Health Care and White Collar: Fraud Recoveries Come from Pharmaceutical Giants

In 2009, the Department of Health and Human Services and Department of Justice jointly created the Health Care Fraud Prevention & Enforcement Action Team ("HEAT"). The goal of the venture was and remains the prevention of waste, fraud, and abuse in programs such as Medicare and Medicaid. The program utilized task forces throughout the country dedicated to the prosecution and hopefully the eradication of health care fraud.

An HHS report claims that the HEAT program obtained 140 indictments in the last fiscal year against 284 defendants. Prosecutors obtained 726 convictions. (The reasons for a larger number of convictions than indicted defendants probably arises from cases already in the prosecutorial pipeline and those that resulted in negotiated pleas without indictments.) The average prison sentence was in excess of three years.

Most remarkable is the report's claim that the program obtained recovery of $4 billion of monies taken by fraud. An analysis of this amount reveals that the largest category of recovery is payment obtained fraudulent by large pharmaceutical companies that marketed drugs for uses not approved by the Food and Drug Administration.

Botox marker Allergan, Inc., agreed to pay the government $600 million to resolve criminal and civil charges stemming from its marketing of Botox as a treatment for headaches. The drug manufacturer Novartis agreed to pay $422.5 billion to resolve criminal and civil issues arising from its illegal marketing of pharmaceutical products for off label uses. Also, AstraZeneca paid $520 million to settle allegations that the company marketed its anti psychotic drug Seroquel for off label uses and also paid kickbacks to physicians for prescribing the drug.

In total, of the $4 billion collected, approximately half came from settlements with large drug manufacturers. In the future the HEAT task forces will no doubt continue to pursue the individual practitions of fraudulent medicine with the goal of financial recovery and prison time. However, it will be interesting to see if the approach taken against the pharmaceutical companies will dissuade future fraudulent conduct. If not, look for the next round of cases against big pharma to include indictments of management with the potential for significant prison terms.

For more about the report please see "Health Care Fraud Crackdown Nets $4 Billion," on CNNMoney.com, http://money.cnn.com/2011/01/24/news/economy/health_care_fraud/.

Health Care: Fraud Goes Viral throughout Country; Miami Is Epicenter

Medicare fraud has gone viral in cities throughout the United States. Investigators have found that criminals from particular ethnic groups have become extremely active in Medicare fraud scams. In various cities criminals from different ethnic groups are active in the fraud schemes. Investigators believe that viral patterns of crime occur in close knit ethnic communities because of the larger number of participants needed to carry out the scams.

Scams that have gone viral include false billing for wheelchairs and scooters, home health care, and infusion therapy (an older method of treating AIDS/HIV that has largely been supplanted by more successful drug "cocktail" therapies). A key to a successful Medicare fraud is the recruiting of Medicare recipients to take part in the scams. Elderly people often receive some remuneration for the illegal use of their Medicare numbers. In some instances, scammers have paid Medicare recipients a cash sum for the use of their Medicare numbers. In others the scammers have provided services such as housekeeping, which was billed as home health care. In still others Medicare recipients have received expensive electronic equipment such as large screen plasma televisions.

The problem of Medicare fraud in Miami is particularly acute. In 2008 Miami received approximately $500 million in Medicare home health care payments meant for the sickest patients receiving Medicare benefits. This sum was more than the rest of the country received combined. Miami received more than 50% of the benefits even though only about 2% of the country's Medicare home health care recipients reside in the city.

Many of the claims involve patients purportedly suffering with diabetes. In many cases scammers made claims for nurses to administer day and night insulin injections to patients who claimed to be blind because of the disease. Investigations have proved that in many cases the patients were not only not blind but did not even have diabetes.

Analysis of payments to Miami recipients showed that Medicare outlier payments for home health care related to diabetes in that city was eight times the national average. "Outlier payments" are those reserved for the extremely ill. They are for services such as occupational therapy and mental health services. Outlier payments can result in approximately double the amount of Medicare payments. Moreover, CMS does not limit the amount that it will pay a home health care agency for these services. While approximately 7% of all Medicare home health care payments are for outlier services, in Miami the percentage of outlier payments for home health care is 60%.

HHS and the Department of Justice have formed task forces throughout the country to combat the rampant growth of health care fraud. If the United States is to gain control of health care spending, it will have to make a major impact on the amounts lost to fraud.

For more information about the viral growth of Medicare fraud please see the Houston Chronicle website, December 6, 2009, http://www.chron.com/disp/story.mpl/metropolitan/6756271.html, and The Miami Herald, December 7, 2009, http://www.miamiherald.com/news/florida/AP/story/1369349.html.