Health Highlights

Mapping The New Fraud And Abuse Landscape

By Jacqueline Wolff, Partner, Co-Chair, Corporate Investigations & White Collar Defense, Manatt | Robert Hussar, Counsel, Healthcare Industry, Manatt | Daniele Capasso, Associate, Healthcare Industry, Manatt

EDITOR'S NOTE: The article below summarizes a detailed analysis of the fraud and abuse landscape—with insights into tracking trends, strengthening compliance and avoiding FCA actions--that appeared in a recent issue of Bloomberg BNA's "Health Care Fraud Report." To download the full article, click here.

In an age of increased government scrutiny and enforcement, providers, payers, pharmaceutical companies and medical device manufacturers, along with their business partners, must be mindful of the fraud and abuse laws regulating their business operations. The decade-long trend of huge settlements and broader, more sophisticated liability theories has continued this year, with the promise of more to come. To remain on course, it's critical for companies to develop and enhance robust compliance programs—and continually monitor the changing regulatory environment.

In the first half of 2013, the Department of Health and Human Services Office of Inspector General (OIG) expected recoveries of $3.8 billion, consisting of over $521 million in audit receivables and about $3.28 billion in investigative receivables. This includes $642.3 million in non-HHS investigative receivables from the OIG's work in areas such as state Medicaid restitution.

These large figures come on the heels of a record-breaking 2012, when the Department of Justice (DOJ) healthcare fraud recoveries topped $3 billion for the first time in a single fiscal year. In total, since January 2009, DOJ has used the False Claims Act (FCA) to recover more than $10.4 billion.

The OIG's Semiannual Report for 2013 also included exclusions of 1,661 individuals and entities from participating in federal healthcare programs. These included 484 criminal actions and 240 civil actions.

The second half of this year and beyond will bring more of the same. Both the DOJ and OIG have made it clear that FCA cases will remain a priority. Together, the DOJ and the HHS run the Medicare Fraud Strike Force, part of the Healthcare Fraud Prevention and Enforcement Action Team (HEAT). Between 2007 and March 2013, Strike Force efforts resulted in over $887 million in investigative receivables and over 800 criminal actions. As the DOJ said, "[We] have made it part of our core mission…to hold accountable those who steal from the Medicare program to line their own pockets."

Healthcare Enforcement Trends

Although past practices are not a guarantee of future actions, it is useful to review current enforcement trends when developing annual compliance plans and allocating resources. Some recent important enforcement trends include:

