controlling nursing home fraud - addisonlibrary.org

M A N A G E M E N T

c p a c o n s u l t a n t

Controlling Nursing Home FraudBy Gerald H. Lander, Alan Reinstein, and Jeannine A. Busch

C PAs auditing nursing homes aiid hospices should be awareof the potential for fraud in the industry. Nursing home fraudadversely affects those paying fur such care, hoth as care-givers and as taxpayers through suppwrt of Medicare and

Medicaid. which constitute a large percentage of the country'sgross domestic product. According to the Center for Medicareand Medicaid Services, healthcare spending constituted W7c ofU.S. GDP in 2{X)fi and is expected lo grow to 19.6% of GDP by2016. reaching over $4.1 trillion.

In a 2(X)6 paper ("Whistle Blowers: False Claims Act"), JanieGaitlner estimates that almost 10% percent of the U.S. annual bud-

get is paid to companies or persons who are defrauding the gov-ernment, of which a large part is due to Medicare :uid Medicaidfraud. A 2004 Oftke of the Inspector General of the Suite of Roridaaudit, for example, found not just individual misdeeds but "that theState permitted improper Medicaid payments for new admissionstotaling $176.853 ($99.957 Federal share) lo sanctioned nursinghomes." Recognized as seriously acute over a decade ago. theiraud problem has occasioned recommendations as severe as doingaway with nursing home can; entirely to avoid the misspending of$50 billion in government funds (Peter Uhlenherg, "Replacing theNursing Home," Public Interest. Summer 1997).

60 OCTOBER 2008 / THE CPA JOURNAL

This article surveys the current state ofnursing home fraud and suggests ways thatCPAs can help conlrol this abuse.

Medicare and MedicaidMedicare provides health insurance to

people aged 65 or older, those entitled toSiicial Security disabilii>' payments for morethan iwo years, and those with end-stagerenal disease. ix:gardless of income. Medicaidcovers nursing hume care and pays forskilled, intermediate, and long-tenn care torlow-income individuals. States have theirown Medicaid plans, receiving pmspective.tiai-mte. mid cosl-based payments, some oíwhich involve ceilings, case-mix adjust-ments, and efficiency incentives. Accordinglu the U.S. Office of the Inspector General.Medicare served 43 million beneficiîuies ata cost of S337 hillion in fiscal year 2(X)6.while Medicaid served 47 million people.costing the states $137 billion and the fed-eral govemment $180 billion.

Nursing homes requesting Medicaidreimbursement mus! detail their revenuesand expenses in cost reports that are subjectto state audit. For example, in Michigan,they must complete Medical ServicesAdministration Medicaid Program Form1579, which contains around I,(XX) differ-ent lines. Stale auditors usually focus on 1(X)to 150 major expense categories. Nursinghomes receive the highest reimbursenienisfor base costs (e.g.. nursing supplies, nurs-ing wages, and food), the next highest forsupport costs (e.g., maintenance supplies andadministrative salaries), and lowest for plantcosts (e.g.. reimbursable leasing costs andproperty taxes). Some suites, however, reim-burse interest expenses based upon fonnu-las that consider the nursing home's aver-age bt>nxiwings.

Reimbursement of certain capital costsare based on the annual depreciationreponed. Nursing homes should capital-isme large expenses (e.g.. exceeding$5,000), which usually affect majorrepairs, maintenance, or equipment.Moreover, unlike plant costs (whieh haveno preset limits), base/support costs oftenhave a built-in profit factor (up to presetlimits). Incorrect reporting of capital costscould result in a nursing home beingimproperly reimbursed on an accelerat-ed basis. Auditors should test capitalexpenditures to assure compliance.

State auditors kxik for correct expense

classification categories and for unallow-able expenses, such as late fees, penalties,and certain types of pharmacy and den-tistry, and compare filings on their taxreturns and accrued general ledgeramounts. They usually base fuilher inves-tigations on amounts of expense claimedand compaiisons lo the prior years. Theyalso compare vendor invoices to amountsclaimed, perfomi their own bank recon-ciliations, iuid compule interest.

