1. Health Care Fraud Enforcement Outlook Nathaniel Kummerfeld, USAO EDTX John Friesell, Friesell Westerlage Samuel Doran, BakerHostetler

2. Enforcement Outlook into 2018
Federal budget shortfalls
State and federal enforcement actions increasing
Medicare insolvent in 15 years
State budget shortfalls
Greater attention by U.S. Attorneys’ Offices, DOJ, and OIG-HHS
Rules remain complex
Increased focus on individual actors

3. Increased Funding
For FY16, Congress allocated $963 million to the Health Care Fraud and Abuse Control Program
CMS program received nearly $560 million
HHS OIG received more than $250 million
DOJ received more than $119 million
Administration pushing for $45 million in additional funding for Health Care Fraud and Abuse Control Program for 2019
ROI on HCFAC from 2014 – 2016
5:1
FY16 aggregate recoveries = $3.3 billion

4. Primer on Parallel Proceedings

5. Parallel Proceedings
Simultaneous pursuit of civil, criminal, and administrative remedies
Often handled by USAOs, DOJ, and agency counsel
Not every case is appropriate
Examples of common parallel matters
Health care fraud
Housing and mortgage fraud
Procurement fraud
Environmental crimes
Drug diversion
SEC investigations

6. Advantages of Parallel Proceedings
Protects the government’s interests
Secures the full range of government’s remedies
Avoids duplication of investigative actions
Leverages limited resources
Provides greatest deterrent effect
Preserves assets for restitution or forfeiture
Provides full spectrum of resolution options

7. Yates Memo (September 2015)
Individual Accountability for Corp. Wrongdoing:
Focus on individuals from inception of both criminal and civil investigations;
Directs routine communication between crim./civ. attorneys;
Embodied in USAM , , and , et seq.

8. Yates Memo (September 2015): Six Factors
In order to qualify for any cooperation credit, corporations must provide to the Department all relevant facts relating to the individuals responsible for the misconduct.
Criminal and civil corporate investigations should focus on individuals from the inception of the investigation.
Criminal and civil attorneys handling corporate investigations should be in routine communication with one another.
Absent extraordinary circumstances or approved departmental policy, the Department will not release culpable individuals from civil or criminal liability when resolving a matter with a corporation.
Department attorneys should not resolve matters with a corporation without a clear plan to resolve related individual cases, and should memorialize any declinations as to individuals in such cases.
Civil attorneys should consistently focus on individuals as well as the company and evaluate whether to bring suit against an individual based on considerations beyond that individual's ability to pay.

9. Holder Memorandum: Coordination of Parallel Criminal, Civil, Regulatory, and Administrative Proceedings (January 2012)
Criminal prosecutors and civil trial counsel should timely communicate, coordinate, and cooperate with one another and agency attorneys to the fullest extent appropriate to the case and permissible by law.
By working together in this way, the Department can better protect the government’s interests (including deterrence of future misconduct and restoration of program integrity) and secure the full range of the government’s remedies (including incarceration, fines, penalties, damages, restitution to victims, asset seizure, civil and criminal forfeiture, and exclusion and debarment).
Every United States Attorney’s Office and Department litigating component should have policies and procedures for early and appropriate coordination (Intake, Investigation, and Resolution) of the government’s criminal, civil, regulatory and administrative remedies.

10. U.S. v. Tariq Mahmood, M.D. – Criminal Case
Owner and operator of several hospitals throughout Texas
Investigation revealed that diagnosis codes were added, changed, and improperly sequenced
Trial
135 months confinement
Approx. $600k restitution
Reduced to approx. $145k after appeal
3 years S/R
Exclusion – minimum 25 years
Agreed Voluntary Suspension of License

11. U.S. v. Tariq Mahmood, M.D. – Civil Case
Civil FCA case filed after the criminal conviction
Sought $2,091, judgment
$1,156, in damages
Total Treble Damages $1,734,721.23
Minus Restitution Paid - $578,240.41
Summary Judgment Damages $1,156,480.82
$935, in civil penalties
$11,000 per claim

12. U.S. v. Tariq Mahmood, M.D. – Civil Case
Motion for Summary Judgment filed
Doctrine of collateral estoppel precludes the litigation of an issue decided on the merits in an earlier proceeding
“[Defendant] is estopped from denying the essential elements of his False Claims Act violation due to his earlier criminal conviction for the same transaction.” United States v. Thomas, 709 F.2d 968 (5th Cir. 1983)
Motion for Summary Judgment granted
Final Judgment entered
$1,223,414.50
$288, in damages
$935, in civil penalties

13. Elite Lab Services, LLC Background and Intake
Jerry and Suzanne Dengler
Clinical lab located in Tyler, Texas
Primary revenue from labs drawn on SNF patients
Allegation stemmed from qui tam complaint concerning inflated mileage
Coordination between Criminal and Civil Division
Criminal investigation initiated

