Medicaid pays for approximately 20% of all healthcare expenses in the United States, over $600 billion each year. Well over 500,000 healthcare providers, ranging from hospital chains to individual doctors to ambulance helicopter pilots, receive payments from Medicaid every year. Inevitably a few of the providers will try to defraud the program to line their own pockets. Medicaid fraud costs the taxpayers of the United States billions of dollars every year.
- What is Medicaid Fraud?
- Medicaid Fraud and the False Claims Act
- Medicaid Fraud Investigations
- Medicaid Fraud Control Units
- Medicaid Fraud Penalties
- Berger Montague’s Successful Medicaid Fraud Cases
- Report Medicaid Fraud
What is Medicaid Fraud?
Applications for reimbursement by Medicaid require a healthcare provider to sign a certification stating that the information contained in the application is true to the best of the provider’s belief. In most situations they must also certify that the procedure or product for which reimbursement is sought is medically necessary.
Medicaid fraud encompasses any situation where a healthcare provider makes a false certification in order to take money from the program they have not earned. Of course, the money is taken not only from the government, but also from the payroll taxes of every worker in America. Even worse, some kinds of Medicaid fraud endanger patients.
Medicaid Fraud Examples
Listing all the forms of fraud that greedy providers have tried would be impossible. Here are a few of the most common forms:
- False claims that services were provided, when they were not. A typical example would be billing for a medical checkup that did not occur. Recently, there have been instances where pharmacists falsely claimed that opioids had been provided to Medicaid-eligible patients, when in fact the pharmacist held them for personal use.
- False certifications that a medical procedure or a prescription was medically necessary. For example, a doctor may order chest x-rays of healthy patients, ostensibly to check for tuberculosis, when there is no reason to suspect that tuberculosis is present. In some cases, such as unnecessary surgical procedures, fraud can endanger patients as well as line a doctor’s pockets.
- “Upcoding,” where a provider completes a relatively simple procedure and seeks reimbursement for a more lucrative procedure. For example, a hospital might bill for an anesthesia where a patient had only received a sedative for minor surgery. For services that are billed on an hourly basis, such as physical therapy, misrepresenting the number of hours that a patient received treatment is considered upcoding.
- A variation on upcoding is misrepresentation of the proper billing rate for a healthcare provider. A common example is permitting a nurse to handle a procedure that should be performed by a doctor, and billing for the nurse’s services as if he were a doctor. In this example, the fraud may also endanger the patient.
Medicaid Fraud and the False Claims Act
While Medicaid fraud can be pursued by the government sua sponte, many times a Medicaid fraud investigation is initiated by the filing of a False Claims Act case. If an individual or group of individuals has evidence of Medicaid fraud, they can seek to file a lawsuit under the Federal or State False Claims Acts. The False Claims Act allows for individuals with such evidence and knowledge to file cases with the government. If the government recovers money from such a case, the individual may be entitled to an award or a percentage of the recovery.
Commencing a Medicaid Fraud Investigation
If the individual or group of individuals has a meritorious case and an attorney files a False Claims Act case on their behalf, an investigation into the case commences. The Medicaid fraud investigation is initiated by the filing of a case and the serving of the complaint and all material evidence on the government. After the government is served, the government reaches out to the plaintiff-whistleblower’s attorney to schedule an interview. During that interview, the government assess the credibility of the whistleblower and gathers information to assist in its investigation.
Medicaid Fraud Investigation
After the interview is complete, the government investigates while the False Claims Act case is under seal. During the investigation, the prosecutor assigned to the case will likely reach out to the government agency involved to obtain the agency’s thoughts/opinion on the case, gather and review the government’s own claims data to assess the size of the case, and decide on a plan to investigate the facts.
In order to investigate the facts, the government might issue a “civil investigatory demand” or “CID” to the alleged defendants to obtain documents, while simultaneously seek and interview former employees. If the government wishes, it might reach out to the alleged defendant to interview or depose current company employees or present the allegations in the complaint to the defendant (without disclosing the whistleblower’s identity or the fact that a case has been filed) and ask the defendant to respond.
Concluding a Medicaid Fraud Investigation
At the end of the government’s investigation of a Medicaid False Claims Act case, the government will make a decision as to whether or not it will intervene or pursue the case or decline the case. At that time, the case comes out from under seal and, if the case goes forward, the alleged defendant is served with the complaint. If the case is declined and the whistleblower does not seek to litigate the case, the case is voluntarily dismissed by the government and whistleblower.
Medicaid Fraud Control Units
In combating Medicaid fraud, State Medicaid Fraud Control Units (“MFCU”s) are tasked with investigating and prosecuting Medicaid provider fraud and patient abuse and neglect. MFCUs are also charged with providing for the collection, or referral for collection, of overpayments they identify.
Provisions of the federal Social Security Act (“SSA”) require each State to operate a MFCU, unless the Secretary of Health and Human Services determines that (1) the operation of a Unit would not be cost-effective because minimal Medicaid fraud exists in a particular State and (2) the State has other adequate safeguards to protect beneficiaries from abuse or neglect. MFCUs operate in 49 States and the District of Columbia. (North Dakota and the territories of American Samoa, Guam, the Northern Marianas Islands, Puerto Rico, and the U.S. Virgin Islands have not established Units).
