As we are coming to the end of another year we have reached the point where open enrollment season is starting for most employer sponsored health plans.  In the State of Idaho, we have a ballot measure we will be voting on in the General Election related to Medicaid expansion in the State.  An employee of our firm just had a family member in the local hospital giving birth to a child.  As you can see, healthcare is something that is an almost daily occurrence in some shape, form or fashion.  Just as easily as we can provide healthcare examples in daily life, we can easily provide fraud related examples too.  In fact, here are a few cases where we see fraud in the healthcare industry.

The Health Insurance Portability and Accountability Act of 1996 (HIPAA) was created to develop regulations to protect the privacy and security of healthcare information.  A cybersecurity breach exposed the information of 79 million people and cost Anthem $16 Million to settle the case with the Office of Civil Rights.  While this is a high-profile example, the case we are going to discuss is much smaller and on a local scale.

The Office Manager at a local physician’s office was having financial problems due to a gambling addiction.  Because the Office Manager had access to patient information including name, address, date of birth, social security and driver license number the Office Manager was able to fraudulently procure credit cards in the name of the unsuspecting patients.  In the course of our investigation we uncovered 18 separate credit card accounts fraudulently setup by the Office Manager.

You would think the greed of our fraudster is what would have gotten her caught or raised the suspicion of the physician.  It was actually a credit monitoring service that tipped off one of the victims that a fraudulent account was being open in their name.  Our fraudster was not the smartest person in the room.  She setup the fraudulent credit cards to be mailed to the physician’s office.  So, it was pretty easy for our victim to trace back where the fraudulent application came from.

Fortunately, the physician engaged our services and we were able to pull the entire details of the fraud from the fraudster with a little help from our local law enforcement.  The fraudster provided all the patients that were victims in the fraud.  We were able to contact them and confirm the fraudulent accounts and connect them with credit repair services.  The physician had our firm implement a few internal controls of patient information to meet and exceed HIPAA compliance.  Patients were contacted and informed of the situation and the steps taken to protect their identity.  Fortunately, the physician did not lose any patients due to this issue.

A case that made headlines a few years back involved a physician that was arrested for fraudulent prescriptions, drug trafficking and money laundering.  While his wife eventually took the blame and said the physician was not involved, the damage to the reputation of this physician was permanently inflicted to the point that the physician ended up suing the hospital in which he practiced.

According to the indictment the operation netted $1.3 Million in proceeds during the life of the crime.  The physician paid for credit cards, rent, loans, etc. belonging to his wife at an estimated $1.3 Million. Coincidence?  A local CPA reviewed the accounts and found $49,200.00 in payments made between the husband and wife.  Further, the wife was found to have paid the husband $242,000.00.

The felony charges against the physician were eventually dismissed in a plea agreement.  The physician pled guilty to two counts of misdemeanor tax fraud.  Misdemeanor Tax Fraud carries a fine of $10,000.00 and a maximum of one year in prison.  Our physician served one month in prison and is on probation for one year.  The physician also paid $48,000.00 in back taxes and $5,000.00 in fines. At this time, it appears that the physician is back to practicing medicine.

As we review these cases we cannot help but look at the fraud triangle.  Our fraudsters had some sort of pressure to commit their fraud.  In one case, it was a gambling problem while the other was providing a lifestyle for himself and his family.  Both cases had an opportunity to commit fraud against people that they were helping.  Finally, they were able to rationalize their fraud to themselves in order to continue committing it.  Fraud happens in every industry and every walk of life.  It reminds me of a statement made by Andrew Rudd at a conference I recently attended in regard to money laundering.  “You will never stop or prevent fraud or money laundering, but you can piss off some people along the way”.