Are honest providers victims of zealous investigators?
Some say honest billing mistakes are interpreted as fraud
There are signals the federal government’s attempts to crack down on fraud and abuse are working. The latest figures from the Office of the Inspector General (OIG) show overpayments to Medicare providers at the lowest point since the federal government began auditing Medicare claims three years ago.
Buoyed by the recent success, the Department of Health and Human Services, along with the Department of Justice and the American Association of Retired Persons, launched a national fraud and abuse initiative, "Who Pays? You Pay," aimed at encouraging Medicare beneficiaries to call a toll-free number to report suspect claims.
No one in the hospice industry argues that providers who engage in defrauding the government should be allowed to participate in Medicare or Medicaid. But many are wondering whether investigators’ zeal to root out criminal behavior ends up hurting those whose only crime is making an innocent mistake.
"HCFA has the distinction of being the new IRS," says Eric Sokol, JD, assistant director of government affairs for the National Association of Home Care in Washington, DC. "There is a failure to differentiate between fraudulent acts and innocent billing mistakes."
Pay now or pay later
Sokol characterizes federal investigators as bullies who threaten providers, most of whom lack the resources to mount an adequate defense, with long, intrusive, and disruptive investigations. Rather than fight accusations of wrongdoing, many agencies simply agree to pay the amount investigators say was overpaid to the provider plus additional fines to avoid expensive legal fees.
"Investigators go in and audit a sample of claims, and they may spot 10% to 15% errors in billing and come back and say, You owe us $100,000. You can pay this amount, or we can go back and look at all your records,’" Sokol says.
David Queen, JD, a Baltimore-based attorney who has defended a number of providers in fraud and abuse cases, corroborates Sokol’s description.
"I’ve got letters that have been sent to clients saying, Pay the amount they have determined from their comprehensive audit or face a full audit,’ Queen says. "The terms I hear from my clients are extortion’ and adversarial.’"
Sokol admits that home health agencies endure the bulk of this type of treatment, but warns that hospices are also starting to see aggressive behavior from federal investigators.
Hospices have been on the list of targeted Medicare providers since mid-1997 when Department of Health and Human Services Secretary Donna Shalala announced that Operation Restore Trust would expand its scope to include hospices. Joining the list of targets was nursing home, durable medical equipment (DME), and home health. (See Hospice Management Advisor, June 1997, pp. 61-63.)
Guilty until proven innocent
Two years prior to that announcement, one home health and hospice provider found itself mired in a nightmare that would take more that two years to awake from.
After investigators released Home Health and Hospice Care Inc. (HHHC), a nonprofit provider in Goldsboro, NC, from their grip, the agency had lost $5 million in referrals and at least two potential joint ventures with area hospitals.
The experience serves as an example of what can go wrong when investigators become overzealous in their attempt to root out fraud and abuse only to cause harm to an honest provider. "[HHHC] had the fortitude to stand up and fight," Sokol said. "Think how many others couldn’t do that."
It was still dark on the morning of Jan. 19, 1995, when nearly 100 FBI agents descended upon HHHC’s offices. While the sun eventually rose, it was a gloomy day in what would be the beginning of a dark period for the rural home health and hospice provider.
During the search of HHHC’s 10 offices scattered throughout eastern North Carolina, agents searched through closets, behind ceiling tiles, and employees’ personal property. By day’s end, they would gather five million documents and computer files, enough to fill 500 boxes that were loaded into borrowed Postal Service trucks.
Working with the testimony of three confidential informants, federal investigators launched one of the biggest raids on a home health agency the state had ever seen. Information provided by the three informants, which documents suggested were HHHC employees, provided the basis for investigators’ request for a search warrant.
Federal investigators were accusing HHHC of billing for services that it had not rendered and falsifying records to meet government billing standards. Informants, federal investigators told a magistrate judge, had told them as much. The judge granted the government’s request for the warrant that was used to search HHHC offices that January day.
As it turns out, one of the informants was the special programs director at the agency. Two months prior to the seizure of documents and computer files, the employee met with investigators at his home. For two hours, he answered their questions. His answers and how federal officials interpreted them would play a major role a year later.
From the start, HHHC officials decried the allegations. To anyone who would listen, they proclaimed that no wrongdoing took place in their organization. But it seemed few were listening.
Beverly Withrow, HHHC president, told the Raleigh News & Observer at the time that HHHC employees were asked why they would work for a company that cheats the government, and one physician openly accused her of taking money from the poor and elderly.
"Our referrals went down sharply during that time," Withrow tells HMA. "We estimated that we lost about $5 million worth of business. At the time, we were also working with area hospitals on joint ventures. Understandably, when the news hit they decided to go in another direction. By the time we had cleared our name it was too late."
