For Professionals: Medicare Fraud and Abuse

Dept. of Health Secretary, Attorney General Announce New Tools to Prevent and Fight Fraud

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Published: Jan. 11, 2011

As part of the Obama Administration’s ongoing efforts to prevent and fight fraud in our nation’s health care system, US Department of Health and Human Services Secretary Kathleen Sebelius and Attorney General Eric Holder announced that the Centers for Medicare and Medicaid Services (CMS) would be acquiring some new state-of-the-art fraud fighting analytic tools to prevent wasteful and fraudulent payments in Medicare, Medicaid and the Children’s Health Insurance Program.

Sebelius and Holder made the announcement at the 4th regional health care fraud prevention summit in Boston last month. The Attorney General and the HHS Secretary are traveling across the country holding a total of 7 summits (the 2nd one was in L.A. in August) bringing together a wide array of federal, state and local partners, beneficiaries, and providers to discuss innovative ways to eliminate fraud within the U.S. health care system.

The passage of the Affordable Care Act provides new tools and resources, innovative strategies and cutting-edge technology to fight fraud.

The results have been phenomenal. Public news coverage of Medicare fraud detection, investigation and prevention has grown remarkably in the past year. The passage of the Affordable Care Act provides new tools and resources, innovative strategies and cutting-edge technology to fight fraud. The Senior Medicare Patrol (SMP) program has also been recognized nationally for its role in these efforts, and California’s SMP has received a generous grant from the Administration on Aging to expand it’s work with the California SHIP network, the Health Insurance Counseling & Advocacy Program (HICAP).

While at the Boston Summit, Attorney General Eric Holder stated that “in communities across the country, health care fraud schemes are being aggressively and permanently shut down. The District of Massachusetts, with U.S. Attorney Carmen Ortiz at its helm, has recovered more than $4 billion in civil and criminal health-care fraud settlements over the past 2 years. These actions are in large part because of the great work being led by Health Care Fraud Prevention and Enforcement Action Team. Through this initiative, we are working in partnership with government, law enforcement and industry leaders to protect taxpayer dollars, control health care costs, and ensure the strength and integrity of our most essential health care programs. Simply put, we have taken our fight against health care fraud to a new level, and I am committed to continued collaboration, vigilance, and progress.”

New Billing Tools to Predict and Prevent Fraudulent Payments

At each fraud summit, CMS is soliciting ideas for analytic tools to help the agency predict and prevent potentially wasteful or fraudulent payments before they occur. This is to replace the old ‘pay and chase’ model of fighting fraud after a fraudulent provider has been paid and disappeared.

These predictive modeling tools are used by banks, credit card companies, insurance and other consumer companies to identify potential fraud before it occurs. For CMS, these tools would prevent “bad actors” from enrolling as health care providers or suppliers for the sole purpose of defrauding the health care system. Other tools would track billing patterns and other information, such as historical data about a suspicious individual or the company with which the individual is affiliated, to identify red flags indicative of fraud.

CMS has already started taking administrative action to stop payments to “false fronts” in Texas identified through sophisticated predictive modeling. Through expanded authority provided in the Affordable Care Act, CMS has also started suspending payments when investigating a credible allegation of fraud.

In one pilot program, CMS partnered with the Federal Recovery Accountability and Transparency Board (RATB) to investigate a group of high-risk providers. By linking public data (information found by anyone on the Internet) with other information like fraud alerts from other payers and existing court records, a sophisticated, potentially fraudulent, scheme was uncovered. The scheme involved opening multiple companies at the same location on the same day using provider numbers of physicians in other states. The data confirmed several suspect providers who were already under investigation and, through linkage analysis, identified affiliated providers who are now also under investigation.

Investing in Fraud Pays for Itself Many Times Over

The Affordable Care Act passed last March provides new tools and resources to fight health care fraud through an additional $350 million over the next 10 years. The Act toughens sentencing for criminal activity, enhances screenings and enrollment requirements, encourages increased sharing of data across government, expands overpayment recovery efforts, and provides greater oversight of private insurance abuses. For information on the 2009 Health Care Fraud and Abuse Control Program Report, please visit: www.justice.gov/dag/pubdoc/hcfacreport2009.pdf.

Investments in fraud detection and enforcement pay for themselves many times over, as seen in the growing amounts of money recovered in the last few years. In FY 2009, anti-fraud efforts put $2.51 billion back in the Medicare Trust Fund resulting from civil recoveries, fines in criminal matters, and administrative recoveries. This was a $569 million, or 29%, increase over FY 2008. Most recently, in FY 2010, the Department of Justice obtained settlements and judgments of more than $2.5 billion in False Claims Act matters alleging health care fraud. This is more than ever before obtained in a single year, up from $1.68 billion in FY2009.

The fraud summits happening around the country are part of the overall joint health care fraud fighting effort undertaken jointly by the Department of Justice and the Department of Health and Human Services through the Health Care Fraud Prevention and Enforcement Action Team (HEAT). As one part of HEAT’s efforts, Medicare Fraud Strike Force operations have expanded from South Florida and Los Angeles to a total of 7 health care fraud hot spots including Houston, Texas; Detroit, Mich.; Brooklyn, N.Y.; Baton Rouge, La.; and Tampa, Fla. Since their inception in March 2007, Medicare Fraud Strike Force operations have obtained indictments of more than 850 individuals who collectively have falsely billed the Medicare program for more than $2.1 billion.

See our Medicare Fraud section for more info on fraud, prevention tips and our Senior Medicare Patrol (SMP) program. You can also join us on Facebook, and visit the government’s website StopMedicareFraud.gov.

If you’re interested in volunteering with your local SMP project, contact Anne Gray at or call our new SMP toll-free number: 855-613-7080.

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