Federal fraud and abuse laws

• Federal Civil Monetary Penalties
• Anti-Kickback Statute
• Stark I, II
• Federal Civil False Claims Act

Health Care Program Administration Statutes

• Exclusion from Federal Health Care Programs
• Fraud and Abuse Control Program
• Health Care Fraud and Abuse Control Account
• Medicare Integrity Program
• Beneficiary Incentive Programs
• Safe Harbors; Advisory Opinions; Fraud Alerts

HIPAA Criminal Statutes

• Health Care Fraud and Abuse Data Collection Program
• Health Care Fraud and Scheme
• Theft or Embezzlement in Connection with Health Care Benefit Program
• Obstruction of Criminal Investigations of Health Care Offenses
• False Statements Relating to Health Care Matters

Fraud and Abuse Statutes

Federal Civil Monetary Penalties (Section 1128A of the Social Security Act/42 USC 1320a-7aa). Health care professionals and entities are prohibited from presenting or causing to be presented claims for services that the individual or entity "knows or should know" were not provided as claimed. This provision applies to persons or entities that know or should know that the claims are false or fraudulent, and it prohibits anyone from providing false or misleading information on coverage that could reasonably be expected to influence a decision regarding when to discharge a person from inpatient hospital services. Civil monetary penalties (CMPs) may be applied in situations where the service was not provided as claimed or where the service was provided during a period in which the professional or entity was excluded from the program. Violation may result CMPs of up to $10,000 per claim, or $15,000 for each individual with respect to whom false or misleading information was given, and assessment payments (with part going for restitution) of up to three times the amount claimed. Physicians who certify the need for home health services and who know that all of the requirements for this care are not met, are subject to CMPs of not more than the greater of $5,000 or three times the amount of payments for services that are made pursuant to the certification. The Health Insurance Portability and Accountability Act of 1996, Public Law 104-191 (HIPAA), clarified that the term "should know" includes, with respect to information set out in a claim, "acts in deliberate ignorance" or in "reckless disregard of the truth or falsity" and "no proof of specific intent to defraud is required."

"Anti-Kickback" law/Criminal Penalties for Acts Involving Federal Health Care Programs (Section 1128B of the Social Security Act/42 USC 1320a-7b). Individuals and entities are prohibited from "knowingly and willfully" making false statements or representations in applying for benefits or payments under all federal and state health care programs. Individuals also are prohibited from fraudulently concealing or failing to disclose knowledge of an event relating to an initial or continued right to benefits or payments. There is also a prohibition against knowingly and willfully soliciting or receiving any remuneration (including any kickbacks, bribe or rebate) directly or indirectly, in cash or in kind in exchange for referrals; or in return for purchasing, leasing, ordering, or arranging for or recommending purchasing, leasing, or ordering any good, facility, service, or item for which payment may be made in whole or in part under a Federal health care program. Violations may result in a felony conviction, with penalties including imprisonment for up to five years and a fine of up to $25,000. (Related safe harbor regulations define payment practices that are not within the meaning of prohibited "remuneration." The regulations provide immunity from criminal prosecution and civil exclusion for payment practices that fall within the safe harbor. Failure to fall within a safe harbor, however, does not mean that a payment arrangement necessarily violates the statute. Current safe harbors address: investment interests; space rental; equipment rental; personal services and management contracts; practice sale; referral services; warranties; discounts; employment relationships; waiver of co-insurance and deductible amounts; group purchasing organizations; increased coverage or reduced cost sharing under a risk-basis or prepaid plan; and charge reduction agreements with health plans.)

