Health care fraud and abuse politics are simple: Everyone in Congress agrees on strong enforcement. The politically more difficult choices are those that would make health services more effective, which in turn could make enforcement more rational, expert panelists said on Thursday.
“We are paying too much for health care. That’s the basic problem,” Marc Smolonsky, associate deputy secretary at the Department of Health and Human Services, said at a forum hosted by Main Justice on Capitol Hill titled, “What’s Next? Strategies for Improving Compliance with Fraud and Abuse Laws.”
Fraud, he added, “is a manifestation of that problem. People are able take advantage of how much we’re paying for health care by defrauding our systems, not just in the public systems but also the private system.”
While Smolonsky was primarily referring to criminals who fraudulently bill Medicare for ghost patients or products and services not provided, health care industry lawyer Patrick Morrisey cited the billion-dollar settlements the government has reached in recent years with mainstream pharmaceutical companies over their marketing and billing practices. Those huge settlements are also linked to the larger issue of public health spending, he said.
“There’s a perception that the government is perceiving those settlements as a cost of doing business, and that it’s a back-handed way to take money out of the system that it didn’t believe should be there in the first place,” said Morrisey, co-chair of the FDA and Life Science practice group at King & Spalding LLP, which sponsored the forum Thursday.
“The trick is to be upfront and honest about it, and rather than take money out of the back of the pocket, just say upfront, ‘Look, the system does have problems and we’re not spending money as efficiently as we can,’” Morrisey said.
Under that approach, the government might have an incentive to be more clear with industry about its interpretation of the increasingly complex body of law against health care fraud and abuse, panelists said.
“Over the past decade what we’ve seen is a vast expansion in the kinds of possible defendants involved in health care fraud cases,” said Ted Ruger, a law professor at the University of Pennsylvania. “Not criminals but mainstream health care providers [and] mainstream pharmaceutical companies, almost all of which have been embroiled in False Claims Act and off label marketing cases.”
Ruger said prosecutors are giving an expansive reading to statutes such as the Food Drug and Cosmetic Act, the whistleblower False Claims Act; the Anti-Kickback Statute, and the Stark laws (named after Rep. Pete Stark, Democrat of California) that bar physician self-dealing.
Stark and Republican Rep. Wally Herger of California are co-sponsors of a bill, H.R. 675, that would expand the authority of the HHS Office of Inspector General to exclude health care industry executives from doing business with Medicare if their companies are found guilty of fraud.
The bill would codify a policy HHS announced last year to ban individual health industry executives from business with the government - effectively ending their careers – even if they weren’t aware of the underlying misconduct of their employees.
But HHS earlier this year backed off its attempt to exclude the 83-year-old head of pharmaceutical company Forest Laboratories Inc. from government business after the move generated bad publicity.
“This is not something that has yet been fully embraced,” said Kim Brandt, chief healthcare investigative counsel for the Senate Finance Committee minority staff. “But it’s certainly something to watch.”
There is more agreement on how to combat the conventional fraud, waste and abuse attributed to mistakes, improper billing and criminals seeking to bilk the system.
Smolonsky described sophisticated new data analysis implemented by HHS to scour the 4.5 million claims received daily.
“The first day that we turned this on, we identified 300 known mobsters in the Medicare system,” Smolonsky said. “We discovered that providers who had been debarred years ago were still billing” for services.
“And that was low-hanging fruit,” he added.
The Centers for Medicare and Medicaid Services will open a 4000 square foot predictive analytics lab in Baltimore in April that “will look like a NASA control room,” with wall-to-wall computer screens monitoring claims through algorithms, he said.
Bad payments will be stopped in advance through such predictive modeling, ending what Smolonksy called the “pay and chase” system of trying to recover and prosecute fraudsters after they’ve received the money.
“Within minutes of the claim coming in, we know what the risk of that claim could be and whether it should be subjected to further review,” he said. Sharing of such data with providers could improve compliance as far as it is allowed by privacy laws, he said.
Morrisey however addressed a different issue, what he called “the effective criminalization” of the industry’s business practices at the discretion of regulators and law enforcement interpreting an increasingly complex web of laws enacted by Congress.
“If anyone in the room can explain some of the regulatory provisions related to average manufacturing price, best price, and average sales price, and Medicare Part D, good luck,” he said. “And you know what? Many of the prosecutors aren’t able to explain either.”
He showed a slide of the largest pharmaceutical company settlements in recent years: $3 billion that GlaxoSmithKline plc said recently it had agreed to pay to settle drug marketing and billing charges; $2.3 billion for Pfizer Inc. and $1.4 billion for Eli Lilly and Company in 2009.
In 2010, the Justice Department gave out its highest professional awards two teams of lawyers: those who prosecuted Pfizer, and those who prosecuted an attempted Al Qaeda bombing of the New York City subway.
“What’s wrong with that picture?” Morrisey asked. “We have to begin to ask ourselves, what kinds of behavior are we incentivizing here [among law enforcement and regulators]? And can start to we rethink some of the strategies that have led us to this point?”
He agreed with Smolonsky that the government should seek to prevent fraud before it occurs, not after the fact. He made three suggestions to help regulated industry get the clarity he said he needs to comply with the laws.
Prosecutors and regulators should give credit to companies that spend heavily on robust compliance programs to educate employees about lawful practices and stop misconduct. “That should be relevant in a fraud and abuse investigation,” he said.
Also, prosecutors shouldn’t be able to use threats of extreme measures against companies to bring them behind closed doors for settlement negotiations, Morrisey said. The U.S. Attorney’s manual and guidance for the HHS OIG should be updated to enshrine such a policy, he said.
Industry lawyers say these threats – including the possibility of barring companies and executives from government business – mean the companies can’t risk going to court, which in turn means the government’s most controversial legal theories haven’t been scrutinized often by judges and juries.
Finally, Morrisey advocated establishing a Food and Drug Administration advisory opinion process. Timely guidance on legal questions would help “the regulated industry can gain a little more confidence in their understanding” of the law,” as well as “be a really good way of addressing behavior before you move to a fraud and abuse settlement,” he said.
The event Thursday, held in the Rayburn House Office Building, was the third in a series of fraud and abuse enforcement forums hosted by Main Justice and sponsored by King & Spalding. Information about the previous events can be found here and here. A copy of the slide deck presented Thursday can be seen here. A video link to the event will be provided next week.