10 Types of Health Care Fraud
The term “health care fraud” means different things to different people. To most physicians and other legitimate health care providers, it means an intentional attempt to siphon money from government benefit programs such as Medicare and Tricare – often to the tune of millions of dollars. For the government and federal agents and prosecutors, the definition of health care fraud is much broader. Under their definition – the definition that matters – even unintentional billing errors can lead to fraud allegations carrying the potential for significant financial penalties and loss of benefit program eligibility.
So, what constitutes “health care fraud”? Here are ten of the most common examples that can lead to civil or criminal charges:
1. Billing and Coding Errors
Billing and coding errors – both intentional and unintentional – are among the most common issues that trigger federal health care fraud investigations. Providers that participate in Medicare, Medicaid, Tricare, and other government health care benefit programs are subject to an extraordinarily complex regulatory scheme that includes numerous specific requirements for obtaining reimbursements for services, supplies, medications, and durable medical equipment (DME). These regulatory schemes and their requirements are also constantly changing and maintaining compliance with the applicable billing requirements is a task that requires deep health care law knowledge and constant dedication to maintaining compliance.
Unfortunately, oftentimes, even these efforts are not enough. Billing and coding errors are common; and, when they trigger the federal health care authorities’ monitoring systems, they can lead to costly investigations. While evidence of knowledge or intent is required to establish criminal culpability for most forms of health care fraud, even simple administrative errors and honest mistakes can lead to federal civil cases with fines of more than $21,000 (as of 2017) per “false claim” plus recoupments, other financial penalties, and loss of eligibility. This includes errors and mistakes such as:
- Double-billing a health care benefit program or billing the government and a private insurer for the same service, supply, medication, or piece of equipment.
- Billing for operational expenses and other “non-allowable” costs which are not eligible for federal health care program reimbursement.
- Billing for services at stand-alone rates rather than the reduced “bundled” rate for related health care services (commonly known as “unbundling”).
- Billing for services at a higher rate than the one prescribed by the applicable program reimbursement regulations (commonly known as “up-coding”).
- Billing for costs or services that are otherwise ineligible for reimbursement, including services provided by unlicensed or excluded providers and services that are medically-unnecessary.
2. Kickbacks, Bribes and Rebates
Under the federal Anti-Kickback Statute, it is illegal for any health care provider to, “knowingly and willfully offer or pay any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind to any person to induce,” a purchase, lease, or patient referral – where any part of the payment is to be made using funds from a federal health care benefit program. Federal law makes it a punishable offense to receive any such kickback, bribe, or rebate as well.
While the Anti-Kickback Statute uses the language, “knowingly and willfully,” under the Patient Protection and Affordable Care Act (PPACA) and federal case law, it has been established that actual knowledge of the illegal payment is not required. As a result, even providers who did not understand that a payment they made or received constituted an illegal kickback or rebate can still face federal prosecution. Forms of “remuneration” covered under the statute may include:
- Cash payments
- Discounts for services, supplies, or equipment
- Free or below fair market value use of clinical space, equipment or staff
- Payments to family members
- In-kind gifts (such as airplane tickets)
- Certain marketing commissions
While the Anti-Kickback Statute is broad in its scope, its prohibitions are not absolute. For example, providers can compensate W-2 employees (subject to certain limits and in accordance with enumerated factors) where the payments would constitute illegal kickbacks if paid to an independent party or contractor. Certain risk-sharing and purchasing arrangements are exempt from the Anti-Kickback Statute as well, and the law also includes safe harbors for a number of specific types of transactions.
3. Physician Self-Referrals
While the Anti-Kickback Statute applies broadly to providers in all segments of the health care industry that participate in federal health care benefit programs, the Stark Law imposes additional restrictions that are unique to practicing physicians. The Stark Law prohibits any transaction that qualifies as a so-called “physician self-referral,” which is defined as a referral for “designated health services” to be provided by an entity with which the referring physician has a “financial relationship.”
The definitions of “designated health services” and “financial relationship” are both extremely broad, and this makes the Stark Law a potent weapon for health care authorities seeking to crack down on improper billings to Medicare and other benefit programs. Designated health services include:
- Clinical laboratory services
- DME and medical supplies
- Home health services
- Inpatient and outpatient hospital services
- Outpatient pathology
- Outpatient prescriptions
- Parenteral and enteral nutrients, equipment, and supplies
- Physical therapy
- Prosthetics, orthotics, and related supplies
- Radiology and radiological therapy
Financial relationships that can trigger Stark Law implications include:
- Direct compensation arrangements
- Direct investment
- Indirect investment or compensation arrangements
- Company or practice ownership
Like the Anti-Kickback Statute, the Stark Law includes a limited number of exceptions that apply in certain specific circumstances. Proving that you qualify for an exception will often be a key defense strategy in Stark Law investigations, and having adequate documentation of a qualifying financial relationship is often among the best ways to avoid liability.
