Medicare and Medicaid Fraud
Medicare fraud and Medicaid fraud have cost the federal government billions of dollars. Qui tam (whistleblower) lawsuits filed under the False Claims Act have been responsible for some of the government's biggest health care fraud recoveries.
There are many different ways companies and individuals can bilk Medicare and Medicaid. The examples of health care fraud that are discussed give an idea of the types of fraud that have been or could be the basis of qui tam lawsuits.
* False claims involving pharmaceutical companies
* Kickbacks and off-label marketing of medical implants and medical devices
* Kickbacks and improper payments to group purchasing organizations (GPOs)
* Services not rendered/add-on services
* Upcoding and Unbundling/Fragmentation
* False Certifications and Information
* Lack of Medical Necessity
* Fraudulent Cost Reports
* Grant or Program Fraud
* News articles about Phillips & Cohen cases involving Medicare and Medicaid fraud
Services not rendered/add-on services
Probably the clearest example of fraud by health care providers involves billing for services that were never delivered to patients. The basic scheme can involve as many variations as there are treatments.
For example, some physicians bill Medicare or Medicaid for diagnostic procedures they never performed, physical therapists bill for sessions that never took place, and nursing homes might bill for supplies that were never actually purchased or used. There is often some falsification of records to support improper billings.
Billing for unnecessary procedures or services that have been added to a bill for legitimate charges is another type of false claim. The government also has held clinical laboratories liable when they induced physicians to order unnecessary add-on tests by including the extra test in a standard blood chemistry panel at minimal or no extra charge to the physician. The lab then bills Medicare for the additional test without the doctor's knowledge. When the physician doesn't have the option of ordering the standard panel without the extra test, the lab may be liable for claims submitted for the extra test.
National Health Laboratories Inc. paid the federal government and state Medicaid programs $111 million to settle a whistleblower case brought by a Phillips & Cohen client. The lawsuit charged the company billed Medicare for blood tests added to the standard panel of blood chemistry tests even though doctors had not ordered the extra tests and they were medically unnecessary.
Columbia/HCA (now known as HCA) paid $92 million to set a whistleblower lawsuit brought by two emergency room doctors represented by Phillips & Cohen. Their lawsuit stated that each time a physician ordered a complete blood count (CBC) for a patient in the emergency room or outpatient services, Columbia hospitals also billed Medicare for additional blood chemistry tests, known as "CBC indices," that doctors hadn't ordered. In addition, the lawsuit said, when a doctor ordered a "chemistry profile" for a patient in the emergency room or outpatient services, the hospitals also charged for various other blood tests that had not been ordered.
An Iowa anesthesiologist agreed to a $500,000 settlement for routinely billing Medicare an extra hour and a half for every open heart surgery in which he participated. In addition, his nurse-anesthetist brother similarly over billed, and the anesthesiologist had frequently failed to supervise him. The anesthesiologist was excluded from participation in the Medicare and Medicaid programs for two years.
A Pennsylvania hospital billed Medicare as if it had transported patients and provided advanced life support services, when in fact it had provided technicians for advanced life support but the actual transport was performed by another company. The hospital was not entitled to reimbursement for ambulance services. It agreed to pay $374,430 in civil penalties and restitution. As part of the settlement agreement, the hospital agreed to set up a training program for employees to insure that Medicare is billed properly in the future.
A California orthopedic surgeon billed for services performed while he was out of the country and billed for X-ray and physical therapy services that were performed by unlicensed, untrained personnel. He agreed to pay a total of $581,500 to settle charges of submitting false claims for Medicare reimbursement and was convicted of theft from the Medi-Cal program for filing similar false claims. He was excluded from the Medicare and state health care programs for 25 years.
A state-owned hospital in Iowa agreed to repay Medicare $521,170 for over billing for services. A government investigation showed that the hospital was billing for ventilation management for all intensive care patients, regardless of whether they received this service. The hospital claimed to have understood from the carrier's medical director that it could bill for Medicare and private insurers in the same fashion.
