Fraud risk in healthcare

Thursday, June 22, 2023

8 Minutes reading time

Whistlehub content team

Don't be a victim of healthcare fraud! Read on to learn about the types, risks, and prevention strategies for this pressing issue plaguing the industry.


Healthcare fraud is a pervasive issue that costs the industry tens of billions of dollars each year, resulting in increased insurance premiums and taxes, as well as exposing individuals to unnecessary medical procedures.

The FBI works tirelessly to combat healthcare fraud, but it's crucial for everyone to be aware of the risks and how to protect themselves from becoming victims. This blog post will delve into the various types of healthcare fraud, their impacts on our society, and what you can do to help prevent them on both a personal and institutional level.

Key Takeaways

  • Healthcare fraud is a widespread issue that costs the industry tens of billions of dollars each year, leading to increased insurance premiums and taxes.
  • Medical providers, patients, and other individuals can engage in healthcare fraud through various means such as upcoding, double billing, prescription forgery, and kickback schemes.
  • The COVID - 19 pandemic has led to an increase in healthcare fraud activities such as advance fee scams related to PPE procurement and antibody testing fraud.
  • Identifying high - risk healthcare providers and red flags for potential fraudulent activity can help prevent and detect healthcare fraud. It's important to report any suspected fraudulent activity promptly to regulatory authorities or health insurance providers.

Understanding Healthcare Fraud

Healthcare fraud can be committed by medical providers, patients and other individuals, and may involve prescription fraud such as forging or diverting prescriptions.

Fraud By Medical Providers

Healthcare fraud by medical providers is a pervasive issue that leads to the loss of tens of billions of dollars each year. Unscrupulous medical professionals employ various tactics to deceive the health care system and illegally profit from it.

Instances such as these not only disrupt financial resources but also jeopardize patient trust in healthcare professionals. For example, an unprincipled surgeon might perform unnecessary surgeries purely for financial gain—an act that devastates both patients' physical well-being and their mental peace.

The FBI takes healthcare fraud committed by medical providers very seriously and collaborates with federal, state, local agencies alongside healthcare fraud prevention partnerships to investigate such fraudulent activities.

To aid this effort, individuals who suspect any form of healthcare fraud are encouraged to report their concerns either to their insurance provider or directly to the FBI so that appropriate action can be taken against those involved in duplicitous practices within the industry.

Fraud By Patients And Other Individuals

Health care fraud perpetrated by patients and other individuals is a significant issue that undermines the integrity of the entire health care system. These deceptive actors seek to exploit vulnerabilities for personal gain, often at the expense of insurers and taxpayers.

For instance, one prevalent form of fraud involves a patient using another person's medical insurance information to receive unnecessary treatments or procedures resulting in illegal reimbursements being paid out.

Another example includes individuals participating in illicit marketing tactics designed to deceive potential patients into purchasing substandard products or services.

The FBI works closely with organizations like National Health Care Anti-Fraud Association (NHCAA) and Insurance investigative units to combat such malicious activities within our healthcare systems.

Awareness campaigns like "Chasing the Dragon: The Life of an Opiate Addict," released by FBI and DEA aim at educating younger generations about serious consequences associated with substance abuse while elucidating on rampant prescription-related crimes committed nationwide.

Prescription Fraud

Prescription fraud is a pervasive and costly issue within the healthcare industry, encompassing various illegal activities such as forgery, diversion, and doctor shopping for prescription medication.

Perpetrators may create counterfeit prescriptions or steal legitimate ones to obtain controlled substances like opioids, contributing to an already devastating epidemic that has claimed countless lives.

To address this widespread problem and protect public health, law enforcement agencies have partnered with organizations such as the National Health Care Anti-Fraud Association (NHCAA), National Insurance Crime Bureau (NICB), and insurance investigative units.

Additionally, physicians are urged to be vigilant in their prescribing practices while individuals can play a role by taking medications only as prescribed and properly disposing of leftover drugs at DEA-approved take-back locations.

The Impact Of COVID-19 On Healthcare Fraud

The COVID-19 pandemic has brought about a surge in healthcare fraud activities that threaten the already-strained healthcare system. Fraudsters have taken advantage of the chaotic situation to create elaborate schemes aimed at defrauding patients, providers, and insurers.

The FBI reports an increase in fraudulent activities such as advance fee scams, procurement fraud related to personal protective equipment (PPE), and antibody testing fraud.

Moreover, with most medical appointments now being held virtually because of social distancing rules, telemedicine is becoming more common. However, this also created new opportunities for individuals who exploit fake telemedicine services and steal patient data.

To curb healthcare fraud during COVID-19 times requires vigilance from regulators at different levels: federal/state/local authorities; regulatory agencies like CMS; financial institutions partnering with law enforcement agencies in detecting transactions involving illicit funds linked with COVID-related crimes like unemployment/benefit payment scams or disaster relief programs abuse; professional associations developing awareness campaigns tailored towards healthcare workers' education/preventive measures against fraudulent billing practices/kickbacks/schemes related to opioids/fentanyl epidemics/medical identity theft among others.

Identifying Healthcare Fraud Risks

Healthcare providers and financial institutions should be aware of high-risk healthcare providers and red flags to detect potential fraud.

