Conducting a Fraud Investigation, Part 1
“Taking a Common Sense Approach”
by Sean Weiss, Partner & VP of Compliance
After being off for a week, I thought I would create a post that would really ensure understanding of why and how to conduct a Fraud Investigation. This post is rather long (3,000 word), so I have broken it into 2-parts. The second part will be posted on Thursday. As with everything I do, I try to take a 2-pronged approach; first I deploy the KISS Principal since I am just a good ol’ boy from South Georgia and second, I use common sense since things can and often do get complicated quickly. In 2018, The DOJ recovered a total of $2.9 Billion under the False Claims Act (FCA) and of that amount, over 87 percent (in excess of $2.5 billion) involved the healthcare industry; including hospitals, pharmacies, hospice organizations, laboratories, physicians, and drug and medical device manufacturers. As a percentage, this was the highest percentage for healthcare-related recoveries since the FCA was overhauled in 1986. 2018 marks the ninth consecutive year that civil False Claims Act healthcare settlements and judgments exceeded $2 billion. These figures do not include sizable healthcare-related recoveries by state Medicaid programs, many of which included both federal and state components. Here is the most critical part of the recoveries in my humble opinion, “Whistleblower, or qui tam, suits once again comprised a substantial portion of the False Claims Act cases filed this year. Whistleblowers filed 645 new lawsuits in 2018 – an average of more than 12 cases every week, a slight decrease from the previous year. This past year, settlements and judgments in qui tam actions made up nearly three-quarters of all False Claims Act recoveries.”
I would like to think that after 25-years of working in health care in a variety of roles and different capacities, that I would have seen and heard it all. However, every day something new pops up that I could swear was totally made up but when I begin the fact-finding mission, I am left bewildered! I always tell you how much I love my work and how lucky I am to get to do the kind of work I do on a daily, weekly, monthly and annual basis. I have conducted fraud investigations on behalf of clients who were accused by employees of wrong-doing simply because the employee was no longer allowed to make the coffee or had their credit card privileges taken away. I have conducted fraud investigations based on a disgruntled former employee’s accusations of the physician/owner making unwanted sexual advances only to find out the employee was the one making the advances. The accusations always start off with “The doctor is committing fraud by upcoding or billing for services they never provided” because that is the quickest way to get an attorney to take the case since the recoveries for FCA violations can be so massive. I have had the privilege (or not so much) to work with attorneys on matters where accusations were made that sounded so preposterous regarding coding and billing that I had to tell them we can do a quick discovery of facts but this just sounds way off to me. Unfortunately, for a lot of attorneys if they do not work with billing, coding, and documentation of patient encounters on a regular basis, they really cannot make a good determination regarding the validity of the claims which is why so many frivolous suits are brought in the first place. This is also one of the reasons the DOJ under the Justice Manual has decided that if a case fails to warrant their taking on the case on behalf of a Whistleblower, they are pushing for the case(s) to be dismissed – meaning the case cannot proceed if the DOJ refuses to engage.
Being accused of any type of wrong doing is never an easy thing for a lot of reasons including but not limited to: Costs (financial and reputational), morale issues (yours and the employees), grapevine rumors, loss of patient population due to not wanting to be caught in the middle of drama even if you are vindicated in the end. This is why I tell clients compliance programs are critical to the organization because when you create a Living, Breathing Document (LBD) you have compliance pledges outlining behaviors that are both acceptable and not acceptable and when and how to report concerns. This creates a culture of compliance within the organization and sets expectations of what is expected when an issue/problem arises. Often, setting out expectations from the start cuts down on rogue employees running off to file an unwarranted claim because you have established a process which they are required to follow.
Conducting a fraud investigation, or any investigation for that matter, is dependent upon gathering facts, being impartial (unbiased), and emotionally detached. Investigations regarding accusations of fraud, false claims filing, or for any type of compliance violation accusation is critical to getting to the heart of the matter and helping to shed light on the events that transpired to aid a court (if necessary) to determine guilt or innocence or a decision-maker within an organization on the course of corrective action or disciplinary measures. Making a determination of whether or not someone committed fraud and leveling an accusation is a very serious matter and one should not take this lightly. Do not believe that you can level an accusation without repercussions if you slander or defame an individual and bring character and financial hardship on them and/or their company. Make sure you know the laws, statutes, and guidelines or at least have guidance from competent legal counsel.
I have experienced expert witnesses who said they were investigators actually claim a person violated the false claims act without really understanding what the FCA entails. Under the FCA, a person is deemed to have acted “knowingly” when the person “acts in deliberate ignorance of the truth or falsity of the information; or acts in reckless disregard of the truth or falsity of the information.” 31 U.S.C. § 3729(b). As the Ninth Circuit has pointed out, the FCA knowledge standard does not extend to honest mistakes, but only to “lies.” “Claims are not ‘false’ under the FCA unless they are furnished in violation of some controlling rule, regulation or standard”. See, e.g., United States ex rel. Local 342 v. Caputo Co., 321 F.3d 926, 933 (9th Cir.2003); United States v. Southland Mgmt. Corp., 326 F.3d 669, 674-75 (5th Cir.2003). Additionally, a Defendant does not knowingly submit false claims when he follows Government instructions regarding the claims. See United States ex rel. Butler v. Hughes Helicopters, Inc. 71 F.3d 321 (9th Cir.1995); Wang v. FMC Corp., 975 F.2d 1412, 1421 (9th Cir.1992).
I would like for all of you to pay special attention to this next statement since it is a standard used to determine whether or not a false claim exists, “Additionally, claims are not “false” under the FCA when reasonable persons can disagree regarding whether the service was properly billed to the Government.” See United States ex rel. Lamers v. City of Green Bay, 168 F.3d 1013, 1018 (7th Cir.1999) (holding that “errors based simply on faulty calculations or flawed reasoning are not false under the FCA . . . [a]nd imprecise statements or differences in interpretation growing out of a disputed legal question are similarly not false under the FCA”) (citations omitted); Hagood v. Sonoma County Water Agency, 81 F.3d 1465, 1477 (9th Cir.1996).
Being systematic and spending the time to create a process and laying out expectations of employee behavior(s) is a first step to controlling situations that can lead to bigger and more costly investigations. In Part II, I will discuss the role of the investigator and how to perform the actual investigation.
What to do next…
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