UNITED STATES DEPARTMENT OF JUSTICE
ADDRESS BY ATTORNEY-GENERAL JANET RENO
American Hospital Association
Annual Membership Meeting
Monday, February 2, 1998
P R O C E E D I N G S
ATTORNEY-GENERAL RENO: Good afternoon. I thank you for the opportunity to speak
with you today about our efforts to deal with health care fraud in this country and what we can do
Yes, whether it be Baptist Hospital which, unfortunately, has a picture of me as a kid on a
pony in its lobby because the pony came from the stable where Baptist Hospital now stands or what
I saw in Minneapolis or what I have seen in so many hospitals across this country.
I just appreciate all that you do for your individual patients, for your community, and to try
to improve health care for all Americans.
I came to the Justice Department dedicated to one effort at enforcement: to try to reach out
to those people who wanted to comply with the law and do everything I could to work with them to
make the law understood, to arrive at common terms, to arrive at common understandings of what
At the same time, I wanted to be prepared for those who would thumb their nose at the law
to take vigorous enforcement action because I found, no matter what the profession, no matter what
the industry or business, most people wanted to see that the law was complied with, they wanted to
do the right thing, and they appreciated it when wrongdoers were brought to justice.
I know from my mail how strongly some of you feel, but I want to tell you here and now:I
am dedicated to working with you in every way possible to make sure that the law is not abused, that
we work together for our common aim.
Health care fraud is one of my highest priorities, but the strategy involves two components,
first of all, strong civil and criminal enforcement which has been facilitated by recent legislative
changes, and, second and equally important, is what I alluded to plus more, to reach out to work with
the industry but to understand from cases that we see occur what can be done to prevent the fraud
in the future. What check and balance was missing? What can the industry learn? What can we
learn that will help prevent that fraud for the future?
We want to encourage providers to adopt compliance programs under which they can accept
responsibility for policing their own activities. I know there are questions about how that should be
done. Let's work together to do it. Let's work together in open, candid communication that can
make a difference.
The reason we should all be in this together is that health care fraud cheats beneficiaries and
taxpayers out of billions of dollars every single year.
These fraudulent schemes put billions of dollars in the pockets of individuals and providers
who cheat the system while at the same time we can't pay for lifesaving drugs to fight AIDS or to
provide some frequent screenings to detect and prevent cancer and other life-threatening illnesses.
While most health care providers are law-abiding, the Inspector General of the Department
of Health and Human Services recently found that the Medicare Program alone has overpaid
hospitals, doctors and other health care providers by as much as twenty- three billion dollars and that
forty percent of Medicare payments made to home health care providers were improper.
Now, when I saw that figure, I said, "Does all that come from fraud"? And I want to make
clear what the answer is. It's not all fraud; it's not outright fraud.
But I think we've got to understand what the dimensions are. I don't want to make reference
to billions of dollars worth of losses. I want to try to work with you to define what the range of the
problem is so that we can devote sufficient resources to taking effective action against it.
Whatever the case, I don't think there's anybody in this room that would disagree with the
fact that we're losing millions of dollars each year to fraud. The President and the Congress have
made fighting it a national priority, and, working together, I think we can do something about it.
We need to respond aggressively not only to cover taxpayer funds that have been to
squandered and to penalize and deter those cheating the system but, also, fraud undermines the
public's confidence in the integrity of the Medicare and Medicaid Programs.
These programs provide such essential medical services to millions of elderly, poor, and
disabled Americans. To ensure the continued vitality of these programs in the future, we must assure
that these programs are not rife with fraud and abuse.
But dollars alone do not tell the full story about the impact of health care fraud on the
American people. Unscrupulous practices done solely to wring more money out of the health care
system can pose a direct threat to the lives and the health of patients.
Let me just share a few examples with you from cases the Department has recently initiated.
In one, patients were abused and received seriously inadequate care at psychiatric centers for youth.
A psychiatrist and his corporation employed unlicensed therapists to provide mental health services
to patients but billed the government for over $5.2 million as though the doctor had performed the
A San Diego ophthalmologist stole $16 million from Medicare by performing medically
unnecessary surgeries. This doctor often saw more than 150 patients a day and on some days
performed 45 surgeries a day with each patient receiving six separate procedures unrelated to any
We cannot allow financial inducements to corrupt the judgment of professional medical
providers. Basic medical decisions, whether and where to hospitalize a patients, what lab tests to
order, what drugs to prescribe, and how long to keep a patient in a hospital must be based on what
is best for the patient's health, not on what is best for a doctor's or a hospital's bottom line.
