If you examined a wall map of the U.S. that had colored pins indicating pending or settled healthcare fraud investigations, the focal point would be the Northeast, with the heaviest concentration of pins surrounding Philadelphia and Boston, healthcare lawyers and government officials say.
A concentration of pins in Florida also would catch your eye. The Midwest and many states in the Far West and South would be conspicuous for the large, blank spaces on the map.
That raises some questions: Are healthcare providers in Philadelphia dirtier than their counterparts in Omaha, Neb.? Is there less healthcare fraud in Colorado or Tennessee than in Massachusetts or Florida? What accounts for those regional variations?
Call it the geography of fraud.
Statistics on fraud prosecutions by jurisdiction are sketchy. Justice Department officials say they cannot provide numbers of healthcare fraud cases either by state or by U.S. attorney districts, although they acknowledge that U.S. attorneys are required to report all pending and settled healthcare fraud cases for annual reports and resource allocations.
Nevertheless, there is numerical and anecdotal evidence of clear geographic patterns of healthcare fraud. In the past five years two U.S. attorney's offices-in Boston and Philadelphia-have accounted for more than $1.3 billion in civil recoveries to the Medicare trust fund, more than half the $2.5 billion returned during that time by all U.S. providers.
In addition, HHS' inspector general's office reported that Pennsylvania logged 53 civil settlements from 1998 to 1999, compared with 46 in Florida and 17 in Massachusetts. During that same period the inspector general recorded no settlements in Arkansas, North Dakota, Rhode Island, Utah, West Virginia or Wyoming and five or fewer settlements in Alabama, Alaska, Delaware, the District of Columbia, Hawaii, Idaho, Iowa, Kentucky, Maine, Michigan, Minnesota, Montana, Nebraska, New Hampshire, Oklahoma, South Carolina, Tennessee and Vermont.
Geography, history, Sheehan. Government officials and healthcare lawyers attribute some of the variation to population density-where there are people, there are hospitals, physicians and other healthcare providers to serve them. Many Medicare beneficiaries retire to warm climates, attracting fraudulent healthcare providers along with the honest ones.
History plays a role as well.
"The Northeastern United States is the most mature healthcare marketplace in the country," notes Brent Saunders, attorney and director of the healthcare group at PricewaterhouseCoopers' Washington office. Geography and settlement patterns make it the most densely populated and healthcare-services-intense part of the country, Saunders says.
"That makes it more conducive for concentrating anti-fraud resources. If you looked at healthcare fraud in the 1990s, it was better to be a hospital in California than in Philadelphia. I was a lawyer from Philadelphia, and I used to joke at conferences that our main export was healthcare fraud."
And then there's James Sheehan. The head of the civil division of the Philadelphia U.S. attorney's office is to healthcare fraud prosecutions what Mark McGwire is to home-run hitters-the leader of the pack.
Since the late 1980s Sheehan has notched scores of high-profile scalps in healthcare fraud prosecutions, from the earliest clinical laboratory fraud cases at the start of the decade to the pneumonia diagnosis upcoding national investigations in the mid-90s to the ongoing fraud and kickback initiatives against pharmaceutical benefit companies today. Sheehan's office has trained its own pool of healthcare fraud investigators, brought in prosecutors from other jurisdictions for fraud seminars and been a legal petri dish for culturing and replicating national healthcare fraud investigations.
"It's more than just Sheehan," observes Saunders, the past president of the Health Care Compliance Association, an organization he co-founded to serve a $600 million-per-year compliance industry that barely existed five years ago.
Saunders says about one-third of that $600 million is spent on risk assessments and audits, another third on investigations and legal and consulting fees, and the remainder on training initiatives, recruiting and development of materials.
"But he's a big part of it. He's inspired a lot of other U.S. attorneys. He's been successful in developing and making cases, and that makes headlines," Saunders says. "That's not been his motivation, but other U.S. attorneys have seen that as one of the fruits of his labors. If you want to make a name for yourself, you copycat Jim Sheehan." Saunders adds there's a sophistication and zeal in prosecuting healthcare fraud cases in the Northeast that evolved out of Sheehan's office and spread.
Resource rewards. Philadelphia whistleblower attorney Marc Raspanti of the firm Miller, Alfano & Raspanti agrees.
"Philadelphia is the epicenter of healthcare fraud prosecutions chiefly because of one man-Jim Sheehan," Raspanti says.
"One reason why is that fraud prosecution is knowledge- and experience-driven. Those who take the time to learn the business and understand how healthcare fraud occurs feel more comfortable investigating and pursuing cases. And those who don't, don't. Sheehan has."
