Identifying and preventing health care fraud

February 4, 2020

Instances of health care fraud account for billions of dollars of lost revenue a year throughout the industry. Without the correct safeguards installed to help identify and end fraudulent practices, health care providers could face investigations and penalties that could cost them significant amounts of revenue and threaten the financial health of their business.

That being said, creating relevant prevention policies and compliance plans to cover all facets of the laws governing fraud and abuse can often prove challenging for providers.

Complying with regulations at the local, state and national level can be difficult for providers who already focus on a range of priorities, including care delivery, payer compliance, medical billing, and revenue cycle management.

And at a time when payment rates are stagnating or dropping across payers, providers looking for every potential advantage to maximize revenue could conceivably engage in fraud and abuse crimes without intent.

Unfortunately, intent doesn’t factor in when the federal government comes to investigate these activities.

While CMS has made strides in recent years to be more proactive about educating providers engaging in potentially fraudulent activities, such as introducing its Targeted Probe and Educate (TPE) audit process, there still is a significant amount of gray area to operate in that can cause uncertainty and leave you vulnerable to takebacks down the road.

Providers will find CMS scrutinizing claim submissions more than ever to detect potential improper billing practices. In short, the days insurers simply paying then chasing are over!

What counts as fraud?

Fraud is defined as any deliberate and dishonest act committed with the knowledge that it could result in an unauthorized benefit to the person committing the act or someone else who is similarly not entitled to the benefit. Here are a few examples:

  • Misrepresentation of the type or level of service provided;
  • Misrepresentation of the individual rendering service;
  • Billing for items and services that have not been rendered;
  • Billing for services that have not been properly documented;
  • Billing for items and services that are not medically necessary;
  • Seeking payment or reimbursement for services rendered for procedures that are integral to other procedures performed on the same date of service (unbundling);
  • Seeking increased payment or reimbursement for services that are correctly billed at a lower rate (up-coding).

During a recent billing audit, we discovered a lab was mistakenly duplicating coding for its CPTs due to a system error. While not intentional, this resulted in the lab being paid twice for each service performed. Had it been caught by the payer; this would have resulted in a takeback request and possibly worse if the lab couldn’t prove the issue was incidental. Fortunately, we were able to uncover the discrepancy and amend the issue before the payer came calling.

Meanwhile, abuse is defined as practices that are inconsistent with accepted sound fiscal, business, or medical practices, and result in an unnecessary cost or in reimbursement for services that are not medically necessary or that fail to meet professionally recognized standards for health care.

  • Misusing codes on a claim;
  • Charging excessively for services or supplies; and
  • Billing for services that were not medically necessary.
  • Paying for referrals

To prevent an organization from engaging in healthcare fraud and abuse activities, providers should understand key healthcare fraud laws, implement a compliance program, and improve medical billing and business operations processes.

What are the rules?

Each of the items below is viewed as fraud, according to CMS:

  • Knowingly submitting, or causing to be submitted, false claims or submitting misrepresentations to acquire claims reimbursement from payers for which no entitlement exists.
  • Intentionally soliciting, receiving, offering, and/or paying remuneration to encourage or reward referrals for items or services reimbursed by payers.
  • Providing prohibited referrals for specific designated health services.

Abuse involves practices that directly or indirectly generate unnecessary costs, according to CMS. Health care abuse can also result in criminal and civil penalties.

For example, we recently had to remind a biller that claims must be filed under the provider who signed out the services unless an overread is being done. In this instance, the doctor who performed the services wasn’t contracted with the payer in question, so the biller filed the charge under a separate member who was contracted with the plan.

All providers should understand Anti-Kickback Statute, Stark Law (self-referral) and the False Claims Act. Also be aware that in addition to these laws, CMS has a number of rules and regulations pertaining to fraud and abuse.

  • Federal False Claims Act: imposes civil liability on any individual who knowingly submits, or causes the submission of, false or fraudulent claims to the federal government, law officials do not need proof of specific intent to defraud to charge individuals.
  • Anti-Kickback Statute: targets individuals who knowingly and willfully pay, solicit, offer, or receive remuneration directly or indirectly to induce or reward referrals of services and items reimbursed by federal health care programs.
  • Stark Law (self-referral): prohibits providers from making referrals for certain health care services reimbursable by federal healthcare programs to an entity in which the provider (or immediate family member) has an ownership or investment interest or with which he/she has a compensation agreement, otherwise known as the Stark Law.

Providers who violate the healthcare fraud laws could face exclusion from federal healthcare programs and civil monetary penalties. Federal judges can also sentence violators to prison.

How a strong compliance plan can protect you

So, what can you do to protect yourself from unknowingly committing these violations and putting yourself and your business at risk? Having a strong and well-developed compliance plan in place is the most important step you can take toward preventing fraud, according to Billie Mildenberger, Director of Audit Services.