In addition, there was the immeasurable amount of productivity lost because HHHC had to reallocate staff to focus on the investigation. Because investigators had seized their patient records, HHHC staff was forced to obtain copies at investigators’ convenience. HHHC staff had to travel to Raleigh and copy records at investigators’ offices.
In order to clear the company, Withrow and its team of lawyers faced a daunting task: prove that the information that federal investigators were using to go after HHHC was indeed false. They would also prove that the information was not only false; and the federal investigators knew the information was false and recklessly disregarded the truth.
The defense of HHHC focused on the legality of the search warrant. HHHC lawyers argued that federal investigators illegally obtained a warrant through misrepresented evidence.
At a hearing in 1996, in front of the same U.S. magistrate judge that granted the government’s earlier request for a search warrant, HHHC attorneys questioned federal agents and hammered on discrepancies between the search warrant and a memo prepared a day after agents interviewed the hospice’s special programs director.
After hearing the testimony, the judge determined the agents knowingly and recklessly gave false information. As it turns out, the employee never told agents that records were falsified. The agent testified that the warrant falsely stated that HHHC billed for services not rendered and that agents misrepresented Medicare and Medicaid rules. In addition, the employee told agents he did not have personal knowledge that HHHC workers altered documents.
The judge also questioned agents’ interpretation of standard records practices. The judge said agents made the standard practice of revising documents look suspect and intentionally deceitful.
The judge also found the federal investigators omitted facts to their benefit. Specifically, federal officials pointed to an earlier investigation of HHHC’s fraud and abuse. They did not clarify their reference by including the fact that the investigation led to no criminal prosecutions, leaving the impression that evidence of fraud was uncovered.
In April 1996, the federal court threw out the search warrant and ruled that the false information and omission of facts rendered the search warrant unable to support a finding of probable cause to search HHHC’s offices.
The federal government was ordered to return the seized documents, but it took a 1997 U.S. District Court order to force the investigators to return HHHC’s documents.
Looking back at the experience, Withrow points to two areas that led to their persecution by federal investigators:
1. Investigators’ refusal to see that errors in billing were the result of honest mistakes made by human beings.
2. Investigators’ lack of knowledge about Medicare and Medicaid regulations.
"They were confusing Medicaid rules with Medicare rules," Withrow said. "The agents needed to be educated on Medicare and Medicaid regulations."
While the OIG investigates the majority of health fraud cases, it did not handle the HHHC case. And its officials deny that it represents the conduct of its investigators, nor do they take an innocent-until-proven-guilty approach to investigating fraud and abuse.
"A vast majority of providers are honest and do the right thing," says Judy Holtz, a spokeswoman for OIG. "We’re not interested in honest billing mistakes. We’re interested in intentional fraud and abuse. The numbers just don’t bear out what providers are saying."
In the past year, Holtz says 12 hospices have been audited by OIG, focusing on whether patients were eligible for the hospice benefit at admission. She disputes claims that recent reductions in overpayment are the result of investigators bullying providers to either pay back claims, and credits the decrease on provider-government cooperation.
"The anti-fraud efforts have had a deterrent affect," Holtz says. "But there has also been input from the provider community on how to make the system better. It’s both the industry and government working toward a clean system."
Prevention methods
Looking back, Withrow believes there was little that her agency could have done to prevent the events that began in January 1995. She admits mistakes may have been made in billing, but that they were honest. However, she says HHHC tried to convince investigators that the information they were basing their accusations on were false and essentially the testimony of a disgruntled employee.
But there have been changes at HHHC, including the implementation of a compliance program — which Queen recommends — to show investigators and prosecutors that a provider has policies in place to ensure federal and state regulations are being followed.
Withrow says there were informal policies within HHHC that addressed claims development and submission prior to the 1995 investigation. Since then, HHHC has developed a lengthy compliance program that outlines specific policies and procedures workers, physicians, and vendors must follow to avoid fraud and abuse issues.
Washington, DC-based National Hospice Association also believes that a compliance program will help hospices limit the number of errors and avoid the perception that errors are incidences of abuse.
In addition to a compliance program, hospices should consider creating a hospice compliance officer position or assigning compliance program oversight to an existing management employee, says Queen. (See related story on developing a compliance program, below.)
"Since this happened, I’ve gotten several calls from other agencies who are were in similar situations and felt they were being treated unfairly," Withrow says. "I told them that we knew we were honest and were willing to stand up and prove it. I would tell others to get a good legal team together. Look for an attorney with criminal experience because your corporate attorney may not have the experience.
"It’s unfortunate that some agencies can’t fight because that’s what causes the government to continue this practice."
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