Blowing the whistle on Medicare fraud may become dramatically more lucrative. On April 29, 2013, the Department of Health and Human Services (HHS) announced its intention to elevate the maximum payout for whistleblowers by a multiple of nearly one million. Specifically, the HHS’s Centers for Medicare and Medicaid Services (CMS) announced it would raise the ceiling for whistleblower payouts to nearly $10 million from the current cap of $1,000. By revising the Incentive Reward Program provisions in § 420.405 of the Code of Federal Regulations, the proposal would entitle any Medicare fraud whistleblower whose tip leads to a recovery to 15 percent of the overpayments recovered, with a cap of $9.9 million. The goal, according to CMS, is to “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.”

The proposed rule contains additional provisions designed to decrease Medicare fraud, including:

• expanding the instances in which a felony conviction can serve as a basis for disbarment of a provider or supplier’s enrollment;
• denying enrollment if the enrolling provider, supplier, or owner had an ownership relationship with a previously enrolled provider or supplier that had a Medicare debt;
• revocation of Medicare billing privileges upon a determination that the provider or supplier has a pattern or practice of submitting claims for services that fail to meet Medicare requirements; and
• limiting the ability of ambulance suppliers to “backbill” for services performed prior to enrollment.

According to HHS Secretary Kathleen Sebelius, the proposed rule is a “signal to Medicare beneficiaries and caregivers, who are on the frontlines of this fight, that they are critical partners in helping protect taxpayer dollars.”

Many observers, however, are wary of the potential negative consequences of the proposed rule. Primary among the concerns is a potential avalanche of mistaken or perhaps even fabricated claims. With a possible windfall of $10 million dollars, employees will have little to no incentive to pursue internal reporting mechanisms, such as company hotlines. By going directly to the government and bypassing the company entirely, the target of the tip will lose the opportunity to remediate the problem (if a problem indeed exists). And, whistleblowers often have only partial or bad information. The proposed rule provides a powerful disincentive for the tipster to check the veracity of his claims internally before contacting CMS.

Another concern is CMS is ill equipped to handle the thousands of tips which will doubtlessly be received by the government once the lucrative potential recovery for whistleblowers becomes more widely known.

A final note: the enhanced award created in the proposed rule is an alternative to a financial recovery under the False Claims Act (FCA). It is not intended to be in addition to awards provided to whistleblowers under the FCA. The proposed rule clearly provides that “an individual is not eligible for an [HHS] reward if he or she has filed a qui tam lawsuit under the federal or any state False Claims Act,” and that the agency will not “give a reward for the same or substantially similar information that is the basis of a payment of a share of the amounts collected under the False Claims Act.”

It is uncertain whether this proposed rule will open the floodgates of unsubstantiated fraud claims. What is clear is Secretary Sebelius and HHS are intensifying the fight to prevent Medicare fraud and abuse.

Interested parties may submit comments on this proposal by June 28, 2013. Comments must refer to the file code CMS-6045-P, and may be submitted electronically through the federal eRulemaking portal, or by regular mail to Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-6045-P, P.O. Box 8013, Baltimore, MD 21244-8013 or Centers for Medicare & Medicaid Services, Department of Health and Human Services, Room 445-G, Hubert H. Humphrey Building, 200 Independence Avenue SW., Washington, DC 20201.

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