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Assistant Attorney General Leslie R. Caldwell Speaks at Health Care Compliance Association’s 20th Annual Compliance Institute


Las Vegas, NV
United States

Remarks as prepared for delivery

Good morning, and thank you for that kind introduction.  It is a pleasure to be here at the Health Care Compliance Association’s 20th Annual Compliance Institute.  I will do my best to follow Inspector General [Daniel] Levinson’s outstanding remarks this morning.

I’m here to provide an update on the Criminal Division’s efforts to fight health care fraud, but I would be remiss if I didn’t discuss how we got to where we are now and where we are headed in the near future. 

For almost two years, I have had the pleasure of leading the Justice Department’s Criminal Division, which includes approximately 600 prosecutors from 17 varied sections.  Among the sections that I oversee, one section—the Fraud Section—has a unit of approximately 50 specialized prosecutors dedicated exclusively to health care fraud investigations and prosecutions.  Those prosecutors often partner with U.S. Attorneys’ Offices, who dedicate even more prosecutors to health care fraud cases.  Stamping out Medicare fraud and holding those who commit this fraud accountable are core missions of the Criminal Division and the Justice Department.  We have effective strategies and a remarkable success rate in this area. 

Some of you have been in this field long enough to recall the days when the Criminal Division and its law enforcement partners were essentially reactive in health care fraud cases.  Prosecutors relied primarily on referrals that came through the Centers for Medicare and Medicaid Services—or CMS—for investigation and prosecution.  CMS maintained control of the health care billing data, and prosecutors relied upon CMS to both provide and analyze it.  At the time, the Criminal Division was focused primarily on “storefront cases,” or cases in which businesses billed Medicare, but were not actually providing services or equipment. 

We have come a long way since those days.

The Criminal Division began its intensive health care fraud enforcement efforts in 2007 with the creation of the Medicare Fraud Strike Force, which began in Miami, in partnership with the FBI and the Department of Health and Human Services’ Office of the Inspector General (HHS-OIG). 

In its infancy, the strike force targeted Medicare billing categories known to be rife with fraud, such as durable medical equipment.  We tackled power wheelchairs and orthotics and hospital beds.  Within one year, the Criminal Division’s enforcement efforts, along with administrative actions taken by HHS, contributed to a $1 billion drop in durable medical equipment billings in the Miami area.

Since those early successes, we have expanded the strike force to eight additional cities that are hot spots for Medicare fraud: Tampa, Baton Rouge, Dallas, Houston, Brooklyn, Detroit, Chicago and Los Angeles.  The strike force focuses exclusively on one thing—prosecuting Medicare fraud—and has developed successful partnerships with law enforcement and a proven model for investigations and prosecutions.  Since its inception in 2007, the Medicare Fraud Strike Force has charged more than 2,300 defendants who had collectively billed the Medicare program for more than $7 billion. 

In the last fiscal year alone, the strike force charged 391 defendants who had collectively billed the Medicare program approximately $1.4 billion.  During the last fiscal year, the strike force had a conviction rate of 92 percent—a spectacular rate of success considering the volume and the complexity of the prosecutions—and secured prison sentences averaging 56 months.   

In June of last year, strike force prosecutors in 17 districts executed a nationwide operation that resulted in charges against 243 individuals, including 46 doctors, nurses and other licensed medical professionals, for their participation in Medicare fraud schemes involving approximately $712 million in false billings.  This coordinated takedown was the largest in strike force history, both in terms of the number of defendants and loss amount, and it will by no means be the last.

Targeting geographic areas with high amounts of Medicare fraud is only one of the successful strategies employed by the strike force.  The Medicare Fraud Strike Force also obtains billing data from CMS and other sources in close to real time.  The Fraud Section has an on-staff data analyst with decades of experience in the health care industry.  She pores through the data looking for meaningful trends.  Not simply finding bills for dead patients or identifying the providers with the highest billings, but using her expertise to find investigative leads, identify strategic trends and corroborate fraud tips. 

Real-time data analysis, especially through the lens of someone with health care expertise, has brought several significant benefits to the Medicare Fraud Strike Force.  First, access to real-time data enables us to bring cases more quickly, rather than having to wait for CMS to provide historical billing data to support an investigation.  Second, we’re finally ahead of the curve and able to go after fraud hot spots at the development stage by identifying data outliers.  And third, we can track existing fraud schemes as they move to new geographic areas.  The strike force pioneered this use of cutting-edge data analysis, and it has revolutionized our heath care fraud prosecutions.

The strike force is a model of 21st century data-driven policing.  And it is has had an undeniable impact.  Data from our partners at HHS-OIG shows that Medicare spending in service areas we have targeted, such as community mental health and home health, has plummeted, decreasing by hundreds of millions of dollars.  For example, after the strike force targeted group psychotherapy fraud in Detroit, the billings to Medicare in that treatment category dropped by more than 70 percent.  I already mentioned our success in decreasing false billings for durable medical equipment.  And, just two years after the strike force in Miami identified and targeted widespread fraud in the home health industry, Medicare billings for home health services in Florida dropped by more than $1 billion and payments to health care providers fell by roughly $500 million.

