A Brief
Primer on Pertinent Federal Criminal Statutes Related to Health
Care Fraud
While obviously the False Claims
Act, 31 U.S.C. 3729-33, as amended ("FCA"), is a civil statute,
it is important to bear in mind that there are many criminal
statutes, particularly those relating specifically to health
care fraud, that are close analogs. When dealing with either a
qui tam case, or a FCA action initiated by the Department of
Justice, it is essential to consider if there is any basis
present for possible criminal liability as well. This is a
particularly important consideration when initiating settlement
discussions with the government, responding to civil FCA
discovery requests, or in terms of handling any type of
purported "civil" or "administrative" investigation. While any
extensive analysis of pertinent criminal statutes is beyond the
scope of this discussion, the following brief outline hopefully
will be of assistance.
General Criminal
Statutes
There are a number of
long-standing criminal statutes that can be invoked against
health care providers, even though they predate the current
emphasis on combating health care fraud.
a. Obstruction of
Federal Audit.
18 U.S.C. 1516
is particularly important to health care providers, since audits
are the primary tool used by the government to monitor provider
performance as well as usually being the initial step in any
investigation. The statute imposes substantial penalties upon
any person or entity that receives in excess of $100,000 from
the government in any year and "with intent to deceive or
defraud the United States, endeavors to influence, obstruct, or
impede a Federal auditor in the performance of official duties"
relating to that person or entity. Of particular importance is
the rather expansive language of "influence, obstruct, or
impede" employed in the statute. Certain parameters are
clear--for example furnishing bogus checks and bank statements
to auditors triggers the statute. In United States v. Henry,
1993 U.S. App. LEXIS 31191 (1993), during an audit, defendants
attempted to conceal fraud by creating and submitting false
checks and bank statements. See also United States v. Jones,
2002 U.S. App. LEXIS 7526 (2002). However it would appear that
any effort to mislead or confound auditors could conceivably
also invoke liability under the statute. Surprisingly, despite
its potentially expansive sweep, the statute has seldom been
employed.
b. Mail Fraud and Wire
Fraud.
18 U.S.C. 1341 and 1343
make it a separate violation of federal criminal law to utilize
either the mails or private or commercial interstate carriers
(such as Federal Express), or wire communications (such as
faxes, telephones, and e-mail or electronic forms of
transmission), to accomplish an illegal act, such as presenting
a false claim to Medicare, state health plan or private
insurer. A fundamental advantage to the government in utilizing
the mail fraud statute is that 18 U.S.C. 1345
provides for injunctive relief to stop an alleged fraud and
freeze the defendant's assets. Section 1345 (a)(1)(C)
specifically states that the injunctive process can be used in
connection with persons "committing or about to commit a Federal
health care offense."
c. Presenting False,
Fictitious or Fraudulent Claims.
18 U.S.C. 287 --
frequently referred to as the "criminal false claims act" -- is
generic in that it applies to any kind of false claim submitted
to the government, including those relating to Medicare and
state health plans. Criminal liability results from the
submission of any claim "upon or against the United States. . .
knowing such claim to be false, fictitious or fraudulent ..."
Compare the "knowing" criterion governing this section with the
more rigorous "willful" standard employed in 18 U.S.C.
1001, discussed below.
d. Conspiracy to
Defraud the Government.
18 U.S.C. 286
adds a significant dimension to 287. It mandates that whoever
enters into "any agreement, combination, conspiracy to defraud
the United States....by obtaining or aiding to obtain the
payment ....of any false, fictitious or fraudulent claim" shall
be subject to a separate criminal penalty. Once again,
the language is subject to an expansive reading, since anyone
"aiding" the payment of false claims conceivably becomes
criminally liable.
e. Making False
Statements to the Government.
18 U.S.C. 1001
is a real workhorse in federal prosecutions. It attaches
criminal liability to anyone who "knowing and willfully
falsifies, conceals or covers up ... a material fact, or
makes any false, fictitious or fraudulent statements or
representations, or makes or uses any false writing or document
knowing the same to contain any false, fictitious or fraudulent
statement or entry...." (emphasis supplied). Section 1001
frequently is employed to prosecute individuals or entities who
make misleading or false statements to, or conceal facts from,
federal investigators during audits and investigations. In this
regard, it is vital to note that the statute reaches concealment
or falsification of a material fact, as well as affirmatively
making false or fraudulent statements. However, the state of
mind requirement is somewhat stringent, in that the government
must prove that the defendant acting "willfully." See
United States v. Jain, 93 F.3d 436, 441 (8th Cir. 1996)
(discussion of "willfully" within the context of the Federal
Healthcare Anti-kickback Act, 42 U.S.C. 1320a-7b).
