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Law & Ethics

Fraud-And-Abuse Enforcement In Medicare: Finding Middle Ground

PROLOGUE: Malcolm Sparrow, the former British detective and author of the influential book License to Steal: How Fraud Bleeds America’s Health Care System, has called fraud and abuse in Medicare a "cancer in the system." The U.S. Department of Health and Human Services (HHS), under Donna Shalala, made detecting and eliminating fraud and abuse in Medicare one of its top priorities. The antifraud provisions of the Health Insurance Portability and Accountability Act of 1996, which authorized the Medicare Integrity Program, allowed the federal government to collect nearly a half-billion dollars in connection with health care fraud cases in FY 1999.

Amid the rhetoric and intense feelings on both sides of this issue, attorney Thomas Stanton proposes some middle ground in addressing fraud and abuse in Medicare. Stanton agrees that fraud and abuse "drain resources from Medicare at a time when resources are limited." Clearly there is the potential for savings as a result of concerted efforts to end fraud and abuse in Medicare, the author argues, but care must also be taken to address the legitimate concerns of providers caught in an aggressive antifraud net.

Stanton, a Washington, D.C., attorney, specializes in improving the design and administration of federal programs. He is a fellow of the National Academy of Public Administration and the Center for the Study of American Government at the Johns Hopkins University, where he teaches on the law of public institutions. He holds a law degree from Harvard and has written a book, A State of Risk (HarperCollins, 1991).

Abstract

 
Medicare fraud and abuse cost billions of dollars each year. Yet Congress is considering legislation to hamper enforcement. Providers’ anger over enforcement led to a congressional compromise several years ago to limit excesses. If providers and their advocates were to hobble enforcement, this could provoke a backlash. Instead, the existing compromise should be strengthened to accommodate legitimate provider concerns while allowing enforcement against major fraud and abuse. Government should further confine, structure, and check its discretion in applying the False Claims Act. Enhancing the Health Care Financing Administration’s capacity to ensure that contractors pay claims properly would remove additional points of friction.

On the other hand, fraud-and-abuse enforcement also has generated a substantial backlash among Medicare providers. The House of Representatives came close to passing legislation in 1998 that would have greatly weakened the False Claims Act, the government’s major legal tool for dealing with fraud and abuse. Legislation to diminish enforcement again is under consideration in the current Congress.

This is a good time to consider the virtues of finding some middle ground. If providers and their advocates succeed in hobbling fraud-and-abuse enforcement, yet another backlash—this time from those who believe enforcement is critical to the integrity of Medicare—can be expected. Taxpayers and experts both believe that health care fraud is widespread and that fraud and abuse are serious contributors to the rising costs of health care.¹ The progression of legislation over the years to strengthen Medicare enforcement indicates that these people too have their advocates in Congress and that these issues will not go away.

The case for middle ground also rests on the fact that good ground exists. The argument goes as follows: (1) Fraud and abuse are serious matters that drain resources from Medicare at a time when resources are limited; (2) the provider backlash resulted in a congressional compromise several years ago that helped to limit the kinds of excesses that had provoked especially hospitals into anger; and (3) further steps can be taken to accommodate legitimate provider concerns while allowing enforcement to address major kinds of fraud and abuse.

Medicare Fraud-And-Abuse Laws

Top Medicare Fraud-And-Abuse Laws Proposed Steps Toward Middle... NOTES

 
The search for middle ground begins with consideration of the two major laws involved in recent fraud-and-abuse enforcement actions: the False Claims Act and the Health Insurance Portability and Accountability Act (HIPAA) of 1996.

False Claims Act. The False Claims Act long predates the Health Care Financing Administration (HCFA) or Medicare. Indeed, the act became law in 1863, during the Civil War, as a tool to allow the government to deal with cheating by the defense contractors that supplied horses, munitions, and equipment to the Union Army. The False Claims Act allows the government to bring a civil action to deal with false claims that are made with actual knowledge, reckless disregard, or conscious disregard of the falsity of the claim.² Thus, the term Medicare fraud often includes not only intentional false statements but also those that are reckless or deliberately indifferent to the truth. For criminal penalties to apply, the government must prove beyond a reasonable doubt that there has been criminal intent to defraud. This is a difficult standard to meet.

