Hospitals, ambulance companies share fraud liability burden

Throughout the first half of 2015, a number of fraud cases and investigations have focused on ambulance services, particularly for non-emergency transportation. In some instances, these cases have implications for both ambulance companies as well as hospitals.

In February, ambulance owners in Southern California, Texas and West Virginia came under fire for False Claims Act charges involving non-emergency transportation. Meanwhile, in Jacksonville, Florida, one ambulance company and nine hospitals collectively paid $7.5 million to settle false claims allegations that the providers conspired to provide unnecessary emergency transportation to healthy patients. Some estimates indicate ambulance fraud costs Medicare up to $350 million annually.

Although there has been a rash of activity over the last several months, ambulance fraud has been scrutinized at the federal level for several years, Sean McKenna, a partner at Haynes and Boone LLP in Dallas and co-chair of the firm's Healthcare Practice Group, said in an exclusive interview with FierceHealthPayer: AntiFraud. McKenna previously served as an Assistant U.S. Attorney for the Northern District of Texas and worked at the Office of Counsel to the Inspector General for the Department of Health and Human Services.

"We're seeing a lot of scrutiny because the perception still is that this area is ripe with abuse," said McKenna, pictured right. "Even large companies and chains have settled civilly for upcoding the severity from a BLS [basic life support] to an ALS [advanced life support], or transportation that didn't have the requisite medical necessity documentation."

Focus on non-emergency transportation

Although ambulance fraud cases "run the gamut," according to McKenna, most investigations revolve around unnecessary services and inappropriate billing for non-emergency transportation. 

"They can look at those types of transports and determine, first of all, is this company servicing the non-emergent population, which is a huge red flag," McKenna said.

Ambulance providers are often small and locally run, which can spark a number of potential issues. In some cases, honest providers get ensnared in fraud investigations simply because they are unaware of coding regulations. On the other end of the spectrum, ambulance services require very little infrastructure and expenditure, which can attract owners intent on defrauding Medicare.

"You get some individuals [who] are unsavory and want to turn a profit, so they start directing questionable transports, which is where you see in a lot of criminal cases," McKenna said.

Pre-certification programs toe thin line

In December, the Centers for Medicare & Medicaid Services (CMS) launched pre-certification programs in New Jersey, Pennsylvania and South Carolina, requiring pre-authorization for non-emergency transportation in an effort to curb improper Medicare payments. Since then, some patient advocates have raised concerns regarding the line between fraud prevention and access to care. As FierceHealthPayer: AntiFraud previously reported, the program has already forced 11 New Jersey ambulance providers out of business in 2015.

Rather than take a broad approach that handcuffs all providers, McKenna argues that a better strategy would target potentially improper transports to expose nefarious fraud schemes.

"CMS is really struggling on how to combat this type of fraud," he said. "It starts with issuance of the supplier number--but it doesn't have to be black and white, because you can create an access to care situation by implementing some of these rules and regulations."

In other parts of the country, CMS instituted a moratorium on new enrollments for ground ambulance providers in an effort to curb abuse in historically high-fraud areas. Both the moratorium and the pre-certification program offer valuable financial metrics that CMS can bring to Congress. For that reason, it's likely that CMS will continue expanding these programs in high-risk areas.

Unfortunately, these regulations often hinder honest providers, particularly when they seek expansion. For that reason, McKenna favors more rigorous enforcement of flagrantly fraudulent providers.

"Focusing on those unscrupulous providers and suspending them can be an effective way to reduce the amount of dollars going out for improper services," he said.

Hospital liability and the emergence of "throughput"

A recent settlement out of Jacksonville underscores an emerging scenario in which hospitals and health systems can be further implicated in ambulance fraud investigations and prosecutions. The case involved nine hospitals and an ambulance company that collectively paid $7.5 million to settle claims that the providers submitted false claims to Medicare for non-emergency rides.

Although the Department of Justice statement described a straightforward case of upcoding and billing for unnecessary services, U.S. Attorney A. Lee Bentley told the Wall Street Journal that hospitals benefited by improving "throughput," or the speed at which they could admit and discharge patients in the emergency department. He went on to say that there was "no reason to believe this isn't going on elsewhere throughout the country." Unnamed sources added that the U.S. Attorney's Office for the Middle District of Florida has been in contact with three other U.S. Attorney's Offices that are broadening their own ambulance investigations.

McKenna said that allegations of increasing ED "throughput" alone are difficult to prove, as the process can be classified as an indirect benefit. Ultimately these cases still rely on evidence of unnecessary services.

"The underlying allegation is not only that it directly benefits you by doing this but, also, [the services] weren't necessary," he said.

However, the fact that other U.S. Attorney's Office may focus on this issue could trigger an expansion of potential liability as the feds seek to expose non-quantifiable factors, McKenna added. That could have meaning for providers outside of ambulance companies.

"There could be broad implications if it's true that is a trend and truly is being pursued by other U.S. Attorney's Offices around the country," he said. "It could be easily applied to other segments of the industry."

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