Loading presentation...

Present Remotely

Send the link below via email or IM


Present to your audience

Start remote presentation

  • Invited audience members will follow you as you navigate and present
  • People invited to a presentation do not need a Prezi account
  • This link expires 10 minutes after you close the presentation
  • A maximum of 30 users can follow your presentation
  • Learn more about this feature in our knowledge base article

Do you really want to delete this prezi?

Neither you, nor the coeditors you shared it with will be able to recover it again.


Fraud, Waste and Abuse: Understanding and Avoiding Liability

No description

Elizabeth Bagby

on 24 June 2015

Comments (0)

Please log in to add your comment.

Report abuse

Transcript of Fraud, Waste and Abuse: Understanding and Avoiding Liability

Any questions?
Know/follow applicable laws, regulations, policies, procedures

Report known/suspected violations

Do annual compliance/specialized Medicare compliance training

Establish and adhere to your Code of Conduct

Do not retaliate against whistleblowers

Your Responsibilities

You can begin defending against an allegation of fraud and abuse before it starts:

Establish, maintain and update a comprehensive compliance plan

Maintain records that all pharmacy personnel are trained and retrained on the pharmacy’s compliance policies

Maintain complete and accurate records of services provided

Anatomy of a Fraud and Abuse Investigation:

The federal Health and Human Services Office of Inspector General (OIG) receives complaints alleging fraud or abuse, thousands each year.

If OIG determines that a complaint contains a credible allegation, OIG may pursue additional information by formal or informal means.


Real-Life Example:
Pharmacy ad in the Sunday paper offers flu shots for $15, but, unbeknownst to pharmacy, the billing system still submits claims for $29.95 to the Government for each flu shot.

False Claim?

Barrier to entry (e.g., PSC card)

Discounted or free items/services to persons without insurance coverage for those items/services and who would not otherwise be able to afford them.

Third party covers discount off item/service

Price Protectors

Commercial payors also commonly use the “lesser of” reimbursement methodology - meaning that reduced U&C may have a significant negative financial impact beyond Government reimbursement.

Watch for “U&C Erosion”-

Discounts, special offers and other reductions in price may erode a pharmacy’s U&C price. In addition to lowering reimbursement, submitting a claim to the Government for more than the “allowable amount” may be a false claim and can result in exclusion and/or significant fines.

Protecting Price

Fraud & Abuse Law Implicated by Pricing:

False Claims Act

False Claims Act generally penalizes the submission of inaccurate or otherwise non-compliant claims for health care services to be paid for by the Government.

Pricing F&A Law

U&C means Usual & Customary Cost and is the amount that a cash-paying customer would expect to pay without the benefit of discounts or insurance.

How is U&C different from “MFN”?

Focusing on pharmaceutical items and services reimbursable by the government.

Often reimbursement arrangements provide that the pharmacy will receive the lesser of discounted rate or pharmacy’s “U&C.”


Real-Life Example:
Pharmacy ad in the Sunday paper offers flu shots for $15, if the patient signs-up for Rewards Card.

Prohibited Inducement?

Real-Life Example:
Pharmacy advertises $5 off flu shot (regularly $29.95) to the first 100 Medicare Part D plan members.

Prohibited inducement?
Prohibited Inducement?
As mentioned earlier, there's a safe harbor for retail rewards programs, currently about to be codified in an OIG regulation.

Safe harbor for retail rewards before the ACA:

Nominal Value - $10 or less ($50 annually), no cash or cash equivalent (e.g., gift card).

Value to promote Government-identified Preventive Services

Sanctioned Incentives

Watch for these Incentives, if aimed at Government Beneficiaries:


Fraud & Abuse Law Implicated by Advertising:

Anti-Inducement Law

Anti-Inducement laws typically prohibit giving anything of value to an individual that is likely to influence that individual to make a government-funded purchase from a particular provider.

Advertising F&A Laws

Pharmacy Signage
Inside and outside signage
Voice and Print Ads


Pharmaceutical Supply Agreement permits pharmacy to purchase 1000 units @ $5/unit, but if the pharmacy purchases 10,000 units, the charge will be only $2/unit.

Prohibited Kickback or Permitted Discount?
In Manufacturer/Wholesaler Purchase/Supply Agreements, watch for:
“Sliding-scale discounts”
Discounts based on prior periods
Retroactive agreements
“Rebates” in the form of incentive payments

Purchasing – Direct

Discounts offered in exchange for referrals to products reimbursed by Government payors?
Fraud & Abuse Law Implicated by Purchasing:

Anti-Kickback Law

Anti-Kickback laws generally prohibit payment or receipt of payment in exchange for referrals for health care paid for by the Government.

