New ‘‘Health Care Fraud Enforcement Act of 2009’’ Includes Health Care Whistleblower Provisions Aimed at Kickbacks
The battle against those who steal taxpayer dollars through Medicare fraud and other health care fraud took a step forward this week. The Senate is now considering the "Health Care Fraud Enforcement Act," which will enhance the government's tools used to investigate and remedy Medicare and Medicaid fraud.
After a Senate Judiciary Committee hearing Wednesday on “Effective Strategies for Preventing Health Care Fraud,” Senators Leahy, Kaufman, Specter, Kohl, Schumer, and Klobuchar sponsored the new anti-fraud measure.
Excerpts of the Senate announcement follow:
The bill makes straightforward but critical improvements to the federal sentencing guidelines, to health care fraud statutes, and to forfeiture, money laundering, and obstruction statutes, all of which would strengthen prosecutors’ ability to combat this particularly destructive form of fraud. These improvements include:
o Sentencing increases: The bill directs the Sentencing Commission to increase the guidelines range for health care fraud offenses and clarifies that the full potential scope of the fraud should be considered at sentencing.
o Redefining “health care fraud offense”: The bill includes all health care crimes within the definition of “health care fraud offense,” regardless of where they are codified. (ERISA, drug marketing, and kickback crimes are currently not included) This change will make available to law enforcement the full range of antifraud tools, including criminal forfeiture and obstruction penalties, to combat these offenses.
o Improving whistleblower claims: Kickbacks lead to unnecessary and risky medical care and pervert the doctor-patient relationship. This bill clarifies that all payments made pursuant to illegal kickbacks are false for purposes of the False Claims Act.
o Creating a common-sense mental state requirement for health care fraud offenses: Some courts have held that defendants must be aware that their conduct violates a specific provision of criminal law in order to be held accountable. This bill restores the original intent of Congress that a person is guilty of a health care offense if he knowingly does what the law forbids.
o Increasing funding: Money spent on health care fraud prevention and enforcement is returned manifold through costs savings and civil and criminal recoveries. This bill authorizes a modest, yet significant, increase in federal antifraud spending of $20,000,000 per year through 2016.
The new bill would add to legislation earlier this year to strengthen law enforcement statutes aimed at fraud, the Fraud Enforcement and Recovery Act.
Of particular importance to qui tam whistleblower cases under the False Claims Act, the nation's major whistleblower law, the new bill removes any ambiguity that "kickbacks" violate the False Claims Act. The official summary discusses kickbacks in section 2(c):
Section 2(c). Kickbacks
All too often, health care providers secure business by paying illegal kickbacks, which needlessly increase health care risks and costs. When a doctor’s independent judgment is compromised by a kickback, the patient faces the risk that the doctor is making decisions that are not in the patient’s best interest. In addition, excessive payments to doctors increase health care costs, may result in unfair competition, and may compromise medical research independence and the standards of scientific integrity.
The Department of Justice has had success both prosecuting illegal kickbacks and pursuing False Claims Act (FCA) matters predicated on underlying violations of the Anti-Kickback Statute (AKS). Nevertheless, defendants in such FCA cases continue to mount legal challenges. A court recently held that, even though a device company may have paid a kickback to a doctor to use a particular medical device, the bill for the procedure to implant the device was not false because the claim was submitted by the innocent hospital, and not by the doctor. United States ex rel. Thomas v. Bailey, 2008 WL 4853630 (E.D. Ark.) (Nov. 6, 2008). In other words, a claim that results from a kickback and that is false when submitted by a wrongdoer is laundered into a "clean" claim when an innocent third party finally submits the claim to the government for payment. This has the effect of insulating both the payor and the recipient of the kickback from FCA liability. This obstacle to a successful FCA action particularly limits Department’s ability to recover from pharmaceutical and device manufacturers, because in such instances the claims arising from the illegal kickbacks typically are not submitted by the physicians that received the kickbacks, but by pharmacies and hospitals that had no knowledge of the underlying unlawful conduct.
This section remedies the problem by amending the AKS to ensure that all claims resulting from illegal kickbacks are false, even when the claims are not submitted directly by the wrongdoers themselves. (Notably, in such circumstances, neither AKS nor FCA liability will lie against an innocent third party that submitted the claim but lacked the requisite intent required under those statutes.)
The full text of the bill is below:
HEN09A48 S.L.C.
111TH CONGRESS
1ST SESSION S. ll
To improve health care fraud enforcement.
IN THE SENATE OF THE UNITED STATES
llllllllll
Mr. KAUFMAN (for himself, Mr. LEAHY, and Mr. SPECTER) introduced the
following bill; which was read twice and referred to the Committee on
llllllllll
A BILL
To improve health care fraud enforcement.