Federal anti-kickback statutes allow many schemes that violate this common sense rule, and
the Department's policy is to rigorously pursue these cases.
Recognizing that fraud is all too pervasive in the health care system, the President and
Congress provided substantial new resources in the Kassebaum-Kennedy bill. The results of our
efforts demonstrate how widespread the fraud problem is and how much more we must do.
Since 1992, criminal health care fraud prosecutions and convictions have increased by over
400 percent. Last year, more than 2,700 individuals and businesses were excluded from federal
health care programs, a 93-percent increase over 1996.
Last year we recovered more than $1 billion in criminal fines, civil settlements, and
administrative penalties. Nine hundred sixty-eight million dollars of the funds recovered were
returned to the Medicare Trust Fund. Money that would have lined the pockets of scam artists is
now going, instead, to preserve the Medicare Trust Fund and to improve the health care for millions
As I have noted, we have established a balanced program that encompasses the two key
components of enforcement and prevention. Our enforcement policy is aimed at preventing,
detecting, investigating, prosecuting, and punishing health care fraud.
We will use all the tools at our disposal, criminal, civil and administrative, to root out health
care fraud by deterring fraudulent conduct, by punishing offenders, by recovering funds to
compensate the government's losses, excluding providers from federal health care programs,
stopping ongoing fraud before additional harm can be inflicted on the health care system, and
requiring the adoption of corporate compliance programs to prevent future crimes.
We can and will use criminal prosecution to punish knowing or intentional schemes to
defraud Medicare, Medicaid or private health care programs or conduct that runs afoul of the
criminal anti-kickback statute.
Just this past week, criminal charges were filed as a result of a three-year undercover
investigation code-named "Operation Overdraw." Through an undercover medical business, the
investigation discovered that dozens of health care entities in Connecticut and New Jersey, such as
clinical laboratories and suppliers of durable medical equipment, were engaging in an extensive
fraudulent activity including kick-back schemes, "upcoding" of bills submitted to Medicare and
Medicaid, mail fraud, and federal tax violations.
The use of civil laws is a critical component of our enforcement policy. The Department of
Justice will bring civil enforcement actions, including actions under the False Claims Act, where the
provider knew or acted in reckless disregard or deliberate ignorance of the fact that false and
fraudulent bills were submitted to Medicare, Medicaid, or other federal health care programs where
the provider knew or acted in reckless disregard or deliberate ignorance of the fact that false and
fraudulent bills were submitted.
I stress that language because I know this issue is of great interest to the AHA, and I want
to make the Department's policy perfectly clear. It is not the policy of the Department of Justice to
punish honest billing mistakes, nor do we prosecute doctors or hospitals for mere negligence. Under
the False Claims Act, such honest mistakes or simple negligence do not amount to a false claim.
There is always an open door at the United States Attorney's Offices and at Main Justice.
If one of your members sincerely believes that it is being pursued for a simple mistake, the attorney
for that hospital should contact the government's attorney and set up a meeting to explain the
hospital's point of view.
I want to make sure that we listen carefully and thoughtfully. I don't want to be a part of an
institution bringing unjust or unsubstantiated cases any more than you want to have to defend them.
I want to make sure that we pursue the law the right way.
Now, some people, when I talk to them, say, "Well, these are just words and she seems like
a nice person and she's got this big institution and she can't make sure that it follows that principle."
I have found that the institution itself is dedicated to following that principle, but I follow this issue
regularly. I have what's called an "8:30 Get-Back List," and this issue is now prominent on that
get-back list. I want to make sure that we are responsive on this issue.
But where there is a reckless disregard, where people have gone beyond simple negligence,
I'm going to use the law but use it, again, the right way.
What I would ask of you, If you have problems, if you feel like you have not gotten a hearing
in the U.S. Attorney's office or at Main Justice, let me know, let us follow through. There reaches
a point where we may find ourselves in respectful disagreement, but we will talk this out and see if
we can't reach a common understanding when the facts and the law justify it.
In the cases that we are pursuing, there is substantial evidence that the providers involved,
including hospitals, acted with knowledge or in reckless disregard of the fact that the bills they
submitted were false.
In fact, in some cases, we are seeing clear patterns of over-billing frequently coupled with
inadequate internal procedures to ensure that the claims submitted to Medicare are true and accurate.
Simply put, these are not cases where we are seeking to punish someone for honest billing mistakes.
We believe and the law requires that all providers, including hospitals, must take
responsibility for ensuring the accuracy of the bills they submit for reimbursement. We will not
apologize for using the False Claims Act to help accomplish that goal.
