Healthcare Fraud and Qui Tam Suits

Originally, healthcare fraud was defined as deceptive means used by an organization to profit from government healthcare agreements. That definition has more recently been extended to include not only deception, but also unreasonable ignorance of the rules.

Healthcare fraud charges stem from the qui tam provision of the 1986 Federal False Claims Act, which allows citizens to file a suit on behalf of the federal government against anyone who has participated in government fraud. Many believe that one of the government's primary motivations for passing this act was to uncover violations of healthcare contracts; indeed, healthcare fraud has accounted for more than half of all qui tam damages recovered since the act was passed.

Who Can Commit Healthcare Fraud?

The U.S. healthcare system has many branches and this leaves many opportunities for government fraud. Healthcare providers that have committed healthcare fraud in the past include:

  • Physicians and their practices
  • Pharmacists
  • Hospitals and hospital chains
  • Nursing homes and nursing home chains
  • Home healthcare agencies
  • Laboratories
  • Rehabilitation centers
  • Medical transportation companies
  • Medical equipment suppliers
  • Pharmaceutical companies
  • Managed care organizations (PPOs, HMOs)
  • Billing companies
  • Attorneys
  • Consumers

Types of Healthcare Fraud

Healthcare fraud can be committed, both intentionally and unintentionally, in a number of ways.

  • Billing for goods or services not provided - This is one of the most common types of fraud and one that is exercised in several ways. Some examples are:
  • A physician's office overstating the number of hours in an office visit
  • Medical schools claiming to provide coverage by a physician that, in reality, was provided by a resident
  • A laboratory claiming to have performed tests or x-rays that it did not
  • Pharmacies or doctors dispensing less than the prescribed amount of a drug but charging for the full prescription
  • Medical transportation providers overstating mileage on trips
  • The establishment of a completely fake provider organization that systematically obtains personal healthcare information from individuals, then files false claims of services supposedly provided to these persons
  • Legitimate goods or services provided at an unreasonable rate - Providers cannot take advantage of an oversight by the government by charging exorbitant prices. For example, one supplier of adult diapers charged $8 per item, while their cost was only $0.30. Providers are also prohibited from conspiring with another to pay high rates for its services (whereby one makes money off of the contract while the other reaps higher government reimbursement).
  • Providing unnecessary coverage - Charging for the performance of medically unnecessary tests or providing other unnecessary coverage is also fraudulent. Laboratories, physicians, and others have been known to perform tests that were unwarranted by the symptoms or were not requested. Claiming these for reimbursement by the government is illegal. So too is ambulance or other transportation service to individuals who are capable of transporting themselves.
  • Inclusion of personal expenses in billing - Medical providers have been known to add personal expenses onto a bill in order to receive reimbursement. This is fraudulent.
  • Kickbacks - A kickback is money paid for a biased decision. In the case of healthcare, it might entail a referral from one healthcare provider to another. Providing money for such a referral is fraudulent.
  • Consumer Fraud - It is important to note that consumers have also been known to commit healthcare fraud. Claiming a false identity to gain coverage and faking a worker's compensation injury are just two of the schemes by which individuals commit this crime.

Medicare Fraud

Medicare fraud refers to false claims or other acts that illegally take advantage of the Medicare system. Medicare is federally funded healthcare for seniors and persons with certain disabilities. Medicare contracts insurers to process almost all of its claims; but their role as intermediaries also places on them the onus of defending Medicare against fraud. When false claims are filed, it is often the insurer's responsibility in addition to that of the filing party.

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