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Top ten things you should know when you are accused of health care fraud

July 24, 2014

The August 2013 indictment of Dr. Farid Fata for improperly diagnosing patients with cancer and improperly treating patients stunned the conscience of the nation and has had a rippling effect in the industry.  This case serves as an important reminder that the U.S. Department of Justice (DOJ) and the U.S. Department of Health and Human Services (HHS) have drastically ramped up their efforts to investigate, detect and punish – through civil actions, criminal charges, fines, forfeitures and exclusions – health care fraud of all types.  In fiscal year 2013 alone, the DOJ obtained settlements and judgments of more than $2.6 billion relating to health care fraud, including under the federal False Claims Act.  Also, the DOJ reported that it opened 1,083 new civil health care fraud investigations, it opened 1,013 new criminal health care fraud investigations, and 718 defendants were convicted of fraud-related crimes in FY 2013.  And, 3,214 individuals were excluded in FY 2013, not to mention a huge number of criminal pleas and charges.  One of the nine Medicare Fraud Strike Force teams is headquartered in Detroit, thus confirming that the fraud enforcement trend will continue in FY 2014 and far beyond.  On top of that, the U.S. Attorney in Detroit established a separate Health Care Fraud Unit in 2010 and, in 2013 alone, its work resulted in 18 indictments of 46 defendants alleging fraudulent schemes involving more than $380 million.  The lion’s share of that amount relates to the recent indictment against Dr. Fata, who remains incarcerated.

The allegations of civil health care fraud are often initiated by a whistleblower (known as a “relator” under the False Claims Act), who alleges wrongdoing.  In FY 2013, whistleblowers received $345 million of the government’s recoveries.  There is, therefore, a very strong financial incentive for whistleblowers to file qui tam actions.  You need not look further than (a) the action against Tuomey Healthcare System in South Carolina, where a qui tam action was filed, settlement negotiations failed, a jury found Tuomey committed Stark Law violations, a judgment was entered against Tuomey for more than $237 million, and the case is on appeal with Tuomey fighting for its very existence, and (b) the action against Halifax Hospital Medical Center in Florida, where the court found that it violated the Stark Law and Halifax settled for $85 million on the first day of trial.  These amounts do not include the significant amounts incurred in attorney’s fees, costs, expenses and lost productivity of personnel.

The Fata, Tuomey and Halifax cases demonstrate that no provider is immune from whistleblower actions or other fraud investigations.  When you learn of a potential civil health care fraud investigation – often through a subpoena from the government – here are the top ten things that should be done:

  1. Convene a TeamOftentimes the subpoena sends shock waves through upper management and panic can set in causing poor decisions to be made.  Appoint a team, including those with respect and authority within the organization and experienced counsel, to address these issues.  Depending on the size and scope of the matter, it may not be necessary to retain outside counsel; however, it is usually better to retain outside counsel to bring a fresh and independent perspective to the matter, particularly for subsequent discussions with the government.
  2. Preserve Documents and Information – It is essential that the organization preserve all potentially relevant documents and information irrespective of whether they are in hard copy or electronic form.  The consequences of not doing so can be dire.
  3. Investigate Internally – Through counsel, the organization should investigate the potential issues involved, the underlying facts, the applicable law and the applicable defenses/justifications.  This process is essential to determine the magnitude of the potential liability.  The benefits of retaining and using outside counsel for this purpose are that the investigation will be independent, objective and likely privileged, and outside counsel will be familiar with the matter from the onset rather than needing to catch up at a later stage, if outside counsel is brought in to interact with government officials.
  4. Produce the Requested Documents  –  Many investigations come to light as a result of the receipt of a government subpoena for documents.  It is critical to understand the scope of the requests, seek clarification from the government as to the documents sought, involve the government in the organization’s search efforts (especially as to searches of electronically-stored information), and then produce the non-privileged documents requested.  Depending on the scope of the requests, the amount of responsive documents, and whether outside vendors are needed, searching for and producing the responsive documents can be costly and time-consuming and take many, many months. 
  5. Open a Dialogue with the Government  It is imperative that the organization, usually through outside counsel, open a dialogue with the appropriate governmental representatives.  It is crucial to understand the precise concerns and focus of the government; they might be considerably different in type or degree than those the organization anticipated.
  6. Open the Door to a Potential Resolution  Once the organization has a sufficient understanding of the issues, facts and applicable law – and understands the government’s concerns and positions – the organization should explore with the government whether a negotiated resolution is possible.  Given limitations on available government resources coupled with increasing demands on those resources, the government is often amenable to a negotiated resolution.
  7. Begin Negotiations  Assuming that the government is interested in discussing a potential resolution, having done your “homework” above (through a thorough internal investigation) and understanding the government’s concerns and aims will permit you to confidently discuss many variables with the government, including:
      • the organization’s positions and defenses,

      • the amount of any potential overpayment,

      • the involved time frame,

      • the involved procedures/codes,

      • the applicability of netting,

      • any applicable credits or reductions,

      • the applicability of any multiplier/trebling of damages, and

      • the applicability and calculation of any civil penalties.

  8. Negotiate the Settlement AgreementAssuming settlement discussions prove fruitful, many provisions of the settlement agreement should be negotiable, including:
      • the scope of the “Covered Conduct,”
      • the scope of the releases,
      • omission of any admission of liability or wrongdoing,
      • interest,
      • attorney’s fees, and
      • return of documents from the whistleblower
  9. Negotiate any Corporate Integrity Agreement (CIA) –  The government may insist on a CIA; if so, some of its provisions should be negotiable, including:
      • those who are considered “Covered Persons,”
      • its duration,
      • the identity of any Independent Review Organization, and
      • the designated compliance officer.
  10. Media Coverage – Prepare for any media coverage that might be generated by the case or a settlement, including by notifying employees and staff and preparing a press release for the public.

We at Honigman have guided our clients through all of these issues, and a myriad of others, involving such investigations, and are available to consult regarding any and all steps along the way.  We also have a great deal of experience defending clients against criminal charges, which involve a different set of procedures, priorities and considerations. For further information, please contact any member of Honigman’s Health Care Practice Group.