Health Care Fraud Recoveries Can’t Keep Pace With Spending

Success in Health Care Fraud Enforcement is generally expressed in terms of dollars recovered and “return of investment.”  For instance, the OIG’s 2015 report to the appropriations committee stated that it expected recoveries for the fiscal year were a staggering $5.8 billion.  The report also stated that it expected an impressive ROI (Return on Investment) of approximately $8.00 for each one dollar allocated to the Health Care Fraud and Abuse Program.

Enforcement data of this type has found its way in press releases and reports for many years, and they give us the feeling of progress in the war on fraud.  However, impressive as these numbers results are, in the context of our actual healthcare spending and current estimates of healthcare fraud, the picture they present is not as optimistic as one might think.

Healthcare spending in the U.S. of 17.4% of the GDP$2.9 trillion, an amount which CMS estimates will increase to 3.2 trillion in 2015.  This makes the U.S. the world leader by a large margin with France a distant second at 11.6 % of GDP.  The principle spenders in 2013 were Medicare at $585.7 million, Medicaid at $449.4 billion, and Private insurers who spent $961.7 billion.

For obvious reasons, estimates of fraud are much harder to pin downrange widely with the Coalition Against Insurance Fraud stating there estimates range anywhere from 6.9% to 25% .  A 2012 study published in the Journal of American Medical Association Journal, however, estimated the level of fraud to be approximately 10%, and this is a figure often used and cited.

The “other perspective” I’m referring to becomes clear once we apply the 10% fraud estimate to actual Medicare and Medicaid spending.  That is, if fraud accounts for 10% of health care billings then Medicare lost $58.5 billion and Medicaid lost $44.9 billion — or over $103 billion in all.  Even if the fraud estimates are wrong and we cut them in half, the federal/state loss would exceed $50 billion!

At the end of the day, the scope of health care fraud, does not diminish the successes or efforts of health care fraud enforcement as each case settled is a victory, and each dollar recovered is important.  It does, however, remind us of how far enforcement has gone — and how much farther it has to go.


Exclusion Screening of Vendors and Contractors

OIG Exclusion Screening: Don’t Forget Your Vendors and Contractors! 

By now, providers should be aware that the OIG requires exclusion screening of contractors and vendors, in addition to employees, if they provide items or services that are payable by Federal health care programs. This article discusses the OIG’s guidance on the issue, explains the difficulties it poses, and concludes by suggesting a framework for applying the guidance to screening vendors and contractors.

OIG Exclusion Guidance: An Emphasis on Patient Care – A Focus on Payment

The OIG states that its emphasis on screening vendors and contractors for exclusions is on “items or services integral to the provision of patient care.”This is sensible as many exclusions are the result of licensing issues and drug offenses which could result in a risk of harm to patients.

That said, the OIG’s guidance focuses heavily on considering the nexus between vendor/contractor activities and any resulting claims. Providers are advised to review the “job category or contractual relationship” of each and every contractor and vendor, and if the provider determines that the vendor or contractor provide items or services payable “directly or indirectly, in whole or in part … by a Federal health care program,”3 the vendor or contractor should be screened for exclusions monthly.

The Breadth of OIG Exclusion Guidance

The OIG exclusion guidance is so broad that it is difficult to apply in a meaningful way. For instance, Exclusion Screening, LLC is sometimes asked by providers who make claims that include facility fees or some other overhead component whether they are obligated to screen contractors or vendors of such basic services as garbage collection and utilities out of a concern that they could be considered to be payable “indirectly” and at least “in part” by Medicare. While it is hard to believe that the OIG expects providers to screen the city sanitation service, the question raises a valid point.

While the guidance contains a number of examples that describe potentially problematic conduct when furnished by an excluded individual, the OIG seems to emphasize the broad scope of the screening obligation instead of providing a better understanding it. For instance, the preparation of a surgical tray by an excluded person (who may not be in the operating theatre) and the inputting of information into a computer by an excluded person (who probably would not have written the prescription or participated in making the claim) are both identified as potentially problematic conduct. The guidance further states that virtually any service (administrative, management, IT support, etc.), even volunteer services, can trigger Civil Monetary Penalties (CMPs) if an excluded person provides the service unless the service is “wholly unrelated to Federal Health Care Programs.“

A Possible Framework for Applying the OIG Guidance4

Screening decisions based solely on whether the item or service provided was “wholly unrelated” to claims (or, stated another way, could possibly have contributed in some way to a claim) not only fail to recognize the OIG’s stated emphasis on services integral to patient care, but, as we already discussed, it may also take a provider down a path that leads toward screening every conceivable vendor or contractor, including the city sanitation service. As an alternative to this rigid (and unrealistic) approach, Exclusion Screening, LLC suggests using a framework that considers both the potential impact to patient safety of the activity in question as well as the relationship between the vendor or contractor and any claims made to, or paid by, Federal Health Care programs. This, we posit, is a sensible and workable approach that is consistent with the OIG’s dual priorities of patient safety and fiscal responsibility.

