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Health Care Fraud Investigation

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Presentation on theme: "Health Care Fraud Investigation"— Presentation transcript:

1 Health Care Fraud Investigation
Universal Vulnerabilities, Challenges And Opportunities William J. Mahon The Mahon Consulting Group, LLC Health Insurance Counter Fraud Group Annual Conference November 3, 2011

2 What Is Health Care Fraud?
An intentional/deliberate act Intended to obtain a benefit, or a greater benefit, to which the perpetrator is not entitled Often joined with “waste and abuse,” but those are not statutorily defined criminal acts Can involve any party within the health care/health insurance system, and professional criminals who target the system.

3 “Health Care Fraud” 18USC, Ch. 63, Sec. 1347
The “What”—U.S., Federal “Health Care Fraud” 18USC, Ch. 63, Sec. 1347 Whoever knowingly and willfully executes, or attempts to execute, a scheme or artifice— 1. To defraud any health care benefit program; or 2. To obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any health care benefit program, in connection with the delivery of or payment for health care services, shall be fined under this title or imprisoned not more than ten years, or both.

4 The “What”—U.S., State-Level
“Health Care Claims Fraud” NJ, 1997 Health Care Claims Fraud means making, or causing to be made, a false, fictitious, fraudulent, or misleading statement of material fact in, or omitting a material fact from, or causing a material fact to be omitted from, any record, bill, claim or other document, in writing, electronically, or in any other form, that a person attempts to submit, submits, causes to be submitted, or attempts to cause to be submitted for payment or reimbursement for health care services.

5 The “Who” Dishonest patients
Collusion with dishonest providers/criminal schemes Eligibility/enrollment fraud re: “Dependents” Dishonest providers (individuals or institutions) Professional criminals/bogus providers Other parties to the system Dishonest billing services Dishonest payer employees

6 The “Why”—U.S. 2011: $2.7 trillion national health care expenditure
52 % private-sector $$$ 48 % public-sector $$$ SOURCE: Centers for Medicare & Medicaid Services, National Health Expenditure Projections

7 The Estimated Financial Loss—U.S.
3% to 10% of total annual expenditure* Translation: $81 billion to $270 billion in 2011 alone * SOURCES: U.S. Government Accountability Office; National Health Care Anti-Fraud Association

8 2011 U.S. Fraud “Spending” in Perspective—at 3% Estimate
Hospital $828 Bil +46% Physician/Clinical Svcs. $556 Bil + 41% Prescription Drugs $275 Bil + 46% Nursing Home $156 Bil +36% Dental $112 Bil +37% Govt. Public Health $ 85 Bil +58% Home Health Care $ 83 Bil +93% Fraud $ 81 Bil +50% Other Prof. Care (non-physician) $ 75 Bil +42% Research $ 54 Bil +38% Non-Durable Med. Products $ 43 Bil +30% Durable Medical Equipment $ 28 Bil +33%

9 2011 U.S. Fraud “Spending” in Perspective—at 5% Estimate
Hospital $828 Bil Physician/Clinical Svcs. $556 Bil Prescription Drugs $275 Bil Nursing Home $156 Bil Fraud $135 Bil Dental $112 Bil Govt. Public Health $ 85 Bil Home Health Care $ 83 Bil Other Prof. Care (non-physician) $ 75 Bil Research $ 54 Bil Non-Durable Med. Products $ 43 Bil Durable Medical Equipment $ 28 Bil

10 The Collateral Damage—Universal
Corruption of patients’ medical histories Theft of patients’ finite health benefits Physical risk/harm to patients Medical identity theft

11 Universal Anti-Fraud Drivers
Impact on ever-increasing costs Link to quality of care/patient safety Media awareness and attention Customer awareness and expectations Senior Management awareness and expectations

