Feds Boost Health-Care Fraud Recoveries by Almost $1 Billion

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By James Swann

The federal government recovered $3.3 billion associated with health-care fraud in 2016, nearly $1 billion more than in 2015.

The recoveries represented a mixture of health-care fraud settlements, judgments and administrative fines, according to the Health Care Fraud and Abuse Control program’s annual report for fiscal year 2016 released Jan. 18. The HCFAC program coordinates federal, state and local law enforcement activities related to health-care fraud and abuse.

The boost in recoveries is significant, especially because FY 2015’s HCFAC report included a drop in recoveries from FY 2014, Gejaa Gobena, a health-care attorney with Hogan Lovells in Washington and former Department of Justice prosecutor, told Bloomberg BNA Jan. 23.

Gobena said the current HCFAC report makes last year’s decline look like “a blip” and not representative of any downward trend.

Past HCFAC reports have featured recoveries driven by one or two large off-label pharmaceutical cases, but that’s beginning to change, Gobena said.

“Now, you’re seeing the recoveries figure driven by more smaller settlements, especially with chain providers as opposed to pharmaceutical companies,” Gobena said.

The report identified a 5-to-1 return on investment over the last three years of the HCFAC program, meaning that every dollar spent on the program resulted in $5 in savings. The ROI was a slight drop-off from that in FY 2015’s report, which was 6.1-to-1.

The recoveries occurred amid automatic budget cuts that reduced spending for the government’s fraud-fighting agencies by $20.6 million in 2016, resulting in fewer resources for agencies such as the DOJ and the Health and Human Services Office of Inspector General.

While the increase in recoveries is significant, enforcement efforts are unlikely to increase in the near future, especially considering President Donald Trump’s Jan. 23 executive order freezing government hiring and salaries, Linda Baumann, a health-care attorney with Arent Fox in Washington, told Bloomberg BNA Jan. 23.

Under the executive order, government agencies won’t be able to replace investigators and attorneys lost to attrition, Baumann said.

“Because fraud and abuse enforcement efforts bring significant amounts of money back to the federal government, I would expect funding ultimately to be restored, but it’s hard to predict at this point particularly since the HHS and DOJ secretaries haven’t been confirmed,” Baumann said.

Effective Enforcement

The HCFAC program is still working and funding effective enforcement efforts, Judith Waltz, a health-care attorney with Foley & Lardner LLP in San Francisco, said.

“Without the designated HCFAC funding, I don’t think a lot of enforcement activity could or would happen, because the budgets for the agencies are usually designated for ongoing activities required by law and don’t have any extras to redirect, even to fraud cases,” Waltz said.

It’s hard to tell if the HCFAC program can expect more funding under the Trump administration, as it appears that the nation is heading into a time of general budget austerity, Waltz said.

“I don’t think that HCFAC funding will be discontinued, but it may be that the definitions of fraud, waste and abuse change a bit, such that budgets may not be as robust going forward,” Waltz said.

Trump Plans

The Trump administration is likely to evaluate how the HCFAC program is working before it makes any changes, Gobena said. While there’s bipartisan consensus in going after health-care fraud, Gobena said, he expects the Trump administration to review how HCFAC funding is being spent.

For example, more than half of the HCFAC funding is discretionary and intended for Medicare and Medicaid program integrity efforts, an area that has faced recent congressional scrutiny over its effectiveness, Gobena said ( 189 HCDR, 9/29/16 ). The Trump administration is likely to have similar questions, Gobena said.

It’s unlikely that the Trump administration will want to be seen as being soft on fraud, Elizabeth Carder-Thompson, a health-care attorney at Reed Smith LLP in Washington, told Bloomberg BNA Jan. 23, and the administration will probably see the benefits of press coverage of health-care fraud crackdowns.

Whether that will translate to increased funding for HCFAC remains to be seen, Carder-Thompson said.

Regardless of whether HCFAC funding increases, government agencies such as the DOJ and OIG remain stocked with employees dedicated to fighting health-care fraud, Carder-Thompson said.

“They can be expected to continue to follow the paper or money trail, armed with the vastly expanded fraud authorities granted in recent years, so I’d expect the HCFAC program to continue its past successes,” she said.

To contact the reporter on this story: James Swann in Washington at jswann1@bna.com

To contact the editor responsible for this story: Kendra Casey Plank at kcasey@bna.com

For More Information

The HCFAC report is at http://src.bna.com/lBD.

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