Ryan White Grantee Meeting

1. Ryan White Grantee Meeting The Impact of Health Reform on Compliance Programs ADAM J. FALCONE, ESQ. Partner

2. The Impact of Health Reform on Corporate Compliance

3. Enhanced CMP Penalties Mandatory Return of Overpayments within 60 days Lower hurdle for Qui Tam (whistleblower) lawsuits Knowing Retention of Overpayments Increased OIG Authorities Higher Risk of False Claims Act liability Patient Protection and Affordable Care and Act New Funding of Medicare and Medicare Program Integrity Enforcement Mandatory Compliance Programs Condition of Enrollment RAC Program Expansions After Health Reform….

4. Key Compliance Implications of Health Reform

5. Compliance Program Mandate • Under Health Reform Law: • As a condition of enrollment in Medicare, Medicaid, and CHIP, providers must establish a compliance program • Expansion of Medicaid under Health Reform Law • Core components of compliance program to be established by the Secretary of HHS in consultation with the OIG • Will be specific to particular industry or category of supplier or provider • Effective after HHS issues regulations

6. Mandatory Return of Overpayments • Health Reform Law requires providers to return and report “overpayments” from the Medicare or Medicaid programs within: • 60 days of identification or • Date corresponding cost report is due • Health reform law defines “overpayment” as funds that a person or entity receives or retains under Medicare or Medicaid to which the person or entity, after applicable reconciliation, is not entitled. 6

7. Medicare Overpayments Rule • CMS issued proposed rule February 16, 2012 • Applies only to payments received or retained under Medicare Part A and Part B • Adopts definitions from the Health Reform Law • Overpayment: Includes as example improper costs in cost report • Identified: Knows or should have known standard – imposes duty to investigate • Applicable reconciliation: Is the cost report • Requires use of existing Medicare contractor overpayment return forms • Reporting also may be done through OIG or CMS self-disclosure protocols • 10 year lookback

8. Higher Risk of False Claims Act Liability • Knowing Retention of Overpayments • False Claims Act violations result from knowingly and improperly avoiding or decreasing a payment “obligation” • Health Reform Law makes the knowing retention of overpayment beyond due date (i.e., 60 days from identification or when applicable cost report is due) an “obligation” under the False Claims Act • Penalties • Up to $11,000 per claim and three times the amount of the overpayment • OIG can also impose civil monetary penalties (CMPs) or exclude a provider from participation in Federal health care programs

9. Federal Civil False Claims Act 31 U.S.C. § 3729-3733 • The FCA forbids knowingly: • Presenting or causing the presentation of, a false claim for reimbursement by a Federal health care program, including Medicare or Medicaid; • Making, using or causing to be made or used, a false record or statement material to a false or fraudulent claim; • Repaying less than what is owed to the Government; • Knowingly and improperly avoiding or decreasing an obligation to pay the Government; and/or • Conspiring to defraud the Federal Government through one of the actions listed above.

10. Federal Civil False Claims Act 31 U.S.C. § 3729-3733 • Key Definitions • Claim = request or demand for money or property if the government provides money or reimburses a person or entity • Knowingly = • Actual awareness of falsity • Deliberate ignorance of the truth or falsity • Reckless disregard of truth of falsity

11. Federal Civil False Claims Act31 U.S.C. § 3729-3733 • Procedure • Attorney General may bring an action • Qui tam: Private person (relator) can bring an action in name of government • Must submit formal complaint to court • With written disclosure of all material evidence • Government has 60 days to review and may request extension • Government decides whether to intervene

12. Federal Civil False Claims Act31 U.S.C. § 3729-3733 • Protects employee whistleblowers from “retaliation” • Whistleblower/Qui Tam Lawsuits • If government doesn’t intervene, relator may proceed on his or her own, and pays litigation costs. • If successful, relator receives 25-30% of proceeds • If government takes the case, Government pays litigation costs (and makes litigation decisions) • If successful, relator receives 15-25% of proceeds • Public Disclosure Bar • Relator cannot base case on public record unless relator was the original source • Public record = criminal, civil or administrative hearing, congressional or GAO report, hearing, audit, investigation, or news media • Original source = direct and independent knowledge of the info and voluntarily gave to government

13. Higher Risk of False Claims Act Liability • Health Reform Law makes significant changes to qui tam provisions of the False Claims Act: • Public disclosure does not require court to dismiss lawsuit where the government opposes dismissal • State proceedings and private litigation do not qualify as “public disclosures” • Whistleblowers can proceed under the “original source” exception to public disclosure without direct (i.e., first-hand) and independent knowledge of the allegations so long as: • The whistleblower voluntarily provided information to the government prior to public disclosure and • The whistleblower’s information must be independent of and materially add to publicly disclosed information

