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The Current State of Healthcare Fraud with Ileana Hernandez of Manatt

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Ileana Hernandez of Manatt, Phelps & Phillips spoke about the current state of healthcare fraud, whistleblowers’ role, and the laws that apply.

Question: Who do you think is most responsible for initiating healthcare fraud cases? Is it law enforcement? A whistleblower? How does that process usually work?

Answer: Federal and state False Claims Act qui tam actions are brought by whistleblowers. The databases of relators (whistleblowers) are rooted in the information that is made public. The U.S. Department of Justice has stated that they rely on whistleblowers to be their eyes and ears. So, the relators are the ones who initiate cases by filing complaints under seal under the False Claims Act.

Question: Let’s talk about some specific healthcare fraud schemes, specifically the ones prevalent now.

Answer: A common healthcare fraud scheme now is drug diversion by doctor shopping and prescription forgery. Drug diversion occurs when pharmacies or other providers fill prescriptions written by doctors who do not see the patients whose names appear on those prescriptions. Often, these fake prescriptions are obtained through doctor-shopping, the practice of going from doctor to doctor to obtain as many prescriptions as possible for controlled substances such as hydrocodone and oxycodone. These drugs are sold on the street or used by individuals themselves, leading to a myriad of medical consequences.

Question: How much money is lost due to fraud each year? Is it a large sum?

Answer: The U.S. Government Accountability Office (G.A.O.) has stated that federal healthcare programs, such as Medicare and Medicaid, paid out $64.8 billion in fraudulent claims in 2011. This number is expected to rise by about 10 percent each year for the near future if left unchecked.

Question: So what happens when a whistleblower comes forward and reports a healthcare fraud scheme?

Answer: A qui tam complaint is filed under seal, and the U.S. Government investigates. It can take many months before the government decides whether to intervene in the case. If the government does not intervene, the plaintiffs may proceed with their lawsuit against those who defrauded federal healthcare programs. If the government decides to intervene, the parties work together to investigate and prepare for trial or settlement of the case. The US DOJ has stated that it will not intervene in cases where they believe there is no merit or the relator cannot prove their case.

Question: What if someone becomes aware of a possible healthcare fraud scheme but is unsure if there’s enough information to launch an investigation?

Answer: Federal whistleblowers are not required to report their information directly to the government. Instead, they can file a False Claims Act qui tam complaint and serve as relators. In addition, there is no requirement to first report suspected fraud or wrongdoing to one’s employer or any other authority before filing a qui tam lawsuit under seal, pursuant to the False Claims Act.

Question: Are any crimes or laws other than the False Claims Act applicable to healthcare fraud? If so, which ones?

Answer: The most commonly used statutes are 18 U.S.C. §§ 1347 and 1349. Section 1347 is a wire fraud statute that prohibits knowingly executing a scheme to defraud and obtaining money or property by means of false or fraudulent pretenses, representations, or promises. Section 1349 is a health care fraud statute that prohibits knowingly executing a scheme to defraud any health care benefit program and obtaining money or property as a result of such conduct.

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