Hospital billing consultant knew exactly how to blow the whistle — and gets $613,000 for his trouble.

Brookhaven Memorial Hospital Medical Center in Long Island, NY will pay the federal government $2.92 (excluding interest) to settle Medicare billing fraud allegations involving outlier payments.

What’s the problem with false claims for outlier payments? Part of the Medicare-provided reimbursement to hospitals is the “outlier payment,” which is basically an additional reimbursement paid to cover unusually expensive treatment and procedure costs incurred by the health care institutions. Brookhaven allegedly overcharged “for cases that were not extraordinarily costly and for which outlier payments should not have been paid,” stated the Department of Justice in a news release.

Who was this ‘professional whistleblower?’

Whistleblower Anthony Kite, who originally filed the qui tam lawsuit in 2005, was a former hospital billing consultant from New Jersey. The false claims act rewards the qui tam relator by giving him a share in the recovery, and Kite will get about $613,000 plus interest as share in the settlement proceeds for the Brookhaven settlement alone. Kite was not a Brookhaven employee, but rather, “appears to be a professional whistleblower working with a Washington-based law firm specializing in qui tam whistleblower cases,” according to The Health Care Bulletin, published online by Bricker & Eckler LLP.

Kite implicated several other New Jersey-based hospitals with the same outlier fraud allegation, including Warren Hospital in Phillipsburg, Bayonne Medical Center in Bayonne, Cathedral Healthcare System in Newark, and Raritan Bay Medical Center in Perth Amboy, according to the Bulletin. These institutions have since settled their cases.

As of November 2009, four other hospitals had settled the qui tam cases brought in by Kite. These are:

- Cooper University Hospital in Camden, New Jersey (settled for $3.85 million);

- St Vincent Hospital in Erie, Pennsylvania (settled for $1.9 million);

- St Joseph Healthcare System Inc in Paterson, New Jersey (settled for $1.75 million).

Available on CD: How to protect your health care organization from Kite and his ilk.

Upcoding E/M services at heart of the case

An internal auditor turned whistleblower when she felt a Michigan cardiology practice was ignoring her concerns about evaluation & management upcoding. A $669,413 settlement with the Department of Justice is the end result.

Genesys Health Systems in Grand Blanc, MI paid $669,413 to settle a lawsuit alleging the provider violated the False Claims Act by improperly upcoding E/M services provided to cardiology patients, according to this DOJ press release. The qui tam relator will receive a $133,882 share of the settlement. Genesys also will pay her $97,500 attorney bill.

A recent article in The Flint Journal sheds some light on why Wendy Domke decided to blow the whistle on Genesys. While working in 2006 as an internal auditor for Catholic Healthcare Audit Network (owned by the same company as Genesys), Domke spotted what she thought were problematic coding patterns for three cardiologists.

When Domke raised concerns with upper management at Genesys, she “ran into a brick wall” and did “a lot of soul searching,” she tells The Flint Journal. “There is a line (between) overbilling as a mistake and overbilling where there appears to be a pattern, and in this care there appeared to be a pattern,” she said from her attorney’s office.

Genesys’ statement called the alleged overbilling “inadvertent documentation and billing errors,” and the company doesn’t admit liability. Shortly after filing her lawsuit, Domke left her auditing position with Catholic Healthcare and now works as an independent consultant.

For legal details, see United States ex rel. Wendy Buterakos v. Ascension Health and Genesys Health System, Civil Action No. 06-10550 (E.D. Mich.).

Available on CD: FERA gives the False Claims Act much sharper teeth. Learn how to protect yourself.

Photo: Mary Ann Reitano

Bill would make it easier for prosecutors to link kickback violations with false claims.

It’s clear that some legislators think that regulators still don’t have the statutory tools available to clamp down on health care fraud. There’s new legislation a-brewing, and just in case you’ve been preoccupied by the deluge of final rules we grapple with in November, HC Compliance Essentials has the 411 on S. 1959.