4. False and Fraudulent Claims
The False Claims Act is perhaps the single most-powerful tool that the federal government has for prosecuting providers suspected of health care fraud. The False Claims Act is an extraordinarily broad statute that imposes civil and criminal penalties for any and all “false and fraudulent” claims submitted for federal health care program reimbursement.
What constitutes a false or fraudulent claim? Since the False Claims Act (FCA) applies across the board, coding errors, illegal forms of remuneration, and other health care law violations can all lead to FCA liability. However, a key limitation of the FCA is that it imposes penalties only where a provider “knowingly” submits a false or fraudulent claim, or where a provider “acts in reckless disregard” of the truth in order to remain willfully ignorant of a billing violation. The government has a number of methods that it uses to prove this actual or “constructive” knowledge, but noting that our attorneys can implement various defenses to FCA liability.
There are two ways that health care providers can become targets of False Claims Act investigations. The first is by direct government initiative, usually when Medicare, Medicaid, or Tricare billing data trends suggest an “abnormal” billing record that is indicative of possible false or fraudulent claims. The second is through what is known as a qui tam lawsuit (or “whistleblower” claim), where a private citizen with information about an alleged violation submits a case to the U.S. Department of Justice (DOJ) or the Department of Health and Human Services’ (HHS) Office of Inspector General (OIG).
For more information about defending against False Claims Act investigations, we encourage you to read:
- 5 Things You Need to Know About the Federal False Claims Act
- Avoiding Criminal Charges in False Claims Act Cases
- False Claims Act & Qui Tam Defense
- What You Should Do When You Are Under a False Claims Act Investigation
5. Billing for Medically-Unnecessary Services, Supplies, or Equipment
In order for medical services, prescription medications, or health care supplies or equipment to be eligible for federal program reimbursement, they must qualify as “medically necessary.” For purposes of Medicare billing compliance, services and supplies are considered medically necessary when they are, “needed to diagnose or treat an illness, injury, condition, disease, or its symptoms and that meet accepted standards of medicine.”
Once again, the definition of proscribed practices in the context of the medical-necessity requirement is broader than it may initially seem. For example, the following services will all generally be considered “medically unnecessary” and therefore not eligible for federal benefit program reimbursement:
- Inpatient treatment that lasts beyond the Medicare-approved length of stay
- Physical therapy treatments in excess of the Medicare usage limit for such services
- Provision of medical services in a hospital where use of a lower-cost facility was an option
- Prescription of medications to treat certain conditions where the entire course of treatment is considered medically-unnecessary (such as cosmetic procedures)
Here, too, exceptions apply. In particular, a variety of screenings as well as annual “wellness” visits are generally eligible for reimbursement even if they do not result in a diagnosis requiring treatment. If your business is being targeted in a federal investigation for allegedly billing for medically-unnecessary services or supplies, our attorneys can assess your internal policies, procedures, and your reimbursement billing record to determine what defenses you have available.
6. Billing for Services, Supplies, or Equipment Not Provided
The DOJ, OIG, Centers for Medicare and Medicaid Services (CMS), Department of Defense (DOD), Medicare Fraud Strike Force, and other federal authorities also vigorously pursue cases against providers suspected of billing for services, supplies, and equipment not actually provided to patients. This practice is commonly known as “phantom billing” in the context of intentional Medicare and Tricare fraud schemes. However, billing for services and items not provided can also be the result of coding errors (i.e. submitting the incorrect billing code), administrative staff misreading patient records, making typographical mistakes, and a variety of other non-criminal practices that do not warrant federal enforcement action.
If your business or practice is being investigated for submitting false or fraudulent reimbursement requests for services not rendered or supplies not provided, it will be critical to get to the bottom of the issue as soon as possible. It is ideal to get to the root of the problem before the government’s investigators find any information that they believe serves as evidence of health care fraud. If it turns out that someone within your business or practice made a mistake, our attorneys can help you address the issue proactively and present a tailored defense that is focused on insulating you, your company, and your key employees from civil or criminal responsibility.
7. Prescription Drug Fraud
Prescription drug fraud has long been a top priority within the government’s health care fraud enforcement efforts. With renewed focus on the nation’s opioid epidemic, the DOJ is devoting additional technological and human resources to targeting physicians, pharmacists, and other health care providers suspected of improperly prescribing, dispensing, and administering opioid medications. In 2017, Attorney General Jeff Sessions announced the formation of a new Opioid Fraud and Abuse Detection Unit, which is, “focus[ed] specifically on opioid-related health care fraud using data to identify and prosecute individuals that are contributing to th[e] opioid epidemic.”
