Health Care Fraud

Health care fraud is a crime that involves misrepresenting information, concealing information, or deceiving a person or entity in order to receive benefits, or to make a financial profit. Both individuals and healthcare providers commit health care fraud, in a number of different ways. The laws regarding health care fraud vary by jurisdiction, though both state and federal laws are in place to curtail and punish this crime. To explore this concept, consider the following health care fraud definition.

Definition of Health Care Fraud

Noun

1. The knowing and willful executing, or attempt to execute, a scheme or deceit to defraud a health care insurance or benefit program, or to obtain by fraudulent means any benefit or payment from the program.

Origin of Fraud

1300-1350        Middle English fraude

What is Health Care Fraud

Health care fraud is a type of fraud involving the use of the health care system by an individual, medical provider, or insurance company in a deceitful manner in order to profit from it. While health care fraud many not seem like a crime that can hurt others, it does have a negative impact. Health care fraud influences insurance rates every day, causing premiums individuals pay to rise to cover the insurance companies’ losses. Such fraud committed by a healthcare provider can cause the loss of professional license, and may affect the healthcare of their patients.

Health Care Fraud and Abuse

Health care fraud and abuse is commonly thought of as the act of intentionally misrepresenting identity, symptoms, or other information, for the purpose of receiving more money or greater benefits from the insurance company. It is estimated that insurance companies in the U.S. lose billions of dollars every year to this type of health care fraud.

Health care providers can commit fraud as well, however, by billing insurance companies for services not performed, or supplies not used, or even by billing for a more complex service than was actually performed. For example, a psychiatrist sees six patients in an afternoon, each for about five minutes, for “med checks.” His office bills each of these appointments as full 1-hour visits, to receive greater payment from the insurance companies.

Both state and federal laws are in place to prevent health care fraud and abuse, and to punish those who commit this crime. Because fraud concerning Medicare and Medicaid runs rampant, federal law applies in many health care fraud and abuse cases, in addition to the state’s law and local prosecution.

Types of Health Care Fraud

Because individuals, medical providers, and insurance companies commit fraud, there are many types of health care fraud. The primary goal of such fraud is to profit financially, or to obtain medical care without valid insurance. The types of health care fraud include:

Fraud Committed by Medical Providers

• Billing for services and procedures that were not actually provided to the patient
• Duplicate submission of a claim for the same service when it was only performed once
• Billing for a different, more costly, service than the one actually rendered, referred to as “upcoding”
• Falsifying a patient’s diagnosis to justify surgeries or other procedures that are not covered, or are not medically necessary
• Billing each step of a procedure as if it was a separate procedure, referred to as “unbundling”
• Providing a service that is not covered under a patient’s insurance policy, then billing for a service that is covered

Fraud Committed by Individuals

• Using insurance that belongs to someone else
• Adding a person to an insurance policy that is not eligible for insurance coverage, by providing false information
• Failing to remove someone no longer eligible from a policy
• Visiting different doctors to obtain multiple prescriptions
• Staging or faking an accident in order to receive care, medication, or reimbursement for expenses
• Exaggerating a claim
• Providing false information in order to receive medical coverage

Fraud Committed by Insurance Companies

• Collecting premiums for policies on which they do not intend to pay
• Evading state insurance regulations to sell health care insurance they are not licensed to sell
• Denying payment on services, procedures, or prescriptions that should be covered

Health Care Fraud vs. Mistakes

Sometimes it is not easy to distinguish whether health care fraud has been committed, or a mistake has been made. For an act to be considered fraud, it must have been committed intentionally, with the intent to defraud. Mistakes happen when an individual, healthcare provider, or insurance company accidentally omits information, creates an improper bill, or makes an error in payment.

For example, if a patient receives a bill for treatment she did not receive, it may be the result of a mistake in the billing system. If, on the other hand, a doctor knowingly bills a patient’s insurance for a procedure she did not receive, in order to obtain payment he did not earn, he has committed health care fraud.

Penalties for Health Care Fraud

All types of fraud are considered crimes, and while it may seem on the surface to be a “victimless crime,” health care fraud is no exception. The penalties for health care fraud can be severe, depending on the exact type of fraud committed, and the amount of money that was obtained under false pretenses. A person does not have to be successful in pulling off a fraud scheme to be found guilty and punished.

Criminal and Civil Penalties for Health Care Fraud

In most cases, health care fraud is a felony, and so the penalties may include imprisonment of a year or more, fines, and restitution. In addition to the criminal charges for committing health care fraud, the individual or entity may be subject to a civil lawsuit. This means that the victim of the fraud can sue the perpetrator in civil court for repayment of the amount they are out. In fact, in some jurisdictions, a victim of health care fraud can sue for double or triple the amount the perpetrator obtained from the fraudulent scheme. In addition, the perpetrator may be ordered to pay punitive damages as further punishment.

Loss of Benefits

When an individual or healthcare provider commit health care fraud, they run the risk of losing their benefits, or their right to participate in the plan, altogether. For a healthcare provider, this would mean they would no longer be able to accept that particular insurance, because they would not be allowed to bill the insurance company. For an individual, it would mean losing their health insurance, and potentially becoming ineligible to enroll with any other company.

