The Justice Department in a September 7, 2015, memorandum entitled "Individual Accountability for Corporate Wrongdoing," indicated a willingness to focus criminal investigations in general on individual executives. Physicians, health care executives, and entities that obtain Medicare and Medicaid reimbursements must be aware of at least the broad outlines of federal fraud statues especially applicable to them. Always consult an experienced attorney in specific situations.
The Department of Justice memorandum written by Deputy Attorney General Yates has been the subject of much commentary. In summary fashion, the following are quoted memorandum section headings:
1. To be eligible for any cooperation credit, corporations must provide to the Department all relevant facts about the individuals involved in corporate misconduct.
2. Both criminal and civil corporate investigations should focus on individuals from the inception of the investigation.
3. Criminal and civil attorneys handling corporate investigations should be in routine communication with one another.
4. Absent extraordinary circumstances, no corporate resolution will provide protection from criminal or civil liability for any individuals.
5. Corporate cases should not be resolved without a clear plan to resolve related individual cases before the statute of limitations expires and declinations as to individuals in such cases must be memorialized.
6. Civil attorneys should consistently focus on individuals as well as the company and evaluate whether to bring suit against an individual based on considerations beyond that individual's ability to pay.
These points are clear and specific warnings to executives. In particular, points 1, 4, and 5 signal that an executive should not expect reciprocal loyalty and protection from her or his corporate employer. Do not reveal information to the corporation's attorney or executive team in the mistaken belief that such communications will remain privileged and confidential.
In many situations an administrative agency may pursue civil fines and other related remedies while criminal prosecutions are typically unique to the Department of Justice. It is true that diffusion of responsibility within a large corporate entity makes proof of individual criminal intent more difficult for prosecutors. However, a health care entity facing a potential exclusion of eligibility for participation in federal and state health care programs, a "death penalty," may easily conclude that passing responsibility for the fraud to an individual executive is a rational business and legal decision.
The following is a brief and incomplete educational overview in no particular order of federal fraud statutes most applicable to health care.
A. The Stark Law (42 U.S.C. Sec. 1395nn) has been in place for about 25 years.
Originally effective in 1992, it is named for Congressman Pete Stark (Democrat, California) who sponsored the bill in 1989. In broadest overview, one must consider perceived financial conflicts of interest when referring patients. It prohibits physician referrals of Medicare and Medicaid patients to an entity (such as a hospital or rehab center) with whom the referring physician or an immediate family member has a "financial relationship." "Financial relationship" includes a "direct or indirect ownership or investment interest," through equity or debt, by the physician or an immediate family member.
Additionally, "compensation arrangements," direct or indirect and including immediate family members, between a physician and a hospital are addressed. "Remuneration" includes "any payment or other benefit made directly or indirectly, overtly or covertly, in cash or in kind."
Note that no wrongful intent or culpable conduct on the part or any person or entity is required for a Stark Law violation. Penalties for violations include denial of payments, mandatory refunds, civil penalties of up to $15, 000 per claim, and exclusion from participating in federal or state health care programs. A Stark Law violation may serve as the basis of a False Claims Act suit, reviewed below, that could result in treble damages and mandatory penalties of $5,500 to $11,000 for each filed false claim.
There are some regulatory exceptions to Stark Law violations but one must be certain that every detail of the exception is met. In broad overview, the exceptions address referrals within physician groups, in-office ancillary services, prepaid plans, intra-family rural referrals, academic medical centers, preventative screening tests, immunizations and vaccines, and eyewear following cataract surgery. Consult an experienced health care attorney.
B. The False Claims Act (FCA) (31 U.S.C. Secs. 3729-3733) was enacted in 1863 and signed into law by President Lincoln to address federal contractor fraud. It allows private parties to sue on behalf of the federal government and receive as a reward a percentage of the recovered funds (qui tam). Qui tam is an abbreviation of a Latin phrase meaning "one who sues on behalf of the King as well as himself." Employees aware of fraud might sue; however, this is a technical process requiring an experienced attorney. Retaliation against reporting employees is prohibited.
The False Claims Act broadly prohibits knowingly presenting or causing to be presented a fraudulent claim for payment to the federal government and knowing making or causing to be made a false record or statement material to a false claim.
