Health Care Fraud and Abuse
Health Care Fraud and Abuse
Michael E. Ryan, MD
Revised April, 2006
Prior to September 11, 2001, the Department of Health and Human Services and the Department of Justice, combined statement regarding healthcare fraud and abuse read, "The detection and elimination of health care fraud and abuse is a top priority of federal law enforcement." Only violent crimes rated a higher priority with federal law enforcement. Despite a clear shift in priorities to homeland security, health care fraud and abuse remains a top concern for federal law enforcement.
Of the nation's annual health care outlay, it is estimated that between 3% - 10% is lost to fraud and abuse. In 2004 alone, Medicare lost $19.9 billion to fraudulent or unnecessary claims. Improperly paid claims represent 9.3% of Medicare's total reimbursement spending. There is a big incentive to cut payment error rates and recoup payment for unnecessary services or fraudulent billing.
What is Fraud and Abuse?
Medicare's definition of fraud is "intentional deception or misrepresentation that an individual knows to be false or does not believe to be true and makes, knowing that the deception could result in some unauthorized benefit to himself/herself or some other person." Abuse is a lesser offense than fraud. Abuse usually involves incidents or practices that directly or indirectly cause financial losses to the Medicare/Medicaid program without intentional deception.
Government Agencies Involved in Health Care Fraud and Abuse
Several federal agencies are involved in the investigation and prosecution of possible charges of fraud and abuse. The Department of Health and Human Services (HHS) is responsible for protecting the health of Americans and providing essential human service. Oversight of it's programs primarily occurs through the Office of Inspector General (OIG) which is responsible for identifying ways to improve HHS programs and operations and protect them against fraud, abuse and waste. The Office of Investigations (OI) is the principal investigating arm of HHS. The OI employs a number of criminal investigators and special agents whose mission is the detection and prevention of fraud, abuse and waste. The Office of Audit Services (OAS) is responsible for providing audits of HHS programs. It recommends ways to reduce waste in HHS programs. Short-term investigations are conducted by the Office of Evaluation/Inspections (OEI). They're also responsible for the management of the fraud and abuse hotline.
Center for Medicare and Medicaid Services (CMS) is another HHS agency responsible for the administration of the Medicare and Medicaid programs. Working with Medicare carriers and beneficiaries, CMS helps to identify providers who may be violating fraud and abuse laws. The Department of Justice (DOJ) working through the Office of the Attorney General (AG), the Office of the Deputy Attorney General (DAG) and the Federal Bureau of Investigation (FBI) investigates and prosecutes cases of health care fraud and abuse.
Administration on Aging (AOA) and American Association of Retired Persons (AARP) are involved in education programs of seniors. Participants are instructed on identification and reporting of fraudulent practices.
A National Health Care Fraud and Abuse Task Force was formed comprised of DAG, OIG, CMS, DOJ, state and local prosecutors. This task force is to formulate strategies to combat health care fraud and safeguard Medicare and Medicaid beneficiaries.
In 1995, Operation Restore Trust (ORT) was undertaken. This was a combined effort between HHS and DOJ against fraud and abuse in the Medicare program. This program focused on dishonest medical equipment suppliers, home health agencies and nursing homes in 5 states (CA, FL, IL, NY, TX). It returned $23 of overpayment to the Medicare Trust Fund for each dollar spent on investigation and prosecution.
The Health Insurance Portability and Accountability Act (HIPAA) was passed by congress and signed into law in 1996. This law enhanced the abilities of law enforcement to pursue and convict providers for fraud against any health care benefit program (not just Federal programs). It established the Health Care Fraud and Abuse Control Program under the control of the Attorney General and HHS/OIG to coordinate federal, state and local law enforcement activities regarding health care fraud and abuse. It also created the Health Care Fraud and Abuse Control Account, which was initially funded with $100 million to fight Medicare fraud. Increased civil and criminal penalties for Medicare fraud was also provided for under this act.
