Don’t Let a Health-Care Claim Dispute Become a Billing Fraud Case

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By Matthew Loughran

Health-care providers facing billing disputes with commercial health insurance companies need to take measures to ensure those disputes don’t morph into civil and criminal enforcement actions.

Health lawyers who represent providers in health-care billing disputes told Bloomberg Law they have been seeing more civil actions based on health insurer fraud unit investigations. They say the involvement of these units also can lead to cases being referred to law enforcement for criminal fraud prosecutions.

“In the last six years or so, the plans have stepped things up—supplying claims, deposition transcripts, and other documents to U.S. Attorneys and the DOJ,” Marcia Augsburger with King & Spalding in Sacramento, Calif., told Bloomberg Law. This change in focus has increased the need for providers to ensure they comply with claim coding, claim submission, and other requirements to head off the possibility that a billing oversight lapse will turn into a criminal fraud prosecution.

One avenue such a prosecution might develop is through the Healthcare Fraud Prevention Partnership (HFPP), a voluntary public-private partnership designed to share information about potential fraud. Almost all of the major private insurance companies, such as Aetna, Anthem, Cigna, Humana, United HealthCare, Moda, Molina, Centene, and many of the Blue Cross Blue Shield affiliates are partners in the HFPP, along with the Federal Bureau of Investigation, the U.S. Department of Justice, the U.S. Department of Health and Human Services, and Medicaid agencies in 17 states.

But the starting point for any of this information is claims auditing that health insurers conduct to ensure that health-care providers are properly coding and documenting their claims for reimbursement by health insurers.

Aggressive Audits

According to many of the attorneys who spoke to Bloomberg Law, commercial insurers have been getting much more aggressive with their audits of the claims health-care providers submit.

“Aggressive audits are on the uptick of late,” Paul D. Werner, of Buttaci, Leardi & Werner LLC in Princeton, N.J., told Bloomberg Law. “There has been a significant bleed in healthcare dollars and insurance carriers are doing all that they can to recapture some of that,” he added.

“Providers need to be mindful of the fact that there is a significant amount of scrutiny being placed on their processes and I don’t think that’s going to get any better,” Werner said.

Of particular concern to providers are the audits that involve an insurer’s special investigations unit (SIU), which generally handles fraud investigations. “We are seeing insurers’ SIUs get a lot more aggressive,” Ross Burris with Polsinelli PC in Atlanta told Bloomberg Law. “You see more cases where the payers are being more aggressive to recoup overpayments and some cases that result in civil fraud claims against the provider,” he added.

But the attorneys who spoke to Bloomberg Law said civil liability is the least of a provider’s worries when the SIU gets involved. According to Augsburger, who defends health-care providers in billing disputes, insurers are using their audits and their SIUs to change the focus of billing disputes and allege fraud instead.

“It’s one thing to be vigilant about compliance and work with providers to resolve discrepancies and concerns so that problem employees and other situations can be appropriately handled,” Augsburger said. “It is quite another to fabricate allegations or take them to a government agency with a ‘gotcha’ attitude toward a hospital to gain some financial or litigation advantage,” she added.

Involving Law Enforcement

Health insurance companies admit that they will work together with state and federal law enforcement, but claim they do so only when they detect signs of health-care fraud.

Insurers that find evidence of fraud during these audits will refer those findings to law enforcement for possible criminal charges, according to Cathryn Donaldson, director, Communications & Public Affairs, for America’s Health Insurance Plans, a national political advocacy and trade association for health insurers, in Washington.

“When criminal activity is identified, we work closely with law enforcement—local police, state police, FBI, etc.—to hold these offenders accountable,” she told Bloomberg Law. “And our processes for doing so are improving all the time,” she added.

“There is no doubt that payers are bringing cases to state and local law enforcement, because they are finding what they believe to be fraud,” Melissa L. Jampol, a former federal prosecutor, who now defends health-care providers with Epstein Becker & Green in New York, told Bloomberg Law.

According to Jampol, a commercial insurer’s SIU can often have staff members with law enforcement experience. “If you look at who is in those SIUs, they are often staffed by people who formerly worked for the HHS Office of the Inspector General, or the Federal Bureau of Investigation, or in a state’s Medicaid fraud unit,” she said.

That information could lead to criminal charges under 18 U.S.C. § 1347—a federal health-care fraud statute that was added in 1996 as part of the Health Insurance Portability and Accountability Act (HIPAA)—or under the Anti-Kickback Statute or related federal criminal statutes involving conspiracy, wire fraud, and mail fraud. “When you see press releases from the Department of Justice announcing pleas in criminal cases, you would never know from their face that there was significant payer help on the front end,” Jampol said.

However, she added, most law enforcement officers aren’t going to just rubber-stamp fraud claims brought to them by commercial insurers. “I know the prosecutors I worked with in the Health Care Fraud Unit at the U.S. Attorney’s Office in the District of New Jersey wouldn’t just accept a ready-packaged case,” she said. “There is a commitment to uncovering actions that could amount to fraud. Often, in the regular course of those investigations one of the first things a prosecutor will do is to look at who has complained about potential fraud, including complaints to payers, and use those complaints, as well as any related SIU investigation, as a starting point,” she said.

Need for Early Engagement

Providers who are facing aggressive audits and involvement of SIUs are best advised to get ahead of the investigation by engaging directly with the investigators early on.

“Providers need to take these audits that they get very seriously,” Burris said. “They need to make sure that the insurers’ requests for additional documentation are handled by staff members or others who understand what investigators’ concerns might be,” he added.

The audits can be made even more difficult by the volume of claims submitted by a provider on a regular basis, according to Anthony Argiropoulos, an attorney with Epstein Becker & Green in New York who handles civil litigation for health-care providers.

Argiropoulos, told Bloomberg Law that a hospital could process hundreds and hundreds of similar claims before they receive notice that an insurer has denied a claim. “Providers are caught in a difficult position where they have to keep track of denials and still process a high volume of claims that are all subject to possible human error,” he said.

Gary Herschman, also with Epstein Becker & Green, agreed, saying health-care providers should treat their interactions with commercial payers in the same way they would interactions with Medicare or Medicaid auditors. “You can’t ignore private payers,” he told Bloomberg Law. “When doing their self-auditing, providers have to look at their high-volume and high-dollar private payer claims too and make sure they are appropriately ordered, documented, and coded,” he said.

Herschman said if a private payer audit results in a potential criminal or civil fraud investigation, having a robust compliance program will help mitigate exposure. “It is always a good defense to fraud to show that you are acting in good faith,” he said. Herschman is a member of a Bloomberg Law advisory board.

These kind of audits act as a reminder to providers that they can’t just put their heads down and work, Werner said. “You have to concern yourself with the business of medicine because providing high-quality medical care isn’t enough to survive a payer audit,” he said.

To contact the reporter on this story: Matthew Loughran in Washington at

To contact the editor responsible for this story: Peyton M. Sturges at

For More Information

The website for the CMS' Healthcare Fraud Prevention Partnership is at

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