The Shifting Landscape of Health Care Fraud and Regulatory Compliance

Regulators Increase Scrutiny As Health Care Costs Consume Higher Share of GDP

NEW YORK, August 19, 2008 /PRNewswire/ — As health care costs continue to accelerate and consume an ever-higher percentage of GDP, federal and state regulators are ratcheting up efforts to find fraud. According to the Deloitte Forensic Center, criminal investigations, civil investigations, civil penalties and criminal convictions are all on the rise. The threat of treble damages, higher rewards for whistleblowers and more sophisticated "data mining" techniques give regulators more weapons in their fraud-fighting arsenal.

Both for-profit and non-profit health care providers need to be alert to recent shifts in the regulatory environment that are making robust, top-to-bottom compliance with federal and state fraud laws and regulations more critical than ever.

News Facts

In fiscal 2007, federal enforcers got 560 criminal convictions and collected $1.8 billion in civil judgments or settlements in health care fraud cases.
Health care fraud "whistleblowers" can now receive up to 30 percent of the amounts that regulators recover as a result of their tips – a powerful incentive.
Revised IRS Form 990, filed by large non-profits, may expose non-profit health providers to higher scrutiny in their compensation and payments to interested parties.
States have powerful incentives to increase their fraud enforcement and recovery. New York State alone will have to increase its recoveries by $470 million in one year so that it can keep federal funds used in enforcement.

Trend Data

In fiscal year 2007, the federal government initiated 878 criminal and 776 civil investigations; it had 1,612 criminal and 743 civil pending investigations.
Spending on health care already approximates 16 percent of the U.S.'s GDP, and is expected to increase to 20 percent of GDP in the next few years.
Demographic factors make the future of compliance more complex. About 78% of all health care costs can be traced to 20 percent of all patients - those with chronic illness.

Quotes

Attributed to Jeffrey Blumengold, FHFMA, partner in Deloitte's Forensic and Dispute Services:

"For years, the Centers for Medicare and Medicaid Services noted they had fewer than a dozen people exclusively dedicated to Medicaid fraud enforcement. They relied on the state agencies like the Medicaid Fraud Control Units within each state attorney general's office. Now, CMS have significant additional funding ($50 million in both fiscal years 2007 and 2008 and $75 million in 2009) to attack systemic fraud, waste and abuse. As a result, there is a very significant initiative at the federal level, not only to fund more fraud enforcement efforts, but also to create programs that ferret out fraud through data matching, data mining and, where necessary, the hiring of contractors to go out as third parties to look for fraud, waste, abuse or errors."

Attributed to Christopher Panczner, Esq., legal counsel, Saint Vincent Catholic Medical Centers and of counsel, Epstein Becker & Green:

"Operating an organization within the health care industry can be like having three different customers with three sets of unaligned rules to comply with when selling your product or service. Providers must meet the requirements for those three specific customers (that is, Medicare, Medicaid and commercial insurance), even when their regulations conflict. Even in the best-run, most compliant organizations, a third-party review of the organization's business relationships, accounting records and e-mail could result in identifying potentially fraudulent claims or other errors or omissions that may otherwise form the basis for a claims investigation."

About the Deloitte Forensic Center

The Deloitte Forensic Center (DFC) is a think tank aimed at exploring new approaches for mitigating the costs, risks and effects of fraud, corruption and other issues facing the global business community. Unique to the marketplace, the DFC aims to advance the state of thinking in areas such as fraud and corruption by exploring issues from the perspective of forensic accountants, corporate leaders and other professionals involved in forensic matters. The DFC strives to provide multidisciplinary analyses that companies and official organizations will find practical and helpful. A particular focus will be placed on the use of technology as a means of providing solutions to fraud and corruption detection, mitigation and prevention. In addition to encouraging a public dialog on these issues, the DFC also will contribute to the development of the forensic accounting profession and raise its profile in discussions of issues of public importance. The DFC will accomplish its goals by bringing together leading professionals from a wide variety of backgrounds, including business, academia, law, government and regulatory affairs. The Deloitte Forensic Center is sponsored by Deloitte Financial Advisory Services LLP.

About Deloitte

As used in this document, "Deloitte" means Deloitte Financial Advisory Services LLP and Deloitte Services LP, separate subsidiaries of Deloitte LLP. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries.