Health Care Fraud

By Mark Schulte

Hypothesis

            In this paper, I am hypothesizing that the U.S. government needs to take a strong, firm stand on health care fraud.  The FBI is using its powers to crack down on fraud, but budget restrictions and improper funding is limiting what they can and can not do.  I want to prove that with proper funding, the FBI can bring these perpetrators to a court of law and punish them to the fullest extent.  I feel that if we use government programs to inform the public that they can be targeted, the dollar amount for these cases for fraud can be reduces.  An informed public and a properly funded FBI will go a long ways in the overall crackdown of health care fraud.

Executive Summary

            This paper looks at health care fraud and the impact that it is currently having on the delivery and reimbursement of services provided.  From this paper, one will learn about the targets of fraud and the diseases that receive the most attention.  Actual fraud cases will be looked at in order to give the reader a better picture of this problem.  The signs of fraud are given along with tips that one can use to stay away from health care fraud.  Also, the FBI’s Health Care Fraud Unit will be explained along with the benefits that it is providing to the American people.  Overall, this paper shows that health care fraud is a big problem, but it can be controlled with correct care and practices.

Introduction 

            “Whether they’re looking for a short cut to losing weight or a cure for a serious ailment, consumers may be spending billions of dollars a year on unproven, fraudulently marketed, often useless health-related products, devices and treatments. Why?  Because health trades on false hope.[1]  Doctors and surgeons are now marketing their services to potential patients in order to get as much work and in turn money as possible.  Yet, with all of this positive marketing for new surgical procedures, the lack of knowledge of potential patients is being taken advantage of on a routine basis.  Hospital administrators are now trying to find more ways to get their physicians to get more work in order to add to the hospital’s bottom line.  Physicians are feeling the pressure from management to get as much work done as possible and they are “burning themselves out.”

            The Federal Bureau of Investigation is spending large amounts of its budget to crack down on health care fraud.  Special units have been formed to help the FBI Crimes Section find these criminals and take them to courts of law to seek proper punishment.  Crimes are being committed by both providers and insurance companies on a daily basis.  Moreover, their patients and subscribers are being punished with improper coverage and over-priced procedures and prescriptions.

            In this paper, I hope to show the reader that they are a target of providers and insurance companies, and with a little knowledge, they can protect themselves from fraudulent activities.  I will be giving some examples of cases that involved medical practice that has occurred in the past.  Also, I will be providing the readers with some examples of ways that they could be target of fraud.  My goal for this paper is to inform the reader that health care fraud is a big problem and it needs to be addressed.

What is Health Care Fraud?

            Health care fraud is noted as the deliberate submittal of false claims to private health insurance plans and/or tax funded health insurance programs such as Medicare and Medicaid.  In the year 2000, nearly $1.3 trillion was spent on health care and related fields.  With all of that spending, how much of it was really legit and how many times were extra charges added on in an attempt to take advantage of a patient and their insurance company? Fraud is a serious crime that should concern all parties of the U.S. health care system and is a costly reality that the government can not overlook.[2]

Health Fraud Targets

            The Federal Trade Commission and the Food and Drug Administration have advised people that they could be prime targets of health care fraud if they have one or more of the following conditions:  cancer, AIDS, arthritis, multiple sclerosis, diabetes and Alzheimer’s disease.  People with these conditions need to be up to speed on the coverage of their insurance and if they can qualify for government programs. 

            Cancer is one disease that shocks a person mentally as soon as it is diagnosed.  Feelings of death can sometime impose improper judgment by those that have been diagnosed and can lead to poor planning for the attack on their cancer.  “Miracle” cures need to be questioned before one jumps to a conclusion that probably won’t cure them and could leave them with a huge hole in their wallet.  If one is willing to try such cures, they should enroll in clinical studies that are endorsed by the FDA. 

            An HIV or AIDS diagnosis can even give the mind more of a shock than a cancer diagnosis since as of today, their in no proven cure for this disease.  Electrical and magnetic devices along with herbal cures have been used to treat HIV patients, but sometimes these cures have lead to interferences with medicines that have already been prescribed.  In example, the herb known as the St. Johns Wort has been promoted as a quality treatment for HIV, but there is no clinical evidence to show that this herb is effective at all.  When in doubt, a safe and quality test should be done to insure a correct diagnosis is given.  From there, proper advice needs to be sought out from a qualified physician in order to get the correct treatment for this HIV.

