MEDICAID FRAUD IN SOUTH CAROLINA – A REVIEW FOR SC HEALTH CARE FRAUD LAWYERS, ATTORNEYS AND LAW FIRMS

The State of South Carolina has enacted several criminal statutes in order to combat health care fraud at the state, as opposed to the federal, level. Health care fraud in the State of South Carolina is exploding, and the state is aggressively prosecuting health care fraud crimes. Health care providers, including hospitals, outpatient surgery centers, ambulatory surgery centers, doctors, nurses nursing home facilities, hospices, and health care administrators, as well as their lawyers, attorneys and law firms, need to be aware of South Carolina’s criminal statutes which are used to fight those who would seek to commit fraud with respect to health care services. SC criminal defense health care fraud attorneys, lawyers and law firms need to be aware of these statutes in order to assess potential criminal activity and properly advise client’s about their conduct.

SOUTH CAROLINA’S CRIMINAL FALSE CLAIMS STATUTE

The South Carolina “Presenting False Claims for Payment” statute, found at S.C. Code Ann. § 38-55-170, provides that a person who knowingly causes, assists with, solicits, or conspires in the presentation of a false claim to an insurer, health maintenance organization, or to any person (including the State of South Carolina) providing benefits for health care in South Carolina is, depending upon the amount of the claim, guilty of anywhere from a misdemeanor for which the person can be fined and imprisoned to a felony whereby the person is subject to imprisonment for ten years and/or a fine of five thousand dollars.

SOUTH CAROLINA’S MEDICAID FALSE CLAIMS STATUTE

The South Carolina Medicaid False Claims Statute, set forth at S.C. Code Ann. § 43-7-60, provides criminal, civil, and administrative penalties and sanctions related to health care providers who knowingly and willfully make a false statement in an application or request for a benefit, reimbursement or in a report or certificate submitted to the Medicaid program. The Medicaid False Claims Statute also provides that it is unlawful for a provider to knowingly and willfully conceal or fail to disclose any material fact which affects the provider’s initial or continued entitlement to reimbursement or the amount of payment under the Medicaid program. Each false claim or concealed fact constitutes a separate offense.

A person who violates the Medicaid False Claims Statute is guilty of a misdemeanor and subject to imprisonment for up to three years and a fine of not more than one thousand dollars per offense. In addition, the Attorney General may bring a civil action to recover treble damages and seek penalties of two thousand dollars per false claim. The state agency administering the Medicaid program may impose additional administrative sanctions on providers convicted under the Statute.

SOUTH CAROLINA’S MEDICAID FALSE APPLICATION STATUTE

The South Carolina Medicaid False Application Statute, contained at S.C. Code Ann. § 43-7-70, provides criminal penalties for any applicant, recipient or other person acting on their behalf to knowingly and

willfully (1) make or cause to be made a false statement or representation of material fact on a Medicaid application for entitlements, or (2) conceal or fail to disclose any material fact affecting initial or continuing entitlement to receive assistance, goods or services under the state’s Medicaid program.

A person who violates the provisions of this statute is guilty of medical assistance recipient fraud, a misdemeanor, and upon conviction must be imprisoned not more than three years or fined not more than one thousand dollars, or both.

SOUTH CAROLINA’S INSURANCE FRAUD AND REPORTING IMMUNITY ACT

The South Carolina Insurance Fraud and Reporting Immunity Act, set forth at S.C. Code Ann. § 38-55-510, et seq., provides for criminal and civil penalties related to insurance fraud and established an Insurance Fraud Division in the office of the Attorney General to prosecute health care insurance and health care fraud violations.

The term “false statement and misrepresentation” is defined as one made with knowledge and the intent of obtaining an undeserved economic benefit or deny another a benefit in connection with an insurance transaction. Any person or insurer who makes a “false statement or misrepresentation” is, depending upon the amount received and number of offenses, guilty of anywhere from a misdemeanor, thirty days imprisonment or fine to a felony, ten years imprisonment, and a fifty thousand dollar fine. In all cases the person must make full restitution to the victim of the health care fraud.

In addition to criminal liability, a person who violates the statute faces potential civil fines up to fifteen thousand dollars and may be ordered to pay court costs and attorneys’ fees to the director of the Insurance Fraud Division which retains the fines for use in enforcing and administering the Act.

Any person, insurer, or agency (1) having reason to believe that another has made a false statement or misrepresentation, or (2) has knowledge of a suspected false statement or representation shall notify the Insurance Fraud Division. If the reporter acts without malice or in good faith, the reporter is immune from any liability arising out of the report.

SOUTH CAROLINA’S COMPUTER CRIME ACT AND HEALTH CARE FRAUD

The South Carolina Computer Crime Act, S.C. Code Ann. § 16-16-10, et seq., provides criminal penalties related to causing direct or indirect access to a computer for, among other things, the purpose of devising or executing a fraud scheme or obtaining money, property or services by means of false or fraudulent pretenses, representations or promises. This statute may be used to prosecute criminal activity in which computers are used to fraudulently obtain health care payments or benefits.

