Medicaid Fraud and Abuse in Florida: A New Approach to an Old Problem
Health care fraud and abuse is suddenly a high profile issue. Thanks to Congress’ recent attention, the public is waking up to the fact that fraudulent and abusive activities on the part of health care providers cost public insurance programs billions of dollars every year. This is old news at the Agency for Health Care Administration (AHCA).
AHCA administers Florida’s Medicaid program, and is a $6.5 billion program that covered more than 1.5 million people in 1997. Estimates are that up to 10 percent of public health care expenditures are related to fraud and abuse. But not anymore — not in the Florida Medicaid program, at any rate. AHCA’s programs not only promise to loosen the grip that fraud has had on Medicaid’s budget but also already are producing groundbreaking results.
Health Care Fraud and Abuse: A Definition
What is fraud and abuse? Simply put, fraud and abuse means paying people who shouldn’t have been paid or paying people more than they deserve. For the purposes of Medicaid, F.S. §409.913 defines fraud and abuse follows:
Fraud : An intentional deception or misrepresentation made by a person with the knowledge that the deception results in unauthorized benefit to himself or another person. The term includes any act that constitutes fraud under applicable federal or state law.
Abuse : 1. Provider practices that are inconsistent with generally accepted business or medical practices and that result in an unnecessary cost to the Medicaid program or in reimbursement for goods or services that are not medically necessary or that fail to meet professionally recognized standards for health care. 2. Recipient practices that result in unnecessary cost to the Medicaid program.
How Fraud Impacts the Entire Economy
Discussions of fraud and abuse in the Medicaid program do not capture most people’s attention. This usually is because people are not interested in things that do not involve them or their pocketbook; however, the public should be aware that Medicaid fraud and abuse affects both. Fraud and abuse are the “stealth tax” of the health care system.
To a certain extent, the lack of public concern is due to a lack of effective communication on the issue. Many of the ways fraud and abuse impact John Q. Citizen are straightforward. Fraud and abuse make the Medicaid program more expensive than it should be. This means higher taxes. Most people can understand this type of social calculus. The more esoteric effects of fraud and abuse are elusive and more difficult for the public to understand. Ironically, these effects undoubtedly have the most direct impact upon individual citizens.
For example: A traditional response to rising costs in the Medicaid program has been for lawmakers to cut the size of the program by limiting the number of people covered. This is considered politically expedient because the people being cut don’t often vote and the people who do vote believe Medicaid reductions don’t involve them directly. Such thinking fails to consider the fact that the indigent will continue to require medical care. If Medicaid is increasingly unavailable, as a consequence of cost-cutting policies, the indigent will seek care in settings which often are partially funded through local property taxes. Fewer Medicaid beneficiaries means more medically indigent, and in many areas of the state, that means upward pressure on local taxes.
But that’s not the end of it, because the largest hit to the average citizen’s pocketbook comes in the form of higher insurance premiums. Since government payments for uncompensated care for indigents typically do not cover the costs of providing that care, hospitals and doctors must shift the remaining cost of this care to those with health insurance or those who pay out of their own pockets, which means higher costs to the insurance companies and higher premiums for subscribers, as well as higher taxes and higher insurance premiums. In the end, John Q. Citizen picks up the tab for Medicaid fraud and abuse.
Medicaid Fraud and
Abuse: A History
When the Medicaid program was created, it was intended to be “just another insurance program.” Responding to fears that Medicaid and Medicare were the first steps to “socialized medicine,” the federal government dictated that providers would be paid what they asked and paid quickly. This policy helped ensure that enough providers would participate in the plan so that enrollees would not lack access to health care.
This hands-off reimbursement approach led to explosive growth in the program’s costs. The Medicaid program was growing faster than the state’s tax revenues by the early 1990s. During this time AHCA Director Doug Cook referred to the program as “the Pac-Man that ate the state budget.” In 1990 the program was growing by more than 26 percent a year.
Medicaid’s concern about having enough providers continued. Now that concern was caused by the fact that Medicaid paid on average only 40 percent of what private health insurance companies were paying for health care services. Doctors and hospitals generally operated free of administrative hassles because the program wanted as many providers as it could get.
In a sense, fraud was considered a cost of doing business in running a public insurance program. A widely held belief existed that a certain level of fraud was endemic and intractable. The reasoning was that the best we could expect was to hold fraud below a certain level.
