result of the Act are
available for the operations of the Trust Fund.

As stated above, the Act appropriates monies from the Medicare Trust Fund
to a newly created expenditure account, called the Health Care Fraud and Abuse
Control Account (the Account), in amounts that the Secretary and Attorney
General jointly certify are necessary to finance anti-fraud activities. The
maximum amounts available for expenditure are specified in the Act. Certain
of these sums are to be available only for activities of the HHS/OIG, with
respect to Medicare and Medicaid programs. In 1999, the third year of the
Program, the Secretary and the Attorney General certified $137.5 million for
appropriation to the Account. A detailed breakdown of the allocation of these
funds is set forth later in this report. These resources supplement the direct
appropriations of HHS and DOJ that are devoted to health care fraud enforcement.
(Separately, the Federal Bureau of Investigation (FBI) received $66 million
from HIPAA which is discussed in the Appendix.)

Under the joint direction of the Attorney General and the Secretary, the
Program’s goals are:

(1) to coordinate federal, state and local law enforcement efforts relating
to health care fraud and abuse;

(2) to conduct investigations, audits, and evaluations relating to the delivery
of and payment for health care in the United States;

(3) to facilitate enforcement of all applicable remedies for such fraud;

(4) to provide guidance to the health care industry regarding fraudulent
practices; and

(5) to establish a national data bank to receive and report final adverse
actions against health care providers.

The Act requires the Attorney General and the Secretary to submit a joint
annual report to the Congress which identifies:

(A) the amounts appropriated to the HI Trust Fund for the previous fiscal
year under various categories and the source of such amounts; and

(B) the amounts appropriated from the Trust Fund for such year for use by
the Attorney General and the Secretary and the justification for the expenditure
of such amounts.

This annual report is submitted in fulfillment of the above statutory requirements.

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MONETARY RESULTS

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As required by the Act, HHS and DOJ must detail in this Annual Report the amounts
deposited and appropriated to the Medicare Trust Fund, and the source of such
deposits. In 1999, as a result of the combined anti-fraud actions of the federal
and state governments and others, the federal government collected $490 million
in connection with health care fraud cases and matters⁽³⁾.
These funds were deposited with the Department of the Treasury and Health Care
Financing Administration (HCFA), transferred to other federal agencies administering
health care programs, or paid to private persons. The following chart provides
a breakdown of the transfers/deposits:

 

Total Transfer/Deposits by Recipient 1999
Department of the Treasury HIPAA Deposits to the Medicare Trust Fund Gifts and Bequests Amount Equal to Criminal Fines Civil Monetary Penalties Amount Equal to Asset Forfeiture * Amount Equal to Penalties and Multiple Damages Health Care Financing Administration OIG Audit Disallowances – Recovered Restitution/Compensatory Damages	$ 2,500 36,006,432 4,797,073 0 73,559,143 50,002,122 209,200,132 373,567,402
Restitution/Compensatory Damages to Federal Agencies Office of Personnel Management Other Agencies Treasury Miscellaneous Receipts Department of Health and Human Services – Other than HCFA	9,286,426 5,408,372 14,793,185 42,993,069 72,481,052
Relators’ Payments **	44,418,028
TOTAL ***	$490,466,482

 

*This includes only forfeitures under 18 United States Code (U.S.C.) 1347,
a new federal health care fraud offense that became effective on August 21,
1996. Not included are forfeitures obtained in numerous health care fraud
cases prosecuted under federal mail and wire fraud and other offenses.

**These are funds awarded to private persons who file suits on behalf of
the federal government under the qui tam provisions of the False
Claims Act, 31 U.S.C. sec 3730(b).

***Funds are also collected on behalf of state Medicaid programs and private
insurance companies; these funds are not represented here.

The above transfers include certain collections, or amounts equal to certain
collections, required by HIPAA to be deposited directly into the Medicare
Trust Fund. These amounts include:

(1) Gifts and bequests made unconditionally to the Trust Fund, for the benefit
of the Account or any activity financed through the Account;

(2) Criminal fines recovered in cases involving a federal health care offense,
including collections under 1347 of title 18, U.S.C. (relating to health care
fraud);

(3) Civil monetary penalties in cases involving a federal health care offense;

(4) Amounts resulting from the forfeiture of property by reason of a federal
health care offense, including collections under section 982(a)(6) of title
18, U.S.C.;

(5) Penalties and damages obtained and otherwise creditable to miscellaneous
receipts of the general fund of the Treasury obtained under sections 3729
through 3733 Title 31, United States Code (known as the False Claims Act),
in cases involving claims related to the provision of health care items and
services (other than funds awarded to a relator, for restitution or otherwise
authorized by law).

HIPAA requires an independent review of these deposits by the General Accounting
Office (GAO).

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PROGRAM ACCOMPLISHMENTS

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Expenditures

In the third year of operation, the Secretary and the Attorney General certified
$137.5 million as necessary for the Program. The following chart gives the
allocation by recipient:

1999 ALLOCATION OF HCFAC APPROPRIATION (Dollars in thousands)
Organization	Allocation
Department of Health and Human Services Office of Inspector General Office of the General Counsel Administration on Aging Health Resources Services Administration Departmental Appeals Board Total	$98,220 2,292 1,400 4,443 138 106,493
Department of Justice United States Attorneys Civil Division Criminal Division Justice Management Division Total	21,580 8,119 803 280 30,740
Total	137,233(4)

These resources supplement the direct appropriations of HHS and DOJ that
are devoted, in part, to health care fraud enforcement. Separately, the FBI
received an additional $66 million in funding which is discussed in the Appendix
to this Report.

Accomplishments

Collections

During this year, the federal government won or negotiated more than $524
million in judgments, settlements, and administrative impositions in health
care fraud cases and proceedings. As a result of these activities, as well
as prior year judgments, settlements, and administrative impositions, the
federal government in 1999 collected $490 million in cases resulting from
health care fraud and abuse, of which nearly $369 million was returned to
the Medicare Trust Fund, and $4.7 million was recovered as the federal share
of Medicaid restitution. It should be emphasized that some of the judgments,
settlements, and administrative impositions in 1999 will result in collections
in future years, just as some of the collections in 1999 are attributable
to actions from prior years.

Judgments/Settlements

Working together, we have brought to successful conclusion the investigation
and prosecution of numerous costly health care fraud schemes. Among them,
are the following.

• A major provider of home health services and one of its subsidiaries entered
  into a global settlement totaling $61 million, including approximately $10
  million in criminal fines, to resolve the corporation’s criminal, civil,
  and administrative liability arising from Medicare fraud investigations
  in Georgia, Florida, and New York. In Georgia and Florida, the investigation
  examined a series of transactions in which the home health services corporation
  paid another large health care corporation for the right to provide Medicare-reimbursable
  management services to that corporation. These payments included large cash
  contributions to the other corporation, enabling it to purchase home health
  agencies of third parties. In consideration of these payments, and of an
  agreement by the defendant to sell its own home health agencies to the other
  corporation at a reduced price, the defendant received the right to manage
  the visits resulting from these transactions for a management fee which
  was fully reimbursed by Medicare. The effect of these transactions was to
  disguise non-reimbursable acquisition costs as management fees, which Medicare
  does not reimburse. As a result of this investigation, the subsidiary pled
  guilty to conspiracy, mail fraud, and violation of the Medicare anti-kickback
  statute in three districts. In New York, a separate investigation focused
  on allegations that the corporation submitted unallowable expenses on its
  Medicare cost reports, including personal expenses of executives, gifts
  and entertainment, and merger costs. In addition to paying $61 million,
  the corporation entered into a comprehensive corporate integrity agreement
  with the Government.

