GAO: Smart cards not a viable weapon in battle against healthcare fraud


A blue door with two small holes in it.There’s been a lot of debate in the last few years over the value of smart cards in the war on healthcare fraud. Some have argued that their use would go a long way toward preventing beneficiaries’ IDs from being used to perpetuate fraud in the healthcare system. Others have suggested that their use would not prevent providers from engaging in fraudulent activity, which is how the bulk of healthcare fraud takes place today.

The U.S. Government Accountability Office (GAO) recently released a study that found the use of smart cards to prevent healthcare fraud may have little impact. The GAO reviewed 739 healthcare fraud cases that were resolved in 2010. Of them, it determined that just 165 cases, or 22 percent, could have been affected by the use of smart cards. The reason: Those cases relied on schemes that involved the lack of verification of the beneficiary or provider at the point of care, the remaining 574 cases did not.

These cases included at least one of six schemes that smart cards could have affected:

  • Billing for services that were never actually provided and no legitimate services were provided.
  • Misusing a provider’s identification information to bill fraudulently (such as using a retired provider’s identification information).
  • Misusing a beneficiary’s identification information to bill fraudulently (such as using a deceased beneficiary’s identification information or stealing a beneficiary’s information).
  • Billing more than once for the same service (known as duplicate billing) by altering a small portion of the claim, such as the date, and resubmitting it for payment.
  • Providing services to ineligible individuals.
  • Falsifying a substantial part of the records to indicate that beneficiaries or providers were present at the point of care.

In the majority of cases, the GAO determined that it was the provider who engaged in the fraudulent activity without the need for beneficiary identification. In fact, the most common healthcare fraud schemes were related to fraudulent billing such as billing for services not provided or billing for services that were not medically necessary.

Other common fraudulent activity involved falsifying records to support the scheme, paying kickbacks to participants and fraudulently obtaining controlled substances or misbranding prescription drugs.

In 2010, medical facilities and durable medical equipment suppliers were subject to the most criminal fraud investigations in which participants either were found guilty or pleaded guilty. Hospitals and medical facilities were the most common subjects of civil fraud investigations, the cases that resulted in judgments or settlements.

In an earlier report issued in March 2015, the GAO found that while the use of smart cards might curtail certain types of fraud, such as when providers misuse beneficiary identification information to bill fraudulently, it would have limited effect on other types of fraud. In addition, GAO concluded that the use of smart card technology could introduce new types of fraud and ways for individuals to illegally access beneficiary information. For example, malicious software could be written onto a smart card and used to compromise provider IT systems.

“As we found in our March 2015 report, while the use of smart cards to verify the beneficiary identity at the point of care could reduce certain types of fraud, it would have limited effect on Medicare fraud since CMS policy is to pay claims for Medicare beneficiaries even if they do not have a Medicare identification card at the time of care,†GAO noted.

At this point, the use of smart cards is not likely. Not only would smart card adoption require significant changes, requiring Medicare beneficiaries to present smart cards at the point of care, it is contrary to current CMS policy, the report noted.

If you become the target of a healthcare fraud investigation contact the Health Law Offices of Anthony C. Vitale at 305 358-4500 or email us at info@vitalehealthlaw.com.

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