As just one concrete example of the success we’re having with real-time data analysis, to date 13 individuals have been convicted in relation to a six-year, $158 million health care fraud scheme at Riverside General Hospital in Houston.  The catalyst for this investigation was the strike force’s review of aberrant real-time data trends.  This steamrolled into a massive, complex investigation that revealed fraud in virtually every corner of the hospital.  To date, five defendants, including Riverside’s president, have been convicted in two separate trials and the remaining eight pleaded guilty.  The defendants engaged in a fraudulent scheme to submit approximately $158 million in false claims to Medicare for partial hospitalization program services, which is an intensive outpatient treatment for severe mental illness.  They billed Medicare for patients who did not qualify for or need partial hospitalization services and, in some instances, never actually received any intensive psychiatric treatment.  In fact, some of the patients were suffering from Alzheimer’s and could not actively participate in the treatment that was billed to Medicare.  The former hospital president was sentenced to 45 years in prison and others received sentences ranging from 12 to 40 years. 

Just a few weeks ago, a licensed psychiatrist, the former attending physician at Riverside General Hospital, was sentenced to 12 years in prison.  A jury found her guilty of participating in the conspiracy to bill Medicare for patients who never actually received treatments.  In addition, the psychiatrist personally billed Medicare for individual psychotherapy and other treatment that she never provided.  She falsified medical records of patients at Riverside’s inpatient facility to make it appear as if she provided psychiatric treatment when she did not. 

It’s not only the high number of prosecutions that demonstrate the strike force’s success, but also the level and sophistication of the individuals prosecuted.  In the last fiscal year, the strike force has charged 83 licensed medical professionals.  These are individuals who have breached the public trust and their professional duties of care, selling their medical licenses for the lure of easy money, and oftentimes preying on vulnerable Medicare beneficiaries. 

I believe that the most horrifying Medicare Fraud Strike Force case of 2015 involved hematologist-oncologist Dr. Farid Fata.  Some of you may have heard about this case in the news.  Dr. Fata owned and operated a cancer treatment clinic with multiple locations in the Detroit area.  For almost six years, Dr. Fata pumped chemotherapy drugs into patients, telling them they had cancer when they didn’t.  He over-treated terminal cancer patients and under-treated other cancer patients.  Dr. Fata also solicited kickbacks for patient referrals.  He did this in order to pad his wallet to the tune of approximately $17 million.  After law enforcement received a tip about Dr. Fata, the Medicare Fraud Strike Force moved quickly to arrest him to ensure that no other patients were harmed.  The allegations came in on a Friday; he was arrested the next Tuesday.  The strike force was only able to move so quickly because of its experience and expertise, their ability to analyze facts and data and draw the appropriate conclusions.  So far we have determined that Dr. Fata had 550 victims, many of whom had their health and lives destroyed forever.  Dr. Fata pleaded guilty and was sentenced to 45 years in prison—a virtual life sentence—last July.

So, where is the Criminal Division headed now?

The Medicare Fraud Strike Force will continue to use billing data to create and corroborate investigative leads.  We will invest in resources to maximize the usefulness of this information, expending every effort to remain ahead of emerging fraud trends, including Medicare Part D, drug diversion, laboratory services, hospital-based services and hospice care.  These are the latest frontiers in Medicare fraud.  We are working hard to identify those engaged in these new schemes and to bring them to justice. 

Last month, the department launched 10 regional Elder Justice Task Forces, which will bring together federal, state, and local prosecutors, law enforcement and agencies that provide services to the elderly to coordinate and enhance efforts to pursue nursing homes that provide grossly substandard care to their residents, many of whom are Medicare and Medicaid beneficiaries.  These can be challenging, but necessary, federal criminal health care fraud cases to bring.  We expect to continue to build more momentum in this area. 

While many of our criminal fraud cases have focused—and will continue to focus—on individual physicians, home health care providers, pharmacy owners and medical supply company executives, the strike force will follow evidence of health care fraud wherever it leads, including into corporate boardrooms and executive suites.  The Criminal Division has a long record of holding executives responsible for their criminal wrongdoing in cases involving financial fraud.  And addressing large-scale corporate health care fraud is a priority for the department.  

To that end, in late 2015, the Fraud Section formed a separate Corporate Health Care Fraud Unit.  We now have over a dozen active corporate investigations, and we are steering additional prosecutorial resources to this area.  The unit is staffed by experienced health care fraud prosecutors, who carefully review virtually every False Claims Act lawsuit filed by qui tam relators across the United States.  In many instances, qui tams are valuable sources of corporate fraud referrals.  During this initial review, prosecutors consider whether the facts and circumstances support criminal investigation and possible prosecution.  In particular, among other factors, we look at the severity or pervasiveness of any compliance failures, the involvement and culpability of individuals, and the availability and appropriateness of regulatory or civil enforcement action, as opposed to criminal prosecution.

