Preventing and Preparing for a Healthcare Fraud Investigation

June 30, 2021

At a glance:

  • Understanding healthcare fraud: medical and dental providers, pharmaceutical companies, insurance companies, medical device manufacturers, and other healthcare-related companies are all at risk for healthcare fraud, which can lead to reputational harm, financial losses, regulatory challenges, higher insurance premiums, and operational disruptions..
  • COVID-19 created new vulnerabilities: the uncertainty created by the pandemic has left individuals and the healthcare industry more at risk for fraud than ever before, requiring a new level of awareness.
  • Next steps: medical and dental providers and other healthcare-related companies vulnerable to healthcare fraud schemes need to take proactive steps to prevent fraud and establish a playbook to respond to allegations.

Don’t face a healthcare fraud investigation alone. Call on Aprio’s Litigation Support & Forensic Accounting professionals and partner with an experienced team you can trust.

The full story:

Healthcare fraud can be committed by medical providers, healthcare patients, and others who intentionally deceive the healthcare system in order to receive unlawful benefits or payments – and this type of fraud can have severe effects on the industry. From a financial perspective, healthcare fraud results in billions in losses each year and can lead to higher prices, higher insurance premiums due to losses, and increased taxes.

It’s important to know how to identify healthcare fraud and understand what to expect from a healthcare fraud investigation.

Identifying healthcare fraud

Healthcare fraud may be broken into two categories, depending on whether the fraud is committed by a medical provider or a patient:

Medical Provider fraud schemes

The vast majority of medical providers uphold their oath to care for patients ethically and “do no harm.” Unfortunately, however, there are many types of medical provider fraud schemes. Here are three commonly identified categories:

1. Insurance Billing Fraud – when a medical or dental provider submits false claims to insurance companies, such as bills for services that were never provided or bills for services that were not covered by insurance, which sometimes results in the manipulation of medical codes for billing purposes. Additionally, as part of the False Claims Act, it is a crime for any person or organization to knowingly make a false record or file a false claim regarding any healthcare program (e.g., Medicare, Medicaid). Penalties for violation can include recovery of three times the amount of the false claim, plus an additional fine.

2. Misrepresentation of services – when medical or dental providers intentionally report false information about services to increase profits, such as false dates, locations, or providers of services. One example of misrepresentation of services is upcoding. Upcoding occurs when a provider bills for a higher level of service than was actually rendered. A common form of upcoding includes generic substitution, which is when a prescription is filled with a less expensive drug while billing for the more expensive form of the same drug.

3. Corruption – when a medical or dental provider unlawfully pays for or receives payment for referrals, often including referrals for services or prescriptions that aren’t needed. Per the Association of Certified Fraud Examiners’ 2020 Report to the Nations, corruption represents this highest risk in the healthcare industry, with roughly 40% of fraud cases involving some type of corruption.

Insured and Beneficiary fraud schemes

Likewise, most patients within the healthcare system utilize insurance benefits only in the appropriate manner. Nonetheless, some seek to defraud the system through fraud schemes. Below are examples of common fraud schemes perpetrated by beneficiaries:

1. Fictitious claims – in some cases, some healthcare programs allow insured individuals to submit reimbursement claims. A fictitious claim occurs when an insured individual submits fraudulent reimbursement claims through their healthcare program, such as fictitious claims forms for multiple surgeries, multiple office visits, false foreign healthcare claims, or non-covered dependents

2. Alterations – if an insured individual is able to submit reimbursement claims through their healthcare program, a dishonest claimant might inflate a medical bill by altering the total amount charged or altering the date of service to become a recoverable expense. The individual submitting the claim might also change the name on the bill from a non-covered family member to a covered family member.

3. Divorce or change of family status – when individuals who undergo a change in family status, such as a divorce, defraud a healthcare program by failing to notify of the change and continuing to submit claims for individuals who are no longer covered

Recently, the effects of COVID-19 have introduced new opportunities for fraud, as evidenced by continued warnings from the U.S. Department of Health and Human Services (HHS) Office of Inspector General. Scammers are using uncertainty created by the pandemic to try and profit at the expense of others, typically luring victims through claims about COVID-19 testing or HHS grants and subsequently capturing personal details that can be exploited, potentially resulting in fraudulent bills or medical identity theft.

Preventing and responding to healthcare fraud

Considering the damage that healthcare fraud can cause, it is critical for healthcare-related companies to take appropriate proactive and preventative steps. For instance, medical and dental providers can consider joining the Healthcare Fraud Prevention Partnership (HFPP), which was created to help public and private healthcare providers detect and prevent fraud through data sharing and transparency.

Even despite best efforts to protect against healthcare fraud, medical and dental providers, pharmaceutical companies, healthcare insurance companies, and other healthcare related companies may still be victimized. If the worst happens, you can expect a full-scale investigation, typically led by the FBI in conjunction with federal, state, and local agencies as well as insurance groups and insurance investigative units.

Related Resources

Healthcare fraud investigations can be lengthy and overwhelming, but partnering with a team of investigators you can trust, such as Aprio’s Litigation Support and Forensic Accounting team, can help the process run more smoothly. Our multidisciplinary team of experts has years of experience aiding similar fraud investigations and developing solutions that bridge the gaps across criminal, civil, and complex investigative matters.

Call on Aprio’s Litigation Support and Forensic Accounting team to ensure any fraud investigation your practice faces is handled thoroughly and professionally.

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About the Author

Haley Beatty

Haley Beatty is a forensic accounting, financial crime reporting expert. Her specialties include Anti-Money Laundering (AML), Know Your Client (KYC) investigation and regulatory compliance. She has advised some of the largest financial institutions in the world and led teams of 500 investigators. Haley works closely with clients to establish and advance AML compliance, monitoring and reporting programs that exceed regulatory requirements. She has experience advising a broad spectrum of financial industry clients from FinTech companies to MSBs and transaction processors.