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Acting Assistant Attorney General Kenneth A. Blanco of the Criminal Division Speaks at the American Bar Association 27th Annual Institute on Health Care Fraud


Fort Lauderdale, FL
United States

Good morning, and many thanks for that very kind introduction. Thanks for having me here today. Thank you for the invitation to address you today, and congratulations for hosting the 27th Annual American Bar Association National Institute on Health Care Fraud.


Before I begin, I want to say a couple of things. One, when I take the time to give a speech, I want to make sure that I am clear about what I say and the position being taken. Two, I want to make sure also that I address any current matter that I think needs to be clarified or addressed.


Given that, let me be clear: health care fraud is a priority for the Department of Justice. Attorney General Sessions feels very strongly about this. I can tell you that he has expressed this to me personally. The investigation and prosecution of health care fraud will continue; the department will be vigorous in its pursuit of those who violate the law in this area.

For so many reasons, health care fraud is particularly egregious, and frankly, in my view, despicable. Greed resulting in the depravation of medical care for those in need is cruelty. Many people focus on the money stolen, which is important. I focus on the impact it has on those in need, and on our great nation.

People typically seek medical care when they are most vulnerable, when they are in need, sometimes helpless. Sometimes it is not just for them personally. Even more heart-wrenching, it is for their children or an elderly parent – people who they feel they need to protect either through obligation, duty, morality or just plain love. Health care fraud deprives many people of access to medical care, even the most basic forms of care, because fraud increases the costs for all of us, and shuts out those who are the most needy or those in society who are just making it; and even those who are doing well but could be crippled financially by a medical situation requiring extensive care.


Health care fraud, and the resulting increase in costs, robs our nation and all of us of our right as citizens to determine how we as a nation choose to structure our society as it relates to how we care for our people.


These points I just shared with you over the last several minutes serve as the lens from which I view health care fraud.


As we all know, there is a lot of money in the health care industry. The Centers for Medicare & Medicaid Services (CMS) estimate that the total health care spending in the United States in 2015 reached $3.2 trillion, or 17.8 percent of the gross domestic product. That is eye-popping in my view.

As a general matter, and unfortunately, we see time and time again that industries with large amounts of money are susceptible to high levels of fraud. Health care is no exception. Under their own standards, health care professionals have a fiduciary duty to their patients – a duty that is shattered when those professionals exploit patients’ vulnerabilities for financial gain. Certainly, there are various checks in place to disallow health care fraud on the front end, some ethical and some legal. Unfortunately, however, there are many outliers and others in the health care industry who engage in fraudulent schemes.


We at the Department of Justice’s Criminal Division are focused on conduct that defrauds the U.S. government and its health care programs – programs that aim to provide access to care for those who qualify for them. The amount of loss to the American tax payer per year due to healthcare fraud is in the billions. Some estimates put the number close to $100 billion per year. In the wake of an alarming rate of fraud in the health care sector, and growing complexity and seriousness of those fraudulent schemes, the Justice Department has been bringing some of the most impactful health care fraud cases yet.


My remarks today focus on what the Justice Department is doing in this area and how our efforts are making a difference. To that end, I will begin by providing an overview of our Health Care Fraud Unit and explain the Strike Force model we employ. Then I will explain our data-driven approach. Finally, I will highlight some of our recent prosecutions.


The Health Care Fraud Unit is housed within the Fraud Section of the Criminal Division of the Department of Justice. It employs about 56 prosecutors focused solely on prosecuting complex health care fraud cases throughout the United States. Their work is both complex and sophisticated, identifying and responding to emerging fraud trends across the country, from large corporate providers to smaller scale medical practices and health care providers.


Since 2007, the Health Care Fraud Unit has employed the Medicare Fraud Strike Forces model – the first of which began 30 miles south of here in Miami. Health Care Fraud Unit attorneys work in Washington, D.C., and in a total of nine Medicare Fraud Strike Forces across the country. These “hot spot” cities, or ones with high levels of billing fraud, include: Miami, Tampa, Baton Rouge, New Orleans, Chicago, Detroit, Houston, Brooklyn and Los Angeles. As such, they are formed with a cross-agency collaborative approach made up of investigators and prosecutors that focus on the worst offenders engaged in fraud in the highest intensity regions. This model brings together the prosecutorial, investigative and analytical resources of many Department of Justice components including the Criminal Division, the U.S. Attorney’s Offices, the FBI, as well as other agencies such as the Health and Human Services Office of the Inspector General (HHS-OIG), CMS and state and local law enforcement partners.


