Medicare Part B 101 Manual

Fraud and Abuse

• Fraud and Abuse
• Unified Program Integrity Contractors
• Defining Fraud and Abuse
• Fraud
• Abuse
• Bribes, Kickbacks and Rebates
• Penalties
• Waiving Deductible and Coinsurance
• What You Can Do As a Medicare Provider to Protect Yourself from Fraud

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Fraud and Abuse

The Medicare Program provides reimbursement for health care services for millions of beneficiaries and provides payment to tens of thousands of providers and suppliers of services. Numerous public and private organizations are involved in the program’s administration. Within a program of such complexity and magnitude, the opportunities for fraud, abuse and waste are considerable. The quality control effort to eliminate fraud, abuse and waste is necessarily a cooperative effort involving the beneficiaries, contractors, QIOs, state Medicaid agencies, federal agencies such as the CMS, the OIG and the DHHS. As well, most providers and provider organizations are interested in fraud and abuse control to protect their industry’s image with the public and Congress.

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Unified Program Integrity Contractors

MACs, DME MACs and BIUs have historically performed Medicare fraud and abuse detection, case referral and provided assistance to law enforcement. As permitted by Congress in the HIPAA, CMS has moved Medicare benefit integrity work from the MACs and DME MACs to the UPICs formerly known as ZPICs and PSCs. The primary goal of the UPIC is to identify cases of suspected fraud, waste and abuse, develop them thoroughly and in a timely manner, and take immediate action to ensure the Medicare Trust Fund monies are not inappropriately paid.

The UPIC is required to use a variety of techniques, both proactive and reactive, to address any potentially fraudulent, wasteful, or abusive billing practices based on the various leads they receive.

UPIC Responsibilities

• Prevent fraud by identifying program vulnerabilities;
• Proactively identify incidents of potential fraud, waste and abuse that exist within its service area and takes appropriate action on each case;
• Investigate (determine the factual basis of) allegations of fraud made by beneficiaries, providers/suppliers, CMS, OIG and other sources. When appropriate, the UPIC may collaborate with CMS, SMA and MFCU personnel;
• Explore all available sources of fraud leads in its jurisdiction, including the SMA and the MFCU;
• Initiate appropriate administrative actions where there is reliable evidence of fraud, including, but not limited to, payment suspensions and revocations;
• Refer cases to the OIG/OI for consideration of civil and criminal prosecution and/or application of administrative sanctions;
• Refer any necessary provider/supplier and beneficiary outreach to the POE staff at the MAC;
• Initiate and maintain networking and outreach activities to ensure effective interaction and exchange of information with internal components as well as outside groups;
• Partner with state Medicaid PI units to perform the above activities in suspected Medicaid fraud, waste, and abuse cases (including Medi-Medi cases); and
• Work closely with CMS on joint projects, investigations and other proactive, anti-fraud activities.

Unified Program Integrity Contractors

The UPIC contracts operate in five separate geographical jurisdictions in the United States combining and integrating functions previously performed by the ZPIC, PSC and MIC contracts. This table lists each by jurisdiction and the state within each jurisdiction.

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Defining Fraud and Abuse

Fraud is intentional deception or misrepresentation that the individual makes, knowing it to be false and that it could result in some unauthorized benefit to them. The key to understanding how fraud differs from abuse is in the word intentional, for example:

I know I am doing something wrong (intention), I take steps to cover it up (deception) and I accept money that I am not entitled to (unauthorized benefit).

Abuse describes incidents or practices of providers, physicians or suppliers or services and equipment which, although not usually fraudulent, are inconsistent with accepted sound medical, business or fiscal practices. These practices may, directly or indirectly, result in unnecessary costs to the program, improper payment, payment for services which fail to meet professionally recognized standards of care or which are medically unnecessary.

Defining a Complaint of Fraud and Abuse

A complaint is a statement, oral or written, alleging that a provider, supplier or beneficiary received a Medicare benefit of monetary value, directly or indirectly, overtly or covertly, in cash or in kind, to which they are not entitled under current Medicare law, regulations and/or program policy. Included are allegations of misrepresentation and violations of Medicare requirements applicable to persons or entities that bill for Medicare-covered items and services.

