Behavioral health fraud perpetrators plead guilty to $1M Medicaid scheme

Two men, who created and managed a company that provided mental health care to Medicaid patients and collected over $1 million in Medicaid payments, pleaded guilty to conspiracy to commit health care fraud. The president of Coastal Bay Behavioral Health, Inc. (Coastal Bay) acknowledged in the plea agreements that the other participant was an “excluded provider,” who was prohibited from billing federal health care programs due to a 2011 conviction for health care fraud. Each man faces a maximum penalty of five years in prison and a fine of up to $250,000.

Although the president was aware that he was employing an excluded provider, he did not disclose this fact to the state Medicaid program. Using an alias, the provider performed a variety of functions, including hiring and firing individuals, seeing patients, and performing other managerial tasks. Coastal Bay received $1.2 million in reimbursements from Medicaid because of the provider’s alleged fraud, according to court papers.

The provider and his family received significant financial benefits due to his involvement in Coastal Bay. Specifically, the provider had access to a Coastal Bay credit card, which he used to make routine purchases at restaurants, furniture stores, gas stations, and other places in North Carolina, even though Coastal Bay had no operations in North Carolina. In addition, the provider and his immediate family received more than $10,000 in direct payment withdrawals from the Coastal Bay business account.

$55M fraud scheme earns 84 months in prison

Involvement in a $55 million health fraud scheme earned a medical clinic owner 84 months in prison. She pleaded guilty in October 2015 to using her two Brooklyn, New York-based clinics, Prime Care on the Bay LLC and Bensonhurst Mega Medical Care PC to submit false and fraudulent claims to Medicare and Medicaid.

Scheme

According to the guilty plea, the owner and various co-conspirators paid kickbacks to induce patients to come to the clinics. She then submitted false claims for services induced by these kickbacks or provided by unlicensed staff. She also wrote checks from the clinics’ accounts to third-party companies that were ostensibly vendors, but were actually not providing services. These payments were used to generate cash for the kickbacks. The owner was ordered to forfeit over $29 million.

Several other co-conspirators have pleaded guilty to their part in the scheme. These include the former medical directors of both clinics, six therapists, three drivers, a former patient who received kickbacks, and the owner of several of the vendor companies used to launder funds.

Timing key for internal audits, self-disclosure

There is an art to conducting internal compliance audits and determining when to begin a self-disclosure protocol—the ideal compliance program should promote prevention, detection, and resolution of any conduct that fails to comply with the requirements of state and federal health care programs. Knowing when to perform an internal investigation or audit to encourage a healthy program is key, according to Leia C. Olsen, shareholder, Hall Render, who was presenting at a Health Care Compliance Association (HCCA) webinar.

Olsen noted that many qui tam actions arise when employees do not feel as though their concerns are being heard and taken seriously. She stressed the importance of having a mechanism for reporting incidents, and timely monitoring identified issues and implementing remedial measures. However, she noted that qui tam suits can potentially be prevented not only by conducting an internal investigation, but also by self-disclosing, which can trigger the public disclosure bar. Self-disclosure of identified wrongdoing is encouraged by the Department of Justice and HHS, but, per the Yates memorandum, all relevant facts must be provided by a company before it can receive credit for cooperating and voluntary self-disclosure. Therefore, it is important to conduct a thorough investigation, collecting all available information and documentation, before self-disclosing.

The 60-day refund rule, promulgated under Sec. 6402 of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148), together with the Fraud Enforcement and Recovery Act of 2009 (FERA) (P.L. 111-21), creates False Claims Act (FCA) liability for providers who fail to report and return identified overpayments within 60 days of identifying the overpayment. Therefore, Olsen said, the time to meet the reasonable diligence standard after learning of a potential overpayment is limited. Having a protocol in place to quickly decide whether to self-disclose is critical in securing the greatest amount of cooperation credit.

