The Affordable Care Act and Health Care Fraud


December 19, 2013 – Back to BlogShare

First there was HIPAA. Then the Patient Protection and Affordable Care Act (ACA). Now Stage 2 of “Meaningful Use.” And soon, final implementation of the new ICD-10 codeset.  

As if managing a physician practice, hospital, or physician-hospital organization isn’t challenge enough, providers must comply with all of these requirements while maintaining perfect compliance with complex coding and billing rules. The Centers for Medicare and Medicaid Services (CMS) doesn’t care whether inaccurate billing is fraud or error; if claims aren’t supported by documentation, it will cost you.  

Can you afford to wait for an audit by CMS, your state or a commercial payer to make sure that your billings are accurate and well-supported?

Big Spending Means Big Potential for Fraud

Health care spending—and associated fraud—are huge. In November 2012, the National Health Care Anti-Fraud Association (NHCAA) put annual health care spending at $2.8 trillion from more than four billion claims. With the ACA expected to extend Medicare to 30 million new beneficiaries, the federal government anticipates growth of 7.4 percent in 2014, followed by 6.2 percent annual growth between 2015 and 2021.

Just as remarkable are the estimates of the amount lost to health care fraud, which the NHCAA places between $60 billion and $230 billion annually. In 2012, the US government recovered a record $4.2 billion, partly due to enhanced enforcement powers under the ACA, suggesting that recovery efforts are clawing back less than two percent of actual losses. 

While the industry has become a target for dishonesty and deception, compounding losses due to innocent error, provider organizations are not helpless. You can implement preventive care and leverage your expensive IT investment to protect yourself against fraud.  

Common Types of Health Care Fraud

  • Phantom billing: Billing for services that were not performed 
  • Upcoding: Billing for more expensive procedures or medical equipment than provided
  • Unbundling: Where a series of related procedures are coded as one billable item, the procedures may be “unbundled” and billed at separate—higher—rates or even double-billed, both separately and together 
  • Kickbacks: Illegal payments to medical professionals in exchange for referring patients to other medical professionals and specialists
  • Performing and billing for medically unnecessary procedures
  • Misrepresenting treatments performed so that non-covered procedures can be billed as if they were covered 

Why Is Fraud So Widespread?

The vast amount of money flowing through health care makes the industry an attractive target for fraud. Other factors also contribute to the industry’s vulnerability:

  • Health care fraud normally takes the form of frequent, relatively small claims over an extended period of time. It is easier to rationalize 1,000 illegitimate claims of $10 each than one claim of $10,000
  • The complex and generally subjective nature of medical diagnosis and treatment makes it difficult to detect fraudulent claims
  • Patients often neglect to scrutinize billing information. When fraud occurs, the patient could often detect the anomaly by reviewing their bills and statements. However, a lack of financial incentives and complex, jargon-heavy statements keep most patients from reading these statements carefully
  • Coding and billing are highly complex due to the vast number of procedures, treatments and products, not to mention variables related to treatment intervals, frequency and patient history that complicate detection of fraud
  • Treatment, particularly in emergency situations, must often be provided quickly and billed afterward. Various mandates require most claims to be filed and processed promptly, causing most claims to be paid before they can be verified 

What Drives Health Care Fraud?

  • Electronic claims submission: In spite of the code checking built into most EHRs and payer systems, electronic billing increases fraud risk because it allows third parties to submit falsified claims undetected
  • Identity theft: As more providers implement EHRs leading up to the 2015 deadline, electronic identity theft and cyber security become greater risks
  • Increasing consumer fraud: A survey of private health insurers by America’s Health Insurance Plans’ Center for Policy and Research [link to ] found that between 2006 and 2008, consumers were responsible for 33 percent of suspected fraud cases and medical professionals for 48 percent. This represented a significant change from the Health Insurance Association of America’s 2000 “Anti-Fraud Report,” which found that medical professionals accounted for 72 percent of suspected fraud cases and consumers just 10 percent
  • Organized crime: Law enforcement agencies report increasing organized crime penetration into the  industry—likely related to a market in illicit drugs said to be worth $65 billion per year

The ACA and Fraud Prevention

The ACA acknowledges the need to minimize fraud if the U.S. is to achieve its goal of expanding health care access to millions of currently uninsured people. The law seeks to achieve this through a proactive, risk-based approach to managing the public health system. It is far easier to prevent losses by denying potential wrongdoers access to billing systems in the first place, and far easier to prevent fraudulent payments than to recover money that has been paid out. 

From a provider’s point of view, understanding the ACA’s increased emphasis on fraud prevention and implementing preventive measures in your own practice, group, or hospital will allow you to avoid penalties, fines, or even prison.

These are the key anti-fraud provisions of the ACA:

  • Increased funding: $350 million will be provided over 10 years to fight fraud and recover overpayments
  • Enhanced screening and compliance measures: The ACA expands the government’s power to conduct background checks and site visits, exclude high-risk industry participants from government programs, withhold payments while investigations are pending, and impose temporary moratoriums on particular geographic areas or service categories
  • Greater penalties: The law provides strict consequences for individuals and providers found to have committed fraud, including 20–50 percent longer prison sentences and the introduction of penalties for obstructing investigations

How Can Weaver Help You?

As you undoubtedly tell patients, it’s better to prevent disease than to treat it. Under the ACA, it is more vital than ever that CMS providers take adequate steps to prevent and identify potential fraud. Failure could result in exclusion from government payer programs, a severe limitation on any health care business.

Can you absolutely prevent all fraud and billing error? Probably not. 

But having systems and processes in place to prevent and detect fraud and persistent error will go a long way toward protecting your business. Weaver can help you on two fronts: we can analyze your financial records and transaction history to detect whether issues exist before you’re subject to an external coding audit, and we can help you develop systems and processes to minimize your future risk. 

Weaver’s forensic group consists of anti-fraud and forensic accounting specialists with specific expertise in the health care industry. Our dedicated team of professionals can use advanced analytic techniques to review your billing practices, help you take steps to address existing issues, and even help prevent future ones. We can also provide compliance reviews and fraud threat assessments to assure that your solvency and payer relationships are not jeopardized.