Fraud Waste and Abuse in Healthcare

Federal healthcare funds help improve overall well-being. Unfortunately, some Medicare and Medicaid funds are lost to fraudulent and wasteful behaviors. Knowing how to detect, report, and prevent inappropriate use of funds associated with the Centers for Medicare and Medicaid Services (CMS) is essential.

Differentiating Fraud, Abuse, and Waste

Detecting and stopping fraud, abuse, and waste rely on distinguishing these behaviors in the healthcare context. All three practices result in unnecessary costs, but they often differ in intent and nature of their impacts.

What is Healthcare Fraud?

Providers commit Medicare and Medicaid fraud when they knowingly submit or contribute to the submission of a false claim for financial gain. Fraud occurs when a person works alone or with others to:

  • Misrepresent facts about a medical claim
  • Bill for unkept appointments
  • Intentionally solicit, receive, pay, or offer reimbursement to encourage Federal program referrals
  • Knowingly bill for services at a higher level of complexity than was used or documented
  • Falsify records to bill for unrendered services or undelivered supplies
  • Intentionally order services or items that were medically unnecessary

What Counts as Medicare or Medicaid Abuse?

Abuse refers to practices that directly or indirectly lead to unnecessary medical costs. It can also result in patients not getting the necessary treatments, being subjected to unnecessary tests or procedures, or receiving care from providers who do not follow professional standards or requirements. Medicare abuse includes:

  • Billing a Federal program for unnecessary services
  • Charging disproportionate or extreme prices for supplies or services
  • Misusing or assigning inaccurate codes on a claim to increase reimbursement, such as upcoding or unbundling codes

What is Waste in Healthcare?

Medicare or Medicaid waste is typically not considered illegal or negligent but directly or indirectly results in the misuse of funds. Wasteful practices include:

  • Errors in reimbursement or billing
  • Unnecessarily complex billing methods, redundant paperwork, and other inefficient administrative processes
  • Ordering excessive numbers of diagnostic tests
  • Readmitting patients because of avoidable complications
  • Overprescribing drugs or prescribing expensive medications when equally effective generics exist

Consequences and Costs of Fraud, Waste, and Abuse in Healthcare

Defrauding and abusing healthcare programs can lead to criminal or civil liability. The legal consequences can be fines, imprisonment, and loss of licensure. Healthcare organizations also risk losing essential Federal funding and community trust.

In addition, the U.S. Department of Justice estimates that healthcare fraud, waste, and abuse cost U.S. taxpayers over $100 billion annually. Illegal or unethical practices also siphon funds away from the growing number of patients who need life-saving services and treatments.

Preventing CMS Fraud, Waste, and Abuse

Organizations and providers must take steps to combat fraud, waste, and abuse and report it when it happens. It starts with familiarity with Federal laws governing the use of program funds:

Accurate Coding and Documentation

Healthcare providers can take steps to stay compliant and ensure the efficient and proper use of Federal funds. These actions include:

  • Using billing codes that accurately reflect the severity level of a patient’s condition
  • Ordering the most cost-effective treatment possible
  • Billing for only necessary medical services as well as those received
  • Ensuring only qualified and licensed employees perform billed services
  • Avoiding duplicate billing
  • Maintaining complete and accurate medical documentation

Provider Compliance Programs

Healthcare organizations should invest resources in rigorous compliance programs that help providers submit accurate claims and avoid fraudulent practices. When partnering with a healthcare compliance company, administrators and providers can access online platforms, training modules, software packages, and individualized guidance to help them streamline their practices while staying legally compliant.

Fraud, Waste, and Abuse Training

Preventing fraudulent and wasteful use of Federal funds depends on staying updated on regulatory changes and the latest ethical standards. All providers must maintain state licensure, continuing medical education (CME), and other requirements. Providers should consider CME training focusing on detecting and preventing healthcare fraud, waste, and abuse.

Reporting CMS Fraud, Waste, and Abuse

If you are a Medicaid or Medicare provider, contact the Office of Inspector General (OIG) Hotline if you suspect fraud or abuse. You can:

  • Call 1-800-HHS-TIPS (1-800-447-8477) or TTY 1-800-377-4950
  • Send a fax to 1-800-223-8164
  • Submit a complaint to the OIG Hotline website

You can also report the fraud or abuse by sending a letter to:

U.S. Department of Health & Human Services

Office of Inspector General

ATTN: OIG Hotline Operations

P.O. Box 23489

Washington, DC 20026

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