Health Care Fraud - Research Paper Example

HEALTH CARE FRAUD “The HealthSouth Corporation founder, Richard Scrushy, paid USD 500,000 in ‘contributions’ to Alabama Governor Don Siegelman to obtain a seat on the Alabama State Hospital Regulatory Board...Initially before the bribery trial, Mr. Scrushy was found not guilty of USD 2.7million in accounting fraud at HealthSouth. He was not so fortunate in subsequent legal battles, and relating to accounting fraud. Scrushy received nearly 7 years in prison for bribery...”(Seidman) “Some 180 billion euros ($260 bln) is lost globally every year to fraud and error in healthcare -- enough to quadruple the World Health Organization’s and UNICEFs budgets and control malaria in Africa….” (Kelland) Healthcare is a socially relevant domain, since the practice of healthcare brings end to the sufferings of those ailing, it is considered to be a Nobel profession. It is worth including that an oath termed as The Hippocratic Oath is taken by all doctor as they swear to practice medicine ethically and with full integrity. Looking at the volume of frauds that are associated with this nobel profession, it indicates that the Hippocratic Oath has been reduced to a mere ritual by the practitioners. This is so because every year numerous doctors are convicted of committing a health fraud. In America, the problem of health care fraud has been called as one of the most massive and persistent financial failures (Sparrow, License To Steal: How Fraud bleeds americas health care system). Healthcare in a country like USA is a highly complex domain, it includes numerous stakeholders. Key stakeholders in healthcare can be grouped as payers, fiscal intermediaries, providers, purchasers, producers and others. Figure 1 lists various actors those constitute each key stakeholder group. The fact that the health care value chain consists of such large number of actors implies that the number of processes involved is high and each long process spells difficulties in efficient management and regulation of the system thus leaving scope for frauds. Figure 1. Key Stakeholders in American Healthcare System (adapted from the Wharton School Study of the Health Care Value Chain) Financial Burden of Fraud The figures pertaining to health care fraud are so staggering that around 10% of the federal health care budget is lost to fraud (Krause) as doctors and healthcare providers form an integral part in many of these frauds. It has been recorded that US healthcare system wastes something between USD 505 billion and USD 850 billion every year and over 20% of this sum is from the fradulent practices like kickbacks to the doctors and unethical insurance practices (Kelland). Since these frauds enhance the healthcare costs to such an extent that it has compelled the policymakers in the government to dedicate due attention to them. In order to enhance the understanding on the topic, this research paper throws light on health care frauds, their types and the role of enforcement agencies in the American context. Figure 2. Projected Medicare and Medicaid Spending & Estimated Fraud (2005-2015) Figure Source: Ted Doyle, Director, Etico llc Since GAO and NHCAA frauds amounts tend to be a fixed percentage of Medicare and Medicaid spening, future growth in government funded healthcare would imply a high risk of health care frauds, unless stringent enforcement measures are adopted. . Defining Fraud Fraud: Practitioners and academicians have defined fraud from numerous perspectives, in order to have a clarity about fraud, the following definitions of fraud as defined in health care context were retreived from the published literature:, “fraud is an intentional deception or misrepresentation that someone makes, knowing it is false, that could result in the payment of unauthorised benefits.” …..by HFCA (Torras) Federal Legislation (Cornell universilty Law School) describes a person who files in an false claim as: “…. Including any person who engages in a pattern or practice of presenting or causing to be presented a claim for an item or service that is based on a code that the person knows or should know will result in a greater payment to the person than the code the person knows or should know is applicable to the item or service actually provided,” It is worth inclusion here that, The Health Insurance Portability and Accountability Act of 1996, Public Law 104-191 (HIPAA), states that the "should know" in the above stated definition also includes, and pertains to the information in the claim, "acts in deliberate ignorance" or in "reckless disregard of the truth or falsity" and "no proof of specific intent to defraud is required." As per National Health Care Anti-Fraud Association (NHCAA) health care fraud is (Offen): “an intentional deception or misrepresentation that the individual or entity makes knowing that the misrepresentation could result in some unauthorized benefit to the individual or the entity or to some other party.” This particular definition covers a wider scope a broad range of activities. Upon a closer look at various definitions, it is clear that the fraud is based on