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FOIA Number: 2006-0810-F
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MARKER
This is not a textual record. This is used as an
administrative marker by the William J. Clinton
Presidential Library Staff.
Collection/Record Group:
Clinton Presidential Records
Subgroup/Office of Origin:
Health Care Task Force
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OA/ID Number:
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FolderlD:
Folder Title:
Briefing Book on Fraud and Abuse [1]
Stack:
Row:
Section:
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�PRESIDENTIAL tMSK iFGRGE CJJN
NATIONAL HEALTH C^RE REITORM
sm.wpmG
FRAUD AND ABUSE
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I. BACKGROUND
A.
THE NEED TO ADDRESS FRAUD AND ABUSE PROBLEMS
1. Size of Health Care Sector and Sheer Volume of Money
a.
The amount of expenditures, volume of services, and number of providers and
patients served make the health care sector extremely vulnerable to fraud and
abuse.
National health care expenditures were estimated to be $840 billion in 1992.
•
National health care expenditures are expected to rise to be in excess of $1
trillion and 15% of GNP by 1995.
Medicare covers 36 million beneficiaries; Medicaid provides services to over
30 million beneficiaries.
b.
Health care fraud and abuse depletes already stretched public and private
resources, erodes public confidence in the operation of the health care system and
government in general.
•
Estimates of fraud and abuse are put at 10% of health care expenditures
or over $80 billion for FY 1992 (see GAO Study, Appendix, Tab C), to over
$200 billion per year (see Washington Post. 5/4/93, p. 1, Appendix, Tab I).
•
FY 1992 expenditures for Medicare totalled $140 billion; for Medicaid, $100
billion ($72 billion federal share)—potentially $24 million in losses due to
fraud and abuse (per GAO estimate of 10%).
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c.
Health care fraud and abuse is often directed at those least able to protect
themselves: the elderly, the sick, the disabled, and needy families with children.
2. Scope and Extent of the Problem of Fraud and Abuse
a.
Fraud and abuse is committed by individual practitioners and businesses of all
sizes.
•
Fraud and abuse is committed by every type of provider and service, and exists
in all geographic areas of country.
The types of fraud and abuse vary widely. They may range from simple false
claims and overutilization of services to complex, long-term schemes involving
multiple providers and direction by top executives of major companies.
b.
Fraudulent or abusive schemes are directed simultaneously at both the
government and private insurance sectors and often involve multiple geographic
areas.
B.
TYPES OF FRAUD AND ABUSE PROBLEMS AND COMMON SCHEMES
1. Fee-for-service plans
•
Billing for services not rendered.
•
Upcoding. Billing for a more extensive or expensive service.
Payments for referrals. Physicians or others may be paid (directly or
indirectly) for referring patients to specific providers for tests or services.
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Unbundling. Billing for individual items or services reimbursed as a package
or global basis.
Duplicate billing.
Forum shopping for higher reimbursement levels. Reimbursement levels may
vary by contractor or geographic area.
Provision of unnecessary care.
•
Falsification of Certificates of Medical Necessity (CMNs). Certain services
are reimbursable only when a physician has certified their medical necessity.
Falsifications of plans of care. Physicians must develop plans of care for
home health services which set forth the types of needed services.
•
Falsification of diagnoses and fabrication of medical records. Certain items
or services are only reimbursable for certain diagnoses.
•
Falsification of cost report information. Institutional services are reimbursed
based in part on the actual cost of operating the facility.
•
Provision of unauthorized tests or services. A provider may bill for tests or
services not ordered by the attending physician.
Misrepresentation of provider or location of service. This may result in
improper reimbursement for services furnished by an excluded provider, or for
a service that requires billing from the actual provider, or for a service that is
included in an institution's payment.
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Misrepresentation or falsification of test results. The need for certain
services or procedures must be supported by test results.
•
Routine waiver of coinsurance and deductibles. Providers, reimbursed on a
charge basis, misrepresent their actual charges.
•
Provision of services by unlicensed or untrained persons.
2. Capitated Payment Plans
•
Failure to provide medically necessary services, especially where the services
are costly.
Pre-enrollment screening to limit enrollment to healthy persons.
Disenrollment of or refusal to re-enroll the sick.
•
Refusal to make referrals to specialists where referring physician must
reimburse specialist, or specialist is not a member of the plan's network.
Fee-for-service billing for services already covered by a capitated
payment.
Making incentive payments to physicians to reduce services.
Imposing excessive premiums.
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C.
VULNERABILITIES IN THE HEALTH CARE SYSTEM WHICH ALLOW
PROLIFERATION OF FRAUD AND ABUSE
1. The health care system has virtually unlimited sources of funds.
•
There are no caps on health care expenditures.
•
Insurers pass along increased costs to enrollees through higher premiums.
There are large amounts of dollars available to pay for services through
government and employer funded health plans.
There are increasing numbers of providers and no limits on the numbers of
providers.
There is often easy access to the market for new providers.
* Few or no licensing requirements.
* Little or no quality or background scrutiny.
* Easy to close and reopen under a new name.
2. The structure of the current fee-for-service system invites abuse.
•
Creates incentive to increase number of services.
•
Encourages paying physicians and others for referrals.
•
Patients are often not concerned about cost of services because they have
insurance coverage for copayments, or because of routine waiver of patient
cost-sharing by provider.
•
Allows physicians to avoid fee limits by increasing the volume of services
provided.
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3. The complexity of the existing payment processes and the need to balance competing
interests within the payment process invites abuse.
a. Fraud and abuse detection and prevention is hampered by:
•
the size and varied structures of the existing payment systems;
the existence of competing and often conflicting demands which are placed on
system administrators.
b. Factors contributing to the complexity
Over 1,000 payers process 4 billion claims per year.
The systems cover over 1.6 million different providers.
Different payers use different claim forms.
Different payers use different payment methods.
Different payers use different coding procedures.
Reimbursable services vary by payer.
Reimbursement rules and levels vary by payer.
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For example, in Medicare:
*
*
*
*
•
For FY 1993 an estimated 700 million claims.
Use 48 fiscal intermediaries (Part A).
Use 34 carriers (Part B).
These 82 contractors use 22 different processing systems, varied
prepayment and post-payment screens, and limits.
Decentralized structure and the variations impede pattern identification.
Fraud and abuse detection is balanced against prompt payment and provider
relations.
*
*
*
Medicare must pay interest after 30 days.
Use of computer edits and screens slows payment.
Provider complaints about delays, rejected claims, or requests for
additional information.
Budget shortfalls result in loss of oversight resources.
*
*
*
Lower percentage of claims reviewed.
Computer edits and screens removed.
Few resources for follow up activities.
4. Lack of coordination within the health care system.
•
Different systems make data sharing difficult.
•
Impedes identification of provider patterns.
•
Collaboration hindered by restrictions on release of patient and provider data.
•
Allows providers to shift scheme to a new payer.
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D.
MAJOR FEDERAL ENFORCEMENT ACTIVITIES
1. Activities of the Office of Inspector General, DHHS
In FY 1992 imposed 1,739 administrative sanctions
(more than 44 times level of 1981).
•
In FY 1992 had 168 successful criminal prosecutions.
2. Activities of the Department of Justice
•
For every $1 spent investigating and prosecuting health care fraud, $8 in
recoveries is paid to the U.S. Treasury.
In 1992 added 50 FBI agents to health care fraud.
From FY 1991 to FY 1992 indictments from FBI-assisted investigations
increased from 82 to 409.
3. National Health Care Anti-Fraud Association
•
This is a consortium of DOJ, OIG/DHHS, FBI, MFCUs (State Medicaid Fraud
Control Units), and private insurers.
•
The purpose of the consortium is to coordinate and share data and techniques.
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H. ISSUES
A.
PROBLEMS INHERENT IN A F E E - F O R - S E R V I C E PAYMENT SYSTEM
1.
General Overutilization
a.
FFS system contains no effective incentives for physicians or patients to control
billings or costs.
b.
FFS system has incentives to overtreat, "upcode," and to bill for services not
rendered:
1. The more the doctor bills, the more money the doctor makes.
2. The patient who has insurance in a FFS system is generally responsible for only
a fraction of the costs and often has a cap on overall liability for a year.
•
•
c.
As a result, patients using the system are generally not too concerned
about costs particularly given patient's unwillingness to question the
provider's judgment).
In some cases, such as those involving durable medical equipment, the
patient often benefits from the fraud and is more than happy to tum a
blind eye.
The common unlawful practice of routinely waiving copayments and deductibles
completely removes cost consideration from the patient's decision to accept treatment
and equipment.
•
Copayments and deductibles are intended to give the patient a financial stake
in the decision to order medical services and equipment.
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EXAMPLE:
As part of a scheme to defraud Medicare and private insurance companies, ten
individuals opened a chain of over 200 clinics offeringfreecheckups. Recruiters for
the clinics approached persons in retirement communities, mobile home parks or
anywhere senior citizens were likely to congregate. They offered "free" comprehensive
examinations, playing on fears of heart attack and stroke. Comprehensive and
expensive laboratory tests were performed,frequentlywithout the patients ever seeing
a doctor. The clinics then submitted inflated claims for payment, making it appear
that healthy people suffered from serious ailments. Insurance companies were billed
over $1 billion for fraudulent diagnostic tests, for which they were actually paid
more than $50 million. (United States v. David Smushkevich et al.) (See GAO
Report, Tab D.)
f
2.
Kickbacks and Physician Self-Referral
a.
Overview
Kickbacks are the payment or receipt of anything of value as an inducement
for the referral of health care business.
Physician self-referral is an overlapping and similar problem.
Physician self-referral is the referral for any item or service to an entity. The
ordering physicians does not directly provide that item or service, but has a
"financial relationship" with the entity.
•
b.
Studies show the physician's medical judgment is often affected by financial
considerations.
Adverse effects of kickbacks and self-referral:
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Ten studies show a predominant overutilization risk anytime a doctor refers a
patient, to a facility where the physician has afinancialrelationship, and the
physician is not directly providing the service (see Appendix, Tab E). This
practice costs money and subjects patients to needless procedures.
Competitive damage to providers. Where referrals are made on the basis on
kickbacks, other providers cannot compete for the business.
Inappropriate steering of patients to less convenient, more expensive or less
well-equipped providers.
EXAMPLE:
The owner of a pacemaker company is presently on trial on charges stemming from
his organization's sale of pacemakers which were tampered with, mislabeled, or
expired. They also sold devices that were previously implanted in other patients and
were not suitable for human implant. As part of the company's sale techniques,
physicians were offered inducements to select the company's medical devices. These
inducements included free trips to Hawaii and other luxury resorts, thousands of
dollars for sporting and entertainment tickets, and prostitutes.Numerous physicians
throughout the Mid-West accepted the company's gratuities and implanted medical
devices that were expired, obsolete, and potentially life threatening. (United States v.
Walton, et al.)
c.
Current prohibitions
The Medicare and Medicaid anti-kickback statute (section 1128B(b) of the
Social Security Act, 42 U.S.C. § 1320a-7b(b)) prohibits the payment of, or
receipt of, remuneration in exchange for the referral of Medicare or
Medicaid items and services.
