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									Weighing the Consequences
 Health Care Fraud – A Game Not Worth Playing

     NM Medical Assistance Division/ HSD
   2007 Anti-Fraud Program Education Series
                                      Defining the Problem

         What is FRAUD?
            – The intentional deception or misrepresentation that
              an individual knows, or should know to be false, or
              does not believe to be true, and makes, knowing
              the deception could result in some unauthorized
              benefit to himself or some other person(s).

         What is FRAUD & ABUSE?
            – Fraud: To purposely bill for services that were
              never given or to bill for a service that has a higher
              reimbursement than the services produced.
            – Abuse: Payment for items or services that are
              billed by mistake by providers, but should not be
              paid for by Medicare/Medicaid. This is not the
              same as fraud.
*Centers for Medicare & Medicaid Services (CMS) Definitions
                                                        Whose Problem Is It?

         Health Care Fraud Impacts Everyone.
            – While one in four Americans says it’s ok to
              defraud insurers, consumers need to
              understand this type of thinking is costly.
                     The average American household pays
                      $1,000 every year in out-of-pocket-costs as a
                      result of insurance fraud.
                     Seniors and taxpayers pay up to $1 billion a
                      year in inflated drug prices due to potential
                      fraud and loopholes in Medicare, representing
                      1/5 of Medicare spending in 2000.
            – Many of the FBI’s 56 field offices rank health
              care fraud as their No. 1 white collar crime

* People's Attitudes About Fraud. Retrieved October 25, 2006 from Coalition Against Insurance Fraud, Web site:
*Zinkewicz, P. (1998). Insurance Fraud Raises Concerns About Consumer Attitudes . Retrieved November 22, 2006 from   3
                                                               The Cost of Fraud

                                                                    Fraud Losses:
                                                                       – Estimates in 2003 show at least three
                                                                         percent ($51 billion) in fraud losses.
                                                                       – Other government estimates place the
                                                                         losses as high as ten percent ($170
                                                                    What would $170 billion buy?
                                                                       – Consumer online internet spending will
                                                                         reach $170 billion in 2006.
                                                                       – Global spending on HIV/AIDS in low
                                                                         and middle-income countries was
                                                                         estimated at $6.1 billion in 2004, with
                                                                         the need projected at $12 billion for
                                                                       – Cancers annually cost the U.S. $70
                                                                         billion in direct medical costs.

*(2005). Africa: Year of Action for AIDS Treatment?. Retrieved November 22, 2006, Web site:

*(2005). Preventing Chronic Diseases: Investing Wisely is Health, Screening to Prevent Cancer Deaths. Retrieved November   4
22, 2006, Web site:
                                             Health Care Fraud’s Victims

         While health care fraud is                                                          Increases
          extremely costly, it is                                                              Taxes to
          important to understand                                                            Government
          that adding a criminal                                                              Programs

          element to health care
          creates quality of care
          issues that can result in                                Creates                                                  Increases
          patients being exploited                                 Distrust                  Health Care                    Insurance
          and/or put at physical                                       in                      Fraud                       Premiums/
                                                                  Health Care                                              Deductibles
         Federal law provides for
          longer potential prison
          terms in health care                                                                  Creates
          fraud cases that result in                                                           Quality of
                                                                                              Care Issues
          a patient’s injury or

*(2004). A Serious and Costly Reality for All Americans. Retrieved October 25, 2006 from National Health Care Anti-Fraud
Association, Web site:
                                                        Common Law Factors

             Under common law, four elements are
              required to prove fraud:
             1. A person makes a material false statement;
             2. The statement is false, and the person
                making the statement knows that it is
             3. The person making the statement intends
                to deceive or mislead the person to whom
                the statement was made with the
                expectation of receiving something of
             4. The person to whom the false statement is
                made is expected to rely on the statement
                to his/her detriment.

*Bowden, K. T., Dean, R. D. & Fyffe, K. H. (2001). Health Care Fraud: An Introduction to Detection, Investigation, and Prevention.   6
Washington, DC: America's Health Insurance Plans. p.175.
                                        Civil & Criminal Law Differences

          Criminal actions are pursued by the government.
             – Example: If a fraud perpetrator violates a criminal law,
               the government may criminally prosecute the offender.
          Civil matters may be pursued by the government or
           private industry.
             – Example: If an insurer believes the perpetrator’s actions
               have injured it in a way that violates civil law, the insurer
               can bring a civil action (lawsuit) against the perpetrator.
          The required level of proof is different in civil and
           criminal cases.
             – Civil cases require a “preponderance of evidence.”
             – The criminal fraud standard is “beyond a reasonable
                     Example: O.J. Simpson Trial was a good example of the
                      differences in criminal vs. civil standards.

