Medicare fraud and lack of transparency are threatening long-term care prospects for seniors in America.

The history of nursing homes in the United States dates back to the late 19th century. At that time, elderly individuals were cared for in their homes by family members, but as families began to move away from each other and urbanization increased, the need for alternative forms of care grew.

In the late 1800s and early 1900s, almshouses and poorhouses were the primary forms of institutional care for the elderly and people with disabilities. These facilities were often overcrowded, underfunded, and had extremely poor living conditions. In response, the first nursing homes in the modern sense were opened in cities like Baltimore, Maryland, Charleston, Massachusetts, and Nashville, Tennessee.

Other establishments soon followed, including the “Brooklyn Society for the Relief of Respectable Aged and Indigent Females” in New York City.

Over the next several decades, the nursing home industry continued to grow and evolve. In the mid-20th century, the introduction of Medicare and Medicaid programs helped improve the funding and regulation of nursing homes. During this time, many facilities shifted from being hospital-based to freestanding, community-based facilities.

But along with the benefits of additional funding and regulation, Medicaid and Medicare brought new challenges to the industry.

“The Bank Without a Lock”

The phrase “the bank without a lock” is often used to describe Medicare because it is a government-funded program that pays out large amounts of money for medical services, making it an attractive and vulnerable target for fraud.

Fraudsters see Medicare as a “bank without a lock” because they believe that they can exploit the system with relative ease, without the risk of being caught. Unscrupulous organizations and individuals engage in activities such as billing for services that were not provided, overcharging for services, or falsifying patient information to receive payment for services that are not covered.

These types of fraud can result in significant financial losses for the government and taxpayers, and can also compromise the quality of care received by patients since the fraud is often facilitated through nursing homes and other long-term medical care providers.

While the majority of U.S. nursing homes are dedicated to providing high-quality care to their residents, medicare fraud can have serious consequences for patients who may receive lower-quality care or be exposed to unnecessary risks as a result.

The exact amount lost to Medicare fraud each year is difficult to determine, as many fraudulent activities go undetected. However, the U.S. Department of Health and Human Services (HHS) estimates that the government loses billions of dollars each year to the nefarious practice.

According to the HHS, the government has recovered over $4 billion in fraudulent Medicare payments through its Fraud Prevention System (FPS) since its inception in 2011. In 2020, the Department of Justice announced that it had recovered over $2.2 billion in false claims submitted to Medicare and Medicaid programs.

How widespread is the problem?

In the late 1990s, Columbia/HCA, one of the largest for-profit hospital chains in the country, was found to have engaged in widespread Medicare fraud. The company was accused of overbilling Medicare by inflating the cost of patient care, double-billing for certain services, and billing for unnecessary procedures. Columbia/HCA eventually settled the case for $1.7 billion, the largest settlement in a healthcare fraud case at the time.

In 2003, HealthSouth, a large rehabilitation and healthcare company, was found to have engaged in a massive accounting fraud scheme that involved inflating the company’s earnings to meet Wall Street expectations. The company was also accused of overbilling Medicare for rehabilitation services that were not provided. Several top executives were convicted and sent to prison, and the company agreed to pay a $100 million fine.

In 2021, Opiant Pharmaceuticals agreed to pay $5.5 million to settle a lawsuit alleging that the company paid illegal kickbacks to nursing homes and hospitals in exchange for using its products. The lawsuit claimed that the kickbacks caused the submission of false claims to Medicare and Medicaid for reimbursement.

The problem continues today. In some ways, it appears to be worsening.

A New Jersey man and company operating nursing homes and assisted living facilities in Wisconsin was charged in a major case of health care fraud on February 2, 2023. The alleged scheme, which operated from 2015 through 2018, included 33 facilities.

These cases — and many more like them — demonstrate the urgent need for ongoing efforts to prevent and detect fraudulent activities.

Activists working to address this issue, including long-time pharmacist Linda Witzal, have been raising the alarm in recent years about the rise in medicare fraud cases stemming from nursing homes and care facilities.

“Our Seniors are still in Danger,” wrote Witzal for Medium on January 2, warning, “The system that we have empowered to take care of our most vulnerable populations is in need of a total overhaul.”

“We can no longer allow bad operators to take advantage of our seniors,” argues Witzal, her voice joining a growing chorus of alarm across the industry.

“Transparency,” she answers succinctly when asked how the industry got into this mess; and how to fix it.

“Ownership of nursing homes is not transparent to the public,” Witzal points out. “Have you ever tried to find out who the owner of the nursing home is? Check the Data Registry lately? You will find many layers, shell companies, and it will take you hours as you sift through the ownership maze.”

“Do you know who owns the pharmacy that provides medications to the nursing homes?” Witzal asks. “Is there common ownership? Could that be a conflict? Is the nursing home for-profit or non-profit?”

Overall, the history of nursing homes in the United States reflects a growing recognition of the need for specialized care for the elderly and a continuous effort to improve the quality and accessibility of this care.

In recent decades, nursing homes have come under criticism for issues such as neglect, abuse, and lack of quality care. In response, the government has implemented stricter regulations and increased funding for nursing homes, and there has been a push for alternative forms of care such as assisted living facilities and in-home care.

The push for transparency, however, seems to have just begun.

(contributing writer, Brooke Bell)