*
The statute has felony criminal remedies and is also the basis for
exclusion from Medicare and Medicaid.
*
There are a number of statutory and regulatory ("safe harbor")
exceptions to the prohibition.
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•
The self-referral statute, section 1877 of the Social Security Act, 42 U.S.C. §
1395nn, currently prohibits Medicare payment for any clinical laboratory test
where the physician who orders the test has a "financial relationship" with the
lab.
"Financial relationship" is defined as an ownership, investment
interest, or a compensation arrangement.
Section 1877 addresses self-referral by prohibiting Medicare payment
for tests where a prohibited "financial relationship" exists, a much more
direct manner of treating the problem compared to the anti-kickback
statute.
This statute is principally administered by HCFA, with civil monetary
penalties for violators to be imposed by the OIG. There are numerous
exceptions to the term "financial relationship" in the statute.
B.
PROBLEMS INHERENT IN A CAPITATED PAYMENT SYSTEM
1.
General Problems
Since a capitated payment system puts the providers ordering the services at financial
risk for their costs, there is little incentive to file false claims or to overutilize
services.
However, a capitated payment system has the potential for other types of abuse
requiring appropriate control mechanisms. Potential abuse includes:
a.
"Skimming" — discouraging the enrollment of (or actually disenrolling)
unhealthy patients or individuals in high risk groups.
b.
Denying patients expensive care even when it is medically indicated.
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EXAMPLE: An example of the seriousness of such abuses is the case
involving the former operators of one of the nation's largest HMOs, located in
Florida. The operators were indicted on charges stemming from complaints of
inadequate care, illegal billing and disenrollment of Medicare beneficiaries.
The HMO had a multi-million dollar contract with the Department of Health
and Human Services whereby, for a flat capitation payment of 95 percent of
Medicare's normal patient costs, the company would take care of all the health
needs of its enrollees. The company subcontracted the delivery of primary care
with a large network of affiliated providers, many of them shady characters.
The HMO and affiliated providers pre-scrcened emollees, illegally charged
Medicare for tests, refused treatments, refused to enroll persons with health
problems, and disenrolled patients who became ill. The HMO vice president
was convicted and sentenced to 4 years in jail. The president of the company
is still a fugitive. (International Medical Centers (IMC)/Miguel Recarey)
2.
Current Prohibitions
Section 1876(i) of the Social Security Act prohibits organizations with a contract with
HCFA under that section from engaging in specified practices, for example, failing to
provide medically necessary services that are required or acting to expel or to refuse to
re-enroll an individual.
C.
PROBLEMS APPLICABLE TQ BOTH FFS SYSTEMS AND CAPITATED
SYSTEMS
1.
Lack of Coordination/Resources
a.
There is a need for better coordination and communication between the various
governmental agencies that are investigating and prosecuting health care fraud and
abuse. These agencies include:
•
the Federal Bureau of Investigation in Department of Justice (DOJ);
•
the Office of Inspector General in the Department of Health and Human
Services (HHS);
•
State Attorneys General and Medicaid Fraud Control Units.
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b.
There is also a need for better coordination and communication between
government agencies and private payers.
•
Investigations and prosecutions arefrequentlystymied by limited
resources, which are inadequate to address sophisticated and complex schemes.
•
Resources are limited despite the fact that, in the past, every dollar devoted to
investigation and prosecution yielded at least eight dollars, paid into the federal
Treasury.
2.
Complexity of Billing System
a.
There is little time for payers to trace patterns of fraud through the entanglement of
contractors, providers, suppliers, billing services and data systems that comprise the
current system.
•
b.
This is largely driven by the need to pay claims promptly.
Health care providers take advantage of multiple reimbursement systems and payers.
EXAMPLE: One of the nation's largest clinical laboratories and its president
recently were convicted of fraudulently inducing physicians to order
unnecessary laboratory tests. The company added two tests to every blood
chemistry panel test ordered by a physician. Physicians who were billed by the
company for their patients' tests, and in tum billed their patients, paid little or
nothing for the additional tests. Accordingly, the physicians generally did not
object to the inclusion of the additional tests even when they were not
medically necessary for the treatment of the patient. However, because
Medicare and Medicaid claims are submitted directly to those agencies by
laboratory companies, the programs were billed full price for the tests. As a
result of the differential billing system, the laboratory billed the Medicare
program more than $30 million in unnecessary tests in a one year period. The
total amount paid by the laboratories to the U.S. was $110 million.
(United States v. National Health Labs)
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3.
Lack of Intermediate Remedies
a.
There are no authorities, such as the federal government, to assess civil monetary
penalties (CMPs) against health care providers who submit false or improper claims to
private health care plans (e.g., Blue Cross/Blue Shield).
•
b.
The federal government currently has the authority to assess civil
monetary penalties (CMPs) in an administrative proceeding against health care
providers who submit false or improper claims to the Medicare or Medicaid
programs.
Federal statues that can authorize exclusion of individuals or entities from
participating in Medicare or State health programs do not apply to apply to a
provider's participation in private health care programs.
The federal government has two mandatory and a number of permissive
authorities under which it may (or, in the case of the mandatory exclusions,
musl) exclude individuals or entities from participation in Medicare and State
health care programs.
4.
Inadequacies in Current Statutes
a.
Forfeiture remedies which exist with respect to the proceeds of health care fraud are
quite narrow.
•
b.
Forfeitures are available only with respect to criminal acts which constitute
the laundering of proceeds of specified unlawful activities and organized crime
activity.
Few federal criminal statutes directly address health care fraud.
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c.
Current federal authorities do not generally prohibit:
•
making of false statements;
•
making of payment of bribes; and
•
inducements to entities other than the federal government.
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HI. RECOMMENDATIONS AND RATIONALE
A. ENCOURAGE CAPITATION
Recommendation:
Move From a Fee-for-Service Payment System to a Capitated Payment System
Rationale;
1. Fee-For Service System
•
There is an ever-present incentive to increase profits by filing claims for
services not rendered or by upcoding.
•
There is also an incentive to order excessive or unnecessary services,
especially when physicians own part or all of the entities that perform ancillary
services for patients (such as clinical laboratories or imaging centers).
2. Capitated System
•
In a capitated payment system that puts providers ordering services at financial
risk for their costs, there is little incentive to file false claims or to
overutilize services.
•
Generally, the fraud and abuse problems with capitated systems are
significantly less than in fee-for-service systems.
•
However, a capitated payment system has the potential for other types of abuse
requiring appropriate control mechanisms.
For example:
•
There may be an incentive for plans to engage in "skimming" —
discouraging the enrollment of (or actually disenrolling) unhealthy
patients or patients in high risk groups.
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Plans will also have an incentive to deny expensive care to patients
even when it is medically indicated.
Our recommendations to reduce these abuses are discussed under
Recommendation: IMPROVE STATUTORY AUTHORITIES TO
DEAL WITH WRONGDOERS
B. ADMINISTRATIVE SIMPLIFICATION
Recommendations:
Simplify Payment Methodologies While Ensuring Provider Accountability.
•
In order to reducefraudand abuse in the health care system, the claims
procedures must be simplified by using a standard form and a uniform,
carefully defined coding system.
The Secretary of the Department of Health and Human Services should be
required to establish, in consultation with other appropriate agencies, e.g. the
Department of Justice, standards and procedures to safeguard against fraud and
abuse in electronic media claims systems utilized by both public and private
health plans.
This would include provisions to ensure that the identity of the individual that
caused the transmission of the claim is known, the assumption of responsibility
by providers for the accuracy, completeness and truthfulness of claims
submitted on their behalf, and the patient is provided with verification of the
type of services rendered.
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Rationale;
A simplified, standard claim form will prevent those who defraud health care
payers from exploiting the myriad of payment methodologies and inconsistent
rules and codes that exist under the current system.
•
Standards to safeguard electronic media systems would ensure standardization,
coordination, and communication among all private health plans receiving
electronic media claims to minimize fraud.
•
It would encourage state-of-the-art procedures to enhance provider
responsibility and potential liability for improper electronic media claims.
•
Further, it would require providers to assume responsibility and liability for
claims submitted through electronic media on their behalf by agents.
C. ENHANCE THE COORDINATION OF HEALTH CARE FRAUD AND ABUSE
ENFORCEMENT ACTIVITIES
Recommendation:
a.
Establish an All-Payer Health Care Fraud and Abuse Enforcement Program.
b.
Establish Health Care Fraud and Abuse Trust Fund.
•
Criminal fines, civil penalties, forfeitures, and damages (other than restitution)
imposed on those entities and individuals who defraud or abuse health care
delivery or payer programs or beneficiaries would be deposited in a Trust
Fund. Exception would be made to the extent that current law directs that the
money be given to other parties (such as the states) or deposited in other Trust
Funds (such as the Medicare Trust Fund).
•
The Trust Fund would be administered by the All-Payer Health Care Fraud
and Abuse Enforcement Program, described above.
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Rationale:
1. Enforcement Program
a.
A program to coordinate Federal, State and local law enforcement activities
aimed at health carefraudand abuse would facilitate communication and
complement investigative resources.
b.
The program should be jointly directed by DOJ, which has primary law
enforcement responsibility for the federal government, and HHS, which has the
most experience in enforcement of civil, criminal and administrative remedies
pertaining to health care programs.
c.
This would enhance public and private enforcement activities and assist in
controlling fraud and abuse.
2. Trust Fund
a.
The trust fund would be used, in addition to appropriated amounts, to
supplement the costs of federal efforts to combat health carefraudand abuse.
It should be noted that significant additional resources would be needed to
implement the authorities of a meaningful anti-fraud program as detailed in
this paper.
b.
The Trust Fund will result in significant additional resources for anti-fraud
enforcement.
•
In the past, every dollar devoted to investigation and prosecution of
health carefraudand abuse yields at least eight dollars paid into the
federal Treasury.
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4. CONTROL KICKBACKS AND S E L F - R E F E R R A L PRACTICES
Recommendation:
1.
Kickbacks:
The payment or receipt of anything of value as an inducement for the referral of
any type of health care business (subject to the exceptions described below)
should be prohibited under health reform.
We recommend the following:
a.
Expand the scope of the statute from just Medicare and Medicaid to
cover all payers.
b.
Authorize civil remedies for the federal government in U.S. District
Court, including: (a) civil penalties; (b) injunctive relief to halt ongoing
kickback schemes; and (c) the authority to secure the assets where
appropriate.
c.
Provide a new administrative remedy of civil monetary penalties for
kickback violations. (See also, Recommendation 5)
We recommend an exception to the kickback prohibitions for the following types
of payments:
a.
payments for items or services furnished to patients paid for on an atrisk basis to that provider furnishing the items or service, such as
capitated payments.
b.
The statutory and regulatory ("safe harbor") exceptions applicable to the current
kickback statute should apply to an expanded kickback statute that applies to
all payers.
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2. Self-Referral
Payment for any type of item or service to an entity should be prohibited
(subject to the exceptions discussed below), where the ordering physician has
a "financial relationship" with the entity and where the physician does not
directly render that item or service.
We recommend that the self-referral limitations have an exception where
the items or services are paid for on an at-risk basis to that provider, such as
capitated payments.