*Lawrence, Michael G. and Wells, Joseph T., “Basic Legal Concepts,” October 2004,, p.2.

*Bowden, K. T., Dean, R. D. & Fyffe, K. H. (2001). Health Care Fraud: An Introduction to Detection, Investigation, and Prevention.   7
Washington, DC: America's Health Insurance Plans. p.175.
                          Problems in Proving Fraud

   Health care rules are not only complex,
    but they are constantly changing.
   The accused may think they have a
    credible defense: “I didn’t know.”
   To prove this defense wrong, it must
    be determined:
    – Should or could have the person known
      what he/she did was wrong (reasonable
    – Is there a pattern of illegal activity to prove
    – Has the issue been addressed before?

                                                         What Doctors Think

                                                               Thirty-nine percent of surveyed
                                                                doctors admitted to stretching
                                                                the truth and even lying in order
                                                                to administer the treatments
                                                                needed by patients.
                                                               Doctors “sometimes,” “often,” or
                                                                “very often” exaggerated
                                                                symptoms or altered diagnosis.
                                                               Over 50 percent of doctors said
                                                                such gaming was increasing in
                                                                their practices.

*Taken from the 2000 Journal of the American Medical Association Survey of 1,124 physicians.        9
                                    Provider Fraud Schemes
    Over 80 percent of all suspected fraud cases involve
     provider fraud.
    These issues are known as “hard” fraud.                 False
           Falsification of Information                  Falsification,
                                                        Altered Claims

                                                     Upcoding, Unbundling,
                                                      Balance Billing, Cost
                                                      Shifting, Kickbacks,
           Questionable Practices                    Prescribing Practices,
                                                  Clustering, Underutilization,
                                                    Invalid Place of Service,
                                            Rolling Labs, Non-Contracted Providers

                                          Medically Unnecessary Diagnostics, Office
           Overutilization              Visit Frequency, Unnecessary Durable Medical
                                      Equipment, Prior Authorization Fraud, Inappropriate
                                                    Procedure for Diagnosis

*List is not all inclusive                                                                  10
                                                   Member Fraud Schemes

         Member fraud is referred to as “soft fraud.”
            –   Soft fraud is harder to detect and is often the result of abuse of an
                insurance process, claim exaggeration, or opportunistic claim filing.
            –   This type of fraud is typically done by individuals without a clear
                criminal history or criminal profile.

         Schemes perpetrated by this population include:
            –   Drug Seeking Behavior and/or Trafficking
            –   Collusion
            –   Conspiracy
            –   Forgery
            –   Impersonation Fraud
            –   Co-payment Evasion
            –   Providing False Information
            –   Sharing or Stealing Medicaid Benefits
            –   Subrogation/Third Party Liability Fraud
            –   Theft
            –   Transportation Fraud

*Bingham, K., Lucker, J. & Masud, M. (2006, March ). A Hard Look. Contingencies, p.28   11
                                         Increased Regulatory Scrutiny

         Anti-Fraud regulatory requirements
          have dramatically increased. As of
          June 2006:
            – Forty states have Insurance Fraud
            – Twenty states require anti-fraud
            – Sixteen states require Special
              Investigative Units; and,
            – Forty-three states have anti-fraud
              mandates that apply to managed care
         New Mexico is held to all of the
          standards listed above.

*NHCAA Guide to State Insurance Fraud Bureaus and Health Insurer Anti-Fraud Requirements.   12
                   Medicaid Anti-Fraud Regulatory Agencies


                                                     State Medical

                                              State Human Services
                   State Medicaid                                            US Health & Human
                                               Department Office of
                  Fraud Control Unit                                            Services OIG
                                             Inspector General (OIG)

                                       State Board
State Insurance
                                       of Medical                      FBI                       IRS
 Fraud Bureau

                                                                       CMS                       DEA


            What is the Deficit Reduction Act?

   On February 8, 2006, President Bush signed Public Law 109-
    171, the Deficit Reduction Act (DRA) of 2005, into law.
   The DRA is the most sweeping legislation to impact
    Medicaid in over 30 years.
   The DRA goes into effect January 1, 2007.
   The DRA aims to cut $11 billion from the Medicare and
    Medicaid programs.
   The plan is to realize this savings over the next five years.
   The DRA plans to save Medicaid monies by deterring and
     – Fraud
     – Waste
     – Abuse
   This plan is evidenced in Section 6032 of the act.
                Section 6032 – What Does it Mean?

