Hospital Fraud: Inpatient, Emergency Room & Medicare Fraud
Millions of dollars a day flow through hospitals.
The rapidly rising costs of modern healthcare means millions of dollars a day flow through hospitals in the form of charges to patients, insurance and government payers like Medicare, Medicaid, and TRICARE.
What is Hospital fraud?
Hospital fraud is when hospitals seeking increased profits for shareholders and greater compensation for executives engage in practices that increase their bottom line, such as false claims. They do this at the expense of the federal government, taxpayers, and patients who are seeking quality health care.
Hospitals that engage in medical billing fraud don’t stop at just one.
Hospital Fraud describes a wide range of illegal practices when hospitals attempt to collect more money than they are legally entitled. They may use improper medical billing, charging, coding (upcoding), or cost reporting practices to generate more profit. Often, hospitals that engage in medical billing fraud don’t stop at just one—they typically commit some combination of fraud practices.
Types of hospital fraud include:
- Billing for medical services or medical supplies that were not medically necessary in a patient’s care
- Billing for medical services or supplies that were not provided to patients or used at all
- Upcoding: manipulating billing codes to bill an insurer, such as Medicare or Medicaid, for a procedure that earns a higher reimbursement than the one performed
- Unbundling: the practice of billing parts of one procedure separately to obtain higher levels of compensation
- Billing for services performed by medical residents that were not supervised as required by law by a teaching physician
- Paying kickbacks (or bribes) to doctors and other healthcare providers in exchange for referring patients to the hospital
Fortunately, thanks to the False Claims Act, our legal system provides incentives to whistleblowers, who play a vital role in helping stop hospitals that engage in billing fraud, Medicare fraud, and insurance fraud or healthcare fraud. Whistleblowers – often ordinary employees in administrative roles who are first-hand witnesses to these fraudulent practices – can pursue legal action that brings hospital fraud and hospital insurance fraud to light. With the help of hospital fraud attorneys, whistleblowers may be rewarded and receive a percentage of what the government recovers.
Kickback Fraud
Hospitals are also subject to a separate type of medical fraud known as a kickback violation. The Anti-Kickback Statute (AKS) is a federal law that prohibits offering, receiving, paying or soliciting anything of value to reward referrals or generate Federal healthcare business.
The idea behind a kickback, or bribe, is that the organization seeking reimbursement from the government for a service to-be-rendered pays a provider to:
- Refer a patient
- Purchase a piece of equipment
- Initiate a transaction that will bring federal income to that organization
There are a wide variety of ways in which hospitals may violate the AKS, such as:
- Agreements between providing organizations to refer patients for a percentage of the amount collected from the government
- The fraudulent leasing of medical equipment as a way for a hospital to pay a doctor for referrals
Inpatient Fraud.
Inpatient fraud is sometimes discussed as a separate category of medical fraud. The unique aspects of treatment in a hospital environment, and particularly emergency room—high patient load, fast turnover, wide-ranging diagnostic testing—can create abundant opportunities for dishonest providers to commit medical fraud.
Medical Necessity
One key area where hospital inpatient fraud is often found is in the area of “medical necessity” decisions, or lack thereof. This begins with the hospital’s decision to admit the patient. If a hospital elects to admit a patient without determining whether admission is necessary, the hospital may be subject to a claim of hospital billing fraud.
Ghost Patients
Inpatient fraud may also occur when services were billed to a patient or health care provider, but never actually delivered — these are so-called “ghost” patients. The provider would submit claims for healthcare services (treatments or tests) that were never given to the patient. Or, a medical provider might submit a false claim for tests, treatments or other healthcare services for a patient who either does not exist or who never received the services. This is a clear example of hospital billing fraud that may take an attentive hospital whistleblower to uncover.
Patient Transfers
Hospitals may also commit inpatient fraud through the misuse of patient transfers. The use of improper coding procedures during patient transfers is a common area of fraud. Transferring a patient with intentionally improper coding allows a hospital to receive a per diem transfer payment. This is a violation of the False Claims Act. Another example is inappropriately transferring patients between a host hospital and a hospital-within-a-hospital.