            Arthritis is a condition that can be dealt with and one can still lead a respectable lifestyle.  Yet in order to lead this respectable lifestyle, proper care needs to be taken and this care rarely comes at discount prices.  It is estimated that each year nearly $2 billion is spent on unproven arthritis remedies such as:  mussel extract, desiccated liver pills, shark cartilage, CMO (cetylmyristoleate), honey and vinegar mixtures, magnets and copper bracelets.  With that, none of these so-called remedies have a quality backing or show that they can offer dependable long-term relief.  Treatments for arthritis need to be effective or one is just burning quality resources that could be used on proven treatments.[3]

FBI

            The Federal Bureau of Investigation is one of the leading organizations in the fight against health care fraud.  The Health Care Fraud Unit was established in 1992 to insure the success of investigations which have a national impact on the health care fraud crime problem.  Furthermore, their mission is to concentrate their investigative resources on multi-district investigations of large health care providers that are being sought out for fraud against both public and private payers of health benefits.  The FBI coordinates their efforts with other law enforcement agencies and regulatory agencies.  Some of the regulatory agencies that they work with include the Department of Health and Human Services Office of the Inspector General (HHS-OIG) and the Health Care Financing Administration, which is in charge of both the Medicare and Medicaid programs.  Despite the power of the Health Care Fraud Unit, no investigations are actually conducted by this unit.  Its primary function is to assist and provide guidance to field offices.[4]

            The creation of this unit was in response to extreme losses due to health care fraud.  In 1999, annual health care expenditures in the U.S. totaled nearly $1.1 trillion and it is estimated that as much as ten percent of that total is fraudulent.  An overwhelming number of the fifty six FBI field offices rate health care frauds as their number one white collar crime problem.  The FBI has been able to secure more resources for more agents due to the funding received as a result of the passage of the Health Insurance Portability and Accountability Act of 1996 (HIPAA).  From 1992 to 1999, the number of FBI agents has increased from 112 to nearly 500 and the number of investigations has increased from 592 to over 3000.[5]  With HIPAA enacted, federal laws now state that if a perpetrator’s fraud results in more injury to a patient, they could be entitled to a doubling of their prison term (up to 20 years).  Moreover, if the patient loses their life as a result of fraud, the perpetrators could be subject to life in prison.  In response to federal mandates, states also have increased their punishments for such fraudulent activities and they now are regulating providers and insurers themselves.[6]

            The FBI can not measure the success of the program by the number of yearly convictions, yet they look at the deterrent effect that their efforts have on those who may be considering fraud.  Medicare also contributed lower than expected spending last year to the effects of the taskforce.[7] The government has estimated that on average about 44 percent of the overall fraud targets Medicare and Medicaid.[8]

Health Care Fraud Cases

            In order to give the reader a better picture of what health care fraud is, I have decided to report on some of the cases that have come up due to health care fraud.  These cases deal with the many areas of health care including insurance, malpractice suits, emergency services and the pricing of health care.

            One particular case convicted nearly twenty individuals for their involvement in a massive and sophisticated scheme to defraud Medicare.  The convictions arose from a five-year investigation of Miami’s largest home health agency.  This investigation revealed that the agency was paid nearly $120 million from Medicare for reimbursement of services.  In this case, some individuals were deceased at the time the services were given.  The convicted were given sentences ranging from eighteen months to nearly twelve years of imprisonment.  One of the defendants had to pay nearly $1.1 million in restitution for fraudulently obtained assets.  One of the keys to these investigations is that the FBI purchased a bogus home health agency and through various dealings with the subjects was able to uncover a system rampant with fraud.[9]

            Another case involved Fresenius Medical Care North America, Inc., the world’s largest provider of kidney dialysis products and services.  Fresenius agreed to pay the U.S. government $486 million to resolve a sweeping investigation of health care fraud of their subsidiary, National Medical Care, Inc.  They are being charged with billing the government for kidney dialysis procedures.  A total criminal fine of $101 million and a civil settlement of $385 million were announced, adding up to the largest civil fraud recovery in history.  This case is a prime example of the submission of claims that were not necessary and the payment of kickbacks for referrals.[10]

            Beverly Enterprise of California pled guilty to mail fraud and making false statements to Medicare.  The settlement will require them to pay the U.S. government $170 million.  They will pay $25 million within 30 days and the remaining $145 million will be paid over an eight-year period.

