EMS Fraud

How EMS Fraud Costs Medicare/Medicaid Hundreds of Millions a Year

July 15, 2019
VectorCare Team

It's estimated that the American healthcare system loses over $765 billion every year due to inefficiencies, unnecessary services, and fraudulent activities. Fraudulent medical bills alone cost the industry up to $260 billion in 2010, accounting for 10% of all healthcare spending.

Even though Americans spend 50% more money per person on healthcare than the top 10 developed countries, the United States still performs the worst overall in healthcare[1].

The Problem

Although many providers are honest and well-intentioned, fraud remains a widespread issue in the EMS industry. It's challenging to maintain financial stability when there isn't a transparent patient logistics system.

In 2014, several cities in the US, already struggling to review the operations of existing companies, were compelled to stop issuing licenses to new ambulance companies[2].

One common form of healthcare fraud in the EMS industry is through kickbacks between EMS providers and hospitals. Dishonest EMS providers make deals with hospitals to deliver cheap services. In exchange, the provider receives special treatment from the hospital.

We spoke with Brian Mahany, a fraud recovery lawyer who specializes in Medicare/Medicaid fraud, about his expertise on EMS fraud. Mahany explains,

“People think of kickbacks as 'cash in an envelope' and that’s not the way it usually happens. Preferential treatment or exclusive provider arrangement is what we would [define as] an illegal kickback.”

Another example of an EMS provider scam would be making up or exaggerating medical documents. Known as "upcoding", this enables providers to charge for services that are not needed.

Most communication between ambulance companies and their clients occurs through phone or fax, so without a clear, easy-to-use, transparently recorded communication system, fraud is difficult to prevent.

More than just an economic crime

When healthcare providers commit Medicare/Medicaid fraud, the entire healthcare ecosystem suffers. Everyone, down to the individual consumer, pays more for health insurance and the care they need[3].

While EMS fraud appears to cheat the system in order to make more money, it also impacts the care that patients receive. In 2014, a hospital was caught paying EMS companies to bring patient transfers to their emergency room, even if another hospital was closer. This hospital was known for having a lot of problems, like high employee turnover, unnecessary procedures, and even a maggot infestation. Despite the hospital's issues or not being the nearest, EMS companies would continue to bring patients to it because they were getting paid to do so.

This type of EMS fraud hurts the honest businesses in the industry, of which there are many. When so many providers are accepting kickbacks, it can become impossible for local ambulance companies to compete and turn a profit.

Why is this so bad for ambulance/EMS companies?

Though fraud is a problem across all areas of the healthcare industry, it’s particularly pervasive among ambulance companies. Part of this can be attributed to the low cost of entry: It is cheaper to establish an EMS company relative to opening a pharmaceutical business or hospital.

Additionally, healthcare has long been known for inefficient communication[7] and a lack of logistical transparency. It’s estimated that up to 80% of serious medical errors involve miscommunication between caregivers[8] during the transfer of a patient; 86% of general mistakes in healthcare involve some form of administrative error.

The system is opaque and lacks proper communication and visibility into day-to-day operations. It’s easy to commit fraud in such a murky system. To compound the situation, the consequences of committing fraud remain strikingly small. Mahany explains,

“It's relatively easy to start a new EMS business. You try to make a lot of money and if you get caught you get caught. The worst that happens is you go out of business, yet in the meantime you’ve pocketed a fair amount of money. I've called the EMS industry “whack-a-mole”: We go after one and tomorrow someone else has popped up in the same city doing the same thing.”

These problems aren't limited to EMS either. The NEMT industry experiences similar challenges with non-emergency medical transportation. Every area of patient logistics is affected by this system.

What does the landscape look like moving forward?

In 2017, investigations into healthcare fraud by the federal government resulted in $2.6 billion being returned to public insurance programs[9]. The following year, in 2018, over 600 charges were brought against individuals for committing healthcare fraud.

Despite this increased focus on auditing, the “whack-a-mole” game continues and EMS fraud remains largely unchecked. Yet there has been a recent rise of criminal sentences for healthcare fraud: In 2019, a provider in Boston was found guilty of false billing practices and sentenced to 6 years in prison[11].

