1. Provided by Coventry Healthcare® ©2010 Coventry Health Care. All rights reserved. Proprietary – Do not copy, distribute or disclose without permission of Coventry Health Care California Medical Bill Reviewer Certification Unit 1: Workers Compensation Benefit Program Module 2: Fraud & Abuse of the Workers Compensation System

2. CA Regulations Training – Fraud & Abuse March 2010 2 Overview Hi! In this module, you will learn about the difference between fraud and abuse. Then, you will learn about who can commit fraud and abuse. Part I: Fraud and Abuse of the Workers Compensation System The Difference Between Fraud and Abuse What is Considered Abuse? What is Considered Fraud? Part I: Fraud and Abuse of the Workers Compensation System Lets start by discussing the effects of fraud and abuse of workers compensation...

3. CA Regulations Training – Fraud & Abuse March 2010 3 The Cost of Fraud and Abuse The total cost of workers compensation in California in 2002 was an estimated $32 billion. The cost of fraud alone to the workers compensation system is estimated between: Clearly, fraud and abuse have a significant negative impact on the cost and efficiency of the workers compensation system! $1-5 billion per year!

4. CA Regulations Training – Fraud & Abuse March 2010 4 Injured Workers Labor Unions Insurance Companies Employers Attorneys Service Providers Regulatory Agencies Arent Fraud and Abuse the Same? Both fraud and abuse have a negative impact on all of the entities in workers compensation. However, as you will see, fraud and abuse arent quite the same.

5. CA Regulations Training – Fraud & Abuse March 2010 5 What Exactly is Abuse? Abuse: any practice that uses the workers' compensation system in a way that is contrary to either the intended purpose of the system or the law. Abuse can be considered criminal behavior, but not always. Lets take a look...

6. CA Regulations Training – Fraud & Abuse March 2010 6 Abuse of the Workers Compensation System If temporary disability benefits continue after the injured worker returns to work, and no one ever asks the claimant if he is working, there is an ABUSE of temporary disability benefits, but there is no written lie and therefore no insurance fraud. Lets take a look…

7. CA Regulations Training – Fraud & Abuse March 2010 7 Abuse of the Workers Compensation System I wonder why the checks are still coming…Oh well, I guess the State must know best.

8. CA Regulations Training – Fraud & Abuse March 2010 8 Fraud Part I: Fraud and Abuse of the Workers Compensation System The Difference Between Fraud and Abuse What is Considered Abuse? What is Considered Fraud? Now that you understand what abuse of the system is, lets talk about fraud. What is Considered Fraud?

9. CA Regulations Training – Fraud & Abuse March 2010 9 What Constitutes Fraud? Fraud: any practice that is done knowingly and with intent to mislead, in order to gain some benefit, or to cause a benefit to be denied. The most significant type of criminal abuse to the workers compensation is insurance fraud.

10. CA Regulations Training – Fraud & Abuse March 2010 10 Criteria for Fraud 1. A lie must be identified. 2. The lie must be material. There are two qualifying criteria for fraud. Lets take a look…

11. CA Regulations Training – Fraud & Abuse March 2010 11 Criteria for Fraud: Identifying a Lie 1.The presence or absence of a specific, provable lie distinguishes between abuse and fraud. Identify a provable lie. In order for an act to be considered fraudulent, a material, written lie that was presented to or by an insurer must be identified.

12. CA Regulations Training – Fraud & Abuse March 2010 12 Criteria for Fraud: A Material Lie 2.The lie must be material, which means the lie must make a difference in the outcome. Identify a provable lie. The lie must be material. This prevents prosecution on the basis of some minor error of memory or transcription which did no harm or had no cost involved.

13. CA Regulations Training – Fraud & Abuse March 2010 13 Fraud of the Workers Compensation System If someone such as the adjuster or the doctor specifically asks the claimant if he is working and the claimant lies and replies No......and the lie is transcribed in a written document-- INSURANCE FRAUD has occurred.

14. CA Regulations Training – Fraud & Abuse March 2010 14 Fraud of the Workers Compensation System Hi Mr. Jones, I need to update my claim records…have you returned to work? Uhhh, no, the doc says my leg isnt quite healed…

15. CA Regulations Training – Fraud & Abuse March 2010 15 Legal Ramifications of Fraud If the amount or duration of temporary disability payments are determined based upon a lie, legal action can potentially be taken under the Workers' Compensation Law and Penal Law.

16. CA Regulations Training – Fraud & Abuse March 2010 16 Who Commits Fraud and Abuse? Now that you are familiar with fraud and abuse, lets move on to who can commit fraud and abuse, and whats being done to prevent it. Part II: Who Commits Fraud and Abuse? Patient Fraud Provider Fraud Organized Fraud Employer Fraud Insurance Carrier Fraud Government Fraud Regulatory Agencies: Whats Being Done? Part II: Who Commits Fraud and Abuse? Patient Fraud Provider Fraud Organized Fraud Employer Fraud Insurance Carrier Fraud Government Fraud Regulatory Agencies: Whats Being Done?