"Stark I, II"/Self-Referral Law/Limitations on Certain Physician Referrals (Section 1877 of the Social Security Act/42 USC 1395nn). "Stark I" became effective in 1995 and prevents physicians and their immediate family members who have an ownership or compensation relationship with a clinical laboratory services facility from making referrals to it. "Stark II" is broader, preventing physicians and immediate family members who have an ownership or compensation relationship with an entity providing "designated health services" from referring patients for these services where payment may be made under Medicare. An entity providing a designated health service is prohibited from billing for the provision of a service based on a prohibited referral. Designated health service includes: clinical laboratory services; physical therapy services; occupational therapy services; radiology services, including magnetic resonance imaging, computerized axial tomography scans, and ultrasound services; radiation therapy services and supplies; durable medical equipment and supplies; parenteral and enteral nutrients, equipment and supplies; prosthetics, orthotics, prosthetic devices and supplies; home health services; outpatient prescription drugs; and inpatient and outpatient hospital services. Penalties for violation of this provision include denial of payment for the designated health services, refund of amounts collected in violation of the provision and CMPs of up to $15,000 for each service. Physicians and entities that enter into an arrangement to circumvent the referral restriction law shall be subject to a CMP of up to $100,000 per occurrence. There are numerous exceptions to this provision, including: personally providing or supervising the provision of the service; in-office ancillary services provided by the physician or another physician or an employee in the same group practice; and referrals through a prepaid health plan.

Federal Civil False Claims Act (31 USC 3829-3733). The Act imposes liability upon anyone who knowingly makes, uses, or causes to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the Government. Depending on the applicable part of the statute, a false statement may or may not be necessary on the claim submitted to the Government for payment for liability.

Health Care Program Administration Statutes

Exclusion from Federal Health Care Programs (Section 1128(a),(b) and (c) of the Social Security Act/42 USC 1320a-7a). Individuals or entities convicted for a program related crime, a criminal offense relating to patient abuse or neglect, a felony offense related to health care fraud, or a felony offense related to controlled substances must be excluded from Medicare and Medicaid for a minimum of 5 years. If there is one prior conviction, the exclusion will be for 10 years, and the exclusion will be permanent where there are two prior convictions. Exclusion will be discretionary only for misdemeanor health care fraud and controlled substance offenses and for criminal offenses related to fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct in non-health care government programs. Discretionary exclusions also are authorized for: license revocation or suspension; exclusion or suspension from a federal or state health care program; excessive charges or the provision of medically unnecessary services; and failure to provide required information. The minimum period of discretionary exclusion would be three years, unless the Secretary of the federal Department of Health and Human Services (HHS) determines (pursuant to regulations) that a longer or shorter period is appropriate.

Fraud and Abuse Control Program (Section 1128C of the Social Security Act/42 USC 1320a-7c). Authorized HHS, acting through the HHS Office of the Inspector General (OIG), and the Department of Justice (DOJ) to design, implement and coordinate the federal Fraud and Abuse Control Program. The purpose of the program is to: coordinate Federal, State, and local law enforcement programs to control fraud and abuse in health plans; conduct investigations, audits, evaluations, and inspections relating to the delivery of and payment for health care; facilitate the enforcement of health care fraud and abuse laws; issue advisory opinions and special fraud alerts; and provide for the reporting and disclosure of "final adverse actions" against health care professionals, providers, or suppliers. HHS and DOJ are to issue guidelines concerning the provision of information to carry out the program from health plans, health care professionals and entities.

Health Care Fraud and Abuse Control Account (Section 1817 of the Social Security Act/42 USC 1395i(k)). HIPAA established the Health Care Fraud and Abuse Control Account within the Medicare Part A Trust Fund to fund HHS and DOJ (including the Federal Bureau of Investigation) activities relating to the costs of administration and operation of the health care fraud and abuse control program. In addition to federal appropriations, the fund will receive a portion of funds collected from health care fraud and abuse penalties and fines. Annual authorizations for this fund grow from $104,000,000 in fiscal year 1997 to $240,558,320 in fiscal years 2004 and beyond. From the Account, funding for the HHS OIG is authorized to grow from between $60,000,000 and $70,000,000 in fiscal year 1997 to between $150,000,000 and $160,000,000 in fiscal years 2003 and beyond. (HIPAA also authorized funds for the FBI from general revenues to combat health care fraud and abuse. This funding is scheduled to grow from $47,000,000 in fiscal year 1997 to $114,000,000 in fiscal years 2003 and beyond.)