The framework would create a continuum of sorts, with contractors or vendors most closely associated with both patient care and claims on one end (such as an agency nurse or a physical therapist), and the vendors and contractors who have nothing to do care and are only incidentally connected to reimbursement on the other (like the city garbage collection service). The closer a vendor or contractor is to the end that encompasses both patient care and claims (i.e., the nurse provided by a staffing company), the more likely it will be that the person or entity should be screened, and, conversely, as one moves along the continuum to the other end, the necessity of screening decreases. Though this may be an imperfect system that does not create bright lines, it specifically identifies and considers the factors important to the OIG, and the continuum gives context and focus to a provider’s screening decisions. By way of example, if one substitutes a hazardous waste collector for the city sanitation service and uses the continuum analysis, one can immediately see that the important considerations are (1) the risk a hazardous waste removal company and its employees pose to patient safety and (2) the nexus between the hazardous waste removal service and reimbursement for the claim. Finally, and perhaps most importantly, since the framework is premised on the OIG’s principle concerns, using a framework helps make provider screening decisions defensible and supportable in the event of an audit.


The OIG’s guidance on exclusion screening of vendors and contractors is so broad that providers are left to draw their own lines and make their own decisions regarding whether or not to screen a specific individual or entity. In drawing these lines and making these decisions, Exclusion Screening, LLC believes providers are best served if they use a framework that incorporates both patient safety and financial considerations. Such a framework helps providers by giving analytic context to their decisions, demonstrating their commitment to compliance, and, ultimately, making their actions all the more defensible if subjected to scrutiny.


The OIG’s Increasing Interest in Exclusion Enforcement

Exclusion Screening, LLC

Exclusion Screening, LLC, a company Robert Liles and I recently started, supplies exclusion screening services to health care providers.  As part of the business, we naturally keep track of all things pertaining to exclusion enforcement including all of the enforcement actions reported by the OIG or DOJ.

The exclusion enforcement cases reported in the 1st quarter of 2015 seemed, at first glance, to be unremarkable showing only small increases in the number of cases reported, and the CMPs imposed, and seeming to maintain the slow, steady rise of the previous years. Close examination of the cases, however, suggests strongly that the OIG is picking up the pace of exclusion enforcement, and that it may even be headed toward a national exclusion enforcement project.

Exclusion Enforce Prior to Publication of the Updated Special Advisory 

Prior to May, 2013, the time at which the OIG published its Updated Special Advisory Bulletin on the Effect of Exclusion from Participation in Federal Health Care Programs (Updated Special Advisory), OIG’s involvement in exclusion enforcement principally took the form of processing self disclosures. In 2013, for instance, 82% of all exclusion cases reported on the OIG website were self disclosure cases, and the percentages in 2010 and 2011 were similar at 80% and 85% respectively.   In other words, only about 1 in 5 exclusion violation cases were investigated on front end by the OIG during this period.

OIG’s Changes Approach to Exclusion Enforcement

OIG’s publication of its Updated Special Advisory seemingly marked a change in more than policy.  In the second half of 2013, for instance, the OIG’s direct involvement in case origination and case investigations started to show signs that it was increasing, and in 2014 approximately 1/3 of the reported cases were initiated by the Agency. The first quarter of this year continues this trend, and even though the sample size is relatively small, the OIG direct investigational involvement in reported cases was 45% for the period.

Exclusion “Data Analysis Project”

Last October, the OIG press release announcing a large exclusion violation settlement gave special credit to a “Data Analysis Project” conducted by its Office of Audit Services in support of the investigation.  Such a project suggests a more proactive approach to exclusion enforcement.

This “suggestion” has gained some traction with the recent announcement of another exclusion violation settlement supported by the so-called “Data Analysis Project.”  This time, however, the Office of Evaluations and Inspections (a sister investigative agency within HHS/OIG) was given credit for the work instead of the Office of Audit Services. Whether or not these “Projects” are connected or a part of some larger initiative can’t be known at this point, but they clearly demonstrate broad based agency of exclusion screening enforcement.


The number of cases are not nearly large enough to be statistically significant and no formal announcements have been made, but the OIG certainly seems poised to aggressively address Exclusion Screening violations with its increasing participation in exclusion investigations, “data analysis projects” and broad based agency support.  In such an environment, compliance with exclusion screening requirements is more critical than ever!