For obvious reasons, this is a particularly important statute to
consider whenever one becomes subject to a federal
investigation.
f. RICO.
The Racketeer Influenced and
Corrupt Organizations Act ("RICO"), 18 U.S.C. 1961 et
seq., recently has become quite prominent in health
care fraud prosecutions, although it can serve as the basis for
a civil cause of action as well. Simply because the statute
appears to be directed at organized crime does not mean that it
should not be reviewed by even small-scale providers. The
complexities of RICO rendered it unsuitable for analysis here,
but there are many helpful discussions of the statute
available. See, e.g., Jones et al.,
"Racketeer Influenced and Corrupt Organizations," 39 Am.
Crim. L. Rev. 977 (2002); Jaff, "Goliath as Victim: Can the
State Bring a Civil Action under RICO?," 3 Quinnipiac Health
L.J. 5 (1999/2000).
Criminal Health
Care Fraud Statutes
g. Making or Causing to
be Made False Statements or Representations
42 U.S.C. 1320a-7b(a)
is a provision of the Social Security Act which renders it a
felony to make or cause to be made "any false statement or
representation of a material fact" in any application for
payment or benefit under a Federal health care program. The
operative language is "any false statement or representation"
(emphasis supplied) of a material fact, which encompasses
requests for reimbursement, cost reports, certifications that
services were performed by licensed physicians, as well as
practically every other kind of representation to Medicare or
Medicaid. Moreover, the section also imposes an affirmative
obligation upon a recipient of any such payment or benefit to
fully disclose any information that would affect "his initial or
continued right to any such benefit or payment." This
obligation also extends to anyone who applies for benefits on
behalf of a third party. Conversion of a payment or benefit
received by another is also rendered a felony under the
section. Individuals who submit requests for reimbursement
falsely representing that services were performed by a physician
also fall afoul of the statute.
h. Making False
Statements with Respect to Conditions or Operations of
Institutions.
42 U.S.C. 1320a-7b(c)
is of particular import to hospitals, skilled nursing
facilities, intermediate care facilities and home health
providers. It imposes criminal sanctions for making
misrepresentations in connection with gaining initial
certification or re-certification where such certification is
necessary in order to participate in Medicare or under a state
health care program. The statute mentions explicitly the making
of false statements or representations of material fact in
connection with "the conditions or operation of any institution,
facility or entity..." The statute also targets any false
statements or misrepresentations made in connection with
information required to be furnished by virtue of 42
U.S.C. 1320a-3a, which mandates the disclosure of
related ownership or control interests.
i. Kickbacks.
The Federal Healthcare
Anti-kickback Act, 42 U.S.C. 1320a-7b(b),
mandates severe criminal penalties or mandatory exclusion from
Federal health care programs. The statute reaches any "any plan
or program that provides health benefits, whether directly,
through insurance, or otherwise, which is funded directly, in
whole or in part by the United States Government [with the
exception of federal employee health plans: 5 U.S.C. 8901 et
seq.]. 1320a-7b(f).
According to a 1994 OIG Fraud
Alert, "the anti-kickback statute penalizes anyone who knowingly
and willfully solicits, receives, offers or pays a remuneration
in cash or kind to induce or in return for:
- referring an individual to a
person for the furnishing or arranging for the furnishing,
of any item or service payable under [a Federal health care
program]; or
- purchasing, leasing or
ordering, or arranging for or recommending purchasing,
leasing or ordering, any good facility, service, or item
payable under [a Federal health care program]."
Thus the statute reaches both
those who would tender illegal inducements as well as those who
receive them. Kickbacks recently have become a rather
significant enforcement target for the federal government. In
part, this is a result of the statute's rather expansive and
ill-defined language (e.g., remuneration "in kind";
"recommending"), resulting in a rather broad potential reach.
Another reason is that the government has begun to contend that
illegal kickbacks are also violations of the False Claims Act
and subject to the extraordinary punitive penalties imposed by
that civil statute. Therefore, healthcare providers are
potentially subject to the double whammy of a criminal penalty
and civil damages arising from exactly the same actions (not to
mention OIG-imposed administrative sanctions as well). There is
no question but that the Anti-kickback Act is second only to the
False Claims Act in terms of being one of the most critical
statutes affecting health care providers.
j. Disclosure of
ownership or control in related organizations.
42 U.S.C. 1320a-3
directs that a Medicare or state health care provider must
disclose to CMS the identity of any person with an ownership
interest, or identify any subcontractor in which the entity has
a 5% or greater interest. The purpose of this provision is to
insure that all contractual transactions are truly at
arms-length and do not involve subversion of bargaining by the
two supposedly separate parties actually being controlled by the
same individuals or entities. Any failure to make full,
complete and accurate disclosure subjects the provider to
criminal prosecution under 42 U.S.C. 1320a-7b(c).
