Health Care Fraud: Information on Most Common Schemes and the Likely Effect of Smart Cards
Published: 2016-01-22T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: While there have been convictions for multimillion dollar schemes that defrauded federal health care programs, there are no reliable estimates of the magnitude of fraud within these programs or across the health care industry. In some fraud cases, individuals have billed federal health care programs or private health insurance by using a beneficiary's or provider's identification information without the beneficiary's or provider's knowledge. One idea to reduce the ability of individuals to commit this type of fraud is to use electronically readable card technology, such as smart cards. Proponents say that these cards could reduce fraud by verifying that the beneficiary and the provider were present at the point of care.
GAO was asked to identify and categorize schemes found in health care fraud cases. This report describes (1) health care fraud schemes and their prevalence among cases resolved in 2010 and (2) the extent to which health care fraud schemes could have been affected by the use of smart card technology. GAO reviewed reports on health care fraud and smart card technology and reviewed court documents for 739 fraud cases resolved in 2010 obtained for a related 2012 GAO report on health care fraud. GAO is not making any recommendations.
The Department of Health and Human Services and the Department of Justice provided technical comments on a draft of this report, which GAO incorporated as appropriate.
section_title: What GAO Found
paragraphs: GAO's review of 739 health care fraud cases that were resolved in 2010 showed the following:
About 68 percent of the cases included more than one scheme with 61 percent including two to four schemes and 7 percent including five or more schemes.
The most common health care fraud schemes were related to fraudulent billing, such as billing for services that were not provided (about 43 percent of cases) and billing for services that were not medically necessary (about 25 percent).
Other common schemes included falsifying records to support the fraud scheme (about 25 percent), paying kickbacks to participants in the scheme (about 21 percent), and fraudulently obtaining controlled substances or misbranding prescription drugs (about 21 percent).
Providers were complicit in 62 percent of the cases, and beneficiaries were complicit in 14 percent of the cases.
GAO's analysis found that the use of smart cards could have affected about 22 percent (165 cases) of cases GAO reviewed in which the entire or part of the case could have been affected because they included schemes that involved the lack of verification of the beneficiary or provider at the point of care. However, in the majority of cases (78 percent), smart card use likely would not have affected the cases because either beneficiaries or providers were complicit in the schemes, or for other reasons. For example, the use of cards would not have affected cases in which the provider misrepresented the service (as in billing for services not medically necessary), or when the beneficiary and provider were not directly involved in the scheme (as in illegal marketing of prescription drugs).

section_title: Letter
paragraphs: We have designated Medicare and Medicaid as high-risk programs  because their size, scope, and complexity make them particularly  vulnerable to fraud and abuse. Although there have been convictions for  multimillion dollar schemes that defrauded federal health care programs,  the extent of the problem is unknown as there are no reliable estimates of  the magnitude of fraud within these programs or across the health care  industry generally. According to the Department of Health and Human  Services’ (HHS) Office of Inspector General (OIG), there are several  types of health care fraud schemes, including those in which providers bill  for services or supplies not provided or not medically necessary, and  those in which providers’ or beneficiaries’ identities are stolen. However,  little is known about which schemes are the most common or most costly.
To help reduce fraud and abuse in federal health care programs,  including Medicare, Medicaid, and the Children’s Health Insurance  Program (CHIP), HHS OIG, the Centers for Medicare & Medicaid  Services (CMS)—an agency within HHS—and the Department of Justice  (DOJ) were provided $571.7 million in budgetary resources for fiscal year  2014 to identify, investigate, and prosecute health care fraud. During  fiscal year 2014, about $3.3 billion in health care fraud judgments and  settlements were collected (including from cases that occurred before  fiscal year 2014) as a result of the HHS OIG’s and DOJ’s investigations  and prosecutions.
Many different types of providers and suppliers are the subjects of fraud  cases. In 2012, we examined the types of providers and suppliers  involved in criminal and civil health care fraud cases and found that for  cases resolved in 2010, medical facilities and durable medical equipment  (DME) suppliers were the most common provider or supplier types that  were subjects of criminal fraud investigations and in which subjects were  found or pled guilty. Hospitals and medical facilities were the most  common subjects of civil fraud investigations and the cases that resulted  in judgments or settlements.
