Health Care Fraud

Excerpted from the FBI's 2009 Financial Crimes Report
Fiscal Year 2009 (October 1, 2008—September 30, 2009)

I. General Overview

The FBI's mission in the area of health care fraud (HCF) is to oversee the FBI's HCF initiatives by providing national guidance and assistance to support HCF investigations targeting individuals and organizations who are defrauding the public and private health care systems. The FBI, along with its federal, state, and local law enforcement partners, the Centers for Medicare and Medicaid Services (CMS), and other government and privately sponsored program participants, work closely together to address vulnerabilities, fraud, and abuse.

All health care programs are subject to fraud; however, Medicare and Medicaid programs are the most visible. Estimates of fraudulent billings to health care programs, both public and private, are estimated between three and ten percent of total health care expenditures. The fraud schemes are not specific to any area, but they are found throughout the entire country. The schemes target large health care programs, public and private, as well as beneficiaries. Certain schemes tend to be worked more often in certain geographical areas, and certain ethnic or national groups tend to also employ the same fraud schemes. The fraud schemes have, over time, become more sophisticated and complex and are now being perpetrated by more organized crime groups.

HCF is expected to continue to rise as people live longer. This increase will produce a greater demand for Medicare benefits. As a result, it is expected that the utilization of long and short-term care facilities such as skilled nursing, assisted living, and hospice services will expand substantially in the future. Additionally, fraudulent billings and medically unnecessary services billed to health care insurers are prevalent throughout the country. These activities are becoming increasingly complex and can be perpetrated by corporate-driven schemes and systematic abuse by providers.

The most recent CMS statistical estimates project the total health care expenditures will total $2.26 trillion, representing 16.2 percent of the Gross Domestic Product (GDP). By the year 2016, CMS estimates total health care spending to exceed $4.14 trillion, representing 19.6 percent of the GDP.

With health care expenditures rising at over twice the rate of inflation, it is especially important to coordinate all investigative efforts to combat fraud within the health care system. The FBI is the primary investigative agency in the fight against HCF, and has jurisdiction over both the federal and private insurance programs. With more than $1 trillion being spent in the private sector on health care and its related services, the FBI's efforts are crucial to the success of the overall program. The FBI leverages its resources in both the private and public arenas through investigative partnerships with agencies such as the U.S. Department of Health and Human Services-Office of Inspector General (HHS-OIG), the Food and Drug Administration (FDA), Drug Enforcement Agency (DEA), Defense Criminal Investigative Service, Office of Personnel Management, IRS-CID, and various state and local agencies. On the private side, the FBI is actively involved with national groups, such as the National Health Care Anti‑Fraud Association (NHCAA), the National Insurance Crime Bureau (NICB), the Blue Cross and Blue Shield Association (BCBSA), the American Association of Retired Persons, and the Coalition Against Insurance Fraud, as well as many other professional and grass‑roots efforts to expose and investigate fraud within the system.

In furtherance of the FBI's efforts to combat HCF in the United States, the FBI participates in various initiatives with federal, state, and local agencies. At the Headquarters level, the FBI participates in a Senior Level Working Group which includes the CMS, DOJ, HHS-OIG, and other agencies to identify and assess health care industry vulnerabilities and make recommendations to protect the industry and the public through a coordinated effort. At the Headquarters level, the FBI is also involved in biweekly coordination meetings at the DOJ which includes various DOJ components involved in the fight against HCF. National-level liaison is also maintained with the DEA, FDA, Bureau of Immigration and Customs Enforcement (ICE), BCBSA, and other partners.

Throughout the country, FBI field offices participate in HCF Working Groups which involve law enforcement agencies, prosecutors, regulatory agencies, and health insurance industry professionals to identify the various crime problems involving HCF. The FBI develops national and local initiatives when large-scale fraud is detected, which may involve participation by several FBI field offices and other law enforcement agencies.

Over the years, FBI national initiatives have addressed frauds involving medical transportation, DME, hospital cost reporting, outpatient surgery centers, pharmaceutical fraud, and a variety of other specialized investigations. FBI offices also establish state and local initiatives to meet the needs of the community. Throughout the country, various field offices have conducted their own initiatives targeting clinic, pharmacy, medical equipment, home health agency, cosmetic surgery center, and other frauds which are of great concern within a community. The FBI participates in task forces whenever possible to address specific crime problems or groups of individuals. In order to meet the needs of the private insurance industry, the FBI works very closely with the NHCAA to identify crime trends and provide training to industry and law enforcement agency personnel. Most of the insurance companies utilize an internal Special Investigations Unit, which works closely with the FBI and our law enforcement partners.

