Kathleen G. Kane - Pennsylvania Office of Attorney General - Protecting Pennsylvanians

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Investigating Health Care Fraud Within the Medicaid Program
Criminal Law Division
Medicaid Fraud Control Section

The high cost of health care is a major concern to all citizens today. The Pennsylvania Medicaid Program has an annual budget of $4.5 billion for the poor, disabled, as well as needy senior citizens residing in nursing homes. One of the factors contributing to the continually rising cost of health care is fraud. It is estimated that fraudulent activities impact on at least 10% of our health care costs. The Pennsylvania Office of Attorney General, Medicaid Fraud Control Section, is responsible for investigating and prosecuting health care providers, and others, who defraud the state Medicaid Program. When the fraudulent provider is prosecuted, the penalties are severe. A violation of the Medicaid Fraud statute is graded as a felony of the third degree with a maximum penalty of seven years imprisonment and a $15,000 fine.

There are over 50,000 health care providers who have contracted with the Pennsylvania Department of Public Welfare, Medicaid Program to provide health care services to over 1.5 million Medical Assistance recipients residing in the Commonwealth. These enrolled health care providers include, among others, physicians, dentists, podiatrists, chiropractors, hospitals, home health agencies, ambulance companies, nursing homes, nurses, pharmacies, durable medical equipment companies, drug and alcohol clinics, laboratories, diagnostic medical practices, rural medical clinics, and family and therapeutic practitioners. Over the more than 20 years that the Medicaid Fraud Control Section has been in existence, the Section has investigated fraudulent activity involving all types of health care providers in a wide variety of schemes, including the following:

Billing for Services Not Rendered
The Medicaid Fraud Control Section has investigated and prosecuted numerous instances in which physicians, chiropractors, dentists, or other types of health care providers, billed the Medical Assistance Program without providing any service. Unscrupulous providers, including pharmacies and durable medical equipment companies, once they obtain a recipient's Medical Assistance Identification Number, have been found to bill the program for medication or supplies never delivered. This type of fraudulent activity is engaged in by almost all provider types.

Misrepresentation of Services
The Medicaid Fraud Control Section has detected situations in which providers bill for more expensive services than they actually render. For instance, a podiatrist who trimmed a patient's toenails may bill the Medicaid Program for a simple surgical procedure that is reimbursed at a higher rate or a pharmacist may dispense generic drugs, but bill the Program for more expensive brand name medication.

These types of fraudulent schemes also involve situations in which a provider renders a service that is not paid for by the Program, so they bill as if they rendered a service that is compensable. For example, pharmacies have dispensed medication which is non-compensable, but have billed the Program for a drug that is compensable. Additionally, since Medicaid does not pay for patients to be transported to their doctor for routine visits, some ambulance companies have billed the program for emergency transportation so as to obtain payment from the Medical Assistance Program.

False Cost Reports
The filing of false cost reports is a scheme used in the nursing home industry. Nursing homes are paid for the services provided to Medicaid patients based, in part, upon the actual costs incurred by the facility for treating the patients. As part of this payment plan, nursing homes are required to file annual cost reports which detail direct patient care expenses. The Medicaid Fraud Control Section has uncovered numerous instances in which nursing home administrators have placed expenses unrelated to patient care on the required cost reports. In fact, one nursing home administrator submitted the cost of remodeling a private home and a funeral home on the cost report.

The state Medicaid Fraud Statute prohibits "kickbacks" from being paid to a health care provider for patient referrals. For example, laboratories have been found to pay physicians for such referrals. In one case investigated and prosecuted, a laboratory attempted to mask the kickbacks being paid to the physician by paying an exorbitant rental fee for utilizing space at the physician's office for the collection and storage of blood samples.

Unbundling Supplies and/or Services
Fraud schemes called "unbundling" involve instances in which a provider bills separately for the component parts of a product or service resulting in a significantly larger payment to the provider. For instance, a durable medical equipment company was found to have billed for the component parts of a wheelchair separately, thus receiving four or five times more than if the wheelchair alone was billed as a single item. This unbundling scheme has also been used by laboratories to illegally increase their reimbursement fee. Diagnostic X-ray series have also been frequently billed as separate, distinct units or procedures rather than as a series or set.

Medically Unnecessary Services and Substandard Care
The state Medicaid Program is designed to reimburse or pay health care providers for medically necessary care that is provided within accepted medical or professional standards. The Medicaid Fraud Control Section has investigated numerous instances in which the Medicaid Program has been billed for medical services provided by unlicensed individuals, including some posing as physicians and dentists.

Additionally, the Section has found instances in which home health agencies have falsified reports concerning the medical condition of patients, in order to continue obtaining reimbursement for visiting the patient at home, despite the fact that the patient no longer requires home attention.

Drug Diversion
The Medicaid Fraud Control Section is involved in the battle against the illegal distribution of controlled drugs which are paid for by the Medicaid Program. Physicians have been found to write prescriptions for controlled drugs to Medical Assistance patients who have no legitimate medical necessity for the drugs. In fact, some physicians have even charged additional fees to the patient for the controlled drug prescriptions.

Where Do Cases Come From?
Our single largest source of allegations is from the public. Every year the Medicaid Fraud Control Section receives several hundred allegations of fraudulent health care activities. Not all allegations result in the filing of criminal charges, however, some are referred to the Department of Public Welfare or the various professional health care licensing boards for administrative review.