While healthcare fraud convictions can help to deter future fraud, it is hard to completely stop it. Says Mahany,

“I am the eternal optimist, and I think we’ll start to see the number go down. We’ll never get it to zero. Unfortunately, people will come up with a new method of fraud next year, something that you or I can’t think of right now.”

CMS and insurance companies can only audit a small amount of companies per year. There isn’t the bandwidth to maintain compliance through the current audit system.

One of the main ways in which ambulance companies face prosecution is through whistleblowing and the False Claims Act. Under the False Claims Act, any employee who reports activity that cheats Medicare/Medicaid may be entitled to compensation. The employee can receive up to 30% of what the government collects from the case, as well as receive protection from company retaliation.

When some EMS providers cheat Medicare/Medicaid, it hurts our whole healthcare system. The honest ambulance companies struggle to make money in a dishonest system. To see an improvement, we need clear, honest communication between ambulance companies and healthcare facilities. That way, everyone – ambulance companies, taxpayers, and patients – can have a healthcare system that is safe and fair.

About Brian Mahany: Practicing in federal courts across the U.S., Brian Mahany founded the Wisconsin-based national fraud and tax law firm Mahany to serve individuals as well as companies ranging from regional firms to the Fortune 500 and foreign financial institutions.

Read more from the Patient Care Logistics Journal? Learn how one provider used VectorCare to evacuate patients 4x faster in an emergency.

1. "2019 Global health care outlook: Shaping the future", Deloitte, 20 February 2019. https://www2.deloitte.com/content/dam/Deloitte/global/Documents/Life-Sciences-Health-Care/gx-lshc-hc-outlook-2019.pdf

2. "A Continuously Learning Health Care System", National Library of Medicine, by a Committee on the Learning Health Care System in America, Institute of Medicine, M Smith, R Saunders, L Stuckhardt, et al., editors, 10 May 2013.  https://www.ncbi.nlm.nih.gov/books/NBK207218/

3. "Eliminating Waste in US Health Care", JAMA Network, by Donald M. Berwick and Andrew D. Hackbarth, 11 April 2012. https://jamanetwork.com/journals/jama/article-abstract/1148376

4. "Medicare Fraud, Nursing Home & Ambulances", Mahany Law, by Bryan Mahany, 7 February 2015. https://www.mahanyertl.com/2015/medicare-fraud-nursing-homes-ambulances/.

5. "How the Feds Foil Fraud", EMS World, by John Erich, 26 July 2018. https://www.emsworld.com/article/220881/pinnacle-how-feds-foil-fraud

6. "2 former Sacred Heart Hospital executives plead guilty in scheme", Chicago Tribune, by Jason Meisner, 23 December 2014. https://www.chicagotribune.com/news/ct-sacred-heart-hospital-fraud-met-20141223-story.html

7. "Inefficient communication costs a hospital $1.7 million a year", Health IT Analytics, by Jennifer Bresnick, 15 July 2014. https://healthitanalytics.com/news/inefficient-communication-costs-a-hospital-1-7-million-a-year

8. "Joint Commission Center for Transforming Healthcare Releases Targeted Solutions for Hand-Off Communications", The Joint Commission, August 2012. https://www.jointcommission.org/

9. "HHS, DoJ Recovered $2.6B from Healthcare Fraud Schemes in 2017", Revcycle Intelligence, by Jacqueline LaPointe, 10 April 2018. https://revcycleintelligence.com/news/hhs-doj-recovered-2.6b-from-healthcare-fraud-schemes-in-2017

10. "Over 600 Individuals Charged in 2018 Healthcare Fraud Takedown", Revcycle Intelligence, by Jacqueline LaPointe, 28 June 2018. https://revcycleintelligence.com/news/over-600-individuals-charged-in-2018-healthcare-fraud-takedown

11. "Physician Sentenced to Prison for False Billing Scheme", The United States Attorney's Office: District of Massachusetts, 6 February 2019. https://www.justice.gov/usao-ma/pr/physician-sentenced-prison-false-billing-scheme