HEALTHCARE FRAUD: SELF-DISCLOSURE PROTOCOL UPDATE

By Mathew J. Levy, Esq. & Seth A. Nadel, Esq.
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What is healthcare fraud? There are the obvious cases of greed, such as physicians billing for fictitious patients, services never performed, and the rendering of unnecessary medical procedures.  However, there is more to healthcare fraud than the obvious. This includes widely practiced rule-bending to assist patients, such as exaggerating either the severity of a patient’s condition, changing a patient’s billing diagnosis, or reporting signs or symptoms that a patient did not have to help the patient secure coverage for needed care.  Recent events make clear that these infractions can result in serious legal issues. The truth is that even well-meaning practitioners who bend the rules are placing their careers, and indeed their very freedom, at risk. 

On November 8, 2021, for the first time since 2013, the United States Department of Health & Human Services Office of the Inspector General (OIG) made substantive revisions to its Self-Disclosure Protocol (SDP).

The SDP – now officially known as the “Health Care Fraud Self-Disclosure Protocol,” pursuant to the recent updates – is intended to allow providers to voluntarily disclose evidence of fraud or improper billing practices to avoid the costs and business disruptions associated with government investigations and possible litigation. In other words, if a provider discovers that it has been previously reimbursed for claims which it knows or should have known to be legally improper (such as claims involving upcoding, overbilling, violations if the Anti-Kickback Statute, and others), it can choose to voluntarily disclose the impropriety in the interest of a more expedient and favorable resolution rather than wait for the government to discover, investigate and possibly sanction the provider.

list of recent enforcement actions on OIG’s website illustrates just some of the types of claims which are commonly the subject of disclosures. In several cases, providers paid penalties  based on having disclosed that they employed individuals they knew or should have known were excluded from the Medicare or Medicaid programs. Other settlements came about as a result of disclosing instances of upcoding, billing for services provided by unlicensed individuals, or submitting claims for incident-to services not covered by Medicare. In one instance, a durable medical equipment company was required to pay $7.1 million for dispensing equipment from unenrolled locations while representing the services were being performed at a different enrolled location.

Other than alleviating the anxiety inherent in knowing that a possible government enforcement action could strike at any time, the self-disclosure process has several notable benefits for providers which avail themselves of it. One key benefit is that penalty calculations in SDP cases tend to be lower than in other government enforcement actions. Although there is no firm standard, the government’s general practice is to require damages in a minimum amount of 1.5 times the actual damage rate (i.e. the amount of the improper claims), whereas the False Claims Act and Civil Monetary Penalties Law can authorize up to triple damages in other cases. Providers who self-disclose also enjoy a presumption by OIG that they will not be required to enter into a Corporate Integrity Agreement, and a suspension of the provider’s requirement to report and return overpayments under CMS regulations until a settlement of the disclosed matter is reached.

For 2021, there are several notable updates to the SDP. First, as mentioned, is the name, which has been amended to “Health Care Fraud Self-Disclosure Protocol” (previously the “Provider Self Disclosure Protocol”), presumably to clarify that the protocol applies to any “person,” rather than merely providers. OIG also published updated statistics, showing that between 1998 and 2020, OIG resolved over 2,200 disclosures, resulting in over $870 million in recoveries to the federal healthcare programs.

To focus its enforcement efforts and more efficiently allocate OIG’s resources, the 2021 updates also provide for higher minimum settlement amounts required to resolve matters which come about as a result of SDP disclosures. Previously, resolutions under the SPD required minimum settlements of $50,000 for disclosed violations of the Anti-Kickback Statute, and $10,000 for all other violations. Under the 2021 updates, the minimum settlements for both have been doubled, to $100,000 and $20,000, respectively.

The 2021 updates also brought several logistical changes to the SDP process. Whereas previously the self-disclosing party could submit an SDP either by mail or through OIG’s online portal, all disclosures must now be sent through the portal. There is also a new requirement that the self-disclosing party must identify the estimated damages to each federal healthcare program as well as the sum of all estimated damages. The updates further clarify additional requirements for use of the SDP for entities subject to existing Corporate Integrity Agreements, and require the disclosing party to state that it is subject to a CIA, and send a copy to the party’s assigned OIG monitor.

Finally, the 2021 updates also contain minor changes to the provision regarding OIG’s coordination with the United States Department of Justice (DOJ) in civil and criminal matters. Unfortunately, although the SDP can be a useful mechanism for more favorably resolving civil matters involving false claims, and while OIG may advocate for leniency from DOJ based on a party’s self-disclosure, use of the SDP does not preclude a related civil investigation by DOJ unless DOJ chooses to participate in any resulting settlement. This has not changed with the 2021 update. However, the language of the SDP with respect to criminal matters has been amended to reflect that OIG no longer “encourages” parties to disclose potential criminal conduct, but that OIG will no longer advocate for a benefit in any prospective criminal matter based on the disclosing party’s use of the SDP. In other words, OIG seems committed to leaving criminal matters to the DOJ, and a provider cannot rely on its use of the SDP to mitigate the consequences of any potential criminal conduct.

A full copy of the updated SDP may be found on OIG’s website here.

The healthcare attorneys at Weiss Zarett routinely assists physicians in connection with OIG self-disclosure protocols, audits and investigations by governmental agencies and third-party payors, as well as investigations by state and federal law enforcement agencies such as DOJ and New York Medicaid Fraud Control Unit. If you have any questions or require assistance with such a matter, please feel free to reach out to Mathew J. Levy, Esq., at 516-929-3320 or email: mlevy@weisszarett.com or Seth A. Nadel, Esq. at 516-926-3308 or email: snadel@weisszarett.com .

Weiss Zarett Brofman Sonnenklar & Levy, P.C. is a Long Island law firm providing a wide array of legal services to the members of the health care industry, including corporate and transactional matters, civil and administrative litigation, healthcare regulatory issues, bankruptcy and creditors’ rights, and commercial real estate transactions.

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