Healthcare fraud is an expansive area of white-collar crime covering federal investigations or prosecutions into professionals in the healthcare industry. The majority of healthcare fraud investigations involve billing Medicare for services that are not performed, not medically necessary or otherwise not allowed by the federal rules. In order to understand these types of cases, it is imperative an attorney has a solid understanding of how the Medicare system works and how the rules for billing Medicare are promulgated. These rules are often confusing and misleading. A simple misunderstanding of the rules could lead to a federal investigation, and ultimately, criminal charges. This blog is meant to provide a basic overview of the Medicare system and how the rules are formed. Later posts will discuss some troubling areas which often lay the foundation for criminal prosecution.
Background – Medicare Program
The Medicare program is codified in Title 42 of the United States Code. Medicare has four distinct parts aimed at assisting the elderly or disabled with their healthcare needs. Part A deals with hospitalization. Part B provides funding for Medicare beneficiary services and products. Part C deals with Medicare Advantage Plans. Part D deals with prescriptions. Medicare is funded by federal funds combined with premiums paid by Medicare beneficiaries.
The Center for Medicare and Medicaid Services (CMS) administers the Medicare program. Based on the size of the program, the federal government requires assistance in day to day operations. CMS contracts with private carriers to process claims for payment and determine whether the claim is medically necessary or otherwise consistent with the rules. The private carriers are ultimately responsible for the day to day operations within the Medicare system.
The rules of Medicare are produced by two sources – Congress and CMS. Congress enacts overarching rules which are codified in the Federal Reporters. These rules can be viewed as the studs and foundation of the home. They provide a good starting point for understanding the requirements, but they are incomplete. Federal agencies provide clarifications and caveats to these overarching rules.
CMS is responsible for filling the gaps, clarifying the Congressional rules and providing exceptions. CMS does this through the production of various publications, including the Medicare Claims Processing Manual and the Medicare Benefit Policy Manual. These manuals are the finishing touches on the home. The walls, the floor and the carpet. Without the manuals, the understanding of the Medicare requirements is woefully incomplete. In addition to providing the manuals, CMS will produce various instructional literature advising professionals how the rules should be interpreted.
“Incident to” services provide a perfect example of the interplay between Congress and CMS in rule promulgation. Under the Federal Reporter, a doctor must be physically present in the building when a procedure is performed to bill Medicare under his provider number. This requirement is known as direct supervision. If a nurse provides a service, and the doctor is down the hall in his office, the doctor may bill Medicare under his provider number. That overarching rule has exceptions which are found in the CMS manuals. Under Chapter 15 Section 60.4 of the Medicare Benefit Policy Manual, the direct supervision requirement is lifted for homebound patients in medically under served areas. Under 60.4, a doctor does not need to be present to bill under his provider number if the elements of the 60.4 exception are met.
Following this example, it should be clear how important the CMS rules are to professional practices. Without an accurate understanding of the rules, a practice could be violating various Medicare laws without any knowledge. These violations can result in civil penalties, and if the government believes the violations were intentional, criminal charges.
Billing the Medicare System
Doctors and other healthcare professionals bill Medicare through the electronic billing system. The only prerequisite is the healthcare professional must enroll in the Medicare system and receive a provider number. There is no federal agency, or private contractor, that screens providers prior to enrollment. There are no safeguards to prevent criminals from entering the program on the front end. Almost any professional can obtain a provider number with Medicare.
The billing system uses a set of codes which delineates the procedure or product provided to the Medicare beneficiary. Medicare utilizes the Health Care Procedure Coding System to provide a uniform language for providers across different regions. This coding system is based in large part off the CPT coding used by providers when billing other carriers.
