Insurers: Anti-fraud efforts worth investment
Software and staffing boost fraud efforts
With the prospect of saving millions of dollars just over the horizon, insurance companies are finding it well worth the cost to invest in anti-fraud programs, particularly software systems to check and track aberrant claims patterns.
In 1995, 120 insurers responding to a Health Insurance Association of America (HIAA) survey reported an average per company savings of $2.3 million through use of anti-fraud measures, says Thomas D. Musco, director of statistics for Washington, DC-based HIAA and the survey’s co-author. The savings found in extra efforts toward detecting fraud result in an average insurer recouping $7.50 for every dollar invested. HIAA is a insurance trade group and lobbyist.
"Part of the investment involves software programs for detection," says Musco. "Insurers also are adding extra auditors to their staff."
By far the highest volume (76%) of fraud cases stem from individuals physicians, dentists, physical therapists, and chiropractors. Facilities such as acute care hospitals, psychiatric hospitals, and outpatient or ambulatory care centers account for 12% of fraud cases, based on 1995 data.
The survey does not specify, however, whether facility-based fraud accounts for larger dollar amounts overall. Also, in some cases, hospitals are placed in a position to defend their billing based on what information a physician or other provider gives them for their medical records.
Nevertheless, provider-based fraud is declining while beneficiary-based fraud is on the rise, the survey shows. In 1993, 92% of all reported cases sprang from providers, compared to 78% in 1995, the last year of the survey data analyzed.
The survey includes small, medium, and large insurers representing 15% to 20% of the insurance industry.
Other key findings include:
• Fifty-nine percent of suspected provider fraud cases stem from billing for services not rendered.
• Fifteen percent of provider fraud comes from fraudulent diagnoses or dates of service, such as altering a diagnosis to accommodate a patient’s coverage provisions or changing a date to fall within coverage requirements.
• Twenty percent of reported fraud cases were due to consumer fraud. Falsifying claims accounted for 69% of these cases in 1995, while misrepresentation on applications accounted for 16%.
• In 1995, 70% of fraud was detected before a fraudulent claim was paid; the remaining savings came from overpayments that were recovered (20%) and from payments identified but not yet recovered (10%).
A growing problem in the area of fraud is capitation fraud detection, Musco says. As fee for service declines and capitation increases, current software detection systems won’t be as effective. Already, HIAA’s survey indicates fraud cropping up in capitation contracts. "Capitation payments increase for each enrolled member," he points out. "Insurers are detecting health systems claiming enrollments of people who don’t exist."
HIAA’s survey addressed private sector payments rather than Medicare and Medicaid claims, but the Health Care Financing Administration also is active in its fraud detection efforts.
In May Health and Human Services (HHS) Secretary Donna E. Shalala announced a return of $23 for every $1 spent on the federal government’s new pilot, five-state anti-fraud initiative called Operation Restore Trust. HHS recovered $187.5 million in restitutions, fines settlements, and other identified overpayments. Most of these recoveries were in Medicare’s fastest areas of growth home health, nursing homes, and the sale of medical equipment and supplies.
Here are five key methods Medicare and Medicaid investigators are using:
• a hotline [(800) HHS-TIPS] for the public to report problems that might indicate fraud, abuse or waste. Since the hotline was activated in June 1995, it has received over 13,000 complaints;
• use of more sophisticated statistical methods to identify providers for investigations with the Department of Justice and other law enforcement officers;
• increased emphasis on concerted planning and conducting of investigations with the Department of Justice and other law enforcement agencies;
• training and empowering state and local aging organizations and ombudsmen to detect and report fraud in nursing homes and other settings;
• use of state survey officials who regularly monitor care in home health agencies and nursing homes to help identify inappropriate and fraudulent billing.
Blue Cross Blue Shield Foundation of Michigan, Ann Arbor; John E. McDonough, Researcher. Telephone: (313) 225-6399.
Coopers & Lybrand, Chicago; William Higgins, Partner. Telephone: (312) 701-5500.
Health Insurance Association of America, Washington, DC; Thomas D. Musco, Director of Statistics. Telephone: (202) 824-1686.
Prospective Payment Assessment Commission, Washington, DC; Donald A. Young, MD, Executive Director. Telephone: (202) 401-8986.
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