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Enforcement Trends: Feds Targeting Commercial & Private-Pay, Not Just Medicare Fraud

by | May 21, 2019 | Enforcement-nir, Essential, National Lab Reporter

From - National Intelligence Report Risk of federal prosecution for health fraud and abuse applies only when you deal with Medicare, TRICARE or other federal health programs… . . . read more

Risk of federal prosecution for health fraud and abuse applies only when you deal with Medicare, TRICARE or other federal health programs.


Wrong! While that used to be true, the times they are a-changin’. In recent years, DOJ enforcers have broadened their targeting to include not just state Medicaid but also private commercial healthcare activity. And they’re finding new laws and new theories to do it.

The Traditional Boundaries

Historically, federal health care enforcement concentrated on federal health programs and states focused on state programs. Of course, there’s more to compliance than healthcare fraud and abuse. Accordingly, in conducting their business, labs are also exposed to risks of liability under other federal and state laws, such as antitrust, OSHA, consumer fraud, medical malpractice, etc.

But while the existence of prosecution risk hasn’t changed, the nature of it has. Today, federal health enforcers are willing and able to deploy their vast array of resources to pursue wrongdoing in realms of activity it traditionally left to the states and other federal regulatory agencies. In effect, when you violate a state law or federal commercial law, you may also be committing a violation under federal health fraud laws.

EKRA & the Opioid Crackdown

One of the things driving this trend is the enactment of new legislation making extending federal Anti-Kickback Statute (AKS) and Stark Law liability beyond Medicare to Medicaid and non-government commercial healthcare activity. Exhibit A: In October 2018, a series of new federal laws designed to crack down on illegal opioid distribution and use took effect. One of those laws, the so called Eliminating Kickbacks in Recovery Act of 2018 (EKRA), creates criminal penalties for “patient brokering,” an arrangement in which a third party enrolls an addicted patient into a private health insurance plan and then arranges for that patient to enter a treatment facility or sober home in exchange for a kickback payment.

Significance: Under previous law, a brokering arrangement could be prosecuted as an AKS or Stark violation only if it involved a patient in Medicare, Medicaid or other government health program; it can’t be used to prosecute brokering arrangements involving patients with commercial or private-pay insurance. But unlike AKS and Stark, EKRA is an “all-payor” statute that applies not just to government health programs but also lab services paid for by commercial insurers.

What EKRA Says

EKRA makes it a federal crime, carrying a fine of up to $200,000 and/or imprisonment for up to 10 years, to knowingly and willfully:

  • Solicit or receive any remuneration for referring a patient to a recovery home, clinical treatment facility or lab; or
  • Pay or offer any remuneration either to induce such a referral or in exchange for an individual using the services of a recovery home, clinical treatment facility or lab.

Federal Prosecution for Commercial Health Fraud: The Forest Park Case

Parallel to EKRA is the increase in DOJ prosecutions against health providers for fraud outside the context of federally funded health programs. This trend has been most apparent in Texas where there have been at least three recent cases of federal prosecution for commercial fraud committed by providers. The most significant of these cases involves the now-defunct Forest Park Medical Center operating as an out-of-network physician-owned surgical hospital in the Dallas area. Federal prosecutors alleged that Forest Park paid over $40 million in kickbacks disguised as consulting fees for marketing services to entities owned or controlled by physicians in exchange for private patient referrals in violation of the AKS. The more surgeries doctors referred, the more they earned.

Had it been just about the AKS, this would have been pretty routine prosecution. But what makes the Forest Park case novel is that the DOJ also charged the defendants with violating a much lesser known law called the Travel Act which makes it a federal offense to carry on interstate commerce for the purposes of carrying on unlawful activity under another statute—in this case, the Texas commercial bribery statute (Texas Penal Code §32.43). Specifically, the DOJ alleged that individuals associated with Forest Park bribed physicians with cash, gifts, discounted leases and other remuneration to direct patients with commercial insurance to its own facilities and steer patients with lower-reimbursing federal programs like Medicare and Medicaid to others. It also allegedly engaged in routine waivers of copayments and deductibles.

Ten defendants pled guilty. On April 10, 2019, the federal jury rendered its verdict on the nine other defendants who risked a trial: seven were convicted, one was acquitted and the other got at least a temporary reprieve due to a deadlocked jury.

Takeaway: Although it’s likely to be appealed, the Forest Park case is being hailed as a significant victory for the DOJ and a wake-up call for providers, including labs. While it may turn out to be nothing more than an outlier, as was noted during the trial, the kinds of marketing agreements involved in the case are in fairly common use within the health care industry. And that creates the potential for more commercial fraud prosecutions, both inside and outside Texas. Bottom Line: Risk of medical fraud prosecution is creeping beyond the bounds of Medicare and into private commercial arrangements.

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