The government has been at pains to assure providers that the statutory standard is quite different from negligent errors or mistakes. The chief counsel to the U.S. Department of Health and Human Services (HHS) inspector general has written, "The False Claims Act simply does not cover mistakes, errors, or negligence."³

The act allows private citizens to sue on behalf of the government, in so-called qui tam (literally, "who as well") actions, and to obtain a percentage of any recovered funds.⁴ In 1986 Congress enacted the False Claims Act Amendments that strengthened the act; clarified that the act applied to Medicare and Medicaid; and made it easier for private parties, called "relators," to bring cases on the government’s behalf. The 1986 amendments were part of a progression of laws that Congress has enacted to strengthen fraud-and-abuse enforcement, especially as it applies to Medicare.⁵

The False Claims Act is an unusual statute. In recent years private parties and the government have brought False Claims Act cases in a broad range of contexts, but especially against defense contractors and health care providers. To government attorneys, the act is an essential tool in the effort to crack down on fraud and abuse in Medicare and other health care programs. To providers, the act is one of the government’s most feared weapons against alleged fraud, because of the substantial potential penalties involved.

Private whistleblowers are the source of most of the government’s False Claims Act cases. Under the act, a relator begins the qui tam action by filing a complaint under seal (in secret) in federal court & and at the same time delivers a copy of the complaint and supporting evidence to the Department of Justice (DOJ). The complaint is not served initially on the respondent. The government then investigates the case, through the HHS Office of Inspector General (OIG) or the Federal Bureau of Investigation (FBI), and determines whether or not to intervene. This process can take several years. If the government intervenes, it takes primary responsibility for the litigation, although the relator remains a party. If the government does not intervene, the relator may choose to bring the action anyway. As a practical matter, it is hard for a relator to do this.

Qui tam actions offer a successful relator the prospect of potentially huge recoveries.⁶ On the other hand, the process of prosecuting a case can be painful for the relator. As a False Claims Act attorney has observed, "It is common for relators to suffer severe financial, social and/or personal consequences."⁷

From the perspective of a respondent, a False Claims Act case is a serious threat. Indeed, respondents have a strong incentive to settle a False Claims Act case with the government rather than fight. Under the act, a party is liable for triple damages and penalties up to $10,000 per false claim if convicted. As applied to Medicare, each false claim is an individual billing to Medicare for a specific medical service or item. The potential penalties can mount quickly. Also, the government can suspend or delay payment of later claims once a respondent is alleged to have submitted some claims falsely. The mere act of the government in bringing or taking over an action under the False Claims Act can hurt the reputation of an institution or other provider once the case becomes public.

Yet, from the enforcement agencies’ perspective, resources are so limited that without settlements, the government would be unlikely to prevail in many cases, regardless of the merits. The government has been hampered in recruitment and retention of personnel by the increasing disparities in compensation between the public and private sectors. A large provider can call upon top-flight legal talent, medical expertise, and skilled support that government attorneys can only dream about.

From the perspective of the administration of justice, the inability of the government to prosecute any large number of cases in court, and the tendency of cases to settle rather than go to court for a decision, have serious consequences for the perception of legitimacy of the process. The problem is that when the OIG or DOJ pursues a False Claims Act case, it is likely to come up with a settlement whether or not the respondent feels actually culpable. Attorneys for providers in False Claims Act cases express great resentment at being forced to settle cases for fear of the penalties, in money and potential damage to the provider’s reputation. In terms of the government’s longer-term interests, the ability to obtain a settlement in virtually any halfway reasonable False Claims Act case raises the specter that the patterns of true and expensive Medicare fraud may be different from the pattern of cases that the government settles.

