A Multidimensional, Proactive Approach Is Best Way To Tackle Health Care Fraud

Although insurance companies are working hard to combat health care fraud, focusing on just one prevention or detection method will not make much of a dent in the billions of dollars that studies suggest are being bilked from the industry. Because these losses hurt not only private insurance companies, but also government-funded payers, employers and patients, developing a more holistic plan of action for fighting fraud benefits all health care stakeholders.

“One of the biggest mistakes insurers make when developing a fraud strategy is to address the situation reactively, looking at just one phase of the claim continuum,” according to Ingenix Director of Fraud and Recovery Solutions Chris Dorn. “Effective fraud prevention requires vigilance at every phase of the claims continuum, leveraging technology to analyze claims from many angles both before and after payment,” he says.

It is clear that dramatic savings opportunities exist with even modest fraud prevention and detection efforts. For example, anti-fraud efforts that prevent 1 percent of government and commercial health plan overpayments would result in a $17 billion savings. Such savings have the potential to substantially increase payer profitability. Studies by Reden & Anders, an Ingenix company, indicate that an anti-fraud program that saves 1 percent of medical expenses can potentially increase the profitability of a typical health plan by 16.7 percent.

Dorn estimates that Ingenix’s multidimensional fraud prevention efforts are 7 to 10 times more effective than traditional post-payment fraud detection techniques. “We decided along the way that there is no one, perfect detection tool, which is why we take a multi-pronged approach,” Dorn explains. “Effective fraud and abuse management depends on an end-to-end management of the problem.”

A significant challenge

According to the National Health Care Anti-Fraud Association (NHCAA), fraudulent activities, which include billing for services not rendered, upcoding or exaggerating a diagnosis, unbundling charges and duplicate billing, are committed by health care providers, health care facilities, members, patients and professional fraud rings.

The most common kind of fraud involves a false statement, misrepresentation or deliberate omission that is critical to the determination of benefits payable,” the NHCAA states. “Fraudulent activities are almost invariably criminal, although the specific nature or degree of the criminal acts may vary from state to state.” The New York State Insurance Department estimates that each U.S. household loses $940 per year to fraudulent claims.

Recent estimates on the total costs of health care fraud range from $51 billion to $170 billion. “Whatever figure you use, it’s over $100 million per day,” Jeff Matza, vice president, special investigations, for Mutual of Omaha, said at a recent NHCAA event. “Everyone will agree that’s a staggering sum.”

Part of the difficulty in estimating fraud’s cost is that it is “not a self-revealing crime,” Dorn says. “In other words, you can’t count what you don’t find.” Some of the difficulty in finding fraud is intrinsic to insurance claims processing, because claim operations are geared toward processing mass amounts of claims efficiently and quickly, with a focus on coding, not fraud, he explains.

Fraud is not going away

“The situation clearly is becoming worse,” Dorn says. “Claims are being paid more quickly as a result of auto-adjudication and advanced technology, without a human touch. There often is inadequate investment in fraud controls, combined with an inaccurate assumption that fraud will be controlled by law enforcement.”

In addition, fraud schemes are increasingly complex and ever-changing. For example, medical identity theft, organized crime and prescription drug fraud all present new challenges. “I am continually surprised at the cleverness of the new and emerging schemes we see,” adds Dorn.

Ingenix tackles these obstacles head on by relying on a diverse arsenal of tools that detect and manage payment integrity issues from many angles. These measures include:

• Mining massive amounts of data using advanced analytics to uncover aberrant billing patterns that may indicate fraud;
• Identifying unusual and illogical behaviors; and
• Examining cases to gather information on provided care and billed costs.

Experienced staff can make a difference

Accomplishing all of these complex tasks takes a team of more than 220 experienced physicians, clinicians, biostatisticians and investigators who work together to root out fraud. Nurses, doctors and other practitioners review medical records to better understand why diagnoses were made and what treatments were offered so that coding relationships can be validated. Investigative teams gather information and advise the health plan on detected fraud cases that should be prosecuted or escalated to law enforcement agencies.

“One of the unique aspects of Ingenix is the number of people we have focused on fraud and abuse – it is one of the largest groups of fraud experts in the health care industry ,” Dorn says. “The skill sets that those people possess really set us apart.”

Ingenix encourages companies to upgrade from a “pay-and-chase” to a “prevent-and-save” strategy, to examine all phases in the payment cycle (pre-adjudication, claim payment and post-adjudication), and to look at every possible source of fraud using both provider-centric and claims-centric approaches.

Technology is a key tool

Technology has always played a key role in helping Ingenix screen claims for possible fraud. Borrowing from the financial industry, Ingenix now is looking at technology that credit card companies have used to help identify fraud. Most recently, Ingenix has been working with ID Analytics on new predictive modeling tools that score individual claims before payment and reflect the mathematical probability of fraud, while still allowing for prompt claims processing.

“Predictive modeling helps us identify subtle schemes and patterns and our investigative teams integrate what we’ve learned. Our data mining and analytical tools are always evolving and getting better.”

The new, “supercharged” predictive modeling tool currently is being beta-tested. “Our partnership with ID Analytics is allowing us to build a first-of-a-kind predictive model,” Dorn says. “With access to more than 30 million claim transactions, we are very excited about the initial stages.”

Results show program is working

With the stakes so high, any gains that insurance companies make in reducing fraud-related losses are worth the investment. Ingenix has operated UnitedHealthcare’s fraud program since 2005 and the results have been positive. The Ingenix program has improved UnitedHealthcare’s fraud prevention results by 370 percent, helping the insurer realize a two-year net benefit of $124 million and a return on investment of 755 percent.

“We analyze more than one million claims every single day. We can take what we’ve learned all across the United States and leverage that intelligence for all of our clients,” says Dorn. “Ingenix is helping health plans save millions each year that would otherwise be lost.”

References:

National Health Care Anti-Fraud Association
State of New York Department of Insurance

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