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Fraud & Abuse. Training for First Tier, Downstream and Related Entities. Purpose of this Training.

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fraud abuse

Fraud & Abuse

Training for First Tier, Downstream and Related Entities

purpose of this training
Purpose of this Training

The Centers for Medicare and Medicaid Services (CMS) requires Medicare Advantage and Prescription Drug Plans to provide Fraud, Waste and Abuse (FWA) training to its employees, First Tier, Downstream and Related Entities on an annual basis beginning in calendar year 2009.

First Tier, Downstream and Related Entities can provide their own training or use training materials from one of their Medicare Advantage or Prescription Drug plans.

first tier downstream entities
First Tier & Downstream Entities
  • First Tier entities are companies that have contracted with Physicians United Plan (PUP) to provide administrative or prescription drug services to PUP’s members
  • Downstream entities are companies that First Tier entities sub-contract with to provide these services
  • Definitions
  • The cost of health care fraud
  • Some recent cases
  • Fraud and abuse laws
  • Penalties
  • What are we doing?
  • What can I do?
the cost of health care fraud
The Cost of Health Care Fraud
  • In 2007, the US spent $2.26 trillion on health care (16% of gross domestic product).
  • By 2016, we will spend more than $4 trillion on health care.
  • The National Health Care Anti-Fraud Association estimates that 3% is lost to fraud.
  • The Government Accounting Office (GAO) and other government sources estimate it may be as high as 10%.
health care fraud costs us all
Health Care Fraud Costs Us All
  • Intangible costs, e.g., effect on patient care of false medical records, deaths caused by dilution of drugs
  • Physical risks to patients from medically unnecessary procedures
  • Dollars diverted from the elderly, sick, poor.
  • Each household pays $1000 more in higher taxes, reduced benefits, increased premiums, and more expensive doctor visits and RX ($1000 per household)
scope of problem
Scope of problem

For fiscal year 2008, the US Department of

Health and Human Services Office of

Inspector-General (OIG) reported:

  • exclusion of 3,129 individuals and entities for fraud or abuse
  • 575 criminal actions
  • 342 civil actions
  • Savings/expected recovery of >$20.4 billion
  • Health care fraud is defined in Title 18, United States Code (U.S.C.) s. 1347 as knowingly and willfully executing, or attempting to execute, a scheme or artifice to defraud any health care benefit program or to obtain (by means of false or fraudulent pretenses, representations, or promises) any of the money or property owned by, or under the custody or control of, any health care benefit program.
definitions cont d
  • Abuse: Provider practices that are inconsistent with generally accepted business or medical practices and that result in any unnecessary costs or result in reimbursement for goods or services that are not medically necessary or that fail to meet professionally recognized standards for health care.
definitions cont d10
Definitions (cont’d)
  • Waste: activities involving payment or the attempt to obtain reimbursement for items or services where there was no intent to deceive or misrepresent but the outcome of poor or inefficient billing or treatment methods causes unnecessary costs to the Medicare/Medicaid/State Children’s Health Insurance Program.
examples of fraud
Examples of Fraud
  • Billing for services that were not provided
  • Performing medically unnecessary services solely to obtain insurance payments
  • Altering claim forms, medical documentation, etc. to obtain a higher payment
  • Duplicate billing (deliberate)
  • Unbundling or “exploding” charges
  • Upcoding (billing for a service that costs more)
  • Soliciting, offering, or receiving a kickback for referral of patients in exchange for other services
examples of fraud cont d
Examples of Fraud(cont’d)
  • Billing for dead and jailed beneficiaries
  • Billing by dead doctors (on 7/9/08, the US Senate Permanent Subcommittee on Investigations estimated that Medicare paid $60.3 to $92.8 million to companies that used the UPINs of dead doctors)
  • Waiving patient co-pays or deductibles
  • Misrepresenting non-covered services as medically necessary, e.g., billing “nose jobs” as deviated-septum repairs, routine foot care as diabetic foot care
  • Using another person’s ID card to obtain care
examples of part d prescription drug fraud
Examples of Part D (Prescription Drug) Fraud

Can be at member, pharmacy, prescriber,

PBM, wholesaler or manufacturer level:

