Healthcare Financial Fraud paper

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Health Science

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Dec 6, 2023

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1 Healthcare Financial Fraud University of Maryland Global Campus HCAD 640: Financial Management for Healthcare Organizations November 14, 2023

2 Healthcare Financial Fraud The healthcare sector continues to grow in revenue generation and data volumes. As such, it has become a critical sector for fraudsters, hackers, and criminals who want a piece of the pie of the large sums circulating within the system. Hence, the paper delves into the complexities and ramifications of a major fraud case in the U.S. healthcare system by scrutinizing the case of Mr. Philip Esformes, who was convicted of orchestrating a multi- billion dollar fraud scheme targeting Medicare and Medicaid in South Florida. This case, characterized by extensive money laundering, kickbacks, and fraudulent claims for unneeded services, exposes the vulnerabilities in the national healthcare insurance funds. By and large, the paper emphasizes the urgent need for a corruption-free healthcare regulatory system, regular audits, and strict enforcement of laws to combat healthcare fraud, which is increasingly likely given the substantial financial stakes involved in medical programs like Medicaid and Medicare. Summary of the Case The selected case involved Mr Philip Esformes, who was found guilty of defrauding Medicare and Medicaid that were meant for foster care homes in South Florida. The fraud case was estimated to have involved billions of dollars in cash, and the scheme targeted the national insurance funds. The case involved a decades-long scheme of kickbacks and money laundering coupled with fraudulent claims to Medicare and Medicaid for services deemed medically unnecessary. After an eight-week long jury trial, Esformes was found guilty of several criminal counts, including conspiracy to defraud the United States, receipt of kickbacks in connection with a federal health care program, payment of kickbacks in connection with a federal health care program, conspiracy to commit money laundering, laundering, bribery and obstruction of justice (The U.S. Department of Justice. Office of Public Affairs, 2019). The final verdict by the federal district judge handling saw Esformes

3 given a 20-year sentence. Though the sentence was commuted by former U.S. president Trump and after lodging a losing appeal, Esformes was set to go to prison. Potential Criminal and Monetary Fines Based on the case, potential criminal and monetary crimes are as follows. Esformes was found guilty of accepting and using bribes and kickbacks to make people enroll in the Medicare and Medicaid services in foster homes that offered assisted living and foster care (Mangan, 2023). Under the statute, individuals are found guilty when they commit criminal offenses wilfully and knowingly and are deemed to have executed a scheme to defraud a health care benefit program. As such, healthcare fraud is punishable by imprisonment for up to 10 years. Individuals found guilty are also subject to criminal fines of up to $250,000 (Oberheiden, 2023). Overall, Esformes was found to have violated The Health Care Fraud Statute and, as such, was subject to legal fines. Preventing The Case from Happening While each case is unique, preventing medical and healthcare fraud requires all stakeholders involved to apply basic security and preventative measures to prevent them from happening in the first place. Based on the Esformes case, the following measures should have been implemented to prevent the fraud from happening. First, the government should have verified all the medical forms submitted by the facility and validated if the patients had visited the facility. That can be implemented by having a robust patient identity verification process that will prevent identity theft and insurance fraud. Doing so will ensure that all medical records and billing documents match at all times before the payment is made to the facility. Second, the government should have conducted a spot check at the facility and audited its financial accounts to ensure nothing was amiss. Pan et al. (2023) contend that medical fraud can be prevented by conducting regular internal and external audits to review

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4 the organizations’ financial records, billing practices, and how best they comply with set regulations. The two discussed measures could have helped prevent the fraud incident. Loopholes In the Applicable Law or The System Based on the case, it is evident that Esformes did not take advantage of the law or system but used people in the relevant authorities to break the law. He also took a lapse in regulatory surveillance to commit the crimes. For one, he bribed physicians to admit patients into his facilities and failed to offer them appropriate medical services that were then billed to Medicare and Medicaid. Second, to ensure that he could cover his tracks, he bribed an employee of a Florida state regulator who, in turn, gave him advance notice of surprise inspections at his facilities, according to the evidence submitted in the court (Mangan, 2023). Overall, it is evident that Esformes understood how the federal health authorities worked and used bribery to get his way or get ahead of them. However, the system is flawed and corrupt since they aided him in committing the crime. Knowing that the system is corrupt, Esformes used money to buy himself time to commit the crime. Had the system been corruption-free, then Esformes would have been stopped at the earliest chance. The system is also flawed, as is evident when the former president of the U.S. commuted his sentences, Donald Trump (Mangan, 2023). Due to the magnitude of his criminal offense, it was not wise for the government to pardon him. Conclusion It is evident that with huge amounts of money at stake in healthcare medical programs like Medicaid and Medicare, healthcare and medical fraud are likely to occur. The crimes can be aided by the failure of the federal and state governments, having flawed regulatory and oversight mechanisms and a system dominated by corruption. However, such medical fraud cases can be prevented by having a corrupt free healthcare regulatory system, regular auditing of the healthcare organizations’ financial books, and verification of all visits by patients to

5 healthcare facilities before a claim is paid. Medical healthcare fraud will continue due to the huge sums of money involved. As such, the federal and state governments must strengthen anti-fraud mechanisms and stringent laws and regulations to deter and prevent healthcare organizations and individuals from committing medical fraud and other healthcare-related financial crimes.

6 References Cornell Law School. (n.d.). 18 U.S. Code § 1347 - Health care fraud . LII / Legal Information Institute. https://www.law.cornell.edu/uscode/text/18/1347 Mangan, D. (2023). Philip Esformes, whose prison sentence Trump commuted, loses appeal and faces retrial on healthcare fraud charges. CNBC . https://www.cnbc.com/2023/01/20/philip-esformes-whose-prison-sentence-trump- commuted-loses-appeal.html Oberheiden, N. (2023). 18 U.S.C. 1347 - Health Care Fraud Statute | Federal lawyer. Federal Lawyer . https://federal-lawyer.com/federal-health-care-fraud-statute/ Pan, K., Pearce, C., Jones, S. T., & Lui, Z. (2023). Types of Hospital Frauds: Nature and Methods of Prevention. Journal of Forensic and Investigative Accounting , 15 (1). The U.S. Department of Justice. Office of Public Affairs. (2019). South Florida Health Care Facility Owner Sentenced to 20 Years in Prison for Role in Largest Health Care Fraud Scheme Ever Charged by The Department of Justice . https://www.justice.gov/opa/pr/south-florida-health-care-facility-owner-sentenced-20- years-prison-role-largest-health-care

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