Medicaid Fraud Control Unit Guidelines
MFCUs must meet several requirements established by the SSA and Federal regulations. For example, each Unit must:
- Be a single, identifiable entity of State Government, separate and distinct from the State Medicaid agency;
- Employ an interdisciplinary staff that consists of at least an investigator, an auditor, and an attorney;
- Develop a formal agreement, such as a memorandum of understanding, describing the Unit’s relationship with the State Medicaid agency; and
- Have either statewide authority to prosecute cases or formal procedures to refer suspected criminal violations to an agency with such authority.
Each MFCU receives Federal reimbursement for 75% percent of its total expenditures, with State funds contributing the remaining 25%. For 2017, combined Federal and State expenditures for MFCUs totaled about $276 million (with $207 million of that amount representing Federal funds).
The U.S. Department of Health & Human Services, Office of Inspector General (“OIG”) oversees the MFCU grant program by recertifying Units, conducting onsite reviews of Units, providing technical assistance to Units, and maintaining key statistical data about Unit caseloads and outcomes.
According to the OIG’s 2017 Annual Report, MFCUs recovered $1.8 billion in misappropriated Medicaid funds – of which $1.1 billion came from civil cases and $693 million from criminal cases. The civil funds resulted from 961 civil settlements and judgments; the criminal funds were derived from 1,528 criminal convictions (of which 1,157 were fraud cases and 371 were patient abuse and neglect cases), which resulted in 1,181 individuals and entities being excluded from federally funded health programs.
The National Association of Medicaid Fraud Control Units
In 1978, the National Association of Medicaid Fraud Control Units (“NAMFCU”) was created to provide a forum for the MFCUs to have a mutual exchange of information, to foster interstate cooperation, and to improve the quality of Medicaid fraud and resident abuse investigations and prosecutions through training programs.
NAMFCU is an organization of officials from the various state agencies that are responsible for investigating Medicaid fraud. NAMFCU helps coordinate national investigations and prosecution of Medicaid Fraud for the states. NAMFCU facilitates joint discussions of cases involving fraud where more than one state’s Medicaid system has been impacted. While membership in NAMFCU is voluntary, all 50 federally certified MFCUs are members of the Association. NAMFCU maintains its offices at the National Association of Attorneys General in Washington, D.C.
Medicaid Fraud Penalties
The potential penalties for healthcare providers found liable for committing Medicaid fraud are significant. If an entity is liable for Medicaid fraud in violation of the False Claims Act, the possible penalties include: civil monetary penalties for each false claim submitted, treble damages based on the amount defrauded from Medicaid, costs, fees and expenses. If you have knowledge about potential Medicaid fraud, you may pursue a qui tam lawsuit as a whistleblower and possibly receive a portion of these Medicaid fraud penalties.
Incentives for Whistleblowers to Report Medicaid Fraud
The False Claims Act allows for individuals with evidence and knowledge of fraud committed against the government to file a case on behalf of the government. If the government recovers money from such a case, the individual may be entitled to an award or a percentage of the recovery, ranging from 15-30% of the recovery.
Specific Medicaid Fraud Penalties
There have been many successful Medicaid fraud cases brought by whistleblowers pursuant to the Federal and State False Claims Acts against a variety of healthcare providers, such as hospitals, pharmacies and drug companies. The penalties in these cases have included:
- Treble Damages: This is the most significant penalty in Medicaid fraud cases. Damages are calculated by taking the amount fraudulently received from the government in reimbursement (or fraudulently underpaid to the government) and multiplying that amount by three. 31 U.S.C. § 3729(a)(1). This is referred to as “treble damages.”
- Civil Monetary Penalties: Civil monetary penalties are assessed on a per claim basis. This means that each individual false claim carries its own penalty. Thus, for a court to impose a civil penalty, it must first determine how many distinct violations occurred. The current minimum penalty per claim is $10,957, and the current maximum penalty per claim is $21,916.
- Attorneys’ Fees, Costs and Expenses: In addition, a successful whistleblower is entitled to the reimbursement of attorneys’ fees, costs, and expenses.
Berger Montague’s Successful Medicaid Fraud Cases
Berger Montague has a long track record of bringing successful Medicaid fraud cases on behalf of qui tam whistleblowers and recovering hundreds of millions of dollars for the government. Some of the Firm’s noteworthy cases include:
- United States ex rel. Rinehart v. Walgreen Co., Case No. 2:14-cv-0148 (E.D. Cal): This Medicaid fraud case against Walgreens settled for $9.86 million in April 2017. The settlement resolved allegations that Walgreens falsely billed California’s Medicaid Program, Medi-Cal, in violation of the False Claims Act and the California False Claims Act. The lawsuit alleged that Walgreens improperly billed Medi-Cal for certain prescription drugs, “Code 1” drugs, appearing on Medi-Cal’s formulary list. As alleged, Walgreens knowingly failed to comply with applicable “Code 1” drug restrictions and documentation requirements by failing to ensure that the drugs were prescribed for the requisite diagnoses prior to dispensing the drugs to Medi-Cal beneficiaries.
- United States ex rel. Streck v. AstraZeneca, LP, et al., C.A. No. 08-5135 (E.D. Pa.): A Medicaid rebate fraud case which settled in 2015 for a total of $55.5 million against three pharmaceutical manufacturers: AstraZeneca, Cephalon, and Biogen.
- United States ex rel. Kieff and LaCorte v. Wyeth and Pfizer, Inc., Nos. 03-12366 and 06-11724-DPW (D. Mass.): a Medicaid rebate fraud case involving Wyeth’s acid-reflux drug, Protonix, which settled for $784.6 million in April 2016.
Contact Us to Report Medicaid Fraud
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