Common Types of Medicare and Medicaid Fraud
The False Claims Act makes it illegal to submit false claims to Medicare, Medicaid and other government healthcare programs. Here are the most common types of false claims.
Billing for Services That Were Not Provided
One of the most common forms of Medicare and Medicaid fraud is billing the government for services, procedures, or supplies that were never provided. Sometimes called “phantom billing,” this type of fraud includes billing for blood tests when no samples were drawn; billing for x-rays when none were taken; billing for dental fillings when none were performed; or billing for home health care hours when they were not provided.
Billing for Services That Were Not "Medically Necessary"
As a general rule, Medicare and Medicaid will only pay for services and items that are deemed “medically reasonable and necessary” for the diagnosis or treatment of an illness or injury. The "medical necessity" must be properly documented. National Coverage Determinations (NCDs) and Local Coverage Determinations (LCDs) identify which tests and procedures require additional medical necessity documentation before they will be approved for reimbursement.
Sometimes the lack of medical necessity is obvious, such as when a provider misrepresents the patient's diagnosis and symptoms in order to submit a claim for reimbursement. Other times the lack of medical necessity is not clear. This is because a physician's judgment of what is “medically reasonable and necessary” for a specific patient may be different than the definition of medical necessity the government uses for billing purposes. In addition, even if a service is determined to be "reasonable and necessary," reimbursement may be limited or denied if the service is provided more frequently than allowed under Medicare coverage policies.
Upcoding, Unbundling, and Double-Billing
Upcoding, unbundling, and double-billing are three distinct forms of Medicare and Medicaid fraud.
Upcoding is the practice of using a billing code that results in a higher reimbursement rate than the level of service justifies. For example, upcoding occurs when a physician examines a patient briefly for a simple matter such as a cold but submits a bill for an hour-long complex visit; or when a pharmacist provides a patient with a low-cost generic but submits a bill for a higher-cost branded drug.
This type of Medicare fraud includes billing for a higher priced service or product than what was actually provided, such as partially filling prescriptions but charging as if a full prescription was provided; billing for the cost of a name brand prescription drug when a generic substitute was supplied at a substantially lower cost; billing for new durable medical equipment (DME) when the patient received used equipment; or billing for expensive equipment when the patient received a less expensive alternative.
Unbundling refers to the practice of using two or more Current Procedural Terminology (CPT) billing codes instead of one inclusive code. It also refers to the practice of submitting multiple bills in order to obtain a higher reimbursement for tests and services that were performed within a specified time period and which should have been submitted as a single bill.
Double-Billing occurs when a provider attempts to bill Medicare or Medicaid and either a private insurance company or the patient for the same treatment, or when when two providers attempt to get paid for services rendered to the same patient for the same procedure on the same date. Double-billing also occurs when a provider attempt to charge more than once for the same service, for example by billing using an individual code and again as part of a bundled set of tests.
False Price and Cost Reports
Pharmaceutical companies, pharmacies, hospitals, and other healthcare providers must report certain cost and price information to Medicare and Medicaid. This cost and price information is used by the government to establish reimbursement rates under Medicare, Medicaid, and other government healthcare programs. Submitting false cost or price information can result in civil and criminal liability under the False Claims Act and other statutes.
Offering or Accepting Kickbacks
The federal Anti-Kickback Statute makes it illegal to pay or receive anything of value in return for referring patients covered by Medicare, Medicaid, or another government health care program. Hospitals, pharmacists, physicians and other healthcare providers who participate in Medicare and Medicaid must certify that they have complied with the Anti-Kickback law when seeking reimbursement. A false certification renders the claim itself false under the False Claims Act.
Inadequate Medical Documentation
Medical professionals and healthcare providers who submit claims to Medicare and Medicaid are required to maintain proper documentation. Failure to maintain proper documentation can result in liability for making "false claims," even if you actually provided the treatment.
When an audit or investigation reveals missing or incomplete medical documentation, the government will take the position that any claims for reimbursement from Medicare, Medicaid, or another government healthcare program were false claims. This can result in demands for refunds, treble damages, penalties, and possibly allegations of fraud. Evidence that medical records have been altered or falsified could result in your case being referred to the FBI or a U.S. Attorney for a criminal investigation and prosecution.
Beneficiary Not Eligible for Reimbursement
The government takes a very hard line on healthcare providers who bill Medicare and Medicaid for services provided to beneficiaries who are not eligible for benefits or reimbursement. The government also prosecutes individuals who apply for and receive benefits by providing false information on their Medicaid applications.
Off-Label Marketing of Pharmaceuticals
Under federal law, the Food & Drug Administration (FDA) approves a pharmaceutical after it determines that the product is safe and effective for its intended use. This approval is only for the particular use for which the product was tested and approved.
Once approved, a physician may prescribe the drug for any use, including an off-label use. But the pharmaceutical company is prohibited from marketing or promoting a drug for a use that the FDA has not approved.
Prohibited activities range from encouraging individual doctors to prescribe a pharmaceutical for an off-label use, to providing financial support for scientific and educational activities promoting off-label uses. If a pharmaceutical company’s statements or materials promote a use that is inconsistent with the product’s approved labeling, the product is considered a “misbranded drug.”
Prescription Fraud and Doctor Shopping
Using fraud or deceit to obtain prescription drugs is a crime that can result in serious financial penalties and prison sentences. The drugs involved are usually addictive narcotics such as codeine, Demerol, OxyContin (oxycodone), methadone, morphine, Valium (diazepam), Vicodin (hydrocodone), and Xanax (alprazolam). But any prescription drug can be the basis for a prescription fraud charge.
Common types of prescription fraud include illegally giving out or obtaining prescriptions, knowingly selling prescription drugs to someone who does not have a valid prescription, altering a legitimate prescription to indicate a higher dosage or quantity of drugs, and obtaining drugs using forged prescriptions. “Doctor shopping” – or switching doctors for the purpose of obtaining additional prescriptions – is also a form of prescription fraud.
Physician Self-Referral and Stark Law Violations
The Stark law prohibits physicians from referring patients for Designated Health Services to facilities in which the physician or an immediate family member has a financial interest. A “referral” can include ordering or certifying the need for a designated health service. A “financial interest” is defined broadly to include an ownership interest, investment interest, or compensation arrangement. The law covers both direct relationships and indirect benefits, such as when a hospital provides a physician with below-market rent for office space.
The Designated Health Services (DHS) covered by the Stark statute include:
The Stark law also prohibits anyone from billing Medicare or Medicaid for services provided as a result of a self-referral. Any such claim for reimbursement is considered a “false claim” under the False Claims Act.
Several exceptions to the general rule exist, including physician services, in-office ancillary services, ownership in publicly traded securities and mutual funds, rental of office space and equipment, and bona fide employment relationships.
Unlicensed or Unqualified Providers
Claims for reimbursement submitted to Medicare or Medicaid are valid only if the individual providing the treatment or service had all the licenses and certification required. If the individual healthcare provider did not have the necessary license or certification, then the claim is considered a "false claim" under the False Claims Act. It is not a defense that the individual healthcare provider gave the patient equivalent care.