  • Pharmacy dispensing a generic but billing for a brand
  • Patient selling drugs back to the pharmacy for pharmacy to re-sell
  • Prescription forging/altering, identity theft, theft of prescription pads (member)
examples of part d fraud cont d
Examples of Part D fraud (cont’d)
  • Inappropriate Formulary decisions (PBM)
  • Inappropriate marketing of drugs, improper incentives to physicians to prescribe medically unnecessary drugs/brand names (manufacturer)
  • Counterfeit/adulterated drugs through black/grey market (wholesaler)
examples of abuse
Examples of Abuse
  • Charging in excess for services/supplies
  • Providing medically unnecessary services
  • Providing services that do not meet professionally recognized standards
  • Submitting bills to Medicare instead of the primary insurer
  • Violating the Medicare Allowable Actual Charge limits or the Medicare Limiting Charge
difference between fraud abuse
Difference between Fraud & Abuse
  • Abuse results from practices that directly/indirectly result in unnecessary cost.
  • Fraud requires evidence of intent to defraud, i.e., acts were committed knowingly, willfully and intentionally.
  • Abusive billing practices may not result from “intent” or it may be impossible to prove that the intent to defraud existed; however under certain circumstances, these types of practices may develop into fraud if there is evidence of the subject knowingly and willfully conducting an abusive practice.
recent florida cases
Recent Florida cases

October 9, 2009, Department of Justice

3 Miami-Dade County, Fla., residents indicted in connection with an alleged $2.3 million Medicare fraud scheme operated out of a Detroit-area clinic that purported to specialize in providing injection and infusion therapies.

August 7, 2009, U.S. Attorney, Southern District of Florida

Federal Judge Sentences Defendants Who Perpetrated $10.9 Million Medicare Fraud HIV Infusion Scheme

recent florida cases cont d
Recent Florida cases(cont’d)

August 17, 2009, U.S. Attorney, Southern District of Florida

Durable Medical Equipment Company Owner Convicted In Medicare Fraud Scheme for fraudulent DME billing. DME prescriptions were not signed by doctors; DME was not provided as claimed; some DME claims were for dead people.

October 9, 2008, U.S. Attorney, Southern District of Florida

Chiropractor and 2 Others Charged in Medicare Fraud Scheme (defendants solicited accident victims and persons to "stage" accidents to file fraudulent insurance claims on non-existent and exaggerated personal injuries).

recent florida cases cont d19
Recent Florida cases(cont’d)

September 29, 2008, Department of Justice

Walgreens Pays $9.9 million to Settle Medicaid Prescription Drug Allegations

January 4, 2008, OIG website

Shands Hospital paid fine of $119,838 for employing an individual that the OIG alleges Shands knew or should have known had been excluded from participation in Federal health care programs

fraud in the managed care setting
Fraud in the Managed Care Setting
  • Marketing (agent misrepresentation/ misleading marketing materials)
  • Enrollment (e.g., beneficiary misrepresentation about residence)
  • Utilization Management
  • Claims
  • Risk Adjustment Data
  • Prescription Drug (Part D) program
fraud and abuse laws
Fraud and Abuse laws
  • False Claims Act (FCA), 31 U.S.C., s. 3729
  • Florida False Claims Act, F.S. 817.234
  • Anti-Kickback Statute 42 U.S.C. s. 1320a-7b(b)
  • Physician Self-Referral (“Stark”) Statute, 42 U.S.C. s. 1395nn
  • Deficit Reduction Act of 2005
  • HIPAA of 1996, Title 18, Section 1347
  • Fraud Enforcement and Recovery Act of 2009 (FERA).
federal false claims act
Federal False Claims Act

Known as the “Lincoln Law”, covers fraud involving any federally funded contract/program. Imposes civil liability on any person who:

  • Knowingly presents, or causes to be presented, to an officer or an employee of the United States government a false or fraudulent claim for payment or approval;
  • Knowingly makes, uses, or causes to be made or used a false record or statement to get a false or fraudulent claim paid or approved by the government; or
  • Conspires to defraud the government by getting a false or fraudulent claim allowed or paid
false claims act cont d
False Claims Act(cont’d)

Key word is “knowingly”!