A California man set up durable medical equipment companies and an elaborate system of sales staff to obtain Medi-Cal eligibility numbers from beneficiaries and institutions. The numbers were used to bill Medi-Cal for incontinence supplies that for the most part were not provided. He pled guilty to Medi-Cal fraud and paying kickbacks. He agreed to pay nearly $3 million to settle civil claims for Medicaid fraud and was excluded from the Medicare and Medi-Cal programs for 30 years.
Upcoding and Unbundling/Fragmentation
Billing Medicare and Medicaid for medical services is done using a complex system of numerical codes that designate various diagnoses and procedures. Reimbursements are based on those codes. The coded, computerized bills submitted by providers are processed by large insurance companies (known as "intermediaries" or "carriers.") that contract with the government to pay claims using government funds.
Because different codes or code combinations may produce dramatically different reimbursements from government programs, there is a financial incentive to "upcode" or bill for a more serious (and more expensive) diagnosis or procedure.
Another common example of improper coding is called "unbundling," also known as "fragmentation." Medicare and Medicaid often have special reimbursement rates for a group of procedures commonly done together, such as typical blood test panels by clinical laboratories. Some health care providers seeking to increase profits will "unbundle" the tests and bill separately for each component of the group, which totals more than the special reimbursement rates.
Genesee Valley Cardiothoracic Group paid $2 million to the federal government to settle a qui tam lawsuit brought on behalf of a whistleblower by Phillips & Cohen that alleged the group submitted false claims to Medicare for the services of "assistant attending surgeons" during surgery. Since qualified cardiothoracic residents were present at those times, they were not allowed to bill for assistant attending surgeons under Medicare regulations.
A Minnesota transportation company billed Medicare, Medicaid and a private health insurer for basic life support transportation when it actually performed special wheelchair transportation. The company and its two owners were convicted of theft and ordered to make restitution of $768,000 to Medicare, Medicaid and the private health insurer.
Two corporations signed a settlement agreement in Illinois for $3.5 million after submitting billings for supervised kidney dialysis of critically ill patients when only routine backup maintenance was provided for hospitalized beneficiaries. They agreed to pay $1.75 million immediately and another $500,000 within five years, and to provide at no cost $1.25 million in medical care to Medicare patients over a five-year period.
A Maryland ophthalmologist billed Medicare for laser surgery when all he performed was post-operative suture removal, a procedure typically included in the global fee for eye surgery. He and his surgery center agreed to pay $750,000 in settlement of false Medicare billings.
A New York laboratory submitted 300 claims for arterial blood gas tests performed on hospital patients as being done by doctors working for the lab. The tests were really performed by hospital technicians, as were the analyses for which Medicare was billed, and were already included in reimbursements to the hospital. The lab agreed to pay $1 million to settle Medicare fraud charges.
A Medicare provider of ophthalmology services in Florida signed a $2.85 million civil monetary penalty (CMP) settlement related to fraudulent Medicare billings by its billing company. The billing service fragmented and submitted as separate claims surgical procedures which Medicare had already reimbursed the provider for as part of global payments. The clinic's settlement is the third by a provider that used a particular billing service. The service was convicted in 1989 for Medicare fraud. CMP settlements of $3.1 million and $630,000 have been made with providers in Massachusetts and Texas, respectively.
In Massachusetts, 87 hospitals agreed to pay more than $3.5 million to settle false claims allegations that they submitted duplicate claims for outpatient services for Medicare patients performed within 3 days of admission to the hospital. These services had already been reimbursed as part of the hospital stays. The hospitals also agreed to implement procedures to ensure future compliance with Medicare billing rules.
One of the most complicated and troubling aspects of the health care system involves hidden financial arrangements between various health care providers. There are a variety of improper arrangements where providers will provide some material benefit in return for other providers prescribing or using their products or services.
In most instances, such arrangements are illegal. Doctors are supposed to decide on the most appropriate treatment for their patients without consideration of their own financia interests. Kickbacks often result in medically unnecessary treatment.
In the largest Medicare fraud settlement, TAP Pharmaceuticals paid the government $875 million to settle criminal charges and two qui tam lawsuits, including one brought by whistleblowers represented by Phillips & Cohen,. The government and whistleblowers alleged that TAP had paid illegal kickbacks to doctors to prescribe Lupron, its prostate-cancer drug.
