Despite the enormous sum of money spent in health care, many Americans continue to be discontented with the services they receive. One possible explanation for the disparities between what Americans expect from health care and what they get is that considerable resources are lost each year to health care fraud. For example, health care fraud cost consumers $85 billion, or 5% of the 1.7 trillion dollars spent on health care in 2003.¹ Health care fraud continues to drain billions of dollars from the U.S. health care system annually. Health care fraud continues today and depletes the health care system of valuable and limited resources. Nurses, as patient advocates, are in a unique position to support patients in obtaining and keeping the health care services they need by helping to combat fraud.

Fraud is generally considered an act of deception or misrepresentation designed to obtain something of value held by another. Fraud may be measured in a particular case by determining whether the scheme demonstrated a departure from fundamental honesty, moral uprightness, fair play, and candid dealings in the general life of the community.² Health care fraud includes filing false claims, offering and receiving kickbacks, and other schemes engaged in by persons and entities within the health care industry to divert money from the government.

Fraud is intentional, and according to the 1996 Health Insurance Portability and Accountability Act (HIPAA), health care fraud is knowingly and willingly executing, or attempting to execute a scheme to defraud any health care benefit program or to obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money owned by, or under custody or control of any health care benefit program. Typically, health care fraud is committed by³ —

• Billing for services not rendered
• Misrepresenting the diagnosis to justify payment
• Soliciting, offering, or receiving inducements to influence future purchases
• Billing for separate parts of a single procedure (unbundling)
• Falsifying documents to justify payment
• Billing for services not rendered as billed
• Providing services more often than indicated (over-utilization)
• Billing for unnecessary services
• Making single visits while billing for multiple visits
• Exhausting insurance benefits for one family member then billing for another (looping)
• Falsifying the credentials of a provider to bill at a higher rate (phantom billing)
• Billing Medicare and a private insurer for the same treatment or procedure (double billing)

When physicians submit Medicare claims for services never performed, they are committing fraud. When podiatrists misrepresent a service as compensable that is not compensable, they are also committing fraud. When nurse practitioners deliver services, but bill for others that pay better than those performed, or bill for unnecessary services, they are also practicing fraud.⁴ Abuse, which is often difficult to distinguish from fraud, may occur when health professionals use methods or practices that may be a medical purpose, but the use of which appears extravagant, improper, unnecessarily costly, or at odds with customary medical practice.

Problems with fraud control

At first glance, it would seem that since the George H. W. Bush Administration’s pronouncement of a fraud crackdown in 1992 with the creation of the Health Care Fraud: Abuse Control Program within the Department of Justice, that fraud control would not only be a top priority for federal law enforcement, Medicaid fraud control units, and insurance companies, but that health care fraud would be substantially eliminated. However, there are a number of significant problems that continue to hamper fraud control operations.

Health care fraud is designed to be invisible. Usually, only one person knows it has occurred, and it remains undetected unless someone goes looking for it. Moreover, the victims are not always suffering in the same way as with crimes like assault, burglary, or murder. It is difficult to allocate resources to fraud investigation when violent crimes besiege American cities. Fraud perpetrators know this and capitalize on the opportunity to pass off fraudulent claims among the hundreds of millions of claims processed each year.

Fraud perpetrators have also learned to “hit and run.” For instance, defrauders have opened bogus durable medical equipment (DME) companies using fictitious names and addresses, obtained DME supplier numbers, and began billing the government for thousands of dollars worth of unwanted, unordered supplies, before fraud control systems ever detected what was happening.¹ By that time, a defrauder would have closed shop and moved on. Defrauders pride themselves on being one step ahead of law enforcement and fraud investigators, and therefore regularly change the type of fraud they practice. A successful fraud investigation or prosecution is sometimes like one successful whack of the mallet in the carnival game Whack-a-Mole™ that is followed all too quickly by three or four new moles springing up around the board in quick succession.¹ The difference with fraud is that when new schemes spring up after a successful “whack” by prosecutors, it generally takes years to detect them.

Cracking fraud schemes takes time and skill on the part of investigators and law enforcement. Once a fraud control approach proves successful, it’s generally used again and again. Agencies keep pursuing the types of fraud they’ve learned to recognize; criminal prosecutors keep pursuing the types of fraud cases they’ve learned will be winners. Oftentimes, however, this approach results in nabbing the novice fraud artist while sophisticated types of fraud continue to propagate. With no one minding the store, innovative defrauders benefit, as investigators are kept busy with small-dollar-yield fraud cases.

