Insurance Fraud: Part III

I know! By now you are tired of hearing about insurance fraud. Three articles on insurance fraud is a lot. For those who have not read the other two articles, the first contained definitions of insurance fraud and insurance abuse with examples. The second article in our last edition, gave instructions for the dental practitioner if an auditor were to show up at your front door. This article is to explain the consequences of insurance fraud. I certainly want you to appreciate how serious fraud is. So why the overkill on insurance fraud given that no audits have been conducted to date? In a lecture last year, I heard the owner of a medical billing company explain that a patient’s $ 5,000.00 deductible could be routinely written off by using the financial hardship exception. The lecturer explained that overcoming a large deductible was easy, just charge at least $10,000.00 for Oral Appliance Therapy and then write off the $5,000.00 deductible and state this was done due to the patient’s financial hardship and inability to pay. Those attending this lecture obviously considered this individual to be an expert. It is reasonable to assume that an owner of a Medical Insurance Billing Company should know the law and would not recommend practices that could result in a charge of insurance fraud. But sadly, that may not be the case. Insurance billing companies can get you in trouble! If a medical biller is filing your claims for you, he is acting as your agent and you are legally responsible for his actions. If the biller working for you commits fraud, you will be charged. In my professional legal opinion, if your biller is overcharging for OAT and you are writing off your patients’ deductibles and co-payments, this practice constitutes insurance fraud and you could go to JAIL!
If this practice is so bad, why no audits yet? Two immediate answers come to mind. First, it is possible the insurance companies might not know that financial hardship clauses are being abused. However, this is unlikely. Insurance companies have an unbelievable ability to determine when fraud is occurring. The more plausible explanation is that the numbers of cases involved have not reached critical mass. Auditors generally work on a percentage of dollars recovered. Most auditors do not work for the insurance company, they are independent contractors and they work on the biggest cases first where they can make the most money. Therefore, for an audit to occur the dentist has to have an adequate total dollar amount of suspicious claims. When an office reaches critical mass, the auditor appears for his percentage.
If you are found guilty of insurance fraud, what can happen? A multitude of state and federal laws have been enacted to prevent fraud and punish those found guilty. There are civil, as well as, criminal statutes which apply, so a dentist convicted of fraud can face fines, as well as jail time. Obviously, state laws vary and you will need to research your particular state’s statutes to determine what punishment could be imposed if you were to be accused. Many states have simply enacted a state version of the existing federal statutes. Some states have enacted additional statutes covering fraud.

Penalties and Sentences in Texas

The penalties for a conviction on charges of insurance fraud vary depending on the amount or value of the claim. For example, a claim of less than $50 is a “Class C” misdemeanor, which only carries a $500 fine as a penalty. The severity of the penalty imposed increases with the increased value of the fraudulent claim. For example, the most severe penalty for insurance fraud is in the case that the value of the fraudulent claim is $200,000 or more. This will be a first degree felony, which carries a sentence of five to ninety-nine years in a state prison and/or a fine of up to $10,000. For the falsification of information on an application for insurance, the defendant will be charged with a state jail felony. This imposes a penalty of 180 days to two years in a state prison and/or a fine of no more than $10,000.

Federal Criminal Statutes

False Claims Act, 18 U.S.C. § 287.
Under this statute, any health care provider who presents a false or fictitious claim or demand to the government seeking reimbursement for medical goods or services can be liable. The prosecutor need only prove that the provider intentionally submitted the claim knowing that it was false, fictitious or fraudulent. This can be shown by showing that the claim was for goods or services that were not provided, were not provided as stated, or were provided but not medically necessary.

There are civil, as well as, criminal statutes which apply, so a dentist convicted of fraud can face fines, as well as jail time.

The punishment for a conviction under the False Claims Act is up to five years imprisonment and a fine of $250,000.00 for an individual and $500,000.00 for a corporation for a felony conviction; or $100,000.00 for an individual and $200,000.00 for a misdemeanor conviction. It should be noted that this penalty is per occurrence. Thus, liability for numerous false claims is very heavy. In light of the new specific provisions concerning false statements in connection with health care fraud found in the recently enacted Health Insurance Portability Act, it is questionable whether this section is applicable to actions that would be covered by the new legislation.
False Statements Act, 18 U.S.C. §1001
This act imposes liability on a health care provider that in a communication submitted to the government, makes false or fraudulent statements or representations, false writings or documents, or that falsifies or covers up a material fact. Like the false claims act, the health care provider need not necessarily have made the statement directly to the federal government; it is enough that the false statement was made to a state agency or insurance company and submitted to the government. See United States v. Huber, 603 F.2d 387 (2nd Cir. 1987) (hospital supply company violated act where it marked up supplies to hospitals, who then submitted the marked up costs to the insurance companies acting as fiscal intermediaries for the Medicare and Medicaid programs.)

The prosecutor need only prove that the provider intentionally submitted the claim knowing that it was false, fictitious or fraudulent.

In order to show a violation of this act, the government must prove that the health care provider willfully submitted the false statement or representation to the government, knowing it to be false, and that the statement was material i.e. that the statement was of the type that has the natural tendency to influence the agency’s action. See United States V. Greber, 760 F.2d 68, 72-73 (3rd Cir. 1985).
The penalty for a conviction under the False Statement Act is a fine of not more than $10,000.00 or imprisonment of more than 5 years, or both. As with the False Claims Act, this penalty can be assessed for every violation.
This is only an example of the many federal statutes that can apply of Medicare and Medicaid fraud, which many states have adopted as applicable in their state.


How to avoid an audit and a finding of fraud:

  1. Don’t be greedy. Excessive fees invite audits.
  2. Do NOT waive patient deductibles or co-payments
  3. Make sure that you have all your documentation before you file the claim
    1. Make sure you do not charge for an evaluation and management code that you cannot justify. Avoid using 99205, as this E & M code likely requires a full body exam which we are not qualified to perform.

Insurance fraud is completely avoidable.  No practitioner should ever be convicted of fraud. As E.T. says: “Beeeee Gooooood.”

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