We also recommend that the exceptions in section 1877 be retained;
however we suggest that they be tightened to prevent schemes designed to
evade the statute, such as:
•
tighten the group practice exception to prevent the creation of sham
group practices;
•
change the large entity investment exception so that the requirement
regarding assets requires that the company have $100 million in
shareholder equity.
Rationale:
1. Kickbacks
Available studies on kickbacks and self-referral show a predominant
overutilization risk anytime a doctor refers a patient for an item or service to a
facility where the physician has a financial relationship, and the physician is
not directly providing items or services.
The overutilization risk and other inappropriate behavior attributable to
kickbacks applies to private payers as well as to Medicare and Medicaid.
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c.
In addition, the broad exception for items or services paid for on an at-risk
basis will ensure that the law does not have a chilling effect on arrangements
between plans and providers in a capitated orrisk-basedsystem.
•
The kickback prohibitions are necessary under health reform since,
given the degree of flexibility envisioned, there will continue to be
payments made on at least a modified fee-for-service basis, where
overutilization has been shown to exist due to kickbacks.
•
However, to the extent that many health care items and services will be
paid for on an at-risk basis to that provider, such as a capitated
payment, the overutilization concerns underlying the kickback
prohibitions would not exist.
2. Self-Referral
There is no reason to believe that the overutilization risk associated with selfreferral applies only to Medicare.
There is an inherent conflict of interest anytime a physician refers a patient to
an entity in which he or she has afinancialinterest, and is not directly
providing the services.
Thefinancialinterest can affect the number of items or services ordered, the
quality of care and competition among providers.
The broad exception for items or services paid for on an at-risk basis will
ensure that the law does not have a chilling effect on arrangements between
plans and providers in a capitated orrisk-basedsystem.
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5.
IMPROVE STATUTORY AUTHORITIES TO DEAL WITH WRONGDOERS
Recommendation:
1.
Enhance Current Criminal Penalties for Health Care Fraud
a.
Amend current federal forfeiture authorities to cover the proceeds derived from
health care fraud.
b.
Create a new health care fraud statute.
c.
Create a federal criminal statute prohibiting the act of making any false
statement to a health plan, HA or state government agency regarding:
•
•
•
d.
the jurisdiction of a plan, Health Alliance or state government agency;
the operation of the plan or Health Alliance; and
with the delivery of a health care item or service.
Create a federal criminal statute prohibiting the payment of bribes, gratuities or
other inducements to the administrators and employees of health plans, HAs or
state government agencies in connection with the operation of health plans or
HAs, or with the delivery of a health care item or service.
Rationale:
a.
Amend current federal forfeiture authorities to cover the proceeds derived from
health care fraud.
•
The potential for forfeiture of the proceeds of criminal activities has been
shown to have a substantial deterrent effect.
•
The forfeiture remedy gives the Government the ability to use either criminal
or civil remedies to seize assets derived from fraudulent or otherwise illegal
activities.
•
The creation of a forfeiture provision to cover any health carefraudoffense
would enhance current law and provide an additional deterrent remedy.
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•
•
b.
Under this proposal, forfeiture would be available only as a remedy for
intentional misconduct, not for acts of simple negligence.
The government would have to prove such conduct in a federal court
proceeding when the assets are seized.
Create a new health care fraud statute.
•
•
A new criminal health care fraud statute, modelled after existing mail and bank
fraud statutes, would specifically penalize schemes to defraud either public or
private health care programs.
•
c.
Few criminal provisions directly address health care fraud.
Also, the existing mail fraud statute should be amended to address schemes
which utilize private courier services in addition to the U.S. mails.
Create a federal criminal statute prohibiting the act of making any false
statement.
•
•
Also, current statutes do not coverfraudulentconduct when private couriers or
private mail services (such as Federal Express and UPS) are used.
•
d.
There are currently no federal remedies that make deliberately lying to health
plans, health alliances or state governments a federal criminal offense.
A new federal statute covering false statements to state governments or nongovemmental entities, and appropriate expansion of the mail and wire fraud
statutes, would enable federal prosecution of such activities.
Create a federal criminal statute prohibiting the payment of bribes, gratuities or
other inducements to the administrators and employees of health plans, HAs or
state government agencies.
•
Current federal statutory remedies do not reach this conduct.
•
This statute would prevent the corruption of administrators of health plans,
HAs and state government agencies by providing a standard federal remedy for
such conduct.
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Recommendation:
2.
Establish Civil Monetary Penalty Remedies for Specified Violations
Authorize the federal government to assess CMPs against persons who engage in
any of the following prohibited activities with respect to any health benefit plan.
•
The penalty amount should be $10,000 per item or service claimed (which is
consistent with the Civil False Claims Act (31 U.S.C. § 3729)) and an
assessment of no more than triple the amount claimed.
•
The law should provide for pre-judgment interest on penalties and assessments
imposed by an Administrative Law Judge.
•
The standard of knowledge in these cases would be the "knows or should
know" standard.
•
A list of actions that would be the basis for a CMP under this proposal is
included as Exhibit A.
Rationale:
The current basic authority to impose CMPs for Medicare and Medicaid was
enacted in 1981 due to the inadequacy of federal criminal and civil court
enforcement activities, and has been an invaluable weapon to fight fraud and
abuse in those programs.
While the Civil False Claims Act, 31 U.S.C. § 3729, ct seq., as employed by
the Civil Division, DOJ, will continue to be the primary civil enforcement
mechanism for attacking health care fraud involving any direct or indirect
federal funding, an intermediate, administrative remedy is needed to
supplement the federal court remedies available to the federal government.
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Recommendation
3.
Establish Administrative Exclusions from Health Care Programs
The basis for exclusion from the Medicare and State health care program should
also serve as the basis for an exclusion from all other health care programs.
•
A list of the actions that would be the basis for an exclusion from health care
programs is included as Exhibit B.
•
Under current law, HHS can exclude an individual or entity prior to a hearing.
•
This procedure has been upheld in federal courts and would continue to be the
case for all exclusions based on the prior determination of another tribunal,
such as, where the exclusion is based upon a criminal conviction or action by a
federal or state administrative body.
•
Courts have upheld this procedure since the exclusion is based on prior
proceedings with due process protection guaranteed to all persons.
•
All other exclusions would take effect after the hearing and A U decision
regarding the exclusion.
Rationale:
Given the extent of the federal subsidization of health care premiums in health
reform, HHS should be given the authority to exclude individuals who have
been found to have committed the above actions, and therefore, demonstrated
their unworthiness to do business with the federal government.
To the extent the Secretary determines that, in a specific case, the action should
not prevent a person from participating in health care programs, the person
would not be excluded.
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EXHIBIT A
The following actions would be the basis for a Civil Monetary Penalties under this
proposal:
False Claims
1.
Submitting a claim for an item or service not provided as claimed. (See section
1128A(a)(l)(A).)
1
2.
Submitting a false or fraudulent claim for an item or service. (See section
1128A(a)(l)(B).)
3.
Submitting a claim for a physician's service provided by a person who was not a
licensed physician, whose license had been obtained through misrepresentation, or who
improperly represented to a patient that he or she was a certified specialist. (See
section 1128A(a)(l)(C).)
4.
The routine waiver of copayments where copayments are required under the plan.
5.
Claiming a higher code for purposes of reimbursement than the one the person knows
or should know is correct.
6.
Unbundling or "fragmentation" of charges in a bundled payment scheme. (See section
1866(g).)
7.
A hospital or other facility engaging in practices such as unnecessary multiple
admissions, or other inappropriate medical or other practices, in order to circumvent a
bundled payment scheme.
False Statements
8.
Failing to report information or reporting inaccurate information that is required to be
submitted to a data bank. (See section 421(c) of the Health Care Quality Improvement
Act.)
1
Many of these actions are already the basis for a CMP
with respect to Medicare and Medicaid. Where t h i s i s the case,
the relevant c i t a t i o n to the Social Security Act i s provided.
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9.
Submitting false or fraudulent statements to the Secretary, a HA or a plan. (See
section 1876(i)(6)(A)(v).)
Violations Specific to Plans
10.
A plan failing substantially to provide medically necessary items or services that are
required (under law or the contract) to be provided to an individual under the contract.
(See section 1876(i)(6)(A)(l).)
11.
A plan acting to expel or to refuse to re-enroll an individual in violation of the
provisions of law. (See section 1876(i)(6)(A)(iii).)
12.
A plan engaging in any practice that would reasonably be expected to have the effect
of denying or discouraging enrollment by eligible individuals with the organization
whose medical condition or history indicates a need for substantial future medical
services. (See section 1876(i)(6)(A)(iv).)
13.
In the case of a plan, employing or contracting with any individual or entity that is
excluded from participation for the provision of health care, utilization review, medical
social work or administrative services or employing or contracting with any entity for
the provision (directly or indirectly) through such an excluded individual or entity of
such services. (See section 1876(i)(6)(A)(vi).)
Miscellaneous
14.
Failure to cooperate with quality or utilization review.
15.
Unlawful kickbacks (subject to exceptions). (See also, section IV.B.)
16.
Submitting a claim for an item or service submitted by an excluded person. (See
section 1128A(a)(l)(D).)
17.
Failure to report violations of federal criminal law. Whistleblowers would be
protected against adverse employment actions in the manner similar to section 7 of the
Inspector General Act.
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EXHIBIT B
The following actions would be the basis for exclusion from health care programs. In
the case of the following criminal convictions, the exclusion from the programs should be
mandatory.
1.
Criminal conviction relating to fraud, theft, embezzlement, breach of fiduciary
responsibility or other financial misconduct in connection with the delivery of a
health care item or service. (See section 1128(a)(1) ^ C'Xl)-)
2
2.
Criminal conviction relating to the neglect or abuse of patients in connection
with the delivery of a health care item or service. (See section 1128(aX2).)
With respect to the remaining bases for exclusion, HHS should have the discretion to
determine whether, given the facts of the case, an individual should be excluded.
1.
Criminal conviction relating to fraud, theft, embezzlement, breach of fiduciary
responsibility or other financial misconduct in connection with an act or
omission in a program operated by or financed in whole or in part by any
Federal, state or local government agency. (See section 1128(b)(1).) (This
would cover convictions for fraud against any non-health related government
program.)
2.
Criminal conviction relating to the unlawful manufacture, distribution,
prescription, or dispensing of a controlled substance. (This would not include
convictions for simple possession.) (See section 1128(b)(3).)
3.
Revocation, suspension, or loss of a license to provide health care for reasons
of professional competence, performance, or financial integrity c i the surrender
of such a license while a formal disciplinary proceeding was pending for
reasons of professional competence, performance, or financial integrity. (See
section 1128(b)(4).)
4.
Exclusion from Medicare or other federal or state health care programs (e.g.,
CHAMPUS, VA). (See section 1128(b)(5).)
2
Many o f these actions are already the basis f o r an
exclusion w i t h respect t o Medicare and Medicaid. Where t h i s i s
the case, the r e l e v a n t c i t a t i o n t o the Social S e c u r i t y Act i s
provided.
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5.