Of course, the burden of proof in criminal cases is different than in civil cases, and the level of intent is different too—generally we need to show a “specific intent to defraud” to secure a criminal conviction, whereas that is not required under the False Claims Act.

Both the Civil Division and the Criminal Division are committed to fighting health care fraud, with our complimentary law enforcement missions and tools.  While our civil colleagues are committed to securing restitution and financial penalties, federal prosecutors are focused on punishing and deterring criminal conduct.

Parallel investigations maximize the department’s ability to secure the appropriate outcome in each matter—whether it be financial penalties, restitution, federal program exclusion or criminal prosecution of both corporations and individuals.  Civil litigators and criminal prosecutors coordinate with each other as appropriate and with other executive branch agencies to protect and advance the government’s overall interests. 

An example of one such sophisticated, multi-district, coordinated effort is the ongoing prosecution of Dr. Aria Sabit.  Dr. Sabit started out in Ventura, California, where he was involved with a company that manufactured spinal implant devices.  He participated in an illegal kickback scheme to pay surgeons to use those spinal implants, and then personally performed medically unnecessary spine surgeries just to use the spinal implants.  Dr. Sabit then moved to Detroit, where he convinced patients to undergo spinal fusion surgeries with instrumentation, meaning specific medical devices designed to stabilize and strengthen the spine, but he never used the instrumentation.  In his dictated operative reports, which were used to support fraudulent insurance claims, Dr. Sabit said that he performed the surgeries with instrumentation, even when he did not. 

The criminal investigation against Dr. Sabit began as a referral from Civil Division of the Department of Justice.  Dr. Sabit had been sued in False Claims Act qui tam cases.  As a result, in December of last year, Dr. Sabit pleaded guilty to his involvement in both the California and the Detroit fraud schemes, which together resulted in over $11 million of false billings to Medicare, Medicaid and private insurance companies.  He has not yet been sentenced.

As I reach the end of my allotted time, I’d like to take a moment to talk about what you can do to join us in the fight against health care fraud.  Despite our successes, Medicare fraud remains a serious drain on our health care system.  In fiscal year 2015, the Justice Department recovered over $2.4 billion of fraudulent Medicare billings through civil, criminal and administrative actions.  One can only imagine that significant fraud exists in other government health care programs, such as Medicaid and Tricare, and the private insurance market.  It’s troubling as a prosecutor and as a taxpayer.

First, I know that there is a wide array of folks in the audience today, including healthcare executives and leaders, physicians and other health professionals, and healthcare regulators.  Many of you are the first line of defense against health care fraud.  You may interact directly with patients.  But even if you don’t, you may serve in a compliance role in your health care institution.  That means, most likely, that you have access to billing data similar to that that we use.  You have the ability to review abnormalities and identify trends reflecting possible fraud and waste within your healthcare institution.  Well before a grand jury subpoena is served or a witness is interviewed, compliance officers like you can and do step in and stop issues from becoming problems down the road. 

One area of compliance failures in the spotlight involves pharmaceutical companies.  In May 2015 and February of this year, CVS Pharmacy reached settlements with the federal government through the U.S. Attorney’s Offices in the District of Maryland and the Middle District of Florida and agreed to pay a total of $30 million to the federal government to resolve allegations that its pharmacies violated the Controlled Substances Act by dispensing controlled substances pursuant to prescriptions that were not issued for a legitimate medical purpose.  Knowingly filling an illegitimate prescription subjects a pharmacy to civil penalties under the Controlled Substances Act.  CVS acknowledged that its pharmacies had dispensed controlled substances, including oxycodone, fentanyl and hydrocodone, in a manner not consistent with its compliance obligations.  This is particularly dangerous right now with the rising rates of opioid addiction across the nation.  To that end, I have asked our narcotics and dangerous drug section and our front section to take a close look at potential misconduct by those in the drug distribution chain, from manufacturers, to wholesalers, to retail pharmacies.

As our corporate investigations progress, health care companies, hospitals and their counsel should understand that the Criminal Division will be applying the very same Principles of Federal Prosecution of Business Organizations—also known as the Filip factors—that we apply in other corporate cases.  Should a criminal investigation ever become an issue, the quality and effectiveness of your company’s compliance program is an important factor that prosecutors consider in determining whether to bring charges.  We look at whether compliance programs are simply “paper programs,” or whether the institution and its culture actually support compliance.  We look at pre-existing programs, as well as what remedial measures your organization took after discovering misconduct—or whether a blind eye was turned to red flags.  We look at whether compliance personnel are empowered to address problems.  These are all important issues and I encourage all of you to regularly review the effectiveness of your compliance programs.  Do not let them get stale.   

The fight against health care fraud requires everyone to be vigilant—from patients to medical professionals, to administrators and everyone else in between. 

Thank you for inviting me to speak with you all today.  I hope that you find the remainder of the conference informative.

Updated December 8, 2017