In some fraud cases, the subjects of the case are able to bill federal  health care programs or private health insurance for payment by stealing  a beneficiary’s or provider’s identification information and using it without  the beneficiary’s or provider’s knowledge. Proposals have been put  forward to reduce the ability of individuals to commit this type of fraud.  Proponents of one proposal—to use electronically readable card  technology, such as smart cards that use microprocessor chips to store  and process data—say that using these cards would bring a number of  benefits, including reducing fraud. In a March 2015 report, we examined  the benefits and limitations associated with the use of electronically  readable cards in Medicare. We reported that the use of electronically  readable cards to verify that the beneficiary and provider were present at  the point of care could curtail certain types of fraud (such as when  providers misuse beneficiary identification information to bill fraudulently)  but would have a limited effect on other types of fraud. Because little is  known about the prevalence of even the most common types of fraud, it is  difficult to assess the extent to which smart card technology would affect  fraud.
You asked us to identify and categorize schemes found in health care  fraud cases. In this report we describe  1.  health care fraud schemes and their prevalence among cases  2.  the extent to which health care fraud schemes could have been  affected by the use of smart card technology.
To describe health care fraud schemes and their prevalence among  cases resolved in 2010, we reviewed government reports (such as  reports produced by HHS and DOJ regarding the Health Care Fraud and  Abuse Control Program), and DOJ and HHS OIG press releases to  develop a list of definitions for schemes related to health care fraud. To  determine the prevalence of health care fraud schemes, we reviewed  court documents for fraud cases resolved in 2010 that were obtained  during our work for our 2012 report on the types of providers involved in  health care fraud. Although the cases obtained for our 2012 report  included investigations as well as prosecutions, judgments, and  settlements, for this study, we included only cases that had been  adjudicated favorably for the United States. The cases we obtained  involved both federal health care programs and private health insurance.  In total, we reviewed court documents for 739 cases from HHS OIG and  DOJ to determine the prevalence of health care fraud schemes by type.  These documents were associated with the charging stage of the case  (such as an indictment, information, or complaint) unless the charging  document for a case was not available. If the charging document was not  available, we reviewed case details as described in a DOJ or Federal  Bureau of Investigation (FBI) press release. For several HHS OIG cases,  we were unable to locate a charging document or a press release. For  these cases, HHS OIG provided us with other court documents, such as  settlement agreements and plea agreements. For each case, we also  categorized information on the beneficiary’s role, the provider’s role, the  programs affected by the fraud (such as Medicare, Medicaid, or private  health insurance), and any monetary amounts associated with the fraud  schemes (such as the amount paid). For each case we reviewed, two  reviewers independently categorized the case into the relevant health  care fraud schemes and resolved any differences in the categorization.  To assess the reliability of the data, we reviewed relevant documentation  and examined the data for reasonableness and internal consistency. We  found these data were sufficiently reliable for the purposes of our report.  (See app. I for additional information about our methodology.)
To describe the extent to which types of health care fraud schemes could  have been affected by the use of smart card technology, we reviewed  literature on the benefits, uses, technical capabilities, and potential effects  of smart cards, including our March 2015 report on electronically readable  cards, and analyzed data on health care fraud schemes from our review  of court cases resolved in 2010. Our analysis of the potential effect of  smart cards on the cases we reviewed is based on the assumption that  the smart cards would have the capability to correctly identify both the  beneficiary and provider at the point of care (e.g., physician office or  hospital). We did not assume any other changes in information  technology that some smart card advocates have suggested could  accompany the adoption of smart cards in some circumstances. For this  analysis, we first identified schemes that could be affected by the smart  cards based on the nature of the scheme and the beneficiary and  provider roles. We then determined the number and percentage of  cases with these particular schemes. For purposes of our analysis, we  defined the term “affected” to mean that the use of smart cards to verify  the beneficiary and provider identities could have potentially reduced the  risk of fraud. We determined whether the smart cards could affect the  entire case (if the scheme was the only one used or was used in  conjunction only with other schemes that could have been affected by  smart cards) or part of the case (if the schemes were used in combination  with other schemes that would not have been affected by smart cards). In  some cases, we were unable to determine if smart cards would have had  an effect because there was insufficient information.