The Balanced Budget Act of 1997 created more deterrents to Medicare fraud. Medicare beneficiaries are encouraged to act as watchdogs to help identify and report questionable Medicare charges (an incentive program with cash incentives).
Forms of Medicare Fraud
Many different actions may take the form of Medicare fraud and abuse. The majority of infractions can be defined into the following categories:
- Billing for services not furnished
- Misrepresenting the diagnosis to justify payment
- Soliciting, offering, or receiving a kickback
- Unbundling or "exploding" charges
- Falsifying certificates of medical necessity, plans of treatment and medical records to justify payment
- Billing for a service not furnished as billed (i.e. upcoding)
- Billing for a non-covered service as a covered item
- Duplicate payment for the same service
VIOLATIONS RESULTING IN HEALTH CARE FRAUD
Civil False Claims Act
31 USC sec. 3729
The False Claims Act (FCA) and its whistleblower provisions are central to the government's anti-fraud campaign. Violations of the FCA law apply to government programs (Medicare or Medicaid) as well as to private insurers. Liability for health care fraud requires the defendant to submit or cause to be submitted a claim for payment to the government; the claim is false or fraudulent; and/or the defendant acted knowingly (actual knowledge or acts in deliberate ignorance of the truth or acts in a reckless disregard of the truth). This does not bar innocent or negligent billing errors submitted on one's behalf.
In 1998, the program increased the pursuit of investigations and prosecutions of cases of substandard care (the quality of care is less than the government expects and, therefore, the claims for expected quality care are false).
In its 1997 and 1998 annual reports on Health Care Fraud, DOJ stated, "Mere negligence, mistakes and inadvertence, however, do not amount to false claims, and The Department does not and will not bring FCA actions against doctors and hospitals for honest billing errors. The purpose of the law is to single out those providers who recklessly or with deliberate indifference allow fraudulent billing practices to occur or continue." Recent cases demonstrate that they are pursuing those cases in which a repeated pattern of inappropriate billing has occurred.
The OIG has undertaken a nationwide review of compliance of reimbursement rules by physicians at teaching hospitals. This has become known as the PATH (Physicians at Teaching Hospitals) initiative. The fundamental tenet of this initiative is that the teaching physician must have personally provided the service billed or have been present when the resident furnished the care. PATH audits include a review of Part B Medicare claims information and medical records to determine if the teaching physician claimed the appropriate reimbursement for the level of service provided. The audits were designed to detect patterns or practices of upcoding.
Prosecutions under the False Claims Act are civil, not criminal. Damages include triple the amount of the false claims paid, civil penalties of not less than $5000 and not more than $11,000 for each false claim.
QUI TAM (Whistleblower) PROSECUTIONS
"One who sues for the king and for himself."
Under the FCA, in certain circumstances, private individuals with insider information can file an action on behalf of the United States, and obtain part of any recovery by the government in the action. The qui tam statute allows strong financial incentives to individuals who expose fraudulent activities. They are a major source of information in exposing Medicare fraud. In qui tam actions the person bringing the charges forward is known as the relator. Anyone with evidence of a false claim to a government agency may act as a relator, if they have inside information of fraudulent activity. In qui tam prosecutions, no specific intent is required and only a preponderance of evidence is needed. The civil penalties are similar to violations of the FCA. The relator can collect 15% - 25% of the amount recovered.
CRIMINAL PENALTIES FOR ACTS INVOLVING FEDERAL HEALTH CARE PROGRAMS
Section 1128B of Social Security Act (42 USC sec. 1320a-7b)
- Criminal penalties may be brought against those who provide false statements or representation. This law states that violations involve those whoever:
- Knowingly and willfully makes or causes to be made any false statement or representation of material fact in any application for any benefit or payment under a Federal Health Care Program;
- Knowingly and willfully makes or causes to be made any false statement or representation of a material fact for use in determining right to a benefit or payment;
- Having knowledge of the occurrence of any event affecting initial or continued right to the benefit or payment, conceals or fails to disclose the event with an intent fraudulently to secure the benefit or payment either in a greater amount or quantity than is due or when no benefit or payment is authorized;
- Knowingly and willfully converts a benefit or payment to a use other than for the use and benefit of the person entitled to it.
