Health Care Reform Strengthens Fraud Prosecutions and Expands Scope of False Claims Act

Aug 13, 2010   

The Patient Protection and Affordable Care Act, signed into law on March 23, 2010, will make it easier for the federal government to investigate and prosecute health care fraud and increase penalties for violations. The new bill provides for more than $350 million over 10 years to reduce healthcare fraud and abuse while easing prosecutions, strengthening sentencing guidelines, and expanding the False Claims Act.

The bill eliminates the need for prosecutors to prove actual knowledge of or specific intent to violate the law under the federal Anti-kickback Statute (42 U.S.C. § 1320a-7b) and the federal health care fraud statute (18 U.S.C. § 1347). The Bill is likely in response to the 9th Circuit Case, Hanlester Network v. Shalala, which provided for heightened standards of intent. Prosecutors will also be able to issue administrative subpoenas for the production of documents.

Kickbacks and offenses in violation of Section 301 of the Federal Food, Drug and Cosmetic Act (21 U.S.C. § 331) will now be considered Federal Health Care Fraud Offenses. Further, those suspected of obstructing a criminal investigation of federal health care fraud may have their assets frozen, while those who obtain property from the commission of fraud w have their personal property subject to forfeiture.

The bill will also change the definition of “intended loss” under the Federal Sentencing Guidelines. Section 2B1.1(b)(1) of the guidelines provides that the loss from fraud is calculated as either the actual loss or intended loss whichever is greater. While courts in the past have calculated “intended loss” as the amount actually paid by the government or payable under government fee schedules, the new bill allows for the dollar amount of fraudulent bills submitted to constitute prima facie evidence of intended loss. The result will be heightened sentencing for white collar criminals in health care. Further, the statute will increase the offense level for defendants convicted. Changes include:
¢ A two-level increase in the offense level for losses of $1 million or more.
¢ A three-level increase in the offense level for losses of $7 million or more.
¢ A four-level increase in the offense level for losses of $20 million or more.

The False Claims Act will also be strengthened by the reform statute. Claims arising from a violation of the Ant-Kickback statute will now expressly constitute violations of the False Claims Act, regardless of whether the wrongdoer submits the claim. The bill also strengthens the Act by allowing for whistleblowers to bring suits and restricting the public disclosure bar (providing that disclosures made in criminal, civil or administrative hearing or in government reports, hearings, audits and investigations bar a federal FCA suit) to federal government hearings, reports, audits and investigations. Finally, the FCA will be applicable to payments made by the American Health Benefit Exchanges if they include federal funds and civil penalties for exchange-related FCA liability will be 3 to 6 times the amount of damages.

Additional Provisions include:
¢ The ability to suspend pending Medicare and Medicaid payments to providers and suppliers pending investigations into allegations of fraud.
¢ Civil monetary penalties for knowingly making false statements to enroll as a provider or supplier in a federal health care program.
¢ Mandatory compliance programs for providers and suppliers.
¢ HHS oversight of Medicaid and Medicare Parts C and D.
¢ Exclusions from Medicaid for companies or individuals that control entities that have not repaid overpayments, have been suspended, terminated, or excluded from participation, or are affiliated with an entity that has.
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