Former U.S. Attorney: Healthcare fraud isn't increasing--detection is just getting better

In the five years he served as U.S. Attorney for the Eastern District of Tennessee, Bill Killian oversaw dozens of healthcare fraud cases. By the time he resigned from his post Dec. 5, Killian's district had collected more than $200 million from healthcare fraud cases during his tenure.

In his new position with the national law firm Polsinelli, Killian (right) will continue focusing on civil and criminal fraud cases through the firm's government investigations and compliance practice. Killian says that although enforcement numbers are continually rising, healthcare fraud is not any more prevalent now than it was in previous years--the government is just getting better at detecting it. Thanks to better detection methods, Killian says his office saw civil fraud claims increase five-fold over the course of his tenure as U.S. Attorney.  

FierceHealthPayer: Antifraud spoke with Killian about the healthcare fraud landscape, the focus of government investigations and his to approach to fraud investigations.

(Editor's Note: The following has been edited and condensed for clarity.)

FierceHealthPayer: Antifraud: You served as U.S. Attorney for five years? How have you seen healthcare fraud schemes evolve over that period of time?

Bill Killian: We had several different cases that we prosecuted, everything from medical device companies overcharging Medicare, to oncologists distributing counterfeit diluted cancer drugs to their patients, to pharmaceutical companies overbilling Medicare.

The largest healthcare fraud case we settled was a medical device company that was billing for oscillating bed covers to keep people from getting bed sores. When the patients would be transferred to the hospital or a nursing home or pass away at their home, the company would continue to bill Medicare to the tune of $42 million.

That was not the total amount; that was the false claims, of course. Estimates were somewhere between $18 million and $26 million of actual overcharges.

We also had a kickback case where hospitals were providing rental space to doctors for less than market value as a kickback scheme to get them to utilize their hospital for admissions.

FHP AF: What do you attribute these large cases to? Is fraud really prevalent in that area of Tennessee?

BK: I think it's everywhere, actually. We just focused on it. I don't think East Tennessee has any more healthcare fraud than other parts of the country, and it probably has less than some areas, but it's prevalent throughout the country and it's a little easier to get away with in some respects. It takes monitoring, it takes auditing and it takes investigating. These cases, from a prosecution standpoint, are labor intensive and resource intensive and personnel intensive.

We had one doctor that the Department of Health and Human Services caught. He was one of the leading users of Botox in the country. There's only one company that makes Botox, and suddenly he went from one of the leaders in the country to not at all. So obviously something was wrong. It turns out he was buying from a foreign unapproved source, which he was distributing to the tune of $7 million.

Those are some examples of cases we've had just in our district, but it's not a problem germane to Tennessee. It's a problem nationwide. It's just good old American ingenuity. If you're a thief and you're motivated by greed, it can be utilized to effectuate whatever fraud scheme you can come up with.

The other thing I would say is that as more and more people learn about these provisions of qui tam or whistleblower action, that's going to result in more reports of fraud. Many of our civil and criminal healthcare fraud cases came in as a result of whistleblowers.

FHP AF: And based on the statistics from the DOJ, that's something that's happening across the country?

BK: Absolutely, and that will continue to grow. I'm not sure healthcare fraud is growing, I think the detection of it is growing and with the Yates memo where corporations have to report who the individuals are that are involved in the fraud schemes, now a corporation cannot pay a fine and get immunity for individuals.

That's changing the landscape of the prosecution of these kinds of cases. It remains to be seen what total effect that's going to have, but it changes the landscape in these cases, I can tell you that.

FHP AF: So you believe the Yates memo will have a big impact on healthcare fraud litigation. How will that change the way these cases play out?

BK: If you have a corporation and let's say three corporate officers are involved in a fraud scheme, each one of them is going to have a different lawyer, of course, because of the conflict of interest, and the corporation is looking only at financial penalties, civilly or criminally. No longer can the corporation pay a fine and get their president, COO, or treasurer out of trouble.

When they pay the fine or settle their case, they are required to cooperate against the three individuals and provide all the information they have about the fraud scheme.

I think the motivation of the DOJ was that these corporations were paying monies, but it was not having the deterrent effect they wanted to have on healthcare fraud.

FHP AF: Compliance seems to be a pretty big focus area as of late. The DOJ came out with a guidance document and also recently hired a compliance counsel. What is the government looking for when it comes to compliance?

BK: The ACA has increased the responsibility of medical providers, and it addressed some areas that were popular for fraud. I think those provisions and the general idea of the federal government was that, in terms of compliance, if we can monitor certain activities, or if we can put in place certain tools requiring reporting, we won't have to monitor as much as we would have before.

FHP AF: Does the federal government also want to see that there is a compliance program in place and meeting certain standards?

BK: That's one of the elements of sentencing structure is if you have a compliance program in place, you can actually get points reduced off your sentencing computation.

FHP AF: What do you see as important focus areas in the healthcare fraud arena, both from the government's perspective and high-risk sectors of healthcare in general?

BK: Some of the future problems are lab charges that aren't necessary, or skilled nursing facilities where they are upcoding treatment or physical therapy to a patient that cannot perform at the highest level, yet they get paid more money for administering it, or at least charging for it. Also, overprescribing of drugs, regardless of whether it's pain medication or otherwise.

Generally, those three areas would be on the forefront for the DOJ. And the Anti-Kickback Statute is always going to be an issue because in the pharmaceutical industry there is promotion of those drugs. That always generates some folks going overboard. That was helped a little bit with the Sunshine Law aspect of the Affordable Care Act. They have to report what incentives they've given to particular doctors. So that's the new provision that provides another monitoring tool.

FHP AF: Anything else you want to add?

BK: Some of these questions are going to be answered as we go forward with the Yates memo. These cases and these investigations are labor and personnel and resource intensive, and it puts a strain on the U.S. Attorney's Office, and the federal and state agencies that are participating with them.

You have to be able to justify the labor and resource utilization when these cases come in, and the only way to control that, to some extent, is raising your intake guidelines.