That’s the health care fraud enforcement bill introduced by Senator Ted Kaufman (D-DE) and co-sponsored by Senate Judiciary Committee Chairman Patrick Leahy (D-VT) and Committee members Arlen Specter (D-PA), Herb Kohl (D-WI), Chuck Schumer (D-NY) and Amy Klobuchar (D-MN).

The bill is inspired both by legislation to crack down on mortgage fraud and other financial crimes, as well as health care reform legislation that would make the federal government an even bigger health care payor, Kaufman’s press release explains.

S. 1959 would:

• Beef up sentencing for health care fraud crimes.
• Define all claims made following illegal kickbacks as “false claims” under the False Claims Act.
• Clarify the ‘mental state’ requirement for proving health care fraud. In other words, take out a lot of the confusion that surrounds “knowingly” and “unknowingly” in such cases.
• Increase funding for the government’s to fight health care fraud.

Kaufman’s bill aims to deter the n’er-do-wells who flock to health care fraud because it’s so hard to detect and the risks are low, but if passed, it likely would do little more than make it harder for law-abiding providers to do business, comment attorney Robert Markette in Home Care Law Blog.

“The False Claims Act already has a very wide reach and, under current case law, often reaches anti-kickback violations,” Markette observes.

AUDIO TRAINING EVENT: Don’t Just Sit and Wait —How to Prepare for RAC Audits.

Therapists formerly employed at a residential treatment center blow the whistle.

Many times, False Claims Act cases in health care hinge on the fact that claims were submitted to Medicare or Medicaid when no actual care was provided at all. But ’substandard care’ can easily trigger a FCA case — especially in residential health care setting such as psychiatric treatment facilities and long-term care facilities.

The Department of Justice has recently intervened in a False Claims Act lawsuit involving three companies doing business as Keystone Marion Youth Center in Marion, VA, according to a DOJ release. The Center “receives Medicaid funds to provide psychiatric counseling and treatment for boys ages 11-17,” says the DOJ.

The qui tam relators or ‘whistleblowers’ in the case are therapists who used to work at the facility. They allege that the Center provided sub-standard care, falsified medical records documenting care provided, and submitted false claims to Medicaid.

The DOJ release acknowledges Virginia’s Medicaid Fraud Control Unit and others for their early involvement in the case.

AUDIO TRAINING EVENT: Medicaid false claims enforcement is gaining ground, and state Medicaid Fraud Control Units are getting more aggressive. Is your facility ready?

Plus, why it’s easier than ever for folks to become whistleblowers.

If you don’t know what a reverse false claim is, it’s time to figure it out.

With the Fraud Enforcement and Recovery Act (FERA), which became law in May 2009, Congress amended the False Claims Act to cover situations when providers knowingly retain Medicare or Medicaid overpayments.

This article explores overpayments, the last of the three areas that Robert W. Markette Jr., a partner with Gilliland & Markette LLP, identified in a recent presentation, “Prepare for Unseen Liabilities: FCA, FERA, and Their Impact on Health Care,” as compliance hot spots for providers under FERA.

In past weeks, we addressed subcontractors’ liability under the FCA and FERA and the application of the FCA to Medicaid claims.

Prior to FERA, the feds would only come after you for reverse false claims if you used a false statement or some other affirmative action to conceal the overpayment, said Markette. But now, under FERA, you can be liable if you avoid an obligation to return money to the government, he explained. “Knowingly and improperly retaining an overpayment becomes a false claim.”

One issue for providers in this is that Congress does not define “knowingly and improperly” in FERA. “If you and the government disagree about whether you have an overpayment, when does that become a false claim?” asked Markette. “It is not clear.”

Err on the side of caution, he advised. “At this point, it’s safe to say Congress intended reverse false claims liability to be much broader than in the original statute.” He called this “disconcerting” and said that we’re probably not going to find out how reverse false claims liability works until some qui tams move through the system.

Qui Tam Liability Expanded

And that could be sooner than you might expect: Qui tam actions — law suits brought by third parties (relators) who turn the case over the feds for prosecution — will be easier to bring under FERA as well, he noted. That’s because FERA provides for new remedies for whistleblowers, who are usually the relators in these cases.

