Health Care Reform: The Assault on Waste, Fraud, and Abuse

By David Behinfar, JD, LLM, CHC, CIPP

Health care reform became a reality on March 23, 2010 when President Obama signed into law the Patient Protection and Affordable Care Act of 2010 (PPACA). A number of the law’s provisions are aimed at reducing and eliminating waste, fraud, and abuse in health care. We’ll highlight several of the law’s provisions that require thoughtful response from the health care community.

Repay Government Overpayments Within 60-days

PPACA requires health care providers to report and return overpayments from governmental payers within 60 days from the time the provider discovers the overpayment. If an overpayment is retained beyond 60 days, it becomes an “obligation” sufficient for reverse false claims liability under the False Claims Act, and may become subject to triple damages and penalties if there is “knowing and improper” failure to return the overpayment.

Health care entities that receive reimbursement from government payers need to address this time-sensitive reporting requirement by examining their current process for auditing charges and returning overpayments. Although this sounds like a simple task, the time pressure—combined with possible penalties—may cause discomfort to those departments involved in the revenue stream. Many parties must address the practical improvements necessary to identify, report, and repay the government within the 60-day limit. Coding specialists are likely to assume a key role in reviewing claims to help avoid overpayments on the front end.

Whistleblowers Gain Incentives

To identify fraud, PPACA expands the class of potential whistleblowers in false claims actions. Typically, whistleblowers are encouraged to come forward through an opportunity to participate in the recovery of any fine imposed upon a health care entity in violation of the False Claims Act.

Prior to PPACA, to qualify successfully as a whistleblower (or “relator,” as the term is defined in the False Claims Act), the individual must be the original source of information that implicated false claims activity. This generally meant the whistleblower was an insider, or someone with close ties to an organization and access to their non-public documents, who stepped forward with this information and exposed the fraud. The government did not allow an individual to share a portion of the recovered amount if the whistleblower provided publicly available information (information available in media reports, state and federal civil administrative, and criminal proceedings, etc.).

PPACA now allows whistleblowers to act based on information disclosed publicly in a state or local proceeding. PPACA takes this small step to recognize that it is more important to encourage people with fraud knowledge to step forward, than to worry about how or where they obtained the information. This is another incremental move in favor of the government, which potentially increases the prosecution of health care fraud.

Stark Violation – Medicare Self-Referral Disclosure Protocol for Providers

In March 2009, the Office of Inspector General (OIG) announced it would focus on potential violations of the anti-kickback statute. Because of this new priority, the OIG no longer would accept provider self-disclosures of Stark Law violations unless those violations also implicated a “colorable” violation of the anti-kickback statute. Consequently, since March 2009, providers have been unable to self-report violations of the Stark Law. PPACA fills this void and allows providers once again to self-report Stark violation through a newly designed protocol.

The new self-referral disclosure protocol for providers was announced on the Centers for Medicare & Medicaid Services (CMS) website Sept. 23, 2010 ( The self-referral disclosure protocol presents an important opportunity for physicians to reduce their risk exposure. By allowing physicians to report Stark violations voluntarily, CMS expects (except in extreme scenarios):

  • Payments made for designated health services that violate Stark will be refunded to the government, but
  • punitive-based penalties to be unlikely, especially in cases of technical violations.

CMS Offsets Stark Violation Payments with Self-Referral Disclosure Protocol

As part of the aforementioned new self-referral disclosure protocol, CMS has the option of recouping payments made to a provider by reducing or offsetting any Medicare payments that otherwise would be made to the provider. The secretary must take the following into account when determining the amount of any reduction:

  • The nature and extent of self-disclosed improper or illegal conduct
  • The timeliness of the provider’s self-disclosure
  • Cooperation when CMS requests additional information during the investigation/reporting
  • The litigation risk associated with the disclosed matter
  • The disclosing party’s financial position

Self-reporting typically is viewed as a positive opportunity for providers to identify and admit to mistakes, pay any resulting amounts owed for the mistake, and move on without fear of further repercussions. The new self-referral disclosure protocol is a welcome tool for providers to prove they mean well but sometimes make mistakes, and to demonstrate to the government they have an active compliance program and own up to those mistakes.

Anti-Kickback Statute and False Claims Liability Implications Change

The federal anti-kickback statute provides civil and criminal penalties to individuals who knowingly offer, pay, solicit, or receive bribes or kickbacks or other remuneration to induce business reimbursable by federal health care programs. PPACA has introduced a provision to eliminate the well-recognized Hanlester defense, which interpreted the statute as requiring proof that the defendant:

(1) had specific knowledge of the anti-kickback statute; and

(2) engaged in prohibited conduct with the specific intent do disobey the law (Hanlester Network v. Shalala, 51 F.3d 1390 (9th Circ. 1995)).

PPACA also contains a provision stating health care claims for reimbursement that include items or services in violation of the anti-kickback statute constitute false claims for False Claims Act purposes.

Providers now face a lower threshold for anti-kickback violations, and may incur possible False Claims Act liability with fewer defenses to avoid this liability. PPACA has made it easier to prove an anti-kickback violation and establish the carry-over effect as a false claims violation. The PPACA may cause providers who have legitimate errors in billing, or contractual deficiencies with third party contractors or suppliers, to find themselves in violation of federal fraud statutes.

Address PPACA Initiatives

PPACA provides clear insight into the government’s intent to tighten the reins on health care waste, fraud, and abuse. Although the well meaning and law-abiding segment of the health care community appreciates the elimination of waste and fraud in health care, providers who fail to recognize that the government can ensnare those who make unintentional billing errors and other compliance-related mistakes are caught in the middle of this battle. Physicians and coders must be proactive in addressing the waste and fraud initiatives in the PPACA, and work with their compliance, legal, and revenue departments to help avoid liability associated with these new provisions.


David Behinfar, JD, LLM, CHC, CIPP, has been employed as privacy manager at the University of Florida College of Medicine in Jacksonville for the past eight years. David has worked in health care compliance both as an attorney and in his current role for more than 14 years. He also has written a number of articles on health care compliance and privacy and has spoken at several national and state level conferences.



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