Healthcare Fraud and Abuse

9 September 2016

Easton pleaded guilty on September 17, 2010, to health care fraud, money laundering, and aggravated identity theft charges. According to his plea agreement, Easton owned and operated Medicap pharmacy in Spencer, Iowa. He admitted that, from about 2003 to 2006, he defrauded Medicaid and Coventry Health Care out of more than $200,000 by submitting false claims for prescriptions.

He used the identities and identification numbers of Medicaid patients when he submitted false prescription claims to the Medicaid program. Easton used some of the proceeds of his schemes to purchase a Cadillac Escalade (Examples of 1). A New Orleans-based orthopedic surgeon was sentenced to one year of home confinement and ordered to pay $750,000 in restitution for defrauding the federal workers’ compensation program (Kurtz 1). Jorge J. Dieppa, MD, a general practitioner, along with about 24 other suspects in Florida, was charged with healthcare fraud as a part of a federal crackdown that charged 4 people in five cities with plotting to defraud Medicare of $251 million (Kurtz 1).

Healthcare Fraud and Abuse Essay Example

Two Brooklyn men opened First Century Medical Supply, Inc. , located in Oklahoma City, to engage in the business of selling power wheelchairs and wheelchair accessories to Medicare beneficiaries. Evidence at trial showed that from 2007 through 2009 the business obtained identification numbers and personal information from Medicare beneficiaries and used that information to submit claims to Medicare for power wheelchairs and wheelchair accessories.

Evidence also showed that the defendants billed Medicare for some beneficiaries who did not receive a power wheelchair at all, some who received a less expensive motorized scooter, and for others who did not have a medical need for a wheelchair or did not even request a wheelchair. In all, the evidence showed that through First Century the defendants submitted over $1. 1 million in fraudulent claims to Medicare. This case became known as the million dollar wheel chair case (New York Men 1). The United States health care system is the most regulated and costly health care system in the world.

Current statistics reveal the United States leads the world in the cost of health care but sadly, ranks 37th out of 191 countries in performance (World Health Organization Assesses 1). The U. S. spends a tremendous amount of resources on health care, creating a virtual gold mine for the criminal element that seeks an easy opportunity to defraud. Expenditures in the United States on health care surpassed $2. 3 trillion in 2008, more than three times the $714 billion spent in 1990, and over eight times the $253 billion spent in 1980.

Stemming this growth has become a major policy priority, as the government, employers, and consumers increasingly struggle to keep up with health care costs (Kaiser1). U. S. health care spending was about $7,681 per resident and accounted for 16. 2% of the nation’s Gross Domestic Product (GDP); this is among the highest of all industrialized countries. Since 1999, family premiums for employer-sponsored health coverage have increased by 131 percent (Kaiser). With so much money flowing into the United States health care system, especially from government sources, criminals are taking advantage of a disorganized and fragmented payer system.

Fraud and abuse of the United States Health Care System, especially Medicare and Medicaid, is rampant. According to CNN Money writer Parija Kavailanz, “…the fraudsters, scammers and organized criminal gangs [are] bilking the system of as much as $100 Billion a year” (1). Additionally, the pressure to keep a hospital, physician practice, or health care entity solvent has been the impetus for illegal physician relationships. And occasionally, just plain ignorance of the law is the reason for violations. The U. S.

Government responded several years ago by requiring all segments of the health care industry to develop and adhere to a stringent set of regulations aimed at preventing fraud and abuse. Fraud is defined as the intentional deceptive act intended to obtain a benefit to which a person is not entitled (Vicchrilli 1). Fraudulent acts can include: * Billing for services not provided. * Billing for services or procedures that are reimbursed at a higher rate than what was provided, sometimes called upcoding. * Billing and upcoding items and to receive a higher reimbursement. Intentionally changing a particular diagnosis code to incorrectly reflect a higher acuity and higher Medicare reimbursement. * Submitting claims for non-covered services and accepting the reimbursement. * Kickbacks-Accepting money or benefits for [physician] referrals. Abuse is defined as an incident or practice by a health care provider that is inconsistent with accepted sound medical, business, or fiscal practices that directly or indirectly creates unnecessary costs the Medicare program (Vicchrilli 1). Abuse can include: *

Duplicate billing. Charging for services that are not reasonable and necessary. * Breach of assignment. * For non-participating Medicare providers, exceeding the “limiting charge” for services provided. Regulated businesses include hospitals, physicians and their practices, pharmaceutical manufacturers, clinical labs, home health agencies, medical billing companies and durable medical equipment companies (DME). All segments of the health care industry are required to have compliance programs in place and follow the policies and procedures of the compliance program. Compliance Officer, John R.

