New healthcare fraud legislation proposed last week by the Clinton administration seeks to employ lessons learned from a previous federal effort to crack down on Medicare and Medicaid scams.
Administration officials said the past effort, called "Operation Restore Trust," which has led to exclusion of 177 providers since it began nearly two years ago, has taught federal agencies how to keep fraudulent providers out of the programs, kick out the bad ones who get in and impose stronger penalties on violators.
In unveiling the legislation last week, Clinton cast healthcare abuses as a "fraud tax" that falls "most heavily upon our senior citizens."
But provider groups objected to a provision in the new legislation that would expand existing kickback laws, which deal solely with Medicare and Medicaid patients, to patients covered by private-sector insurance.
Mary Grealy, senior Washington counsel for the American Hospital Association, said the kickback laws are outdated because they consider illegal compensation solely in the context of fee-for-service.
Contracts between providers and private-sector managed-care plans sometimes include arrangements that could be considered compensation in return for increased referrals under the kickback laws.
The kickback provisions of the 1977 Medicare and Medicaid fraud-and-abuse statutes bar any form of remuneration to induce referrals.
The new legislation also would allow courts and HHS' inspector general's office for the first time to impose civil fines on providers of up to $50,000 per violation.
Under current law, the only civil remedies available to federal agents are to suspend or exclude providers from the Medicare and Medicaid programs. Those sanctions are so severe that the feds are hesitant to use them, proponents of the new legislation say.
Rep. William M. Thomas (R-Calif.), chairman of the House Ways and Means health subcommittee, called the plan a "positive step toward saving the Medicare program from bankruptcy" and vowed to hold hearings on healthcare fraud.
Other provisions of the plan include:
Prohibiting undervaluation of the assets of hospitals and other providers when ownership changes hands. That provision aims to prevent hospitals from claiming an artificial loss when they are sold and becoming eligible for payments under Medicare's recapture program.
Assessing civil fines against providers that hire practitioners who have been kicked out of the programs.