What is the true cost of healthcare fraud?

Are there any secrets remaining regarding the True Cost of Healthcare? It is currently estimated that healthcare fraud accounts for an estimated 100 billion dollars per year in the United States alone!

Healthcare fraud is putatively increasingly a reason that health care costs continue to rise. Unnecessary and fraudulent treatments are being submitted to payer organizations daily, if not hourly. Healthcare fraud has become a huge business in North America today.

Increasingly, health insurance organizations, as well as consumers, are looking at new ways to detect, investigate and prosecute anyone submitting fraudulent health care claims.

In 2000, Americans were spending a staggering 1.3 trillion dollars per year on healthcare! As inexorably as night follows day, when that much money is at stake, the unethical among us seek their personal benefit at the cost of those around them.

What percentage of the $1.3 trillion is spent on fraudulent billing? The truth is, nobody truly knows!

The IRS estimates that between 3 and 10% of healthcare dollars (i.e., $39 billion) may be fraudulent. Independent review organizations, if truly independent, play an important role in helping healthcare fraud special investigative units ("SIU") investigate and determine whether claims are legitimate, whether chart notes support a legitimate case and whether medical necessity is associated with a case.

However, with Billions of dollars at stake for SIU employers (i.e., insurance companies), is it safe to conclude that so-called "independent review organizations" have clean hands? Not very likely!

The same human nature that leads to healthcare fraud permeates the SIU investigator and the "independent review organization." In displays of prosecutorial bravado, too frequently, the innocent are greatly inconvenienced, falsely accused, or even wrongfully convicted.

We all agree, something should be done. The question is, "What should be done?"

Frequently, federal investigators and prosecutors typically rely on a heavy and injudicious hand. The strategy appears to be to make examples of individuals, rather than bring about systemic change, which would be inconvenient and difficult.

What are the types of fraudulent activities that the dishonest Physicians and healthcare providers are known to engage in? The activities include,

• Up-coding/Upgrading (billing for more than actual service provided)
• Providing and subsequently billing for treatments that are not medically ecessary
• Scheduling extra visits for patients
• Referring patients to another physician unnecessarily
• Billing for services to accompanying family members
• Ordering unnecessary tests

Providers often engage in such practices, ignorant of the fact that such activities may trigger fraud investigations. What can providers do when they become the target of a healthcare fraud investigation?


There are several steps providers should take when they become the target of a healthcare fraud investigation. There are 10 steps providers should take:

1. Determine whether the action is civil or criminal. There is a huge distinction. In a civil action, if you lose, you may have to pay monetarily. In a criminal action, if you lose, you may go to prison.


2. Do not shred documents that you now suspect are incriminating.
Although it seems counterintuitive, do not commence a shredding-campaign. Providers frequently fail to realize that patients’ files are often the “crime scene”. By the time you either are made aware of or suspect that you are a target, the incriminating documents are in the investigators’ hands.


3. Determine whether you are a “target” or a “subject” of an investigation.
Frequently, investigators are working closely with prosecutors months, if not years, prior to identifying the “target” of an investigation. If you are a “subject” of such an investigation, this suggests either that the investigation is in an early stage, i.e., information-gathering, or you are a conduit to the “target”. If you are a “target,” seek consultation with someone knowledgeable in health care law without delay.

To see steps 4-10, complete the form below and receive your FREE 10-Step Quick-Start Guide to an effective HealthCare Compliance program.