- Presents or causes to be presented, a claim for a physician's service for which payment may be made under a Federal Health Care Program and knows that the individual who furnished the service was not licensed as a physician. Criminal penalties for those prosecuted and found guilty under this law involve fines of up to $25,000, imprisonment up to 5 years, or both.
- Federal Anti-Kickback Statute
This federal statute provides "criminal penalties for individuals or entities that knowingly and willfully offer, pay, solicit or receive remuneration in order to induce business reimbursed under the Federal or State health care programs". The types of remunerations include kickbacks, bribes and rebates, whether made directly or indirectly, overtly or covertly or in cash or in kind. Both the person offering the remuneration and the person receiving it share equal legal risk. Violations are felonies and punishable by fines up to $25,000 and imprisonment for up to 5 years or both. The Balanced Budget Act of 1997 allowed inclusion of a civil money penalty provision. This administrative sanction may add $50,000 for each act and an assessment of not more than 3 times the amount of remuneration.
The OIG established provisions in order to permit certain non-abusive arrangements. These are known as safe harbors and are subject to periodic updating. To date, more than 21 safe harbors have been identified. Safe harbor payment practices will not be treated as criminal offenses under the Anti-Kickback Statute. However, in each case the person must comply with all of the requirements of the particular safe harbor. In many cases the requirements are quite detailed.
The current safe harbors include areas of:
If one is considering an arrangement and is not sure if it violates the Anti-Kickback Statute, they may ask for an advisory opinion from the OIG. After all facts of the arrangement are provided, a formal opinion will be issued. The opinion is binding for the facts presented in the case of the requestor only (third parties may not legally rely on these opinions). These opinions are binding for HHS only.
- Investment interests
- Space rental
- Equipment rental
- Personal services and management contracts
- Sale of practices
- Referral services
- Group purchasing organizations
- Waiver of beneficiary co-insurance and deductible amounts
- Increased coverage, Reduced cost-sharing or Reduced premium amounts offered by health plans
- Price reductions offered to health plans
- Practitioner recruitment
- Obstetrical malpractice insurance
- Investments in group practices
- Cooperative hospital service organizations
- Ambulatory surgery centers (ambulatory endoscopy centers)
- Referral agreements for specialty services
- Price reductions offered to eligible managed care organizations (MCO)
- Price reductions offered by contractors with substantial financial risk to MCO
Ethics In Self-Referral Act (Stark I & II)
42 USC sec. 1395nn
Stark I enacted in 1992 prohibited physicians from referring Medicare beneficiaries to clinical labs for services in which the physician or an immediate family member had a financial interest. In 1995, Stark II increased the scope of Stark I. It included Medicaid patients and prohibited referrals to entities for designated health services in which the physician or an immediate family member have a financial relationship unless a specific statutory exception applies. Services affected include:
- Clinical laboratory services
- Radiologic and diagnostic services (CT, MRI, ultrasound)
- Radiation therapy
- Physical therapy
- Occupational therapy
- Home health services
- Prosthetics and orthotic services
- Parenteral and enteral nutrients, equipment and supplies
- Outpatient prescription drugs
- Durable medical equipment and supplies
- Inpatient and outpatient hospital services
There is often overlap between the Federal Anti-kickback Statute and the Stark Acts. Some differences are that the Stark Acts apply only to physicians and carry only civil penalties. Intent to defraud is not a requirement for conviction under the Stark Acts.
