By the numbers: Figuring out health care fraud


Billing for 32-hour days for three days in a row, as reported in the May 23 Star Tribune, looks like an outrageous example of health care fraud. Turns out – it wasn’t. The personal care assistant in the example didn’t receive the overpayment. The health care billing agency that did receive the money paid it back when they discovered the mistake.

The Strib’s investigation reported some fraud, but, says David Hancox, executive director of the Metropolitan Center for Independent Living, that’s a very small part of the home health care picture in Minnesota.

The article reports 57 current criminal cases and 31 pending criminal cases involving [personal care attendants/direct service providers] DSPs being pursued by the attorney general’s office. Good, if they are guilty of fraudulent or criminal behavior they should be held accountable. Keep in mind, there are about 45,000 DSPs at work in Minnesota. These cases represent 0.2 percent of the workforce. Clearly, an overwhelming majority of DSPs are honest and hardworking.

Great. Personal care attendants – the direct service providers at the bottom of the health care hierarchy – are not the problem. Then who is?

“There’s a healthcare fraud industry where people do nothing but recruit patients, get patient lists, find doctors, look on the Internet, find different scams. There are entire groups and entire organizations of people that are dedicated to nothing but committing fraud, finding a better way to steal from Medicare.”

That’s FBI Special Agent Brian Waterman, explaining the organized crime business of health care fraud to 60 Minutes investigators last year. The big business of health care fraud isn’t in individual caregivers or patients – they’re often the whistleblowers. 60 Minutes talked to 76-year-old Clara Mahoney:

She began to notice all sorts of crazy things turning up on her quarterly Medicare statements back in 2003 – things that Medicare paid for on her behalf that she had never ordered, never wanted and never received. … Mahoney, who says she hasn’t been sick in 30 years, began calling Medicare to tell them that someone was ripping them off.

An in-depth report on health care fraud by researchers at George Washington University says that fraud costs somewhere between $68 billion and $220 billion yearly, but warns:

Fraud must be distinguished from improper payments under public programs, which must be publicly reported as a matter of federal law. An improper payment can arise from simple errors in documentation, coding, reporting, verification, and other technical matters related to the administration of public programs.

In addition to the mistaken billing, the Strib’s article pointed out some of the real problems – the state’s 10 investigators are overworked, computer programs fail to catch the errors, and greater monitoring is needed in a fast-growing and much-needed program.

The GWU report warns that “existing information on health care fraud tends to conflate evidence of fraud with evidence of payment errors.  While payment errors in public insurance programs pose a serious problem, the tools for remedying errors differ significantly from those used to address fraud.”

When it comes to actual fraud, the researchers report:

Estimates are that 80% of healthcare fraud is committed by medical providers, 10% by consumers, and the balance by others, such as insurers themselves and their employees.  According to the National Health Care Anti-Fraud Association, the majority of healthcare fraud is committed by dishonest providers.

Medicare fraud is a big part of the health care fraud problem, but it’s only part of the problem:

despite strong evidence that fraud is system-wide and affects the cost of health care in both public and private insurance, national reporting systems on health care fraud fail to capture private sector fraud. (GWU Report, p. 2)

Among the examples cited in the report are two recent large recoveries:

  • United Health’s managed care underpaid consumers by manipulating the database it used to pay customers for out-of-network services, and was ordered to repay $350 million in 2008.
  • McKesson Pharmaceutical fraudulently inflated prices of some 450 drugs and was ordered to pay $350 million in 2009.

In theory, pursuing Medicare fraud is a federal priority. This month, the feds issued the annual report of the Health Care Fraud and Abuse Control Program. The report summarized Medicare Fraud Strike Force operations during FY2009, when big operations targeted Florida, Houston, Los Angeles and Detroit.

In addition to the Strike Force ops, the program went after pharmaceutical companies – the top two were Pfizer, which agreed to pay a whopping $2.3 billion in a fraud settlement, and Eli Lilly, which agreed to $1.4 billion. Other settlements were reached with physicians, other health care providers, hospitals, pharmacies, clinics, medical equipment suppliers, nursing homes, mental health facilities, and other organizations. The table below shows federal progress – or lack thereof – in recovering money over the past five years.

If Medicare fraud has become a high priority, where’s the big increase in criminal investigations and prosecutions?

Since FY2009 refers to October 1, 2008-September 30, 2009, it’s still a Bush-administration budget year, and the budget was set before last year’s 60 Minutes exposé.

Let’s hope that we will see ramped-up investigation and prosecution of health care fraud by the time that the FY2010 report is released a year from now.

For more on reporting on health care fraud, see Following the numbers: Not always easy, even for journos