Outlaw writes in an article for Pathology Outlines. com, “In the 1990’s, the OIG (Office of Inspector General) began developing Model Compliance Program Guidances to develop a higher level of ethical and lawful conduct throughout the entire health care community” (1). Under intense scrutiny by the federal government, and spearheaded by the OIG, health care providers are “strongly” urged by the OIG and Department of Justice to have a corporate compliance program in place. There are eight elements that must be included in an effective compliance plan (see figure 1).

Element| Requirement| 1. Written policies, procedures, and standards of conduct. | The policies demonstrate the organization’s commitment to comply with all applicable federal and state standards. | 2. Designation of a compliance officer. | Must have: a. Compliance officer b. Compliance Committee c. Established protocol for review d. Compliance officer if responsible for fraud and abuse program. | 3. Training and education. | Must have a training and education program in place. | 4. Effective lines of communication throughout. Must have: a. Organized lines of communication b. Mechanisms in place for capturing concerns and risks| 5. Enforce procedures. | Must enforce standards through disciplinary guidelines. | 6. Procedure for effective internal monitoring and auditing. | Requirements are: a. must have a monitoring and auditing program b. Must monitor and audit contractors c. Must allow CMS to audit financial records d. Contractors must allow CMS to access their records| 7. Procedures for corrective action. | Must ensure: a.

Prompt response to violations b. Appropriate corrective action is taken | 8. Fraud and abuse plan in place. | Must have a plan in place to detect and prevent fraud and abuse| Fig. 1. Common Elements of a Compliance Program (Buchbinder 363). Compliance programs are difficult and labor intensive to organize and enforce. However, it is to the benefit of the health care provider to invest the resources necessary to develop a program that includes internal and external auditing to mitigate the risk of compliance errors.

It is incumbent upon the administration of health care entities to have a compliance program that limits the liability to the Board of Directors who are responsible for governance, and the management team responsible for the day to day operations of the entity. Healthcare corporate compliance should address specific areas including the False Claims Act, Stark Law, Anti-kickback Statute and HIPAA. Simply put, an ongoing, effective corporate compliance plan is the right thing to do.

If properly implemented and communicated, the plan will provide the guidelines necessary to manage the laws, rules, and regulations of an ever changing and over regulated health care industry. It also makes good business sense to use well documented and communicated guidelines to help insure that everyone, from the board room to the bedside, understand the “rules”, expectations and the ramifications of health care compliance. Communication, ongoing monitoring and auditing, and accountability are essential to a successful compliance program intended to minimize risks and improve patient care.

Yet, one of the greatest overall benefits to having an effective corporate compliance program may be- what is called the “Federal Sentencing Guidelines. ” Chief Compliance Officer John R. Outlaw describes this benefit in the Case for Compliance. He writes, “The Federal Sentencing Guidelines provide relief for any entity convicted of a crime that has an effective compliance program in place. In determining the amount of any fine, the Guidelines require a court to determine a “culpability score” by calculating aggravating and mitigating factors.

Having a compliance program doesn’t excuse the crime, but demonstrates that the organization took reasonable efforts to prevent, detect and correct any improper conduct. It may lower the organization’s starting “culpability score” by 60%, and not having a compliance program is actually considered an aggravating factor which increases the culpability score (2). How serious is the Federal Government in pursuing health care compliance violations? In 2009, a local hospital had a routine compliance audit of their physician contracts by a third party.

