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Senior Medicare Patrol

Some Common Health Care Fraud and Abuse Schemes

Home Health Agencies and Hospice Programs, What are they?  

A home health agency (HHA) is an organization that makes skilled nurses and other therapists available to provide services in a consumers home. These services are especially useful after surgery when a physical therapist might visit to conduct therapy for several weeks. As recovery progresses, it is likely that simpler needs can be met by home health aides. They are trained professionals or semi-professionals who assist nurses or therapists by taking temperatures, helping with prescribed exercises and 'doing household tasks such as shopping, cooking and laundry.

Hospice care is designed for people with a terminal illness who are likely to die within six months. A hospice is a facility or program, that includes counseling and health care services for the comfort of a dying patient and his or her family. According to the National Hospice Organization, hospice care is designed to treat not only the physical needs of the patient, but the emotional and spiritual needs as well. The care takes place in the consumers home or in a long-term care facility concentrates on alleviating pain. The care supports the family as an essential part of its mission and believes quality of life to be as important as length of life.

Home health agencies and hospices are vulnerable to fraud because most beneficiaries or consumers do not understand Medicare requirements for coverage. In the past, and as recently as 1996, beneficiaries have not received Medical Summary Notices (MSNs) forms for home health services. There is no co-pay or deductible for these service


An Example of Fraud

A Medicare certified home health agency received a complaint from a beneficiary stating that he had not received any of the home health visits listed on the MSNs. After an investigation by the billing contractor I the home health agency realized that the visits did not occur and that the same nurse was involved in all of the visits. After reviewing over 40 visits made by the nurse, the home health agency realized that all but one of

the visits were false. In fact, the beneficiaries' signatures were forged by the nurse. In' I several cases, the nurse misspelled the beneficiaries' name three different times. The nurse later admitted to the fraud when approached by the home health agency.

The Fraud Schemes -Home Health Agencies and Hospice Programs

  • Billing for services not provided. Billing for more visits than provided.

  • Billing for services to consumers who do not meet the strict definition of homebound.

  • Billing housekeeping or custodial services as skilled nursing or therapy services- .Unfair marketing practices--some home health agencies have offered incentives, such as free groceries or free transportation to beneficiaries in exchange for their Medicare number or for switching to its agency.

  • Kickbacks--some home health agencies have offered cash or other benefits to physicians or referring beneficiaries and or signing treatment plans for beneficiaries who do not meet the conditions for home health care. Consumers who do not meet the eligibility requirements for hospice have been enrolled by hospice personnel.

  • Some hospice programs have received duplicate payments, billing both Medicare and Medicaid.

  • Some HHAs have provided home health aides to patients of assisted living facilities, when services provided by the aides should be provided by the assisted living facility staff .

  • Some board and care facilities have the same ownership as HHAs. In these cases, most of the residents of the board and care homes receive home health from the HHA that owns the facility. In addition, the home health services are often not necessary .

  • Some registered nurses have provided care to their relatives and then billed the service as home health care.

  • Some agencies have been found to have ties with durable medical equipment companies. Because of these financial relationships, the HHA staff have ordered large numbers of supplies the patient does not need.

Signs of Fraud In Home Health Agencies and Hospice Programs

  • Beneficiaries or consumers who are not homebound but who are receiving home health services.

  • Beneficiaries or consumers who are not terminally ill but are enrolled in hospice. 

Durable Medical Equipment Suppliers                

A wheelchair is durable medical equipment (DME), as is a walker or a commode. It is equipment which can withstand repeated use. It is primarily used for a medical purpose and generally is not useful to a person in the absence of an illness or injury , and it is appropriate for use in the home.

Medical equipment suppliers are likely targets for fraudulent operators because no professional licensing boards regulating durable medical equipment suppliers exist. Therefore, there are no licensing requirements. Only a business license is required to obtain a supplier number. In the past, Medicare contractors have not verified the existence or location of the suppliers. There is a huge potential for quick profit in the DME industry. And, suppliers have found it fairly easy to obtain beneficiaries' Medicare numbers.

