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Medicare Fraud and Business Interruption Effects
Lori Ranzino Renda
Introduction to Business Continuity, Security, and Risk Management
February 19, 2013
Mark Carroll

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An overview of the False Claims Act 31 U.S.C. §§3729-33 will be presented. The author
has developed two matrices to clearly outline the regulations and reduced damages criteria. The
justification as to who pays the cost of civil action will be introduced. The agencies that oversee
enforcement introduced and the ramifications from non-compliance are discussed. The Medicare
Strike Force and its capture of government money will be further discussed. A reference will be
made to the Patient Protection and Affordable Care Act 2010 as it pertains to the enforcement of
fraudulent claims, which is consistent with the other governmental regulations. The types of
violations that pose a threat to the business continuity of a healthcare organization and those
medical professionals committed of conspiracy for such crimes will also be explained. The
penalties imposed for Medicare Fraud create business interruptions. A good business continuity
plan is necessary to limit the medical industries' exposure to the potential fines, penalties, and
even imprisonment of key personnel. Several Medicare Fraud schemes will be presented for
their impact, or the long term effect on the industry.

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The False Claims Act: 31 U.S.C. §§3729-33
The False Claims Act ("FCA") was enacted as a result of the billions of dollars spent by
the Medicare and Medicaid programs making the U. S. Government the largest consumer of
health-related spending in the world (Staman, 2010). The catalyst for fraudulent claims is
directly related to: (i) the billions of dollars available in government funds; (ii) the years of abuse
without consequences; and (iii) the involvement of unwitting patients (HHS, 2013). The FCA is
the federal law that created public accountability on those individuals or organizational
leadership who knowingly engage in misconduct involving government money or property
(Staman, 2010). FCA is codified at 31 U. S. C. §§3729-33. The context of the law is relevant to
the healthcare industry and its providers (Staman, 2010). Failure to comply with the FCA
establishes regulations shows just cause for investigation (Staman, 2010). Entities or individuals
found liable for violations of certain acts, and knowingly to violating any of portions of 31
U.S.C. §§3729-33 regulations can be held in contempt, causing a business interruption. The
information below is provided by the Federal Government and has been written literally as found
in the regulation itself, but should not be interpreted as plagiarism. A literal quote is necessary
for exact interpretation.
Structure of 31 U.S.C. 3729-False Claims
(1) In general-- Subject to paragraph (2), any person who--
Paragraph Subject to Paragraph
A knowingly present, or causes to be presented, a false or fraudulent claim for
payment or approval;
B knowingly makes, uses, or causes to be made or used, a false record or
statement material to a false or fraudulent claim;
C conspires to commit a violation of subparagraph (A), (B), (C), (D), (E), (F),
and (G);
D has possession, custody, or control of property or money used, or to be used,
by the government and knowingly delivers, or causes to be delivered, less
than all of that money or property;
E Is authorized to make or deliver a document certifying receipt of property

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used, or to be used, by the government and, intending to defraud the
government, makes or delivers the receipt without completely knowing that
the information on the receipt is true;
F Knowingly buys, or receives as a pledge of an obligation or debt, public
property from an officer or employee of the government, or a member of the
Armed Forces, who lawfully may not sell or pledge property; or
G Knowingly makes, uses, or causes to be made or used, a false record or
statement material to an obligation to pay or transmit money or property to
the government, or knowingly conceals or knowingly and improperly avoids
or decreases an obligation to pay or transmit money or property to the
government. liable to the United States government for a civil penalty of not
less than $5000 dollars and not more than $10,000 dollars, as adjusted by the
Federal Civil Penalties Inflation Adjustment Act of 1990 U.S.C. 2461; Public
Law 104-410, plus triple damages, which the government sustains because of
the act of that person (31 U.S.C. §3729, 2008).
Reduced Damages (2)
As per the official regulations…It the court finds
A The person committing the violation of the subsection furnished officials of the
United States responsible for investigating false claims violations with all
information known to such person about the violation within 30 days after the
date on which the defendant first obtained the information;
B Such person fully cooperated with any government investigation of such
violation; and
C At the time such person furnished the United States with the information about
the violation, no criminal prosecution, civil action, or administrative action had
commenced under this title with respect to such violation, and the person did
not have actual knowledge of the existence of an investigation into such
violation, the court may assess not less than two times the amount of damages
with the government sustains because of the act of that person.
Costs of Civil Actions (3)
A person violating this subsection shall also be liable to the United States Government
for the costs of a civil action brought forth to recover any funds, penalties or damages.
Causes of False Claims
False claims arise out of billing: (i) billing for services not rendered; (ii) billing for
unjustified procedures; (iii) double billing for the identical services or equipment; (iv) billing for