the intent of the one who commits it. Types of Health Care Frauds The two cases in point presented at the beginning of this research are indicative of the scale of health frauds not only in the US but globally as well. As mentioned earlier, healthcare being a complex domain, engages numerous stakeholders and an equal number of potential fraud committers. Figure 3 below depicts the range of people, entities and processes those could be categorised as cases of fraud and malpractice. The impact of fraud on individuals’ quality of life is direct and negative, hence it calls for extraordinary efforts. To make extra ordinary efforts, it is important that we understand the key types of healthcare frauds, which include: Figure 3. People, entities and processes in health care Figure source: BlueCross BlueShield of Tennessee Upcoding: Coding (Current Procedure Terminology) is a process in which a particular ailment and a procedure is identified and these CPT codes are used for the purpose of reimbursement. At times a doctor or a healthcare provider assigns a code that is assigned for entitlement to higher reimbursement. This is termed as upcoding and at times coding may be very difficult to be detected (Lovitky). Overutilisation: The economic gains arising out of the medical services those are not relevant or those are not required but are provided. In other words, this fraud pertains to the medical services those are not necessary. Common examples worth citing could be that the doctors prescribe routine pathological or radiological tests even to the patients who do not need these tests (Liberman and Rolle). Phantom Billing or Billing for services not provided: This is one of the simpler frauds. In this type of a fraud, the doctor or a health care service provider submits a claim for a service that is not actually provided. This type of fraud is performed in two ways, i) when the doctor codes a procedure that has not been provided. ii) when the doctors codes a procedure when the patient doesn’t exist in reality (Liberman and Rolle). Filing false cost reports: Providers (like hospitals, nursing facilities, home health agencies etc) covered by Medicare Part A are required to follow Health Care Financing Administration regulations, so that only the permissible costs are reimbursed for the cost reports submitted by them. Disguising an unpermissible cost as a permissible cost is an example of this type of a fraud (Lovitky). Double Billing: Double billing is also a common type of fraud where in for same ailment two claims are submitted (Liberman and Rolle). Pharmacy Fraud: In the case of this fraud, pharmacy may over bill, that is at times the patient is charged for a branded drug (an expensive drug) but is given a generic drug that is significantly cheaper. In another instance, the pharmacy buys back the medicine from the patient and sells those medicine to other patients ( Liberman and Rolle ). Health Insurance Fraud: Since group health insurance is not offered to small and medium enterprises, they fall prey to fake health insurance plans those seem to be customised for their needs. In light these frauds, in various States the insurance departments have been tracking such swindlers. The victims (SME owners and employees) realise about these easy signup and low premium health plans when they are not able to claim for their benefits when required. It is obvious that up-coding and bogus billing are the two frauds that are very hard to be proved. All the more, high probability exists that providers can always claim an “honest mistake”, if caught (Stanton). As per National Health Care Anti-Fraud Association majority of the health care frauds are committed by the unprofessional providers (Rosenbaum, Lopez and Stifler). Furthemore it is estimated that 80% of the frauds are committed by the providers like the doctors and 10% are committed by the consumers. Consequences of Health Care Frauds Despite the fact that the US Healthcare system is a huge, complex, fragmented and often called “a broken” system, it is still a big magnet for fraudsters, scanners and organized crime gangs, for the simple fact that the industry prints $2.3 trillion a year. The following are few apparanent and not so apparent consequences or impacts of healthcare frauds on US economy and society at large: 1. As mentioned above, healthcare frauds pose a financial burden on shoulders of taxpayers, as huge as $850 Bn every year. 2. Since a huge portion of these frauds is channeled through Medicare and Medicaid spending, and Medicare is funded through payroll tax on both employer and employee; raising of Medicare funds would lead to raising of taxes thus affecting the overall economy of the nation. 