HIPAA. HIPAA, also known as the Kassebaum-Kennedy Act, was landmark legislation that had a strong impact on the government’s efforts to address fraud and abuse. The law provided tougher sanctions and penalties and—most importantly—authorized the HCFA Medicare Integrity Program and a dedicated fund for fraud-and-abuse activities. HIPAA guaranteed funding from the Medicare Part A Trust Fund, through an account called the Healths Care Fraud and Abuse Control (HCFAC) Account, and divided the funds among HCFA, the OIG, the Office of General Counsel, and other parts of HHS, and the FBI and other parts of the DOJ.

HCFAC expenditures for fiscal year 1999 amounted to $137.2 million. The annual HCFAC allocations supplement the direct appropriations of HHS and the DOJ that are devoted, in part, to health care fraud enforcement. Separately, the FBI received in FY 1999 an additional $66 million in funding.

On the other side of the ledger, in FY 1999, as a result of the combined antifraud actions of the federal and state governments and others, the federal government collected $490 million in connection with health care fraud cases and matters; $44.4 million of the total was paid to private persons under qui tams provisions.

HIPAA’s funding (that is, HCFAC) provisions expire after FY 2003. The large returns to the government from fraud-and-abuse enforcement under HIPAA would seem to help create a constituency for reauthorization of the HCFAC account for subsequent years and a positive financial record to support budget scoring of substantial net revenues for any reauthorizing legislation. Meanwhile, HCFA’s Medicare Integrity Program outlays amount to a large part of available funding for all administrative costs of Medicare, and health care enforcement is a top priority for the OIG, DOJ, and FBI.

Proposed Steps Toward Middle Ground

Top Medicare Fraud-And-Abuse Laws Proposed Steps Toward Middle... NOTES

 
It is remarkable to contrast the progression of stronger antifraud legislation, at least until 1998, with the increasing squeeze on resources over the same period for the administration of Medicare outside of fraud-and-abuse enforcement. It would seem that all parties would be better off if Congress devoted added resources to allow sound management of the Medicare program, including the institution of effective systems and administrative measures to monitor and deter inappropriate claims before rather than after they become the subject of enforcement actions. Similarly, there is a need to improve the program’s design in ways that can reduce the program’s vulnerability to fraud and abuse. Improved systems and design can reduce the points of friction between providers and the law enforcement process and increase the government’s capacity to promptly assess fraud and abuse so that they can be contained.

Effectively administering the claims payment process. Despite its notable progress, and recognizing its efforts to obtain new legislation, HCFA continues to lack the capacity to administer the claims payment process effectively. There are several obstacles, including HCFA’s organizational structure (one single office needs the authority and capacity to oversee performance of all carriers and fiscal intermediaries), HCFA’s limited statutory powers to address performance shortcomings at carriers and intermediaries (including barriers to selecting and replacing these contractors based on merit), and limitations of the systems that the contractors use to make payments.⁸ Again, a major constraint relates to budget resources: HCFA’s payments per claim to carriers and fiscal intermediaries have declined to about one-third of the amount that HCFA paid in 1975.While some of this decline relates to improvements in technology, the fact remains that carriers and fiscal intermediaries have an incentive to pay claims quickly rather than accurately. Finally, although claims payment systems are seriously out of date, HCFA lacks the financial resources to modernize its systems and the specialized capacity to implement such an effort.

So far, in terms of dealing with fraud and abuse, the government essentially has muddled through. Although the underlying systems are limited, especially because one cannot sample data easily across systems of different claims administration contractors, investigators have been able to find ways to overlay intelligent inquiries onto the old systems. Moreover, to borrow the mixed metaphor discovered by Malcolm Sparrow, "Every time the enforcers turn over another rock, they find a new can of worms."

Sparrow, a specialist in law enforcement policy, points out that much of the fraud in health care, and in Medicare in particular, is not susceptible to easy detection.⁹ Indeed, a perpetrator of fraud might take special care to submit false claims that are superficially appropriate and well documented, just to avoid triggering a review or audit. Sparrow contends that the government lacks the necessary cognitive map of the incidence and severity of different types of fraud and that much more work is required to gather, analyze, and evaluate quantitatively sound information about fraud. Nevertheless, the government has made definite progress. The availability of whistleblowers helps to point government officials toward serious cases of fraud. In addition, smart analysts use systems and data to make queries and flag likely improper payments. The activities of HCFA’s new program-safeguard contractors promise improved ability to pinpoint fraud and abuse in the future.

