Psychiatric Fraud and Abuse

In response to allegations that some Texas psychiatric hospitals paid kickbacks for patient referrals, falsified diagnoses to obtain insurance payments, and kept patients against their will in order to maximize payments, GAO reviewed the vulnerability of federal health programs to fraud and abuse by psychiatric hospitals. Investigators have found that crooked psychiatric hospitals are more likely to take advantage of patients covered by private insurance, which has higher reimbursement rates for mental health services than federal programs and is thus more profitable. Although federal programs have many controls in place to guard against unnecessary or poor quality care, some control weaknesses exist that render federal programs vulnerable to fraudulent and abusive psychiatric hospital practices. For example, although required by federal law, some state Medicaid programs do not independently evaluate the need for inpatient care. In addition, the Civilian Health and Medical Program of the Uniformed Services lacks adequate systems for ensuring that payments are limited to authorized psychiatric stays and for preventing duplicate payments.

GAO found that: (1) federal health programs have been subjected to fraudulent and abusive practices by psychiatric hospitals, but to a lesser extent than private insurers; (2) some internal control weaknesses have resulted in unnecessary hospital admissions, excessive lengths of stay, poor care, and unauthorized or duplicate payments; (3) some state Medicaid programs do not independently evaluate the need for inpatient psychiatric care; (4) lower reimbursement rates and greater controls have made federal programs less vulnerable to such abuses; and (5) as federal investigations continue, further fraud and abuse in federal programs may be identified.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

Director: David P. Baine Team: General Accounting Office: Health, Education, and Human Services Division Phone: (202) 512-7101