Healthcare Fraud
Learn about the different types of healthcare fraud.
Table of Contents
The United States spends almost a trillion (yes, trillion!) dollars on Medicare and Medicaid. Experts estimate that up to 10% of all healthcare spending results from false claims. That amounts to tens of billions of dollars a year in fraudulent billings to Medicare and other government healthcare programs. When a whistleblower thinks they have spotted fraud, they’re probably right.
Whistleblowers who report healthcare fraud may be eligible to receive a share of the government’s recovery as a financial reward.
Here are some of the most common types of healthcare fraud:
Kickbacks and Other Financial Arrangements
Illegal payments or incentives given to healthcare providers or organizations in exchange for referring patients or prescribing specific medications, treatments, or services. These kickbacks can distort medical decision-making, leading to unnecessary or overpriced services that ultimately defraud government healthcare programs like Medicare and Medicaid.
The Stark Law and Anti-Kickback Statute are two laws that prohibit kickbacks and certain financial arrangements.
Stark Law: The Stark Law, or Physician Self-Referral Law, prohibits physicians from referring Medicare or Medicaid patients to entities with which they or their family have a financial relationship. Aimed at preventing conflicts of interest in healthcare, it ensures medical decisions are made based on patient need, not financial gain.
Anti-Kickback Statute: The Anti-Kickback Statute (AKS) is a federal law that prohibits the exchange of remuneration—such as cash or gifts—for referrals of services that are reimbursable by federal healthcare programs like Medicare and Medicaid. It aims to prevent financial incentives from influencing medical decision-making, ensuring that patient care is based on clinical needs rather than financial gain. Violations of the AKS can result in severe penalties, including fines, imprisonment, and exclusion from federal healthcare
Upcoding
The practice of billing for a more expensive service or procedure than what was actually performed. This involves using a billing code that reflects a higher level of care or more complex service than what was provided, resulting in higher reimbursement from insurance companies or government healthcare programs like Medicare and Medicaid.
Risk Adjustment Fraud
Manipulating patient diagnosis codes to make patients appear sicker than they actually are, thereby increasing the payments received from government healthcare programs like Medicare Advantage. This fraudulent practice is used to unjustly maximize reimbursements by exploiting the risk adjustment payment system, which is designed to provide higher payments for patients with more severe health conditions.
Unbundling
The fraudulent practice of billing separately for individual components of a procedure or treatment that should be billed together as a single, comprehensive service. This tactic is used to increase reimbursement by submitting multiple claims for each component instead of a single claim for the entire procedure, resulting in higher overall payments from insurance companies or government healthcare programs.
Billing for Services Not Provided
Billing for services not provided involves submitting claims for medical treatments or procedures that were never actually performed. This type of fraud results in receiving payments for non-existent services, defrauding insurance companies or government healthcare programs.
Billing for Services that are Not Medically Necessary
Billing for services that are not medically necessary involves charging for treatments, tests, or procedures that are not required for the patient's condition. This practice exploits the healthcare system by providing unnecessary care to inflate bills and receive higher reimbursements.
Billing for Unlicensed Personnel
Billing for unlicensed personnel involves submitting claims for services provided by individuals who do not have the appropriate licenses or credentials. This fraudulent activity misrepresents the qualifications of the personnel and can compromise patient safety.
Billing for Unauthorized Locations
Billing for unauthorized locations involves submitting claims for services purportedly rendered at approved sites but actually performed at unapproved or different locations. This misrepresentation can lead to improper reimbursements from healthcare programs or insurers.
Electronic Health Record (EHR) Fraud
EHR fraud involves manipulating electronic health records to include false information, such as upcoding, unbundling, or fabricating patient diagnoses. This manipulation aims to justify higher billing or to meet incentive program requirements, leading to improper financial gains.
Off-label Marketing of Prescription Drugs
Off-label marketing of prescription drugs refers to promoting medications for uses not approved by the FDA. This can lead to submitting false claims for prescriptions that are not covered by healthcare programs, resulting in fraudulent reimbursement.
