The Challenge of Health Care Fraud

Consumer Alert: The Impact of Health Care Fraud on You!

In 2011, $2.27 trillion was spent on health care and more than four billion health insurance claims were processed in the United States. It is an undisputed reality that some of these health insurance claims are fraudulent. Although they constitute only a small fraction, those fraudulent claims carry a very high price tag.

The National Health Care Anti-Fraud Association (NHCAA) estimates that the financial losses due to health care fraud are in the tens of billions of dollars each year.

Whether you have employer-sponsored health insurance or you purchase your own insurance policy, health care fraud inevitably translates into higher premiums and out-of-pocket expenses for consumers, as well as reduced benefits or coverage. For employers-private and government alike-health care fraud increases the cost of providing insurance benefits to employees and, in turn, increases the overall cost of doing business. For many Americans, the increased expense resulting from fraud could mean the difference between making health insurance a reality or not.

However, financial losses caused by health care fraud are only part of the story. Health care fraud has a human face too. Individual victims of health care fraud are sadly easy to find. These are people who are exploited and subjected to unnecessary or unsafe medical procedures. Or whose medical records are compromised or whose legitimate insurance information is used to submit falsified claims.

Don't be fooled into thinking that health care fraud is a victimless crime. There is no doubt that health care fraud can have devastating effects.

What Does Health Care Fraud Look Like?

The majority of health care fraud is committed by a very small minority of dishonest health care providers. Sadly, the actions of these deceitful few ultimately serve to sully the reputation of perhaps the most trusted and respected members of our society-our physicians.

Unfortunately, the stock in trade of fraud-doers is to take advantage of the confidence that has been entrusted to them in order to commit ongoing fraud on a very broad scale. And in conceiving fraud schemes, this group has the luxury of being creative because it has access to a vast range of variables with which to conceive all sorts of wrongdoing:

  • The entire population of our nation's patients;
  • The entire range of potential medical conditions and treatments on which to base false claims; and
  • The ability to spread false billings among many insurers simultaneously, including public programs such as Medicare and Medicaid, increasing fraud proceeds while lessening their chances of being detected by any a single insurer.

The most common types of fraud committed by dishonest providers include:

  • Billing for services that were never rendered-either by using genuine patient information, sometimes obtained through identity theft, to fabricate entire claims or by padding claims with charges for procedures or services that did not take place.
  • Billing for more expensive services or procedures than were actually provided or performed, commonly known as "upcoding"-i.e., falsely billing for a higher-priced treatment than was actually provided (which often requires the accompanying "inflation" of the patient's diagnosis code to a more serious condition consistent with the false procedure code).
  • Performing medically unnecessary services solely for the purpose of generating insurance payments-seen very often in nerve-conduction and other diagnostic-testing schemes.
  • Misrepresenting non-covered treatments as medically necessary covered treatments for purposes of obtaining insurance payments-widely seen in cosmetic-surgery schemes, in which non-covered cosmetic procedures such as "nose jobs" are billed to patients' insurers as deviated-septum repairs.
  • Falsifying a patient's diagnosis to justify tests, surgeries or other procedures that aren't medically necessary.
  • Unbundling - billing each step of a procedure as if it were a separate procedure.
  • Billing a patient more than the co-pay amount for services that were prepaid or paid in full by the benefit plan under the terms of a managed care contract.
  • Accepting kickbacks for patient referrals.
  • Waiving patient co-pays or deductibles and over-billing the insurance carrier or benefit plan.

Consider Some Risks of Health Care Fraud to You

False Patient Diagnoses, Treatment and Medical Histories

Health care fraud, like any fraud, demands that false information be represented as truth. An all too common health care fraud scheme involves perpetrators who exploit patients by entering into their medical records false diagnoses of medical conditions they do not have, or of more severe conditions than they actually do have. This is done so that bogus insurance claims can be submitted for payment.

Unless and until this discovery is made (and inevitably this occurs when circumstances are particularly challenging for a patient) these phony or inflated diagnoses become part of the patient's documented medical history, at least in the health insurer's records.

A Boston-area psychiatrist, for example, forfeited $1.3 million and was sentenced to several years in federal prison following his late-1990s conviction on 136 counts of mail fraud, money laundering and witness intimidation related to his fraudulent billing of several health insurers for psychiatric therapy sessions that never took place-using the names and insurance information of many people whom he actually had never met, let alone treated. (He also went so far as to write fictitious longhand session notes to ensure phony backup for his phony claims. )
In fabricating the claims, the psychiatrist also fabricated diagnoses for those "patients"-many of them adolescents. The phony conditions he assigned to them included "depressive psychosis," "suicidal ideation," "sexual identity problems" and "behavioral problems in school."

Theft of Patients' Finite Health Insurance Benefits

Patients who have private health insurance often have lifetime caps or other limits on benefits under their policies. So every time a false claim is paid in a patient's name, the dollar amount counts toward that patient's lifetime or other limits. This means that when a patient legitimately needs his or her insurance benefits the most, they may have already been exhausted.

Medical Identity Theft

As a consumer, you are surely aware of the perils of identity theft and the devastating affects it can have on your financial health-jeopardizing bank accounts, credit ratings and your ability to borrow. But are you as familiar with the risks posed by medical identity theft? You should be, considering that 250,000 to 500,000 individuals have been victims of this escalating crime.

When a person's name or other identifying information is used without that person's knowledge or consent to obtain medical services or goods, or to submit false insurance claims for payment, that's medical identity theft. Medical identity theft frequently results in erroneous information being added to a person's medical record, or even the creation of an entirely fictitious medical record in the victim's name.

