Credible Allegations of Fraud: Part 2, Examples of Allegations that Constitute Credible Allegations of Fraud

Posted by Michael Jenkins on Monday, March 2, 2015

As the previous blog post related to credible allegations of fraud outlined, the authority of government payers to turn off the spigot of claims payment is a powerful tool that can be wielded with little or no notice to a healthcare provider. The regulations defining a “credible allegation of fraud” are broad, and federal and state payers have used this broad definition to suspend payments to providers in a number of different contexts.

The Code of Federal Regulations defines a “credible allegation of fraud” as an “allegation, which has been verified by the State, from any source.” 42 CFR § 455.2. The regulation states that the sources of these allegations may include, but are not limited to, “(1) fraud hotline complaints, (2) claims data mining, (3) patterns identified through provider audits, civil false claims cases, and law enforcement investigations. Allegations are considered credible when they have indicia of reliability and the State Medicaid Agency has reviewed all allegations, facts, and evidence carefully and acts judiciously on a case-by-case basis.”

In practice, a credible allegation of fraud can come from a number of different sources. Often a provider will have an indirect indication of circumstances that are likely to form the basis of an allegation. Audits by private insurers, patient grievances filed with state inspectors, notices of pending surveys or investigations, the grumblings of former employees, and analysis of payer datasets are all examples of circumstances that can give rise to a credible allegation of fraud. Examples of credible allegations of fraud that have been the basis for suspension of payments by the Iowa Medicaid Enterprise include allegations of upcoding and/or double billing, investigations by the OIG and FBI, deposition testimony indicating the inclusion of improper costs on cost reports, allegations of failing to meet face-to-face requirements, investigations by Iowa’s Medicaid Fraud Control Unit of cost report fraud, allegations of billing for services not rendered, allegations of prescribing narcotic drugs for use in illegal drug trafficking, arrest for “tampering with records” and “second degree fraudulent practice,” allegations of submitting false claims, and allegations of falsifying documentation.

Once state or federal authorities receive an allegation of healthcare fraud, those authorities must conduct a preliminary investigation to verify each allegation.  See 42 CFR § 445.14. That investigation may include: interviews with employees or patients; interviews with other providers or suppliers; verification of professional credentials, enrollment, or licensing; request for medical records related to claims; review and assessment of claims and supporting medical records and documentation; and consultation with experts in a particular service area.  Upon preliminary confirmation of the credible allegation of fraud, the government payer must suspend payment unless there is “good cause” to not suspend payments. Additionally, the state must refer the suspected fraud to its Medicaid Fraud Control Unit or other law enforcement agency for further investigation.

If a provider becomes aware of a potential or likely credible allegation of fraud, that provider should begin to prepare for a suspension of payment by assembling documents and records that will demonstrate that “good cause” exists to restore partial or full payments under 42 CFR § 455.23(e). The next blog post in our three-part series on credible allegations of fraud will describe the process for working with state representatives following a notice of suspension of payments due to a credible allegation of fraud.