 

• In Pennsylvania, a company providing end-stage renal disease (ESRD) services
  through a network of subsidiary corporations it had acquired, agreed to
  pay the Government $16.5 million to resolve allegations of false Medicare
  claims submitted by one of the subsidiaries. The claims arose from the sale
  of Medicare-reimbursable noninvasive diagnostic tests between 1992 and 1995.
  The subsidiary companies provided financial inducements to primary care
  physicians and to renal dialysis facilities in exchange for the referral
  of patients for diagnostic testing. As a result, a percentage of the tests
  performed by the subsidiaries were medically unnecessary. The final settlement
  resolved three different qui tam lawsuits which had been brought
  against the subsidiaries and/or the parent company.

 

 

• A key component of the HCFAC effort to protect the integrity of the Medicare
  trust funds is the investigation of allegations of fraud by contractors
  enlisted by HCFA to process and pay Medicare claims. Stemming from a qui
  tam complaint filed in New Mexico, two former Medicare contractors
  agreed to settle their False Claims Act, criminal, and administrative liability
  for misrepresenting their performance. In order to resolve allegations of
  manipulating certain computer files to obtain a better score on the Contractor
  Performance Evaluation Program, one of the corporations agreed to pay the
  Government $6.84 million. On or after May 1, 2001, the United States may,
  at its sole discretion, demand that the other corporation pay the Government
  $5.86 million, after considering the corporation’s financial condition,
  for attempting to conceal evidence of poor performance on their audits of
  Medicare Part A providers. In addition, both corporations will forgo contract
  claims for overbudget and termination costs totaling $3.1 million. Both
  corporations also entered into a 5-year corporate integrity agreement with
  the OIG. In addition, as part of the global settlement, the former contractors
  pled guilty to obstruction of a Federal audit and conspiracy to obstruct
  a Federal audit. A third corporation, co-owned by the contractors to provide
  them with management services, pled guilty to conspiring to obstruct a Federal
  audit as well. The United States should ultimately receive $15.8 million
  in criminal fines, the civil settlement, and the contract claims.

 

 

• On October 15, 1998, the United States reached an agreement with a major
  metropolitan fire department and a local hospital corporation to resolve
  allegations in a qui tam complaint that the defendants routinely
  had submitted false claims to the United States to obtain reimbursement
  for medically unnecessary ambulance transportation. The city agreed to pay
  the Government $9.5 million. Among other things, the complaint alleged that
  the fire department misrepresented the diagnosis of patients in order to
  receive reimbursement from Medicare for ambulance transportation. As part
  of the settlement, the company entered into a comprehensive institutional
  compliance agreement which will be monitored and enforced by the HHS/OIG
  for the next 5 years.

 

These and other settlements reflect the culmination of investigations that
have been ongoing for several years. Though settled in 1999, the fines and
restitution generated by some of these cases will not be credited to the Medicare
Trust Funds until 2000.

Collaboration

Effective health care fraud and abuse control requires close collaboration
and regular exchanges of information among federal, state and local law enforcement
entities. Shown here are a few of the many instances of collaborative effort
between DOJ, HHS, and many other organizations involved in combating health
care fraud.

National Health Care Fraud Task Force. In 1999, the Administration
launched a new National Health Care Fraud Task Force, chaired by the Deputy
Attorney General, in which HHS/OIG, HCFA, DOJ and State and local prosecutors
will work together in formulating strategies to combat health care fraud and
abuse and safeguard the well-being of Medicare and Medicaid beneficiaries.
While the task force will focus on a wide range of health care fraud and abuse
policy issues, particular attention will be devoted to fighting nursing home
fraud and abuse and excluding dishonest and abusive providers from participation
in Medicare, Medicaid and other Government-funded health care programs.

Nursing Homes. The destructive impact of fraudulent billing
is not measured in dollars only. During 1999, the Program continued to pursue
investigations, prosecutions, audits and evaluations that directly affect
not only financial losses, but also the quality of care provided
to Medicare, Medicaid and other beneficiaries of government funded health
care programs. Quality of care in nursing homes has been identified as a priority
for both DOJ and HHS; and in October 1998, DOJ launched a major new initiative
to crack down on fraud, abuse and neglect in nursing homes and other residential
care facilities. The Nursing Home Initiative, coordinated by the Civil Division,
focuses on enhanced enforcement; training; outreach to industry, resident
advocates, medical professionals, academics and others; new legislation to
address gaps in federal law; an analysis of the applicable state laws and
improved inter-agency and governmental coordination, use of data, and services
to victims.DOJ began a series of regional training conferences in 1999 that brought
together representatives of federal, state, and local law enforcement, regulatory,
survey, oversight and advocacy entities. During the conferences, State Working
Groups (SWG) were formed (or expanded where they existed), including representatives
of the many entities that play a role in nursing home quality of care. These
SWGs provide an on-going opportunity to promote quality of care by establishing
a forum for key players to meet, share information and skills, identify
problem facilities, best practices, and ways to address quality of care
given the unique situations in the various states.

These and other investigative initiatives complement HCFA’s ongoing Nursing
Home Initiative, which has already resulted in significant improvements
to nursing home oversight, enforcement and quality monitoring. Communication
and coordination are facilitated by monthly Nursing Home Steering Committee
meetings attended by the Civil Division, Criminal Division, Civil Rights
Division, FBI, HHS/OIG, HCFA, HHS/OGC as well as in Senior Staff and Executive
Level policy meetings during which nursing home fraud, abuse and neglect
are among the health care issues addressed.

Examples of investigations of nursing homes for false claims relating to
the quality of care provided to their residents that were brought to successful
conclusion in 1999 include:

 

• A survey by the state Department of Health of a Pennsylvania nursing
  home disclosed inadequate wound care, incontinence care and nutrition.
  After investigation, the nursing home entered a settlement agreement with
  the government, agreeing to pay $195,000, to implement specific quality
  of care protocols, and to appoint a monitor to oversee the quality of
  patient care.

 

• In Kansas, a therapy service provider agreed to pay the Government $688,996
  to settle allegations of impropriety in providing services to nursing
  home patients. It was alleged that the provider billed for therapy that
  was medically unnecessary and excessive, as well as billed for staff education
  inappropriately, and overbilled for applications of splints and positioning
  of patients. As part of the settlement, the provider agreed to adhere
  to a 3-year comprehensive corporate integrity agreement.

Beneficiary Outreach. On February 24, 1999, the HHS/OIG,
DOJ, HCFA, and the Administration on Aging (AoA) joined with the American
Association for Retired Persons (AARP) to launch an initiative against Medicare
fraud, waste, and abuse. The educational campaign — entitled “Who Pays? You
Pay. Report Medicare Fraud” — was held in 31 cities throughout the country,
and was attended by approximately 10,000 Medicare beneficiaries. Outreach
materials developed for the campaign include a brochure, entitled “What You
Can Do To Stop Medicare Fraud” in English and Spanish, a drain-image poster
entitled “Medicare Fraud is Money Down the Drain”, and a 30-second public
service announcement. The award-winning announcement was produced by AARP
and is shown under the logos of AARP and HHS.Since the campaign kick-off, the collaborative partnership between HHS/OIG,
HCFA, AoA, DOJ, and AARP has continued. Monthly meetings are held to update
partners on the activities of each respective partner and to plan for future
collaborative activities. Since the event, the HHS/OIG Hotline 1-800-HHS-TIPS,
has served as an educational and reporting resource to approximately 300,000
callers (up from 76,000 calls in 1998). The Hotline has also experienced
a spike in calls from Puerto Rico and has established an active monitoring
and evaluation system to ensure that concerns of the Hispanic community
are addressed. To address this call increase, the Hotline has hired an additional
Spanish-speaking representative and has increased the number of Spanish
representatives at the contractor site in Chicago.

