Medicare Fraud

One of the most common type of actions filed under the Qui Tam provision of the False Claims Act is Medicare fraud.  In fact, health care fraud cases filed under the Qui Tam law has increased dramatically in the last 20 years to include not only Medicare fraud, but fraud occurring within the Medicaid program and the Department of Defense health insurance program for military dependents called TriCare (formerly O’CHAMPUS).  Fraud within these programs have not been limited to providers (doctors, clinics, hospitals, nursing homes, etc.), but also fiscal intermediators who process claims for each program.

The most common form of Medicare Fraud is found in billing for reimbursement.  Examples of this would be billing for services not rendered, billing for a more expensive procedure code than actually performed (“upcoding”), and billing for services rendered that were not compensable under Medicare.  There are many other forms of billing schemes such as billing for new equipment when used equipment was purchased, billing for tests never given and “unbundling,” the practice of fragmenting procedures or tests to maximize reimbursement that should have been submitted in a bundled form at a lower cost.  There is also the converse of this practice of submitting billings of tests and procedures that includes those that would not have been reimbursable in a stand alone billing.

Another form of fraud found with all federal healthcare programs – Medicare, Medicaid, TriCare, is what is called cost report fraud.  All providers that participate in these programs are required to submit reports annually of their overhead costs of providing care to patients under the programs.  These costs are then used as a basis for compensation for services rendered to patents.  This type of fraud is also in the category of accounting fraud and takes on a variety of schemes.  They usually fit into one of several categories such as including costs or expenses that are not related to patient care, shifting non-reimbursable costs to reimbursable costs ( a form of mischarging), and inflating reimbursable costs.  An example would be adding non-Medicare nursing hours to Medicare nursing hours resulting in inflated number of hours used to pad overhead costs.

Along with the many billing and cost report schemes, there has been efforts by some qui tam relators to file actions claiming providers, especially hospitals and nursing homes, did not provide adequate care even though they certified and were compensated by Medicare and Medicaid for providing all required care.  This “quality of care” type of scheme was first tested, generally without success, under qui tam,more than a decade ago with several claims of inadequate and negligent care of Medicare and Medicaid residents in various skilled nursing facilities. The theory of the schemes were similar to the “Product Substitution” schemes found in many Department of Defense qui tam actions that involved defective products, that is a contractor certified that a product sold to DOD met all required specifications when, in fact, it did not.  Skilled nursing facilities, along with all other providers, are bound by quality of care regulations under the Medicare and Medicaid programs under the threat of exclusion from those programs.  Also, there are a number of quality of care standards found within the Code of Federal Regulations.   However, these type of cases have gotten some traction with various federal courts with court rulings favoring relators that were successful.

Medicare and Medicaid together represent a healthy percentage of the United States GDP and, thus, are highly susceptible to fraud.  The highly complicated regulations found within those programs also contribute to the problem.  The schemes mentioned above represent only a small number of possibilities as many iterations of those schemes pop-up on an ongoing basis.  The Justice Department has given significant attention to all health care fraud given the amount of federal money involved and thus any meritorious qui tam actions involving health care fraud should receive the resources necessary to be successful.


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