Healthcare fraud stats continue to rise


Let's kick off 2012 by talking about healthcare fraud and near frauds. My favorite recent hospital CFO tears-out-their-hair story from that realm comes from a friend who's a NICU nurse at a Southern California hospital. One of her recent patients was a preemie whose cost of care was likely in the high six or even low seven figures.

Fortunately, the newborn was enrolled in Medi-Cal, the state's Medicaid program. That means the hospital got something for its trouble, but almost certainly not enough to cover its expenses (California has among the lowest Medicaid hospital payment rates in the country).

However, it turns out the father is no ordinary 20-something slacker. He's the starting shortstop for the local Major League Baseball team. He earned $3 million last year. Since he's now eligible for salary arbitration, I'm guessing he'll take home around $6 million in 2012, and possibly even more should he sign a long-term contract.

Aside from enjoying compensation that actually tops most hospital CEOs, Major League ballplayers belong to perhaps the most powerful labor union in the United States. They have rarely had to familiarize themselves with terms such as "deductible" or "co-payment."

So why this particular newborn wound up on Medi-Cal rather than his or her father's generous private insurance is a mystery, although I can venture a guess. Professional athletes have the money and free time to lead personal lives significantly sloppier than the rest of us. It's entirely possible he needed to keep this child's arrival--as well as the mother's existence--off the books.

Although such conduct is legal and ethically no worse than personal dishonesty, it has the whiff of financial fraud. The hospital lost hundreds of thousands of dollars in revenue by not being able to bill a commercial payer. The taxpayers lost hundreds of thousands of dollars paying for the care of a child who could have been insured by the private sector. If that child has chronic healthcare conditions due to premature birth, the potential public losses could run into the millions of dollars over the next couple of decades.

As irritating as this incident is, it is mild compared to the number of people who believe federal healthcare programs should give them even more than a free ride. Thousands believe that a mere Medicare identifier number, a post office box and a few dummy corporations are all that separate them from millions of dollars. As a result, healthcare fraud siphons about $90 billion in U.S. taxpayer funds each year.

The Justice Department seems to have taken the huge number of healthcare scammers to heart. It prosecuted 1,235 individuals for such malfeasance in 2011--the largest number since records started in the early 1990s. The government recovered about $3 billion as a result. Some convictions led to prison sentences of 30 years or more. And while scammers still perpetrate fraud on a large scale, new security measures by the Department of Health and Human Services make it a lot tougher to steal from Medicare and other programs.

Hopefully, this new vigilance in preserving the public trust will seep down to the state level. That would mean the California Department of Health Care Services--the state agency overseeing the Medi-Cal program--will do a little investigating of its own and track down this particular deep-pocketed father to obtain reimbursement for his child's cost of care, to which taxpayers are legally entitled. Last season, that player was caught stealing six times while running on baseball diamonds. He needs to face similar accountability in real life. - Ron (@FierceHealth)

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