Our analysis has several limitations. First, it is based on cases we  received from DOJ and HHS OIG that had been resolved in 2010.  Although the cases were resolved in 2010, the fraud schemes and  investigations could have occurred in prior years. The types of fraud  schemes used during those years may be different from the schemes  prevalent now, as schemes can be influenced by various factors, such as  changes to payment policies and program integrity efforts in Medicare  and Medicaid. To mitigate this limitation, we discussed the schemes  identified and our analysis with officials from HHS OIG and DOJ, who  confirmed that while there may be geographic or provider type differences  in fraud cases, the schemes we identified are still relevant today because  they are similar to the common fraud schemes that have been used since  2010. A second limitation of our analysis is that we generally reviewed  charging documents, which represent allegations of fraudulent conduct  and may or may not have been the basis on which the case was  adjudicated or settled. We chose to use charging documents (when  available) as these documents generally tend to provide a more complete  description of all of the alleged fraud schemes compared to schemes that  were adjudicated. Third, the cases we reviewed were prosecuted and  resulted in a favorable outcome. These cases represent a fraction of the  potential fraud cases that could have occurred or that were identified by  DOJ and HHS OIG for possible investigation and prosecution. As a  result, our findings are not generalizable to all fraud cases. Fourth, our  analysis of the potential effects of smart cards assumed a particular set of  smart card characteristics—specifically, that the identity of both providers  and beneficiaries would be verified—and our findings could be different if  we had made different assumptions about the capabilities or  implementation of smart cards. We believe our assumptions are  reasonable given the challenges associated with implementing smart card  technology.
We conducted this performance audit from December 2014 to January  2016 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.
subsections: section_title: Background
subsections: section_title: Health Care Fraud Statutes
paragraphs: There are multiple statutes that concern health care fraud, including the  following:
The False Claims Act is often used by the federal government in  health care fraud cases and prohibits certain actions, including the  knowing presentation of a false claim for payment by the federal  government.
Civil monetary penalty provisions of the Social Security Act apply to  certain activities, such as knowingly presenting a claim for medical  services that is known to be false and fraudulent. In addition, the  Social Security Act also provides for criminal penalties for knowing  and willful false statements in applications for payment.
The Anti-Kickback statute makes it a criminal offense for anyone to  knowingly and willfully solicit, receive, offer, or pay any remuneration  in return for or to induce referrals of items or services reimbursable  under a federal health care program, subject to statutory exceptions  and regulatory safe harbors.
The Stark law and its implementing regulations generally prohibit  physicians from making “self-referrals”—certain referrals for  “designated health services” paid for by Medicare to entities with  which the physician (or an immediate family member) has a financial  relationship—nor may the entities that perform the “designated health  services” present claims to Medicare or bill for these services.  These prohibitions also extend to payments for Medicaid-covered  services to the same extent and under the same terms and conditions  as if Medicare had covered them.
The Federal Food, Drug, and Cosmetic Act, as amended, makes it  unlawful to, among other things, introduce an adulterated or  misbranded pharmaceutical product or device into interstate  commerce.
section_title: Types of Health Care Fraud and Provider and Beneficiary Involvement
paragraphs: Health care fraud takes many forms, and a single case can involve more  than one fraud scheme. Schemes may include fraudulent billing for  services not provided, services provided that were not medically  necessary; and services intentionally billed at a higher level than  appropriate for the services that were provided, called upcoding. Other  fraud schemes include providing compensation—kickbacks—to  beneficiaries or providers or others for participating in the fraud scheme  and schemes involving prescription drugs (including prescription drugs  that contain controlled substances), such as the submission of false  claims for prescription drugs that have been improperly marketed for non- FDA-approved uses and the illicit diversion of prescription drugs for profit  or abuse. Fraud cases may involve more than one scheme; for  example, an infusion clinic may pay kickbacks to a beneficiary for  receiving care at the clinic, and the care that was provided and billed for  may not have been medically necessary.
Providers may be complicit in the schemes or unaware of the schemes.  For example, providers who are complicit may willingly use their provider  identification information to bill fraudulently, misrepresent services  provided to receive higher payment, or receive kickbacks to provide their  identification information for others to bill fraudulently. In other cases,  providers may be unaware that their identification information has been  stolen and used in various fraud schemes. Similarly, beneficiaries can be  either complicit in or unaware of the fraud. Beneficiaries who are complicit  may willingly provide their identification information to a provider for the  purposes of committing fraud or receive kickbacks in exchange for  providing their information to or receiving services from a provider. In  contrast, they also may be unaware of fraud schemes in which the  provider bills for services not medically necessary or uses beneficiaries’  identification information without their knowledge. Additionally, both  beneficiaries and some providers may not be involved in the fraud  scheme, in the sense that the fraud schemes involved circumstances  other than a provider giving care to a beneficiary. For example, a  pharmaceutical manufacturing company that marketed prescription drugs  for non-FDA approved uses does not involve a provider giving care  directly to a beneficiary. Individuals and entities that commit fraud do so in  federal health care programs and private insurance programs, and may  commit fraud in more than one program simultaneously.
