Forbes reports that a New York area cardiologist has pleaded guilty to charges that he committed health care fraud, admitting to billing Medicare Part B, Medicaid, and numerous private insurers “for unnecessary tests and unnecessary procedures based on false diagnoses and for medical services rendered by unlicensed practitioners.” In total, the cardiologist billed Medicare and Medicaid more than US $70 million from 2005 to 2012.

The cardiologist is scheduled to be sentenced in July. The crimes for which he has pled guilty carry a maximum total sentence of 15 years. He is also subject to fines and will be required to pay restitution.  

Lessons Learned 

The damage caused by medical fraud is significant, including injury to or death of the patient and financial loss of taxpayer money. The U.S. Federal Bureau of Investigation estimates that approximately US $80 billion a year is lost as a result of medical fraud. Yet, some might argue that Medicare appears to have left itself vulnerable to fraud. Fundamentally, physicians are trusted to uphold ethical standards and practices in their submission of Medicare bills. Checks and balances reside in the U.S. government’s health administration compliance programs, aided by whistleblower initiatives. The range of medical fraud is broad, and includes kickbacks, bribery, deliberate misdiagnosis and mistreatment, and fraudulent billing.

Internal auditors will no doubt recognize the main kinds of fraudulent billing activities to which the New York cardiologist pleaded guilty, and other similar cases currently in the media, as they resemble many types of financial fraud committed against nonmedical organizations. These include fraudulent billing for services:

  • Not actually rendered.
  • Not medically necessary.
  • Performed by an inappropriately supervised or unqualified employee.
  • Performed by an employee who has been excluded from participation in federal health care programs.
  • Of such low quality that they are virtually worthless.
  • Already included in a global fee (e.g., billing for an evaluation and management service the day after surgery).

Beginning in 2013 under the U.S. Affordable Care Act, physician practices will be required to create compliance programs to help them avoid fraudulent activities and ensure they are submitting true and accurate claims. Internal auditors have an opportunity to play a direct role or to advise about physician compliance programs by:

  • Conducting internal monitoring and auditing, including payments made and received.
  • Implementing and assessing compliance and practice standards, including those that are performance-related or for diagnosis, testing, treatment, and quality.
  • Designating a compliance officer and monitoring the effectiveness of the role.
  • Establishing and monitoring appropriate training, communications, and education programs, including conflict of interest, professional qualification standards, personnel security and screening procedures, and whistleblower mechanisms.
  • Responding appropriately to detected offenses and developing corrective action.
  • Enforcing disciplinary standards through well-publicized guidelines.

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