Ethical Consideration Of Billing Fraud

Medicare is the nation’s health insurance program for the elderly and the single largest payor for home health services. In 1993, the U.S. attorney general announced that pursuing health care fraud would be the Department of Justice’s top priority. The False Claims Act of 1986 (FCA) has been used to investigate many different health care providers, including managed care organizations, home health agencies, nursing homes, physician practices, hospital chains and more.

Fraud is considered an act of deception or misrepresentation designed to obtain something of value held by another.1 It’s also intentional.

Health care fraud, according to the 1996 Health Insurance Portability and Accountability Act (HIPAA), is knowingly and willingly executing, or attempting to execute, a scheme to defraud any health care benefit program, or to obtain by means of false or fraudulent pretenses, representations or promises, any of the money owned by, or under custody or control of, any health care benefit program. Over utilization of one procedure code, inconsistent coding among partners within a group, up coding evaluation and management visits, up coding on stable chronic conditions, inadequate documentation and consistently submitting “unspecified” diagnoses are a few of the many activities that could trigger red flags and a possible audit by Medicare officials.

Cases that are most often prosecuted involve suspected or outright fraud for such activities as billing for goods and services not rendered, billing for phantom patients, billing or up coding for more time than the actual service duration, charging Medicare patients more than non-Medicare patients for the same services, billing for medically unnecessary tests, billing incident to services when the physician is not present, and double billing

The FCA is embodied in the U.S. Code Title 31, Chapter 37, Subchapter III, and prohibits the submission of “knowing” false claims to obtain federal funds.2 The United States may sue violators for three times the government’s loss plus $5,000-$10,000 per false claim. The law also applies to individuals who make false claims pretending ignorance. With the act, the government has a remedy against all the major players of the false claim. However, it usually takes someone on the inside to come forward and report the fraud.

Nurses are on the front lines with respect to contact with patients and have access to information that can help prove health care fraud.

In this age of managed care, sometimes under provision of care prevails: misrepresenting patients’ rights, selectively recruiting well patients, or dismissing sick patients. For instance, in 1997 South Florida was cited as a “hotbed of fraudulent activity,” and incidence of fraud was said to have “topped 15 percent of health care expenditures.”3 Billing for services not rendered is very popular and usually the patient is not aware of the fraud. But under treating and billing for services not performed can jeopardize the patient.

Registered nurses are in a unique position as employees in the health care industry. If a nurse in a home health agency, for example, notices that the agency is not providing services for which it may be billing Medicare, she can file what is called a qui tam action lawsuit. This is a section under the false claims statute that allows a private individual to bring a suit against someone who has knowingly presented false claims to the government. It generally is brought by a person who observes fraud in the workplace and is the original source of information that initiated the lawsuit. These persons have come to be known as “whistle blowers.”

Of course, filing the lawsuit is not the end of a nurse’s responsibility and could be the beginning of a long haul with respect to job or future jobs. Nurses have been wrongfully dismissed as a result of whistle blowing. But if they hide their head in the sand out of fear of reprisal, they can still be held liable; and most nurse practice acts hold the nurse directly responsible for the safety and quality of care of their patients.

The quality of health care is affected by fraud. Those who commit it are not only putting financial gain before service, but can be putting patients at risk as well. For example, a nurse at a psychiatric hospital in Oklahoma City, OK, witnessed underage patients being treated under harmful and unsafe conditions while receiving mental health benefits from Medicaid.

Several staff members complained, but nothing was done. Lisa Aranda, the nurse involved, and another person brought a qui tam lawsuit against the hospital and its owners. The lawsuit was settled in 1997 for $750,000, and the relators received $150,000.

In 1994, a mental health facility in Kissimmee, FL, routinely took advantage of elderly patients by transporting those with chronic brain disorders such as Alzheimer’s disease from the nursing home to the mental health facility for psychotherapy, billing Medicare for the unnecessary treatment. The patients’ disorders were incurable and the therapy was not medically necessary or appropriate.

Rhea Rowan, the nurse manager, and a co-worker filed a qui tam lawsuit alleging that the facility routinely took advantage of elderly patients. In August 1998, the facility agreed to pay $4.8 million in federal fines to settle, and the two whistle blowers. are eligible to receive more than $900,000 as their share of the government’s recovery.

The Department of Justice recently prosecuted a case where an ophthalmologist was performing unnecessary cataract surgery on patients. Not only was he defrauding Medicare out of millions of dollars, but he was putting his patients at unnecessary risk. In 1995, a major medical device corporation was selling and distributing heart catheters that had not yet been approved by the U.S. Food and Drug Administration.

At other times, facilities use nurses in their attempt to defraud the government. A group of physicians in Washington, DC, was recently accused of violating the FCA by reporting they were providing nursing care and chemotherapy when the services were actually performed by the hospital.

People who perpetrate billing fraud are apt to target patients who cannot advocate for themselves, such as those with psychiatric disorders.

Nurses can assist patients and their families by educating them how to recognize and report fraud. For instance, family members should be encouraged to request itemized bills for services, especially those submitted to Medicare, and to keep records of the services their loved ones receive to compare to those bills.

How difficult is it to apply ethical principles in today’s changing health care climate?

In determining whether the FCA has been violated, there are several questions nurses should consider in judging whether improper health care claims have been made:

Was the claim false and, if so, what written rule, contractual language or statement on the claim establishes its falsity?

Did the claimant have actual knowledge of the falsity? Did he/she submit the claim deliberately disregarding the falsity?

Did the claim get paid?

Did the false claim result in financial loss to the government?

In the above questions, if any of the answers are “yes,” how does it fit in with the description of the word “ethic” and the discipline of dealing with good and bad?

Since most health care professionals and nurses in particular are patient advocates, answering any of the above questions in the affirmative clearly demonstrates that that particular deed would be considered an act of deception or misrepresentation intended to attain something of value that belongs to another.

In other words the action would be dishonest, immoral and detrimental to the community in general. None of these questions mention putting patients at risk or causing injury the antithesis of what our health care system should be about.

Efforts to slow down fraud by use of the FCA appear to be working. According to a 1999 article in The New York Times, Medicare spending had dropped for the first time in the history of the program. Many health care workers have come forward, even in the face of retaliation from employers. State nurses’ associations have been advocating for broader whistle blower protection laws for nurses.

If at any time nurses consider filing a complaint against a facility that is suspected of health care fraud, they should contact their state nurses’ association or the American Nurses Association at 800-274-4ANA. They should also keep good records.

1. U.S. v. Goldblatt , 813F. 2nd 619 (3dCir. 1987).

2. Slade, S. (2000, Aug. 23). Health care fraud: How far does the false claims act reach? [Online]. Retrieved July 2, 2001 from the World Wide Web:

3. Lawrence, J. (1997, October). Fraud and abuse find a home in managed care. Managed Care, 10.

Goldsmith, C. (May 18, 2000). Blowing the whistle: Laws protect nurses who report healthcare fraud. Nurseweek. [Online]. Retrieved June 25, 2001 from the World Wide Web:

Office of Inspector General. (1999). Inspector general issues draft compliance program guidance for nursing facilities. Washington, DC. Office of Public Affairs.

Office of the Inspector General. (1995). Results of the audit of medicare home health services in Florida. Washington, DC. Department of Health and Human Services.

Poston, M. (1999). Whistle blowing.: Does the law protect you? American Journal of Nursing, 99 (1).

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