Examples of complaints include:

• Allegations that items or services are not received
• Allegations that the services received are inconsistent with the services billed as indicated on the MSN
• Allegations that a provider has billed both the beneficiary and Medicare for the same item or service
• Allegations regarding the waiver of coinsurance or deductibles
• Allegations that a provider has misrepresented itself as having an affiliation with an agency or department of state, local or federal government, whether expressed or implied
• Beneficiary inquiries concerning payment for an item or service, which in his or her opinion, may far exceed a reasonable payment for the service which they received (i.e., the provider or physician has “upcoded” to receive a higher payment) and/or
• Allegations that a provider is accepting payment for referrals
• The following are not fraud and abuse complaints:
• Complaints (or inquiries) regarding Medicare coverage policy
• Complaints (or inquiries) regarding the status of claims
• Requests for claims appeal, complaints regarding the appeals process and/or
• Complaints concerning providers (other than those complaints meeting the criteria established), which are general in nature and are policy or program oriented

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Fraud

The most frequent type of fraud arises from a false statement or misrepresentation which is material to entitlement or payment under the Medicare Program. The violator may be a provider, a beneficiary or some other person or business entity (e.g., a prescribing physician).

Fraud in the Medicare Program takes such forms as, but is not limited to:

• Billing for services or supplies that were not provided
• Altering claim forms to obtain a higher payment amount
• Deliberately billing to receive duplicate payment (i.e., billing both Medicare and the beneficiary for the same service, or billing both Medicare and another insurer in an attempt to get paid twice)
• Soliciting, offering, receiving or giving a kickback, bribe or rebate in exchange for referring a patient or arranging for referral of a patient
• Falsifying physician signatures
• False representation with respect to the nature of services rendered, amounts charged for services rendered, identity of the person receiving the services, dates of services, etc.
• Claims for noncovered services billed as covered services
• Claims involving collusion between a provider and a beneficiary, or between a supplier and a provider resulting in unwarranted or higher costs or charges to the Medicare Program
• Use of another person’s Medicare card in obtaining medical services and/or
• Unbundled or fragmented charges

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Abuse

The type of abuse to which Medicare is most vulnerable is over-utilization of medical and health care services.

Abuse takes such forms as, but is not limited to:

• Breaches of assignment agreements, which result in beneficiaries being billed for disallowed amounts on the basis that such charges exceeded the reasonable charge criteria (unless ABN applies)
• Claims for services not medically necessary, or not medically necessary to the extent rendered
• Routine waiver of coinsurance and/or deductibles, and/or
• Excessive charges for services or supplies

Although these types of practices may initially be categorized as abusive in nature, under certain circumstances they may develop into fraud.

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Bribes, Kickbacks and Rebates

Under federal law, Sections 1877 (b) and 1909 (b) of the SSA (42 USC 1395 nn [b] and 42 USC 1396h [b]), it is a felony for anyone to knowingly and willfully offer, pay, solicit or receive any payment in return for referring an individual to another person for the furnishing, or arranging for the furnishing, of any item or service that may be paid for by the Medicare or Medicaid program. Individuals convicted under these felony provisions may be fined up to $25,000 or imprisoned up to five years, or both.

Anyone who accepts or solicits any payment for referring patients to any practitioner, DME supplier, HHA, laboratory or any other health provider or facility which furnishes items or services that may be paid for by Medicare or Medicaid may be subject to prosecution.

The criminal statute applies regardless of whether the payment for referral is made directly or indirectly, overtly or covertly, in cash or in kind.

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Penalties

Providers may be subject to up to $25,000 fine and a five-year imprisonment term, or both per violation, under the applicable federal law and suspended from the Medicare Program. Civil penalties include $2,000 fines plus double damages per violation and exclusion. Administrative remedies for abuse include revocation of assignment privileges, withholding of payments, recovery of overpayments, educational contacts and/or warnings, as well as exclusion from the Medicare Program.

Keep in mind that the suspects in Medicare fraud and abuse are seldom beneficiaries. Most often the suspects are providers/suppliers or physicians. Many times the beneficiaries are witnesses in suspected fraud and abuse cases.

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Waiving Deductible and Coinsurance

In determining reasonable charge for a service, MACs must consider, in addition to other factors, the amount the provider actually expects to receive from the patient and/or third-party payer.

A billed amount that is not reasonably related to an expectation of payment is not considered the actual charge for the purpose of processing a current claim.

Routinely and consistently waiving the deductible and coinsurance collection from or on behalf of Medicare patients may constitute a violation of the law pertaining to false claims and kickbacks.

