Chapter 16 FORENSIC ACCOUNTING IN HEALTH CARE FRAUD

• Jurisdiction: United States

Chapter 16 FORENSIC ACCOUNTING IN HEALTH CARE FRAUD

Melissa Davis

Soneet R. Kapila

Health care fraud may be described as a scheme in which the perpetrator conducting the fraud gains some economic benefit from a health care benefit program he or she is not otherwise entitled to receive. The Centers for Medicare and Medicaid Services (CMS) describes fraud as:

Making false statements or representations of material facts to obtain some benefit or payment for which no entitlement would otherwise exist. These acts may be committed either for the person's own benefit or for the benefit of some other party.⁵¹⁷

The health care industry is highly regulated and susceptible to complex fraud schemes. During 2012, the federal government spent $1.5 billion combating health care fraud and abuse activities.⁵¹⁸ The inherently highly regulated environment adds to the challenges in any health care fraud investigation. Recent economic conditions and changes to health care laws have added to the challenges for this struggling industry.

Persistent health care fraud also impacts the fiscal condition of the industry. Forensic accountants are invariably solicited to assist in detecting health care fraud. It is important for the investigator to have an understanding of the general infrastructure of the health care delivery system to be effective in fulfilling the forensic investigator's role, including knowledge of the health care delivery system, the relevant legislation that governs the industry and the operation of the reimbursement system. A breach of the legislation and rules imposed on the health care industry can impose severe hardships on providers and patients alike on economic, criminal and civil fronts. This chapter will address some of these aspects.

I. Health Care Fraud Legislation

Most health care providers and patients needing health care services are ethical and do not abuse the health care system. Trust is a key component of a physician/patient relationship.⁵¹⁹ Despite this faith in the system, there are parties that take advantage of the health care system by committing fraud and abuse schemes. The need for stringent regulation has resulted in the establishment of numerous laws that govern health care in an effort to combat health care fraud. Awareness and familiarity with these laws is essential for forensic accountants when conducting their investigations.⁵²⁰

A. Health Insurance Portability and Accountability Act of1996

The Health Insurance Portability and Accountability Act (HIPAA) was enacted in 1996 to

amend the Internal Revenue Code to improve portability and continuity of health insurance coverage in the group and individual markets, to combat waste, fraud, and abuse in health insurance and health care delivery, to promote the use of medical savings accounts, to improve access to long-term care services and coverage, to simplify the administration of health insurance, and for other purposes.⁵²¹

HIPAA established several criminal statutes related to health care fraud and made it illegal for anyone to knowingly and willfully:

• carry out a scheme to defraud any health care benefit program;⁵²²
• steal or embezzle any funds, property or money of a health care benefit program;⁵²³
• make false statements relating to health care matters;⁵²⁴
• obstruct a criminal investigation of a health care offense;⁵²⁵ and/or
• obtain money by means of false or fraudulent means from a health care program.⁵²⁶

HIPAA also requires the Department of Health and Human Services to regulate the privacy and security of health care information. This is in conjunction with the Standards for Privacy of Individually Identifiable Health Information (known as the "Privacy Rule").⁵²⁷ The Privacy Rule standards address the disclosure of patient health information by health care organizations subject to the Privacy Rule. The regulations have imposed extensive administrative requirements and restrictions on the use and disclosure of health information. In general, protected health information (PHI) cannot be disclosed without consent of the patient or the personal representative of the patient. The Privacy Rule applies to health insurance companies⁵²⁸ and any health care provider that transmits health information in electronic format. Violations of HIPAA may result in civil and criminal penalties.

When a health care provider files for bankruptcy, many of its creditors may be patients, so HIPAA regulations will apply. A high degree of care must be exercised to protect patient records. In some cases, it may be appropriate to appoint a patient ombudsman. 11 U.S.C. § 333(a)(1) of the Bankruptcy Code generally states that the court shall order the appointment of an ombudsman in health care business bankruptcy proceedings to represent the interests of the patients of the health care business.⁵²⁹

B. Anti-Kickback Statute

The Anti-Kickback Statute is a criminal law that was enacted by the government in an effort to deter referral fees among health care professionals that are Medicare providers. This statute prohibits anyone from knowingly and willfully offering to pay or receive any consideration to induce, either directly or indirectly, the referral of any good or service that is reimbursable with federal money.⁵³⁰

The statute states that whoever knowingly or willfully receives money or compensation of any kind in return for referring a person in return for a payment under a federal health care program will be guilty of a felony and may be fined up to $25,000 or imprisoned for not more than five years.