More recently, the Department also has used civil actions under the False Claim Act to
redress the provision of inadequate care to patients of nursing homes.
Just within the last two weeks, we filed a civil False Claims Act complaint against three
Pennsylvania nursing homes and their corporate owners for provision of inadequate care to their
patients. Five patients died as a result of the inadequate provision of medical care such as nutrition,
wound care, diabetes management, as well as placing one patient, who was unable to speak, in a
scalding tub of 138-degree water.
The owner of the nursing homes has agreed to pay the United States $500,000 and to
implement a comprehensive compliance program to settle these allegations.
As a comment, one of the areas that I would like to work with you on in these months and
years ahead is how we address the problem of elderly abuse.
So many members here in this room have led the way, through appropriate pediatric trauma
facilities, to let us know more about child abuse and how to diagnose it and how to prevent it and
how to treat it.
We have, with increased life expectancy in this country, a special responsibility to explore
elderly abuse as well, whether it be in the home, an adult congregate living facility, or other
institution. I think we can do so much in this area, for certainly modern medicine has given us a
whole new understanding of how we can prolong life and make it a good life if we do it the right
The Department also works closely with the Department of Health and Human Services to
pursue administrative sanctions where appropriate. There are a number of mandatory and
discretionary exclusion authorities available to regress abusive and fraudulent conduct in federal
health care programs. We provide the Department of Health and Human Services as much
information as we can for its use in these proceedings.
The Kassebaum-Kennedy legislation also provided another important tool, the adverse action
databank. This databank will be an important source of information concerning the identities of
persons and entities against whom adverse actions are taken and their known affiliates.
The Department of Health and Human Services will disclose final adverse actions upon
request to federal, state, and state government agencies and health plans.
The Department of Health and Human Services also will establish regulations to ensure the
accuracy of information in the database and to protect the privacy of patients' records. I think this
is so important, and, should you have suggestions as to how we can improve accuracy and take
appropriate precautions to protect privacy, I welcome them.
I'm very proud of the Department's enforcement efforts, but equally important to our
enforcement efforts are our efforts to prevent health care fraud from occurring in the first place.
In this area, we have a two-pronged approach, first, fostering efforts with the health care
industry to develop effective compliance programs and providing guidance concerning liability
under the anti-kickback statute where appropriate and, secondly, empowering patients to be partners
in our efforts to root out fraud and abuse.
We participated in the recently-concluded negotiated rulemaking to establish safe harbors
under the anti-kickback statute prompted by a concern that a literal application of the anti-kickback
statute might prohibit otherwise beneficial managed care arrangements.
Congress directed the Department of Health and Human Services in conjunction with the
Department of Justice and others to provide appropriate safe harbors for such beneficial
The Committee has proposed two safe harbors to protect such beneficial managed care
arrangements while ensuring that the proposed safe harbors do not authorize business arrangements
which provide an inappropriate financial incentive for referrals.
As I am sure you all know, the Kassebaum-Kennedy legislation also established an advisory
opinion process to provide guidance on whether specific transactions violate the anti-kickback or
civil monetary penalty statute.
Under this process, providers and others can request a formal opinion from the Department
of Health and Human Services as to whether certain conduct or business arrangements violate the
statute or fall within a regulatory safe harbor. This is another avenue providers can use to ensure that
they are following the law, and to date a number of advisory opinions have been issued.
I would again ask you, if you don't think that these advisory opinions are helpful, if you think
we can improve on them, we would always welcome your suggestions as to what can be done to
address the issue at hand and yet, at the same time, whenever appropriate, to better inform the
industry and the community.
However, probably the most effective measure to prevent health care fraud is for hospitals
and providers to adopt compliance and voluntary disclosure programs. I know that the AHA has
undertaken a number of steps to work with the hospital industry to develop and implement effective
compliance programs, and I think that this is a very positive step.
We have been working closely with the Department of Health and Human Services in its
development of model compliance guidance for clinical laboratories and the soon-to-be-released
hospital compliance plan, and I want to commend the HHS Inspector General, June Gibbs-Brown,
for her efforts in this area. We look forward to working with her office on the next model
compliance plans, which will concern HMOs and home health agencies.
Our emphasis on corporate compliance plans represents a fundamentally different approach
from traditional law enforcement. Rather than the FBI and the Inspector General policing
corporations, they would police themselves. Rather than an adversarial relationship between law
enforcement and corporations, there would be a relationship of cooperation and mutual support.
Through corporate self-governance, business leaders will build a corporate culture
emphasizing integrity in which ethical conduct goes hand in hand with profitability and becomes a
way of doing business.
