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It’s Here: Rampant Health Care Fraud and Abuse

How does your practice fall into targeted efforts?

By Lynn Berry, PT, CPC
This past January, the Department of Health and Human Services (HHS) and the Department of Justice (DOJ) published the “Health Care Fraud and Abuse Control Program (HCFAC) Annual Report for Fiscal Year 2010.” This meticulous report of major fraud and abuse attempts, and their resulting penalties, is more than a political gesture to justify the funds associated with the effort, which is mandated by the Health Insurance Portability and Accountability Act of 1996 (HIPAA): It is a look into the future of government constraints on health care fraud and abuse, what they will be targeting, and why.
Resource: HCFAC annual report.

Collaborative Investigations Bolster Efforts

The sheer number of agencies involved in fraud and abuse investigative efforts is astonishing:

  • The FBI, Office of Inspector General (OIG), the Centers for Medicare & Medicaid Services (CMS), and others look at individual physicians, durable medical equipment (DME) companies, hospitals, and extended care facilities for proper practice.
  • The Food and Drug Administration (FDA) looks at drug companies for kickback schemes, improper marketing or drug labeling, and clinical trial problems.
  • Beneficiaries are scrutinized through the Administration on Aging, Assistant Secretary for Public Affairs, and Civil Rights Divisions for fraud perpetration, enlistment in fraud schemes, and fraud and abuse detection.
  • Divisions within the DOJ investigate organized crime and racketeering schemes that defraud the health care system, either directly or through corruption and abuse of private sector and employment-based group health plans.

Several agencies collaborate their efforts through the Health Care Fraud Prevention and Enforcement Action Team (HEAT) and the Medicare Fraud Strike Force, while also working on new technologies and targeted data analysis tools (including modeling tools used in the financial industry) to predict fraud and abuse prior to payment. A partial list of tactics used includes:

  • Automated fraud edits
  • Establishment of a national data bank of adverse actions
  • Unannounced provider and supplier visits
  • “Secret shopper” investigations of insurance carriers
  • Payment suspension
  • Stricter enrollment requirements
  • More extensive quality and financial requirements
  • Beneficiary interviews
  • Increased revocation of privileges
  • Enhanced integration and communication between all agencies of their findings
  • More oversight of some of their own agencies to ensure correct error rates

As a result, there was an increase in the use of civil monetary penalties in 2010, as well as an increase in criminal fines, recoveries, and compensatory damages.

ROI Is Worth the Expense

With an investment of $577,425,182 for federal agencies involved, $2,862,553,309 was returned to the Medicare Trust Fund. Additional payments were returned to other agencies, for a total of $4,021,727,786. The return on investment (ROI) for the program as a whole since 1997 is $4.90 returned for every $1 spent. The three-year ROI (2008-2010) is $6.80 for every $1 spent. Not bad, as far as federal expenditures go.
Note that many investigations are ongoing, or have not yet been brought to trial. This means we’ll likely see an increase in health care-related civil and criminal cases brought before courts in 2011.

Health Care Fraud and Abuse Covers a Full Spectrum

The following summarizes the numerous problems found in various areas of the health care spectrum:

  • Payment of kickbacks (in cash or drugs) and/or threats made to beneficiaries for use of their Medicare information, and to providers for use of their Medicare numbers
  • Identity theft of beneficiary and provider/supplier numbers
  • Injection and infusion claims (especially of expensive HIV treatments) not medically necessary or not provided
  • Physical and occupational therapy services billed but not provided, or not medically necessary

DME issues included:

  • DME items not medically necessary, not prescribed, or not provided (especially power wheelchairs, motorized scooters, and other high-end equipment)
  • Enteral nutrition supplies not medically necessary, not provided, or substitution of a lower-end product
  • Diabetic equipment and supplies not medically necessary

In the pharmaceutical industry, problems included:

  • Drug companies misbranding or falsely marketing drugs, paying kickbacks for drugs for off-label indications, or using post-market studies to increase sales
  • Underpayment of rebates to Medicaid for drugs by misclassification
  • Manipulation of clinical trial data by drug companies and device manufacturers
  • Pharmacists submitting claims for prescription drugs not dispensed, charging illegal dispensing fees, replacing medications with lower cost drugs but charging for the higher cost versions, and/or substituting drugs they made themselves that were harmful to patients, and knowingly dispensing dangerous drugs with illegitimate prescriptions
  • Medical device manufacturers advising providers to up-code procedures

In the hospital industry, problems included:

  • Provision of kickbacks to physicians in the form of rent, increased referrals, increased face time on units to increase their income, and provision of medical directorship payments
  • Misrepresentations of outlier payments to increase reimbursements
  • Improper billing for inpatient admissions that should have been coded as observation or outpatient visits
  • Admissions (including recruiting of patients) that were not medically necessary
  • Upcoding diagnosis-related group (DRGs), billing for unsupervised services, and billing for services not rendered or not necessary
  • Noncompliance with teaching physician regulations
  • Providers submitting fraudulent records to obtain payment, upcoding visits to a higher level than what was rendered, or ignoring co-pays to induce patients into their clinic
  • Mental health and nursing home facilities providing substandard care with excluded providers, or falsifying patient records to cover up errors

In the home health industry:

  • Overstating services provided
  • Improperly trained personnel
  • Noncertified home health care or care that was not provided
  • Home visits for patients who were not homebound

