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    June 01, 2018

    Healthcare Fraud Enforcement Trends Under the Trump Administration

    Ryan O’Quinn, Ardith Bronson, and Michael Greenfield, DLA Piper LLP (US), Miami, FL

    With each administration change, practitioners wait with trepidation to see how the new administration will address healthcare fraud enforcement.  It often takes up to a year or more of tracking before the new administration’s focus becomes clear.  With the Trump administration, however, healthcare fraud enforcement remains a top priority carried over from the prior administration.  Confirmation of this came early on with President Trump proposing approximately $751 million in funding to the Health Care Fraud and Abuse Control program for fiscal year 2018 – an increase of approximately $70 million from the fiscal year 2017 budget – despite his budget proposal’s significant cuts to related departments and agencies.1

    In July 2017, the government announced the largest healthcare fraud takedown (the 2017 Takedown) in U.S. history.2  The 2017 Takedown spanned 41 districts, involved $1.3 billion in false billings, and resulted in charges against 412 defendants, including doctors, nurses, and other licensed professionals.3 The number of individuals charged in the 2017 Takedown represented an “89% increase from the 2016” healthcare fraud takedown.4  Further, in fiscal year 2017, the Department of Justice (DOJ) opened 967 new criminal healthcare fraud investigations and charged defendants in 439 cases.5  The DOJ also opened 948 civil investigations and had 1,086 civil healthcare fraud cases pending as of the end of fiscal year 2017.6  As a result of these efforts, the government obtained over $2.4 billion in settlements and judgments related to healthcare fraud.7

    The first year of Donald Trump’s presidency also has revealed certain specific trends in healthcare fraud enforcement that should be areas to watch for in advising clients throughout this administration.

    Opioid-Related Healthcare Fraud

    Since President Trump took office in 2017, one of his administration’s top priorities has been combatting the opioid epidemic, which, according to the Centers for Disease Control and Prevention (CDC), claims the lives of approximately 91 Americans per day.8  As part of its efforts to attack this epidemic head on, the Trump administration has made opioid-related healthcare fraud one of its top targets.9              

    This focus on opioid-related healthcare fraud has been evidenced by a number of recent government actions, including the 2017 Takedown.  Of the 412 individuals charged as part of the 2017 Takedown, more than 120 of the defendants were accused of crimes relating to the improper prescription and distribution of opioids and narcotics.10 The opioid-related cases involved fraudulently billing Medicare and Medicaid for drugs that were never purchased, prescribing unnecessary opioids, and recruiting addicts with gifts in a scheme that billed tens of millions of dollars in false treatments and tests.11

    Following the 2017 Takedown, Attorney General Jeff Sessions continued the Trump administration’s efforts to combat the opioid epidemic by creating the Opioid Fraud and Abuse Detection Unit.12 According to Attorney General Sessions, the unit was created to “focus specifically on opioid related health care fraud using data to identify and prosecute individuals that are contributing to this opioid epidemic.”13  As part of this new unit, the DOJ funded 12 United States prosecutors to focus solely on opioid-related healthcare fraud, “including pill mill schemes and pharmacies that unlawfully divert or dispense prescription opioids for illegitimate purpose.”14  Since the announcement, the unit’s prosecutors have charged several defendants with crimes relating to the unlawful distribution of opioids, and there is no sign that these efforts will let up. 

    The 2017 Takedown, the creation of the Opioid Fraud and Abuse Detection Unit, and recent charges and convictions for opioid-related healthcare fraud are just some of the examples that show that opioid-related healthcare fraud will remain a key focus of the Trump administration.  For example, in February 2018 a Michigan doctor was sentenced to 75 months in prison for his role in conspiracies to illegally distribute prescription opiates and to defraud Medicare.15  As Attorney General Sessions put it when announcing the 2017 Takedown, “[w]hile today is a historic day, the Department’s work is not finished.  In fact, it is just the beginning.  We will continue to find, arrest, prosecute, convict and incarcerate fraudsters and drug dealers wherever they are.”16

    Healthcare Fraud Enforcement Against Individuals

    Another notable trend is the government’s continued focus on individual liability for healthcare fraud.  While this seems to be a continuation from the Obama administration, the DOJ appears to be vigorously continuing its enforcement efforts against individuals.  For example, the 2017 Takedown charged over 412 defendants, including 115 individual doctors, nurses, and other licensed professionals.17 In addition to the 2017 Takedown, 2017 was filled with settlements, judgments, and new enforcement actions involving individual defendants, including company employees, doctors and other medical professionals.  These cases demonstrate that the government will likely continue to prosecute individuals associated with corporate misconduct and not just the entities themselves.  Below are just a few examples of some of these actions:

    In May 2017, eClinicalWorks and three of its founders agreed to be held jointly and severally liable for falsely obtaining certification for its electronic health records software.18  As part of the settlement, the company and the three founders agreed to pay $155 million.19  A software developer and two project managers also agreed to pay a total of $80,000 to resolve claims against them.20