Furnishing or causing to be furnished items or services to patients that are of a
quality which fails to meet professionally recognized standards in a gross and
flagrant manner or in a substantial number of cases. (See section
1128(b)(6)(B).)
6.
Commission of an act that is described in the federal criminal laws specifically
related to health care or civil monetary penalty laws specifically related to
health care. (See section 1128(b)(7).)
7.
Entities that are controlled by an excluded individual. (See section 1128(b)(8).)
8.
Individuals who have a majority ownership interest in, or have significant
control over the operations of, an entity that has been convicted of a an offense
related the delivery of a health care item or service.
9.
Failure to disclose required information regarding ownership, controlling
interests, or convictions of individuals with ownership or controlling interests,
officers, directors, agents or managing employees. (See section 1128(b)(9).)
10.
Failure to provide access to documentation or provide documentation related to
the health care claims submitted or services to a health benefit plan, a HA or
the government. (See section 1128(b)(ll).)
11.
Failure to grant physical access (with reasonable notice) to appropriate
authorities for required on site reviews and surveys. (See section 1128(b)(12).)
12.
Defaulting on repayments of scholarship obligations or loans in connection
with health professions education made or secured, in whole or in part, by the
Secretary of HHS. (See section 1128(b)(14).)
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IV. QUESTIONS AND ANSWERS
Q.
Exactly how much fraud and abuse is there, and how much of it can you
realistically prevent?
A.
Since trying to cover one's tracks is an inherent part of fraud, it is impossible
to know how much there really is. But all knowledgeable authorities agree the
figure is in the many tens of billions of dollars a year. The overall estimates
of the total amount of fraud and abuse in the system range from about $80
billion a year (GAO estimate), to over $200 billion a year.
Similarly, it is impossible to predict exactly how much fraud and abuse can be
wrung out of the system.
It is clear that the structural changes we are seeking, like moving
strongly to capitated payment systems, and administrative simplification,
will greatly reduce the vulnerabilities of the current system.
Just because these concepts cannot be easily quantified does not mean
one should fail to take action.
Q.
Is a saving of several billion dollars by wringing out more fraud and abuse really
worth all this effort, if it is only a one-time savings? All fraud and abuse is
probably less than one year's inflation in the system.
A.
Wringing out fraud and abuse is NOT a one-time savings. Rather, it will
reduce medical care expenditures EACH year, year after year, as long as
significant attention and resources are devoted to the problem.
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Q.
Do we really need so much Big Brother looking over the shoulders of health care
providers in order to have meaningful reform?
A.
The great majority of health care providers in this country are honest,
hardworking people who want to do a good job for their patients.
The intent of the anti-fraud program is not to get in their way, but to come
down hard on the greedy minority who feed off the current system by
exploiting its vulnerabilities.
Q.
Will Health Reform's anti-fraud program penalize simple billing errors or other
innocent mistakes?
A.
No. The program will not convert a simple mistake into a Federal ofTense.
On the other hand, where there is a clear pattern of "mistakes" in the provider's
favor, there is reason for the enforcement authorities to be concerned. The
same goes where there is an unusual or aberrant practice pattern which is
resulting in significantly more payouts to a particular provider.
Q.
Will Health Reform's anti-fraud program compromise the legitimate due process
rights of providers?
A.
Not at all. Where an action is taken against a particular provider, that provider
will receive due process protections in conformity with the Constitution and
other law, protections such as right to counsel and a hearing before a neutral
factfinder.
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Q.
Will Health Reform's anti-fraud program inhibit quality of care by making
providers fearful of straying from the "lowest common denominator" of
"generally accepted medical practice?"
A.
Since overutilization is perhaps the most costly type of abuse in the current
fee-for-service system, increased attention should be paid to this issue. The
issue can be addressed through clinical practice guidelines, utilization review,
and in extreme cases, an administrative sanction.
Obviously, there is a balance to be drawn here. These activities should not be
so intensive as to inhibit legitimate medical decisions about the care of a
particular patient.
Q.
Will Health Reform's anti-fraud program inhibit the development of efficient
managed care structures?
A.
Managed care systems are certainly not immune to fraud and abuse
problems.
•
•
Q.
Capitated plans do remove the basic incentive to overutilize services,
or file claims for services not rendered. Thus, Health Reform would
basically exempt these plans from the anti-kickback statute, and the
physician self-referral laws. However, capitated plans sometimes
engender other problems, such as failing to render necessary care, or
disenrolling the very sick.
Managed care plans in a fee for service payment system retain many
of the vulnerabilities of other providers. Thus, while these managed
care should be strongly supported and encouraged, any sort of broad
exemption from the fraud and abuse laws would not be appropriate.
Will Health Reform's anti-fraud program inhibit the formation of verticallyintegrated health delivery systems?
A.
Vertically integrated delivery systems (VIDS) are certainly not immune to
fraud and abuse. For example, under a fee-for-service payment system, there
should not be bonuses given to physicians directly tied to ordering more and
more ancillary services. Thus, while VIDS should be encouraged for many
reasons, any sort of broad exemption from the fraud and abuse laws would not
be appropriate.
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V. POLITICAL CONSIDERATIONS
1. MOVE FROM FEE-FOR-SERVICE TO CAPITATED PAYMENT SYSTEM
Proposal:
•
Increase the prevalence of capitated payment arrangements.
Congressional Action:
•
There have been 5 health reform bills introduced which promote managed care
arrangements and also contain specific provisions dealing with capitated
payment mechanisms. They are:
H.R. 191:
Introduced by Cong. Gekas (R-PA) and provides for
capitation payments for managed care under Medicaid at
the same level as payments would be made for nonMedicaid enrollees.
H.R. 200:
Introduced by Cong. Stark (D-CA) and provides for
adjustments in Medicare capitation payments to account
for regional variations in the application of secondary
payor provisions.
H.R. 1691: Introduced by Cong. Andrews (D-ME) and provides for
the use of health plans paid through a capitation method.
S. 491:
Introduced by Sen. Wellstone (D-MN) and includes
provisions for individual capitation amounts to be paid to
the States for each resident and also for the use of
capitation payments as a method of reimbursing health
care providers.
S. 684:
Introduced by Sen. Inouye (D-HI) and includes
provisions for payment for services based on alternative
payment methodologies including capitation.
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Interest Group Positions:
•
Many managed care trade groups will probably strongly support this effort
(mainly for reasons unrelated to fraud and abuse issues). These groups include
the Group Health Association of America, the American Association of
Preferred Provider Organizations, and the American Managed Care and
Review Association.
2. ADMINISTRATIVE SIMPLIFICATION
Proposal:
•
To simplify and standardize the procedures for the submission of claims for
payment.
Congressional Action:
H.R. 1255 (introduced by Cong. Stark, D-CA) and S. 867 (introduced by Sen.
Cohen, R-ME) would require all claims submitted by providers for payment to be in a
uniform format.
•
Providers would be required to submit claims using a unique provider
identification code, with the coding of procedures and diagnoses according to a
uniform, nation-wide format.
•
The use of electronic data interchange (EDI) technologies would be
encouraged.
•
The Department of Health and Human Services would be required to establish
standards, including "methods of ensuring provider responsibility and
accountability for claims submitted electronically that are designed to control
fraud and abuse in the submission of such claims."
Interest Group Positions:
•
Last year, a Workgroup for Electronic Data Interchange, chaired by the
Travelers Insurance Company and the Blue Cross/Blue Shield Association
issued a comprehensive report on EDI issues as they relate to health care.
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Insurance companies and hospitals have identified EDI technology as a
positive way to reduce health care costs and administrative burdens.
Physicians have highlighted the complexities associated with filing claims for
payment as a major part of the "hassle factor" they are seeking to reduce.
No one outside government has addressed the potential fraud and abuse
problems associated with utilizing EDI for the submission of claims for
payment.
3.
COORDINATION OF HEALTH CARE FRAUD AND ABUSE ENFORCEMENT
ACTIVITIES
Proposal:
•
Establish a new Federal program to coordinate Federal, State and local law
enforcement activities aimed at health care fraud and abuse.
•
The new program would be funded in part by a new Health Care Fraud and
Abuse Trust Fund into which criminalfines,civil penalties, forfeitures, and
damages (other than restitution) would be deposited.
Congressional Action:
•
Legislation has been introduced in both the House (H.R. 1255), introduced by
Cong. Stark, D-CA, and Senate (S. 867), introduced by Sen. Cohen, R-ME.
They would establish a new "All Payer Fraud and Abuse Control Program" to
coordinate health care fraud and abuse enforcement activities and a new Trust
Fund to support such activities.
Interest Group Positions:
•
No adverse interest group or public reaction has been identified. Everyone is
publicly committed to improving coordination and increasing resources to
address health care fraud and abuse.
•
The only issue identified as provoking debate is how much additional Federal
funds should be authorized and appropriated for enhanced enforcement
activities. H.R. 1255 would authorize $300 million for FY 1995, increasing
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to $450 million in FY 1998, while S. 867 does not include a specific amount
of additional authorization of appropriations.
4. CONTROLLING KICKBACKS AND PHYSICIAN SELF-REFERRALS
Kickbacks
Proposal:
•
Expand to all payers the current Medicare/Medicaid anti-kickback statute, and
authorize an alternative civil monetary penalty remedy.
Congressional Action:
Legislative proposals to accomplish the above have been introduced in both the House
(H.R. 1255), introduced by Cong. Stark, D-CA, and Senate (S. 867), introduced by
Sen. Cohen, R-ME.
•
These bills would amend the current criminal statute to expand its coverage to
all health care payers, modify the current bona fide employment relationship
exception, and establish an alternative civil monetary penalty remedy.
Interest Group Reaction:
Little adverse interest group or public reaction has been identified to the specific
legislative proposals discussed above.
•
Many health care providers and health care interest groups, such as the
American Medical Association, the American Hospital Association, the Group
Health Association of America, and the Health Industry Manufacturers
Association, have complained about the breadth of the anti-kickback statute;
however, they are reluctant to voice opposition to legislation expanding the
statute (probably for fear of appearing to favor kickbacks).
•
In addition, these same providers and groups have complained that the
statutory exceptions and regulatory "safe harbors" are too narrow. [These
regulations are narrowly drafted in order to not let abusive arrangements
achieve "safe harbor" status.]
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Physician Self-Referral
Proposal:
Expand the current ban on Medicare payment for services furnished by clinical
laboratories with which the referring physician has a "financial relationship" in two
ways.
•
First, expand the ban to all payers.
•
Second, expand the ban to all services where the physician is referring to a
facility where he or she is not personally providing the service.
Congressional Action:
•
H.R. 345, introduced by Cong. Stark, D-CA, was marked up by the Ways and
Means Committee (on 5/6/93) as a part of the Reconciliation legislation, and
thus appears to be on a fast track.
•
The bill expands the current ban basically in line with the proposal outlined
above, expanding the scope of the anti-self referral law to all payers, and to 14
enumerated services (e.g., MRI, physical therapy, radiation therapy, etc.).
(See Appendix, Tab G.)
•
Also, H.R. 345tightensthe current statutory exceptions to close loopholes in
current law. Several other similar bills have been introduced in both the House
and Senate.
