December 21, 2010

CERT Cited in Healthcare Fraud and Abuse Report from OIG

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WASHINGTON, D.C. - The U.S. Department of Health and Human Services Office of Inspector General (OIG) has released statistical details about its efforts to fight fraud and abuse during the 2010 fiscal year, when healthcare fraud in particular represented a key investigative target.

 

In its semiannual report to Congress, the OIG announced an anticipated total of $25.9 billion in recoveries during that time.

"Along with our significant work related to a variety of HHS agency programs during this reporting period, we are particularly encouraged by the success of our partnerships with HHS and the Department of Justice through the Health Care Fraud Prevention and Enforcement Action Team (HEAT)," Inspector General Daniel R. Levinson said. "For example, our HEAT Strike Force teams yielded 89 convictions and $71.3 million in investigative receivables in the second half of FY 2010 alone."

 

Unprecedented Healthcare Fraud

 

The report cited what was described as an "unprecedented" healthcare fraud sting performed in July, covering seven cities and resulting in charges against 94 doctors, healthcare company owners, executives and others for more than $251 million in alleged false billing. The OIG during the fiscal year excluded a total of 3,340 individuals and organizations from participation in federal healthcare programs, and reported 647 criminal actions against individuals or organizations that engaged in crimes against HHS programs.

 

The roundup also included 378 civil actions, including False Claims Act and unjust enrichment suits, Civil Monetary Penalties Law settlements, and administrative recoveries related to provider self-disclosure matters.

 

CERT Improper Payments

 

Also outlined in the report was an analysis of the federal Comprehensive Error Rate Testing (CERT) contractor for the 2009 fiscal year. The analysis indicated that six types of Medicare healthcare providers - inpatient hospitals, durable medical equipment providers, hospital outpatient departments, physicians, skilled nursing facilities and home health agencies - accounted for $4.4 million, or 94 percent, of a total of $4.7 million in improper payments identified by the contractor. Of the former figure, 98 percent of those erroneous claims were attributable to insufficient documentation, miscoding or medically unnecessary services or supplies.

 

CMS agreed with the OIG recommendation that the analysis should be used to identify the type of payment errors indicative of programmatic weaknesses and to determine any additional corrective actions necessary to strengthen the CERT program.

 

Medicare Drug Plans Cited

 

The report also indicated that Medicare drug plans and enrollees paid pharmacies a total of $1.2 billion in 2007 for more than 18 million prescription drug claims that contained 527,749 different invalid prescriber identifiers.

 

The report also outlined a recent settlement of $7.3 million between a group of three affiliated firms - United Shockwave Services, United Urology Centers and United Prostate Centers - and the federal government for Civil Monetary Penalties Law liability. The agreement settled allegations that the firms solicited remuneration from hospitals in exchange for patient referrals. Specifically, it was alleged that the firms threatened to refer patients to competing hospitals if they did not agree to contracts with United, or in the alternative they promised additional referrals to hospitals that did contract with them.

 

To read the full Semiannual Report to Congress, go to the following link: http://oig.hhs.gov/publications/sar/2010

 

Operators of Fraud Scheme Sentenced

 

In a related matter, HHS and the U.S. Department of Justice (DOJ) have announced that the owner and the vice president of a Detroit-area physical therapy clinic were sentenced to 151 months and 108 months in prison, respectively, for their leading roles in a $23 million Medicare fraud scheme. Bernice Brown, 56, the owner of Wayne County Therapeutic Inc. (WCT), and Daniel Smorynski, 63, the company's vice president, were sentenced by U.S. District Court Judge Arthur Tarnow. In addition to their prison terms, Brown and Smorynski were sentenced to three years of supervised release and were ordered to pay jointly and severally $6.5 million in restitution.

 

Brown and Smorynski were convicted by a federal jury earlier this year after a six-day trial. Brown was convicted of one count of conspiracy to commit healthcare fraud and nine counts of healthcare fraud. Smorynski was convicted of one count of conspiracy to commit healthcare fraud and five counts of healthcare fraud, and also was acquitted on four counts of healthcare fraud.

 

According to evidence presented at trial, WCT purported to specialize in physical and occupational therapy. But prosecutors showed that Brown purchased from third-party contractors fake physical and occupational therapy files that were created by non-enrolled, and in many cases, non-licensed, contractor therapists. Rather than provide therapy, the contractor therapists paid Medicare beneficiaries cash kickbacks to induce the Medicare beneficiaries to provide their Medicare numbers and to sign false documentation to make it appear as if they received therapy.

 

Between approximately October 2002 and September 2006, Brown and Smorynski submitted approximately $23.2 million in claims to Medicare for physical and occupational therapy services that were never provided. Medicare paid approximately $6.5 million of those claims.

 

Evidence at trial also showed that Brown and Smorynski, in addition to submitting claims for non-existent physical and occupational therapy, caused WCT to submit fraudulent claims for psychotherapy services. In January 2006, when Congress enacted a cap on physical and occupational therapy services to control costs, Brown and Smorynski devised a scheme to avoid the cap by billing for psychotherapy services instead.

 

And finally, Dey Inc., Dey Pharma L.P. (formerly known as Dey, L.P.) and Dey L.P. Inc. have agreed to pay $280 million to settle False Claims Act allegations, the Department of Justice announced on Tuesday.  This settlement resolves claims by the United States that the defendants engaged in a scheme to report false and inflated prices for numerous pharmaceutical products, knowing that federal health care programs relied on those reported prices to set payment rates. The actual sales prices for the Dey products were far less than what Dey reported, according to the DOJ.


The United States alleged that Dey reported false prices for the following drugs:   Albuterol Sulfate, Albuterol MDI, Cromolyn Sodium and Ipratropium Bromide.   The difference between the resulting inflated government payments and the actual price paid by health care providers for a drug is referred to as the "spread."  The larger the spread on a drug, the larger the profit for the health care provider or pharmacist who is reimbursed by the government.  The government alleges that Dey created artificially inflated spreads to market, promote and sell the drugs to existing and potential customers.  Because payment from the Medicare and Medicaid programs was based on the false inflated prices, the government alleged that Dey caused false and fraudulent claims to be submitted to federal health care programs and, as a result, the government paid millions of claims for far greater amounts than it would have if Dey had reported truthful prices.

 

This is the fourth such settlement with pharmaceutical manufacturers that the Department of Justice has announced this month.   On Dec.7, 2010, the Department announced settlements totaling $421.1 million involving similar allegations against three other manufacturers: Abbott Laboratories Inc., B. Braun Medical Inc. and Roxane Laboratories Inc.

 

Since its inception in March 2007, Medicare Fraud Strike Force operations in seven districts have obtained indictments of more than 825 individuals and organizations that collectively have billed the Medicare program for more than $2 billion.

 

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