The list of cities keeps growing, and it will continue to grow, particularly given that we will begin focusing even more attention to other current issues plaguing our country, such as the opioid abuse epidemic. We are always looking for new and effective ways to hold health care professionals and institutions accountable when they willfully provide opioids to addicts who do not actually require such medication, or drug dealers and traffickers who illegally sell the drugs.


Since its inception in March 2007, the Medicare Fraud Strike Force has charged nearly 3,200 defendants who have collectively billed the Medicare program for more than $11 billion. To give you a sense of how this looks during a shorter timeframe: between the beginning of 2016 and February of this year, the Medicare Strike Force program, the Health Care Fraud Unit, and partner U.S. Attorney’s Offices, charged 482 individuals with a total loss amount of nearly $2.8 billion. During this period, 180 defendants were convicted, and the Medicare Fraud Strike Force reached resolutions totaling $512 million paid to U.S. and state authorities. These resolutions vary in amounts from thousands of dollars to one corporate resolution resulting in a U.S. penalty of $144 million.


I cannot overemphasize the importance of the cooperative partnerships between the Strike Forces, U.S. Attorney’s Offices, and several investigative agencies. Let me give you an example of the kind of results we have achieved by working hand-in-hand. Last year, the Criminal Division organized the largest national health care fraud takedown in history, both in terms of individuals charged and the loss amount. This nationwide sweep was led by the Medicare Fraud Strike Force with the collaboration of 36 U.S. Attorney’s Offices and the largest number ever of participating Medicaid Fraud Control Units (MFCUs). This effort resulted in charges against 301 individuals, including 60 doctors, nurses and other licensed medical professionals, for their alleged participation in Medicare and Medicaid fraud schemes involving approximately $900 million in false billings. This example drives home our commitment, capabilities, our nimbleness and our level of coordination.


To achieve these impressive results, the Strike Forces use a wide array of investigative and prosecutorial tools. In addition to many traditional methods for developing information and evidence, the Strike Forces are using highly advanced data analysis to identify aberrant billing levels in order to target suspicious billing patterns and emerging schemes. More specifically, the Medicare Fraud Strike Force is obtaining billing data from CMS in close to real time.


We now have an in-house data analytics team headed by some of the best and brightest. Analyzing billing data from CMS has become a key part of our investigations because it permits us to focus on the most aggravated cases and to identify quickly emerging schemes and new types of Medicare fraud. Access to CMS billing data in close to real time permits us to remain a step ahead. We have the opportunity to halt schemes as they develop. This cutting-edge method has truly revolutionized how we investigate and prosecute health care fraud.


What’s more is that we are pushing out the data we develop to U.S. Attorney’s Offices and investigative agencies across the country, not just our Strike Force cities. Doing so empowers other prosecutors whether or not they are in a city with a Strike Force by providing key data to fuel their investigations and prosecutions.


​ This approach is proving to be very successful. Not only are violators being punished, often with steep fines and long prison sentences, but we are deterring further conduct. Specifically, our prosecutions have significantly reduced Medicare fraud and lowered payments for certain Medicare-reimbursed goods and services. For example, prior to the creation of the Medicare Fraud Strike Force, Medicare payments for home health care increased each year from 2006 until 2010. In 2009, following federal law enforcement actions initiated by the Medicare Fraud Strike Force in Miami and the resulting report from the HHS-OIG regarding home health outlier payments, CMS changed Medicare’s Home Health Agency (HHA) outlier coverage policy to curb fraudulent HHA payments. Since 2010, payments for HHAs in Miami decreased by $100 million per quarter since its peak in 2009, and continued to decline, totaling an aggregate savings of over $1 billion. In the Detroit Medicare Fraud Strike Force location, HHA payments are down by over $25 million per quarter, respectively, since 2010.


