S.D. to sharpen focus on fraud cases in health care

U.S. Attorney Brendan Johnson said he is restructuring his office to pursue more health care fraud cases, which he predicts will be among the fastest growing areas of criminal concern in South Dakota.

Johnson said his office has put together a new team of lawyers from both the criminal and civil divisions that will devote "significant time" to investigating fraud. Health care fraud is growing nationally, and he wants to have the resources to pursue increasingly "complex and egregious" cases.

"My advice to the medical community is to stay away from gray areas or outright fraud that wastes tax dollars, because we will be watching," he said. "The end result in many of these cases will be that the taxpayers get their money back with interest and penalties, and the medical professional loses their license. That's not a very good risk/reward proposition. Follow the rules and don't cheat."

Kenneth Senger, the senior vice president of the South Dakota Association of Healthcare Organizations, said in an emailed statement that South Dakota hospitals and nursing homes work with the federal government on a daily basis to reduce fraud and abuse.

"We have strong and effective oversight programs in place, and we work in collaboration with all of our payors to make sure that services are billed accurately and properly," Senger said. "Because of the ever increasing complexities of coding and billing for health care services, we strive to look for collaborative solutions to improve processes for everyone involved."

Johnson's office settled a fraud investigation with Sanford Health and two of its surgeons, Drs. Wilson Asfora and Bryan Wellman, after a whistleblower accused the two doctors of defrauding federal health care programs. The lawsuit alleged that Asfora offered Wellman and other doctors money in exchange for them to use spinal implants manufactured by a company Asfora owns.

Sanford paid $625,000 to settle the lawsuit, but the doctors and the hospital did not admit wrongdoing. The doctors and Sanford declined to talk about the details of the lawsuit. Cindy Morrison, Sanford's executive vice president for marketing and public policy, said the hospital settled to avoid distraction.

"For us, it's the issue of time and expense," she said.

The type of action brought against Sanford is known as a qui tam lawsuit. Johnson said he wants people to know that qui tam is an option if they have evidence of fraud.

In qui tam actions, a person who has knowledge of fraud against the federal government can sue on behalf of the federal government to recover money under the Federal False Claims Act, said Monica Navarro, a professor at Thomas M. Cooley Law School in Michigan and an expert in qui tam. Thirty-one states have similar statutes.

The federal cases are filed under seal for 60 days while the Justice Department decides whether to intervene, although the period under seal can be extended, Navarro said. If the government chooses to intervene, it becomes the primary prosecutor. If the government does not intervene, the person who sued — known as the relator — may continue with the action.

Qui tam has been "very effective" at rooting out fraud in government programs because it offers private insiders an incentive to file claims. Insiders with knowledge of fraud are the key, and they can receive 15 percent to 30 percent of whatever the government recovers.

"Without insiders that can really tell you where the skeletons are, it can be difficult to prosecute those cases," Navarro said.

The Federal False Claims Act dates to the Civil War, where authorities used it to prosecute people who defrauded the government's war effort, Navarro said. It wasn't used much after the Civil War until it was amended in 1986.

Much of the outrage in 1986 concerning defrauding of the federal government centered on military programs, said Patrick Burns, the co-director of Taxpayers Against Fraud. But it has turned out that 75 percent of the fraud committed against the government has been in government health care programs.

"Kickbacks, payola, graft — we all know it's bad," Burns said. "But this is how health care works. I don't know of a hospital or doctor that runs straight."

Medicine has been rife with fraud and abuse, Burns said, and medical devices are a growing part of the problem.

In the case against Sanford, the government alleged almost $375,000 in damages to Medicare, Medicaid and Veterans Affairs from May 2010 to April 2011, Johnson said. The damages were multiplied by 1.66, and Medicare received most of the damages, more than $432,000.

David DuBay, the former Sanford employee who brought the action, received $156,250.