By: David L. Haron and Mercedes Varasteh Dordeski

Originally published in the Michigan Chapter of IASIU "Investigator," August 2006

           Some years ago, one of my clients found herself in the middle of a complex scheme with the potential to cheat the United States government out of millions of dollars. The client, who worked at a medical laboratory, discovered that the lab was using improper marketing practices to force physicians into ordering extra blood tests for patients who did not need them. These expensive and unneeded tests were grouped with regular, necessary blood tests on an order sheet and the claims were submitted to Medicare, who reimbursed the lab for the costs of both the regular and unnecessary procedures. This substantially increased the lab’s revenues.

            My client was in the uncomfortable position of a whistleblower. She was concerned that bringing attention to the matter might draw criticism, or even retaliation, from her associates at work. Yet, her conscience would not permit her to ignore the illegal activities. After resigning because of her distress, she filed a civil suit on behalf of the federal government that described the employer’s fraudulent billings.

            In 1996, she and the government settled the case for $119 million in civil and criminal fines. She received $9 million of the recovery.

            The above case is an example of the type of fraudulent activity that costs the government–and in turn, taxpayers–billions of dollars every year, and the steps people can take to stop health care fraud. While fraud may be hard to define, most of us know it when we see it. The federal Department of Justice (DOJ) has made combating health care fraud one of its top white collar crime priorities.¹ The department describes fraud as “any scheme designed to obtain money or something of value under false pretenses.”² Specifically, the DOJ is interested in stopping fraudulent billing schemes in health care services, any activities that mislead patients on quality of care issues, and stopping needless prescriptions for medical care equipment in exchange for kickbacks.³

            As a health care attorney who works to prevent fraud and abuse in government programs, I have heard my clients describe a variety of fraudulent schemes. I specialize in cases involving the federal False Claims Act, representing the “relator” or “whistleblower” who sues a health care provider on behalf of the government once fraud is detected.

            Just as fraud comes in many forms, it exists in a variety of health care settings. Hospitals, nursing homes, physician offices and laboratories are the sites where much of this abusive activity occurs, and the people who work there ultimately become plaintiffs and defendants in federal false-claims lawsuits.

            Federal and state law enforcement agencies have tried to combat fraud themselves. But without the assistance of health care professionals, their success rate would be spotty at best. So law enforcement looks to health care professionals for help in combating fraud, a cancerous kind of greed that affects just about everyone.

            The estimated annual loss to Medicare due to fraud, abuse and error is $12.1 billion.⁴ The rehabilitation field is being closely watched for fraud because medical payments to outpatient rehabilitation facilities have increased significantly, a trend that started in the 1990s and has continued since then. The Centers for Medicare and Medicaid Services (CMS) issued a summary audit report on Medicare payments to rehab centers showing that the total outlay has increased from $378 million in 1993 to $572 million in 1997.

            In the report, CMS focused on six states: Florida, Louisiana, Michigan, New Jersey, Pennsylvania and Texas during a 12-month period. They reviewed sample claims from various rehab centers, and determined that more than $173 million had been paid for unallowable or highly questionable services. About 55 percent of all the claims reviewed were not reasonable and necessary for the patients’ condition, or lacked the documentation to support the services billed,⁵ according to the CMS.

            One case involving a former emergency room physician in Cleveland highlights some of the perils. The government charged that between 1999 to 2001, the defendant falsely billed Medicare and Medicaid for house calls he failed to make. His records indicated that he billed for services that sometimes stretched beyond 24 hours in a single day, and he also charged higher-priced house call rates when he was visiting patients in group homes, or patients were visiting him.

            The defendant pled guilty to criminal fraud charges, was sentenced to two years in prison and was ordered to pay $340,000, along with being sentenced to 180 hours of community service and three years of supervised release once his sentence is completed.⁶

 

Up Coding

            Another common fraud scheme is “upcoding.” According to the FBI, upcoding accounts for a large portion of reported provider fraud cases.⁷ It involves the manipulation of Medicare’s Current Procedural Terminology (CPT) coding system. Anyone who bills Medicare and Medicaid is required to use the CPT system, including therapists.

            To expedite its payment system, Medicare requires providers to assign CPT codes for each service performed. Sometimes the same service has multiple billing codes with varying reimbursement rates according to the specific nature of the service delivered. So, a provider who abuses this system might select the code with the highest reimbursement rate even when the patient’s condition or treatment warrants a different code.

            Common in these cases is use of a CPT code that reflects a longer period of time to deliver a service than it actually took to perform. Physical therapists are paid by 15-minute increments. Medicare considers a session lasting eight to 23 minutes as one 15 minute increment. If a physical therapist sees a patient for 23 minutes, but bills for 30 minutes of therapy, then he is upcoding. Any treatment that lasts less than eight minutes should not be billed at all. A seven-minute session that is billed as 15 minutes is also considered upcoding.

