Health Care Fraud Blog

As reported previously here, a central feature of the Obama administration’s health care reform has been the HEAT (Health Care Fraud Prevention and Enforcement Action Team) initiative is the use of Strike Force teams. Strike Forces are multi-agency units of Federal and State law enforcement personnel designed to identify, investigate, and prosecute Medicare fraud. Strike Forces are supported by a CMS data analysis team and CMS program experts.

Since May 2009, this Administration has expanded Strike Force cities from Miami and Los Angeles, when Strike Force teams were launched in Houston and Detroit in May 2009 and in Brooklyn, Baton Rouge, and Tampa in December 2009. (To read more, click: here).

Building on the momentum started last May, U.S. Department of Health and Human Services Deputy Secretary William Corr and U.S. Department of Justice Acting Deputy Attorney General Gary Grindler, testified earlier this month before the United States House of Representatives Subcommittee on Labor, Health and Human Services, Education, and Related Agencies Committee on Appropriations and stated that the entire $250 million increase in the President’s Budget advances the goals of the HEAT initiative.

Strike Force defendants are also more likely to receive prison sentences and longer terms of imprisonment than more traditional criminal health care fraud defendants. Since the Strike Force’s inception, over 94% of all Strike Force defendants were convicted and sentenced to terms of imprisonment compared to 64% of all criminal health care fraud defendants. The average prison term for Strike Force defendants was 45 months, which was about 10% longer than the overall national average for federal health care fraud defendants over this same period.

New Strike Force locations are chosen based on thorough analysis of Medicare claims data, which helps identify hot spots of unexplained high-billing levels in concentrated areas, and a review of the most effective allocation of investigative and prosecutorial resources. The cost associated with Strike Forces expansion resulting in 20 locations by end-of-year FY 2011 is an estimated $46 million.

The Governor of Montana, following a line of other politicians over the years, is promoting the idea of that state purchasing drugs for publicly run health care programs from Canada . However, for a number of reasons, such ideas have never gained any traction.

The position of the FDA has been rather clear, Canadian drugs are not US NDC (National Drug Code) products, and therefore are adulterated versions of the drugs they purport to be. Since the source of the drugs is not the US regulatory system, the drugs are "potentially" dangerous. As we pointed out on a previous posts (click: here and here), the actual danger was largely caused by Canadian and US drug officials themselves.

In reality, though, the name brand drugs being used by Canadians are in fact the very same drug as are offered in the United States , only in Canada the drugs are cheaper due not only market forces, but also government price controls. Americans pay more for drugs because the United States does not have any government restrictions on prices. Intellectual property rights in Canada and the US protect the right of one manufacturer to control the price of a name brand drug, therefore the price is what the market will bear; and Americans are generally willing to pay more for their name brand drugs than to allow the government to regulate commerce in the way Canada does.

The same is not true with respect to generic drugs. Generic drugs are name brand drugs whose intellectual property rights have expired, allowing any manufacturer to make and sell the drugs. The price of generic drugs in Canada is the same or more expensive than generic drugs in the United States because the prices of generic drugs are controlled solely by the market, since there are multiple manufacturers.

Typically, the only generic drugs that people attempt to import into the United States tends to be controlled substances. This is not due not to government pricing restrictions, but government availability restrictions. When the DEA began aggressively pursuing internet pharmacies in 2002 and pain management now, one aspect of that enforcement was to warn manufacturers and distributors that they would hold them accountable for the distribution of too many of their drugs and particularly to suspect providers, warning that their DEA registrations were at issue. In one instance, the DEA certificate for a major wholesaler was suspended for its Florida location because the supplier distributed too many controlled substances to suspect providers. This led many internet pharmacies to move off shore and some suppliers to illegally import controlled substances.

For more, click: here.

Alex Carrazana was a Medical Assistant. He is currently serving 72 months in prison for Medicare Fraud. He was for a time employed by a clinic called Midway Medical. At that clinic his job was to help with the infusion of drugs to HIV patients for therapy for a condition called thrombocytopenia, a bleeding disorder. He was not an owner, operator or licensed health care professional. Nearly everyone connected to the alleged conspiracy and probably even the government would concede he was not a major participant in the crimes (by way of disclosure, we represented other parties in this matter).

According to the government and the plea proffers of the co-defendants who were physicians, physicians assistant and owner of Midway, the clinic billed Medicare for approximately $8,000,000 in false claims. The claims were for infusion of a drug, RhoGAM, which in many instances was not provided. It was somewhat fortunate the drug wasn’t provided because the blood tests, detailing the need for the infusion therapy, had false data because the blood of the patients was altered by a person hired by the owner to mix the blood to generate false results.

There were apparently some facts that indicated Mr. Carrazana was aware fraud was going on and at a certain point he quit, according to his lawyer because he discovered what was going on and wanted out. Rather than pleading guilty with a plea agreement as most of the co-defendants did, he plead openly to the court because he and his lawyer disagreed with the facts the prosecutors would have required him to agree to as well as several sentencing guidelines adjustments; and he would have given up his right to an appeal.