14. Surge in Financial Support for Enforcement Activities • Federal Health Care Fraud and Abuse Control Program (HCFAC) • Established as a requirement under HIPAA to combat fraud committed against all health plans, both public and private • Jointly directed by the Attorney General and HHS OIG • Designed to coordinate Federal, State and local law enforcement activities with respect to health care fraud and abuse • Health Care Fraud and Abuse Control Account receives additional $10 million per year for FY 2011-2020 • Reconciliation allocates an additional $250 million to the Account for FY 2011-2016

15. Surge in Financial Support for Enforcement Activities • Federal Health Care Fraud and Abuse Control Program (HCFAC) • In FY 2011: • HCFAC won judgments or negotiated settlements of nearly $4.1billion • U.S. Attorneys Offices opened 1,110 new criminal healthcare fraud investigations involving 2,561 potential defendants • 743 defendants convicted for healthcare fraud-related crimes • Federal prosecutors had 1,873 health care fraud criminal investigations pending, involving 3,118 potential defendants, and filed criminal charges in 489 cases involving 1,430 defendants • DOJ opened 977 new civil health care fraud investigations and had 1,069 civil health care fraud matters pending • Since 1997, HCFAC has recovered $20.7 billion • Source: HCFAC Annual Report for FY 2011 (February 2012)

16. New Enforcement Entities • In 2006, Congress established a permanent Recovery Audit Contractor (“RAC”) Program, designed to review Medicare Part A and B claims and correct improper payments • The Health Reform Law expanded the RAC program to cover Medicare Parts C and D and Medicaid • Predicted to save $2.1 billion over the next five years

17. New Enforcement Entities • Final Rule issued by CMS September 16, 2011 • Purpose of RACs: To correct payment errors • Medicaid RACs must report potential fraud to the State, which must refer the activity to the appropriate authorities • Payments must be made to RACs on a contingency basis • Compensation scheme is mandated for identified overpayments • No compensation scheme is mandated for identified underpayments • Compensation to RACs must be based on amounts recovered

18. Recovery Audit Contractors (RACs) • States have considerable flexibility regarding the design, procurement and operation of their respective RAC programs including: • Establishing the compensation structure for the identification of underpayments • The number and frequency of medical records to be examined • State appeals process • State exclusion of claims from Medicaid RAC review • Bundling of procurements • Coordination of the collection of overpayments • Contingency fee rates • States have complete flexibility in the contingency fee rates they pay, exclusive of Federal financial participation (FFP). Absent an exception, however, CMS will provide FFP only for amounts that do not exceed the then-highest contingency fee rate paid to Medicare RACs – 12.5%

19. Recovery Audit Contractors (RACs) • Medicaid Provider Protections • Medicaid RACs: • Limited to a three-year look-back period • Prohibited from auditing claims that they or another entity (such as Medicare RAC) have already audited • Must notify providers of overpayment findings within 60 days • States must provide adequate appeal processes for providers to dispute adverse determinations made by Medicaid RACs

20. Medicaid Fraud Control Units (MFCU) • Purpose: Finding and reporting Medicaid fraud • Also investigate and prosecute patient abuse and neglect in health care facilities • MFCUs are state agencies that must be “separate and distinct” entities from state Medicaid agencies • Funded through Medicaid grants to States • 49 States and the District of Columbia have established MFCUs

21. MFCU Enforcement Record • Medicaid Fraud Control Units (MFCUs) in FY 2010: • Obtained 1,329 convictions • Reached 1,077 civil judgments or settlements • Referred 942 individuals and entities for exclusion from Federal health care programs by the OIG • Recovered: • $1.8 billion as a result of in court-ordered restitution, fines, civil settlements, and penalties

22. Medicaid Fraud Control Units - Statistics

23. The Medicaid Integrity Program • In February 2006, Congress created the Medicaid Integrity Program (MIP) • CMS has two broad responsibilities under the Medicaid Integrity Program: • To hire contractors to review Medicaid provider activities, audit claims, identify overpayments, and educate providers and others on Medicaid program integrity issues • To provide effective support and assistance to States in their efforts to combat Medicaid provider fraud and abuse

