Fraud Enforcement Trends for 2015: Over the Horizon

Health care fraud enforcement continues to be a priority for the federal government and is poised to expand even more. As a result, health care providers and suppliers should anticipate greater oversight activities from auditors and investigators. Ensuring that your compliance program is up-to-date and up-to-task in proactively identifying problems and making timely decisions about corrective actions and potential disclosures is key to protecting the organization.


In the fiscal 2015 budget, Congress more than doubled the appropriation to the Health Care Fraud and Abuse Control (HCFAC) program to $672 million. This means that the U.S. Centers for Medicare and Medicaid Services (CMS), the U.S. Department of Justice (DOJ), and the Office of Inspector General (OIG) for the U.S. Department of Health and Human Services (HHS) received a large infusion of new funding at a time when many agencies continue to face flat or declining appropriations. CMS program integrity functions received more than $477 million for Medicare oversight, including Parts C and D. OIG and DOJ received more than $67 million and $60 million, respectively, from HCFAC.

Congress’ action reflects the high level of bipartisan support for HHS and DOJ fraud prevention and enforcement efforts. The Appropriations Committee shed light on another reason this new funding was able to pass: it was scored by the Congressional Budget Office as a saver because of the return on investment (ROI) figures for HCFAC. In the latest HCFAC report, the ROI for every $1 spent on fraud and abuse control activities was $8.10 in recoveries. This was the highest three-year average ROI in the 17-year history of HCFAC. The Appropriations Committee expects the HCFAC appropriation to generate more than $5.4 billion.

The industry should expect new agency hiring and expanded fraud enforcement and prevention activities in order to achieve the ROI that Congress expects.

ACTION ITEM: Ensure you have a robust compliance program to mitigate risk, to be prepared for government auditors or investigators, and to have a thoughtful disclosure strategy and plan. With increasing law enforcement activities and changes in care delivery models and payment rules, it has never been more important to have a comprehensive compliance program that systematically re-evaluates itself to change as the risk environment changes. Key issues to consider include the following:

  • Effective training for staff not only on payment rules and internal reporting mechanisms, but also on what to do if contacted by a government auditor or investigator
  • An internal auditing program that is right-sized for the organization and periodically re-evaluates risk areas
  • A thoughtful and timely process for evaluating issues identified in the compliance program, including effective corrective action and potential disclosure to the government


CMS’s additional funding will likely be used in part to improve its recoveries and ROI under the Fraud Prevention System (FPS), the predictive data analytics program started by the Small Business Jobs Act of 2010. In 2014, OIG certified $54.2 million of savings in the Medicare fee-for-service program, with an ROI of $1.34 for every dollar spent on the FPS. As CMS builds new and more sophisticated data models to analyze claims data, FPS will grow in importance to various program integrity functions, from identifying contractor audit targets to making decisions about imposing payment suspensions or creating new moratoria.

Continued CMS and OIG investment in predictive data analytics, as well as the publicity of Medicare claims data and the Open Payments database under the Sunshine Act, will likely further increase the number of criminal and False Claims Act (FCA) investigations.

Many enforcement cases are based on billing controlled or influenced by physicians, either through their own practices or their relationships with other entities. More people now can find out who the “outlier” physicians are—which means you need to find out who yours are first.

ACTION ITEM: Know your data before the government does. Effective internal auditing is critical for ensuring compliance and identifying potential problems before they escalate. Regardless of whether physicians are employed or independent, hospitals can become caught up in an investigation of physicians who are high utilizers of the hospital. Compliance programs also play a key role in monitoring physician relationships to ensure compliance with the Anti-Kickback and Stark Laws.


The year 2015 will continue to see increasing numbers of criminal actions and FCA cases filed and litigated, either by the relator or the government. FCA settlements and judgments totaled $5.7 billion for fiscal year 2014 (compared to $3.8 billion in fiscal year 2013), with $2.3 billion from the health care sector. While much of the health care sector amount came from pharmaceutical defendants, cases involving hospitals resulted in $333 million. The number of qui tam suits continues to rise, from 30 in 1987, to 300 to 400 a year from 2000 to 2009, to more than 700 for each of the last two fiscal years.

Increased scrutiny is already underway at Main Justice. In fall 2014, DOJ announced that both the criminal and civil divisions will automatically review all new FCA qui tam complaints to decide whether to conduct a parallel investigation. This policy is a change from the criminal division waiting to receive a referral for potential prosecution from civil.

In the past, if the United States declined a case, the relator would usually not continue to pursue it. Now, as relators (and relator law firms) have seen the amount of money paid to relators increase, and have seen DOJ’s resources being stretched thin over the past sequester years, they are becoming more motivated to actively assist in the investigation and to continue to pursue a case if the government declines.

The Affordable Care Act created an express requirement to return and report overpayments received from the Medicare or Medicaid program within 60 days of identifying the overpayment (the 60-day rule). While the regulation interpreting this rule is still pending with CMS, not following the statute has the potential to result in FCA liability. Now that the 60-day rule has existed for a few years, it is likely that failure to report and return identified overpayments will be increasingly cited as a claim in new FCA complaints.

