There are many different ways in which businesses and individuals have defrauded, and continue to defraud, federal and state government health care programs. Examples of fraudulent conduct have included:
Services Not Rendered: The submission of a claim for health care services, treatments, diagnostic tests, medical devices or pharmaceuticals that were never rendered.
Ghost Patients: The submission of a claim for health care services, treatments, diagnostic tests, medical devices or pharmaceuticals provided to a patient who either does not exist or who never received the service or item billed for in the claim.
Kickbacks: The federal Anti-Kickback Statute prohibits any offer, payment, solicitation or receipt of money, property or remuneration to induce or reward the referral of patients or healthcare services payable by a government health care program, including Medicare or Medicaid. These improper payments can come in many different forms, including, but not limited to: referral fees; finder’s fees; productivity bonuses; discounted leases; discounted equipment rentals; research grants; speaker’s fees; excessive compensation; and free or discounted travel or entertainment. The offer, payment, solicitation or receipt of any such monies or remuneration can be a violation of the Federal Anti-Kickback statute, 42 U.S.C. §1328-7b(b), the Federal False Claims Act, as well as various other federal and state laws and regulations.
Up-Coding Services: Billing of government and private insurance programs is done using a complex series of numerical codes that identify the specific procedure or service being performed. These code sets can include: the American Medical Association’s Current Procedural Terminology (“CPT”) codes; Evaluation and Management (“E&M”) codes; Healthcare Common Procedure Coding System (“HCPCS”) codes; and International Classification of Disease (“ICD-9”) codes. Government health care programs assign a dollar amount it will pay for each procedure code. Up-coding occurs when a health care provider submits of a claim for health care services, treatments, diagnostic tests or items which represent a more serious and more expensive procedure than that which actually was performed. Up-coding can be a violation of the Federal False Claims Act.
Bundling and Unbundling: In many cases, government health care programs have special reimbursement rates for groups of procedures that are typically performed together, such as laboratory tests. One common type of fraud has been to “unbundle” these procedures or tests and bill each one separately, which results in greater reimbursement than the group reimbursement rate.
Lack of Medical Necessity: In order to qualify for payment by government health care programs, health care services, treatments, diagnostic tests, medical devices and pharmaceuticals must be medically necessary. Health care providers are required by law to document the medical necessity of the treatment or services for which they are seeking reimbursement. One common type of fraud has been to submit claims for services, treatments, diagnostic tests, and medical devices that are not medically necessary.
False Certification: When physicians, hospitals and other health care providers submit bills to government health care programs they are required to include a number of important certifications, including that the services were medically necessary, were actually performed, and were performed in accordance with all applicable rules and regulations. Additionally, health care companies such as pharmaceutical companies and pharmacy benefits managers that provide products or services to government health care programs are required to certify that they are satisfying all obligations under their contracts with the government. One common type of fraud has been to falsify these certifications in order to get a health care claim paid or to obtain additional business.
Research Grant Fraud: Federal and state government funding for health care research continues to skyrocket. According to published data, federal government spending on research grants in health care (principally through the National Institutes of Health) grew from just over $9 billion in 1994 to nearly $23 billion in 2004. Despite the courageous work of qui tam whistleblowers, fraud continues to plague federal and state sponsored health care research. Some of the common forms of research grant fraud include: falsifying a grant application in order to secure a grant; falsifying research data and results; over-billing costs and other expenses associated with the grant; using grant money for other unrelated research; and improper conflicts of interest by the principal investigators.
Improper Financial Interest: There are a number of federal and state laws and regulations that prevent physicians and other health care providers from having a direct or indirect financial interest in certain services provided to their patients. Perhaps the best known of these “Anti Self-Referral” laws is commonly known as the Federal Stark law, 42 U.S.C. § 1395nn and § 1396b. The Stark law generally prohibits physician investment interests and compensation arrangements with entities that perform certain designated health services to which they refer patients or from which they order goods and services paid for by Medicare or Medicaid. The Stark law covers not only investments and compensation paid to the physician, but to any member of the physician’s immediate family. Violations of the Stark Law or another federal or state Anti Self-Referral law can also result in a violation of Federal and State False Claims Acts.
Inflating Cost Reports: Medicare generally reimburses hospitals and health care institutions for certain overhead and costs in addition to paying for the treatment delivered to particular patients. Hospitals are required to file Cost Reports with Medicare, that specify, among other things, information on the hospital’s charges, revenue, profits, and charge to cost ratios. Medicare then uses the information it obtains from these reports to determine how much it will pay for this overhead and other costs. One common type of fraud has been for hospitals to inflate the costs on their Medicare Cost Reports, or to otherwise falsify the information on these reports to maximize its reimbursement.
Medicare can also make what are known as cost “outlier” payments when a hospital’s cost-adjusted charges surpass certain cost formulas or other thresholds set by Medicare. Attorneys in the national qui tam whistleblower practice of Pietragallo Gordon Alfano Bosick & Raspanti successfully represented the lead relator in one of the largest cases of Medicare “outlier” fraud in the history of false claims litigation, United States ex rel. Monahan v. St. Barnabas Health Care System, Inc., (D. N.J.) which resulted in a recovery of $265 Million for federal taxpayers.
Red-Lining: Medicare and Medicaid generally reimburse hospitals a fixed amount based upon a particular diagnosis, regardless of the patient’s length of stay or the hospital’s costs for actually treating a particular patient. In addition, insurance companies that provide supplemental Medicare insurance coverage are often paid on a per patient basis, regardless of the current health or medical history of the particular person. Under such payment systems, hospitals, and insurance companies can maximize their profits by accepting only the healthier persons. One common type of fraud has been for hospitals and particularly insurance companies, to discourage enrollment by persons they deem to be sicker or at higher risk for serious illness. Such discriminatory practices commonly referred to as “red-lining,” can violate Federal and State laws and can also be a violation of the Federal False Claims Act.
Medicare Part D Fraud: In 2003, Congress passed the Medicare Prescription Drug, Improvement, and Modernization Act, which added a new outpatient prescription drug benefit known as “Part D” to the Medicare Program. The drug benefit is provided by private entities that receive payments from Medicare for the prescription drug benefit services they provide to Medicare beneficiaries who enroll in the company’s plan. Although the Part D program is relatively new, and data is just beginning to be reported by the private companies that are providing the prescription drug services, it is widely expected that the Part D program will be the target of substantial fraud in the coming years, including potential for claims of: duplicate billing; overcharging; enrollment fraud; red-lining; and improper rebates from pharmaceutical manufacturers and wholesalers.