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Nov 10, 2015


One of the biggest problems facing the health care industry today is fraud. According to the National Health Care Anti-Fraud Association (“NHCAA”), of the over $2.27 trillion spent in the United States on health care annually, tens of billions of dollars are lost every year due to fraud. Spending in the United States for health care is expected to continue to increase, outpacing inflation and exacerbating the fraud issue. As a result, the Federal Bureau of Investigation has a task force assigned to exposing and investigating health care fraud, with jurisdiction over both federal and private insurance programs.


According to the NHCAA, the definition of health care fraud is the intentional deception or misrepresentation that the individual or entity makes knowing that the misrepresentation could result in some unauthorized benefit to the individual, the entity, or some other party.  There are many different types of fraudulent activity that can affect the health care industry.  Some of the most common schemes are as follows:

  1. Billing for services, procedures or supplies by health care practitioners that were never performed or provided.
  2. Intentional misrepresentation for purposes of obtaining a payment for greater than one is entitled.  This can involve diagnostics, identity of providers, medical records of services/treatment provided, dates of services, etc.
  3. Deliberate performance of procedures/services that are unnecessary for the purpose of financial gain.
  4. Upcoding – the assigning of an inaccurate billing code to a medical procedure or treatment to increase reimbursement.
  5. Unbundling – the practice of submitting bills piecemeal or in a fragmented fashion to maximize the reimbursement for various tests or procedures that are required, pursuant to Medicare and Medicaid guidelines, to be billed together and therefore at a reduced cost.
  6. Accepting kickbacks for referrals.

This rampant fraud effects everyone involved, from the patients themselves to taxpayers and the government as a whole.  As a result of these fraudulent activities, premiums charged by insurance companies are forced to increase, more taxpayer dollars are spent on programs such as Medicare and Medicaid, and patients could even be left with bills for services never or unnecessarily performed.


As previously stated, the FBI continues to work to identify and prosecute individuals and entities engaged in health care fraud.  Occasionally, the agency will work with other federal, state, or local agencies, as well as private groups such as insurance associations, to take down those who engage in this activity.  One such take down occurred in mid-June 2015, when over 240 individuals (doctors, nurses, and other licensed professionals) were arrested for their participation in Medicare fraud schemes in which false billings were issued totaling approximately $712 million.  The practitioners involved were charged with billing Medicare for services that were either unnecessary or not performed at all.  According to FBI Director James B. Comey, “in these cases, we followed the money and found criminals who were attracted to doctors’ offices, clinics, hospitals, and nursing homes in search of what they viewed as an ATM.”


It is very difficult to prevent a health care practitioner from participating in fraudulent activity.  As a patient, one can protect his/her self by reading insurance policy and benefits statements.  Reviewing the details of Explanation of Benefits (“EOB”) statements and any other paperwork received from an insurance company following a visit to a health care practitioner is extremely important.  If any procedures/treatments are listed for services that were not performed, then the insurance company should be contacted immediately.   Additionally, individuals should never sign blank insurance claim forms or give blanket authorization to a medical provider to bill for services rendered.  Insurance companies can also continue to work on modeling analytics, or other data-mining procedures to detect fraudulent schemes.  Employing these techniques, among others, can help to detect fraudulent activity before the practitioner is reimbursed for services, thereby eliminating the “pay-and-chase” scenario.


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John D. O'Grady

Mr. O'Grady is a Director in EisnerAmper's Financial Advisory Services . He specializes in fraud and forensic accounting, business valuations, commercial damages assessments, and family and civil court matters.

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