Insurance companies experience the same type of frustrating circularity. Insurance companies ‘fraud unit staff often finds it difficult to convince their employers that they need additional resources to help uncover new types of fraud. In addition, they may be competing for funds that financial advisors suggest should be allocated for investments or activities that yield a greater profit than fraud control. Some companies deny the presence of fraud altogether. Certainly an organization’s fraud record appears stellar if no one is looking for fraud in the first place. Another problem develops if a new type of fraud is uncovered. The amount of staff-power needed to pursue the investigation often taxes the unit beyond its capacity.¹ Overburdened fraud-control staff, often out of necessity, are then forced to resume traditional, familiar approaches that tend to focus on the commonplace fraud practices they know well. Again, clever defrauders are serendipitously placed out of reach of the system designed to catch them.

Despite the difficulties associated with detecting and eliminating fraud, increased collaboration at the state and federal levels is yielding substantial results. For example, in 2001 the Federal Government from judgments, settlements, and administrative impositions was awarded more than $1.7 billion.⁵ In addition, 465 individuals were convicted of health care fraud-related offenses and 3,756 individuals or entities were excluded from participating in government programs.⁵ Since the inception of the Health Care Fraud: Abuse Control Program, more than $2.9 billion has been returned to the Medicare Trust Fund and more than $3 billion returned to the Federal government.⁵

Despite these efforts, fraud persists because some believe that defrauding the government or private health care payors is acceptable — an “entitlement” to get back money that they perceive will otherwise go to insurance company executives or government employees. A 1993 Insurance Research Council survey showed that 41% of mid-Atlantic state residents thought it was all right to pad insurance claims to make up for past premiums.¹ Some feel fraud is justified because “everybody does it.” Several years ago, Philadelphia staged a series of fake bus accidents using actors to pose as passengers. Hidden video cameras recorded passersby scrambling to board the crashed bus before the police arrived. Fifty-one people boarded the buses and recorded their names with police as having been aboard at the time of the crash; eleven additional people submitted injury claims without even bothering to board the bus at the scene.¹ Fraud results in higher insurance premiums for all Americans. Moreover, those individuals most in need of health care are the ones who suffer the most when the cost of fraudulent acts results in service cutbacks.

Laws governing health care fraud

There are a number of state and federal laws and regulations with accompanying penalties, fines, and sanctions that may be enforced against health care providers who engage in fraud. State laws generally mirror federal laws. The consequences for committing fraud vary; civil, criminal, and administrative sanctions are available. Defrauders may be subjected to the penalty of mandatory exclusion from Medicare and Medicaid, which also results in notification of state licensing officials. In addition, offenders may be required to pay civil monetary penalties, pay restitution, be subjected to peer review sanctions, have reimbursement payments suspended, and serve substantial periods of time incarcerated.

Federal, civil, and criminal actions arise from several federal statutes: the False Claims Act, including the Qui Tam provisions; False Statements, Mail and Wire Fraud, Conspiracy to Defraud the Government, and Money Laundering Statutes; the Medicare-Medicaid Anti-Kickback Act; the Ethics in Patient Referrals Act; the Stark Law; and HIPAA.

If a health professional submits a false or fraudulent claim⁶ to the U.S. government, such as billing for services not rendered, or makes a false statement,⁷ including concealing material facts as well as providing fictitious or fraudulent representations, he or she has committed a crime that carries a five-year prison sentence as well as fines. The U.S. can also pursue a false claims civil action against the defrauder and recover $5,000 to $10,000 for each false claim plus three times the amount of damages that the government sustained because of the fraudulent act.⁸

Mail and wire fraud statutes⁹ prohibit the use of mail or wire to carry on schemes to defraud. Therefore, a health professional that uses the U.S. Postal Service to mail false claims to Medicare or Medicaid may be prosecuted for mail fraud. Violators are subject to fines and/or imprisonment.