   Employee Education
    About False Claims
    – Any health care entity
      who receives or pays out
      $5 million or more in
      Medicaid funds per year
      must have written
      policies in place for the
         EMPLOYEES
         AGENTS

                             Policy Requirements

   Policies must provide detailed information
    – The Federal False Claims Act and any state
      laws pertaining to civil or criminal penalties
      for false claims and statements, including
      whistleblower protections granted in these
    – How the provider will detect and prevent
      fraud, waste, and abuse; and,
    – The rights of the employee to be
      protected as whistleblowers and reiteration
      of the entity’s policy for detecting and
      preventing fraud, waste, and abuse in the
      employee handbook.

               Federal False Claims Act Terms Defined

   In order to understand the Federal False
    Claims Act, certain terms need to be
    – “Knowing” and “Knowingly”- mean that a
      person, with respect to information-
         Has actual knowledge of the information;
         Acts in deliberate ignorance of the truth or
          falsity of the information; or,
         Acts in reckless disregard of the truth or
          falsity of the information.

   No proof of specific intent to defraud is

                               Liability Factors

   Under the Federal False Claims Act, any person who
    engages in the following is liable for his/her actions:
    1. Knowingly presents, or causes to be presented, to an
       officer or employee of the United States Government or a
       member of the Armed Forces of the United States a false or
       fraudulent claim for payment or approval;
    2. Knowingly makes, uses or causes to be made or used, a
       false record or statement to get a false or fraudulent claim
       paid or approved by the Government;
    3. Conspires to defraud the Government by getting a false or
       fraudulent claim allowed or paid;

                                Liability Factors, cont.

4.   Has possession, custody, or control of property or money used, or to be
     used, by the Government and, intending to defraud the Government or
     willfully to conceal the property, delivers, or causes to be delivered, less
     property than the amount for which the person receives a certificate or

5.   Authorized to make or deliver a document certifying receipt of property
     used, or to be used, by the Government and, intending to defraud the
     Government, makes or delivers the receipt without completely knowing that
     the information on the receipt is true;

6.   Knowingly buys, or receives as a pledge of an obligation or debt, public
     property from an officer or employee of the Government, or a member of
     the Armed Forces, who lawfully may not sell or pledge the property; or,

7.   Knowingly makes, uses, or causes to be made or used, a false record or
     statement to conceal, avoid, or decrease an obligation to pay or transmit
     money or property to the Government.

So, what does this mean???
                          Time to Pay the Piper

   It means be prepared to pay.
    – Persons who have engaged
      in the acts described are
      liable to the United States
      Government for a civil
    – The penalty is not <$5,000
      and not >$10,000 plus
      three (3) times the amount
      of damages the Government
      sustains because of the act
      of that person.

                       Exceptions to the Rule

   The only exceptions made by the court is if it were
    A. The person committing the violation of this subsection
       furnished officials of the U.S. responsible for
       investigating false claims violations with all information
       known to such person about the violation within thirty
       (30) days after the date on which the defendant first
       obtained the information.
    B. Such person fully cooperated with any Government
       investigation of such violations; and,
    C. At the time such person furnished the U.S. with the
       information about the violation, no criminal
       prosecution, civil action, or administrative action
       had commenced under this title with respect to such
       violation, and the person did not have actual knowledge
       of the existence of an investigation into such violation.
Exceptions to the Rule, cont.

         This would result in the court
          assessing the matter at not
          less than two (2) times the
          amount of damages, which
          the Government sustains
          because of the act of the
         A person would still be liable
          to the U.S. Government for
          the costs of a civil action
          brought to recover any such
          penalty or damages.

                 Article 14- Medicaid False Claims Act

   Due to the government’s success with the
    federal version, New Mexico joined the ranks of
    several other states by enacting state qui tam
   Governor Bill Richardson signed House Bill 468,
    the Medicaid False Claims Act, into law on
    March 8, 2004.
   Prior to this legislation, people in New Mexico
    were only able to file a qui tam lawsuit on
    behalf of the government as allowed by the
    federal act.
   Going forward, the Medicaid Integrity Program
    (funded by the DRA), will require all states and
    applicable territories to have their own false
    claims act.

                                          Article 14 Sections
   Article 14 contains fifteen (15) sections:

      Section                                    Title
     27-14-1    Short Title.
     27-14-2    Purpose.
     27-14-3    Definitions.
     27-14-4    False claims against the state; liability for certain acts.
     27-14-5    Documentary material in possession of state agency.
     27-14-6    Immunity.
     27-14-7    Civil action for false claims.
     27-14-8    Rights of the parties to qui tam actions.
     27-14-9    Award to qui tam plaintiff.
     27-14-10   Certain actions barred.
     27-14-11   Department not liable for certain expenses.
     27-14-12   Employee protection.
     27-14-13   False claims and reporting procedure.
     27-14-14   Application of other law.
     27-14-15   Use of funds.

