Fraud, Waste, Abuse

Medicare Provider Appeals

Dr Cover Folder

Recently, Brian Ritchie, the Acting Deputy Inspector General for Evaluation and Inspections, testified before the Subcommittee on Energy, Healthcare and Entitlements.  The hearing, titled “:Medicare Mismanagement: Oversight of the Federal Government’s Efforts to Recapture Misspent Funds”, focused in part on the Medicare provider appeals process.  The Medicare appeals process is currently suffering from huge backlog and delays due to an increase in the number of appeals by Medicare Part A providers. The Center for Medicare & Medicaid Services (CMS), which is responsible for ensuring that Medicare makes accurate payments, contracts with Recovery Auditor Contractors (RACs). RACs receive a commission when they identify and recover/return improper Medicare payments.  Each year, it is estimated that $50 billion is improperly paid from the Medicare program.  In August of 2013, the Office of the Inspector General (OIG) published a study which revealed that in FYs 2010 and 2011, RAC audits identified improper payments of $1.3 billion, of which $768 million was recovered.  RACs and other program contractors now play a major role in the government’s efforts to curve fraud, waste and abuse.

However, in recent years, there has been a strong surge in the number of successful appeals from Recovery Auditor overpayment determinations.  This dramatic increase in appeals has caused higher administrative burdens on the entire judicial system.  It was found that two percent (2%) of providers account for one-third (1/3) of all Administrative Law Judge (ALJ) appeals, with a few providers seemingly appealing almost every reimbursement denial.  One reason for the surge is due to the high level of success Part A providers have received at the ALJ level.  The probability of receiving a favorable decision at the ALJ level by Part A providers is approximately 56% according to recent testimony.  In agency comments released by CMS dated 06/12/13, there are several likely factors which attribute to the high appeal success rate: 1) ALJ are not bound by the CMS manual and local coverage determinations; 2) ALJ interpret Medicare policy less strictly; 3) ALJ are less specialized in the Medicare program and do not have clinicians on staff; 4) there is a low cost to appeal. 

Because so many RAC determinations have been overturned, this calls into question the viability of RACs in the future.  Recent lawsuits have surfaced which challenge the appeals process, which in turn put more pressure on CMS to take corrective action.  We will see what develops from the higher scrutiny pertaining to this issue.

The False Claims Act after ACA


Healthcare providers are confronted with a heighted regulatory landscape since the enactment of the Affordable Care Act. Congress has been patently devoted to prosecuting provider practices that conspicuously overbill Medicare or Medicaid. The ability to prosecute providers under the False Claims Act has significantly changed in recently years including recent legislation under the Fraud Enforcement and Recovery Act of 2009 and the formation by the Department of Justice and Health and Human Services of the Health Care Fraud Prevention and Enforcement Action Team (“HEAT”). On the State level, Section 6031 of the Deficit Reduction Act of 2005 created a financial incentive for States to establish legislation to prosecute individuals or entities who submit false or fraudulent claims to the Medicaid program.

In addition to these dramatic changes in the law, language in the Affordable Care Act ushered in a new era of enforcement against fraud, waste and abuse. This new era includes enhanced use of technology such as sophisticated data mining, and other fraud detection methods which has resulted in the Federal government becoming more efficient in identifying false claims. Nevertheless, the government still greatly depends on qui tam relators (private citizens who initiate false claim actions and report such claims to the government for investigation and possible prosecution). Provider liability under the Act can be massive, with penalties between $5,500 to $11,000 per false claim, plus three times the total loss to the government. Qui tam relators, can receive fifteen to thirty percent of the total recovery. Moreover, recent amendments to the False Claims Act enacted under the Affordable Care Act has widened the scope of potential claims that can be successfully initiated and sustained by qui tam relators, especially given the whistleblower protections afforded to these potential claimants. This means, in essence that there is a more definite probability of claims being initiated by past and present employees of health practices under the False Claims Act.

In the last couple of years, Congress has increased funding as part of its committed effort to fight fraud, waste and abuse in the Federal healthcare programs. Approximately $350 million through 2020 has been allocated under the Affordable Care Act toward investigation and prosecution of fraud, waste and abuse. To be found liable under the act, no proof of specific intent is required. Providers can be found liable under the act for knowingly making a false statement to have a Medicare or Medicaid claim paid or approved. The term “knowingly” can mean that the provider or entity acted in deliberate ignorance or reckless disregard of the truth of information submitted to receive payment. If a provider is accused of knowingly submitting a false claim, the provider could see all of  their Medicare and Medicaid payments for care suspended by CMS if there is deemed to be a “credible allegation of fraud” as defined by the Department of Health and Human Services.

What this means is that provider practices should be diligent in their billing practices and institute and evaluate periodically proper controls regarding their revenue cycle. The penalties are too severe not to have proper policies and procedures in place.  In addition, provider practices regardless of size should implement a compliance program in response to these changes in the law and heightened government enforcement actions.  For more information, please contact our firm at

Check Fraud

Our firm recently consulted on issues related to external fraud and so we believe it is befitting to address this issue here.  Most of this article will be to educate persons on this issue than to tell a story.  You will find in reading this blog that educating the public is also one of our goals in posting here.  Our hope is that in reading this information, you become more informed of this issue.  The Washington Post recently conducted an investigation where they found that over 1000 nonprofit organizations have had a “significant diversion” of assets since 2008 mostly attributed to theft or embezzlement.

The losses suffered by some nonprofit organizations sometimes amounted to tens of millions of dollars as reported on the organization’s IRS Form 990 return.  For a struggling nonprofit organization, the loss of even thousands of dollars may impair the nonprofit organization from achieving its mission.  Therefore, proper internal controls are essential for organizations of all sizes.

Embezzlement has been defined as the fraudulent appropriation of money or property lawfully in one’s possession according to Dr. Larry Crumbley in his book Forensic Investigative Accounting.  One way a fraudster may embezzle funds is by check tampering.  In fact, checks are known to be one of the most frequent fraud schemes with over 500 million checks forged each year in the United States.  Many frauds are perpetrated by an employee who gains access to a check and goes on to prepare computer copies and cash them under someone else’s name.  Thus, one way a nonprofit can protect it is by incorporating a control concerning checks. Checks can be imprinted with holographic images, watermarks, and inks that cannot be erased or copy or other types of security inks as one control to deter check fraud.

Organizations that wish to do more to identify operations risks should have a risk assessment conducted to expose and strengthen weaknesses within the organization.  Image