But there are costs to muddling through. One cost is that paid by the U.S. taxpayer, in increased operating costs associated with fraud. Good systems, which are now lacking, could provide the information needed to nip many fraudulent schemes at an early stage rather than letting them grow into substantial losses. (One example of such systems is the superb antifraud measures of credit card payment systems.) Weak systems limit government’s ability to direct enforcement actions to the most pressing risk-based priorities. The government has not yet constructed a data warehouse that combines data from all carriers and intermediaries and allows intelligent analysis of patterns of fraud on a timely basis at multiple levels and over the entire country, although such work is under way at HCFA. HCFA needs an improved information base so that the government can conduct the in-depth analysis, evaluation, and investigation that could be cost-effective for the program.¹⁰ Access to high-quality information is essential to support analyses that can influence the government’s allocation of scarce resources to investigate and deal with the most likely sources of fraud and abuse.

The second cost is that of constituency for the fraud-and-abuse enforcement program. No one expects providers to welcome government oversight. On the other hand, I have conducted interviews with providers and their advocates who express anger at what they perceive to be injustices in fraud-and-abuse enforcement. Muddling through means that the government relies too heavily on enforcement to deal with many erroneous claims that otherwise might have been denied early or flagged for administrative action through a series of filters that, in a more capable system, could be adjusted promptly to deal with the new types of misbehavior. Disinvestment in HCFA’s administrative resources has meant that too much of the bill collection process is left to law enforcement.

That said, new resources alone will not be enough; Congress will need assurance that if funds are forthcoming, modernization can succeed. HCFA will need to prepare a systems modernization plan that can be implemented effectively. HCFA will not be able to reform its systems without major outside support. HCFA also will need to build substantial in-house capacity to oversee outside contractors and implement systems modernization.

Building a stronger constituency for law enforcement. Medicare is one of the largest federal programs. As such, it enjoys a strong constituency among beneficiaries. Beneficiaries also are interested in fraud-and-abuse enforcement, although their benefits are designed to flow regardless of the extent to which the government deals with providers’ false claims.

That many members of Congress backed the 1998 legislation to vitiate the False Claims Act stands as a warning that the officials concerned with Medicare fraud and abuse cannot assume that there will always be support for a strong law enforcement program. Many different enforcement agencies, notably the Internal Revenue Service (IRS), have learned this painful lesson.

Providers are the critical constituency that the law enforcement community must address. While providers are not likely to welcome government review of their billing, it is possible to reduce areas of unnecessary friction. This point has not been lost on HCFA, the OIG, or the DOJ. The leadership of all of these agencies has taken great pains to reassure responsible providers that they have little to fear from law enforcement.

Despite this reassurance, too many providers remain unconvinced. There are at least five reasons for this. First, any change in normative values takes time. To move, as then HCFA administrator Nancy-Ann Min DeParle said, "in just a few short years from relatively lax efforts to a zero tolerance policy on fraud, waste and abuse" requires providers to pay attention to their billing practices as they never have before.¹¹

Second, Medicare fraud-and-abuse enforcement comes at a difficult time for many providers. Many types of providers are under financial stress and find themselves squeezed by cost cutting in Medicare reimbursement rates. Providers care about helping patients, and some may justify upcoding and other padding as an effort to maintain quality of care by protecting the funding for that care. Whatever the cause, as Sparrow amply documents, some providers appear to prefer fighting to accommodating.

