Healthcare Fraud Overview
What is Healthcare Fraud?
Healthcare fraud occurs when someone submits or helps submit improper claims for payment to a public or private health insurance program while knowing that the submission of such claims is illegal. The intent part is essential. Differences in medical opinion are not fraud. Mistakes are not fraud. Negligence and recklessness are not fraud. “Should have known better” is not a fraud.
Healthcare fraud cases should be brought only when the government can prove beyond a reasonable doubt that a specific person submitted or helped submit improper claims with the “willfulness” required under the federal statute. Typically, this should involve evidence of intent beyond just the submission of improper claims, such as altering charts that are requested as part of an audit or continuing to submit improper claims after being warned by a colleague or law enforcement.
Healthcare fraud is a federal crime under 18 U.S.C. 1347. Violations of the healthcare fraud statute carry a maximum sentence of 10 years, though prosecutors usually bring multiple counts, which can increase the total maximum sentence. If you are convicted of healthcare fraud, you can face financial penalties for restitution, forfeiture, and a fine.
If the government does not have strong evidence of willfulness and criminal intent, the case probably should be handled civilly or administratively, not criminally. The government and private individuals can bring claims under the federal False Claims Act, which is a law that allows for civil lawsuits to be brought for the submission of “false” claims to a federal governmental program. Critically, you can be held liable under the False Claims Act even when you did not have criminal intent.
What are the Two Types of Healthcare Fraud?
After prosecuting and defending healthcare fraud cases for more than a decade, I think it is helpful to think about healthcare fraud in two types:
Classic or doctor-driven healthcare fraud occurs when a doctor or medical professional bills for services at a higher reimbursement level than they should be (what we call “upcoding”), for services that were not rendered, or for unnecessary services. Here, the doctor is the main person directing and benefiting from the scam, usually involving their patients. This can cause devastating damage to patients and cost millions of dollars, but in the aggregate, it does not pose a significant fiscal threat to Medicare.
Many healthcare fraud cases the Department of Justice brought in the past decade involved doctor-enabled fraud (I charged many of these cases myself when I was an AUSA). These schemes targeted the provision of home health, hospice, durable medical equipment, pain creams, genetic testing, and many other care aspects billed in the name of a particular doctor who often is unaware of many aspects of the overall scheme.
This also explains one fact that goes little-noticed in the data – most people charged in the takedowns periodically announced by the Department of Justice are not medical professionals but business owners and marketers.
Doctor-enabled healthcare fraud is more complex to prosecute than other allegations of criminal fraud because everyone can point to someone else. Businesspeople could argue that they relied on doctors to approve only appropriate and necessary claims — can prosecutors prove that those businesspeople knew that the doctors were not doing this? Doctors could argue that they did not understand the requirements for service and acted out of negligence — can prosecutors prove that those doctors did know enough to have acted willfully? When I was a prosecutor, proving willfulness often proved the biggest challenge in many of my cases. I uncovered multiple systems of fraud and was able to charge some people, but there were more people I did not charge because I judged that I could not show that they knew enough to have acted willfully and thus be criminally liable.
Doctor-enabled healthcare fraud is different. The doctor or nurse is not the main person directing the fraud or benefiting from it, and many doctors or nurses do not even know they are part of a fraud. Here, non-medical professionals identify patients open to receiving a service or healthcare-related item that they generally do not need; find doctors willing to sign off on such services or items, sometimes out of negligence and sometimes with criminal intent; and then bill public or private insurers for unneeded or inaccurately described care.
How can Doctors and Medical Professionals Protect Themselves from Healthcare Fraud Accusations?
Here are some things that I regularly tell doctors and medical professionals:
Check your data. The government is analyzing data to look for outliers, and you should check your data to see if you are an outlier. Aggregate Medicare data is available by provider, service, and year, and this can help you know how you compare to your peers.
If you are the top provider for a particular billing code, be prepared for an audit or investigation. Be ready to explain why you are the top provider and defend your practice. Or, if you have made mistakes, take corrective steps to avoid criminal prosecution down the road.