Interest Group Reaction:
•
The major interest groups, such as the AMA and AHA, have expressed
support in general terms for the legislation, but there is considerable
controversy regarding specific exceptions in the legislation, such as the
defmition of "group practice" and the scope of the "in-office ancillary
services" exception.
•
Groups representing the managed care industry are apparently satisfied, as they
have not been heard from.
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5.
ENHANCEMENT OF CURRENT STATUTORY AUTHORITIES FOR
ADDRESSING HEALTH CARE FRAUD AND ABUSE
Criminal Penalties
Proposal:
To expand upon the current authorities contained in the criminal code of the United
States to address health care fraud. This would include:
Amending the existing mail fraud statute to cover delivery by private or
commercial interstate carriers.
Certain technical amendments to the wire fraud statute.
Increased penalties under the mail and wire fraud statutes.
It has also been proposed that a new criminal health care fraud statute be
enacted.
Amendment of the existing federal forfeiture authorities to cover the proceeds
derived from health care fraud has also been proposed.
Congressional Action:
Last session of Congress, Senator Joseph Biden introduced S. 2652 which included
many of the above proposed amendments to the criminal code.
•
A hearing of the Senate Judiciary Committee is scheduled to consider these
and other legislative proposals for addressing health care fraud and abuse. It
is anticipated that Senator Biden will be introducing a new bill similar to S.
2652 at the conclusion of the hearing process.
Interest Group Reaction:
No adverse interest group or public reaction has been identified.
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Civil Monetary Penalties
Proposal:
To enhance the current authority contained in section 1128A of the Social Security
Act for imposing civil monetary penalties and assessments on those who defraud or
abuse the Federal health care financing programs.
This would include:
•
Specifying in the statute certain practices which are impermissible and subject
to sanctions, e.g., routine waiver of coinsurance and deductible amounts.
•
Increasing the amount of authorized penalties to $10,000 and authorizing prejudgment interest.
•
Establishing certain new bases for civil monetary penalties.
Congressional Action:
Legislative proposals for amending the current civil monetary penalty authority in the
Social Security Act have been introduced in both the House (H.R. 1255) and Senate
(S. 867).
Interest Group Reaction:
•
No adverse interest group or public reaction has been identified.
•
Concerns have been raised by provider groups that adequate due process is
provided before civil monetary penalties are imposed. As under the current
law, prior to the imposition of a civil monetary penalty, a provider or
practitioner has a right to a hearing before an administrative law judge and
appeal to the Departmental Appeals Board. Once a final agency decision is
imposed, a provider or practitioner may appeal the imposition of civil
monetary penalties to the appropriate Federal Court of Appeals.
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Exclusion from Program Participation
Proposal:
To enhance the current authority in section 1128 of the Social Security Act for
excluding from participation in Medicare and State health care programs those
providers and practitioners determined to have engaged in fraudulent or abusive
activities.
Congressional Action:
Legislative proposals for amending the current program exclusion authority in the
Social Security Act have been introduced in both the House (H.R. 1255) and Senate
(S. 867). These legislative proposals
•
Mandate the program exclusion of any individual convicted of a felony relating
to fraud or controlled substances.
•
Establish a minimum exclusion period for certain exclusions.
•
Authorize the exclusion of an individual with an ownership or control interest
in a sanctioned entity.
•
Modify the current statutory authority for sanctioning health care providers
who render substandard or unnecessary services.
Interest Group Reaction:
•
No adverse interest group or public reaction has been identified.
•
Certain concerns have been raised by provider groups regarding the adequacy
of due process provided before an exclusionfromprogram participation is
imposed. Under current law, a provider or practitioner is generally excluded
prior to the administrative appeal process. This procedure protects the
program and beneficiaries while the matter is on appeal to the administrative
law judge. This administrative procedure (under which notice and an informal
opportunity to respond is afforded prior to the imposition of the program
exclusion), has been uniformly upheld by Federal courts. As one court noted,
"[a]t some point, the rights of the caretaker must end and the rights of the
cared-for begin." Patchogue Nursing Center v. Bo wen. 797 F.2d 1137 (2d
Cir. 1986).
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VI. Appendix
Tab A
Working Group Paper--"Fraud and Abuse
Vulnerabilities In New Health Care System"
Tab B
GAO Report-October 1991
(Medicare: Improper Handling of Beneficiary
Complaints of Provider Fraud and Abuse)
Tab C
GAO Report-May 1992
(Health Insurance: Vulnerable Payers Lose
Billions To Fraud and Abuse)
Tab D
GAO Report-August 1992
(Medicare: One Scheme Illustrates Vulnerabilities
To Fraud)
Tab E
Self-Referral Studies
Tab F
Legi-Slate Report of Current Health Related Bills Concerning Fraud
and Abuse
Tab G
H.R. 345 (Stark—Comprehensive Physician Ownership
and Referral Act of 1993)
Tab H
H.R. 1255 (Stark-National Health Care Anti-Fraud
and Abuse Act of 1993)
Tab I
"Cutting Waste: No Cure-All For Health Care"
The Washington Post. May 4, 1993.
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VI. APPENDIX
�Clinton Presidential Records
Digital Records Marker
This is not a presidential record. This is used as an administrative
marker by the William J. Clinton Presidential Library Staff.
This marker identifies the place of a tabbed divider. Given our
digitization capabilities, we are sometimes unable to adequately
scan such dividers. The title from the original document is
indicated below.
Divider Title:
�For O f f i c a l Use Only
Tab 1
Working Group Paper—"Fraud and Abuse Vulnerabilities
In New Health Care System"
�4/15/93
FRAUD AND ABUSE VULNERABILITIES I N NEW HEALTH CARE SYSTEM
BACKGROUND
Under c u r r e n t law, t h e f e d e r a l government has a v a r i e t y o f
methods t o r e d r e s s f r a u d and abuse i n t h e f e d e r a l h e a l t h c a r e
programs, such as t h e Medicare and Medicaid programs, i n c l u d i n g
c r i m i n a l s a n c t i o n s , c i v i l remedies and a d m i n i s t r a t i v e remedies
(e.g., program e x c l u s i o n and c i v i l monetary p e n a l t i e s ) . The o n l y
f e d e r a l remedies f o r f r a u d and abuse i n p r i v a t e h e a l t h p l a n s
a v a i l a b l e t o t h e f e d e r a l government a r e t h e c r i m i n a l m a i l and
w i r e f r a u d s t a t u t e s (18 U.S.C. §§ 1341 and 1343).
Under h e a l t h r e f o r m , t h e f e d e r a l government w i l l be
s u b s i d i z i n g t h e premiums o f many i n d i v i d u a l s c h o o s i n g p r i v a t e
h e a l t h p l a n s t h r o u g h t h e HAs, t h e r e f o r e , t h e r e i s a need t o
expand t h e f o c u s o f f e d e r a l a n t i - f r a u d e f f o r t s t o t h e s e r v i c e s
provided through these plans.
Fraud and abuse w i t h i n t h e s e
p r i v a t e p l a n s w i l l u n n e c e s s a r i l y d r i v e up premiums and, hence,
federal subsidies.
There i s a l s o a need t o c o n t r o l f r a u d and
abuse g i v e n t h e g o a l o f k e e p i n g o v e r a l l spending f o r h e a l t h care,
b o t h p u b l i c and p r i v a t e , w i t h i n a budget.
W i t h t h e f e d e r a l government s u b s i d i z i n g e n r o l l m e n t i n
p r i v a t e h e a l t h p l a n s , remedies a r e a l s o needed t o respond t o
s i t u a t i o n s where: e n r o l l e e s a r e p r o v i d e d w i t h s u b s t a n d a r d c a r e ;
p r i v a t e h e a l t h p l a n s w i t h h o l d m e d i c a l l y necessary s e r v i c e s ; o r
engage i n p r a c t i c e s t h a t c o u l d undermine f a i r c o m p e t i t i o n among
plans.
A l t h o u g h t h e f o c u s o f t h e s e a c t i v i t i e s c o u l d be a t t h e s t a t e
l e v e l , g i v e n t h e f e d e r a l f i n a n c i a l support f o r h e a l t h s e r v i c e s
and t h e d e s i r e t o p r o v i d e a u n i f o r m n a t i o n a l b e n e f i t , b e n e f i c i a r y
p r o t e c t i o n s s h o u l d a l s o be u n i f o r m w i t h remedies i n f e d e r a l
statutes.
OPTIONS
I.
Coordination
Activities
o f Health
Care Fraud and Abuse Enforcement
A. C u r r e n t S t a t u s .
C u r r e n t l y , v a r i o u s governmental
agencies and p r i v a t e h e a l t h p l a n s and o r g a n i z a t i o n s a r e d e v o t i n g
r e s o u r c e s t o i n v e s t i g a t i n g and p r o s e c u t i n g h e a l t h c a r e f r a u d and
abuse. These i n c l u d e t h e F e d e r a l Bureau o f I n v e s t i g a t i o n and t h e
Department o f J u s t i c e (DOJ), t h e O f f i c e o f I n s p e c t o r General i n
t h e Department o f H e a l t h and Human Services (HHS), S t a t e
A t t o r n e y s General and M e d i c a i d Fraud C o n t r o l U n i t s .
Often, there
i s l i m i t e d c o o r d i n a t i o n and communication between i n v e s t i g a t i v e
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�and p r o s e c u t i v e e n t i t i e s r e g a r d i n g t h e i r ongoing a c t i v i t i e s and
a l l o c a t i o n o f r e s o u r c e s t o s p e c i f i c h e a l t h care f r a u d and abuse
i n v e s t i g a t i o n s and p r o s e c u t i o n s . A d d i t i o n a l l y , i n v e s t i g a t i o n s
and p r o s e c u t i o n s a r e f r e q u e n t l y stymied by l i m i t e d r e s o u r c e s ,
which a r e inadequate t o address s o p h i s t i c a t e d and complex schemes
t o d e f r a u d and abuse h e a l t h care programs.
B.
Proposals
1. E s t a b l i s h an A l l - P a y e r Health Care Fraud and Abuse
Enforcement Program.
R a t i o n a l e . A program t o c o o r d i n a t e F e d e r a l , S t a t e and l o c a l
law enforcement a c t i v i t i e s aimed a t h e a l t h care f r a u d and
abuse would f a c i l i t a t e communication and complement i n v e s t i g a t i v e
resources.
The program s h o u l d be j o i n t l y d i r e c t e d by DOJ, which
has p r i m a r y law enforcement r e s p o n s i b i l i t y f o r t h e f e d e r a l
government, and HHS, which has t h e most experience i n enforcement
of c i v i l , c r i m i n a l and a d m i n i s t r a t i v e remedies p e r t a i n i n g t o
h e a l t h care programs. T h i s would enhance p u b l i c and p r i v a t e
enforcement a c t i v i t i e s and a s s i s t i n c o n t r o l l i n g f r a u d and abuse.
