Forensic Accounting Issues

The Opioid Crisis: What Can CPAs Do?


In 2016, about 63,000 Americans lost their lives to drug overdoses and about 42,000 of these deaths were linked to Opioids. Despite progress in the fight, abuse of Opioids is the most significant health care issue going into 2019.  So how does this affect the accounting industry?  The American Institute of Certified Public Accountants (AICPA) requested a review of the Opioid abuse landscape and a subsequent presentation to member CPAs.

I thoroughly enjoyed teaming with Ms. Valerie Rock, CHC and CPC at PYA, P.C., Atlanta, Georgia to research and present the following information to CPAs at the AICPA Forensic and Valuation Conference, Atlanta, Georgia, in November 2018.

Main Points for Consideration:

  1. Drug overdoses are the leading cause of death for Americans under the age of 50.
  2. Drug overdoses were linked to Opioids found in prescription drugs, heroin, and other synthetic drugs such as Fentanyl.
  3. The Opioid crisis affects Medicare, Medicaid, Tricare, and Private Insurance industries.
  4. CPAs occupy many roles found in these programs.
  5. CPAs are in unique positions to be part of the solution to the Opioid Crisis.

What Are Opioids?

                Legally manufactured Opioids are drugs that can treat both acute and chronic pain. Most people are probably familiar with Opioids such as Hydrocodone, Methadone, Oxycodone, and now Fentanyl.  Fentanyl is often prescribed for cancer patients and people in severe pain who cannot tolerate morphine.  Fentanyl is a synthetic Opioid narcotic similar to morphine, but 50 to 100 times stronger. 

What is the Opioid Crisis?

                The Opioid crisis it two-fold.  First, overprescribing Opioids to control pain can result in addiction and dependency.  A second darker side emerges with illegally obtained Fentanyl.  Starting in 2013, the United States was flooded with illegally manufactured Fentanyl from nefarious foreign actors who profited from distributing the drugs.  Illegal Fentanyl is cheaper to make than heroin, very potent, and results in more doses per batch made.  U.S. Drug Enforcement agents see illegal Fentanyl appearing in counterfeit pain pills found in the form of powder, blotter paper, patches, and counterfeit tablets.  Heroin, of course, is illegal and highly addictive.

                Synthetic drugs are created using man-made chemicals rather than natural ingredients.  Examples of other synthetic drugs would be Ecstasy, LSD, Methamphetamine, Synthetic Marijuana, and Designer Drugs (chemically made version of illegal drugs that was slightly altered to avoid having it classified as illegal). YF

What Industries Are Affected by the Opioid Crisis and How are Accountants Involved?

                Opioid abuses have entered the mainstream of American life.  Legally prescribed Opioids appear in established medical communities such as Physician Practices, Hospitals, Pharmacies, Distributors, Wholesalers, and Drug Manufactures.

                The accounting industry is deeply imbedded in the medical community and may appear as Chief Financial Officers, Controllers, Internal Auditors, External Auditors, Compliance Officers, Government Auditors, and Government Investigators. `

What is the Response from the U.S. Government?

                In July 2017, President Donald Trump declared a public health emergency and formed the President’s Commission on Combating Drug Addiction and Opioid abuse.  The President tasked the U.S. Department of Justice to address the problem.  In response, the Department of Justice added more prosecutors to high-risk areas to support the arrest, prosecution and conviction of fentanyl dealers.  A new Opioid Fraud and Abuse Detection Unit was formed to deploy a data-analytics program that focuses specifically on Opioid related health care fraud matters.

                The data analytics teams were assigned to identify:

  • Which physicians are writing Opioid prescriptions at a higher rate exceeding peers.
  • How many of a doctor’s patients died within 60 days of an Opioid prescription
  • Average age of patients receiving prescriptions
  • Pharmacies that dispense disproportionately large amounts of Opioid
  • Regional spots for Opioid issues

Government investigators then began to focus on the flow of money through audits and investigations.  Practitioners began to see increased audit and investigative scrutiny of tax dollars expended through Medicare, Medicaid, Tricare, and private insurance.