Medicare Integrity Program (Section 1893 of the Social Security Act/45 USC 1395ddd). HHS is authorized to contract with private organizations to: review the activities (including utilization and fraud review) of health care professionals and entities providing services for which payment may be made; audit cost reports; determine whether a Medicare payment should have been made and initiate recovery of Medicare payments that should not have been made pursuant to Medicare secondary payer requirements; educate individuals and entities with respect to payment integrity and benefit quality assurance issues; and develop and periodically update a list of items of durable medical equipment subject to prior authorization. (Medicare carriers and fiscal intermediaries will no longer perform these functions in areas where there is a Medicare Integrity Program contract.) Funds also were authorized (pursuant to HIPAA) from the Part A Trust fund to the Health Care Fraud and Abuse Control Account for the Medicare Integrity Program. This funding is scheduled to grow from between $430,000,000 and $440,000,000 in fiscal year 1997 to between $710,000,000 and $720,000,000 in fiscal years 2003 and beyond.

Beneficiary Incentive Programs (Section 203 of HIPAA/42 USC 1395b-5). HHS is to establish a program to encourage individuals to report information on health care professionals and entities they suspect to be engaging in or who have engaged in acts or omissions that may constitute fraud or abuse against the Medicare program. Where a beneficiary reports information that serves as the basis for the collection of at least $100, a portion of the amount collected may be paid to the individual.

Safe Harbors; Advisory Opinions; Fraud Alerts (Section 1128D of the Social Security Act/42 USC 1320a-7d). HHS is to solicit proposals annually on modifications to existing as well as new safe harbors. Health care professionals, entities, or health plans may request an advisory opinion from HHS, acting in consultation with DOJ, on the following issues: what constitutes prohibited "remuneration" or payment under the Anti-kickback statute; whether the arrangement or proposed arrangement is prohibited remuneration; whether an arrangement or proposed arrangement is not prohibited remuneration; what constitutes an inducement to reduce or limit services to Medicare/Medicaid beneficiaries; and whether any activity or proposed activity constitutes grounds for the imposition of fraud and abuse sanctions. Advisory opinions will not be issued on questions of fair market value or whether an individual is a bona fide employee. Advisory opinions will be binding on the requesting party and HHS. Failure to seek an advisory opinion is not admissible as evidence of intent to violate the law. Individuals may request that the HHS OIG issue fraud alerts which will inform the public of practices that the OIG considers to be suspect. The OIG is to investigate to determine whether a fraud alert is warranted. Fraud alerts will be issued through the Federal Register.

HIPAA Criminal Statutes (crimes created by HIPAA but not specific to HIPAA)

Health Care Fraud and Abuse Data Collection Program (Section 1128E of the Social Security Act/42 USC 1320a-7c). A central health care fraud and abuse database is established for the reporting of final adverse actions (not including malpractice claims and settlements in which no findings of liability have been made) against health care professionals, providers, and suppliers. HHS is to establish procedures to address disputed accuracy of information. Information from the database will be available to government agencies and health plans.

Health Care Fraud and Scheme (18 USC 1347). Prohibits knowing and willful actions or attempts to execute a scheme to defraud any health care benefit program or to obtain, by means of false or fraudulent pretense, representation, or promises, any of the money or property owned by, or under the custody or control of any health benefit program. Potential penalties include fines and imprisonment for up to 10 years. Imprisonment may be for up to 20 years if the offense causes serious bodily injury and up to life imprisonment if the offense causes death.

Theft or Embezzlement in Connection with Health Care Benefit Program (18 USC 669). Prohibits knowingly and willfully embezzling, stealing, or otherwise without authority converting or intentionally misapplying money or property of a health care benefit program. Potential penalties include fines and imprisonment for up to 10 years. Where the value of the property at issue is $100 or less, maximum imprisonment will be for one year.

Obstruction of Criminal Investigations of Health Care Offenses (18 USC 1518). Anyone who willfully prevents, obstructs, misleads, or delays or attempts to prevent the communication of information or records relating to a violation of a federal health care offense to a criminal investigator may face fines and up to five years imprisonment.

False Statements Relating to Health Care Matters (18 USC 1035). Anyone who knowingly and willfully falsifies or conceals a material fact or makes a materially false fictitious or fraudulent statement in connection with the delivery of or payment for health care benefits, items or services may face fines and up to five years imprisonment.