What is Healthcare Fraud?

Healthcare fraud is, according to one legal definition, a crime in which healthcare claims are dishonestly filed to profit illegally from the payments received. It is estimated that it leads to a loss of nearly $60 billion per year.

There are many types of healthcare fraud, including those carried out by healthcare practitioners and those committed by healthcare insurance members. Prosecutions under this title are carried out under the federal False Claims Act.

Costs of Healthcare Fraud

Why does healthcare fraud matter? With this type of fraud, the customers of the healthcare organization are made to pay for the money robbed. Some legal experts estimate that a tenth of each dollar spent on health care is wasted on such fraudulent claims. In addition, healthcare fraud can mean patients undergo unnecessary tests, evaluations, treatments, and procedures.

Moreover, health insurance premiums may go up because of the heavy claims paid out, while overall, taxes may be raised to pay for the health insurance claims. Many of these have come to light due to private whistle-blowers, as well as investigations by independent researchers to identify the causes of increasing healthcare costs.

Healthcare fraud is a matter involving the violation of trust between healthcare providers/managers and patients using deception to gain an illegal financial advantage at the cost of the patient. The various elements include:

• deception – misrepresentation of the truth in order to lie, hide or manipulate the truth
• intentionality – the fraud is not because of a mistake or negligence but is a deliberate strategy to obtain illegal profit
• achieves a benefit for the perpetrator, usually financial
• is always illegal, and sometimes criminal
• is limited by the scope of health insurance coverage

The types of healthcare practices that are banned in the name of fraud include false claims, kickbacks and self-referrals – referring patients to any organization or provider that has a financial relationship with the referring physician. Kickbacks refer to financial or other considerations intended to induce the sale or purchase of goods or services related to healthcare.

Healthcare Practitioner Fraud

Some ways in which physicians and other healthcare practitioners commit healthcare fraud include:

• Prescribing unnecessary medications that are covered or subsidized by healthcare, so that they can be resold on the black market at higher prices
• Filing the same claim multiple times
• Filing claims for medical services that were never given (“phantom billing”)
• Providing wrong details such as identities, dates and descriptions of services
• Modifying medical records
• Wrongly billing a service that is not covered by insurance
• Adding unnecessary treatments, procedures or diagnoses to increase the claim amount
• Using a commission system among members
• Excluding members from co-pays

Healthcare Customer Fraud

Customers can commit healthcare fraud by:

• Selling prescription drugs
• Providing wrong details when applying for programs or services
• Forging prescription drugs
• Claiming transport payments when actually used for other purposes not related to medical treatment
• Filing a claim using another member’s insurance card

Factors Favoring Healthcare Fraud

The presence of audit, supervision and control of health insurance claims influence the occurrence of healthcare fraud, as do the culture, complexity of procedures, and the prevailing socio-economic and political conditions. In particular, masquerading as someone else in order to claim benefits is characteristic of a situation with poor oversight coupled with deliberate intent to deceive on the part of the claimant.

A perception that the healthcare system is skewed against the user, or that the copayments are too high, are among other factors that encourage healthcare fraud by the users.

For instance, if healthcare claim policies are not backed by established policies but depend on the discretion (read whim) of the adjuster, and if complaints are poorly managed, the incidence of fraud increases. Patients are not encouraged to report fraud, and laws against such fraud are either missing or are poorly enforced.

The cost of medications, prescription patterns, and medicine dispensing are all instrumental in the increasing levels of healthcare fraud, as well as the underlying values of the society, regarding ethicality and morality, and the perceived attitude of claims adjusters. Being a woman and being more likely to become ill are also factors that push up the incidence of fraud, as does having health insurance and speaking the official language of the country.

Finally, the type of relationship between the provider and the insurer, the consumer and the provider, and the bosses, all influence the healthcare fraud prevalence, as does the consumer-insurer relationship.

The short period of time, typically a month, by which healthcare claims must be settled, leaves little time for proper investigation of the claims, making healthcare fraud easier. However, the criminal may, if convicted, face imprisonment and fines, and in the case of healthcare providers, may be barred from practice.

Laws Against Healthcare Fraud

In the USA, the Federal Bureau of Investigation (FBI) is in charge of looking into cases of healthcare fraud. The US Department of Justice looks into violations of federal statutes, while administrative suits are the responsibility of the Department of Health and Human Services' Inspector General Office.

While false claims fall under the federal False Claims Act, kickbacks are investigated under the Anti-Kickback statute at the federal level and by state laws. Self-referrals are prohibited by federal Ethics in the Patient Referral Act and in other state laws.

Read next: What is the Role of Regulatory Bodies in Healthcare?

References

• Villegas-Ortega, J. et al. (2021). Fourteen Years of Manifestations and Factors of Health Insurance Fraud, 2006–2020: A Scoping Review. Health & Justice. https://doi.org/10.1186/s40352-021-00149-3. Available at: https://healthandjusticejournal.biomedcentral.com/articles/10.1186/s40352-021-00149-3. Accessed on 13 December 2021.
• What is Health Insurance Fraud? Available at: https://www.michigan.gov/difs/0,5269,7-303–458215–,00.html. Accessed on 13 December 2021.
• Healthcare Fraud. Available at: https://www.law.cornell.edu/wex/healthcare_fraud#. Accessed on 13 December 2021.
• Health Care Fraud and Abuse. Available at: https://www.hopkinsmedicine.org/johns_hopkins_healthcare/providers_physicians/health_care_fraud_and_abuse/. Accessed on December 13, 2021.

Further Reading

• All Healthcare Content
• Healthcare Systems Around the World
• What is the Role of Regulatory Bodies in Healthcare?
• How is the ‘omics’ Revolution Changing Healthcare?
• Primary Healthcare Providers

Written by

Dr. Liji Thomas

Dr. Liji Thomas is an OB-GYN, who graduated from the Government Medical College, University of Calicut, Kerala, in 2001. Liji practiced as a full-time consultant in obstetrics/gynecology in a private hospital for a few years following her graduation. She has counseled hundreds of patients facing issues from pregnancy-related problems and infertility, and has been in charge of over 2,000 deliveries, striving always to achieve a normal delivery rather than operative.