Most Common Forms of Medicare Fraud in the U.S.
The False Claims Act (FCA) is a federal law that imposes liability on individuals or entities that submit false or fraudulent claims for payment to the federal government. Under the False Claims Act, a private individual can file a qui tam lawsuit on behalf of the government, and if the suit is successful the whistleblower may be eligible to receive between 15% and 30% of the government’s total recovery as a whistleblower award. False Claims Act lawsuits have resulted in significant recoveries for the government and have helped deter fraud and abuse. In fact, each year several billion dollars are recovered through the FCA, and hundreds of millions of dollars are given out as whistleblower rewards.
The FCA prohibits an extensive list of fraudulent activities – any economic fraud against the federal government can potentially be remedied through the False Claims Act, however, due to limited government resources, the cases with higher value damages tend to receive more attention. Medicare is a government healthcare program that spends almost a trillion dollars a year. If even one percent of that is fraudulent, that’s close to a 100 billion dollars of fraud a year. Each year only 2-3 billion dollars of fraud is caught through the False Claims Act, which means if the fraud estimates are true, 99% of the fraud goes undetected. Medicare is a federal health insurance program for people aged 65 or older, individuals with certain disabilities, and people with End-Stage Renal Disease (ESRD). It helps millions of Americans access essential healthcare services, but unfortunately due to the large pool of funds available, it is the frequent target of fraudsters. Fraudulent activities that take advantage of the Medicare system can harm both the program, its beneficiaries and the taxpayers who fund it all. In this article, we explore the most common types of Medicare fraud and abuse.
Kickbacks and Self-Referrals
Kickbacks involve giving or receiving payments, gifts or items above fair market value (FMV) in exchange for referrals or other healthcare services. Pharmaceutical kickbacks occur when a drug company offers financial incentives to a provider to prescribe their products. This might involve paying medical professionals to attend training sessions, conferences, or seminars, as well as offering them complimentary meals or other benefits. While these are just a few examples, kickbacks can take on numerous forms. The Anti-Kickback Statute (AKS) was enacted to combat kickbacks in federal healthcare programs, such asMedicare Medicaid and Tricare. Conceptually, if a provider is providing a service or product because of an economic inducement it impugns the impartiality of the provider and even if the product or the service is in the best interest of the client, there’s an appearance of impropriety. That’s why there’s a bright line rule prohibiting kickbacks and why it’s considered Medicare Fraud.
Another type of Medicare fraud is self-referrals, which involves medical professionals referring patients for certain health services to entities with which they or their immediate family members have a financial relationship and failing to disclose the interest. The Physician Self-Referral Laws, also known as the Stark Law was implemented to combat these violations, however, it’s heavily laden with exceptions and exceptions to the exceptions.
Violations of the AKS and the Stark Law are violations of the False Claims Act. Both laws are intended to prevent improper financial incentives in federally funded programs by ensuring that medical decisions are based completely on the best interests of the patients.
The AKS has resulted in some of the most significant False Claims Act settlements, leading to billions of dollars of recoveries for taxpayers. In addition, depending on the severity of the violation, the AKS has criminal implications and has also led to criminal repercussions. In 2019, a whistleblower was awarded $112 million for reporting kickback schemes involving the sale of medical equipment and supplies to hospitals and healthcare providers. Numerous companies involved agreed to pay over $1.4 billion in settlements. “Whistleblower Gets $112 Million in U.S. Case Over Medicare Fraud.” Bloomberg, 7 November 2019. https://www.bloomberg.com/news/articles/2019-11-07/whistleblower-gets-112-million-in-u-s-case-over-medicare-fraud
Phantom Billing
Phantom billing is another common form of Medicare fraud in the U.S. It involves billing Medicare for services or equipment that were not actually provided to a patient. Alternatively, some physicians submit claims for patients who do not even exist, commonly referred to as phantom patients.
Billing for Services Not Medically Necessary
Unfortunately, healthcare providers don’t always have the patients’ best interest at heart. Oftentimes, providers submit claims for services and procedures that are not medically necessary for the sole purpose of financial gain. A few examples are billing for pointless diagnostic tests such as x-rays or ultrasounds, durable medical equipment (DME), and/or prescribing medication that is not needed. Some providers go as far as egregiously performing unnecessary surgery. These fraudulent billing practices not only result in significant financial losses for the Medicare program, but they can also harm patients by subjecting them to unnecessary medical interventions.
Doctors will be afforded some latitude in medical decision making and the purpose isn’t for the False Claims Act warriors to act as armchair quarterbacks. Certain hallmarks of physicians who engage in billing for services not medically necessary include reflexively performing the procedure on every patient. An example of reflexive billing is if someone walks into a pain clinic for a stubbed toe, and the individual, along with every other patient who goes there, is prescribed opiates, automatically given a brace, automatically given physical therapy and told they need to come back three times a week (for the rest of their life…).
Upcoding
Another unlawful tactic frequently used is upcoding. It is a type of Medicare fraud where a provider bills for a more expensive service or equipment than was actually provided. For example, a provider may bill Medicare for a complex surgical procedure when a simpler one was performed. Upcoding can also occur when a provider makes a false diagnosis for a more serious condition or billing for more time than was spent with the patient. Upcoding can also involve a falsely elevated amount of time spent with a patient. Sometimes, greedy physicians upcode so much that the aggregate time spent with all patients exceeds 24 hours. This is known as an “impossible day” and when invoked in the False Claims Act case, the defendant doctor has a lot of explaining to do, since the math burns them.
Unbundling
Unbundling refers to separately billing a group of services that should be billed together as a bundle. Essentially, these medical services are required to be bundled together so that the healthcare provider receives only one lump sum payment for related procedures under one billing code. When these services are split up into different codes, instead of receiving payment in one bundle, providers can illegally receive duplicate payments from the government. Additionally, some providers falsely separate interrelated services provided on the same day and bill them as if they were performed on different days or stretch out the days beyond something like the 14 day rule, which results in a larger reimbursement.
Double Billing
Double billing is where a provider submits multiple claims for the same medical service or equipment. For example, a provider may bill Medicare for the same procedure twice or bill for a medical supply that was already covered under a previous claim. This type of fraud can result in Medicare paying twice for the same service.
Off-Label Marketing
Off-label marketing is a type of pharmaceutical fraud involving marketing or promoting a drug or medical equipment for uses that have not been approved by the U.S. Food and Drug Administration (FDA). By promoting off-label uses, the drug company may be able to sell more of their product and receive higher reimbursement from Medicare. For example, in the past a birth control product was marketed as treating acne or a drug to treat benign prostate enlargement was marketed to grow back hair. The FDA has a rigorous approval process and if the pharmaceutical company wishes to market the product for something other than what it was initially approved for – it simply can’t until it obtains a separate approval. In addition to unlawful kickbacks, some of the largest False Claim Act settlements involved off-label promotion and marketing.
What happens when you report Medicare fraud?
These are just a few types of Medicare fraud that healthcare providers and pharmaceutical companies use to commit Medicare fraud, but fraud is only limited by imagination and is untamed by greed. With potentially less than 1% of Medicare fraud detected, whistleblowers are integral to fixing the system. Through the use of an accomplished whistleblower law firm, a private individual can report Medicare fraud and stand to gain significant economic awards for their information. A Medicare fraud whistleblower may be eligible to receive between 15% and 30% of the government’s total recovery as a whistleblower award if the case is successful.
Medicare fraud costs taxpayers billions of dollars every year. The False Claims Act remains a critical tool in protecting the government and taxpayers from fraud and abuse in government programs and encouraging individuals who know of misconduct to stop it.