Carriers’ automated claims processing systems include computerized controls, or screens, that screen claims for diagnosis coding errors, billing abuses, and incorrect or incomplete documentation. Instances of Wrongful Billing Suggest Widespread Activity

Fraudulent and abusive practices by some providers who furnish services and supplies to nursing facility patients entail billing Medicare for unnecessary or undelivered services and supplies or misrepresenting a service or supply item to obtain Medicare reimbursement as the following examples show:
A company billed Medicare for heart monitoring services provided to nursing facility patients. Medicare overpaid this company an estimated $4.3 million. Because data on fraud and abuse have not been accumulated based on place of service, investigators cannot quantify the extent of Medicare fraud and abuse involving the provision of services and supplies to nursing facility patients. As a result, services provided to Medicare beneficiaries in nursing facilities offer a target of opportunity for the fraudulent schemes and billing abuses of the dishonest provider. Second, nursing facilities should be held accountable for the unauthorized disclosure of patient medical records. To examine the nature and extent of inappropriate and abusive billing for services and supplies to nursing facility patients, we (1) asked the carriers’ fraud units to identify cases involving services and supplies provided to patients in nursing facilities—both ongoing cases and those referred to OIG in the previous 24 months; (2) performed a detailed file review of each identified case and obtained and reviewed copies of relevant documents; (3) discussed cases with carrier officials, as needed, and met with OIG officials to discuss the status of cases that carriers had referred to them for investigation; and (4) asked OIG officials to identify any additional investigations completed within the previous 12 months and ongoing investigations dealing with services and supplies furnished to Medicare patients in nursing facilities. The facility administrators gave the provider complete access to patient medical records. Medicare: Reducing Fraud and Abuse Can Save Billions (GAO/T-HEHS-95-157, May 16, 1995). Additional copies are $2 each.
Why GAO Did This Study

Pursuant to a congressional request, GAO reviewed allegations of fraud and abuse related to services and supplies provided to nursing facility patients, focusing on: (1) the nature and extent of such fraud and abuse exist; (2) why nursing facility patients are an attractive target for miscreants; and (3) options for reducing fraudulent billing practices.

What GAO Found

GAO found that: (1) fraudulent and abusive billing of Medicare is widespread and frequent and a wide variety of providers have been involved in Medicare fraud or abusive billing related to nursing facility patients' care; (2) most fraud and abuse involves billing Medicare for unnecessary or undelivered services and supplies or misrepresenting services to obtain reimbursement; (3) Medicare patients in nursing facilities are attractive fraud targets because of the high volume and concentration of Medicare beneficiaries in nursing facilities, easier access to patients' medical records, billing without confirmation, the lack of sufficient and timely warning flags in Medicare's automated claim processing systems, and inadequate recovery of unwarranted payments; (4) to change its reimbursement method to incorporate the nursing facilities' monitoring of the provision of services and supplies Medicare will need long-term commitment, structural changes, unified billing, and capped payments; and (5) short-term steps to reduce fraud and abusive billing include instituting federal penalties for unauthorized disclosure of patients' medical records and incorporating various early warning controls into Medicare's claim processing systems.