Medicare and Medicaid revenues ariseprimarily from census data of patientsreceiving appawed medical services (at cur-rent rates). Thus, fintuicial fraud often entailsnurses or other caregivers falsely certifyingthat tlie patient was actually in the nursinghome or received unapproved ti-eatment. ;indthe administrative staff falsely attesting lothe appR>prialeness of the chiuges hilled andreconciling such charges to the financialstatements. Coding documentation drivesboth revenues and expenses, and state andfederal autlitors. plus oulside CPAs, reviewthese scores, often focusing on consisten-cy, including testijig to see if the facility hasadequate nurses on staff to handle the doc-umented treatments. CPAs who performnursing home audits should consider usingthe services of a .specialist (such as clinicalstaff) for reimbursement issues.

Medicaii: payments evolved Imm patientcost reimbursements to predetennined feeschaiules. Tlie Balanced Budget Act oï 1997required that most of the services then paidon a cost reimbursement methtxiology even-tually convert to a fee schedule. WhileMedicare payments are genenilly bused part-ly on providers' costs and partly on theprospecti\'ely est^lished fees, the mies dií-fer for nursing homes. Nursing homes stillprepare Medieare cost reports, but receiveMedicare A reimbursement based on clini-cal acuity compared to a 53-calegory list(resource utiliziition group, or RUG score)—i-athei- ihan tlieir incurred costs for taking careof specific patients. Moreover. Medicaidreimbursements are generally cost-reim-bui^ed. Medicare auditors should thus exam-ine of the facilities" paxedures to identifyreimbursable costs and report them appro-priately on filed cost reports.

Internal Controls andExamples of Fraud

Since most owners usually own only afew nursing homes and many are not-for-

profit organizations with financial con-straints and a small ailministrative staff,iniuiy homes have intemal controls that areweak or nonexistent. Thus. CPAs oftencannot rely on such intemal controls in per-ibnning iheir audits, despite authoritativeaudit standards that require tliis assessment.Independent auditors generally performincreased testing of a nursing home'sdetailed records, as well as summiirizingand disclosing such intemal control weak-nesses in Iheir management letters.

Much Medieaid fraud involves admin-istrators paying personal expenses, suchas billing Medicaid lor luniishing a vaca-tion home's chairs and tables. Anotherexample of fraud is not reporting rev-enues to the 1RS for patients who stay foronly a few days bul request Medicaidreimbursement. Nursing homes also canwrite (but not mail) checks; fraud canoccur when, after the auditors match thechecks lo invoices, the nursing homevoids the check, returns ihe supplies, andbills Medicaid for the expenses. Otherexamples oí fraud include billing ficti-tious patients, administrators overcharg-ing services and splitting the proceedswith the vendors, "accidental mistakes"made on cost repor ts , and bil l ingMedicaid for working hours spent on aside business, "Gang visits" are a type offraud ihai occurs in nursing homeswhen doctors or other hcallhciire practi-tioners bill for services for all or nearlyall residents, when the physician reallydid not provide services to all residentsand would have been logistically inca-pable of doing so.

Despite the fact thai violators face fraudpenalties of l()()'7r from Medicaid aswell as criminal penalties, fraud persists.More thiui 3(),(XX) Medic;ire providers inseven states failed to report over $1 bil-lion in federal taxes in 2006 (RichardWolf, "Probe Uncovers 3(),(XX) MedicaidProviders Cheating 1RS." USA Today,November 14, 20()7). Writing in FraudMüíiazine. Richard Carozza stressedthat, if conservative indusir>' estimates of3% to 5% losses from outright fraud areaccurate, annual losses could rangeabout $51 billion to $85 billion—butthat some govemment estimates put fraudloss at over 10% ("Health-Care FraudDrains Lileblood from Patients, System."March/April 2006).

OCTOBER 2008 / THE CPA JOURNAL 61

SuppliesFraudsters often focus on false reim-

bursements fur nursing home supplies,because they come IVom outside partiessubject to limited government oversight.They employ techniques such as billing torunnecded supplies, double billing, upccid-ing. "lick and stick" relabeling schemes,billing for phantom supplies, billing forbnuid-name supplies, billing for unlicensedor uniipproved dings. ;ind misrepresentingthe value of imponed goods—all of whichare detailed below.