Data Sharing. In 1999, efforts continued to share information
­ both general data about trends in health care fraud and emerging investigative
and prosecutorial techniques — and to communicate and coordinate with respect
to specific investigations. A general data sharing process was instituted
between the FBI and the HHS/OIG to ensure that complete, accurate and current
information on Federal health care fraud investigations is maintained and
readily accessible by both agencies.Preventing Health Care Fraud

The Program also continues to focus on prevention of health care
fraud and abuse through inclusion of rigorous corporate integrity provisions
in settlements with alleged offenders, industry-specific program compliance
guidance, formal advisory opinions, special fraud alerts, beneficiary outreach,
and exclusions from program participation. These activities, coupled with
the overall sentinel effect of our heightened enforcement efforts have netted
real results. Perhaps the most concrete evidence of the success of anti-fraud
and oversight efforts is the significant reduction in the error rates in
Medicare fee-for-service payments ­ an overall 45 percent reduction
in improper payments in just 2 years. As part of the HHS/OIG audit of HHS’s
1996 financial statements, HHS/OIG developed a statistically valid estimate
of improper payments amounting to $23.2 billion, or about 14 percent of
the total payments made in the fiscal year. Just 2 years later, improper
payments dropped by $10.6 billion to $12.6 billion, or about 7 percent of
the fiscal year total.

According to Treasury Department and Congressional Budget Office statistics,
Medicare spending rose at an average annual rate of about 9 percent from
1994 to 1997, then dropped to 1.5 percent in 1998 — the smallest increase
in the history of the program. 1998 also marked the first year that Medicare
spending grew more slowly than the Federal budget as a whole, which increased
by 3 percent. This downward trend is continuing; during 1999, Medicare spending
actually declined 0.7 percent. Even home health care expenditures, which
experienced explosive growth during most of the 1990’s, declined. The Medicare
Trustees recently announced that the solvency of the Trust Fund had been
extended 7 years to 2015, after also being extended 7 years the prior year.

A more detailed description of these and other accomplishments of the major
federal participants in the coordinated effort established under HIPAA follows.
While information in this report is presented in the context of a single
agency, most of these accomplishments reflect the combined efforts of HHS,
DOJ and other partners in the anti-fraud efforts. The continuing accomplishments
of the DOJ and HHS and our partners in the coordinated anti-fraud effort,
as well as prevention efforts, demonstrate that the increased funds to battle
health care fraud and abuse continue to be sound investments, as well as
good public policy.

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FUNDING FOR DEPARTMENT OF HEALTH AND
HUMAN SERVICES

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Office of Inspector General

Certain of the funds appropriated under HIPAA are, by statute, set aside
for Medicare and Medicaid activities of the HHS/OIG. During the third year
of the Program, the Act provides that between $90 and $100 million be devoted
to these purposes. The Secretary and the Attorney General jointly allotted
$98.2 million to the HHS/OIG in 1999, an increase of $12 million over 1998.

With these increased resources, HHS/OIG conducted or participated in 942
prosecutions or settlements in 1999. A total of 2,976 individuals and entities
were also excluded, many as a result of criminal convictions for program-related
crimes (550), criminal convictions for patient abuse or neglect (323), and
others were excluded based on licensure revocations (1,416).

In addition to the HHS/OIG’s role in bringing about the judgments and settlements
described in the Overview of Accomplishments, the Department of Health and
Human Services acted on HHS/OIG recommendations and disallowed $113.5 million
in improperly paid health care funds in 1999. HHS/OIG continues to work
with HCFA to develop and implement recommendations to correct systemic vulnerabilities
detected during HHS/OIG evaluations and audits. These corrective actions
often result in health care funds not expended (that is, funds put to better
use as a result of implemented HHS/OIG initiatives). In 1999, such funds
not expended on improper or unnecessary care amounted to approximately $11.8
billion — about $10.8 billion in Medicare savings, and nearly $1 billion
in savings to the Medicaid program.

HHS/OIG moved closer to its goal of extending its investigative and audit
staffs to cover all geographical areas in the country, particularly
those that were previously underserved. During 1999, overall HHS/OIG staff
levels increased from 1,258 to 1,363 by the end of the year, and HHS/OIG
opened 2 new investigative offices. The HHS/OIG also significantly increased
its staffing resources devoted to ensuring health care providers’ compliance
with Federal health care program rules.

Fraud and Abuse Prevention

The increased resources made available under HIPAA have enabled the HHS/OIG
to expand activities designed not just to uncover existing fraud and abuse,
but to prevent it. Vital prevention initiatives, such as those
listed below, inform and assist the health care industry, and patients.
Equally important, these prevention activities reduce the government’s enforcement
costs and program losses.

Compliance Guidance. A key element of HHS/OIG’s prevention
efforts has been the development of compliance program guidance to encourage
and assist the private health care industry to fight fraud and abuse. The
guidance, developed in conjunction with the provider community, identifies
steps that health providers may voluntarily take to improve adherence to Medicare
and Medicaid rules. In 1999, the OIG developed and released final compliance
program guidance for third party medical billing companies, hospices and the
durable medical equipment, prosthetics, orthotics, and suppliers industry. Corporate Integrity Agreements. Many health care providers
that enter agreements with the government in settlement of potential liability
for violations of the False Claims Act also agree to adhere to a separate
“corporate integrity agreement.” Under this agreement, the provider commits
to establishing a compliance program or undertaking other specified steps
to ensure its future compliance with Medicare and Medicaid rules. The duration
of most corporate integrity agreements is 5 years, during which time the provider
must submit periodic reports to HHS/OIG. These agreements require a substantial
effort by the provider to ensure that the organization is operating in accordance
with Federal health care programs rules and regulations and the parameters
established by the corporate integrity agreement. Breach of the agreement
may result in a variety of sanctions, including exclusion of the provider.
At the close of 1999, HHS/OIG was monitoring more than 425 corporate integrity
agreements. Industry Guidance. The centerpiece of the HIPAA guidance
initiatives is an advisory opinion process through which parties can obtain
binding legal guidance as to whether their existing or proposed health care
business transactions run afoul of the Federal anti-kickback statute, the
civil money penalties laws, or the exclusion provisions. The advisory opinion
process has become an integral part of the Inspector General’s ongoing commitment
to preventing health care fraud. During 1999, the HHS/OIG accepted 39 requests
for advisory opinions and issued 15 opinions. Many requests are still being
processed; others were withdrawn or rejected as outside the scope of the advisory
opinion process.The advisory opinion process also serves to enhance the HHS/OIG’s understanding
of new and emerging health care business arrangements and informed the development
of new safe harbor regulations, fraud alerts, and special advisory bulletins.
Topics so addressed in 1999 include hospital payments to physicians to reduce
or limit services to beneficiaries (commonly known as “gainsharing” arrangements);
the effect of exclusion from Federal health care programs on excluded providers
and those who employ or contract with them; physician liability for certifications
of medical necessity in the provision of medical equipment and home health
services; and the effects of exclusion from Federal health care programs
on current and prospective employees.

The HHS/OIG made significant strides toward resolving pending safe harbor
regulations. Formal clearance was begun for a proposed anti-kickback safe
harbor for ambulance restocking arrangements between hospitals and ambulance
providers who transport patients to hospital emergency rooms and a proposed
safe harbor under the civil money penalty law for inducements to beneficiaries
to protect certain payments by ESRD facilities of insurance premiums for
their patients. Two final anti-kickback statute safe harbor rules were finalized
for issuance in early 2000 — one promulgating eight new safe harbors and
a series of clarifications to existing safe harbors (originally proposed
in 1993 and 1994), and another addressing the statutory exception for shared
risk arrangements.