If you do not know how to check publicly available Medicare data, talk to a biller consultant or lawyer who can help you do so.
Do not make a problem worse. If you have made mistakes in your billing, it’s better to accept them and repay money now than to take steps that might escalate your case. When I was a prosecutor, I had several cases that could have been resolved civilly or administratively but became criminal cases when people altered medical records, which is a crime in and of itself and significant evidence of healthcare fraud.
Be cautious about jobs involving chart review. In many doctor-enabled cases, I have been involved with doctors who approved charts that others did not. If you are being asked to review or approve charts for patients whom you have never seen or spoken with, be careful and ask questions.
How can Medicare and the Government Stop Healthcare Fraud More Effectively?
During my time as a prosecutor, I developed new tools and methods to address willfulness and to make it easier to bring these cases. These methods can and should address other types of healthcare fraud.
Enhancing Government Use of Data Analytics in Healthcare Fraud Detection
First, the government should rethink how it uses data analytics. I engaged in extensive data analysis when I was a prosecutor. When I was prosecuting one type of fraud, I analyzed every single claim in that field in Illinois for several years. I identified hundreds of providers that I believed were likely committing healthcare fraud. My colleagues and I were able to build cases against some of these providers but not all. This kind of data analytics should be used to identify targets for a small number of investigations and audits and to identify people who can and should receive targeted deterrence efforts on a broader scale.
Medicare and private insurers should develop claims monitoring methods to identify red flags like the ones I found and then inform doctors and other medical professionals directly and specifically about those indicators of problematic billing practices. Some should get cease-and-desist letters, some should get demand letters, and some should get a warning letter. In any event, Medicare and private insurers should follow up with calls and meetings to ensure that providers understand their obligations to follow their rules and address systemic problems. Many doctors involved in doctor-enabled healthcare fraud schemes will change their behavior if given such information, mainly since many are not benefiting significantly from such schemes.
Such letters can efficiently save vast sums. Prosecutors can then better target criminal cases against providers who ignore such efforts and continue with unjustified billing after receiving specific notice of improper practices. The number of these cases will be smaller, and it will be much easier to prove willingness if the government can prove that a doctor disregarded a clear warning letter.
At the very least, Medicare should rethink its disclosure system regarding payments. Currently, Medicare provides patients with an explanation of benefits notices of how much they should pay in copayments and deductibles, but not the total payments it has made on their behalf. Patients and their families have no idea that Medicare has sometimes paid thousands or hundreds of thousands of dollars for home health or hospice services that did not occur, that involve inflated descriptions of services, or that the patients do not need. Similarly, Medicare provides medical professionals with notices of how much they have billed and been paid themselves but has done nothing to ensure that these notices get to the professionals themselves, a fundamental issue now that many professionals have assigned their billing rights to their employers and do not know what has been billed by those employers. And Medicare provides medical professionals with no information about how much has been billed by other providers in their names. As a result, doctors have no idea that Medicare has paid companies millions of dollars for services or items allegedly authorized by the doctors, which might make them more cautious or raise questions if they knew.
I implemented some of these ideas during my time as a prosecutor. In one case, a doctor had authorized large amounts of improper home health claims, but we had patchy evidence that he knew the relevant home health rules and thus was weak on willfulness. I directed law-enforcement agents to talk with the doctor, interview him, show him the data, and put him on notice of the red flags in his practice. Despite that interaction, the physician continued engaging in the same practices. We then charged him and put a very straightforward case to a jury that found him guilty. On a broader scale, a coordinated, comprehensive approach to using data analytics to deter fraud, waste, and abuse – not just to identify potential litigation cases – would better address the scale of the healthcare fraud problem and be more effective in the long run.
