Medicare Fraud and Fraud in Other Government Healthcare Programs

Healthcare fraud is a pervasive and significant form of fraud perpetrated against federal and state governments. The Constantine Cannon Whistleblower Lawyer Team has over 100 years of experience representing whistleblowers under the qui tam provisions of the federal and state False Claims Acts, with particular expertise in addressing healthcare fraud. What distinguishes us from other whistleblower lawyers and law firms is our unmatched combination of attorneys with a long and unsurpassed track record of whistleblower successes — particularly in the area of healthcare fraud — our substantial resources to handle any type of case against any size defendant, and our depth of experience in both whistleblower litigation and government enforcement.

The federal and state governments collectively spend hundreds of billions of dollars every year on healthcare through various healthcare programs, including Medicare, Medicaid, TRICARE, CHAMPVA, the Federal Employees Compensation Program, and numerous state employee programs.

The largest and most expansive government healthcare program is Medicare, on which the federal government spends close to $600 billion annually. Medicare covers most medical services for persons over age 65 or disabled, including inpatient and outpatient hospital services, physician care, long term care, diagnostic tests, durable medical equipment, and prescription drugs.

Experts estimate that up to 10% of all healthcare billings are lost to fraud. That amounts to tens of billions of dollars a year in fraudulent billings to Medicare and other government healthcare programs. This comes from the countless ways healthcare fraud can be committed and the numerous entities in the healthcare delivery process that can be involved, including hospitals, doctors, insurers, pharmaceutical companies, nursing facilities, diagnostic laboratories, etc.

Common types of fraud on government healthcare programs include:

Federal law prohibits hospitals, physicians, pharmaceutical companies, medical device manufacturers and other providers and companies from either paying or receiving kickbacks in exchange for referrals for health care services. It can be a violation of the False Claims Act for a physician, hospital, therapist or other entity to bill the Government for healthcare services tainted by the payment or receipt of illegal kickbacks. This could include, for example, a drug company paying a physician sham “consulting fees” or sending the physician on expensive vacations in exchange for the physician prescribing more of the company’s drugs. It could also include a hospital hiring physicians and paying them substantially inflated salaries to get them to send all of their patients to the hospital. Click here to read more about Stark Law and the Anti-Kickback Statute.

  • Off-label marketing of prescription drugs

Pharmaceutical companies may not promote their drugs for uses, doses, or populations not specifically approved of by the Food and Drug Administration as safe and effective. Such “off-label” marketing and promotion can be a violation of the False Claims Act. This could include, for example, if a drug is approved for use in treating severe psychiatric disorders, and the drug company’s sales representatives promote it for widespread use in calming elderly patients in nursing homes.

  • “Upcoding” diagnoses to increase Risk Adjustment scores

The Medicare Part C program, also known as Medicare Advantage or Medicare Managed Care, pays private insurance companies a monthly fee (called capitation) to provide care for Medicare beneficiaries. Medicare pays a higher capitation rate if the plans’ members have certain diseases, such as cancer, diabetes, heart disease or an acute stroke, that are known to be very expensive to treat. These extra payments are known as “risk adjustment” or “risk scoring” payments. It can be a violation of the False Claims Act to claim beneficiaries are sicker than they actually are.   This could include, for example, claiming patients were treated for chronic kidney disease, major depression or malnutrition when they did not actually have those diseases.

  • Billing for medically unnecessary services

Government-funded healthcare programs will only pay for services, supplies or equipment that are “medically reasonable and necessary.” It can be a violation of the False Claims Act to bill the Government for healthcare services, supplies or equipment that are not medically reasonable or necessary. This could include, for example, a doctor billing Medicare for cardiac or spinal surgical procedures performed on patients who did not need them, or a durable medical equipment company billing Medicare for motorized wheelchairs for patients who do not need one.

  • Billing for services that were not performed

The Government will only pay for medical services that are actually performed or for equipment that is actually delivered. It can be a violation of the False Claims Act to bill the Government for healthcare services, supplies or equipment that were not performed or delivered. This could include, for example, a diagnostic testing lab submitting a bill claiming it had performed both a two dimensional CAT scan and a sophisticated 3D scan and analysis, when, in fact, only the 2D scan was performed.