C. The Stark Law

The Physician Self Referring Act, also known as the Stark Law, prohibits physicians from referring Medicare or Medicaid patients for services that are covered under the programs to an entity that is owned or controlled by the referring physician.⁵³¹ The statute prohibits referrals if a physician or a family member has a financial relationship with the entity to which a patient is being referred. A financial relationship includes an ownership or investment interest in the entity or a compensation arrangement between the physician and the entity.⁵³²

D. The False Claims Act

The False Claims Act is a criminal statute that prohibits parties from submitting false claims to the government for payment.⁵³³ The Act establishes liability when a person:

1. knowingly presents a claim for payment or approval;
2. to the United States government;
3. that is false or fraudulent;
4. knowing of its falsity; and
5. seeking payment from the federal treasury.⁵³⁴

E. Combating Medicare Fraud

In addition to the increase in legislation, the government has also established certain agencies and organizations to focus on fighting health care fraud. In May 2009, in an effort to curtail health care fraud, the federal government formed the Health Care Fraud Prevention & Enforcement Action Team (HEAT).⁵³⁵ HEAT's goal is to marshal resources across the government to prevent waste, fraud and abuse in the Medicare programs and to crack down on those who abuse the Medicare program.⁵³⁶

The Health Care Fraud and Abuse Control Program (HCFAC) was established with HIPAA. The program is designed to identify and prosecute the most egregious instances of health care fraud, to prevent future fraud or abuse, and to protect program beneficiaries in both public and private health plans.

Under joint direction by the Attorney General and the Secretary of the Department of Health and Human Services, during 2012, $4.2 billion was recovered by these programs from settlements and judgments.⁵³⁷ Over $23 billion has been returned to Medicare since the inception of the program in 1997.⁵³⁸

In 2012, the Department of Justice (DOJ) opened 1,131 new criminal health care fraud investigations. Federal prosecutors had 2,032 health care fraud criminal investigations pending and filed criminal charges in 452 cases.⁵³⁹ A total of 826 defendants were convicted of health care fraud-related crimes during the year.⁵⁴⁰ In 2012, Federal Bureau of Investigation (FBI) health care fraud investigations resulted in the operational disruption of 329 criminal fraud organizations.⁵⁴¹

More recently, provisions of the Affordable Care Act give CMS additional tools to expand efforts to fight fraud.⁵⁴² These new rules allow CMS to focus on prevention and detection of fraud before it occurs rather than on trying to recover funds from frauds after the fact. CMS is also focused on strengthening the process and procedures for provider enrollment in the Medicare program. The Patient Protection and Affordable Care Act (PPACA) includes provisions to screen providers by risk level.⁵⁴³ CMS is also improving the claims-review process and developing more robust methods for identifying vulnerabilities in the Medicare claims payment system.⁵⁴⁴

F. Medicare and Medicaid

Medicare and Medicaid are government-funded health insurance programs that generally provide coverage for selective groups of Americans. Medicare provides insurance coverage for individuals 65 years of age and older.⁵⁴⁵ Medicaid provides coverage for low-income families and children. The programs are administered by the CMS.

While Medicare is funded by the federal government, Medicaid is funded with both federal and state money. The programs are operated by state governments, and each state determines the standards of the programs and administers the program.

The Medicare and Medicaid systems pay claims submitted by providers on an expedited basis, often without verification that the claims were submitted correctly before the payment is made. In order to receive reimbursement, health care providers must comply with strict regulations. While this system facilitates cash flow to providers, it is also susceptible to widespread abuse and fraud.

As the largest insurance program in the U.S., Medicare is a significant target for fraud. Fraud occurs in the Medicare system at various stages: the provider-enrollment stage, the patient-claims stage and the claims-payment stage...