So many of your members already have built that corporate culture which emphasizes
integrity, which emphasizes the finest service to the patient, which emphasizes service to the
community, and I would like to see that spread throughout the industry.
Certainly, compliance programs give companies a leg up in dealing with prosecutors.
Prosecutors have wide discretion to consider mitigating evidence both at the charging stage, when
the prosecutor decides whom to charge and what charges to bring and at sentencing, when the court
An effective compliance program can increase the company's chances of obtaining a
satisfactory civil resolution as opposed to a criminal case with possible forfeitures and exclusion.
An effective compliance program showing that the company has done its best to act responsibly to
prevent wrongful activity and to root it out when it occurs is perhaps the best way for a corporation
to protect itself from the dire consequences of indictment and conviction.
Even if the prosecutor chooses to bring criminal charges, the United States sentencing
guidelines for corporations convicted of crimes provide another compelling reason to adopt effective
Substantial reductions in criminal fines can be obtained by companies that have an effective
program to prevent and detect violations of the law and fully and responsibly cooperate with the
government by voluntarily disclosing employer misconduct.
I want to emphasize that prosecutors will examine compliance programs carefully to satisfy
themselves that the programs really have teeth. We will not be fooled by paper policies and
programs. We will want to interview employees and check to be sure that the programs are real.
Our experience has shown that some programs are not specific or strong enough to have any
chance of working because they lack the backing of top management. Without the commitment of
top management, a corporate compliance program is literally worthless.
The ultimate question the prosecutor has to answer in each case is does the compliance plan
work. I want to emphasize one other thing: when I speak of corporate compliance, I mean not only
the existence of a program to prevent fraud but also one that investigates it and reports it.
Making a voluntary disclosure should be part of a business executive's or corporate counsel's
calculus when he discovers that one or more of his employees are engaged in fraudulent conduct.
When a corporation discloses wrongdoing, makes full restitution, and takes swift disciplinary
action against the employees engaged in the misconduct, the federal interest in prosecuting the
corporation may be greatly reduced, and the Department will view the corporation more favorably.
On the other hand, the corporation that learns of criminal activity and fails to report it or fails
to cooperate fully with the government cannot expect to obtain the same benefits.
An additional benefit from voluntary disclosure is that the False Claims Act provides an
incentive for companies to voluntarily disclose employee misconduct in that a court has discretion
under the act in certain circumstances to impose as low as double rather than treble damages if a
company reports employee wrongdoing within 30 days.
As I mentioned, one area in which we are looking to do more outreach education is outreach
in education of patients. A recent survey commissioned and released by the American Association
of Retired Persons revealed that an overwhelming majority of Americans believe fraud is increasing
in our health care system, and they are willing to personally assist in the fight against fraud and
However, the public is confused about how to report suspected fraud and abuse and is
unaware of our efforts to combat health care fraud. We are exploring ways in which we can better
educate the public about health care fraud, the government's enforcement efforts to combat fraud,
and how to report instances of suspected fraud.
I place a high priority on this kind of outreach, not only in connection with health care fraud
but in other areas such as telemarketing fraud and consumer fraud.
We want to educate the consumers of health care and to enlist them as our first line of
defense. As we empower citizens with such information concerning health care fraud, we'd also
notify them about the Department of Health and Human Services Fraud Hotline, 1-800-HHS-TIPS.
The President has also proposed legislation that would require information on how to report
suspected fraud and abuse included on every explanation of medical benefits that a patient receives
from the Medicare Program. In this way, patients can assist our efforts to detect and prevent fraud
and abuse at the earliest possible stage in order to minimize the losses to the government.
But I would also like to work with you and work with others concerned about this issue to
look at the cases that we've prosecuted, the cases in which we have secured a conviction, and see just
what caused the problem in the first place, how it was permitted to occur, how it happened because
there was not that check and balance, there was not that process in place, the auditor didn't follow-up
in the right way, what we can do together to install systems of checks and balances and other
processes and procedures that can ensure the full and honest delivery of health care.
As I indicated, I have watched a large number of your members as they served their patients
with diligence, dedication, and great professionalism. I have watched as you've serve communities.
I have watched as you have worked with government to try to address the problem of health care
You do such much for so many. You represent what is best about those who deliver health
I want to work with you so that the concern reflected by your being here today can be spread
across this country, and together we can develop for all who deliver health care that culture, that
thought, that ethic that we're going to do it in the best, most honest way possible and in a way that
is in the best interest of the people we serve.
Thank you so much for this opportunity.
(Whereupon, at approximately 3:30 p.m., the PROCEEDINGS were adjourned.)
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