Medicare Fraud

The Health Insurance for the Aged and Disabled Program, popularly known as the Medicare program, was created in 1965 as part of the Social Security Act (SSA). The Secretary of the Department of Health and Human Services (HHS) administers the Medicare Program through the Center for Medicare and Medicaid Services (CMS), a component of HHS.

Medicare is a federal health insurance program that provides coverage for people age 65 or older and for certain disabled people. Individuals who receive benefits under Medicare are commonly referred to as “beneficiaries.” Medicare is financed by federal funds including funds from payroll taxes and premiums paid by beneficiaries. Benefits available under Medicare are prescribed by statute and by federal regulations administered by HHS, through its agency, CMS.

The Medicare program consists of four parts. Medicare Part A authorizes the payment of federal funds for hospitalization and post-hospitalization care. Medicare Part B authorizes the payment of federal funds for medical and other health services, including without limitation physician services, supplies and services incident to physician services, laboratory services, outpatient therapy, diagnostic services, and radiology services.

Insurance companies that process Medicare Part A claims are referred to as “fiscal intermediaries.” 42 U.S.C. § 1395h. Insurance companies that contract with CMS to process Medicare Part B claims are known as “carriers.” See 42 U.S.C. § 1395u. Medicare fiscal intermediaries and carriers process and pay billions of dollars of Medicare benefit claims on behalf of the federal government.

Part C of the Medicare Program, known as Medicare Advantage, allows Medicare beneficiaries to obtain their medical benefits through private managed health care organizations (“MA Organizations”).Under this program, MA Organizations enter into contracts with CMS, according to which CMS pays each MA Organization a set amount for each Medicare beneficiary it enrolls. In exchange, MA Organizations agree to provide their Medicare enrollees with, at a minimum, all the benefits the beneficiary would be entitled to receive under the original Medicare program.

Part D is a voluntary prescription drug benefit program which offers Part D prescription drug plans (“PDPs”) to Medicare beneficiaries, where the government contracts for and subsidizes insurance PDP’s offered by private, third-party insurers. Part D participants pay monthly premiums to their insurers.

Medicare pays claims based upon a bare electronic submission indicating that particular services or supplies for a particular patient covered by Medicare have been rendered or furnished. Beyond computer edits, there is only minimal verification or due diligence before payment is made.

False Claims Act violations for Medicare fraud can be divided by the type of facility or healthcare provider involved. False Claims Act violations are made by providers such as hospitals, skilled nursing facilities, home health agencies, pharmacies, HMO’s and physician groups. Our Medicare fraud lawyers have broad familiarity with these areas.

Potential False Claims Act violations include the following:

    1. Billing for services not rendered or products not delivered;
    2. Billing for services or supplies not ordered;
    3. Misrepresenting services rendered or product provided e.g. upcoding, inappropriate coding;
    4. Billing for medically unnecessary services – this includes furnishing services in excess of the patient’s needs, or furnishing a battery of diagnostic tests, where, based on the diagnosis, only a few were needed; it also includes misrepresenting the diagnosis to justify the services or products;
    5. Duplicate billing;
    6. Billing procedures over a period of days when all treatment occurred during one visit i.e. split billing;
    7. APC fraud;
    8. Upcoding;
    9. Diagnosis Related Group fraud;
    10. RUG upcoding;
    11. Hospice fraud;
    12. Part A Admissions that lack medical necessity (inpatient, observation);
    13. Case mix creep;
    14. Medicare-funded managed care fraud (e.g. inflated general and administrative costs for cost-based MCOs; failure to provide necessary services for patients).

Two federal laws criminalize conduct that often lead to over utilization, and can also give rise to False Claims Act violations. The two laws which proscribe such conduct are the Stark law and Anti-kickback law:

The Stark law, 42 U.S.C. §1395nn, is also known as the Physician Self-Referral Law. If a physician (or immediate family member) has a direct or indirect financial relationship (ownership or compensation) with an entity that provides any of certain designated health services (“DHS”), the physician cannot refer patients to the entity for DHS and the entity cannot submit a claim to Medicare for such DHS unless the financial fits in a statutory or regulatory exception.

The Stark law was intended to prohibit physicians from profiting (actually or potentially) from their own referrals. The Stark law acts to sanction improper physician referrals, and does so by providing penalties for illegal referrals prospectively. Its effect is to prohibit relationships that have been demonstrated to encourage over utilization. It is a strict liability statute, i.e. there is no need to show knowledge or intent.

