On the heels of President Obama’s call for government belt-tightening, Attorney General Eric Holder on Thursday pledged to apply more pressure on health-care fraudsters who siphon billions of dollars from the federal fisc each year.

Holder, speaking at a health-care fraud summit at the National Institutes of Health, said he would push to strengthen a Cabinet-level team devoted to the effort, as well as beef up anti-fraud strike forces around the country. Holder also said he would ask Congress for more funding and legislation targeting fraud, and reach out to the private sector — one of the aims of Thursday’s summit.

The Attorney General said more than $60 billion in public and private health-care spending was lost to fraud each year. Holder, joined by Secretary of Health and Human Services Kathleen Sebelius, brought the oft-cited estimate to life with a bit of pop-culture.

“That is a staggering amount of money,” Holder said in prepared remarks. “It’s half the entire economy of Secretary Sebelius’s home state of Kansas. It’s more than the net worth of America’s eight largest private foundations. And it’s 33 times the amount of money that Avatar — now the highest-earning movie of all time — has made at the box office.”

Holder and Sebelius lead the Health Care Fraud Prevention and Enforcement Action Team, known as HEAT, which supports the efforts of seven health-care fraud strike forces around the country. Thursday’s summit, attended by representatives from the insurance industry and health care-provider community, was intended to ally the public and private sectors in HEAT’s mission.

“There’s no question that our ability to protect taxpayer dollars, to ensure the viability of our government health care programs, and to strengthen our national health care system depends on our ability to expand the discussion beyond the federal government,” Holder said.

In his State of the Union speech to Congress on Wednesday, Obama said he was prepared to freeze government spending for three years, starting in 2011, and urged Congress to pass a “pay as you go” law. And anti-fraud efforts have also taken on new urgency as Congress tussles over health-care legislation that could cost north of a trillion dollars if enacted.

Holder noted that the department recovered more than $2 billion in 2009 under the False Claims Act. On the criminal enforcement front, the department charged more than 800 people for health-care fraud and related crimes and won more than 580 convictions, he said.

Assistant Attorney General Tony West (Steve Bagley/Main Justice)

The Department of Justice and Congress are working together to beef up the government’s ability to fight health care fraud.

Assistant Attorney General Tony West told the Senate Judiciary Committee Wednesday the DOJ needs Congress’s help. “We cannot combat this fraud alone,” said West, who has headed the DOJ’s Civil Division for eight months.

Good timing. Later Wednesday, Sen. Ted Kaufman (D-Del.) introduced the Health Care Fraud Enforcement Act to help the Justice Department out.

The act would make a few key reforms, Kaufman said, including changing sentencing guidelines for criminals convicted of health care fraud, make punishments “commensurate with costs” of the fraud, and increase whistleblower payments.

According to a news release from Kaufman’s office, the bill would increase the sentences for health care fraud convictions, redefine the definition of what constitutes a health care fraud offense to include drug marketing, kickback and ERISA crimes, increase whistleblower claims, create a mental state requirement for trying health care fraud offenses and devoting $20 million annually from 2011 to 2016 in federal funding to increase Medicare fraud investigations and prosecutions.

“We have seen an increasing number of sentences of fines for where there is really serious egregious conduct. Fines have just added to the cost of doing business,” Sen. Arlen Specter (D-Pa.) said at the Senate Judiciary Committee hearing this morning.

On the Senate floor Tuesday, Kaufman spoke about the bill, the Health Care Fraud Enforcement Act of 2009. “We must also ensure law enforcement has the tools it needs,” Kaufman said.

West said that “fighting Medicare and Medicaid fraud has become a “Cabinet-level priority,” with the DOJ and HHS’s combined efforts.

The two agencies in May announced the Health Care Fraud Prevention and Enforcement Action Team (HEAT) to pursue Medicare and Medicaid fraud.  ”If we can put these people in prison, we will do that,” West said. “That’s a commitment the department has made.”

At the hearing, Sen. John Cornyn (R-Texas) said he wanted to see the DOJ’s Civil and Criminal Divisions beef up their staff to deal with health care fraud. “The bad guys outnumber the good guys,” Cornyn said. “I don’t know how we can expect [The Centers for Medicare and Medicaid Services] to do a better job, when out of the 4.4 million claims you get every day you can only review 3 percent of them. I’m not sure we are ever going to have enough good guys to outnumber the bad guys in this.”

Sen. Chuck Grassley (R-Iowa) questioned West on the 1,040 pending qui tam lawsuits waiting for the DOJ to sign on. “I find it troubling that some cases are lingering for 36 months,” Grassley said of the whistle blower suits. “Does the Justice Department have a plan to clear this backlog in a timely manner? And if so, what is it?”

Those cases, West said, are being “actively investigated.”