In addition, HHS/OIG has made frequent presentations to industry groups
on areas of suspected fraud and abuse and measures they can take to avoid
trouble.

Medicare Error Rate: The HHS/OIG’s annual audit of the
Department’s financial statements included a statistically valid review of
the error rate in Medicare fee-for-service payments. This year’s estimate
is $7.7 billion less than last year’s estimate of $20.3 billion and $10.6
billion less than the previous year’s estimate of $23.2 billion–a 45 percent
drop. While there is no empirical evidence supporting a specific causal relationship
between the error rate decline and particular corrective actions, we believe
that among the important causes for the reduced error rate are the fraud and
abuse prevention and detection initiatives, the Medicare Integrity Program
administered by HCFA and the cooperative efforts of major provider groups. Recommendations for Systemic Improvements: Frequently,
investigations (and resulting civil settlements or criminal prosecutions),
audits and evaluations reveal vulnerabilities or incentives for fraud in agency
programs or administrative processes. As required by the Inspector General
Act, the HHS/OIG makes recommendations to correct these vulnerabilities, and
thereby promote economy and efficiency in HHS programs and operations. Relying
on the independent factual information generated by HHS/OIG, agency managers
fashion legislative proposals and other corrective actions that, when enacted
or implemented, close loopholes and avoid ineffective expenditures or improper
conduct. The net savings from these joint efforts toward program improvements
can be substantial.An example of an HHS/OIG study that provided evidence and ideas supporting
proposals for significant cost savings issued during 1999 was the series
of reports on the early effects of the prospective payment system (PPS)
on access to skilled nursing facilities and the appropriateness of Medicare
payments for physical and occupational therapy in skilled nursing facilities.
The studies found that there are no serious problems in placing Medicare
beneficiaries in nursing homes; however, nursing homes are changing their
admission practices in response to the new PPS. One-fifth of the hospital
discharge planners say that it has become more difficult to place patients
who require extensive services while it has become easier to place patients
who need rehabilitation services. Most nursing home patients were appropriate
candidates for and benefitted from the physical and occupational therapy
they received. However, 13 percent of the therapy was improperly billed
to Medicare. In terms of dollar amounts, Medicare reimbursed skilled nursing
facilities almost $1 billion for improperly billed physical and occupational
therapy and almost $331 million for undocumented physical and occupational
therapy.

The reports recommended that HCFA instruct Medicare fiscal intermediaries
to provide more training to facility and therapy staff on Medicare coverage
criteria and guidelines, local medical review policies, and monitoring procedures
for therapy and adequately fund Medicare contractors to perform medical
reviews of therapy.

Focus on Collaboration

Federal-State Audit Partnership. In 1994, the HHS/OIG initiated
a partnership between federal and state auditors to enhance and provide broader
audit coverage of the Medicaid program. Collaboration among HHS/OIG, State
auditors, inspectors general, Medicaid agencies and HCFA maximizes scarce
resources at both the Federal and State levels. The focus of the partnership
effort is not on the traditional identification and recovery of unallowable
Medicaid costs; rather the program focuses on identifying program improvements
and reducing the cost of providing necessary services to Medicaid recipients.
HHS/OIG auditors provide computer support, audit programs and guides, training,
information-sharing and other specialized assistance to State auditors, as
well as direct audit support.To date, active partnerships flourish in 22 states. This partnership effort
has been a resounding success. State auditors have shown a great interest
in creating partnerships and we continue to get inquiries on other potential
joint projects. By the end of 1999, these State partnerships generated approximately
$145 million in Federal and State savings since the partnership began. Many
of these recommendations related to Medicaid prescription drugs.

Roundtable on Compliance. In conjunction with the health
care industry, the HHS/OIG conducted a joint roundtable on health care compliance
to gain new insights into the challenges of creating effective compliance
programs. The event reflects HHS/OIG’s commitment to engage in ongoing discussions
with the health care compliance industry about practices and policies related
to compliance programs, including the impact of compliance recommendations
advanced by HHS/OIG. More than 125 compliance officers, government representatives
and others attended the event. Self-Disclosure Protocol. In October 1998, the HHS/OIG
implemented a self-disclosure program, to assist providers and suppliers in
investigating and reporting potential violations of Federal health care laws.
The program offers providers an opportunity to police themselves, correct
underlying problems and work cooperatively to resolve these matters. Since
issuance of the protocol, 40 health care providers have submitted self-disclosures
to the HHS/OIG. Two of these were successfully resolved through the return
of overpayments to the Federal Government; the others are under investigation. Data Sharing. With the increased focus on investigations
that are national in scope, close collaboration among investigative and prosecutive
agencies has become critical. To this end, the HHS/OIG Office of Investigations
and the FBI have initiated an efficient information sharing system. Copies
of all healthcare fraud referrals and allegations received by HHS/OIG are
sent to the FBI Health Care Fraud Unit at FBI Headquarters. The FBI then serves
as an informational contact and dissemination point for DOJ and its prosecutors
nationwide. In turn, the FBI provides information on their health care investigative
matters to HHS/OIG. All such cases, wherever generated, are entered into the
HHS/OIG Case Information Management System, which serves as a comprehensive
data base for Federal health care investigations. This prompt information
sharing system fosters efficient investigative teamwork, supports criminal
prosecutions and deters health care fraud. Beneficiary Outreach. The HHS/OIG’s outreach efforts are
not limited to industry; equally important is enlisting the beneficiary population
in the fight against fraud and abuse. The HHS/OIG continues to distribute
hundreds of its Medicare fraud educational materials to beneficiaries through
AoA grantees, the AoA network, AARP regional offices, and to public libraries
in each State. HHS/OIG has developed a working relationship with national
Asian American and Hispanic organizations to seek advice on translating and
printing HHS/OIG Medicare fraud materials into Chinese, and to distribute
these materials and those already printed in Spanish, respectively, to Chinese
Americans and a wider Spanish-speaking population.Focus on Quality of Care

Some of the HHS/OIG’s most important investigations, audits and evaluations
focused on the quality of care furnished to program beneficiaries.
These include the investigations described in the Overview section of this
report, as well as the following activities:

Patient Anti-Dumping Enforcement. Both HCFA and the HHS/OIG
continue to vigorously pursue potential violations under the patient anti-dumping
statute. Federal law requires that an emergency medical screening examination
and stabilizing treatment be provided by the emergency department of a Medicare
participating hospital. In 1999, HHS/OIG entered 61 settlement agreements
with hospitals and physicians and collected civil monetary penalties of $1.7
million. This is an increase from the previous high of 53 settlements in 1998,
and reflects the commitment of both HCFA and HHS/OIG to ensure patient access
to appropriate emergency medical services. Quality of Care in Nursing Homes. The HHS/OIG released
a series of inspection reports concluding that serious problems with quality
of care continue to exist in nursing homes. This is demonstrated by an increase
in survey and certification “quality of care” deficiencies as well as an increase
in ombudsman complaints, especially about resident care. Other findings include
inadequate nursing home staffing levels; weaknesses in the survey system;
inadequate resources in the ombudsman program; and inconsistent and unreliable
State systems to safeguard nursing home residents. The problems described
in this inspection will require continuing attention. An effective strategy
would include actions to enhance the survey and certification process; strengthen
the ombudsman program with increased resources; improve nursing home staffing
levels; and improve coordination between State survey agencies and ombudsmen.
Additionally, further evaluation and performance measurement of the Omnibus
Budget Reconciliation Act 1987 and the conditions in nursing homes would make
an important contribution to efforts to advance nursing home care. Hospital Quality Oversight. A two-year study by the HHS/OIG
found major deficiencies in the external oversight system intended to make
sure the nation’s hospitals are safe and recommended how those agencies responsible
for oversight can provide leadership in improving quality and accountability.
The study received significant national media attention when it was released.
Four evaluation reports assessed the key roles in hospital quality oversight
played by the Joint Commission for Accreditation of Healthcare Organizations,
the State survey and certification agencies, and HCFA, which oversees Medicare.
Overall, the reports concluded that while the system of oversight that HCFA
relies upon has some strengths, it also has deficiencies that warrant serious
attention. The HCFA does little at present to hold either the Joint Commission
or the State survey agencies accountable for their performance.The reports called for HCFA to exert leadership in addressing the shortcomings.
The HHS/OIG urged HCFA to steer the external review process so that it represented
a balance between the educationally oriented approaches of the Joint Commission
and the enforcement-oriented approaches of the State agencies. In recommendations,
the HHS/OIG presented a number of steps HCFA should take to hold both the
Joint Commission and the States more fully accountable for their performance
in reviewing hospitals. In addition, the HHS/OIG called for HCFA to determine
the appropriate minimum cycle for conducting certification surveys of non-accredited
hospitals. Since the publication of the final report, the Joint Commission
has made several changes to its review and accreditation process, based
on HHS/OIG recommendations, that have made the process more meaningful and
more accountable.