The physician contracts included timeshare leases, medical directorships and any other physician agreement that included an exchange of money. The auditors found several discrepancies which triggered a full blown audit of the hospital compliance program, including physician contracting, billing practices, and potential conflict of interest by anyone associated with the hospital in a position to directly influence business. The audit took several months and exposed a practice of sloppy record keeping, poor documentation of lease arrangements, and out-of-date fair market evaluation of the office space leased to physicians.

Federal Government Anti-kickback laws prohibit hospitals from leasing space to physicians at a rate under “fair market valuation” as determined by a qualified third party appraisal. The fair market valuation is determined by comparing the leased space to comparables-other similar-type office space in the general market, not owned by the hospital being compared. Also included in the valuation are furnishings, utilities, property taxes, and any other services that the lessee would have to otherwise purchase but may be included in the base rent.

It was determined by the hospital’s third party audit that following violations had occurred: * The hospital did not have properly executed physician office space leases. Many of the leases were not signed and dated or totally missing. However, a follow-up audit 30 days after the initial audit revealed all physician leases were present, dated and signed-a red flag to the auditors that the documents were probably fraudulently back dated and sign after the fact.

Federal regulations require all physician agreements, including office space lease agreements, to be properly signed and dated prior to the physician occupying the space. This was not done. * Many of the timeshare leases were not reviewed on an annual basis and rates adjusted according to the terms of the lease. Most standard office space leases require at least an annual review of the fair market value and an appropriate adjustment to the rate if needed. Many of physician office leases in this case were also tied to the consumer price index (CPI) and require an annual review and adjustment if appropriate.

It is the view of the government that forgiven or forgotten rate increases are a violation of Anti-kickback. * The fair market valuation was not done in several years and the lease rate varied from $6. 90 a square foot to $14. 50 a square foot for the various leases. Some lease rates were not updated for as long as seven years. The law requires an annual lease review and rates must be set at fair market. Otherwise this would be a violation of Anti-kickback laws and perceived as an inducement to get physician referrals which is a federal crime!

Due to the seriousness of the deficiencies found during the audit, the results were not shared immediately with the hospital management but forwarded to the corporate office of the hospital system of which the hospital was affiliated. The system senior management and their legal counsel felt the compliance deficiencies were so serious that the hospital in question could put entire thirteen hospital system in jeopardy. Moreover, a cursory audit of the other hospitals in the system revealed a least a few compliance issues all the hospitals in the system, which could lead otentially, to millions of dollars in fines and millions of dollars in refunds to Medicare. The corporate leaders acted swiftly and decisively to minimize the damage. The CEO and CFO responsible for physician contracting at the hospital in question were terminated and the remaining senior leadership was put through a number of grueling interviews by the FBI and OIG. A full Medicare audit was also conducted. The results of the interviews and Medicare audit proved the hospital had a fairly good compliance program and no fraudulent Medicare billing issues.

Furthermore, the physician contract violations were isolated to office leases and all other physician agreements met the “letter of the law” and were compliant. The next phase of the process, the assessment of fines, could have financially devastated the hospital. However, the fine was lessoned as the government considered three issues favorable to the hospital; 1. The hospital system self-disclosed the audit and compliance violations. 2. The system terminated the parties responsible-the CEO and CFO. 3. Although not totally adequate, the hospital did have a corporate compliance program in place.

This bode in favor of the hospital according to the Federal Sentencing Guidelines. After eighteen months of interviews, government audits, and remediation discussions, the hospital was fined about 30% of the potential fines and penalties. Needless to say, the hospital currently has a very robust and active corporate compliance program. There are many other forms of fraud and abuse taking place every day in health care. Criminals continue to be creative and are able to take advantage of Medicare and steal billions out of the system.

Health care identity theft dominates all other crimes in this arena. The most common method of health care identity fraud is being perpetrated by someone with legitimate access who then sells the patient’s information to organized criminal groups (Kavilanz 1). Likewise, criminal groups are taking advantage of the government’s mandate forcing hospitals into an electronic medical record, actually before the hospitals are really prepared to do so, thus creating unsecured access to digital medical records. CNN reporter Kavilanz adds, “The payoff for health care identity fraud is huge.

