HCFAC Annual Report 2017: Monetary Recovery Decreased but Enforcement Remained Steady with Expanded Focus on Opioids

Last Friday, the U.S. Department of Justice (DOJ) and the U.S. Department of Health and Human Services (HHS) issued its 21st Health Care Fraud and Abuse Control Program (HCFAC) annual report, detailing the expenditures, results, and enforcement actions of fiscal year 2017. Compared to FY 2016, HCFAC spending slightly increased. Overall monetary recovery significantly decreased, while overall recoveries resulting from HHS auditing considerably increased. Other than expanded efforts to combat the opioid crisis, enforcement remained more or less consistent with prior trends.

According to newly appointed HHS Secretary Alex Azar, the HCFAC report “highlights the success of HHS and DOJ’s joint fraud-fighting efforts… By holding individuals and entities accountable for defrauding our federal health programs, we are protecting the programs’ beneficiaries, safeguarding billions in taxpayer dollars, and, in the case of pill mills, helping stem the tide of our nation’s opioid epidemic.”

In 1996, the Health Insurance Portability and Accountability Act created the HCFAC as a national initiative to combat the fraud, waste, and abuse plaguing Medicare, Medicaid, and other public and private plans. DOJ and HHS jointly spearhead HCFAC. 

From FY 2016 to FY 2017, the overall HCFAC expenditures for DOJ and HHS increased slightly by four percent, from $963 million to $1 billion. Yet the overall monetary recovery during the same period decreased by over 20 percent from $3.3 billion to $2.6 billion. As a result, the return on investment (ROI)—money recovered for every $1 of HCFAC expenditure—continues to drop, as shown in the below chart.  

	FY 2013	FY 2014	FY 2015	FY 2016	FY 2017
ROI	$8.10 to $1	$7.70 to $1	$6.10 to $1	$5.00 to $1	$4.20 to $1
% decrease	N/A	5%	21%	18%	16%

According to the DOJ, the downward ROI trend is due, in part, to “a reduction in large monetary settlements as many of the large pharmaceutical manufacturers have entered into Corporate Integrity Agreements with the HHS Office of the Inspector General to establish protections against fraudulent activities.”

Criminal and civil enforcement remained relatively flat overall compared to FY 2016 levels. 

On the criminal side: DOJ opened 967 new criminal health care fraud investigations in FY 2017, slightly down from 975 in FY 2016. Federal prosecutors convicted 639 defendants of health care fraud in FY 2017, slightly down from 658 in 2016. HHS-Office of the Inspector General (OIG) conducted investigations resulting in 788 criminal actions in FY 2017, slightly up from the 765 in FY 2016. 

On the civil side: DOJ initiated 948 civil health care fraud investigations in FY 2017, slightly more than the 930 in FY 2016. HHS-OIG investigations resulted in 818 civil actions in FY 2017, including under the False Claims Act and civil monetary penalties. This reflects a significant increase from the 690 civil actions in FY 2016. 

In FY 2017, HHS-OIG excluded 3,244 individuals and entities from federal health care programs as a result of criminal and civil enforcement, down from 3,635 in FY 2016.

The FY 2017 HCFAC report details a re-allocation of funds among the DOJ’s Civil Division, Criminal Division, and the U.S. Attorneys Offices. Of note,

• Funding for U.S. Attorneys Offices has increased by approximately 30 percent (from $54.8 to $71.5 million).
• Funding for the Criminal Division has increased more than 25 percent (from $17.6 million to $22.4 million).
• Funding for the Civil Division has decreased by approximately 32 percent (from $35.3 to $24.1 million).

Those re-allocations indicate that enforcement is shifting toward the U.S. Attorneys Offices as more take a primary or exclusive role in health care fraud prosecutions rather than Main Justice. The increased allocation to the DOJ Criminal Division likely reflects the continued success of the Criminal Division Fraud Section’s Health Care Fraud Unit (including the largest national health care fraud takedown in DOJ’s history in 2017) and the Criminal Division’s significant role in combatting the opioid epidemic. 

HCFAC expenditures for FY 2017 increased for HHS-OIG and the Centers for Medicare & Medicaid Services (CMS). HHS-OIG’s allocation increased seven percent from $255 million in FY 2016 to $274 million in FY 2017. And CMS’s allocation increased about two percent from $559 million in FY 2016 to $569 million in FY 2017. 

Those increases yielded greater recovery for Medicare but less for Medicaid. CMS and HHS-OIG audit disallowances recovered $365 million in FY 2017, which represents more than a 360-percent increase compared to the $79 million recovered in FY 2016. For Medicaid, however, CMS and HHS-OIG audit disallowances recovered $350 million in FY 2017, which represents a 44 percent decrease compared to the $504 million recovered in FY 2016. 

In addition to the well-publicized, stepped-up efforts to combat the opioid epidemic, the HCFAC report also highlights criminal and civil investigations in several health care sectors. Those include home health, hospice, medical devices, pharmaceuticals, nursing homes, and hospitals and health systems, which all continue to face close scrutiny from DOJ, HHS-OIG, and other enforcement authorities. 

For a more detailed analysis of the 2017 HCFAC report and what it reveals about enforcement risks facing health care companies and other industry stakeholders, please join Crowell & Moring Partner William S.W. Chang and Counsel Stephanie D. Willis on April 17, 2018 from noon to 1 pm EST for a CLE webinar titled, “Health Care Fraud 2018: Understanding Where the Government Is Heading.”

In February 2018, Will Chang joined Crowell & Moring from the DOJ Criminal Corporate Healthcare Fraud Strike Force. Stephanie Willis was an Associate Counsel at HHS-OIG before entering private practice.