section_title: Agencies That Investigate and Prosecute Health Care Fraud
paragraphs: Several agencies are involved in investigating and prosecuting health  care fraud cases, including CMS; HHS OIG; DOJ’s U.S. Attorneys’  Offices, Civil and Criminal Divisions; and the FBI. HHS OIG and the FBI  primarily conduct investigations of health care fraud, and DOJ’s divisions  typically prosecute or litigate the cases. DOJ prosecutes fraud cases  that affect both federal health programs and private health insurance.
section_title: Use of Smart Cards
paragraphs: Amid concerns about identify theft, proposals have been put forward to  replace Medicare’s paper identification cards that contain the  beneficiary’s Social Security numbers with electronically readable cards,  such as smart cards. Some proposals have suggested that such cards  should be issued to providers as well. Electronically readable cards  include those that store information on magnetic stripes and bar codes  and cards called smart cards that use microprocessor chips to store and  process data. In March 2015, we identified three key uses for  electronically readable cards: (1) authenticating beneficiary and provider  presence at the point of care, (2) electronically exchanging beneficiary  medical information, and (3) electronically conveying beneficiary identity  and insurance information to providers. We also found that smart cards  could provide more rigorous authentication of beneficiaries and providers  at the point of care than cards with magnetic stripes and bar codes,  though all three types of cards can electronically convey identity and  insurance information. Proponents of smart cards have suggested that,  among other benefits, using smart cards may reduce health care fraud in  the Medicare program. For example, some proponents claim that the use  of smart cards to identify the beneficiary and provider at the point of care  could potentially curtail certain types of fraud such as schemes in which  providers misuse another provider’s information to bill fraudulently.
However, our March 2015 report also found that there are several  limitations associated with the use of smart cards. Specifically, it is  possible that individuals may still be able to commit fraud by adapting and  altering the schemes they use to account for the use of smart card  technology. In addition, the use of smart card technology could introduce  new types of fraud and ways for individuals to illegally access beneficiary  information. For example, malicious software could be written onto a  smart card and used to compromise provider IT systems. Further, various  factors may limit the implementation of smart card technology in the  Medicare program. As we found in our March 2015 report, while the use  of smart cards to verify the beneficiary identity at the point of care could  reduce certain types of fraud, it would have limited effect on Medicare  fraud since CMS policy is to pay claims for Medicare beneficiaries even if  they do not have a Medicare identification card at the time of care. CMS  officials noted that it would not be feasible to require the use of smart  cards because of concerns that this would limit beneficiaries’ access to  care given that there may be legitimate reasons why a card might not be  present at the point of care. For example, beneficiaries who experience a  health care emergency may not have their Medicare cards with them at  the time care is rendered. Additionally, we concluded that the use of  smart cards to verify the beneficiary and provider presence at the point of  care would require addressing costs and implementation challenges  associated with card management and information technology system  enhancements. These enhancements would be needed to update both  CMS’s and providers’ claims processing and card management systems  in order to achieve a high level of provider and beneficiary authentication  as well as meet security requirements.
section_title: Fraudulent Billing Schemes Were Most Common Schemes in Cases Reviewed
paragraphs: The majority of the 739 cases resolved in 2010 that we reviewed had  more than one fraud scheme. Fraudulent billing schemes, such as billing  for services that were not provided and billing for services that were not  medically necessary, were the most common fraud schemes. Over 20  percent of the cases included kickbacks to providers, beneficiaries, or  other individuals. Providers were complicit in the fraud schemes in over  half of the cases. In contrast with providers, only about 14 percent of the  739 cases we reviewed had beneficiaries who were complicit in the  schemes.
subsections: section_title: Most Cases Had More than One Scheme, and Fraudulent Billing Schemes Were the Most Common
paragraphs: Using cases from 2010, we identified 1,679 fraud schemes in the 739  cases that we reviewed. The majority of the 739 cases (about 68 percent)  included more than one scheme; 61 percent of the cases had 2 to 4  schemes, about 7 percent had 5 or more schemes. Thirty-two percent  had only one scheme. The most common schemes used in the cases we  reviewed were related to fraudulent billing, such as billing for services that  were not provided (42.6 percent of cases), billing for services that were  not medically necessary (24.5 percent), and upcoding, which is billing for  a higher level of service than the service actually provided (17.5 percent).  Additionally, schemes used to support other fraud were also common,  such as falsifying a substantial portion of records to support the fraud  scheme (25.2 percent) and paying kickbacks to participants in the  scheme (20.6 percent). Schemes related to prescription drugs (including  prescription drugs that contained controlled substances), such as  fraudulently obtaining or distributing prescription drugs or marketing  prescription drugs for non-FDA approved uses in order to commit fraud,  were found in about 21 percent of the cases we reviewed. (See table 1 for  the number and percentage of cases in which these schemes were used  and app. II, table 6, for additional details on schemes we identified in  cases.)
