Remarks of Deputy Attorney General Eric H. Holder, Jr.
"Combating Health Care Fraud & Abuse: Technologies and
Approaches for the 21st Century"
June 26, 2000
Thank you very much. Approximately one year ago, the Department of Justice and the Health Care Financing Administration recognized the need to significantly enhance the use of technology to improve our collaborative fraud fighting efforts. As the Internet and other forms of information technology transform virtually every aspect of our society - from how we transact business, to how we keep in touch with family and friends, and countless other ways - it is obvious that we should - indeed, we must - harness these technologies to bolster one of government's most important responsibilities - combating fraud and other illegal activity.
And nowhere is this more important than in the area of health care fraud. Every year, we lose billions of dollars to fraud in federal, state and private-sector health care programs. Every dollar we lose to fraud and abuse is a dollar that is not available to provide home care to seniors, to treat HIV and AIDS, to immunize children, and to discover new treatments for cancer and other diseases. And some fraud schemes pose a direct threat to the health and safety of patients. All too often, we have encountered fraud schemes where health care professionals bill for services that are needed but never provided. In other instances, we have prosecuted health care providers who have subjected patients to unnecessary medical procedures, including unnecessary surgical procedures, risking the lives and health of the patients just to make an extra buck. These examples should remind everyone in this room of the importance of your efforts to combat health care fraud and abuse, and the benefits the public receives as a result of your hard work and dedication.
DOJ's Commitment to Health Care Fraud and Recent Accomplishments
Today's conference is an important step in our overall effort to combat health care fraud and abuse. As many of you know, health care fraud is one of the Justice Department's top priorities. Even a brief summary of our accomplishments over the past several years demonstrates our resolve to vigorously investigative and prosecute health care fraud and, just as important, to work with honest and law abiding providers to prevent fraud and abuse in the first place. From 1993 to 1999:
- criminal health care fraud convictions quadrupled ( from 96 to nearly 400);
- civil health care fraud case filings tripled (from 29 to 91) and civil health care fraud investigations more than quadrupled (from 500 to 2,278); and
- The number of federal prosecutors devoted to health care fraud has increased five-fold (from 52 to 287), while the number of FBI agents working health care fraud cases has tripled (from 147 to 471).
Since 1996, with the enactment of HIPAA and the establishment of a strong partnership between the Department of Justice, HCFA, and the HHS Office of Inspector General, we have recovered approximately $2.5 billion as a result of criminal fines, restitution, and civil recoveries, the vast majority of which has been returned to the Medicare Trust Fund -- funds that are used to provide vitally needed health services to elderly and disabled Americans.
Perhaps most importantly, improper payments in the Medicare program have been cut by more than 40% - from $23 billion in 1996 to $13.5 billion in 1999.
Through our agencies' partnership and vigorous enforcement and prevention efforts, we have saved the taxpayers billions of dollars.
Using Information Technologies to Combat Health Care Fraud
While we are proud of our accomplishments to date, we are still losing far too many taxpayer dollars to fraud and abuse in the health care system. And today's conference is an important step in our efforts. Recently, innovative law enforcement agencies have harnessed information technologies to bolster their health care fraud investigations and prosecutions. A recent case (the largest health care fraud case in the Justice Department's history) dramatically illustrates just how technology can serve a key role - in fact, an indispensable role - in helping our efforts to combat health care fraud and abuse.
This case came to the Justice Department in the form of a whistleblower complaint under the False Claims Act. The U.S. Attorney's Office in Boston, which had the lead on this case, took several innovative measures to employ technology for verifying the whistleblower's allegations and analyzing medical claims data to map out and focus their investigative strategy. By fully employing technology and data analysis on the front end of an investigation, the Boston team developed evidence of a far-reaching fraud scheme directed by certain company officials that ultimately led to criminal convictions and a criminal fine, as well as a civil settlement. Among these technology-centered, innovative measures were:
- obtaining an outside data consultant to review, extract and analyze medical claims data;
- developing a methodology for linking more than 200 million electronic records of Part A, Part B, and DME claims from nine years of HCFA data to analyze a complete claims history for each beneficiary; and
- developing a randomly drawn 200 beneficiary sample designed to withstand trial scrutiny.