Government Takes Further Steps in 2011

A final rule promulgated by the Affordable Care Act in CMS-6028-FC, entitled “Additional Screening Requirements, Application Fees, Temporary Enrollment Moratoria, Payment Suspensions and Compliance Plans for Providers and Suppliers” will serve to “cut them off at the pass,” so to speak. Instead of catching the perpetrators after the fact, there will be new rules and technology to prevent the fraud in the first place. For Medicare, Medicaid, and/or the Children’s Health Insurance Program (CHIP), based on fraud and risk levels, these include:

  • Establishing new screening procedures for providers of medical or other services and suppliers in the Medicare program, and providers in the other programs
  • Establishing an application fee for enrollment to be imposed on “institutional providers” (look closely at the definition) and suppliers
  • Establishing temporary moratoria that may be imposed to prevent or combat fraud or abuse under these programs for certain geographical areas and/or for particular provider types identified as having heightened fraud risk
  • Establishing state guidance regarding termination of providers from Medicaid and CHIP if first terminated by Medicare or another state plan or CHIP, as well as termination of providers and suppliers from Medicare if first terminated by a Medicaid state agency
  • Establishing requirements for suspensions of payments pending credible allegations of fraud in the Medicare and Medicaid programs
  • Requesting comments on requirements regarding establishing compliance programs including model compliance programs

How Will This Affect Your Practice?

Depending on your practice type, many of the new rules might apply and could affect your practice adversely in terms of time, money, litigation, and the development of your compliance plan.
In addition to the rules above, consider how these findings fit in with the overall OIG Work Plan and the issues identified and investigated by the various recovery audit contractors (RACs), Medicare administrative contractors (MACs), and Comprehensive Error Rate Testing (CERT), including:

  • Hospital inpatient admissions and readmissions
  • Quality of care in nursing facilities
  • Overuse of physical and occupational therapy
  • States requiring criminal background checks for nursing home employees
  • Over coding of services
  • CERT oversight
  • Payments for services ordered or referred by excluded providers
  • Frequency of replacement supplies and medical payments for power wheelchairs
  • Medicare pricing for parental nutrition and home blood glucose testing supplies and mail-order strips
  • Payments for prescription drugs

All of the above remain part of the OIG Work Plan for 2011 because they were identified in 2010 as excessive areas for fraud and abuse.
As for RACs, they also read the current reports and base their focus and data mining on these areas of high cost and high risk for fraud and abuse. Remember, RACs can perform retroactive audits back three years, and they will expand their scope into Medicare Parts C and D, as well.
Issues currently identified by RACs for either automated or complex reviews include:

  • Parenteral nutritional supplies more than once a day
  • Wheelchair bundling and wheelchair seating with mutually exclusive codes
  • Infusion pump issues
  • Durable medical equipment prosthetics, orthotics, and supplies (DMEPOS) issued while patient is in a covered acute hospital stay
  • Medical supplies and home health consolidated billing
  • Prosthetic and orthotic issues
  • Units billed for untimed codes
  • Inpatient admissions without physician inpatient admit orders
  • Acute hospital readmission issues
  • Incorrect patient status – acute
  • Minor surgery and other treatment billed as an inpatient stay
  • Outpatient claims billed during inpatient admission
  • Pharmacy supply and dispensing fees
  • Drug dosage vs. units billed

These issues, along with an increasing number of medical necessity issues, are found across all four RAC regions.
Increased scrutiny of CERT errors will mean closer inspection of requested medical records. Increased analysis of MAC errors means more real-time edits and pre-payment reviews for all provider types.

Take Steps to Combat Fraud and Abuse

If any these issues pertain to your practice, make sure you perform internal and external audits to ensure you are in compliance. Benchmarking your statistics against others in your industry will help to protect you against being caught up in adverse data mining findings. Make sure your practice has a viable, written, and effective compliance plan that is followed closely and revised as necessary.
You also must become even more vigilant that coding and billing is correct, that documentation is complete and accurate, that all orders are entered into the record and legibly signed, and that you answer all additional documentation requests promptly and carefully. Note whether an appeal of the agency’s findings is appropriate.
You cannot stop fraud (although you can report it, if known) so leave this up to the government. But you can stop unintentional abuse by knowing the law and abiding by it. As you increase your efforts to avoid errors, adhere to the Medicare mantra: “The goal of Medicare is to ‘pay claims right the first time.’”
Note: The application fee for “institutional suppliers” who are newly-enrolling, re-validating, or adding a new practice location will be imposed for all applications received on and after March 25, 2011. The cost for 2011 is $505, but will vary from year to year. These fees should be promptly paid upon submitting the application through www.Pay.gov. Once on the site, you must type CMS in the search box under “Find Public Forms,” click on the “GO” button, and click on “CMS Medicare Application Fee.” Fill out the form and submit it (the fields are pre-populated with the correct amount). The government will only accept electronic checks, credit card, or debit from checking or savings accounts. The receipt should then be mailed to the Medicare contractor along with the completed application or the Certification Statement for the enrollment application, if enrolling through PECOS.

Lynn Berry, PT, CPC, had over 35 years of clinical and management experience before beginning a new career as a coder and auditor and later becoming a provider representative for a Medicare carrier. She now has her own consulting firm, LSB HealthCare Consultants, LLC, furnishing consulting and education to diverse provider types. She has held a variety of offices for her local AAPC chapter and continues as one of the directors of the St. Louis West Chapter.
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