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services at a higher price than were actually provided (also referred to as "upcoding")(Staman,
2010, p. 9). The Government definitions for "knowing" and "knowingly" pertain to a person, in
the matter of information, having genuine understanding of the facts and acting with methodical
ignorance or with reckless abandon of the truth or falsity of the facts; proof of specific intent to
defraud is required (HHS, 2013).
Oversight Agencies
Department of Health and Human Services ("HHS") and Department of Justice ("DOJ")
Agencies oversee the Healthcare Fraud Prevention and Enforcement Action Team ("HEAT"). As
a part of HEAT, the Medicare Strike Force (consisting of nine regional teams) reports its
findings to HEAT (HHS, 2013). The Medicare Strike Force team is directly responsible for the
investigation of alleged offenders (fbi.gov, 2012). The strike force team consists of "…analysts,
investigators, and prosecutors…" who target emerging trends in fraud schemes, including fraud
by criminals pretending to be healthcare providers or suppliers (fbi.gov, 2013). The agencies
oversee Medicare Fraud indirectly by means of analysis and investigation completed by
members not employed by the HHS or DOJ (Healthcare.gov, 2013, p. 1).
Strike Force HEAT Up
According to the Office of Inspector General ("OIG") fiscal year 2010, the U.S.
Government established the right to collect $1.84 billion dollars from Medicare Fraud. The
amounts of funds refer to judicial settlements and judgments, but not actual money collected
(Cheung-Larivee, 2011). The greatest amounts recovered came from the states of: (i) New York;
(ii) Texas; (iii) California; (iv) Florida; and (v) Ohio.
Affecting Business Continuity: Cost of Non-compliance
In 2011, HEAT was responsible for the largest Federal healthcare fraud raid on 155
individuals in nine cities involving $530 million dollars in fraudulent billing. The accused

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include "doctors, nurses, healthcare company owners and executives, for alleged participation in
Medicare Fraud schemes involving $240 million in false billing" (Healthcare.gov, p. 1). In
another case, three local doctors in Florida approved group therapy through the American
Therapeutic Corporation and fraudulently submitted $200 million in claims since 2007 (Weaver,
2011). Detroit-18 charged with Medicare Fraud totaling $28 million in false billing claims
(fbi.gov, 2011). These alleged crimes took place in the home healthcare sector and
psychotherapy. Investigators seized 28 bank accounts related to the fraud incidents (fbi.gov,
2011).
In May 2012, the Medicare Strike Force teams disrupted the professional business lives
of 107 healthcare professionals that included "…doctors, nurses, and other licensed medical
professionals in seven cities involving more than $452 million dollars" (fbi.gov, 2012, p.1).
In October 2012, the Medicare Strike Force interrupted the business lives of 91
healthcare professionals in seven U.S. cities. The alleged abusers also included doctors, nurses,
and other licensed medical professionals. These alleged perpetrators are accused of participating
in Medicare Fraud schemes totaling $432 million dollars in fabricated billing claims. Under the
Patient Protection and Affordable Care Act, the Department of Health and Human Services is
capable of interrupting the businesses of these alleged perpetrators by suspending payments to
the accused offenders until the investigation was complete. In Miami, Federal agents seized $4.6
million dollars in assets including houses and bank accounts, of alleged violators (Ingram, &
Morgan, 2012). FY 2012 teams recovered $4.2 billion dollars (HHS.gov, 2013).
Patient Protection and Affordable Care Act
The passing of the Patient Protection and Affordable Care Act ("PPACA") discloses in
greater (than FCA) detail the number of existing regulations as they pertain to fraud in
healthcare. The PPACA provides additional funding for law enforcement agencies to track and