Examples of DME Fraud

A DME supplier may offer a motorized scooter to a beneficiary under the pretense that Medicare pays for it. The supplier then bills Medicare for an electric wheelchair with attachments instead of the scooter. Medicare usually does not pay for scooters because they are considered a convenience and not a medical necessity.

A DME supplier may supply a lower-cost manual wheelchair to a beneficiary I and yet bill Medicare for a more expensive electric wheelchair with attachments. Electric wheelchairs can cost anywhere from $2,000 to $3,000 more than manual ones.

In some cases, a beneficiary may no longer need a wheelchair , perhaps due to recovery or death. Meanwhile, the supplier continues to bill Medicare, even if the wheelchair has been returned by the beneficiary. In other cases, the beneficiary may call the supplier and they may try to dissuade the beneficiary from returning the wheelchair, claiming it was already paid for and should be kept for possible use in the future. It sometimes takes repeated phone calls by the beneficiary to get the supplier to pick up the wheelchair. Even then, the supplier may continue to bill as if the beneficiary is still renting the equipment. This is why it is important to review MSNs and report any discrepancies.

The fraud looks like this

  • Unscrupulous DME suppliers use a variety of means to obtain Medicare numbers, some examples include:  

  • Calling beneficiaries under the guise of conducting a health survey. One of the question is  "What is your Medicare number?" 

  • Offering beneficiaries a "free health screening" like blood pressure check or a cholesterol test and asking for the Medicare number .

  •  Paying beneficiaries for their Medicare number .

  •  Offering beneficiaries "free" services or supplies like milk or bread or clothing in exchange for a Medicare number

 Obtaining lists of Medicare beneficiaries and their Medicare numbers from nursing homes or board and care homes by selling administrators or operators on "new" Medicare benefits that will help their facility .

  •  Lymph edema pumps are supplied to patients who did not meet the medical necessity requirement. Suppliers falsified claims and certificates of medical necessity. As a result, Medicare was billed for higher-priced pumps while pumps costing nearly $3,000 less actually supplied.

  • Oxygen concentrators have been provided to patients who have no need for oxygen. Because Medicare requires patients to be tested by an independent lab before paying for oxygen, suppliers have engaged in schemes with physicians and labs to falsify results.

  • Suppliers offer "free" case of milk supplements or groceries, then bill Medicare for more costly enteral or parenteral supplies. 

Signs of Fraud or Abuse in Durable Medical Equipment Suppliers

  • Look for the same type or brand of durable medical equipment provided to all or most residents of a nursing home or other long-term care facility .If all residents have the same brand of air fluidized beds, then chances are it has been ordered unnecessarily.

  • Consumer may not be able to use the quantity of supplies or equipment received. Look for vast quantities of supplies.

  • Supplier conducts health screenings and medical surveys to obtain Medicare numbers. Business is generated by telemarketing or offers of "free" items or cash.

  • Did the supplier waive co-pays and deductibles in the absence of financial need? Beware of "FREE" anything. It is usually billed to Medicare or other insurers.

Nursing Homes

Nursing homes are facilities that offer 7 day-a-week 24 hour-a-day services delivered under the supervision of a licensed nurse. Nursing homes provide a wide variety of assistance to meet physical, dietary, therapeutic, social, and recreational needs. Most nursing home residents are elderly, many are frail and have difficulty living on their own. Therefore they have increased needs for care and monitoring. Some have decreased mobility while others may suffer from chronic illness, physical or mental debilitation or emotional trauma.

Nursing Homes may be a temporary placement for individuals who, after hospitalization, are not yet ready to return home. For others needing higher levels of care and monitoring, it is a more permanent situation. Different nursing homes and community services provide different levels of care. It is important to assess needs to determine if a nursing home is appropriate and, if so, which facility will provide the best care. 

Why does health care fraud occur in nursing homes and other long term care facilities?

