The Health Care Fraud and Abuse Control Program (HCFAC)

The Health Care Fraud and Abuse Control (HCFAC) Program became effective in 1997. The program was created under HIPAA to identify fraud and abuse in federal programs, such as Medicare and Medicaid, and among private payers. HIPAA legislation established this program and allocated funds from the Medicare Part A Trust Fund to expand fraud and abuse control activities. The program is administered “under the joint direction of the Attorney General and the Department of Health and Human Services (acting through the Office of the Inspector General). The HCFAC program is designed to coordinate federal, state and local law enforcement activities concerning health care fraud and abuse. Monies recovered through fraud investigations must be deposited into the Federal Hospital Insurance Trust Fund, as mandated under HIPAA.”

HIPAA also expanded the definition of fraud to include language indicating that providers can be held liable if they knew or should have known that information on a claim was false. Fraud is defined as an intentional deception or misrepresentation that someone makes, knowing it is false, that could result in an unauthorized payment. The Centers for Medicare and Medicaid Services (CMS) outlines the following as the most common forms of fraud as illustrated in Figure 3-2:

Abuse is defined as actions or practices of health care providers that are inconsistent with accepted sound medical practice, which may result in improper payment. CMS outlines the following as the most common forms of abuse as illustrated in Figure 3-3:

The Incentive Program for Fraud and Abuse

The Incentive Program for Fraud and Abuse, also created under HIPAA, provides incentives to Medicare beneficiaries and others who report fraud and abuse in the Medicare program. Rewards are paid if the information leads directly to the recovery of Medicare funds.

Medicare Integrity Program (MIP)

Creation of the Medicare Integrity Program (MIP) was authorized under HIPAA legislation. The primary objective of the program is to develop and implement systems to safeguard Medicare payments. One function is to identify and investigate suspicious claims throughout Medicare to ensure that the program does not pay claims other insurers should pay. The MIP also ensures that Medicare pays only for covered services that are reasonable and medically necessary.

HIPAA legislation also granted CMS authority to hire contractors to perform fraud-fighting functions. CMS developed a program called Program Safeguard Contractor (PSC) in 1999 to carry out audits, to identify cases of fraud and abuse, conduct medical reviews, and perform other essential program integrity activities that were previously performed by Medicare contractors who processed claims. The transfer of fraud and abuse work from Medicare contractors to PSC was completed in 2006. The Program Safeguard Contractors were replaced by Zone Program Integrity Contractors (ZPIC) and these contractors are established in seven zones as illustrated in Figure 3-4. A contractor may be responsible for more than one zone. For example, the contractor for Zones 2 and 5 is AdvanceMed. CMS partners with other audit contractors such as Recovery Audit Contractors (RAC) and Medicaid Integrity Contractors (MIC). Recovery Audit Contractors (RAC) are audit contractors hired by CMS to carry out Medicare audits to identify and correct underpayments and overpayments, conduct medical reviews, and perform other essential program integrity activities. Medicaid Integrity Contractors (MIC) are audit contractors hired by CMS to carry out Medicaid audits, conduct medical reviews, and perform other essential Medicaid program integrity activities. Audits performed by these contractors can result in demands for repayment, civil and criminal penalties, and exclusion from government programs.