2. E s t a b l i s h H e a l t h Care Fraud and Abuse T r u s t Fund.
C r i m i n a l f i n e s , c i v i l p e n a l t i e s , f o r f e i t u r e s , and damages ( o t h e r
t h a n r e s t i t u t i o n ) imposed on t h o s e e n t i t i e s and i n d i v i d u a l s who
d e f r a u d o r abuse h e a l t h c a r e d e l i v e r y o r payer programs o r
b e n e f i c i a r i e s would be d e p o s i t e d i n a T r u s t Fund, e x c e p t t o t h e
e x t e n t t h a t c u r r e n t law d i r e c t s t h a t t h e money be g i v e n t o o t h e r
p a r t i e s (such as t h e s t a t e s ) o r d e p o s i t e d i n o t h e r T r u s t Funds
(such as t h e Medicare T r u s t Fund). The T r u s t Fund would be
a d m i n i s t e r e d by t h e A l l - P a y e r H e a l t h Care Fraud and Abuse
Enforcement Program, d e s c r i b e d above.
R a t i o n a l e . The t r u s t f u n d would be used, i n a d d i t i o n t o
a p p r o p r i a t e d amounts, t o supplement t h e c o s t s o f f e d e r a l e f f o r t s
t o combat h e a l t h care f r a u d and abuse. I t should be n o t e d t h a t
s i g n i f i c a n t a d d i t i o n a l r e s o u r c e s would be need t o implement t h e
a u t h o r i t i e s o f a m e a n i n g f u l a n t i - f r a u d program as d e t a i l e d i n
t h i s paper. I n t h e p a s t , every d o l l a r devoted t o i n v e s t i g a t i o n
and p r o s e c u t i o n o f h e a l t h care f r a u d and abuse y i e l d s a t l e a s t
e i g h t d o l l a r s p a i d i n t o t h e f e d e r a l Treasury.
Thus, t h e T r u s t
Fund w i l l r e s u l t i n s i g n i f i c a n t a d d i t i o n a l resources f o r a n t i f r a u d enforcement.
II.
Enhance C u r r e n t C r i m i n a l P e n a l t i e s f o r H e a l t h Care Fraud
A. C u r r e n t S t a t u s . Under c u r r e n t f e d e r a l law, i t i s a
c r i m i n a l o f f e n s e t o d e f r a u d , make f a l s e statements t o , o r f i l e
f a l s e c l a i m s f o r payment by t h e U n i t e d S t a t e s . The Government
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�has certain statutory criminal remedies through which i t may
recover losses associated with health care fraud against the
Federal government. Federal law also provides for criminal
penalties for schemes to defraud private individuals or
businesses for the purposes of obtaining money or property, i f
the mails or the wires are used for the purpose of executing a
scheme. There i s also a federal statutory basis for private
parties to bring an action in federal court i f they have suffered
from a pattern of racketeering a c t i v i t y . Currently, the only
forfeiture remedies which exist with respect to the proceeds of
health care fraud are quite narrow. Forfeitures are available
only with respect to criminal acts which constitute the
laundering of the proceeds of specified unlawful a c t i v i t i e s and
organized crime a c t i v i t y .
B.
Proposals
1. Amend current federal forfeiture authorities to cover
the proceeds derived from health care fraud.
Rationale. The potential for forfeiture of the proceeds of
criminal a c t i v i t i e s has been shown to have a substantial
deterrent effect. The f o r f e i t u r e remedy gives the Government the
a b i l i t y to use either criminal or c i v i l remedies to s e i z e assets
derived from fraudulent or otherwise i l l e g a l a c t i v i t i e s . The
creation of a f o r f e i t u r e provision to cover any health care fraud
offense would enhance current law and provide an additional
deterrent remedy.
Under t h i s proposal, forfeiture would be available only as a
remedy for intentional misconduct, not for acts of simple
negligence. The government would have to prove such conduct in a
federal court proceeding when the assets are seized.
2.
Create a new health care fraud statute.
Rationale. Few criminal provisions d i r e c t l y address health
care fraud. A new criminal health care fraud statute, modelled
after existing mail and bank fraud statutes, would s p e c i f i c a l l y
penalize schemes to defraud either public or private health care
programs. Also, the existing mail fraud statute should be
amended to address schemes which u t i l i z e private courier services
in addition to the U.S. mails.
3.
Create a federal criminal statute prohibiting the act
of making any false statement to a health plan. HA or state
government agency or i n a matter within the j u r i s d i c t i o n of a
plan, HA or state government agency in connection with the
operation of the plan or HA or in connection with the delivery of
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�a health care item or service.
Rationale. There are currently no federal remedies that
make deliberately lying to health plans, health a l l i a n c e s or
state governments a federal criminal offense. Also, current
statutes do not cover fraudulent conduct when private couriers or
private mail services (such as Federal Express and UPS) are used.
A new federal statute covering f a l s e statements to state
governments or non-governmental e n t i t i e s , and appropriate
expansion of the mail and wire fraud statutes, would enable
federal prosecution of such a c t i v i t i e s .
4.
Create a federal criminal statute prohibiting the
payment of bribes, g r a t u i t i e s or other inducements to the
administrators and employees of health plans. HAs or state
government agencies i n connection with the operation of health
plans or HAs or i n connection with the delivery of a health care
item or service.
Rationale. Current federal statutory remedies do not reach
t h i s conduct. This statute would prevent the corruption of
administrators of health plans, HAs and state government agencies
by providing a standard federal remedy for such conduct.
I I I . Establish C i v i l Monetary Penalty Remedies for Specified
Violations
A. Current Status. The federal government currently has
the authority to assess c i v i l monetary penalties i n an
administrative proceeding against health care providers who
submit false or improper claims to the Medicare or Medicaid
programs. There i s no s i m i l a r authority to assess CMPs against
health care providers who submit false or improper claims to
private health care plans (e.g.. Blue Cross/Blue S h i e l d ) .
B. Proposals. Authorize the federal government to assess
CMPs against persons who engage i n any of the following
prohibited a c t i v i t i e s with respect to any health benefit plan.
The penalty amount should be $10,000 per item or s e r v i c e claimed
(which i s c o n s i s t e n t w i t h the C i v i l False Claims Act (31 U.S.C. §
3729)) and an assessment o f no more than t r e b l e t h e amount
claimed. The law should provide f o r pre-judgment i n t e r e s t on
p e n a l t i e s and assessments imposed by an A d m i n i s t r a t i v e Law Judge.
The standard of knowledge i n these cases would be the "knows or
should know" standard.
The f o l l o w i n g a c t i o n s would be the basis f o r a CMP under
t h i s proposal:
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�False Claims
1.
S u b m i t t i n g a c l a i m f o r an i t e m o r s e r v i c e n o t p r o v i d e d
as c l a i m e d .
(See s e c t i o n 1128A(a)(1)(A) . )
1
2.
S u b m i t t i n g a f a l s e o r f r a u d u l e n t c l a i m f o r an i t e m o r
service.
(See s e c t i o n 1 1 2 8 A ( a ) ( 1 ) ( B ) . )
3.
Submitting a claim f o r a physician's service provided
by a person who was n o t a l i c e n s e d p h y s i c i a n , whose l i c e n s e
had been o b t a i n e d t h r o u g h m i s r e p r e s e n t a t i o n , o r who
i m p r o p e r l y r e p r e s e n t e d t o a p a t i e n t t h a t he o r she was a
certified specialist.
(See s e c t i o n
1128A(a)(1)(C).)
4.
The r o u t i n e w a i v e r o f copayments where copayments a r e
r e q u i r e d under t h e p l a n .
5.
C l a i m i n g a h i g h e r code f o r purposes o f reimbursement
t h a n t h e one t h e person knows o r should know i s c o r r e c t .
6.
Unbundling o r " f r a g m e n t a t i o n " o f charges i n a bundled
payment scheme. (See s e c t i o n 1866(g).)
7.
A h o s p i t a l o r o t h e r f a c i l i t y engaging i n p r a c t i c e s such
as unnecessary m u l t i p l e admissions, o r o t h e r i n a p p r o p r i a t e
m e d i c a l o r o t h e r p r a c t i c e s , i n order t o c i r c u m v e n t a bundled
payment scheme.
False Statements
8.
F a i l i n g t o report information or reporting inaccurate
i n f o r m a t i o n t h a t i s r e q u i r e d t o be s u b m i t t e d t o a d a t a bank.
(See s e c t i o n 421(c) o f t h e H e a l t h Care Q u a l i t y Improvement
Act.)
9.
Submitting f a l s e o r f r a u d u l e n t statements t o t h e
S e c r e t a r y , a HA o r a p l a n .
(See s e c t i o n 1 8 7 6 ( i ) ( 6 ) ( A ) ( v ) . )
V i o l a t i o n s S p e c i f i c t o Plans
10. A p l a n f a i l i n g s u b s t a n t i a l l y t o p r o v i d e m e d i c a l l y
necessary i t e m s o r s e r v i c e s t h a t are r e q u i r e d (under law o r
t h e c o n t r a c t ) t o be p r o v i d e d t o an i n d i v i d u a l under t h e
contract.
(See s e c t i o n 1 8 7 6 ( i ) (6)(A) ( 1 ) . )
1
Many o f these a c t i o n s a r e a l r e a d y t h e b a s i s f o r a CMP
w i t h r e s p e c t t o Medicare and M e d i c a i d . Where t h i s i s t h e case,
the relevant c i t a t i o n t o t h e Social Security Act i s provided.
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�11. A p l a n a c t i n g t o e x p e l o r t o r e f u s e t o r e - e n r o l l an
i n d i v i d u a l i n v i o l a t i o n o f t h e p r o v i s i o n s o f law. (See
section 1 8 7 6 ( i ) ( 6 ) ( A ) ( i i i ) . )
12.
A p l a n engaging i n any p r a c t i c e t h a t would r e a s o n a b l y
be expected t o have t h e e f f e c t o f denying o r d i s c o u r a g i n g
e n r o l l m e n t by e l i g i b l e i n d i v i d u a l s w i t h t h e o r g a n i z a t i o n
whose m e d i c a l c o n d i t i o n o r h i s t o r y i n d i c a t e s a need f o r
s u b s t a n t i a l f u t u r e medical services.
(See s e c t i o n
1876(i)(6)(A)(iv).)
13.
I n t h e case o f a p l a n , employing o r c o n t r a c t i n g w i t h
any i n d i v i d u a l o r e n t i t y t h a t i s excluded from p a r t i c i p a t i o n
f o r the p r o v i s i o n o f h e a l t h care, u t i l i z a t i o n review,
m e d i c a l s o c i a l work o r a d m i n i s t r a t i v e s e r v i c e s o r employing
or c o n t r a c t i n g w i t h any e n t i t y f o r t h e p r o v i s i o n ( d i r e c t l y
o r i n d i r e c t l y ) t h r o u g h such an excluded i n d i v i d u a l o r e n t i t y
o f such s e r v i c e s .
(See s e c t i o n 1 8 7 6 ( i ) ( 6 ) ( A ) ( v i ) . )
Miscellaneous
14.
F a i l u r e t o cooperate w i t h q u a l i t y or u t i l i z a t i o n
review.
15.
Unlawful kickbacks (subject t o exceptions).
s e c t i o n IV.B.)
(See
also,
16.
S u b m i t t i n g a c l a i m f o r an i t e m o r s e r v i c e s u b m i t t e d by
an excluded person.
