FinCEN Advisory on COVID-19 Health Care-Related Fraud

What Happened:

On February 2, 2021, the U.S. Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) issued an advisory alerting financial institutions about recent health insurance and health care fraud schemes related to the COVID-19 pandemic (the “Advisory”). FinCEN outlined numerous examples of illegal activity in the health care arena perpetrated by fraudsters attempting to take advantage of the global pandemic.

The Bottom Line:

FinCEN cautions financial institutions to carefully scrutinize unusual or suspicious health insurance and health care transactions and other financial activity arising after the Secretary of Health and Human Services declared a public health emergency on January 31, 2020. FinCEN provides a detailed list of red flag indicators for financial institutions to consider when monitoring transactions for purposes of detecting, preventing, and reporting fraud related to the pandemic.

The Full Story:

In the Advisory, FinCEN identified a variety of fraud schemes arising from COVID-related transactions. With the benefit of a year’s worth of information aggregated from Bank Secrecy Act data (such as Suspicious Activity Reports (“SARs”)) and public reporting, FinCEN has observed frauds targeting Medicare, Medicaid, and TRICARE, as well as other health care programs provided through government and private insurance providers. COVID-19 relief funds, such as those provided under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) or Paycheck Protection Program (“PPP”), have also been fertile ground for fraudulent activity.

Over the past year, the Department of Justice and other agencies have prosecuted a number of fraud cases related to COVID-19 testing and treatment. These cases include allegations of health care providers ordering unnecessary tests (such as allergy or genetic testing that has no relation to COVID-19 diagnostic tests); billing for services not rendered or overbilling for COVID-19 testing and treatments; or paying kickbacks to marketing organizations or others who will then order services and testing. Other billing schemes under investigation involve prescribing fake COVID-19 testing or treatment or using stolen personally identifiable information to submit fraudulent claims for payment. In other scams, claimants allegedly fraudulently applied for and received relief funds (such as PPP funds or other funds provided by the CARES Act) for which they were not eligible.

To assist financial institutions with identifying and reporting COVID-related fraud, FinCEN listed sixteen “financial red flags” divided into four broad categories. Some representative examples from each category are below:

Medically Unnecessary Services or Billing Schemes

• Health care provider accounts receiving payments from health care benefit programs or health insurance plans well above the provider’s typical pre-pandemic receipts (or, receipts stay the same even though the provider would be expected to have reduced business volume because of the pandemic).
• Health care provider business accounts processing unusual transactions such as payments for personal or non-medical expenses (such as automobile payments, travel agents, or consumer retailers).

Potential Fraudulent Businesses

• Personal or business accounts that did not process health care-related payments or transactions before the pandemic begin receiving health care benefit program or insurance payments.
• Transactions from a purported health care provider’s account that are unusual or inconsistent with prior activity, such as withdrawal of funds via cash, wire transfers, or cashier’s checks.
• A newly-opened health care business account has transaction volume or activity inconsistent with expected levels of activity for such an account.
• A purported health care provider’s business location is non-existent, a residential address, or a non-office building address, and/or the provider has a minimal online presence (or one that only began around the start of the pandemic).

Kickbacks and Money Laundering

• After the public health emergency declaration, a health care provider’s account begins having unusually complex medically-related transactions involving multiple parties (which could indicate structuring, layering, kickbacks, or other fraudulent activity).
• A health care provider’s or servicer’s account makes frequent or large payments recorded as advertising or marketing expenses, or referencing “consulting fees” or the like.

Fraudulently Obtaining COVID-19 Relief Funds

• A previously inactive health care provider account, or an account with no previously-known relationship to the provision of health care services, receives an unexpected or excessive COVID-19-related payment from the CARES Act Provider Relief Fund or PPP Health Care Enhancement Act funds.

These indicators, as well as others detailed in the Advisory, are intended to alert financial institutions to fraud related to health insurance and health care. FinCEN encourages financial institutions to perform additional inquiries and investigations as needed. If an investigation reveals suspicious activity, financial institutions should file a SAR that references the key term
“FIN-2021-A001” and describes the connection between the reported activity and the activities highlighted in the Advisory. 

Hunton Andrews Kurth LLP will continue to closely monitor related announcements from FinCEN or other law enforcement agencies that may impact financial institutions. Please contact us if you have any questions.