| Health care fraud Medicare fraud and Medicaid fraud have cost the federal
government billions of dollars. Qui tam lawsuits filed under the False Claims Act have
been responsible for some of the government’s biggest health care fraud recoveries.
There are many different ways companies and individuals can bilk Medicare and Medicaid.
(See below.) The examples of health care fraud that are discussed give an idea of the
types of fraud that have been or could be the basis of qui tam (whistleblower) lawsuits.
Services not rendered/add-on services
Probably the clearest example of fraud by health care providers involves billing for
services that were never delivered to patients. The basic scheme can involve as many
variations as there are treatments.
For example, some physicians bill Medicare or Medicaid for diagnostic procedures they
never performed, physical therapists bill for sessions that never took place, and nursing
homes might bill for supplies that were never actually purchased or used. There is often
some falsification of records to support improper billings.
Examples
An Iowa anesthesiologist agreed to a $500,000 settlement for routinely billing Medicare
an extra hour and a half for every open heart surgery in which he participated. In
addition, his nurse anesthetist brother similarly over billed, and the anesthesiologist
had frequently failed to supervise him. The anesthesiologist was excluded from
participation in the Medicare and Medicaid programs for two years.
A Pennsylvania hospital billed Medicare as if it had transported patients and provided
advanced life support services, when in fact it had provided technicians for advanced life
support but the actual transport was performed by another company. The hospital was not
entitled to reimbursement for ambulance services. It agreed to pay $374,430 in civil
penalties and restitution. As part of the settlement agreement, the hospital agreed to set
up a training program for employees to insure that Medicare is billed properly in the
future.
A California orthopedic surgeon billed for services performed while he was out of the
country and billed for X-ray and physical therapy services that were performed by
unlicensed, untrained personnel. He agreed to pay a total of $581,500 to settle charges of
submitting false claims for Medicare reimbursement and was convicted of theft from the
Medi-Cal program for filing similar false claims. He was excluded from the Medicare and
state health care programs for 25 years.
A state-owned hospital in Iowa agreed to repay Medicare $521,170 for over billing for
services. A government investigation showed that the hospital was billing for ventilation
management for all intensive care patients, regardless of whether they received this
service. The hospital claimed to have understood from the carrier's medical director that
it could bill for Medicare and private insurers in the same fashion.
A California man set up durable medical equipment companies and an elaborate system of
sales staff to obtain Medi-Cal eligibility numbers from beneficiaries and institutions.
The numbers were used to bill Medi-Cal for incontinence supplies that for the most part
were not provided. He pled guilty to Medi-Cal fraud and paying kickbacks. He agreed to pay
nearly $3 million to settle civil claims for Medicaid fraud and was excluded from the
Medicare and Medi-Cal programs for 30 years.
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Upcoding and Unbundling/Fragmentation
Billing Medicare and Medicaid for medical services is done using a complex system of
numerical codes that designate various diagnoses and procedures. Reimbursements are based
on those codes. The coded, computerized bills submitted by providers are processed by
large insurance companies (known as "intermediaries") that contract with the
government to pay claims using government funds.
Because different codes or code combinations may produce dramatically different
reimbursements from government programs, there is a financial incentive to
"upcode" or bill for a more serious (and more expensive) diagnosis or procedure.
For example, Medicare may pay for an X ray if there is an indication of lung disease but
not as part of a routine check-up. Hospitals or radiology labs that wish to increase their
reimbursement rates may routinely upcode all of their x-ray bills for Medicare patients by
using a code indicating lung disease even if there is no medical basis for that diagnosis.
Another common example of improper coding is called "unbundling," also known
as "fragmentation." Medicare and Medicaid often have special reimbursement rates
for a group of procedures commonly done together, such as typical blood test panels by
clinical laboratories. Some health care providers seeking to increase profits will
"unbundle" the tests and bill separately for each component of the group, which
totals more than the special reimbursement rates.
Examples
A Minnesota transportation company billed Medicare, Medicaid and a private health
insurer for basic life support transportation when it actually performed special
wheelchair transportation. The company and its two owners were convicted of theft and
ordered to make restitution of $768,000 to Medicare, Medicaid and the private health
insurer.
Two corporations signed a settlement agreement in Illinois for $3.5 million after
submitting billings for supervised kidney dialysis of critically ill patients when only
routine backup maintenance was provided for hospitalized beneficiaries. They agreed to pay
$1.75 million immediately and another $500,000 within five years, and to provide at no
cost $1.25 million in medical care to Medicare patients over a five-year period.
A Maryland ophthalmologist billed Medicare for laser surgery when all he performed was
post-operative suture removal, a procedure typically included in the global fee for eye
surgery. He and his surgery center agreed to pay $750,000 in settlement of false Medicare
billings.