Purchasing F&A Laws

Direct from Manufacturer/Wholesaler
Purchase Agreements
Supply Agreements
Group Purchasing Organization
Participation Agreement

Purchasing Arrangements

Beneficiary Issues

Does the prescription look altered or possibly forged?

Have you filled numerous identical prescriptions for this beneficiary, possibly from different doctors?

Is the person receiving the service/picking up the prescription the actual beneficiary(identity theft)?

Is the prescription appropriate based on beneficiary’s other prescriptions?

Does the beneficiary’s medical history support the services being requested?

Indicators of Potential Fraud, Waste, and Abuse
How to Avoid Fraud & Abuse Liability
Part III
Services reimbursed through prospective payment or bundled physician group

Processing of claims submitted to a Medicare fiscal intermediary

Services by an excluded administrator, billing agent, accountant, claims processor or utilization reviewer

Items or equipment sold by an excluded manufacturer or supplier and used to treat or care for beneficiaries
Items/services furnished or ordered by an excluded provider

Items/services furnished to a hospital inpatient or outpatient based on an excluded provider’s order

Administrative and management services not directly related to patient care but necessary to provision of care and items.

42 CFR § 1001 –

Mandatory exclusions
from federal health care programs for conviction of crimes involving delivery of services under Medicare or other serious criminal convictions related to fraud, health care abuse, or controlled substances.

Subsection (iii) precludes the use of rewards only to get federal reimbursement.

For instance, a drugstore program that offered a $20 coupon to
customers, including Medicare beneficiaries, who transferred their prescriptions to the drugstore would not meet this criterion because the $20 coupon would be tied to the drugstore’s getting the recipients’ Medicare Part D prescription drug business.

On the other hand, a program that awarded a $20 coupon once a customer spent $1,000 out-of-pocket in the store—even if a portion of that $1,000 included copayments for prescription drugs— would likely meet the criterion.

Changes/codification of existing safe harbors:

Part D Cost-Sharing Waivers by Pharmacies:
Protects certain cost-sharing waivers that are generally prohibited by the AKS, including pharmacy waivers for needy Medicare Part D participants

Pharmacies would need to meet three criteria:

(1) the waiver/reduction is not advertised or part of a solicitation;

(2) the pharmacy does not routinely wave cost-sharing; and

(3) before waiving a cost-sharing obligation, the pharmacy determines in good faith that either the beneficiary has a financial need or the pharmacy fails to collect cost-sharing amounts after making a reasonable effort to do so.


Felony conviction

Imprisonment up to five years and/or

Maximum of $25,000 fine

Potential exclusion from federal health care programs

18 USC § 1320a-7b(b)


Inducing or rewarding referrals of business payable under a federal health program

Falsely applying for benefits or payments

Concealing or failing to disclose knowledge

Anti-Kickback Statute
Two Words: Qui Tam - means that anyone, anywhere can be a false claims watchdog.

Heightened Gov’t Enforcement
Disgruntled Employees
Jealous Competitors
Qui Tam “Hobbyists”

Risk of Enforcement

For example, assume a false claim for $100 – one fraudulently-claimed prescription. Gov’t recovery could be 3x $100 for the damages, and the maximum penalty of $11,000 = $11,300 penalty for that one claim.

If there were 100 false claims for prescriptions over ten year statute of limitations under the FCA, however, the maximum penalty would be $1,130,000 for an average of only ten fraudulent prescription claims a year – less than one a month.


Minimum of $5,500 but no more than $11,000, plus three times the amount of damages the government sustains because of the act

The penalty is incurred per violation, which can add up.

If the health care fraud resulted in someone’s death, imprisonment may be for a term of years or for LIFE.
18 U.S.C. § 1347 –

(a) Whoever knowingly and willfully executes, or attempts to execute, a scheme or artifice—

(1) to defraud any health care benefit program; or

(2) to obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any health care benefit program, in connection with the delivery of or payment for health care benefits, items, or services, shall be fined under this title or imprisoned not more than 10 years, or both.[…]

(b) With respect to violations of this section, a person need not have actual knowledge of this section or specific intent to commit a violation of this section.

Health Care Fraud
Federal/State Anti-Kickback Laws
Federal/State Anti-Inducement Laws
Federal/State False Claims Laws

Regulatory Regimes

Part B
Part C (Medicare Advantage)
Part D
Federal Employee Health Benefit Programs

Scope: Gov’t Business

Scope of Fraud & Abuse Restrictions and Implications
Part II
Practices resulting in unnecessary cost:

Overuse, underuse and misuse of care

Non-value-added services

Medication errors

Prescription refill errors

What is Waste?
Civil Penalties

Criminal Penalties


Loss of License

Exclusion from / Ineligibility for Payor Reimbursement
Why Understanding Fraud, Waste & Abuse is Important

Nothing in this presentation shall be construed as a legal approval or disapproval of any particular proposal/activity/ad. Further, nothing in this presentation is intended to be a legal opinion regarding whether any particular proposal/activity/ad is legal or illegal. Independent legal review of each proposal/activity/ad is necessary before giving legal guidance due to the highly fact-dependent nature of laws and regulations.


