Transcript Using Fraud Cases in the Classroomx

Mary Anne Atkinson
Cheryl Prachyl
Carol Sullivan
American Accounting Association Annual Meeting
Atlanta, Georgia
August 2014
Why exposing students to these
cases is important.
 Healthcare fraud losses are estimated to be about 80
billion dollars per year.
 These losses contribute to rapidly increasing
healthcare costs for all Americans.
 Healthcare fraud differs from the types of fraud that
accounting students generally study. Reviewing
healthcare fraud cases can expand students’
knowledge of
 how different types of healthcare fraud might be
perpetrated and
 the extensive list of stakeholders involved when
healthcare fraud is committed.
Suggested Classroom Use
 Review cases and discuss how the frauds might be
perpetrated and/or discovered.
 Discuss ethical issues including determining the
stakeholders, impacts of the frauds, and possible
rationalizations of the perpetrators.
 Consider possible control mechanisms that might be
used to prevent such frauds and discuss how these
controls might impact patients, health care providers,
and businesses involved in delivering heath care
products and services.
 Discuss perpetrators and how they differ from those
who commit financial frauds.
Appropriate Classes
 Accounting Information Systems – especially in
considering controls and detection methods
 Ethics – Useful in helping students recognize the
broad range of stakeholders who may be affected by
fraud.
 Introductory Financial – Provide a good introduction
to the concept of fraud and stakeholder identification.
Who Commits Health Care Fraud?
10%
Medical Providers
(Hospitals, Clinics,
Medical Professionals)
10%
Individuals (Consumers)
80%
Insurance Providers and
Employees
Example Provider Fraud Methods
 Billing for services not performed
 Billing duplicate times for one service performed
 Falsifying a diagnosis
 Misrepresenting procedures (billing for a covered
service when a non-covered service was
performed)
 Upcoding – billing for a more costly service than
was performed
 Accepting kickbacks for patient referrals
 Waiving co-pays or deductible amounts and
overbilling insurance plan
Healthcare Spending in Perspective
 Healthcare spending in 2011 was $2.7 billion.
 This represents 17.9% of Gross Domestic Product
(GDP) – a significant increase from the 1970 health
care spending of 7.2% of the GDP.
 A 2013 study reported that about 25% of all senior
citizens declare bankruptcy due to medical expenses
and 43% either mortgage or sell their primary
residence because of financial problems.
 Healthcare fraud impacts the economy as well as
individuals.
Where To Find Cases
 A good resource to identify cases of healthcare fraud is
the Department of Justice web site
http://www.justice.gov/
 The site can be searched by company name and will
provide details of allegations against companies as well
as settlements that may have been reached.
 The information provided there is brief enough that
the readings could be used in class to foster discussion
of various topics related to fraud and/or ethics.
Case Examples
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Glaxo Smith-Kline
Purdue Frederick Company
Bristol-Myers Squibb Company
Amerigroup
Pfizer
Sanofi-Aventis
WellCare Health Plans, Inc.
Amgen Inc.
Johnson & Johnson
Wyeth
Genzyme
RehabCare Group, Inc.
VA Hospital
Glaxo Smith-Kline
 In 2006, Glaxo Smith-Kline paid $14 million to settle
charges of patient fraud and related violations. They
were found to have attempted to block the generic
versions of their antidepressant drug Paxil from
reaching the market.
 In 2010, Glaxo Smith-Kline pled guilty to charges
related to the manufacture and distribution of certain
adulterated drugs and paid a $600 million civil
settlement as well as another $150 million in criminal
finds and forfeiture.
Purdue Frederick Company
 The government alleged that Purdue fraudulently
misbranded OxyContin as being less addictive and less
subject to abuse than other pain medications.
 The company pled guilty to charges of misbranding
the addictive and highly abusable drug in 2007.
 Purdue forfeited $276.1 million to the United States
(about $160 million to resolve liability for false claims
made to Medicaid and other government healthcare
programs) and paid a total of $634.5 million as a global
resolution for their criminal and civil liabilities.
Bristol-Myers Squibb Company
 In 2007, Bristol-Myers Squibb (BMS) paid the United States
$328 million and $187 million to state governments to
resolve allegations related to illegal drug pricing and
marketing activities for its generic division, Apothecon.