A pharmaceutical company created a "grant-in-aid" research program that offered physicians kickbacks in the form of grants in exchange for performing small-scale studies of its antibiotic. From 1986 to 1991, the physicians were paid fees of $500 to $2,500 each to treat patients with the company's antibiotic. Investigation showed that in most cases the research performed by the physicians was not of scientific value. In addition, some physicians never completed the research but received full payment from the pharmaceutical company. The company agreed to pay $450,000 to settle civil and administrative claims that it had defrauded the Medicare program.
A national corporation agreed to pay $161 million to settle criminal and civil liabilities for paying kickbacks to physicians for referrals for its home infusion business and growth drug, for making improper billings and for failing to keep accurate records at some of its pharmacies. The company entered criminal pleas in Ohio and Minnesota and agreed to cooperate in an investigation of individuals involved in the schemes, including physicians.
The parent corporation of a Virginia health care provider of inpatient and outpatient services agreed to pay $2 million in settlement of liability for violating the Medicare anti-kickback statute. The company made income guarantees and office-rent subsidies to physicians, granted low-interest or no-interest loans, forgave repayment of loans, provided staff support for a physician's private practice and entered "directorship" contracts in which physicians performed little or no services, to induce them to make referrals to the company.
A medical group involving five hospitals located in Kansas and Missouri, which provided on-site care to nursing home patients through its physicians, paid a "fee" or inducement to the medical center for the referral of patients to its "geriatric center." The center agreed to pay more than $1.2 million to settle its false claims liability resulting from the kickback scheme.
False Certifications and Information
Health care providers who submit Medicare and Medicaid claims containing false statements also may be liable under the False Claims Act.
In Florida, five persons were involved in a scheme in which Medicare was fraudulently billed about $5.2 million for oxygen concentrators, nebulizers, medications and tests. Three men were ordered to pay $2.3 million in restitution, and were sentenced to 41, 46 and 51 months in jail, for paying physicians for prescriptions that they sold to two medical supply companies and a laboratory to use in billing Medicare. One of the company owners and one of the physicians who also had billed for house calls he did not make were convicted and given prison terms as well.
Employees of a New York pharmaceutical corporation were forging doctors' signatures on certificates of medical necessity and beneficiaries' signatures on assignment forms for surgical dressings. An investigation of the three subsidiaries, all of which were operated by the same corporate officer, showed the same activities for incontinence, ostomy and urostomy supplies. The companies also violated point-of-sale regulations and billed for supplies never sent. The company and its subsidiaries agreed to pay $3.4 million to settle government allegations that they filed false Medicare claims.
The owner/president of a Texas home health agency forged physicians' signatures on certification forms, and the controller directed employees to alter nurses' notes, add services to Medicare claims and use the forged forms. He also made false ledger entries and carried "ghost" employees on payroll records. The agency, its owner/president and its controller were sentenced to pay $1.3 million in fines, restitutions and special assessments for submitting false claims to Medicare.
The two principal executive officers of a home health services agency engaged in massive fraud by falsifying and altering training certificates and other credentials of personal care aides and home health care aides employed by the company. The two individuals and their corporation were excluded for 15 years from participation in Medicare and state health care. The corporation pled guilty to falsifying personnel files and grand larceny. It agreed to pay $4.75 million to resolve liabilities under the civil monetary penalties law, the False Claims Act and New York state statutes.
A Maryland durable medical equipment company submitted claims for more than a year for lymphedema pumps under a code for which the pumps did not meet specifications. It agreed to pay $1.5 million to resolve liabilities under the civil monetary penalties law.
Lack of Medical Necessity
Some health care providers bill Medicare and Medicaid for services or procedures that are not medically necessary. They would be liable under the False Claims Act for those false billing practices.
A Florida chiropractor who owned several clinics required doctors whom he hired to order X rays, diagnostic tests and other therapies regardless of the needs of the patients. He also billed for tests never given, such as pelvic X rays, and submitted duplicate claims for the same services. He was sentenced to five years in prison and ordered to pay $1.6 million for defrauding Medicare, the Railroad Retirement Board and private insurers.