High-risk Healthcare Providers

High-risk healthcare providers are more likely to engage in fraudulent activities due to various reasons, including financial pressures and the complexity of healthcare billing. Identifying these providers is crucial for preventing and detecting healthcare fraud. Here are some examples of high-risk healthcare providers:

  1. Providers with a history of fraud: If a provider has a history of healthcare fraud or abuse, they are more likely to repeat such behavior.
  2. Providers with high reimbursement rates: Healthcare providers that consistently bill for higher amounts than their peers can be flagged as potential risks.
  3. Providers with questionable billing patterns: Billing practices that differ from standard medical practices can be red flags for fraudulent activities, such as upcoding or unbundling.
  4. Providers with extensive Medicare/Medicaid billing: Providers who bill a significant percentage of their services to government insurance programs may be at higher risk for engaging in fraudulent schemes.
  5. Providers who offer unnecessary services: Healthcare providers offering non-essential services that patients do not need are potential risks for irregular billing practices.

It's essential to monitor and investigate any unusual billing activity by high-risk healthcare providers carefully. The JHHC Corporate and Medicare Compliance Departments conduct validation audits regularly to ensure compliance with regulatory authorities and detect any instances of healthcare fraud and abuse promptly. Additionally, reporting suspected fraud through the SPEAK2US hotline helps prevent losses associated with fraudulent activities in the healthcare industry.

Red Flags For Healthcare Providers

Healthcare providers should be vigilant in identifying and addressing potential red flags for fraud and abuse. Some of the red flags that may indicate fraudulent activity include:

  1. High-Risk Healthcare Providers: Providers with histories of disciplinary actions or sanctions, those operating outside their scope of practice, and those frequently billing at a higher level than peers can be considered high-risk.
  2. Durable Medical Equipment (DME) Claims: DME claims with higher-than-average reimbursement rates may indicate fraudulent activity, especially when submitted by new or infrequent providers.
  3. Shell Companies: Providers who use shell companies to bill for services may be attempting to hide their identity or funnel payments into a different account.
  4. False Documentation: Providers who submit claims for services that were not rendered or falsified medical records are committing fraud and abuse.
  5. Opioid and Fentanyl Epidemics: Prescriptions for opioids and fentanyl have raised concerns about over-prescribing by some healthcare providers, leading to addiction and abuse by patients.
  6. Transactional Red Flags: Unusual patterns in claims submissions such as sudden increases in certain procedures, an increase in referrals from non-healthcare sources, or unusual timing of submissions may indicate fraudulent activity.
  7. Kickbacks: Payments received by providers in exchange for patient referrals can constitute illegal kickbacks that defraud the healthcare system.
  8. Medical Identity Theft: Stolen prescription pads or patient identification numbers can allow criminals to obtain drugs or medical services under another person's name.
  9. Centers for Medicare & Medicaid (CMS): Frequent audits by CMS and other regulatory authorities could signal problematic practices that should be investigated thoroughly by providers themselves.
  10. Compliance Concerns: Other indications of compliance concerns include issues with billing practices, misrepresentation of medical necessity, false claims submission, and failure to comply with government regulations such as the False Claims Act.

Healthcare fraud is a serious issue affecting both patients and providers alike. Being aware of potential red flags and taking proactive steps to prevent fraud can help protect the integrity of the healthcare system. With resources like JHHC's Special Investigations Unit and Thomson Reuters CLEAR, providers and financial institutions have access to powerful tools that can help them combat healthcare fraud more effectively.

Prevention And Detection Of Healthcare Fraud

Financial institutions play a crucial role in the prevention and detection of healthcare fraud by identifying suspicious activity and filing Suspicious Activity Reports (SARs) to regulatory authorities.

Role Of Financial Institutions

Financial institutions play a critical role in healthcare fraud prevention and detection. They are often the first line of defense against financial crimes, including fraudulent billing schemes and kickbacks.

Financial institutions can detect suspicious activity by analyzing transactional red flags such as shell companies, false documentation, and high-risk healthcare providers.

One example of the importance of financial institution involvement in healthcare fraud prevention is the National Money Laundering Risk Assessment (NMLRA). The NMLRA identified healthcare fraud as one of the highest risks for money laundering due to its potential for large payouts with minimal oversight or regulation.

By working closely with regulators and other entities involved in combating healthcare fraud like Johns Hopkins Healthcare LLC's Special Investigations Unit (SIU), financial institutions can contribute significantly to reducing losses associated with fraudulent activities.

Reporting Suspected Fraud

Individuals should report suspected health care fraud to the FBI or their health insurance provider. Reporting suspected fraud can help prevent future fraudulent activity and reduce financial losses for individuals and entities.

Tips for reporting suspected health care fraud include:

  1. Keeping detailed records of any suspicious activities, including dates, times, and locations.
  2. Gathering supporting documentation such as medical records or billing statements.
  3. Contacting the FBI's Health Care Fraud Unit or the National Health Care Anti - Fraud Association.
  4. Reporting suspected fraud to the individual's health insurance provider or Medicaid/Medicare program.
  5. Utilizing hotlines such as SPEAK2US to anonymously report fraud.

It is important to note that whistle-blowers are protected under the False Claims Act and Whistleblower Protections Policy. By reporting suspected health care fraud, individuals can play an active role in preventing fraudulent activity and protecting themselves and others from financial losses.


Healthcare fraud is a serious issue that not only impacts the financial landscape but also poses risks to patients' health. It's important to understand the common types of healthcare fraud, such as upcoding and prescription forgery, and be aware of red flags associated with high-risk providers.

Proactively preventing and detecting fraud through reporting suspicious activity to regulatory authorities or health insurance providers can help mitigate this problem. With increased vigilance and collaboration between agencies, we can work towards a safer healthcare system for everyone.

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