  • Expanding types of FCA claims. The government has called the FCA its "most potent weapon in addressing fraud." Government theories on FCA liability are expanding from "classic" fraudulent claims and off-label promotion cases to cases involving new and creative violations, such as violations of Good Manufacturing Practices (GMP).
  • Using AKS as the basis for FCA cases. The Federal Anti-Kickback Statute (AKS) prohibits offering or soliciting "remuneration" to drive referrals for products or services covered by Medicare or Medicaid. The AKS is now routinely used as the basis for FCA cases. There is no explicit written certification required when submitting for reimbursement that the products or services were not obtained through a kickback arrangement. Therefore, though it's not an airtight argument, prosecutors have resorted to arguing that the request for reimbursement implicitly certifies that no kickback was provided.
  • Pursuing off-label marketing cases zealously. The government has continued its dogged pursuit and punishment of off-label promotion in the pharmaceutical and biotech industries, as well as its utilization of FCA settlements as predicates for corporate integrity agreements (CIAs). Recent off-label FCA settlements have been noteworthy for their size, ranging from as high as $500 million to $1.5 billion. They are often based on years—sometimes more than a decade—of submitted reimbursement claims.
  • Basing FCA liability on GMP violations. In its emerging theory of FCA liability, the government has targeted manufacturers that have not followed GMPs to satisfy safety, quality and purity requirements for prescription drugs. This theory of liability is built on implied certification of GMP requirements to government healthcare programs by those participating. It already has yielded hundreds of millions of dollars in recoveries, with more expected in the future.
  • Questioning medical judgment. The government has increased scrutiny of providers' medical judgment, particularly around determining whether to perform procedures on an inpatient or outpatient basis. Because reimbursement rates for inpatient procedures are higher, OIG and DOJ are increasingly questioning their necessity.
  • Prosecuting FCA violations involving Medicare Part D. In one of the first prosecutions under the FCA involving the Medicare Part D prescription drug program, RxAmerica agreed in October 2013 to pay $5.25 million to resolve an FCA lawsuit alleging deceptive drug pricing submissions to Medicare.
  • Implementing the Fraud Whistleblower Incentive Rewards Program and Senior Medicare Patrol. On April 29, 2013, the CMS published a proposed rule that will increase incentives for reporting information leading to the recovery of funds related to Medicare fraud and abuse to up to $9.9 million. The proposal follows the administration's announcement in early April that it would be expanding its Senior Medicare Patrol activities, designed to educate Medicare beneficiaries on preventing, detecting and reporting Medicare fraud, waste and abuse.
  • Collecting damages based on gross profit with no credit for benefits received. Courts of appeals across the country are allowing district courts to base treble damages on the full amount the defendant received, not the amount the government was overcharged.
  • Using predictive modeling. The Fraud Prevention System (FPS), launched July 1, 2011, uses predictive modeling and data analytics to review all Medicare fee-for-service claims for indications of fraud. According to a CMS report, the FPS has helped stop, prevent or identify $115 million in fraudulent payments, generated leads for 536 new investigations and supported 511 ongoing investigations—all in its first year.
  • Subjecting "Responsible Corporate Officers" to liability. The OIG is subjecting "Responsible Corporate Officers" to both criminal and civil liability for violations of statutes affecting public welfare. Liability does not depend on the officer's approval or even knowledge of the wrongdoing--just his or her authority to prevent or correct it and failing to do so.
  • Bringing wiretaps/dragnets to healthcare fraud investigations. Increased use of wiretaps, videotapes and other enforcement tools not historically part of healthcare fraud investigations has made prosecuting healthcare fraud easier.
  • Imputing liability using alternative theories. Another key enforcement trend is the use of alternative theories to impute liability on entities allegedly defrauding federal healthcare programs. State and federal agencies are using workers' compensation statutes, wire fraud, mail fraud and other easier-to-prove statutes to convict individuals of healthcare fraud.
  • Enhancing CIA and settlement provisions. Enhanced provisions in CIAs and settlement agreements are increasingly common. Examples include added provisions for claw back of performance pay for executives participating in misconduct, agency certification of management, and retention of compliance experts and outside counsel. The OIG also has been active in enforcing breach notifications.
  • Reporting and returning ACA overpayments. Under the ACA (Affordable Care Act), if a person receives an overpayment, he or she is obligated to return it to the payer within 60 days—and notify the payer in writing of the reason for the overpayment. Retaining overpayments beyond the 60-day deadline can lead to significant penalties. Liability may exist even if a company is unaware of the overpayment, if it acted in "reckless disregard" or with "deliberate ignorance."
  • Connecting the FCA and the Exchanges. Under the ACA, all payments made by, through or in connection with the Exchanges will be subject to the FCA. This will heighten significantly FCA exposure for insurers operating on the Exchanges—and potential recoveries could be immense.

Understanding the Requirements of Mandatory Compliance Programs

With the ACA's passage, suppliers or providers seeking Medicare or Medicaid reimbursement must establish a compliance program meeting certain minimum requirements. Specific regulations outlining the elements of mandatory compliance programs for providers and manufacturers are still pending. The Accountable Care Organization (ACO) mandatory compliance plan, however, reflects CMS's latest thinking, requiring ACOs to:

  • Maintain a dedicated compliance officer who is not legal counsel to the ACO and reports directly to the ACO's governing body.
  • Conduct compliance training for the ACO, as well as its participants and suppliers.
  • Maintain annual compliance certification.
  • Report probable violations to an appropriate law enforcement agency.

Putting Compliance Program Best Practices into Action

The sooner companies thread compliance systems and processes throughout their operations, the sooner those processes will become embedded throughout their organizations. Companies benefit from effective compliance programs not only by enhanced detection and remediation systems to identify violations but also by the outward demonstration of a culture of compliance and self-critical analysis. This enhances both public perceptions and government opinions of the organization. There are six core elements of effective compliance programs:

  1. They are built from the top down. There is a culture of compliance that starts with the Board of Directors and C-suite executives and flows down through the organization.
  2. Every employee has an important role in the compliance program. An engaged and empowered compliance committee assists in implementing the program and guiding the compliance officer.
  3. The organization considers the compliance risks unique to its business—and establishes policies, training, audits and monitoring programs specific to its risk areas. Compliance programs are not one-size-fits-all.
  4. Employees have mechanisms for reporting potential noncompliance.
  5. The company carefully maintains documentation of its compliance processes, including manuals, plans, board resolutions and minutes describing the board's role in overseeing compliance.
  6. There must be periodic risk assessment and effectiveness reviews, including documentation of follow through, to identify and implement enhancements.


