Health Care Fraud Is on the Rise, With Billions at Stake

October 8, 2014

Health Care Fraud Is on the Rise, With Billions at Stake; Smart Organizations Engage Forensic Specialists to Detect or Prevent It

Doctors, Patients, Companies and Institutions Have Committed Fraud; Complex Transactions and Record Keeping Make It Hard to Identify, Says Marks Paneth Advisor

NEW YORK, NY--(Marketwired - Oct 8, 2014) -  Health care fraud is on the rise, with costs to federal programs and private institutions rising into the billions of dollars.

Private and government health care providers are equally at risk of being victims of fraud -- but detecting or preventing it can be difficult. Smart health care providers engage forensic specialists to detect fraud, or better yet, prevent it before it happens, according to New York accounting firm Marks Paneth LLP.

"With large amounts of money at stake in the health care system, and complex transactions involving multiple parties, there is both motive and opportunity for fraud," says Sareena M. Sawhney, directorin the Litigation and Corporate Financial Advisory Services Group of Marks Paneth.

"The complexity of health care finance and record keeping means that fraud can be exceptionally difficult to detect," Ms. Sawhney says. "Health care institutions need to be alert to the possibility of fraud. But in many cases it will require special skills to detect it."

According to Ms. Sawhney, the stakes are high. "In Fiscal Year 2012 alone, various government teams involved in the Health care Fraud and Abuse ("HCFAC") Program recovered $4.2 billion dollars from individuals and companies who attempted to defraud federal health programs," she says. 

Also in Fiscal Year 2012:

  • The Justice Department opened 1,131 new criminal health care fraud investigations involving 2,148 potential defendants.
  • A total of 826 defendants were convicted of health care fraud-related crimes during the year.
  • The department also opened 885 new civil investigations. Just one example: In May, the HCFAC strike force coordinated a takedown that involved 107 individuals in seven cities, including doctors and nurses, that included the highest number of false Medicare billings -- about $452 million -- in the program's history.
  • Other strike force operations in these same cities resulted in 117 indictments, information and complaints involving charges against 278 defendants who allegedly billed Medicare more than $1.5 billion in fraudulent schemes.
  • 251 guilty pleas and 13 jury trials were litigated, with guilty verdicts against 29 defendants. The average prison sentence was more than 48 months.

Why the high rate of fraud? "The combination of high dollar amounts and a complex system of multi-party transactions makes it attractive and easy for fraudsters to operate," Ms. Sawhney says. She explains that health care fraudsters use many techniques:

  • They bill for services they haven't provided - This can mean that no medical service of any kind was rendered, the service was not rendered as described in the claim for payment, or a previously paid claim is being filed again.
  • They bill at higher rates than are justified - This happens when a health care provider submits a bill using a procedure code that results in a higher payment than the code for the service actually rendered. A 30-minute session might be billed as a 50-minute session.
  • They submit duplicate claims - One service is billed two times (for example, by using two different service dates) in an attempt to be paid twice for one service.
  • They "unbundle" services into multiple bills - Here, a provider bills separately for services that are usually included in a single service fee.
  • They provide more service than the patient needs - A provider might schedule and bill for daily medical office visits when monthly office visits are adequate.
  • They ask for or are offered kickbacks - Here, a health care provider offers, solicits, pays or accepts money, or something of value, in exchange for the referral of a patient for health care services that may be paid for by Medicare or Medicaid. A laboratory owner might pay a doctor $50 for each Medicare patient a doctor sends to the laboratory for testing. Kickbacks do not have to be in cash -- they can take other forms such as jewelry, paid vacations or other valuable items.

When health care organizations suspect fraud, several steps are usually required to detect it, Ms. Sawhney explains. "Fraud detection involves a combination of interviews, document reviews and complex data analysis," she says. "When a fraudster is billing for services not rendered, the dates of service on the claim forms need to be compared to the patient's records to prove that the patient was not at the facility on those days." The investigation might require the review of office sign-in sheets if other records are not available. Data analysis options include reviewing physician activity to see if a particular provider is generating extremely high activity or dollar volume, testing for duplicate transactions, and joining data sets such as social security numbers with patient names and addresses, or vendor names and addresses with payroll records for employees.

These techniques are useful once fraud is suspected, Ms. Sawhney explains. But too often, organizations are not aware of it until the fraud is well developed or until a whistleblower comes forward. "The best approach is to detect fraud before it happens," she says. "Organizations can take a more proactive approach by identifying risk factors early on. If you monitor transactions continually using some or all of these approaches, the odds are much higher that you will be able to bring the fraud to the surface and reduce further losses," she says. 

Ms. Sawhney is available for interviews and can author a bylined article. For more information, contact Katarina Wenk-Bodenmiller of Sommerfield Communications at (212) 255-8386 or

About Marks Paneth LLP

Marks Paneth LLP is an accounting firm with over 500 people, of whom 65 are partners and principals. The firm provides public and private businesses with a full range of auditing, accounting, tax, consulting, bankruptcy and restructuring services as well as litigation and corporate financial advisory services to domestic and international clients. The firm also specializes in providing tax advisory and consulting for high-net-worth individuals and their families, as well as a wide range of services for international, real estate, media, entertainment, nonprofit, professional and financial services, and energy clients. The firm has a strong track record supporting emerging growth companies, entrepreneurs, business owners and investors as they navigate the business life cycle.

The firm's subsidiary, Tailored Technologies, LLC, provides information technology consulting services. In addition, its membership in Morison International, a leading international association for independent business advisers, financial consulting and accounting firms, facilitates service delivery to clients throughout the United States and around the world. Marks Paneth, whose origins date back to 1907, is the 33rd largest accounting firm in the nation and the 10th largest in the mid-Atlantic region. In addition, readers of the New York Law Journal rank Marks Paneth as one of the area's top three forensic accounting firms for the fifth year in a row.

Its headquarters are in Manhattan. Additional offices are in Westchester, Long Island and the Cayman Islands. For more information, please visit

Katarina Wenk-Bodenmiller
Sommerfield Communications, Inc.
(212) 255-8386

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