Cost Report Fraud

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The purpose of the qui tam provisions of the False Claims Act is to encourage private individuals who are aware of healthcare fraud, or any other type of fraudulent acts being perpetrated against the government to bring such information forward. Cost report fraud typically occurs with Medicare Part A providers, such as hospitals, nursing homes and home health agencies. Most providers are now paid based on the prospective payment system, and therefore much less financial impact occurs if cost report entries are falsified. Even so, some areas remain fully cost-based. Some cost report fraud scenarios include:

  1. Falsely inflating costs related to patient care; i.e. including costs of non-covered services, supplies and equipment.
  2. Seeking reimbursement for costs apportionable to non-Medicare patients;
  3. Seeking reimbursement for costs that are not related to patient care;
  4. Failing to disclose the related nature or the relationship between business entities with whom the provider is dealing;
  5. Improperly manipulating statistics (e.g. patient census, cost center allocations, square footage).
  6. Shifting costs to improper cost centers.
  7. Hospital Capital Cost Fraud.
  8. Outlier Payments Fraud.

The States of California, Florida, Texas and New York lead Medicare cost reimbursement provided to the U.S. hospital and other provider systems. Some providers still commit cost report fraud due to a lack of commitment to compliance. Medicare Part A cost report fraud is relatively easy to get away with because of the lack of oversight and enforcement resources. Whistleblowers who have tried to correct cost report fraud internally to no avail (or those who can’t) have the incentive of the qui tam provisions of the False Claims Act should they choose. Nolan Auerbach and its experts provide experienced representation and knowledgeable expert consultants in this very specialized area of healthcare reimbursement whistleblower representation.

On an annual basis, providers participating in the Medicare program are required to submit information to achieve settlement of costs relating to health care services rendered to Medicare beneficiaries. When a provider fails to file a timely cost report, all interim payments since the beginning of the cost reporting period can be deemed overpayments, although we view this as a technical argument that would not serve as the basis of a False Claims Act violation.

Medicare issues standard forms for the preparation of provider cost reports:

CMS-2552 Hospitals and Hospital Health Care Complex
CMS-2540 Skilled Nursing Facility and Skilled Nursing Facility Health Care Complex
CMS-1728 Home Health Agencies
CMS-2088 Outpatient Rehabilitation Providers (CORF)
CMS-222 Indepen. Rural Health Clinics/Freestanding Federally Qualified Health Centers
CMS-216 Organ Procurement Organization/Histocompatibility Laboratory Providers
CMS-265 Independent Renal Dialysis Facility
CMS-1984 Hospice Cost and Data Report
CMS-287 Home Office Cost Statement
CMS-276 Health Maintenance Organization

The filing of a combined or a consolidated cost report for a chain organization or other group of providers is not an acceptable practice under the Medicare program. Generally, each provider in a chain organization or other group of providers, with limited exceptions, must file a separate, individual cost report.

Institutions which have multiple facilities but only one provider number, or one provider number with sub-provider numbers for its related cost entities, are required to submit one cost report under that principle provider number together with the sub-provider numbers, if any. Hospitals which have sub-providers and hospital-based SNFs must also maintain uniforms charges across all payer categories, as well as like charges for like services across each provider setting, in order to properly apportion costs.

Cost reports can still be the subject of False Claims Act violations, although much less so since the implementation of the prospective payment system of reimbursement. In cost report fraud cases, it is often only the Medicare fraud whistleblower that, as a current or former employee, has the requisite insider knowledge to sustain a qui tam lawsuit.

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