Health Care Fraud

With increased funding from the federal and state government, criminal investigations and prosecutions for health care fraud are on the rise in both the federal and state law enforcement arenas. Due to the manner in which fraud amounts are calculated, the penalties for health care fraud can be very significant in both the state and federal courts. Therefore, if you have been contacted by law enforcement from either the federal government or a state regulatory agency, you should contact an experienced criminal defense lawyer immediately. John T. Floyd has experience defending individuals and businesses accused of health care fraud. With professional resources across the state, Mr. Floyd can assemble an team of experienced lawyers and health care professionals appropriate to defend the particular needs and interests of a single health care professional or a large health care provider.

Health Care Fraud Investigations

Health care fraud investigations are among the highest priority investigations within the FBI, ranking behind only Public Corruption and Corporate Fraud in the FBI's White Collar Crime Program Plan. National initiatives by the law enforcement agency include the National Outpatient Surgery Initiative, the Medical Transportation Initiative, and the Pharmaceutical Fraud Initiative. Furthermore, numerous FBI field offices throughout the U.S. have pro-actively addressed significant crime problems through coordinated initiatives, task forces, and undercover operations to identify and pursue investigations against the most egregious offenders which may include organized criminal activity and criminal enterprises. Organized criminal activity has been identified in the operation of medical clinics, independent diagnostic testing facilities, durable medical equipment companies, and other health care facilities. The FBI also addresses large scale medical providers, such as hospitals and medical corporations, who engage in criminal activity and commit fraud against the Government which undermines the credibility of the health care system.
Current fraud schemes consist of traditional schemes that involve fraudulent billing, but also incorporate unnecessary surgeries, diluted cancer drugs, and fraudulent lab tests.

What is Health Care Fraud?

• Altered or fabricated medical bills and other documents.
• Excessive or unnecessary treatments.
• Billing schemes, such as:
--charging for a service more expensive than the one provided.
--charging for services that were not provided.
--duplicate charges.
• False or exaggerated medical disability.
• Collecting on multiple policies for the same illness or injury.

Medicare-Medicaid Fraud Laws

Title XVIII of the Social Security Act, 42 U.S.C. § 1395 et seq., enacted in 1965 Pub.L. 89-97 (July 30, 1965), 79 Stat. 286, created the Federal Medicare and Medicaid programs and authorizes medical benefits for the aged, blind, and disabled. See generally United States v. Gold, 743 F.2d 800, 806 (11th Cir. 1984), cert. denied, 469 U.S. 1217 (1985). Frauds executed against these aid programs may be prosecuted via a number of criminal statutes. See Bucy, Health Care Reform and Fraud by Health Care Providers, 38 Villa. L. Rev. 1002 (1993); Bucy, Fraud by Fright: White Collar Crime by Health Providers, 67 N.C.L.Rev. 855 (1989). The 1965 statute was designed to "to provide a hospital insurance program for the aged under the Social Security Act with a benefits program and an expanded program of medical assistance to increase benefits under the Old-Age, Survivors, and Disability Insurance System, to improve the Federal-State public assistance programs, and for other purposes."

The Act included two programs popularly known as Medicare, 42 U.S.C. § 1395ff (Title 18 of Social Security Act of 1935), and Medicaid, 42 U.S.C. § 1396ff (Title 19 of Social Security Act of 1935). Medicare and Medicaid are administered by the Health Care Financing Administration (HCFA) of the United States Department of Health & Human Services (HHS). Investigations involving either program are conducted by the Office of Inspector General of HHS, the FBI and other agencies.

Medicare is a health financing program for the elderly. Its financing derives from a federally-administered trust fund. Claims for reimbursement are filed by beneficiaries or their health care providers and are paid by carriers and intermediaries (private insurance companies in each state which are the Federal government's agents) under contracts to perform this service. The carrier or intermediary is reimbursed for claims that are paid, and for administrative costs, out of the Federal trust funds.

Medicaid is a health financing program for low-income individuals administered by each state, pursuant to a state plan that must be approved by HHS. The states have some flexibility with regard to how they structure their respective programs. Each state is reimbursed by the federal government on a quarterly basis for a percent of the costs incurred in operating its program.

Beneficiaries and providers under either program can be prosecuted under Federal law for (1) making material false statements, (2) submitting false claims, or (3) being a party to a kickback scheme. The first two offenses are prohibited by 18 U.S.C. §§ 287, 1001; all three are prohibited by specific criminal provisions in the Medicare and Medicaid statutes. See generally 42 U.S.C. § 1320a-7b.

Federal Level Health Care Fraud Investigations

The Department of Justice relies heavily on the investigative and audit work of numerous federal and state law enforcement agencies committed to addressing health care fraud, each with different experience, expertise and program knowledge.

