When it comes to healthcare fraud enforcement, the government knows how to target its resources.  It is estimated that at least 25 percent of all claims paid by Medicare are improper.  The government understands the implications of this figure and is ramping up yet again its efforts to fight fraud, prevent improper payments, and execute proactive prevention programs.

The government also knows that the risk of fraud will increase as competitive pressures build on healthcare providers and equipment suppliers.  Doctors and healthcare professionals already are feeling squeezed by the government with reductions in reimbursement and payment rates.

Skilled Nursing Facilities have become targets for enforcement.  Each year, SNFs are responsible for approximately $1 billion in fraud and overbilling.  In a recent report, the Department of Health and Human Services (HHS), Office of Inspector General, found that there were significant problems with Medicare reporting and billing of skilled nursing care.  In the report, the IG found that 25 percent of claims filed in 2009 were in error; $1.2 billion in improper payments were made because of erroneous upcoding; and nearly half of SNF’s claims contained erroneous information or were incomplete.  The report also cited SNFs for over-utilizing resources when providing services.  At the heart of the problem, the IG cited the continuing pressure by “for-profit” SNFs to bill for higher paying service codes and to provide therapy in situations which did not warrant such services.

You can bet that fraud enforcement in 2013 will target SNFs.  In fiscal year 2012, Medicare paid over $32 billion for SNF services.  Government cost-saving efforts have failed to reduce SNF costs.  The government is left with only one alternative – criminal and civil fraud enforcement.

The government signaled its intent to ramp up enforcement in this area when it announced in November 2012, its recent intervention in U.S. ex rel. Martin v. LifeCare Centers of America, Inc., 08-cv-251 (E.D. Tenn., Nov. 28, 2012).  LifeCare Centers operates 200 nursing homes around the country and the government is alleging Medicare fraud and waste for medical services which were mot necessary or were never provided.

Medicare has five established rehabilitation categories for nursing home patients, called “Resource Utilization Groups” (RUGs), each of which has a different level of prescribed rehabilitation and assigned payment rate.  The government alleges that LifeCare adopted a system to maximize the number of days it billed to Medicare at the highest rate which were unrelated to patients’ actual conditions or needs.  LifeCare billed nearly 70 percent of Medicare rehabilitation services at the highest rate which was nearly double the national average.

In particular, the government cited the fact that business managers imposed mandatory targets for utilization and length of stay which had no relation to the patients’ conditions or needs.   In addition, the government contends that clinicians recommendations were either overridden or ignored by business managers.

In the face of ever-rising healthcare costs, SNF claims will continue to be scrutinized closely for potential fraud or waste, especially in assisted-living services and therapies.  While there is a strong incentive to increase revenues, SNFs have to develop a counterforce of compliance which can bring a proper balance in providing SNF services without waste or fraud.