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GAO Report Reveals Biggest Violators of Healthcare Fraud

Jaclyn Jaeger | December 3, 2012

Companies in the healthcare industry will want to pay attention to the findings of a newly-released report out of the Government Accountability Office, revealing several enforcement efforts the agency has taken against those who have committed Medicare fraud. Those enforcement efforts are likely to intensify as the GAO continues to look more closely at what initiatives other federal agencies are taking to combat Medicare fraud.

In testimony last week before the House Committee on Energy and Commerce's Subcommittee on Health, Kathleen King, Director of Health Care for the GAO, provided an overview of the report's findings. King also said that the GAO is stepping up scrutiny of the Center for Medicare and Medicaid Services efforts in reducing Medicare fraud, stressing that much more still needs to be done.

King's remarks derived from a GAO report on health care fraud conducted in September 2012, analyzing criminal and civil fraud cases in Medicare, Medicaid, and CHIP (Children's Health Insurance Program) in 2010. Her observations additionally derived from eight years of prior work on fraud, waste, and abuse in health care programs.

According to the Department of Health and Human Services' Office of Inspector General (HHS-OIG), common health care fraud schemes include providers or suppliers billing for services or supplies not provided, or not medically necessary, purposely billing for a higher level of service than that provided, misreporting data to increase payments, paying kickbacks to providers for referring beneficiaries for specific services or to certain entities, or stealing providers' or beneficiaries' identities.

King said that, while CMS has made progress implementing strategies to prevent fraud, it has not followed GAO's recommendations enough. In July 2011, CMS implemented its Fraud Prevention System (FPS), which uses predictive analytic models, resulting in automatic alerts on high-risk claims and health care providers. The system is designed to help identify suspicious claims and stop fraudulent payments before they are sent.

In October, the GAO conducted a study to assess, among other things, the implementation and use of the FPS, and the extent to which CMS has defined and measured benefits and performance goals for the system.

“Although CMS has taken some important steps to identify and prevent fraud, more remains to be done to prevent making erroneous Medicare payments because of fraud,” said King. “It's critical that CMS implement and make full use of new authorities granted by [the Affordable Care Act], as well as incorporate recommendations made by the OIG, and the HHS-OIG in these areas.”

In her remarks, King also discussed what individuals and entities that the OIG has identified as biggest violators of health care fraud. According to the OIG, of the 7,848 individuals and entities investigated in criminal health care fraud cases, the plurality (18 percent) were medical facilities, including medical centers, clinics, and practices. An additional 16 percent were durable medical equipment suppliers. Among the individuals and entities investigated in criminal fraud cases, three percent were beneficiaries of healthcare programs.

In the majority of criminal fraud investigations, the HHS-OIG did not refer the case to Department of Justice for prosecution. Still, of the 1,086 individuals and entities charged in criminal fraud cases, 925 of them were found guilty, plead guilty, or plead no contest to some or all of the criminal charges. Of those cases that were prosecuted, the most frequent subjects were medical facilities (18.7 percent) and durable medical equipment suppliers (18.5 percent).

Civil Fraud Cases

With civil fraud cases, including cases that resulted in judgments or settlements, the most frequent targets were hospitals and medical facilities. Hospitals constituted 20 percent of the 2,339 civil fraud cases investigated in 2010, and medical facilities accounted for 18 percent. Less than one percent of those involved in civil health care fraud cases were beneficiaries of health care programs.

Of the total cases investigated in 2010, 47 percent resulted in an enforcement action, whereas the remaining 53 percent resulted in no actions. Whether to pursue a case depends on a variety of reasons, including lack of resources or insufficient evidence, as reported by the HHS-OIG, King said.

According to the report, among the 1,087 individuals and entities pursued in a civil fraud case, 602 resulted in a judgment or settlement for the government or the relator. None of these civil fraud cases involved beneficiaries of health care programs. Hospitals and medical facilities were pursued in the plurality of cases, at 27 percent and 17 percent, respectively.

More to be Done

The GAO continues to investigate the work of CMS. “We are investing significant resources in a body of work that assesses CMS efforts to refine and improve its fraud detection and prevention efforts,” said King. “Notably, we are assessing the effectiveness of different types of prepayment edits in Medicare and of CMS's oversight of its contractors in implementing those edits to help ensure that Medicare pays claims correctly the first time.”

The GAO also is conducting a study examining how federal agencies—CMS, HHS-OIG, and the Justice Department—are allocating funds received from the Health Care Fraud and Abuse Control Program to reduce fraud, as well as the effectiveness of such efforts, said King. In addition, the GAO also is examining CMS's oversight and management of its Zone Program Integrity Contractors—the contractors responsible for detecting and investigating potential fraud—including how they prioritize their work and are evaluated by CMS.

In its semi-annual report to Congress, HHS' office of the inspector general stated that at least $64 billion was lost to Medicare fraud in 2011. “Because of the amount of program funding at risk,” said King, “fraud will remain an inherent threat to Medicare, so continuing vigilance to reduce vulnerabilities will be necessary.”