HHS OIG and DOJ Publish 2023 Report on Fraud and Abuse Enforcement

Unlike the proposed, scammy Department of Government Efficiency, whose billionaire leaders seem focused on slashing budgets and trimming enforcement efforts in numerous federal agencies regarded as part of the "deep state," DOJ and HHS have actually been working hard to root out skullduggery and outright theft in the health care industry. This report is quite revealing. It also begs the question whether we will see another report like this from the next administration. 

Here's an overview:

In FY 2023, civil health care fraud settlements and judgments under the False Claims Act exceeded $1.8 billion, in addition to other health care administrative impositions won or negotiated by the Federal Government. Due to these efforts, as well as those of preceding years, more than $3.4 billion was returned to the Federal Government or paid to private persons in FY 2023. Of this $3.4 billion, the Medicare Trust Funds received transfers of approximately $974 million during this period, in addition to $257.2 million in Federal Medicaid money that was transferred separately to the Centers for Medicare & Medicaid Services.

One gets the feeling that $1.8 billion is the tip of the fraud-and-abuse iceberg. First, the report shows just how thoroughly fraud permeates most aspects of the health care system. The report discusses major areas of enforcement efforts (past, present, and future) and should be read by any healthcare lawyer who advises any individual or institutional providers on this list:

• Ambulances 
• Clinics (e.g., pain clinics, ophthalmology services and related ambulatory surgical centers)
• COVID-19 Related Enforcement 
• Diagnostic Testing (huge)
• Durable Medical Equipment (DME) (an oldie but a goodie, still huge)
• Electronic Health Records 
• EMTALA Violations
• Genetic Testing/RPP (Respiratory Pathogens Panel )Testing 
• Home Health Providers 
• Hospice Care
• Hospitals and Health Systems (see below for the details of one especially notable enforcement action against a renowned hospital and health system)
• Laboratory Testing 
• Managed Care 
• Medical Devices 
• Pharmacies 
• Physical Therapy 
• Physician and Other Practitioners 
• Prescription Drugs and Opioids 
• Psychiatric and Psychological Testing and Services
• Substance Use Treatment Centers 
• Telemedicine Exploitation and Fraud

More detail on the "Hospitals and Health Systems" item. 

In February 2023, the University of Pittsburgh Medical Center (UPMC), University of Pittsburgh Physicians (UPP), and a cardiothoracic surgeon agreed to pay $8.5 million, submit to a year-long audit, and implement a corrective action plan to resolve civil FCA allegations that UPMC (an integrated health care system and teaching hospital based in Pittsburgh), UPP (UPMC’s physician practice group), and the surgeon (a teaching physician and longtime chair of UPMC’s department of cardiothoracic surgery) violated the Teaching Physician Regulations, 42 C.F.R. §§ 415.190 and 415.192, by performing as many as three complex surgeries at the same time, failing to participate in all of the key and critical portions of those surgeries, unnecessarily inflating anesthesia times during those surgeries, and billing Medicare and other government Health Benefit Programs for those surgeries and services.  In its September 2021 Complaint-in-Partial-Intervention, the government alleged that, from 2015-2021, UPMC, UPP and the surgeon submitted false claims for payment related to: (1) doubly- and triply-concurrent surgeries, during which the surgeon left a first surgery before the key and critical portions of that surgery were complete, participated in as many two other simultaneous surgeries in separate operating rooms, and caused delays and complications in some of those surgeries; (2) surgeries where the surgeon did not participate in the timeout at the outset of the procedure; (3) surgeries where the surgeon was outside the hospital facility, unlocatable for significant stretches, or otherwise not immediately available throughout the procedure; (4) unduly prolonged anesthesia services associated with the surgeon’s concurrent surgeries and absences; and (5) procedures, services, and care related to otherwise avoidable complications caused by the concurrent surgeries. 

This is far from an isolated incident. Massachusetts General Hospital, one of the Harvard teaching hospitals, was cited for the same activity and paid out three settlements that totaled $32.7 million to settle three claims of multiple simultaneous surgeries between 2019 and 2022 (Boston Globe, Feb. 18, 2022 - paywall; law firm blurb based on the story). In June 2024 I wrote on the issue when it involved a major Houston hospital.