Fraudster suppliers bill Medicare directlyfor prepackaged supply kits rather thanthrough the nursing home for a specificpatient, allowing them to ship, bill, and col-lect for unnecessary kits. Some sell nursinghomes whole supply kits rather th;ui the spe-cilic items in the kits tliat the patieni nxjuiies.

Suppliers and nursing humes can upcodebills for more expensive (e.g.. brand-name)items rather than the less expensive itemsthat were actually delivered (e.g.. genericequivalents). A "lick and stick" fraudentails lying about prescription drugs"true wholesale price.

Double billing arises when fraudsterscharge the government twice for the samegoods or .services, as iti the notable casein which New York State agreed to pay upto $11 million to settle a class-action law-suit alleging that thousands of poor, dis-abled, and elderly nursing home residentswere cheated out of millions ol" dollars inthe laie I98(}s {"New York Settles Lawsuitin Nursing Home Fraud Case." BuffaloNews, November 17. 2006). The lawsuitclaimed thai the state mishandled Medicaidand Medicare funds and wrongfully col-lected insurance co-payments from morethan 13.000 nursing home patients.Allegedly, the state knowingly authorizednursing homes to double-bill insurancecompanies for the same services, such asbilling medical expenses to Medicaid thatwere already covered by Medicare, andreceived kickbacks ftxjm the nursing homesfor allowing them to double-bill.

Some fraud viclims are unknowinglybilled for unlicensed or unapproved drugsor are kept unaware of known productdefects in order for the nursing homes tobe able to continue to sell or hill the gov-ernment for the products (The F;ilse ClaimsAct Legal Center. "What Is the False ClaimAct and Why Is It Important'.'" 2006).

Fraudsters will also misrepresent the valueof imported gaxls or their country of ori-gin for tariff purposes, or undervalue goodsfrom other countries in order to minimizethe import tax.

HospicesHospices and mental health services can

also commit or be party to Iraud, for exam-ple, when doctors provide nnneeded med-ical services or bill unpertbrmed .servicesto nursing homes, hospices, and mentalhealth centers. A U.S. Department ofHealth and Human Services review ofmental health services provided to nurs-ing home residents found that Medicarepaid unnecessary expenses for 32% of suchservices (G. F. Grob. April 16. 1997. tes-timony on fraud, waste, and abuse in nurs-ing homes). For example, a Pittsburghnursing home administrator was foundguilty of altering records to cover upinadequate patient care, defraudingMedicitre and Medicaid out of over $7 mil-lion from 1999 to 2003 ("Former NursingHome Administrator Convicted of Fraud."Philly Biirbs. August 24. 2005).

Improper interrelationships between hos-pice services and tiußing homes can encour-age illegal practices. TTie U.S. Departmentof Health and Human Services found thatup to "one in five hospice patients who livein nursing homes may be erroneouslyenrolled." Fraud investigators have foundthat hospices provide m;iny services to nurs-ing liome patients Ihai iire available to themat the nursing home, thus imposing extraMedicare and Medicaid charges.

The hospice situation is especiallycomplex for tenninaily ill nursing homepatients, who often receive both Medicareand Medicaid reimbursements. Focusingon pain control, symptom management.and patient and family counseling,Medicuid programs pay 95% of the dailynursing home rate to the hospice, andMedican; pays the hospice the same dailyrate it pays for at-home patients ("NursingFacility Fraud and Abuse," ArkansasSenior Medicare/Medicaid Patrol TrainingMaterials, 2006). This complicated finan-cial situation provides incentives for fraud.In order to elect the hospice benefit, aMedicare beneficiary must be entitled toMedicare Part A services and be certifiedas terminally ill, that is, have a medicalprognosis of a less-than-six-months' life

expectancy, if the illness "runs its normalcourse" ("Fraud and Abuse in NursingHome Arrangements with Hospices,"Oftice of Inspector General. Speciiil FraudAlert. March 1998). Medicare will thencontinue lo pay for nonhosplce care fromthe patieni's physician and for nontermi-nal related illness treatment.

Fraud can arise when a hospice worksdirectly with a nursing home. Hospicesreceive identical per diem rates whether theytlinction at the patient's home or in the nurs-ing home, regardless oi" the amount of ser-vice pRjvided. A Medicare hospice patientin a nursing home who is al.so eligible forMedicaid would thus receive at least 95%of the daily home nursing rate, but the hos-pice is then responsible lor paying the nurs-ing home for tlie patient's RX)m and board.

