Healthcare fraud puts patients’ lives at risk and costs billions of dollars every year. Nursing homes, which house vulnerable patients away from loved ones and the outside world, are especially fertile breeding grounds for healthcare fraud schemes. While government agencies have stepped up their enforcement efforts, nursing home workers who witness fraud are in the best position to put it to a stop—and thanks to federal and state whistleblower laws like the False Claims Act, a single principled healthcare worker can take down even the most egregious and wide-ranging frauds.

What is Healthcare Fraud?

While there’s no strict definition of “healthcare fraud,” it can be generally said to take place when someone lies in order to get paid by an insurer for medical services or goods. It can also involve knowingly engaging in prohibited conduct while participating in a government healthcare program; the most common prohibited conduct is paying for patient referrals.

In the nursing home context the insurers being defrauded are most likely to be Medicare or Medicaid, which are together responsible for more than half the payments to skilled nursing facilities (SNFs) in the US. And the “lie” can be a false statement made at any stage in the process of prescribing, providing, documenting, or billing for healthcare services. In a nursing home, all of the following would likely constitute healthcare fraud:

• A doctor diagnoses patients as sicker than they actually are, or performs medically unnecessary procedures, in order to generate a bigger Medicare payout.
• A rehabilitative therapy manager schedules patients for longer or more frequent therapy sessions than necessary—or with therapy that’s medically unnecessary, or even that the patient has refused—in order to maximize Medicare reimbursement rates that are based on the number of  minutes of therapy provided per week.  
• A billing manager overstates how sick a patient is by “upcoding,” or submitting reimbursement requests to Medicare with incorrect or unwarranted reimbursement codes for more expensive services.
• A facility refers patients to specific providers in exchange for kickbacks, bribes, or rebates in exchange for the referrals, or otherwise engages in prohibited conduct while participating in Medicare or Medicaid.
• The executives or upper management of a large healthcare corporation encourage the above practices—or willfully turn a blind eye when subordinates engage in them—in order to increase Medicare reimbursements.

The Financial and Human Costs of Healthcare Fraud

Just how much money does healthcare fraud cost Americans? While it’s impossible to say with precision, the FBI conservatively puts the figure at $80 billion per year—likely a substantial understatement given how much fraud is not detected or reported. Yet another estimate puts the annual loss to Medicare alone at $60 billion.

An oft-cited (and possibly more accurate) estimate puts healthcare fraud losses at between 3 and 10 percent of the roughly $3 trillion spent on healthcare each year in the US, or $90 billion to $300 billion per year. Nursing and assisted living facility spending recently topped $150 billion a year, so by extension fraud in this context could be between $4.5 billion and $15 billion a year.

The cost of this massive greed is even more staggering when you factor in the human toll. A few more egregious examples include:

• After surgery, an otherwise healthy grandfather enters a nursing home. Three weeks later, he is dead. Nursing home staff were too busy “providing rehabilitative therapy” to notice he had become severely dehydrated and emaciated.
• Over the course of a decade, a group of cardiologists and a hospital administrator induce 750 people—including many who are homeless or addicted to drugs—to undergo unnecessary heart catheterizations, angioplasties, and other unnecessary procedures and tests in exchange for cigarettes, food, and cash. At least two of these people—“who had needles stuck in their hearts purely for profit”—died.  
• Doctors declaring thousands of people “terminally ill” in order to fill beds in hospice facilities, where their medical treatment ends and they receive only palliative care. It’s unknown how many people have died in hospices who might have otherwise lived.

Enforcement Agencies Struggling to Keep Up

As we’ve previously noted, federal agencies have made catching and punishing healthcare fraudsters a top priority. In a massive nationwide sweep this past June, the Medicare Fraud Strike Force charged 301 people—including 61 doctors, nurses, and other licensed healthcare professionals—were charged in relation to a whopping $900 million in false Medicare billings. It’s the biggest sweep in the nine-year history of the Strike Force, a cooperative effort of the U.S. Justice and Health and Human Services departments.

Still, even $900 million is just a drop in the bucket compared to the billions lost annually to healthcare fraud, and federal agencies’ resources are limited. That’s where everyday healthcare workers in all parts of the industry can step in.

Enter Whistleblowers

Principled healthcare employees who can no longer stay silent about Medicare or Medicaid fraud they’ve witnessed can come forward with the help of whistleblower laws like the False Claims Act. Under the False Claims Act’s qui tam provisions, a healthcare worker with evidence that a private company has knowingly submitted a false claim to the federal government can sue the company on behalf of the government and is entitled to a share of the recovery, including treble damages and penalties, even if a case settles. The False Claims Act also provides protections and remedies for whistleblowers who are fired, suspended, demoted, harrassed or discriminated in their terms and conditions of employment in retaliation for coming forward.

Since 2009, the Department of Justice has recovered over $30.6 billion through the False Claims Act. Over 60 percent of that has been in cases of federal healthcare fraud—a staggering $18.5 billion. That recovery is made possible in large part by courageous whistleblowers who decide to take a stand against the fraud they witness in their workplaces.

Thanks to the False Claims Act, even the highest corporate executives at the biggest companies in the business can be held accountable. Just this month, a whistleblower’s tip led to a $30 million settlement with North American Health Care, Inc., its board chairman, and its senior vice president of reimbursement analysis. North American operates 35 skilled nursing facilities, most in California, which provide inpatient physical, occupational, and speech therapy. The whistleblower and the Department of Justice alleged that North American billed Medicare and TRICARE (the civilian care component of the Military Health System) for medically unnecessary therapy, and that the officers contributed to the fraud by creating an improper billing scheme and reinforcing it at North American facilities.

And this past January, RehabCare—the nation’s largest nursing home therapy provider with contracts at over 1,000 SNFs in 44 states—and its parent company, Kindred Healthcare, agreed to pay a whopping $125 million to settle a False Claims Act lawsuit brought by two brave whistleblowers. Physical therapist Janet Mahoney and occupational therapist Shawn Fahey had both worked at RehabCare facilities in Massachusetts. They, along with the DOJ, alleged that RehabCare classified patients in the “ultra-high” reimbursement level—the highest possible Medicare billing category, for patients who need 720 or more minutes of therapy per week—without regard to their actual needs.

In order to get to the “magic number” of 720 minutes per week, RehabCare poured subjected patients to many more hours of therapy than they needed and even types of therapy that were not clinically indicated. RehabCare even allegedly billed for therapy provided to patients who were in fact asleep. And perhaps most sinister, some patients were allegedly kept in the facilities—even after their own therapists recommended they be discharge—so RehabCare could milk them for additional therapy minutes.

Worth the Wait

Mahoney and Fahey’s case went on for just over four years; it undoubtedly put them under significant stress. But if online comments are any indication, their blowing the whistle on RehabCare’s abusive practices has made them heroes among their peers—and hopefully emboldened others to come forward. A January 13 story about the RehabCare settlement on the American Physical Therapy Association’s PTinMotion News blog received dozens of comments, apparently from other therapists, supporting Mahoney and Fahey and recounting their own similar horror stories. Some excerpts:

“I was a contractor for three years and I cannot tell you the amount of fraud that I saw at so many facilities.”

“I was forced to leave employment in SNFs due to the pressure exerted on me to participate in these types of practices.”

And perhaps the most gratifying:

“Bravo to all for speaking up and demonstrating support for doing so! It makes me proud to be a part of our profession!”

 If you or anyone you know has potential information about nursing home fraud, please contact our attorneys for a free and confidential consultation.