3. In case of employee-based or group insurance, if anyone else in the group or company is dealing in fraudent practices, the claim history of company or group gets affected. This implies higher premiums for everyone. Fauds & Law (American Legal System) and Enforcement Within the American Legal System, in the past around thirty years, body of federal law has been developed to address frauds. Federal False Claims Act (FCA) – This Act clarifies the punishment or the penalty on a person who submits false bills to claim funds from the federal government. These bills could take many forms including overbilling, not providing the promised service, charing for a different service than that is provided etc. As per this law the penalties to the culprits varies between USD 5000 to USD 10,000 per bogus claim besides trebling the damages (Federal False Claims act). This law includes qui tam provions, wherein any citizen holds the right to file a lawsuit on behalf of the government and receive a reward of up to 15 % (Bennette and Medearis). The Government has made significant strides in tackling the issue of health care frauds. Anti-fraud enforcement and recovery efforts have been successful in convictions and recoveries. Health Insurance Portability and Accountability Act (HIPAA) has established a Health Care Fraud and Abuse Control Program and this particular control program has produced very good results. As per Stark Law the medical practitioner cannot refer a patient for tests and other diagnostic examination to a laboratory owned by his family. Anti-Kickback Act is another important step in the direction to curb health care fraud, at times the hospitals and other privately owned healthcare delivery set ups pay a fee for referring Medicare patients to those set ups. Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative has been put together to reduce Medicare and Medicaid frauds. One of the major challenges that these enforcement agencies face is that the investigators have very little knowledge about the field of medicine; therefore whenever these investigators find themselves in situations where they are challenged by the medical aspects, they feel greatly disadvantaged (Sparrow) . Kickbacks and Paybacks Following are some of the real world examples of different types of frauds, their motives and methods as well as description of litigations against them: 1. Fraud by Pharmaceutical Manufacturers: Pfizer, one of the largest pharmaceutical company in the world, recently agreed to pay $2.3Bn (NY Times), the largest healthcare fraud settlement in the history of Department of Justice, with respect to illegal promotion of pharmaceutical products. The drug giant was found guilty of promoting few drugs as “off-label”, hence manipulating drug information from patients, 2. Fraud by Healthcare providers: In July 2006, Tenet Healthcare Corporation was found guilty of manipulating their bills and orders of outlier payments to Medicare, as well as indulged in kickbacks, upcoding and bill padding. Upon litigation, the company agreed to pay Federal Government a sum of $900 mn (USA Today). Conclusion: US Healthcare system is a hybrid and complex ecosystem of numerous stakeholders in a private-public healthcare financing model. Due to the free-market nature of the system, a number of intermediaries, high financial value of $2.3 trillion dollars, the system is vulnerable to numerous fraud attacks. These fraud attacks cause a huge financial burden on the shoulders of taxpayers, as high as $820Bn a year. There are different types of frauds that have occurred in the history of frauds in United States. These include upcoding, over-utilization, Phantom Billing, Filling false cost reports along with pharmacy and insurance frauds. The healthcare reform act of 2010 has a number of regulatory protocols set to enforce measures to contain fraud incidents. Bibliography USA Today. Tenet accused of $1 billion Medicare fraud. 3 March 2005. 26 April 2011 . Bennette, R S and D M Medearis. "Health Care Fraud; Recent Developments and Timeless Advice." Texas Medicine 99 (2003): 50-56. Cornell universilty Law School. U.S. Code. 22 April 2011 . Federal False Claims act. The False Claims act. August 2010. 25 April 2011 . Kelland, K. Global Healthcare Fraud Costs put at USD 260 billion. 18 January 2010. Reuters. 23 April 2011 . Krause, J H. "Conceptual Model of Health Care Fraud Enforcement." Brooklyn Journal of Law and Policy 12 (2003): 55. Liberman, A and R Rolle. "Alleged Abuses in Health Care in 1990s: a Critical Assessment of Causation and Correction." The Healthcare Supervisor 17 (1998): 1-11. Lovitky, J A. "Health Care Fraud - A Growing Problem." Nursing Management (1997): 42-45. NY Times. Pfizer Pays $2.3 Billion to Settle Marketing Case. 2 September 2009. 26 April 2011 . Offen, L M. "Health Care Fraud." Neurologic Clinics 17.2 (1999): 321-333. Seidman, Saul William. Trillion Dollar Scam: Exploding Health Care Fraud. Universal Publishers, 2008. Sparrow, M K. "Health Care Fraud Control; Understanding the Challenge." Journal of Insurance Medicine 28 (1996): 86-96. —. License To Steal: How Fraud bleeds americas health care system. Colorado: Westview Press, 2000. Stanton, T H. "Fraud-and-Abuse Enforcement in Medicare: Finding Middle Ground." Health Affairs 20 (2001): 28-41. Rosenbaum, S, N Lopez and S Stifler. "Health Care Fraud." Department of Health Policy (2009). Torras, H W. Health Care Fraud and Abuse: A Physicians Guide to Compliance (Billing and Compliance). Chicago: American Medical Association Press, 2003. Read More