Signs of Medical Insurance Fraud & Abuse

Medical fraud and abuse costs the government and insurance companies billions of dollars each year. Some of the fraud and abuse is unintentional, but in other cases, it's intentional and known to be criminal. When that happens, fines and lawsuits are filed, and sometimes someone goes to jail.

Unintentional Fraud

• When fraud is unintentional, for the most part hospitals and physicians will be held blameless. An example of that concerns general lab testing. Physicians will request lab tests and submit a diagnosis supporting that test. The receiver will process the tests and send out a bill that includes a diagnosis. However, that one diagnosis might not cover all the tests the physician has requested. It's considered fraud to bill for something you know won't be paid, but in this case, since most insurance providers understand what this particular issue is, they won't prosecute anyone for committing this act.

Intentional Fraud

• Since the intended result of fraud is to get money that's not deserved, this issue is taken seriously by the Department of Health and Human Services' Office of the Inspector General (OIG) and Medicare's Recovery Audit Contractor program. Some examples of fraud and abuse include upcoding, charging too many services, sending too many bills, and altering or falsifying medical records.

Upcoding

• Upcoding is making a person's diagnosis appear more severe than it really is by giving it a higher-level diagnosis code. The processing of inpatient claims is based on diagnosis codes and their order. The more severe the diagnosis, the more money a hospital is paid. There are certain diagnosis codes that are on the OIG's watch list, and if they receive a higher percentage of claims from a facility for those diagnosis codes, they'll go into a facility and do a full audit. They will also take a look at the case mix of diagnoses within a hospital's inpatient population to see if there are significantly more severe diagnoses across the board than normal. If they determine that this was done intentionally, the hospital will be fined.

Charging Too Many Services

• Every facility and physician is supposed to have a process set up for capturing charges for each patient. In some cases, this system is flawed and patients end up getting overcharged for services, not based on price but based on volume. In some circumstances, it's been found that overcharging is intentional, as sometimes those services weren't even provided by either entity.

Sending Too Many Bills

• Sending too many bills out for processing is probably the easiest bit of fraud and abuse to figure out by insurance companies.

  Every insurance company and government agency knows how many beds each hospital has, as well as the types of services they provide. They also know the general population of the area, and they can calculate how many procedures of a certain type can possibly be performed on a daily, weekly and monthly basis. Seeing a one or two-day total jump higher than normal won't raise any red flags. Higher than normal numbers a few months in a row is an indication that something has changed, and an audit will be triggered.

  The same goes for physicians and physician's groups. Insurers and the government know the average time a physician needs to see patients based on diagnoses and procedures billed, and do the same types of calculations. If a physician has a solo practice and is sending out 100 claims a day, it's easy for everyone to know that's an impossible figure. It's why we hear of so many physicians being accused by Medicaid of fraud, because of the physical impossibility of seeing as many patients as bills that are being submitted.

Altering or Falsifying Medical Records

• This is the most severe form of fraud and abuse, and the hardest one to find. Medical records don't have to be submitted with all claims. This means if an entity understands what triggers there are for audits, they can manipulate the system enough to increase their reimbursements without going over any obvious percentage numbers.

  It's illegal to change medical records with the intention of altering the amount of money you're going to be paid. It's also illegal to omit critical information on purpose or alter that information, to hide an error that might have occurred in treating a patient. And finally, even if ordered to do so, it's illegal for a diagnosis coder to change codes with the intention of increasing the reimbursement to the provider.

Penalties

• The penalties for intentional fraud and abuse are stiff. Fines are based on a percentage of reviewed claims and records and an estimate of how long the abuse has been going on. Not only that, but payments for those erroneous claims will be taken back, which causes even more financial pain. Entities can decide to challenge, but if they lose, they have to pay triple the original estimated fine. This is why most entities just pay the fine and move on, because most challenges end up favoring the plaintiff.

  The second penalty is criminal prosecution for fraud. If convicted, this will result in up to five years' jail time and a personal fine on top of the fine already levied against the hospital or practice.