1 Be it enacted by the Senate and House of Representatives2
tives of the United States of America in Congress assembled,
3 SECTION 1. SHORT TITLE.
4 This Act may be cited as the ‘‘Health Care Fraud
5 Enforcement Act of 2009’’.
6 SEC. 2. ENHANCEMENTS TO CRIMINAL LAWS RELATING TO
7 HEALTH CARE FRAUD.
8 (a) FRAUD SENTENCING GUIDELINES.—
9 (1) DEFINITION.—In this subsection, the term
10 ‘‘Federal health care offense’’ has the meaning given
2
HEN09A48 S.L.C.
1 that term in section 24 of title 18, United States
2 Code, as amended by this Act.
3 (2) REVIEW AND AMENDMENTS.—Pursuant to
4 the authority under section 994(p) of title 28,
5 United States Code, and in accordance with this
6 subsection, the United States Sentencing Commis7
sion shall—
8 (A) review the Federal Sentencing Guide9
lines and policy statements applicable to per10
sons convicted of Federal health care offenses;
11 (B) amend the Federal Sentencing Guide12
lines and policy statements applicable to per13
sons convicted of Federal health care offenses
14 involving Government health care programs to
15 provide that the aggregate dollar amount of
16 fraudulent bills submitted to the Government
17 health care program shall constitute prima facie
18 evidence of the amount of the intended loss by
19 the defendant; and
20 (C) amend the Federal Sentencing Guide21
lines to provide—
22 (i) a 2-level increase in the offense
23 level for any defendant convicted of a Fed24
eral health care offense relating to a Gov25
ernment health care program which in3
HEN09A48 S.L.C.
1 volves a loss of not less than $1,000,000
2 and less than $7,000,000;
3 (ii) a 3-level increase in the offense
4 level for any defendant convicted of a Fed5
eral health care offense relating to a Gov6
ernment health care program which in7
volves a loss of not less than $7,000,000
8 and less than $20,000,000;
9 (iii) a 4-level increase in the offense
10 level for any defendant convicted of a Fed11
eral health care offense relating to a Gov12
ernment health care program which in13
volves a loss of not less than $20,000,000;
14 and
15 (iv) if appropriate, otherwise amend
16 the Federal Sentencing Guidelines and pol17
icy statements applicable to persons con18
victed of Federal health care offenses in19
volving Government health care programs.
20 (3) REQUIREMENTS.—In carrying this sub21
section, the United States Sentencing Commission
22 shall—
23 (A) ensure that the Federal Sentencing
24 Guidelines and policy statements—
4
HEN09A48 S.L.C.
1 (i) reflect the serious harms associ2
ated with health care fraud and the need
3 for aggressive and appropriate law enforce4
ment action to prevent such fraud; and
5 (ii) provide increased penalties for
6 persons convicted of health care fraud of7
fenses in appropriate circumstances;
8 (B) consult with individuals or groups rep9
resenting health care fraud victims, law enforce10
ment officials, the health care industry, and the
11 Federal judiciary as part of the review de12
scribed in paragraph (2);
13 (C) ensure reasonable consistency with
14 other relevant directives and with other guide15
lines under the Federal Sentencing Guidelines;
16 (D) account for any aggravating or miti17
gating circumstances that might justify excep18
tions, including circumstances for which the
19 Federal Sentencing Guidelines, as in effect on
20 the date of enactment of this Act, provide sen21
tencing enhancements;
22 (E) make any necessary conforming
23 changes to the Federal Sentencing Guidelines;
24 and
5
HEN09A48 S.L.C.
1 (F) ensure that the Federal Sentencing
2 Guidelines adequately meet the purposes of sen3
tencing.
4 (b) CRIMINAL OFFENSE.—Section 1347 of title 18,
5 United States Code, is amended—
6 (1) by inserting ‘‘(a) IN GENERAL.—’’ before
7 ‘‘Whoever knowingly’’; and
8 (2) by adding at the end the following:
9 ‘‘(b) WILLFUL CONDUCT.—For the purposes of this
10 section, a person acts willfully if the person acts volun11
tarily and purposefully to do what the law forbids and the
12 person need not have actual knowledge of the law or spe13
cific intent to violate the law.’’.
14 (c) KICKBACKS.—Section 1128B of the Social Secu15
rity Act (42 U.S.C. 1320a-7b) is amended by adding at
16 the end the following new subsection:
17 ‘‘(g) In addition to the penalties provided for in this
18 section or section 1128A, a claim for items or services that
19 are provided in violation of this section constitutes a false
20 or fraudulent claim for purposes of subchapter III of chapter
21 37 of title 31, United States Code.’’.
22 (d) HEALTH CARE FRAUD OFFENSE.—Section 24(a)
23 of title 18, United States Code, is amended—
6
HEN09A48 S.L.C.
1 (1) in paragraph (1), by striking the semicolon
2 and inserting ‘‘ or section 1128B of the Social Secu3
rity Act (42 U.S.C. 1320a-7b); or’’; and
4 (2) in paragraph (2)—
5 (A) by inserting ‘‘1349,’’ after ‘‘1343,’’;
6 and
7 (B) by inserting ‘‘section 301 of the Fed8
eral Food, Drug, and Cosmetic Act (21 U.S.C.
