Doing More With Less: Despite Sequestration Cuts to Funding DOJ/HHS Enforcement Flourishes

Like providers, even government enforcement entities have faced budget cuts. But it doesn’t seem to have slowed down enforcement efforts. In 2014, funding for the Health Care Fraud and Abuse Control (HCFAC) Program was reduced due to sequestration by $21.6 million. But $278.1 million in mandatory funds (after the sequestration reduction) and another $293.6 million in discretionary funds provided enough fuel for HCFAC to generate significant fraud recoveries and the agencies indicated they are pleased with their return on investment.

Report details enforcement successes

The U.S. Department of Justice (DOJ) and the Department of Health and Human Services (HHS) released their joint Health Care Fraud and Abuse Control Program Annual Report for Fiscal Year 2014 on March 19, 2015. A press release announcing the report declares that in fiscal year 2014, the DOJ and HHS recovered $3.3 billion via federal health care fraud enforcement activities.

That amount brings the lifetime total recovery for the HCFAC program to $27.8 billion. The release also claims that for the period 2012-2014, the agencies’ return on their investment is $7.70 per dollar spent to fight health care related fraud and abuse. This is a rolling average to account for the variation in the amount and type of cases resolved each year which impacts annual ROI. The agencies claim this is the third-highest return on investment ever for the program and $2 above the average ROI for the program.

Attorney General Eric Holder had praise for the enforcement efforts of HCFAC in the press release issuing the report: “As the innovative and collaborative work of the Health Care Fraud and Abuse Control Program proceeds, more taxpayer money is being recovered, more criminals are facing justice, and more fraud is being punished, prevented, and deterred.” The DOJ and HHS credit HCFAC’s success to 1) a more proactive strategy promoted by the Affordable Care Act to prevent fraud and abuse before it occurs rather than “pay and chase” which requires recovering sums already paid out and later determined to be fraudulently solicited; and 2) the Health Care Fraud Prevention and Enforcement Action Team, better known as HEAT, which the HHS’s Office of Inspec tor General and the DOJ run together using real-time data analysis, increasing the speed of the investigation, enforcement and prosecution process.

A little help from their friends

DOJ and HHS credit not only HEAT but other government programs for the continued enforcement success. For example, the report notes efforts of the Medicare Strike Force which DOJ and HHS expanded into nine more geographic areas including Brooklyn, Miami, Los Angeles, Dallas and Chicago. Strike Force’s aggregate achievements since its creation are indeed striking: 963 cases against 2,097 defendants, seeking return of $6.5 billion in Medicare billings; 1,443 guilty pleas and 191 convictions with 1,197 sentenced to an average of 47 months jail time. In 2014, the DOJ opened 924 new investigations, prosecutors filed charges in 496 cases against 805 defendants and 734 defendants were convicted.

The DOJ/HHS report also cites the False Claims Act as an effective enforcement tool responsible in 2014 alone for garnering $2.3 billion in settlements and judgments in civil fraud and abuse claims involving Medicare and Medicaid and other federal health care programs. That brings the total recovered since 2009 to $15.2 billion (federal losses only). Separate state program enforcement efforts also received help from these prosecutions in recovering billions of dollars. The report indicates 782 new investigations were begun in 2014 under the False Claims Act.

Proactive fraud prevention activities

Fraud prevention measures were also lauded in the report, including provider enrollment provisions and revalidation of existing suppliers and providers—to ferret out improper enrollees who aren’t legitimate providers. Through these efforts 470,000 enrollees were deactivated and 28,000 enrollments were revoked. A revoked enrollee can’t re-enroll for 1-3 years.

Also another preventive measure the report highlights is use of a Fraud Prevention System similar to that used by credit card companies to “apply advanced analytics to all Medicare fee-for-service claims on a streaming, national basis.” It “identifies aberrant and suspicious billing patterns which in turn trigger actions that can be implemented swiftly to prevent payment of fraudulent claims,” saving $210.7 million in its second year (almost doubling the first year’s achievement).

Enforcement examples involving laboratory services

Some of the cases resolved in 2014 and highlighted in the report include laboratory services. For example:

  • A $15.8 million settlement in February 2014 with a clinical laboratory and two physicians owning addiction treatment clinics relating to alleged fraudulent urine testing and False Claims Act violations. “The government alleged that the lab … submitted false claims to federal health care programs for medically unnecessary quantitative urine drug tests referred to it by the treatment clinic.” The lab also allegedly sought higher reimbursement by misidentifying the class of drug being tested for. The settlement included a five-year Corporate Integrity Agreement (CIA) for the laboratory which required “substantial internal compliance reforms” and third-party claims review.
  • Another settlement, for $4.7 million, relating to alleged false claims relating to unnecessary urine drug testing with a Massachusetts lab in May 2014.
  • A $5 million settlement with a Texas laboratory regarding alleged violations of the Civil Monetary Penalties Law for submitting claims with modifier 59, billing for multiple units of a drug test when only one unit could be billed for each patient visit, and billing urinalysis codes for screening tests. That settlement also involved a five-year CIA.


Annual Report of the Departments of Health and Human Services and Justice, Health Care Fraud and Abuse Control Program Annual Report for Fiscal Year 2014 (March 19, 2015).

Takeaway: Laboratories and other providers beware: Despite sequestration fueled funding cuts, the DOJ and HHS report their enforcement efforts have been vigorous and financially successful in terms of their return on investment.


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