The American College of Healthcare Executives Code of Ethics states that the healthcare executive shall, within the scope of his or her authority, “prevent fraud and abuse and aggressive accounting practices that may result in disputable financial reports.”
But how can an executive even hope to detect this growing phenomenon, much less prevent it?
Losses to healthcare fraud total billions of dollars, according to government and industry estimates. The BlueCross BlueShield Association estimates that in 2005, $90 billion of the total of $1.8 trillion paid for healthcare costs was lost to healthcare fraud.
Fraud control remains a top priority of the U.S. Department of Justice. In fiscal year 2006, the DOJ opened 915 new civil healthcare fraud investigations and had 2,016 investigations pending at the end of the year. On the criminal side, the U.S. Attorney’s Offices opened 836 new criminal investigations involving 1,448 potential defendants in 2006 and had 1,677 investigations pending at the end of the year. These cases involve hospitals, pharmaceutical companies, nursing homes, laboratories, durable medical equipment suppliers, ambulance service companies, as well as physicians and other healthcare providers. In fiscal year 2006, the federal government won or negotiated approximately $2.2 billion in judgments and settlements involving fraud cases.
The Health Insurance Portability and Accountability Act of 1996 defines healthcare fraud as knowingly and willfully executing a scheme to defraud a healthcare benefit program or obtaining, “by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by … any healthcare benefit program.”
Fraud in the industry can be committed at every step of the healthcare delivery process.
The role of technology
The rise of technology in the billing arena can actually facilitate fraud opportunities. Highly automated claims processing without proper human oversight can make it easy for an individual to test the system and, once they find the proper combination of codes and pricing that passes cleanly through, increase the number of claims using different patients and different payers. Increased technology calls for increased fraud detection and prevention programs.
On the flip side, insurers have begun to use technology to identify potential fraud before claims are paid by flagging unusual patterns. “Borrowing techniques from financial and credit services,” says USA Today, “Medicare and private health insurers are increasingly mining claims data for suspicious patterns, comparing practitioners with their peers and larger databases of claims.”
Another key factor: coding
Coding practices, due to the significant inherent risk associated with this area, must be regularly scrutinized for intentional and unintentional abuse. Since coding usually includes both the healthcare providers and the organization’s information technology group (integral to the billing process), it is important to establish a working relationship between the groups to facilitate a common understanding of proper procedures. Coding audits are one tool that healthcare executives can use to detect questionable coding practices. Ideally, a coding audit should be performed by an independent outside agency and on a regular basis. An independent audit company should be able to tell you how your organization is operating compared to others, as well as suggest improvements to your organization’s policies and procedures.
Red flags for patient fraud
Patients can commit fraud in many ways. A common scheme is worker’s compensation fraud. When reviewing a worker’s compensation claim, look for things that don’t make sense.
Look for unusual conditions:
Finally, look at the details given for the incident.
Red flags for provider fraud can include the following:
Detection of these types of fraud can be difficult without extensive investigation. Internal audits and utilization review processes are common in many healthcare operations and are effective in correcting honest billing errors. But they’re ineffective in detecting fraud as some schemes simply apply the correct codes for procedures not performed.
When possible, put controls in place that could detect:
Red flags for employer fraud
According to the U.S. Census Bureau, 59.7% of Americans were covered by employer-based health insurance in 2006. Employers’ incentive for fraud is often lowering the cost of the coverage. Other employer healthcare fraud schemes may include underreporting the number of employees, employee classifications, or payroll amounts. Employers may discourage employees from seeking needed care. More blatant schemes may direct employees to specific providers who will pay kickbacks.
Look for these indicators:
If anything appears suspicious, other indicators may come from employee reports. Employees may report that the business may be shifting the costs from an employee’s non-work-related health problem to a workers’ compensation claim. They may report that they’re discouraged from seeking care, or encouraged to visit a specific facility. They may note that new employees are being asked to complete 1099 forms, asserting that they are independent contractors.
Healthcare fraud is a federal crime
The impact of healthcare fraud on every American, most directly in the increased costs of healthcare, should not be minimized. While these red flags for patient, provider, and employer fraud may be a start in helping industry executives to meet their obligation to detect and prevent healthcare fraud, the ever-growing industry has attracted some more experienced criminals who may be more difficult to combat.
According to the National Healthcare Anti-Fraud Association, “Law enforcement agencies and health insurers have witnessed in recent years the migration of some criminals from illegal drug trafficking into the safer and far more lucrative business of perpetrating fraud schemes against Medicare, Medicaid, and private health insurance companies.”