HCF investigations are among the highest priority investigations within the FBI's WCCP, ranking behind only public corruption and corporate fraud. National initiatives include the DME Fraud Initiative, the Infusion Therapy Fraud Initiative, and the Home Health Care Fraud Initiative (HHCFI). Furthermore, numerous FBI field offices throughout the United States have proactively addressed significant crime problems through coordinated initiatives, task forces, and undercover operations to identify and pursue investigations against the most egregious offenders, which may include organized criminal activity and criminal enterprises. Organized criminal activity has been identified in the operation of medical clinics, independent diagnostic testing facilities, DME, and other health care facilities. The FBI is committed to addressing this criminal activity through disruption, dismantlement, and prosecution of criminal organizations. One of the most significant trends observed in recent HCF cases includes the willingness of medical professionals to risk patient harm in their schemes. FBI investigations in several offices are focusing on subjects who conduct unnecessary surgeries, prescribe dangerous drugs without medical necessity, and engage in abusive or sub-standard care practices. Recent trends also suggest that advances in technology and electronic medical data have caused HCF schemes to evolve. The FBI has developed a significant amount of expertise in investigating technical schemes involving medical data theft and other fraud schemes facilitated through the use of computers. Of course, fraud schemes continue to consist of traditional schemes that involve fraudulent billing, such as billing for services not rendered and upcoding of charges for services provided.

In December 2006, the DME Initiative was developed to address the significant crime problem associated with DME providers. Information developed with assistance from the CMS, the NHCAA, and the FBI's Financial Crimes Intelligence Unit (FCIU) identified DME providers as one of the top two provider types identified within all case referrals, preliminary investigations, and suspensions. The initiative was established to bring additional attention to DME fraud and the FBI's commitment to addressing the crime problem. The primary goal of the initiative is to provide intelligence to field offices concerning suspect DME providers, focusing on cases involving multiple districts or divisions, unique schemes, advanced techniques, and/or substantial loss amounts.

Infusion therapy fraud was established in April 2008. Its focus is on the billing of infusion-related services and medications that were not provided or were not medically necessary. An infusion is a method of intravenously introducing some substance into the human body. Receiving an infusion is more commonly referred to as "receiving an IV." In infusion therapy fraud, most often the perpetrator bills insurance providers for expensive medications that are rarely, if ever, administered to patients. In many cases, the medications are extremely powerful drugs used in only a small number of patients and require extensive management by a physician.

The HHCFI, established in January 2010, is the newest of the initiatives. Home health care makes up approximately $15.1 billion of the health care market and continues to grow. The expanding market is a target for perpetrators who are seeking to acquire a more significant share of illicit proceeds by exploiting expensive Home Health Agency (HHA) services. One of the more common HHA schemes, representing $4.5 billion and 30 percent of the overall industry, involves HHA providers who are inflating HHA diabetic episodes to create outlier payments which are in excess of the national 60-day episode payments. This scheme is projected to cost Medicare $1 billion in 2009, according to the CMS.

The Medicare Prescription Drug Program (Part D), implemented on January 1, 2006, has become an increasing focus and concern for the FBI. Prior to the implementation date, FBI Headquarters personnel regularly met with representatives from CMS and DOJ to share information, as well as review fraud and abuse occurring during the enrollment period. After the implementation date, the FBI established a working group for Part D which includes representatives from CMS, DOJ, HHS-OIG, FDA, DEA, USPIS, and the FTC. This working group shares and discusses information which can be used by each agency in future investigations of fraud related to this program. The FBI has worked with CMS to obtain regional training for field office personnel of the various agencies represented in this working group. The FBI is also working through CMS to maintain dialogue with the Medicare Drug Integrity Contractors (MEDICs) who have been tasked by CMS to identify, review, and analyze cases of suspected fraud and abuse in the Part D Program.

During the past year, the FBI continued to identify and analyze industry fraud trends through input from private and public health care program experts. Present areas of concern include DME, hospital fraud, physician fraud, home health agencies, beneficiary-sharing, chiropractic, pain management, and associated drug diversion, physical therapists, prescription drugs, multidisciplinary fraud, and identity theft which involve physician identifiers used to fraudulently bill government and private insurance programs.