Annual Cost Reporting
Annual cost reporting is another area where we frequently see hospital fraud. Hospitals that participate in Medicare Part A must submit an annual cost report. These reports itemize many of the costs incurred by the hospital in providing care, like various procedures performed at the hospital, the costs of devices and equipment purchased by the hospital, leasing costs, etc. This annual cost report is considered a “claim” within the meaning of the False Claims Act. The report serves as the basis for claims for reimbursement submitted to health care program such as Medicare, Medicaid and TRICARE. Hospitals that overstate the costs they incurred on one of these reports are effectively committing hospital Medicare fraud through these false claims. Often whistleblowers are the most effective backstop at identifying and catching this fraud.
Who can serve as a whistleblower in a hospital fraud case?
Hospital whistleblowers are most frequently current or former employees of a hospital. The key requirement that a whistleblower must satisfy is that he or she must have clear knowledge of fraudulent activity committed by the hospital or healthcare provider.
Though hospital employees are the most common whistleblowers in hospital fraud and healthcare fraud cases, whistleblowers are not limited solely to hospital employees. Independent contractors, consultants, and other individuals who have knowledge of healthcare fraud, such as Medicare or Medicaid fraud at hospitals, may also be eligible to serve as hospital whistleblowers. Administrators, doctors, nurses, physician assistants, accountants, billing specialists, coding supervisors, and benefit administrators are all people who have served in whistleblower roles bringing false claims and hospital fraud cases to light.
Protection & Rewards
The False Claims Act.
The False Claims Act ensures that any whistleblower who brings claims exposing government fraud is protected. The Anti-Retaliation provision in the False Claims Act establishes that an employee, contractor, agent, or any other type of whistleblower which is employed by the company at issue cannot be retaliated against, or threatened for retaliation, for their actions.
Protection against Retaliation or Harassment.
Retaliation could take the form of harassment, dismissal, demotion or disciplinary measures. Harassment could also include such behaviors as failing to renew the contract of a whistleblower, withdrawing certain privileges (such as access to training), or the loss of responsibilities (marginalization).
Billions have been recovered. Up to 30% awarded.
In 2023 alone, whistleblowers helped the government recover $2.68 Billion. For their courage and assistance, a whistleblower can be awarded 15% to 30% of the amount recovered in their case.
Examples of successful hospital fraud whistleblower cases.
These are just some examples of the types of hospital fraud cases that involve violations of the False Claims Act, and which may be brought to successful resolutions, thanks to hospital whistleblowers.
A notable example of a kickback violation occurred in 2017, when Staten Island physicians were caught accepting hundreds of thousands of dollars in cash kickbacks in return for sending blood samples to a New Jersey lab. Pediatrician George Roussis and brother Nicholas Roussis, an obstetrician-gynecologist, admitted to accepting roughly $175,000 in cash payments from the lab in question from October 2010 to April 2013. In exchange for these illegal kickbacks, the doctors in turn referred their patients’ blood specimens to the lab, generating more than $1.7 million in total lab business. The government recovered millions of dollars from these doctors after uncovering their illegal kickback scheme.
A similar case in 2018 illustrates the magnitude of the fraud in these cases, and also the size of the potential recoveries, thanks to whistleblowers. In a whistleblower case in South Carolina, a federal judge imposed civil damages and penalties totaling more than $114 million on the former CEO of a medical testing lab and two owners of the lab’s marketing partner for violations of the False Claims Act.
The CEO of Health Diagnostic Laboratory (HDL) in Richmond, VA, and the owners of BlueWave Healthcare Consultants, an Alabama marketing company, were ordered to pay more than $111 million in damages and penalties for fraud. The fraud was in relation to HDL’s arrangement with BlueWave to market HDL blood tests in part by offering illegal kickbacks to physicians who ordered the tests.
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