14. Elite Lab Services, LLC Investigation
Search and seizure warrants executed
Seizure of approx. $2.5 million
Additional seizure warrant executed ($150,000)
Civil forfeiture action initiated (18 USC 1956/57 and 1347)
Five pieces of real property
Lis pendens issued
Civil forfeiture complaint amended after admin. claims made
$2.7 million in funds
Joint stay request – administratively closed

15. Elite Lab Services, LLC Resolution
Civil settlement as to corporation (Elite) and individual defendants (Jerry and Suzanne Dengler)
Used seized funds and real properties subject to civil forfeiture to satisfy a portion of agreed $3.75 million judgment
Defendants admitted claims were false because they included inflated mileage claims in excess of actual miles driven
Dismissed civil forfeiture
Voluntary Exclusion as to corporation and individuals
Relator share 21% - $787,500

16. Elite Lab Services, LLC Resolution
Jerry and Suzanne Dengler pled guilty to informations charging violations of 18 USC 1349, Conspiracy to Commit Health Care Fraud
Jerry Dengler
24 months, 3 years S/R, and $161,695 restitution
Suzanne Dengler
5 year term of probation, 6 month term of home detention, and $161,695 restitution
Factual bases described arbitrary route mileage increases between March 7, and October 22, 2014; narrower scope of conduct than the civil case

17. Charging Decisions

18. Grounds for Commencing or Declining Prosecution
The attorney for the government should commence or recommend Federal prosecution if he/she believes that the person’s conduct constitutes a Federal offense and that the admissible evidence will probably be sufficient to obtain and sustain a conviction, unless, in his/her judgment, prosecution should be declined because: 1. No substantial Federal interest would be served by prosecution; 2. The person is subject to effective prosecution in another jurisdiction; or 3. There exists an adequate non-criminal alternative to prosecution. U.S.A.M. §

19. Principles Of Federal Prosecution Of Business Organizations: The Filip Factors (U.S.A.M. § 9-28.300)
the nature and seriousness of the offense, including the risk of harm to the public, and applicable policies and priorities, if any, governing the prosecution of corporations for particular categories of crime;
the pervasiveness of wrongdoing within the corporation, including the complicity in, or the condoning of, the wrongdoing by corporate management;
the corporation’s history of similar misconduct, including prior criminal, civil, and regulatory enforcement actions against it;
the corporation’s willingness to cooperate in the investigation of its agents;
the existence and effectiveness of the corporation's pre-existing compliance program;

20. Principles Of Federal Prosecution Of Business Organizations: The Filip Factors (U.S.A.M. § ), cont.
the corporation’s timely and voluntary disclosure of wrongdoing;
the corporation’s remedial actions, including any efforts to implement an effective corporate compliance program or to improve an existing one, to replace responsible management, to discipline or terminate wrongdoers, to pay restitution, and to cooperate with the relevant government agencies;
collateral consequences, including whether there is disproportionate harm to shareholders, pension holders, employees, and others not proven personally culpable, as well as impact on the public arising from the prosecution;
the adequacy of remedies such as civil or regulatory enforcement actions; and
the adequacy of the prosecution of individuals responsible for the corporation's malfeasance.

21. Substantial Federal Interest?
Federal law enforcement priorities;
The nature and seriousness of the offense;
The deterrent effect of prosecution;
The person’s culpability in connection with the offense;
The person’s history with respect to criminal activity;
The person’s willingness to cooperate in the investigation or prosecution of others; and
The probable sentence or other consequences if the person is convicted.
U.S.A.M. §

22. Non-Criminal Alternatives to Prosecution
“When a person has committed a federal offense, it is important that the law respond promptly…that does not mean, however, that a criminal prosecution must be initiated…Congress has provided civil and administrative remedies for many types of conduct that may also be subject to criminal sanction…Attorneys for the government should familiarize themselves with these alternatives and should consider pursuing them if they are available in a particular case.” U.S.A.M. §

23. Types of Resolutions Available
For Individuals:
Administrative
Civil
PTD
Charge
For Corporations:
Non-Prosecution Agreement (NPA)
Deferred Prosecution Agreement (DPA)
For Both:
Exclusion
No charge

24. Use of NPAs and DPAs

25. Sessions Memorandum: Department Charging and Sentencing Policy (May 2017)

26. CHARGE
STATUTE
STATUTORY MAX
FINE
Health Care Fraud
18 U.S.C. 1347
10 yrs.
$250,000
Conspiracy
18 U.S.C. 1349
10/20 yrs.
Illegal Remunerations
42 U.S.C. 1320a-7b
5 yrs.
Aggravated ID Theft
18 U.S.C. 1028A
2 yrs. Consecutive
False Statements
18 U.S.C. 1035
Obstruction HC
18 U.S.C. 1518
Wire Fraud
18 U.S.C. 1343
20 yrs.
Mail Fraud
18 U.S.C. 1341
Criminal HIPAA
42 U.S.C. 1320d-6
1/5/10 yrs.
$100,000/$250,000
Money Laundering
18 U.S.C. 1956/1957
20/10 yrs.
$500,000/$250,000

27. Loss and Restitution

28. Calculating Loss – General Rule
General Rule (U.S.S.G. § 2B1.1)
“… loss is the greater of actual loss or intended loss.” Id., comment (n. 3(A)).
“Intended loss” is defined as “(I) …the pecuniary harm that was intended to result from the offense; and (II) includes intended pecuniary harm that would have been impossible or unlikely to occur (e.g., as in a government sting operation, or an insurance fraud in which the claim exceeded the insured value.” Id., comment. (n. 3(A)(ii)).

