Genetic Testing Scheme Prosecuted With New Favorite Tool: Data

The Justice Department’s recent takedown of a $2.1 billion cancer genetic testing scam shows how the government’s stepped-up use of data analytics can speed indictments for health-care fraud.

The DOJ’s investigation into a surge of unexplained Medicare claims for expensive genetic tests unfolded quickly, in six to eight months, a time period much shorter than could have been pulled off a decade ago, officials say. Federal prosecutors were alerted to the trend early this year and shut down the scheme in September. They indicted 35 people, including nine physicians.

Prosecutors say the scammers duped hundreds of thousands of mostly elderly people into signing up for cancer genetic tests that were medically unnecessary.

The triumph involved in quickly shutting down the lucrative scheme can’t obscure the fact that $2.1 billion in taxpayer funds had already gone out the door. It’s not clear the penalties for the perpetrators will allow the government to recoup all that money. The problem is illustrative of the “pay and chase” dilemma that has bedeviled health-care fraud enforcement since the creation of Medicare.

Efficient Targeting

The prosecutorial model in health-care fraud is to catch the wrongdoers who cost the government the most money and hope the subsequent punishments will deter others from following suit. Data aids that effort on two fronts: It speeds up the investigation so less money goes out the door in the first place, and it leads enforcers to the leaders of the scheme more efficiently.

“Data analytics is a powerful tool that points us in the right direction, allows us to see trends and spikes in billing patterns and outliers in terms of usage, and even allows us to act in real time,” Joe Beemsterboer, deputy chief of DOJ’s Fraud Section, said in an interview. He’s also the former head of the department’s Health Care Fraud Unit.

New data mining techniques have become the “foundation of how we investigate and analyze cases,” he said.

The new data techniques allow the department to target “the head of the snake” in complex schemes, the organizers of the fraud, who often are the most difficult to bring down, said Sandra Moser, who joined Quinn Emanuel Urquart & Sullivan LLP as a partner in January after serving as chief of the DOJ’s Fraud Section.

It’s easier to identify the biggest perpetrator using data rather than tipsters, who may be at lower rungs of the scheme. Claims data generally involves doctors and indicates to investigators who is in charge so they can target their efforts more efficiently, she said.

“It’s always harder to get to the person at the top of the scheme, usually a doctor in a health-care fraud case,” she said. “But with the help of data, you can get to the most culpable people, the doctors trading their Hippocratic oath for envelopes of cash.”

Finding Outliers

The goal of the new techniques is to mine the mountains of health-care data in the possession of the CMS and other agencies to find anomalies that are suggestive of possible fraud. Earlier enforcement efforts were almost entirely dependent on tips from whistleblowers and cooperating witnesses.

“Data analytics allows us to see billing patterns that are unusual and suspicious, for example,” Beemsterboer said. “You might have a doctor whose patients are all getting the same services or treatment, and at a rate that’s far greater than what you see from other doctors. So you go take a closer look.”

Moser said one sign of the seriousness of the DOJ’s commitment to making use of the health-care data was to include an analyst with a Ph.D. in statistics on her team in the Fraud Section.

The data is useful for regional offices, too. “For us in the New Jersey office, we realized it didn’t make sense to be guided only by things that came to us in a non-systematic way, by tips and coincidences,” said Jacob Elberg, a professor at Seton Hall Law School and former chief of the Health Care and Government Fraud Unit in the U.S. Attorney’s office in New Jersey.

Then comes the shoe-leather investigative work. “You still need all the techniques and work of traditional law enforcement to show whether there’s fraud, and to make a case,” Beemsterboer said. “The mere fact of an anomaly doesn’t necessarily mean fraud. There often are unusual circumstances that justify what you see.”

The DOJ can move faster because the claims data comes to it in real time, he added.

Moser said the effectiveness of the department’s use of data analytics has “exploded in the last five years.”

“We’ve always had all of this data in CMS, and there’s Medicaid data out in the states, but it hasn’t always been accessible to prosecutors, and we haven’t always known what to do with it,” she said. Now enforcers can build on past successes and build models for pinpointing claim spikes.

‘Pay and Chase’

The fraud still has to be prosecuted after the fact, in part because the
DOJ’s role in rooting out bad behavior is fundamentally different from that of the Centers for Medicare & Medicaid Services, which is to disperse health benefits.

“The idea is that it’s good if lots of people get lots of benefits,” said attorney Michael Elliott, with Elliott Sauter PLLC in Dallas. “We trust the providers to adhere to the rules and submit legitimate claims.” Elliott is a former assistant U.S. Attorney who led the Medicare Fraud Strike Force in North Texas.

Investigators are always playing catch-up to fraud that has already taken place, he said.

Moser said this is a problem throughout law enforcement. “You think you see something, you detect a violation,” she said. “But if you’re going to go before a jury and prove a case beyond a reasonable doubt, you have to build the case, and that takes time, especially when you’re actually building dozens of cases, as in this genetic testing scheme.”

“There’s always a rub between DOJ and CMS because, although they’re partners, there’s a disconnect,” Elliott said. “CMS is inclined to assist with DOJ, but it’s not their main function, and they look at things differently.”

Elliott said he can recall meetings with CMS officials in which the DOJ investigators were left wondering, “How did this go on for so long? And why did they pay these claims?”

A partial answer, he said, can be found in CMS’s name. “It’s the Center for Medicare Services,” he said. “Not the Center for Medicare Enforcement.”

New Steps at CMS

The CMS is taking steps to prevent fraud before it occurs. A new rule allows the agency to exclude doctors and hospitals from Medicare based on their connections with other entities that have previously been kicked out, thus addressing the “whack-a-mole” phenomenon created by scammers who disappear and reappear inside criminal webs.

The new rule also allows the CMS to exclude health providers based on a pattern of abusive ordering of drugs, equipment, or services.

It’s still a pay-and-chase game, Elliott said. “This may make CMS a bit more effective in combating fraud, but they’ll still be taking action after the money has been paid out.”