It has broad application to any person or entity receiving federal funds, including health care providers. In the health care context FCA liability might include:
Claims for services that the provider knows are not medically necessary;
Claims for deficient nursing services and deficient and unnecessary rehabilitation therapy;
Kickbacks to health care providers and physicians to induce the use of certain drugs, goods, and services;
Claims for a higher level of service than was actually provided (miscoding);
Claims for services not rendered.
A provider has 60 days to return overpayments after they are identified. Civil penalties for violations are $5,500 to $11,000 per false claim or statement or record plus treble damages and court costs. "Knowledge" is required to impose liability; however, this is broadly defined to include not only actual knowledge but also deliberate ignorance and reckless disregard of truth or falsity.
C. The Civil Monetary Penalties Law (42 U.S.C. Sec. 1320a-7a) arose from the Social Security Act of 1935 and has been amended numerous times. It allows the Office of the Inspector General of the Department of Health and Human Services to impose civil monetary penalties upon any entity or person who presents or causes to be presented a knowingly false or fraudulent claim to any federal or state agency.
The following specific actions are prohibited:
Offering something of value to a health care program beneficiary to influence the beneficiary to obtain items and services that may be billed to the program;
Employing or contracting with an entity or individual that is excluded from participating in a health care program;
Billing for services requested by an unlicensed physician or excluded provider;
Failing to timely report and return a known overpayment;
Billing for medically unnecessary services.
Penalties may include significant fines as high as $50,000 for each item billed, treble the amount wrongfully billed, and exclusion from participation in health care programs. Under certain circumstances, individuals may be guilty of a felony punishable by up to a $25,000 fine and five years imprisonment.
D. The Anti-Kickback Statute, 42 U.S.C. Sec. 1320a-7b(b), is related to the Civil Monetary Penalties Law but specifically addresses offering, soliciting, or receiving anything of value in return for a referral that would produce business reimbursable under a federal health care program. A given "remuneration" may be a violation even if there are some non-kickback purposes for the payment.
Because of the potential breadth of the statute, the Department of Health and Human Services has promulgated "safe harbors" for certain transactions. One should have made a good faith attempt to qualify under these provisions. Strict compliance is required; however, the Office of Inspector General of the Department of Health and Human Services may evaluate specific arrangements.
The criteria to qualify for safe harbor protection include:
The arrangement is written and signed by the parties;
The arrangement specifies the services to be provided;
The arrangement specifies precise times and charges;
The arrangement exists for at least one year;
The compensation is specified in advance and is consistent with fair market value;
The arrangement is only for what is reasonably necessary to accomplish the stated business purpose.
A violation is a felony punishable by up to a $25,000 fine, five years imprisonment, and exclusion from participation in federal health care programs. Additionally, a violation may the basis for a False Claims Act lawsuit.
E. While not a fraud statute, health care executives should be aware of the provisions and fraud-like penalties of the Emergency Medical Treatment and Active Labor Act (EMTALA), 42 U.S.C. Sec 1395dd, enacted in 1986. It is designed to prevent hospitals from refusing to treat individuals who are unable to pay ("patient dumping"). Individuals arriving at a hospital emergency room must be provided an "appropriate medical screening" in a nondiscriminatory manner and be stabilized before discharge or transfer.
Individuals may sue a "participating hospital," defined as one that is eligible for Medicare and Medicaid reimbursement. Individual physicians cannot be sued under EMTALA but remain otherwise subject to state medical malpractice law. There is a two year statute of limitation for civil lawsuits and it runs without interruption (no "tolling") from the date of the violation.
Precisely what constitutes an "appropriate medical screening" is often litigated and some courts additionally require proof of an "improper motive" to support a claim. There is limiting statutory language modifying "appropriate medical screening" to actions "within the capability of the hospital's emergency department, including ancillary services routinely available to the emergency department." This allows an individualized review of a facility and removes a patient's ability to demand that a standardized service be provided within a particular time frame. Actual knowledge of an emergency medical condition is required to trigger the "stabilization" requirement. Courts frequently rule that admitting the patient removes the stabilization requirement.
A hospital may be fined up to $50,000 per violation and have its federal health care participation rights revoked under a "death penalty" provision.
This comment provides a brief and incomplete educational overview of a complex topic and is not intended to provide legal advice. Always consult an experienced health care attorney in specific situations.