Know the auditors and audit process, you’ll be audited someday

Providers and suppliers will be audited by CMS at some point, so it is important to understand the various types of audits and the appeals process, according the presenter of a Health Care Compliance Association (HCCA) webinar titled “Medicare Audits & Audit Appeals—From A to Z(PIC).” Scott R. Grubman, Esq., of Chilivis Cochran Larkins & Beyer LLP, focused his discussion on recovery audit contractors (RACs) and zone program integrity contractors (ZPICs) and the various steps of the audit appeals process, from the initial determination to judicial review.

RACs

Charged with “identifying and correcting improper payments through detection and collection of overpayments,” the RAC program started as a demonstration project and completed its first audits in 2011-2013. As new RAC contracts were awarded in October 2016, RAC audits will continue into the future. RACs are paid a contingency fee (somewhere between 7 and 17 percent of the recovery), but only when a favorable reconsideration is made, so they have a financial incentive to find and recover overpayments. According to Grubman, RACs “may not work on the side of fairness for providers.” But RACs are limited in the number of claims they can audit per provider per year and must maintain a 95 percent accuracy rate and an overturn rate of less than 10 percent. RAC audits, as well as MAC audits, are desk reviews, contrary to ZPIC audits.

ZPICs

Grubman warns to be careful when going through a ZPIC audit. ZPICs are tasked, for example, to investigate potential fraud and abuse and to refer parties for CMS administrative actions or for law enforcement; conduct investigations (not just as desk audits, but through interviews and onsite visits, too) and data analysis under the CMS Fraud Prevention System; and to identify the need for administrative actions such as payment suspensions. While RACs typically look at unintentional overpayments, ZPICs respond to intentional overpayments.

Audit process

Whatever the auditor that reviews the claim, an initial determination is first made as to whether the item and services are covered and the amount payable. The auditor then notifies the provider/supplier of the decision following specific notice requirements. A provider or supplier may appeal that decision, following this chronology:

1. Redetermination. A request for a redetermination must be filed within 120 calendar days from receipt of the initial determination, and within 30 calendar days to avoid CMS starting to recoup the overpayment. (Grubman suggests starting the count on the date listed on the determination, not receipt, to avoid running into any issues.) The redetermination involves an “independent review” performed by the same contractor (but a different individual). New issues may be raised by the contractor during redetermination, but a redetermination must be issued within 60 days from receipt of request.
2. Reconsideration. Within 180 days of the redetermination (or within 60 days to avoid recoupment), a party may file a request for reconsideration, which is an independent review of the evidence and findings conducted by a qualified independent contractor (QIC). QICs are bound by national coverage determinations (NCDs), CMS rulings, precedential Medicare Council decisions, and applicable laws and regulations. (Local coverage determinations (LCDs) and CMS program guidance is not binding but given substantial deference.) A QIC has 60 days to issue its reconsideration, and if the deadline isn’t met, the appellant can escalate to the next level of appeal.
3. Administrative law judge (ALJ). If the amount at issue exceeds $160, a request for an ALJ decision may be filed within 60 days of the reconsideration (recoupment cannot be avoided). A hearing is typically held either in person, video conference, or telephone, and parties may submit evidence and/or present witnesses. An ALJ decision is a de novo review and ALJs have wide discretion over the hearing. ALJs are bound by the same NCDs and laws and regulations and must give deference to non-binding authority as with reconsiderations. An ALJ must issue a decision within 90 days, however, there exists an immense backlog in issuing decisions, which has even become the subject of a legal challenge (see Court sets a timeline for Medicare claims backlog, December 6, 2016).
4. Medicare Appeals Council. Within 60 calendar days of the ALJ’s decision, a review by the Medicare Appeals Council may be requested. The Council’s review is limited to those issues the appellant claims to disagree with. Briefs are filed by the parties but no new evidence is provided. Typically a decision is made with no oral arguments and must be made within 90 calendar days.
5. Judicial review: Within 60 calendar days of receipt of the Council’s decision, a suit may be filed in the district court where the provider/supplier resides or has its principal place of business, with the Secretary of HHS named as defendant.