Any person convicted or computer crime is, depending upon the amount of the victim’s loss and number of offenses, guilty of anywhere from a misdemeanor, thirty days imprisonment or fine of not more than two hundred dollars to a felony, five years imprisonment, and/or a fifty thousand dollar fine.

SOUTH CAROLINA’S ADMINISTRATIVE SANCTIONS AGAINST MEDICAID PROVIDERS ACT

Pursuant to the South Carolina Department of Health and Human Services (“DHHS”) Regulations, “Administrative Sanctions Against Medicaid Providers,” found at S.C. Code of Regulations R. 126-400, et seq., the Administrator of Medicaid may invoke administrative sanctions against a Medicaid provider who has been determined to have abused the Medicaid Program. “Abuse” is defined as provider practices that are inconsistent with sound fiscal, business, or medical practices and result in unnecessary cost to the Medicaid Program, reimbursement for medically unnecessary services, or services that fail to meet professionally recognized standards for health care.

Grounds for sanctioning providers under the DHHS regulations include presenting a false claim for services, submitting false information to obtain greater compensation than that to which the provider is entitled, overutilization, conviction for a criminal offense related to Medicaid or Medicare, failure to meet standards required by State or Federal law for participation in Medicaid, and other acts. Sanctions may include educational intervention, peer review, recoupment of overpayments, suspension, termination, post-payment or prepayment review of claims, and referral to licensing and certifying boards or agencies.

The factors considered in determining sanctions include, but are not limited to: the seriousness of the offense; the extent of violation; history of prior violation(s); prior imposition of sanction; and, the providers failure to obey program rules and policies as specified in the appropriate Provider Manual or other official notices.

SOUTH CAROLINA’S MEDICAID FRAUD CONTROL UNITS (MFCUs)

South Carolina’s Medicaid Fraud Control Units are responsible for facilitating and coordinating state efforts to identify and prosecute Medicaid fraud and abuse. Federal legislation, 42 U.S.C.A. § 1396a(a)(61), required each state to establish a Medicaid Fraud Control Unit by 1995 to fight Medicaid fraud by health care providers and health care beneficiaries.

The primary duties and responsibilities of Medicaid Fraud Control Units are:

To conduct a statewide program for investigating and prosecuting violations of all applicable State laws pertaining to fraud in (a) the administration of the Medicaid program; (b) the provision of medical assistance; or, (c) the activities of providers of medical assistance under the State Medicaid plan. See 42 U.S.C.A. § 1396b(q); 42 C.F.R. § 1007.11(a).

To conduct a statewide program for investigating and prosecuting abuse and neglect in health care facilities by (a) establishing procedures for the review of complaints alleging abuse or neglect of patients in health care facilities receiving payments under the State Medicaid plan as well as complaints alleging the misappropriation of patients’ funds; (b) prosecuting, or referring for prosecution, those complaints found to be criminal; and, (c) referring non-criminal matters to an appropriate State agency. See 42 U.S.C.A. § 1396b(q); 42 C.F.R. § 1007.11(b).

To collect or refer for collection any overpayments made to a health care facility or other provider of medical assistance under the State Medicaid plan. See 42 U.S.C.A. § 1396b(q); 42 C.F.R. § 1007.11(c).

In December of 1999, the authority of Medicaid Fraud Control Units was extended (a) to authorize the investigation and prosecution of fraud under any federal health care program, upon the approval of the Inspector General of the relevant Federal agency; and (b) to authorize investigation and prosecution of resident abuse in non-Medicaid facilities. Section 407, Extension of Authority of State Medicaid Fraud Control Units, included in H.R. 1180, “Ticket to Work and Work Incentives Improvement Act of 1999."

The following are the actual provisions of some of the foregoing South Carolina criminal statutes:

SOUTH CAROLINA INSURANCE FRAUD AND REPORTING IMMUNITY

SECTION 38-55-510. Short title.

This article is known and may be cited as the "Omnibus Insurance Fraud and Reporting Immunity Act".

SECTION 38-55-520. Purpose of article.

The purpose of this article is to confront aggressively the problem of insurance fraud in South Carolina by facilitating the detection of insurance fraud; to allow reporting of suspected insurance fraud; to grant immunity for reporting suspected insurance fraud; to prescribe penalties for insurance fraud; to require restitution for victims of insurance fraud; to establish a division within the Office of the Attorney General to prosecute insurance fraud; and to require the investigation of alleged insurance fraud by State Law Enforcement Division.

SECTION 38-55-530. Definitions.

As used in this article:

(A) "Authorized agency" means any duly constituted criminal investigative department or agency of the United States or of this State; the Department of Insurance; the Department of Revenue; the Department of Public Safety; the Department of Motor Vehicles; the Workers' Compensation Commission; the State Accident Fund; the Second Injury Fund; the Employment Security Commission; the Department of Consumer Affairs; the Human Affairs Commission; the Department of Health and Environmental Control; the Department of Social Services; the Department of Health and Human Services; the Department of Labor, Licensing and Regulation; all other state boards, commissions, and agencies; the Office of the Attorney General of South Carolina; or the prosecuting attorney of any judicial circuit, county, municipality, or political subdivision of this State or of the United States, and their respective employees or personnel acting in their official capacity.