This data indicates that the Medicare Fraud Strike Force home health fraud initiatives and convictions not only eliminated some of the bad actors but also deterred other fraudsters from exploiting the outlier coverage policy. Similar patterns of decreased Medicare payments exist for durable medical equipment and community mental health services following concentrated law enforcement initiatives and administrative fraud prevention efforts.


I would like to share with you a number of significant and impactful matters on which the Health Care Fraud Unit has been working.


I will begin with the Esformes matter. In July 2016, three individuals were charged in what was a massive Miami-area health care fraud and money laundering scheme involving approximately $1 billion in false and fraudulent claims to Medicare and Medicaid that started in 2002. The indictment charges three individuals for their roles in the scheme: (1) the owner of a dozen skilled nursing facilities and assisted living centers; (2) a hospital administrator who allegedly facilitated kickbacks and bribes; and (3) a physician’s assistant who allegedly received kickbacks and bribes in exchange for making medically unnecessary referrals.


In early 2017, a superseding indictment was returned, which alleges that the owner and his co-conspirators facilitated the scheme by bribing state regulators in order to obtain advance notice of inspections at certain facilities. As I mentioned earlier, fraud on this scale is a blow to the patients who allegedly received unnecessary care and to the American taxpayers who were defrauded and Americans in general because of the increase cost of health care.


In October 2016, Tenet Healthcare Corporation entered into a global resolution with the government. Tenet is a publicly-traded company and the third largest hospital chain in the United States. Tenet agreed to resolve an investigation of a corporate bribery and fraud scheme at four Tenet-owned hospitals in Georgia and South Carolina. As part of that scheme, the hospitals paid over $12 million in bribes to a chain of prenatal care clinics in exchange for the referral of Medicaid patients.


The owners and operators of the clinics and others made false statements and representations to these vulnerable expectant mothers, including that Medicaid would only cover the costs associated with their delivery and the care of their newborn baby if the expectant mother delivered at one of the Tenet hospitals or that they were required to deliver their baby at one of the Tenet hospitals, leaving expectant mothers with the false and mistaken belief that they could not select the hospital of their choice. As a result, many expectant mothers traveled long distances from their homes to deliver at the Tenet hospitals, placing their health and safety and that of their newborn babies, at risk.


Under the global resolution: two Tenet subsidiaries pleaded guilty to conspiracy to defraud the United States and pay kickbacks and bribes in violation of the Anti-Kickback Statute, and forfeited over $146 million, representing the gross Medicaid and Medicare proceeds traceable to the offense; Tenet Health System Medical, Inc. entered into a non-prosecution agreement requiring, among other things, an independent compliance monitor for a period of three years over all entities owned, in whole or in part by Tenet; and Tenet and its subsidiaries entered into a civil settlement agreement and paid $368 million to the United States, the State of Georgia and the State of South Carolina.


To date, two individuals have pleaded guilty, and on Jan. 24, 2017, the Criminal Division’s Fraud Section at the Department of Justice charged John Holland, a former senior executive of Tenet and former CEO of North Fulton Hospital, who is alleged to have participated in the scheme. This settlement and these indictments should send a clear signal to hospitals and health care institutions around the country that they and their management will be held accountable for fraudulent misconduct.


Next, let me discuss a matter that is at the heart of our work for vulnerable victims. In April of this year, we indicted two Detroit doctors and one co-conspirator for their alleged participation in a scheme to perform female genital mutilation (FGM) on minors. Our Detroit Strike Force has been working together with the United States Attorney’s Office for the Eastern District of Michigan on this matter. To be clear, federal law criminalizes this heinous conduct. This is the first prosecution brought under 18 U.S.C. § 116, which criminalizes this conduct and protects minors.


I could go on and on about all the cases that the Department of Justice is bringing against institutions, medical professionals, administrators and others, who have chosen to commit Medicare fraud to make money. I think that these three cases highlight the kind of important, complex health care fraud cases we are pursuing and will continue to pursue. Our prosecutors and investigators are committed and dedicated; they are working very hard every day, every night, on weekends, on holidays and during family gathers, for all of us. They go beyond the call of duty, and it is admirable by any measure. And, I am proud to work with them.


In closing, I want to thank you again for having me here today to address such an important issue. I hope that I have been helpful in making clear the Justice Department’s position on health care fraud.


Have a wonderful rest of the day.

Health Care Fraud
Updated December 11, 2017