(See s e c t i o n 1 1 2 8 A ( a ) ( 1 ) ( D ) . )
17.
F a i l u r e t o r e p o r t v i o l a t i o n s o f f e d e r a l c r i m i n a l law.
W h i s t l e b l o w e r s would be p r o t e c t e d a g a i n s t adverse employment
a c t i o n s i n t h e manner s i m i l a r t o s e c t i o n 7 o f t h e I n s p e c t o r
General A c t .
Rationale.
The c u r r e n t b a s i c a u t h o r i t y t o impose CMPs f o r
Medicare and M e d i c a i d was enacted i n 1981 due t o t h e inadequacy
o f f e d e r a l c r i m i n a l and c i v i l c o u r t enforcement a c t i v i t i e s , and
has been an i n v a l u a b l e weapon t o f i g h t f r a u d and abuse i n t h o s e
programs. While t h e C i v i l F a l s e Claims Act, 31 U.S.C. § 3729, e t
seq., as employed by t h e C i v i l D i v i s i o n , DOJ, w i l l c o n t i n u e t o be
t h e p r i m a r y c i v i l enforcement mechanism f o r a t t a c k i n g h e a l t h care
f r a u d i n v o l v i n g any d i r e c t o r i n d i r e c t f e d e r a l f u n d i n g , an
i n t e r m e d i a t e , a d m i n i s t r a t i v e remedy i s needed t o supplement t h e
f e d e r a l c o u r t remedies a v a i l a b l e t o t h e f e d e r a l government.
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�IV.
Prohibit Kickbacks (Subject to Exceptions)
A.
Current Status. The Medicare and Medicaid a n t i kickback statute (§ 1128B(b) of the Social Security Act, 42
U.S.C. § I320a-7b(b)) prohibits the payment of, or receipt of
remuneration in exchange for the r e f e r r a l of Medicare or Medicaid
items and services. The statute has felony criminal remedies and
i s also the basis for exclusion from Medicare and Medicaid. The
statute i s aimed at curbing overutilization; inappropriate
steering of patients to l e s s convenient, more expensive or less
well-equipped providers; and competitive damage to providers who
do not pay kickbacks. There are a number of statutory and
regulatory ("safe harbor") exceptions to the prohibition.
B.
Proposals. The payment or receipt of anything of value
as an inducement for the r e f e r r a l of any type of health care
business (subject to the exceptions described below) should be
prohibited under health reform. W recommend the following:
e
1.
Expand the scope of the statute from just Medicare
and Medicaid to cover a l l payers.
2.
Authorize c i v i l remedies for the federal
government i n U.S. D i s t r i c t Court, including: (a) c i v i l
penalties; (b) injunctive r e l i e f to halt ongoing
kickback schemes; and (c) the authority to secure the
assets where appropriate.
3.
Provide a new administrative remedy of c i v i l
monetary penalties for kickback violations. (See also,
section III.B.15.)
The kickback prohibitions are necessary under health reform
since, given the degree of f l e x i b i l i t y envisioned, there w i l l
continue to be payments made on at least a modified fee-forservice basis, where overutilization has been shown to exist due
to kickbacks. However, to the extent that many health care items
and services w i l l be paid for on an at-risk basis to that
provider, such as a capitated payment, the overutilization
concerns underlying the kickback prohibitions would not e x i s t .
Therefore, we recommend an exception to the kickback prohibitions
for the following types of payments:
payments for items or services furnished to patients
paid for on an a t - r i s k basis to that provider
furnishing the items or service, such as capitated
payments.
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�I n a d d i t i o n , t h e s t a t u t o r y and r e g u l a t o r y ("safe h a r b o r " )
exceptions a p p l i c a b l e t o t h e c u r r e n t kickback s t a t u t e should
apply t o an expanded k i c k b a c k s t a t u t e t h a t a p p l i e s t o a l l p a y e r s .
R a t i o n a l e . A v a i l a b l e s t u d i e s on k i c k b a c k s and s e l f - r e f e r r a l
show a predominant o v e r u t i l i z a t i o n r i s k anytime a d o c t o r r e f e r s a
p a t i e n t f o r an i t e m o r s e r v i c e t o a f a c i l i t y where t h e p h y s i c i a n
has a f i n a n c i a l r e l a t i o n s h i p , and t h e p h y s i c i a n i s n o t d i r e c t l y
p r o v i d i n g items o r s e r v i c e s .
The o v e r u t i l i z a t i o n r i s k and
other i n a p p r o p r i a t e behavior a t t r i b u t a b l e t o kickbacks a p p l i e s t o
p r i v a t e payers as w e l l as t o Medicare and M e d i c a i d . I n a d d i t i o n ,
t h e broad e x c e p t i o n f o r items o r s e r v i c e s p a i d f o r on an a t - r i s k
b a s i s w i l l ensure t h a t t h e law does n o t have a c h i l l i n g e f f e c t on
arrangements between p l a n s and p r o v i d e r s i n a c a p i t a t e d o r r i s k based system.
V.
P r o h i b i t S e l f - R e f e r r a l (Subject t o Exceptions)
A.
C u r r e n t S t a t u s . S e c t i o n 1877 o f t h e S o c i a l S e c u r i t y
Act p r o h i b i t s Medicare payment f o r any c l i n i c a l l a b o r a t o r y t e s t
where t h e p h y s i c i a n who o r d e r s t h e t e s t has a " f i n a n c i a l
relationship" with the lab. "Financial relationship" i s defined
as an ownership o r investment i n t e r e s t o r a compensation
arrangement. S e c t i o n 1877 addresses s e l f - r e f e r r a l by p r o h i b i t i n g
Medicare payment, a much more d i r e c t manner o f t r e a t i n g t h e
problem compared t o t h e a n t i - k i c k b a c k s t a t u t e . T h i s s t a t u t e i s
p r i n c i p a l l y a d m i n i s t e r e d by HCFA, w i t h c i v i l monetary p e n a l t i e s
f o r v i o l a t o r s t o be imposed by t h e OIG. There a r e numerous
e x c e p t i o n s t o t h e term " f i n a n c i a l r e l a t i o n s h i p " i n t h e s t a t u t e ,
such as, payments t o p h y s i c i a n s who a r e employees, s e r v i c e s i n
r u r a l areas, investments i n l a r g e , p u b l i c l y - t r a d e d companies,
etc.
B.
P r o p o s a l s . Payment f o r anv type o f i t e m o r s e r v i c e t o
an e n t i t y should be p r o h i b i t e d ( s u b j e c t t o t h e e x c e p t i o n s
discussed below) where t h e o r d e r i n g p h y s i c i a n has a " f i n a n c i a l
r e l a t i o n s h i p " w i t h t h e e n t i t y and where t h e p h y s i c i a n does n o t
d i r e c t l y r e n d e r t h a t i t e m o r s e r v i c e . We recommend t h a t t h e
s e l f - r e f e r r a l l i m i t a t i o n s have an e x c e p t i o n f o r t h e f o l l o w i n g
situation:
where t h e items o r s e r v i c e s a r e p a i d f o r on an a t - r i s k
b a s i s t o t h a t p r o v i d e r f u r n i s h i n g t h e items o r s e r v i c e ,
such as c a p i t a t e d payments.
2
A summary o f t h e n i n e r e c e n t s t u d i e s i s a v a i l a b l e from
HHS/Office o f t h e General Counsel a t 619-0335 (Mac T h o r n t o n ) .
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�As discussed above i n t h e s e c t i o n on k i c k b a c k s , t h e
o v e r u t i l i z a t i o n r i s k a s s o c i a t e d w i t h s e l f - r e f e r r a l does n o t e x i s t
i n a s i t u a t i o n where t h e p h y s i c i a n i s p r o v i d i n g t h e s e r v i c e s i s
a t - r i s k f o r t h e c o s t s o f o v e r u t i l i z a t i o n . We a l s o recommend t h a t
t h e e x c e p t i o n s i n s e c t i o n 1877 be r e t a i n e d ; however we suggest
t h a t t h e y be m o d i f i e d i n l i g h t o f experience.
Several o f the
i m p o r t a n t changes t o t h e e x c e p t i o n s i n c l u d e :
1.
C l a r i f y t h a t the current exception f o r " i s o l a t e d
t r a n s a c t i o n s " a p p l i e s t o t h e purchase o f a p h y s i c i a n
p r a c t i c e o n l y where no v a l u e o f t h e purchase i s
a t t r i b u t a b l e t o r e f e r r a l s t o t h e purchaser.
2.
Create an e x c e p t i o n t h a t would a l l o w payments t o
p h y s i c i a n s under p e r s o n a l s e r v i c e s c o n t r a c t s as l o n g as
t h e amount o f any compensation p a i d i s n o t d e t e r m i n e d
i n a manner t h a t t a k e s i n t o account ( d i r e c t l y o r
i n d i r e c t l y ) t h e volume o r value o f any r e f e r r a l s and
c e r t a i n o t h e r c o n d i t i o n s were met.
3.
T i g h t e n t h e group p r a c t i c e e x c e p t i o n t o
t h e c r e a t i o n o f sham group p r a c t i c e s .
prevent
4.
Change t h e l a r g e e n t i t y investment e x c e p t i o n so
t h a t t h e r e q u i r e m e n t r e g a r d i n g assets r e q u i r e s t h a t t h e
company have $50 m i l l i o n n e t , t a n g i b l e u n d e p r e c i a t e d
h e a l t h care a s s e t s ( i n s t e a d o f s i m p l y r e q u i r i n g t o t a l
a s s e t s o f $100 m i l l i o n ) .
R a t i o n a l e . There i s no reason t o b e l i e v e t h a t t h e
o v e r u t i l i z a t i o n r i s k associated w i t h s e l f - r e f e r r a l applies only
t o Medicare. I n a d d i t i o n , t h e r e i s an i n h e r e n t c o n f l i c t o f
i n t e r e s t anytime a p h y s i c i a n r e f e r s a p a t i e n t t o an e n t i t y i n
which he o r she has a f i n a n c i a l i n t e r e s t , and i s n o t d i r e c t l y
p r o v i d i n g t h e s e r v i c e s . The f i n a n c i a l i n t e r e s t can a f f e c t t h e
number o f items o r s e r v i c e s ordered, t h e q u a l i t y o f c a r e and
c o m p e t i t i o n among p r o v i d e r s . The broad e x c e p t i o n f o r items o r
s e r v i c e s p a i d f o r on an a t - r i s k b a s i s w i l l ensure t h a t t h e law
does n o t have a c h i l l i n g e f f e c t on arrangements between p l a n s and
p r o v i d e r s i n a c a p i t a t e d o r r i s k - b a s e d system.
VI.
E s t a b l i s h A d m i n i s t r a t i v e Exclusions
Programs
from H e a l t h Care
A.
Current Status.
S e c t i o n 1128 o f t h e S o c i a l S e c u r i t y
Act c o n t a i n s two mandatory and a number o f p e r m i s s i v e a u t h o r i t i e s
under which t h e S e c r e t a r y o f HHS may ( o r , i n t h e case o f t h e
mandatory e x c l u s i o n s , must) exclude i n d i v i d u a l s o r e n t i t i e s from
p a r t i c i p a t i o n i n Medicare and S t a t e h e a l t h care programs. The
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exclusions do not currently apply to a provider's participation
in private health care programs.