Federal Investigative Agencies: At the federal level, there are numerous law enforcement agencies with authority to investigate health care fraud including those listed below. The description of the primary responsibility of each agency to investigate fraud on particular health care programs shall not be interpreted to exclude any federal investigative agency with jurisdiction from investigating fraud on any other health care program.

The Department of Health and Human Services Office of Inspector General (HHS-OIG) focuses primarily on fraud on the Medicare and Medicaid programs and the health benefits programs of the United States Public Health Service (PHS) such as the Indian Health Service.
The Federal Bureau of Investigation (FBI) focuses on fraud on private health plans and on any health plan receiving federal funds such as Medicare, Medicaid, the Civilian Health and Medical Program of the Uniformed Services (CHAMPUS), and the Federal Employees Health Benefits Program (FEHBP).

The Defense Criminal Investigative Service (DCIS), the investigative arm of the Office of the Inspector General), Department of Defense (DoD), is responsible for investigating alleged fraud and abuse in DoD programs. The programs include those which provide health care to active duty and retired military personnel, their dependents and survivors through: (1) direct care provided by a military medical treatment facility; and (2) civilian care provided through an indemnity type health insurance program known as the Civilian Health and Medical Program of the Uniformed Services (CHAMPUS). The DCIS has primary investigative jurisdiction of all allegations of fraud committed by health care providers throughout the DoD Military Health Services System.

The Office of Inspector General of the Department of Veterans Affairs (VA-IG) focuses on fraud on the VA which provides health benefits to our veterans.

The Office of Inspector General of the Office of Personnel Management (OPM-IG) focuses on fraud on the FEHBP, which provides health benefits to federal civilian employees, retirees, and their dependents.

The Office of Inspector General of the Department of Labor (DOL-OIG) focuses on health care fraud in three major Federal health benefit and disability program administered by DOL that compensate or provide benefits to Federal workers and certain coal miners and longshore/harbor workers, who sustain job-related injuries, illnesses or diseases. DOL-OIG also devotes significant attention to fraud within private sector health and welfare benefit plans regulated under the Employee Retirement Income Security Act.

Other federal agencies investigate fraud by health care providers within their respective jurisdictions, e.g., the Internal Revenue Service of the United States Department of the Treasury, Federal Trade Communication, and the United States Postal Inspectors.

State Level Health Care Fraud Investigations

In addition to the MFCUs, state Attorneys General may have jurisdiction to investigate health care fraud offenses under state law.
Many district attorneys' offices also enforce state and local laws relating to health care fraud.

Several state oversight agencies whose focus is not health care fraud and abuse nevertheless may reveal problems which may constitute or be related to health care fraud and abuse. For example, State Surveillance and Utilization Review Subsystems (S/URS). The S/URS staff reviews systems output and conducts preliminary reviews of Medicaid providers to determine whether they can substantiate a pattern of fraud. If so, such allegations must be referred for fraud investigation.

State Longterm Care Ombudsmen, funded through AOA, identify, investigate and resolve complaints involving the health and safety of residents of long-term care facilities.
State survey and certification agencies monitor quality of care in longterm care facilities.
Investigations by Private Health Plans: Some private health plans investigate allegations of fraud.

Medicaid Fraud Control Units

Following a series of revealing hearings in 1977 concerning an infestation of fraud and abuse in the nation’s health care system, Congress created the state Medicaid Fraud Control Units (MFCU’s) to combat the flagrant criminal abuses in the system. This congressional enactment was called the Medicare-Medicaid Anti-Fraud and Abuse Amendments, and they conferred sweeping authority upon the MFCUs to not only investigate but prosecute both fraud and abuse in the Medicaid program, including patient abuse and neglect of health care facilities receiving Medicaid funding. See, MedFraud § 6.11.

Most state MFCUs embraced the independent authority they enjoyed from other agencies that administered Medicaid programs. MFCUs are generally created within the state Attorney General’s office allowing them to be staffed by attorneys, investigators, and auditors “specially trained in the complexities of health care fraud.” Id. In addition to congressional legislation, the federal government created a litany of financial incentives designed to encourage states not only to set up MFCUs but to provide them with the support needed to vigilantly police Medicaid program expenditures. Id.

In 1980 Congress strengthened the MFCU programs with the Omnibus Reconciliation Act (OCA) that required each state to establish a MFCU as a prerequisite to receiving federal Medicaid funding. Congress created a provision that allowed a state to avoid the strict mandate of the OCA if it could establish that only a minimum amount of Medicaid fraud and abuse occurred in that state and that the state assured the federal government it could address these minor abuses through other effective means. All but three states have now established MCFUs since the enactment of the OCA. Id.

