Health care fraud a challenge to system reform

Widespread health care fraud continues as lawmakers work to overhaul the health system and tackle long-term financing issues. As scrutiny over fraud intensifies, so must physicians' attention to their own billing and business activities, experts say.

An annual audit of the Health Care Fraud and Abuse Control Program, a joint effort of the Depts. of Health and Human Services and Justice, showed federal enforcement activities yielding $1 billion in fraud settlements and judgments in 2008, mostly from Medicare and Medicaid false claims. Other big cases targeted illegal referrals and kickbacks by physicians and hospitals, improper off-label promotion by pharmaceutical companies, and medically unnecessary services.

Most federal attention is fixed on organized crime groups, where intentional participation by physicians is rare, said Louis Saccoccio, executive director of the National Health Care Anti-Fraud Assn. Still, "doctors are going to have to be careful who they do business with and be more protective of their own business information, because these groups can get a hold of their billing information to file false claims."

The level of recoupment in 2008 slid from the $1.8 billion retrieved in 2007, but experts agreed that the figures typically fluctuate based on when particular major cases happen to be resolved and subsequently reported.

More potential prosecutions are in the works. The study showed that 957 new criminal health care fraud investigations were opened in 2008, up from 878 in the previous year. Prosecutors opened 843 civil cases in 2008, compared with 776 in 2007. A total of 2,911 civil and criminal cases were pending in 2008, up from 2,355 in 2007.

The $1 billion in recoveries represents a mere fraction of the scope of fraud plaguing the health care system. And as criminal tactics evolve, funding, technology and information-sharing are going to be key in the government's fight, Saccoccio said. Although an exact figure is difficult to pin down, he estimated that 3% to 10% of the nation's roughly $2.3 trillion annual health care expenditures are lost to fraud.

"If we're going to reform the system in other ways, we have to go after the fraud aspect," and so far most of the health system reform proposals pending before Congress have taken a stab at addressing the issue, Saccoccio said. "We're going to see much more of a focus on anti-fraud activities not just legislatively, but also in terms of the [federal] strike forces," which are coordinated HHS-Justice teams that operate locally to root out fraud.

More fraud, more tools

Legislation introduced Oct. 28 by Senate Judiciary Committee Chair Patrick Leahy (D, Vt.) and fellow panel members suggest that federal authorities need more help when it comes to curbing fraud.

The Health Care Fraud Enforcement Act would bolster fraud prevention provisions included in broader health system reform legislation pending in the Senate. It would give prosecutors more funding -- $20 million a year through 2016. It also would give enforcement officials the ability to prosecute a broader range of fraud activities and impose harsher penalties.

"We all know rooting out waste, fraud and abuse in both government and private programs is critical to making health reform work," said Sen. Ted Kaufman (D, Del.), a co-sponsor of the bill. "There's more work to be done, however, and [this bill] is an important part of that effort."

Researchers at the George Washington University School of Public Health and Health Services and the National Academy for State Health Policy said in a recent study that scrutiny of potential fraud in both public and private health insurance programs is critical if authorities are going to be successful in attacking widespread fraud.

"And in the case of the private sector, it's not just confined to doctors and hospitals. It is potentially the behavior of the insurance industry itself," said Sara Rosenbaum, chair of GWU's Dept. of Health Policy and lead author of the study, released Oct. 27. Such behavior may include insurers systematically denying or underpaying claims, or even rescinding coverage.

Federal reporting systems tend to capture fraud data only from public health care programs, such as Medicare and Medicaid. Requiring private insurers to report could help quantify and address the full scope of the problem, Rosenbaum said.

The National Health Care Anti-Fraud Assn. also has advocated more information-sharing between public and private insurance programs, a provision that was included in the health system reform bill approved by the Senate Health, Education, Labor and Pensions Committee, Saccoccio said.

Existing fraud controls, particularly in public programs, often confuse payment errors with intentional fraud, and future prevention tools must distinguish between the two, Rosenbaum added.

"A program error is not a good thing, but it's not fraud, and we should stop talking about it as fraud, which has real legal consequences," she said. For example, physicians could face civil liability under the federal False Claims Act for having sloppy billing practices misidentified as fraud.