Session Description
This Presentation provides a firsthand-source look
at the 'what, how and where' of the most damaging
and widespread types of fraud schemes that
continue to target public programs and private
health plans in the United States.
Case examples will illustrate the 'what, how and
where' of those schemes, including common
denominators that facilitate the fraud, how schemes
have been detected and lessons learned
www.etico.com
Partners in Health Care Fraud and Abuse Solutions
US Health
Care System
“Fraudster”
Ted Doyle
Director of Client Solutions
Over 26 years of public & private sector Health Care Insurance experience,
focused mainly on detection and prevention of health care fraud
Experience includes more than 12-years working for US CMS
– Managed the CMS LA and Miami Field Offices (SIU Services)
– Responsible for identifying inappropriate payments exceeding $177 million,
projected savings exceeding $462 million, and the revocation of billing privileges
for 272 providers suspected of fraud
SIU Director & Internal Audit Manager for Commercial Insurer
Two-time recipient of the HHS Secretary’s Award, 2-time recipient of CMS
Administrator’s Citation, 2-time recipient of HHS Inspector General’s
Cooperative Achievement Award, and recipient of Commendation for
Distinguished Public Service from the District Attorney, LA County, California
On “Bureau of National Affairs Health Care Fraud Report” Advisory Board
Participated in 1st National Health Care Fraud Summit hosted by HHS/DOJ
Requested speaker at Health Care Anti-Fraud Conferences/Meetings
www.etico.com
Partners in Health Care Fraud and Abuse Solutions
What is Health Care Fraud?
What is the Scope of the
Problem?
4
Health Care Fraud in the United States
I
Health care related fraud has become a significant
drain on the resources of the American health
system, impacting federal and state health plans as
well as commercial health insurance products
PUBLIC PERCEPTION
20% of Americans say it’s acceptable to defraud
insurers
40% say it’s okay to exaggerate claims to beat
the deductible
One-third of doctors say it’s necessary to “game
the health care system”
Over one-third of doctors say their patients ask
them to help them obtain fraudulent coverage for
services
6
Health Care Fraud
“The Motive”
2010: $2.6 trillion national health care
expenditure
– 52 % private-sector $$$
– 48 % public-sector $$$
SOURCE: Centers for Medicare & Medicaid Services, National Health Expenditure Projections
www.etico.com
Partners in Health Care Fraud and Abuse Solutions
7
Health Care Fraud
“The Damage”
3% To 10% of annual U.S. Expenditure*
Translation: $78 billion to $260 billion in 2010
alone
SOURCES:
U.S. Government Accountability Office; National Health Care Anti-Fraud Association
www.etico.com
Partners in Health Care Fraud and Abuse Solutions
8
PRE Patient Protection and Affordable
Care Act (PPACA) Projected Medicare
& Medicaid Spending & Estimated
Fraud 2005-2015 ($Bs)
$1,500
Medicare (Part D:+20%in'06)
$1,250
$1,134
GAO Frd=10%M&M
$500
$903
$839
$774
$722
$649
$799
$641
$500
$408
$336
$438
$250
$77
$72
$65
$0
$974
NHCAA Frd=3%M&M
$1,000
$750
$750
$1,424
Medicare & Medicaid
$19
2005
$22
2006
$23
2007
$477
$84
$25
2008
$513
$97
$90
$27
2009
$250
$553
$29
2010
$113
$34
2012
$142
$43
2015
9
$0
System’s Inherent Vulnerabilities
Necessary assumption of honesty
Thousands of payers
1,000,000 providers
4 billion+ transactions annually
Evolving system
– Plan/product design
– Less paper, human scrutiny; more auto-adjudication
– ICD-10 conversion October, 2013
Fraud perceived as low-risk/high-reward crime
www.etico.com
Partners in Health Care Fraud and Abuse Solutions
10
Contributing Factors
The Need to Pay Large Volumes of Claims Promptly
and Electronically
Complex Coding and Payment System
Speed at Which Fraudulent National Schemes Can
Payoff
Regulatory and Compliance Considerations
www.etico.com
Partners in Health Care Fraud and Abuse Solutions
11
The Collateral Damage
Corruption of patients’ medical histories
Medical identity theft
Theft of patients’ finite health benefits
Physical risk/harm to patients
Financial Damage for Health Care Payors
12
The Perpetrators
Dishonest patients
Dishonest providers (individuals or institutions)
Professional criminals/bogus providers
Other parties to the system
– Dishonest billing services
– Dishonest payer employees
www.etico.com
Partners in Health Care Fraud and Abuse Solutions
13
Most Common Forms of
Provider Fraud
Billing for services not rendered
Misrepresentation of services provided
Provision of medically unnecessary services
www.etico.com
Partners in Health Care Fraud and Abuse Solutions
14
Healthcare Fraud Environment
HHS/DOJ Defined
Fraud High Risk Areas
Traditional Fee
For Service
Healthcare
Managed Care
or “Capitated
Payment”
Miami, FL