In our current environment of healthcare coverage and cost expansion, the government will continue to reinvigorate its use of the FCA and deputize private citizens to report questionable healthcare and billing practices. All healthcare-related entities, therefore, should take this opportunity to evaluate and enhance their compliance programs to protect their reputations—and limit their risks.

back to top

Getting The Word Out On Marketplaces

Click here for Your Free Analysis of State Education and Outreach Efforts

What do a raccoon, "the boil it down guy" and Paul Bunyan have to do with the new Marketplaces?

They've all been featured in Marketplace ads, videos and outreach campaigns to help inform consumers about their new coverage options. As of October 1, open enrollment began—and with it came a tidal wave of consumer demand for information about health coverage under the ACA.

To help you track the communications activities states have in place to support consumers, KidsWell has published a new document—powered by Manatt Health—analyzing the education and outreach campaigns of 17 State-Based Marketplaces and 3 State Partnership Marketplaces. Titled Getting the Word Out on Marketplaces, the new piece showcases the innovative strategies states are using in their campaigns to target populations that are hard to reach and/or have high rates of uninsurance. Linking to actual ads and videos, the document provides an overview of outreach and marketing efforts in each state, as well as the campaign kick-off date, target populations, estimated Marketplace enrollment, notable partnerships, marketing funding and marketing vendors.

Click to download your free copy of Getting the Word Out on Marketplaces.

back to top

Register Free For Manatt's New Webinar, Regulating Compounding Pharmacies: What's The Real Prescription For Change? And Earn CLE!

Click Here to Sign up Now—and Learn the True Impact of New Drug Compounding Legislation

NOTE: The course is approved for 1.0 Professional Practice/General CLE credit in New York and California, respectively.

For years, oversight of compounding pharmacies has been a patchwork of state regulation and federal oversight. Last year's meningitis outbreak, caused by a tainted steroid prepared in a Massachusetts compounding pharmacy, put a spotlight on the public safety concerns driven by the enforcement gaps. Responsible for 64 deaths, the outbreak sparked vigorous debate in both the House and the Senate over how to resolve the issue—and whether the FDA should have more power over compounding pharmacies. On September 25, the House passed a bill that, if enacted, will strengthen regulation of compounding pharmacies.

What exactly would this bill mean for drug compounders, the pharmaceutical industry and the public? How does it split the responsibilities of state boards of pharmacy and the FDA? And is it really the solution to ongoing safety issues? Find out at a new, free webinar from Manatt, Regulating Compounding Pharmacies: What's the Real Prescription for Change? Join us on November 14 from 2:00 – 3:00 p.m. ET, as our thought-leading presenters—Michelle McGovern, Associate, Healthcare Industry, Manatt and Ian Spatz, Senior Advisor, Manatt Health—give you the chance to:

  • Track the history of compounding regulation, including the legislative actions and judicial decisions that created the "mix and match" approach to enforcement jurisdiction.
  • Examine state spotlights, including the trends in enforcement jurisdiction that grew out of the meningitis outbreak.
  • Analyze proposed legislation, understanding the implications for all the stakeholders.
  • Compare the new legislation with the key points FDA Commissioner Margaret Hamburg and other experts raised during Congressional testimony—and learn if the FDA now has the enforcement jurisdiction it needs to resolve public safety issues.

As Congress moves toward enacting legislation, stakeholders continue to debate the efficacy—and the necessity—of the proposed regulation. Join us at Regulating Compounding Pharmacies to learn what would happen if a compounding bill becomes law—and what the implications are for all the healthcare players. Click here to register free.

back to top

What's Next For The Exchanges?

Click Here to Find Out in a New Health Affairs Podcast, Featuring Manatt's Joel Ario

With open enrollment beginning on October 1, Exchanges have been in the headlines across the country. Despite all the information available, many questions remain about exactly what we can expect as implementation of the ACA (Affordable Care Act) moves forward. What's the status of open enrollment now that it's underway? What caused the widespread computer glitches, particularly on the federal Exchange—and how significant will they be in the long run? What kind of risk pool will the Exchanges attract? What are the challenges in convincing younger, healthier Americans to enroll? How will the relationship develop between Medicaid and the Exchanges?

The latest podcast in the Health Affairs Conversation series explores what we can anticipate in the weeks and months to come. Chris Fleming hosts the compelling discussion with Manatt Health Managing Director, Joel Ario, former Director of the Office of Health Insurance Exchanges at the U.S. Department of Health and Human Services, as well as Sarah Dash, member of the research faculty at Georgetown University's Health Policy Institute, and Joe Antos, Scholar in Healthcare and Retirement Policy at the American Enterprise Institute. Click here to listen now and find out what's next for Exchanges.

back to top



pursuant to New York DR 2-101(f)

© 2021 Manatt, Phelps & Phillips, LLP.

All rights reserved