 The allegations were that
 (1) BMS and Apothecon set and maintained inflated prices
 (2) BMS paid kickbacks to doctors to induce them to purchase
BMS’s drugs;
 (3) BMS paid kickbacks to wholesalers and retail pharmacies to
induce purchases of generic products;
 (4) BMS promoted Abilify, for uses that were not approved by
the Food and Drug Administration (FDA)
 (5) BMS violated the Medicaid Drug Rebate Act by reporting
false “best prices” to the government which resulted in BMS
underpaying quarterly rebates owed to the Medicaid program.
Amerigroup
 Amerigroup was contracted to provide managed
health care to all eligible low income individuals in
Illinois.
 The corporation was alleged to have avoided enrolling
pregnant women and unhealthy individuals in its
managed care program, thereby cutting its costs and
increasing its profits.
 In 2008, Amerigroup Corporation agreed to pay $225
million to resolve allegations that it defrauded the
Illinois Medicaid system.
Pfizer
 Pfizer pleaded guilty in 2009 to charges of
misbranding several drugs with the intent to mislead
or defraud: Bextra, Geodon, Zyvox, and Lyrica.
 Pfizer promoted the use of these drugs for “off-label”
purposes .
 Pfizer also was charged with paying kickbacks to
health care providers to induce them to prescribe the
drugs.
 Pfizer agreed to pay $2.3 billion to settle the charges
and Pfizer subsidiary Pharmacia & Upjohn will pay a
$1.195 billion criminal fine for similar charges for the
unapproved use of their drug Neurontin.
Sanofi-Aventis
 In 2009, Sanofi-Aventis paid $95 million to settle
charges that it misrepresented drug prices in the
Medicaid Drug Rebate Program.
WellCare Health Plans, Inc.
 WellCare Health Plans agreed to a settlement of $80
million for claims that the firm overcharged the
Florida Medicaid program for behavioral health
services.
 The fraud was perpetrated through the creation of an
intermediary entity that increased service expenses to
equal the amounts paid by insurers for those services
 In 2012, WellCare Health Plans, Inc., agreed to pay
$137.5 million to resolve FCA allegations that WellCare
had falsely inflated claimed expenses in order to avoid
returning money to Medicaid, falsified patient records,
knowingly retained overpayments, and engaged in
marketing abuses by cherry-picking healthy patients.
Amgen Inc.
 In 2012, Amgen Inc. agreed to pay $762 million to
resolve criminal and FCA liability related to the
marketing and promotion of certain drugs.
 Amgen agreed to pay $612 million to resolve civil FCA
allegations that Amgen engaged in off-label promotion
for uses and doses that were not approved by the FDA,
offering kickbacks to healthcare providers, and false
price reporting practices.
Johnson & Johnson
 Paying kickbacks to physicians and pharmacies to
recommend and prescribe Risperdal and Invega
(antipsychotic drugs) as well as Natrecor (used to treat
heart failure) were the allegations.
 In November 2013, Johnson & Johnson agreed to pay
over $2.2 billion to resolve criminal and civil
allegations of promoting three prescription drugs for
off-label uses not approved by the Food and Drug
Administration.
Wyeth
 Wyeth illegally marketed a transplant drug called
Rapamune for uses that had not been approved by the
Food and Drug Administration.
 In 2013, Pfizer, Inc., who owns Wyeth, will pay $257
million to resolve civil allegations that Wyeth engaged
in illegal marketing and will pay another $234 million
of the settlement to cover criminal fines and penalties.
Genzyme Corp.
 In 2013, Genzyme Corp. agreed to pay $22.28 million to
resolve allegations that it marketed and caused false
claims to be submitted to federal and state health care
programs for use of a “slurry” version of its Seprafilm
adhesion barrier.
Rehabcare Group, Inc.
 In 2014, nationwide contract therapy
providers, RehabCare Group, Inc. agreed to
pay $30 million to resolve the claims that
they violated the False Claims Act by
engaging in a kickback scheme related to
the referral of nursing home business.
VA Hospital
 Audit reports released in 2014 indicate that schedulers
falsified records to conceal wait times for veterans to
receive initial primary care appointments.
 The push to falsify the wait times are likely related to
tying bonuses and salary increases to decreased wait
times.