Mental Health Services. A settlement agreement was reached
with a university to resolve its civil liability for the submission of false
claims to Medicare, Medicaid and other Federal health care programs from 1992
through 1997. At issue were claims for mental health services rendered at
its clinics by non-paid, unsupervised students. The university submitted the
claims and was reimbursed as if qualified mental health providers (psychologists
or psychiatrists) had provided the services. The university agreed to enter
a 5-year comprehensive corporate integrity agreement with the HHS/OIG. It
also agreed to pay the government a total of over $4 million. Monetary payment
will be made to the federal government for both the Medicare damages and the
federal portion of Medicaid damages. However, the State agreed that the university
could satisfy its liability for the state share of the Medicaid damages through
the provision of services rather than through a cash payment.The HHS/OIG also completed a five-State study of partial hospitalization
program services provided in community mental health centers. This program
is an intensive outpatient psychiatric program which provides services to
acutely ill individuals in order to prevent their hospitalization. Medical
reviewers found that over 90 percent of the Medicare payments ($229 million
of $252 million) were for unallowable or highly questionable services. Cost
reports at selected centers contained significant unallowable and nonreimbursable
items. Further, HCFA’s enrollment initiative in nine States found that a
high percentage of the nearly 700 centers covered did not meet certification
requirements to qualify for Medicare payments. To address these problems,
HCFA developed a 10-point plan under which approximately 150 centers have
already been terminated (this includes voluntary terminations and cessation
of business). Instructions were issued to fiscal intermediaries on intensified
medical review and provider education. HCFA is also implementing a prospective
payment system for partial hospitalization program services, and has started
the process of deactivating billing numbers for centers that have not billed
Medicare within 6 months.

 

Health Resources and Services Administration

 

The Act mandates that the HHS/OIG and DOJ establish a national health care
fraud and abuse data collection program for the reporting and disclosure
of certain final adverse actions (excluding settlements in which no findings
of liability have been made) taken against health care providers, suppliers,
and practitioners. The Health Resources and Services Administration (HRSA)
has been authorized to design, implement and operate this program, currently
named the Healthcare Integrity and Protection Data Bank (HIPDB). In 1999,
HRSA received $4.4million from the Account to continue development of the
HIPDB as an all electronic system that will collect, store and disseminate
reports to the law enforcement community and health plans upon request.

The Act requires Secretarial rulemaking for certain features of the HIPDB,
including access, information dissemination, disclosures to the subjects
of reported information and report corrections, and any other optional reporting
elements that the Secretary chooses to request. Decisions were made jointly
by HHS and DOJ to continue the development of the data base in 1999 in anticipation
of the publication of the Final Rule. Final regulations were published in
the Federal Register in October1999 and plans are underway to open the data
bank in early 2000.

Development of the HIPDB has included activities related to data base design
specifications, reviews of required hardware and software, modification
of physical facilities, and the procurement and installation of equipment.
The forms and methods of information to be collected to populate the data
base has also been part of the HIPDB development process. Most of the information
reported to the HIPDB will come from Federal agencies and State licensing
authorities. Data acquisition activities have included working with: DOJ,
HCFA, HHS/OIG, the Departments of Defense and Veterans Affairs, and various
health care related and health professional organizations, including those
representing Nursing and Chiropractic Licensing Boards.

Operations will be supported by charging a fee for searching the data base.
When the HIPDB becomes operational, the query fee payment will be collected
via an interface with Mellon Bank. To date, more than 2,300 entities have
registered to query the HIPDB in anticipation of its opening for operation.

Office of the General Counsel

The Office of the General Counsel’s (OGC) headquarters divisions (the Health
Care Financing Division and the Business and Administrative Law Division)
as well as its 10 regional offices provide legal support consistent with
the statutory authority of the HCFAC Program. These OGC components, in partnership
with other HHS components — including HCFA, HHS/OIG and DOJ, work jointly
to combat health care fraud and abuse.

OGC was allocated $2.3 million in HCFAC funding for 1999. These funds were
used primarily for litigation activity, both administrative and judicial.
OGC continues to experience an increase in the number of new Program Integrity
Litigation items: an approximate increase in new cases for fiscal years
1998 and 1999 of 17 and 18 percent, respectively. Pending cases for those
fiscal years increased 34 and 14 percent respectively. It is our anticipated
new litigation and pending litigation that drives OGC’s activities. The
bulk of the administrative (non-court) litigation involved: (1) Civil Money
Penalties (CMPs) and other sanctions imposed on nursing facilities; (2)
revocations, terminations or denials of provider status (especially nursing
facilities, home health agencies, as well as Community Mental Health Centers
(CMHCs) under the Operation Restore Trust CMHC Initiative); (3) Medicare
Secondary Payor (MSP) cases; and, (4) suspensions of Medicare payments to
providers and suppliers. The bulk of the court litigation involved MSPs
or bankruptcies. The dollars reflected here are not included in the Monetary
Results section of this report.

Accomplishments

Within this year’s framework of prominent HCFAC themes such as civil and
criminal enforcement actions; exclusions from federally sponsored programs;
initiatives for preventing health care fraud; administrative penalties for
Emergency Medical Treatment and Active Labor Act (EMTALA) violations; and
collaborative and outreach efforts, OGC had the following HCFAC accomplishments:

 

• OGC’s HCFA Division worked with OIG to draft a Special Advisory Bulletin
  to clarify the applicability of the EMTALA to managed care organizations.
  That Division also assisted HCFA in its efforts to draft a regulation
  to clarify the scope of EMTALA so that hospitals will know when their
  obligations under EMTALA begin and end and whether the obligations under
  EMTALA apply to hospital inpatients. Other EMTALA efforts included a presentation
  by Region X staff to the Washington State Bar Association on EMTALA requirements.

 

• Region V staff assisted in successfully defending against federal district
  court and bankruptcy court suits seeking to enjoin recoupment of overpayments
  from a home health agency in Indiana ($5 million) and from a nursing facility
  ($1 million).

 

• Region VI’s collaborative and outreach efforts are plentiful and significant:
  for example, in ongoing collaborative efforts with HCFA, the Texas Department
  of Human Services and the Texas Attorney General’s Office, an action plan
  to preserve patient health and safety when nursing home chains become
  insolvent or file for bankruptcy was coordinated. These efforts arose
  out of the bankruptcy of a Texas nursing home chain where issues of fraud,
  suspension of payments, patient safety and bankruptcy were all present.
  As a result, this model will be used in similar OGC efforts in the future.