A New York laboratory submitted 300 claims for arterial blood gas tests performed on
hospital patients as being done by doctors working for the lab. The tests were really
performed by hospital technicians, as were the analyses for which Medicare was billed, and
were already included in reimbursements to the hospital. The lab agreed to pay $1 million
to settle Medicare fraud charges.
A Medicare provider of ophthalmology services in Florida signed a $2.85 million civil
monetary penalty (CMP) settlement related to fraudulent Medicare billings by its billing
company. The billing service fragmented and submitted as separate claims surgical
procedures which Medicare had already reimbursed the provider for as part of global
payments. The clinic's settlement is the third by a provider that used a particular
billing service. The service was convicted in 1989 for Medicare fraud. CMP settlements of
$3.1 million and $630,000 have been made with providers in Massachusetts and Texas,
respectively.
In Massachusetts, 87 hospitals agreed to pay more than $3.5 million to settle false
claims allegations that they submitted duplicate claims for outpatient services for
Medicare patients performed within 3 days of admission to the hospital. These services had
already been reimbursed as part of the hospital stays. The hospitals also agreed to
implement procedures to ensure future compliance with Medicare billing rules.
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Kickbacks
One of the most complicated and troubling aspects of the health care system involves
hidden financial arrangements between various health care providers. There are a variety
of improper arrangements where providers will provide some material benefit in return for
other providers prescribing or using their products or services.
In some instances, such arrangements are illegal. Kickbacks often result in medically
unnecessary treatment. In cases where a kickback arrangement results in the government
paying for medically unnecessary services or in the government being overcharged, a case
under the False Claims Act may be appropriate.
Examples
A pharmaceutical company created a "grant-in-aid" research program that
offered physicians kickbacks in the form of grants in exchange for performing small-scale
studies of its antibiotic. From 1986 to 1991, the physicians were paid fees of $500 to
$2,500 each to treat patients with the company's antibiotic. Investigation showed that in
most cases the research performed by the physicians was not of scientific value. In
addition, some physicians never completed the research but received full payment from the
pharmaceutical company. The company agreed to pay $450,000 to settle civil and
administrative claims that it had defrauded the Medicare program.
A national corporation agreed to pay $161 million to settle criminal and civil
liabilities for paying kickbacks to physicians for referrals for its home infusion
business and growth drug, for making improper billings and for failing to keep accurate
records at some of its pharmacies. The company entered criminal pleas in Ohio and
Minnesota and agreed to cooperate in an investigation of individuals involved in the
schemes, including physicians.
The parent corporation of a Virginia health care provider of inpatient and outpatient
services agreed to pay $2 million in settlement of liability for violating the Medicare
anti-kickback statute. The company made income guarantees and office-rent subsidies to
physicians, granted low-interest or no-interest loans, forgave repayment of loans,
provided staff support for a physician's private practice and entered
"directorship" contracts in which physicians performed little or no services, to
induce them to make referrals to the company.
A medical group involving five hospitals located in Kansas and Missouri, which provided
on- site care to nursing home patients through its physicians, paid a "fee" or
inducement to the medical center for the referral of patients to its "geriatric
center." The center agreed to pay more than $1.2 million to settle its false claims
liability resulting from the kickback scheme.
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False Certifications and Information
Health care providers who submit Medicare and Medicaid claims containing false
statements also may be liable under the False Claims Act.
Examples
In Florida, five persons were involved in a scheme in which Medicare was fraudulently
billed about $5.2 million for oxygen concentrators, nebulizers, medications and tests.
Three men were ordered to pay $2.3 million in restitution, and were sentenced to 41, 46
and 51 months in jail, for paying physicians for prescriptions that they sold to two
medical supply companies and a laboratory to use in billing Medicare. One of the company
owners and one of the physicians who also had billed for house calls he did not make were
convicted and given prison terms as well.
Employees of a New York pharmaceutical corporation were forging doctors' signatures on
certificates of medical necessity and beneficiaries' signatures on assignment forms for
surgical dressings. An investigation of the three subsidiaries, all of which were operated
by the same corporate officer, showed the same activities for incontinence, ostomy and
urostomy supplies. The companies also violated point-of-sale regulations and billed for
supplies never sent. The company and its subsidiaries agreed to pay $3.4 million to settle
government allegations that they filed false Medicare claims.
The owner/president of a Texas home health agency forged physicians' signatures on
certification forms, and the controller directed employees to alter nurses' notes, add
services to Medicare claims and use the forged forms. He also made false ledger entries
and carried "ghost" employees on payroll records. The agency, its
owner/president and its controller were sentenced to pay $1.3 million in fines,
restitutions and special assessments for submitting false claims to Medicare.
