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Written By:
Renee Flasher, Ph.D., CFE, CPA, CMA
RX for Fraud
Growing health care fraud drastically affects all of us
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Welcome to the new health care fraud column. In May, U.S. authorities charged 107 people — including doctors, nurses and other licensed medical professionals, for allegedly trying to defraud Medicare of about $452 million, the largest Medicare fraud sweep to date. "Health care fraud shows no sign of abating," said Dr. Joseph T. Wells, CFE, CPA, founder and Chairman of the ACFE, during his recent keynote message at the 23rd Annual ACFE Fraud Conference & Exhibition. "Don't expect a downturn any time soon because governments have a long history of being able to dole out money without keeping very good track of it."
In this inaugural column, Lauren E. Davis, CFE, ASA, a consulting manager with Pershing Yoakley & Associates, P.C., describes other recent cases, pertinent U.S. legislation and governing agencies, typical schemes and ways to detect and deter health care fraud. — ed.
Health care fraud is a serious problem affecting every patient and consumer. The devastating situation is rooted not only in the excessive financial losses incurred, which extend into the billions of dollars every year, but also in patient harm. It's estimated that the economic cost of fraud related to health care in the U.S. is 3 percent to 10 percent of all healthcare spending — an estimated $68 billion to $260 billion annually.
Fraudsters commit a wide variety of schemes against private and public insurance companies by filing fictitious health care claims to generate profits. As health care costs rise, so will the costs associated with these schemes. Consumers then will endure rising insurance premiums and out-of-pocket expenses.
RECENT HEALTH CARE FRAUD INDICTMENTS
The successful prosecution of individuals charged with committing health care fraud is an essential step in the deterrence of fraudulent activity. The punishment of health care fraud perpetrators can include such serious consequences as fines, incarceration and even the loss of the provider's right to practice in the medical profession. The following are examples of recent fraud indictments:
Medicare Fraudulent Billing Scheme — Justice News, June 2012
Various individuals, including owners, the CEO and other senior employees, of American Therapeutic Corporation (ATC), a mental health company in Miami, have been convicted or named as defendants for their participation in a $205 million Medicare fraud scheme involving fraudulent billings. The defendants are alleged to have billed Medicare for hundreds of millions of dollars for services that were either unnecessary or never provided to the patients, and based on fraudulent documentation. Some key participants — ATC's executives, Lawrence Duran, Marianella Valera, Judith Negron, and Margarita Acevado — were sentenced to 50 years, 35 years, 35 years and 91 months in prison, respectively, for their roles in the fraud scheme.
Settlement of False Claims Act allegations — Justice News, December 2010
Detroit Medical Center, a non-profit company that owns and operates hospitals and outpatient facilities in Detroit, allegedly engaged in improper financial relationships with referring physicians. The company has agreed to pay $30 million to settle allegations that it violated the False Claims Act, the Anti-Kickback Statute and the Stark Statute.
Medicare fraud scheme — Justice News, December 2010
The owner and vice president of Wayne County Therapeutic Inc. were sentenced to 151 months and 108 months in prison, respectively, and ordered to pay $6.5 million in restitution. The two were the leaders in a $23 million Medicare fraud scheme, which included the filing of false claims for physical and occupational therapy services that were never provided.
Medicare and Private Insurance Fraud Scheme — Justice News, June 2012
Boris Sachakov, M.D., owner and operator of Colon and Rectal Care of New York, P.C., was found guilty on one count of health care fraud and five counts of health care false statements. The indictment alleged that Sachakov submitted more than $22.6 million in false and fraudulent claims to Medicare and private insurance companies for surgeries and medical services that were never provided and received in excess of $9 million on those claims. Sachakov faces a maximum penalty of 35 years in prison and an $18 million fine.
Organized crime health care fraud — Justice News, October 2010
A total of 73 defendants, including alleged members and associates of an organized crime enterprise, were indicted for various fraudulent billing schemes totaling approximately $163 million. The frauds committed included submission of bills for medically unnecessary treatments or for treatments that were never provided, identity theft of physicians and Medicare beneficiaries and the operation of phony clinics for the purpose of submitting Medicare reimbursement claims.
HEALTH CARE FRAUD LEGISLATION
Health-reform legislation is fundamentally centered on improving and expanding consumer protections, strengthening Medicare and reducing health care costs. However, the Patient Protection and Affordable Care Act (PPACA) of 2010 contains approximately 30 sections related to health care fraud and abuse and related anti-fraud statutes. The PPACA establishes new tools to prevent fraud, enhanced penalties to deter fraud and abuse, greater oversight of private insurance abuses, new rules and sentencing procedures for criminals, enhanced screening on enrollment requirements and other resources to fight fraud.
