HHS Proposed Rule Would Increase Rewards For Successful Medicare Fraud Tips to $9.9M

  BNA’s Health Care Fraud Report™ is the go-to source for health care fraud reporting, with in-depth information on government and private enforcement actions and strategies designed to...

By James Swann

The Department of Health and Human Services would increase the reward for a successful tip about Medicare fraud to as much as $9.9 million, according to a proposed rule published in the April 29 Federal Register.

The proposed rule said anyone who provides specific information leading to the recovery of Medicare funds would potentially be eligible to receive a reward of 15 percent of the total amount recovered, up to $9.9 million. Currently, HHS offers a reward of 10 percent of the total amount recovered, with a maximum award of $1,000.

Comments on the proposed rule are due June 28.

“We believe this proposed rule would increase the incentive for individuals to report information on individuals and entities that have or are engaged in sanctionable conduct; improve our ability to detect new fraud schemes; and help us ensure that fraudulent entities and individuals do not enroll in or maintain their enrollment in the Medicare program,” HHS said in the proposed rule (see related analysis in the BNA Insights section).

The Medicare Incentive Reward Program (IRP) was created under the authority of Section 203(b)(1) of the Health Insurance Portability and Accountability Act, which said the HHS secretary should implement a program to reward individuals who report potential Medicare fraud.

Modeled on IRS Program

HHS said the proposed change to the Medicare IRP was based on a reward program run by the Internal Revenue Service, which pays individuals who provide tips on violations of the IRS code.


Although the proposed rule would increase the reward amount from 10 percent to 15 percent of the total amount recovered, HHS said it is soliciting comments on whether to offer rewards in the 15 percent to 30 percent range.  



The IRS program pays individuals rewards of 15 percent to 30 percent of the total amount recovered.

HHS said it proposed the change to the incentive program “because the IRS program has proved to be highly successful in generating leads that returned far greater sums than the existing Medicare IRP, which limited rewards to 10 percent of the first $10,000 of the final amount collected.”

Although the proposed rule would increase the reward amount from 10 percent to 15 percent of the total amount recovered, HHS said it is soliciting comments on whether to offer rewards in the 15 percent to 30 percent range.

HHS also said an individual who has already filed a qui tam, or whistleblower, lawsuit under the federal or state False Claims Act is not eligible to receive a reward from the IRP.

Potential Increase in Tips

Kirk Nahra, an attorney with Wiley Rein, Washington, told BNA that he suspects the proposed changes to the IRP “will lead to a substantially increased volume of tips, but will not have any material impact on qui tam lawsuits, which will continue to be filed by those willing to make that effort.”

Nahra said the level of fraud-related tips will increase due to the ease of using the IRP. For example, a phone call providing information on potential fraud could be enough to qualify for a reward, he said.

Nahra said qui tam suits require much more work, and while there are “enormous potential incentives if you succeed,” there also are professional risks and “significant investments of time and potentially money.”

Kirk Ogrosky, an attorney with Arnold & Porter, Washington, and former head of criminal health care enforcement at the Department of Justice, told BNA that the success of the IRP depends partly on DOJ working with the health care industry to bar qui tam suits that are filed after a tip has been accepted by the IRP.

“Currently, DOJ seems unwilling to join with defendants to dismiss even spurious qui tam issues, so it is hard to imagine that tips to the Centers for Medicare & Medicaid Services under the IRP would discourage the relators' bar,” Ogrosky said.

He said the number of “ill-advised qui tams continues to grow, and the government doesn't address them, so what will happen to all the tips filed with CMS?”

Ogrosky said he did not expect the IRP to be effective this decade unless qui tam relators can be discouraged from filling suits that are often “expensive fishing expeditions.”

Strengthened Provider Enrollment

In addition to the increase in reward money, the proposed rule would strengthen the Medicare provider enrollment process by authorizing enrollment denials under certain situations.

For example, provisions in the proposed rule would deny Medicare enrollments from a provider or supplier who previously owned another provider or supplier who had a Medicare debt and whose Medicare enrollment was revoked or terminated.

Enrollment denials would be allowed if the provider or supplier left the previous entity within one year of the entity's Medicare termination or revocation, if the Medicare debt had not been fully repaid, and if HHS determined that any unpaid debt posed a significant risk of fraud and abuse.

Medicare Denials and Revocations

Additional provisions in the proposed rule would:

• allow for Medicare enrollment denial or revocation if the provider or supplier had been convicted of any federal or state felony in the previous 10 years that CMS considers harmful to the program. (Under current rules, enrollment can be denied or revoked if a provider or supplier has been convicted of one of a set number of felonies that CMS considers harmful to the program);

• allow for the revocation of Medicare billing privileges if the provider or supplier had Medicare billing patterns that did not meet Medicare standards;

• reduce the ability of ambulance providers to bill Medicare for services provided before they enrolled with Medicare; and

• require providers and suppliers who have their Medicare enrollment revoked to submit any remaining claims within 60 days of the revocation.

HHS said the proposed rule's change to the IRP would potentially result in $29 million in future recoveries per year, compared with the current estimate of $193,000. HHS calculated the $29 million estimate by taking the average number of rewards paid per year under the IRS program (149) and multiplying it by $193,000.

By James Swann  

The HHS proposed rule is at http://www.gpo.gov/fdsys/pkg/FR-2013-04-29/pdf/2013-09991.pdf.

An HHS fact sheet on the proposed rule is at http://op.bna.com/hl.nsf/r?Open=bbrk-973ln5.