Like health care fraud, “prescription drug fraud” is a broad term that encompasses a wide range of civil and criminal offenses under numerous federal laws. Prescription drug fraud investigations conducted by the DOJ, the Drug Enforcement Administration’s (DEA), and other agencies, frequently target practices such as:
- Dispensing more medication than was prescribed
- Drug shorting and refill schemes
- Falsifying prescriptions
- Illegally importing prescription medications
- Inaccurately reporting test results in order to prescribe drugs that are medically-unnecessary
- Prescribing medications without an in-person exam
- Prescription drug diversion
- Selling fraudulent prescriptions
Compound pharmacies have also recently received renewed attention from federal law enforcement authorities. From allegations involving kickbacks and overbilling for compound medications to falsely marketing compound drugs as FDA-approved, compound pharmacy fraud is a broad and highly targeted area under the umbrella of health care fraud as well.
8. Falsifying Patient Records and Inaccurately Reporting Test Results
Despite the omnipresent need for quality health care in the United States, some physicians’ practices, clinical laboratories, and other health care businesses are in financial trouble. Whether due to market competition or other factors, some practitioners and businesses simply are not able to make payroll and pay their expenses on an ongoing basis. Unfortunately, this leads some practice owners and executives to make poor decisions, including falsifying patient records and test results in order to bill for additional testing and procedures.
However, in certain circumstances, legitimate patient records and test results can appear falsified or fraudulent when compared to regional or national averages. This, like many other billing-related “issues,” can often trigger investigations as a result of the government’s heavy reliance on data analytics. Federal authorities simply do not have the time to individually examine all health care providers’ billing practices. As a result, they are increasingly relying on data analysis to identify providers who, based on certain characteristics of their benefit program billings, present certain red flags for health care fraud.
Regardless of the circumstances at hand, you need to get out in front of the government’s investigation. This means hiring experienced legal representation promptly, and it may also mean self-disclosing any violations under the protective provisions of the False Claims Act. But, these provisions apply only under limited circumstances; and, before you provide any information to federal authorities, it is imperative that you discuss your situation with a knowledgeable health care fraud defense attorney.
9. Fraudulent Physician Certifications
In order for a Medicare or other health care program beneficiary to be covered for home health or hospice care, a physician must certify as to his or her eligibility. This certification must be based upon the physician’s own independent examination, and must accurately reflect the results of the examination without financial motive or influence from other outside factors. Allegations of fraudulent certifications are common in health care fraud investigations targeting home health providers and hospices, and physicians will often face allegations of engaging in fraudulent certification practices as well. Here are some common allegations in these types of cases.
- Home health providers and hospices creating false, fraudulent, or forged physician certifications
- Physicians accepting bribes or kickbacks in exchange for fraudulent certifications
- Relying on a physician other than the patient’s primary care physician to provide a home health or hospice certification
Fraud allegations involving patient recertification are common as well. Home health patients must be recertified every 60 days, and recertification requires that a reviewing physician determine, based upon his or her professional judgment, that home health care is still needed. The standards for recertification are the same as those for initial certification. If a physician fraudulently recertifies a patient, or if a home health agency falsifies or forges a recertification, there is the possibility for civil and criminal penalties to both be on the table.
10. Issues with Election Statements for Hospice Care
In addition to the requirement for a physician certification, in order for a patient to have his or her hospice care expenses covered by Medicare, the patient must sign an election statement. The election statement must include two specific acknowledgments. In the election statement, the patient must acknowledge that:
- he or she has received complete and accurate information about the palliative (rather than curative) nature of hospice care, and
- by entering hospice care, the patient is waiving his or her right to Medicare coverage for treatment not provided or arranged for by the patient’s chosen hospice services provider.
In order to avoid prosecution in the event of a federal investigation, hospices should keep all patient election statements, and they must also respect patients’ decisions to revoke their elections. If a hospice is unable to provide valid election statements for all patients within its care (and for which Medicare has been billed in the past), it will very likely face intense scrutiny from federal authorities.
Oberheiden & McMurrey
Oberheiden & McMurrey is one of the country’s best-known health care fraud defense firms. Our attorneys—many of which come from leading positions within the Department of Justice— have successfully defended physicians, businesses, and business owners in civil and criminal health care fraud investigations across the United States, involving Anti-Kickback, Medicare fraud, Medicaid fraud, Tricare fraud, fraud in connection with the Department of Labor benefit program, Stark Law, and False Claims Act allegations.
