Fraud and Abuse Compliance: A “Wake-Up Call” for Private Duty Providers

By: Elizabeth E. Hogue, Esq.


Agencies that provide private duty services only and Medicare-certified home health agencies that also provide private duty services may have erroneously concluded that the fraud and abuse prohibitions that apply to Medicare-certified agencies do not apply to private duty providers. Recent action against Maxim Healthcare makes it clear that this is not the case.  Maxim is a privately held company with 360 offices nationwide and approximately 88,000 staff members. While some of these locations are Medicare-certified, Maxim provides services primarily to Medicaid, including Medicaid waiver, patients. 

As a result of both criminal and civil investigations, Maxim has agreed to pay $150 million to the federal government and state Medicaid Programs to settle allegations of false claims.  Payments to the federal government include false claims made to the Veterans Administration.  In addition, nine employees of Maxim have already pled guilty to criminal charges; including three regional accounts managers, a Director of Clinical Services, a home health aide, an account manager, a recruiter, and a licensed practical nurse.  Action may yet be taken against other individual employees, including members of the upper management team.

Based on this case alone, it is clear that providers of private duty services are subject to the same fraud and abuse prohibitions as Medicare-certified agencies and must take action to help ensure compliance.  What kind of action should be taken by providers of private duty services? 

The statements of officials about the Maxim settlement offer clear direction.  New Jersey Attorney General Paula Dow, for example, said: “Companies like Maxim, that provide health care services to Medicaid patients, are expected to take necessary steps to prevent fraud and abuse by instituting strong compliance programs and maintaining effective internal controls.”

How do compliance programs, including effective internal control, help providers avoid enforcement action?  First, as a practical matter, when providers establish and maintain a Compliance Program, it clearly discourages regulators from pursuing allegations of fraud and abuse violations.  Technically speaking, the Federal Sentencing Guidelines make it clear that establishment and implementation of Compliance Programs is considered to be a mitigating factor.  That is, if accusations of criminal conduct are made, as they were in the Maxim case, the consequences may be substantially less severe as a result of a properly implemented Compliance Plan.

Providers with Compliance Plans are more likely to avoid fraud and abuse.  This is because Plans routinely establish an obligation on the part of each employee to prevent fraud and abuse and the Plans include training for all employees.  Compliance Plans make it clear that employees have an obligation to bring any potential fraud and abuse issues to the attention of their employers first.

Compliance Plans may help to prevent qui tam, or so-called “whistleblower” lawsuits by private individuals, rather than by government enforcers, who believe that they have identified instances of fraud and abuse.  There are significant incentives to bring these legal actions since “whistleblowers” receive a share of monies recovered as a result of their efforts.  Some whistleblowers have received millions of dollars.  The whistleblower in the Maxim case will receive over $15 million.

Finally, the Deficit Reduction Act (DRA) requires providers who receive more than $5 million in monies from the Medicaid Programs per year to implement policies and procedures, provide education to employees, and put information in their employee handbooks about fraud and abuse compliance.  These requirements can be met through implementation of a Fraud and Abuse Compliance Program.

In view of the above, all providers of private duty services should implement and maintain effective compliance plans.

In addition, as part of an agreement to defer prosecution, Maxim admitted in documents filed in court that “certain aspects of Maxim’s operations emphasized sales goals at the expense of clinical and compliance responsibilities, as reflected in certain aspects of its culture, training, incentive compensation and allocation of personnel resources.”  Based upon Maxim’s statement, providers of private duty services should review incentives in compensation to staff and should work to ensure that there are checks and balances on incentives that may encourage staff to engage in fraudulent conduct.  These measures should be built into agencies’ compliance plans.

It is quite clear that providers of private duty services must meet requirements regarding fraud and abuse compliance.  If they fail to do so, both criminal and civil enforcement action may be taken against them.

© 2011 Elizabeth E. Hogue, Esq. All rights reserved. 

No portion of this material may be reproduced in any form without the advance written permission of the author.