As a result, in January of this year, the largest provider of dialysis services in the United States agreed to pay $486 million in criminal fines and in civil recoveries to resolve allegations that the company engaged in a wide-ranging conspiracy to defraud Medicare and other federal health care programs. Including savings to the government from denied claims for which NMC withdrew its administrative appeals for payment as a result of the case, the total sum of financial recoveries and savings to the government was approximately $618 million.
The success of the NMC case, based largely on strategic use of technology and claims data analysis, also involved extraordinary collaboration and teamwork among numerous law enforcement and health care agencies which resulted in a global settlement. These agencies included: the U.S. Attorney's Offices in Boston and Miami, with assistance from the U.S. Attorney's Offices in the District of Columbia, Philadelphia and San Francisco; the Department of Justice's Civil Division; the HHS Office of Inspector General; investigators and auditors from the FBI and Defense Criminal Investigative Service, and many other federal and state agencies.
I am hopeful that this conference, and subsequent efforts following from tomorrow afternoon's Working Session, will help our agencies improve our use of technology to fight fraud and abuse in the future.
Immediate and Emerging Priority Areas
There are several immediate and emerging priorities where effective use of new technologies and strong interagency partnerships can bolster our enforcement and prevention efforts. These include: (1) fraud, abuse and neglect in nursing home and long-term care facilities; (2) fraud and abuse in the pharmaceutical industry; and (3) the exploding growth of the Internet health care industry. Each of these developments presents new challenges for program integrity and fraud and abuse. Therefore, we must employ technology to help us protect Medicare beneficiaries from poor quality care and the Medicare trust fund from new fraud and abuse schemes that may arise in these areas.
Nursing Homes and Residential Care Facilities
With baby boomers aging and medical advances allowing us to live longer, the elderly population of this country is burgeoning. Today, about 34 million of this country's citizens are over 65. Twenty-five years from now, that number will almost double. It is difficult to overestimate the potential impact of this change on our society. One likely consequence is that there will be a dramatic increase in the demand for quality long-term care in nursing homes and assisted living facilities. It is imperative that we ensure that elderly Americans relying on such facilities receive high-quality care.
Compounding this challenge, recent studies have found that seriously inadequate care persists at far too many of our nursing homes. Residents suffer from unnecessary pressure sores, malnutrition, and accidents. As many of you know, many residents cannot defend themselves from violence or other inappropriate contact. They cannot leave to find a new nursing home. Often times, they do not have the physical capacity to give voice to their pain or suffering. The high price of bad care is paid in human suffering and lost public resources. While care is improving in some areas, the current level of abuse and neglect in American's nursing homes is simply unacceptable.
In spite of existing quality of care problems and a growing elderly population, there are reasons for optimism. President Clinton has made quality care for the elderly a priority. Secretary Shalala has implemented an extensive effort to strengthen the safeguards and care in nursing homes. HCFA is using technology to improve the monitoring of patient health and safety.
Furthermore, the Departments of Justice and Health and Human Services, along with our state partners, cosponsored a national Nursing Home Conference in October 1998, much like this one being held today. At that initial conference, we worked together to draw up an ambitious and far-reaching plan to protect the vulnerable residents of nursing homes and other residential care facilities. Since that time, the Justice Department has implemented many of the specific items from the initial plan developed at the October 1998 conference.
- In February of 1999, the Office for Victims of Crime convened a focus group of experts to gain their insight on how to improve our efforts to protect nursing home residents against fraud, abuse and neglect. The group developed a number of promising recommendations, including a call for stepped-up enforcement, coordination and training.
- Since last July, the Department has hosted four regional nursing home fraud and abuse conferences to provide training to nearly 1,000 federal, state and local officials. Participants at those conferences, in addition to DOJ and FBI, included our partners in the HHS/OIG and HCFA, the VA, as well as the Medicaid Fraud Control Units, the state Attorneys General offices, local District Attorneys and law enforcement, state regulatory agencies, medical experts and others.
- As you all know, any successful effort requires a multi-disciplinary response. In any given jurisdiction, as many as 25 different law enforcement, regulatory, oversight, advocacy, medical and emergency entities have responsibility in these matters. Historically, there has been too little information sharing and cooperation among these agencies.