Victims of medical identity theft may receive the wrong medical treatment, find that their health insurance benefits have been exhausted, and could become uninsurable for both life and health insurance coverage.

A medical identity theft victim may unexpectedly fail a physical exam for employment because a disease or condition for which he's never been diagnosed or received treatment has been unknowingly documented in his health record.

Untangling the web of deceit spun by perpetrators of medical identity theft can be a grueling and stressful endeavor. The effects of this crime can plague a victim's medical and financial status for years to come.

Physical Risk to Patients

Shockingly, the perpetrators of some types of health care fraud schemes deliberately and callously place trusting patients at significant risk of injury or even death. It's distressing to imagine, but there have been many cases where patients have been subjected to unnecessary or dangerous medical procedures simply because of greed.

In June, 2002, for example, a Chicago cardiologist was sentenced to 12-1/2 years in federal prison and was ordered to pay $16.5 million in fines and restitution after pleading guilty to performing 750 medically unnecessary heart catheterizations, along with unnecessary angioplasties and other tests as part of a 10-year fraud scheme.
Three other physicians and a hospital administrator also pleaded guilty and received prison sentences for their part in the scheme, which resulted in the deaths of at least two patients.
The physicians and hospital induced hundreds of homeless persons, substance abusers, and elderly men and women to feign symptoms and be admitted to the hospital for the unnecessary procedures. How? By offering them incentives such as food, cash and cigarettes. "There were 750 people who had needles stuck into their hearts purely for profit, not because they needed it," said one of the federal prosecutors.

Health Care Fraud and Organized Criminal Groups

Health care fraud is not just committed by dishonest health care providers. So enticing an invitation is our nation's ever-growing pool of health care money that in certain areas - Florida, for example - law enforcement agencies and health insurers have witnessed in recent years the migration of some criminals from illegal drug trafficking into the safer and far more lucrative business of perpetrating fraud schemes against Medicare, Medicaid and private health insurance companies.

In South Florida alone, government programs and private insurers have lost hundreds of millions of dollars in recent years to criminal rings - some of them based in Central and South America - that fabricate claims from non-existent clinics, using genuine patient-insurance and provider-billing information that the perpetrators have bought and/or stolen for that purpose. When the bogus claims are paid, the mailing address in most instances belongs to a freight forwarder that bundles up the mail and ships it off shore.

A Federal Crime with Stiff Penalties

In response to these realities, Congress-through the Health Insurance Portability and Accountability Act of 1996 (HIPAA)-specifically established health care fraud as a federal criminal offense, with the basic crime carrying a federal prison term of up to 10 years in addition to significant financial penalties. [United States Code, Title 18, Section 1347.]

The federal law also provides that should a perpetrator's fraud result in the injury of a patient, the prison term can double, to 20 years; and should it result in a patient's death, a perpetrator can be sentenced to life in federal prison.

Congress also mandated the establishment of a nationwide "Coordinated Fraud and Abuse Control Program," to coordinate federal, state and local law enforcement efforts against health care fraud and to include "the coordination and sharing of data" with private health insurers.

Many states also have responded vigorously since the early 1990s, not only by strengthening their insurance fraud laws and penalties, but also by requiring health insurers to meet certain standards of fraud detection, investigation and referral as a condition of maintaining their insurance or HMO licenses.

Private-Public Cooperation Against Fraud is Essential

Founded in 1985 by a handful of private insurers and law enforcement personnel, the National Health Care Anti-Fraud Association is a private-public non-profit organization focused solely on improving the private and public sectors' ability to detect, investigate, prosecute and, ultimately, prevent fraud against our private and public health insurance systems.

Today NHCAA represents the combined efforts of the anti-fraud units of the majority of our country's private health payers and the entire spectrum of federal and some state law enforcement agencies that have jurisdiction over the crime, along with hundreds of individual members from the private health insurance sector and from federal, state and local law enforcement.

The NHCAA pursues its mission by fostering private-public cooperation against health care fraud at both the case and policymaking levels, by facilitating the sharing of investigative information among health insurers and law enforcement agencies and by providing information on health care fraud to all interested parties.

The NHCAA Institute for Health Care Fraud Prevention, a non-profit educational foundation, provides professional education and training to industry and government anti-fraud investigators and other personnel.

What Can You Do To Avoid or Prevent Health Care Fraud?

Here are some simple ways you can protect yourself from health care fraud, and keep health care costs down for everyone:

  • Protect your health insurance ID card like you would a credit card. In the wrong hands, a health insurance card is a license to steal. Don't give out policy numbers to door-to-door salespeople, telephone solicitors or over the Internet. Be careful about disclosing your insurance information and if you lose your insurance ID card, report it to your insurance company immediately.
  • Report fraud. Call your insurance company immediately if you suspect you may be a victim of health insurance fraud. Many insurers now offer the opportunity to report suspected fraud online through their Website.
  • Be informed. Be informed about the health care services you receive, keep good records of your medical care, and closely review all medical bills you receive.
  • Read your policy and benefits statements. Read your policy, Explanation of Benefits (EOB) statements and any paperwork you receive from your insurance company. Make sure you actually received the treatments for which your insurance was charged, and question suspicious expenses. Are the dates of service documented on the forms correct? Were the services identified and billed for actually performed?
  • Beware of "free" offers. Is it too good to be true? Offers of free health care services, tests or treatments are often fraud schemes designed to bill you and your insurance company illegally for thousands of dollars of treatments you never received.

Health care fraud is a serious crime that affects everyone and should concern everyone-government officials and taxpayers, insurers and premium-payers, health care providers and patients-and it is a costly reality that none of us can afford to overlook.