 

• Region VI also was successful in protecting HCFA’s interests when a
  nursing home chain in Texas (90 facilities) filed for bankruptcy. Through
  the efforts of Region VI’s staff, HCFA was able to recoup a $3 million
  cost report overpayment over a 12-month period. Additionally, they were
  able to arrange for continued repayment of a $885.9 thousand settlement
  of 29 civil monetary penalty cases.

 

• OGC’s Region III and Region X offices collaborated with efforts to sustain
  denial of $4.8 million in payments to a Medicare supplier, headquartered
  in Pennsylvania, of orthotics and lymphedema pumps. The supplier filed
  for bankruptcy protection which most likely would have resulted in HCFA
  (as an unsecured creditor) receiving pennies on the dollars for its claims.
  However, OGC was able to convince the unsecured creditors’ committee that
  the debtor’s claims were fraudulent, and that the appeal of the denial
  of claims would be fruitless. Medicare was able to retain the $4.8 million
  as a result of these offices’ efforts.

 

 

Administration on Aging

 

In 1999, the Administration on Aging (AoA) was allocated $1.4 million in
HCFAC funds to train and educate both paid and volunteer aging network staff
to recognize and report potential practices and patterns of fraud, waste,
and abuse in the Medicare and Medicaid programs. These activities were focused
on training nursing home ombudsmen, health insurance counselors, state and
area agency on aging staff, senior center directors, social workers, eldercare
information specialists, and other professionals in 18 states how to identify
and report potentially fraudulent practices.

This funding also helped to support the technical assistance and nationwide
infrastructure for educating beneficiaries to be the “eyes and ears” of
the Medicare system. The AoA and its network agencies engaged in coordinated
outreach and educational activities designed to assist older persons and
their families to recognize and report fraudulent and abusive situations
and to prevent or minimize victimization of such behavior.

Accomplishments

• The 18 grantees trained more than 10,000 staff and volunteers to be
  Medicare resources and educators in their communities.
• With the collaboration and assistance of HCFA, the HHS/OIG, health
  care providers, and other professionals from around the country, the
  projects developed more than 150 community-based training manuals, educational
  brochures, and public information documents designed to recruit volunteers,
  involve providers in the campaign, and inform beneficiaries of what
  they should do if they have questions regarding their Explanation of
  Medicare Benefits Statement or Medicare Summary Notice. Educational
  materials were developed in a variety of languages, and outreach initiatives
  were targeted to high-risk populations. The AoA entered into a contract
  to develop culturally sensitive videos and brochures targeted to the
  African American, Hispanic, and Chinese communities.
• The AoA grantees convened more than 1,500 community education events
  which educated and informed over 200,000 individuals through public
  forums and education and training sessions to identify and report health
  care waste, fraud, and abuse. Special initiatives were undertaken to
  include local health care providers in these activities. Two examples
  of these efforts include the assistance of physicians in developing
  a personal health care journal that beneficiaries can use to record
  the services they receive during a doctor or hospital visit, and a collaboration
  with hospitals in developing and distributing an informational brochure
  on waste, fraud, and abuse that individuals receive when they are discharged
  from the hospital.
• With the assistance of the HHS/OIG and HCFA, the grantees developed
  and tested telephone screening systems and tracking mechanisms designed
  to trace the outcomes of inquiries made by beneficiaries. Of the more
  than 9,800 calls concerning potential cases of health care fraud, waste,
  and abuse which were screened by the projects, approximately half were
  referred to Medicare carriers, intermediaries, or regional durable medical
  equipment carriers for follow-up, thirty percent were referred to providers,
  and one-fifth were referred to the HHS/OIG Hotline, State Medicaid Fraud
  Control Units, State Attorney General’s Offices, or other fraud and
  abuse agencies.

HCFAC funding also provided vital technical assistance to support AoA’s
Senior Medicare Patrol Projects which have been highly successful in recruiting
and training retired professionals to report waste, fraud, and abuse.

 

Departmental Appeals Board 

The Secretary delegated to the Departmental Appeals Board (DAB) responsibility
for conducting hearings and reviewing appeals in administrative sanction
cases initiated by the HHS/OIG. The HHS/OIG administrative sanction cases
may result in exclusion from participation in Medicare and State health
care programs imposed under sections 1128 and 1156 of the Social Security
Act, and imposition of CMP pursuant to section 1128A of the Act. Another
substantial category of HHS/OIG administrative sanction cases involve violation
of the Patient Anti-Dumping Statute, section 1867 of the Social Security
Act. With enhanced HHS/OIG resources resulting from HIPAA, the HHS/OIG has
processed an ever-increasing number of administrative sanction cases.

The DAB Civil Remedies Division received $138,000 in 1999 in HCFAC funds.
These funds supported the work involved in issuing 33 decisions, dismissing
73 cases, and closing 106 cases in 1999. All of these cases were generated
by the HHS/OIG.

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FUNDING FOR DEPARTMENT OF JUSTICE

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United States Attorneys

Health care fraud involves a variety of schemes that defraud public and
private insurers and providers nationwide. In addition to Medicare and Medicaid,
a number of federally funded health benefit programs have been the targets
of these schemes. The fraudulent activity may include double billing schemes,
kickbacks, billing for unnecessary or unperformed tests, or may be related
to the quality of care provided to patients. In addition to monetary losses,
in some instances these improper activities endanger patient safety. United
States Attorneys’ offices (USAOs) are responsible for civilly and criminally
prosecuting health care professionals, providers, and other specialized
business entities who engage in health care fraud and abuse.

USAOs continue to strengthen cooperative efforts with federal, state and
local law enforcement agencies involved in the prevention, evaluation, detection,
and investigation of health care fraud and abuse. In addition to the FBI,
HHS/OIG and HCFA, USAOs offices work with State Medicaid Fraud Control Units,
Offices of Inspectors General for a number of federal agencies, the Drug
Enforcement Administration, and the Department of Defense Criminal Investigative
Service and TRICARE Support Office. Each USAO has appointed both a civil
and criminal health care fraud coordinator to assist in coordination and
facilitate communication between federal, state and local law enforcement
groups.

Over the past year, USAOs have diligently worked to enhance provider understanding
of the Department’s enforcement responsibilities and efforts. A number of
outreach presentations have been made to health care professionals, provider
organizations, and beneficiary groups around the country in this regard.

Prior to the enactment of HIPAA, USAOs dedicated substantial resources
to combating health care fraud and abuse. HIPAA allocations have supplemented
these efforts.

Training

The Executive Office for the United States Attorneys’ Office of Legal Education
(OLE) is tasked with the responsibility for providing health care fraud
training for USAO and DOJ attorneys, investigators, and auditors. During
1999, OLE conducted a number of courses and presentations on health care
fraud, including:

 

• Affirmative Enforcement for Investigators (including a health care fraud
  training component)

 

• Civil Health Care Fraud for Attorneys
• Criminal Health Care Fraud for Attorneys
• Basic Health Care Fraud for Attorneys – Criminal and Civil
• Basic Affirmative Civil Enforcement for Attorneys (includes a health
  care fraud component)

While the primary participants in OLE sponsored courses were DOJ employees,
agency counsel and investigative personnel were also invited to participate
as presenters and students. In addition to OLE sponsored training a number
of USAO attorneys, auditors and investigators participated in multi-agency
health care fraud training courses over the last year.

Accomplishments – Criminal Prosecutions

The primary objective of criminal prosecution efforts is to ensure the
integrity of our nation’s health care programs and to punish and deter those
who, through their improper activities, adversely affect the health care
system and the taxpayers.