                                 State vs. Federal Act

   The state false claims act contains overlapping language in terms of a
    person’s liability for certain acts.
   Article 14 differences, in terms of liability:
     – Presents or causes to be presented to the state a claim for payments under the
       Medicaid program knowing that the person receiving a Medicaid benefit or
       payment is not authorized or is not eligible for a benefit under the Medicaid
     – Knowingly applies for and receives a benefit or payment on behalf of another
       person, except pursuant to a lawful assignment of benefits, under the Medicaid
       program and converts that benefit or payment to his own personal use;
     – Knowingly makes a false statement or misrepresentation of material fact
       concerning the conditions or operation of a health care facility in order that the
       facility may qualify for certification or recertification required by the Medicaid
       program; or,
     – Knowingly makes a claim under the Medicaid program for a service or product
       that was not provided.

                       Other Sections of Interest

   Sections of special note are:
    – Section 7 – Civil action for false claims
    – Section 9 – Award to qui tam plaintiff
   These sections describe in detail:
    – How the State may pursue civil actions
      against those who defraud the Medicaid
      system; and,
    – The monetary rewards whistleblowers
      may be entitled to for bringing a false
      claims issue to the attention of the

                  What Providers Need to Know

   Section 12 – Employee protection
    – States employees who have been “discharged, demoted,
      suspended, threatened, harassed or otherwise discriminated
      against” due to their role in furthering a false claims action
      are entitled to “all relief necessary to make the employee
    – An employee turned whistleblower is entitled to:
         Employment reinstatement at the same level of seniority;
         Two times the amount of back pay;
         Interest on the back pay; and,
         Compensation for special damages incurred by the employee as
          a result of the employer’s inappropriate actions.

Why All These Rules?
     By making health care entities
      responsible for putting these laws
      into practice within their business,
      these entities can no longer claim
      they are not aware of False Claims
      laws and what these laws mean.
     Health care entities must embrace
      the law by showing that they have
      methods for detecting and
       – Fraud
       – Waste
       – Abuse

                    Facing the Consequences

   Providers who receive or pay out $5 million or more
    from Medicaid per year who fail to implement DRA
    legislative requirements by January 1, 2007 will be at
    risk of forfeiting all Medicaid payments until
    compliance is met.

                             Anti-Fraud Program Role
   As directed by regulatory guidelines, the main role of the Anti-Fraud
    Program is to:
     – Detect
     – Prevent
     – Investigate
     – Report
   Other roles the program assumes are:
     – Providing Provider Education;
     – Conducting proactive and meaningful investigations;
           Including generating material evidence to support criminal investigations.
     – Identifying hard and soft $$$ savings;
     – Actively participating in maintaining and analyzing system needs;
     – Working and coordinating efforts with other law enforcement and special
       investigative units; and,
     – Training employees how to identify potential fraud, waste, and abuse.

                                     Help Us Help You

   Aid Anti-Fraud Program Investigations by:
    – Remembering that accusations can either be true or false.
    – Knowing it is against the law to report matters with malicious
    – Providing an objective, comprehensive explanation when
      reporting an allegation.
    – Keeping in mind the Five W’s and One H when reporting matters:
         What laws and/or statutes were broken?
         Who broke the law?
         Why was the law broken?
         When was the law broken?
         Where did the law get broken?
         How was the law broken?

    – Providing evidence (e.g., claims, call logs, medical records).

                Employee Rights & Responsibilities

   Employees are obligated to report
    potential fraud and abuse.
   Anyone referring a matter to the Anti-
    Fraud Program has the right to remain
   Information reported to the Anti-Fraud
    Program will remain confidential to the
    extent possible as allowed by law.
   The employer expressly prohibits
    retaliation against those who, in good
    faith, report potential fraud and abuse
    to the Anti-Fraud Program
                             Reporting Potential Fraud

   Anyone with information about potential fraud or abuse
    impacting their employer may report the matter anonymously.
   You may report Medicaid fraud to:
     – Medical Assistance Division
       Quality Assurance Bureau
       P.O. Box 2348
       Santa Fe, NM 87504-2348
       Toll-Free: 1-888-997-2583
       Local in Santa Fe: 1-505-827-3100

     – Medicaid Fraud Control Unit
       111 Lomas NW, Suite 300
       Albuquerque, NM 87102
       Toll-Free: 1-800-678-1508
       Local in Albuquerque: 1-505-222-9000

     – New Mexico Human Services Department
       Office of Inspector General
       Local in Albuquerque: 1-505-827-8141
       Toll-free: 1-800-228-4802

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