Los Angeles, CA


New York, NY


Detroit, MI & Chicago, IL


Houston/Dallas, TX


Insurers (Payers & Plans) need to be aware of heightened
risk in these locations
Trends morph from one high risk area and appear in another
high risk area VERY easily
www.etico.com
Partners in Health Care Fraud and Abuse Solutions
15
Trends in Provider/ Member Based
Healthcare Fraud
Type of Fraud
Traditional Fee For
Service Healthcare
Managed
Care or
Capitated
Payment
Billing for Services Not Rendered


Billing for dead members and/or by
Dead providers


Medically Unbelievable


Physically Impossible Services


Sham services/providers


Upcoding


Kickbacks/Bribes


ID Theft of member and/or
provider information


www.etico.com
Partners in Health Care Fraud and Abuse Solutions
16
Benefit/Program Trends
Provider and/or Member Based
Health Care Fraud
Type of Fraud
Traditional Fee For
Service Healthcare
Managed Care
Infusion Therapy


Durable Medical Equipment


Diagnostic Centers



Out of Network Schemes
Outpatient Schemes, i.e., PT


Prescription Drug Diversion

Cosmetic Procedures

Pain Management


Inpatient Schemes


Home Health and Hospice


Organized Crime


www.etico.com
Partners in Health Care Fraud and Abuse Solutions
17
Fraud Schemes That
Continue to Target
Public Programs and
Private Health Plans
www.etico.com
Partners in Health Care Fraud and Abuse Solutions
18
Notable Hot Spots
Outpatient surgery center schemes (“rent-a-patient”)
Cosmetic surgery schemes
Imaging/other diagnostic testing
Pain management & related narcotic Rx schemes
(“pill mills”)
Partial Hospitalizations, Inpatient One-Day Stays
Common denominators:
–
–
–
–
Little or no medical necessity
Little or no validation of “Ordering Relationship”
Little or no validation of provider’s legitimacy
Risk/harm to patients
www.etico.com
Partners in Health Care Fraud and Abuse Solutions
19
Other “Top” Risks
Ambulance Transports
Alternative Medicine
Weight Loss Clinics
Hospital Fraud
Podiatric Fraud
DME Fraud
Sleep Studies
Dialysis Fraud
Clinical Laboratory
Wound Repair Upcoding
Unlicensed Ambulatory Surgical Centers
Free Standing Emergency Rooms
www.etico.com
Partners in Health Care Fraud and Abuse Solutions
20
Less-Prominent Frauds “Chronic Cases”
Evaluation & Management upcoding – “time bandits”
– Office visits & ALL patients billed for same level of service
– Consultations (in- and outpatient)
– Emergency evals, with non emergency diagnosis
Prescription drug diversion – “doctor-shopping”
– Abuse and/or resale of controlled substances – “A perfect storm”:
• Narcotics (vicodin, oxycontin, fentanyl, methadone)
• Sedatives/anxiety drugs (valium, xanax)
• Stimulants (ritalin, adderall/amphetamine)
– Medical-claim cost far exceeds Rx cost
– Significant potential liability for Rx payers
21
Anorectal Manometry
Monday, March 8, 2010: California Medical Clinic
Owner Convicted in $3.4 Million Medicare Fraud
Scheme.
Manuk Karapetyan, 46, an Armenian national, found
guilty of 22 counts of health care fraud and six counts
of money laundering for a scheme that billed more than
$3.2 million in only one month for medical services
that were not provided
Charges against Karapetyan are in connection with
approximately 6,000 health insurance claims for more
than 800 patients supposedly treated at Karapetyan’s
clinic, USA Independent Medical Corp
No patients received medical services, and no doctors
provided any medical services
22
Anorectal Manometry
USA Independent billed for services such as
echocardiography, office evaluations, ultrasounds,
electromyography studies of the anal or urethral
sphincter, and Anorectal Manometry.
Karapetyan sentenced to five years in state prison