The report has some additional intriguing details:

In FY 2023, the Department of Justice (DOJ) opened more than 802 new criminal health care fraud investigations.  Federal prosecutors filed criminal charges in over 346 cases involving at least 530 defendants.  More than 476 defendants were convicted of health care fraud related crimes during the year.  Also, in FY 2023, DOJ opened more than 770 new civil health care fraud investigations and had over 1,147 civil health care fraud matters pending at the end of the fiscal year.  Federal Bureau of Investigation (FBI) investigative efforts resulted in over 620 operational disruptions of criminal fraud organizations and the dismantlement of more than 127 health care fraud criminal enterprises. 

In FY 2023, investigations conducted by HHS’s Office of Inspector General (HHS-OIG) resulted in 651 criminal actions against individuals or entities that engaged in crimes related to Medicare and Medicaid, and 733 civil actions, which include false claims, unjust-enrichment lawsuits filed in Federal district court, and civil monetary penalty (CMP) settlements.  HHS-OIG excluded 2,112 individuals and entities from participation in Medicare, Medicaid, and other Federal health care programs.  Among these were exclusions based on criminal convictions for crimes related to Medicare and Medicaid (871) or to other health care programs (314), for beneficiary abuse or neglect (203), and as a result of state health care licensure revocations (531).  

There's no denying it's been another busy year for the enforcers, but there seems to be no stopping health care providers (real or fake) with larceny in their heart. 

Two New Enforcement Actions from Texas Attorney General

As easy as it is to dislike Ken Paxton for his extravagantly disruptive policies on abortion and gender-affirming care for minors, his office does a good job in its enforcement program against health fraud. Two recent examples:

Attorney General Ken Paxton’s Investigation Results In 10-Year Prison Sentence And Over $34 Million Restitution For North Texas Doctor (November 25, 2024; State of Texas) Attorney General Ken Paxton’s Medicaid Fraud Control Unit Plays Key Role In Largest Ever Criminal Enforcement Action Targeting Opioid Distributors (November 25, 2024; State of Texas)

Health Care Fraud: Texas Style

On Oct. 15 a federal jury in Houston convicted the owner of a firm that operated 14 pharmacies, on fifteen counts including conspiracy to commit mail fraud, conspiracy to violate the anti-kickback statute, bribery concerning programs receiving federal funds, conspiracy to commit bribery, five counts of healthcare fraud, and six counts of money laundering, resulting in $160 million in fraudulent claims that were paid by Medicare. 

As described by the Office of the U.S. Attorney for the Southern District of Texas:

From 2014 through 2021, Mohamad Mokbel led a company called 4M Pharmaceuticals which operated 14 pharmacies with straw owners. The jury heard evidence that Mokbel illegally purchased thousands of Medicare beneficiaries, including their identification number, personal health and physician information. Mokbel targeted elderly diabetic patients who are dependent on diabetic testing supplies to manage their blood sugar levels. Mokbel paid $16 to $40 per Medicare beneficiary.  

To maximize reimbursements and without regard for medical necessity, Mokbel then directed 4M employees to use the Medicare beneficiaries’ patient data to run insurance claims to determine if Medicare or other insurance plans would cover and reimburse at a high rate for the topical creams, Omega-3 pills and other medications that Mokbel intended to sell through 4M pharmacies.

At Mokbel’s direction, 4M employees would then fax pre-filled prescription requests to the patients’ doctors appearing to be for diabetic testing supplies with topical creams added at the bottom. They also included false representations that the patient was requesting a 4M Pharmacy fill their medications. In reality, Mokbel had previously purchased the patient’s personal information, the patient had not selected a 4M Pharmacy and the patient was often unaware the request was being made on their behalf. 

Many doctors apparently took the representations in the fax at face value and did sign and send back the prefilled prescription requests to 4M. Mokbel’s call center in Houston and later in Egypt then contacted the patients and made false and misleading statements about the topical cream and their doctor’s order. Mokbel’s pharmacies then shipped out numerous topical creams, often on auto-refill, and excessively billed Medicare, Medicaid and private insurance plans. 

Mokbel made over $200 million as a result of the scheme. 