Fraud occurs in nursing homes and other long term care facilities because the residents or beneficiaries are not aware about items that are billed to Medicare under their Medicare number. Often beneficiaries are not able to participate in decisions regarding , their medical treatment. There is no method of regulating sales representative, and poor oversight of supply inventory. Staff is usually not well versed in how fraud works. 

Stories of Nursing Home Fraud and Abuse

In spring of 1994, an elderly resident was moved from Tucker House, a nursing home in north Philadelphia, to a local emergency room. The resident showed signs of serious neglect. He was "dehydrated, malnourished, severely anemic, and his eyes were infected." He had well over twenty bedsores resulting from prolonged pressure on the body. Most were at Stage Four development, indicated by a "deep crater-like ulcer" .

The facts led to a federal prosecution for violation of the False Claims Act. Ultimately, a fine of $ 600,000 was paid, the nursing home's management changed and a detailed consent decree monitoring the operation of the facility was put in place.

In another case, an ophthalmologist billed for treating 88 nursing home residents in a single day. This is impossible because it would take 57 hours and 45 minutes to examine 88 patients and perform all the procedures billed for .

In some instances, mental health professionals visit a nursing home or other long term care facilities, host a social event and bill this as group therapy.


Fraud Schemes in Nursing Homes

  • Billing for medical supplies not provided to the patient. When the patient is not under a Medicare Part A covered stay I facilities may bill for certain medical supplies under Part B. Numerous instances of billing for supplies not received by the resident or beneficiary have been detected .

  • Billing social activities or life services as psychotherapy.

  • Irrigation kits are often supplied to nursing facilities for ostomy patients in quantities far greater than needed. In many cases, sterile kits are not medically necessary .Many nursing homes break kits down and add individual components to their own supply rooms.

  • Suppliers have billed Medicare for custom-fitted body jackets, when in reality the items supplied are plain, wrap-around -corsets secured by Velcro straps. Medicare is billed for custom-fitted, molded body jackets. Reimbursement for the custom jackets is often several hundred dollars, while the items actually cost $30.

  • "Gang visits" is the term used to describe a group of practitioners such as optometrists, podiatrists, etc., stopping by all or most patients in a facility without providing any service, but billing as if a service had been provided.

  •  Most of the patients do not have any prior symptom or conditions warranting the practitioner's service.

  • Providing medically unnecessary physical, occupational and speech therapies (PT, OT, ST) .Therapies often supplied to large groups of patients but billed as it provided to individual patients. For example: A physical therapist spends 30 minutes with a group of 10 patients. Medicare is billed for 30 minutes of PT for  patient.

Signs of fraud in Nursing Homes and other Long Term Care Facilities

Severely dehydrated and neglected residents of nursing homes and other long term care facilities may indicate neglect of services that are being billed to the Medicare program.

Kits marked for individual residents used for other residents. Kits held in extremely large supply in storage areas. This may be a sign that unnecessary supplies are being stockpiled-

Therapies (PT/OT/ST) being provided to groups of patients. These services may be billed to Medicare as if provided individually.

  • Therapies, such as psychotherapy, being provided to patients who cannot benefit from the services, particularly those with Alzheimer's Disease or those in a coma

  • Patient file access provided to persons who are not actual practitioners for specific patients.

  • The same medical equipment for every patient may indicate fraud. It is highly unlikely that every patient needs or uses the same brand and type of wheelchair or walker. Moreover, the government may be paying twice for the equipment: Medicare pays on behalf of each patient, and Medicaid factors the cost of durable medical equipment (DME) into rates for the nursing home.

Managed Care Plans or HMO's

Managed care is simply a type of health insurance designed to control the rising cost of medical care without sacrificing the quality of the health care consumers receive. It was developed to lower the out-of-pocket costs for consumer. Critics contend that it has lowered costs by limiting access to health care and by cutting the quality of care consumers receive. It is popular with employers looking to cut costs associated with the traditional indemnity type of health insurance.

Managed care generally falls into three types or categories, but it can be misleading to generalize. Exceptions abound and it is important to study each individual plan offered. That said, the following discussion is a good starting point.

Decisions by managed care plans denying health services or health care can be appealed by the consumer .

