As long as healthcare providers have billed insurance companies and government health programs, there has been healthcare fraud.
The problem grew after the establishment of Medicare and Medicaid in the mid-1960s, and government officials began pursuing healthcare fraud in earnest in the 1980s as stories of massive bilking of government programs circulated and healthcare costs began to skyrocket. In 1986, the federal False Claims Act, a Civil War-era law with roots in 13th century England, was revised to give monetary incentives to whistleblowers who filed against fraudulent providers on behalf of the government. Under the law, those suits allowed whistleblowers to sue for triple the alleged amount of money defrauded from the government. Whistleblowers were entitled to claim a percentage of any recovery.
The law began reaping results among healthcare providers in the early 1990s. A series of big-dollar settlements with companies such as SmithKline Beecham, Beverly Enterprises, Caremark and other national chains drew attention to endemic healthcare fraud. Different sectors of healthcare faced scrutiny and paying large settlements; first to face the music was the clinical laboratory business, followed by psychiatric hospital chains, home health and long-term care, and now the pharmaceutical industry. Hospitals began getting tagged in the mid-1990s with a series of national investigations into billing and marketing practices and referral relationships with doctors. In 1997, Columbia/HCA Healthcare Corp., a predecessor of HCA, faced a series of raids investigating the business practices of the Nashville-based for-profit giant and agreed to pay $845 million in civil and criminal penalties.