As part of our national strategy to address HCF, the FBI cooperates with the DOJ and the various USAOs throughout the country to pursue offenders through parallel criminal and civil remedies. These cases typically target large-scale medical providers, such as hospitals and corporations, who engage in criminal activity and commit fraud against the Government which undermines the credibility of the health care system. As a result, a great deal of emphasis is placed on recovering the illegal proceeds through seizure and forfeiture proceedings, as well as substantial civil settlements. Upon the successful conviction of HCF offenders, the FBI provides assistance to various regulatory and state agencies, which may seek exclusion of convicted medical providers from further participation in the Medicare and Medicaid health care systems.

The FBI and the health care industry continue to expand their technology and intelligence assessments through the use of sophisticated data-mining techniques to identify patterns of fraud, systemic weaknesses, and aberrant billing activity.

In 2005, the FCS developed the Electronic Bank Records Initiative (EBRI). The EBRI was implemented to identify and develop a process for obtaining electronic (digital format) records from financial institutions. Historically, financial institutions have provided paper copies of records to law enforcement when they receive a subpoena from the government. These records are generally maintained by the banks in an electronic format. The time it takes the financial institution to make the copies of the records and for the investigative agencies to return the paper copies back to an electronic format for financial analysis creates a severe negative effect on the timeliness, effectiveness, and efficiency of investigations. In an effort to increase the efficiency of the process, a subpoena attachment was developed by the DOJ, FBI, and the IRS-CID for the production of electronic records instead of paper copies. The development included significant coordination with the financial institutions and their associations. The subpoena attachment was not based upon new or expanded laws, regulations, or rules. The attachment is merely meant to standardize and clarify the requests for electronic records according to the current Federal Rules of Criminal and Civil Procedure. In general terms, if a financial institution maintains records electronically, the requesting agency would be seeking to obtain the records electronically. In addition, the scope of the records requested has not changed due to the subpoena attachment, with the exception of seeking the records electronically.

The subpoena attachment was disseminated to FBI offices, IRS offices, and throughout the DOJ in November 2007. The goal of the DOJ, FBI, and IRS-CID is to inform and prepare financial institutions and their respective agencies for the use and response to the subpoena attachment. This includes working with financial institutions during the transition period in coordinating the requests and associated responses to subpoenas. In addition, it is anticipated the EBRI will greatly increase the efficiency of the financial records production process and provide significant costs savings to both the government and private industry.

II. Overall Accomplishments

Through FY 2009, 2,494 cases investigated by the FBI resulted in 945 indictments and 640 convictions of HCF criminals. It should be noted that numerous cases are pending plea agreements and trials. The following notable statistical accomplishments are reflective in FY 2009 for HCF: $1.6 billion in restitutions, $853 million in recoveries, $68 million in fines, and $54 million in seizures. The chart below reflects HCF pending cases from FY 2005 through FY 2009 as follows: FY 2005—2,547 cases; FY 2006—2,423 cases; FY 2007—2,493 cases; FY 2008—2,434 cases; and FY 2009—2,494 cases.

III. Significant Cases

Dr. Hany M. Iskander (Cleveland): Dr. Hany M. Iskander, an Egyptian national here on work visa, executed a scheme to defraud Medicare, Medicaid, and other health care benefit programs through his pain management business located in Bucyrus, Ohio, and Lewis Center, Ohio. The scheme involved millions of dollars of fraudulent claims for payment for medical services which were either not performed or which had no medical necessity to be performed. On October 2, 2009, Dr. Iskander and his wife, Evat Hanna, were found guilty of obstruction of justice by shredding and concealing medical records to impede a federal investigation. Pursuant to a plea agreement, Dr. Iskander agreed to serve at least 51 months' imprisonment to be determined by the sentencing judge, at a hearing set for February 2, 2010. Iskander also agreed to forfeit his medical license and to be deported to Egypt following his release from prison. The government has entered into a plea agreement with Iskander's wife recommending a sentence of home detention for one year, following which she will also be deported.

