When former WellCare Inc. general counsel Thaddeus M.S. Bereday walks into a federal courtroom in Tampa on Nov. 15 for his scheduled sentencing hearing, he'll be facing a maximum penalty of five years in prison and a $250,000 fine for making false statements to defraud Medicaid. Bereday, who pleaded guilty on June 28 to one count of "knowingly and willingly" submitting false expenditures, is one of the latest examples of the federal government's crackdown on health care fraud. Bereday, who is free on bond, has declined comment for this article. Thanks to his cooperative plea deal, however, the Justice Department has said it will seek to lower his sentence at the hearing.

While Bereday is one of the few lawyers to be charged with health care fraud recently, he is not the only professional by any means. The U.S. Department of Justice had a record two weeks in July, citing professionals for health care fraud and other misdeeds.

For example, from July 5 to July 17, a clinical psychologist in Louisiana was sentenced to 180 months in prison and ordered to pay $13.8 million in restitution for Medicare fraud; a licensed physician in Miami pleaded guilty to submitting false claims and illegally prescribing controlled substances and a Brooklyn pharmacy owner and operator was charged with allegedly submitting $9 million in false claims to Medicare and Medicaid.

But the record haul came on July 13, with the annual health care fraud "take down." Prosecutors charged 412 defendants across the country, including 115 doctors, nurses and other licensed medical professionals, for allegedly participating in health care fraud schemes involving more than $1.3 billion in false billings. Of those charged, over 120 defendants were charged for their roles in prescribing and distributing opioid medications and other dangerous narcotics. 

Civil enforcement actions are also a big business for the government, and have garnered some of its largest fraud settlements and resolutions. Of the more than $4.7 billion the agency recovered from False Claims Act cases in fiscal year 2016, more than half—$2.5 billion—involved the health care sector, according to the department.

Of the 10 largest False Claims Act (whistleblower) cases since 2000, nine involve health care fraud. (See chart on page 49).

Some of the cases in the July 13 operation, in fact, began as FCA claims: When plaintiffs show they have a viable case, the government can step in and take over the litigation, which often results in a settlement that the government uses to cover its losses, and a monetary reward for the whistleblower. Government officials and whistleblower attorneys say the health care industry is a natural target for enforcement activity largely because of the staggering amounts of money involved. U.S. health care spending grew to $3.2 trillion, or 17.8 percent of the gross domestic product, in 2015, according to the U.S. Centers for Medicare & Medicaid Services, an agency within the U.S. Department of Health & Human Services. As Kenneth Blanco, acting assistant attorney general of the DOJ's Criminal Division, said at the American Bar Association's 27th Annual National Institute on Health Care Fraud in May, " We see time and time again that industries with large amounts of money are susceptible to high levels of fraud. Health care is no exception."

Whistleblowers Are Setting Policy Priorities

Most, if not all, of the recent major settlements recovered by the Justice Department's Civil Division fraud section were driven by whistleblowers, says former DOJ senior counsel Eva Gunasekera, who is of counsel in the Washington, D.C., office of Finch McCranie, an Atlanta firm with strong practices in whistleblower representation, monitorships and compliance.

The False Claims Act remains the government's primary civil enforcement tool , says her colleague, Renée Brooker, who is of counsel at Finch McCranie in Washington, D.C., and a former assistant director in the civil division. "We would not have been able to pursue those cases but for the whistleblower filing the case and tipping us off," Brooker says. Cases involving hospice care and pharmaceutical off-labelmarketing—promoting drugs for uses unapproved by the U.S. Food and Drug Administration—are strong examples of this trend, she says. Initial allegations of off-label marketing encouraged other whistleblowers to come forward, which produced more big settlements and corporate integrity agreements. For example, a record $2.3 billion settlement with Pfizer Inc. for off-label marketing in 2009, brought more cases. As a result, seven of the top 10 FCA health care cases since 2000 involve pharmaceutical companies.

Feds also increasingly pursue civil and criminal cases against hospice services and nursing homes on charges of providing unneeded treatment under Medicaid and Medicare. On July 17, three linked Ohio nursing home operators and their executives agreed to pay $19.5 million to resolve allegations of filing false claims with Medicare for medically unnecessary rehabilitation therapy and hospice services.

Mischarges to the Medicare Part C (Medicare Advantage) prescription drug program are another, relatively new area of False Claims Act activity. More Kickback Allegations

Most False Claims Act cases accuse health care companies of fraudulent billing. But at least half also allege illegal kickbacks—a definite increase in recent years. The unlawful remuneration includes everything from discounted lease payments, to gift cards and exorbitant speaking fees. It's "usually not cash in an envelope," Gunasekera says."Whenever you are incentivizing a health care provider to make certain clinical judgments, whether it's prescribing certain drugs or services to a patient, in return for remuneration, it's fraud, " she says. In what could signal a new area of inquiry, prosecutors on May 31 for the first time applied the anti-kickback statute to promotion and sale of electronic health record systems. The DOJ announced that one of the nation's largest vendors of electronic health records, eClinicalWorks, based in Westborough, Massachusetts, had agreed to pay $155 million to settle civil fraud and kickback charges in Vermont for failing to meet federal standards in electronic record keeping. As a result legal observers may see an uptick in the number of whistleblowers seeking to file electronic health records cases. Health care company marketing programs also may be interpreted as kickback schemes, says Patrick Cotter, a former federal prosecutor and head of the government interaction and white-collar practice group at Greensfelder, Hemker & Gale in Chicago.

"If the [marketer's] compensation is in any way tied to results—the number of prescriptions flowing to the client or the increased number of patients the pain clinic gets, for example—the government is taking the position that such marketing constitutes kickbacks," he says. Companies should therefore immediately undertake a thorough review of their marketing techniques as well as key government billing and record keeping practices, Cotter says.

