Top 5 Healthcare Fraud Schemes to Watch for In Your Workplace

Healthcare professionals often witness various irregularities in their daily operations, many of which may constitute healthcare fraud. Fraud takes many forms and can significantly impact patient care and financial stability within the healthcare system.

This article reviews the top five healthcare fraud schemes, how to spot them, and how to work with a whistleblower attorney to report your suspicions.

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1. Risk Adjustment Fraud

This type of fraud usually occurs when healthcare providers or managed care organizations manipulate coding or patient information to inflate the risk profile of their members, leading to higher payments from Medicare, Medicaid or other payers. In the U.S., risk adjustment is designed to compensate health insurance companies based on the health status and demographics of their insured populations. The goal is to ensure that insurers are fairly reimbursed when they take on sicker or more complex patients. However, some organizations exploit or game this system for financial gain.

Here are some examples of risk adjustment fraud and how to spot it:

• Upcoding Diagnoses: Insurers or healthcare providers submit inflated diagnoses codes that suggest a patient is sicker or has more severe conditions than they actually do. For example, coding a mild condition as a more severe version (e.g., classifying a mild heart failure as severe heart failure).
• Diagnosing Unsupported Conditions: Providers document and submit diagnoses for conditions that are not actually supported by medical records or clinical evidence. This can include adding chronic conditions or serious diseases that the patient does not have or that are not substantiated by medical testing or history.
• Retrospective Chart Reviews (Fishing for Diagnoses): Insurers or providers conduct chart reviews to search for possible diagnoses that may not have been previously coded, even if those diagnoses were not relevant to the patient’s care or did not impact the treatment provided. This can lead to coding conditions that are not clinically significant.
• False or Inflated Health Risk Assessments: Managed care plans sometimes encourage providers to conduct health risk assessments (HRAs) and then use those assessments to document additional, sometimes exaggerated, diagnoses. Insurers may pressure physicians to identify more health issues in these assessments to justify higher risk scores.
• Misrepresenting the Timing of Diagnoses: Coding for conditions that existed in the past, but are no longer relevant or actively being treated. For example, continuing to report a condition as if it is ongoing when the patient no longer has symptoms or requires treatment.
• Failure to Remove Resolved Diagnosis: Insurers or providers do not update the patient’s records to remove resolved conditions, allowing them to continue to receive higher payments based on outdated information. This can include keeping chronic conditions on a patient’s profile even after they are under control or no longer a concern.
• Pressure on Providers to Diagnose Certain Conditions: Some insurers may offer financial incentives or apply pressure on doctors to diagnose specific conditions that increase risk scores, even if these conditions may not be relevant or accurately reflect the patient’s health status.
• Manipulation of Coding for Comorbidities: Inflating the severity of comorbid conditions (such as diabetes with complications vs. diabetes without complications) to increase the overall risk adjustment score.
• Submitting Diagnoses from Unqualified Encounters: Risk adjustment claims are sometimes submitted for diagnoses made during encounters that are not qualified for risk adjustment purposes, such as visits for routine screenings or minor ailments that should not trigger higher payments.

Given that Medicare and Medicaid Advantage plans (a form of managed care) have become increasingly popular, risk adjustment fraud has become a significant area of scrutiny. Investigations by the U.S. Department of Justice (DOJ) and the Office of Inspector General (OIG) have led to several high-profile cases involving improper upcoding and manipulation of diagnosis data by managed care organizations.

2. Phantom Billing and Unbundling

Phantom billing is the fraudulent act of charging for services or procedures that were never performed. This deceitful practice misleads both patients and insurers, leading to unjustly inflated costs. Unbundling occurs when procedures that should be billed as a single package are instead billed individually, leading to inflated reimbursements.

How to Spot It

• Patient Complaints: Pay attention to patient inquiries about bills for services they did not receive.
• Billing vs. Records: Regularly compare billing records with actual treatment records to detect discrepancies.
• Unusual Patterns: Look for billing patterns that do not align with typical patient care practices.
• Separated Services: Monitor if bundled services are being unbundled without clinical necessity.

3. Kickbacks for Referrals

Kickbacks refer to the offering or receipt of incentives in exchange for patient referrals or business, which is a direct violation of the Anti-Kickback Statute. This practice disrupts the fair distribution of medical services and compromises patient welfare.

How to Spot It

• Close Relationships: Be cautious of unusually close relationships between providers and referral sources.
• Incentive Offers: Report any offers of financial or other benefits in exchange for referrals.
• Unjustified Referrals: Watch for referrals that do not seem medically necessary or beneficial to the patient.

4. Misrepresenting Provider Credentials

When healthcare providers misuse another provider’s credentials or billing information, it triggers a series of fraudulent activities, such as unauthorized billing and misrepresentation.

How to Spot It

• Credential Verification: Regularly verify the credentials of providers involved in billing.
• Billing Anomalies: Look for billing inconsistencies that suggest credential misuse.
• Provider Records: Ensure that provider records match the billing submissions and patient interactions.

5. Medical Billing for Unnecessary Services

Billing for unnecessary tests, treatments, or services that are not medically required constitutes a form of medical fraud that exploits patient trust. This malpractice can also include charging for medical equipment that was never provided or inflating the costs of equipment.

How to Spot It

• Overprescription: Be alert to a high volume of tests or treatments that seem excessive.
• Patient Outcomes: Monitor whether prescribed services align with patient outcomes and medical necessity.
• Equipment Billing: Verify that billed medical equipment was indeed provided and necessary.

Tips for Healthcare Professionals: What to Look For in Daily Operations

Staying vigilant at work is crucial to maintaining the integrity of patient care and safeguarding the financial health of our healthcare system. To help identify fraudulent activities, here are 3 things to look for if you’re suspicious about healthcare fraud in your organization:

• Close Relationships with Pharma Reps: Be wary of perks or incentives shared between doctors and pharmaceutical representatives.
• Old Diagnoses on Charts: Note if old diagnoses are intentionally left on patient charts to boost billing reimbursements.
• Suspicious Orders: Watch for unnecessary sponsored genetic tests or orders for durable medical equipment (DME) like continuous glucose monitors (CGMs) that may not be needed by patients.

How to Report Suspicious Activities

Whether you work in a small doctor’s office or a large-scale hospital, healthcare fraud and illegal medical billing practices can exist in nearly every branch of healthcare. It’s crucial for healthcare professionals to remain vigilant in combating fraud.

If you suspect healthcare fraud at your place of employment, report it to DJO. Our whistleblower attorneys can set up a free, no-obligation consultation to review your concerns.

As a contingency law firm, we don’t get paid unless you get paid, so we’ll strive to secure the highest reward possible for your bravery. If your case is successful, you could potentially earn a whistleblower reward of up to 30% of any funds recovered by the government, sometimes exceeding $1 million!

Contact us today to see how we can work together to uncover fraud schemes in your workplace.