Healthcare fraud under the microscope: improving its prevention

Author:Nicole F. Stowell, Martina Schmidt, Nathan Wadlinger
Position:Department of Accounting, University of South Florida St. Petersburg, St. Petersburg, Florida, USA
Pages:1039-1061
SUMMARY

Purpose The purpose of this paper is to make readers aware of the extensiveness of healthcare fraud in the USA and how it involves and affects the government, healthcare providers, insurance companies, patients and the public. In addition, recommendations are made that may help control this pervasive type of fraud. Design/methodology/approach A range of different journal... (see full summary)

 
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Healthcare fraud under the
microscope: improving
its prevention
Nicole F. Stowell
Department of Accounting, University of South Florida St. Petersburg,
St. Petersburg, Florida, USA
Martina Schmidt
Department of Finance, University of South Florida St. Petersburg, St. Petersburg,
Florida, USA, and
Nathan Wadlinger
Department of Taxation, Florida State University, Tallahassee, Florida, USA
Abstract
Purpose The purpose of this paper is to make readersaware of the extensiveness of healthcare fraud in
the USA and howit involves and affects the government, healthcareproviders, insurance companies,patients
and the public.In addition, recommendations are made thatmay help control this pervasive type of fraud.
Design/methodology/approach A range of different journal publications, information from
government healthinstitutions and law enforcement websites, healthcare fraudcases and healthcare laws are
used as a basis to provide information about how fraudsters are committing healthcare fraud and how to
prevent thisfraud from occurring.
Findings Despite increased funding and prosecution efforts by the government, healthcare fraud
continues to be a majorthreat to the US economy and public. While healthcare fraud willnever be eradicated,
specic effortscan be deployed to help rein in these complexfraud schemes.
Practical implications The paper provides a useful resource of information on healthcare fraud for
healthcare providers, insurance companies, patients and the public that may help combat healthcare fraud
and prevent nanciallosses.
Social implications Every dollar saved from combatingfraud could be used to improve access to more
or better healthservices and can, thereby, save lives.
Originality/value This paper provides recommendations regarding healthcare fraud that could help
prevent thislarge drain on the US economy.
Keywords False claims act, Anti-Kickback statute, Healthcare fraud, Medical identity theft,
medicare and medicaid, stark law
Paper type General review
1. Introduction
Healthcare costs are a signicant drag to the US economy and continue to rise. According to
the Centers for Medicare and Medicaid Services (CMS), health expenditures in the USA are
estimated to grow by an average annual rate of 5.8 per cent between 2015 and 2025 and are
projected to reach $5.4 trillion in 2025, up from $3 trillion in 2014 (Centers for Medicare and
Medicaid Services, 2016a). Thus, it is of no surprise that fraudsters view healthcare as a
lucrative eld for illegal activity. The Federal Bureau of Investigation (FBI) states that the costs
associated with healthcare fraud amount to tens of billions of dollars a year (Federal Bureau of
Healthcare
fraud under
the microscope
1039
Journalof Financial Crime
Vol.25 No. 4, 2018
pp. 1039-1061
© Emerald Publishing Limited
1359-0790
DOI 10.1108/JFC-05-2017-0041
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1359-0790.htm
Investigation, 2016) and are estimated to increase over time as people live longer, which in turn
increases the demand for Medicare benets (Federal Bureau of Investigation, 2012).
The impact of healthcare fraud is signicant and wide-reaching. Examples of who may
suffer the nancial impact include:
insurance holders who have to pay higher premiums and out-of-pocket expenses
and also receive reduced benets and coverage;
businesses who pay increasing amounts to provide healthcare to their employees,
which results in the overall increased cost of doing business; and
taxpayers who pay more to cover healthcare expenditures in public health plans.
Beyond monetarydamages, healthcare fraud can also place patientsat risk of serious
physical harm when unnecessary procedures are performed and unapproved drugs
are administeredor when fraudsters tamperwith medical records.
Because of troublesome increases in healthcare fraud, the US federal government and
federal and state law enforcement agencies made healthcare fraud prosecution a primary
focus. The Patient Protection and Affordable Care Act (PPACA) of 2010 under the Obama
Administration, for example, provided an additional $350 million for healthcare fraud
prevention and enforcementefforts (US Department of Justice, 2016, 2).
While the FBI is the primary investigativeagency in the ght against healthcare fraud, it
coordinates its efforts with the Health and Human Services Ofce of Inspector General
(HHS-OIG), the Food and Drug Administration (FDA), Drug Enforcement Administration
(DEA), the IRS Criminal Investigation Division and various state and local agencies (FBI,
2012). However, despite morefunding and a more focused and integrative effort by multiple
government entities in the past few years, the threat of healthcarefraud remains high. This
is evidenced by record-settingdollar amounts in recent healthcare fraud scheme takedowns.
The goal of this analysis is to shed light on healthcarefraud as well as present solutions
to help control it. An analysis of the scope of this fraud highlights the importance of
effectively combatting it. Educating the public is an important step towards detecting and
preventing this fraud in the rst place. To understand this typeof fraud, the different types
of healthcare fraud are explained.Recent healthcare fraud cases and an analysis of the laws
and regulations applicable to healthcare fraud are also presented. This information is then
used to help explore some specic recommendations that can further help combat this type
of fraud. The remainder of this paper is organized as follows: rst, the scope of healthcare
fraud is presented along with some statistics on healthcare fraud prosecution; second, the
different types of healthcare fraud are discussedalong with recent example cases; third, an
overview of the laws and regulations applicable to healthcare fraud are given; and fourth,
specic recommendationsto combat healthcare fraud are offered.
2. Healthcare fraud scope and statistics
Healthcare fraud is an enormous world-wide problem. The World Health Organizations
estimate of annual global healthcare expenditure was $6.5 trillion in 2012[1](WHO, 2016).
Each year, 7.3 per cent of that (Gee et al., 2011), or an estimated $470 billion, is lost to
healthcare fraud and error aroundthe world. In the USA, the picture is also bleak. While the
percentage of healthcare costs lost to fraud may beless in the USA compared to the rest of
the world, the total amount is still staggering. The National Healthcare Anti-Fraud
Association (NHCAA) estimates that $75 billion will have been lost to healthcare fraud in
the USA (National HealthcareAnti-Fraud Association, 2016). This amounts to 2.5 per cent of
all healthcare costs, accordingto the NHCAA estimate.
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