Nursing homes employing hospicesreceive more money for providing fewer ser-vices to more patieiu.s. Thai is, the hospicereceives a tlat fee per patient for each daythe patient is enrolled in its hospice program,regardless of the number of services or med-ici^ioiis provided. The financial payment sys-tem rewards hospices for increasing theirnumber of patients, which can lead todecreased quality of patient care. Hospicecaregiver^ working in a nursing home canvisit more patients than those taking care ofpatients at their own homes, creating incen-tives for hospice care in nursing homes. Thehospice provider can thus see more patientsand make more money while tlie niirsingliome giiins t"unds by keeping those patientsat its facilities, having Medicaid pay foralmost all of that patient's room and board,sometimes even receiving kickbacks fromthe hospices.

Kickbackslt is possible for nursing homes to evade

accusations of fraud while colluding with ahospice. Nui-sing homes often state that theywiint to work with only one or two hos-pices because they want to monitor thehospice's qualifications and safety record.Nupiing home operators can then cooixiinatecare and maintain control ol the premises.But some nursing home operators or hos-pices may wrongfully offer kickbacks toinfluence the selection of LI hospice.

The antikickback stamte, section 1128B(b)of tlie Social Security Act. pnjhibiLs know-ingly and willfully soliciting, receiving, olîer-ing, or paying anything of value to induce


retèrrdJs of iteras OT services from a tederallieiillhcare pmgrain. Nursing home hospicessometimes receive kickbacks in the form oïa patient's room and boiuxi, as when they getil patient's Medicaid paynients thai shouldtJieii be paid to (he nui\ing home to coverthose charges. Kickbacks occur when the lios-pice overpays the nursing home for thepatient's room and hoard bill, which, inluni. provides an incentive to the nursinghome to assign more ol' their patients to thatpaiiicular hospice in order to receive extramoney (S. Wicke. "'Nursing Home FacilitiesMust Make Clear Distinction BetweenDiseoiuits and Kickbacks.'' Journal of HealthCare Compliance. May/June 2(K)3).

Other kiekbacks involve offering dis-counted or free services to nursing homepatients to induce the nursing home to referits residents to that hospice. Hospices canpay nursing homes for additional Medicare-covered services in their room-and-boardcosts, providing the nursing home extrafunds for no additional services. Hospicessometimes refer their patients to the nurs-ing home in hopes that it will refer theirresidents to the hospice, a practice ihat vio-lates the antikickback statute.

Mental Health ServicesFraud often occurs in nursing

home-provided mental health services.U.S. law requires nui'sing home residentsto have a mental health evaluation, but doesnot require testing for physical illnesses.nutritional deficiencies, or other causes ofdistress. An Inspector General study test-ing the adequacy of mental health ser-vices provided by nursing homes con-eluded that "32 percent of the services paidfor by Medicare were unnecessary, i.e., $17million or 24 percent of all 1993 Medicarepayments" (Groh 1997).

Regulatory MeasuresCPAs should be knowledgeable of the

many federal and state regulations gov-erning Medicare and Medicaid reim-bursement involving nursing homes. Forexample, combining federal regulationswith the Ohio Administrative Codereveals that reimbursable costs are nec-essary and proper to deliver patient care.Facilities treating patients both in a certi-fied hospital and in a noncertified facili-ty attached to the hospital (e.g., for theirphysicians' outpatients) receive no reim-

bursable costs related to the physicians'patients. Nonallowahle costs should betreated as either 1) reduction in theprovider's total costs for the direct costsof nonallowable activities: or 2) step-downallocation for those nonallowable activi-ties that would typically be expected toabsorb allocated overhead or other costs.such as hospital space leased to others.

Medicare considers the following to benonallowahle costs: patient telephones, tele-visions, and radios; drug and medicalsupplies sold to nonpatients: physicianrecruitment; community service-offered[patient cdtication or general heidth aw;ue-ness programs; country club memberships:interest expense on Medicare overpay-ments, fines and. penalties; fines and penal-ties resulting from violations of federal,state, or kx:al laws; entertainment, includ-ing tickets to sporting and other entertain-ment events; bad dcht expense, except spe-cific bad debt expense related to Medicarebeneficiaries; depreciation on nonpatientcare a.ssets; and goodwill expense.