He says the federal government rewards those U.S. attorneys offices that do. It does not offer the same level of resources to offices that shun fraud cases, although government sources deny that it's comparable to a bounty system. That explains why some jurisdictions have returned hundreds of millions of dollars to the Medicare trust fund and sent crooked healthcare providers to jail, Raspanti says, "while in other jurisdictions healthcare fraud is practiced with near impunity."
The real estate axiom "location, location, location" applies to attorneys and where they file whistleblower lawsuits, he says.
"Two miles can make all the difference in the world. Bring a case in Camden (N.J.), and it might not go anywhere. In Philly, if it's a good case, it will be thoroughly investigated."
Sheehan is sheepish about talking about his accomplishments in healthcare fraud. He says other U.S. attorneys share the results of investigations they've done.
"We've made a concerted effort to benefit from what everyone else is doing," he said. "If we have an advantage, it is that this office has a critical mass of sophisticated, intelligent, knowledgeable and experienced investigators and prosecutors working here."
Whistleblower influence. Stuart Gerson, a healthcare fraud attorney with the Washington office of Epstein, Becker & Green and a former Justice Department official, says whistleblowers often drive healthcare fraud prosecutions because their attorneys determine where the lawsuits are filed.
"And they're more likely to file in places where they've found receptive ears in the past and where they've received help from the government," Gerson says. "There's no doubt that there's been a greater intensity of interest in places like Tampa, Fla.; Boston; Sacramento, Calif.; and yes, Philadelphia."
Gerson says the Justice Department in Washington investigates every whistleblower lawsuit first and then later refers each one to local U.S. attorneys for consideration. "But it's quite true that if the local U.S. attorney is not aggressive in following through that it could have an echo effect on the Justice Department," making it less likely that the case will move forward, he says.
Sheehan says another contributing factor to regional variations in fraud prosecution is a local concentration of crime that forces a U.S. attorney's hand in allocating prosecutorial resources.
"In an area overrun with cocaine or flooded by illegal immigrants, your office is always putting out fires," he explains. "Offices in border states can be overwhelmed with reactive cases. In those situations it's hard to free up agents and prosecutors for long-term investigations."
The U.S. attorney's office in New York, for example, is responsible for monitoring organized crime and prosecuting related cases and for tracking schemes related to the stock and financial markets, which can sap resources.
Fed fiefdoms. Michael Ruggio, a healthcare defense lawyer in the Washington office of Jenkens & Gilchrist, says that all 93 U.S. attorneys may work for the Justice Department, but each office functions as a separate fiefdom reflecting the U.S. attorneys' personalities and priorities. Ruggio, a trial lawyer for the U.S. Justice Department for eight years, witnessed the evolution of regional government enforcement efforts against healthcare fraud.
"What differs is that you have activist and nonactivist U.S. attorneys," Ruggio says, pointing out that staffing, experience and expertise vary widely among U.S. attorneys, some of whom have yet to file or try a healthcare fraud case.
Ruggio says the healthcare fraud task forces funded by the 1996 Health Insurance Portability and Accountability Act brought together the FBI, HHS' inspector general's office, the Internal Revenue Service, the Justice Department, state Medicaid fraud-control units and the U.S. Postal Service to meet regularly and discuss local fraud cases.
"One major case gives an office the knowledge and resources to step up their efforts," he says.
"The large settlements and recoveries have been profitable for Justice, and it, in turn, is more willing to fund that office, which can now show a need for more agents and prosecutors. The government is more willing to invest in an office that is producing big cases," Ruggio says.
Which leads to more cases and more colored pins.
He says there has been a concerted federal effort to target healthcare fraud in high-population centers, particularly since the 1995 initiative Operation Restore Trust, which looked at nursing homes, hospice care and home health in Arizona, California, Florida, Illinois, New York and Texas.
Not everyone has jumped on the healthcare fraud bandwagon, Ruggio recalls. You can let someone know the fraud may be there, he says, but you can't make an office prosecute a healthcare kickback case.
"Were there U.S. attorneys who had no interest in healthcare fraud? Yes, there were a whole bunch of them. They thought it was too complex, or they lacked the resources and experience, or didn't think there was any money in them," he says.
Another factor influencing healthcare fraud whistleblower suits could be the receptiveness of particular appellate court districts.
The whistleblower suit against Columbia/HCA Healthcare Corp. and Quorum Health Group was originally filed by James Alderson in 1993 in U.S. District Court in Butte, Mont. But it was moved in 1995 to Tampa to take advantage of both a more-fraud-experienced U.S. attorney as well as an 11th Circuit U.S. Court of Appeals precedent that false statements on Medicare cost reports may be considered material to a case.
