Grand Valley State University ScholarWorks@GVSU Masters Theses Graduate Research and Creative Practice 8-2016 Health Care Fraud Across Time and Delivery Systems: Assessing the Legal Impact of the Affordable Care Act Dana K. Bonnell Grand Valley State University Follow this and additional works at: http://scholarworks.gvsu.edu/theses Part of the Criminology and Criminal Justice Commons Recommended Citation Bonnell, Dana K., "Health Care Fraud Across Time and Delivery Systems: Assessing the Legal Impact of the Affordable Care Act" (2016). Masters Theses. 822. http://scholarworks.gvsu.edu/theses/822 This Thesis is brought to you for free and open access by the Graduate Research and Creative Practice at ScholarWorks@GVSU. It has been accepted for inclusion in Masters Theses by an authorized administrator of ScholarWorks@GVSU. For more information, please contact [email protected]. Health Care Fraud Across Time and Delivery Systems: Assessing the Legal Impact of the Affordable Care Act Dana Kay Bonnell A Thesis Submitted to the Graduate Faculty of GRAND VALLEY STATE UNIVERSITY In Partial Fulfillment of the Requirements For the Degree of Master of Science School of Criminal Justice August 2016 Abstract Health care fraud is a crime that costs the United States billions of dollars each year. Health insurance fraud against government programs such as Medicaid and Medicare make up the majority of false claims. Government health care programs are particularly susceptible to fraud for three reasons: (a) high volume of claims; (b) recipient characteristics; and (c) a favorable ratio of reward to risk. Modes of fraud commission change depending on the health care delivery and payment model in use. In part, the Patient Protection and Affordable Care Act of 2010 sought to dramatically reduce health care fraud. The Affordable Care Act and related documents were analyzed using a qualitative, inductive approach that involved aspects of legal impact study and grounded theory methodology. The principles of Cressey’s Fraud Triangle Theory were applied with the goal of generating new hypothetical understanding about how the law influences pressure, opportunity, and rationalization in terms of the way the legislation was intended as well as its real world application. The Act decreases pressure by awarding grants and providing funding and incentives to institutions and individuals, thus improving their financial stability. In a small number of cases, the Act may increase pressure on specific entities by imposing financial penalties, although the purpose of these sanctions is to coerce compliance with requirements of the law. The Act has the strongest effect on opportunity through increased regulation and oversight, linking payment with quality and outcomes, reporting requirements, use of alternative payment methods, and innovative demonstration projects. The Act addresses rationalization by consistently endorsing a consensus-based, multi-stakeholder approach when it comes to the creation of operating rules and standards. Emphasis is also placed on public reporting of performance data and information related to safety and quality standards. This was found to have a culture changing effect in ways that discourage favorable definitions of trust violation. The 3 study concludes that linking provider payment with performance and outcomes is the optimal way to control costs while safeguarding patient health and deterring fraud, waste, and abuse. Future studies should explore the impact of the Act after it has been fully implemented. 4 Table of Contents Chapter One – Introduction Background of the Problem………………………………….……………………………8 Corporate crime………………………………………….………………………...……...8 Health care fraud and Medicaid……………………….……………………………..…...9 Fraud and managed care……………………………………....…....……………...…….11 Previous Research…………………………………………....….....………………….....12 The Affordable Care Act……………………………...…………......…………..........…13 The Act and Fraud Triangle Theory……………………………..……..……..............…14 The Current Study……………………………………………...………..………….....…17 Chapter Two – Review of Literature Expanding on the Fraud Triangle…………………………………....…………………..18 Pressure…………………………………………………….…………...………………..18 Opportunity………………………………………………………………………………23 Rationalization…………………………………………………………………………...24 Independent businessmen………………………………………………………………..26 Long term violators………………………………………………………………………27 Absconders……………………………………………………………………………….29 Summation of the Fraud Triangle………………………………………………………..31 Inception of Government Health Care Programs………………………………………...33 The Affordable Care Act and Medicaid expansion...........................................................35 Reimbursement and its relationship to care…………………….......................................36 Fee for service versus capitation…………………………………………………………38 Cost control mechanisms of managed care………………………………………………39 The Emergence of Fraud in Medicaid Managed Care…………………………………...41 Effects on patient health………………………………………………………………….44 Medical ethics versus business ethics……………………………………………………47 Fraud among corporate actors……………………………............