The money value of the fraud is considerably less than the record for Medicare fraud, but what caught my eye was the complexity of the scheme and the lineup of law-enforcement agencies involved in the case: Homeland Security Investigations (HSI) Houston, the FBI, IRS Criminal Investigation, the U.S. Department of Health and Human Services, the U.S. Food and Drug Administration, and the Texas Attorney General’s Medicaid Fraud Control Unit. This was a big, big deal for these investigators.

One Guy, $234 Million Medicare Fraud Scheme

 

With a name that could be right out of Dickens novel, Imran Shams puts most other health care fraudster to shame. What he lacks in imagination -- his fraudulent conduct was pretty middle-of-the-road stuff -- he more than makes up with old-fashioned doggedness. The DOJ-OIG summary is illuminating:

A California man was sentenced today to 10 years in prison for conspiring to conceal his involvement in operating a laboratory and billing Medicare approximately $234 million for various lab tests, including COVID-19 and respiratory pathogen panel tests, despite his decades-long exclusion from the Medicare program.

“Criminals who cheat federal health programs and profit at the expense of American taxpayers will be met with the full force of the Justice Department,” said Attorney General Merrick B. Garland. “As our country was battling the COVID-19 pandemic, this individual was fraudulently billing Medicare for hundreds of millions of dollars. Today, thanks to the work of the Justice Department’s Criminal Division, he will now spend 10 years in federal prison for his crimes. We will continue to disrupt schemes that defraud the federal health programs the American people rely on, and we will hold accountable those who perpetrate those schemes.”

According to court documents, Imran Shams, 65, of Glendale, was convicted of Medicare and Medicaid fraud in separate 1990 and 2001 cases in New York and California, respectively. After each conviction, he was excluded from participation in Medicare and all federal health care programs, and advised by the Department of Health and Human Services Office of Inspector General (HHS-OIG) that he had to submit a written application to be considered for reinstatement in federal health care programs. Shams never sought reinstatement, yet he continued to operate health care clinics in New York that billed federal health care programs. In November 2017, Shams pleaded guilty to conspiracy to pay and receive health care kickbacks and other charges in the Eastern District of New York related to his operation of these clinics.

By 2018, Shams was an owner, operator, and manager of Matias Clinical Laboratory, doing business as Health Care Providers Laboratory (HCPL), a Baldwin Park, California-based clinical testing laboratory that billed Medicare and other federal health care programs. In order to maintain HCPL’s status as a Medicare provider and enable it to receive payments from Medicare for its testing services, Shams and a co-conspirator fraudulently concealed Shams’ role in HCPL from Medicare, including failing to submit required enrollment documentation identifying Shams’ ownership, management position, and prior convictions; causing the submission of false documentation to Medicare identifying another person as HCPL’s sole owner and managing officer; submitting false documentation concerning HCPL’s ownership and management to the California Department of Public Health; and making false statements to the U.S. Probation Office and Pretrial Services Agency while Shams was on federal court supervision following his 2017 conviction. Between August 2018 and April 2022, when the grand jury returned the indictment in this case and Shams was arrested and ordered detained without bond, HCPL fraudulently billed Medicare approximately $234 million. Medicare paid HCPL approximately $31.7 million based on these fraudulent claims.

Shams pleaded guilty in the Central District of California on Jan. 24, 2023, to conspiracy to commit health care fraud and concealment of his exclusion from Medicare.

In addition to the term of imprisonment, Shams was ordered to forfeit $31,761,286.21, including $4,513,106.30 in funds that the government previously seized from two bank accounts, as well as his interest in two residential properties and one business property in the Los Angeles area. Shams was also ordered to pay $31,761,286.21 in restitution.

“Shams engaged in a years-long scheme in which he billed American taxpayers nearly $234 million and lined his pockets with millions of dollars of funds intended for the health and welfare of patients,” said FBI Director Christopher Wray. “This case demonstrates the FBI’s commitment to rooting out fraud to help ensure critical healthcare funds go where they are needed most.”

Four New Advisory Opinions from HHS-OIG

On Jan. 3, HHS's Office of Inspector-General (OIG) released four new Advisory Opinions, all apparently finalized at the end of December:

Advisory Opinion 23-12: This favorable opinion regards a one-time, voluntary redemption offer to physician partners reaching age 67 to have their partnership units repurchased by a partnership over a 2-year period, contingent upon the physician partners’ agreement to retire from the practice of medicine.  