The Medicare program depends on physicians and other health care professionals to exercise independent judgment in the best interests of patients. Hospital admissions that lack medical necessity, for instance, is not in the best interest of the patients, as patient harm can obviously  result. Financial incentives tied to referrals have a tendency to corrupt the health care delivery system in ways that harm the federal programs and their beneficiaries. Corruption of medical decision-making can result when a physician refers a patient to a provider on the basis of the physician’s financial self-interest instead of the patient’s best interests.

Overpaid medical directorships, interest free loans/forgiveness of debts, illegal recruitment arrangements and improper discounts, may represent financial windfalls to physicians resulting in hospital referrals in violation of the “Stark law.” Examples also include sham contracts (which afford to physicians benefits for office space, renovations, equipment, furniture, housekeeping services, office supplies, copy and fax machines, telephone and utility as well as transcription services).

The other law is the federal Anti-kickback statute, 42 U.S.C. § 1320a-7b(b). It arose out of congressional concern that payoffs to those who can influence healthcare decisions will result in goods and services being provided that are medically unnecessary, of poor quality, or even harmful to a vulnerable patient population. To protect the integrity of the program from these difficult to detect harms, Congress enacted a per se prohibition against the payment of Medicare kickbacks in any form, regardless of whether the particular kickback gave rise to over utilization or poor quality of care.

The Anti-kickback statute prohibits any person or entity from making or accepting payment to induce or reward any person for referring, recommending or arranging for federally-funded medical services, including services provided under the Medicare, Medicaid and TRICARE programs.

Our Medicare fraud lawyers have had the privilege of helping our clients in cases ranging from coding false claims, long term care fraudDRG false claimsPPS false claims, to outpatient APC false claims, Stark law and Medicare kickback violations and other types of Medicare fraud. Medicare has been amended and expanded many times since it was enacted in 1965, and although efforts have been made to curtail Medicare fraud, we still have a long way to go. Medicare fraud has cost taxpayers billions over the last decade, and through the qui tam provisions of the False Claims Act, a significant portion has been returned to the U.S. Treasury.

The elimination of third-party payments (“assignment of benefits”) directly to physicians and other providers as opposed to reimbursement of the beneficiary will help, but there would still be a lot of cracks. Healthcare fraud simply is ripe for disclosure by Medicare fraud whistleblowers, and it is important that the qui tam provisions of the False Claims Act continue to be available as incentive for Medicare fraud whistleblowers to come forward and expose fraud.

For decades, healthcare fraud cases have brought the largest return to the U.S. Treasury. Many of these cases, and the resulting returns to the Medicare system, were made possible by brave whistleblowers stepping forward to report evident cases of fraud. By use of the qui tam provisions under the False Claims Act, these individuals were able to stop fraud and have cumulatively been awarded hundreds of millions of dollars for their part in stopping this fraud.

  • Medicare Overpayment – describes the nature of the False Claims Act violation when an overpayment is retained.

REAL PEOPLE making real change Medicare Fraud Wins

Kathleen Hawkins

Dignity Health
$37 million

Kathleen Hawkins, RN MSN, had been employed by Defendant, Catholic Healthcare West (CHW) for approximately 6 years when she decided she had had enough of trying to change the hospital system from within.

CHW, a California not-for-profit corporation that operated hospitals in California, Arizona, and Nevada, was at the time the eighth largest hospital system in the nation and the largest not-for-profit hospital provider in California.

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Joe Strom

Johnson & Johnson
$184 Million

Joe Strom contacted us in 2005. We were very grateful that he did. We immediately formed an all-star legal team and a process to stop a very harmful pharmaceutical marketing strategy. It was this process we set into motion that ultimately returned hundreds of millions of dollars to the U.S. Treasury, and a portion of that, very well-deserved, into Joe’s bank account.

Joe told us a very troubling story about the off-label promotion of a pharmaceutical drug for patients who already suffered from chronic heart failure.

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Description
Description

“I collaborated with Nolan, Auerbach and White on a broad variety of cases where whistleblowers stepped forward to disclose tactics employed by large companies to influence physicians' medical decision-making in patient care. They and their medical consultants, have consistently leveraged biomedical research and best medical evidence to advance patient safety, optimize clinical outcomes, and control precious resource utilization.”

— Fred Polsky M.D.,, Former Medical Director, CMS Zone 7 Integrity Contractor

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