- And just two weeks ago, the Department of Justice sponsored a national meeting of the State Working Groups formed at the four regional conferences. Attorney General Reno spoke to more than 150 representatives assembled in Washington from 42 states who are serving on State Working Groups participating in the Department's Nursing Home Initiative.
Perhaps the most important result of the October 1998 National Nursing Home Conference was to create an infrastructure for broad-based coordination where the real work is done -- at the state and grass roots level. We have a similar objective here today - to create and enhance the infrastructure for broad-based coordination and collaboration by you and your colleagues in using technology to combat and prevent health care fraud and abuse. I am grateful that more than 300 representatives from State and Federal agencies as well as Medicare and Medicaid contractors from all over the country are participating in this conference. Together, we can bridge organizational gaps between contractors and health care program agencies on the front lines who see the problems first hand, and those of us in law enforcement who are charged with investigating and enforcing laws intended to prevent those problems.
Medicare Prescription Drug Benefit
Fraud and abuse in the pharmaceutical industry is also a growing concern to the Justice Department. And the need for effective anti-fraud and program integrity efforts will become even more important should Congress enact a comprehensive prescription drug benefit for Medicare beneficiaries, as President Clinton has urged Congress to do. Currently, one-third of Medicare beneficiaries have no insurance protection at all for their drug expenditures. For those beneficiaries with coverage, it is not always adequate, and it is expensive when people have to pay for it themselves.
The Department of Justice has begun to consider possible program integrity issues that may emerge from any Medicare prescription drug benefit. I believe this is just the type of area - a new program, where we have a chance to develop effective program safeguards at the outset - where technology and electronic fraud detection tools could have a major impact.
Impact of the Internet on Health Care
The Department of Justice also has begun to work with FBI, HCFA, the HHS/OIG, and others to assess the potential for fraud and abuse against federal health care programs posed by the rapidly growing Internet health care industry. Of course, the chief area where we have targeted these efforts is the illegal online sale of drugs and medical products. In the past year, the Department of Justice, working with its investigative partners at DEA, FBI, and FDA, has filed several cases involving sales of drugs on the Internet. In addition to the cases we have filed in court, in the past year the Department has opened approximately 30 cases involving the sale of drugs on the Internet, of which approximately 20 involve the sale of prescription drugs by online pharmacies. Those 20 investigations encompass at least 60 different websites.
Because the I-health industry is still relatively small, and has focused primarily on the business-to-consumer space, we have not yet seen online health care scams against Medicare and Medicaid. If, however, websites begin to bill private or public health care programs or insurers for a "doctor's" advice or for the price of the drug or product itself, and if false representations are made to the insurer to obtain payment, such conduct could run afoul of federal criminal and civil anti-fraud laws.
Therefore, the Department anticipates a significant increase in Internet health care scams in the next few years -- if for no other reason than that the same attributes that make the Internet a revolutionary means of communication also make it a useful tool for fraud artists. At least one market analyst expects the business-to-business side of the I-health industry to reach $370 billion by 2004. Given that the federal government pays for a substantial percentage of all health care goods and services consumed in the United States, I think it's fair to assume that some of the business-to-business market eventually will involve goods and services reimbursed by federal health care programs. Therefore, we should take steps now - before significant taxpayer dollars are lost - to identify any vulnerabilities and to take steps to boost program safeguards without stifling the growth of this promising industry. In doing so, we should be diligent to explore all possible ways in which technology can help us in these efforts.
My Challenge to Each Participant Attending This Conference
I want to conclude by challenging every person attending this conference to be an active participant rather than a passive observer in the sessions that follow:
- share lessons learned from your experiences in the field;
- exchange ideas about your successes and setbacks using data analysis and technology;
- discuss the problems you have encountered and overcome, as well as the current challenges you face;
- and, most importantly, propose solutions to these challenges.
Following this conference, representatives from each regional Working Session discussion group and agency representatives who planned this conference will prepare a report to be submitted to HCFA and the Department of Justice with recommendations suggesting how we can better harness current and future technologies to combat health care fraud and abuse. I challenge each participant in this conference to seize this opportunity to map out how technology and improved interagency cooperation can enhance our joint health care program integrity efforts.
I thank you for the opportunity to speak to you this morning, and wish you success as you continue with the Conference.