A Bounty System for Federal Investigators

Two identically-suited men arrived at the offices of Anytown Homecare, presented the receptionist with a search warrant and proceeded to remove the company’s computers, customer records and various odds and ends.

Anytown Homecare was the target of a federal Medicare fraud investigation. So was Homespun Respiratory Care. Three months after Homespun responded to a carrier inquiry about 10 claims submissions, federal agents showed up at the homes of its nursing staff at 7:30 one morning to ask them about Homespun’s billing habits. Oh, one other important bit of information: Each of these homecare companies believed they already had compliance programs in place. The problem: They weren’t effective compliance programs.

If suppliers are lucky, their government investigations will merely result in dozens of hours of lost time; thousands of dollars spent in legal and accounting fees; and a degree of harm to their reputation that can be salvaged over time.

Often, severe fines and monetary penalties that easily run into six figures will be part of this package. Exclusion from federal program participation and even imprisonment are also possible. These examples occur throughout the country with increasing frequency.

The U.S. Attorney General has stated that health care fraud is one of the Justice Department’s highest priorities. A recent OIG audit estimates that approximately 11 percent of CMS’s 2016 fee-for-service payments were improper.

For the DMEPOS industry, this meant $3.7 billion in projected improper payments in 2016. From 2010 to 2012, the government collected almost $8 for every dollar spent, in fines and penalties, on health care enforcement. State governments are conducting their own fraud and abuse investigations.

Medicare DMERCs and ZPICs, and even the NSC, are initiating investigations and turning over damaging information to the Office of Inspector General and/or the Justice Department. Perhaps most sobering, a supplier may become the target of an investigation that began with another provider. For example, if a hospital is under investigation, and that hospital is engaged in a contractual relationship with a DMEPOS supplier, that supplier’s relationships generally may be scrutinized as part of the expanded scope of the hospital investigation.

Incentives for Aggressive Investigation

The most obvious form of scrutiny is a direct, focused inquiry from the government because of a specific concern about a submitted bill. Consider the following: Inaccurate claim submissions may now become fraudulent when the government believes that materially inaccurate claims were filed and that the supplier failed to make inquiries to ascertain whether the claims were filed correctly. Similarly, repeated errors enable the government to argue that there was a pattern of indifference to accuracy, which constitutes fraud.

The whistleblower provisions of the federal False Claims Act enable a private party to bring suit against a provider for submitting false claims. If the lawsuit is successful, the instigator (called a relator) will be entitled to a percentage of the recovery (usually 5 to 30 percent, typically 15 percent).

Since much of the fines under the various fraud and abuse laws tie to penalties charged additional to repayment, the potential recovery for a relator can be substantial incentive to become a whistleblower. For example, in one whistleblower suit, a national home medical equipment supplier was charged with anti-kickback violations, because it allegedly paid to medical advisors fees that were not tied to legitimate well-documented services. Essentially, the flaw in the company’s medical advisor contracts was that they left out supporting information.

HIPAA has created a bounty system for federal investigators. CMS gets to keep a substantial portion of monies recovered and penalties paid from settlement of fraud and abuse investigations. This provides a substantial incentive for aggressive investigation and pursuit of questionable cases. Civil and criminal sanctions are available.

Amounts repaid to the government are typically many times in excess of the amount allegedly overbilled. For example, in one settlement a physician was fined more than $4 million for Medicare fraud, where payments originally received totaled slightly more than $273,000. Thus, fines and penalties were over 15 times the amounts wrongfully paid.

Settlement and Concession

Even if there is not a finding of guilt, the threat of prosecution is used extensively by the government as leverage for concessions and settlement. While many view this as legalized coercion, settlement is often a far cheaper alternative to the costs and risks of prosecution, even when the company ultimately prevails.

There are over 68,000 providers excluded from government programs at this time. They include suppliers, physicians, therapists, pharmacists, nurses, nurse’s aides, salesmen, billing clerks, office managers, bookkeepers, marketing reps and private citizens. Managers and billing staff have been convicted and/or excluded. Doing as the “boss” instructed is not a defense. Willful blindness is not an excuse.

Suppliers Unaware of Their Exposure

In my experience, suppliers generally believe that their business operations are correct, proper and legal. However, very often they or their employees have done something that may be illegal or unlawful, or at least that could trigger an investigation. This is particularly troublesome at branch locations or after a supplier merger.

Most suppliers are unaware of the extent of their exposure. They may be ignorant of the improper activities. Or they may engage in conduct that can be questioned and challenged, even though it is common in the industry.

Many suppliers, for example, still don’t realize that the common practice of paying percentage commissions to independent contractor salespeople or a company is extremely risky, as the government believes such payments can induce referrals.

One key response to these increasing dangers is to establish a formal compliance program. “But,” you say, “we already have one of those.” But is it well-understood by your personnel, well-integrated into your corporate culture, and sufficient to satisfy your needs?

An effective compliance program is a practical, written policy for reviewing a provider’s activities. The program establishes step-by-step, department-specific, written protocols to identify correct procedures; to establish whether problems exist; to minimize such problems; and to quickly remediate the situations when they do occur.

An effective program will establish procedures that show due diligence in detecting and preventing inappropriate conduct by a supplier or by its employees and agents. It will include training of your staff, and monitoring to ensure the compliance program is running correctly. Most existing compliance programs do not satisfy these requirements. Often, not much is written down.

Often, specific procedures for reporting problems or looking into them are vague, solutions are insufficiently implemented, or follow-up is haphazard. In some ways, a sloppy compliance program is worse than none at all, because it breeds complacency.

A properly structured compliance program can substantially reduce penalties if violations do occur.

Beginning in 1992, the United States Sentencing Commission put into effect the “Guidelines for Organizations.” These Guidelines were intended to encourage companies to implement effective compliance programs to prevent and detect violations of law. The incentives are structured around the formula used to calculate fines. If a company has an effective compliance program in place, this will reduce its “culpability score,” thus decreasing by at least 60 percent any fine that is imposed.

There are additional benefits to an effective compliance program. It should improve internal communication within the organization. It should create and encourage effective employee feedback. It should reduce the likelihood of civil and criminal wrongdoing, as well as the dangers of employee “whistleblowing” and its consequent risks.

An effective compliance program will also establish a structure that efficiently disseminates legal and policy changes to all personnel, and includes a “disaster response plan” that improves a company’s ability to respond quickly to investigations, losses, and other crises. It also just makes good business sense to have all of your employees adhere to your “best practices” and approved standards of conduct.

In my opinion, compliance programs offer real value for homecare companies. I have found enthusiasm for the concept from clients in all parts of the country, both in communities with significant integration and managed care activity as well as in communities with low levels of both.

At a minimum, every homecare company should consider undergoing prompt and regular legal and financial analysis of its health care compliance activities; correcting deficiencies identified in that analysis; and implementing a program to reduce the likelihood of these sorts of problems from occurring in the future.

The question no longer is whether you can afford a fraud prevention, accurate billing compliance program. Rather, the question to be asked is whether you can afford not to have a program in place. A compliance program cannot guarantee that those dark-suited government agents will not show up at your front door. But, it can minimize the likelihood that the agents will hang around.