Before responding to a request for information about alleged fraud or abuse:
Take a Deep Breath
Call Trusted Legal Advisor
Complaint is an Allegation, Not a Conviction

Basic Rules of Responding to Fraud & Abuse Inquiry
Part IV
Bills a Government program the wrong price?

Receives too much reimbursement from the Government?

Discounts or gifts offered to influence an individual to purchase an item or service paid for by the government?
Pharmaceutical Supply Agreement gives pharmacy a $5/unit price for the first 1000 units the pharmacy dispenses, and $2/unit price if the pharmacy dispenses 10,000 units in one year.

Prohibited Kickback or Permitted Discount?
Prohibited Kickback?
In GPO Agreements Watch For:
“Sliding-scale discounts”
Discounts based on prior periods
Purchasing – GPO

Provider Issues

Does the provider write for diverse drugs or primarily only for controlled substances?

Are the provider’s prescriptions appropriate for the member’s health condition (medically necessary)?

Is the provider writing for a higher quantity than medically necessary for the condition?

Is the provider performing unnecessary services for the member?

No Federal health care program payment may be made for any item or service furnished, ordered, or prescribed by an individual or entity excluded by the Office of Inspector General, which means there’s also a prohibition on hiring excluded individuals.

There’s a civil monetary penalties for $10,000/claim submitted for services/items furnished during exclusion

Knew or should have known person excluded

Affirmative duty to check employees’ exclusion status

42 U.S.C. §1395(e)(1)
42 C.F.R. §1001.1901

Permissive exclusions
for fraud, waste, abuse and violations of other laws, such as False Claims Act.

OIG can exclude businesses/individuals that pose a business risk to the government through violations of laws that protect against fraud, waste and abuse.

This will prevent companies/individuals from participating in government programs, and a payment ban applies to all methods of federal program reimbursement.

Exclusion from Federal Health Care Programs
OIG issued a notice of proposed rulemaking – October 2, 2014

Codifies existing safe harbors to the AKS and adds new ones

Presenting a false claim for payment or approval;
Making or using a false record or statement in support of a false claim;
Conspiring to violate the False Claims Act;
Falsely certifying the type/amount of property to be used by the Government;
Certifying receipt of property without knowing if it’s true;
Buying property from an unauthorized Government officer; and
Knowingly concealing or knowingly and improperly avoiding or decreasing an obligation to pay the Government.

31 USC § 3729-3733

False Claims Act
CMS’ exclusionary authority extends to providers convicted under federal or state law of fraud or other misconduct in connection with the delivery of health care items or services.

A fraud & abuse mistake with a private payor may carry over into government business.
Scope: Private Business

Unnecessary, inappropriate care

Care doesn’t meet professionally recognized standards

Provider conduct inconsistent with acceptable business and/or pharmacy practices resulting in greater reimbursement

What is Abuse?

Billing for nonexistent prescriptions

Billing for brand when generics are dispensed

Billing for non-covered items as covered

Billing for prescriptions never picked up

Inappropriate use of dispense as written(“DAW”) codes

Billing for a high-priced generic and dispensing a lower-priced generic

What is Fraud?
Fraud & Abuse Topics and Implications
Part I
Kentucky Pharmacists Association
2015 Annual Meeting

Anne-Tyler Morgan, Esq.

Fraud, Waste and Abuse
Understanding and Avoiding Liability

(859) 231-8780, ext. 108


Intentionally submitting false information to the government or a government contractor in order to get money or a benefit.
Retailer rewards programs

The offer or transfer of items or services for free or less than fair market value by a person, if—

(i) the items or services consist of coupons, rebates, or other rewards from a retailer;

(ii) the items or services are offered or transferred on equal terms available to the general public, regardless of health insurance status; and

(iii) the offer or transfer of the items or services is not tied to the provision of other items or services reimbursed in whole or in part by the program under title XVIII or a State health care program (as defined in section 1128(h)).

Prohibited by exclusion:
New Health Reform Exception:

Retailer Coupons, Rebates and Rewards

Available to General Public

Not Tied to Government-Reimbursed Services

False Claim?
Real Life Example:
Pharmacy offers PSC for an annual fee.

Medicaid changes definition of U&C to include prices available under PSC.

Medicaid reimburses pharmacy the “lesser of” (i) contract rate, (ii) Government-imposed rates, or (iii) pharmacy’s U&C.

Anne-Tyler Morgan, Esq.
Note: A felony conviction at either the state or federal level is often the basis for a lifetime revocation by the Board of a pharmacist's license in Kentucky.
Full transcript