By pleading guilty without a plea agreement, he and his lawyer could challenge at sentencing and on appeal everything from the amount of loss alleged down to his role in the clinic and the conspiracy. They did exactly this, and it did not turn out well - he unfortunately received a higher sentence than some of the other co-defendants. He appealed and the United States District Court for the 11th Circuit rejected all of his arguments and upheld his sentence. (To read the opinion, click: here).

The court found that leaving a conspiracy is not enough to cut off responsibility for the acts of co-conspirators after he left, therefore he was responsible for the full $8 million dollars in fraud. In addition, even though Mr. Carrazana did nothing sophisticated himself to aid in the commission of the crime and may have been unaware of the blood mixing, the court held that he should have known that his co-defendants would do something by sophisticated means, so he was also responsible for their acts in that sense.

To read more, click: here.

When it comes to chronic pain, the current DEA war on pain management leads to a question: How much authority should the DEA have over the treatment of patients? According to the Association of American Physicians and Surgeons, “If you’re thinking about getting into pain management using opioids as appropriate: DON’T. Forget what you learned in medical school – drug agents [from the DEA] now set medical standards.” For more on this click: here.

Chronic pain, pain that lasts longer than 24 hours, affects approximately 25 percent of the U.S. population, that is 76 million people, according to the National Centers For Health Statisitics. Of those that reported chronic pain, 43% reported that pain has persisted longer than a year. More than 26 million people report having persistent back pain. Ouch! (To read more on this, click: here).

The treatment options, depending on the cause of the pain involve invasive measures such as surgery and injections, however such results can be short lived. Also, physicians who practice interventional pain find it difficult to get privileges to perform services at hospitals and have very high malpractice insurance premiums. Chiropractic adjustment and physical therapy are less invasive and less expensive, but for chronic pain are also considered by many patients to be of limited use.

What is left is treatment through combinations of other therapies and prescription drugs. The problem for physicians is that pain medications are being prescribed to help a person get through their day, not to solve the underlying medical issue that causes the pain. Therefore, the analysis is very subjective, a combination of the condition causing the pain, the patient’s history of previous treatment, and the amount of prescription drugs that currently work to ease that patient’s suffering. The challenge to the physician prescribing drugs designed to treat chronic pain, opioids, is to discern how much should be prescribed and when and if a patient should be cut off due to potential abuse.

Here is where the war on drugs encounters the reality of medical practice and pain management. As the advice of the AAPS makes clear, doctors are advised to and many doctors stay away from treating pain with narcotics because they are at risk of prosecution or discipline for doing so even when it is a necessary and valid treatment. Accordingly, there is a narrower and narrower pool of physicians willing to treat pain and do so largely in pain management practices. The result is that such physicians prescribe much more pain medications than ordinary physicians, because those are the only patients they see, those physicians will also likely be more liberal in the prescribing of those medications simply because they are so used to seeing chronic pain.

In comes law enforcement, curiously timing high profile raids on pain clinics smack dab in the middle of the Florida legislative session which ends in several weeks while two competing pain management bills are debated. (To read the proposed legislation, click here and here). Reporters, as they do with every law enforcement crime du jour, breathlessly report about how dangerous and prolific “pill mills” are, never once addressing any reason for the need or treatment of pain. Law enforcement describes how oxycontin pills sold to patients in Florida for $5 end up being sold in Kentucky for $20 on the street, without examining whether those people paying those premiums are merely drug addicts, or patients who cannot get pain treatment in Kentucky due to fearful physicians there.

The DEA, using only the vaguest of regulations, declares that physicians treating pain are criminals, dispensing excessive amounts of medications. The DEA does so without legislating, regulating or providing any guidance on the limitations of such dispensing. For example, if the DEA believes no patient should receive more than a certain amount of oxycontin in a prescription, create and publicly debate such a measure.

There is certainly much that can be debated in the treatment of pain and the prescribing of narcotics, but it is rarely debated, often with the words “pill mill” substituting for actual analysis of a much larger and complex issue. Tragically, many of those issues find their way into criminal courts, with jurors instead of health care officials, debating the medical validity of prescription medication dispensing.

According to an article in the South Florida Sun-Sentinel, at least 45 pain clinics opened in Broward and Palm Beach counties in the past year, while state law makers and state and local law enforcement agencies stepped-up their efforts to put an end to the operation suspected “pill mills.”

In August 2008, 66 pain clinics were open for business in Broward and Palm Beach counties combined. The Sun-Sentinel article reports that according to data available from the Florida Department of Health, the number centers issuing narcotic pain medications currently is more than the times what it was in August 2008 - with 122 in Broward to 122 and in Palm Beach County to 108.