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prosecute individuals, clinics, and hospitals who are fraudulently submitting patient
reimbursement claims for services that are either not rendered or are an exaggeration of
procedures submitted for payment.
Penalties for Medicare Fraud
Persons and organizational leadership found guilty of Medicare Fraud run the risk of
being treated as criminals, imposed with fines, penalties, and convictions that result in their
imprisonment. Lawrence Duran of the American Therapeutic Corporation plead guilty to 38
counts of "healthcare fraud, conspiracy, and money-laundering" (Cheung-Larivee, 2011, p.1).
Duran was charged and convicted of stealing $205 million dollars from Medicare. Duran has
been sentenced to 50 years in prison. His penalty is notably the harshest prison sentence related
to healthcare fraud (Cheung-Larivee, 2011).
While persons or organizations are under investigation, Medicare will suspend all
payments to the individuals or organizations until it has completed its investigation (Ingram &
Morgan, 2012).

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In conclusion, an overview of the False Claims Act was presented in detail. The author
developed two matrices to present an account of the regulations and what can be done to reduce
damages. The justification of the cost associated with the civil action as part of the penalty
process is explained. The two agencies that oversee enforcement have been revealed and the
ramifications of non-compliance have been introduced. The Medicare Strike Force and its
capture of government money have been revealed. The Patient Protection and Affordable Care
Act 2010 as it pertains to the enforcement of fraudulent claims was discussed. The types of
violations that pose a threat to the business continuity of an organization and those individuals
found in conspiracy for such crimes have been explained. The penalties for Medicare Fraud
obviously create interruptions in the continuity of any healthcare organization, those penalties
have been given. If Medicare and Medicaid fraud go undetected or unpunished, the long term
effect of the federal government running out of money to fund healthcare will result impacting
every U. S. citizen

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References
FBI.gov, (2012, May 02). Medicare Fraud strike force charges 107 individuals foe
approximately $452 million in false billing. U.S. Department of Justice. Retrieved from
https://www.fbi.gov/news/pressrel/press-releases/medicare-fraud-strike-force-cahrges-
107-individuals-for-approximatley-452-million-in-false-billing
FBI.gov, (2011, September 01). Eighteen charged for Medicare fraud schemes in Detroit
involving $28 million in false billing. U.S. Attorney's Office. Retrieved from
http://fbi.gov/Detroit/press-releases/2011/wighteen-Charged-for-medicare-fraud-
schemes-in-detroit-involving-28-million-in-false-billings
Healthcare.gov, (2012). New tools to fight fraud, strengthen Federal and private health programs
and protect consumer and taxpayer dollars. Newsroom. Retrieved from
http://www.healthcare.gov/news/factsheets/2012/02/medicare-fraud02142012a.html
HHS.gov, (2013). Department of Justice and health and human services announce record-
breaking recoveries resulting from joint efforts to combat health care fraud. Retrieved
from hhs.gov/news/press/2013pres/02/20130211a.html
HHS.gov, (2013). Medicare Fraud 7 abuse: Prevention, detection, and reporting. Department of
Health and Human Services; Centers for Medicare & Medicaid Services. Retrieved from
http://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-
MLN/MLNProducts/downloads/Fraud_and_Abuse.pdf
Ingram, D., & Morgan, D., (2012). Authorities charge 91 in $430 million Medicare Fraud.
Thomas Reuters. Retrieved from https://www.reutersreprints.com.
Cheung-Larivee, K., (2011). Healthcare exec swindled Washington, landed heaviest fraud
sentence ever. FierceHealthcare.com. Retrieved from
http://www.fiercehealthcare.com/node/62851/print

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Staman, J., (2010). Healthcare fraud and abuse laws affecting Medicare and Medicaid: An
overview. Congressional Research Service. Retrieved from
http://aging.senate.gov/crs/medicaid20.pdf
United States Code, (2008, June 7). 31 U.S.C. §3729. Retrieved from
http://www.law.cornell.edu/uscode/text/31/3729
Weaver, J., (2011, February 17). Feds make Medicare fraud sweeps in Miami, nationwide. The
Palm Beach Post. Retrieved from http://www.palmbeachpost.com/news/news/state-
regional-feds-make-medicare-fraud-sweeps-in-miami-nationwid/nPf6d