Defective Products and Manufacturing Violations
Defective products and manufacturing violations involve the sale of medical devices or pharmaceuticals that do not meet regulatory standards. Companies may falsely certify compliance, leading to the submission of claims for unsafe or ineffective products, violating the False Claims Act.
Discount/Rebate and Other Pricing Fraud
Discount/rebate and other pricing fraud involves manipulating pricing information to overcharge government healthcare programs. This can include false reporting of discounts or rebates given to customers, resulting in inflated reimbursement claims.
Clinical Trial/FDA Fraud
Clinical trial/FDA fraud includes falsifying clinical trial data or other information submitted to the FDA to obtain drug or device approval. This deception can lead to the approval and marketing of unsafe or ineffective products, resulting in false claims for their use.
Compounding Pharmacy Fraud
Compounding pharmacy fraud involves billing for compounded medications that are not medically necessary, improperly formulated, or falsely labeled. This fraudulent practice can result in significant financial losses to healthcare programs and potential harm to patients.
Most common perpetrators:
Just about anyone in the healthcare system can commit healthcare fraud, including providers (doctors and clinics), hospitals, pharmaceutical manufacturers and pharmacies, labs, managed care organizations, and others.
Upcoding
The practice of billing for a more expensive service or procedure than what was actually performed. This involves using a billing code that reflects a higher level of care or more complex service than what was provided, resulting in higher reimbursement from insurance companies or government healthcare programs like Medicare and Medicaid.
Managed Care Organizations
Managed care organizations may commit fraud by inflating risk scores to receive higher payments from government programs through risk adjustment fraud. They may also deny necessary services to patients while still collecting full premiums, or falsify enrollment and eligibility data to boost their revenue.
Hospitals
Hospitals can engage in fraud by upcoding services, billing for medically unnecessary procedures, or submitting claims for services not provided. They might also falsify patient admissions and discharge information to qualify for higher reimbursements or unbundle services to receive multiple payments for what should be a single comprehensive procedure.
Providers
Providers, such as doctors and nurses, may commit fraud by billing for services not rendered, performing and billing for unnecessary tests or procedures, or upcoding patient visits to receive higher payments. They might also engage in kickbacks for patient referrals, leading to biased and potentially harmful medical decisions.
Pharmaceutical Organizations
Pharmaceutical organizations might engage in off-label marketing, promoting drugs for unapproved uses and leading to false claims for those prescriptions. They can also inflate drug prices, manipulate rebate programs, or provide kickbacks to healthcare providers to prescribe their medications.
Medical Device and Durable Medical Equipment (DME) Manufacturers and Distributors
These entities can commit fraud by submitting claims for defective or unnecessary medical devices and equipment. They might also engage in kickbacks to providers for prescribing or recommending their products, or upcoding and unbundling device-related services to receive higher payments.
Home Health and Hospice Organizations and Providers
These organizations may bill for services not provided, provide and bill for unnecessary services, or falsify patient eligibility to qualify for higher payments. They might also engage in kickbacks for patient referrals or inflate the number of visits and services rendered.
Skilled Nursing Facilities (SNF)
SNFs can commit fraud by upcoding the level of care provided to receive higher reimbursements, billing for services not rendered, or falsifying patient records to qualify for more extensive and expensive care. They might also provide unnecessary services to inflate bills.
Laboratories and Diagnostic Testing Facilities
These facilities may engage in fraud by billing for tests that were not performed or were not medically necessary, upcoding tests to receive higher reimbursements, or falsifying results to justify further unnecessary testing. They might also engage in kickbacks for test referrals.
Chiropractors
Chiropractors can commit fraud by billing for services not rendered, performing and billing for unnecessary treatments, or upcoding visits to receive higher payments. They might also falsify patient records to justify extended treatment plans or engage in kickbacks for patient referrals.