Civil Money Penalties (CMP)
Section 1128A of the Social Security Act (42 USC sec. 1320a-7a)
Additional money penalties may be added to violators of Federal Health Care Fraud and Abuse laws. Violators involve whoever knowingly presents or causes to be presented any of the following claims:
- Claims for items or services the person knows or should know were not provided (includes pattern or practices of upcoding)
- Claims for items or services the person knows or should know are false or fraudulent.
- Claims billed as physician services where the person knows or should know the services were provided by a person not licensed as a physician.
- Claims for items/services furnished during a period in which the person was excluded from the Program.
- A pattern of presenting claims for items/services the person knows or should know are not medically necessary.
- Knowingly gives or causes to be given information the person knows or should know is false or misleading (information could affect hospital discharge).
- Arranges or contracts with an individual or entity the person knows or should know is excluded from participation in a Federal Health Care Program.
- Violates the Anti-Kickback statute.
Penalties include (a) CMP of $10,000 for each item or service and three times the amount claimed for each item or service, (b) $15,000 for each individual with respect to whom false or misleading information was given to influence hospital discharge, (c) $50,000 for each act in violation of the Anti-Kickback Statute and three times the amount of the remuneration offered/paid, and (d) exclusion form Federal/State Health Care Programs.
Other Criminal Statutes
Providers being investigated for health care fraud and abuse may face charges under other federal laws than those listed above. Those other statutes may include:
- 18 USC sec. 286; Conspiracy to defraud the Government with respect to claims
- 18 USC sec. 287; False Claims
- 18 USC sec. 371; Conspiracy to defraud the United States
- 18 USC sec. 1001; False statements
- 18 USC sec. 1341; Mail fraud
- 18 USC sec. 1343; Wire fraud
The Results of Health Care Fraud and Abuse Investigation
For every dollar invested in investigation and prosecution of federal health care fraud, $13 are returned to the American people. During the 5 year period from 1999 to 2003, $5.7 billion were recovered by the federal government from civil health care fraud action. Recoveries for fiscal years 2002 and 2003 averaged $1.65 billion, up 38% from 2001 and double the amount recovered in 2000. There has been a drop in non-fraudulent, improper fee-for-service payments over the past 5 years. Most of this was attributed to more appropriate coding by providers. Included in these settlements were 35 medical schools involving $224 million of settlements. Nineteen of these settlements were part of the PATH initiative.
In 2005, the OIG reported exclusions of 3806 individuals and entities from Federal health care programs for fraud or abuse, 537 criminal actions and 262 civil actions. DOJ opened over 800 new civil health care fraud investigations and the U.S. Attorneys' Offices opened over 1000 new criminal investigations. Since 1997, $7.3 billion dollars have been returned to the Medicare Trust Fund as a result of HCFAC activities.
Pitfalls for Endoscopists
There are four areas of coding/billing that one should carefully monitor to avoid possible fraud or abuse charges. They include: documentation of medical necessity, upcoding (or coding at a higher level than your documentation supports), double billing and billing for services not rendered. The first two, medical necessity and upcoding, requires that detailed and complete records are kept. This would not only be true for E&M activity but also for procedures.
Another potential area of abuse for endoscopists involves the use of the 25-modifier. This allows for the same day billing of a procedure and E&M activity. The E&M activity must, however, be a significant, separately identifiable E&M service by the same provider on the same day of the procedure. The E&M service must not be for the primary purpose of the pre- or post-procedural care of the patient. The use of the 25-modifier is very easy for a Medicare carrier to profile and tract. In 2004, the OIG targeted this modifier for review of proper use.
Endoscopists practicing at teaching hospitals must demonstrate they supplied the service billed or were present while the resident/fellow performed the service. Records must document the degree of involvement with the procedure to avoid liability under the PATH initiative and FCA.