According to the Officer of the Inspector General (OIG), a compliance plan should “establish a culture within a hospital that promotes prevention, detection and resolution of instances of conduct that do not conform to Federal and State law, and Federal, State and private payer healthcare program requirements, as well as the hospital’s ethical and business policies.”

The OIG also suggests the following:

  • Development and distribution of written conduct standards and policies that promote the hospital’s commitment to compliance (e.g., by including compliance adherence as part of staff evaluations) and that address areas of potential fraud, such as claims management and financial relationships with other providers.
  • Appointment of a Chief Compliance Officer and other compliance staff charged with operating and monitoring the compliance program and reporting to the hospital’s governing body.
  • Implementation of continuous education and training for staff.
  • Maintenance of a process to receive healthcare fraud reports and complaints, such as a hotline, and the development of procedures to protect anonymity and whistleblowers from retaliation.
  • Establishment of a system to respond to healthcare fraud and abuse accusations and appropriate disciplinary actions against staff who violate compliance policies and laws.
  • Use of audits and/or evaluations to track compliance adherence and help reduce issues.
  • Investigation and remediation of systemic problems and the establishment of policies to address if staff involved are retained or terminated.

Vachette has worked with a number of various providers and administrators across the pathology industry to develop appropriate compliance plans. If you’d like assistance evaluating the effectiveness of your program or if you want to redesign it from the ground up, we have the expertise to review standards and policies, staff training, internal reporting system monitoring, non-compliance discipline, investigations and more.

Organizations that can show they have a compliance plan in place will be able to better defend themselves if they’re accused of fraud, said Jennifer Martin, Vachette’s Director of Special Audits.

“It has to be legitimately practiced and known throughout the organization,” Martin added. “Investigators will generally be able to tell if it’s something you were just paying lip service to.”

One independent lab we work with recently had its compliance plan put to test after a newly hired receptionist elected to willfully engage in acts of fraud by stealing the credit card numbers of patients. Fortunately, the lab was able to act quickly to amend the issue once the scheme was uncovered because their compliance plan offered a playbook on how to respond. The employee was reported to police and terminated, while all affected patients were notified and made whole.

In short, the existence and institution of a compliance plan could be the deciding factor between civil or criminal charges if an event of fraud or abuse were to occur.

How efficient processes add protection

In addition to having a compliance plan in place, providers should also be work to improve their medical billing and coding in order to both boost their revenue cycle and prevent unnecessary errors.

Clinical documentation is the basis upon which payers reimburse providers for their services. Inaccurate or inappropriate coding can also trigger potential healthcare fraud and abuse investigations.

Common clinical documentation and coding issues include billing for the following:

  • Services that were not rendered.
  • Medically unnecessary procedures.
  • Services performed by an improperly supervised or unqualified employee.
  • Procedures or tests of such low quality they are deemed worthless.
  • Separate services already included in a global fee, such as an evaluation and management (E&M) code service the day after surgery.

You should be especially conscious of upcoding in an attempt to boost your claims reimbursement, which is a practice CMS watches closely for.

Providers should try to benchmark their medical billing data against industry standards, says Mick Raich, CEO of Vachette Pathology. That way, they can be aware of whether their billing practices deviate significantly from industry standards, which can obviously trigger payers to become suspicious and launch investigations.

“We track all our audits and can provide a direct comparison of your billing company versus industry standards and the competition,” says Raich. “This means we can tell you the trends and errors by biller.”

Additionally, CMS recommends that providers exercise caution with investments in healthcare business ventures. Providers may invest in third parties, such as laboratories, imaging centers, equipment vendors, or physical therapy clinics, to expand patient care access. However, referral patterns to these facilities could implicate a provider in an investigation.

“These business relationships can sometimes improperly influence or distort physician decision-making and result in the improper steering of a patient to a particular therapy or source of services in which a physician has a financial interest,” according to CMS. “Many of these investment relationships have serious legal risks under the AKS [Anti-Kickback Statute] and Stark Law.”

To avoid illegal kickback schemes with investment partners, the agency recommends that providers ask the following questions:

  • Is the investment interest for a nominal capital contribution?
  • Will the provider’s ownership share be greater than his/her share of the total capital contributions made to the venture?
  • Is the investment venture promising the provider high rates of return for little or no financial risk?
  • Is the investment venture, or any possible business partner, offering to loan the provider money to make his/her capital contribution?
  • Is the partner asking the provider to guarantee patient referrals or item orders?
  • Does the provider believe he will be more likely to refer patients for services provided by the venture just because he/she made the investment?
  • Will the venture have enough capital from other sources to fund its operations?

Providers should ask themselves similar questions if health care vendors approach them with free samples, business opportunities, and incentives.

If you would like assistance reviewing or implementing a compliance plan, don’t hesitate to reach out to us directly. You may contact Dustin Suntheimer, Vice President of Sales and Marketing, at 734-972-2693 or by emailing dsuntheimer@vachettepathology.com. You can also contact our main office directly at 517-486-4262.

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