2018 Texas Assisted Living Association Annual Meeting Health Care Fraud By: Richard Y. Cheng, JD, CHC Direct: 214.462.6492 Email: rcheng@dykema.com

Presentation Overview Healthcare Fraud Statistics Investigations Potentially Problematic Conduct Sanctions Civil and Administrative Statutes Criminal Statutes Anti-Kickback Responding to Government Inquiries Protective Measures

Recovery Due to Health Care Fraud-FY 2017 Federal government (DOJ) recovered $3.7 billion in False Claims Act (FCA) cases, with $2.4 billion from healthcare cases alone. 8th consecutive year in FCA recovery exceeding $3.0 billion. Gov't paid out $392 million to relators (aka. Whistleblowers). Recovered money for Medicare, Medicaid and TRICARE. Over $56 billion since1986 – when civil FCA was strengthened by statute. State MFCUs Recovered $1.9 billion in 2016.

Year to Year Comparisons

2017 National Healthcare Fraud Takedown Targeted Industries – medical device, pharmacy, health IT, physicians, labs, hospitals and individual accountability. Post-acute providers remain a target. Data analytics continue to identify possible bad actors. Agents are now able to obtain and analyze billing data in real-time. 674 new qui tam matters in FY 2017. 53 new non-qui tam matters in FY 2017 in healthcare- $32 million in healthcare.

Investigations Federal Government—CMS, OIG and DOJ State Government—Texas Health and Human Commission OIG & AG. Private Insurers and intermediaries Whistleblowers/Qui Tam –state and federal. Main reason for FCA and other healthcare regulatory violations. State Licensing Boards—may lead to referral to other state agencies which could result in further investigations.

Most Common Conduct Services not rendered—documentation and time provided Inappropriate relationships Physician pre-screening / assessment Kickbacks/inducements Retention of overpayments

Inducements to Beneficiaries, Referral Sources and Employees Offers of gifts or gratuities to beneficiaries Cost-sharing waivers and discounts Free Transportation Preventative care service Gifts to referral sources Payments Based on Production/Commissions Co-pay waivers

Sanctions Administrative Civil—corporate integrity agreement (CIA) and on-going monitoring Monetary hold/suspension of payments License renewal Exclusions Criminal—money and prison time Forfeitures—seize assets, accounts and property State Board—license suspension/revocation

Exclusion/Suspension of Payments/Revocation of Enrollment Mandatory Exclusion--OIG is required by law to exclude from participation in all Federal health care programs Permissive Exclusion--OIG has discretion to exclude individuals and entities on a number of grounds, including misdemeanor convictions related to health care fraud other than Medicare or a State health program, fraud in a program (other than a health care program) funded by any Federal, State or local government agency Suspension—”credible allegation of fraud” (state and federal) Revocation of Enrollment— if fail to maintain or produce documents

Whistleblower/Qui Tam Actions (31 USC § 3730) Private parties can bring actions in the name of the United States Recover 15%-30%, attorneys fees and costs Main source of investigations for healthcare fraud

Civil Monetary Penalty Laws (42 USC § 1320-7a) Knowingly (or should know) presenting a claim for services or items not provided Knowingly (or should know) presenting a claim for services or items that are not medically necessary Knowingly (or should know) being an office/entity, holding ownership/ control or managing employees of a CMS excluded entity

Civil Monetary Penalty Laws (42 USC § 1320-7a) Knowingly (or should know) presenting a claim that violates Medicare assignment requirement, Medicaid rules or Medicare participation. Arranging or contracting with an individual or entity that the person knows or should know is excluded Offering remuneration to Medicare or state health beneficiary that is likely to influence the beneficiary Violating the federal or any state based Anti- kickback statutes

Health Care Fraud (18 USC § 1347) To knowingly and willfully execute or attempt to execute, a scheme – To defraud any health care benefit program, or To obtain, by means of false or fraudulent, or pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any health care benefit program.

Anti-Kickback Statute (42 USC § 1320-7b) Knowing and willful conduct involving the solicitation, receipt, offer or payment of any kind of remuneration in return for referring, directly or indirectly, an individual or for recommending or arranging the purchase, lease or ordering of an item or service that may be wholly or partially paid for by any federal health care program. Person need not have actual knowledge of this section or specific intent to violate this section. Texas Patient Solicitation Statute—broader and goes beyond government healthcare programs and includes private insurance payer sources.

Penalties for Violating Anti-Kickback Statute Criminal Statute Felony Not more than 5 years, not more than $25,000 cash, or both per violation Civil Sanctions Exclusion for Medicare/Medicaid Civil Monetary Penalty (“CMP”) of up to $50,000 plus damages of up to 3x the amount of the kickback.

Intent Pre-PPACA—an individual must have actual knowledge of, and the specific intent to, violate the AKS. Post-PPACA—a person need NOT have actual knowledge of the AKS or have a specific intent to commit an AKS violation; still requires knowing and willful intent.

Texas Patient Solicitation Act (“TPSA”) Person knowingly offers to pay or agrees to accept, directly or indirectly, overtly or covertly any remuneration in case or in kind to or from another for securing or soliciting a patient or patronage for or from a person licensed, certified, or registered by a state health care regulatory agency.

