September 22, 2015

Sleep-Disorder Fraud

By Jessica T. Moore

Can one commit fraud while sleeping?  Sort of.

Increasing numbers of troubled sleepers are seeking diagnosis and treatment of chronic sleep disorders that affect more than fifty million Americans.  The significant growth in sleep medicine over recent years brings increasing opportunities for the unscrupulous to engage in fraudulent services and billing

The most common method of diagnosing sleep disorders is a polysomnography test, which involves the monitoring and assessing of physiological reactions during sleep.  Results of this test might show, for example, the presence of obstructive sleep apnea (OSA).  A diagnosis of OSA often leads to a prescription for a continuous positive airway pressure (CPAP) device, which keeps the patient’s airway open and unobstructed during sleep.

Medicare spending on polysomnography services is extremely high: $407 million in 2005, increasing to $565 million in 2011.  With the uptick in sleep disorder services and government spending comes the discovery of various schemes that defraud federal and state health care programs that reimburse for such services.

Medicare, Medicaid, and other government programs reimburse claims for sleep tests and devices that are “reasonable and necessary” or “medically necessary” and impose a number of related requirements.  For example, Medicare reimbursement requires that sleep tests be conducted by physicians or properly licensed or certified sleep technologists.  Sleep tests also must be performed under the appropriate level of doctor supervision, including overall direction and control.  Moreover, independent diagnostic testing facilities (e.g., non-hospital based sleep test centers), must be properly enrolled and approved by Medicare on a location-by-location basis.  A provider who knowingly fails to meet these requirements yet bills a government program might be violating the False Claims Act.

Another area of potential abuse is the prescribing and dispensing of durable medical equipment (DME) such as CPAP devices.  Knowingly prescribing and seeking reimbursement for devices without demonstrating the proper need defrauds government health care programs.  As with independent diagnostic sleep study facilities, each location of a DME supplier must be in an appropriate site that is separately enrolled and approved by Medicare.  Moreover, DME, with its individual sizing and pressure settings, must be dispensed by properly qualified personnel.

Federal laws and regulations also prohibit certain self-interested dealing or business-overlap between sleep-test providers and device suppliers.

SleeptestThe federal government repeatedly identifies fraud related to sleep testing as particularly warranting attention.  In 2008, the Center for Medicare and Medicaid Services (CMS) stated: “We believe that we have sufficient reason to believe that OSA and CPAP are more amenable to fraud and abuse than some other items and services.”  73 Fed. Reg. 69855 (November 19, 2008).  The U.S. Department of Health and Human Services Office of the Inspector General promises to “examine Medicare payments to physicians, hospital outpatient departments, and independent diagnostic testing facilities for sleep-testing procedures to assess the appropriateness of Medicare payments for high utilization sleep-testing procedures and determine whether they were in accordance with Medicare requirements.”  (HHS OIG Work Plan for Fiscal Year 2015).

Adding on to HHS and CMS scrutiny are Department of Justice actions against a number of sleep-medicine providers.  In a 2011 case involving non-credentialed sleep technicians, DOJ declared: “Providers who participate in federal health care programs must play by the rules, not cut corners,” and that billing for tests performed by unlicensed personnel “is unfair to patients and a misuse of taxpayer dollars.”  (statement of Tony West, then Associate Attorney General for the Justice Department’s Civil Division).  And in a 2014 action, DOJ decried a respiratory care company that “flouted important licensure requirements, failed to provide patients the standard of care that they deserve and fraudulently billed the federal government for improperly rendered services.”  (statement of Carmen M. Ortiz, United States Attorney for the District of Massachusetts).

The many DOJ actions against sleep-medicine fraudsters include:

  • A 2010 federal indictment in Sacramento, California, for a wide-ranging health care fraud scheme including billing Medicare for sleep studies never performed and falsifying related records
  • Multiple lawsuits against sleep clinics accused of knowingly using unlicensed or unqualified personnel to conduct tests or dispense medical devices:
    • 2011 whistleblower lawsuit against Florida-based SomnoMedics LLC
    • 2011 settlement of allegations against Alpha Sleep Diagnostic Centers in Colorado
    • 2013 settlement for $15.3 million against American Sleep Medicine to resolve whistleblower and government allegations
    • 2014 settlement of a whistleblower action against central Florida’s VMG Pulmonary and Sleep Institute and its physician/owner
    • 2014 settlement of whistleblower and government accusations against North Atlantic Medical Services Inc. (NAMS) in Massachusetts (respiratory therapy services including devices)
  • A 2014 settlement of alleged multiple fraudulent practices by Florida’s Sleep Medicine Center and two physicians, including billing for services that were not medically necessary or never performed, using unlicensed personnel, and failing properly to supervise a center
  • A 2015 DOJ lawsuit against California’s Qualium Corporation dba Bay Area Sleep Clinics alleging over 14,000 false claims to Medicare due to alleged billing for tests and devices provided at non-Medicare-approved locations, using unlicensed personnel, and violating rules prohibiting sleep-test providers from providing related medical devices and from co-locating a sleep-clinic with a medical equipment business. A related whistleblower complaint additionally alleges unlawful kickbacks and accusations against a third party billing company.

The opportunities for deception and false claims in the diagnosis and treatment of sleep disorders are seemingly limited only by the creativity of fraudsters.  In addition to the alleged schemes described above, other activities that might lead to violations of the False Claims Act include:

  • Excessive ordering of tests or medical equipment
  • Improper levels of physician supervision
  • Scoring or reading of sleep tests by non-qualified personnel
  • Deceptive use of a physician’s name to misrepresent that physician’s level of involvement in diagnosis or treatment of disorders

Under the qui tam provisions of the False Claims Act, private citizens may bring a lawsuit on the government’s behalf to expose and remediate fraudulent practices that financially cheat the public fisc.  Successful cases can result in a whistleblower receiving a portion of the government’s recovery, usually somewhere between 15% and 25%.

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