B.
Proposals. Many of the bases for exclusion from the
Medicare and State health care program should also serve as the
basis for an exclusion from a l l other health care programs.
Under current law, HHS can exclude an individual or entity prior
to a hearing. This procedure has been upheld i n federal courts
and would continue to be the case for a l l exclusions based on the
prior determination of another tribunal, such as, where the
exclusion i s based upon a criminal conviction or action by a
federal or state administrative body. Courts have upheld t h i s
procedure since the exclusion i s based on prior proceedings with
due process protection guaranteed to a l l persons. A l l other
exclusions would take effect after the hearing and ALJ decision
regarding the exclusion.
We recommend that the following actions be the basis for
exclusion from health care programs. In the case of the
following criminal convictions, the exclusion from the programs
should be mandatory.
1.
Criminal conviction r e l a t i n g to fraud, theft,
embezzlement, breach of fiduciary responsibility or other
f i n a n c i a l misconduct i n connection with the delivery of a
health care item or service. (See section 1128(a)(1) and
(b)(1).)
3
2.
Criminal conviction r e l a t i n g to the neglect or abuse of
patients i n connection with the delivery of a health care
item or service. (See section 1128(a)(2).)
With respect to the remaining bases for exclusion, HHS should
have the discretion to determine whether, given the f a c t s of the
case, an individual should be excluded.
1.
Criminal conviction r e l a t i n g to fraud, theft,
embezzlement, breach of fiduciary responsibility or other
f i n a n c i a l misconduct i n connection with an act or omission
in a program operated by or financed i n whole or i n part by
any Federal, state or local government agency. (See section
1128(b)(1).)
(This would cover convictions for fraud
against any non-health related government program.)
3
Many of these actions are already the basis for an
exclusion with respect to Medicare and Medicaid. Where t h i s i s
the case, the relevant c i t a t i o n to the Social Security Act i s
provided.
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2.
Criminal conviction r e l a t i n g t o the unlawful
manufacture, d i s t r i b u t i o n , p r e s c r i p t i o n , o r d i s p e n s i n g o f a
c o n t r o l l e d substance.
( T h i s would n o t i n c l u d e c o n v i c t i o n s
f o r simple possession.)
(See s e c t i o n 1 1 2 8 ( b ) ( 3 ) . )
3.
R e v o c a t i o n , suspension, o r l o s s o f a l i c e n s e t o p r o v i d e
h e a l t h c a r e f o r reasons o f p r o f e s s i o n a l competence,
performance, o r f i n a n c i a l i n t e g r i t y o r t h e s u r r e n d e r o f such
a l i c e n s e w h i l e a f o r m a l d i s c i p l i n a r y p r o c e e d i n g was pending
f o r reasons o f p r o f e s s i o n a l competence, performance, o r
financial integrity.
(See s e c t i o n 1 1 2 8 ( b ) ( 4 ) . )
4.
E x c l u s i o n from Medicare o r o t h e r f e d e r a l o r s t a t e
h e a l t h c a r e programs (e.g., CHAMPUS, VA) . (See s e c t i o n
1128(b)(5).)
5.
F u r n i s h i n g o r c a u s i n g t o be f u r n i s h e d i t e m s o r s e r v i c e s
t o p a t i e n t s t h a t a r e o f a q u a l i t y which f a i l s t o meet
p r o f e s s i o n a l l y r e c o g n i z e d standards i n a g r o s s and f l a g r a n t
manner o r i n a s u b s t a n t i a l number o f cases.
(See s e c t i o n
1128(b)(6)(B).)
6.
Commission o f an a c t t h a t i s d e s c r i b e d i n t h e f e d e r a l
c r i m i n a l laws s p e c i f i c a l l y r e l a t e d t o h e a l t h c a r e o r c i v i l
monetary p e n a l t y laws s p e c i f i c a l l y r e l a t e d t o h e a l t h c a r e .
(See s e c t i o n 1 1 2 8 ( b ) ( 7 ) . )
7.
(See
E n t i t i e s t h a t a r e c o n t r o l l e d by an e x c l u d e d
section 1128(b)(8).)
individual.
8.
I n d i v i d u a l s who have a m a j o r i t y ownership i n t e r e s t i n ,
o r have s i g n i f i c a n t c o n t r o l over t h e o p e r a t i o n s o f , an
e n t i t y t h a t has been c o n v i c t e d o f a an o f f e n s e r e l a t e d t h e
d e l i v e r y o f a h e a l t h care item o r service.
9.
Failure t o disclose required information regarding
ownership, c o n t r o l l i n g i n t e r e s t s , o r c o n v i c t i o n s o f
i n d i v i d u a l s w i t h ownership o r c o n t r o l l i n g i n t e r e s t s ,
o f f i c e r s , d i r e c t o r s , agents o r managing employees. (See
section 1128(b)(9).)
10.
F a i l u r e t o p r o v i d e access t o documentation o r p r o v i d e
documentation r e l a t e d t o t h e h e a l t h care c l a i m s s u b m i t t e d o r
s e r v i c e s t o a h e a l t h b e n e f i t p l a n , a HA o r t h e government.
(See s e c t i o n 1128 (b) (11)..)
11. F a i l u r e t o g r a n t p h y s i c a l access ( w i t h r e a s o n a b l e
n o t i c e ) t o a p p r o p r i a t e a u t h o r i t i e s f o r r e q u i r e d on s i t e
reviews and s u r v e y s .
(See s e c t i o n 1 1 2 8 ( b ) ( 1 2 ) . )
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12. D e f a u l t i n g on repayments o f s c h o l a r s h i p o b l i g a t i o n s o r
loans i n c o n n e c t i o n w i t h h e a l t h p r o f e s s i o n s e d u c a t i o n made
o r secured, i n whole o r i n p a r t , by t h e S e c r e t a r y o f HHS.
(See s e c t i o n 1 1 2 8 ( b ) ( 1 4 ) . )
R a t i o n a l e . Given t h e e x t e n t o f t h e f e d e r a l s u b s i d i z a t i o n o f
h e a l t h care premiums i n h e a l t h r e f o r m , HHS should be g i v e n t h e
a u t h o r i t y t o exclude i n d i v i d u a l s who have been found t o have
committed t h e above a c t i o n s , and t h e r e f o r e , demonstrated t h e i r
unworthiness t o do business w i t h t h e f e d e r a l government. To t h e
e x t e n t t h e S e c r e t a r y d e t e r m i n e s t h a t , i n a s p e c i f i c case, t h e
a c t i o n should n o t p r e v e n t a person from p a r t i c i p a t i n g i n h e a l t h
care programs, t h e person would n o t be excluded.
VII.
Ensuring t h e I n t e g r i t y o f E l e c t r o n i c Media Claims
A. C u r r e n t S t a t u s . I n r e c e n t y e a r s , i n c r e a s e d a t t e n t i o n
has been p l a c e d on encouraging t h e submission o f c l a i m s f o r
Government reimbursement t h r o u g h e l e c t r o n i c media. I t i s l i k e l y
t h a t under h e a l t h r e f o r m , p r o v i d e r s w i l l be r e q u i r e d t o use
s t a n d a r d i z e d forms and w i l l be encouraged t o submit c l a i m s
electronically.
B.
proposal
1.
Require t h e development and a d o p t i o n o f standards t o
i n c o r p o r a t e a c c o u n t a b i l i t y i n t o t h e e l e c t r o n i c media c l a i m s
process. The S e c r e t a r y o f t h e Department o f H e a l t h and Human
S e r v i c e s should be r e q u i r e d t o e s t a b l i s h , i n c o n s u l t a t i o n w i t h
o t h e r a p p r o p r i a t e agencies, e.g. t h e Department o f J u s t i c e ,
standards and procedures t o safeguard a g a i n s t f r a u d and abuse i n
e l e c t r o n i c media c l a i m s systems u t i l i z e d by b o t h p u b l i c and
p r i v a t e health plans.
( T h i s would i n c l u d e p r o v i s i o n s t o ensure
t h a t t h e i d e n t i t y o f t h e i n d i v i d u a l t h a t caused t h e t r a n s m i s s i o n
of t h e c l a i m i s known, t h e assumption o f r e s p o n s i b i l i t y by
p r o v i d e r s f o r t h e accuracy, completeness and t r u t h f u l n e s s o f
c l a i m s s u b m i t t e d on t h e i r b e h a l f , and t h e p a t i e n t i s p r o v i d e d
w i t h v e r i f i c a t i o n o f t h e type o f services rendered).
R a t i o n a l e : The p r o p o s a l would ensure s t a n d a r d i z a t i o n ,
c o o r d i n a t i o n , and communication among a l l p r i v a t e h e a l t h p l a n s
r e c e i v i n g e l e c t r o n i c media c l a i m s t o minimize f r a u d . I t would
encourage s t a t e - o f - t h e - a r t procedures t o enhance p r o v i d e r
r e s p o n s i b i l i t y and p o t e n t i a l l i a b i l i t y f o r improper e l e c t r o n i c
media c l a i m s . F u r t h e r , i t would r e q u i r e p r o v i d e r s t o assume
r e s p o n s i b i l i t y and l i a b i l i t y f o r c l a i m s s u b m i t t e d t h r o u g h
e l e c t r o n i c media on t h e i r b e h a l f by agents.
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Health Care Reform
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2006-0810-F
Description
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<p>This collection consists of records related to Hillary Rodham Clinton's Health Care Reform Files, 1993-1996. First Lady Hillary Rodham Clinton served as the Chair of the President's Task Force on National Health Care Reform. The files contain reports, memoranda, correspondence, schedules, and news clippings. These materials discuss topics such as the proposed health care plan, the need for health care reform, benefits packages, Medicare, Medicaid, events in support of the Administration's plan, and other health care reform proposals. Furthermore, this material includes draft reports from the White House Health Care Interdepartmental Working Group, formed to advise the Health Care Task Force on the reform plan.</p>
<p>This collection is divided into two seperate segments. Click here for records from:<br /><a href="http://clinton.presidentiallibraries.us/items/browse?advanced%5B0%5D%5Belement_id%5D=43&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=2006-0810-F+Segment+1"><strong>Segment One</strong></a> <br /><a href="http://clinton.presidentiallibraries.us/items/browse?advanced%5B0%5D%5Belement_id%5D=43&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=2006-0810-F+Segment+2"><strong>Segment Two</strong></a></p>
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Clinton Presidential Records
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Briefing Book on Fraud and Abuse [1]
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Health Care Task Force
General Files
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2006-0810-F Segment 1
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Box 59
<a href="http://clinton.presidentiallibraries.us/items/show/36144" target="_blank">Collection Finding Aid</a>
<a href="https://catalog.archives.gov/id/12090749" target="_blank">National Archives Catalog Description</a>
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Clinton Presidential Records: White House Staff and Office Files
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Adobe Acrobat Document
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5/5/2015
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42-t-2194630-20060810F-Seg1-059-010-2015
12090749