In 2009, Attorney General Eric Holder and Former U.S. Department of Health and Human Services Secretary Kathleen Sebelius created an interagency task force, the Health Care Fraud Prevention and Enforcement Action Team (HEAT), to increase coordination and optimize criminal and civil enforcement.  According to the U.S. Department of Justice, the task force yielded historic results resulting in the recovery of $12.1 billion from January 2009 through September 2013.  Of that amount, the DOJ claims it recovered more than $2 billion each year for healthcare fraud, reaching $2.6 billion in 2013.  In 2014, this trend has continued with two Florida hospitals settling FCA claims with the DOJ last spring for $85 million and $7 million and another two healthcare entities recently settling with the DOJ for $2.2 million and $35 million.  

Notably, three out of four of the 2014 cases were initially brought by former employees as whistleblowers.  The False Claims Act (FCA) allows private individuals to file suits for violations of the FCA on behalf of the government.  The government can then intervene in the suit, thereby becoming a party.  If successful, the whistleblower receives a portion of the settlement the government receives. 

In U.S. and State of New York ex rel. Hinestroza v. Ralex Services, Inc., 1:10-CV-00822 (E.D. NY), a former nurse at a nursing and rehabilitation center claimed she was terminated in retaliation for complaining to management and reporting Medicaid fraud to New York State officials.  Specifically, the whistleblower stated the nursing and rehabilitation facility’s administrator falsified Patient Review Instruments to New York’s Medicaid program, inflating the level of care needed by the residents, causing New York to reimburse the facility at an inflated rate for more than 62,000 claims.  The defendants then allegedly falsified records to cover up the fraud.  The nursing and rehabilitation facility’s owner agreed to pay $2.2 million to settle the FCA claims.  For filing the lawsuit, the whistleblower will receive her costs and attorney’s fees as well as 19% ($250,000) of the New York State portion of the settlement and an undetermined amount of the federal portion of the settlement.  

This summer also saw a record-breaking settlement for Arizona when a nonprofit healthcare system agreed to pay $35 million to settle FCA claims for the period beginning April 7, 2004 through December 31, 2011.  The whistleblower that brought the suit, an agency that provides healthcare compliance consulting and fraud investigation, will receive $5.95 million of the settlement. The healthcare system, which operates two hospitals in Tuscon, Arizona, allegedly improperly billed Medicare, the Federal Employee Health Benefits Program and the Arizona Health Care Cost Containment System for inpatient rehabilitation facility services for patients who did not meet the coverage criteria for these services. 

Interestingly, prior to learning of the government’s investigation, in 2010 the healthcare system had conducted an internal audit that revealed unsupported billings for which the healthcare system repaid the government $24 million and implemented new procedures to prevent this from happening again.  Wary of whether the healthcare disclosure was complete, the government did continue its investigation.  However, the government considered the disclosure when settling the matter.

As the DOJ continues to pursue FCA claims, healthcare employers can reduce their exposure by conducting internal audits to ensure there is proper documentation to support services billed to Medicare and Medicaid programs.