………………………51 Past issues with fraud control………………………………....………........................…54 Changes in anti-fraud technology………………………………………....................…..57 Anti-Fraud Legislation………………………………………….......................................58 Quality Assurance and Accreditation………………………………........………………60 Changes in Fraud Control due to the Affordable Care Ac......................................……...62 Impact on fraud……………………………………………………………………..........64 Summary of Related Literature…………………………………………………………..66 Chapter Three – Methodology Introduction to the Qualitative Approach………………………………………………..69 5 Legal Impact Research…………………………………………………………………...70 Document Analysis in Grounded Theory………………………………………………..70 Advantages and disadvantages of document analysis................................................…...72 Issues with legal impact studies……………………………........................................….73 Summary of Methodology……………………………………………………………….75 Chapter Four – Findings Decreasing Pressure through Grants, Incentives, and Appropriations…………………..77 Increasing Pressure through Financial Sanctions………………………………………..81 Impact of the Affordable Care Act on Opportunity……………………………………...87 Increased regulation and oversight………………………………………………………87 Linking provider payment with quality and outcomes…………………………………..90 Reporting requirements…………………………………………………………………..93 Insurance plans…………………………………………………………………………...93 Exchanges………………………………………………………………………………..95 Historically fraud-prone sectors………………………………………………………….96 DME and home health care………………………………………………………………96 Skilled nursing facilities…………………………………………………………………96 Hospice…………………………………………………………………………………..97 Alternative payment methods……………………………………………………………97 Accountable Care Organizations………………………………………………………...97 Bundled payments………………………………………………………………………..98 Pay for performance……………………………………………..……………………...100 Patient-Centered Medical Homes……………………………..………………………..101 Demonstration Projects…………………………………………………..……………..103 Medicaid Global Payment System Demonstration Project………..……………………104 Hospital Value-Based Purchasing Program…………………………………..………...105 Large-scale quality improvement efforts…………………………………..…………...106 Increasing Opportunity…………………………………………………………………109 Impact of the Affordable Care Act on Rationalization…………………………………110 Summary of Findings…………………………………………………………………...112 Chapter Five – Discussion Implications……………………………………………………………………………..114 Theoretical implications………………………………………………………………...119 Limitations……………………………………………………………………………...120 Recommendations………………………………………………………………………122 References………………………………………………………………………………………125 6 List of Figures FIGURES ______________________________________________________________________________ Figure 1. Investigations 108 Figure 2. Convictions 108 Figure 3. Provider Exclusions 109 Figure 4. Recoveries in Billions 109 7 Health Care Fraud Across Time and Delivery Systems: Assessing the Legal Impact of the Affordable Care Act Background of the Problem Corporate crime. Corporate crime has been defined as, “offenses committed by corporate officials for their corporation and the offenses of the corporation itself” (Clinard & Yeager, 1980, p. 189). The Federal Bureau of Investigation (FBI) has adopted a more focused definition of corporate criminality; “those illegal acts which are characterized by deceit, concealment, or violation of trust and which are not dependent upon the application or threat of physical force or violence” (Barnett, n.d., p.1). Compared to conventional crime (street crime), corporate crime exacts a much higher financial and social price. According to Clinard and Yeager (1980), the most economically significant crimes are also the least publicized, investigated and punished. Reiman (2007) calculated the cost of conventional crime versus that of corporate crime. Whereas property crime in 2003 cost the U.S. $17 billion, corporate crimes cost $419 billion (Reiman, 2007). In terms of the cost of white collar and corporate crime to society in general, “corporate crime is dysfunctional because it lacks the social opprobrium necessary to foster solidarity” (Brown & Chiang, 1995, p. 33). Corporate crime undermines the social structure by violating public trust which generates cynicism toward the law and destroys the hope of an egalitarian society (Brown & Chiang, 1995). “The corporation acts as a separate entity