Many different combinations of schemes were present in the 68 percent  of cases with more than one scheme. The most common schemes were  also the ones that were most often used together: billing for services not  provided along with billing for services that were not medically necessary,  billing for services or supplies that were not prescribed by a physician and  falsifying a substantial portion of records in order to support the fraud  scheme. (See app. II, table 7, for additional analysis of the number of  schemes per case.) For example, according to the indictment in a fraud  case we reviewed, a DME supplier used two schemes to commit fraud:  (1) billing Medicare for medical equipment, such as orthotic braces, that  were not provided to Medicare beneficiaries and (2) billing for supplies  that had not been prescribed by physicians for these beneficiaries.
Many different federal programs and private insurers were affected by  fraud schemes in the cases we reviewed. In one-quarter of the cases,  more than one program was affected. Medicare was affected in about 63  percent of the 739 cases reviewed, Medicaid and/or CHIP in about 32  percent, TRICARE in about 5 percent, and the Federal Employees Health  Benefits Program (FEHBP) in 3 percent of the cases. In over 11 percent  of the cases, private health insurers were affected. Other programs  affected included Department of Veterans Affairs programs, Social  Security programs, worker’s compensation programs, and other benefit  plans.
Among the fraud cases we reviewed, one-third—262 cases—had  information in the documents we reviewed about the amount of fraudulent  payments made by the programs and insurers. For the 262 cases, the  total paid was $801.5 million. The amounts of the fraudulent payments in  these cases typically ranged from $10,000 to $1.5 million.
section_title: About 20 Percent of Cases Reviewed Included Kickbacks to Providers, Beneficiaries, or Other Individuals
paragraphs: In about 20 percent of the 739 cases we reviewed, kickbacks were paid to  providers, beneficiaries, or other individuals. The most common schemes  used in cases where providers were paid kickbacks were marketing  prescription drugs for non-FDA-approved uses, billing for services that  were not medically necessary, upcoding, and self-referring. Many  different types of providers received or provided kickbacks in these cases;  the most common provider types were DME suppliers, hospitals, and  pharmaceutical manufacturers. The most common schemes used in  cases where beneficiaries were paid kickbacks were billing for services  that were not medically necessary and billing for services that were not  provided. In addition, kickbacks were paid to both beneficiaries and  providers for their involvement in a fraud case or to other individuals, such  as “recruiters,” who connect providers and beneficiaries in exchange for a  fee. For 23 of the cases we reviewed, there was information in the  documents we reviewed about the amount of kickbacks paid to  beneficiaries, providers, and other individuals, which totaled $69.7 million.
section_title: Providers Were Complicit in Fraud Schemes in More than Half of the Cases Reviewed
paragraphs: In about 62 percent of the 739 cases we reviewed, providers were  complicit in the cases, either by submitting fraudulent claims or by  supporting the fraud schemes. (See table 2 and app. II, table 8, for  additional information on the role of the provider, by fraud scheme.) For  example, a physician would be complicit when billing for higher level  services than those actually provided in order to receive a higher payment  rate (upcoding). A physician may also be complicit in a case by receiving  kickbacks for referring beneficiaries to a particular clinic, even though the  physician did not bill for the services provided by that clinic.
Example of health care fraud case in which  providers were complicit  According to an indictment in one of the cases  we reviewed, a physician conspired with the  owner of a medical testing company that  performed diagnostic ultrasound tests to bill  Medicare and private insurance companies for  tests that were either never provided or were  not medically necessary. The physician  signed orders for these ultrasound tests for  beneficiaries that he had not actually treated  and received kickbacks from the medical  testing company for the orders. well as hospitals, other clinics, home health agencies, and pharmacies  were the most common types of providers that were complicit.
Providers were not complicit in about 10 percent of the cases we  reviewed. In those cases, providers’ information had been stolen or used  without their knowledge to carry out the fraud schemes. The most  common schemes in these cases were falsifying records and billing for  services or supplies that were not prescribed by the physicians.  Additionally, in two cases, a fictitious provider was created to support the  fraud schemes.
Example of health care fraud case in which  provider was not complicit  According to a complaint, a DME supplier  billed Medicare for supplies prescribed by a  physician. However, those supplies were not  prescribed by the physician the DME supplier  had listed on the claims. During an interview  with investigators, the physician indicated his  practice was not to prescribe DME supplies to  his patients and instead to refer them to a  specialist. When reviewing a list of 200  Medicare beneficiaries for whom the DME  supplier had listed him as the prescribing  physician on the claims, the physician  identified that only 12 of those listed had ever  been his patients. In this case, the DME  supplier was using the physician’s information  without his knowledge to bill for DME supplies  that were not provided.
