If you thought having a Medicare compliance plan was enough to keep you out of hot water with the feds, think again.

States are increasing enforcement efforts to root out Medicaid fraud, and the feds have decided that they are more interested in the joint state-federal program than they have been in the past.

Plunging state revenues, a proliferation of state false claims acts, and CMS’s increased interest in the Medicaid Integrity Program are combining to create new compliance pitfalls for providers, according to Robert Markette Jr., a partner with Gilliland & Markette LLP, who recently gave an audio conference called “Medicaid Fraud Enforcement Is on the Rise” (now available on CD).

Medicaid is usually one of the largest — if not the single largest — state budget item. “State revenues are down, which makes it harder to finance Medicaid programs,” Markette said. “They like to focus on audit and fraud recoveries, because it’s a way to get money back in system.”

The Deficit Reduction Act of 2005 is also a key driver in the increase in enforcement. Because it gave states incentives to pass their own false claims acts, many states have taken advantage: Markette counts 38 states to date as having state FCAs on the books, which gives whistleblowers yet another way to come after providers.

In addition, the Deficit Reduction Act requires providers who make over a certain income level to educate their employees about the False Claims Act. “You have to tell your employees now that if they pursue claims under it, they get to keep a percentage of the recovery,” he said. Along with increased enforcement staffing, this means even more people are going to be looking over your shoulder and making sure all your t’s are crossed and i’s are dotted in your Medicaid claims.

Finally, there’s the Medicaid Integrity Program, which was also created by the Deficit Reduction Act, as a joint federal and state program to combat Medicaid fraud. CMS is providing a lot of educational resources under this program, Markette pointed out. “This is designed to provide tools and strategies for states to police Medicaid.” With a $75 million budget in 2009, the agency had a lot of money dedicated just to rooting out Medicaid fraud. “I’ve seen reports that say they’re requesting more money,” he added.

Markette also pointed to the Fraud Enforcement and Recovery Act (FERA), which expanded the federal False Claims Act to cover Medicaid as well as Medicare claims. “Congress and CMS are continuing to pressure states to increase enforcement and get a handle on Medicaid fraud expenditures,” he said, adding that Congress thinks one of the main expenses in the program is due to fraud and abuse. And while Markette said he was dubious about that claim, he acknowledged that the result — justified or not — is increased state interest in policing Medicaid.

The upshot is that more entities than ever are looking over your shoulder, talking to your employees and even your patients. “They are far more likely to catch mistakes as well as outright fraud,” he said. “What one might have gotten away with in an earlier era will be caught more and more frequently.”

You can be prosecuted by the state and the feds for Medicaid fraud, and the state usually works with a variety of federal agencies, including the FBI, HHS OIG, and others. You could end up in both state and federal court, Markette said. “When they work together, you have twice as many investigators, twice as many lawyers to deal with.”

What’s a provider with good intentions to do? The best thing is to avoid trouble in the first place by staying in compliance with all these new requirements, Markette said. “Your compliance program should take into account Medicaid and Medicare.”

But it’s not enough to simply change your Medicare compliance program’s title by adding “Medicaid” and be done with it. Next week, we’ll explore how to create an effective Medicaid compliance program in HC Compliance Essentials.

Do you know what to expect from a MIC audit? Learn more about the Medicaid Integrity Program in this audio training event.

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.

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.

AUDIO TRAINING EVENT: Medicaid Fraud Enforcement is on the Rise — Are You in Compliance?

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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