HCFAC 2014: A Drop in Recoveries and in New Cases

The Health Care Fraud and Abuse Control Program (HCFAC), the key funding source for DOJ and HHS/OIG in fighting health care fraud, issues detailed yearly reports that are viewed by many to be a barometer of fraud and abuse enforcement efforts.  While conclusions can’t be reached based solely on the numbers reported in a single year, since DOJ and OIG regularly issue press releases  announcing “Record Years” or “Record Settlements,” side by side comparisons of the yearly numbers — such as those made in this article — are fair game.
HCFAC 2014 Reports that False Claims Act Recoveries Were Down Almost 25%

According to HCFAC 2014, DOJ and OIG won or negotiated $3.3 billion in 2014 as compared to $4.2 billion and $4.3 billion in the prior two years.  Health care fraud judgments and settlements also dropped, though not quite as steeply, from $3.0 billion in 2012 and $2.6 billion in 2013 to $2.3 billion in 2014.  The amounts returned to Medicare and Medicaid, the critical numbers in the view of many, dropped proportionately to $1.9 from $2.3 billion and from $835.7 million to $523 million for Medicare and Medicaid comparing 2012 to 2014.    There may, of course, be several explanations for the  drop, but it is worth keeping an eye on the numbers to see what, if anything, it means — particularly when one considers that …

New Civil and Criminal Health Care Investigations Also Dropped in 2014

Whereas the lower recoveries were not a big surprise to health care observers as 2014 had been shaping up as an “off” year for awhile, but the same cannot be said for the across the board drops in new civil and criminal health care fraud investigations that was found in HCFAC 2014.  New DOJ civil investigations in 2014 declined by 20% as compared to 2013 and by about 10% as compared to 2012 (there were 782 new investigations in 2014 compared to 1083 and 885 in the prior two years), and new criminal investigations found similar drops with only the years being reversed.  That is, DOJ opened 924 new criminal health care fraud investigations in 2014 which represented about a 20% drop from the 1131 in 2012 and 10% from the 1013 new cases opened in 2013.

Can Conclusions be Reached from these Numbers?

The short answer is “NO.”  But, on the other hand, speculation and a wait and see attitude is probably an appropriate response.  Perhaps recoveries are lower simply because the Mega  Pharma settlements are dwindling and it’s not easy to replace billion dollar settlements, or perhaps it is just a temporary “blip” on the radar; but would either necessarily mean enforcement efforts are lagging?   Similarly, do the decreases in the new cases reflect a meaningful change in approach, or can they be explained by a redeployment of enforcement resources or a shifting focus to certain high impact, but low “number” areas?  These are just some of the questions HCFAC 2014 raises; questions that won’t be answered in the immediate future.

Mediating a “Mission Impossible” False Claims Act Case

I recently had the opportunity to mediate a False Claims Act case that was described in advance as a “Mission Impossible” matter.   In fact, the potential for a successful resolution seemed so unlikely to the parties, that some of the participants actually apologized for bringing me in during private and joint pre-mediation discussions.

The pessimism of the parties notwithstanding, I was pleased at the chance to put my knowledge and expertise in False Claims Act cases to use.  Besides, I figured that with expectations so low, the parties were unlikely to be disappointed with my services.

Pre-Mediation Calls Helped Set the Tone

Pre-mediation calls are an important part of the mediation process insofar as setting the tone and agenda, and for the educational purposes they serve.  In this case, however, I believe they were also helpful in setting a positive tone for the mediation.  That is, while the parties consistently maintained a dim view of the chances of success, I maintained a positive and optimistic attitude which I think carried over to the mediation.

Patience Was the Key to Successful (and Surprising!) Outcome

There are many books about mediation.  They will generally explain the process and discuss the various techniques available to mediators, with the more advanced books placing greater emphasis on strategy selection and optimization.  It would be nice to take credit for selecting a brilliant strategy which turned out to be the key to success in this case — but that simply didn’t happen.  The key in this case, it turned out, was patience.

As is often the case with complex cases, there was a lot for one side to sort out before we could even begin the process of sharing information and exchange offers.  And while it would have been easy for one or both of the parties (or the mediator) to chuck it in, everyone stayed focused on the goal.  Indeed, although this seems counter intuitive, I think the long delays during the day may have tended to give the sense that something was happening even during periods of time when, perhaps, it wasn’t.

Even though it took quite a long time before the parties began to feel that there was a reasonable chance the case really could be resolved, they agreed to stay at it as long as there was the sense of some progress.  And stay the course we did.  Planes flights were rescheduled; hotel reservations were extended; and we stayed at it all the way to tomorrow.

It was the Litigant’s Dispute — and their Settlement

The other takeaway from the case was that it was the litigant’s dispute and their settlement to reach.  At the end of a long long day, it was the litigants that came up with the key concessions and answers, and it was their settlement.  So while I was proud and excited to have contributed to mission success, and I gladly accepted any praise offered, I knew that they had done the heavy lifting and that they deserved the credit.


States Make Surprising Contributions to OIG Exclusion List

The Office of Inspector General List of Excluded Individuals and Entities plays a significant role in federal compliance enforcement efforts and is generally thought of as primarily a federal matter, but State contributions should not be overlooked.  Last year, the OIG excluded 4,017 in 2014, up almost 25% from the prior year, but a breakdown of the source of the exclusions is somewhat surprising.  The Annual report for State Medicaid Fraud control Units, released earlier this week, announced that 1/3 of all OIG Exclusions (1337 of 4017) were the result of MFCU investigations, prosecutions and convictions. Licensure revocations and patient abuse, also primarily State related issues, accounted for an additional 1,933 according to the HCFAC report issued in March. When adding up the numbers, it appears that almost 75% of all of last years exclusions were actually related to State efforts and State issues.