12 Worldwide Awareness & Responses
HICFG & Global Partners Korea: National Health Insurance Corporation identifies significant provider-fraud problem in early 2000s Africa “Samie, who also chairs the South African Insurance Association (SAIA), has expressed an urgent need for industry experts and professionals to address this issue through the recently developed Insurance Crime Bureau (ICB), an independent industry body aimed at curbing and preventing insurance related crime in South Africa.” —Insurance Times & Investment News, 6/08 AAR Holdings: Kenya, Uganda, Tanzania, Rwanda. . . Further expansion planned. “Post-tax profits amounted to just 150 million shillings in 2009, due largely to the high levels of fraud plaguing the medical insurance sector.” —Insurance Business Times, 12/10 “About percent of all insurance fraud is on medical costs, through the health providers” —Jagi Gakunju, AAR CEO • Middle East • Abu Dhabi: 2010 Health Authority audits identify 38 cases of health insurance fraud: Services not rendered, Rx substitution, non-compliant policies & marketing

13 Insurers’ Inherent Vulnerabilities
Necessary assumption of honesty Number of providers/billers Number of transactions Variances and ongoing evolution in plan/product design Ongoing technological evolution Less paper, human scrutiny; more auto-adjuducation Fraud perceived as low-risk/high-reward crime

14 External & Internal Challenges
Nature of some frauds far less clear to critical audiences Many cases inherently more complex, harder to argue and to prove intent Some health insurers wary of alienating good providers Inherent tension between Fraud Investigation and other operating units with potentially conflicting priorities Claims Provider Relations Provider Network Management Lingering misconception that Managed Care eliminates incentives and opportunities for provider fraud Little or inconsistent coordination between private payer and government-plan anti-fraud activities 14

15 Worldwide Anti-Fraud Challenges
Inconsistency/diversity of medical standards, regulatory oversight and enforcement actions across regions and countries Wide variances in procedure costs across regions and countries, with lack of centralized comparative cost data Lack of “boots on ground” investigative resources in many regions or countries Inevitable advent of fraud related to growing medical tourism trend Emergence of international marketing of health care services—e.g., adverts in U.S. in-flight magazines for South America cosmetic surgery clinics

16 Plans’ Greatest Exposure = Provider-Based Frauds
Providers (or purported providers) are the focus of 85% or more of payers’ fraud investigations Provider-fraud tools: Patient population to exploit Possible conditions & treatments to bill Widespread 3rd-party billing authority, even under managed care-oriented system Patient/provider/payer information = the vital commodity

17 Most Common Forms of Provider Fraud
Billing for services not rendered (c. 25%) Misrepresentation of services provided (c. 35%) Provision of medically unnecessary services (c. 10%)

18 Common Characteristics
Wide range of simultaneous targets Multiple payers Private & public plans Multiple insurance lines Elimination of patient’s financial interest, or provision of greater financial inducements to patient Often follows new/expanded benefits, new treatments & technologies Occurs across entire provider spectrum

19 Notable U.S. Hot Spots “The Acute”
Outpatient surgery center schemes (“rent-a-patient”) Cosmetic surgery schemes Imaging/other diagnostic testing Pain management & related narcotic Rx schemes (“pill mills”) Neuro/Musculoskeletal “one-stop shopping” facilities (chiro, PT, massage, acupuncture, orthopedic, neurological, pain management) Common denominators: Little or no medical necessity Risk/harm to patients

20 Less Prominent Frauds “The Chronic”
Evaluation & management upcoding – “time bandits” Office visits Consultations (in- and outpatient) Emergency evals, including outsource ER staffing/billing Prescription drug diversion – “doctor-shopping” Abuse and/or resale of controlled substances – “A perfect storm”: Narcotics (vicodin, oxycontin, fentanyl, methadone) Sedatives/anxiety drugs (valium, xanax) Stimulants (ritalin, adderall/amphetamine) Medical-claim cost far exceeds Rx cost Significant potential liability for Rx payers Often “out of sight/out of mind” re: Outsourced to PBM

21 Trends Worth Watching. . . More member-inducement schemes
Rx diversion Diagnostic testing Cosmetic surgeries/procedures More Rx doctor-shopping, pharmacy frauds & diversions, prescriptions-for-cash schemes More “sake of the patient” misrepresentations by providers (“soft fraud”) More identity-theft schemes—data breaches, sale of patient/member info Providers reaching beyond own specialties for new revenue sources “Medical spa” billing falsifications Aggressive pharmaceutical-industry marketing of financial inducements to privately insured patients Medical Tourism