(B) "Insurer" shall have the meaning set forth in Section 38-1-20(25) and includes any authorized insurer, self-insurer, reinsurer, broker, producer, or any agent thereof.

(C) "Person" means any natural person, company, corporation, unincorporated association, partnership, professional corporation, or other legal entity and includes any applicant, policyholder, claimant, medical providers, vocational rehabilitation provider, attorney, agent, insurer, fund, or advisory organization.

(D) "False statement or misrepresentation" means a statement or representation made by a person that is false, material, made with the person's knowledge of the falsity of the statement and made with the intent of obtaining or causing another to obtain or attempting to obtain or causing another to obtain an undeserved economic advantage or benefit or made with the intent to deny or cause another to deny any benefit or payment in connection with an insurance transaction, and such shall constitute fraud. "False statement or misrepresentation" specifically includes, but is not limited to, an intentional:

(1) false report of business activities;

(2) miscount or misclassification by an employer of its employees;

(3) failure to timely reduce reserves;

(4) failure to account for Second Injury Fund reimbursements or subrogation reimbursements; or

(5) failure to provide verifiable information to public or private rating bureaus and the Department of Insurance.

An undeserved economic benefit or advantage includes, but is not limited to, a favorable insurance premium, payment schedule, insurance award, or insurance settlement.

(E) "Immune" means that neither a civil action nor a criminal prosecution may arise from any action taken pursuant to this article unless actual malice on the part of the reporting person or gross negligence or reckless disregard for the rights of the reported person is present.

SECTION 38-55-540. Criminal penalties for making false statement or misrepresentation, or assisting, abetting, soliciting or conspiring to do so; restitution to victims.

(A) A person who knowingly makes a false statement or misrepresentation, and any other person knowingly, with an intent to injure, defraud, or deceive, or who assists, abets, solicits, or conspires with a person to make a false statement or misrepresentation, is guilty of a:

(1) misdemeanor, for a first offense violation, if the amount of the economic advantage or benefit received is less than one thousand dollars. Upon conviction, the person must be fined not less than one hundred nor more than five hundred dollars or imprisoned not more than thirty days;

(2) misdemeanor, for a first offense violation, if the amount of the economic advantage or benefit received is one thousand dollars or more but less than ten thousand dollars. Upon conviction, the person must be fined not less than two thousand nor more than ten thousand dollars or imprisoned not more than three years, or both;

(3) felony, for a first offense violation, if the amount of the economic advantage or benefit received is ten thousand dollars or more but less than fifty thousand dollars. Upon conviction, the person must be fined not less than ten thousand nor more than fifty thousand dollars or imprisoned not more than five years, or both;

(4) felony, for a first offense violation, if the amount of the economic advantage or benefit received is fifty thousand dollars or more. Upon conviction, the person must be fined not less than twenty thousand nor more than one hundred thousand dollars or imprisoned not more than ten years, or both;

(5) felony, for a second or subsequent violation, regardless of the amount of the economic advantage or benefit received. Upon conviction, the person must be fined not less than twenty thousand nor more than one hundred thousand dollars or imprisoned not more than ten years, or both.

(B) In addition to the criminal penalties set forth in subsection (A), a person convicted pursuant to the provisions of this section must be ordered by the court to make full restitution to a victim for any economic advantage or benefit which has been obtained by the person as a result of that violation, and to pay the difference between any taxes owed and any taxes the person paid, if applicable.

SECTION 38-55-550. Civil penalties for violations of article; costs; payment; use of revenues; Attorney General to assist Insurance Fraud Division; consent agreements.

(A) In addition to any criminal liability, any person who is found by a court of competent jurisdiction to have violated any provision of this article, including Section 38-55-170, is subject to a civil penalty for each violation as follows:

(1) for a first offense, a fine not to exceed five thousand dollars;

(2) for a second offense, a fine of not less than five thousand dollars but not to exceed ten thousand dollars;

(3) for a third and subsequent offense, a fine of not less than ten thousand dollars but not to exceed fifteen thousand dollars.

(B) The civil penalty must be paid to the director of the Insurance Fraud Division to be used in accordance with subsection (D) of this section. The court may also award court costs and reasonable attorneys' fees to the director. When requested by the director, the Attorney General may assign one or more deputies attorneys general to assist the bureau in any civil court proceedings against the person.

(C) Nothing in subsections (A) and (B) shall be construed to prohibit the director of the Insurance Fraud Division and the person alleged to be guilty of a violation of this article from entering into a written agreement in which the person does not admit or deny the charges but consents to payment of the civil penalty. A consent agreement may not be used in a subsequent civil or criminal proceeding relating to any violation of this article.