  • “Knowingly” does not require proof of specific intent to defraud the government.
  • “Actual knowledge of the information” or acting “in deliberate ignorance of the truth or falsity of the information” or “in reckless disregard of the truth or falsity of the information” is enough.
false claims act cont d24
False Claims Act (cont’d)

Amended in 1986 to increase the penalties and qui tam


  • Civil monetary penalty: $5500- to 11,000- per false claim
  • Treble damages
  • OIG sanction/exclusion from participation in federal health care programs
false claims act cont d25
False Claims Act(cont’d)

A False Claims Act case can be brought by:

  • The Attorney General in federal court
  • A private citizen (whistleblower) in federal court on behalf of the government (“qui tam” action) The complaint is filed under seal, and the DOJ may decide to intervene and take over the case.
  • If the DOJ does not, the private citizen may continue the case. If money is recovered, the whistleblower gets 15% - 25% (more if DOJ does not take over the case).
false claims act cont d26
False Claims Act(cont’d)

From 1986 to 2006:

  • Qui tam lawsuits brought under the FCA have returned > $11 billion to the government
  • Recoveries resulting from all qui tam and non-qui tam cases brought under the FCA total $18.1 billion. 
  • Whistleblower rewards for qui tam cases exceed $1.79 billion.
  • In fiscal year 2006, qui tam lawsuits resulted in recoveries of $1.4 billion. Whistleblowers received rewards that totaled $198 million.

(Source: US DOJ statistics)

florida false claims act
Florida False Claims Act
  • Florida’s FCA closely mirrors the Federal FCA
  • Whistleblowers can bring qui tam action if the fraud involves Medicaid or other state-funded programs.
  • If a state FCA’s whistleblower provisions are at least as effective as the federal FCA, the state gets a 10% increase in their share of Medicaid fraud recoveries (Florida’s FCA currently does not qualify)
deficit reduction act
Deficit Reduction Act
  • Requires Medicaid programs to look for FWA
  • Mandate procedures on FWA
  • Requires employers who receive more than $5 million per year in Medicaid payments to train their staff on the False Claims Act, qui tam lawsuits and FWA program
  • Creates incentive for states to have their own whistleblower laws
anti kickback statute
Anti-Kickback Statute

It is a felony to knowingly and willfully to offer, pay, solicit, or receive any remuneration to induce or reward referrals of items or services paid in whole or in part by a federal health care program. “Remuneration” includes transfer of anything of value, directly or indirectly, overtly or covertly, in cash or in kind.

physician self referral prohibition statute
Physician Self-Referral Prohibition Statute

The “Stark Law” prohibits a physician from making a referral for certain designated health services to an entity in which the physician (or a member of his/her family) has an ownership/investment interest or with which he or she has a compensation arrangement, unless an exception applies.


HIPAA established health care fraud as

a federal criminal offense and increased

the penalties.

  • Forfeiture of property derived, directly or indirectly, from gross proceeds traceable to the commission of the offense
  • Imprisonment for up to 10 years/up to 20 years if the violation results in “bodily injury”/life if patient dies
hipaa cont d
  • Created funding for states to fight fraud and abuse; Florida used the money for the South Florida Health Care Fraud Center.
  • HIPAA s.203(b)(1) created the Medicare Incentive Reward Program (IRP). to encourage reporting of sanctionable activities. IRP will pay a reward for information that leads to a minimum recovery of $100 from a party determined by CMS to have committed sanctionable offenses.
fraud enforcement and recovery act of 2009
Fraud Enforcement and Recovery Act of 2009
  • In May 2009, President Obama signed into law the Fraud Enforcement and Recovery Act (“FERA”) of 2009.
  • Boosts federal government’s power to investigate and prosecute any financial fraud against the govt. and expands liability under the False Claims Act.
enforcement agencies
Enforcement Agencies
  • Office of Inspector-General (OIG)
  • Federal Bureau of Investigation (FBI)
  • Federal Department of Justice (DOJ)
  • Postal Inspectors (mail fraud)
  • United States Attorneys
  • Medicaid Fraud Control Unit
  • AHCA Bureau of Medicaid Program Integrity
  • MEDICs (Medicare Integrity Contractors)
  • Quality Improvement Organizations (QIO)
  • Civil or criminal prosecution
  • Fines/Civil Monetary Penalty ($10K/violation)
  • Restitution
  • Imprisonment
  • Administrative sanctions (exclusion, Corporate Integrity Agreement)
  • Treble damages
pup s fwa program
PUP’s FWA Program
  • PUP’s claims software (Virtual Examiner) can detect:
    • Upcoding
    • Unbundling (e.g., billing for separate lab tests that should be billed as a lab panel)
    • Duplicate billing
    • Weekly visits for blood pressure checks for a patient with medically treated and stable hypertension
    • Billing a hysterectomy for a male patient
    • Inappropriate place of service for a procedure
pup s

PUP’s FWA Program (cont’d)