Anti-kickback violations are becoming an area of increased scrutiny. Offering gifts of any value to beneficiaries to influence their choice of a Medicare provider raises questions of cost and quality. For enforcement purposes, a $10 individual and $50 aggregate per year limit has been set. However, the OIG is evaluating a proposal for complimentary local transportation service. Any gift provded to referring physicians that may appear as an inducement for referral business would be a violation of the anti-kickback laws or the Stark laws. In addition, physicians receiving gifts from industry sources (pharmaceutical, equipment suppliers, etc) may find themselves in violation of these laws if the value of the gift exceeds certain limits. Gifts under $50 each, which are not cash or cash equivalents, with a total single source yearly aggregate not exceeding $300 per physician are acceptable. Educational grants must be monitored in order to guarantee that the manufacturer has no control over the speaker or content of the educational presentation in order to be in compliance with anti-kickback laws.
OIG may be evaluating cases of excessive screening colonoscopy utilization. Medicare rules require 48 month interval between a screening flexible sigmoidoscopy and a screening colonoscopy and 10 years between screening colonoscopies. Performance and billing for screening colonoscopy not in compliance with these rules may violate the False Claims Act.
A compliance program represents comprehensive documentation that a practice is aware of all Federal and state laws affecting it. By development of compliance plan an individual or a practice can best avoid violations that could lead to fraud and abuse charges. The OIG has published compliance guidelines for individual physicians and small group practices. The OIG considers the following seven elements necessary for a comprehensive compliance program:
- Development of written policies and procedures
- Designation of a compliance officer
- Development and implementation of effective training and education programs
- Development and maintenance of effective lines of communication
- Enforcement of standards through well-publicized disciplinary guidelines
- Use of audits to monitor compliance
- Development of procedures to respond to detected offenses and to initiate corrective action
There is little doubt that the development of a compliance program is needed in order to address the concerns of federal law enforcement agencies of potential fraud and abuse.
- Kalb PE. "Health Care Fraud and Abuse" JAMA 1999;282:1163-8.
- Hope P. "OIG Unveils Anti-Kickback Safe Harbors and Shared-Risk Regulations," Group Practice Journal, Feb 2000, pg. 8.
- "Solicitation of Information and Recommendations for Developing OIG Compliance Program Guidance for Individual Physicians and Small Group Practices." (64FR48846). Federal Register 1999;64:48846.
- "Federal Health Care Programs: Fraud and Abuse; Statutory Exceptions to the Anti-Kickback Statute for Shared Risk Arrangement." (64FR63504) Federal Register 1999;64:63504.
- Department of Health and Human Services at http://www.hhs.gov
- Office of Inspector General at http://www.hhs.gov/oig
- Department of Justice at http://www.usdoj.gov
- Federal Bureau of Investigation at http://www.fbi.gov
- Centers for Medicare and Medicaid Services at http://www.cms.gov
- HHS and DOJ Health Care Fraud and Abuse Control Program Annual Report FY 2004 at http://www.usdoj.gov/dag/pubdoc/hcfacreport2004.htm
- HHS Fact Sheet: Comprehensive Strategy to Fight Health Care Waste, Fraud and Abuse at http://www.hhs.gov/news/press/2000pres/20000309a.html
- Special Fraud Alerts, Bulletins and Other Guidance at http://www.oig.hhs.gov/fraud/fraudalerts.html
- OIG Compliance Program for Individual Physicians and Small Group Practices at http://oig.hhs.gov/authorities/docs/physician.pdf
Risk Management for the GI Endoscopist, ASGE, May 2001.
Prepared by the ASGE ad hoc Risk Management Committee
John L. Petrini, MD, Chair
Sansum Medical Clinic, Santa Barbara, CA
Andrew D. Feld, MD
Group Health Cooperative Seattle, WA
Patrick D. Gerstenberger, MD
Digestive Health Associates, Durango, CO
Martin L. Greene, MD
University of Washington, Seattle, WA
Michael E. Ryan, MD
The Marshfield Clinic, Marshfield, WI
The preceding information is intended only to provide general information and not as a definitive basis for diagnosis or treatment in any particular case. It is very important that you consult your doctor about your specific condition.