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Why Health Care Fraud Is A Problem: Bob Thomas and Erica Blachman Hitchings Explain to BU Law

September 10, 2019

Why is health care fraud such a big problem in this country?  Whistleblower Law Collaborative co-founder Bob Thomas and Member Erica Blachman Hitchings began their BU Law Seminar with this question.

This year marks the tenth year of the “Health Care Fraud and Abuse” class.  Bob has taught the class since its start, and Erica joins this year.  For thirteen sessions, they will teach future lawyers about the dangers fraud pose to our health care system. This first week focused on big picture issues.

BU Law Health Care Fraud and Abuse Seminar

This month marks Whistleblower Law Collaborative attorney Bob Thomas’ tenth year teaching the “Health Care Fraud and Abuse” seminar at Boston University Law School, a popular one among students, many of whom concentrate in Health Law.  It covers the intricacies of fraud and abuse in our health care system and how to fight it. It is 13-sessions long and will run all semester.  (For a glimpse of how the course goes, here’s the syllabus.)

This year’s seminar, however, gets additional energy in the form of a second instructor co-teaching alongside Bob:  Whistleblower Law Collaborative attorney Erica Blachman Hitchings.  Erica recently returned to her New England roots after a wonderful career in government service, first in the Department of Justice Honors Program, then in the San Francisco United States Attorney’s Office, before joining the Whistleblower Law Collaborative LLC.  “She will bring a fresh set of eyes to the course. Along with and great energy and understanding of the technical aspects of the course material,” Bob said.  “We’re going to have a lot of fun working on this together.”

Class One: How did the Health Care Fraud Problem Come to Exist

Class One covered the big picture:  how did the health care fraud problem come to exist?  What is the scope of the problem, and why is it so easy to defraud health insurers?  Who is working to slow down this problem, and what tools do they have at their disposal?

Government Relies on Honor System

Most government contracting systems operate on what is effectively an honor system, relying of the accuracy and veracity of the person or entity submitting claims for payment.  Claims are paid promptly for the most part, and problems are dealt with later—what is often referred to as the “pay and chase” system.  Even in a hypothetical world that is 90% compliant (sounds good, right?), a 10% fraud and abuse problem in a two trillion-dollar health care economy adds up to a $200 billion per year hit to the taxpayers’ pocketbook.

The profit-driven aspect of many medical practices contributes to the problem.  With physicians and hospitals (sometimes called “providers”) getting paid a “fee for service,” there’s a built-in temptation to find ways to maximize reimbursement in billing.  This can take many forms, some legal and some not.  But all contribute to the mounting costs of health care and over-medicalization of patients’ cases.

Many Different Ways to Cheat Government

The limits of the human imagination are the only parameters holding back the ways in which health insurance reimbursement systems can be gamed.  There are the street crime versions:  stealing a doctor’s provider ID and billing Medicare for phantom patients, using shell companies and P.O. boxes.  There are the brazen, breath-taking schemes, like the doctor who for years administered chemotherapy to cancer patients who were in remission and no longer need chemotherapy.  And then there are the subtle, and often huge, cases such as large pharmaceutical companies hiding pricing information from CMS, reducing its rebate obligations, or drug distributors running an illegal and unlicensed drug repackaging operation outside of the view of the Food & Drug Administration.

All of these and more fall within the rubric of “health care fraud and abuse”.  DOJ statistics (required reading for the course) show that whistleblowers play a critical role in the government’s work in chasing these lost dollars.  The False Claims Act (“FCA”) is the primary enforcement tool, and an increasingly effective one.

But the government collects only roughly $2-3 billion per year under the FCA. If the problem is really $200 billion per year, are these enforcement tools working as well as they should be?  What else can the government be doing?  This is what the seminar is designed to address.

Fraud Evolves as Fast As Efforts to Combat It

Why, one student asked after class, doesn’t the government modify “pay and chase” to include software technology to more effectively deny claims before being paid?  Great question.  The answer is that the government is already doing this up to a point.  But artificial intelligence “AI” technology has its limits and is only as effective as the assumptions baked into its algorithms.  As of now, any AI software that could effectively stop all or most fraudulent claims would necessarily hold up or wrongly deny many legitimate claims.  The political fallout from the denial of non-problematic claims would be immense.  CMS and other agencies realistically can use AI only to ferret out obviously improper claims. And they use data analytics to identify leads for cases rather than actual denial of claims.  So “pay and chase” remains the core modus operandi for false claims fraud enforcement for the foreseeable future.

Next Week’s Class

Next week Erica and Bob will begin a deep dive into the wonders of the False Claims Act. This is the first of two classes on the topic. The FCA is one of the more interesting and procedurally nuanced laws on the books.  We hope to write further updates on the seminar as it goes along.  Stay tuned.