Medicare Fraud 101

Stark Violations May Result in Exclusion of Tenet Hospital from Federal Programs

The “Stark” statute, 42 U.S.C. §1395nn, is also known as the Physician Self-Referral Law or Section 1877 of the Social Security Act. The Stark law was intended to prevent physicians from profiting (actually or potentially) from their own referrals. The Stark statute acts prospectively, i.e., it prohibits relationships that have been demonstrated to encourage over-utilization. Because it is a strict liability statute, there is no need to show knowledge or intent.

Medicare and Medicaid programs depend on physicians and other health care professionals to exercise independent judgment in the best interests of patients. Financial incentives tied to referrals have a tendency to corrupt the healthcare delivery system in ways that harm the federal programs and their beneficiaries. Corruption of medical decision-making can result when a physician refers a patient to a provider on the basis of the physician’s financial self-interest instead of the patient’s best interests. Restrictions on the practice of self-referral exist at both the state and federal levels.

Medical directorships, interest free loans/forgiveness of debts, illegal recruitment arrangements and improper discounts in the form of professional courtesy, may represent additional financial windfalls to physicians, resulting in hospital referrals and a violation of the “Stark” statute. A Stark scenario may also be present when a hospital circumvents potentially compliant contracts by providing outside of what appear to be legitimate contracts, office space, renovations, equipment, furniture, housekeeping services, office supplies, copy and fax machines, telephone, utility and transcription services to referring physicians for free or less than fair market value.

Something to Hide? Big Pharma Attorneys Say “No” to False Claims Act

The pharmaceutical industry is attempting to curtail the success of the federal False Claims Act by discouraging its application and expansion to additional states. While big pharma lawyers argue that these cases are nothing more than a “lottery ticket,” Jill Kozeny, Senator Grassley’s spokeswoman, attributes the recovery of “billions of dollars that would have been otherwise lost to fraud” to federal False Claims Act as further discussed in a recent article that appeared in The Washington Drug Letter. (Stephen Langel, Industry Attorneys Warn States Not to Enact False Claims Acts, Washington Drug Letter (May 8, 2006)).

ARE CLINICAL DRUG STUDIES BEING MANIPULATED?

 A pharmaceutical company can violate the false claims act by submitting false statements in connection with drug applications and other records to the United States Food and Drug Administration (”FDA”).  For example, clinical trial results can involve false statements; and subsequent false statements and claims in marketing materials promoted to the medical community and other health care providers, can cause the submission of hundreds of millions of dollars worth of claims to Government Healthcare Programs in violation of the False Claims Act. This can occur by the misrepresentation of data i.e. overstating a drug’s efficacy or safety in order to generate sales for uses that are marginally effective or even unsafe. These fraudulent acts deceive the FDA and physicians as well as jeopardizing the lives of seriously ill patients.

In the Op-Ed section of the April 25, 2006, Los Angeles Times, Shannon Brownlee suggests that if consumers want honesty, clinical research for drug studies need to be publicly funded. She cites that, “…two-thirds of clinical trials and three-quarters of the papers published in the top medical journals commercially funded, the drug industry has gained unprecedented leverage over what doctors and patients know — and don’t know — about drugs.” While researchers may dispute the implication that their results are manipulated, Ms. Brownlee cites the following: “The recent case of drugs known as atypical antipsychotics is instructive. These new and expensive drugs, with sales of about $10 billion annually, are used to treat serious mental illnesses such as schizophrenia. Earlier this year, the American Journal of Psychiatry published an analysis of 30 separate trials involving head-to-head comparisons of five drugs. Nine out of 10 times, the drug made by the company that funded the study came out on top. When Eli Lilly, the maker of Zyprexa, funded five studies of its drug, Zyprexa was found superior in all five. But when Janssen, the maker of Risperdal, ran its studies, Risperdal came out ahead.”
She suggests that,”.. If we want high-quality medical care, dozens of other drugs — as well as medical devices and non-drug treatments should be subjected to… noncommercial scrutiny.”

Medicare Fraud

The purpose of the qui tam provisions of the False Claims Act is to encourage private individuals who are aware of fraud being perpetrated against the government to bring such information forward. The Medicare law has been amended and expanded many times since it was enacted in 1965.