CPAs and govemment auditors shouldalso use helpful an;ilytical ttxils to compareclient data for current and prior years andlook for items such as changes in lengths ofstay, gross/net revenue per inpatient day ordischarge, proportion of inpatient iind out-patient revenue, gross/net revenue and vis-its per physician, gross/net reventie per nurs-ing home resident, price per unit {equipment,supplies) or gross margins. ;ind fees paidto third-p^uty billing compmiies. Besides tra-ditional audits, many nursing homes engageCPAs to use agreed-upon prtx:edures to tesicompliance with appropriate guidelines.

Focus on Areas of RiskThe Office of the Inspector General,

Carozza, and others have called the fol-lowing items the major risk areas forMedicare/Medicaid fraud:• Billings for excessive or duplicatedosages of prescription dnigs for Medicare:• Disenrollnient of deceased beneficiaries;• Unallowable payments to terminatedMedicare providers/suppliers;• Medicaid payments for ineligible man-aged-care members;• Appropriateness of payments for phys-ical and occupational therapy services;• Medicare/Medicaid credit balances;• Upcoding—chai^ng for a more expen-sive service, such as a visit to a specialist

when the patient actually saw a nurse oran intem;• Doctor shopping—bouncing fami onedoctor to ¡mother to obtain multiple pre-scriptions for controlled substances;• Unbundling—breaking down a multi-step prticedure or service into a series ofseparate or distinct services to increasethe total amount of reimbursement;• Other duplicate billings or impriiperlyusing time-basetl cixles; and• Providing unnecessary care, such astests, surgeries, luid other jiriKedures.

Examples of Testing a Nursing Home'sIntemal Controls

Similar to other audits, nursing homeengagements require CPAs to associateaudit pr(K-edurcs with the assessment ofinternal controls. Stich a procedure couldinclude tiie folluwing steps:

Ensuie that revenue and receivables arecorrectly recorded in amount, account, andperiod based on conti"actual arrangementswith respective payer sources. An intemalcontrol feature might compare peritxlical-ly ircorded amounts of revenue and receiv-ables to the original contract, or embed-ding the contract tenns in client softwarethat calculates all billing information basedon services rendered. Computer applica-tion controls shouid preclude the manipu-lation of accounting data and be testableby the IT auditor. Before auditors canrely on application controls, identify,review, and test the reliance of general con-trols over the IT environment.

Management should review monthlydays sales outstanding (DSO) and variancesin excess of certain number of days.

Record allow;mces fordoiibtftil accountsusing established criteria and assumptionsfor the monthly review of management,incliiding a review of the adequacy ofprior-period allowances.

Check correct rec(xling of amounts, clas-sifications, and periods of payroll costs(e.g.. the payroll supervisor compares pay-roll per employee to individual time Ciirdsthe employees file and sees if the correcthourly rate helps compute payroll).Computer application contnils usually pre-serve the accuracy and reliability of infor-mation used to calculate payroll. IT audi-tors eould audit the presence and effec-tiveness of any controls, but would wantto test the existence, nature, and reliahili-


ty of the general controls over the ITenvironmeni.

When potential liirge risks exist, com-pare l«g reports that therapists submit peri-odically to Medicare billings to ensureproper documentary support tor Medicarebillings (e.g.. the doctor's recommendedtherapy compared to the therapy actuallyprovided). To strengthen intemal controls.some facilities review or ask a third partyto review resident files to continu thai thedocumentation, therapy, and other factorssupptirt the RUG scores.

To test for overtllling (e.g.. a therapistreporting the administering of more thera-py than could be achieved in a hospital inan eight-hour shift), review the number ofpatients treated during the time peritxl thetherapist was present at the healthcare facil-ity to determine the reasonableness andlikeiihotxj that the therapy claimed to havebeen provided could have heen pmvided.Interviewing patients can help to detemiinethe therapy frequency, nature, iind success.within limits: many nursing home residentssuffer from dementia or other similar dis-eases, or do not know what ser\'ices theirRUG scores dictate.