A New York radiologist systematically billed Medicaid for thousands of medically unnecessary, duplicative, forged and unreadable sonogram tests. His Medicaid billings went from $8,200 to more than $2.2 million in two years and involved huge kickbacks to more than 50 so-called "salesmen." He was excluded from Medicare and state health care programs for 10 years and sentenced to one to three years in prison.
A chiropractor and his wife, operators of several vascular diagnostic centers in Florida, submitted billings for vascular testing as being ordered by a medical doctor when they were actually ordered by the chiropractor himself. They also practiced deceptive advertising, backdated diagnostic prescriptions, used unauthorized signatures of various medical doctors, altered patient medical records and obstructed a criminal investigation. They were sentenced for conspiracy in defrauding Medicare and private insurance carriers from 1985 through 1990. The chiropractor was sentenced to 51 months imprisonment, his wife to 37 months. In addition, the pair were ordered to make restitution of $637,000.
Fraudulent Cost Reports
Medicare reimburses health care institutions for certain costs in addition to paying for individual procedures and treatment. Virtually every hospital and many other providers submit cost reports to Medicare, which are used to calculate how much the government will reimburse the provider for expenses related to patient care. This includes the costs of capital improvements like new medical equipment and bigger wards. Over the years, cost reports can represent billions of dollars in payments for some providers.
Providers who knowingly inflate the costs they incurred, mischaracterize the nature of those costs or give the wrong percentage of their services dedicated to Medicare patients are liable under the False Claims Act.
HCA Inc., the nation's largest for-profit healthcare provider, paid $631 million to the government to settle two qui tam lawsuits brought by whistleblowers represented by Phillips & Cohen and an unrelated kickback case. The whistleblowers alleged that the company had inflated expenses for reimbursement claimed in annual Medicare "cost reports."
Quorum Health Group Inc., at that time the nation's largest hospital management company, paid $85.7 million to the federal government to settle a whistleblower lawsuit brought by a Phillips & Cohen client. He alleged Quorum had filed fraudulent Medicare "cost reports" for hospitals it managed and owned.
Sharp Memorial Hospital, a San Diego hospital, paid the federal government $6.2 million to settle a qui tam lawsuit brought by a whistleblower represented by Phillips & Cohen attorneys. The qui tam lawsuit alleged Sharp defrauded Medicare by filing fraudulent claims for reimbursement for costs associated with its heart and kidney transplant centers. These included the costs for employees whose work was unrelated to organ acquisition and so was not reimbursable by Medicare and costs that were essentially illegal financial inducements for physicians to refer patients to the organ transplant centers.
Two sisters, both supervisory employees of a residential care facility, stole money by creating phantom employees and phantom contractors whose salaries and expenses were included in the cost reports submitted to the Maine Medicaid program. They were excluded from Medicaid for 25 years.
In Georgia, the owner/operator of physical therapy clinics and a nursing home defrauded Medicare by billing for the owner's personal expenses such as jewelry, cars, vacations and costs associated with show dogs. Many of the billings were disguised as salaries for employees. The company had to pay more than $1 million to settle criminal and civil fraud charges. The owner, his wife, the nursing home and clinics he operated in eight states had to pay more than $900,000 to settle civil charges and $100,000 in criminal fines. An additional $182,000 in legitimate Medicare reimbursement was also withheld. The owner will not be allowed to participate in the Medicare and Medicaid programs for two years and thereafter may submit only audited cost reports.
A former nursing home owner and operator filed over 7,000 fraudulent Medicare claims. A government audit and investigation revealed that he had billed Medicare for nonexistent medical supplies for his nursing home and filed cost reports with false expenses. He attempted to conceal the scheme by submitting false cost reports to Medicare supported by falsified medical records and fabricated invoices. He was sentenced to 11 years and three months imprisonment and ordered to pay fines, restitution and special assessments totaling more than $3.5 million. Two of his employees and two former Medicare carrier employees who testified against him pled guilty and also received sentences.
Grant or Program Fraud
The federal and state governments fund a variety of research and other specialized projects in the health care area. Typically, government funds are targeted for a specific and narrow purpose, a specialized research project or medical care for a specific group. Sometimes the recipients of grant or program funds mischaracterize their qualifications, the basis of their research or the quality and extent of services they provide.