In 1992 Congress followed with legislation called the Anti-Kickback Statute which, as Katayama reported, has been expanded to include all “federal health care programs, not just Medicare and Medicaid … This brings programs like the Civilian Health and Medical Care Program of the Uniformed Services and the Federal Employees Health Benefit Plan within the gambit of the anti-kickback law.”

Healthcare Fraud: Definitions and Costs

Fraud is a leading cause in the continuing rise in health care costs and health care insurance each year in this country. Billions of dollars are lost in the corrupt arena of fraud, not just to illegal profiteering but to staggering costs involved in the investigation and prosecution of health care fraud cases. In April 2007, Greg Dean writing for HealthDecisions.org attempted to define the varying definitions of healthcare fraud and abuse by listing certain shared elements between the two.

•A person makes a material statement of fact. (A material statement is a statement that is relevant to the subject at issue and likely to affect the course of action of the person to whom the statement is made.)
•The statement is false, and the person making the statement knows that it is false.
•The person making the false statement intends to deceive or mislead the person to whom the statement was made with the expectation of receiving something of value.
•The person to whom the false statement is made is expected to rely on the statement to her detriment.
Let’s look at some of the fine points of these elements (examples in italics).
•A material statement may be made orally (in person or by telephone), in writing, or via electronic communication (fax, Email, website, etc.).
•Fraud is not only making an untrue statement. It can also be committed by concealing a material fact.
An individual conceals an improvement in her medical condition so that she may continue to receive prescription drugs. (She no longer needs the drugs, but she wants to resell them at a profit.)
•A statement of opinion constitutes a false statement if the speaker does not believe the opinion he expresses. A physician states, “I believe your Lyme disease will kill you within a year unless you get intravenous antibiotics,” but the physician does not believe this.
•Fraud is committed when a person makes a promise she has no intention of fulfilling.
A nursing home representative says, “If you move into our nursing home, you will have a private room within three months and we will never make you leave even if you can’t pay,” while not intending to make a private room available or continue care in the event of nonpayment.
•Usually, the person to whom the false statement is made suffers a monetary loss, while the person making the statement realizes a monetary gain. But the perpetrator’s gain and the victim’s loss must be more than merely coincidental. The perpetrator must intend to deceive or mislead with the expectation that the victim will rely on the false statement to her detriment and to the perpetrator’s benefit. It is these elements of intent and reliance on material fact that are most difficult to prove.

In 1996 the U.S. Congress appropriated $548 million to be spent over the next seven years for health care fraud enforcement. As a result, federal convictions for health care fraud, waste and abuse rose by 57 percent between 1997 and 1998. [U.S. Department of Health and Human Resources 2000]. The FBI-generated cases secured 560 convictions for health care fraud alone in 2001, a four-fold increase from 1992. The agency was also responsible for some 741 health care fraud indictments in 2001, up from 615 in 1999. [FBI, 2001]

A Culture of Fraud

In one way or another, fraud has become almost endemic in the American culture. The U.S. Department of Health and Human Resources reported that Medicare lost $11.9 billion to fraud, waste and mistakes in 2000 alone – a figure that represented half of what had been lost just five years earlier to improper payments to doctors and hospitals. Most health care experts say that 10 percent of all health care expenditures in the United States are fraudulent. [Government Accounting Office; National Health Care Anti-Fraud Association]

The impact of fraud on seniors is particularly devastating. Seniors, and other taxpayers, pay up to a billion dollars a year in inflated drug prices due to potential fraud and loopholes in Medicare. Overpayments represented one-fifth of Medicare spending in 2000. [Government Accounting Office] The problem runs ocean-deep in the nation’s health care delivery sys\tem. As much as 80 percent of healthcare fraud is by medical providers while 10 percent is by consumers and the rest by a litany of other sources. [Health Insurance Association of American, 1998]

95 percent of health insurers now have anti-fraud training programs for its employees and 56 percent have fraud hotlines. [Health Insurance Association, 1999] These educational efforts have proven beneficial to both the private and public sector. The U.S. Government recovers more than $8 dollars for every dollar spent fighting health fraud and abuse by using the False Claims Act. [New Directions for Policy, 2001]

Consumers Attitudes About Fraud

While there has been an increase in awareness of the problems associated with fraud, the problem nonetheless remains prevalent in the American culture. The Coalition Against Insurance Fraud reported the following attitudes by consumers about fraud:
•More than one of three Americans state it is okay to exaggerate insurance claims to make up for the deductible. [Insurance Research Council, 2000]
•One in four Americans state it is okay to pad a claim to make up for premiums. [Insurance Research Counsel, 2000]
•One in three Americans state it is okay for employees to stay off work and receive workers compensation benefits because they feel pain, even though their doctor says it is okay to return to work. [Insurance Research Council, 1999]
•One of five employed workers state they have been aware of fraud in their workplace. [Insurance Research Council, 1999]

Why Has Health Care Fraud Become So Prevalent in the United States?