            A Maine urologist, Joseph Olstein, M.D., was sentenced by U.S. District Judge Nancy Gertner to a one year of probation and a fine of $20,000.  Dr. Olstein was charged with trying to bill insurance companies for free samples of the drug Lupron, which had been received without charge from a pharmaceutical representative.  The defendant was sparred a harsher sentence due to his cooperation during the investigation and allowed it proceedings to be faster than normal.  He also had to pay back $50,000 in restitution fees.  Dr. Olstein was the fourth doctor to be convicted of this crime in connection with the investigation.[11]

            Dr. David Chase was indicted on eighty counts of health care fraud after performing unnecessary cataract surgery on 250 patients and charging their insurance programs more than $1 million.  Chase was found to be over exaggerating the severity of the patient’s cataracts and he informed them that surgery was mandatory.  Fraudulent vision tests were performed in order to further convince patients that surgery was needed.  These insurance programs included Medicare, Medicaid, Tri-Care and several private insurers like Blue Cross and Blue Shield.  This investigation began shortly after the state had suspended Chase’s license.  If Chase is convicted, he could face up to ten years in prison and could be fined up to $250,000 for each count.  Chase was supposed to appear before the state Medical Malpractice Board for 136 counts of professional misconduct, but these proceedings are being delayed for criminal proceedings.[12]

            Two brothers from the Los Angeles area, Mohammadali Abolahrar and Reza Abolahrar, have been indicted for submitting fraudulent claims totaling almost $400,000 to the government.  They are facing twenty-one charges of conspiring to defraud a health care benefit program and health care fraud.  The brothers received a substantial amount of business from the liver transplant unit at the UCLA Medical Center.  Over time they strategically reduced the amount of the prescriptions for each patient, yet they continued to bill Medi-Cal for the same amount as they previously charged them.[13]

            Health care organizations even chose to hit areas that patients have little defense to protect them, ambulance services.  Professional Ambulance Service of Norwich, Inc. had been submitting claims for kidney patients and their transfers for dialysis treatments from 1999 to 2001.  Medicare will only pay for such transfers if the patient is unable to get out of bed without assistance.  The prosecutors will be seeking up to five years probation and more than $1.5 million in civil penalties for violating the False Claims Act.  The company has admitted that it over-charged and will be willing to work with the government to properly train their employees for such medical practices.[14]

            Finally, I was able to find a case that involves a prison escapee and his attempt to impersonate a doctor.  A North Hollywood resident, Gerald C. Barnes, was named in an indictment that involved sixteen counts of mail fraud, wire fraud, dispensing a controlled substance and identity theft.  Barnes had originally escaped from prison during a transfer to another facility.  After escaping, he changed his named to match something of another doctor, and he began his practice.  This just an addition to a long criminal record that includes a 1981 conviction of involuntary manslaughter based on a patient’s death which resulted from the defendant’s misdiagnosis of manslaughter.[15]

Insurance Companies

            Not only does the patient take a huge hit with health care fraud from providers, but their insurance provider can also get in on fraudulent activities.  Each year more than four billion health insurance claims were filed and with that, the chance for fraud to take is always increasing.  An auditor of Medicare reported that of the $191.8 billion paid out for services, $12.1 billion should not have been paid due to erroneous billing or payment.  Overall, it is estimated that three percent of all health expenditures is paid in error.  Once a claim is sent to an insurance company, the lifetime maximum for each subscriber is updated to reflect a service that was done.  When false claims are filed, these maximums are met earlier than they should have.  After the maximum is met, coverage is not given to a subscriber and thus leaving them without coverage when they need it.[16]  For example, Dana and Doug Christensen purchased insurance from a group called National Association and in turn would be covered by MEGA Life & Health Insurance Co.  Payments for this plan were cheaper that normal, but everything tuned sour when Doug had his previous cancer problems return.  Their insurance company chose to pay only $1,000 for each chemotherapy treatment when it really cost $18,000 per treatment (something that was noted in fine print, but never pointed out to the Christensen’s).  Doug later died at the age of forty-eight and his wife was stuck with $500,000 in medical bills, which forced her to live in their boat in order to cut expenses.  A trial is being set to charge NASE and MEGA for unfair trade practices and it will take place in January 2005. 

            Montana recently shut down fifteen fake insurance that were offering plans for as little as $89.95 per month.  Moreover, Florida officials have shut down nearly 200 fake insurance companies that were set up to target Florida’s senior population.

            With the amount of uninsured people jumped from 1.4 million to 45 million and the amount of people buying their own coverage increased from 1.5 million to 17.5 million people.  These figures show that people need to be on their guard, since companies are preying on those that are self-insured.[17]

Indications of Medical Fraud

            In order to better inform the reader of health care fraud, I have chosen to include some signs that indicate fraudulent activities.  One thing that needs to be checked is the bill that is sent to an insurance company for reimbursement.  Evidence of up-coding, duplicate billing, excessive amounts of services, miscellaneous codes that don’t explain service and different color ink, handwriting or typewriter print on an original document are just a few examples of signs of health care fraud.  Another part of the medical bill that needs to be looked at is the date of service.  These dates of service that don’t match up with the date that the service was done need to be examined.  Also photocopies, supporting documents that appear to be cut off and anything that has been hand written should cause a level of concern.