Third, some early government enforcement actions in the 1990s did in fact involve "heavy-handed" approaches, as the then deputy attorney general later acknowledged. Among the most unfortunate was the practice of some U.S. Attorneys’ offices of sending out demand letters to providers before the government had investigated the case. The problem was compounded by high potential penalties of the False Claims Act that gave providers an urgent incentive to negotiate with the government, for example, in the so-called laboratory unbundling cases.¹²

Fourth, many billing disputes involve complex and ambiguous issues. Government suffers from what economists call "information asymmetries." In other words, in many cases, and especially those involving coding, the government can find it hard to distinguish among proper billing, minor mistakes, and a deliberate effort to skim off small extra payments from a large number of claims.

Fifth, as discussed above, the False Claims Act encourages providers to settle billing disputes rather than to adjudicate them. Without adjudication by an impartial body, providers may pay to settle claims when they believe that the settlement is unfair. The issue is not whether the particular provider is right or wrong in these perceptions; the point is that the False Claims Act by its very nature builds resentment except in very clear cases of wrongdoing.

Defining prosecutorial discretion. Given that the False Claims Act is probably the most important legal tool available to deal with Medicare fraud and abuse, the government needs to be sure that its application is widely regarded as legitimate. It is useful here to consider applying the analytic framework proposed by Kenneth Culp Davis in his seminal work, Discretionary Justice.¹³

In its reliance on settlement rather than adjudication, the False Claims Act resembles many other areas where prosecutorial discretion is perhaps more important than the letter of the law. To deal with prosecutorial discretion, Davis proposes a several-part approach. He recommends that enforcement agencies first confine their discretion—that is, articulate the types of cases that the government will enforce and, either explicitly or by implication, those cases that will not be the subject of enforcement. Second, Davis wants agencies to structure their discretion. In other words, government should articulate the ways in which different levels of violation will be addressed. Third, Davis believes that agencies should check their discretion by creating a process for review of prosecutorial judgments before actions are brought.

Consider these approaches in the context of the government’s discretion to enforce the False Claims Act to deal with Medicare fraud and abuse. Given the limited resources available for law enforcement, even since HIPAA, the net result of the effort to confine, structure, and check discretion is intended to lead to more effective fraud-and-abuse enforcement directed toward cases that are more effective fraud-and-abuse enforcement directed toward cases that are more widely perceived to be important, rather than a diminution. Again, the government in many cases already has begun to adopt some form of each of these approaches.

Confining discretion. Officials at all three organizations concerned with fraud-and-abuse enforcement—HCFA, the OIG, and the DOJ—have sought to articulate limits upon the application of law to deal with improper billing practices. For example, the OIG chief counsel has stated:

We are very mindful of the difference between negligent errors and mistakes on one hand, and reckless or intentional conduct on the other...Even ethical physicians (and their staffs) make billing mistakes and errors through inadvertence or negligence. In part this is due to the complexity of Medicare rules. When billing errors, honest mistakes, or negligence result in improper claims, the physician may be asked to return the funds improperly claimed, but without penalties.¹⁴

Another government attorney urges that providers take a close look at the cases that the government brings. In the area of alleged upcoding, for example, the government will focus on two kinds of cases: (1) where a provider consistently bills so many services in a day that it is physically impossible or at least highly improbable, and (2) where a provider, perhaps with the benefit of coding consultants, systematically engages in a high degree of upcoding. The government also will try to check with providers in the locality to obtain a reasonable baseline of practices in the area.

In interviews, advocates for hospitals and laboratories expressed two concerns in this regard: First, they contend that rules of conduct may be expressed in OIG and DOJ enforcement activity rather than beforehand in rules. Second, they say that some OIG investigators and some Assistant U.S. Attorneys may not adhere to policies that are articulated in Washington at the higher levels of the OIG and the DOJ and that a provider will settle rather than fight over a particular set of facts and allegations.

It appears that much of the first issue relates to the jolt that the provider community felt regarding the behavioral change that is taking place with respect to Medicare claims and payments. Traditionally, as noted earlier, virtually all of the players understood relevant rules of proper billing. In the contentious teaching hospital cases, for example, the rules required that there be evidence that the teaching physician was physically present while the resident provided the service.¹⁵ While many violations of the billing rules once had been acceptable to the government, the focus on Medicare fraud and abuse in the mid-1990s meant that some of these suddenly provided grounds for litigation under the False Claims Act.

