Healthcare Services

Healthcare, which includes physicians, hospitals, drugs, tests, equipment, etc., is one of the largest sectors of the economy. It is estimated that ten cents of every health dollar goes to fraud. A good deal of healthcare is paid for by federal, state and local governments.

Healthcare fraud, which involves the filing of dishonest healthcare claims, takes many forms.

  • Practitioner fraud includes: prescribing unneeded medications, paid for by the insurer, that are then sold on the street for a profit; billing for care that is never rendered; filing multiple claims for the same treatment; Bundling and unbundling (see Glossary); changing the codes on treatments to those for which higher payments are available; intentional misdiagnosis of conditions, permitting longer or more expensive treatment plans; use of unlicensed, hence inexpensive, staff to provide services; giving or receiving kickbacks for referrals; alteration of medical records; prescribing or dispensing unnecessary treatment; etc.
  • Patient fraud includes: providing false information to secure insurance coverage; forging prescriptions; selling prescription drugs on the street; loaning one's insurance card to someone else; using someone else's insurance card; using medical transportation benefits for other purposes; selling prescription medical equipment; etc.
  • Hospital and other healthcare organization fraud includes: charging for procedures not performed; charging for supplies and medications not delivered to the patient; home health care visits not made; etc.                            
Risks Risks Risks
Billing for Services Not Provided

Utilization rates of certain procedures that are greater than industry/plan average.

Services provided that seem to lie outside the practice of the provider.

Services provided that are inconsistent with the patient being treated.

Levels of service that are inconsistent with average levels of service or are merely implausible.

Procedure codes (CPT) inconsistent with diagnosis codes (ICD or DRG).

Perform regular analytics of the occurrence of certain types of costly procedures performed. Isolate and investigate the upper segment anomalies. Of particular interest are expensive procedures, such as MRIs.

Certain types of physicians perform certain types of services. A pediatrician does not frequently perform open heart surgery; an orthopedic surgeon does not often prescribe tests for sexually transmitted diseases. Billings for services lying outside and provider's specialty deserve heightened attention.

Men do not get hysterectomies. Make sure that analytics are in place to determine that the procedures performed for a patient are appropriate to the patient's medical history, gender, age, etc.

Determine the average daily or weekly patient encounters by provider type. Next, isolate those providers two or more standard deviations greater, in terms of service levels, than their peers. Review their claims for plausibility, duplications, contemporaneous scheduling of incompatible services, multiplicity of overlapping locations (the provider claims to be in the operating room and the office at the same time), etc.

Each claim contains one or more procedures that relate--or should related--to the claim's diagnoses (one doesn't normally get an MRI prescribed by a dermatologist to treat a skin rash). Procedures (especially expensive ones) should be plausibly and reasonably related to the diagnosis.

Coverage of Ineligible Charges Payments made for ineligible procedures. Every plan (from that offered by a private insurance company, to coverage provided by a government's self-funded plan, to Medicare) limits the procedures for which it pays. Often, certain types of elective or experimental procedures are not covered. When ineligible procedures are paid, it usually involves an administrator overriding controls to get the claim paid. This may be a form of favoritism or involve kickbacks.
Excessive Out-of-Network Costs Out-of-network billings for covered services.

Most plans feature fairly high discounts offered by in-network providers. Sometimes, a certain type of procedure is not available from an in-network provider so the treatment must be rendered by an out-of-network provider at a much higher cost.

One form of fraud perpetrated against health care plans is when an in-house or third-party administrator colludes with an out-of-network provider to route a certain amount of business to that provider. The provider makes more on the service than he or she would performing the same service as an in-house provider; the administrator receives a kickback.

Follow-up Appointment Billings A physician scheduling two appointments a day apart with the same patient Physicians are paid for each office visit. This charge is separate from the actual procedures performed. Occasionally, a provider will, rather than performing multiple procedures during the same visit (when possible), schedule a second appointment with the same patient on the following day so as to collect another office visit payment. Review the practices of physicians looking for this pattern. If the pattern is spotted, examine the nature of the procedures to determine whether they could have been accomplished in a single visit. Note that some procedures legitimately involve a secondary or tertiary visit (things like follow-ups to preceding visits or a series of inoculations or intravenous treatments.)
General Guidance Newspapers, blogs, professional literature, television and radio broadcasts address healthcare fraud with alarming regularity. The health care industry involves a lot of money, a lot of people and a lot of fraud. As an introduction to the topic, you may wish to look at some of the resources listed to the right. If you're involved in health care, review the risks, red flags and tools/best practices shown to the right.