29. Calculating Loss – Special Rule
Special Rule (U.S.S.G. §2B1.1, comment. (n. 3(F)(viii)))
In a case in which the defendant is convicted of a Federal health care offense involving a Government health care program, the aggregate dollar amount of fraudulent bills submitted to the Government health care program shall constitute prima facie evidence of the amount of the intended loss, i.e., is evidence sufficient to establish the amount of intended loss, if not rebutted.
BUT, case law on reducing this in the 5th Circuit
United States v. Isiwele, 635 F.3d 196, 203 (5th Cir. 2011) and United States v. Usman, 460 Fed. Appx. 414, 417 (5th Cir. 2012)

30. Calculating Loss: Isiwele and Miller
[T]he amount fraudulently billed to Medicare/Medicaid is ‘prima facie evidence of the amount of loss [the defendant] intended to cause,’ but ‘the amount billed does not constitute conclusive evidence of intended loss; the parties may introduce additional evidence to suggest that the amount billed either exaggerates or understates the billing party's intent.’
U.S. v. Isiwele, 635 F.3d 196, 203 (5th Cir. 2011)
U.S. v. Miller, 316 F.3d 495, 504 (4th Cir. 2003)

31. Calculating Loss: Credits Against Loss
“[l]oss shall be reduced by the money returned, and the fair market value of the property returned and the services rendered, by the defendant or other persons acting jointly with the defendant, to the victim before the offense was detected.”
U.S.S.G. § 2B1.1, cmt. n.3(E)(i)

32. Calculating Loss after Mahmood
District court is required to credit defendant convicted of health care fraud for fair market value of legitimate health care services rendered to patients, absent rebuttal evidence tending to suggest that Medicare would not have paid for services or that services were not actually provided.
U.S. v. Mahmood, 820 F.3d 177, (5th Cir. 2016)

33. Mahmood Credit Analysis
Two-part analysis:
Were services rendered?
If services were rendered, would Medicare have paid?
If Medicare would have paid for the services but for the fraudulent billing, then the defendant is entitled to a credit for the fair market value of those services.
If Medicare would not have paid for the services, then the defendant is entitled to no such credit.

34. Restitution Mandatory Victim Restitution Act (18 U.S.C. § 3663A)
Authorizes restitution to a victim directly and proximately harmed by a defendant’s offense of conviction
Limits restitution to the actual loss directly and proximately cause by the defendant’s offense of conviction.
An insurer’s actual loss for restitution purposes must not include any amount that the insurer would have paid had the defendant not committed the fraud.
The MVRA places the burden on the government to prove a victim’s actual loss.
The sentencing court may shift the burden to the defendant as justice requires.

35. Emerging Trends

37. 2017 National Healthcare Fraud Takedown
Led by the Medicare Fraud Strike Force
Department of Justice’s Criminal Division,
U.S. Attorney’s Offices (USAOs)
Federal Bureau of Investigation (FBI)
U.S. Department of Health and Human Services - Office of Inspector General (HHS- OIG)
Medicaid Fraud Control Units (MFCUs)
State Attorney General (AG) offices
Drug Enforcement Administration (DEA)
Internal Revenue Service (IRS)
Defense Criminal Investigative Service (DCIS)
Local law enforcement agencies

39. 2017 National Healthcare Fraud Takedown
Last year’s takedown features a large-scale federal and state partnership to combat health care fraud and the opioid epidemic.
Medicare fraud schemes are regional and viral. Criminals often copy fraud techniques they learn from other criminals in their communities.
In one noteworthy fraud scheme, a medical professional in the Eastern District of Texas was charged with overprescribing medically unnecessary narcotics to patients, some of whom died from drug overdoses. The doctor allegedly fraudulently billed Medicare and received more than $1.2 million in reimbursement.

41. 2017 National Healthcare Fraud Takedown
Another fraud scheme resulted in the arrest of seven defendants in Michigan, including five physicians, who allegedly engaged in illegal kickbacks and billing for medically unnecessary joint injections, drug screenings, and home health services. One of the defendants owned multiple medical and health-related businesses, and these businesses allegedly fraudulently billed Medicare $126 million as part of the scheme.
In the Southern District of Texas, 26 individuals were charged in cases involving over $66 million in alleged fraud. Among these defendants are a physician and a clinic owner who were indicted for the distribution of controlled substances in connection with a pain management clinic that is alleged to have been the highest prescribing hydrocodone clinic in Houston, where approximately people were seen daily, and were issued medically unnecessary prescriptions for hydrocodone in exchange for approximately $300 cash per visit.