In total, Medicare paid over $30M for
suspected fraud related to ARM (CPT: 90911,
91010, 91122, 43236)
Source http://7thspace.com/headlines/337394/california_medical_clinic_owner_convicted_in_34_million_medic
are_fraud_scheme.html
http://articles.glendalenewspress.com/2010-07-28/news/tn-gnp-sentenced-20100728_1_manuk-karapetyanmedicare-patients-health-care
23
Anorectal Manometry
Lessons Learned
How does fraud or “over-utilization” like the ARM
Occur?
How can it be prevented?
24
CA Doctor Glen R. Justice
Charged in $1MFraud Scam
Charged with fraudulently billing up to $1 million for
injectable cancer medications that never were provided
Billed for injectable cancer medications when patients
never received those medications
“Upcoded” claims by claiming that more expensive
injectable medications were provided
Scheme involved medications: Neulasta, Neupogen,
Procrit/Epogen/Aranesp, and Neumega
Scheme ran from 2004 thru October 2009
Physician’s plea agreement acknowledged that the public
and private health insurance companies suffered losses of
between $400,000 and $1 million
Source:
http://7thspace.com/headlines/341747/california_cancer_doctor_glen_r_justice_of_corona_del_mar_charged_in_1
25
_million_health_care_fraud_scam.html
Fraud and Organized Crime
Armenian-American Crime Ring
Mirzoyan-Terdjanian Organization
http://www.fbi.gov/news/stories/2010/october/medicare-fraud-organized-crime-bust/
26
Armenian-American Crime Ring
Largest Medicare fraud scheme ever committed by a
single enterprise
73 defendants—including members and associates of an
Armenian-American organized crime enterprise
federal indictments announced in five states
more than $163 million in fraudulent billings
55 arrested in a nationwide takedown carefully planned
and carried out by the FBI
More than two dozen search warrants were also executed
at the same time.
Headquartered in New York City and Los Angeles but
operated throughout the U.S. and around the world
27
Armenian-American Crime Ring
Subjects allegedly stole identities of thousands of
Medicare beneficiaries and doctors licensed in more than
one state
Other subjects leased office space and opened phony
clinics
Others simply rented a PO box
Other subjects opened bank accounts to receive Medicare
funds
Subjects billed Medicare for services never provided
Funds directly deposited into designated bank accounts
and immediately withdrawn and laundered
Opened were at least 118 phony clinics in 25 states
Significant lead came from Income Tax Investigation
28
Fraudulent Billing &
“Ordered Services”
Independent Diagnostic Testing Facilities (Labs)
Clinical Testing Laboratories
Durable Medical Equipment
Home Health Services
Hospice Services for “Terminally Ill”
EQUALS
Tests & Equipment Not Really Ordered and Likely NOT
Performed
Tests For Which A Clinical Relationship Does NOT Exist
29
Deceased But Not
“Dead & Gone”
Deceased Members
Deceased Performing Providers
Deceased Ordering Providers
Identity Theft
30
“Identity Compromise”
Compromised IDs – Medicare Program
– More than 200,000 Member IDs have been compromised
– More than 4,900 “False Front” Providers identified
• Source: CMS PSC, Western Integrity Center, May 2010
Deceased Doctors
– Dead Doctors Used to Scam Government Out of Medicare
Money:http://hsgac.senate.gov/public/_files/OPENINGSTMTCa
rlLevin7908.pdf
– Senate Hearing Viewable at:
http://hsgac.senate.gov/public/index.cfm?FuseAction=Hearings.
Hearing&Hearing_id=eb856347-01f1-4b55-826e-a9bf5247072c
– Fraudulent providers submitted claims based on “orders” from
some doctors who were dead for 10 years or more
– From 2000 to 2007, Medicare paid between $60M & $93M for