            While some providers may make honest mistakes when coding their treatment services, others purposely upcode to receive more money.

 

Unbundling

            Unbundling is another widespread fraudulent scheme in rehabilitation and physical therapy. It occurs when a provider bills for two or more separate procedures that should be billed together under one CPT code. Medicare, in its “Correct Coding Initiative,” or CCI, has listed more than 90,000 code combinations that are billed incorrectly. Medicare recognizes these combinations to be “bundled” and will only pay for one of the procedures involved in each instance.

            According to the CCI, under special circumstances, two bundled procedures may be recognized as separate and distinct, and paid accordingly. In order to identify them, a modifier extension “-59” is attached to the CPT code when billing Medicare. The modifier identifies “procedures/services that are not normally reported together but are appropriate under the circumstances.”⁸ This may happen because different sites, organ systems, or injuries are involved, or because the patient visits the provider twice on the same day. If a provider bills for two procedures with a modified “-59,” he is required to have the documentation to support his claim. Overuse or routine billing with modifier “-59” certainly sends a red flag to Medicare, and may result in an audit.

 

Filing a False Claims Act Lawsuit

            Private citizens who are aware of fraud can file suit under the “whistleblower” or “qui tam” provisions of the False Claims Act. “Qui tam” is short for a Latin phrase that means “he who sues on behalf of the king, as well as for himself.” The provisions, as part of a law enacted in the Civil War era, and which Congress amended in 1986, allow private citizens to assist federal investigators by representing the United States in lawsuits against fraud perpetrators. As a result of their tips, these “relators” are entitled to between 15 percent and 30 percent of the civil funds recovered for the government. More than 5,000 qui tam lawsuits have been filed since the statute was amended in 1986, and the government has recovered over $17 billion as a result of the suits. Over $1.6 billion has been paid to Relators/whistleblowers.⁹

 

Fraud on a National Scale

            Fraud is not only illegal but also increases the cost of health care, reduces the quality of services, and, when the defrauded party is the government, raises taxes. The FBI estimates that fraudulent billings to health care programs, both public and private, account for between 3 and 10 percent of total health care expenditures.¹⁰ In 2004, the U.S. government’s health care expenditures were estimated at $2.1 trillion, which represents 15.5 percent of the Gross Domestic Product.¹¹ This means that between $63 and $210 billion dollars each year is lost to fraud. By the year 2012, CMS estimates that total health care spending will exceed $3.1 trillion.¹²

            In 2004 the Federal government won or negotiated over $605 million in judgments and settlements for cases pertaining to health care fraud.¹³ Federal prosecutors filed 395 criminal charges in health care fraud cases in 2004, and a total of 459 defendants were convicted for health care fraud-related crimes during the year.

            Solutions for combating fraud do exist whether you are an employee or an employer. To avoid a qui tam suit and the Department of Justice knocking on your door, it is important to be proactive and to take certain steps. First, review the infrastructure of your organization, taking special note of any non-compliance problems or related weaknesses in your current operation. Second, develop, implement and follow a compliance program that has been tailored for your practice or business. Compliance programs vary in size and price, therefore it is important to seek the advice of an attorney and designate a compliance officer so that the compliance program is geared toward your organization's specific needs. Be aware that the danger of not implementing compliance programs became considerably more stringent in 1991, when the Federal Sentencing Guidelines for Organizations took effect. According to the DOJ, these guidelines significantly increased the average fine imposed on corporations found guilty of violating criminal law.

               Once developed, compliance plans must be observed, and every employee should receive appropriate training on how to comply with laws and regulations, as well as how to properly report non-compliance. Employees may feel more comfortable about reporting questionable circumstances if your organization has a mechanism, such as a hotline, that guarantees anonymity.

            A manual should be distributed to every employee detailing how each person's duties should be performed in order to comply with laws and regulations. Staff members should also be informed of disciplinary action to be taken in the event that improper practices are discovered or not reported. Finally, once a compliance program is in place, your organization should make sure the program remains effective by randomly auditing claims. Giving staff periodic compliance updates is another way to maintain the program's visibility.

            Remember, the only thing worse than not having a compliance plan is having one and not following it. This tells the government that you knew how to comply with the law, but chose not to.

            As an employee, if you suspect or detect fraud, you should first talk to an attorney, ideally one who specializes in the False Claims Act. He or she will advise you to either report the fraud directly to the proper authorities, or file a lawsuit. The recommended approach will be determined largely by the complexity or extent of the fraud. For example, an isolated incident may only require a call to a compliance program's hotline. However, for a far-reaching scheme, you may want to consider filing a qui tam suit.                                               

            Whatever course you choose, it is important to take action. Many of my clients have received the satisfaction of knowing that they helped stop illegal activity and ensured that justice was properly served. In the end, that can be the most gratifying reward of all.