Pain clinics “are proliferating despite our efforts," Broward Sheriff Al Lamberti said last week, after state and federal agents executed search warrants at three pain clinics owned or controlled by Christopher and Jeffrey George in Palm Beach County. The Georges' homes were also searched.

No arrests have been made yet, however, a federal law law suit has been filed in U.S. District Court in West Palm Beach. According to the law suit, three of the Georges’ clinics collected $14 million last year and dispensed more than 2.1 million pills. [To read the law suit, click: here.] Additionally, five doctors who worked at the clinics have had their DEA numbers to prescribe pain medications suspended. The doctors can either voluntarily agree to the suspension or can challenge the suspension before a DEA Administrative Law Judge at a hearing scheduled for May.

Independent sources close to the investigation indicate that patient files were properly documented, regular MRI's were required and prescriptions that issued were 100% medically necessary. From time to time, patients who were suspected of phony symptom ology were discovered, refused treatment and escorted off the premises. If you or someone you know has ever suffered from debilitating pain, then no one has to tell you that life can be pure hell without taking pain medication just to get through the day and attempting to perform even the simplest of tasks. The real tragedy in the "gung-ho, rah, rah" attitude of law enforcement targeting pain clinics, is that the overwhelming majority of patients have well-documented injuries requiring pain medication for treatment. These legitimate pain sufferers are the forgotten "victims" who unfortunately wind up as unintended by-product caught in the overreaching net of law enforcement, much like innocent dolphins caught in the nets of profit-driven commercial fisherman.

Palm Beach County and several cities in both counties have temporarily banned new pain clincs, reported by the HCFB here and here. "Palm Beach County is ahead of us [in law enforcement efforts aimed at detecting criminal activities at pain clinics]. We're [Broward County is] trying to play catch up now," Lamberti said. "On the street, [there are] too many targets, not enough deputies. We're really trying to be hard on it because it causes crime in the community. We think they know we are serious."

To read the Sun-Sentinel article, click here.

Florida and a number of states attempting to outlaw so called ambulance chasing in personal injury cases have employed several methods to limit access to records of patients. First, statutes prohibit access to police accident reports for 60-days. Second, statutes as well as professional rules regulating the professional conduct of lawyers and health care license holders prohibit the direct solicitation of patients for services.

Nevertheless, there have been some novel ways developed to get around those laws, including every once in a while someone starting a “newspaper” to use a media exception to the rule regarding access to accident reports. With restrictions on direct access to accident information, a black market for patient information has developed as well as intricate referral networks, including everyone involved in accidents, from tow truck drivers and auto body employees, to ambulance service employees, to hospital employees.

All these involve payments of one type or another, generally in cash, for access to that information and people who employ themselves gathering that information. In a recent case, a Miami man was indicted for a second time for bribing employees, first of an ambulance company, and then hospital employees to get patient information for personal injury attorneys.

To read more, click: here.

In the 1990’s there was a system in place that seemed reasonable at the time. The government hired private companies to audit hospital cost reports on the government’s behalf and to add additional incentive, those companies, generally large insurance companies, would receive bonuses based upon funds recovered. This lead to a sort of system where there were "gotcha" games between the auditors and providers, the providers would try and maximize their reimbursement knowing that the auditors would be specifically looking for places to cut.

Making matters worse, the auditors tended to ignore “errors” that benefited the providers because those errors didn’t benefit the government contractors. So too, the providers, in analyzing and contesting the audits through the appeals process would only report “errors” that benefited the providers. This system eventually led to the prosecution of a number of hospital executives as well as one of the largest whistleblower cases ever. (Click here to read more about John W. Schilling and the case against HCA/Columbia) The government ended that incentive program in part because of the gaming of the system it produced.

Well, it is back again. The government has contractors, called recovery audit contractors, or RACs that receive between 9-12% of overpayment funds they recover on behalf of the government on Medicare audits. In just three years, they have reportedly collected over $1 billion dollars. The only problem, except that the last time it produced somewhat unseemly results, is that these contractors are required to report to law enforcement instances of criminal fraud as opposed to billing errors or overpayment.

To date, only two cases have been referred to for criminal prosecution. The motive, you might suspect, is financial. The RACs don’t get any money for cases referred for criminal prosecution, only for their own recoveries. This suggests that the RACs are erring on the side of overpayment as opposed to fraud, which still benefits the government as well as the RAC and the provider; no harm, no foul. However, the implicit or explicit threat of criminal referral may be an interesting bargaining tool to make these recoveries. Another interesting twist is that the RACs can go back and audit the same providers over and over again, collecting on overpayments (not fraud) no matter how many times the provider makes the same errors.

To read more, click here.

Whatever you do, don't harass the Medicare fraud investigators. A kind of simple rule, if you are committing a crime (no one I represent does that), don’t go out of your way to send harassing emails and phone calls to investigators, including death threats; it tends to incentivise them a bit to arrest you.

To read what happened to one defendant who couldn't get out of his own way, click here.