Contractors and their agents are now treated the same as employees for the purposes of whistleblower protection. “They are protected from being ‘discharged, demoted, suspended, threatened, harassed, or otherwise discriminated against in the terms and conditions of employment,’” Markette pointed out.

This could mean that if a provider becomes aware that a subcontractor has become a whistleblower, you can’t sever the relationship with that subcontractor by terminating your contract with it. There is now “a broader category of individuals who are protected,” he said. And thus a broader category of people who could bring qui tam suits.

But Congress didn’t stop there. The feds were having trouble filing new claims because of the backlog of cases they wanted to intervene in. In the years since the case was first filed, other alleged violations might have occurred, and the feds want to be able to add claims to the original, but because of a six-year statute of limitations, they couldn’t add anything older than that.

FERA changes that by making it easier for the government to intervene in qui tam false claims suits. “Government claims now ‘relate back’ to the original claim under a much broader standard,” Markette pointed out. “FERA made it easier for the government to add new claims.”

“This will make it harder for providers who are sued,” he said. “It will allow the government to circumvent the statute of limitations if the government wants to intervene later.”

Got Compliance?

“In addition to these risk areas, if history is any indicator, FERA is likely to lead to an expansion of FCA generally,” he said. This will make compliance even more important, especially in regard to whistle blowers.”

One way to protect yourself is to make sure your compliance plan has a process in place for contacting the payers of your Medicare and Medicaid claims. You need to be identifying and documenting possible overpayments, which will cut in your favor should there be an issue over your intent to retain an overpayment. “It’s hard to argue that you’re wrong if you document that you’ve been trying to give it back,” said Markette.

Markette’s FCA and FERA lessons are available on CD here.

Don’t rely overly on the employment exception — or discount a competitor’s ability to stir up trouble.

Covenant Medical Center in Waterloo, Iowa, recently agreed to fork over a hefty $4.5 million to settle a federal False Claims Act lawsuit involving alleged Stark law violations. The case provides a potential harbinger of things to come and some “lessons learned” for hospitals and physicians trying to survive a growing government crackdown on fraud and abuse.

The crux: The U.S. government claimed that Covenant submitted false claims to Medicare because it had gravely overpaid five employed physicians who referred patients to the hospital for services — a verboten practice under the physician self-referral Stark law. In a news release announcing the settlement agreement, the Department of Justice noted that the Covenant physicians ranked among the best paid hospital-employed physicians not only in Iowa, but nationwide.

As for the physicians’ fate: The DOJ doesn’t anticipate any sanctions being brought against the physicians in the case, Bob Teig, assistant U.S. attorney told Eli’s Medicare Compliance & Reimbursement Alert.

That doesn’t mean, however, that the government couldn’t impose a civil or criminal penalty against both the hospital and physician in Stark cases, warns attorney Wayne J. Miller, with the Compliance Law Group in Los Angeles.

“The physician risks losing status as a Medicare provider and/or there could be licensure and other actions at the state level that could follow.”

Case Portends 2 Troubling Trends

The Covenant case sounds a warning knell for two key reasons, say legal experts. For one, the government targeted employment relationships, which it typically hasn’t done under Stark or as  kickbacks, observes attorney William Mathias, with Ober Kaler, Grimes & Shriver in Baltimore, Md. Secondly, a disgruntled competitor of Covenant reportedly stirred up the legal trouble for the not-for-profit medical center. Mathias says that based on the background he’s heard, the competitor saw that Covenant’s IRS form showed Covenant was “giving its physicians a much better deal than the competitor” was giving its physicians. “It wasn’t a qui tam suit,” however, he adds. “The hospital reportedly complained to Senator [Charles] Grassley and to other government officials.”

Mathias predicts that we will see “more and more” of this type of activity on the part of competing providers. “Healthcare providers trying to go through a lot of hoops to comply with the law feel frustrated when they feel like their competitors” gain unfair advantage by ignoring the law, he notes.