No provider was involved in another 10 percent of the cases that we  reviewed. For example, no provider gave care directly or billed for  services provided to a beneficiary in cases where a prescription drug  manufacturer marketed prescription drugs for non-FDA-approved uses. In  the remaining 18.5 percent of cases, we were unable to determine how  the provider was involved as the court documents did not include this  information.
section_title: Beneficiaries Were Complicit in about 14 Percent of Cases Reviewed
paragraphs: In contrast with providers, only about 14 percent of the 739 cases we  reviewed had beneficiaries that were complicit in the schemes. For  example, there were cases in which the beneficiary willingly provided  identification information so a provider could fraudulently bill, or the  beneficiary received kickbacks for receiving treatment at a specific clinic.  Among the cases in which the beneficiary was complicit, the most  common schemes were billing for services that were not medically  necessary, billing for services that were not provided, and falsifying  records to support the fraud schemes.
Example of health care fraud case in which  beneficiary was complicit  According to an information document filed by  prosecutors in one case we reviewed, an  employee of a medical clinic asked a  beneficiary to visit the clinic complaining of  ailments that the beneficiary did not have in  order to receive prescriptions for drugs  containing controlled substances. The  beneficiary visited the clinic complaining of a  toothache and obtained a prescription for a  controlled substance. The employee then  purchased that medication from the  beneficiary.
In about 62 percent of the 739 cases we reviewed, beneficiaries were not  complicit in the schemes. Among beneficiaries that were not complicit,  most received services from the provider, but there was no evidence that  the beneficiary was aware of the fraud (54.8 percent). For example,  beneficiaries who were not complicit in the schemes received services  from the provider but were unaware that the provider billed for upcoded  services or that they received services that were not medically necessary.  In 39 cases (5.3 percent), court documents we reviewed indicated that  the beneficiaries’ information was stolen or sold without their knowledge.  In an additional 12 cases (1.6 percent) we reviewed, the beneficiaries’  information was obtained through false pretenses, such as through a  telemarketer. (See table 3 and app. II, table 9, for additional information  on the role of the beneficiary, by fraud scheme.)
Additionally, the beneficiary was not involved in about 13 percent of the  739 cases we reviewed. The beneficiary may not have been involved in  the fraud schemes because the schemes did not involve billing for care  provided to a beneficiary. For instance, in one case, a pharmaceutical  drug manufacturer marketed drugs for non-FDA-approved uses and paid  kickbacks to providers for prescribing those drugs to beneficiaries. This  scheme did not involve billing for care provided to the beneficiary. For the  remaining 11 percent of cases we reviewed, we were unable to determine  whether the beneficiary was complicit or not, and in 1 case, a fictitious  beneficiary’s information was created to support the fraud scheme.
section_title: Smart Cards Likely Would Not Have Affected the Majority of Cases Reviewed
paragraphs: Among the 739 cases, we found 165 cases (22 percent) in which the  entire case (2 percent) or part of the case (20 percent) could have been  affected by the use of smart cards. The remaining 574 cases (78 percent)  had schemes that would not have been affected by smart cards. (See fig.  1.)
subsections: section_title: Health Care Fraud Schemes That Could Have Been Affected by the Use of Smart Cards
paragraphs: Example of health care fraud case in which  the provider was complicit but the  beneficiary was not  According to a complaint document in one  case we reviewed, the provider submitted  duplicate claims for the same service provided  to a beneficiary. The beneficiary received the  service from the provider the first time but was  unaware that a second claim had been  submitted as if the service had been provided  a second time when it had not.  Example of health care fraud case in which  neither the beneficiary nor the provider  was complicit  According to a complaint document in one  fraud case we reviewed, a DME supplier used  the identification information for several  beneficiaries to submit a bill for DME supplies.  The DME supplier also used a physician’s  identification information to allege that the  supplies had been prescribed when that  physician had not prescribed the DME  supplies. In this case, neither the beneficiaries  nor the provider were aware of the fraud  schemes.