This context of changing public values makes it difficult to address the first complaint of hospital and laboratory advocates, that rules of conduct should be articulated in informal guidance or rule making before they become the subject of enforcement actions. The problem appears to be more subtle than that. Even if the rules of conduct are widely known, the problem seems to be that traditionally they were not enforced, even in cases that could support charges under the False Claims Act. The OIG now has taken some steps to deal with this issue by publishing "Special Fraud Alerts" and "Special Advisory Bulletins." Also, note that some physicians object vigorously to documentation guidelines, where there has been little enforcement action.¹⁶

HCFA itself spends more than $50 million annually on provider education. One reviewer, who comes from a provider perspective, suggested that HCFA greatly increase that effort. By contrast, to warn providers expressly before bringing enforcement actions in particular areas does not seem wise. This could be resource intensive and time-consuming. Express warnings also would favor the deliberate perpetrators of fraud, who could use the warning process to give themselves a free bite at the apple.

It may be easier for the enforcement agencies and HCFA to address the second complaint of provider advocates, that some officials may not adhere to established enforcement policies. HCFA, the OIG, and the DOJ might consider enacting rules to confine the discretion of government investigators and attorneys to help assure that they implement the major articulated policies. Including hypothetical examples can help to distinguish negligence or error from actionable conduct under the False Claims Act in ways that do not unreasonably tie prosecutors’ hands. Indeed, Davis argues that a regulation that sets forth hypotheticals may be preferable to hard-and-fast regulatory limits in areas such as Medicare fraud and abuse, where players have the potential to game any rigid set of rules. Such rule making might help to respond to the plea of some provider advocates that the top levels of the OIG and DOJ should assert more leadership over activists in their middle levels. The rule-making process itself might assist in bringing provider advocates to the table so that reasonable conversations can take place about devising hypothetical examples to deal with areas in which providers and their attorneys feel unjustly abused by the investigative process.

Structuring discretion. For Davis, the question in structuring discretion is, "How can administrators...regularize [the exercise of their discretionary power], organize it, produce order in it, so that their decisions affecting individual parties will achieve a higher quality of justice?"¹⁷ Davis lists seven tools for structuring discretion: open plans, open policy statements, open rules, open findings, open reasons, open precedents, and fair informal proceedings. He stresses openness as an important way to prevent arbitrary action.

In structuring discretion, too, the enforcement agencies have come far since the mid-1990s. Perhaps the most impressive documents to structure discretion are the two memoranda from the deputy attorney general to provide guidance on the use of the False Claims Act in civil health matters. The DOJ memorandum of 3 June 1998, "Guidance on the Use of the False Claims Act in Civil Health Care Matters," sets forth detailed requirements that the department is supposed to follow in determining whether facts exist that would reasonably support an allegation that the act was violated.

The HHS inspector general has suggested, as a further step toward openness, that the settlement agreements that the DOJ and the OIG sign with alleged violators of the False Claims Act also should be published. When final, these settlement agreements are available under the Freedom of Information Act. Many private law firms maintain complete sets of these agreements. However, if the settlement agreements were to be published for a wider audience, it would be valuable to expand the statement of facts that is recited at the beginning of each agreement. This could help to create a growing body of information about how the government applies its discretion. Given that the respondents in these settlement agreements generally deny the allegations of wrongdoing, it seems unlikely that the government would lose much negotiating power as to remedies if it insisted on a full statement of allegations.

In structuring discretion, government attorneys have the understandable fear that new forms of fraud may emerge that provider advocates could try to shield by reference to some existing precedent that emerged from a settlement in a different context. This issue should not be minimized. Yet the government might enhance the perceived legitimacy of its enforcement actions by pointing to well-founded allegations of wrongdoing that rise to the level of a violation of the False Claims Act. The publication of settlement agreements with detailed factual allegations could help to persuade policymakers who will be deliberating the reauthorization of HIPAA’s funding provisions, for example, of the legitimacy and importance of the government’s enforcement actions. It also should help to discourage some of the more marginal enforcement actions that provider advocates complain about.