Potential Kickback Violations Routine waivers of co-pays or deductibles (aka cost-share waivers) Joint ventures with Medicare/Medicaid pay Institution-arrangements: credentialing, medical directors, recruitment and retention Prescription Drug Marketing — inducement by manufacturer (e.g. frequent flier program or research grant) Lab discounts—additional work done, direct benefits or discount on composite rate Home health, skilled nursing facilities/nursing facilities, hospices and ambulances Office rental Gifts to Medicare/Medicaid Beneficiaries

Marketing May be Suspect Payment by a healthcare provider  marketer may be seen as an inducement for marketer to arrange for or recommend services. Remuneration is a broadly defined term.* No actual prohibited referral needed – only the opportunity to earn money through referrals for services or use a product reimbursed by a federal health care program.

OIG’s Perspective On Anti-Kickback Prohibits the offering or acceptance of remuneration for the purposes of “arranging for or recommending the purchasing, leasing,…any service or item.” Marketing and advertising may involve at least technical violations of the statute. Many do not warrant prosecution because they are passive in nature or not involved in the delivery of healthcare.

OIG Suspect List Success fees, compensation based on percentage of revenue or compensation that reflects generation of new business. Marketing by healthcare providers and suppliers because they are in a position of trust and may exert undue influence. Direct contact between sales agent and physician in a position to order items or services. Direct contact between sales agent and federal healthcare program beneficiary. Degree of coercion or perceived coercion by marketing.

Yates Memo & Individual Accountability DOJ Deputy AG Sally Yates drafted a memo emphasizing "individual accountability" for corporate wrongdoing. Encourage full disclosure to get cooperation credit. Weak start with 2 acquittals of corporate CEOs. Tuomey Case Impact – CEO pays $1mm and 4 year exclusion. U.S. Healthcare Supply – 2 executives personally paid $12.2 mm due to FCA violation.

Yates Memo & Individual Accountability Unknowns Will D&O carriers start refusing to pay for new counsel hired to represent individual employees/officers? Since individual counsel are hired much earlier and more often, will this inhibit providers’ ability to investigate? Will Trump administration change this policy?

Texas Criminal Statutes & Other Federal Statutes Medicaid Fraud—Texas Penal Code § 35A.01 and 35A.02 Theft—Texas Penal Code § 31.03 Securing Execution of document by deception—Texas Penal Code § 32.4 Federal Travel Act

Obstruction of Justice Do not destroy documents Do not withhold documents Do not alter documents Do not tell employees not to talk to the government Do not tell employees what to say Do not lie or misrepresent anything

Document Hold Memo Inform everyone there is an audit or investigation No paper or electronic data (emails) should be altered or deleted Nothing transferred Automatic deletion policy—suspend Certification from employees Personal computers/phones

Proactive Measures Compliance program Ethics policies Internal reporting policies and incentives Compliance officer/consultant Training on coding, charting and billing Internal audits P & P for handling investigations Consider safe harbors Avoid “white coat” marketing Legal reviews Document discussions with the government

State Medicaid Fraud Control Units & Convictions FY 2015, published in 2016, Medicaid Fraud Control Units Annual Report – 14 ALF related criminal convictions for abuse or neglect. Example: Criminal conviction for fraud involving ALF, with $1465 recovered. The example is an indication prosecution is NOT always tied to money value. One abuse conviction involved ALF nurse caught by hidden camera assaulting a resident who resisted to be dressed – 2 years probation and barred from federal health care program.

Recent Cases – 2016 & 2017 Philip Esformes – indictment filed July 21, 2016 accusing owner of historic $1 billion healthcare fraud scheme. Esformes owned more than 30 SNFs and ALFs was charged of conspiracy, obstruction, money laundering and considered the “largest single criminal healthcare fraud case ever brought against individuals by the DOJ.” Scheme involved lackof medical necessity, non-delivered services and kickbacks. Provided access to ALF residents “for any healthcare provider willing to pay a kickback,” including pharmacies, home health agencies, physician groups, therapy companies, labs & diagnostic companies; many were not medically necessary or provided. Kickbacks were disguised in cash, lease payments and charitable donations.

Recent Cases - 2017 Life Care Centers of America Inc. - agreed to pay $145 million to settle allegations that it caused SNFs to submit false claims for therapy that were unreasonable, unnecessary, or non-skilled. Largest civil settlement with a SNF chain in the history of the FCA. DOJ alleged corporate-wide policies and practices designed seek highest reimbursement irrespective of the clinical needs. Life Care also allegedly sought to keep patients longer than necessary in order to continue billing for therapy. eClinicalWorks (ECW) – paid $155 million to resolve allegations of falsely obtained certification for its EHR software by concealing from its certifying entity that its software did not comply with the requirements for certification.

Contact Richard Y. Cheng, JD, CHC Dykema Cox Smith Thank You Contact Richard Y. Cheng, JD, CHC Dykema Cox Smith 214.462-6492 (office) RCheng@dykema.com 214.647.2108 (cell) https://www.linkedin.com/in/richardchengesquire