With health-care fraud becoming a more widespread problem, checking the accounts-payable records of benefit plan care providers has become a necessity for auditors and fraud investigators, experts say.
Earlier this year, the U.S. Department of Health and Human Services said $4.1 billion was recovered from individuals and companies who fraudulently sought federal health-care payments—the highest tally since the Health Care Fraud and Abuse Control Program was created in 1997, according to the Department of Justice.
State and federal regulators are taking a closer look at health-care providers’ billing practices, particularly if two different providers are billing for the same patient or one provider is submitting multiple billings. Billing and “cost report fraud,” such as inflating costs or manipulating statistics, are some of the most common types of fraud health-care firms face today, aside from the more serious embezzlement and misappropriation-of-funds charges.
Medical equipment makers came under fire from regulators lately over their inflated eligibility policies, according to Allan Blum, a partner at the Loeb & Troper LLP accounting firm, in a speech at a New York State Society of Certified Public Accountants’ Foundation for Accounting Education conference last week. Too many participants are routinely accepted for the use of their products, whether they meet certain criteria or not, he said. “We’ve seen significant fraud within these areas.”
Deciding what constitutes fraud can be difficult, however. Too often, health-care employees walk a fine line between making an error and intentionally entering into fraud. The mistake could be as simple as inadvertently altering documents that were sent back for a signature, said Blum.
“A lot of times it’s the staff accountant or staff clinician doing the work. They don’t realize many times that they just committed fraud by adding new information,” he said.
Managed care centers are ripe for those kind of fraud challenges. That’s because health maintenance organizations, preferred provider organizations, and the like typically need to upgrade from old reimbursement methodologies to new ones — a process which can cause errors, noted Blum. “Nursing homes upgraded to a 2002 reimbursement model, but we’re in 2012. We’re working on costs that are 10 years old. As we deal with economic downturns, changes in reimbursement methodologies will put stress on an organization’s operations,” he said. (Managed care organizations typically negotiate contracts with health care providers on behalf of their members.)
The increased attention on health-care billing has had some positive results. Myriad compliance departments have sprung up in special needs health-care agencies or smaller home health-care facilities to help combat accounting fraud in the sector — departments which would have been unheard of years ago, according to Blum.
But simply creating a compliance department will be of no help in unearthing a misappropriation of funds. The firms need the right reporting structure in place. “The compliance department also should be reporting, in addition to the internal auditor, to the [health care corporation’s] audit committee itself. They do need that direct line of ability to handle issues that might be occurring within the organization,” he said.
And setting up compliance programs can be costly. Within health-care organizations, compliance, quality assurance, and oversight are considered “unfunded mandates,” according to Blum. “There’s nobody out there paying organizations to fund these particular areas.”
But the cost of not having a compliance unit and subsequently missing accounting mistakes can be even more expensive, according to Blum. Just extrapolating even a small mistake in one segment of a business for $2,000-$3,000 can often add up to millions of dollars across a whole organization, he said.