The most notable portions of health care fraud legislation, which PPACA amended, are:
Furthermore, U.S. Code Title 18: Crimes and Criminal Procedures addresses mail fraud and other fraud offenses:
To further support PPACA, as of December 2011, the Center for Medicare and Medicaid Services (CMS) now requires automated provider screenings and implemented a site visit verification process for certain providers and suppliers. These measures are intended to ensure the integrity of the Medicare program at the time of provider enrollment and to provide screening mechanisms to confirm payments are made only for appropriate and reasonable services to legitimate providers. [See the Centers for Medicare and Medicaid Services (CMS) Fraud Prevention: Automated Provider Screening and National Site Visit Initiatives.]
GOVERNING AGENCIES
The U.S. Department of Health & Human Services (HHS) Office of Inspector General (OIG) and the FBI largely governs the investigation and deterrence of health care fraud.
The FBI is the primary agency for the investigation of health care-related fraud, with jurisdiction over both federal and private insurance programs. However, HHS and the Department of Justice (DOJ) review claims and investigate providers for possible Medicare fraud. These agencies are also responsible for the direction of the Healthcare Fraud Prevention and Enforcement Action Team (HEAT). Other governing agencies include, but aren't limited to, the CMS, the U.S. Attorney's Office and the U.S. Postal Service.
The reduction of health care fraud is a top priority of HHS and the Obama Administration. The HHS invested $311 million in discretionary resources to strengthen Medicare and Medicaid program integrity in the 2010 and 2011 budgets and has allocated $581 million for 2012. This increase in resources is designed to place more emphasis on minimizing inappropriate payments, pinpointing potential weaknesses in the program, targeting emerging fraud schemes by provider and type of service and establishing safeguards.
HHS has reported that efforts to combat healthcare fraud will save an estimated $9.9 billion over the next 10 years. However, on Jan. 24, 2011, the annual Health Care Fraud and Abuse Control Program report announced that the joint efforts of DOJ and HHS during 2010 resulted in the recovery of $4 billion. This is the largest sum ever recovered in a single year.
HEAT TASK FORCE
Since its inception in May of 2009, the HEAT Task Force has worked to prevent the waste, fraud and abuse of the Medicare and Medicaid programs, reduce rising health care costs and improve the quality of care. It accomplishes this by securing criminal convictions and civil action against individuals and organizations committing fraudulent acts.
The DOJ, CMS and HHS Inspector General's Medicare Fraud HEAT Strike Forces have expanded to localities that are particularly plagued by health care fraud including Baton Rouge, Brooklyn, Detroit, Houston, Los Angeles, Miami-Dade and Tampa Bay. Recently, HHS reported that since 2007, the HEAT Strike Forces have charged more than 1,330 defendants for falsely billing the Medicare program, which resulted in more than $4 billion in fraudulent billing.
HOW HEALTH CARE FRAUD IS COMMITTED
Health care providers — the most common perpetrators of health care fraud — can commit it through a variety of different scenarios. Here are some of their most common schemes:
In addition, individuals can commit health care fraud through:
In this inaugural column, Lauren E. Davis, CFE, ASA, a consulting manager with Pershing Yoakley & Associates, P.C., describes other recent cases, pertinent U.S. legislation and governing agencies, typical schemes and ways to detect and deter health care fraud. — ed.
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Fraudsters commit a wide variety of schemes against private and public insurance companies by filing fictitious health care claims to generate profits. As health care costs rise, so will the costs associated with these schemes. Consumers then will endure rising insurance premiums and out-of-pocket expenses.
RECENT HEALTH CARE FRAUD INDICTMENTS
The successful prosecution of individuals charged with committing health care fraud is an essential step in the deterrence of fraudulent activity. The punishment of health care fraud perpetrators can include such serious consequences as fines, incarceration and even the loss of the provider's right to practice in the medical profession. The following are examples of recent fraud indictments:
Medicare Fraudulent Billing Scheme — Justice News, June 2012
Various individuals, including owners, the CEO and other senior employees, of American Therapeutic Corporation (ATC), a mental health company in Miami, have been convicted or named as defendants for their participation in a $205 million Medicare fraud scheme involving fraudulent billings. The defendants are alleged to have billed Medicare for hundreds of millions of dollars for services that were either unnecessary or never provided to the patients, and based on fraudulent documentation. Some key participants — ATC's executives, Lawrence Duran, Marianella Valera, Judith Negron, and Margarita Acevado — were sentenced to 50 years, 35 years, 35 years and 91 months in prison, respectively, for their roles in the fraud scheme.