While meant to provide efficiency, the coding system provides an easy foundation for mistakes or fraud. There are certain procedures where it may be unclear which code is appropriate. There may be two CPT codes which seem to cover a similar procedure or service. Doctors, federal agents, and billing experts may disagree on the correct code for billing a particular procedure. This disagreement, though logical, leads to a dangerous scenario for providers. If a doctor is using a code which provides for a higher reimbursement, and the government believes this action is intentional, the provider could fall under federal investigation. This risk goes up if the amounts billed are outliers in the industry. It is imperative professionals are conservative in their billing and obtain expert assistance when confusion arises.
Medicare System is Too Expansive to Police Efficiently
Federal government programs are ripe for fraud based on the sheer volume and lack of oversight. This is a common theme for federal programs throughout the United States. The Internal Revenue Service (IRS) struggles to mitigate fraud because they do not have the man power to audit every return. The IRS is notorious for missing companies who fail to file a return for decades. And catching fraud is even more difficult. The IRS combats the volume issue by focusing on certain industries, or waiting for tips, to lessen the world of returns they must review. Historically, cash businesses, tax preparation firms and large earners receive the most scrutiny from the civil and criminal divisions of the IRS.
The Medicare system suffers from a similar problem. There are too many providers and claims to police the entire system effectively. With close to a billion claims filed each year, investigators have the impossible task of trying to verify claim validity. To attack this problem, investigators are forced to focus on individual treatments, review monetary outliers or follow up on whistle blower complaints.
Focus on Certain Treatments
Historically, the government has focused their attention on certain services provided to Medicare beneficiaries. Some of these services include physical therapy, electronic transportation products, various infusion therapies, and diagnostic testing. Once the government came across fraudulent schemes utilizing these services, professionals providing these services came under a microscope. This increased focus continues to run the risk of exposing legitimate practices to scrutiny over minor infractions in their Medicare billing. The complexity of the Medicare rules ensures no practice runs at a 0% error rate when billing Medicare. Between human error, complicated rules, and the coding system, mistakes are going to happen in the Medicare billing process. These minor infractions can lead to issues with the federal government both civilly and criminally. This reality has led to many doctors failing to provide these services to the elderly or opting out of Medicare altogether.
The regional private carriers assist CMS in identifying potential fraud. One of their main tools is to flag a provider who is a monetary outlier in the industry. If an average hospitalist bills $40,000 per year for x-rays or other diagnostic testing, the private carrier will flag a provider who greatly exceeds that amount. If a hospitalist in that region were to consistently bill $400,000 a year for x-rays or other diagnostics, the system would flag that provider. At that point an investigation into the doctor’s practice and Medicare billing could open, and a thorough criminal investigation could follow.
This system does not take into account the particular clientele of a doctor or any other individualized traits of the doctor’s practice. The outlier method is merely a simple tool to narrow the world of claims the government must review. It is not without merit, but it also brings legitimate practices under government scrutiny.
Whistle blower Complaints
The False Claims Act incentivizes persons to come forward with information about fraudulent healthcare practices. Under the Act, a successful prosecution or civil disposition against a professional defrauding the government can result in large monetary rewards for the whistle blower. This route for ferreting out healthcare fraud is effective and a common starting point for both civil and criminal investigations across the country.
Ultimately, the Medicare system relies on a system of trust. This system requires healthcare professionals to honestly bill Medicare within the guidelines promulgated by Congress and CMS. There are very few checks and balances to ensure the efficiency of the system. From enrollment to billing oversight, the federal government has laid out a system that is highly susceptible to fraudulent activity. Undoubtedly, millions of dollars is fraudulently obtained from the federal government yearly through the Medicare program.
However, there is another side to that coin. The system is also highly complicated. CMS provides rules which are as clear as mud and holds professionals accountable to follow them. It is not uncommon for experts, CMS, the Courts, and federal agents to have differing opinions on what the Medicare guidelines require of a Medicare provider. This issue is compounded by the human error inherent in running a large practice. The Medicare system is dysfunctional on both ends, and this dysfunction provides a climate for both fraud and arbitrary federal action.
Later posts will discuss some troubling areas which often lay the foundation for criminal prosecution.