  • Prescription Solutions , our Pharmacy Benefit Manager, uses software to detect trends, raise red flags (e..g, sudden spike in certain claims
  • Fraud awareness training for staff, providers, members
  • Review OIG/GSA sanctions list (providers/employees)
  • Compliance program to establish an environment that promotes prevention, detection and resolution of conduct that does not conform to legal, ethical or program requirements
  • Hotline
pup s fwa program cont d
PUP’s FWA Program (cont’d)
  • Agent oversight and monitoring of marketing activities
  • Report suspected fraud to OIG when there is a reasonable basis to suspect that someone:
      • Intentionally engaged in improper billing
      • Submitted improper claims with actual knowledge that they were false
      • Submitted improper claims with reckless disregard or deliberate ignorance of their truth or falsity
    • Work with MEDIC (CMS Medicare Integrity Contractor) on prescription drug FWA cases
pup s fwa program cont d39
PUP’s FWA Program (cont’d)
  • Work with PUP’s contractors and delegated entities to:
    • Implement policies and procedures to address FWA
    • Assist contractors and delegated entities with their own FWA awareness training
    • Report all suspected FWA cases to PUP
    • Protect employees and others who report FWA
what can i do
What can I do?
  • Know your department’s P&Ps
  • Watch for suspicious activity, red flags
  • Educate providers/members/vendors
  • Report suspicious activity
  • Audits/checks and balance
  • Bring suggestions for preventing FWA
  • No retaliation against employees who report in good faith
where to find additional info
Where to find additional info:
  • National Healthcare Anti-Fraud Association
  • CMS website
  • OIG website
  • OIG exclusions
  • MLN website
  • Health Care Fraud Prevention and Enforcement Action Team (HEAT) website
review questions
Review Questions
  • The effort to prevent and detect fraud is___________________.
  • Primarily the responsibility of state and federal law enforcement agencies (OIG, FBI, DOJ, MFCU)
  • A cooperative effort involving CMS, Medicare beneficiaries, providers, health plans, QIOs, MEDICs, in addition to state and federal law enforcement agencies (OIG, FBI, DOJ, MFC)
review questions43
  • Those making false statements and receiving kickbacks, bribes and rebates in relation to the Medicare program may be determined to be guilty of a felony and may be fined or imprisoned, or both.
    • True
    • False


review questions44
Review Questions

3. The following are potential elements of civil prosecutions and penalties:

  • Civil monetary penalty (CMP)
  • Penalty for up to 3 times the amount claimed for each item or service.
  • Exclusion from federally funded programs for a specified number of years.
  • Signing a Corporate Integrity Agreement which subjects the entity to federal monitoring.
  • All of the above
review questions45
Review Questions
  • Neither Medicare nor PUP will pay a provider who has been excluded by the OIG from participation in federal health care programs.
    • True
    • False
review questions46
Review Questions

5. Fraud is:

  • An unintentional act that results in unnecessary cost
  • Intentionally, or knowingly and willfully attempting to execute a scheme to falsely obtain money
  • An intentional act that results in unnecessary cost
  • Unintentionally or unknowingly attempting to falsely obtain money
  • B and C
  • A and D
review questions47
Review Questions

6. The ________________ prohibits a physician from making a referral for certain designated health services to an entity in which the physician (or a member of his/her family) has an ownership/ investment interest or with which he or she has a compensation arrangement, unless an exception applies.

  • The Anti-Kickback Statute
  • The “Stark” Statute
review questions48
Review Questions

7. The _____________ has the authority to exclude (sanction) providers or suppliers who have been convicted of health care-related offenses.

  • Social Security Act
  • Medicare Program
  • Medicare Integrity Program
  • Office of Inspector-General (OIG)
  • Federal Bureau of Investigation (FBI)
review questions49

8. The ____________ pays an incentive award to individuals who provide information on Medicare fraud and abuse or other sanctionable activities.

  • Medicare Incentive Reward Program
  • Medicare Trust Fund
  • Social Security Act
  • HIPAA Public Law
review questions50
Review Questions
  • Which of the following are examples of abuse?
  • Charging in excess for services/supplies
  • Providing medically unnecessary services
  • Providing services that do not meet professionally accepted standards
  • Submitting bills to Medicare that are the responsibility of other insurers
  • All of the above
review questions51
Review Questions
  • PUP’s Virtual Examiner software can detect:


Inappropriate bundling and unbundling

Duplicate billing

Services rendered to a person of the wrong gender

Inappropriate place of service for a procedure

All of the above