Healthcare Fraud and Abuse


HealthcareFraud and Abuse

TheUnited States faces a big challenge of Medicare and Medicaid scamsthat span across the entire healthcare system. In 2012, more than 107health care providers were arrested and charged with fraud, amountingto $452 million (Matthews, 2012). In 2007, the Medicare Fraud StrikeForce visited Miami’s 1,600 businesses randomly, and the resultswere astonishing nearly one-third of the healthcare businesses didnot exist, but the government had billed $237 to them (Matthews,2012). Of the $2.7 trillion budget for healthcare (17% of the totalGDP), the amount lost to fraud is not known, but FBI estimates thatthe health care providers embezzle 3-10% of this amount every year(The Medicare News Group, 2015). Researchers Donald Berwick of CMSand Andrew Hackbarth of the Rand Corporation estimated thathealthcare fraud amounted to $98 billion in 2012, which represented10% of the total Medicare and Medicaid allocations that year (TheEconomist, 2014). Matthews (2012) suggests that the rise in healthcare fraud is because it is seen by fraudsters as a less dangerousyet lucrative activity compared to other traditional forms oforganized crime in the United States.

Matthews(2012) suggests that the United States would save a lot of troublefor taxpayers if aggressive policies and efforts were targeted athealthcare frauds because millions of dollars are lost every yearthrough frauds and abuse in the health care sector. Currently,efforts have been taken to reduce healthcare fraud. FBI probed morethan 2,000 health care fraud cases towards the end of 2013 (TheMedicare News Group, 2015). The Department of Justice and Departmentof Health and Human Services lead these fights against these fraudcases. Between 1980 and 2013, 48,023 cases of healthcare fraud wereopened, and 46,667 of them were closed (Blue Cross Blue Shield ofMichigan, 2015). Compared to the billions lost, this is still a smallamount of recovery. Therefore, efforts need to be intensified toimprove the situation.

  1. How Affects a Healthcare Organization

Accordingto Price and Norris (2009), the ethical concerns of fraud in healthcare systems result in the failure of major corporate organizationsdue to increased cost of providing healthcare benefits. For example,the scandals of WorldCom, Adelphi, and Enron show the seriousness ofthe consequences of fraud in organizations. Healthcare fraud andabuse lead to losses of billions of dollars which could be used byorganizations for various projects such as medicine, emergency roomexpansion, etc. These losses, therefore, lead to stagnation of theorganization because it lacks funds to grow and meet the needs of thepatients who flock into the facility for services every day. Priceand Norris (2009) argue that the diversion of money to fraudulentactivities increases the costs of service provision in the healthcare. Health care providers may go through certain mechanisms torecover the losses through unfairly high pricing strategies thatcause lack of public trust. Fraud losses in healthcare organizationsincrease as Medicare and Medicaid continue to serve the increasingnumber of people seeking affordable medical services, causing morelosses and risks to such organizations.

Asorganizations use deception and concealment to obtain an unfairadvantage, they tend to lose trust from the public (Price and Norris,2009). These result in decreasing public image, and increased chancesof whistle-blowing. When caught, the individuals who engage in fraudwill become a source of problems to their organizations because theorganization will be responsible for the legal tussles that follow.In fact, the organization may end up using more funds and losing morepublic trust in the process of trying to solve cases related totrust. The practice tarnishes the reputation of the organization andthe medical profession. Poor image in healthcare organizations causeslow patient visits because the intention of providing affordablemedical services becomes a challenge rather than a solution to poorpeople.

Theincreasing cases of health care fraud and abuse also lead to poorquality of healthcare services provided by healthcare organizations.Healthcare fraud and abuse may include the provision of wrongdiagnosis to increase the amount paid by the patient’s insurancepackage above the required amount. Fraud also involves interferencewith patients’ health records to make room for deceit without beingnoticed from the health records (Price and Norris, 2009). Thesemanipulations compromise the quality of services provided topatients. In the long run, these poor quality services may cause lowtrust from patients, and patients may seek medical serviceselsewhere.

  1. Examination and Evaluation

  1. Corporate Structure and Governance

Corporategovernance in the healthcare sector ensures that the managers ofhealthcare organizations act ethically and responsibly by taking careof the interests of patients and other stakeholders. The corporatestructure usually consists of a board of directors whoseresponsibility is to provide oversight on the management of thehealth organizations (Jamali et al., 2010). It consists of achairman, vice chairman and board members. The chosen directorsshould be qualified for the position and should be ethically uprightso that they do not perpetuate frauds rather than fighting them.

