Follow the Money: Healthcare Fraud

In a hypothetical Dante’s Inferno scenario where all of the world’s white collar criminals were arranged in descending order of wickedness, healthcare fraudsters would sit somewhere between hell’s eighth and ninth concentric rings. By pocketing money that’s meant to pay for medically necessary procedures, those who commit healthcare fraud effectively steal from the sick—and from taxpayers—in order to make themselves more wealthy.

Healthcare fraud, which costs the nation billions of dollars every year, consists of filing dishonest healthcare claims in order to earn a profit. In its simplest form, it’s billing for a service that wasn’t provided or for a more expensive procedure than medically necessary and then collecting payment from an insurance provider (or taxpayer-funded programs like Medicare and Medicaid). But the demons of healthcare fraud are more nefarious than just that.

If there’s a way to rip off some portion of the healthcare system, healthcare fraudsters have likely already found it and exploited it. Other categories of healthcare fraud include: billing for a more expensive procedure than the one that was actually performed; performing medically unnecessary procedures just to receive insurance payments; re-categorizing medically unnecessary procedures as medically necessary; and accepting or receiving kickbacks for patient referrals.

At a time when the expansion of healthcare services sits atop the political agenda of many Americans, fighting healthcare fraud has never been more important.

Famous Case: The Philip Esformes Billion-Dollar Fraud

Philip Esformes made $78 million in 2017. He drove a Ferrari. He ran a network of 16 skilled-nursing and assisted living facilities (ALFs) across Chicago and Miami. And between the years 2006 and 2016, he billed approximately a billion dollars to federal health insurance programs for questionable services that, in many cases, patients didn’t even receive.

It wasn’t just greedy; it was negligent. Esformes housed elderly patients alongside younger patients who suffered from mental illness and drug addiction. In one instance, an older patient was beaten to death by a younger patient. The two should never have even been in the same facility, but Esformes put them there to make himself some extra cash.

Esformes kept his facilities packed by bribing physicians and other medical professionals to refer patients his way. In turn, Esformes would refer his patients to other fraudsters. Two of those conspirators, Guillermo and Gabriel Delgado, paid for those referrals in cash, then listed them on their accounts as travel and hotel expenses. Esformes paid bribes through Gabriel to a state healthcare administrator, thereby getting a heads-up before any inspections on the largely bogus medical facilities could take place.

But when an investigation into the Delgado brothers started up, Gabriel, who called himself Esformes’ right-hand man, asked Esformes for help. Esformes casually suggested that Gabriel kill himself. That was enough to make the Delgados flip, and the brothers went on to record what would become an incriminating two-hour conversation with Esformes.

In April 2019, a federal jury found Esformes guilty of the majority of the 26 charges that had been brought against him. While they were unable to reach a verdict on the main count of Medicare fraud, the story was clear: Esformes was one serious villain. He was sentenced to 20 years in prison, closing the case on what the US Justice Department called the largest healthcare bribery and kickback scheme in history.

How Investigators Fight Healthcare Fraud

Investigators who fight healthcare fraud know all about following the money. Healthcare fraud, in particular, is prone to leaving a paper trail. But detecting fraud isn’t always as easy as that. As healthcare changes, so do the ways bad actors seek to defraud it, and tomorrow’s healthcare fraud can be hiding in some innocuous places. Where’s one supposed to look, and how does one tell the difference between the genuine and the bogus?

“The healthcare landscape is ever-changing, and fraudsters are continually altering schemes to stay one step ahead,” says Special Agent in Charge Derrick Jackson, at the Department of Health and Human Services Office of Inspector General (HHS OIG). “The biggest change, and definitely an advantage for law enforcement, is our use of proactive data analysis and access to data at our fingertips. This allows us to be proactive versus reactive and we can save the taxpayer millions before new fraud schemes evolve.”