Our track record is impeccable. What makes Oberheiden & McMurrey so successful is our combination of government experience and relentless negotiation and trial advocacy. Several of our attorneys (e.g. Bill McMurrey, Lynette Byrd, Glenn Harrison) previously served in leading health care law positions at the Department of Justice. We are proud of our results and we are ready to do the same for you.
- Anti-Kickback Investigation Against A Nationally Operating Health care Business. Several Branches of the Federal Government Investigated Alleged Violations of the Anti-Kickback Statute Within a Large Health care Business. Our Attorneys Pursued a Proactive Approach with the Lead Assistant United States Attorney (AUSA) With the Goal to Present Factual Explanations and Legal Arguments As to Why Our Client Was Not Involved in Fraud and Abuse. Parallel to Providing Documents and Corporate Policies to the Government, We Met with the Prosecutors and Our Health care Law Knowledge Allowed Us to Persuade the Government to Conclude the Fraud Investigation with No Civil and No Criminal Liability for Our Client and Any of Its Principals, Directors, Employees, and Otherwise Affiliated Individuals.
- Medicare Fraud & Stark Law Investigation by the Department of Justice and the Federal Bureau of Investigation (FBI) Against Our Client. After Initiating and Continuing Negotiations, Our Attorneys Were Able to Provide the Government with Compelling Reasons to End the Investigation at an Early Stage. The Case Had Both Civil and Criminal Components and Our Attorneys Were Able to Resolve the Matter With No Civil and No Criminal Liability for Our Client and Any of Its Principals, Directors, Employees, and Otherwise Affiliated Individuals.
- Tricare Fraud Investigation by the Department of Defense, the Federal Bureau of Investigation (FBI), and the Department of Justice. Our Health care Client Received a Grand Jury Subpoena Potentially Implicating Him in a Federal Health care Fraud Conspiracy. Our Attorneys Were Able to Discuss the Matter with the Lead Assistant United States Attorney (AUSA) and Reached a Proffer Agreement with the Government. Our Client Was Facing Several Years of Incarceration; We Were Able to Negotiate a No Civil and No Criminal Liability for Our Client.
- False Claims Act Investigation Against a Large Health care Conglomerate. Our Client Received a Subpoena from the Office of Inspector General. Our Attorneys Quickly Determined that the Investigation Had Underlying Anti-Kickback and Stark Law Components. We Immediately Reached Out to the Handling Local U.S. Attorney’s Office and Began Negotiations to Resolve the Matter with the Primary Goal to Avoid Criminal Prosecution. Several Months into the Case We Felt Comfortable Enough to Make a Presentation at the Department of Justice and Were Able To Explain and Resolve the Allegations By Way of a Skillful Health care Fraud Defense Presentation. The Government Ended the Investigation and We Concluded the Representation for Our Client With No Civil and No Criminal Liability for Our Client and Any of Its Principals, Directors, Employees, and Otherwise Affiliated Individuals.
If you received a subpoena, a target letter, a request to testify or any other correspondence from the Department of Justice, you should speak to one of our experienced health care fraud attorneys today. Calls are free and confidential. We are here to avoid investigations or even indictments. Call former federal prosecutors Bill McMurrey, Glenn Harrison, or Lynette Byrd or request a free and confidential assessment from Dr. Nick Oberheiden.
Oberheiden & McMurrey LLP is a team of former Department of Justice prosecutors and veteran federal defense attorneys that represent professionals and businesses against government investigations and federal charges. With decades of experience in leading government positions, our attorneys are able to effectively assess a situation and to provide reliable advice in times of crisis. Call us today for a free and confidential assessment.
- Choosing The Right Lawyer
- 10 Things You Should Know When Facing A Health care Fraud Investigation
- When Is Health care Fraud Criminal?
- Avoiding Criminal Charges in Tricare Compound Pharmacy Investigations
- Compound Pharmacy Investigations: Questions You Should Ask Your Attorney
- What Is Compound Pharmacy Fraud?
- Defending Compound Pharmacies in Tricare Fraud Investigations
- What Home Health Agencies Should Do to Avoid a Government Investigation
- Home Health Fraud – Common Characteristics
- The Federal Government Is Finding New, Aggressive Ways to Combat Home Health Fraud
- Mistakes to Avoid in Anti-Kickback Investigations
- What You Should Do When You Are Under Investigation for Anti-Kickback Violations?
- Anti-Kickback Exceptions
- Medical Research Studies and Anti-Kickback Investigations
- Defending Physicians against Kickback Charges in Connection with PGX Testing
Health Care Fraud Defense Attorneys – Former Fed Prosecutors // Oberheiden & McMurrey, LLP