Review cost reports submitted toMedicare at year-end to detennine that theyarc accurate and reliable, and that privatepayee costs were not inappropriately placedon Medicare cost reports. A CPA couldanalyze the sum of pmvided monthly ther-apy minutes in a specific cost category withthe number of patients receiving such treat-ments and the number of available staffto handle such treatments. For instance, afacility holding in patients who can receiveup to 40 minutes per day of massagesshould have at most 12.(HX) minutes (200hours) per month of reimbursable costs.Obviously, reimbursement reque.sts for AWhours per month would require furtherexplanation—especially if the facilityemploys only one physical therapist.

CPAs should note that comparisons toMedicLire RUG scores usually help to jus-tify whether the nursing homes providedadequate therapy to justify the selectedRUG category rather than whether thecosts are allov/able.

Other Methods to DetectNursing Home Fraud

Carozza notes that many insurers use sys-tem edits and other "add-on" computer logic

to easuœ that claims are paid comsctly andto detect many Ihiudulent claims, focusingon anomalies and pattems of billing thatfall outside expected norms. They also worktogether to share infomialion and einergingtechnologies to cnntrol Iraud.

In February 2006. President Bush signedinto law the Deficit Reduction Act of 2(X)5.which provided 10% point increases in theshares of Medicaid recoveries to states thatestablish false claims acts. The law alsoadded "whistleblower" incentives and pro-tections to those reporting Medicaidfraud. For example. Ciena HealthcareManagement. Inc.. of Southfield. Mich.,will pay about $1.25 million to settle a civillawsuit alleging it improperly billedMedicaid and Medicare for inadequate c;ireat four of its 30 managed nursing homes(Paul Egan. "Nursing Home CompanySettles Suit Alleging Improper Care,"Detroit News, August 20. 2{X)7).

The former acting director of one ofCiena's facilities will also receive about$174,000 from this settlement plus legalfees for bringing a whistleblower lawsuitthat uncovered the problem. Federal lawgrants private citizens who report fraud infederal programs 15% to 25% of theamount the govemment recovers.

Auditors' Role in MinimizingMedicare Fraud

Many of the newer auditing standardsaddress the steps that auditors must takeregiirding the heightened sensitivity to fraud.Professionals should design and perfonntheir procedures accordingly. For example.Statement on Auditing Standai-ds (SAS) 99and the recent risk assessment audit stan-dards, such as SASs 109 and 110. containmany useful suggestions for minimizingpotential nursing home and other types offraud, including an assessment of the facil-ities' integrity and the "tone at the top."

Some specific risk areas include:• the facility over-using incentive-basedcompensation:• financial relationships with potentialreferral sources;• unusual staff turnover;• duplicate services covered by outsidegriUlts; and• due diligence on prior issues, acquisitions,and joint ventures (Deloitte, "Medicare andMedicaid Billing Compliance: ManagingYour Risk." webcast, October 17. 2007).

Auditing for Medicare fraud generallyparallels other types of audits. For exam-ple, practitioners can analytically ascer-tain the reasonableness of the number ofMedicare patients that a physical therapistcan treat in one day. and ascertain if thehospital misallocates too many generaloperating costs to Medicare. To take advan-tage of Medicare reimbursement ptilicies.fraudsters can allocate many commonMedicare/non-Medicare costs to Medicare-reimbursable categories. For example, anursing home could allocate as much of adiagnostic machine as possible as reim-bursable Medicare costs. Similarly, it couldeven allocate such common costs as officefurniture and other general and adminis-trative costs to Medicare, thereby defraud-ing taxpayers into subsidizing the entity'soperations. In addition, fraudsters oftenmanipulate reimbursable costs, for exam-ple, attesting that one physical therapistsees 25 Medicare patients per day. whenphysical therapist assistants or otheruntrained persons actually treat thesepatients (or. worse, no one actually helpsthem). As a further test. CPAs couldrequest conespondence from the state audi-tor related to a nursing home's audits andreview the adjustments that these auditorsrequested.

