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HealthCare Fraud Research Paper


For many years the United States government has taken keen interest on the welfare of the healthcare consumers, especially in regard to healthcare fraud. Notably there have been numerous fraudulent transactions within the American healthcare system, which have had severe medical and financial implications. Specifically, the United States government has lost billion of dollars due to healthcare fraud.

This is coupled with many patients who have been conned off their benefits as a result of transfer of policy to a different. As a result the United States government came up with laws to regulate the healthcare sector and minimize, as well as prosecute cases of fraud. These laws are famously referred to as The Anti-Kickback Statutes.

The case of Sundown Community Hospital and Central Park Medical Group joint venture, which offered financial benefits to facilitate the agreement on the transfer to patients, a majority of whom are under Medicare plan, violates the requirement of the Anti-Kickback law. However, this plan can still be safeguarded if it is modeled along a different approach which fulfills the requirement of ‘safe harbor’ exemptions.

There have been a number of healthcare landmark cases, such as Feldstein v. Nash Community Health Services, Inc., which have brought forth a number of urgent concerns.

Suffice to state that healthcare issues are intricate and complicated to the extent that the United States government developed a set of detailed statues referred to as the Anti-Kickback Statutes to address emergent issues in healthcare provision (Office of Inspector General, 1999; Altshuler, Creekpaum and Fang 2008).

The main purpose for this law is to protect the welfare of healthcare consumers from exploitation by fraudulent healthcare providers. One of the major concerns that arise is the determination of whether any (healthcare) transaction is either a minor misdemeanor or fraud. In this regard, it is the primary objective of the prosecutor to determine whether there was intent and objective of obtaining kickbacks.

Furthermore, debate still ranges on, on the definition of the terms kickback and bribe. Out of Subsequent cases, there have emerged several interpretations of the terms kickback. The United States V Hancock case assumed the broader interpretation of the term kickback as the intentional receiving of payments fraudulently.

This definition does not however, address other issues of concern such as nonfinancial benefits. As a result, the congressional amendments of 1977 stipulated that Medicare fraud did not have to result in a kickback. Currently, the Social Security Act stipulates that any party in a Medicare agreement cannot offer or receive payments or any other benefits to engineer a business deal (Schwartz, 2003).

Just like the Feldstein v. Nash Community Health Services, Inc., the Sundown Community Hospital and Central Park Medical Group joint venture involves financial and social security privileges to employees. Sundown Community Hospital is intending to make the deal a success and as such has to put together an attractive offer to Central Park Medical Group in terms of permanent staff privileges to Central Park owners.

This also includes monthly bonuses. Since the deal is proposed by Sundown Community Hospital, the privileges to Central Park Medical Group staff are intended to make an appeal and as such avoid any objection to the deal. Furthermore, 60% of the healthcare consumers at Central Park Medical Group are under Medicare plan.

This implies that Sundown Community Hospital stands to benefit directly from the joint ownership of these consumers who are on Medicare. Such implications made Sundown Community Hospital to offer kickbacks in terms of indirect payments to permanent staff, to successfully engineer the deal. It can thus be concluded that such kickbacks were made willfully and knowingly to induce business.

The anti-kickback statute prohibits and criminalizes any willful payments made knowingly to engineer the referral or transfer of any individual who is a beneficiary of any medicare scheme. As such the statute proposes criminal penalties for any payments made, such as in the United States v Jain to induce the said referrals and transfers, which includes prison terms and fines.

Furthermore, any party found to have willfully offer or received such payments attracts criminal liability for such offenses (Romano and Fox, 2009). This case is therefore in contravention of the Anti-kickback Statutes as well as the 1996 regulation on the movement of healthcare consumers between providers, referred to as The Health Insurance Portability and Accountability Act (Price and Norris, 2009).

Therefore, the joint venture between Sundown Community Hospital and Central Park Medical Group cannot proceed since the two parties faces criminal charges for giving and receiving indirect payment to induce referrals of Medicare consumers.

This deal can however go ahead, but under the 1972 congressional amendments which provided for certain safe harbors regulations. Within these regulations, there are certain business transactions which are can be exempted from the Anti-Kickback Statutes (Schwartz, 2003). While there are numerous safe harbor regulations, two specific one can protect this deal from criminal liability.

Specialty Referral Arrangements between Providers is a regulation within the Anti-kickback Statutes that safeguards the referrals and transfer of Medicare beneficiaries between providers. Under this provision, it is possible to refer a patient from the primary physician to a secondary physician on grounds of specialized treatment.

The regulation also stipulates that the party to whom the patient is being referred to has the obligation of referring the patient back to the primary healthcare provider at some point during the course of the treatment (Office of Inspector General, 1999).

Suffice to say that this kind of an arrangement is closely monitored to ensure that such transfers are motivated by the need for further medical treatment from specialized physician and not timed to benefit the second party financially.

As such, Sundown Community Hospital and Central Park Medical Group patient transfers are only applicable on the grounds of specialized medical treatment. Furthermore, Anti-Kickback Statutes do not exempt such kind of a transaction to the extent of financial benefits if the patient is on a Federal Healthcare plan.

In this case, the parties involved in this plan have to ensure that the 60% of patients are under a state controlled medical plan before filing for exemption from the Anti-Kickback Statutes.

Transfer of patients who are on any form of Medicare plan is not necessarily a fraud. As such, the parties involved may not be criminally liable for engineering patient transfer and co ownership deals on certain grounds.

The Sundown Community Hospital / Central Park Medical Group joint venture is however suspect. Borrowing from rulings such as Feldstein v. Nash Community Health Services, United States V Hancock and others, the two parties involved are criminally liable since they knowingly exchanged payments as part of the business agreement.

As such the deal is not motivated by medical reasons and as such need to be redesigned to avoid prosecution.

Reference List

Altshuler, M., Creekpaum, J., & Fang, J.. (2008). Health care fraud. The American Criminal Law Review, 45(2), 607-664.

Office of Inspector General (1999). . Web.

Price, M., and Norris, D. (2009). Journal of American Academy of Psychiatry and the Law. Web.

Romano, D. and Fox, A. (2009). What to do when you’re recruitment agreement leaves town. AHLA Connections. Web.

Schwartz, J. (2003). Elaborating on sham transactions as evidence of violations of the anti-kickback statute. Journal of Law & Policy. Web.

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"HealthCare Fraud." IvyPanda, 25 May 2020, ivypanda.com/essays/healthcare-fraud-research-paper/.

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IvyPanda. 2020. "HealthCare Fraud." May 25, 2020. https://ivypanda.com/essays/healthcare-fraud-research-paper/.


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