Albion Monitor /News
[Editor's note: for more background and a special fraud alert from the Inspector General, see "Investigators Uncover Nursing Home Fraud" in a previous edition.]

Medicare Fraud Widespread

by Jeff Elliott

As much as $17 billion dollars annually may be lost to overall Medicare fraud

Calling nursing homes "an inviting target of opportunity" for fraud, the GAO issued a report in January showing frequent and widespread abuse of Medicare by medical equipment suppliers, laboratories, physicians, optometrists, and psychiatrists, sometimes with the aid of insurance companies.

Although this report did not estimate the amount lost, the GAO has previously estimated that as much as 10 percent of the Medicare budget, or about $17 billion dollars annually, may be lost to overall fraud.

The GAO found a pattern of abuse in at least 40 states, with some of the fraudulent companies operating in as many as 20 states.

One bill for surgical dressings jumped 2,800 percent in a year without raising suspicions

Nursing homes are an attractive target for fraud, the GAO said, because a number of Medicare recipients are under the same roof, allowing them to operate their schemes in bulk. Many homes also permit outsiders to inspect patient records, which provides valuable information on services and products that can be fraudulently billed. As the report notes, it is a violation of federal law to allow anyone not directly involved with a patient's treatment to view these records.

In some cases, insurance companies act as contractors with Medicare, processing and paying claims. These bills are then passed on to Medicare for reimbursement. The GAO found none of the insurers had "triggers" in place that would halt payments when claims exceed reasonable thresholds.

In one case described, the bill for surgical dressings in one nursing home jumped from $211,900 to more than $6 million in one year -- a 2,800-percent increase -- without raising suspicions.

Some other examples of fraud cited in the report:

  • A group optometrical practice performed routine eye examinations on nursing home patients, a service not reimbursable by Medicare. But the home also gave a sales person access to patients' records, which contained the information necessary to file claims. Medicare was then billed for expensive services that were never furnished or necessary.

  • A supplier forged doctor's signatures using samples of signed orders found in patients' files. This case involved about 4,000 fraudulent claims totaling about $1.5 million. No medical supplies were ever delivered.

  • A clinical psychology group practice billed for individual psychotherapy visits lasting 45 to 50 minutes, On many days ,the leading biller of this group would have had to work more than 24 uninterrupted hours to provide the services he claimed.

    Even when Medicare officials discover abuse, there is little hope of repayment; the companies go out of business or deplete their resources until they are unable to make full restitution. The GAO cited one case where an optometrist had defrauded the government out of $450,000, but the case was settled for $30,000 to be paid over 35 months.

  • 131 hospitals accused of illegally billing Medicare for expensive medical devices that were still experimental

    In related news, the Senate opened hearings Wenesday of 131 hospitals accused of illegally billing Medicare for expensive medical devices while they were still undergoing testing.

    According to investigators at the Department of Health and Human Services, hospitals have billed Medicare for more than $1 billion over the last decade, often with the manufacturer's encouragement.

    Among the hospitals charged, according to a Los Angeles Times story, is Sutter Hospital in Sacramento. The hospital implanted several dozen pacemakers and cardiac defibrillators not covered by Medicare, but billed the government anyway.

    A federal grand jury is investigating Sutter, and a spokesperson said the hospital was unaware that such billing was against the law, according to the Times.

    With one witness dramatically sitting behind a shield with his voice electronically altered -- a secrecy device usually seen in trials of top mobsters -- the Senate was told of one incident where a patient died after an experimental cardiac device unraveled inside the heart.

    The Times reported that senators were stunned when the witness said that at least half of the hospitals billed Medicare knowing that it was illegal. Using a practice called a "reimbursement balloon," the hospital would take an x-ray of the patient using an approved device such as an angioplasty balloon, then replace it with an experimental catheter.

    Albion Monitor February 18, 1996 (

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