Enhancing Compliance Measures to Address Doctor-Enabled Healthcare Fraud
Second, the government should update compliance procedures to acknowledge the realities of doctor-enabled healthcare fraud. When I served in a U.S. Attorney’s office, I had to sit through annual compliance videos to ensure I understood my obligations for handling tax matters, discovery, and office workplace behaviors. You may sit through similar compliance measures as part of your workplace. These measures are done not necessarily because you or I need the reminders but because these videos ensure that anyone who engages in bad behavior cannot claim to have known the rules.
Medicare has no such requirements or procedures. Doctors and other Medicare providers promise to comply with Medicare’s rules and regulations when they first enroll with Medicare. Still, there are no subsequent steps to (a) remind people of those obligations or (b) make clear that people understand what those obligations mean in practice.
Such outdated, naïve approaches to compliance lead to huge problems. Many healthcare providers have become involved with doctor-enabled healthcare fraud schemes in which they believe they are simply reviewing charts, unaware that the charts they sign off on cost Medicare hundreds or thousands of dollars. Some of these doctors understand that they have crossed legal lines, but many genuinely do not.
The government could address this problem by requiring Medicare providers to certify that they have watched a compliance video addressing doctor-enabled healthcare fraud. A short video could
Provide warnings about doctor-enabled healthcare fraud schemes.
Explain Medicare’s expectations about doctor-patient relationships.
Set the requirements for some commonly-abused regions, such as home health and genetic testing.
Such a video would deter many doctors from becoming parties to doctor-enabled healthcare fraud schemes and facilitate prosecutions against doctors who nonetheless participate in such schemes. Similarly, the government should re-examine regulatory loose ends that inadvertently create openings for fraud. Significant amounts of home health fraud could be avoided, for example, if the government simply revised the standard form to authorize home health. That form requires the signing doctor to attest that the patient is homebound but does not furnish Medicare’s criteria for determining whether that status has been met or even indicate that an official Medicare definition exists. Accordingly, many doctors have signed this form based on looser definitions provided by firms looking to maximize revenues. Changing this form would close this gap.
Patient-Centric Investigations: A Strategic Approach to Combatting Healthcare Fraud
Third, the government should direct more of its investigative and compliance efforts to patients who become entangled in doctor-enabled healthcare fraud schemes rather than relying on providers with financial incentives to cover up their fraud. Medicare rarely goes directly to patients when improper billing is suspected. If Medicare conducts an audit, it typically requests files from the provider and often does not double-check the accuracy of the files with the patients themselves.
I went directly to patients as part of my investigations, and the contrast between the care they reported receiving and the bills that went to Medicare provided some significant evidence. In one case, a doctor billed Medicare and private insurance for the destruction of large numbers of precancerous lesions; the patients thought they were getting preventative light treatments and were never told that they had severe conditions. In a hospice case that I had, agents interviewed one patient who had received “hospice” services for years; he did not believe that he was dying and was very surprised by the visit. In multiple home health cases, patients were surprised to learn that the lovely nurse who came by once a week had lied about their abilities to conduct basic activities of daily living, such as being able to dress themselves or go to the bathroom by themselves.
Medicare should consider implementing more controls to check with patients who receive expensive care in high-risk areas. If Medicare has paid for years of home health services for one patient in a situation with red flags, Medicare could contact patients to check whether those individuals are receiving appropriate care. If Medicare is asked to pay for expensive durable medical equipment or pain creams that often have been associated with fraud schemes, and if the doctor who supposedly authorized the items has never billed an office visit with the patient, Medicare might contact some of these patients before paying the claims. When patients report that they do not want the items or do not know the doctors, additional inquiry is warranted. Setting up these systems may take effort but would likely be cost-effective in the long run.
None of these efforts would be a magic bullet that would solve the problem of healthcare fraud. However, they would slow down the engines set up around the country to defraud the healthcare system, making the situation more manageable. With better use of data analytics, compliance procedures, and better controls, the government could reduce the incidence of fraud and abuse. The remainder could be handled more effectively through litigation and prosecution.
Contact Stephen Lee Law for Legal Guidance on Healthcare Fraud.
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