Advisory Opinion 23-13: This favorable opinion regards the use of a "preferred hospital" network as part of Medicare Supplemental Health Insurance ("Medigap") policies, whereby an insurance company would contract with a preferred hospital organization to provide discounts on the otherwise-applicable Medicare inpatient deductibles for its policyholders and, in turn, would provide a premium credit of $100 off the next renewal premium to policyholders who use a network hospital for an inpatient stay. 

Advisory Opinion 23-14: This favorable opinion regards the use of a "preferred hospital" network as part of Medicare Supplemental Health Insurance ("Medigap") policies, whereby an insurance company would contract with a preferred hospital organization to provide discounts on the otherwise-applicable Medicare inpatient deductibles for its policyholders and, in turn, would provide a premium credit of $100 off the next renewal premium to policyholders who use a network hospital for an inpatient stay.  

Advisory Opinion 23-15: This favorable opinion regards a physician consulting company’s proposal to offer physician practices that are current customers of the company certain gift cards for referring potential new physician practice customers.

 

Health Insurers' Tactic Resurfaces With a Vengeance: Deny, Deny, Deny

I once had a Health Law student who had been an HMO employee in a previous life. She was the one who answered the phone when a provider (hospital, clinic, physician, etc.) dialed 1-800 for pre-authorization for a procedure, hospitalization, or prescription item (medication, wheelchair, PT, etc.). Her standing order was simple: Always deny the request first time around. In Texas, we call that "bad faith claims handling" and it's a tort that can result in compensatory and punitive damages. So much for the deterrence effect of tort law!

A lot has changed in health care in the intervening two decades, byt "deny, deny, deny" is still with us. It's frustrating for policy holders (a/k/a patients and human beings), and it's aggravating for the providers. It's also a form of Russian roulette that results in dangerous delays in providing needed health care goods and services.

A recent article in Becker's CFO Report (Aug. 14, 2023) highlights the problem. As described by a hospital CEO with 37 years of experience in health care, bare-knuckle negotiations over reimbursement rates get all the media attention when providers and a payor appear to be at impasse and termination of the contract is a looming reality for thousands of patients whose providers are about to be "out of network." Reimbursement rates are the "above the surface" story in these negotiations, but eventually both sides compromise and crisis is averted.

The "below the surface" issues, though, have an outsized effect on providers. These issues stem from denials of payment for any of the myriad reasons insurers can cite: service or medication not covered, no pre-authorization or referral from a gatekeeper, DRG down-coding, difference in clinical judgment about medical necessity . . . . The list goes on. Here's the eye-popping heart of the article:

Data and numbers on denial rates are not easy to find, but some examination paints a picture rich with variation. An analysis of 2021 plans on Healthcare.gov conducted by KFF found nearly 17 percent of in-network claims were denied, with rates varying from 2 percent to 49 percent. The reasons for the bulk of denials are unclear. About 14 percent were attributed to an excluded service, 8 percent to lack of pre-authorization or referral and 2 percent to questions of medical necessity. A whopping 77 percent were classified as "all other reasons." 

Adding to the inconsistency is the fact that health plan denial rates fluctuate year over year. In 2020, a gold-level health plan offered by Oscar Insurance in Florida denied 66 percent of payment requests; in 2021 it denied 7 percent.

And here's a refrain I hear from physician friends from all over:

"Nobody becomes a physician because they hope to feel like a cog in a factory," Michael Ivy, MD, deputy chief medical officer of Yale New Haven (Conn.) Health, told Becker's. "However, between meeting the demands of payers for referrals, denials of payment and increased documentation requirements in order to assure proper reimbursement and risk adjustment, as well as an increasing number of production metrics, it can be difficult not to feel like a cog." 

As for the government's role in policing the conduct of these insurers:

Authors of the 2010 Affordable Care Act worried that provisions to expand health insurance access — such as barring health insurers' refusal to cover patients with preexisting conditions — could cause them to ratchet up other tactics to make up for the change. With this in mind, the law charged HHS with monitoring health plan denial rates, but oversight has been unfulfilled, leaving denials widespread.  