(D) All revenues from the civil penalties imposed pursuant to this section must be used to provide funds for the costs of enforcing and administering the provisions of this article.

SECTION 38-55-560. Insurance Fraud Division; duties; powers and duties of Attorney General; forensic accountant.

(A) There is established in the office of the Attorney General a division to be known as the Insurance Fraud Division, which must prosecute violations of Sections 38-55-170 and 38-55-540 and related criminal insurance activity. Upon receipt of any claims or allegations of violations of Section 38-55-170 and 38-55-540 and related criminal insurance activity, the Attorney General shall forward the information to the State Law Enforcement Division for investigation.

(B) The Attorney General, upon receipt of any claims or allegations of violations of Sections 38-55-170 and 38-55-540 and related criminal insurance activity, is empowered to:

(1) refer the matter for investigation to the State Law Enforcement Division;

(2) prosecute persons determined to be in violation of Sections 38-55-170 and 38-55-540 and related criminal insurance activity in a court of competent jurisdiction; and

(3) collect fines and restitution ordered by the court. Where considered appropriate, the Attorney General may use the Setoff Debt Collection Act to collect fines and restitution ordered as a result of actions brought pursuant to Sections 38-55-170 and 38-55-540.

(C) The State Law Enforcement Division shall investigate thoroughly all claims or allegations of violations of Sections 38-55-170 and 38-55-540 and related criminal insurance activity received from the Attorney General pursuant to this section.

(D) The Insurance Fraud Division of the Office of Attorney General and the investigative services of the State law Enforcement Division as provided by this section must be funded by an appropriation of not less than two hundred thousand dollars annually from the general revenues of the State derived from the insurance premium taxes collected by the Department of Insurance and/or from fines assessed under Sections 38-55-170 and 38-55-540 which must be deposited in the general revenue fund to the credit of the Office of the Attorney General and the State Law Enforcement Division to offset the costs of this program; provided, that the funds generated from these fines, to be utilized by either the Office of the Attorney General or the State Law Enforcement Division shall not total more than five hundred thousand dollars. These monies must be shared equally on a fifty-fifty basis by the Office of the Attorney General and the State Law Enforcement Division, and the balance must go to the general fund of the State.

(E) The Office of the Attorney General is authorized to hire, employ, and reasonably equip one forensic accountant, and this forensic accountant must be assigned to the Insurance Fraud Division of the Office of the Attorney General. A person is not qualified to be hired and the Insurance Fraud Division may not hire a forensic accountant unless he possesses and maintains a current license to engage in the practice of accounting pursuant to the provisions of Chapter 2, Title 40.

SECTION 38-55-570. Notification of Insurance Fraud Division of knowledge or belief of false statements or misrepresentations; information to be released; shared among government agencies; privileged; not subject to subpoena.

(A) Any person, insurer, or authorized agency having reason to believe that another has made a false statement or misrepresentation or has knowledge of a suspected false statement or misrepresentation shall, for purposes of reporting and investigation, notify the Insurance Fraud Division of the Office of the Attorney General of the knowledge or belief and provide any additional information within his possession relative thereto.

(B) Upon request by the Insurance Fraud Division, any person, insurer, or authorized agency shall release to the Insurance Fraud Division any or all information relating to any suspected false statement or misrepresentation including, but not limited to:

(1) insurance policy information relevant to the investigation, including any application for such a policy;

(2) policy premium payment records, audits, or other documents which are available;

(3) history of previous claims, payments, fees, commission, service bills, or other documents which are available; and

(4) other information relating to the investigation of the suspected false statement or misrepresentation.

(C) Any authorized agency provided with or obtaining information relating to a suspected false statement or misrepresentation as provided for above may release or provide the information to any other authorized agency. The Department of Insurance, the Department of Revenue, the Department of Public Safety, and the Department of Motor Vehicles shall report, but not adjudicate, all cases of suspected or reported false statement or misrepresentation to the Insurance Fraud Division of the Office of Attorney General of South Carolina for appropriate investigation or prosecution, or both. The Workers' Compensation Commission may refer such cases as provided in Section 42-9-440.

(D) Except as otherwise provided by law, any information furnished pursuant to this section is privileged and shall not be part of any public record. Any information or evidence furnished to an authorized agency pursuant to this section is not subject to subpoena or subpoena duces tecum in any civil or criminal proceeding unless, after reasonable notice to any person, insurer, or authorized agency which has an interest in the information and after a subsequent hearing, a court of competent jurisdiction determines that the public interest and any ongoing investigation will not be jeopardized by obedience of the subpoena or subpoena duces tecum. The Department of Insurance may receive and must maintain as confidential any documents or information furnished to it by the National Association of Insurance Commissioners or insurance departments of other states which is classified as confidential by that association or state. The Department of Insurance may share documents or information, including confidential documents or information, with the National Association of Insurance Commissioners or insurance departments of other states, if the association or other state agrees to maintain the same

level of confidentiality as is provided under South Carolina law. If the documents or information received by the Department of Insurance from the National Association of Insurance Commissioners or the insurance departments of other states involve allegations of insurance fraud, the documents or information must be forwarded by the Department of Insurance to the Insurance Fraud Division of the Office of the Attorney General.

