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The $712 Million Medicare Fraud Bust – A Few Tough Lessons For HRs

June 23, 2015


June 23, 2015

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On June 18th, 2015, the US Attorney General Loretta Lynch announced the largest ever medical fraud take-down in history. A total of 243 people including nurses, doctors and other licensed healthcare professionals were arrested in coordinated operation across 17 cities. They were charged with defrauding Medicare of a total of $712 million in false billings.

A prime example is a Los Angeles doctor who billed Medicare of $23 million for supplying 1,000 power wheelchairs. The problem is that the wheelchairs were prescribed for people that didn’t actually need them. Even then, most were actually not supplied.

Another example is a Houston nurse who coached patients on what to tell doctors in order to make them appear eligible for Medicare. He then received payment for those who qualified. He ended up racking a total of $4 million in fraudulent claims.

And it wasn’t just individuals who defrauded the system. Some companies cashed in as well. In New Orleans, two companies shipped talking glucose monitors to Medicare beneficiaries across the country. They sent the monitors regardless of whether the beneficiaries requested for them or actually needed them. They ended up fleecing Medicare of $22 million.

HRs On The Hot Seat

Although there was no mention of an HR being among those charged, it doesn’t take a stretch of the imagination to realize that HRs are going to face the heat – at least internally within the organizations in which the indicted individuals worked.

When such publicity generating incidents occur, HRs always end up on the hot seat. After all, they are charged with ensuring that the right individuals are hired and retained. As such, when bad apples slip through, then it is always assumed that HRs didn’t do their jobs properly.

Under normal circumstances, pointing the finger at the HR would be making them scapegoats. After all, HRs cannot police very employee all the time. However, when it comes Medicare fraud, the finger pointing is totally justified. After all, Medicare fraud is nothing new.

Since 2007, a total of 2,300 people have been charged by the Department of Justice for falsely billing Medicare. These individuals defrauded the system of a total of $7 billion. This info has been in the public domain. Therefore, any HR who keenly follows the healthcare service industry would have known that Medicare fraud is rampant.

Most of those charged have actually ended up on the OIG’s List of Excluded Individuals and Entities (LEIE). Therefore, HRs who have been conducting their due diligence (through healthcare sanctions checking) must have known that Medicare fraud is a big deal. Those who did not take measures to curb it within their own organizations clearly deserve to be in the hot seat (sorry HRs, but that’s the brutal truth).

Post-Hire Insider Threats

The fact that there is abundant info about Medicare fraud isn’t the only case which can be brought against HRs on the hot seat. They can also be rightly accused of not paying attention to HR trends.

In January 2015, the Society for Human Resource Management (SHRM) published an illuminating piece entitled “Know Before You Hire: 2015 Employment Screening Trends”. The piece opined that throughout 2015, organizations would have to contend with the rise of “post-hire insider threats”. These are basically threats which crop-up after individuals have passed through the screening process and have been hired.

Examples cited include “embezzlement, fraud, theft, child molesters and active shooters”. The SHRM article predicted that proactive organizations would have to institute “post-hire screening” in order to counteract such threats (well examine this post-hire screening in detail shortly). Click here to read more.

The bottom line is that any potential chaos which medical service providers will face following the Medicare fraud arrests could have been avoided had the HRs been keener. A consistent program of medical sanctions checking would have alerted the HR to the exact extent of Medicare fraud among health professionals. A basic mindset of paying attention to HR trends would have alerted them on how other organizations are tackling post-hire internal threats.

Anyhow, it is often said that hindsight is easy. Also, telling HRs “you should have done this or the other” is quite redundant. The ultimate question is, how can HRs in the health service sector reduce the likelihood of Medicare fraud festering within their organizations in future?

Counteracting The Threats

The threats of incidences like the Medicare fraud arise from either hiring or retaining people of a questionable character. Therefore, a strategy for counteracting them is two-fold i.e. reducing the likelihood of hiring such individuals, or weeding them out once they are hired. This is basically carried out through pre-hire and post-hire screening.

Most HRs are actually quite adept at carrying out pre-hire screening. This is because they know the risks of hiring the wrong individuals. As such, they thoroughly screen job applicants. In the health service sector, the penalties associated with employing sanctioned individuals are a further motivation for thorough pre-screening.

Where many HRs fall short is in post-hire screening. What is post-hire screening? It is a system of systematically screening employees for potential character flaws or criminal records. Post-hire screening can be carried out either periodically, or prior to key personnel decisions e.g. promotions. In the health-service sector, post-hire screening can take two forms:

Healthcare sanctions checks. The healthcare sector is unique in the sense that the names of people who are barred from working in it are published periodically. The OIG publishes its names in the LEIE. The US General Services Administration publishes its names in the Excluded Parties List System (EPLS). Sanctions checking is basically cross-checking the lists periodically to ensure that none of your current employees have been sanctioned. Typical sanctions checking periods include annually, bi-annually, quarterly or even monthly.

Background checks. The best time to carry background checks out is before major personnel decisions. For instance, before offering a new hire a contract, or before offering an employee a promotion. The idea is to see if anything has cropped up since their pre-hire background check was carried out. Background checks can also be carried out periodically. For instance, it can be stated that every employee must have at least one background check every three years that they work with the company.

The success of post-hire screening of course depends on how thoroughly it is carried out. The first step towards creating an effective strategy is to formulate a comprehensive post-hire screening policy. Such a policy will ensure that the screening is carried out comprehensively, systematically and consistently. The second step is to find a reputable employee screening company and sub-contract the screening activities (especially background checks) to them.

Ultimately, the recent Medicare fraud bust offers some serious lessons for HRs within the health service sector. In case your organization was affected, too bad. Next time better. If your organization wasn’t affected, congrats. However, it doesn’t mean you have to be complacent. It could be you next time. The bottom line is that, moving forward, you have to create measures to reduce the likelihood of such incidences occurring. To achieve this, you have to double your pre-hire screening and step-up your post-hire screening. Such measures will not only protect you from future DOJ fraud busts, but also improve the safety of your patients, employees and expensive equipment. Cheers!

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