The U.S. Justice Department has filed new charges in what prosecutors are calling the biggest Medicare fraud case in U.S. history, the Miami Herald reports. Prosecutors say health-care executive Philip Esformes' network of skilled-nursing and assisted-living facilities, and co-conspirators billed Medicare US$1 billion for services that were either unnecessary or not provided to about 14,000 patients between 2009 and 2016. According to the indictment, physicians and other medical professionals at Larkin Community Hospital referred many of the Medicare patients to Esformes' facilities in exchange for kickback payments. Later, the facilities would send the patients back to the hospital. The latest charges allege Esformes gave an associate US$5,000 to bribe an employee of Florida's Agency for Health Care Administration to find out what evidence the regulator had on Esformes' health-care network. That associate, Gabriel Delgado, secretly videotaped the exchange to receive a lesser sentence from federal prosecutors. The details of this case are similar to a 2006 civil dispute over kickback allegations that Esformes, his father, Delgado, and Delgado's brother settled for US$15.4 million. If convicted, the Justice Department could seize most of Esformes' assets and send him to prison for the rest of his life.
In 2015, U.S. health-care spending was about US$3.2 trillion, with more than 4 billion insurance claims processed. The National Health Care Anti-Fraud Association estimates that the financial losses from health care fraud are in the tens of billions of dollars each year. Whether it impacts employers, governments, or individuals, this level of fraud inevitably translates into higher premiums, expenses, costs of providing benefits, and reduced benefits or coverage. It may even make the difference between whether or not some Americans can afford health insurance.
There are two particularly troubling aspects of this story. First is the length of time it took officials to catch the alleged perpetrators, along with the lack or ineffectiveness of scrutiny of a vast number of false or overbilled claims for medical services. Second is the use of bribery techniques to circumvent inspections and investigations of complaints that might have helped detect this fraud earlier.
Weaknesses in the internal controls over the approval of health-care billing and claims must continuously be monitored and addressed. Recent audits conducted by the U.S. Government Accountability Office (GAO) reveal that the nation's Patient Protection and Affordable Care Act marketplaces remain "vulnerable to fraud." The audits, which looked at the 2015 and 2016 coverage years, echo previous findings about the potential for fraud, and the failure to detect it, within organizations that are part of health-care delivery systems and government-run exchanges that sell individual health plans. The investigations looked at how well the U.S. Department of Health and Human Services (HHS) did at verifying whether claims filed were eligible for reimbursement. They also looked at whether people with dubious documentation could actually enroll in coverage, particularly for coverage that was subsidized by the federal government for applicants with low or moderate incomes. For both sets of testing, the GAO submitted fictitious or incomplete documentation as part of the application and enrollment processes. As one example of an area for improvement, the GAO found that HHS inspections focused on supporting documentation that had obviously been altered. If the documentation submitted did not show such signs, inspectors were not likely to question its authenticity.
Strong internal controls are essential to prevent bribery of government officials. A fraud risk assessment is one good way to assess the degree and focus of measures to counter this kind of corruption. The GAO has noted that bribery, along with infiltration by organized crime elements, is prevalent in South Florida. Key internal controls over this area include:
- Policies. Organizations must have in place clear, robust, and readily understood conflict-of-interest and code-of-conduct policies that include a practical level of prohibition of the kinds of behaviors that must be avoided by employees, backed by senior leadership endorsement and reinforcement.
- Practices and procedures. Each policy should have a corresponding practice and documentation procedure. This could include a requirement that no one employee may have sole contact with a medical services biller that has a history of claims exceeding a particular value. Regulators also could implement electronic security measures that monitor communications between staff members performing approval and regulatory functions over billers.
- Enforcement. While most organizations with conflict/code-of-conduct policies may also have enforcement provisions for noncompliance, exceptions made to enforcement actions can occur frequently — for valid reasons in some cases. However, such exceptions can signal to potential noncompliant billers that the chances of being prosecuted may be low. In addition, an active and robust internal audit function is an essential tool.
- Whistleblowing. Where supported by senior management and established in collaboration with regulators and law enforcement officials, whistleblower programs can be one of the most effective measures in deterring and detecting bribery schemes.
It should be noted that the HHS has acknowledged it has room to improve and intends to take action, as indicated by this statement: "As recommended by the GAO, we are applying their marketplace fraud risk assessment to areas of eligibility and enrollment to identify and prioritize key areas for potential risk in the marketplace." The statement goes on to say, "We are also working closely with issuers through the Healthcare Fraud Prevention Partnership to identify trends, schemes, and specific bad actors."