The Justice Department and the Department of Health and Human Services have made healthcare fraud a number one priority – it is another example of the synergy of politics and enforcement.  Congress spends more money on prosecution resources and prosecutors use these resources to bring more criminal and civil enforcement actions.  

Every few months the government announces another nationwide crackdown and defendants are swept up and prosecuted.  No one ever follows up to see what happens to those cases, whether some defendants are fairly charged and prosecuted.  Equally important is the question of whether or not such prosecutions are reducing or preventing healthcare fraud.

The government prosecutes many cases against defendants who have already received money for improper claims.  It is estimated that the government recovers 20 cents of every dollar improperly paid. 

Health care spending totals approximately $3 trillion per year.  It is difficult to measure the exact annual cost to the federal government of healthcare fraud and abuse.  The Centers for Medicare and Medicaid Services (CMS) estimates that Medicare fraud totals between $70 and $100 billion, and Medicaid fraud (improper payments to states) totals $10 billion annually. 

Each year Medicare administrative contractors (“MACs”) process about 4.5 million claims from 1.5 million providers each day.  In addition, MACs process roughly 30,000 enrollment applications each month from health care providers and suppliers of medical equipment seeking to bill under the Medicare and Medicaid programs. In this environment, there are significant risks for fraudulent claims. 

Law enforcement is focusing on this mountain of claims and eligibility applications through data mining and predictive models. CMS has a two-prong proactive strategy: one pillar is a fraud prevention system that uses advanced analytic techniques, including algorithms and historical data, to flag suspicious claims; and the second pillar is an automated provider screening program, which identifies ineligible providers or suppliers before they are enrolled or revalidated by the use of enhanced screening procedures.

Data mining techniques which focus on billing discrepancies or patterns are not without controversy.  For example, HHS has acknowledged that Medicaid claims data may suffer from reliability problems, which could unfairly target providers for costly and time-consuming audits. 

Additional questions have been raised about the conduct of Benefit Integrity Contractors, private companies who conduct Medicare and Medicaid audits, and who are incentivized to discover improper claims during the audits.

For healthcare providers who have suffered through a federal audit, these efforts may lead to increased sensitivity to reducing the burdens on the industry from government audits.  To the extent CMS weighs the burden of audits initiated by faulty analytics, service providers may get some relief.   

Congress has started to focus on these issues to ensure that healthcare fraud enforcement is effective and fair.  The House Energy and Commerce Subcommittee on Oversight and Investigations Committee held an oversight hearing on June 8, 2012, Medicare Contractors’ Efforts to Fight Fraud – Moving Beyond ”Pay and Chase” (link is here), and Senators Hatch and Coburn on the Senate Finance Committee have begin to question CMS’ fraud prevention program and the need to improve in identifying and preventing fraud from occurring rather than paying and chasing federal dollars through less effective recovery programs.

In a recent report (here), the Government Accounting Office highlighted some of these concerns concluding that CMS’ data analytics program is still evolving and that CMS is not yet in a position to take more and quicker data-driven administrative enforcement actions such as the revocation of Medicare billing privileges. 

CMS needs to redouble proactive fraud strategies to ensure a more efficient and fair result.  Specifically, CMS needs to:

— mandate that service providers have an appropriate compliance program as a condition of eligibility for Medicare;

— expand its existing surety program to nursing homes and other high-risk providers;

—  impose limits on high-risk suppliers and providers;

—  deny payments to suppliers and providers who have a pending overpayment or suspension;

— adopt enhanced supplier and provider screening tools to ensure that only eligible entities are authorized to submit claims.