The National Law Journal’s Mike Scarcella reports that the Assistant Attorney General Lanny Breuer, who heads the Criminal Division, is bulking up the fraud section to back up the Obama administration’s rhetoric about cracking down on health care and corporate fraud. (Subscription required.)

Lanny Breuer (USDOJ)

The first piece of the puzzle is filling the the vacancy created last month when last month when Steven Tyrrell, section chief since 2006, announced he was stepping down. Breuer told Scarcella he’s looking for “a superstar” or a “rock star” to fill Tyrrell’s shoes. The department is also planning to pad the section with 10 additional trial attorneys and fill the long-vacant job of deputy chief for corporate, securities and investment fraud.

Breuer appears to casting a wide net in his search for a new section chief. From The NLJ:

Breuer, who oversees the Criminal Division, said he’s been talking to U.S. Attorneys and private practitioners, including former colleagues, about his plans to bolster the fraud section. He said he wants the section, which has 57 attorneys now, to grow. “We’re aggressively and zealously pursuing this hiring initiative,” said Breuer, whom the Obama administration brought over from Washington-based Covington & Burling.

Five of the new positions would be dedicated to sniffing out and prosecuting health-care fraud. The others would be part of the traditional “rapid-response” team of prosecutors who parachute into fraud hot zones around the country.

The defense bar, predictably, is opposed to expanding the section, raising concerns that more prosecutors and more task forces will result in minor violations metastasizing into major litigation, the kind that plays well in news releases.

Prosecutors live to prosecute, especially young lawyers told they’re bringing “cases of extraordinary importance” aimed at reaping millions for the American taxpayer. So defense lawyers counsel caution.

“When the statistics drive the effort, you run the risk of sweeping in otherwise explainable, innocent or nonfraudulent conduct,” warned Gibson, Dunn & Crutcher partner Robert Blume of the Los Angeles-based firm’s Washington and Denver offices.

Attorney General Eric Holder and Health and Human Services Secretary Kathleen Sebelius just announced a new initiative to combat Medicare fraud.  The interagency effort, the Health Care Fraud Prevention and Enforcement Action Team (HEAT), will coincide with an expansion of Strike Force team operations to Detroit and Houston.  Medicare Fraud Strike Forces, currently in operation in South Florida and Los Angeles, fight Medicare fraud on a targeted local level.  The first Strike Force team was established in South Florida in 2007 and has brought in $186 million in criminal ines and civil recoveries.   The Los Angeles team, created about a year ago, over $55 million has been ordered in restitution to the Medicare program.

Kathleen Sebelius

“With this announcement, we raise the stakes on health care fraud by launching a new effort with increased tools, resources and a sustained focus by senior-level leadership,” said Holder.  “Every year we lose tens of billions of dollars in Medicare and Medicaid funds to fraud.  Those billions represent health care dollars that could be spent on medicine, elder care or emergency room visits, but instead are wasted on greed.  This is unacceptable, and the Justice Department is committed to working with the Department of Health and Human Services to eradicate it.”

“Today, we are turning up the heat on perpetrators who steal from the taxpayers and threaten the future of Medicare and Medicaid,” said Secretary Sebelius.  “Most providers are doing the right thing and providing care with integrity.  But we cannot and will not allow billions of dollars to be stolen from Medicare and Medicaid through fraud, waste and serious abuse of the system. It’s time to bring the fight against fraud into the 21st century and put the resources on the streets and out into the community to protect the American taxpayers and lower the cost of health care.”

“We know these strike forces work.  I believe a targeted civil and criminal enforcement strategy in these locations will have a substantial impact on deterring fraud and abuse, protecting patients and the elderly from scams, and ensuring that taxpayer funds are not stolen,” said Holder. 

The team will build on demonstration projects by the HHS Inspector General and the Centers for Medicare & Medicaid Services that focus on suppliers of durable medical equipment (DME).  These projects increase site visits to potential suppliers to prevent imposters from posing as legitimate DME providers.  Other initiatives include:

• Increasing training for providers on Medicare compliance, offering providers the resources and the knowledge they need to help identify and prevent fraud.
• Improving data sharing between the Centers for Medicare & Medicaid Services and law enforcement so we can identify patterns that lead to fraud.
• Strengthening program integrity activities to monitor and ensure Medicare Parts C (Medicare Advantage plans) and D (prescription drug programs) compliance and enforcement.

You can visit the website here: www.hhs.gov/stopmedicarefraud

Fraud prevention efforts are also strengthened in President Obama’s proposed Fiscal Year 2010 budget.  The President’s budget invests $311 million – a 50 percent increase from 2009 funding – to strengthen program integrity activities within the Medicare and Medicaid programs.  Combined, the anti-fraud efforts in the President’s budget could save $2.7 billion over five years by improving oversight and stopping fraud in the Medicare and Medicaid programs, including the Medicare Advantage and Medicare prescription drug programs.