    In August 2017, the owner of five Houston home health companies was sentenced to 40 years in prison and ordered to pay $17.8 million in restitution, and a registered nurse who worked for one of the companies was sentenced to five years and ordered to pay $5 million for their role in a $17 million Medicare and Medicaid fraud scheme.21  As part of the scheme, the defendants paid kickbacks for referrals and also paid kickbacks to doctors in order to obtain certification for patients to receive medically unnecessary home health services.22

    The government also settled with The Hartford Dispensary, a Connecticut substance abuse provider, and its former President and chief executive officer (CEO) for $627,000 in September 2017.23  The settlement resolved the government’s claims brought pursuant to federal and state False Claims Acts that the defendants falsely represented and certified that Hartford had a medical director as required by state and federal law and that these certifications related to fraudulent Medicaid claims.24  Further, in addition to the government’s settlement with Freedom Health, Inc. and its related entities (Freedom), discussed below, Freedom’s chief operating officer (COO) agreed to pay $750,000 to settle claims relating to his role in Freedom’s alleged scheme.25

    Similar individual enforcement actions also have continued into 2018.  For example, in April 2018, a co-owner of medical and rehabilitation clinics located in Miami, Florida was sentenced to more than eight years in prison and ordered to pay approximately $4 million in restitution for his role in a $10 million healthcare fraud scheme.26

    These cases are just examples of the myriad actions brought against individuals for their role in healthcare fraud activity, which demonstrate that the Trump administration will continue to focus on holding individuals and not just corporations accountable.

    Medicare Advantage Plans

    Medicare Advantage plans have recently been at the forefront of government scrutiny for potential False Claims Act violations.  Medicare Advantage plans are offered by private insurance companies that administer the healthcare benefits for Medicare eligible enrollees.  The plans receive monthly capitated payments on a per member basis to cover the expenses for those enrollees and assume the financial risks associated with medical expenses that exceed the capitated payments made by the government.

    In May 2017, the government settled with Freedom and its related entities for nearly $32 million after the government brought civil False Claims Act claims against Freedom for its role in fraudulent activity relating to Medicare Advantage plans.27  According to the government, Freedom overbilled and received inflated reimbursements based on its submission of unsupported diagnosis codes to the Centers for Medicare & Medicaid Services (CMS) and, in addition, misrepresented the scope of its provider networks to CMS.28  In the government’s announcement regarding the Freedom settlement, Chief Counsel to the Inspector General Gregory Demske made the government’s intentions regarding Medicare Advantage plans clear: “Medicare Advantage insurers must play by the rules and provide Medicare with accurate information about their provider networks and their patients’ health. OIG will investigate and hold managed care organizations accountable for fraud.”29

    May 2017 was a big month for Medicare Advantage cases, as the government also intervened in a number of qui tam suits.  For example, in U.S. ex rel. Poehling v. UnitedHealth Group, Inc., (Poehling), the government alleged that the defendant overbilled Medicare by fraudulently inflating its Medicare risk adjustment scores in connection with its Medicare Advantage plans.30  While the Central District of California dismissed a majority of the False Claims Act claims in Poehling, the court refused to dismiss the common law unjust enrichment claims and one of the False Claims Act claims, which involve allegations that the defendant improperly failed to refund the government for overpayments relating to improper risk adjustments.31  This case is just one example of the several cases brought by the government across the country involving Medicare Advantage plans.

    While the government has faced obstacles in pursuing the False Claims Act claims relating to Medicare Advantage plans as shown by the partial dismissal in Poehling, it appears that the government will continue to heavily scrutinize and bring enforcement actions against these plans.32

    Conclusion

    The healthcare fraud enforcement trends noted above are just examples of the trends that may be seen in this area during Trump’s presidency, and enforcement in new areas may arise.  For example, the OIG added telehealth audits to its work plan in late 2017 and issued a report on Medicare payments for telehealth services in April 2018.33  One thing appears clear, however:  healthcare fraud enforcement is and will remain a top priority for the Trump administration.  

