April 4, 2014

Healthcare Fraud Investigation

Healthcare Fraud Investigation”

Jerry Levine, MD, MBA, CPE
Senior Physician Executive Advisor
Coors Healthcare Solutions

Not a week goes by without reading a news story of potential/admitted fraud and abuse being investigated by one of the many arms of the government- OIG; DOJ; CMS (Medicare Trust Fund Strike Force)- as well as Whistleblower suits, etc. A recent summary of hospital settlements involving physician kickbacks in 2013 is sobering, to say the least!1 In fact, healthcare fraud investigations recovered $4.3 Billion in FY 2013 alone, with collections of $19.2 billion in the last four years. With the rate of return on the costs of fraud investigation from 2011 to 2013 on the order of $8.10 TO $1 spent, we can be sure that there will only be a continued increase in these activities.2

Let’s look at a very recent settlement to get a better idea of areas that are “red flags” to investigators. In early March 2014, with the jury selection slated to start, Halifax Health in Daytona Beach, Florida, reached an $85 million settlement with prosecutors. This settlement was to resolve the issue of whether the organization’s physician compensation deals violated Stark conflict of interest rules.3 The suit stemmed from a whistleblower suit from the former physician services director at Halifax Health. She claimed that some of the employed physician payments looked “illegal” to her. When the agreements did not get modified, she filed the lawsuit. The hospital contended that their lawyers had approved the original contracts and stated that they did not believe they had done anything wrong. Though this deal is still preliminary, its significance to that hospital is substantial- the $ 85 million is more than eight times its annual operating margin and nearly 18% of its annual revenue!

Though the DOJ may be toughening its Stark enforcement (Stark represents a very complex set of rules prohibiting payments that encourage unnecessary medical services and hence drive up the costs of federal healthcare), many observers believe that as more hospitals are signing integration contracts, potential Stark issues are being watched by attorneys specializing in this area and that whistleblowers are looking for a large payout (the Halifax whistleblower may be entitled to $ 13 million!) So, what we are seeing are hospitals and physicians caught between competing pressures- public policy ( ACA), market forces leading health systems to move toward integration and better care coordination and to reduce their costs, and the federal government out to keep its tough stance on fraud and abuse, as noted above. Thus, strict diligence to understanding Fair Market Value, the Stark regulations, and even listening to potential whistleblowers and their concerns are all necessary. Civil penalties and potential jail time for the executives and physicians, as well as a Corporate Integrity Agreement for the hospital, are real and worrisome issues!

Coors Healthcare Solutions has a proven track record for understanding physician recruiting, contracting, and retention. Attention to these issues is crucial for both hospitals and physicians. We can help you understand the issues of FMV and appropriate contracting, as well as work with your legal team in the process of negotiation. Please give us a call to discuss it further with you!

Just one final comment of historical interest- the suit against Halifax was based on the False Claims Act, which is a Civil War era law that makes it a civil violation to over-bill government programs. It is also known as “Lincoln’s Law“!4




1. http://www.beckershospitalreview.com/legal-regulatory-issues/7-hospital-settlements-involving-physician-kickbacks-referrals-in-2013.html

2. http://www.modernhealthcare.com/article/20140226/NEWS/302269955/healthcare-fraud-investigations-recover-4-3b-in-fy-2013?AllowView=VXQ0UnpwZTVDUGFZL1IzSkUvSHRlRU9yalVvZEErTlk=&utm_campaign=am

3. http://www.modernhealthcare.com/article/20140303/NEWS/303039970/fla-system-reaches-85m-stark-settlement?AllowView=VXQ0UnpwZTVDZlNkL1IzSkUvSHRlRU9xajA4ZEErRmQ=&utm_campaign=am

4. http://www.all-about-qui-tam.org/fca_history.shtml

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