Some providers, of course, are also invested in leveling a crowded playing field. “Encouraging the government to investigate [a competitor] is often an option in a very competitive healthcare market,” says Miller.

3 Take-Home Messages You Can’t Miss

To stay out of competitors’ and the government’s crosshairs for Stark violations, hospitals and physicians should cover the following bases.

1. Always perform a fair market analysis of physician compensation. To meet the employment exception under Stark, the employment compensation has to be “consistent with fair market value” (FMV), explains Miller. And “the Covenant case indicates very clearly that the government and the courts are not going to ignore FMV in employment compensation arrangements.”

Best practices: If the physicians’ compensation is above the 50th percentile, there should be “clear, specific, documented reasons for the higher payment tied to quality or productivity – never to referrals,” urges attorney Steve Lokensgard, special counsel with Faegre & Benson LLP in Minneapolis.

It’s also a good idea to obtain the fair market value evaluation from a competent company that uses the appropriate factors in making the determination, advises attorney Andrew Wachler, with Wachler and Associates in Royal Oaks, Mich.

2. Document outlier situations very carefully. “There are factors that justify higher salaries, but the actual documentation showing why is critical,” says attorney Lisa Ohrin, with Sonnenschein, Nath & Rosenthal LLP in Washington, D.C. For example, she’s aware of one case where a doctor started a phenomenal “top notch specialty program at a hospital where you would never expect to see that level of care.” Thus, “you could justify why his salary was in the 75th to 90th percentile range.”

Ohrin thinks, however, that hospitals sometimes tend to shrug off higher salaries. People will say, “‘Well, it was an arm’s length negotiation. We wanted Dr. X and he wouldn’t come for less than $800,000,’” she notes. “But if everyone else like him or her is getting $400,000, that could be a problem.”

Bottom line: If the hospital is paying a physician “huge amounts of money” and lacks a “a rock-solid [FMV] analysis from a third party — and perhaps additional documentation regarding the hospital’s needs and the physician’s credentials and value to the hospital and its patients” — it’s going to be vulnerable, says Ohrin.

3. Be prepared for a competitor-turned-complainant.

If you suspect that a competitor “wants to denigrate your operation to authorities,” one option is to seek guidance about your conduct through a formal or informal opinion from the government, suggests Miller. “Otherwise, the best approach is to be prepared at all times for an unannounced government audit or investigation.”

No quid pro quo: “It’s not typically effective to try to make a counter claim against a whistleblowing competitor to divert a review of your practice,” Miller cautions. That strategy can be viewed “as retaliation or as an attempt to deflect the fact-finding.” However, “a provider under review can certainly ask an auditor to question the motivation of a competitor making a claim,” he adds.

© Eli’s Medicare Compliance & Reimbursement Alert.

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What do these guys have to do with Medicaid? You'd be surprised.

How a qui tam case involving generators for Navy destroyers ended up going all the way to the Supreme Court — & why that means more whistleblower risk to YOU.

Following several federal court cases that limited the reach of the False Claims Act, some providers argued that Medicaid claims could not qualify as false claims because providers submit claims to government contractors and not the government itself.

It was a nice try. Congress took care of that possible loophole — and then some — in the Fraud Enforcement and Recovery Act (FERA), which was signed into law in May 2009. FERA makes it much more clear that the FCA should apply to Medicaid claims, said Robert W. Markette Jr., a partner with Gilliland & Markette LLP, in a recent presentation, “Prepare for Unseen Liabilities: FCA, FERA, and Their Impact on Health Care.”

This article explores the second area of the three that Markette identified as compliance hot spots for providers under FERA — Medicaid. Last week, we addressed subcontractors’ liability under the FCA and FERA. (Next week, we’ll focus on overpayments, so stay tuned.)

The Cases Behind the Concern

The cases that got the Senate’s goat include a 2008 U.S. Supreme Court case, Allison Engine Co. v. United States ex rel. Sanders, and a 2004 case out of the D.C. Circuit, United States ex. rel. Totten v. Bombardier Corp. They both involved subcontractors.