For example:

Joe allows his cousin, Frank, to use his insurance card to be seen at the emergency room for a broken leg. This is fraud, and if Joe is caught, his insurance company will not only seek to be reimbursed for the amount they paid out for Frank’s care, they will most likely terminate Joe’s policy. Joe will also face criminal prosecution, as will Frank, as they both participated in the fraud scheme.

Health Care Fraud Investigators

Insurance companies and law enforcement agencies often employ health care fraud investigators to look into reports of suspected fraud. A fraud investigator reviews the evidence, and meets with the insurance company, medical providers, and patients, to collect information. Health care fraud investigators sometimes use asset searches, surveillance, and other methods to conduct a thorough investigation into suspected fraud. If the investigator determines that fraud has been committed, he provides the evidence to the appropriate law enforcement agency, or the local prosecutor, to bring criminal charges against the perpetrator.

Health Care Fraud Statistics

Health care fraud is an ongoing national problem that affects nearly everyone, whether directly or indirectly. Most people are aware that fraud takes place, but they are often unaware of how much it costs the United States and other countries around the world on an annual basis. As of 2015, the National Health Care Anti-Fraud Association estimates that the U.S. loses $68 billion each year due to health care fraud. From 1980 to 2015, the Blue Cross Blue Shield’s fraud unit estimates that:

• Over 47,000 fraud cases are opened annual
• 46,000 of those cases are closed each year
• Only 4,241 of those cases are referred to law enforcement agencies
• 3,318 of those referrals end in arrests and 2,719 in convictions

Reporting Health Care Fraud

Reporting fraud is vital to ensuring the person responsible is caught and convicted. It is also important in the drive to stop this crime from occurring so rampantly. Fortunately, there are several ways to report fraud, starting with a phone call to local law enforcement. People can also contact the medical board in their state, or the United States Department of Defense, Office of Inspector General at 1-800-424-9098, or by visiting their website as http://www.dodig.mil/HOTLINE/index.html.

Health Care Fraud Cases

Healthcare Provider Fraud

In 2014, Susanna Artsruni, owner of a durable medical equipment (“DME”) company, was convicted of health care fraud and money laundering. Artsruni’s fraud scheme had her submitting, over the course of several years, nearly $25 million in bills to Medicare for supplies and services that were not medically necessary, and in many cases not even provided. Artsruni was aided by three physician’s assistants working at medical clinics in the Los Angeles area, as they signed orders for diagnostic tests and durable medical equipment, which were later billed to Medicare.

Because Artsruni tried to hide her trail by writing more than $35,000 in checks to three different corporations with no link to the medical industry, she was also convicted of money laundering. Artsruni was sentenced to spend 76 months in a California prison, and ordered to pay nearly $10 million in restitution.

Medicaid Fraud

For the four years between 2008 and 2012, Victoria Finney Brewton and Rodnisha Sade Cannon recruited families to sign their children up for their childcare programs for no payment, explaining that the services were free for Medicaid recipients. The women used the children’s Medicaid numbers to bill Medicaid for mental and behavioral health services that were not provided. In fact, they were not even Medicaid approved providers, but submitted the claims through other providers. In four years, Brewton and Cannon submitted more than $4 million in false Medicaid claims.

In April 2014, after pleading guilty of health care fraud, conspiracy, and aggravated identity theft, Brewton was sentenced to spend 111 months, over 9 years, in prison, and ordered to pay over $7 million in restitution to Medicaid, and over $570,000 to the IRS. Cannon, who also plead guilty, was sentenced to spend 102 months, over 8 years, in prison, and ordered to pay more than $2.5 million in restitution.

Related Legal Terms and Issues

• Criminal Charge – A formal accusation by a prosecuting authority that an individual has committed a crime.
• Civil Lawsuit – A lawsuit brought about in court when one person claims to have suffered a loss due to the actions of another person.
• Damages – A monetary award in compensation for a financial loss, loss of or damage to personal or real property, or an injury.
• Felony – A crime, often involving violence, regarded as more serious than a misdemeanor. Felony crimes are usually punishable by imprisonment more than one year.
• Fine – An amount of money ordered by the court to be paid as a penalty. A fine may include court costs and other fees.
• Fraud – A false representation of fact, whether by words, conduct, or concealment, intended to deceive another.
• Fraudulent Intent – A false statement or deceptive act made with the intent to deceive the victim.
• Intent – A resolve to perform an act for a specific purpose; a resolution to use a particular means to a specific end.
• Jurisdiction – The legal authority to hear legal cases and make judgments; the geographical region of authority to enforce justice.
• Perpetrator – A person who commits an illegal or criminal act.
• Punitive Damages – Money awarded to the injured party above and beyond their actual damages. Punitive damages may be awarded in cases where the defendant’s actions in regard to the case are malicious, or so reckless as to give a reasonable person pause. Punitive damages, also referred to as “exemplary damages,” are ordered for the purpose of punishing the wrongdoer for outrageous misconduct in a civil matter.
• Restitution – The restoration of rights or property previously taken away or surrendered; reparation made by giving compensation for loss or injury caused by wrongdoing.