HIPAA Criminal
Statutes
The determination of the
government to devote enhanced resources to underwriting
enforcement initiatives to combat health care fraud became even
more evident on August 21, 1996, when President Clinton signed
the Health Insurance Portability and Accountability Act of 1996
(Pub. L. 104-191) ("HIPAA"). Title II of the Act, captioned
"Preventing Health Care Fraud and Abuse," encompasses a package
of new offenses, enhanced penalties, increased investigative
funding, and inventive enforcement mechanisms. For example, the
"Fraud and Abuse Control Program" contained in Section
201 provides enhanced enforcement funding drawn from
the civil penalties and criminal fines assessed for health care
fraud violations, including the requirement that offending
health care providers who be required to reimburse the costs of
the government's investigation. Section 204
expands the Medicare criminal sanction provisions so that they
apply to all federal health care programs (with the
exception of federal employee benefit programs). In addition,
the act expands the government's current enforcement focus on
Medicare and Medicaid programs by creating a host of new
criminal offenses (Sections 241-246) and
innovative enforcement devices (Sections 248-249)
which encompass all health care delivery systems, regardless
of payer. It is important to recognize that all these new
offense require proof that the act was done "knowingly and
willfully" which is the usual stringent criminal law standard.
Section 241 (18
U.S.C. 24) defines this new category of "health care
offense" as involving the violation of specified federal
criminal laws (e.g., mail fraud or conspiracy) in connection
with a health care benefit, including benefits derived from
private insurers. In addition, five new health care fraud
offenses are created by the act. Each new offense specifies
substantial penalties of incarceration and/or fines.
The first HIPAA criminal offense
is found in section 242 (18 U.S.C. 1347), which
establishes a federal offense of "health care fraud." This
offense includes knowingly and willfully executing a scheme or
artifice to defraud a health care benefit program or to obtain
by means of false or fraudulent pretenses, representations or
promises any of the money of the health care benefit program in
connection with the delivery of or payment for health care
benefits, items or services.
Section 243 (18 U.S.C.
669) creates the next HIPAA offense of theft or
embezzlement in connection with health care. This offense
consists of knowingly and willfully embezzling or stealing or
converting to the use of any person, other than the rightful
owner, or intentionally misapplying, any money or other assets
of a health care benefit plan.
Giving false statements relating
to health care matters is the third HIPAA offense and is found
in Section 244 (18 U.S.C. 1035). This
provision forbids knowingly and willfully lying or covering up a
material fact or making false statements in connection with the
delivery of, or payment for, health care benefits.
Section 245 (18 U.S.C.
1518) makes it a criminal offense to obstruct, or
attempt to obstruct, the criminal investigation of health care
fraud offenses. The focus of this offense is willfully
preventing, obstructing, misleading or delaying the flow of
information or records to investigators engaged in investigating
a possible federal health care offense, or attempting to do any
of these actions. Note that this statute has a significantly
broader potential sweep than 18 U.S.C. 15416, discussed above,
which focuses exclusively upon frustrating audits.
The fifth and final HIPAA offense
(Section 246) (effects an amendment of the
general federal money laundering statute ([18 U.S.C.
1956(a)(1)] to include money laundering relating to a
federal health care fraud offense.
Under Section 248 (18
U.S.C. 3486) of HIPAA, the Attorney General may issue
subpoenas for documents in connection with the investigation of
any health care offense, whether it involves a public or private
insurer.
HIPAA also granted the government
enhanced authority (Section 247) under 18 U.S.C. 1345
to secure injunctive relief and seek an federal court order
freezing the assets of those suspected of committing health care
offenses. The government has not been slow to employ this new
authority; see United States v. Chang, 937 F. Supp.
1186 (D. Md. 1996). In addition, Section 249 (18 U.S.C.
982) permits the forfeiture of real and personal
property derived directly or indirectly from the commission of a
health care fraud offense.
It is advisable that health care
providers review these HIPAA criminal offenses. The five new
offenses, coupled with the earlier criminal statutes discussed
in this article, afford the government a vast and varied array
of statutes upon which to predicate a criminal prosecution.
Particularly in light of section 204 of the Act, which makes
certain criminal provisions previously applicable only to
Medicare and Medicaid (including the Anti-kickback law) now
applicable to all federal health care programs (other than
federal employee health benefit plans), and section 241 defining
"health care offense" to include offenses against private
insurers as well as federal programs, providers should undertake
compliance reviews and legal audits of their operations to
insure that they are not accruing potential liability under any
of these manifold criminal statutes, as well as the Civil False
Claims Act.
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