To be considered a reasonable collection effort, the effort to collect Medicare deductible and coinsurance amounts must be similar to the effort made to collect comparable amounts from non-Medicare patients. It should also involve issuance of a bill to the Medicare patient or to the party responsible for the patient’s personal financial obligations.

Evidence of genuine rather than token collection efforts may include subsequent billings, collection letters, telephone calls or personal contacts.

If the services of a collection agency are employed by the provider to collect non-Medicare patient charges, but do not refer like charges of Medicare patients which are due the provider, Medicare will consider the reduced amount in considering the provider’s actual charge.

The following are examples of circumstances that generally show evidence that a provider has reduced his/her actual charges.

• Advertisement of an intention generally to waive collecting Medicare deductible and coinsurance.
• Unsolicited advice given by physicians to nonindigent beneficiaries that they do not have to pay deductible and coinsurance.
• Charges to Medicare patients higher than those made to other persons for similar services, i.e., to offset the waiver of deductible or coinsurance.
• Failure generally to collect deductibles and coinsurance for an identifiable group of Medicare patients for reasons unrelated to indigency or disproportionate costs of billing, e.g., a supplier waives deductible and coinsurance for all referrals from a particular hospital.
• Waivers are made for the majority (over 50 percent) of Medicare patients for any reason other than disproportionate billing costs, unless reasonable collection efforts were made.

The following are examples of circumstances where failure to bill for or to collect deductibles and coinsurance amounts do not constitute a reduction of the actual charges made by the provider for that service.

• The provider accepts a lesser amount than his/her usual charge in discharge of a patient’s liability based on his/her determination of a particular patient’s indigency. Where a provider has previously made such a determination, he/she may notify the beneficiary that they do not have to pay the deductibles and coinsurance.
• Failure to collect deductibles and coinsurance from the majority of patients on the grounds of indigency constitutes a reduction of the provider’s actual charge, unless reasonable collection efforts are made.
• The patient’s indigency should be determined by the provider, not the patient. The provider may need to ask if any source other than the patient is legally responsible for the patient’s medical bills, e.g., Title XIX, local welfare agency, guardian or other insurance.
• The provider demonstrates that the cost of billing for and/or collecting the deductibles and coinsurance for a particular service exceeds or is disproportionate to the amounts to be collected.

Where the MAC has found routine and consistent waivers of deductibles and coinsurance from or on behalf of Medicare patients, they are required to notify the provider, in writing, regarding the determination, the basis for the determination and that the billing practice may be a violation of Sections 1128A and 1128B of the SSA pertaining to false claims and kickbacks.

The provider has 30 days to dispute the determination and/or offer an explanation. Where the provider does not provide a satisfactory explanation, MACs are required to:

• process current claims (if waivers are currently occurring) on the basis of the actual charges made, e.g., the amounts the provider actually expects to receive; and
• refer cases—where a pattern of waivers is found—to the regional OIG for appropriate action.

If the MAC determines that there has been a waiver of the deductibles and coinsurance, the provider may appeal through the normal appeals process. (Refer to the appeals section of this guide for details on the appeals process.)

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What You Can Do As a Medicare Provider to Protect Yourself from Fraud

Be Informed

It is important to understand Medicare eligibility criteria, coverage guidelines, billing and cost report requirements. Seek clarification from your MAC as necessary and attend training opportunities by CMS and Medicare contractors.

Be An Educator

Keep beneficiaries (patients) properly informed and educated about the care you are providing, and ensure the physician is actively involved in the planning and delivery of your service to the patient.

Many recent OIG hotline reports by beneficiaries relate to billing and service issues. A provider can prevent inappropriate referrals about them from beneficiaries if they have informed patients and family members. Always provide complete and accurate information to beneficiaries according to your participation agreement.

Be In Compliance

If your agency does not have a compliance program in place, development of one should be considered. The OIG has developed a number of model compliance programs for providers to use as guidance in developing individual agency programs. These programs, along with other pertinent information, can be found on the OIG website or by contacting the OIG directly.

Be A Responsible Employer

Every provider should be aware of and use the OIG’s sanction list. This list identifies Medicare providers who have been restricted from participation in government programs. For a provider’s protection, the list should be checked prior to hiring new employees to ensure the government has not sanctioned the prospective employee. The OIG sanction list can be accessed via the OIG website.

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Reviewed 10/31/2024