Iowa State Auditor David A. Vaudtand his staff have developed some excel-lent procedures that practitioners ciin adoptin auditing hospitals, including Medicarereimbursements (www.auditor.iowa.gov/practice_aids/PrgHospital()8.pdf). This auditprogram includes such areas as auditplanning, review of internal control, ana-lytical procedures, and audii and account-ing problems. Some specific audit proce-dures dealing with Medicare includereviewing the validity and assumptions ofthird-party reimbursement I'epoits (includ-ing the effect of Medicare Peer ReviewOrganization program), payment denials.and their effect on the current year's finan-cial statements.

Practitioners can also apply the provi-sions of the AICPA"s Statement of Position(SOP) 99-1 to help hospitals and other health-care entities evaltiate their compliance withcorporate integrity agreements with tlie U.S.Department of He;üth ;ind Humiui ServicesOffice of the Inspector Genenil; SOP 99-1could also be useflil in evaluating a volun-tary compliance program. SOP 99-1 dLsoLsses


how to conduct and report on the findingsof an agrccd-upon pixxredures engagement inaccordiince with the AICPA Statements onStiuidiuds tor Attestation Engagements, inlight of particular client agreements. Forexample. CPAs should use SOP 99-1 todesign procedures that will ascertain whetherthe hospital properiy allocates common coststo their Medicare and non- Medicare convponent.s. They should als(.i recognize SASl()9"s warning that detected misstatementsare often not isolated occurrences, and SASI lO's requirements to respond appropriatelyto signiliciint mutters.

In 1995. the Clinton administrationlaunched Operation Restore Trust toaddress healthcare fraud. This antifraiid andantiabuse initiative began in five states, ¡mdstxm recovered nearly $190 million fromfraudulent healthcare schemes (MichaelSiegel. "Compliance Restores Trust."Nursing Homes. April 1. 1998). Nursinghomes had to enforce a compliance pro-gram that was "reasonably designed, imple-

mented and enforced so that it generallywill be effective in preventing and detect-ing criminal conduct." Effective plansunder Operation Restore Trust included;compliiuicc standards and procedures, over-sight responsibilities, delegation ofauthority, employee training, monitoringand auditing, enforcement and discipline,and response and prevention.

A Public TrustDifferences do exist between CPA audi-

tors looking for. identifying, and detectingpotential ñnancial statement fraud and doingthe same with regard to Medicare andMedicaid. The CPA's major ULsk in the lat-ter case is not to detect fraud, but. given thepiumincncc of these government progi-anisand the incidence ol" fraud in their adminis-tration, Üie public will expect special dili-gence from CPAs auditing Medicare- iindMedicaid-related documents. America'saging population will surely place addition-al pttssure on nursing homes and ancillary

facilities to contR>l their costs properly andlavyfully. CPAs Ciin play a key mle in help-ing nursing home mid hospice clients to nian-age the healtli of older Americans as wellas in impm\ ing the public trust in such insti-tutions and their ftinding. Q

Gerald H. Lander, DBA, CPA, CCEA,CFE, is the Gre^^ory. Sharer, und StuartTerm Professor in Forensic Accountingat the college of business at the

of South Florida. St.Alan Reinstein, DBA,

CPA, is the George R. HusbandProfessor of Accounting at the school ofbusiness admiiüstrution at Wayne StateUiiivcrsitw Detroit. Mich. Jeannine A.Busch i.\ an MBA ^taduate student at thecollege of business. University of SouthFlorida. St. Petersburg. The authorsappreciate the useful comments fromBruce Cole (Virclunv Krau.se) and RobertUmg {Plante & Moran).

Public Schools Accounting\uditinand inference

Wednesday, November 19, 2008Albany Marriott169 Wolf RoadAlbany. NY 12205

Conference Code: 25152941Member Fee: $300Nonmember Fee: $400Recommended CPE Credit: 8 hoursField of Study: 3 hours Accounting; 4 hours Auditing; 1 hour Ethics

Thursday, December 4,FAE Conference Center3 Park Avenue, at 34tb Street. 19tb FloorNewYork.NYIQQIG

Conference Code: 25152911Member Fee: $300Nonmember Fee: $400Recommended CPE Credit: 8 hoursFieltl of Study; 3 hours Accounting: 4 hours Auditing: 1 hour Ethics

I

To register or for more information, please visit www.nysscpa.org, or call 800-537-3635.


controlling nursing home fraud - addisonlibrary.org

Documents