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Eric Holder, Loretta Lynch and the future of healthcare fraud enforcement


Earlier this month, the Department of Justice (DOJ) released a long list of accomplishments credited to departing Attorney General Eric Holder. The lengthy bulleted list read like a drawn out retirement speech--one you can't make it through without dozing off--highlighting the progress of the department in addressing terrorism and national security, violent crime, transparency, fraud and environmental protection under Holder's leadership since he was sworn in 2009.

It was far from a "fair and balanced" review of his time leading the department--it was compiled by the DOJ, after all. There have been plenty of criticisms levied against Holder, from his timid approach to prosecuting banks to an often hostile relationship with the press.

Isolate Holder's approach to Medicare and Medicaid fraud, though, and his record is fairly impressive.

Early in his tenure, Holder created the Health Care Fraud Prevention and Enforcement Action Team (HEAT), adding to the Medicare Strike Force program that had been in place in specific cities since 2007. The HEAT program, which has been in place for almost six years, has charged nearly 700 individuals with fraud schemes that totaled $2.2 billion. Holder also prosecuted fraudsters under the False Claims Act, recovering $15.2 billion in false claims against federal health agencies. This included notable, multi-billion settlements with major pharmaceutical companies including Johnson & Johnson and GlaxoSmithKline.

Pundits have argued Holder's legacy since he announced he would be stepping down, but it seems pretty clear that there has been a distinct shift when it comes to fighting fraud, particularly given that False claims Act recoveries have maintained a steady annual ascent. Now that Loretta Lynch is officially taking the torch from Holder, it's worth considering how she will pick up where he left off.

Lynch's previous rhetoric on healthcare fraud offers some clues. In a 2011 testimony before the House Oversight and Government Reform Subcommittee on Healthcare, Lynch said healthcare fraud was a "serious problem facing our country" and a "priority of the Department of Justice." She pointed to the success of the HEAT program and collaborative approach the DOJ has adopted, working with U.S. Attorneys General and the FBI.

Lynch, formally the US Attorney for the Eastern District of New York, can back up that rhetoric with an impressive history of fighting fraud.

  • In 2009, Lynch helped negotiate a $302 million settlement with Quest Diagnostics for misbranded diagnostic test kits.
  • She helped bring down a 12-person $95 million fraud ring in 2011.
  • In 2013, she convicted a Staten Island physician who was sentenced to more 151 months in prison for a $77 million Medicare fraud scheme.
  • Just last month, she convicted a physician submitting $14.2 million in false claims for vitamin injections and physical therapy.

A Wall Street Journal article described her low-profile approach to taking on high-profile cases. In 2014, she famously went after Staten Island Representative Michael Grimm for fraud and tax evasion. He eventually pleaded guilty to one charge of tax evasion and resigned from office. That experience may prove beneficial, given the DOJ's current case against New Jersey Senator Robert Menendez. Former associate attorney general Tony West recently told the Washington Post that Lynch was "steel wrapped in velvet, in­cred­ibly tough with a diplomatic touch."

We can scrutinize Lynch's resume to death, but the truth is the infrastructure is already in place for her to pick up where Holder left off. The Affordable Care Act has amended to the False Claims Act, strengthening rules surrounding anti-kickback liability and providing more leeway for whistleblowers. In fact, federal prosecutors find more success than ever before by jumping into qui tam lawsuits. The government has also devoted more resources toward recovering Medicare and Medicaid overpayments by targeting high risk areas and replacing the outdated "pay-and-chase" model with fraud prevention methods that draw on predictive analytics.

There's no question that healthcare fraud will remain a federal priority, so questions surrounding Lynch's tenure are more nuanced. How will she deal with with pharmaceutical manufacturers that seem content to cut settlement checks in order to routinely violate anti-kickback regulations? How will she manage high-risk fraud areas such as home health, durable medical equipment suppliers, ambulance companies or the bottom half of South Florida? How will she continue the transition way from the longstanding "Whac-A-Mole" approach and toward predictive analytics that actually prevent fraud rather than allowing schemes to play out for years?

Unfortunately, these are questions that we won't have answers to for some time. Considering her first official day as attorney general was met with riots and chaos in the city of Baltimore, something tells me healthcare fraud may not top her priority list at the moment. Given the current enforcement climate, though, it's probably not very far down.

It'll be interesting to see how Lynch's approach differs from Holder's, if at all. Either way, I wouldn't expect her to ease her foot off the gas pedal. If anything, you might see her flash a little more steel. - Evan (@HealthPayer)

Related Articles:
Federal False Claims Act scrutiny shows no signs of letting up
False Claims Act enforcement continues in high gear
Whistleblowers gain power in government anti-fraud efforts
To fight fraud, go in with the new, out with the Whac-a-Mole
Tighter controls' oversight will mitigate endemic fraud in South Florida
Ambulance services contribute to $350M in fraud annually