Medical Necessity Fraud

Government healthcare programs, such as Medicare, Medicaid, and TRICARE, spend more than $1.5 trillion dollars every year. To keep spending in check, these programs have instituted strict rules governing when they will pay for a treatment or test. Government healthcare programs will pay for treatments or tests only when they are medically necessary.

A test or treatment is medically necessary only if it is reasonable and necessary for the diagnosis or treatment of a patient’s illness or injury. This means a healthcare provider must examine a patient, make an individualized determination of medical necessity, and appropriately document why the treatment or test is being ordered. Under the False Claims Act (FCA), a healthcare provider who bills the government for medically unnecessary treatments or tests faces severe civil and criminal penalties.

Types of Medically Unnecessary Treatment

Because government healthcare programs will not pay for treatment that is medically unnecessary, this type of fraud can affect every part of the healthcare industry. A few of the most common types of medical necessity fraud involve:

• Hospice care. Patients in hospice care no longer receive curative treatments and are instead given palliative care to make them comfortable in their final days. For a patient to be eligible to receive hospice care, a physician must determine the care is necessary and must certify that the patient’s life expectancy is six months or less. Sometimes, hospice care facilities will admit patients who are not actually terminally ill so they can fraudulently bill the government for their care.
• Laboratory tests. For a laboratory test to be medically necessary, it must be ordered by the physician treating the patient for the treatment of a specific illness or injury, the test must be individualized to patient need, and the results of the test must be used to help treat the patient. In addition, each test must be supported by sufficient documentation to demonstrate that it is medically necessary. Doctors and laboratories violate the law when they conduct genetic tests (such as CGx or PGx tests) or urine drug tests (UDTs) for every patient, regardless of individual need.
• Medical procedures. Medical procedures, such as the placing of medical devices, can be extremely lucrative for doctors. However, each procedure is governed by requirements with regard to medical necessity. Government healthcare programs will not pay for medically unnecessary procedures. When a doctor performs a medically unnecessary procedure and bills the government, he or she faces significant liability. For example, in 2019, a cardiologist was sentenced to 60 months in prison for implanting cardiac stents in his patients and lying about the necessity of doing so. Medically unnecessary procedures are often tied to the payment of kickbacks—for example, a surgeon might receive bribes from the manufacturer of a medical device to implant that device in patients, regardless of whether it is medically necessary.

Recent Settlements

Although medical necessity fraud can sometimes be difficult to prove, the federal and state governments continue to pursue this theory of liability. Several recent settlements provide examples of some of the behavior that is prohibited by the FCA:

• In May 2021, the University of Miami agreed to pay $22 million to resolve allegations that it ordered medically unnecessary laboratory tests, among other misconduct. The government alleged that the university automatically ordered a pre-set “protocol” of tests to be run for every kidney transplant patient, regardless of medical necessity.
• In July 2020, a hospital group paid $122 million to resolve allegations that it admitted federal healthcare beneficiaries for inpatient psychiatric treatment when their conditions did not require that level of care, while also failing to properly discharge appropriately admitted beneficiaries when they no longer required inpatient care.
• In July 2020, a hospice care company paid $3.2 million to resolve allegations that it billed Medicare for four or more years of hospice care for certain patients who were not terminally ill for at least a portion of their hospice stay.
• In October 2019, a hospital group paid $20.25 million to resolve allegations that one of its neurosurgeons performed medically unnecessary procedures involving implantable devices in which he had a substantial financial interest.

Identifying Medically Unnecessary Treatments

Although medical necessity fraud encompasses a wide variety of situations, there are a few key points that help determine whether certain behavior is illegal. Potential whistleblowers should consider the following questions:

• Are patients receiving treatments or tests that are actually necessary? Are patients receiving any benefit from the treatments or tests?
• Are doctors making individualized determinations of medical necessity for each treatment or test? Or are they automatically ordering treatments or tests regardless of individual patient need?
• Are doctors providing sufficient documentation of medical necessity? Is all of the information justifying a treatment or test accurate?

Whistleblowers are essential in identifying, reporting, and stopping medically unnecessary treatments and tests. These treatments and tests are often very expensive, and ordinary taxpayers ultimately foot the bill. In addition, they can sometimes endanger patients’ health.

Whistleblowers are typically current or former employees of a healthcare provider, with inside information about medically unnecessary treatments or tests. However, even non-employee “outsiders” or competitors often are able to use their technical knowledge to identify and report fraud.  In any case, a whistleblower may be entitled to an award of 15%-30% of any amount recovered in a successful enforcement action. If you have evidence that a person or company is providing medically unnecessary treatment, an experienced whistleblower attorney can help you file an effective complaint and maximize your share of any recovery.

Our Team

With more than 50 years of experience, the attorneys on Baron & Budd’s whistleblower representation team have represented dozens of clients in government fraud cases returning over $6 billion to federal and state agencies, with whistleblower recovery shares as high as 50%. They are ready to help if you have evidence of healthcare fraud related to medically unnecessary treatments or tests.

Please call (866) 845-2164 or complete our contact form if you would like more information. For more information, see What You Need to Know About Becoming a Whistleblower.  Please understand that contacting us does not mean that you have established an attorney-client relationship with Baron & Budd, P.C.