“In Allison Engine, the U.S. Supreme Court ruled that to be liable under the False Claims Act, the entity had to intend that the government pay the false claim,” said Markette. “It was not enough that the defendant was simply paid with funds received from the government.”

And in Totten, the court ruled that phrase “presented to an officer or employee of the United States government” meant a claim actually had to be presented to an officer of employee of the federal government. “Presenting a claim to a government contractor did not meet this requirement,” he pointed out.

So in FERA, Congress specifically defined “claim” to include any request or demand for money or property, whether under a contract or otherwise, even money or property that is not the property of the United States, said Markette. “The definition specifically states that a claim can be a request or demand to a government contractor,” he added.

Feds Enter State Territory

Many states already have a version of the FCA on the books that applied to Medicaid claims. But FERA means that “Medicaid claims are now a source of potential federal FCA liability,” Markette said. “This is especially important if you are in a state that has not enacted a ‘compliant’ state false claims act.”

“If a claim is made to a contractor, the claim must be for money or property to be spent on the government’s behalf or to advance a government program and the government provides the money or will reimburse the contractor,” he continued. “This means a claim to Medicaid is likely to be considered a claim for FCA purposes now.”

Health care lawyers at Reed Smith, in a May 2009 client alert concerning FERA, went even further than “likely,” pointing to a Senate Judiciary Committee Report that indicates that FERA’s revisions to the FCA “were intended to clarify that FCA liability extends to ‘all false claims submitted to State administered Medicaid programs.’”

What this means is that it will be easier for the government — both state and federal — to get involved in false claims cases, and easier for the plaintiffs’ bar to bring more false claims cases against providers. The courts are likely to follow Congress’ lead, Markette said.

What To Do Now

Providers should, number one, have a compliance plan in place that helps them avoid submitting false claims in the first place, Markette advised. “Audit your claims prior to submission,” he said. “Have a clear process in place before you submit.”

And number two, Markette added, “If you do have a plan in place…it should address Medicaid.”

In New York, for instance, there are other reasons to implement a Medicaid compliance plan STAT: Under state regulations that went into effect October 1, providers must have an effective compliance program in place if they receive more than a $500,000 from the state’s Medicaid program, according to a recent alert by Drinker Biddle & Reath LLP.

“The OMIG will adopt regulations that will outline the types of providers that will be responsible for adopting and implementing a compliance program,” according to the New York Office of Medicaid Inspector General.

Increased enforcement, audits, FCA, whistleblowers & Medicaid rules that differ from Medicare. Prevent Medicaid compliance nightmares with this audio conference with Robert Markette.

Find out why the feds are looking even harder at HHA & hospice therapy services.

As if worrying about compliance with the False Claims Act wasn’t enough: As part of the follow-on to the 2009 stimulus package, Congress passed the Fraud Enforcement and Recovery Act (FERA), which expands the FCA’s reach in three critical areas that providers need to pay close attention to.

Those three areas are subcontracting, Medicaid, and overpayments, according to Robert W. Markette Jr., a partner with Gilliland & Markette LLP. FERA now provides “an even larger hammer to hit providers with,” Markette said in a recent presentation, “Prepare for Unseen Liabilities: FCA, FERA, and Their Impact on Health Care.”

In this article, we explore the first of the trouble areas, subcontractors. If you use or are a subcontractor, you need to know how the FCA now affects you.

Subcontractors Now Subject to FCA

According to Markette, Congress amended the FCA because of several federal cases dealing with subcontractors who avoided false claims liability because they themselves did not submit Medicare claims to the government. (The contractors did.) “The U.S. Senate was outraged by these rulings,” said Markette, and the result was FERA, as well as the False Claims Correction Act (H.R. 1788), which is still moving through the House.

Under FERA, Congress changed the intent requirement in the FCA so that you no longer have to “get paid” to trigger the FCA. “You just have to submit a false document that is material to the claim,” he explained. “That is a very, very broad definition.”

