Fraud Investigations Targeting Federally Qualified Health Centers

Federally Qualified Health Centers (FQHCs) enjoy a number of benefits that are not available to other healthcare providers. However, as a result of having access to these benefits (in addition to participating in Medicare and Medicaid generally), FQHCs are subject to close scrutiny, and they are at high risk for
federal healthcare fraud investigations.

Federally Qualified Health Centers (FQHCs) play a uniquely-important role in the United States’ healthcare system. As explained by the Health Resources & Services Administration (HRSA), an agency with the U.S. Department of Health and Human Services (DHHS):

“Federally Qualified Health Centers are community-based healthcare providers that receive funds from the HRSA Health Center Program to provide primary care services in underserved areas. They must meet a stringent set of requirements, including providing care on a sliding fee scale based on ability to pay and operating under a governing board that includes patients.”

In addition to receiving funds under the HRSA Health Center Program, FQHCs also participate in Medicare and Medicaid, receiving reimbursements under the prospective payment system (PPS) implemented under Section 10501 of the Patient Protection and Affordable Care Act of 2010. Types of FQHCs that are eligible for HRSA, Medicare, and Medicaid funding include:

• Community Health Centers
• Migrant Health Centers
• Healthcare for the Homeless
• Health Centers for Residents of Public Housing

FQHC Facts and Figures: Statistics Published by the HRSA

Despite being unknown by the majority of the American population (not to mention most of the healthcare field), FQHCs serve an extraordinary volume of patients. While this underscores the importance of Community Health Centers and other FQHCs, it also helps to explain why FQHCs are frequently targeted in federal healthcare fraud investigations. According to the HRSA’s 2019 Fact Sheet:

• One in twelve people receive treatment at FQHCs;
• One in nine children receive treatment at FQHCs;
• One in five rural residents and one in three people living in poverty rely on FQHCs for their healthcare needs;
• FQHCs serve more than 385,000 U.S. military veterans nationwide; and,
• Since 2000, the number of patients relying on FQHCs for their healthcare needs has increased by 196 percent.

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Gamal Abdel-Hafiz

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Chris Quick

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Kevin M. Sheridan

Former Special Agent (FBI)

Ray Yuen

Former Supervisory Special Agent (FBI)

Dennis A. Wichern

Former Special Agent-in-Charge (DEA)

Federally-Funded Healthcare Services Offered by FQHCs

Combined, the approximately 1,400 Federally Qualified Health Centers operating across the United States provide primary care services to more than 28 million individuals. This includes providing services such as annual check-ups, routine screenings and exams, diagnosis and treatment of illnesses and injuries, mental health and nutrition counseling, and referrals to specialists. FQHCs also receive federal funding to assist in the federal government’s fight against opioid diversion and abuse, combat the spread of HIV, and various other national healthcare initiatives.

Where Do FQHCs Get into Trouble?

If FQHCs serve such an important role in our nation’s healthcare system, and if the HRSA and other federal agencies rely on FQHCs to help advance government healthcare priorities, where do they get into trouble? What types of mistakes are most common, and what factors increase FQHCs’ risk of being targeted in a federal healthcare fraud investigation?

1. Patient and Treatment Misclassification

Federally Qualified Health Centers’ Medicare reimbursement rates are calculated based on an adjusted national rate. This rate, “is increased by 34.16 percent when a patient is new to the FQHC, or an Initial Preventive Physical Exam (IPPE) or Annual Wellness Visit (AWV) is furnished.” As a result, a common issue raised during fraud investigations targeting FQHCs is the potential misclassification of patients and certain types of treatments and procedures. While the very nature of FQHCs means that they serve a high volume of new patients (and the HRSA’s data indicate that more patients are visiting FQHCs every year), an unusually-high volume of new patient, IPPE, and AWV billings is still viewed as a potential “red flag” for Medicare billing fraud.