A health care fraud perpetrator who works along with another person to affect a scheme may be guilty of conspiracy,¹⁰ that is punishable by fines and/or imprisonment. If a health professional obtains money from a fraudulent activity, then uses that money to continue the unlawful activity, he or she may be prosecuted for money laundering and subject to fines of up to $500,000 or twice the property involved in the transaction, whichever is greater, imprisonment for up to 20 years, or both.¹¹

The Medicare-Medicaid Anti-Kickback Act makes it a felony to make false statements or representations in connection with claims submitted for reimbursement by Medicare or Medicaid.¹² The act also forbids the knowing and willful solicitation or receipt of any remuneration, including any kickback, bribe, or rebate, directly or indirectly, overtly or covertly, in cash or in kind, in return for referrals for services charged to Medicare or Medicaid.¹³ Under the Act, it is unlawful for clinical laboratories to offer financial incentives to physicians in exchange for referrals for services payable by Medicare or Medicaid. DME suppliers, physical therapy, and other supportive therapy agencies may not offer physicians any remuneration for Medicare/Medicaid referrals either. Violators are subject to a $25,000 fine or imprisonment for up to five years, or both. The only safety net for providers is to check whether a certain activity is mentioned in the Safe Harbor regulations,¹⁴ and therefore not a violation of the Act. Hospitals that violate the anti-kickback statute may lose their tax-exempt status.

Because Congress believed that having a financial interest in a clinical laboratory could affect a physician’s decision to order tests, it passed the Ethics in Patient Referrals Act.¹⁵ The law, which took effect January 1, 1992, is familiarly called Stark I, named for its primary sponsor, Rep. Pete Stark (D-CA). Stark I bans referrals by physicians to an entity with which they or immediate family members have a financial relationship.¹⁶ Stark II, which became effective January 1, 1995, expanded the ban to include ten other categories of health services in addition to clinical labs. These additional services include physical therapy, occupational therapy, radiology, radiation therapy, DME, parenteral and enteral nutrients, equipment and supplies, prosthetics, home health, outpatient prescription drugs, and inpatient and outpatient hospital services. Health care professionals need to evaluate the exceptions to the self-referral ban.¹⁷ Otherwise violators are subject to civil penalties and exclusion from participation in Medicare and Medicaid.

A section under the false claims statute — a qui tam action — allows a private individual to bring a suit against someone who has knowingly presented false claims to the government.¹⁸ Qui tam, a Latin abbreviation, means “Who sues on behalf of the King as well as for himself.”¹⁹ A “whistleblower” is the individual who brings about the qui tam action. The “whistleblower” observes fraud in the workplace and is the original source of information regarding the alleged fraud. Qui tam suits under the False Claims Act began during the Civil War era. The Lincoln administration wanted to stop fraud, but depended on private government contractors to supply a host of wartime necessities. Like most wartime administrations, it did not have adequate resources to scrutinize every contract deliverable to check for fraud, such as the substitution of sawdust for gunpowder.²⁰ While fraud involving wartime government and defense contracts may have been the primary reason for whistleblower actions for more than a hundred years, the majority of qui tam suits currently filed deal with health care fraud. Other possibilities for qui tam actions involve health care-related federal research grant fraud.

Individuals who bring qui tam suits are called “relators” and are entitled to 15% to 25% of the proceeds of an action or settlement if the government chooses to join in the suit, and 25% to 30% if they proceed with the case on their own. Jack Dowden, a salesman of one of National Health Laboratories’ (NHL) competitors, brought the most successful and well-known qui tam action. NHL had added a cholesterol and ferritin test to its blood chemistry profile that physicians thought were included in the standard profile cost. In actuality, NHL was charging the government separately for each of these tests. Jack Dowden blew the whistle on this practice and recovered 15% of the $111 million settlement. The popularity of qui tam suits is increasing with hundreds of actions being filed each year; recoveries have been in the hundreds of millions of dollars. The law protects individuals who file qui tam suits from retaliation such as harassment, demotion, suspension, or termination by their employers.²¹

In April 2002, the Department of Health and Human Services and the Department of Justice published their annual report in which they described the results of a successful investigation and prosecution of costly fraud schemes involving Health Care Corporation, Vencor, Inc, LifeScan, Inc., and Quorum Health Care.⁵

In December 2004, the Department of Justice demonstrated its continuing commitment to combat health care fraud by reporting that Gambro Healthcare, a corporation that was providing laboratory and associated services to patients with End Stage Renal Disease, was going to pay more than $350 million in criminal fines and civil penalties to settle health care fraud allegations. It represented the largest fraud settlement obtained by the United States Attorney’s Office in the Eastern District of Missouri and one of the largest health care fraud settlements ever reached by the Department of Justice.⁶ <http://www.usdoj.gov/opa/pr/2004/December/04_civ_774.htm>

Approximately nine months after the Gambro settlement, on September 20, 2005, the Department of Justice announced that GlaxoSmithKline, one of the world’s largest pharmaceutical manufacturers, paid over $150 million to resolve allegations that it engaged in fraudulent drug pricing and marketing of Zofran and Kytril, anti-emetic drugs used in conjunction with oncology and radiation treatment.⁷ <http://www.usdoj.gov/opa/pr/2005/September/05_civ_489.html>

The role of the RN

Nearly every kind of health care service has some type of fraud associated with it that nurses can help eliminate. Often RNs have access to information that enables them to identify fraud long before investigators or law enforcement officers do. As advocates, nurses can assist patients to recognize and report fraud and help employers avoid fraud. As whistleblowers, they can report fraud that is already flourishing.