When you consider insurance company profits and their executive salaries, it's apparent that the "middle men" in these transactions are getting rich at the expense of providers and patients alike. Where's a good, old-fashioned congressional or FTC hearing when you need one? 

Something Old, Something New (Hellacious Health Fraud (VI))

 

Here are a couple of recent cases that caught my eye. First, the old style of health care fraud:

• Evergreen Hospice, LLC (Evergreen), a hospice company located in Tulsa, Oklahoma, appears to be a Mom & Pop operation that advertises a Servant Attitude ("We are givers, not takers. We are listeners, not talkers. We are promoters of others and will perform our roles with humility and dignity") and touts their institutional commit to Ethics ("We will not participate in or tolerate dishonesty or unethical behavior"). On June 29 DOJ announced that Evergreen agreed to pay $48,830.70 to resolve allegations that it violated the False Claims Act by knowingly submitting false claims to Medicare for hospice care provided to beneficiaries who were not terminally ill. Medicare's hospice program requires a physician's certification that the patient/beneficiary is terminally ill, i.e., will probably die within 6 months. The settlement announcement included the usual boilerplate that liability was not established. The U.S. Attorney's announcement added: "'Unfortunately, some healthcare providers seek to defraud Medicare by billing unnecessary hospice services. Left unchecked, this misconduct would deplete funds available for terminally ill patients desperately in need of the relief that hospice care provides."

And something new(-ish):

• A key feature of 2010's Patient Protection and Affordable Care Act (PPACA, ACA, or Obamacare) offered state governments a deal. It was well known that many states had substantial populations of individuals who were not old enough to qualify for Medicare and had too much income to qualify for Medicaid. (States get to establish the eligibility criteria for Medicaid and some, like mine, disqualify individuals at a ridiculously low income level.) The federal government's offer: cap your eligibility at 133% of the federal poverty level (effectively 138% of FPL after accounting for the 5% income disregard feature of Medicaid) and we will pay 100% of the cost of expanded coverage for the first few years, 95% for the next few years, and 90% from then on. In return, states (including California) agreed that at least 85% of the services provided to the expanded population would be for "allowed medical expenses." Shortfalls would need to be returned to the state and ultimately to the U.S.

The four defendants in this case are [1] a county organized health system (COHS) that contracts to arrange for the provision of health care services under California’s Medicaid program (Medi-Cal) in Santa Barbara County and San Luis Obispo County, California; [2] a not-for-profit hospital network operating in Santa Barbara County; [3] a non-profit outpatient clinic operating in Santa Barbara County; and  [4] a non-profit community health center operating in Santa Barbara and San Luis Obispo Counties. The four allegedly violated the False Claims Acts (state and federal) by falsely certifying that they met the 85% minimum from 2014-16. The net result was that Medicaid expansion funds were used to subsidize non-Medicaid services. 

The four defendants settled the suit for $68 million, of which $12.58 million will go to the whistleblower, the former medical director of the COHC. 

New Advisory Opinion from HHS/OIG

It's OIG Advisory Opinion No. 23-04 (Favorable) (posted July 11), only the fourth AO issued this year, which makes it worth reading. It's long and the fact pattern is somewhat complicated, but the OIG's conclusion is favorable (another reason it's worth reading). On the other hand, as the lengthy recitation of facts suggests, the scope of the question (and the OIG's conclusions) are not likely to have broad applicability. Still, health lawyers everywhere should be up-to-speed on any and all Advisory Opinions, right?

The request was "for an advisory opinion regarding: (i) the use of Requestor’s online health care directory by Federal health care program beneficiaries to search for and book medical appointments with providers and the display of sponsored advertisements to Federal health care program beneficiaries on the directory and certain third-party websites (the “Existing Arrangement”); and (ii) certain proposed changes to the functionality of the directory (the “Proposed Changes,” and together with the Existing Arrangement, the “Arrangement”).

The AO recites the usual boilerplate about the payments being illegal remuneration under the Anti-Kickback Statute, and the concludes that it will exercise its discretion and not seek Civil Monetary Penalties or program exclusions. All's well that ends well.