Health Law Bulletin

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May 2010 Health Law Bulletin

Changes to the Health Care Fraud and Abuse Laws Enacted as Part of Health Reform Legislation

After more than a year of intense debate, President obligation owing to the government is suffi cient to Obama and the 111th Congress have succeeded in constitute a false claim. enacting comprehensive health care reform The PPACA adds an overpayment reporting legislation. The legislation is composed of two obligation to the Social Security Act, requiring any separate laws—the Patient Protection and Affordable person who receives an overpayment to report it to Care Act (PPACA), which was signed into law by the Department of Health and Human Services (HHS) President Obama on March 23, 2010, and the Health and repay the amount of the overpayment before the Care and Education Reconciliation Act of 2010 later of (i) the date that is 60 days after the overpayment (Reconciliation Act), amending certain provisions of is identifi ed or, (ii) if applicable, the date any the PPACA, which was signed into law on March 30, corresponding cost report is due. With this change, 2010. an overpayment is now an obligation to the This bulletin, the second in a series of bulletins government, and therefore failing to return the for health care providers and other Vedder Price overpayment constitutes a false claim under the False clients in the health care industry, discusses changes Claims Act (as amended by FERA). in federal laws concerning health care fraud and abuse, including the False Claims Act, the Medicare The Anti-Kickback Statute and Medicaid Anti-Kickback Statute, and the Civil The Anti-Kickback Statute prohibits the knowing and Monetary Penalties provisions of the Social Security willful offer, payment, solicitation or receipt of Act. remuneration to induce or reward the improper referral of items or services reimbursable by a federal health The False Claims Act care program. Most courts have held that an The False Claims Act generally provides that a person arrangement is in violation of the Anti-Kickback Statute can be subject to a fi ne and/or imprisonment for up to where any purpose of the arrangement is to induce or fi ve years when he or she, in any matter involving a reward referrals, regardless of whether there are health care program, “knowingly and willfully additional, legitimate reasons for the arrangement. (1) falsifi es, conceals, or covers up by a trick, scheme, Prior to the enactment of the PPACA, however, courts or device a material fact; or (2) makes any materially were split as to what constitutes a “knowing” payment, false, fi ctitious, or fraudulent statements or solicitation or receipt of remuneration. representations, or makes or uses a materially false Most courts have long held that the “knowing and writing or document knowing the same to contain any willful” criterion is satisfi ed if the defendant engaged materially false, fi ctitious, or fraudulent statement or in the payment, solicitation or receipt of remuneration entry.” The False Claims Act was amended in 2009 in exchange for referrals with the knowledge that such by the Fraud Enforcement and Recovery Act of 2009 conduct was illegal. In contrast, the Ninth Circuit and (FERA), to provide that knowingly failing to pay an other courts have held that the government or plaintiff

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must prove that the defendant knew that his or her The PPACA expands the bases under which the conduct was a violation of the Anti-Kickback Statute OIG is authorized to impose civil monetary penalties and acted with specifi c intent to violate the law. The and, at its option, exclude from participation in federal PPACA resolves this issue by adding a new provision health care programs the following: which states that “a person need not have actual ■ Knowingly making, using or causing to be made knowledge of [the Anti-Kickback Statute] or specifi c or used a false record or statement material to a intent to commit a violation” of the Anti-Kickback false claim for payment under federal health care Statute to constitute a violation. programs ($50,000 per false record or statement); The PPACA further clarifi es that a claim which originates from a referral in violation of the Anti- ■ Failing to grant timely access to the Inspector Kickback Statute constitutes a “false claim.” General upon the IG’s reasonable request for the Accordingly, in addition to direct liability under the purpose of audits, investigations, evaluations or Anti-Kickback Statute itself, a violation of the Anti- other statutory functions of the OIG ($15,000 per Kickback Statute can be the basis for liability under day); the False Claims Act. ■ Ordering or prescribing a medical or other item or service during a period in which the person was Administrative Sanctions—Civil excluded, where the person knows or should know Monetary Penalties and Exclusion the claim for such service will be made to a federal health care program ($10,000 plus three times the Health care providers engaging in fraudulent or amount of the potential claim); abusive activities are subject to a number of administrative sanctions, including exclusion from ■ Making false statements in connection with participation in Medicare and Medicaid, and the provider enrollment; and imposition of civil monetary penalties for each claim ■ Knowingly failing to report and return an deemed improper. The so-called “CMP Statute” overpayment within the required timeframe. authorizes HHS to impose civil monetary penalties In a rare example of a change in the fraud and (CMPs) for presenting or causing to be presented a abuse laws that benefi ts providers, the PPACA added claim that falls into any of a number of categories of a number of exclusions from the defi nition of “improper” claims. “Improper” claims include, among “remuneration,” including: others, any claim that is false or fraudulent, is in ■ An incentive that “promotes access to care and violation of the anti-assignment rule or involves the poses a low risk of harm to patients and the Federal transfer of funds to a Medicare or state health plan health care programs”; benefi ciary to induce the benefi ciary to improperly order or receive services from a particular institution, ■ The provision of items or services for free or below physician or other practitioner. fair market value, in connection with a rebate, Exclusion, pursuant to which a provider is barred coupon or similar program, provided that the items from receiving any payment from Medicare or any or services are made available to all individuals state health care program, including Medicaid, is without regard to health insurance status, and are mandatory for providers convicted of certain crimes not tied to the provision of other items or services relating to health care fraud, patient abuse or misuse reimbursable by Medicare or a state health of controlled substances, and for providers who have program; or defaulted on Health Education Assistance Loan ■ The provision of items or services for free or obligations. In addition, the Offi ce of the Inspector below fair market value, if the item or service is General (OIG) has the discretionary authority to reasonably connected to the medical care of the exclude health care providers (known as “permissive individual, and the discount is granted based upon exclusion”). a good faith determination of fi nancial need.

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Implementing regulations will no doubt have a in the form of new laws and the dedication of additional signiﬁ cant effect on the scope of these changes and resources to their enforcement. We will monitor these the actions necessary to maintain compliance. In developments as they occur. addition, we can expect an increasing governmental focus on fraud and abuse in the health care industry

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