RNs can help patients recognize fraud by encouraging them, as smart consumers, to check their medical bills and explanations of medical benefits (EOMBs) with the same scrutiny they use to check their credit card bills.¹ This will help guard against payments being made for services that were never rendered. This type of scrutiny recently helped the government detect a pair of fraud perpetrators. A Medicare beneficiary remembered sending away a nurse and physician who appeared at her door, claiming Medicare had sent them. She also remembered sending away a DME supplier who had tried to deliver equipment she neither needed nor ordered. When she checked her EOMB and found that Medicare had paid the physician for a home visit and the supplier for the equipment, she complained immediately to her Medicare contractor. An investigation turned up over $450,000 in potential overpayments to these same providers.¹

Aware that fraud perpetrators are apt to target those patients least likely to advocate for themselves, nurses can remind the family members of Alzheimer’s, hospice, or psychiatric patients to keep a log of medical services the patient has received. They can then compare the services received to those for which the patient, family, insurance company, or Medicare/Medicaid will ultimately pay.

Nurses can help employers prevent fraud by making sure data is entered correctly on claim forms, procedure codes match diagnoses, duplicate claims are not filed, certificates of medical necessity are properly signed, and that physician-employers are aware of the risks involved with code optimization (code manipulation that translates into more money for the practice, but which is generally considered abuse).¹ Nurses may suggest that employers draft and adopt a compliance program that spells out the institution’s procedures for compliance with anti-fraud statutes.

Because they prohibit conduct that may not be considered illegal in other business contexts, kickback and self-referral statutes can take health professionals by surprise. RNs are in key positions to recognize these types of fraud. When guarding against potential kickback situations, nurses should be mindful of the court’s decision in U.S. v Greber,²² wherein the defendant, a cardiologist and president of an organization that provided Holter monitoring, tried to argue that as long as he could demonstrate another purpose for paying a physician other than inducing referrals, he would not be in violation of the anti-kickback statute. In this case, Greber had claimed he was paying physicians “interpretation fees.” The Third Circuit Court of Appeals held, however, that if at least one purpose of the payment was to induce referrals, the statute has been violated.

RNs can also combat fraud in the employment setting by reporting fraud. Once nurses have become familiar with existing anti-fraud laws as well as reimbursement processes, they can use their knowledge of disease and trauma-related conditions, health care procedures, and standards to detect and eliminate fraud. In an effort to eliminate health care fraud, insurance companies, managed-care organizations, and primary care institutions now hire nurses regularly to review medical records and claims.

Finally, RNs can help control fraud by participating in qui tam actions permitted by the False Claims Act. RNs may be the employees best situated to detect potentially fraudulent practices such as billing for unperformed services. In one instance involving a home care agency, it was a nurse who first noticed the organization’s questionable billing practices. Claims were being submitted for more than 15, 90-minute-long home visits by the same nurse in one day (a total work day of more than 22 hours). The relator nurse in this qui tam action netted $123,500 of the government’s $650,000 recovery.²⁰

Health care fraud robs Americans of billions of dollars that could be spent on health services. Nurses have always used their health care expertise to help patients. Now RNs can add knowledge of anti-fraud laws to the constellation of skills used to ensure that patients get the care they need.

Finally, nurses need to be aware that as of April 21, 2006, even small health plans (those with annual receipts of $5 million or less) are required to protect the integrity, confidentiality, and availability of electronic heath records. The new HIPAA regulations require this protection whether the covered entity creates, receives, stores, or transmits the information. In addition, the regulations clarify that information contained in electronic health records be protected against any reasonably anticipated threat or hazard to its security or integrity.

The United States Department of Health and Human Services Office for Civil Rights oversees and enforces these new and continuing federal privacy regulations <http://www.hhs.gov./news/facts/privacy.html>. To help patients obtain more information about filing a complaint if they believe their privacy protections have been violated, encourage them to go to: www.hhs.gov/ocr/hipaa or call (866) 627-7748.