Medicare Billing Fraud Costs to Society

We all will need it at some time in our future. The costs keep rising and the loss to the government (i.e. we, the People) is staggering. Medical billing experts estimate that the U.S. Government loses 30 cents of every dollar earned from fraudulent practices and medical billing scams. You may recall that the Obama Health Care Reform Act that was signed into law on March 23, 2010, cited about $500 billion in Medicare fraud that is supposed to be recovered to help pay for the Act. I believe this is the tip of the iceberg.

Medicare's war on fraud went high-tech on August 1, 2012, with the opening of a $3.6 million command center in Baltimore that features a giant screen and the latest computer and communications gear. The idea is to have the tools to prevent the annual $60 Billion cost in Medicare fraud and recover as much as possible from the fraudsters. The government expects the system to eventually pay for itself, although as with most statements of this kind the glaring omission is how much is spent to run the system and pay the employees charged with its operation.

I’ve often wondered what motivates a highly-skilled and well-educated medical professional to commit Medicare fraud. These are reasonably well paid individuals who, supposedly, receive a great deal of self-satisfaction from doing their job well. Very few professions can match those benefits.

I believe there are a variety of factors involved including an indifference to ethical transgressions. I like to think of it as the absence of a moral compass or a compass that is not pointed true north. In my last blog I spoke of this phenomenon.

We all know people who seem to be amoral – but we expect medical professionals to be better than that. You know, The Hippocratic Oath historically taken by physicians, physician assistants' and other healthcare professionals swearing to practice medicine ethically and honestly.   

Alas, I am forced to conclude that physicians are no better or worse than the “average” American. Not all, of course, but way too many have morphed into greedy individuals who pursue self-interests above all else and rationalize unethical actions. Perhaps they feel entitled my low Medicare reimbursement rates to pad their billings, bill for nonexistent services, or perform and bill for unnecessary procedures. Unfortunately, the end result is we all pay higher health care costs to cover the over-billings for unsubstantiated Medicare services.

I’ve done a bit of research on actual cases of Medicare fraud and am alarmed at the lengths to which some medical professionals go in billing the government for fraudulent services. I describe just a few below to educate the reader about the extent of the problem.

Medicare fraud generally refers to willfully and knowingly billing medical claims in an attempt to defraud the Medicare program for money. Anyone found guilty of Medicare fraud is subject to exclusion from participation in the Medicare program in addition to fines and possibly imprisonment. Most Medicare fraud occurs in four areas:

1. Medical Equipment Never Provided The most common area of Medicare fraud is billing for Durable Medical Equipment (DME). DME refers to any medical equipment necessary for a patient's medical or physical condition. It includes wheelchairs, hospital beds, and other equipment of that nature. The provider will bill Medicare for equipment that the patient never received. Mobility scooters have been particularly popular for Medicare fraud schemes.
2. Services Never Performed In this instance, the provider bills for tests, treatment or procedures never performed. This can be added to the list of tests a patient has actually received and never be noticed. A provider may also falsify diagnosis codes in order to add on unnecessary tests or services.
3. Upcoding Charges Misrepresenting a level of service or procedure performed in order to charge more or receive a higher reimbursement rate is considered upcoding. Upcoding also occurs when a service performed is not covered by Medicare but the provider bills a covered service in its place.
4. Unbundling Charges Some services are considered all inclusive. Unbundling is billing for procedures separately that are normally billed as a single charge. For example, a provider bills for two unilateral screening mammograms, instead of billing for 1 bilateral screening mammogram.

Two examples illustrate particularly egregious behavior. On January 12, 2012, Jorge Pineiro pleaded guilty for his participation in a $25 million home health Medicare fraud scheme. Pineiro was a registered nurse who worked for ABC Home Health Care Inc. and Florida Home Health Care Providers Inc., two Miami home health care agencies that purported to provide home health and therapy services to Medicare beneficiaries. Pineiro and his co-conspirators operated ABC and Florida Home Health for the purpose of billing Medicare for expensive services that were not medically necessary and/or were never provided. The medically unnecessary services were prescribed by doctors, including, but not limited to, Pineiro’s co-defendant, Dr. Jose Nunez.

According to court documents, beginning in approximately June 2008, and continuing until approximately March 2009, Pineiro and his co-defendant nurses falsified patient files for Medicare beneficiaries to make it appear that they qualified for home health care and therapy services. Pineiro knew that the beneficiaries did not actually qualify for and did not receive the services. Pineiro and his co-defendant nurses described in nursing notes and patient files symptoms that were non-existent, such as tremors, impaired vision, weak grip and inability to walk without assistance. They included these symptoms to make it appear that the patients were unable to self-inject insulin and were homebound, thus appearing to qualify for home health care benefits under Medicare.

Lana Le Chabrier, a physician in Santa Barbara, California, was sentenced on July 12, 2012 to six and a half years in prison for conspiring to commit health care fraud. Le Chabrier was responsible for close to a million dollars in fraudulent billings submitted to Medicare and more than $400,000 in payments made on false claims. During the period of February 2006 through August 2008, Vardges Egiazarian, 63, of Panorama City, owned and controlled three health care clinics in Sacramento, Richmond, and Carmichael. Egiazarian and others recruited doctors to submit applications to Medicare for billing numbers. Le Chabrier assumed the role of co-owner and practitioner at the Richmond clinic, and claims were submitted to Medicare under her name for medical services purportedly rendered at the clinic.

In fact, Le Chabrier never treated a single patient at the clinic. Clinic patients, almost all of whom were elderly and non-English speaking, were recruited and transported to the clinics by individuals who were paid according to the number of patients they brought to the facilities. Rather than being charged a co-payment, the patients were paid for their time and the use of their Medicare eligibility, generally $100 per visit. False charts were created stating that each patient received comprehensive exams and a broad array of diagnostic tests. Few of these tests were ever performed, none were performed based on any medical need, and clinic employees filled out other portions of the charts using preprinted templates. Some clinic employees admitted to performing various tests on themselves, and placing the results in patient files.

Fraud is endemic in our society. It infects the business world including financial institutions, the health-care services profession, and our government. The total costs of fraud to society are difficult to determine. I believe it ranges in the trillions, not billions, and certainly not millions. Imagine if we had that money to pay off our national debt. Imagine if that money were returned to the taxpayer to stimulate the economy. Imagine if we lived in a society where people followed their inner voice rather than ignore it. We can hope, we can dream, but in the end “it takes a village” to raise a society that is led by a moral compass pointing due North.

Blog posted by Steven Mintz, aka Ethics Sage, on August 4, 2012