At that time, the identification and prosecution of fraudulent and abusive providers was a low priority, and few dollars were allocated to fraud fighting efforts. Because relatively few resources were available, the program had to focus its efforts on the most egregious offenders.
One consequence was that enforcement efforts were highly reactive. Often, providers were investigated only when the program received a complaint or evidence was brought to the state’s attention. This was generally known as the “pay and chase” method. Little coordination was pursued among state law enforcement officials and individuals. When repayments and sanctions were pursued, they were done through the Department of Administrative Hearings.
The administrative hearing process generally proved to be ill suited to this task. It took too long, cost too much, and rarely offered definitive settlement actions that furthered the interest of the state. Most troubling, fraudulent providers were able to use the administrative hearing process to avoid termination from the program, arguing that a Medicaid provider number was personal property. Medicaid could barely get rid of the providers that were admittedly stealing from it.
Agency Takes Over
In 1992, the Florida Legislature created the Agency for Health Care Administration (AHCA) and charged it with reigning in the runaway Medicaid program.1 The legislature was clear in its direction to AHCA: Bring down the spiraling cost of the health care system in general, and in the Medicaid program in particular.
One thing was apparent: Too much money was being wasted through fraud and abuse. The belief, though, was that the perpetrators of fraud and abuse could be pursued aggressively without negatively impacting the number and quality of providers in the program. No one really knew just how much money was being wasted, and no one was really sure what to do about it. No other state had made combating fraud and abuse a priority. One thing was clear: If we were going to take a stand on fraud and abuse in Medicaid, we were going to have to blaze our own trail.
Based on the 1992 legislation, combating fraud and abuse became a top priority at Medicaid. Medicaid Program Integrity (MPI), the unit charged with fighting fraud and abuse in the program, was going to have the money to hire the investigators needed to get the job done. A “cop” with real world law enforcement experience was hired to lead the unit. Next, attorneys were designated to work with MPI and the Attorney General’s Medicaid Fraud Control Unit (MFCU) to help prosecute the cases MPI developed. With the team in place, an offensive game plan was needed.
Time to Send a Message
Over the years, a general feeling developed that Medicaid fraud was a low risk crime. There was no one actively targeting fraudulent providers who, even when caught, just stonewalled and bargained their fines away. The result was that the amount eventually repaid was significantly less than what was received in fraudulent payments. The worst part was that the provider got to keep its provider number and continued to bill Medicaid. That had to change.
The tools generally used to combat fraud and abuse in the past had proved largely ineffective. Chart audits and administrative hearings frightened few but the innocent. What was needed, obviously, were prosecutorial tools of a sufficient gravity to send the clear message that if you were defrauding or abusing the system, you would be identified quickly and made to repay what you stole.
Getting Rid of the Criminals
The first priority was to get rid of the abusers who were already in the system. MPI established contacts with the Florida Department of Law Enforcement and the MFCU to begin establishing a broader approach to the effort. If criminal activity were uncovered, the wrongdoers would be treated as if they were caught robbing a store. The perpetrators would be arrested and sent to jail.
Now that MPI had the necessary manpower, prosecuting criminal cases was strictly a matter of effort. Using innovative investigation methods, criminal activity would be identified. A systematic case would be built and turned over to MFCU for further investigation and prosecution.
For those providers who were not deemed to be engaging in prima facie criminal activities, Medicaid needed a new prosecutorial tool that would be superior to pursuing complaints through the administrative hearing process. In 1994 the legislature provided that tool in the form of a Florida version of the false claims act.
Affirmative Civil Enforcement
Antiracketeering laws had never been used to prosecute Medicaid fraud cases. Nonetheless, the False Claims Act of 19942 gave Medicaid the opportunity to move complaints from administrative hearings to civil proceedings in circuit court. With the False Claims Act (FCA) on the side of Medicaid, the game playing was over. The traditional process gave way to the more easily recognizable trial and pleading, penalties and settlement process common to fraud suits. Under the FCA, the providers are liable for treble damages and a minimum mandatory $5,000 to a maximum $10,000 penalty for every false claim filed.