Checking discretion. The process of checking discretion involves a system of institutional checks and balances. The first place to check discretion is in the supervisor’s review of the case that an investigator or attorney is developing. As a practical matter, some supervisors may lack the incentive or perhaps even the confidence to advise a subordinate that a case requires more substantiation or that it should not be brought. This is especially true in False Claims Act cases, where a settlement and monetary payment are possible even for less substantiated cases.

As one provider attorney puts it, the government needs to build "some countervailing view" into its process of case development. Otherwise, the incentives to go forward even with marginal cases almost always will prevail. Again, the 3 June 1998 memorandum of the deputy attorney general and subsequent amplification stand as an excellent model of the way that a government agency can structure discretion. The DOJ has established working groups that are responsible for assuring that each part of the department complies with the guidance set forth by the deputy attorney general. In an unusual step, Congress enforced this process by requiring the U.S. General Accounting Office (GAO) to provide reports on the progress of the DOJ in complying with the guidance.

Set against this progress is the continuing complaint of provider advocates that some parts of the DOJ may not be adhering to the guidance that the former deputy attorney general issued. The DOJ’s 3 February 1999 follow-up memorandum calls upon providers or their counsel to bring concerns about DOJ compliance with the guidance to higher levels at the department. However, conversations with provider advocates indicate that a fear of retaliation against their clients, whether well-founded or not, may inhibit some from doing this. Despite the impressive efforts of the then deputy attorney general, Medicare fraud and abuse remains an area in which distrust seems to come from many different sides.

Other models. Future research might look at examples of checked discretion in other fields of law to see if promising models might be adapted to the context of Medicare fraud-and-abuse enforcement. One model comes from the Federal Trade Commission (FTC). At the FTC, a Bureau of Economics that is independent from the FTC enforcement bureaus must review any case being developed. An analogous requirement in Medicare fraud-and-abuse enforcement might be to mandate active concurrence by a knowledgeable body within HCFA before a case is brought to a supervisor at the OIG or the DOJ for approval of preliminary action. (Of course, once again, this assumes that HCFA receives the necessary resources to carry out this function.) Such concurrence can help to deal with the perception of some outsiders that prosecutors lack adequate access to sophisticated medical judgments that can provide a context for understanding a particular provider claim or activity. While the OIG does communicate informally with HCFA to determine the basis for possible new enforcement actions, the recommendation here is to make that process more formal so that HCFA plays a role in concurring with major enforcement actions as they go forward. The 3 February 1999 deputy attorney general memorandum requires coordination between HCFA and the DOJ working groups, and this idea would bring that coordination with HCFA to bear on individual matters at an early stage of the process.

Any model that is developed needs to avoid committing the opposite mistake from the one being addressed. In other words, if the problem today is that activist investigators and attorneys may bring some marginal cases to settlement that never should have been brought at all, the opposite problem would be to create so many administrative and procedural hurdles that the perpetrators of fraud and abuse would have a field day. Achieving an appropriate balance may be difficult, but the continuing search for such a balance is essential as a way of protecting the prosecution and enforcement of Medicare fraud and abuse from any stigma of illegitimacy.

The responsible parties in government and the private sector have a stake in finding reasonable common ground so that trust is maintained in the Medicare program, among beneficiaries, providers, and the government. That common ground is likely to be found in three main areas. One is improved HCFA administration of the claims-paying process, including new funding for modernized systems and new authority to select and replace carriers and fiscal intermediaries based on merit. The government cannot afford to skimp on resources for such a major and growing program as Medicare. A second area is in efforts to redesign the Medicare program to reduce program vulnerabilities as well as points of friction. It is time to look at HCFA as an organization and to consider means of enhancing the government’s institutional capacity to administer the Medicare program. Third, but not least, is through continuing progress by the OIG and the DOJ to confine, structure, and check discretion so that False Claims Act cases are accepted broadly as legitimate and worthy of increased funding when the HIPAA funding provisions come up for reauthorization in 2003.