claims where the “ordering” or prescribing doctor had been dead
for at least 12-months
31
Fraud Interdiction Program
Former Deputy DA Albert
Mackenzie
50 Crook Project
Program’s core project wherein numerous medical
doctors suspected of being involved in healthcare fraud
have been identified as viable tax fraud cases
Originally the list consisted of 50 medical doctors we
identified who had failed to report over 122 million in
income paid by Medicare
As the suspects have been arrested, leads have been
developed leading to additional suspects involved in
these multi-million dollar healthcare fraud cases
Led to recent Armenian-American Arrests in LA
and other US cities
32
People vs. Parviz Berjis
$23 million in automobile insurance, workers’
compensation, and tax fraud
Sentenced to 8 years in prison
Ordered to pay $2.2 million in restitution to L.A.
County and $2.8 million in back state taxes
33
People vs. Saud Salim Rayyis
Convicted of tax fraud for failing to report $4 million
Sentenced to 3 years in prison
Surrendered medical license
Will be deported upon release
34
Joint HHS/DOJ
HEAT Initiative
35
HEAT: HEATH CARE FRAUD
PREVENTION AND
ENFORCEMENT ACTION TEAM
Cabinet-level Attention and Coordination
Prevention -- Detection -- Enforcement
Increased Use of Technology to Prevent and Detect Fraud
Expansion of Medicare Fraud Strike Forces (“MFSF”) and
Investigative Techniques
Recommendations to Remedy Vulnerabilities
National Summit on Health Care Fraud
– Public-Private Collaboration
36
HEAT Initiative
www.stopmedicarefraud.gov
www.etico.com
Partners in Health Care Fraud and Abuse Solutions
37
HEAT Initiative
FY2009: DOJ+HHS-OIG+CMS
– Charges filed for criminal health care fraud against more
than 800 defendants
– Secured 583 criminal convictions
– Opened 886 new civil health care fraud investigations
– Obtained 337 civil administrative actions against
individuals and organizations committing health care Fraud
– Recovered more than $2.5 billion in criminal, civil and
administrative actions related to health care fraud
enforcement activities
www.etico.com
Partners in Health Care Fraud and Abuse Solutions
38
The Good News!
Private health insurance - 2009 Stats
Every $2M invested in fighting health-care fraud
returns $19.5M in recoveries, court-ordered judgments
and prevented losses
SIUs on average:
–
–
–
–
–
–
–
Produce an ROI of 9 to 1
Bring in recoveries of nearly $4.3 million
Generate savings of more than $11.1 million
Establish $8.8 million in prevented losses
Had 453 total open cases
Handled 940 total cases
Handled 31 cases per Investigator
Source: NHCAA (www.nhcaa.org) - Anti-Fraud Management Survey CY 2009
www.etico.com
Partners in Health Care Fraud and Abuse Solutions
39
The Good News!
Health Care Fraud & Abuse Control Program Annual
Report for Fiscal Year 2009 - Enforcement Actions
U.S. Attorneys' Offices opened 1,014 new criminal health
care fraud investigations involving 1,786 potential
defendants
Federal prosecutors had 1,621 health care fraud criminal
investigations pending, involving 2,706 potential
defendants, and filed criminal charges in 481 cases
involving 803 defendants
583 defendants were convicted for health care fraudrelated crimes
DOJ opened 886 new civil health care fraud investigations
and had 1,155 civil health care fraud matters pending
Source: http://www.justice.gov/dag/pubdoc/hcfacreport2009.pdf
www.etico.com
Partners in Health Care Fraud and Abuse Solutions
40
Contact information
Ted Doyle
Director of Client Solutions
(414) 828-6884
ted.doyle@etico.com
www.etico.com
www.etico.com
Partners in Health Care Fraud and Abuse Solutions
Questions
42