Pfizer Inc. (Boston): Investigation was predicated in August 2004 upon the receipt of qui tam information from the FDA that Pfizer employees may have destroyed records sought in a federal civil investigation and that company employees had been engaged in a series of transactions involving off-label promotions and kickbacks. Between 2001 and 2005, Pfizer northeast regional manager Mary Holloway directed approximately 100 sales employees to market the painkiller Valdecoxib (Bextra) for uses specifically prohibited by the FDA. On March 30, 2009, Holloway pled by criminal information to one count of distribution of a misbranded drug. Holloway was sentenced to 24 months' probation and a $75,000 fine on June 18, 2009. Holloway is the second subject convicted in this case. Thomas Farina, a New York-area sales manager for Pfizer was indicted in March 2008, and pled guilty to obstruction later that month. In January 2009, Pfizer agreed to pay the U.S. Government $2.3 billion to settle claims involving the drugs Bextra, Zyvox, Goedon, and Lyrica. Valdecoxib (Bextra) was a nonsteroidal anti-inflammatory prescription drug, administered in tablet form, which was used in the treatment of arthritis, inflammation, pain, and menstrual symptoms. Bextra was approved by the FDA for distribution in the United States in 2001. Pfizer withdrew Bextra from the U.S. market in 2005, after the FDA cited increased incidence of heart attacks, strokes, and serious skin reactions to the drug.

Operation Therascam (Miami):This HCF investigation was a large‑scale joint investigation between the FBI, the HHS-OIG, USAO, Southern District of Florida, and DOJ trial attorneys from D.C. It was predicated on companies offering kickbacks to individuals who had access to patients residing in assisted living facilities for the purpose of billing for fraudulent claims to the Medicare program. During the initial stage of the investigation, a massive kickback network was uncovered involving a multitude of patients, physicians, DME companies, and pharmacies. The case led to more than 20 search warrants over the last several years, and the investigation resulted in more than 200 consensual recordings which resulted in the recovery of over $100,000 in kickback payments.

IV. Health Care Fraud Schemes

HCF is carried out by many segments of the health care system using various methods. Some of the most prevalent schemes include:

Billing for Services not Rendered—These schemes can have several meanings and could include any of the following:

Upcoding of Services—This type of scheme involves a billing practice where the health care provider submits a bill using a procedure code that yields a higher payment than the code for the service that was truly rendered. The upcoding of services varies according to the provider type. Examples of service upcoding include:

Upcoding of Items—A medical supplier is upcoding when, for example, the supplier delivers to the patient a basic, manually propelled wheelchair, but bills the patient's health insurance plan for a more expensive motorized version of the wheelchair.

Duplicate Claims—A duplicate claim usually involves a certain item or service for which two claims are filed. In this scheme, an exact copy of the claim is not filed a second time; rather, the provider usually changes a portion, most often the date of service on the claim so that the health insurer will not realize the claim is a duplicate. In other words, the exact claim is not filed twice, but one service is billed two times, in an attempt to be paid twice for one service.

Unbundling—This is the practice of submitting bills in a fragmented fashion in order to maximize the reimbursement for various tests or procedures that are required to be billed together at a reduced cost. For example, clinical laboratory tests may be ordered individually, or in a "panel" (i.e., a lipid panel, an arthritis panel, a hepatitis panel). Billing tests within each panel as though they were done individually on subsequent days is an example of unbundling.

Excessive Services—These schemes typically involve the provision of medical services or items which are in excess of the patient's actual needs. Examples of excessive services include:

Medically Unnecessary Services—A service is medically unnecessary and may give rise to a fraudulent scheme when the service is not justified by the patient's medical condition or diagnosis. For example, a claim for payment for an electrocardiogram test may be fraudulent if the patient has no conditions, complaints, or factors which would necessitate the test.

Kickbacks– A health care provider or other person engages in an illegal kickback scheme when he or she offers, solicits, pays, or accepts money, or something of value, in exchange for the referral of a patient for health care services that may be paid for by Medicare or Medicaid. A laboratory owner and doctor each violate the Anti-Kickback statute when the laboratory owner pays the doctor $50 for each Medicare patient a doctor sends to the laboratory for testing. Although kickbacks are often paid in cash based on a percentage of the amount paid by Medicare or Medicaid for a service, kickbacks may take other forms such as jewelry, free paid vacations, or other valuable items.

V. Health Care Fraud Prevention Measures

HCF is not a victimless crime. It increases health care costs for everyone. It is as dangerous as identity theft. Fraud has left many thousands of people injured. Participation in HCF is a crime.

Keeping America's health system free from fraud requires active participation from each of us. The large number of patients, treatments, and complex billing practices attract criminals skilled in victimizing innocent people by committing fraud.

What is Health Care Fraud?

Tips to protect yourself against Health Care Fraud

This article was posted on April 14, 2011.

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