Editor's Notes

 
This paper is based on a study that the author conducted for the National Academy of Social Insurance (NASI). The author thanks the members and professional staff of the NASI Study Panel on Medicare’s Governance and Management for the support and insights that they contributed to this work. He also expresses gratitude to many other people who gave generously of their time and insights, including members of the Health Care Financing Administration, the Department of Justice, the Office of Inspector General, the U.S. General Accounting Office, AARP, former government health care attorneys, attorneys who bring qui tam litigation under the False Claims Act, and attorneys who advise providers and defend them in litigation. In addition, the author did speak with providers. However, the number of interviews was far too limited because of the time and resource constraints involved in preparing the original study. Of course, full responsibility for this work rests completely with the author.

NOTES

Top Medicare Fraud-And-Abuse Laws Proposed Steps Toward Middle... NOTES

 

1. AARP, America Speaks Out on Health Care Fraud: A Consumer Survey (Washington: AARP, 1999); and M.K. Sparrow, License to Steal: How Fraud Bleeds America’s Health Care System (Boulder, Colo.: Westview Press, 2000).
2. False Claims Act, 31 U.S. Code, sec. 3729.
3. D.M. Thornton, " ‘Sentinel Effect’ Shows Fraud Control Effort Works," Journal of Health Law (Fall 1999): 493–502.
4. A qui tam action is a civil, statutory proceeding brought by a third party to redress a wrong against an institution. The plaintiff sues "as well" for the institution as for him/herself.
5. See American Health Lawyers Association, Fraud and Abuse: Do Current Laws Protect the Public Interest? (Report on a colloquium held 29–30 January 1999), 12–13, <www.healthlawyers.org> (March 2001).
6. See, for example, S.R. Slade, "The False Claims Act and Health Care Fraud: How Far Does the Act Reach?" <www.fraudbuster.com/page10.html> (March 2001).
7. R.L. Vogel, "Deciding Whether to File a Qui Tam Suit," <www.fraudbuster.com/page6.html> (March 2001).
8. U.S. General Accounting Office, Medicare Contractors : Further Improvement Needed in Headquarters and Regional Office Oversight, Pub. no. GAO/HEHS-00-46 (Washington: GAO, 2000); and see E. Steinhouse, "Government Contracting in the Medicare Program" (Report prepared for the Study Panel on Medicare’s Governance and Management of the National Academy of Social Insurance, Washington, March 2001).
9. Sparrow, License to Steal, 1–36.
10. GAO, Medicare: HCFA Could Do More to Identify and Collect Overpayments, Pub. no. GAO/HEHS/AIMD-00-304 (Washington: GAO, 2000), 14.
11. Health Care Financing Administration, "Medicare Governance," testimony of Nancy-Ann Min DeParle before the Senate Finance Committee, 4 May 2000.
12. GAO, Medicare Fraud and Abuse: DOJ Has Made Progress in Implementing False Claims Act Guidance, Pub. no. GAO/HEHS-00-73 (Washington: GAO, 2000), 7–9.
13. K.C. Davis, Discretionary Justice: A Preliminary Inquiry (Urbana: University of Illinois Press, 1969).
14. See Thornton, " ‘Sentinel Effect,’ " 499. Thornton cites the attorney general in support of his position. A similar HCFA message is found in HCFA, The Medicare Integrity Program: Pay It Right! Pub. no. HCFA 02201 (Washington: HCFA, 2000).
15. GAO, Medicare: Concerns with Physicians at Teaching Hospitals (PATH) Audits, Pub. no. GAO/HEHS-98-174 (Washington: GAO, 1998), 15.
16. See, for example, American Medical Association, House of Delegates, Resolution 205, "Rejection of OIG’s Compliance Program Guidance for Individual and Small Group Physician’s Practices," 25 October 2000.
17. Davis, Discretionary Justice, 97.

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