Individual Prosecutions on the Rise

Although Sally Yates—deputy AG in the latter part of the Obama administration and acting AG until her high-profile firing in January—is no longer at the Justice Department, the memo that bears her apparently name lives on. The Yates Memo outlined a policy of making corporate executives responsible for wrongdoing on their watch. Since it was issued in September 2015, more individuals have been criminally prosecuted, whether in health care fraud or white-collar crime generally, says Gejaa Gobena, a partner at Hogan Lovells and former chief of the DOJ Criminal Division's health care fraud unit.

And in the past six months to a year, the civil side also has seen an increase in actions, he says.

In September 2016, for instance, the DOJ issued new guidance stressing that individual accountability required for cooperation credit in criminal cases also extends to civil ones. "The department is not giving individuals civil releases the way they have in the past," Gobena says. "The mandate is to evaluate individuals."

In a late 2016 case, the DOJ reached a settlement with Ralph Cox III, the former CEO for Tuomey Healthcare System Inc., now part of Columbia, South Carolina-based Palmetto Health. Cox allegedly entered into illegal compensation agreements with physicians who agreed to refer patients to Tuomey. The company then allegedly improperly billed Medicare and Medicaid , according to the Feds. Tuomey Health entered a $72.4 million settlement with the government, dismissed Cox and agreed to be sold. Cox eventually agreed to pay $1 million to settle the allegations, and accepted a four-year debarment from participating in federal health care programs. Laura Cordova, a partner at Crowell & Moring and former assistant chief in the Criminal Division fraud section, who most recently oversaw the corporate health care fraud strike force, says these "very public, very embarrassing" individual prosecutions could have a deterrent effect.

Top Tools: Data Analysis, Strike Forces

In recent years, the Justice Department increasingly has relied on data analysis, including predictive analytics, to help determine which cases to investigate and prosecute. Gobena says he expects this to continue, and perhaps expand to issues such as opioid overprescribing.

A case from last October involving skilled nursing facility chain Life Care Centers of America and its owner underscored the government's use of statistical sampling in calculating damages in False Claims Act health care fraud cases, Finch McCranie's Brooker says. In that instance, Life Care paid $145 million to settle a whistleblower's allegations that from 2006 to 2013, it billed federal health care programs for the highest level of therapy, whether or not patients needed it, such as applying "excessive electrical stimulation" to an 88-year-old patient with colon cancer.

Significantly, a federal judge ruled that government lawyers could review a random sample of 400 patient admissions to Life Care Centers and extrapolate its findings to more than 50,000 other patient admissions—potentially winning those damages without individually proving every false billing claim.

The DOJ also has effectively deployed the Medicare fraud strike force, an interagency team made up of investigators and prosecutors that focuses on the worst offenders. It uses advanced data analytics to identify aberrant billing levels in fraud "hot spots" and target suspicious billing patterns, as well as schemes that migrate from one community to another, the Justice Department says.

All Opioids, All the Time Going Forward?

In response to a request for comment about its strategy for prosecuting health care fraud going forward after the Justice Department's big July takedown—touted as the largest health care fraud enforcement action in its history—a spokesman said simply, "The announcement today speaks for itself." An examination of complaints, however, reveals that at least some defendants were charged with felony drug charges, such as the dispensing of controlled substances, but not with traditional health care fraud allegations such as false billing. Some observers say the shift represents a change in priorities for the department toward illicit opioid distribution prosecution under the Trump administration, as opposed to white-collar fraud. Cordova says, "The department as a whole and the enforcement agencies are looking hard and being creative in the ways they pursue, criminally and civilly, any entity that touches opioids in any way." Cordova says this means companies that are in any way associated with producing and distributing or prescribing opioid medications need to carefully assess their compliance programs.

General counsel at all health care companies, however, should familiarize themselves with the prosecutorial theories the government is pursuing, perhaps even taking some time to review the indictments included in the takedown, she says.

Former federal prosecutor Cotter agrees.

"GCs need to include in their consideration of how they represent their company [with] the potential for criminal exposure," given the government's "much more harsh, much more aggressive treatment" of alleged health care fraud, he says. Also, pursuing white-collar fraud and illegal opioid distribution are not mutually exclusive goals as the two often coincide, says Gobena. Civil enforcement is not likely to abate. "When you look at the annual reports issued to Congress, the return on investment is largely driven by civil recoveries," Gobena says.

A Wake-Up Call for Compliance

The government's recent crackdown on health care fraud should be a wake-up call for compliance. Donna Thiel, a health care practice shareholder in the Washington, D.C., office of Baker, Donelson, Bearman, Caldwell & Berkowitz, says there's a tendency for a company's compliance plan to be simply "a big notebook with lots of policies and procedures that sits on a shelf." Instead, the plan should be a "living document" that is revisited often.

Annual training, perhaps by outside consultants, is a good time to notify employees of updated or changed regulations she says. Meaningful internal auditing is also crucial. Occasional reviews of claims, employee interviews and other procedures is important. If reviews reveal egregious conduct, officials should consider self-reporting it in the hopes of receiving some sort of cooperation credit, Cotter suggests.

Every compliance plan must specify some sort of reporting capability. Individuals tasked with receiving health care-related complaints must document what steps were taken to investigate them, even if the complaint ultimately was deemed to lack merit.

"If you get a complaint about a billing matter or a kickback issue, you cannot say, 'Oh, that's nothing,'" Thiel says. "There is no case in which it is OK to ignore something like that, because then you get a disgruntled employee and have to worry about a whistleblower."

Contact the reporters Kristen Rasmussen at krasmussen@alm.com; Sue Reisinger at sreisinger@alm.com Twitter: @sreisinger.