Most importantly, Medicaid now has the will and the resources to make it stick. All potential fraud cases identified are simultaneously referred to the MFCU and the Office of the Statewide Prosecutor for immediate prosecution. And it is done quickly. MPI now expects to have all investigations conducted by the unit to be disposed of in 90 days or less.
The other major thrust of the new initiative was to keep fraudulent providers from getting into the program in the first place. One of the first steps in this effort was to set up a program integrity field office in south Florida, the hotbed of Medicaid fraud. The field office allows MPI staff to do site visits to any provider quickly without undue expense.
Next in line was the establishment of new institutional programs designed to make sure that “bad” providers don’t get enrolled and that those providers who are enrolled don’t cross the line into fraudulent and abusive activities. Some of these initiatives include the following:
•New Provider Applications and Provider Reenrollment
In December of 1995 AHCA introduced a new Medicaid provider enrollment application and provider agreement requiring additional information from providers seeking to enroll or reenroll. The application now has a termination date and requires FDLE background checks for all officers, directors, physicians, and principals owning five percent or more of the entity involved. The agreement further requires substantively changed provider standards and explicitly states that the Medicaid provider number is not a property right. All providers were required to reenroll under this new agreement by June 1997. Furthermore, all providers are subject to a site visit by a firm that specializes in these types of security investigations.
•Surety Bond Requirements
Also in December 1995, Medicaid began imposing a $50,000 surety bond requirement (the statutory limit provided under F.S. §409.907(7)) on provider applicants in certain Medicaid provider categories, and all providers — new and old — in certain categories in Dade and Broward counties. This bond serves as a financial screen to prevent the enrollment of unscrupulous providers and provides some financial protection to the Medicaid program from fraud and abuse.
•Financial and Criminal Background Checks
Provider background checks were implemented on September 16, 1996, along with the first wave of provider reenrollments under the new agreement pursuant to F.S. §409.907. Now providers can be denied a provider number if they have, among other things, been convicted of a felony involving moral turpitude, made false representations or omissions of material fact, or have been excluded, suspended, terminated, or had involuntarily withdrawn from participation in Florida’s, or any other state’s, Medicaid program.
Since 1995, AHCA has had a game plan, effective fraud fighting tools, and the personnel in place to begin an entirely new era in combatting Medicaid fraud and abuse. The early results from these efforts are just now starting to come in and they look highly positive.
The Early Results Are In
Conservative current estimates predict that in fiscal year 1996–97, antifraud initiatives will save taxpayers more than $81 million. These estimates also predict that these initiatives will save an additional $111 million in fiscal year 1997–98. That’s nearly $200 million the state will have not paid out in fraudulent and abusive claims that it previously would have paid. These numbers mean more than saving taxpayers money. These numbers are our roadmap in our continuing efforts to fight Medicaid fraud. There are no other states that are doing the number and types of innovative activities that we are.
A Model for National Efforts
Florida’s unprecedented success in deterring fraud in the Medicaid program has sparked other government agencies to copy some of our more progressive reforms. Most notably, the Health Care Financing Administration (HCFA), the federal agency that administers the Medicaid program, has now instituted a surety bond for Medicare home health agencies. Operation Restore Trust, HCFA’s antifraud initiative, has been looking for innovative antifraud ideas. With the recent Government Accounting Office report identifying the Medicare home health program as being rife with fraud, HCFA turned to the surety bond idea, due to the success that Florida has had with it.
Conclusion
The last three years have witnessed a bit of a revolution in the way government views fraud and abuse in public health insurance programs. This revolution has been largely characterized by a new attitude that if a provider is ripping off the system, the provider will repay all ill gotten gains, plus a penalty, and, if warranted, will go to jail. Keeping in mind that this “get tough” attitude is not directed at those providers who have trouble understanding the admittedly complex regulations, AHCA works with providers to help them understand what is expected. The focus is on those providers who bring nothing to the table other than their greed and a disregard for the law.q
1 Fla. Stat. §§20.42 and 408.002.
2 Fla. Stat. §68.081.
As the assistant director of the Agency for Health Care Administration, Elizabeth Dudek supervises the state’s Medicaid fraud and abuse eradication program. Ms. Dudek has more than 25 years in the health care industry, both as a provider and as an administrator. She has spent more than 13 years with the certificate of need program at both the Department of Health and Rehabilitative Services and the Agency for Health Care Administration, serving as program director for six of those years.