Among the 739 cases we reviewed, we found 165 cases in which the  entire or part of the case could have been affected by the use of smart  cards. These cases included at least one of six schemes smart cards  could have affected as the schemes involved the lack of verification of the  beneficiary or the provider at the point of care. These six schemes were  (1) billing for services that were never actually provided and no legitimate  services were provided; (2) misusing a provider’s identification  information to bill fraudulently (such as using a retired provider’s  identification information); (3) misusing a beneficiary’s identification  information to bill fraudulently (such as using a deceased beneficiary’s  identification information or stealing a beneficiary’s information); (4) billing  more than once for the same service (known as duplicate billing) by  altering a small portion of the claim, such as the date, and resubmitting it  for payment; (5) providing services to ineligible individuals; and (6)  falsifying a substantial part of the records to indicate that beneficiaries or  providers were present at the point of care.
In 18 cases (2.4 percent of all cases resolved in 2010 that we reviewed),  the entire case could have been affected because all of the schemes on  those cases involved the lack of verification of the beneficiary or provider  at the point of care. For these 18 cases, either the beneficiary or the  provider was complicit in the scheme, while the other was not, or neither  the beneficiary nor the provider was complicit in the scheme. The use of  smart cards could have had an effect because the card would have been  able to verify at least one identity.
Example of health care fraud case that  may have been partially affected by the  use of smart cards  According to a complaint in one case we  reviewed, a physical therapy provider was  billing for services that were not medically  necessary and was submitting duplicate bills  for the same service. This case could have  been partially affected by the use of smart  cards, as the smart card would have verified  that the beneficiary was present for only one  service in which a duplicate bill was submitted  but would not have affected the ability of the  provider to bill for services that were not  medically necessary.
Smart cards could have partially affected an additional 147 cases (19.9  percent) in which at least one of the six schemes was present. However,  because other fraud schemes were used, the entire case would not have  been affected. (See table 4.)
section_title: Health Care Fraud Schemes That Likely Would Not Have Been Affected by the Use of Smart Cards
paragraphs: Smart card technology would not have affected the majority of fraud  schemes we identified, which represented 574 of the 739 cases that we  reviewed (78 percent). In these instances, the schemes would not have  been affected by the smart cards because although the beneficiary and  provider were present at the point of care, the provider misrepresented  the services rendered after the smart cards would have registered their  identities. These schemes included the following: billing for services that were not provided along with services that billing for services that were not medically necessary, unbundling of services, billing for services that were not prescribed or not referred by a billing for services as if they were provided by a physician to receive a  higher payment rate when they were actually provided by another  provider in which the payment rate would have been lower.
In these schemes, smart cards would not be able to detect that the  provider misrepresented the actual services provided even if the cards  verified the beneficiary’s and provider’s presence. Similarly, schemes that  involved a provider misrepresenting eligibility to provide services would  not have been affected by smart cards, including schemes in which bills  were submitted for services provided by an excluded provider or by an  unlicensed, uncertified, or ineligible provider. Many of these schemes  involved health care entities that billed for services provided by  employees or contractors that were not licensed or were excluded from  providing care.
In addition, smart card technology would not have affected schemes in  which the beneficiary was not present or the verification of the beneficiary  and provider was not relevant to the scheme. These fraud schemes  involved improper marketing of prescription drugs, including drugs for  non-FDA-approved uses; misbranding prescription drugs; inflating  prescription drug prices; and physician self-referrals. In addition, smart  cards would not have affected schemes related to improperly obtaining or  distributing prescription drugs (including drugs that contained controlled  substances), regardless of whether the beneficiary’s or provider’s identity  was verified, such as cases in which individuals visited multiple providers  complaining about pain to obtain prescriptions.
Further, smart cards would not have had an effect on cases in which the  beneficiary and provider were complicit in the scheme, regardless of the  schemes used on the case. For instance, smart cards would not have an  effect on the billing for services never provided if both the beneficiary and  provider were willing participants in the scheme. Similarly, smart cards  would not have an effect on cases in which kickbacks were paid to a  beneficiary or to a provider that allowed his or her smart card to be used  for fraud.
section_title: Agency Comments
paragraphs: HHS and DOJ provided technical comments on a draft of this report,  which we have incorporated as appropriate.  In its comments, HHS  reiterated that it would be difficult for CMS to implement smart cards in  the Medicare program because implementation would require significant  changes. For example, CMS stated that it would need to require that  Medicare beneficiaries present smart cards at the point of care, which is  contrary to current CMS policy and which CMS believes could create  access to care issues. Additionally, CMS officials noted that implementing  smart cards in Medicare would be a significant business process change,  requiring substantial resources and time to implement. This report, as well  as our past work on smart cards in Medicare, recognizes the concerns  raised by CMS.