9 331), or section 411, 501, or 511 of the Em10
ployee Retirement Income Security Act of 1974
11 (29 U.S.C. 1111, 1131, and 1141),’’ after
12 ‘‘title,’’.
13 SEC. 3. SUBPOENA AUTHORITY RELATING TO HEALTH
14 CARE.
15 (a) SUBPOENAS UNDER THE HEALTH INSURANCE
16 PORTABILITY AND ACCOUNTABILITY ACT OF 1996.—Sec17
tion 1510(b) of title 18, United States Code, is amended—
18 (1) in paragraph (1), by striking ‘‘to the grand
19 jury’’; and
20 (2) in paragraph (2)—
21 (A) in subparagraph (A), by striking
22 ‘‘grand jury subpoena’’ and inserting ‘‘subpoena
23 for records’’; and
24 (B) in the matter following subparagraph
25 (B), by striking ‘‘to the grand jury’’.
7
HEN09A48 S.L.C.
1 (b) SUBPOENAS UNDER THE CIVIL RIGHTS OF IN2
STITUTIONALIZED PERSONS ACT.—The Civil Rights of
3 Institutionalized Persons Act (42 U.S.C. 1997 et seq.) is
4 amended by inserting after section 3 the following:
5 ‘‘SEC. 3A. SUBPOENA AUTHORITY.
6 ‘‘(a) AUTHORITY.—The Attorney General, or at the
7 direction of the Attorney General, any officer or employee
8 of the Department of Justice may require by subpoena
9 access to any institution that is the subject of an investiga10
tion under this Act and to any document, record, material,
11 file, report, memorandum, policy, procedure, investigation,
12 video or audio recording, or quality assurance report relat13
ing to any institution that is the subject of an investiga14
tion under this Act to determine whether there are condi15
tions which deprive persons residing in or confined to the
16 institution of any rights, privileges, or immunities secured
17 or protected by the Constitution or laws of the United
18 States.
19 ‘‘(b) ISSUANCE AND ENFORCEMENT OF SUB20
POENAS.—
21 ‘‘(1) ISSUANCE.—Subpoenas issued under this
22 section—
23 ‘‘(A) shall bear the signature of the Attor24
ney General or any officer or employee of the
8
HEN09A48 S.L.C.
1 Department of Justice as designated by the At2
torney General; and
3 ‘‘(B) shall be served by any person or class
4 of persons designated by the Attorney General
5 or a designated officer or employee for that
6 purpose.
7 ‘‘(2) ENFORCEMENT.—In the case of contu8
macy or failure to obey a subpoena issued under this
9 section, the United States district court for the judi10
cial district in which the institution is located may
11 issue an order requiring compliance. Any failure to
12 obey the order of the court may be punished by the
13 court as a contempt that court.
14 ‘‘(c) PROTECTION OF SUBPOENAED RECORDS AND
15 INFORMATION.—Any document, record, material, file, re16
port, memorandum, policy, procedure, investigation, video
17 or audio recording, or quality assurance report or other
18 information obtained under a subpoena issued under this
19 section—
20 ‘‘(1) may not be used for any purpose other
21 than to protect the rights, privileges, or immunities
22 secured or protected by the Constitution or laws of
23 the United States of persons who reside, have re24
sided, or will reside in an institution;
9
HEN09A48 S.L.C.
1 ‘‘(2) may not be transmitted by or within the
2 Department of Justice for any purpose other than to
3 protect the rights, privileges, or immunities secured
4 or protected by the Constitution or laws of the
5 United States of persons who reside, have resided,
6 or will reside in an institution; and
7 ‘‘(3) shall be redacted, obscured, or otherwise
8 altered if used in any publicly available manner so
9 as to prevent the disclosure of any personally identi10
fiable information.’’.
11 SEC. 4. ADDITIONAL AUTHORIZATION OF APPROPRIATIONS
12 TO THE DEPARTMENT OF JUSTICE FOR
13 CRIMINAL AND CIVIL ENFORCEMENT OF
14 HEALTH CARE FRAUD.
15 (a) AUTHORIZATION.—There is authorized to be ap16
propriated to the Attorney General, to remain available
17 until expended, $20,000,000 for each of fiscal years 2011
18 through 2016 for the purposes of investigations, prosecu19
tions, and civil or other proceedings relating to fraud and
20 abuse in connection with any health care benefit program,
21 as defined in section 24(b) of title 18, United States Code.
22 (b) ALLOCATIONS.—With respect to each of fiscal
23 years 2011 through 2016, the amount authorized to be
24 appropriated under subsection (a) shall be allocated as fol25
lows:
10
HEN09A48 S.L.C.
1 (1) For the offices of the United States attor2
neys, $10,000,000.
3 (2) For the Criminal Division of the Depart4
ment of Justice, $5,000,000.
5 (3) For the Civil Division of the Department of
6 Justice, $5,000,000.
Bookmark: 