A Roadmap for New Physicians: Avoiding Medicare and Medicaid Fraud and Abuse

Centers for Medicare & Medicaid Services: Medicaid Integrity Program

National Association of Medicaid Fraud Control Units (NAMFCU) Website

National Health Care Anti-Fraud Association (NHCAA)

NHCAA Complimentary Webinar: Gaining an Edge on More than Just Fraudsters

NHCAA White Paper on Anti-Fraud Policy Making

NHCAA's New York Public Awareness Campaign on Health Care Fraud

Fighing Health Care Fraud: An Integral Part of Health Care Reform, by NHCAA

Government & Law Enforcement Health Care Anti-Fraud Contacts

Medicaid Fraud Control Units (MFCU) - Hosted by HHS

Medical ID Theft/Fraud Information - Hosted by HHS

Private Health Care Fraud Contacts

State Enforcement Actions - Hosted by HHS

State False Claims Act Reviews - Hosted by HHS

State Insurance Departments Website Directory

State Medical Boards Website Directory

U.S. Department of Health and Human Services Centers for Medicare & Medicaid Services

Ineligibility Name mismatches.

Many plans allow for or include dependent coverage. Those cases in which the patient name does not match the insured's should be investigated. As is the case with any red flag, name mismatches do not necessarily mean fraud. Here, spouses may elect to retain their former names, children of former marriages may have different names, etc.

Some plans limit the ages of dependents. Claims carry the patient's date of birth. Charges for claimed but ineligible dependents should not be paid or, if paid, recovered.

Some plans cover dependents of a certain age only if they continue to be full-time students. A dependent's enrollment status should be checked.

Overpayment of Services Costs higher than projected/budgeted/expected for the level of service. Often, claims are paid by schedule. This means that every procedure is entitled to a certain amount of payment or received a certain percentage of discounts from retail. Plans and their administrators sometimes erroneously pay more than the plan allows. This can be determined by comparing a sample of the amounts paid against the amounts that should have been paid. If this error is universally applied (all providers received a similar incorrect payment), it is an indication of error. If such errors are repetitive in nature, relate only to single or a small number of providers, involve manual overrides, etc., then fraud is likely. The person approving the payments may be receiving kickbacks from the providers receiving the overpayments.
Prescription Drug Fraud

High prescription rates for certain controlled substances.

Oxycodone, hydrocodone, morphine sulfate, hydromorphone and oxymorphone are narcotics and, hence, subject to abuse. When not used to combat pain, they can be sold to or used by addicts.

Provider type and prescription pattern inconsistent.

A disproportionately high number of controlled substance prescriptions are filled by a single pharmacy, particularly an independently owned pharmacy.

Look for patterns in which a single patient is filling these types of prescriptions at a number of different pharmacy chains. A pharmacy chain has access to its own dispensing records, but generally not those of other chains. Look, for unusual patterns of prescription fulfillment. Generally, a patient will fill prescriptions at a pharmacy fairly close to a provider, close to his or her home, somewhere along the route between the provider, or somewhere close to where he or she is employed. When one sees a pattern in which prescriptions are being filled at a pharmacy or pharmacies off an expected route, it is a cause for concern. Such a pattern may be indicative of fraudulent activity.

Certain types of physicians (orthopedic surgeons, oncologists, etc) are typically involved in the treatment of pain and may be expected to have higher prescription rates for narcotics than, for example, pediatricians or primary care physicians. When the level of controlled substance prescription is inconsistent with a provider's specialty, his claims should be examined.

If the pattern of prescription involves a few recurring patients and the prescriptions are often filled at the same pharmacy, it may be indicative of fraudulent activity.

Some drug stores form alliances with physicians and patients to fill unwarranted controlled substance prescriptions. The medications are paid for by the insurer. The drugs themselves are sold on the street, generally by the patient. The patient, the doctor and the pharmacy split the proceeds from the drug sales.

Unbundling Services generally billed together are billed separately.

A group of closely related services used to treat a specific diagnosis are often bundled together and billed as a single charge, which is significantly less than what the cost of the services would be were they to be billed separately. Some providers unscrupulously and illegally unbundle their services to illicitly bill and recieve higher payments.

Review providers' claims to determine whether and to what extent unbundling may be occuring. The first step in the data analytics might be to look for cases in which the number of line items per single claim is greater than average. As an alternative, look for relatively high rates of lab tests. A common bundle would be an office visit and a lab test to determine the existence and nature of an infection. A common unbundling scheme would involve separate charges for the office visit, the examination and the lab tests.