Settlement of False Claims Act allegations — Justice News, December 2010
Detroit Medical Center, a non-profit company that owns and operates hospitals and outpatient facilities in Detroit, allegedly engaged in improper financial relationships with referring physicians. The company has agreed to pay $30 million to settle allegations that it violated the False Claims Act, the Anti-Kickback Statute and the Stark Statute.
Medicare fraud scheme — Justice News, December 2010
The owner and vice president of Wayne County Therapeutic Inc. were sentenced to 151 months and 108 months in prison, respectively, and ordered to pay $6.5 million in restitution. The two were the leaders in a $23 million Medicare fraud scheme, which included the filing of false claims for physical and occupational therapy services that were never provided.
Medicare and Private Insurance Fraud Scheme — Justice News, June 2012
Boris Sachakov, M.D., owner and operator of Colon and Rectal Care of New York, P.C., was found guilty on one count of health care fraud and five counts of health care false statements. The indictment alleged that Sachakov submitted more than $22.6 million in false and fraudulent claims to Medicare and private insurance companies for surgeries and medical services that were never provided and received in excess of $9 million on those claims. Sachakov faces a maximum penalty of 35 years in prison and an $18 million fine.
Organized crime health care fraud — Justice News, October 2010
A total of 73 defendants, including alleged members and associates of an organized crime enterprise, were indicted for various fraudulent billing schemes totaling approximately $163 million. The frauds committed included submission of bills for medically unnecessary treatments or for treatments that were never provided, identity theft of physicians and Medicare beneficiaries and the operation of phony clinics for the purpose of submitting Medicare reimbursement claims.
HEALTH CARE FRAUD LEGISLATION
Health-reform legislation is fundamentally centered on improving and expanding consumer protections, strengthening Medicare and reducing health care costs. However, the Patient Protection and Affordable Care Act (PPACA) of 2010 contains approximately 30 sections related to health care fraud and abuse and related anti-fraud statutes. The PPACA establishes new tools to prevent fraud, enhanced penalties to deter fraud and abuse, greater oversight of private insurance abuses, new rules and sentencing procedures for criminals, enhanced screening on enrollment requirements and other resources to fight fraud.
The most notable portions of health care fraud legislation, which PPACA amended, are:
- Anti-Kickback Statue (42 U.S.C. §1320a-7b(b)), a criminal statue, prohibits anyone from knowingly and willingly offering, paying, soliciting, receiving or providing any remuneration intended to 1) induce the purchase, lease, order or an arrangement for purchase of an item or 2) service or referrals for any item of value that is reimbursed by federal healthcare programs (including Medicare, Medicaid and TRICARE programs).
- The False Claims Act (31 U.S.C. §3729) imposes civil liability upon any person who knowingly submits, or causes the submission of, false or fraudulent claims for payment or approval. The attorney general or a person acting as a whistleblower may bring civil action; this action is referred to as qui tam.
- The Stark Law (42 U.S.C. §1395nn), a civil law, prohibits the referral of Medicare and Medicaid beneficiaries by a physician to an entity for the provision of designated health services if the physician has a financial relationship with the entity. This financial relationship can include an ownership interest, an investment interest and/or a compensation arrangement. The Stark Law is also referred to as the Physician Self-Referral Statute.
Furthermore, U.S. Code Title 18: Crimes and Criminal Procedures addresses mail fraud and other fraud offenses:
- Healthcare Fraud (18 U.S.C. §1347) states that whoever knowingly and willingly executes, or attempts to execute, a scheme to 1) defraud any healthcare benefit program or 2) obtain by false pretenses any money or property owned by any healthcare benefit program shall be fined and/or imprisoned.
To further support PPACA, as of December 2011, the Center for Medicare and Medicaid Services (CMS) now requires automated provider screenings and implemented a site visit verification process for certain providers and suppliers. These measures are intended to ensure the integrity of the Medicare program at the time of provider enrollment and to provide screening mechanisms to confirm payments are made only for appropriate and reasonable services to legitimate providers. [See the Centers for Medicare and Medicaid Services (CMS) Fraud Prevention: Automated Provider Screening and National Site Visit Initiatives.]
GOVERNING AGENCIES
The U.S. Department of Health & Human Services (HHS) Office of Inspector General (OIG) and the FBI largely governs the investigation and deterrence of health care fraud.