SECTION 38-55-580. Immunity from liability arising out of providing information concerning false statements or misrepresentations to authorized agency; malice or bad faith.

(A) A person, insurer, or authorized agency, when acting without malice or in good faith, is immune from any liability arising out of filing reports, cooperating with investigations by any authorized agency, or furnishing other information, whether written or oral, and whether in response to a request by an authorized agency or upon their own initiative, concerning any suspected, anticipated, or completed false statement or misrepresentation when such reports or information are provided to or received by any authorized agency.

(B) Nothing herein abrogates or modifies in any way common law or statutory privilege or immunity heretofore enjoyed by any person, insurer, or authorized agency.

(C) Nothing herein limits the liability of any person or insurer who, with malice or in bad faith, makes a report of suspected fraud under the provisions of this article.

(D) In addition to the immunity granted in this section, persons identified as designated employees whose responsibilities include the investigation and disposition of claims relating to suspected fraudulent insurance acts may share information relating to persons suspected of committing fraudulent insurance acts with other designated employees employed by the same or other insurers whose responsibilities include the investigation and disposition of claims relating to fraudulent insurance acts, provided the department has been given written notice of the names and job titles of these designated employees prior to any designated employee sharing information. Unless the designated employees of the insurer act in bad faith or in reckless disregard for the rights of any insured, neither the insurer nor its designated employees are civilly liable for libel, slander, or any other relevant tort, and a civil action does not arise against the insurer or its designated employees:

(1) for any information related to suspected fraudulent insurance acts provided to an insurer; or

(2) for information related to suspected fraudulent insurance acts provided to the National Insurance Crime Bureau or the National Association of Insurance Commissioners.

Provided, however, that the qualified immunity against civil liability conferred on any insurer or its designated employees shall be forfeited with respect to the exchange or publication of any defamatory information with third persons not expressly authorized by subsection (D) to share in such information.

SECTION 38-55-590. Annual report by director of Insurance Fraud Division in Office of Attorney General to General Assembly.

The director of the Insurance Fraud Division in the Office of the Attorney General shall annually report to the General Assembly regarding:

(A) the status of matters reported to the division, if not privileged information by law;

(B) the number of allegations or reports received;

(C) the number of matters referred to the State Law Enforcement Division for investigation;

(D) the outcome of all investigations and prosecutions under this article, if not privileged by law;

(E) the total amount of fines levied by the court and paid to or deposited by the division; and

(F) patterns and practices of fraudulent insurance transactions identified in the course of performing its duties. The director shall also periodically report this information to insurers transacting business in this State, health maintenance organizations transacting business in this State, and other persons, including the State of South Carolina, which provide benefits for health care in this State, whether these benefits are administered directly or through a third person.

MEDICAL ASSISTANCE PROVIDER FRAUD

SECTION 43-7-60. False claim, statement, or representation by medical provider prohibited; violation is a misdemeanor; penalties.

(A) For purposes of this section:

(1) "provider" includes a person who provides goods, services, or assistance and who is entitled or claims to be entitled to receive reimbursement, payment, or benefits under the state's Medicaid program. "Provider" also includes a person acting as an employee, representative, or agent of the provider.

(2) "false claim, statement, or representation" means a claim, statement, or representation made or presented in any form including, but not limited to, a claim, statement, or representation which is computer generated or transmitted or made, produced, or transmitted by an electronic means or device.

(B) It is unlawful for a provider of medical assistance, goods, or services to knowingly and wilfully make or cause to be made a false claim, statement, or representation of a material fact:

(1) in an application or request, including an electronic or computer generated claim, for a benefit, payment, or reimbursement from a state or federal agency which administers or assists in the administration of the state's medical assistance or Medicaid program; or

(2) on a report, certificate, or similar document, including an electronic or computer generated claim, submitted to a state or federal agency which administers or assists in the administration of the state's Medicaid program in order for a provider or facility to qualify or remain qualified under the state's

Medicaid program to provide assistance, goods, or services, or receive reimbursement, payment, or benefit for this assistance, goods, or services.

For purposes of this subsection, each false claim, representation, or statement constitutes a separate offense.

(C) It is unlawful for a provider of medical assistance, goods, or services knowingly and wilfully to conceal or fail to disclose any material fact, event, or transaction which affects the:

(1) provider's initial or continued entitlement to payment, reimbursement, or benefits under the state's Medicaid plan; or

(2) amount of payment, reimbursement, or benefit to which the provider may be entitled for services, goods, or assistance rendered.

For purposes of this subsection, each fact, event, or transaction concealed or not disclosed constitutes a separate offense.

(D) A person who violates the provisions of this section is guilty of medical assistance provider fraud, a Class A misdemeanor and, upon conviction, must be imprisoned not more than three years and fined not more than one thousand dollars for each offense.

