My Actions Were Innocuous. Did I Commit Fraud?

Dr. Derm has run an honest, reputable, successful dermatology practice for 30 years. She is respected by her colleagues and loved by her patients. Her usual Medicare office visit charge of $45 is considered reasonable and customary by all of the managed care providers in her service area. Unfortunately, Dr. Derm’s office manager becomes ill, and the doctor hires an insurance/billing specialist. The “specialist” notes that the $45 is a minimal amount of money when compared with the effort undertaken by the physician.  He suggests that the dermatologist simply upcode, without changing the $45 fee; with this, reimbursements will be improved. Since the fee charged would not be changed, he innocently suggests, there can be no harm. He further explains to Dr. Derm that her coding could be undertaken in an honest, yet more aggressive, manner.

Dr. Derm takes this advice and assumes that since she is not charging more than the original $45 fee, there cannot be a problem. Unfortunately, her “level of care” documentation is abysmal. In one year she bills 1,000 patients in this manner. She continues to provide impeccable care, but unfortunately she receives a Medicare audit that suggests fraud on her part. She is convinced that she is innocent. After all, she is still charging the same $45. She knows that if she had better documentation, she could charge higher fees. Is this really fraud?

Healthcare fraud

Only violent crime ranks higher than the white-collar crime of healthcare fraud according to the Department of Justice (DOJ). Ten percent of the DOJ’s financial resources are directed to healthcare fraud. The General Accounting Office claims 10 percent of the trillion dollar healthcare industry is lost to fraudulent provider claims. The resulting cost to federal and state governments are tens of billions of dollars a year. The numbers have only increased over the past decade. Healthcare fraud is a classic example of a white-collar crime.

There are eight major theories of fraud under which a healthcare provider can be prosecuted:

1) Treatment by fraud (violations of statutes regulating controlled substances,

2) billing for services not provided,

3) misrepresenting the nature of services provided,

4) auto accident scams,

5) quackery  (misrepresenting credentials or remedies),

6) false cost reports,

7) illegal remunerations, and

8) providing unnecessary or substandard health services.

The Healthcare Financing Administration’s Web site notes that the most common forms of fraud include billing for services not provided, misrepresenting the diagnosis to justify payment, soliciting, offering or receiving a kickback, unbundling or “exploding” charges, falsifying plans of treatment and medical records to justify payment, and billing for a service not furnished as billed – so called upcoding.

Next: Statues addressing false claims

Statutes addressing false claims

Both civil and criminal statutes deal with such false claims. The Medicaid and Medicare fraud and abuse laws make it a felony to misrepresent the nature of services rendered and provide for imprisonment, as well as fines. The False Claims Act (FCA) allows the government to recover three times the amount of damage to the government as well as fines up to $10,000 per claim.

The FCA also allows private citizens to bring actions in their own name and the name of the government. Referred to as “qui tam” actions, a person bringing such an action (known as a relator) is entitled to share in the proceeds of any recoveries, which result from the action. The financial rewards to a qui tam plaintiff can run in the millions of dollars.

By sharing in the government’s recoveries, qui tam actions encourage private individuals to report fraud. The intent of the qui tam provisions, in the FCA, is to encourage “whistleblowers” to assist the government in its pursuit against fraud. A Washington Times journalist once referred to qui tam relators as “bounty hunters.”

As with FCA convictions, providers can incur catastrophic losses when prosecuted under the Medicaid and Medicare fraud and abuse laws. The Office of the Inspector General also has administrative authority to exclude providers from the Medicaid and Medicare program. A provider dependent upon these programs for a significant segment of his/her practice can be economically destroyed by such a sanction.

Dr. Derm thought her actions were innocuous; she followed the advice of her specialist. It does not matter. Her actions will be considered fraudulent.