A key component of HHS OIG’s mission is to root out fraud in federal healthcare programs like Medicare and Medicaid. They’ll conduct investigations, run high-tech audits, and impose exclusions and/or penalties on fraudsters. To do all that, they need a diverse and skilled pool of talent.

“At the Office of Inspector General, we like to have a very diverse educational background in our cadre,” Jackson says. “The diversity brings different skill sets to the table; we have everyone from criminal justice majors and healthcare policy majors to accountants, business, and economics majors. Lately, we have had a huge success with bringing on individuals from the medical sector such as physical therapists, nurses, and pharmacists. These individuals understand the rules, regulations, and medical terminology.”

According to Jackson, it’s also important for investigators to pay attention to the changes in healthcare itself—and the possibilities for fraud that go with those changes. Telemedicine, for example, while still a relatively new service, could reach $3.5 billion in revenue in the near future.

Medicare Advantage (also known as Medicare Part C) adds further complexity by introducing private insurance companies as a middleman contracted through Medicare. A large shift towards value-based coordinated care changes the rules for what counts as quality care. In each instance, there are places where money can, and will, illicitly slip through the cracks.

When it does, Special Agent in Charge Jackson and his team intend to be there to catch it. And that team is growing, thanks to Jackson’s outreach to high school and college students.

“When I travel around to universities, my best advice for young students is to be proactive and seek out [both volunteer and paid] internships at OIG while attending school,” Jackson says. “These programs are invaluable; they allow you to build your resume early and give you a head start on landing a full-time job after graduation.”

If you’re looking to make those first steps towards fighting healthcare fraud, check out some of the programs below.

Special Agent Derrick Jackson: An Expert Leading the Charge Against Healthcare Fraud

Derrick Jackson (HHS OIG)

Special Agent in Charge Derrick Jackson heads investigations in the Department of Health and Human Services Office of Inspector General’s Atlanta region. He’s also the agency’s National Diversity Recruitment Coordinator. All of this is in his blood. His mother, Carolyn Jackson, was the first African American, and first female, Assistant Special Agent in Charge in the Philadelphia region. Part of her legacy was to make the office more diversified in its hiring. That’s a legacy that her son still upholds today.

In addition to carrying out countless successful investigations over the last 18 years, Jackson and his team have reached out to high school and college students to inform them about the OIG’s mission, potential internships, and job opportunities. In the course of this work, the OIG maintains partnerships with the National Organization of Black Law Enforcement Executives, Women in Federal Law Enforcement, Hispanic American Police Command Officers, and the National Asian Peace Officers Association.

Other Experts Who Teach How to Fight Healthcare Fraud

James Byrd, PhD (University of Alabama at Birmingham)

James Bird is an assistant professor of accounting at finance at the University of Alabama at Birmingham’s Collat School of Business, where he’s taught classes in the fundamentals of healthcare financial management, financial accounting, and corporate governance. He received both his master’s of accounting and his PhD in healthcare administration from UAB. Byrd’s research has explored the topic of accounting fraud in healthcare, and, in addition to a thorough diagnosis of the problem’s causes, provided a call for greater accounting controls. His academic papers have been published in: Journal Of Accounting, Ethics, and Public Policy; Journal of Healthcare Finance; and Journal of Healthcare Management.

Robin J. Kempf, JD, PhD (University of Colorado, Colorado Springs)

Dr. Robin Kempf is an assistant professor in the School of Public Affairs at UCCS. She formerly served as an assistant professor at the John Jay College of Criminal Justice, where she taught classes in healthcare fraud, organizational theory, and ethics. She holds both a JD and a PhD from the University of Kansas. Prior to joining the faculty at John Jay, she held several positions within the government of the State of Kansas, including as Inspector General of the Kansas Health Policy Authority, where she oversaw the Medicaid program and state employee health plan. Her scholarly work has been published in: Journal of Public Affairs Education; Journal of Public Administration Research and Theory; and American Review of Public Administration.