17. CA Regulations Training – Fraud & Abuse March 2010 17 Who Commits Fraud and Abuse? You might think that dishonest injured workers and greedy providers are the only parties guilty of committing fraud. But, in fact, this is not the case. There are several parties that can be guilty of committing fraud. Lets take a look…

18. CA Regulations Training – Fraud & Abuse March 2010 18 So, Who Exactly are the Guilty Parties? Patients Providers Employers Government Insurers

19. CA Regulations Training – Fraud & Abuse March 2010 19 Workers may: Patient Fraud & Abuse Lets start by discussing the types of fraud that can be committed by injured workers, or patients. Fake an injury. Lie about the extent of their injury. Lie by denying that they filed previous claims. Fail to disclose a prior injury to the same body part. Claim a non-work injury is work related. Illegally work while obtaining benefits.

20. CA Regulations Training – Fraud & Abuse March 2010 20 Staged Injuries The injury may be what is termed a staged event, which means the injury never took place. The injury may have occurred outside the workplace. The injury may have been caused by horseplay at work. The injury may be a slip and fall incident. The worker may have avoided the incident, such as slipping in a puddle of water, but instead allowed themselves to fall in order to claim injury.

21. CA Regulations Training – Fraud & Abuse March 2010 21 Extended Recovery Time Occasionally workers may extend their recovery time off work. The patient may exceed the stated normal limitations for a specific injury, and then claim lack of improvement or onset of new symptoms.

22. CA Regulations Training – Fraud & Abuse March 2010 22 Patient Fraud in the Real World Illegal Work: A former food worker in Hawthorne, CA collected $128,000.00 in benefits for a shoulder injury while taking similar jobs at other school districts around the state during the time he was on leave.

23. CA Regulations Training – Fraud & Abuse March 2010 23 Provider Fraud and Abuse Medical providers can also commit fraud and abuse of the workers compensation system. Lets take a look…

24. CA Regulations Training – Fraud & Abuse March 2010 24 Self-Referrals Creative BillingUpcoding Provider Fraud and Abuse Medical provider schemes include: Upcoding: Providers may bill for a more expensive treatment than the procedure performed. Creative billing: Providers may bill for services not performed. Self-referrals: Providers who inappropriately refer a patient to a clinic or laboratory in which the provider has an interest.

25. CA Regulations Training – Fraud & Abuse March 2010 25 …Even More Provider Schemes Hmm, 1 fracture or 2, that is the question… Product Switching Unbundling Unbundling: Providers may perform a single service but bill it as a series of separate procedures. Product switching: A pharmacy or other provider may bill for one type of product but dispense a cheaper version, such as a generic drug.

26. CA Regulations Training – Fraud & Abuse March 2010 26 New and Improved… Newer forms of fraud and abuse that occur under managed care arrangements include: Kickbacks Overutilization Underutilization Underutilization: Doctors who receive a fixed fee per patient may not provide a sufficient level of treatment. Overutilization: Doctors may provide unnecessary treatments or tests to justify higher patient fees in a new contract year. Kickbacks: Doctors may receive incentives for patient referrals. Providers may also shift from the less expensive, all-inclusive patient report to supplemental reports, which add evaluations and incur separate charges.

27. CA Regulations Training – Fraud & Abuse March 2010 27 Organized Fraud In some instances, providers and lawyers work to commit fraud together. This is known as organized fraud. Organized workers compensation fraud that involves doctors and lawyers has been an ongoing problem, especially in Southern California.

28. CA Regulations Training – Fraud & Abuse March 2010 28 Organized Fraud Fraud rings have made a practice of recruiting people to file phony work injury claims.

29. CA Regulations Training – Fraud & Abuse March 2010 29 Organized Fraud The workers are sent to medical clinics or legal referral centers commonly known as "claim mills," which in turn refer them to a doctor or lawyer who is in on the scheme.

30. CA Regulations Training – Fraud & Abuse March 2010 30 Organized Fraud in the Real World Although the campaign against California claim mills wiped out a substantial part of medical provider abuse, new cases continue to emerge. Lets take a look…

31. CA Regulations Training – Fraud & Abuse March 2010 31 More Fraud in the Real World In October of 1997, a pharmacist pled guilty to 21 counts of fraudulent workers' compensation insurance billing. The pharmacist increased his revenues by up to 500% per prescription on more than $600,000 of drugs sold over a four-year period.