Each time a criminal case is referred to a USAO from the FBI, HHS/OIG,
or other law enforcement agency, it is opened as a matter pending in the
district. A referral remains a matter until an indictment or information
is filed or the case is declined for prosecution. In 1999, the USAOs had
1,994 criminal matters pending involving 3,158 defendants, a 6.9 percent
increase in the number of criminal matters over 1998. During 1999, 371 cases
were filed involving 506 defendants. This represents a 16.3 percent increase
over cases filed in 1998. A total of 396 defendants were convicted for health
care fraud-related crimes in 1999. Health care fraud convictions include
both guilty pleas and guilty verdicts.

In one case, 20 individuals were convicted for their involvement in a massive
and sophisticated scheme to defraud Medicare. The convictions arose from
an almost five-year investigation (conducted by HHS/OIG, FBI, the Internal
Revenue Service, and the Department of Labor) of a home health agency, which
from 1991 to 1994 was the largest Medicare-certified home health agency
in Miami. During that time, the home health agency was paid approximately
$120 million by Medicare for reimbursement of services, including nursing
and home health aide visits, which either had not been provided, were not
necessary, or were provided to persons who were not eligible. In some cases,
Medicare was billed for services provided to persons who were already deceased
when the billed services were supposedly rendered. The two highest level
home health agency administrators admitted to illegal hidden partnerships
in literally hundreds of subcontractor groups and the conspirators’ involvement
in hundreds of thousands of dollars in illegal payoffs to everyone from
“professional beneficiaries” to home health aids, nurses and doctors. The
convicted defendants, in what eventually became two separate federal court
cases, arising from two separate series of indictments, received sentences
ranging from 18 months imprisonment to, in the case of the highest level
administrator, 12 years imprisonment. A single defendant returned $1.1 million
in fraudulently obtained assets.

Accomplishments – Civil Cases

Civil health care fraud efforts constitute a major focus of Affirmative
Civil Enforcement (ACE) activities. The ACE Program helps ensure that federal
laws are obeyed and that violators provide compensation to the government
for losses and damages they cause. Civil health care fraud matters ordinarily
involve the United States utilizing the False Claims Act, as well as common
law fraud remedies, payment by mistake, unjust enrichment and conversion
to recover damages from those who have submitted false or improper claims
to the United States.

Each time a civil referral is made to a USAO it is opened as a matter pending
in the district. Civil health care fraud matters are referred directly from
federal or state investigative agencies, or result from filings by private
persons known as “relators,” who file suits on behalf of the Federal Government
under the 1986 qui tam amendments to the False Claims Act. Relators
may be entitled to share in the recoveries resulting from these lawsuits.
At the end of 1999, the USAOs had 2,278 civil health care fraud matters
pending. A matter becomes a case when the United States files a civil complaint,
or intervenes in a qui tam action, in United States District Court.
The vast majority of civil health care fraud cases and matters are settled
without a complaint ever being filed. In 1999, 91 civil health care fraud
cases were filed.

A multimillion dollar settlement was reached with one of the largest home
health care companies in Texas, which agreed to pay the Government $10 million
to resolve allegations involving its subsidiary, a provider of home health
care and infusion therapy services. Allegedly, the subsidiary improperly
charged Medicare for unallowable costs including salaries, travel, and legal
fees. In addition, the subsidiary allegedly conspired with and caused skilled
nursing facilities to overcharge Medicare for infusion therapy drugs, supplies,
and nursing services. As part of the settlement, the subsidiary also entered
into a comprehensive corporate integrity agreement with HHS/OIG.

 

Civil Division 

Civil Division attorneys vigorously pursue civil remedies in health care
fraud matters, working closely with the USAOs, the FBI, the Inspectors General
of HHS and Defense, as well as other federal and state law enforcement agencies.
Cases involve health care providers, carriers and fiscal intermediaries
that defraud Medicare, Medicaid and other federal health care programs.

The Department’s Nursing Home Initiative, launched in October 1998 to crack
down on fraud, abuse and neglect in nursing homes and other residential
care facilities, is coordinated by a Civil Division attorney, and focuses
on eight key areas: (1) stepped up enforcement; (2) improved coordination
among federal agencies and among federal, state and local law enforcement,
regulatory agencies and resident advocates; (3) development and use of data
systems to target facilities that provide inadequate care; (4) focused training,
particularly training that brings together prosecutors, investigators, regulators,
surveyors, advocates and others;(5) outreach efforts to industry to promote
compliance and to patient advocates, medical professionals and academics;
(6) new legislation to address gaps in federal law; (7) improved services
to victims of fraud, abuse and neglect; and (8) analysis of state laws to
identify effective or promising state abuse and neglect statutes and enforcement
practices. This Initiative complements the efforts being undertaken at HCFA
and HHS/OIG, communication and coordination are facilitated by monthly Steering
Committee meetings attended by the Criminal Division, FBI, HHS/OIG, and
HCFA.

The financial crisis in the nursing home industry has to date resulted
in bankruptcy filings by two of the ten largest nursing home chains and
several smaller chains. These bankruptcy cases, the largest ever involving
health care providers, raise both financial and quality of care issues,
and require significant on-going coordination between the Civil Division’s
Corporate Finance (bankruptcy experts) and Civil Fraud sections, the Criminal
Division, HCFA, and HHS/OIG.

The Civil Division continues to chair the Managed Care Fraud Working Group,
which meets quarterly and coordinates the managed care enforcement activities
of DOJ, FBI, HHS/OIG, HCFA, TRICARE Management activity of the Department
of Defense, Office of Personnel Management Office of Inspector General,
The National Association of Attorneys General, the National Association
of Medicaid Fraud Control Units, and the Internal Revenue Service.

Accomplishments

In 1999, 182 new health care fraud matters were initiated. In addition
to pursuing more health care fraud allegations, the Civil Division is pursuing
an increasing number of health care fraud cases in which the apparent single
damages are particularly high. Following is a discussion of some of the
significant cases the Division has been involved in during 1999.

A $32 million payment was received from a university — the largest recovery
ever in a case involving either the Food and Drug Administration or the
National Institutes of Health (NIH). The case established favorable new
case law and its settlement resolved allegations that, for more than two
decades, the University had illegally profited from selling an unlicensed
drug, failed to report the sales income to NIH, improperly tested the drug
on patients and improperly used grant funds.

The Civil Division, in conjunction with 39 USAOs, is handling a
qui tam action alleging that 100 hospitals located nationwide upcoded
pneumonia diagnosis codes to falsely obtain higher Medicare reimbursements.
Thus far, settlements have been reached with eight defendants for a total
recovery of $15.4 million.

A $15 million settlement resolved a case against a billing service and
its physician founder, for submitting false claims on behalf of emergency
physicians around the country. The settlement with the United States and
twenty-eight states was reached after a trial on liability in which the
court found both the company and the owner liable for violating the False
Claims Act. In addition to the civil settlement, the owner was excluded
from participation in all federal health care programs for fifteen years.

A drugstore chain paid nearly $8 million to settle allegations of submitting
false prescription claims to state Medicaid and other federally-funded health
programs. The case was the first to address a common practice of billing
insurance programs for the full amount of prescriptions which were only
partially filled.

Vital resources were made available from the Account to provide the Civil
Division with Automated Litigation Support (ALS), auditors and consultants.
These resources supplemented other Civil Division funds. During 1999, ALS
was provided to 14 cases while auditor/consultant support was provided to
21 cases. Four of the supported cases have settled, yielding more than $44
million. Recoveries in the remaining cases are expected to reach hundreds
of millions of dollars.

 

Criminal Division

 

The Fraud Section of the Criminal Division develops and implements white
collar crime policy and provides support to the Criminal Division, DOJ and
other federal agencies on white collar crime issues. The Fraud Section supports
the USAOs with legal and investigative guidance and, in certain instances,
provides trial attorneys to prosecute criminal fraud cases. For several
years, a major focus of Fraud Section personnel and resources has been to
investigate and prosecute fraud involving federal health care programs.

