False Health Claims Can Be Trap for the Unwary Mental Health Targeted as Expenditures Grow

May 1, 1997

Like most other medical specialties, mental health has its share of unscrupulous providers who choose to break the rules and often end up learning lessons the hard way. The federal False Claims Act, a civil remedy, along with a myriad of other criminal statutes, have evolved into powerful weapons in the hands of federal and state prosecutors who have made health care fraud a national priority.

Near dawn, smoke drifts casually across a Civil War battlefield strewn with the dead of a previous day's battle. For many Union soldiers, their sacrifice may have been in vain, their chances of survival diminished by bullets filled with sawdust rather than gunpowder, provided by contractors intent on defrauding the federal government.

Over a hundred years later, federal law that originated during this national tragedy now seeks to avert a new crisis, this time in health care. And the struggle to maintain the economic viability of Medicare and Medicaid has taken on the same life and death implications for the millions whose health depends on these taxpayer-funded programs.

Like most other medical specialties, mental health has its share of unscrupulous providers who choose to break the rules and often end up learning lessons the hard way. The federal False Claims Act, a civil remedy, along with a myriad of other criminal statutes, have evolved into powerful weapons in the hands of federal and state prosecutors who have made health care fraud a national priority. In June 1994, for instance, Santa Monica, Calif.-based National Medical Enterprises, settled criminal and civil fraud charges by paying $362.7 million in fines to the federal government and the states in which it operated.

With health care fraud taking a reputed 10% bite out of the approximately $1 trillion Americans spend every year on medical treatment, abating dishonesty has become an urgent issue. As Medicare, plagued by out-of-control expenditures, careens toward bankruptcy before the end of the next decade, the system will soon lose its ability to meet patient needs unless the diversion of resources comes to a halt.

For physicians, health care providers and hospitals, renewed scrutiny means that the failure to religiously follow procedures and regulations can lead to apocalyptic legal and financial woes. In December 1995, for instance, the University of Pennsylvania Medical System reached a settlement with federal regulators that required the teaching hospital to return a whopping $10 million in overbillings. But it was the $20 million in penalties that caught national attention. Meanwhile, the nation's 1,200 teaching hospitals have now all been subjected to increased scrutiny, with reimbursements of overbillings totaling in the hundreds of millions of dollars.Last February, SmithKline Beecham Clinical Laboratories shelled out $325 million to settle a Medicare fraud case involving laboratory overbillings, a record amount for that industry.

What this all means is that the reallocation of U.S. Justice Department resources that increased the number of federal lawyers handling health care fraud has had dramatic results. Since 1992, the number of health care fraud convictions increased by 241%. Operation Restore Trust, a federally-sponsored antifraud initiative that targeted Medicaid and Medicare expenditures in California, Florida, Illinois, New York, and Texas produced savings of $10 for every one dollar spent on administering the program. June Gibbs Brown, the inspector general of the Department of Health and Human Services, said in February that the number of auditors and investigators will increase by 20% by 2002, adding to her already existing cadre of 960 enforcement staff.

Mental health has become a target of federal regulators because of rising abuses, particularly in nursing homes and residential facilities. Although psychologists and other nonpsychiatric health care providers are often more likely to run afoul of billing regulations, in at least two states-California and Illinois-psychiatrists were just as likely as nonphysician practitioners to provide unnecessary or questionable services, according to a report issued last year by HHS' inspector general. In Florida, psychiatrists were actually more likely to engage in inappropriate billing or treatment practices.

With rising levels of enforcement, the financial and legal risks to mental health care providers, whether organizations or individuals, have increased, and ignorance of the law is no excuse. And while provably innocent mistakes usually only require refunding the excess payments, conduct that is egregious can lead to enormous penalties and, sometimes, criminal prosecutions.

Lisa Foster, a San Diego-based attorney whose entire practice is limited to representing whistleblowers in False Claims Act cases said that the financial incentives are enormous, and that it is not unusual any more for employees to turn in bosses who overbill or otherwise engage in fraudulent conduct. Amendments to the law in 1986 made the Act more "user friendly" she said, and suits proliferated. If a case is successful, the defendant can be hit with treble damages, fines ranging from $5,000 to $10,000 per claim submitted, and attorneys fees. The original claimant, meanwhile, is rewarded with 25% of the government's recovery.

In August 1996, the Los Angeles Times reported that a former administrator and medical school resident filed a False Claims Act charge against the University of California medical schools, alleging, in part, that psychiatric residents are allowed to run patient programs while the services are billed by the faculty staff in order to justify Medicare payments. Treatment by residents are not reimbursable, since Medicare pays for medical training under a separate disbursement. Though still under seal as required by law, the Times article said the case was filed by Foster, a statement she is not allowed to either confirm or deny until federal authorities decide whether they will take over the litigation.

Foster advises psychiatrists and any health care provider that they should think twice before "pushing the envelope" on billings. In addition, once caught, settling the case as soon as possible with the government means that some of the enormous penalties that accrue after a trial can be avoided. "If you honestly think you didn't do anything wrong, then it's worth fighting about because you can try to convince the government you didn't do anything," Foster said.

In Los Angeles, disproportionate numbers of psychotherapy claims led to a crackdown on billing and treatment practices. According to Arthur Lurvey, M.D., medical director of Transamerica Occidental Life Insurance Company, the administrator for Part B Medicare claims in Southern California, during 1995 the region had 20% of all psychotherapy claims to Medicare but only 5% of the total patients.

After a review, new policies were adopted and more careful oversight of these claims now occurs. According to Lurvey, the best way to avoid run-ins with federal investigators is to ask questions and learn the codes. In addition, documenting files appropriately assures there is sufficient justification to support billings and the medical necessity of patients. The heightened oversight, has drawn criticism that the pendulum has now swung too far, with patients being denied necessary care.