(E) In addition to all other remedies provided by law, the Attorney General may bring an action to recover damages equal to three times the amount of an overstatement or overpayment and the court may impose a civil penalty of two thousand dollars for each false claim, representation, or overstatement made to a state or federal agency which administers funds under the state's Medicaid program. Upon a finding that the provider has violated a provision of this section, the state agency which administers the Medicaid program may impose other administrative sanctions against the provider authorized by law. A civil or criminal action brought under this section may be filed or brought in either the county where the false claim, statement, or representation originated or in the county in which the false claim, statement, or representation was received by the Health and Human Services Finance Commission or other agency of the State responsible for administering the state's Medicaid Program.

MEDICAL ASSISTANCE RECIPIENT FRAUD

SECTION 43-7-70. False statement or representation on application for assistance prohibited; violation is a misdemeanor; penalties.

(A)(1) It is unlawful for a person to knowingly and wilfully to make or cause to be made a false statement or representation of material fact on an application for assistance, goods, or services under the state's Medicaid program when the false statement or representation is made for the purpose of determining the person's entitlement to assistance, goods, or services.

(2) It is unlawful for any applicant, recipient, or other person acting on behalf of the applicant or recipient knowingly and wilfully to conceal or fail to disclose any material fact affecting the applicant's or recipient's initial or continued entitlement to receive assistance, goods, or services under the state's Medicaid program.

(3) It is unlawful for a person eligible to receive benefits, services, or goods under the Medicaid program to sell, lease, lend, or otherwise exchange rights, privileges, or benefits to another person.

(B) A person who violates the provisions of this section is guilty of medical assistance recipient fraud, a Class A misdemeanor and, upon conviction, must be imprisoned not more than three years or fined not more than one thousand dollars, or both.

SOUTH CAROLINA COMPUTER CRIME ACT

SECTION 16-16-10. Definitions.

For purposes of this chapter:

(a) "Computer" means a device that performs logical, arithmetic, and memory functions by manipulating impulses including, but not limited to, all input, output, processing, storage, computer software, and communication facilities that are connected or related to a computer in a computer system or computer network. For the purposes of this section, "computer" includes, but is not limited to, mainframes, servers, workstations, desktops, and notebooks; industrial controls such as programmable logic controllers and supervisory control and data acquisition systems; portable hand-held computing devices such as personal digital assistants and digital cellular telephones; data communications network devices such as routers and switches; and all other devices that are computer-based or communicate with or are under the control of a computer such as appropriate telephone switches, medical devices, and cable and satellite television interface systems. "Computer" does not include automated typewriters or typesetters.

(b) "Computer network" means the interconnection of two or more computers, and those devices and facilities through which an interconnection occurs.

(c) "Computer program" means a series of instructions or statements executable on a computer, which direct the computer system in a manner to process data or perform other specified functions.

(d) "Computer software" means a set of computer programs, data, procedures, or associated documentation concerned with the operation of a computer system.

(e) "Computer system" means a set of related, whether connected or unconnected, computer equipment, devices, or software.

(f) "Property" includes, but is not limited to, financial instruments, data, documents associated with computer systems, and computer software, or copies thereof, whether tangible or intangible, including both human and computer system readable data, and data while in transit.

(g) "Services" include, but are not limited to, the use of the computer system, computer network, computer programs, or data prepared for computer use, or data obtained within a computer system, or data contained within a computer network.

(h) "Data" means a representation of information, knowledge, facts, concepts, or instructions that has been prepared or is being prepared in a formalized manner and has been processed, is being processed, or is intended to be processed in a computer, computer system, or computer network. Data may be in any form including, but not limited to, computer printouts, magnetic storage media, optical storage media, network data packets, flash memory cards, smart card memory, punched cards, or as stored in the memory of the computer or in transit or displayed on a video device.

(i) "Access" means to gain entry to, attempt to gain entry to, instruct, communicate with, attempt to communicate with, store or alter data in, retrieve or remove data from, or otherwise make use of or attempt to make use of the logical, arithmetic, control, memory, storage, output, or communication functions of a computer, computer system, or computer network.

(j) "Computer hacking" means:

(1) accessing or attempting to access all or part of a computer, computer system, or a computer network without express or implied authorization for the purpose of establishing contact only;

(2) with the intent to defraud or with malicious intent to commit a crime after the contact is established;

(3) misusing computer or network services including, but not limited to, mail transfer programs, file transfer programs, proxy servers, and web servers by performing functions not authorized by the appropriate principal of the computer, computer system, or computer network. Misuse of computer and network services includes, but is not limited to, the unauthorized use of:

(i) mail transfer programs to send mail to persons other than the authorized users of that computer or computer network;

(ii) file transfer program proxy services or proxy servers to access other computers, computer systems, or computer networks; and

(iii) web servers to redirect users to other web pages or web servers;

(4) using a group of computer programs commonly known as "port scanners" or "probes" to intentionally access any computer, computer system, or computer network without the permission of the appropriate principal of the computer, computer system, or computer network. This group of computer programs includes, but is not limited to, those computer programs that use a computer network to access a computer, computer system, or another computer network to determine:

(i) the presence or types of computers or computer systems on a network;

(ii) the computer network's facilities and capabilities;

(iii) the availability of computer or network services;

(iv) the presence or versions of computer software including, but not limited to, operating systems, computer services, or computer contaminants;

(v) the presence of a known computer software deficiency that can be used to gain unauthorized access to a computer, computer system, or computer network; or

(vi) any other information about a computer, computer system, or computer network not necessary for the normal and lawful operation of the computer initiating the access.

