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Healthcare Fraud: How It’s Harming The System & How You Can Report It

November 14, 2023

Fraud poses a significant threat to patient care and the integrity of the healthcare system as a whole. Luckily, healthcare fraud whistleblowers can play a significant role in uncovering, combating, and prosecuting healthcare fraud cases. The bravery of whistleblowers has resulted in the recovery of billions of dollars that were siphoned off through fraudulent schemes. Statutes like the False Claims Act were designed to combat health care fraud when the government is the payor and permit individuals to receive up to 30% for disclosing Medicare Fraud, Medicaid Fraud and/or Tricare Fraud as whistleblower award.  Additionally, certain states like California and Illinois allow whistleblowers to report systemic private insurance fraud and receive up to 50% as a whistleblower reward. The California Insurance Fraud Prevention Act and the Illinois Insurance Claims Fraud Prevention Act are the mechanisms to report healthcare fraud in those states through the use of a whistleblower law firm.  

One example of how whistleblowers play a role in equalizing the healthcare system is in 2013 pharmaceutical giant Johnson & Johnson’s subsidiary Janssen pled guilty to illegally promoting the antipsychotic drug Risperdal for off-label uses and paying kickbacks to healthcare professionals. This case was brought to light by whistleblowers, ultimately leading to a settlement of over $2.2 billion. There were multiple whistleblowers who were paid for their information – the individual who filed the False Claims Act in the Eastern District of Pennsylvania received $112 million whistleblower award, the whistleblowers in the District of Massachusetts received $27.7 million in whistleblower rewards and the whistleblower in the Northern District of California received $28 million in whistleblower awards.

Healthcare fraud can also affect how willing payers and insurers are to cover certain procedures and treatments, or what prior authorizations they might require, thus leading to negative health outcomes. Fraud can also lead to more audits and administrative costs, taking away resources from patient care. As a result, knowing what healthcare fraud looks like and how to properly report it can help doctors, administrators, and patients and the system as a whole. 

Understanding Healthcare Fraud

At its core, healthcare fraud can take various forms, however it always involves deceitful practices aimed at undeserved extracting financial gain from the healthcare system, often at the expense of patient care. There are many ways in which healthcare fraud can be committed vary but here are seven common forms:

  1. Services Not Rendered/Medically Unnecessary Procedures: This occurs when medical professionals submit false claims for services or bills for treatments that were not rendered or on the flip side that were performed but were not medically necessary. 
  2. Kickbacks and Bribes: Pharmaceutical companies may offer incentives to doctors or other healthcare professionals to promote their products or treatments. Those who accept those incentives are committing healthcare fraud. The incentives could be freebies like free conferences or sporting tickets or actual payments for fancy titles that have little or no connection to any substantive work other than prescribing the product. 
  3. Phantom Patients: Sometimes fraudsters will create fictitious patient records and bill for non-existent treatments or medications.
  4. Reflexively Upcoding: Some health care practitioners opcode all of their encounters at a higher level than actually occurred either in terms of complication and/or in level of complexity.
  5. Unbundling: Providers or billing coders may use improper billing codes to overcharge for services or unbundle procedures that should be billed together to increase reimbursement.
  6. Identity Theft: Those in the healthcare system with access to sensitive patient information commit fraud when they use that information for their own personal benefit, such as obtaining prescription drugs for their own use. This comes into play with the opioid epidemic.
  7. Quality of Care Fraud: Similar to upcoding, quality of care fraud occurs when healthcare professionals provide substandard care while billing for premium services. The distinction is that, while upcoding involves charging for services at a higher level of reimbursement than they provided, in quality of care cases patients received the services charged but their care was compromised to reduce the actual cost or the overall overhead

The Impact of Healthcare Fraud

The consequences of healthcare fraud are far-reaching and detrimental to both patients and the healthcare system as a whole. Those committing healthcare fraud are not only endangering their institutions and risking legal consequences, but they may also be putting the health of the patients in their charge in danger.

  1. Financial Drain: Healthcare fraud leads to increased administrative costs and additional procedures in the billing of healthcare, which diverts precious resources away from patient care, leading to increased healthcare costs for everyone involved.
  2. Compromised Patient Care: Patients may receive unnecessary or invasive treatments, incorrect medications, or subpar care due to fraudulent practices.
  3. Erosion of Trust: When patients are the victims of fraud, due to receiving compromised care, they become less trusting in the healthcare system. This can make them less likely to get regular medical treatment or complete the proper treatments when recommended.
  4. Legal Ramifications: Healthcare professionals involved in fraud can face severe legal consequences, including fines, imprisonment, and damage to their professional reputation.

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     Reporting Healthcare Fraud

One of the most potent tools in the fight against healthcare fraud is the False Claims Act (FCA). The FCA is a federal law that allows individuals with knowledge of fraudulent activity to file a lawsuit on behalf of the government. These individuals are often referred to as whistleblowers.

The FCA incentivizes whistleblowers to come forward by offering them a percentage of the funds recovered through legal action. Whistleblowers can receive anywhere from 15% to 30% of the recovered amount, which can be a significant sum and in recent years. 

So, how can healthcare professionals play a pivotal role in reporting healthcare fraud?

  1. Stay Informed: The first step in combating healthcare fraud is to be aware of its existence and the various forms it can take. Healthcare professionals should educate themselves about common fraudulent practices within their institutions.
  2. Document Suspicious Activity: If you come across billing irregularities, substandard patient care, or any other suspicious activities that may suggest fraud, document them meticulously. Gathering evidence is crucial when reporting fraud, but you should learn how to gather evidence the right away and not overstep your authority or boundaries which is why it’s critical to consult with one of the best whistleblower law firms
  3. Report the Right Way: Whistleblowers are often concerned about retaliation. Thankfully, the FCA allows for reporting confidentiality under seal, so the employer won’t find out for quite some time about the action giving you time to plan. 
  4. Consult a Whistleblower Law Firm: In addition to having a False Claims Act lawyer report fraud on your behalf, it is also advisable to consult with legal counsel experienced in healthcare fraud cases before taking legal action. They will explain your rights. Look for firms with qui tam experience and former Department of Justice workers as that’s the agency you will be interfacing with.
  5. File a Qui Tam Lawsuit: If you have evidence of fraud, consider filing a qui tam lawsuit under the False Claims Act. Evidence can consist simply of your testimony, but often requires a bit more than that. T
  6. Cooperate with Authorities: If you choose to pursue legal action, cooperate fully with government investigators and prosecutors as advised by your whistleblower lawyers. 

The Moral Imperative

Reporting healthcare fraud goes beyond financial incentives; it is a moral imperative for healthcare professionals. At the heart of this issue lies patient safety and the integrity of the healthcare system. By blowing the whistle on fraudulent practices, healthcare professionals uphold the true values and ethics that underpin their profession.

Every healthcare professional takes an oath to prioritize patient well-being above all else. Reporting fraud is a tangible way to honor that oath and ensure that patients receive the care they deserve. It’s about holding those who compromise patient care accountable for their actions and protecting the integrity of the healthcare system.

Reporting healthcare fraud is not just a legal duty; it is a moral obligation that upholds the principles of patient care and the integrity of the healthcare system. If you are a healthcare professional who has encountered or suspects healthcare fraud at your institution, remember that you have the power to make a difference