32. CA Regulations Training – Fraud & Abuse March 2010 32 Employer Fraud & Abuse Employer fraud is one of the fastest growing areas of workers compensation insurance and can take many forms. Lets take a look…

33. CA Regulations Training – Fraud & Abuse March 2010 33 No Workers Compensation Insurance No workers compensation insurance: Some businesses are part of the "underground economy" and carry no workers compensation insurance at all. Employer Fraud and Abuse Declaring Independent Contractors Underreporting Payroll Underreporting payroll: Employers reduce their premiums by not reporting parts of the work force, paying workers off the books, or creating a companion corporation to hide a portion of the employees. Declaring independent contractors: Employers avoid premium payments for employees by classifying them as independent contractors or leased employees even though they are legally employees.

34. CA Regulations Training – Fraud & Abuse March 2010 34 Employer Fraud and Abuse Underestimating Employment Projections Misclassifying Workers Misclassifying workers: Employers intentionally misrepresent the work employees do to put them in less hazardous occupational categories and reduce their premiums. Underestimate of employment projections: Employers deliberately underestimate employment projections at the beginning of the premium year and essentially receive an interest-free loan from the insurance company for the amount that would have been required to insure new employees. For example, an employer may save money on premiums by reporting a roofer as an office worker.

35. CA Regulations Training – Fraud & Abuse March 2010 35 Insurer Fraud and Abuse Unscrupulous insurers may also commit fraud in workers compensation claims. Lets take a look…

36. CA Regulations Training – Fraud & Abuse March 2010 36 Insurer Fraud and Abuse Employers or employees of an insurance carrier may make false statements regarding a workers entitlement to benefits to discourage the worker from pursuing a legitimate claim. Insurance companies could theoretically mislead prospective clients, collect premiums for insurance coverage not provided, inflate premiums, or fraudulently fail to pay an appropriate claim.

37. CA Regulations Training – Fraud & Abuse March 2010 37 …More Unscrupulous Insurers Insurance companies could use delaying tactics to hold onto legitimate claim payments longer than necessary to maximize their own accounts. Insurance companies could alter codes provider services routinely in order to pay out less. Although, the law indicates, an entity reviewing an itemization of service submitted by a physician or medical provider shall not alter the procedure codes, there is an exception when supporting documentation does not match level of service. At which point, an Explanation of Review (EOR) shall provide an explanation of the alteration to provider of service.

38. CA Regulations Training – Fraud & Abuse March 2010 38 Government Fraud and Abuse Even the government can commit acts of fraud and abuse. Lets take a look…

39. CA Regulations Training – Fraud & Abuse March 2010 39 Government Fraud and Abuse BiasBribes Conflict of Interest Conflict of interest: Any workers compensation judge is disallowed from sitting on a case in which he has an interest or is employed by any of the litigating parties. Bribes: Offering or accepting kickbacks for the referral or settlement of cases can contribute to fraud and therefore is a reportable and highly prosecutable crime. Bias: It is considered abusive for a workers compensation judge to preside over a hearing for any claimant to whom the judge could not be impartial.

40. CA Regulations Training – Fraud & Abuse March 2010 40 Injuries included: Government Abuse in the Real World In 2004, the Sacramento Bee published an article noting that Californias 150 workers compensation judges are six times more likely to file on- the-job injury cases than their judicial counterparts in state government. Rearranging artwork Slipping on a lunchroom puddle Loading a crate in a trunk Tripping over a phone cord Writers cramp

41. CA Regulations Training – Fraud & Abuse March 2010 41 More Government Abuse… Judge Bernardine Baldwin of Santa Monica filed a claim in August of 2004 for injuries to her heart and psyche from inadequate staffing and security, deadlines, attorneys and parties harassment & conflicts with angry, hostile litigants.

42. CA Regulations Training – Fraud & Abuse March 2010 42 Crime Fighters… FRAUD Department of Insurance District Attorneys Offices Insurance Companies Fraud Assessment Commission In 2004, local DAs in LA County prosecuted 263 fraud cases, which represented more than $54 million in chargeable fraud. The Department of Insurance has its own Fraud Division investigating accusations of fraud. The FAC prosecuted an employer who reduced the premiums for workers by classifying them as clerical workers, hiding payroll, and using shell corporations to evade surcharges. Some insurance companies have their own fraud and abuse departments that track suspicious billing practices in their systems.

43. CA Regulations Training – Fraud & Abuse March 2010 43 Summary Identify a provable lie. The lie must be material. What constitutes fraud and abuse. Who commits fraud and how its done. FRAUD Who investigates and prevents fraud. Abuse of the workers compensation system.

44. CA Regulations Training – Fraud & Abuse March 2010 44 Module 2 Quiz Click on the link to go directly to the quiz. Feel free to review any of the material before you move on. Good Luck! Quiz: U1M2: Fraud and Abuse