This group of computer programs does not include standard computer software used for the normal operation, administration, management, and test of a computer, computer system, or computer network including, but not limited to, operating system services such as domain name services and mail transfer services, network monitoring and management computer software such as the computer programs commonly called "ping", "tcpdump", and " traceroute", and systems administration computer software such as the computer programs commonly known as "nslookup" and "whois". It is unlawful to intentionally and knowingly use such computer software to access any computer, computer system, or computer network to adversely affect computer or network access or performance; and

(5) the intentional use of a computer, computer system, or a computer network in a manner that exceeds any right or permission granted by the appropriate principal of the computer, computer system, or computer network.

Computer hacking does not include the introduction of a computer contaminant into a computer, computer system, computer program, or computer network.

(k) "Computer contaminant" means a computer program designed to modify, damage, destroy, disable, deny or degrade access to, allow unauthorized access to, functionally impair, record, or transmit information within a computer, computer system, or computer network without the express or implied consent of the owner. Computer contaminant includes, but is not limited to:

(1) a group of computer programs commonly known as "viruses" and "worms" that are self-replicating or self-propagating, and that are designed to contaminate other computer programs, compromise computer security, consume computer resources, modify, destroy, record, or transmit data, or disrupt the normal operation of the computer, computer system, or computer network;

(2) a group of computer programs commonly known as "Trojans" or "Trojan horses" that are not self-replicating or self-propagating, and that are designed to compromise computer security, consume computer resources, modify, destroy, record, or transmit data, or disrupt the normal operation of the computer, computer system, or computer network;

(3) a group of computer programs commonly known as "zombies" that are designed to use a computer without the knowledge and consent of the appropriate principal, and that are designed to send large quantities of data to a targeted computer network for the purpose of degrading the targeted computer's

or network's performance, or denying access through the network to the targeted computer or network, resulting in what is commonly known as "Denial of Service" or "Distributed Denial of Service" attacks; or

(4) a group of computer programs commonly known as "trap doors", "back doors", or "root kits" that are designed to bypass standard authentication software, and that are designed to allow access to or use of a computer without the knowledge or consent of the appropriate principal.

(l) "Unauthorized access" means access of a computer, computer system, or computer network not explicitly or implicitly authorized by the appropriate principal of the computer, computer system, or computer network.

(m) "Unauthorized use" means the:

(i) use of a computer, computer system, or computer network not explicitly or implicitly authorized by the appropriate principal of the computer, computer system, or computer network;

(ii) the use of computer software not explicitly or implicitly authorized by the appropriate principal or licensee of the computer software; or

(iii) the authorized use of a computer, computer system, computer network, or computer software in a manner not explicitly or implicitly authorized by the appropriate principal or licensee.

SECTION 16-16-20. Computer crime offenses; penalties.

(1) It is unlawful for a person to wilfully, knowingly, maliciously, and without authorization or for an unauthorized purpose to:

(a) directly or indirectly access or cause to be accessed a computer, computer system, or computer network for the purpose of:

(i) devising or executing a scheme or artifice to defraud;

(ii) obtaining money, property, or services by means of false or fraudulent pretenses, representations, promises; or

(iii) committing any other crime.

(b) alter, damage, destroy, or modify a computer, computer system, computer network, computer software, computer program, or data contained in that computer, computer system, computer program, or computer network or introduce a computer contaminant into that computer, computer system, computer program, or computer network.

(2) A person is guilty of computer crime in the first degree if the amount of gain directly or indirectly derived from the offense made unlawful by subsection (1) or the loss directly or indirectly suffered by the victim exceeds ten thousand dollars. Computer crime in the first degree is a felony and, upon conviction, a person must be fined not more than fifty thousand dollars or imprisoned not more than five years, or both.

(3)(a) A person is guilty of computer crime in the second degree if the amount of gain directly or indirectly derived from the offense made unlawful by subsection (1) or the loss directly or indirectly suffered by the victim is greater than one thousand dollars but not more than ten thousand dollars.

(b) A person is also guilty of computer crime in the second degree where:

(i) he interferes with, causes to be interfered with, denies or causes to be denied any computer or network service to an authorized user of the computer or network service for the purpose of devising or executing any scheme or artifice to defraud, or obtaining money, property, or services by means of false or fraudulent pretenses, representations, or promises, or committing any other felony;

(ii) he deprives the owner of possession of, or takes, transfers, conceals, or retains possession of any computer, data, computer property, or computer-related property, including all parts of a computer, computer system, computer network, computer software, computer services, or information associated with a computer, whether in a tangible or intangible form; or

(iii) the gain derived from the offense made unlawful by subsection (1) or loss suffered by the victim cannot reasonably be ascertained.

