Evan H. Krinick

Health insurance fraud continues to be a problem in New York as well as nationally. Nothing may illustrate this better than two recent reports, one issued by New York’s Department of Financial Services (DFS) and the other issued jointly by the U.S. Department of Justice (DOJ) and the U.S. Department of Health and Human Services (HHS). The two reports are striking not just because of the variety of the health insurance frauds they discuss, but also because of the immense amount of money they point out is at issue.

For example, the federal report, “Health Care Fraud and Abuse Control Program Annual Report for Fiscal Year 2017,” available at https://oig.hhs.gov/publications/docs/hcfac/FY2017-hcfac.pdf, notes that, in fiscal year 2017, the federal government’s health-care fraud prevention and enforcement efforts led to $2.6 billion being recovered from individuals and entities attempting to defraud the federal government and Medicare and Medicaid beneficiaries. That certainly is a substantial sum, but the DFS report, “Investigating and Combating Health Insurance Fraud,” available at https://www.dfs.ny.gov/reportpub/fraud/health_frd_rpt_2017.pdf, observes that losses due to health-care fraud are estimated in the tens of billions of dollars each year.

With health-care fraud continuing to be an important target of both New York and federal officials, it is worth reviewing highlights from the two reports.

Kinds of Health Insurance Fraud

As the DFS explains in its report, health insurance fraud affects three major types of insurance: accident and health, private disability, and no-fault. The kinds of health-care fraud range from prescription drug diversion and misuse, medical identity fraud, and billing for services that were never rendered and products that were not provided or billing for more expensive procedures or services than were actually provided (“upcoding”), performing medically unnecessary treatments and expensive diagnostic tests for the sole purpose of generating insurance payments, and misrepresenting non-covered treatments as medically necessary covered treatments.

People engaged in health insurance fraud also may stage or cause auto accidents, file no-fault claims for nonexistent injuries, and file false or exaggerated medical disability claims.

The DFS’s Anti-Fraud Steps

The DFS’s Insurance Frauds Bureau investigates and prosecutes health-care fraud. The bureau is headquartered in New York City, with an office in Garden City and five offices across upstate New York in Albany, Syracuse, Rochester, Buffalo and Oneonta.

Last year, the DFS’s Insurance Frauds Bureau received 14,622 reports of suspected health-care fraud, most commonly from insurers. Of that number, 12,887 were no-fault reports, 1,500 were accident and health insurance reports, and 235 were disability insurance reports. Thus, the number of suspected no-fault fraud reports accounted for almost 90 percent of all health-care fraud reports received by the DFS in 2017. Perhaps even more notably, the reports of suspected no-fault fraud amounted to 54 percent of all suspected insurance fraud reports (23,876) received by the DFS last year.

In addition to its own Insurance Frauds Bureau, the DFS works with insurance industry and other law enforcement agencies at the local, state and federal levels to combat health-care fraud. For example, the DFS is a member of 10 task forces and working groups, including the Western New York Health Care Fraud Task Force, the Central New York Health Care Fraud Working Group, and the Rochester Health Care Fraud Working Group. The DFS also is a member of the New York Anti Car Theft and Fraud Association and the New York Alliance Against Insurance Fraud, as well as the FBI New York Health Care Fraud Task Force/Medicare Fraud Strike Force and the National Insurance Crime Bureau Working Group.

The DFS assigns investigators to groups and task forces and collaborates in other ways. An example cited in the DFS report is the DFS’s participation in the Drug Enforcement Administration Tactical Diversion Task Force, which investigates organized drug diversion schemes. The DFS pointed out that a case investigated by this task force resulted in the indictment in June 2017 of a New York-licensed doctor and two others on charges of writing medically unnecessary prescriptions for oxycodone over a five-year period.

Another investigation by this task force led last November to the arrest of a New York-licensed doctor who, while operating out of clinics in Manhattan, Queens and Nassau County, allegedly wrote thousands of medically unnecessary prescriptions for oxycodone and fentanyl patches over a three-year period in exchange for cash. The doctor allegedly provided prescriptions with little or no physical examination and received an estimated $2 million in fees. A nurse practitioner who allegedly wrote medically unnecessary prescriptions for oxycodone also was arrested, as was an employee at one of the doctor’s offices who allegedly assisted the doctor in the scheme.

The Federal Report

The federal government challenges health-care fraud in large measure with its Health Care Fraud Prevention and Enforcement Action Team (HEAT). Through HEAT, groups of law enforcement agents, prosecutors, attorneys, auditors, evaluators and other staff from the DOJ and the HHS investigate and prosecute health-care fraud. A component of HEAT, the Medicare Fraud Strike Force, operates in nine areas in the United States, including in Brooklyn. Each Medicare Fraud Strike Force team includes resources from the FBI and the Office of Inspector General (OIG) of the HHS together with resources from the DOJ’s Criminal Division’s Fraud Section and U.S. Attorney Offices.