Dueto the unending cases of health care fraud, corporate structure andgovernance seem to be performing poorly in its mandate. Corporateboards and governance should be able to advise health organizationsconcerning state and federal laws that can help them deal effectivelywith fraud and abuse (Jamali et al., 2010). They should also advisehealth care organizations about how to prevent kickbacks and dealwith individuals who engage in such fraudulent activities. The Boardis required to evaluate the financial performance of the company andensure that the management has disclosed all the required informationabout the use of funds. The board should also provide good incentivesto the managing directors in terms of compensation. The board alsonominates managers with good ethics and qualifications. Corporategovernance boards oversee the operations of hospitals and otherhealthcare organizations (Jamali et al., 2010). They also offeradvice and engage in the decisions making processes of thoseorganizations. The boards ensures that organizations follow therequired laws governing Medicare, Medicaid, and other healthcareservices.

  1. Culture

Corporateculture also plays a significant role in healthcare fraud and abuse.Organizational culture is the set of norms or values that determinethe way of doing things in an organization. The Economist (2014)suggests that the business of healthcare fraud is becoming lucrativeand less risky for corporate thieves. Therefore, the practice ofdeceit and wrongful acquisition of funds from unsuspecting healthinsurance companies and patients has become the norm healthcareorganizations need to change it in order to reduce fraud (Carney,2011). Kickbacks are also common among physicians who are bribed toparticipate in the fraudulence and abuse. If the perpetrators ofthese frauds and abuses in the health sector are not caught, theycontinue doing the practice. The increasing vulnerable and poorpatients who do not understand the prices and services of the healthorganizations increase the difficulties in overcoming this practice.Fraudsters take advantage of this issue and make their fraudulentactivities a norm in the workplace. Therefore, to change thesituation all stakeholders need to change the entire culture ofdeceit and selfishness.

  1. Social Responsibility

Theconcept of social responsibility can be used to examine the ethicalissue of fraud and abuse in the healthcare sector. Corporate socialresponsibility requires corporations to act in the best interest ofstakeholders and the society at large (Price and Norris, 2009).Healthcare organizations are therefore required to act responsibly byusing the funds allocated by the government to perform the activitiesintended for those funds. Instead, a few selfish individuals arepursuing their interests at the expense of those for the poormajority members of the public who were targeted by those funds(Joudaki et al., 2015). Corporate social responsibility can bepracticed through transparency, honesty and accountability to thegeneral public. Without ethical responsibility, healthcareorganizations will lose trust from the public, and their reputationwill become low. As a result, the organization fails in to servepatients from poor backgrounds that have been considered foraffordable services by the government (Price and Norris, 2009).Denying members of the public what is rightfully theirs is unethicaland against the theory of corporate social responsibility.

  1. Resources to be Allocated to Prevent this Situation

  1. Recommendations

Thefirst recommendation to curb this menace is changing the culture ofhealth organizations through sensitization and improvement ofcorporate structures and governance. Board of Governors of varioushealth institutions and organizations need to be sensitized andeducated on the need and approach of ethical responsibility inhandling corporate funds (Moris, 2009). This activity should be doneby government officials from the Department of Health and HumanServices and the Department of Justice in collaboration with FBI,healthcare organizations, non-governmental agencies, and the localcommunities.

Thesecond recommendation is to provide effective mechanisms forwhistle-blowing and reporting so that the public can report commonsigns of malpractice (Moris, 2009). Government agencies should alsosensitize the public about their rights regarding affordablehealthcare and the services they should demand (Thornton et al.,2015). Good feedback mechanisms should be provided for the public togive their opinions regarding the services they are receiving andtheir expectations.

  1. Ethical issues tied to the decision of those resources

Ethicalresponsibility in the healthcare sector depends on the effectivenessof corporate structure and governance. One of the roles of corporategovernance in the health sector is to ensure transparency andaccountability in the utilization of resources within healthcareorganizations. The board of directors shows a duty of care by workingwith the management to overcome the problem of healthcare fraud andabuse. In this regard, the board of directors has an ethicalresponsibility to protect the welfare of patients and become thecustodians of the resources intended for the poor. Ethical issuesalso affect feedback/reporting and whistle blowing in the health caresector. Whistleblowers may be threatened and silenced by beingbribed. Kickbacks are also offered for physicians to win theircollaboration in healthcare fraud and abuse.

  1. Conclusion

Itis clear that healthcare fraud and abuse is becoming a seriousproblem in the healthcare sector. The healthcare sector is losingbillions of money every year through frauds. These losses causefinancial problems in the healthcare sector and ruin the reputationof healthcare organizations. The sector has also become an attractiveenvironment for thieves who develop a culture of deceit andmanipulations to commit fraud. Corporate governance that is supposedto oversee and advise managers to ensure transparency andaccountability end up being compromised. The two recommendationsoffered to solve this issue are: sensitizing the board to change theculture of healthcare organizations, and encouraging effectivereporting/feedback and whistle-blowing, and sensitizing the publicabout their health care rights.


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