? What does fraud look like In the managed care environment?

Fraud looks different in a managed care setting as compared to a fee for service environment because most managed care plans operate in a capitated pre-payment environment instead of a fee for services one. In other words, no claims are required to secure payment. No bills or statements are sent to members for review. The fraud usually occurs when a needed service is not provided. It is the underutilization of a service that could be fraud instead of the provision of unnecessary services. Many managed care plans pay their network providers a monthly, flat or capitated payment and some providers have failed to provide needed care so as not to exceed their monthly payment. However I in addition to failing to provide needed services, almost any fraud scheme described in the traditional fee for services sections above can occur in the managed care environment.


Fraud Schemes


Signs of Fraud In Managed Care Plans.


Since 1990, hospitals have been undergoing a series of changes. Many have expanded their functions to respond to the changes that managed care has wrought. Others have been swallowed up in mergers and turned into 'super hospitals' combining in and out -patient services. But hospitals are still places to go for care you need when you are sick or injured. Some are teaching hospitals that educate doctors and other health care professionals. Some hospitals are specialty or rehabilitation centers. Whatever the type, they can seem impersonal and complex places to many of us. To others, hospitals have provided a caring atmosphere and life saving services-

? Why does the fraud occur?

Because patients are often not aware of all of the services they are receiving. Sometimes the patient is too ill to monitor the details of their medical care. Medicare payments rules for hospital services are complex and there are insufficient auditors to conduct extensive, detailed audits.

Stories of Health Care Fraud in Hospital Settings

Several hospitals in Philadelphia made it their practice to bill resident's time as a supervising physician's time. This practice is not permitted by Medicare and Medicaid regulations. The hospitals were sued to stop the practice and the federal programs were reimbursed millions of dollars for the error.

A drug and alcohol rehabilitation facility discharged their patients on paper, but not in fact. The hospital received the reimbursement for the inpatient stay and then also billed for outpatient services. Since the patients never left the hospital, the facility should have only received the inpatient payment. This discrepancy could result in higher costs than legitimately allowed.

Some Common Fraud Schemes

  • Misrepresentation of patient's condition on the claim form in order to increase the payment.

  • Misrepresentation of discharge date in order to obtain inpatient and outpatient reimbursement

  • Billing multiple view x-rays when only one view was taken.

  • Some patients have been held in observation status for 3 or 4 days, rather than admitted as a hospital patient. Hospital observation services are usually reimbursed at a higher rate than the hospital would receive for an inpatient.

Mental Health Services  

Mental health services can be delivered to consumers in several settings. For example, a consumer may experience a mental health crisis and receive treatment in a hospital. She or he may then move on to a nursing home or other facility with a less intensive level of care. Some time later, the consumer may be treated as an outpatient or simply attend counseling sessions with a psychiatrist, a clinical psychologist (CP), or a clinical social worker (CSW) .

Partial Hospitalization Programs (PHP's) are designed to keep patients with severe mental conditions from becoming hospitalized by providing intensive psychotherapy in a day outpatient setting. Some Community Mental Health Centers (CMHC's) are outpatient mental health facilities authorized to provide partial hospitalization services.

? Why Mental Health Services?

  • Patients must trust their therapist or counselor .

  • Some patients may be incapable of reviewing and understanding the MSNs or the MSN's to monitor discrepancies in services provided and services billed for.

  • Because to some individuals a stigma may attach to the person receiving mental health services, they may hesitate to question claims or report them when they have a question.

Stories of Health Care Fraud in Mental Health Services

Private insurance companies lost millions of dollars in the 1980's when it seemed an epidemic of clinical depression had targeted the nation's teenagers, the overweight and the substance abusers. Doctors and private nursing homes diagnosed depression to assure reimbursement whether it fit the symptoms or not. Because the diagnosis "depression" guarantees that the insurance company would pay for the illness, and being overweight or a troubled teen or a substance abuser does not, the "depression" diagnosis was overused.

