The Robust But Unsatisfying State Of Health Care Fraud Enforcement

By Zack Buck

Earlier this spring, the U.S. Department of Health and Human Services and Department of Justice reported they had recovered nearly $28 billion as a result of anti-health care fraud efforts in FY 2014. The federal False Claims Act played a substantial role in achieving these recoveries: the government recovered $2.3 billion in FCA settlements and judgments, and opened nearly 800 new civil health fraud investigations, in FY 2014 alone. Further, the agencies noted that these anti-fraud efforts—bolstered by increased funding and authority under the Affordable Care Act—are continuing to abandon the “pay and chase” method of fraud enforcement, relying instead on prevention and “real-time data analysis.”

Interestingly, it is no longer just the federal government driving the enforcement regime. Increasingly, facing Medicaid shortfalls, states are getting involved—and, according to practitioners, state enforcement is “exploding.” For example, in New York, its Office of Medicaid Inspector General recovered more than $1.7 billion from FY 2011 to 2013. States have also had success in litigating claims to trial, most recently illustrated by the notable South Carolina Supreme Court verdict against pharmaceutical giant Johnson and Johnson. Further, Vermont is likely to become the newest state to establish its own state false claims act, another wide-ranging and powerful statute that mirrors the federal FCA.

Generally, health fraud actions are politically popular and financially lucrative for the government: in the press release, the agencies noted that “for every dollar spent on health care-related fraud and abuse investigations in the last three years, the administration recovered $7.70.” Last year’s report pegged the number slightly higher.

Largely due to these powerful incentives and a lack of countervailing pressures, I’ve raised potential practical concerns with aggressive medical necessity-based anti-fraud enforcement here and here. Indeed, in cases lacking clear fraudulent intent and patient harm, the enforcement regime can be fairly critiqued.  Fraud enforcement actions, in the context of services that are of questionable medical necessity, often feature draconian penalties without having any impact on the powerful incentives that cause overtreatment in the first place.  Powerful fraud-based statutes are—at best—an awkward fit for these frequent cases.

A reconceptualization of the legal harm for expensive and unnecessary medical services—and a strategy for more orderly enforcement in this area—seems necessary. I’ve proposed one potential partial solution—to refocus the enforcement regime in these cases on “cumulative excess” instead of medical necessity—in a law review article that has just been published, and is available here. What is undoubtedly true is that the current enforcement regime is subject to few structural limitations.

But given the pressure on the public financing system largely due to the increased enrollment in Medicaid and expanding number of beneficiaries in Medicare, there has not been momentum to limit the fraud statutes’ wide-ranging application—or even to recalibrate their enforcement—in any significant way. The annual press releases continue, trumpeting the aggressive but disordered enforcement mechanism showing no signs of a slowdown.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.