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Compliance Risks Are Real – OIG Report Reflects That The Government Projects Almost $26 Billion In Recoveries And Savings In FY 2010

When advising clients regarding the legal risks potentially implicated by the health care transactions into which they contemplate entering, we at The Health Law Partners have consistently articulated the mantra that “there is substantially heightened scrutiny in the regulatory arena.” It is not uncommon for clients to inquire, upon hearing this, whether the risks are more theoretical or real. The semi-annual report issued by the Department of Health and Human Services (“HHS”) Office of Inspector General (“OIG”) on December 15th (the “Report”) provides a clear answer that, by any standards, compliance risks are real and enforcement is increasing. Some highlights of the Report include the following:

• The Government expects recoveries and estimated savings of about $25.9 billion in fiscal year (“FY”) 2010. This amount includes $1.1 billion in audit receivables and $3.8 billion in investigative. The remainder is attributable to legislative and other cost‐saving actions that were supported by OIG audits and recommendations.

• In 2010, the OIG excluded 3,340 individuals and entities from participation in federal healthcare programs.

• The agency initiated 647 criminal actions and 378 civil actions for program-related offenses.

• In collaboration with the Department of Justice, the interagency Health Care Fraud Prevention and Enforcement Action Team (“HEAT”) efforts have resulted in the filing of charges against 88 individuals or entities, 89 convictions, and $71.3 million in investigative receivables.

As 2010 draws to a close, the Report vindicates our predictions that the trajectory of healthcare enforcement would only continue to increase. The same, in our view, will hold true for 2011, with greater resources deployed to combat health care fraud, thus translating into an even-higher level of regulatory scrutiny in the health care sector. And, while this clearly should not deter providers from entering into transaction where the business metrics are favorable, the Report is a clarion call to ensure that the framework of any deal be structured by legal counsel who can identify, and navigate, the spectrum of healthcare regulatory risks to which the transaction likely will be subject.

For more information, please contact the Health Law Partners at (248) 996-8510, (212) 734-0128, or (770) 804-6475 or visit the Compliance specialty page or the Stark and Anti-Kickback specialty page on the HLP website.

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