New York Times, “Pervasive Medicare Fraud Proves Hard to Stop”

September 17th, 2014 by Qui Tam

The New York Times published an article noting that, despite huge investments in preventing Medicare fraud—up to $600 million a year—fraud against the program persists to the tune of $60 billion, which is equivalent to 10% of Medicare’s cost. For example, last year, the federal government was only able to recover $4.3 billion. Such news only serves to emphasize the role of whistleblowers who, with the aid of counsel, can alert the government to the existence of fraud much more quickly than many of the fraud prevention systems in place today.

Federal prosecutors, F.B.I. agents, investigators, paralegals and other paraprofessionals, some of whom serve on one of nine specialized federal strike forces, work on behalf of the federal government to root out fraud in the Medicare system. In addition, the U.S. government has hired contractors to assist in fraud detection; these include: recovery audit contractors who work to reduce hospital overbilling and earn their keep by receiving anywhere from 9 to 12.5% of the money they recover; Medicare administrative contractors who focus on claim payments; and zone program integrity contractors who specialize in fraud. Moreover, The Centers for Medicare and Medicaid Services (“CMS”) has invested $100 million into a computer system that analyzes medical claims daily and searches for suspicious patterns that indicate fraudulent billing.

Recent successes include three strike forces working together earlier this year to charge 90 people with $260 million worth of fraudulent billing. Meanwhile, the computer program assisted contractors in identifying and then cutting off a Texas ambulance company for false billing after just $1,800 was billed in 2013, compared to the $312,000 the ambulance service earned in 2012.

However, despite the large number of people working on fraud detection and these recent gains, the New York Times noted that the federal government’s efforts are still falling short when compared to the sheer scale of the fraud. The government’s anti-fraud efforts appear to be stymied in part by a lack of coordination and cooperation among contractors, a lack of communication with the government, and contractors’ potential conflicts of interest with the very entities they are examining.

In addition, the federal government’s fraud prevention system oftentimes leaves private entities, such as insurance and technology companies, with responsibility for handling claims with minimal to no government oversight. In fact, CMS is only able to manually review 3 million of the 1.2 billion claims it receives each year, leaving the remainder of compliance oversight to the private entities that provide private insurance and software.

And, oddly, those contractors who have been successful have assisted in slowing down their own programs. For example, recovery audit contractors have assisted Medicare in recovering $8 billion since 2009. But, because of the hospitals’ right to appeal the contractors’ findings, there is now a two year delay for adjudicating those appeals. In addition, hospitals have complained that the contractors are nothing more than bounty hunters because of their reimbursement scheme.

Furthermore, for an unknown reason, the government shut down a popular fraud alert hotline in South Florida that would turn tips around in 48 hours to investigators. Now, those calls are routed to the government’s Medicare hotline, and tips take months to be addressed.

According to the New York Times’ report, government officials are frustrated with the lack of management, communication, and cooperation between the government and its contractors as well as between the contractors themselves. In fact, an October 2013 report from the Government Accountability Office criticized Medicare for its lack of oversight of its contractors and for not aligning contractors’ financial goals with the aims of the agency. Other recent reports have criticized Medicare’s conflict of interest rules for its contractors as well as its supposed recoveries through the $100 million software program.

However, Medicare’s Center for Program Integrity, which acts as its anti-fraud center, has heard these criticisms and advised the New York Times that it is focusing more than ever on fraud detection and resolution.

Nevertheless, the limitations of the existing fraud detection system makes it clear that the best way to quicken and enhance the government’s investigation of fraud remains those insiders with knowledge of a provider’s false billing who are willing to step forward and blow the whistle.

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