The kinds of health-care fraud that the federal report highlights are somewhat different from the focus of the DFS report. The federal report discusses frauds ranging from providers submitting false claims to Medicare for ambulance transportation services, and clinics submitting false claims to Medicare and Medicaid for physical and occupational therapy, to drug companies paying kickbacks to providers to prescribe their drugs, and pharmacies soliciting and receiving kickbacks from pharmaceutical companies for promoting their drugs.

The statistics in the federal report are quite eye-popping. For instance, in fiscal year 2017, the DOJ opened 967 new criminal health-care fraud investigations, of which federal prosecutors filed criminal charges in 439 cases involving 720 defendants. A total of 639 defendants were convicted of health-care fraud related crimes.

During the same period, the Medicare Fraud Strike Force filed 253 indictments and charges against 478 defendants who allegedly billed federal health-care programs more than $2.3 billion. The government obtained more than 290 guilty pleas, litigated 33 jury trials, and won guilty verdicts against 40 defendants. Moreover, the Medicare Fraud Strike Force secured prison sentences for more than 300 defendants, with an average sentence of 50 months. In addition to criminal cases, the DOJ opened 948 new civil health-care fraud investigations during fiscal year 2016, and had 1,086 civil health-care fraud matters pending at the end of the fiscal year. The federal report also points out that 3,244 individuals and entities were excluded from participating in Medicare, Medicaid and other federal health-care programs. The exclusions were based on, among other things, criminal convictions for crimes related to Medicare and Medicaid (1,281) or to other health-care programs (309), patient abuse or neglect (266), and licensure revocations (973).

Examples of Health-Care Fraud

The federal report provides numerous examples of over a dozen different kinds of health-care fraud in its report in cases involving ambulance and transportation services, clinics, dental practices, medical device companies, diagnostic service providers, drug companies, durable medical equipment manufacturers, hospitals, nursing homes and pharmacies, among others.

For example, the report explains that, last July, the DOJ and HHS announced the largest ever health-care fraud enforcement action, involving 412 charged defendants across 41 federal districts, including 115 doctors, nurses and other licensed medical professionals, for their alleged participation in health-care schemes involving approximately $1.3 billion in false billings.

In another case described in the report, a previously excluded provider was sentenced in New Jersey to 18 years in prison for, among other things, his illegal operation of an ambulance company that billed Medicare and Medicaid. In 2004, the defendant was excluded from participating in Medicare or Medicaid for a minimum of 11 years as a result of a state conviction for Medicaid fraud. From at least 2005 to 2014, and in violation of the exclusion, prosecutors said, the defendant operated K&S Invalid Coach in his brother’s name. During this time, Medicare and Medicaid paid over $9 million in claims to K&S. Following a bench trial, he was convicted of all 17 counts of the indictment and was ordered to pay $8.8 million in restitution.

In one other case, a former outpatient drug rehabilitation program provider was excluded from all federal health-care programs for 50 years. The provider agreed to resolve False Claims Act allegations that it submitted claims to Medicaid for services predicated on illegal kickbacks and services not rendered. In settling, the provider admitted that, between 2006 and 2014, it induced beneficiaries to use its outpatient programs by providing them with subsidized housing. The provider also admitted that, between 2008 and 2011, it paid operators of other short-term residences to condition residency at their residences on enrollment in and attendance at one of the provider’s outpatient programs. The provider also admitted that, in 2010, it directed employees to falsify records to reflect that counselors had treated certain Medicaid beneficiaries. As part of the settlement, the provider, currently in Chapter 7 bankruptcy, agreed that the United States would receive a $50.5 million bankruptcy claim.

Modern Tools

Health insurance fraud prevention is no longer solely a matter of a tip to the government leading to an investigation. More and more often, state and federal fraud cases are developed through the use of technology by government officials.

The federal report notes that, to detect health-care fraud, the HHS-OIG uses technology and data analysis capabilities such as data mining, trend evaluation and modeling approaches to analyze claims made to the Medicare and Medicaid programs. Government teams use near real-time data to examine Medicare claims for known fraud patterns, identify suspected fraud trends, and calculate ratios of allowed services as compared with national averages. Its predictive analytics technology runs predictive algorithms and other analytics nationwide against Medicare fee-for-service claims on a continuous basis prior to payment in an effort to identify, prevent and stop potentially fraudulent claims.

The Future

The DFS stated in its report that its Insurance Frauds Bureau “will continue to aggressively combat health-care fraud in the year ahead.” Federal authorities no doubt will be similarly engaged. In fact, they recently broadened their anti-fraud efforts in a significant respect with the formation of the Opioid Fraud and Abuse Detection Unit, a new Department of Justice program focusing specifically on opioid-related health-care fraud using data to identify and prosecute individuals who are contributing to the prescription opioid epidemic.

Health-care fraud certainly will continue to be an important target for both the New York and federal government this year, and in years to come.


Evan H. Krinick is the managing partner of Rivkin Radler in Uniondale.