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Why health care workers get more jail time than Wall Street CEOs

June 19, 2015

    Sam Bernstein, Daily Briefing

    As Daily Briefing readers know, fraud is sadly common across health care. (Just last week, we reported on Earnest Gibson, a former hospital president who was sentenced to 45 years in prison for helping to defraud Medicare of $158 million.)

    And in recent years, the Department of Justice (DOJ) has dramatically stepped up its prosecutions of health care fraud cases.

    But how does federal scrutiny of health care fraud compare with other types of white-collar crime? 

    16 doctors among 90 arrested in Medicare fraud sweep

    By the numbers

    Consider the case of hedge fund billionaire Raj Rajaratnam, who was found guilty of insider trading in 2011. Rajaratnam enriched himself to the tune of $54 million and received the longest prison sentence for insider trading on record—11 years.

    11 years in prison is no picnic, but it's a short stay compared to the 45 years Gibson received. And the disparity is even starker when you consider the 13 other defendants in the Rajaratnam case received an average sentence of just three years.

    According to a government report, DOJ in fiscal year (FY) 2014:

    • Launched 924 new criminal health care fraud investigations;
    • Filed charges in 496 cases; and
    • Ultimately convicted 734 defendants for health care fraud-related crimes.

    While the number of DOJ-led health fraud investigations in FY 2014 was not an all-time high, it's a dramatic leap from the approximately 600 cases brought during President Obama's first year in office.

    Similar statistics are harder to come by for white collar financial crime in other sectors, but overall, very few criminal cases were brought against individuals involved in the 2008 financial crisis. As of 2014, only one senior executive linked to the financial crisis has gone to prison.

    Why the difference?

    Some would argue that it's easier for regulators to go after white-collar criminals in the health care sector than on Wall Street. Hospital workers almost certainly don't possess the resources or connections that well-paid investment professionals might have.

    There's also an undeniable reason for the disparity: Lawmakers began actively targeting health care fraudsters almost two decades ago.

    When Congress passed the Health Insurance Portability and Accountability Act (HIPAA) in 1996, it also created a special task force to investigate health care fraud. That task force—known as the Health Care Fraud and Abuse Control Program—makes an annual report to Congress about how much money it recovers for Medicare and Medicaid. 

    And since the program was launched in 1997, officials have credited the task force with recovering $27.8 billion for the Medicare Trust Funds.

    The program also has ramped up in recent years; the task force collected $1.9 billion in FY 2014 alone.

    That's partly because the Affordable Care Act gave the task force more tools to go after fraud and factored the task force's financial contributions into the long-term cost of the ACA. (The program had a dedicated budget of $571 million in FY 2014.)

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    If there's a takeaway, it's that Congress has created a strong financial incentive for prosecutors to pursue health care fraud cases aggressively. So while it may be a worthy effort, there are few parallels elsewhere in the justice system.

    And when it comes to government efforts to fight fraud, health care may have a special target on its back.

    Make sense of the changing fraud and abuse landscape

    The Obama Administration has taken several steps to intensify its enforcement activities, including recent amendments to the False Claims Act and unprecedented coordination between the Department of Justice and the Department of Health and Human Services.

    In this webconference, we help you make sense of the changing fraud and abuse landscape.

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