Plus, you don’t have to intend to defraud the government anymore; FERA makes it so that you only have to “knowingly” submit, which means you deliberately ignore or recklessly disregard the possibility you’re submitting false documentation.

Markette gave two examples that illustrate the change to the FCA intent requirement.

In one, a psychiatrist’s wife, who was his billing staff, assumed that every therapy session was a 50-minute session, even though that was not always true, and billed Medicare accordingly. She reasoned that the sessions that were shorter (and thus overpaid) would be balanced out by the sessions that were longer (and underpaid). “The court held that the provider was submitting claims with a reckless disregard for their truth, to the extent they exceeded a number of hours beyond which he could not have provided services,” said Marquette.

In another, a hospital learned it had been receiving overpayments because its intermediary made a mistake. “The hospital was aware not only that it was receiving the overpayments, but that the source of the overpayment was likely due to this mistake,” he said. “However, the hospital took no action to confirm the source of the problem or to fix it, and was found to be deliberately indifferent to the problem.”

“For subcontractors, this makes the FCA a much broader statute,” Markette concluded. “Subcontractors can now be liable for claims submitted to government contractors.”

What To Do Now

First, providers need to make sure they have a compliance plan in place that accounts for these changes to the FCA. The goal, Markette said, is to avoid false claims in the first place. And even if you already have a plan in place, he said, “review it in light of these changes.”

You should also audit and monitor your subcontractors’ claims. Ask them if they have a compliance program, and if you’re receiving claims from them, “make sure they are watching what they’re doing,” he said. “Do they know about your compliance hotline? You’d rather hear about problems from their employees than from the DOJ.”

For HHAs and hospices, the most common use of subcontractors is for staffing arrangement services, which are a particular area of concern. “Staffing often includes part-time and over-time staff, and while therapy services were a routine area of concern for the OIG even before FERA,” he said, “now it is an area with more FCA peril.”

And subcontractors themselves need to audit their claims to government contractors as if they were Medicare/Medicaid claims. “Even without an intent to defraud, if you are reckless in submitting claims to a contractor, you’re in trouble,” he said.

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What looked like a law that cracks down on mortgage and financial fraud packs a punch to health care reimbursement.

If you’ve watched the news over the summer, you’re aware that President Obama signed the Federal Enforcement and Recovery Act (FERA) of 2009 to focus on mortgage and banking fraud. But what you may not have known is that also tucked into the legislation is language that gives the False Claims Act a whole new set of teeth.

Section 4 of the bill, titled “Clarifications to the False Claims Act (FCA) to Reflect the Original Intent of the Law,” makes several changes that apply to health care providers.

First, the law defines “obligation” to include the phrase, “arising from statute or regulation, or from the retention of any overpayment,” regardless of whether you originally submitted a “false claim.”

This suggests that you could be obligated under the False Claims Act if you have, for instance, created backdated medical records to support a claim you’ve already submitted, according to a news release from James G. Sheehan, New York’s Medicaid Inspector General.

AUDIO TRAINING EVENT: Prepare for auditors before & after they hit your doorstep.

Also: “Proof of specific intent to defraud is not required under the FCA,” says Scot T. Hasselman, Esq. with Reed Smith, LLP, in Washington, DC. “The law requires that a person ‘knowingly’ cause the submission of a false claim (or the corollary causes of action). ‘Knowingly’ is defined in several ways, but can include acting in deliberate ignorance or reckless disregard of the truth. This is a fairly low bar for the government  to overcome.”

How it affects you: “The law now explicitly creates liability for individuals who improperly avoid an obligation to return an overpayment to the government,” Hasselman says.

“So now the low intent standard of the FCA can be applied to a situation where a practice has been overpaid, and does not realize that it has been overpaid, if the failure to recognize the overpayment was a result of deliberate ignorance or reckless disregard of the truth.”

“The bottom line is that providers should be as concerned about underpayments as they are about overpayments and have processes in place to regularly reconcile and return any overpayments to payers,” Hasselman advises.

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