Tidal Wave of Litigation

                The drug industry, including Opioid painkiller manufactures, distributors, wholesalers, and pharmacy chains began to experience a tidal wave of litigation.  At least 30 states, cities, and counties have either filed lawsuits or are formally recruiting lawyers to initiate legal actions.  The complainants argue that manufactures used aggressive sales tactics to boost revenues while downplaying the risks and turning a blind eye to excessive orders.

                In August of 2018, President Trump called on the Attorney General to bring a major lawsuit against drug companies that are sending Opioids at a level that should not be happening.

Nationwide sweeps indicted and arrested several medical practitioners who profited from overprescribing the addictive Opioids.  In one case investigated, billing records showed one physician seeing 80 to 145 patients a day, writing prescriptions for all the patients seen, the visits lasted only five minutes or less, follow-ups for medication refills lasted less that two minutes, and the physician did not obtain prior medical records and did not treat with anything other than controlled substances.

What Can CPAs Do?

CPAs have earned the respect and trust of the public through years of public service and are regarded as trusted advisors.  CPAs are encouraged to gain knowledge of the breadth and scope of the Opioid Crisis and become part of the solution.  By understanding how government auditors and investigators identify suspicious trends, CPAs can conduct similar inquiries with clients to identify activity that may hit the “radar screens” of government agents.  Here are some suggestions for consideration by CPAs:

  1. When reviewing accounts and documentation of medical related practices, consider:
    • Do the numbers add up?
    • Can these volumes and revenues be supported by the current staffing?
    • For example, is it possible for one physician to see 100+ patients a day?
  2. For Health Care Entities:
    • Monitor drug costs, particularly opioid drug costs, and investigate significant changes in drug expenses
    • Consider using internal data to identify “super-prescribers” of Opioids
    • Consider sharp increases in drug costs that can highlight inventory issues.
    • Regardless of quantities of Opioids in inventories, evaluate sufficiency of physical and financial controls needed to mitigate opportunities for theft and misuse.
    • Internal audits should be used to test the controls.
  3. For Pharmaceutical Company Payments:
    • Investigate increases in revenue for Opioids.
    • Understand when doctors receive payments from drug companies.
    • Although most payments are small (meals, drinks, etc.), research indicates pharmaceutical payments result in increased prescribing of marketed medication.
  4. For Urine Drug Screens and Testing Revenue:
    • Payers view the billing of urine drug screens as unnecessary and fraudulent when the documentation does not clearly indicate medical necessity per their coverage guidelines.
    • If significant increase is seen, confirm that the appropriate monitoring and auditing is performed.
    • Ensure that documentation supports the order – per state and federal governmental and payer guidance.
    • Ensure there are no medical necessity concerns.
  5. For a Laboratory:
    • Monitor the marketing department’s spending on complimentary supplies provided to physicians and other ordering providers.
  6. To Avoid Litigation:
    • Verify the legality of any payments received from drug companies.
    • Ensure the payments are reported in accordance with the Physician Payments Sunshine Act.
    • If you identify any undefined or uncategorized revenue streams, ask questions about the origin of the revenue.

Conclusion: Guidelines have changed significantly as Opioid prescription use has increased.  Regardless of quantities of Opioids in inventories, sufficient physical and financial controls are needed to mitigate opportunities for theft and misuse, and internal audits should be used to test these controls.  A robust monitoring process is important in identifying potential fraud waste abuse and compliance risks.  It is just as important to have communication protocols in place.  Work with your organization’s compliance officer to determine potential indicators of an issue, including indicators that affect the entity’s revenue, legal, and compliance issues.  If an issue is identified, notify your compliance officer. 

Your knowledge in accounting coupled with health care experience can help identify potential fraud and abuse to mitigate risks.