Another example of fraud or abuse is to bill for psychotherapy to treat an advanced stage of Alzheimer's resident in a nursing home. Psychotherapy is an intensive treatment requiring the patient to interact with the therapist. Advance stage Alzheimer patients simply do not have the cognitive abilities to participate in this kind of treatment.

The Fraud Schemes

  • Routine up coding of psychotherapy sessions by the mental health provider. There are several variations that occur:

  • A psychiatrist conducts group sessions in a nursing or residential facility but bills for individual therapy.


   What to watch for in Mental Health Settings

  • Group therapy sessions where recreational activities are being provided.

  • The presence of mental health providers with patients who are non-communicative or cannot benefit from psychotherapy (patients in coma, patients in the late stages of Alzheimer's or other similar illness.)

Clinical Laboratory Services

Clinical laboratories provide invaluable data to doctors by testing specimens and providing results to aid in diagnosis. Consumers may not come into contact with the lab, as the physician often sends the specimen, such as blood or other material, to the lab directly.  

? Why does the fraud occur?

Clinical labs are in the almost unique position of billing without oversight because of several factors. The first is that beneficiaries or consumers have not received Explanation of Benefit forms, or Medical Summary Notices or any explanation of fees. Second, Medicare pays 100% of lab fees. Third, physicians do not see the lab bill submitted to Medicare. And finally, for most lab tests, Medicare has not required labs to submit diagnosis or symptom information to support the need for the tests.

A Story of Fraud in the Clinical Lab Setting

A good example of this kind of health care fraud occurred in February 1997. SmithKline Beecham PLC, a Philadelphia based multinational drug company agreed to pay a total of $325 million to the federal government to settle claims it's clinical laboratory conducted unnecessary blood tests and cost the Medicare and Medicaid programs millions of dollars. This fine is the highest to date. The fraud included deliberately overcharging for certain blood tests. These unnecessary blood tests were not ordered by doctors and in many instances the blood tests were billed for separately, instead of as a package. This practice is called unbundling. It costs more, and is specifically prohibited by Medicare and Medicaid regulations. The cost on any single patient's bill was small, yet because of the volume of business, the overall cost to Medicare and Medicaid was high.

Some Common Schemes

Signs of Fraud In Clinical Laboratories


Ambulance Services

Ambulances are used to transport patients, nursing home residents and the homebound in many different circumstances. Medicare and Medicaid cover the cost only if necessary. The definition of "necessary" is based on whether the consumer can use some form of transport, such as a car or a taxi. The capacity of the consumer to walk the distance required to use the car or a taxi to travel to a treatment that they could not receive in their home also figures in the eligibility determination. A detailed explanation of the requirements and benefits are available in the Medicare Handbook.

? Why Does the Fraud Occur?

Beneficiaries, hospital discharge planners, nursing home staff and others do not understand Medicare coverage of this benefit.

A Story of Health Care Fraud In Ambulance Services

Ambulance transport were provided to ambulatory dialysis patients to and from the dialysis center and billed as medically necessary transports. In one case, patients were filmed walking to the ambulance and riding in the front seat. In some cases, they were transported in a regular automobile. In addition, two or three patients were transported ) in the same vehicle, yet Medicare was billed as if they were individual trips.

    Some Common Fraud Schemes

  • Billing for advanced life support services (ALS) when basic life support services (BLS) are provided. Documentation is often falsified to indicate the patient needed oxygen - which is a key indicator to establish medical necessity for ALS. 

  • Billing for more miles than traveled for transport. Air ambulance services have reported their mileage in ground miles instead of nautical miles.

  • Falsification of documentation to substantiate the need for a transport from a hospital back to the patient's home. Medicare will only cover transport from hospital to home if the patient could not travel by any other means, such as car, taxi, or cabulance.

Signs of Fraud in Ambulance Services

  • Ambulatory patients requiring regular medical services, such as renal dialysis, being transported by ambulance.

  • Discrepancies between services provided and those billed for on the MSNs.

 The above information is contained in the Senior Medicare Patrol Volunteer Training  Manual which was written by CARIE, in Philadelphia. 

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