Following the money in health care fraud: reflections on a modern-day yellow brick road.

Who cheats? Well, just about anyone if the stakes are right.1 Stealing a million dollars or more is remarkably easy, and carries with it little chance of getting caught. You don't even need to know much about health care.2 I. INTRODUCTION Health care fraud is all about the money. A small group of offenders may believe the rules simply do not apply to them; a few may be motivated by the thrill of outsmarting a complex regulatory system; and occasionally someone may view fraud as a political act of protest against unwarranted governmental intrusion into health care.3 But in the vast majority of cases, health care fraud occurs simply because, as Professor Pamela Buey long-ago noted, "[t]hat's where the money is."4 And quite a lot of money it is, indeed: the United States is estimated to have spent $2.5 trillion on health care in 2009, with over $918 billion of that coming from the federal government.5 Under some estimates, up to 10 percent of that amount - no one quite knows for sure - might be lost to fraud.6 But the relationship between health care fraud and the U.S. health care system is far more complex than might first appear. Would-be thieves and hucksters - or "fraudsters," to use the common lingo - are not the only ones who respond to the financial incentives and disincentives in the system. Due to the unique nature of the laws used to pursue health care fraud, both public and private prosecutors also follow the money in choosing their targets and both may share in the spoils of a successful prosecution. Moreover, perceptions about the money lost to health care fraud have enormous influence on policymakers, as exemplified by the recent health care reform debate. In short, money may drive health care fraud, but not all roads lead in the same direction. This essay will explore three different perspectives on the ways in which health care fraud "follows the money": the would-be perpetrators of fraudulent schemes, the public and private prosecutors who pursue fraudulent activities, and the policymakers who attempt to prevent fraud and recapture lost funds for legitimate program purposes. Part II of this essay identifies key attributes that make the health care system an attractive target for fraud. Part III discusses the financial incentives affecting the behavior of each of these groups. Part IV concludes by offering some thoughts on the future of the antifraud agenda in the shadow of health care reform. II. FOLLOWING THE MONEY Several attributes of the U.S. health care system are relevant to health care fraud. Some invite fraud; others, albeit far fewer, make it easier to identify fraudulent activities. Two have particular salience to this essay: the reliance on documentary proof of services rendered and the persistence of a decentralized operative model. A. DOCUMENTATION The first attribute of the U.S. health care system is our heavy reliance on documentation to establish the amount and propriety of services provided. Documentation not only provides a record of the information necessary to assure continuity of care, it also is needed to get paid for that care and forms the basis for post-payment review. The mantra has long been "If it's not documented, it wasn't done" - and according to audits of the Medicare program, quite a lot of claims aren't up to snuff. In November 2007, the Centers for Medicare and Medicaid Services (CMS) deemed "improper" 3.9 percent of the Medicare payments made during the 2006-07 audit period, a total of $10.8 billion dollars.7 Roughly 1 percent of payments were deemed improper based on lack of documentation alone, 0.6 percent due to no documentation and 0.4 percent due to insufficient documentation. Another 1.3 percent were found to have been medically unnecessary and 1.5 percent to have involved incorrect coding - categories that also implicate documentation, as the reviewed records lacked the information that would justify the chosen procedure or billing code. …