Malcolm Sparrow, a professor at Harvard University's Kennedy School of Government and the author of License To Steal: Why Fraud Plagues America's Health Care System, says the degree of political support for investigating and prosecuting healthcare fraud varies considerably.
"It's common knowledge among healthcare fraud investigators that you have to dance delicately in some states because of the political power wielded by some provider associations and prominent healthcare institutions there," Sparrow says.
Sparrow points to regional variations in attitudes toward fraud, citing a 1993 survey from the Insurance Research Council. That survey revealed that patients in New Jersey, New York and Pennsylvania were nearly twice as likely to pad insurance claims as patients in the rest of the nation.
"There are huge differences between attitudes in Minnesota and New Jersey," he says.
Spreading out. John Bentavoglio, the Justice Department's special counsel for healthcare fraud, says U.S. Attorney General Janet Reno has directed the department to develop a geographic information system mechanism to allocate resources, not just in healthcare fraud, but in areas of drug enforcement and terrorism.
"We are also pursuing the goal of geographic coverage in every state," Bentavoglio says. "We think there should be a minimum investigative presence in every state."
Now, he says, about 40 states are covered.
Bentavoglio says U.S. attorney offices shouldn't be graded only by the number of the cases they bring.
"The recent National Medical Care (now Fresenius Medical Care North America) settlement for almost a half billion dollars consumed the resources of the Boston office for some time," he points out. "And their focus on this case was totally appropriate."
He says 90% of the cases coming to Justice were referred by whistleblower lawsuits, investigative agencies such as the FBI or HHS' inspector general's office, and other outside sources. "We have a very limited ability to determine our own caseload," he says.
Although every U.S. attorney's office has a healthcare fraud coordinator to help develop expertise in fraud cases, not every district has fraud investigators from the FBI and the HHS' inspector general's office, Bentavoglio says.
"So in districts where there's no real investigative presence, when Medicare contractors find potential fraud cases, they refer them to the nearest regional (HHS' inspector general's) office," Bentavoglio says.
He adds the Justice Department allocates its resources based on a formula that takes into account the number of Medicare beneficiaries in that region, as well as the manpower needs of a district.
"There's more fraud in Miami (and other areas) where our seniors are," he says. "But there is no bounty system. Resources are allocated according to need."
While Bentavoglio says there's a lot of healthcare fraud left to uncover, he believes government initiatives have been effective in detecting, deterring, prosecuting and reducing fraud. "My sense is, it was a lot easier to commit healthcare fraud five years ago than it is today," he says.
Aggressive individuals. Healthcare providers that have felt the heat from geographically specific scrutiny attribute the attention to several factors.
"These investigations are the creatures of aggressive U.S. attorneys," says Richard Wade, the American Hospital Association's senior vice president of communications.
Mary Yost, a spokeswoman for the Ohio hospital association, says Ohio hospitals feel particularly singled out because of one man and one investigation.
"Assistant U.S. Attorney James Bickett in Cleveland pioneered the Operation Bad Bundle investigation, tried it out on our hospitals and then exported it to other states," Yost says. That investigation looked into hospitals' billing separately for laboratory tests that should have been billed as series of tests under Medicare. "Because the case began here, we didn't know how to protect our hospitals and were easier prey. That's why it spread so extensively throughout Ohio. By the time it reached other states, they'd had the time to learn from our experience and were better able to defend themselves."
Yost says that a New Jersey consultant, Harry Metzinger, who later pleaded guilty to federal fraud charges and cooperated with the government, also snared a number of Ohio hospitals.
"Who your fiscal intermediaries are can also determine whether you're hit or spared," she says. "Ohio hospitals weren't hit by the `72-hour window' national investigation because our (fiscal intermediary) instructed us early, which helped us to comply." Under that probe, the government said some providers were billing separately for diagnostic tests taken within 72 hours of an admission that should have been covered by the inpatient DRG payment.
Charles Pierce, president of the Florida Hospital Association, says that when the government stepped up fraud enforcement initiatives in the mid-1990s, Florida was one of its priorities. Of the state's three U.S. attorneys, the Miami office would set the tone, he says.
"It was clear that we had a very aggressive office in Miami, among the most aggressive in the country," says Pierce, who declined to say whether he viewed the added government scrutiny as unfair.
Lewis Morris, HHS' assistant inspector general for legal affairs, attributes some of the regional variation not only to individual U.S. attorneys, but to small cadres of talented investigators, auditors and prosecutors within a few of those offices.
"One or two of those people within an office can build hard, effective cases," says Morris. That can skew the numbers up within a district, making it appear as though there's more fraud there. "We're trying to spread that wealth and create teams that can be replicated and grown elsewhere."