About Fraud and Abuse

Fraud and Abuse Definitions

Medicare defines abuse as actions that are inconsistent with accepted sound medical practice. Abuse may, directly or indirectly, result in unnecessary costs to the program, improper payment, or payment for services which fail to meet professionally recognized standards of care, or that are medically unnecessary. Abuse involves payment for items or services when there is no legal entitlement to that payment and the provider has not knowingly and intentionally misrepresented facts to obtain payment. Although abuse may appear similar to fraud, abusive acts are not committed knowingly, willfully, or intentionally.

The three standards that the Centers for Medicare & Medicaid Services (CMS) uses when judging if abusive acts in billing were committed are:

medical necessity;
conformity to professionally recognized standards; and
fair price.

Examples of abuse include but are not limited to:

charging excessive amounts for services;
providing medically unnecessary services;
providing services that do not meet professionally recognized standards;
billing Medicare based on a higher fee schedule than for non-Medicare patients;
submitting bills to Medicare that are the responsibility of other insurers; and
violating the provider participation agreement.

Fraud is intentional deception or misrepresentation that the individual makes, knowing it to be false and that could result in some unauthorized benefit to them. The most frequent kind of fraud arises from a false statement or misrepresentation that is material to entitlement or payment under the Medicare program. The violator may be a participating provider, a supplier, a beneficiary, or some other person or business entity, including a Medicare employee.

The following is a sampling of typical fraud practices which have resulted in inappropriate payment from the Medicare Trust Fund:

Incorrect reporting of diagnoses or procedures to maximize payments;
Billing for services not furnished;
Billing that appears to be a deliberate application for duplicate payment of services or supplies;
Billing noncovered or nonchargeable services as covered items;
Incorrectly apportioning cost on cost reports;
Including costs of noncovered services, supplies, or equipment in allowable costs;
Billing Medicare for costs not incurred or which were attributable to non-program activities (e.g., private duty or homemaker services), or other enterprises or personal expenses;
Repeatedly including unallowable cost items on a provider's cost report except for purposes of establishing a basis for appeal;
Claiming bad debts without first genuinely attempting to collect payment.

This is not an all inclusive list of the practices which may be considered fraudulent. If you feel you or someone you know has encountered inappropriate activities, please access the Cahaba Safeguard Administrators, LLC ® Web site and contact one of the offices or contact the OIG Hotline at 800-447-8477. The Medicare Benefit Integrity Unit at Cahaba initially investigates any allegations of fraud or abuse. Allegations that are substantiated may be referred to the OIG or other appropriate law enforcement agency for investigation and/or U.S. Attorney prosecution.

Areas of Risk

Hospitals

Billing multiple view x-rays when only one view was taken.
Misrepresenting discharge date to obtain inpatient and outpatient payment.
Misrepresenting diagnosis to increase Medicare payment.
Holding patient in observation 3 or 4 days to receive higher reimbursement instead of admitting person.

Skilled Nursing Facilities

Documenting individual therapy when group therapy (5 or more patients) was provided.
Billing social activities as psychotherapy.
Billing medical supplies not provided to the patient.
"Upcoding" DME (billing for a more expensive or Medicare covered item when a less expensive/non-covered item was provided).

Home Health Agencies

Billing for services to patients that do not meet the homebound criteria.
Billing for more visits than were actually made.
Billing custodial/housekeeping as skilled nursing or therapy services.
Continuing to bill for skilled nurse visits when the beneficiary's condition is stable/unchanging.
Providing "kickbacks" to physicians who refer patients and/or sign plans of care for patients who do not meet home health criteria.
Providing home health aide services to patients living in assisted living facilities when these same services are also being provided by the facility.
Fraudulently submitting a Medicare cost report to increase reimbursement.

Hospice Agencies

Certifying patients not terminally ill.
Billing separately for services directly related to terminal illness.
Discharging patients when they are admitted to inpatient care.
Billing for respite care when a patient resides in a skilled facility.

Penalties for Committing Medicare Fraud

When Law Enforcement completes its investigation and assuming the offender is found guilty, one of the following penalties may be imposed:

The offender may be convicted of a crime which could result in imprisonment, and/or fines.
The Federal False Claims Act may be used to levy fines that can range up to $10,000 per false claim and an additional fine of up to three times the total amount of false payments that were made.
The Department of Health and Human Services may access a Civil Monetary Penalty (CMP). Under CMP, the provider may be fined a penalty of up to $2,000 per each item falsely or improperly claimed. In addition, there may be an assessment of up to twice the total amount that was falsely or improperly claimed.
Administrative sanctions may be imposed. Sanctions may take different forms including, but not limited to, revocation of the provider's assignment privileges; withholding Medicare payments; referral to state licensing authorities and medical boards which may result in the provider losing their license to practice medicine; and excluding the provider from the Medicare program. There are two categories of exclusions - mandatory and permissive. Under mandatory exclusions, it is required to exclude the provider from the Medicare program if the provider is convicted, in a court of law, of a crime related to the Medicare program or related to patient abuse or neglect. The minimum exclusion term is 5 years.

Permissive exclusions may be imposed by choice. They may be based on the findings of a court, licensing board, other agency; or may be based on investigative findings. The term of permissive exclusion may vary from one year to an indefinite term.

Page last updated: May 9, 2008