You are a forensic accountant hired to investigate a case of suspected billing fraud in a healthcare
Question:
You are a forensic accountant hired to investigate a case of suspected billing fraud in a healthcare organization. The organization provides medical services to patients and bills third-party payers, such as insurance companies, for the services rendered. The suspected fraud involves a medical provider who has been overbilling the third-party payers for the services performed. You have been provided with the following information for the provider in question:
Year | Services Rendered | Charges Billed | Payments Received |
---|---|---|---|
2019 | 1,000 | $200,000 | $150,000 |
2020 | 1,500 | $400,000 | $300,000 |
Your investigation has revealed that the provider has been billing the third-party payers for services that were not provided or were medically unnecessary. You have also identified that the provider has been engaging in upcoding, which involves billing for more complex and expensive services than what was actually performed. Based on your analysis, you have determined that the provider has engaged in fraudulent billing practices and has caused financial harm to the healthcare organization and the third-party payers.
a) Calculate the provider's average charge per service for 2019 and 2020. (4 marks)
b) Calculate the provider's gross profit margin for 2019 and 2020, assuming a cost of goods sold (COGS) of 30% of charges billed. (6 marks)
c) Calculate the amount of overbilling and upcoding that has occurred in 2020, assuming that the provider has billed for 20% more services than were actually provided and has upcoded 30% of the services performed. (6 marks)
d) Based on your analysis, what recommendations would you make to the healthcare organization to prevent similar frauds in the future? (4 marks)
Forensic Accounting and Fraud Examination
ISBN: 978-0078136665
2nd edition
Authors: William Hopwood, george young, Jay Leiner