October 14, 2010

After stepping up enforcement of fraud and abuse cases related to health care providers under the Patient Protection and Affordable Care Act, the Federal government is now targeting health care corporate structures and executives.  In seeking to expand the authority provided to the HHS Office of the Inspector General (OIG), on September 22, 2010, the House passed the “Strengthening Medicare Anti-Fraud Measures Act of 2010” (introduced by Congressmen Pete Stark and Wally Hedger). The bill, which was passed with bipartisan support in the House, will now move on to the Senate.

In altering Title XI of the Social Security Act, the goal of the legislation is to crack down on health care fraud by extending federal program exclusion, “permissive exclusion,” penalties to individuals and entities affiliated with sanctioned entities, including hospital executives and parent corporations.  Currently, health care executives may be able to escape liability for acts of fraud committed by their employer by simply leaving the health care entity for a position elsewhere.  Additionally, parent corporations are not likely to be held accountable for the fraud of their subsidiaries.

The Strengthening Medicare Anti-Fraud Measures Act seeks to close these liability loopholes.  As the law is currently written,  the OIG is permitted to exclude the following from participating in Federal health care programs: (1) any individual or entity convicted a misdemeanor relating to fraud, theft, embezzlement, breach of fiduciary responsibility or other financial misconduct: (i) in connection with delivery of health care service, (ii) with respect to any act or omission in a health care program, or any individual or entity convicted of a misdemeanor relating to fraud, other than in a healthcare program; (2) conviction relating to obstruction of an investigation; (3) misdemeanor conviction related to a controlled substance.

If passed by the Senate, the Act would permit the OIG to also exclude corporate executives and parent/related entities from participating in Federal health care programs, if they were affiliated with a sanctioned entity at the time any of the conduct forming the basis for conviction or exclusion of the sanctioned entity occurred.  Sanctioned entities include not only those convicted of program-related crimes, but also those convicted of misdemeanors and fraud.

Essentially the bill would provide for permissive exclusion of an officer or managing employee from healthcare programs based upon certain events, including the criminal conviction of an entity in connection with the delivery of a health care item or service. In addition, the OIG has the ability under the Act to “re-attach” a corporate executive, or officer, or managing employee, to the sanctioned entity, even if he or she is not longer employed by the entity.  The legislation has the potential to subject executives to exclusion from federal health care programs for an indefinite period after they have left the employment of the sanctioned employer. This is very broad and may be a motivating factor for an employee or former employee to become a relator should he or she believe that fraud has been committed.