In 2008, criminals pocketed more than $19,000 per incident of health care fraud…One key reason having Medicare information is a virtual “goldmine” for fraudsters is the system’s ‘pay and chase’ system-under the law, Medicare must send out payments within a very short time… as the government is more often reacting to cases of abuse instead of preventing them before they happen… concern is that as they put more patient’s records online, they are not doing it in the most secure way… which will lead to more open doors” (3).

Other health care related schemes that are defrauding the system include: * Durable medical equipment (DME) providers ordering equipment for a Medicare patient who doesn’t need it and bill Medicare several times the cost of the equipment. * Corrupt attorneys and unscrupulous health care providers billing insurance companies for non-existent or minor injuries. This is called, “ambulance chasing” (Barrett 1). * Intentional miscoding to boost income. * Rent-a-patient-scheme. Patients are recruited to go to clinics for unnecessary testing and split the insurance reimbursement with the provider (Barrett 3). The OIG has reported instances of bogus health insurance companies, lacking legal authorization, selling insurance to high risk patients. The scammers collect premiums and never paying for a claim, leaving patients with huge health care related bills (Barrett 3). * Viatical Fraud-People with terminal illnesses sell or assign their life insurance to companies for a percentage of the face value. The fraud occurs when agents recruit the terminally ill people to apply for multiple policies. The criminals misrepresent the truth and have healthy imposters undergo the medical evaluation.

The policies are then sold to unsuspecting third-party investors (Barrett 5). With this in mind, it has been estimated that health care waste, fraud, and abuse costs the system, or the American taxpayer, an incredible amount of money annually. National Journal writer Marilyn Werber-Serafini drives home this point, “The U. S. health care system wastes between $505 billion and $850 billion every year-22%, or approximately $200 billion, of which is fraudulent Medicare claims, kickbacks, and other scams” (1).

Consequently, the Obama Administration, Department of Justice/OIG, FBI, and Department of Health and Human Services are teaming up to combat the incredible amount of lost revenue and increased criminal activity around U. S. health care. Several new initiatives have been added to the Health Care Fraud and Abuse Control Program (HCFAC), in addition to increased enforcement of health care compliance. Jim Kouri of Renew America writes, “By strengthening criminal enforcement efforts related to health care in 2007. * U. S. Attorney’s Office opened 878 new criminal health care fraud investigations involving 1,548 potential defendants. Federal prosecutors had 1,612 health care fraud criminal investigations pending, involving 2,603 potential defendants, and filed criminal charges in 434 cases involving 786 defendants” (1). In March 2009, as President Obama was trying to garner congressional support for his health care reform legislation, he introduced a program to root out health care fraud using high-tech “Bounty Hunters” (Cassata 1). The private auditors called Recovery Audit Contractors (RAC) are armed with sophisticated computer programs to scan Medicare and Medicaid billing data for patterns of bogus claims.

The auditors get to keep part of the funds they recover for the government. The White House estimates RACs could recoup at least $2 billion over a three year period. In May of 2009, the Obama Administration introduced new task force called Health Care Fraud Prevention and Enforcement Action Team-or HEAT. HEAT was formed to aggressively crack down on those who abuse and steal from the system and take advantage of those who are the most venerable.

A few of their many accomplishments in year were: * Pharmaceutical giant Eli Lilly agreed to pay 1. billion in criminal fines and civil damages to resolve allegations that it defrauded Medicaid and Medicare through improperly marketing one of its products (Johnson 1). * Quest Diagnostics agreed to plead guilty and pay more than 300 million in connection with faulty test kits sold to labs across the country, one of the largest recoveries in a medical device case (Johnson 2). In conclusion, the federal government is making progress in their fight for health care compliance and reducing fraud and abuse.

But it will take a combination of effective health care compliance and aggressive investigation and prosecution of the criminals stealing scarce and valuable resources from the U. S. health care system. The enforcement steps have resulted in a drop in the amount of fraudulent claims to CMS, which then reduces the amount of money that is paid out. The net result is reductions of cost to the system which can then ensure health care for more people (Why Do We 1). It is interesting to note that experts believe there is a loss of about $200 Billion in fraud, kickbacks and scams to the Medicare system every year.

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