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As criminal convictions for Medicare fraud rise, lawyers who represent health-care providers face an increased number of enforcement actions against their clients. Part of the reason: Health care is big business. It consumed approximately 14.1 percent of the U.S. gross domestic product, for a total of more than $1.4 trillion in 2002, according to a June 2003 report issued by the Centers for Medicare and Medicaid Services. Government programs finance nearly half the nation’s health-care bill. Because the government spends more than a trillion dollars annually on health care, even a small percentage of fraud in the system produces large-dollar estimates of how much money criminals illegally take out of federal Medicare and Medicaid programs. But any fraud estimate can present a highly misleading picture of how much fraud and abuse takes place in our health-care system. The most official guess of the extent of health-care fraud comes from the Office of the Inspector General at the Department of Health and Human Services (HHS). In a 1997 audit of Medicare claims, the inspector general found that the system loses $23 billion, or 14 percent, to fraud and abuse. It’s fair to say that no one knows how much federal money is lost through outright fraud and abuse of the health-care system. According to Louis J. Freeh, a former director of the Federal Bureau of Investigation who testified before the Senate Select Committee on Aging on March 18, 1995: “No segment of the health-care delivery system is immune from fraud. . . . [A]ll types of recipients, providers and business people are committing fraud.” Medicare fraud generally is defined as any form of intentional deception or misrepresentation that may result in the government paying benefits. Congress and federal law enforcement officials have become aggressive in combating fraud and protecting the 39 million Americans covered by federal health-care programs. In February 1999, then-Secretary of Health and Human Services Donna Shalala claimed in a speech to the American Bar Association’s Health Care Section that government efforts had led to a dramatic decrease in health-care fraud and abuse, noting that Medicare’s $12.6 billion in erroneous claims in 1998 had dropped from $20.3 billion in 1997. However, an audit of HHS conducted by the Office of the Inspector General revealed that the declining numbers resulted primarily from a significant decrease in “documentation errors” by physicians who were responsible for 44 percent of Medicare overpayments in 1996 compared to 16.8 percent in 1997. The “documentation error” decline made up $8.7 billion of the $10.6 billion reduction in “improper” Part A and Part B payments, according to Part B Medicare Newsletter 99:1. It’s also clear that Congress reacted aggressively by passing a blizzard of new federal criminal statutes targeting the health-care industry, including the most recent major piece of legislation contained in the Health Insurance Portability and Accountability Act (HIPAA) of 1996. Congressional actions come on top of a mountain of rules and regulations � estimated to be more than 132,720 pages covering hospitals and physicians � and funding for an army of enforcement agents. This push to criminalize health-care fraud is either a long-overdue measure or a dangerous new trend toward criminalizing the practice of medicine. HIPAA defines a “federal health-care offense” as a violation of, or a conspiracy to violate, any of the nine current criminal statues or any of the four new health-care crimes created under the act: health-care fraud, embezzlement, false statements and obstruction of justice. As an example, under HIPAA, anyone knowingly and willfully executing a scheme to defraud any health-care benefit program or to obtain falsely money or property owned or under the control of any health-benefit program faces imprisonment of not more than 10 years, a $250,000 fine or both. Red Flags One of the most useful tools in the federal arsenal to combat health-care fraud is the False Claims Act (FCA). The federal FCA is an old statute, signed into law by then-President Abraham Lincoln in 1863 in response to widespread allegations of fraud in the Union Army. Today, prosecutors use this extremely broad statute to deal with every species of billing fraud. Additionally, the FCA covers criminal actions and civil fraud. The FCA provides generally that anyone who presents a false or fictitious claim to the government in the process of seeking reimbursement for medical goods or services is guilty of submitting a false claim. Punishment for each occurrence can be up to five years imprisonment and a $250,000 fine for individuals and a $500,000 fine for corporations. For civil offenses, the statute allows the assessment of treble damages plus civil penalties of $5,000 to $10,000 for each instance against persons who submit false claims. Billing fraud is probably the largest area of government enforcement interest and produces false-claims indictments for the billing of services and procedures not actually provided. Targeted groups include not only doctors, but also a broad variety of health-care practitioners, including nurses, chiropractors, podiatrists, emergency medical technicians, physical therapists, pharmacists, clinical psychologists, acupuncturists, dieticians, aides, and licensed or certified alternative medicine practitioners, such as homeopaths and naturopaths. FCA actions pose problems for prosecution and defense lawyers. It’s difficult for the government to conduct an FCA investigation properly. For defense lawyers, FCA cases are challenging. The FCA does not define billing fraud. Indeed, even identifying fraudulent claims that were not “medically necessary” can be difficult. How can the federal government define a term as medically ambiguous as “medical necessity” in a way that would get it right for every patient in every medical circumstance? In the current environment, however, the government generally attempts to prove that the provider “knowingly and willingly” submitted a false claim by pattern evidence or through live witnesses. But neither the government nor the defendant ever can be sure what the government’s definition will be in any given case. In this environment of heightened enforcement and legal uncertainty, innocent errors can appear suspicious. Repetitive billing patterns can raise red flags for investigators. With most medical practitioners using computer-driven billing, a simple error in the billing code, called current procedure terminology (CPT), can be repeated many times and result in numerous “false claims.” Additionally, the CPT codes change constantly; they rival the Internal Revenue Code for the most complex set of governmental regulations known to man. The FCA is a powerful tool and prosecutors use it extensively. According to the U.S. Department of Justice’s Bureau of Justice Statistics, criminal convictions for Medicare fraud have nearly doubled in four years, from 261 in 1998 to 517 in 2002. During roughly the same time period, Medicare funding recovered through the use of the FCA jumped to $1.49 billion in 2002, compared with $235 million in 1996. Let the provider, and his or her attorneys, beware. Charles W. Blau is a partner in Dallas’ Meadows, Owens, Collier, Reed, Cousins & Blau. He is board certified in criminal law by the Texas Board of Legal Specialization and holds an L.L.M. in taxation from Georgetown University. A federal prosecutor before entering private practice, he has successfully represented clients in health-care fraud cases.

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