The Fraud Section has provided guidance to FBI agents, AUSAs and Criminal
Division attorneys on criminal, civil and administrative tools to combat
health care fraud, and worked on an inter-agency level through:

• providing frequent advice and written materials on confidentiality
  and disclosure issues arising in the course of investigations and legal
  proceedings regarding medical records.
• reviewing and commenting on numerous requests for advisory opinions
  submitted by health care providers to the HHS/OIG and consulting with
  the HHS/OIG on draft advisory opinions per the requirements of HIPAA.
• sponsoring a national Nursing Home Fraud and Abuse conference to address
  the problems of financial fraud and resident abuse and neglect. The
  conference brought together key officials from DOJ, USAOs, HHS/OIG,
  HCFA, and other federal, state, and local agencies, to develop a plan
  of action for combating fraud, abuse, and neglect in nursing homes across
  the nation. The national conference helped lead to the development of
  DOJ’s Nursing Home Initiative and the development of regional nursing
  home training conferences that will be held in Los Angeles, Philadelphia,
  and Des Moines.
• preparing and distributing to all USAOs and FBI field offices a quarterly
  electronic newsletter summarizing recent developments on major issues,
  interagency initiatives, and significant activities of DOJ’s health
  care fraud component organizations as well as periodic electronic newsletters
  summarizing recent cases.
• participating on interagency working groups and task forces formed
  to address fraud in health care and managed care as well as newly emerging
  problem areas involving illicit online sales of drugs and medical products
  and nursing home fraud and resident abuse.

 

Justice Management Division 

The Justice Management Division, Debt Collection Management Staff continues
to perform for the program various administrative and coordination duties.
The duties of this office include: budget formulation, oversight and coordinating
with the Office of Management and Budget and HCFA; development and data
collection for the internal program evaluation; coordinating with HHS/OIG
and the Department of the Treasury on the tracking of collections; coordinating
with the GAO on required audits; and preparation and coordination of the
annual report.

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APPENDIX

 

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Federal Bureau of Investigation
Mandatory Funding 

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“There are hereby appropriated from the general fund of the
United States Treasury and hereby appropriated to the Account for transfer
to the Federal Bureau of Investigation to carry out the purposes described
in subparagraph (C), to be available without further appropriation– (I)
for fiscal year 1999, $66,000,000”.

Successful health care fraud enforcement cannot be achieved by any one
agency alone. Investigations must be a cooperative effort if they are to
be successful in combating the increasing problems of health care fraud.
The FBI is involved in this cooperative effort. The FBI works many health
care fraud cases on a joint basis with other federal agencies, including
the HHS/OIG. These two federal agencies collaborate through attendance at
health care fraud working groups, attend each other’s training conferences,
and have a liaison program between the two organizations. In addition, the
Health Care Fraud task forces represent the coordinated efforts of the FBI,
state and local law enforcement, investigative agencies such as Inspectors
General, and private industry. The FBI and HHS/OIG share a common commitment
to ending fragmented health care fraud enforcement.

In addition to providing new statutory tools to combat health care fraud,
HIPAA specified mandatory funding to the FBI for health care fraud enforcement.
In 1999, $66 million was provided by HIPAA for 651 positions (380 agents).
The FBI used this funding, in large part, to fund an additional 40 agents
and 42 support positions for health care fraud and to create several new
dedicated Health Care Fraud Squads. This increase in personnel resources
along with the direct FBI funding increased the number of FBI agents addressing
health care fraud in the fourth quarter of 1999 to approximately 493 agents
as compared to 112 in 1992.

As the FBI has increased the number of agents assigned to health care fraud
investigations, the caseload has increased dramatically from 591 cases in
1992, to 3,027 cases through 1999. The FBI caseload is divided between those
health plans receiving government funds and those that are privately funded.
Criminal health care fraud convictions resulting from FBI investigations
have risen from 116 in 1992, to 548 in 1999.

Health care fraud investigations are among those investigations having
the highest priority within the FBI. The investigations are generally complex
and require specific knowledge, skills and abilities to successfully investigate.
Often sophisticated, innovative and creative ideas are needed to combat
and eventually prosecute the perpetrators of these crimes. As the complexity
and long-term nature of health care fraud investigations increase, the FBI
anticipates that the number of FBI investigations and convictions will begin
to level off.

As part of the FBI’s national strategy to address health care fraud, the
Bureau utilizes proactive investigative techniques, to include the use of
undercover operations. A major FBI led undercover investigation culminated
in 1999 with the last of over 40 subjects either entering guilty pleas or
being found guilty at trial as a result of their participation in a fraud
scheme that robbed the Medicare Program of millions of dollars. During this
investigation the FBI actually purchased a bogus home health agency and
through various business dealings with the subjects uncovered a system rampant
with fraud from top to bottom.

A considerable portion of the increased funding was utilized to support
major health care fraud investigations. In addition, operational support
has been provided for FBI national initiatives focusing on pharmaceutical
diversion, chiropractic fraud, and medical clinics. Further, the Health
Care Fraud Unit, FBI Headquarters, supported individual field offices with
equipment and supplies to assist in numerous individual investigations.

The funding made available through HIPAA also made possible two Basic Health
Care Fraud training conferences which provided the expertise necessary for
an additional 200 FBI agents to address the health care fraud crime problem.
A total of 82 additional FBI agents received specialized training on fraud
schemes plaguing a particular provider service that has been historically
vulnerable to fraud. The HIPAA funding also allowed FBI headquarters staff
to conduct specialized training sessions in a number of FBI field offices
and to make numerous presentations to various industry groups.

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GLOSSARY

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The Account – The Health Care Fraud and Abuse Control Account

ACE – Affirmative Civil Enforcement

ALS – Automated Litigation Support

AoA – Administration on Aging

AUSA – Assistant United States Attorney

CMHC – Community Mental Health Centers

CMP – Civil Monetary Penalty

DOJ – The Department of Justice

EMTALA – Emergency Medical Treatment and Active Labor Act

ESRD – End-stage Renal Disease

FBI – Federal Bureau of Investigation

GAO – General Accounting Office

HCFA – Health Care Financing Administration

HHS – The Department of Health and Human Services

HIPAA, or the Act – The Health Insurance Portability and Accountability
Act of 1996, P.L. 104-191

HIPDB – Healthcare Integrity and Protection Data Bank

HRSA – Health Resources and Services Administration

MSP – Medicare Secondary Payer

NIH – National Institutes of Health

OGC – The Department of Health and Human Services, Office of the General
Counsel

OIG – The Department of Health and Human Services, Office of Inspector
General

OLE – Office of Legal Education, located within the Executive Office for
the United States Attorneys

PPS – Prospective Payment System

The Program – The Health Care Fraud and Abuse Control Program

Secretary – The Secretary of the Department of Health and Human Services

USAO – United States Attorney’s Office

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1. Hereafter, referred to as the Secretary.
2. Also known as the Hospital Insurance (HI) Trust Fund. All further references
   to the Medicare Trust Fund refer to the HI Trust Fund.
3. In 1999, DOJ collected, or continued to hold in suspense, an additional
   $96,480,614 in health care fraud cases and matters that was not disbursed
   to the affected agencies and/or the Account in 1999 due to: (i) on-going litigation
   regarding relator shares in qui tam cases that will affect the amount
   retained by the federal government; and (ii) receipt of funds late in the
   year that were then processed in FY 2000.
4. The original certification was for $137,540,000. However, during the fiscal
   year a $307,000 recission was taken against the account, leaving $137,223,000
   available.