22 The Beauty of Botox. . .

23 Cosmetic Acupuncture. . .

24 “Nothing Shows Reason the Door Like Cures for Things”*
Aqua Chi Detoxification Foot Spa Body Cleansing Body Purge Deluxe Detox Foot Spa for all Vital Organs Internal Cleansing Machine uses Negative Ions...BUY NOWハ ・Liver Detoxification ・Purge Heavy Metalsハ ・Increase Energy and Reduce Stress・Internal Cleansing with Full Body Purge ・Improve Sexual Health・Significant Pain Relief ・Improve Memory and Sleep ・Liver, Kidneys and Parasite Cleanse ・Wrinkles, Acne & other Skin Problems ・Enhance Immune Systemハ * Brock P: “Charlatan: America’s Most Dangerous Huckster, The Man Who Pursued Him, and the Age of Flimflam,” Three Rivers Press, New York, NY, 2008

25 Before . . .

26 After . . .

27 No Co-Pay? Priceless . . .

28 One of Many Big-Pharma Offers . . .
ORENCIA® Coupon; COPAY REDUCTION CARD; No Co-Pay For 6 Months; Bristol Myers Squibb Offer CLICK HERE Name of Offer: ORENCIA® Promise Program Description: Try-Before-You-Buy; Money Back Guarantee This is a very valuable prescription drug coupon. It is known as the ORENCIA Promise Program. This offer is only good for patients with private insurance. [Emphasis added] When you sign up for this program, Bristol Myers Squib (the company that markets Orencia ®) will pay your copay for 6 months of therapy (up to 8 infusions). They confident that you will obtain a satisfactory outcome with Orencia. When you are enrolled with this program, if you are NOT satisfied with Orencia therapy, they will pay your first co-pay for a different rheumatoid arthritis medicine up to $ We would classify this offer as a "Try-Before-You Buy" + Money Back guarantee offer. These offers are rare and valuable

29 Where We’re Headed. . .?

30 Essentials for Anti-Fraud Effectiveness
Understanding of the crime & its impact Appreciation of the plan’s exposure Creation/articulation of formal policies Support from the plan’s highest levels Clear strategies & mechanisms for detection, investigation, resolution & prevention (in-house or outsourced) Appropriate perspective: Vast majority are honest, but the dishonest do disproportionate damage

31 Essentials for Anti-Fraud Effectiveness
Emphasis on pre-payment avoidance Allocation of adequate resources Appropriate plan-wide training Education of insureds re: Impact & risks

32 Stopping Fraud The Fundamentals
Detection High-Tech Claim-system edits Fraud-detection software Sophisticated data-mining Low-Tech Human claim review Audits Basic data analysis – “follow the money” CPA Audits Internal-control vulnerabilities Benefit Consultants Prudent benefit design and coverage policies

33 Stopping Fraud The Fundamentals
Audit and Investigation Audits ID discrepancies Investigations Establish the facts As warranted, support formal allegations of fraud Resolution Criminal prosecution and/or civil action Financial recovery Network sanctions Prevention Far more beneficial than “pay & chase”

34 Prevention = Transaction-Level Tools
Translate post-pay audit/investigative findings & knowledge into pre-pay obstacles to fraud (technological and human) Fraud indicators Claim-system edits Specific “fraud flags” re: providers, diagnoses, procedures, geographic areas, etc. Anticipate impact Anticipate new benefits and potential vulnerabilities/schemes Design and/or amend benefit policies where appropriate

35 Prevention = Broader Deterrence
Enforcement actions Member/employee education “Your money” “Your benefits” “Your wellbeing” Provider & other contracts Network actions Credentialing awareness/procedures Effective coordination of benefits “Pay & pursue” or pre-pay safeguards? Enrollment level Subsequent eligibility audits

36 The Bottom Line: U.S. Health Insurers’ Anti-Fraud R.O.I.
Average anti-fraud budget: $1.9 mil. Average savings & recoveries: $12.3 mil. Widespread average PMPY return: $2.50 Best operations’ PMPY return: $7.50 Average R.O.I.: 6.5 to 1 Best operations’ R.O.I. Exceeds 12 to 1

37 The Anti-Fraud Vital Signs


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