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Hospital Fraud

Hospital Fraud: What it is and How to Report It

What is Hospital Fraud?

Hospital fraud is a broad term that refers to any action a hospital may take to improperly bill the Medicare and Medicaid programs.

This type of fraud is a serious problem. A large percentage of the billions of dollars that are distributed by public health programs every year are paid directly to hospitals for the services they provide to patients and outside treatment centers.

Fraud involving hospitals is not easy to detect. Most hospitals around the nation process thousands of transactions every day as tests are performed, drugs are provided and treatments are administered. Fraud can slip through the cracks at any large facility, even without the administrators being aware of it.

The important work that hospitals do further complicates the detection of fraud. When auditors interfere with the daily operations of hospitals, it can endanger patients. In order to avoid threats to the patients, regulators rely heavily on whistleblowers within the hospital to provide evidence that proves fraud.

Whistleblowers are highly incentivized to reveal fraud because, under the False Claims Act, they are entitled to receive a portion of all funds that are recovered.

How is the False Claims Act involved in Hospital Fraud Cases?

The False Claims Act is the federal law that criminalizes false reports made to federal programs. It covers fraud on a broad scale, including everything from overcharging to falsified records. In order to encourage cooperation, the law also includes a qui tam provision that financially rewards whistleblowers.

How the qui tam Provision Rewards Hospital Fraud Whistleblowers

Qui tam provisions allow any individual who assists in the prosecution of fraud to receive a portion of the penalties that are imposed. In the case of hospital fraud, employees who wish to report fraud may be able to provide documentation proving that records, invoices or required reports were falsified.

In the past, hospital fraud cases have revealed schemes that work on a massive scale. The fraud may not only involve one hospital but entire networks of them across one or several states. The penalties imposed in cases like these can easily reach into the hundreds of millions of dollars.

There are many examples of whistleblowers being awarded dollar amounts in the millions for their work on the public’s behalf. Whistleblowers have participated in many different ways, as there are many types of hospital fraud.

The Most Common Types of Hospital Fraud

Hospitals are reimbursed by Medicare and Medicaid based on the care that they provide to patients. These programs use complex payment tables that consider factors such as the type of care provided and whether the care was outpatient or inpatient.

An outpatient receives medical care and is then sent home, while an inpatient is admitted to the hospital for monitoring and more advanced treatments. Outpatient services are generally reimbursed at a much lower rate than inpatient services. Fraud involving outpatients frequently involves schemes to maximize these rates.

What follows are some common examples of hospital fraud that involve inpatients, outpatients, and other facilities.

Duplicate Billing Fraud: This common form of fraud takes place when the patient (or patient’s insurance) is charged for a service that was already charged to a public medical program. The hospital accepts two payments for a single service.

Upcoding Fraud: The American Medical Association provides a series of codes that apply to each hospital procedure, and negotiates on behalf of the medical industry to determine how much Medicare and Medicaid should reimburse. When hospitals provide codes for more expensive services than they provided, it is considered upcoding fraud.

Improper DRG Claims Fraud: The DRG (Diagnosis Related Group) system is a patient classification system designed to standardize payments to hospitals. When records are altered to make patients appear to fall under a different and more lucrative classification, it can be considered a fraudulent claim.

Unbundling Fraud: Many treatments involve a series of different procedures. Some of these procedures are bundled together and reimbursed at the treatment of a single condition. However, individual procedures that are charged separately may be reimbursed at a higher rate. It is considered a type of fraud to unbundle services to make more claims.

Cost Report Fraud: This type of fraud occurs when hospitals improperly inflate the costs of care provided to inpatients or outpatients. When nurses provide care, but that care is reported as being provided by a doctor, it may be considered cost report fraud.

Stark’s Law Violations: Hospitals often have long-term relationships with nursing homes, dialysis centers, and hospice facilities. However, they are not permitted to have a financial relationship. Any referrals to facilities that make payments to the hospital may be considered improper.

Examples of Hospital Fraud Cases

False billing and kickback claims were successfully brought against the Health Management Associates LLC chain of hospitals in Florida. The chain paid $260 million to resolve claims that they had submitted claims for inpatient services when they provided only provided outpatient services among other types of fraud.

Accusations of coding violations were brought against Encompass Health Corporation over a period of 7 years and ending in 2019. While the company did not admit to wrongdoing, they ultimately agreed to a $48 million settlement payment to resolve a qui tam lawsuit.

How to Bring a Hospital Fraud Whistleblower Lawsuit

If you are aware of hospital fraud, you may be able to bring a qui tam lawsuit on the government’s behalf and claim a percentage of any funds recovered. To begin, you should speak to our experienced whistleblower lawyers. We can answer any questions you have and help you understand what is necessary for these cases to succeed.