The FBI is the primary agency for the investigation of health care-related fraud, with jurisdiction over both federal and private insurance programs. However, HHS and the Department of Justice (DOJ) review claims and investigate providers for possible Medicare fraud. These agencies are also responsible for the direction of the Healthcare Fraud Prevention and Enforcement Action Team (HEAT). Other governing agencies include, but aren't limited to, the CMS, the U.S. Attorney's Office and the U.S. Postal Service.
The reduction of health care fraud is a top priority of HHS and the Obama Administration. The HHS invested $311 million in discretionary resources to strengthen Medicare and Medicaid program integrity in the 2010 and 2011 budgets and has allocated $581 million for 2012. This increase in resources is designed to place more emphasis on minimizing inappropriate payments, pinpointing potential weaknesses in the program, targeting emerging fraud schemes by provider and type of service and establishing safeguards.
HHS has reported that efforts to combat healthcare fraud will save an estimated $9.9 billion over the next 10 years. However, on Jan. 24, 2011, the annual Health Care Fraud and Abuse Control Program report announced that the joint efforts of DOJ and HHS during 2010 resulted in the recovery of $4 billion. This is the largest sum ever recovered in a single year.
HEAT TASK FORCE
Since its inception in May of 2009, the HEAT Task Force has worked to prevent the waste, fraud and abuse of the Medicare and Medicaid programs, reduce rising health care costs and improve the quality of care. It accomplishes this by securing criminal convictions and civil action against individuals and organizations committing fraudulent acts.
The DOJ, CMS and HHS Inspector General's Medicare Fraud HEAT Strike Forces have expanded to localities that are particularly plagued by health care fraud including Baton Rouge, Brooklyn, Detroit, Houston, Los Angeles, Miami-Dade and Tampa Bay. Recently, HHS reported that since 2007, the HEAT Strike Forces have charged more than 1,330 defendants for falsely billing the Medicare program, which resulted in more than $4 billion in fraudulent billing.
HOW HEALTH CARE FRAUD IS COMMITTED
Health care providers — the most common perpetrators of health care fraud — can commit it through a variety of different scenarios. Here are some of their most common schemes:
- Billing for services never rendered. This involves fraudulently billing for services for an actual patient or through identity theft. This falsified billing can include the fabrication of entire claims or the "padding" of charges.
- Upcoding for services. This involves falsifying a claim, such as billing for a more expensive service or procedure than what was actually rendered to the patient.
- Unbundling procedures. This involves charging separately for procedures that should accurately be charged as a single procedure, according to published billing regulations.
- Performing medically unnecessary services or procedures. The provider performs services or procedures for the sole purpose of generating charges. The services provided aren't considered reasonable or necessary to provide the patient with the appropriate standard of care. This scheme may also include intentionally incorrectly recording a patient's diagnosis to justify the additional services.
- Accepting kickbacks for referrals. This involves providers receiving some kind of payment or compensation for the referral of patients or the referral of business.
In addition, individuals can commit health care fraud through:
- Identity theft. This is the use of another individual's protected health insurance information or identity to obtain medical treatments, prescription drugs or surgeries.
EDUCATION AND DETERRENCE
Health care fraud schemes come in various shapes, sizes and forms. The fundamental step in fighting this ongoing battle is rooted in the education and deterrence of all players, from individual patients and medical providers to national insurers and administrators. We must work to change the perception that health care fraud doesn't impact our lives and that this type of fraud can go on undetected without consequences.
Lauren E. Davis, CFE, ASA, is a consulting manager with Pershing Yoakley & Associates, P.C. (PYA — www.pyapc.com) in Knoxville, Tenn.
Sidebar:
Ways to detect and deter health care fraud
- Patients/consumers need to protect their personally identifiable information, including medical and health insurance records, Social Security numbers and Medicare numbers.
- Patients/consumers should question health care providers when billing, services, etc. seem incorrect or inappropriate.
- Patients/consumers should report any suspected fraud to authorities.
- Providers should review their operations to ensure compliance with new legislation under the PPACA.
- Physician practices, hospitals and other health care entities should introduce compliance programs that outline anti-fraud controls, such as annual audits by independent third parties; fraud hotlines for reporting fraud, abuse and waste; and guidelines governing the monitoring of patient, provider and payor activity.
- Train employees, patients and providers so they can recognize fraud and misconduct.
- Analyze data through data-mining techniques to identify suspicious billing practices, such as inconsistent diagnoses, geographical disparities and providers with an impossibly large number of patients.
- Enforce compliance through pursuing criminal and civil actions against perpetrators.
The Association of Certified Fraud Examiners assumes sole copyright of any article published on www.Fraud-Magazine.com or ACFE.com. Permission of the publisher is required before an article can be copied or reproduced.
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