The American cultural tolerance of fraud can probably be traced to the origins of the insurance industry. Nearly one in four Americans believe it is okay to defraud insurers. 8 percent say it is “quite acceptable” to bilk insurers while 16 percent say it is “somewhat acceptable.” 10 percent say it is okay to submit claims for items not lost or damaged, or for personal injuries that do not occur. And, finally, some 40 percent of Americans are “not very likely” or “not likely at all” to report someone who has ripped off an insurer. [Accenture, Ltd., 2003]

These findings are consistent with a 2001 Progressive Insurance report that found nearly one out of 10 Americans would commit insurance fraud if they believed they could get away with it. Another 29 percent said they would not report insurance scams committed by someone they know.

The Insurance Council in 1999 reported that 45 percent of Americans believed that all types of fraud were increasing. The following year the Journal of the American Medical Association found that nearly one in three physicians said it was necessary to “game the health care system” in order to provide high quality medical care. The same number of physicians said patients have asked them to deceive “third-party payers” to help the patients obtain coverage for medical services. A lesser number of physicians, one in 10, said they reported false medical signs and symptoms so a patient could secure coverage for needed medical treatment or services.

False personal injury and arson are leading sources of insurance fraud. For example, the Insurance Research Council (1996) reported that 33 percent of a “bodily-injury claims from car crashes” involved fraud. And the U.S. National Fire Protection Association (1998) said arson or suspected arson accounted for nearly 500,000 fires annually - or 25 percent of all fires.

The Kennedy-Kassebaum Law

In 1996 the U.S. Congress passed the Kennedy-Kassebaum Law – known as the Health Insurance Portability and Accountability Act of 1996 – designed to give employees protections as they move from job to job. But health care fraud expert Alyce Katayama, a Milwaukee attorney, wrote in The Business Journal of Milwaukee that same year that the law “may well be the most comprehensive anti-fraud bill in decades. Its stated goals are to detect, deter, and punish health care fraud, while at the same time steering clear of those who make innocent mistakes.”

Katayama reported that for the first time Medicare beneficiaries were “enlisted in the war on fraud.” Under the direction of the Kennedy-Kassebaum legislation, Katayama said the U.S. Department of Health and Human Resources was required to provide Medicare beneficiaries with a “written explanation of benefits each time Medicare made a payment on their behalf, even if no patient coinsurance or deductible is involved … This should alert beneficiaries to situations where their names are being misused.”

The Distinction Between Health Care Fraud and Health Care Abuse

Many people speak about health care fraud and health care abuse synonymously. Although closely related, the term “health care abuse” does not lend itself easily to a precise definition, Greg Dean said “insurers generally use [the term] to mean any activity that unjustly robs the health care system but does not constitute fraud. In abuse, a consumer or provider may obtain money or health care services to which he is not entitled, but there is not the intent to deceive that is necessary for fraud to have occurred.” Dean listed the following examples of health care abuse:

•A surgeon deliberately submits a bill for a procedure she did not perform. This is fraud because the surgeon is knowingly and intentionally making a misrepresentation in order to realize a financial gain.
•A physician regularly conducts unnecessary lab tests because she believes them to be necessary. This is abuse because the health care system is making illegitimate expenditures and the physician is receiving payments she is not entitled to. But this is not fraud because the physician is not making a misrepresentation. (The physician accurately reports the tests she has conducted, and her opinion that the tests are necessary is sincere.)
But the primary distinction between fraud and abuse is that fraud is a criminal act while abuse is normally not. When abuse occurs, the insurer may elect to recover the money that should not have been paid in a civil proceeding because generally a crime has not been committed.

 

 

[ Back to top ]

Site menu:

John T. Floyd

Travels To All Criminal Courts
In Texas

Phone
(713) 224-0101

Toll Free
1-866-374-1327

Email
jfloyd@JohnTFloyd.com

Principal Office
440 Louisiana,
Ste. 1900
19th Floor
Lyric Centre
Houston, TX 77002

All other locations by appointment only

City Links

• Angleton
• Austin
• Beaumont
• Brownsville
• Conroe
• Corpus Christi
• Dallas
• Del Rio
• El Paso
• Federal Crimes
• Fort Worth
• Galveston
• Hempstead
• Houston
• Laredo
• Lufkin
• Marshall
• Midland
• Mc Allen
• Pearland
• Richmond
• San Antonio
• Sherman
• Sugar Land
• Texarkana
• Tyler
• Victoria
• Waco

In case of EMERGENCY after hours and weekends, please e-mail at jfloyd@JohnTFloyd.com