            Overall, the rule of thumb says that when ever there is some doubt about a bill or claim, one should contact their service provider as soon as possible.  Questioning a provider could cause you to save yourself from overpaying a charge.  Smart consumers need to use good judgment when they are making decisions about their bills.[18]  Free medical screenings of vision, cholesterol, blood pressure or other basic information should be taken advantage of by citizens.  Yet, when free care is offered for office visits to dentist, chiropractors or other specialist, one should be cautious.  These free screenings are used by physicians to obtain medical and insurance information for use in the filing of fraudulent claims to insurance companies or government programs.[19]

            Officials in the United Kingdom are feeling the effects of fraudulent activities due to health tourism, which is when people come to a country to have their services done.  Providers look at these ‘health tourists’ as prime targets for their fraudulent activities.  These patients hide assets and use false information to receive free or discounted care for U.K. providers.[20]

Conclusion

            In closing, health care fraud is a problem that should not have the amount of significance that it currently has.  I feel that the government needs to continue supporting the FBI’s Health Care Fraud Unit.  This group is doing some remarkable work and many feel that they are starting to get a hold on the rising cost of health care.  Using the FBI’s “muscle,” I feel that this unit can continue to have a great impact and could eventually lead providers down a path of quality cost-effective health care.

            As a future hospital administrator, I know that I will be tempted to commit these activities on a daily basis.  My ability to shy away from fraudulent activities could lead into a successful career, and I plan on using my ethical Midwestern roots to get that successful career.  I prove that I am an ethical person show that my knowledge obtained through researching this paper will keep me away from fraud. 

            People need to be smart when it comes to taking care of their body.  They need to research the procedures that they are having, and learn to question any charges that seem to be incorrect.  Also, the purchasing of health and life insurance should be done with the utmost regard.  Correct coverage and procedures can save a person a lot of pain during trying times.

            Finally, what ever happened to the days when people had a procedure done and paid a fair price for it?  Do these providers really lack the morals and ethics that their predecessors based their careers on?  One should not have to worry about whether or not they are being taken advantage during a time of poor health.  Fraud is financially and morally wrong – case closed.

Works Cited

“About the Health Care Fraud Unit.”  Federal Bureau of Investigation  25 Oct. 2004.             <http://fbi.gov/hq/cid/fc/hcf/about/hcf_about.htm>

“Ambulance Company Pleads Guilty to Fraud Charge.”  The Associated Press State & Local Wire  19 Oct. 2004.  <http://web.lexis-   nexis.com/universe/document?_m...>

“Burlington Eye Doctor Charged with Health Care Fraud.”  The Associated Press & Local Wire 16 Sept.  2004.  <http://fbi.gov/hq/cid/fc/hcf/about/hcf_about.htm>

“FDA Offers Grants to States to Fight Fraudulent Drugs.”  Drug Industry Daily on the Web 30 June 2004. <http://web.lexis-nexis.com/universe/document?_m...>

Grow, Brian.  “It’s Enough to Make You Sick.”  Business Week 13 Sept. 2004.  pg 58

“Health Care Fraud Video Text.”  Federal Bureau of Investigation 25 Oct. 2004.  http://www.fbi.gov/hq/cid/fc/video_text/hcf_txt.htm

“Health Care Fraud:  A Serious and Costly Reality for All Americans.”  National Health Care Anti-Fraud Association.  25 Oct. 2004.     <www.nhcaa.org/pdf/all_about_hef.pdf>

“Maine Urologist Sentenced for Healthcare Fraud. Reports U.S. Attorney.”  PR Newswire  6 Oct. 2004.  <http://web.lexis.nexis.com/universe/document?m...>

“Man with Lengthy History of Impersonating Doctor Indicted for Posing as Physician After Escape From Prison.”  U.S. Department of Justice FBI  25 Feb. 2003.

<http://www.fbi.gov/fieldnews/february/la022503.htm>

“Medical Fraud:  Indications of Medical Fraud.”  American International Group 25 Oct. 2004.  <http://home.aigonline.com/content/0,1109,11030-1513-center--          ceo,00.html>

“Miracle Health Claims:  Add a Dose of Skepticism.”  Food and Drug Administration Sept. 2001. <http://www.ftc.gov/bcp/online/pubs/health/frdheal.htm>

Moss, Lyndsay.  “Healthcare Fraud is ‘Killing Patients.”  The Press Association Limited Press Association 18 Oct. 2004. 

<http://web.lexis-nexis.com/universe/document?_m...>

“Rancho Palos Verdes Pharmacists Indicted in Scheme to Overall for Drugs Prescribed After Liver Transplants.”  U.S. Department of Justice FBI 19 Feb. 2003.

<http://www.fbi.gov/fieldnews/february/21a021903.htm>