EMS Fraud

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

July 15, 2019
VectorCare Team

The Problem

We all know that the American healthcare system has a lot of problems. Even though we 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].

Each year, it's estimated that the American healthcare system loses over $765 billion 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.

Fraud is a widespread issue in the EMS industry. Although many providers are honest and well-intentioned, the industry's prevalent fraud makes it challenging to maintain financial stability. We don't have a transparent patient logistics system.

In 2014, several cities in the US were compelled to stop issuing licenses to new ambulance companies[4]. This was because they were already struggling to review the operations of existing companies, and were unable to handle new ones.

One common form of healthcare fraud in the EMS industry is through kickbacks between EMS providers and hospitals. This happens when dishonest EMS providers make a deal with a hospital to provide cheap services. In exchange, they receive 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. Some more of preferential treatment or exclusive provider arrangement is what we would say is an illegal kickback.”

People think of kickbacks as “cash in an envelope” and that’s not the way it usually happens. Some more of preferential treatment or exclusive provider arrangement is what we would say is an illegal kickback.”

EMS providers can scam the healthcare system by making up or exaggerating medical documents. This lets them charge for services that are not needed, which is known as "upcoding."

There's no clear and easy-to-use communication system between ambulance companies and their clients. This makes it difficult to prevent fraud, since most communication occurs through phone or fax.

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.

EMS fraud is when people cheat the system in order to make more money. But this can affect 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 these problems, EMS companies would still bring patients to this hospital because they were getting paid to do it. Fraud in Medicare and Medicaid directly impact the quality of care patients receive.

Lastly, 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 bad among ambulance companies.

Part of this can be attributed to the low cost of entry. Compared to the cost associated with opening a pharmaceutical company or hospital, starting an EMS company can be relatively low cost.

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 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. Put frankly, it’s easy to commit fraud in such a murky system. To compound the situation, the consequences for 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 if 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 affects 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. 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 still largely remains unchecked. Yet there has been a recent rise of criminal sentences for healthcare fraud. Just las week, a Boston provider 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.

“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 next year with a new method of fraud: 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 simply isn’t the bandwidth to maintain compliance through our current audit system.

One of the main ways which ambulance companies face prosecution is actually through whistleblowing and the False Claims Act.

Under the False Claims Act, any employee who reports activity which cheats Medicare/Medicaid can be entitled to compensation. They can receive up to 30% of what the government collects from the case and be protected 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 make things better, we need more clear and 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 LAW to serve individuals as well as companies ranging from regional firms to the Fortune 500 and foreign financial institutions.

Want to 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. Committee on the Learning Health Care System in America; Institute of Medicine; Smith M, Saunders R, Stuckhardt L, et al., editors. Best Care at Lower Cost: The Path to Continuously Learning Health Care in America. Washington (DC): National Academies Press (US); 2013 May 10. 5, A Continuously Learning Health Care System.Available from: https://www.ncbi.nlm.nih.gov/books/NBK207218/

3. Berwick DM, Hackbarth AD. Eliminating Waste in US Health Care. JAMA.2012;307(14):1513–1516. doi:10.1001/jama.2012.362

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

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

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

7. Bresnick, Jennifer. "Inefficient communication costs a hospital $1.7 million a year", Health IT Analytics, 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", Joint Commission for Transforming Healthcare, August 2012. https://www.jointcommission.org/-/media/deprecated-unorganized/imported-assets/tjc/system-folders/blogs/tst_hoc_persp_08_12pdf.pdf?db=web&hash=BA7C8CDB4910EF6633F013D0BC08CB1C

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

10. LaPointe, Jacqueline. "Over 600 Individuals Charged in 2018 Healthcare Fraud Takedown", Revcycle Intelligence, 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