    1. Trump Budget Would Boost Health-Care Fraud-Fighting Efforts, https://www.bna.com/trump-budget-boost-b73014451549.  The proposed budget was released on March 16, 2017.  See The First 100 Days: A Renewed Commitment to Health Care Enforcement, https://www.whitecollarbriefly.com/2017/04/30/the-first-100-days-a-renewed-commitment-to-health-care-enforcement.
    2.  National Health Care Fraud Takedown Results in Charges Against Over 412 Individuals Responsible for $1.3 Billion in Fraud Losses, https://www.justice.gov/opa/pr/national-health-care-fraud-takedown-results-charges-against-over-412-individuals-responsible.
    3.  Id.
    4.  United States Department of Justice, Fraud Section Year in Review 2017, available at https://www.justice.gov/criminal-fraud/file/1026996/download, at p. 9.
    5.  The Department of Health and Human Services and the Department of Justice Health Care Fraud and Abuse Control Program Annual Report for Fiscal Year 2017, available at https://oig.hhs.gov/publications/docs/hcfac/FY2017-hcfac.pdf, at p. 1.
    6.  Id.
    7.  Id. 
    8.  Supra note 2. 
    9.  While both the Obama and Trump administrations focused on the opioid epidemic, their approaches differ.  The Obama administration focused on treatment and prevention, while the Trump administration has made enforcement its top priority.  See Trump Budget Doubles Down on Drug War, http://www.drugpolicy.org/press-release/2018/02/trump-budget-doubles-down-drug-war.
    10.  Id.
    11.  Id.
    12.  Attorney General Sessions Announces Opioid Fraud and Abuse Detection Unit, https://www.justice.gov/opa/pr/attorney-general-sessions-announces-opioid-fraud-and-abuse-detection-unit.
    13.  Id.
    14.  Id.; see also supra note 5, at p. 12.
    15.  Former Doctor Sentenced to 75 Months in Prison for Illegally Prescribing Opiates and Committing Health Care Fraud, https://www.justice.gov/usao-edmi/pr/former-doctor-sentenced-75-months-prison-illegally-prescribing-opiates-and-committing.
    16.  See supra note 2.
    17.  Id.
    18.  Supra note 5, at p. 20.
    19.  Id.
    20.  Id. at 20-21.
    21.  Supra note 5, at p. 23.
    22.  Id.
    23.  Connecticut Substance Abuse Treatment Provider Pays $627K to Settle False Claims Act Allegations, https://www.justice.gov/usao-ct/pr/connecticut-substance-abuse-treatment-provider-pays-627k-settle-false-claims-act.
    24.  Id.
    25.  Medicare Advantage Organization and Former Chief Operating Officer to Pay $32.5 Million to Settle False Claims Act Allegations, https://www.justice.gov/opa/pr/medicare-advantage-organization-and-former-chief-operating-officer-pay-325-million-settle.
    26.  Miami Man Sentenced to More than Eight Years in Prison for Role in $10 Million Health Care Fraud Scheme, https://www.justice.gov/opa/pr/miami-man-sentenced-more-eight-years-prison-role-10-million-health-care-fraud-scheme.
    27.  Supra note 25; supra note 5, at p. 21.
    28.  Id.
    29.  Id. The OIG refers to the Department of Health and Human Services’ Office of Inspector General.
    30.  U.S. ex rel. Poehling v. UnitedHealth Group, Inc., No. 16-cv-08697 (C.D. Cal.).
    31.  United States ex rel. Poehling v. UnitedHealth Grp., Inc., No. CV1608697MWFSSX, 2018 WL 1363487, at *10 (C.D. Cal. Feb. 12, 2018).
    32.  For Example, in January 2018, the Office of Inspector General (OIG) added a study entitled “Financial Impact of Health Risk Assessments and Chart Reviews on Risk Scores in Medicare Advantage” to its work plan.  https://oig.hhs.gov/reports-and-publications/workplan/summary/wp-summary-0000268.asp.
    33.  OIG Adds Telehealth Audits to Work Plan, https://mcdonaldhopkins.com/Insights/Alerts/2017/12/06/OIG-adds-telehealth-audits-to-work-plan; CMS Paid Practitioners for Telehealth Services That Did Not Meet Medicare Requirements, https://oig.hhs.gov/oas/reports/region5/51600058.asp.

    Ryan O’Quinn

    DLA Piper LLP

    Ryan O’Quinn is a litigation partner at DLA Piper LLP (US) in its Miami office and serves on the firm’s Healthcare Steering Committee.  Mr. O’Quinn advises clients who are navigating healthcare compliance issues arising through government investigations and transactional due diligence.  Mr. O’Quinn has represented hospital systems, managed service organizations, medical groups, and ambulatory surgery centers responding to concerns impacted by the False Claims Act, the Stark Law, and Anti-Kickback regulations. He may be reached at [email protected]

    Ardith Bronson

    DLA Piper LLP

    Ardith Bronson is litigation of counsel at DLA Piper LLP (US) in its Miami office.  Ms. Bronson primarily focuses her practice in complex commercial litigation in the healthcare industry and represents clients in wide-ranging litigations and arbitrations involving Unfair and Deceptive Trade Practices Statutes, ERISA, Medicare, False Claims Act, Anti-Kickback Statute, RICO, and other claims impacting the insurance and managed care industry.  She may be reached at [email protected].

    Michael Greenfield

    DLA Piper LLP

    Michael Greenfield is a litigation associate at DLA Piper LLP (US) in its Miami office.  Mr. Greenfield focuses his practice on complex commercial litigation and arbitration matters.  Mr. Greenfield represents individual and corporate clients in a wide variety of lawsuits, including complex contract disputes, insurance coverage and ERISA matters and cases involving business torts and unfair and deceptive trade practices claims.  He may be reached at [email protected].