  • Billing for “upcoded” medical services

Like billing for services not performed, it is also improper for a healthcare provider to submit a bill to the Government for a more complex or time-consuming service or procedure than the provider actually performed. This type of fraud is known as “upcoding” and can also be a violation of the False Claims Act. This could include, for example, a hospital claiming it treated a patient in an expensive inpatient setting when the patient was actually treated as an outpatient, or a physician claiming he or she performed an intensive evaluation of a patient during an office visit when, in fact, the patient was only seen briefly by the physician’s nurse.

  • “Unbundling” services to increase reimbursement

Government-funded healthcare programs often require certain services to be billed as one collective unit—a bundle—if they are performed at approximately the same time. “Unbundling” is the improper practice of billing such services separately in order to increase revenue and can be a violation of the False Claims Act. This could include, for example, a lab unbundling a group of blood tests and billing them separately when billing rules require the tests be billed as one collective unit, or billing separately for certain x-rays, CT scans, MRIs or other expensive radiology tests if those tests were supposed to be billed as part of the “global” charge for a surgical procedure.

  • “Bundling” or billing for services that were not ordered by a physician

Diagnostic laboratories and other providers may only bill for services that are ordered by a patient’s doctor. Nonetheless, some laboratories and other providers improperly “bundle” services by performing and billing the Government for a group of services when only one service was ordered. This can be a violation of the False Claims Act. This could include, for example, a laboratory billing the Government for multiple blood tests, or an imaging center billing for multiple CT scans or other expensive radiological tests, when the patient’s physician only ordered one test.

  • Billing for drugs made in violation of good manufacturing practices

The Food and Drug Administration has established strict rules governing how drugs are manufactured, known as the Current Good Manufacturing Practice (CGMP) regulations. These rules ensure that drugs are safe for use and have the ingredients and strength they are supposed to have. Government-funded healthcare programs pay for prescription drugs on the premise that the drugs have been manufactured in accordance with CGMP regulations. If they are not, it can be a violation of the False Claims Act. This could include, for example, a pharmaceutical company’s manufacturing facility using dirty equipment to make drugs, or using equipment that does not accurately measure the type or amount of the active ingredients incorporated into a drug, and then selling these tainted drugs to patients covered by Government-funded health care programs.

  • Defective products

Even if the FDA’s CGMP regulations are followed, some drugs, medical devices and other products still may be defective. It can be a violation of the False Claims Act to sell drugs, medical devices, or other products to patients covered by Government-funded health care programs if those products do not perform as represented and/or to specifications.

  • “Best price” and Medicaid rebate fraud

To obtain Medicaid coverage of their drugs, pharmaceutical companies generally must promise to give state Medicaid programs the lowest price made available to almost any buyer of the drug. In order to provide this price, pharmaceutical companies report their “best price” on a drug—often calculated based on the drug’s “average wholesale price” or “average manufacturer price”—and pay back to Medicaid in rebates any amount the programs paid in excess of this price. Pharmaceutical companies can defraud Medicaid, and violate the False Claims Act, by manipulating their “best price” to reduce the amount of money they must return to state Medicaid programs.

  • Illegal drug-switching

As a general rule, pharmacies must fill patients’ prescriptions as they are written by the ordering physician. Putting aside situations where a generic drug may be substituted for a name-brand drug, pharmacists may not simply substitute one drug for another, or dispense a liquid form of a drug when a pill or tablet was prescribed. Billing government insurers for medications that have been so manipulated can be a violation of the False Claims Act.

  • Home healthcare fraud

Some Government-funded healthcare programs provide coverage for in-home healthcare services to patients who need nursing, physical or occupational therapy, or other medical care, but do not need to be in a hospital or nursing home to get the care. Home healthcare providers can defraud these programs and violate the False Claims Act by billing for services that were not provided, billing for more intensive services than are needed or provided, and/or enrolling patients in such services who do not need or qualify for them.

  • Hospice fraud

Medicare provides coverage of hospice care for patients who are terminally ill. It can be a violation of the False Claims Act for hospice providers to fraudulently enroll patients for hospice service who are not eligible for such care, or fail to provide the patients with the needed treatments.

  • Compounding pharmacy fraud

Compounding pharmacies prepare medications tailored to meet the needs of individual patients by mixing drugs or changing the route of administration. Compounding pharmacies can violate the False Claims Act by paying kickbacks to physicians to prescribe their drugs, making large batches of drugs—known as mass-compounding—rather than providing the individualized service that is required, “compounding” drugs that are already commercially available, or inflating the amount of particular medications used in the mixture to increase the cost.