The two principal executive officers of a home health services agency engaged in
massive fraud by falsifying and altering training certificates and other credentials of
personal care aides and home health care aides employed by the company. The two
individuals and their corporation were excluded for 15 years from participation in
Medicare and state health care. The corporation pled guilty to falsifying personnel files
and grand larceny. It agreed to pay $4.75 million to resolve liabilities under the civil
monetary penalties law, the False Claims Act and New York state statutes.
A Maryland durable medical equipment company submitted claims for more than a year for
lymphedema pumps under a code for which the pumps did not meet specifications. It agreed
to pay $1.5 million to resolve liabilities under the civil monetary penalties law.
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Lack of Medical Necessity
Some health care providers bill Medicare and Medicaid for services or procedures that
are not medically necessary. They would be liable under the False Claims Act for those
false billing practices.
Examples
A Florida chiropractor who owned several clinics required doctors whom he hired to
order X rays, diagnostic tests and other therapies regardless of the needs of the
patients. He also billed for tests never given, such as pelvic X rays, and submitted
duplicate claims for the same services. He was sentenced to five years in prison and
ordered to pay $1.6 million for defrauding Medicare, the Railroad Retirement Board and
private insurers.
A New York radiologist systematically billed Medicaid for thousands of medically
unnecessary, duplicative, forged and unreadable sonogram tests. His Medicaid billings went
from $8,200 to more than $2.2 million in two years and involved huge kickbacks to more
than 50 so-called "salesmen." He was excluded from Medicare and state health
care programs for 10 years and sentenced to one to three years in prison.
A chiropractor and his wife, operators of several vascular diagnostic centers in
Florida, submitted billings for vascular testing as being ordered by a medical doctor when
they were actually ordered by the chiropractor himself. They also practiced deceptive
advertising, backdated diagnostic prescriptions, used unauthorized signatures of various
medical doctors, altered patient medical records and obstructed a criminal investigation.
They were sentenced for conspiracy in defrauding Medicare and private insurance carriers
from 1985 through 1990. The chiropractor was sentenced to 51 months imprisonment, his wife
to 37 months. In addition, the pair were ordered to make restitution of $637,000.
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Fraudulent Cost Reports
Medicare reimburses health care institutions for certain costs in addition to paying
for individual procedures and treatment. Virtually every hospital and many other providers
submit cost reports to Medicare, which are used to calculate how much the government will
reimburse the provider for expenses related to patient care. This includes the costs of
capital improvements like new medical equipment and bigger wards. Over the years, cost
reports can represent billions of dollars in payments for some providers.
Providers who knowingly inflate the costs they incurred, mischaracterize the nature of
those costs or give the wrong percentage of their services dedicated to Medicare patients
are liable under the False Claims Act.
Examples
Two sisters, both supervisory employees of a residential care facility, stole money by
creating phantom employees and phantom contractors whose salaries and expenses were
included in the cost reports submitted to the Maine Medicaid program. They were excluded
from Medicaid for 25 years.
In Georgia, the owner/operator of physical therapy clinics and a nursing home defrauded
Medicare by billing for the owner's personal expenses such as jewelry, cars, vacations and
costs associated with show dogs. Many of the billings were disguised as salaries for
employees. The company had to pay more than $1 million to settle criminal and civil fraud
charges. The owner, his wife, the nursing home and clinics he operated in eight states had
to pay more than $900,000 to settle civil charges and $100,000 in criminal fines. An
additional $182,000 in legitimate Medicare reimbursement was also withheld. The owner will
not be allowed to participate in the Medicare and Medicaid programs for two years and
thereafter may submit only audited cost reports.
A former nursing home owner and operator filed over 7,000 fraudulent Medicare claims. A
government audit and investigation revealed that he had billed Medicare for nonexistent
medical supplies for his nursing home and filed cost reports with false expenses. He
attempted to conceal the scheme by submitting false cost reports to Medicare supported by
falsified medical records and fabricated invoices. He was sentenced to 11 years and three
months imprisonment and ordered to pay fines, restitution and special assessments totaling
more than $3.5 million. Two of his employees and two former Medicare carrier employees who
testified against him pled guilty and also received sentences.
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Grant or Program Fraud
The federal and state governments fund a variety of research and other specialized
projects in the health care area. Typically, government funds are targeted for a specific
and narrow purpose, a specialized research project or medical care for a specific group.
Sometimes the recipients of grant or program funds mischaracterize their qualifications,
the basis of their research or the quality and extent of services they provide.
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