24. The Medicaid Integrity Program

25. Office of Inspector General (OIG) • OIG Enforcement Activities • FY 2011: • $5.1 billion expected health care recoveries • 2,262 individuals and entities excluded from participation in Federal health care programs • 1,105 prosecutions or settlements • 614 criminal actions involving health care offenses • 375 civil actions involving health care offenses • 6,848 complaints received for investigation • Source: OIG Budget Request to Congress for FY 2013 (February 2012) • FY 2000 (the last time data were released): • OIG’s fraud “hotline” received 526,780 calls

26. Federal Grants Financial Management • All Federal grantees must comply with requirements of 45 C.F.R. Part 74, including financial management • Risk areas include: • Failure to create written procedures for determining reasonableness, allowability, and allocability of costs • And failure to follow those policies after they are implemented • Failure to comply with federal procurement requirements before awarding contracts worth more than $25,000 • Failure to use personal activity reports to ensure staff time was allocated to the correct grant (where the organization had multiple funding streams)

27. Past OIG Audit Investigation Findings • Not using actual costs as the basis to charge the program* - Big One! • Assessing higher client copayments than appropriate • Not separately accounting for copayments collected • Not using copayment funds to provide additional program services • Providing services to ineligible clients

28. Office of Inspector General (OIG) • Under the Civil Monetary Penalties (CMP) Law, the Office of Inspector General (OIG) may assess penalties for: • False and fraudulent conduct related to Federal health care programs or beneficiaries, which includes submission of claims that are: • False or fraudulent • Provided by someone who has been excluded from participation in Federal health care programs • Prohibited by the beneficiary inducement law • OIG may assess penalties of up to $11,000 for each item or service falsely claimed and up to three times the amount falsely claimed • OIG may also seek to exclude the provider from participation in Federal and State health care programs

29. Expanded Enforcement Authorities • Health Reform Law authorizes the OIG to impose CMPs when a provider: • Fails to report and return an overpayment, as required under the new Health Reform Law requirement • Orders or prescribes a medical or other item or service during a period in which the provider was excluded from a federal healthcare program, if the provider knows or should have known that a claim for such medical or other item or service will be made • Knowingly makes false statements, omissions, or misrepresentations of a material fact in any application, bid or contract to participate or enroll in a Federal health care program • Fails to grant to the OIG timely access to documents for the purpose of audits, investigations, evaluations, or other statutory functions

30. Increased Financial Penalties • Health Reform Law increases Civil Monetary Penalties: • Increases the penalty for a false statement or misrepresentation to $50,000 • Allows up to $15,000 per day that provider refuses access to OIG

31. Office of Inspector General (OIG) • Debarment and Exclusion • No Federal health care program payment may be made for any items or services furnished by an excluded individual or entity • Extends to payment for administrative and management services not directly related to patient care, but that are a necessary component of providing items and services to Federal program beneficiaries

32. Responsible Corporate Officer Doctrine • Under the responsible corporate officer (RCO) doctrine, individual corporate officers can be found guilty of violating a variety of federal laws without exhibiting any unlawful intent, negligence, knowledge of the violation or direct participation in the wrongdoing • Instead, under the RCO doctrine, the government only needs to prove that the executive did these three things: • Held a position of responsibility and authority in the corporation • Had the ability to prevent the violation • Failed to prevent the violation • Sticking one’s head in the sand has never been so dangerous!

33. OIG Permissive Exclusion Authority • In October of 2010, HHS-OIG issued guidance on how it would exercise its discretionary authority to debar individual corporate officers when their company violates health care laws • Factors the OIG will use for permissive exclusion: • Circumstances of the Misconduct and Seriousness of the Offense • Individual’s Role in the Sanctioned Entity • Individual’s Actions in Response to the Misconduct • Information about the Entity

34. Office of Inspector General (OIG) • Debarment and Exclusion • All Federal grant applicants and sub-recipients are required to make appropriate certifications that neither they nor their principals are (or have been) • Presently or proposed for debarment/suspension • Declared ineligible • Voluntarily excluded • Within the last 3 years, convicted of or have a civil judgment against them (or are presently indicted or charged) with respect to fraud, a criminal offense, an antitrust violation, embezzlement, bribery, falsification, theft, or forgery

35. Office of Inspector General (OIG) • OIG Exclusions List • http://www.oig.hhs.gov/fraud/exclusions/exclusions_list.asp • Government Services Administration (GSA) Excluded Party List System • http://www.EPLS.gov • http://www.SAM.gov

36. Questions? Adam J. Falcone, Esq. 1129 20th St. NW, 4th Floor Washington, DC 20036 202.466.8960 afalcone@ftlf.com www.ftlf.com