Health Care FraudInvestigation

Universal Vulnerabilities, Challenges And

Opportunities

William J. MahonThe Mahon Consulting Group, LLC

Health Insurance Counter Fraud GroupAnnual Conference

November 3, 2011

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.

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.

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.

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

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

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

2011 U.S. Fraud “Spending” in Perspective—at 3% Estimate

1. Hospital $828 Bil +46%2. Physician/Clinical Svcs. $556 Bil + 41%3. Prescription Drugs $275 Bil + 46%4. Nursing Home $156 Bil +36%5. Dental $112 Bil +37%6. Govt. Public Health $ 85 Bil +58%7. Home Health Care $ 83 Bil +93%8. Fraud $ 81 Bil +50%9. Other Prof. Care (non-physician) $ 75 Bil +42%10. Research $ 54 Bil +38%11. Non-Durable Med. Products $ 43 Bil +30%12. Durable Medical Equipment $ 28 Bil +33%

2011 U.S. Fraud “Spending” in Perspective—at 5% Estimate

1. Hospital $828 Bil2. Physician/Clinical Svcs. $556 Bil3. Prescription Drugs $275 Bil4. Nursing Home $156 Bil5. Fraud $135 Bil6. Dental $112 Bil7. Govt. Public Health $ 85 Bil8. Home Health Care $ 83 Bil9. Other Prof. Care (non-physician) $ 75 Bil10. Research $ 54 Bil11. Non-Durable Med. Products $ 43 Bil12. Durable Medical Equipment $ 28 Bil

The Collateral Damage—Universal

• Corruption of patients’ medical histories

• Theft of patients’ finite health benefits

• Physical risk/harm to patients

• Medical identity theft

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

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 40-60 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

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

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

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

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

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%)

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

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

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

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

The Beauty of Botox. . .

Cosmetic Acupuncture. . .

“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

Before . . .

After . . .

No Co-Pay? Priceless . . .

One of Many Big-Pharma Offers . . .

ORENCIA® Coupon; COPAY REDUCTION CARD; No Co-Pay For 6 Months; Bristol Myers Squibb OfferCLICK HERE

Name of Offer: ORENCIA® Promise ProgramDescription: Try-Before-You-Buy; Money Back GuaranteeThis 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 $500.00.

We would classify this offer as a "Try-Before-You Buy" + Money Back guarantee offer. These offers are rare and valuable

www.internetdrugcoupons.com

Where We’re Headed. . .?

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

Essentials for Anti-Fraud Effectiveness

• Emphasis on pre-payment avoidance

• Allocation of adequate resources

• Appropriate plan-wide training

• Education of insureds re: Impact & risks

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

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”

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

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

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

The Anti-Fraud Vital Signs

Essential Elements of An Effective Health Care Anti-Fraud Program

COMPREHENSIVE APPROACH DETECTION & REPORTING INVESTIGATION & REFERRAL CASE RESOLUTION PREVENTION

• Commitment/Visible Support • Transaction Level (Claims, • Appropriate Placement/ • Criminal Prosecution • Emphasis on Pre-Payment

At Highest Management Levels Enrollment, Credentialing . . .) Report in Organizational - Criteria for referral Detection and Deterrence

- Human (processors et al) Structure - Law enforcement relationships

• Adoption/Communication of - Training: Entry & ongoing - Familiarity with priorities • Transaction-Level Pre-Payment

Formal Fraud Policy - Fraud indicators • Adequate & Appropriate - Effective case packaging Avoidance/Savings

- Reporting procedures Management & Staffing - Appropriate attention to - Human Review

• Establishment/Ongoing Execution - Technology-based - Management ability restitution - Technology/systems-based

of Formal Anti-Fraud Plan - Claim-system edits - Investigative skills & tools - Clear Objectives - Specific "red flags" - Operational knowledge • Civil Action • Anticipation of New

- Loss prevention/recovery - Providers - Clinical knowledge - Criteria Vulnerabilities

- Cost containment - Diagnoses - IT/data knowledge & skills - Individual or joint action - New treatments/technologies

- Patient/member protection - Procedures - Effective insurance-fraud - New benefits

- Physical wellbeing - Geographic areas • Appropriate Jurisdiction litigation resources - New fraud schemes

- Benefit availability & Operational Authority

- Medical-history integrity • Investigation-Unit Level • Direct Financial Recovery • Prudent Benefit Policies

- Full regulatory compliance - Data mining • Formal Operating - Criteria & Design

- Clear Strategies - Technology & Skills Principles & Procedures - Investigation unit vs. outside

- Detection & reporting - Intelligence legal and/or recovery firm • Appropriate Anti-Fraud

- Investigation & referral - Law enforcement • Effective External - Policy decision re: Contingency Provisions in Contracts

- Prosecution/Resolution - Other plans/programs Relationships/Networking arrangements - Pharmacy Benefit Managers

- Prevention - Healthcare agencies/entities - Law Enforcement/Other - Network sanctions - Specialty benefit contractors

- Adequate Resources - Media Plans & Programs - Claim administrators

- Case-information sharing • Administrative Action - Network providers

• Organizationwide Training - Other plans/programs • Effective Internal Working - Criteria - External provider networks

- Fraud awareness - Law enforcement Relationships/Procedures - Provider education/sanctions - EDI Claim clearing houses

- Job-specific, as appropriate - Claims - Potential financial recovery

• Audit-Based - Information Technology • Deterrence

• Sound & Informed Oversight - Provider audits, routine - Medical/Utilization Review - Appropriate statements &

- Benchmarking vs. and targeted - Provider Credentialing warnings re: anti-fraud

- Own objectives - Patient/member service - Enrollment/Eligibility policy and penalties in SPD and

- Realistic expectations verifications, routine and - Network Management on claim/enrollment forms

and measurement terms targeted - Provider Relations - Appropriate enforcement

- Other organizations - Eligibility Audits - Legal & Audit - Appropriate communication

- Acknowledged best practices - Other-line SIUs (DI, P&C) of enforcement actions

- Periodic independent review • External - Corporate Communications

- Patient/Member Awareness - Customer Relations

- Explanation of Benefits - Government Affairs

© Copyright 2011, The MAHON - Reporting Mechanisms

Consulting Group LLC. - Via Hotline and/or website • Training: Entry Level & Ongoing