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If you or your staffs have any questions about this report, please contact  me at (202) 512-7114 or kingk@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. Major contributors to this report are listed in appendix III.
section_title: Appendix I: Methodology for Describing the Types of Health Care Fraud and Their Prevalence
paragraphs: This appendix provides details on the methodology we used to describe  the types of health care fraud and their prevalence among cases resolved  in 2010 that we reviewed.
To describe types of health care fraud, we reviewed our prior reports, as  well as reports from the Department of Health and Human Services  (HHS) Office of Inspector General (OIG) and the Department of Justice  (DOJ) to develop a list of schemes and definitions for these schemes, and  then reviewed cases resolved in 2010 that we obtained through the  course of work for our 2012 report. Specifically, we reviewed several  government reports, such as reports produced by HHS and DOJ on the  Health Care Fraud and Abuse Control Program, and DOJ and HHS OIG  press releases to identify fraud schemes that were commonly included in  the reports and to develop definitions for these schemes. See table 5 for  the health care fraud schemes developed for our case review.
Using the list of fraud schemes identified, we reviewed court documents  for the health care fraud cases resolved in 2010 to determine the  prevalence of health care fraud schemes. The data we obtained for the  2012 report were for fraud cases, including investigations and  prosecutions, from HHS OIG and DOJ’s U.S. Attorneys’ Offices and Civil  Division and included a variety of information such as information on the  subjects of the fraud case and outcomes of the case (such as prison or  probation). We obtained data from both HHS OIG and DOJ, as HHS OIG  conducts investigations but DOJ does not prosecute all of the cases that  are investigated. Also, because HHS OIG often works jointly with DOJ on  fraud cases, for our 2012 report, we reduced duplication of fraud cases  from the data we received from HHS OIG and DOJ by comparing  subjects of the fraud cases that were in more than one data set we  received.
Although the cases we obtained for the 2012 report included  investigations as well as prosecutions, judgments, and settlements, for  this engagement, we included only cases that had been adjudicated  favorably for the United States, meaning criminal cases in which the  subjects were found guilty, pled guilty, or pled no contest to at least one  of the charges, and civil cases that resulted in a judgment for the United  States or a settlement. There were 834 cases that resulted in a favorable  outcome for the United States, though we only reviewed 739 of these  cases. We excluded 95 cases because they were duplicative of another  case in our data set (18 cases), they were not health care fraud cases (21  cases), the data were insufficient to determine the fraud schemes used  on the cases (15 cases), the cases were administrative actions rather  than criminal or civil cases (9 cases), or we could not locate information  on the cases, such as a court document or a press release, to determine  the fraud schemes involved in the cases (32 cases).
To determine the health care fraud schemes used in the 739 cases  included in our report, we reviewed court documents associated with the  charging stage of the case (such as indictment, information, or complaint)  unless the charging document for a case was not available. We used  court documents that we had previously obtained through our work on the  2012 report. For that report, we obtained court documents from the Public  Access to Court Electronic Records (PACER) database for the DOJ  cases. However, we did not have a charging document for all of the DOJ  cases and did not have a charging document for any of the HHS OIG  cases. As a result, we searched in PACER for charging documents for  any cases for which we were missing a charging document. If the  charging document was not available, we reviewed case details as  described in a DOJ or Federal Bureau of Investigation (FBI) press  release. For several HHS OIG cases, we were unable to locate a  charging document or a press release and obtained other court  documents, such as settlement agreements and plea agreements, from  HHS OIG.
When reviewing the court documents, we collected information on the  health care fraud schemes that were used in the cases along with  information about the beneficiary’s role, the provider’s role, whether a  durable medical equipment supplier was involved, the programs that were  affected by the fraud, and any monetary amounts associated with the  fraud schemes (such as the amounts paid). For each case we reviewed,  two reviewers independently categorized all information obtained for the  case, including the relevant health care fraud schemes used on the case,  and resolved any differences in the categorization. To assess the  reliability of the data, we reviewed relevant documentation and examined  the data for reasonableness and internal consistency. We found these  data were sufficiently reliable for the purposes of our report.
section_title: Appendix II: Additional Details on Health Care Fraud Schemes in Cases GAO Reviewed
paragraphs: Tables 6 through 9 provide detailed information on health care fraud  schemes for cases we reviewed, including whether the scheme was the  only scheme in the case or used in combination with other schemes, the  number of schemes used in cases, the role of the provider, and the role of  the beneficiary.
section_title: Appendix III: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Martin T. Gahart, Assistant  Director; Christine Davis; Laura Elsberg; Christie Enders; Matt Gever;  Jackie Hamilton; Dan Lee; Elizabeth T. Morrison; and Carmen Rivera- Lowitt made key contributions to this report.