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.