Top 5 Most Common Healthcare Provider Fraud Activities

November 13, 2017 - Healthcare provider fraud is extraordinarily common and can be conducted at a shockingly large scale.  The largest healthcare provider fraud takedown in US history was announced just recently, resulting charges against 400 defendants in 41 federal districts for schemes totaling $1.3 billion, according to HHS and the Office of the Inspector General (OIG).  

Providers involved in fraud relied on creative schemes such as forgery, bribes, fake patients, and falsified billings to financially benefit from administrative vulnerabilities in public programs such as Medicare and Medicaid.

Based on public data from the OIG and GAO, what are the most common healthcare provider fraud activities and how much of an impact can they have on patient safety and public welfare?

Billing for medically unnecessary services or services not performed

Fraudulent provider billing, duplicate billing, and billing for services not medically needed accounted for 46 percent of provider fraud cases in 2016. Billing for services not performed is the most common provider fraud activity and defrauds millions from public and commercial insurers alike.

OIG found that in in Westlake, OH, a provider fraudulently overbilled Medicare private payers for several unnecessary services. Unnecessary services completed by the provider included catheterizations, tests, stent insertions, and causing unnecessary coronary artery bypass surgeries. The fraudulent billings totaled $29 million for Medicare. Commercial insurers overpaid by $7.7 million.

In 2017, a Detroit-area provider was found guilty of a $25 million Medicare defrauding scheme by billing for nerve-block injections he never provided to patients, the Department of Justice said.

Falsifying claims or diagnoses

Falsified claims schemes accounted for 25.5 percent of provider fraud cases last year and usually involve the use of fake medical personas and identify theft.

From February to April 2016, a Medicare Strike Force Unit discovered an $11 million fraud scheme between a biller and a physician that used unlicensed physicians to complete medical services. Licensed physicians were then brought in to sign forms suggesting that they completed the services.

In the same year, OIG found that another physician submitted $2.4 million in falsified claims to Medicare and received payments of around $1.2 million.

In October of 2015, an unlicensed nurse in Ohio used the identity of another nurse to receive over $20 million in Medicare reimbursements.

Participating in illegal referrals or kickbacks

Under the False Claims Act, it is illegal for a provider to participate in kickbacks, or the use of bribery to gain exclusive patient referrals. Providers that used kickbacks to increase their profitability accounted 20 percent of fraud cases in 2016.

Back in 2015, Rosner Home Healthcare in Illinois paid kickbacks to physicians, which led to profits of $2.6 million, OIG found.

Another provider in New Orleans was recently found guilty of a kickback scheme where she and co-conspirators defrauded the Medicare program of $3.2 million in illegally obtained referrals.

The provider and co-conspirators gave durable medical equipment companies financial incentives in exchange for the personal information of Medicare beneficiaries.

Prescribing unnecessary medications to patients

Providers that prescribe unnecessary medications to patients for financial gain accounted for 10.8 percent of provider fraud cases in 2016.

Unnecessary prescribing is especially dangerous because it leads to pharmaceutical diversion, or the transfer of a controlled substance from a medical professional to an unauthorized party or individual outside of the traditional supply chain. Pharmaceutical diversion is a contributor to the opioid crisis.

Many common provider fraud cases include the fraudulent distribution of drugs.

According to OIG, one doctor was sentenced to 8 years and 4 months in the Western District of KY for conspiracy to unlawfully distribute controlled substances, among other conduct. The provider was required to pay $870,000 as part of his sentencing for distributing drugs.

Upcoding for expensive, medically unwarranted services

While upcoding only accounted for 2 percent of provider fraud cases, the financial impact of these schemes can be extremely costly.

From 2009 and 2014, a Roseville, CA podiatrist submitted over $2.8 million in fraudulent claims for reimbursement to Medicare, Medicaid, TRICARE and private insurers. The provider falsely claimed that he performed more expensive procedures which were justified because of illnesses or symptoms that were not present.

Even though public payer programs have fraud vulnerabilities, law enforcement continues to identify popular provider fraud schemes and charge offending parties. Payers in the public and commercial sectors should constantly review troubling or uncertain claims, and the providers submitting these claims, to further protect beneficiaries.