While most of law enforcement’s action is on the criminal and civil sides, OIG’s administrative recoveries under the Civil Monetary Penalties Law (CMPL) have increased significantly in the last three years. Starting from less than $2 million in fiscal year 2011, OIG obtained more than $14.4 million in fiscal year 2014. These numbers come from OIG-initiated investigations, not from the Self-Disclosure Protocol. OIG reported that self-disclosure settlements brought in an additional $23 million.

Improved data analytics capabilities and increased funding of OIG should lead to more affirmative investigations and settlements. OIG also looks at FCA cases as a source for additional CMPL and exclusion proceedings—either against another entity implicated in the conduct or a senior executive who OIG believes has culpability for the conduct. One result of OIG’s increasing interest in examining individual corporate executives for potential “spin-off” administrative cases may be that companies are less inclined to enter into a settlement unless they obtain some comfort concerning OIG’s intentions to pursue executives.


  • Develop a thoughtful disclosure strategy if you discover a potential issue.
    • Effective compliance programs will find problems. It is critical to conduct a thorough and timely analysis of the facts and law to confirm the nature of the issue and what to do about it.
    • The key to success is having a process in place to ensure potential issues are appropriately reviewed and acted upon. In particular, if the problem resulted in receiving an overpayment from a federal health care program, providers must ensure that the issue is fully examined to confirm the problem and determine the best way to inform the government, as well as who should do so.
  • Seek clarity from OIG at the time of settlement on potential future actions.
    • The time to obtain an understanding from OIG about its intentions to pursue other targets, including executives, is when you are negotiating a settlement.
Joan Polacheck
Joan Polacheck advises clients on a variety of health care compliance and regulatory issues, including fraud and abuse, Stark law, Anti-Kickback Law and Medicare reimbursement issues. She represents a broad range of health care industry clients, including hospitals, suppliers, and drug and device companies. Read Joan Polacheck's full bio.

Laura McLane
Laura McLane serves as head of McDermott's Boston Litigation Practice Group. Laura represents national and international clients in health care, securities and other government enforcement matters, both civil and criminal. She also represents clients in professional and products liability cases and in complex commercial disputes. A significant part of Laura's practice is devoted to representing health care and other companies, as well as individuals, in government investigations and qui tam litigation based on the False Claims Act (FCA) and related statutes, including the Anti-Kickback Statute and the Stark Law. Read Laura McLane's full bio.

Michael W. Peregrine
Michael W. Peregrine represents corporations (and their officers and directors) in connection with governance, corporate structure, fiduciary duties, officer-director liability issues, charitable trust law and corporate alliances. Michael is recognized as one of the leading national practitioners in corporate governance law. Read Michael W. Peregrine's full bio.

Tony Maida
Tony Maida counsels health care and life sciences clients on government investigations, regulatory compliance and compliance program development. Having served as a government official, Tony has extensive experience in health care fraud and abuse and compliance issues, including the federal and state Anti-Kickback and Stark Laws and Medicare and Medicaid coverage and payment rules. He represents clients in False Claims Act (FCA) qui tam matters, government audits, civil monetary penalty and exclusion investigations, and Centers for Medicare and Medicaid Services (CMS) suspension, and revocation actions, negotiating and implementing corporate integrity agreements, and making government self-disclosures. Read Tony Maida's full bio.

T. Reed Stephens
T. Reed Stephens represents clients in the life sciences industry, including pharmaceutical and biotech manufacturers, wholesalers and individuals, as well as health care systems and non-health care related companies in other global industries such as the defense and financial services/banking sectors. He also represents clients in matters involving state and federal government law enforcement, voluntary disclosures and congressional investigations. Read T. Reed Stephens' full bio.

Ankur J. Goel
  Ankur J. Goel represents health industry clients in significant compliance, False Claims Act, litigation and regulatory matters. Ankur works with a range of health industry clients. He represents health plans on issues arising under Medicare Advantage, Part D, and health insurance exchanges, as well as health care providers on a variety of complex enforcement, compliance, regulatory and litigation matters. Read Ankur Goel's full bio.

Daniel H. Melvin
Daniel H. Melvin counsels clients on Stark, Anti-Kickback and Medicare compliance issues such as physician compensation matters, and assists clients in investigating and addressing potential or alleged violations, including self-disclosures and defense of Stark- and Anti-Kickback-related qui tam actions. He also works with hospitals and physicians on coordinated care and other alternative service delivery models, including bundled payment and cost savings models, providing regulatory and transactional counsel and support. Read Daniel H. Melvin's full bio.

Eric B. Gordon, MD
Eric B. Gordon advises clients on fraud and abuse and compliance issues and health care transactions. He is partner-in-charge of the California Health Industry Practice Group. Eric represents a wide range of clients, including proprietary and tax-exempt hospital systems, medical groups, academic medical centers and faculty practice groups, pharmaceutical companies and medical device manufacturers, and group purchasing organizations. Read Eric B. Gordon's full bio.

Jason B. Caron
Jason B. Caron provides strategic advice to health care and life sciences organizations, primarily focusing on regulatory, reimbursement and policy matters. He has extensive experience navigating coding, coverage, payment, medical necessity, clinical documentation, comparative research, certification, enrollment, and other payer participation and reimbursement issues, particularly in light of ongoing health reforms. Read Jason B. Caron's full bio.