2. FQHC Billing Non-Compliance

FQHCs are subject to numerous complex and nuanced billing requirements. Despite the complexity of the FQHC billing rules and regulations, Community Health Centers and other federally-funded centers are expected to maintain strict compliance. Examples of billing errors and other mistakes that can expose FQHCs to recoupment liability and other penalties during federal fraud investigations include:

• Billing for services provided by non-FQHC practitioners;
• Failing to provide one-on-one, face-to-face medical consultations;
• Failing to meet the requirements for billing for home-bound patients;
• Billing for services that do not qualify as medically-necessary, a “mental health visit,” or a “qualified preventative health visit;”
• Improperly using code G0466 (FQHC visit, new patient) instead of code G0467 (FQHC visit, established patient);
• Improperly using code G0469 (FQHC visit, mental health, new patient) instead of code G0470 (FQHC visit, mental health, established patient)

3. Improper Use of the 340B Drug Pricing Program

The 340B Drug Pricing Program is available to all FQHCs. However, registration is required, and registered FQHCs must consistently adhere to all 340B program requirements. Improperly obtaining discounted medications, improperly dispensing or diverting discounted medications, and other similar types of issues can lead to invasive inquiries and severe civil or criminal penalties.

4. Non-Adherence to the Health Center Program Compliance Manual

In addition to billing compliance, Federally Qualified Health Centers have a number of organizational and operational compliance obligations as well. For example, under the Health Center Program Compliance Manual (and other applicable federal regulations), FQHCs are required to:

• “Deliver high quality, culturally competent, comprehensive primary care, as well as supportive services such as health education, translation, and transportation that promote access to healthcare.”
• “Provide services regardless of patients’ ability to pay and charge for services on a sliding fee scale.”
• “Develop systems of patient-centered and integrated care that respond to the unique needs of diverse medically underserved areas and populations.”
• “[M]aintain[] its operations, including developing and implementing its own operating procedures, in compliance with all Health Center Program requirements and all other applicable Federal, state, and local laws and regulations.”

5. “Failing” an Operational Site Visit (OSV)

All FQHCs are subject to Operational Site Visits (OSVs) conducted by the HRSA. The purpose of these OSVs is to, “provide HRSA the information necessary to perform its oversight responsibilities using a standard and transparent methodology that aligns with the Compliance Manual.” While OSVs can result in the direct imposition of conditions on PPS payment and other penalties, they can also trigger civil and criminal federal healthcare fraud investigations.

6. Improper Referral Relationships with Other Providers

Another issue that is commonly targeted in federal healthcare fraud investigations is violation of the Anti-Kickback Statute and Stark Law through the offering, payment, and receipt of unlawful referral fees and other forms of “remuneration.” Both of these statutes impose sweeping prohibitions, and even relationships that seem to be common practice can expose FQHCs, physicians, and other providers to substantial federal liability.

What are the Potential Consequences of an FQHC Healthcare Fraud Investigation?

Just as FQHCs are subject to an extensive range of federal obligations, they can also face a variety of different penalties when charged with billing fraud and other forms of non-compliance. Under the Health Center Program Compliance Manual, potential penalties include:

• Requiring payments as reimbursements rather than advance payments;
• Requiring additional financial reports or monitoring;
• Requiring technical or management assistance;
• Imposition of additional prior approval requirements;
• Temporary withholding of payments pending further action;
• Disallowance of costs for non-compliant services;
• Whole or partial suspension of program participation;
• Initiation of debarment proceedings;
• Withholding of additional federal program awards and funding; and,
• “[O]ther remedies that may be legally available.”

In addition to these penalties – which are specific to the FQHC program – Federally Qualified Health Centers targeted in federal fraud investigations can face various other statutory penalties as well. This includes penalties that are both civil and criminal in nature. For example, under the Anti-Kickback Statute, Stark Law, False Claims Act, and other relevant statutes, federal prosecutors can seek penalties including:

• Recoupment of Medicare and Medicaid reimbursements
• Prepayment review of future program billings (which can delay payment by as long as six months)
• Civil monetary penalties (CMP) or criminal fines
• Treble damages (three times the government’s actual losses)
• Government attorneys’ fees
• Loss of Medicare, Medicaid, and other federal program eligibility
• Federal imprisonment

Experienced Defense Representation for FQHC Healthcare Fraud Investigations

Oberheiden, P.C. is a team of federal healthcare fraud defense lawyers and former federal healthcare fraud prosecutors who are highly experienced in site visits, audits, inspections, investigations, and prosecutions. We have a proven track record of success, and we have defended healthcare providers in high-stakes civil and criminal matters across the country. If your FQHC is facing an OSV or a federal healthcare fraud investigation, it is important that you engage experienced legal representation promptly, and we encourage you to contact us right away to speak with a member of our defense team for free.

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For a free and confidential consultation with a member of Oberheiden, P.C.’s healthcare fraud defense team, please call 888-680-1745 or contact us online. Our attorneys are available 24/7, and we can provide representation on an emergency basis if necessary.