(c) Computer crime in the second degree is a misdemeanor and, upon conviction for a first offense, a person must be fined not more than ten thousand dollars or imprisoned not more than one year, or both. Upon conviction for a second or subsequent offense, a person is guilty of a misdemeanor and must be fined not more than twenty thousand dollars or imprisoned not more than two years, or both.

(4) A person is guilty of computer crime in the third degree if the amount of gain directly or indirectly derived from the offense made unlawful by subsection (1) or the loss directly or indirectly suffered by the victim is not more than one thousand dollars. A person is also guilty of computer crime in the third degree if he wilfully, knowingly, and without authorization or for an unauthorized purpose engages in computer hacking. Computer crime in the third degree is a misdemeanor and, upon conviction for a first offense, a person must be fined not more than two hundred dollars or imprisoned not more than thirty days. Upon conviction for a second or subsequent offense, a person must be fined not more than two thousand dollars or imprisoned not more than two years, or both.

(5) Each computer, computer system, or computer network affected by the violation of this chapter constitutes a separate violation.

SECTION 16-16-25. Compensatory damages and restitution.

In addition to other civil remedies available, the owner or lessee of a computer, computer system, computer network, computer program, or data may bring a civil action against a person convicted under this chapter for compensatory damages, restitution, and attorney's fees. Compensatory damages and restitution may include:

(1) expenditures reasonably and necessarily incurred by the owner or lessee to verify whether a computer system, computer network, computer program, or data was altered, damaged, or deleted by the access;

(2) costs of repairing or, if necessary, replacing the affected computer, computer system, computer network, computer software, computer program, or data;

(3) lost profits for the period that the computer, computer system, computer network, computer software, computer program, or data was unusable; and

(4) costs of replacing or restoring the data lost or damaged as a result of a violation of this chapter.

SECTION 16-16-30. Venue.

For the purpose of venue under this chapter, a violation of this chapter is considered to have been committed in the county in which the violation took place; however, upon proper motion and the proper showing before a judge, venue may be transferred if justice would be better served by the transfer, to one of the following:

(1) a county in which an act was performed in furtherance of a transaction which violated this chapter;

(2) the county of the principal place of business in this State of the owner or lessee of a computer, computer system, computer network, or any part of it, which has been subject to the violation; or

(3) a county in which a violator had control or possession of proceeds of the violation or of books, records, documents, property, financial instruments, computer software, computer programs, or other materials or objects which were used in the furtherance of the violation.

SECTION 16-16-40. Applicability of other criminal law provisions.

The provisions of this chapter must not be construed to preclude the applicability of any other provision of the criminal law of this State, which presently applies or may in the future apply, to any transaction which violates this chapter.

CONCLUSION

Clearly, the number of civil and criminal health care fraud prosecutions involving Medicaid has increased in recent years. Many of these civil prosecutions have been a result of whistleblowers bringing qui tam False Claims Act (FCA) lawsuits against hospitals, outpatient surgery centers, ambulatory surgery centers, nursing home facilities, hospices, doctors, nurses, health care administrators, pharmacists, pharmaceutical companies and pharmacies for false and fraudulent claims against Medicare, Medicaid and other federal health care programs. So too, as a result of increased funding for federal prosecutors and health care fraud investigators, criminal prosecutions against health care providers who commit fraud against federal health care programs have also increased. South Carolina’s MFCU has stepped up its prosecution of Medicaid fraud cases. Health care fraud lawyers, attorneys and law firms need to be aware of recent prosecution trends involving health care providers accused of making false and

fraudulent claims against Medicare, Medicaid and Tricare. Whether representing the relator or whistleblower in a qui tam suit alleging fraud against a hospital, outpatient surgery center, ambulatory surgery center, nursing home facility, hospice, doctor, nurse, health care administrator, pharmacy, pharmaceutical company or pharmacist, or the defendant in a civil and/or criminal proceeding against a health care provider or beneficiary, the practitioner needs to keep abreast of the case law developments in this area and the expanding efforts by the federal government to take civil and criminal actions against those involved in making fraudulent health care claims against the federal government.

© 2010 Joseph P. Griffith, Jr.

Joseph P. Griffith, Jr. SC Health Care Fraud AttorneySC Qui Tam Whistleblower Fraud LawyerSC Medicaid-Medicare Fraud Law FirmJoe Griffith Law Firm, LLC7 State StreetCharleston, South Carolina 29401(843) 225-5563http://www.joegriffith.com

South Carolina Attorney Joe Griffith is a former SC federal prosecutor who handles health care fraud white collar criminal cases, qui tam whistleblower cases, Medicaid fraud cases, Medicare fraud cases, pharmaceutical fraud cases and government contractor fraud cases in South Carolina and the United States.

© 2010 Joseph P. Griffith, Jr.