R&I: What was your first job?
My first job during high school was as a salesperson at the department store, Montgomery Ward. After college, my first career job was as a commercial real estate lender at Continental Bank in Chicago, which was then the seventh largest bank in the country.
R&I: How did you come to work in risk management?
In 1997, I became chief risk officer of GE Capital’s railcar leasing business, GE Capital Railcar Services.
A headhunter reached out to me in late 1996. The chief risk officer of GE Capital liked my analytical skills and banking background, and the CEO of the railcar leasing business liked that I had been an entrepreneur investing my own money in real estate transactions. At GE, I learned how to use data and analytics to make better business decisions.
R&I: What is the risk management community doing right?
Risk management has become an integral part of the business processes and strategic planning of companies. In forward-thinking companies like Arch, risk management has a seat at the table.
R&I: What could the risk management community be doing a better job of?
It could better convey to everybody in a company that they all have a role in risk management. There’s an inclination to think risk management is only done by the risk management department, but actually everybody has a role in risk management. Embracing that concept drives an appropriate risk culture and ensures resiliency.
Cyber risk is an emerging risk that gets a lot of attention, but in the mortgage industry, I am concerned that as the housing crisis recedes, the industry may allow some undisciplined practices to slip back in.
R&I: What’s been the biggest change in the risk management and insurance industry since you’ve been in it?
Better analytics and an understanding of the importance of stress-testing your portfolio to make sure your company can withstand extreme events.
R&I: What emerging commercial risk most concerns you?
Cyber risk is an emerging risk that gets a lot of attention, but in the mortgage industry, I am concerned that as the housing crisis recedes, the industry may allow some undisciplined practices to slip back in. A healthy housing market and economy requires that we not let that happen.
R&I: How much business do you do direct versus going through a broker?
We originate all our business directly with our customers who are banks, credit unions and mortgage companies.
R&I: Are you optimistic about the U.S. economy or pessimistic and why?
I am cautiously optimistic since No. 1, the economy has created three million net new jobs over the past 12 months and going forward, another two to three million jobs could be created over the next year. No. 2, consumers have been saving more of their extra pocket money, but spending is likely to pick up with employment growing.
And No. 3, residential construction will likely rise 10 to 15 percent a year over the next few years.
My caution is external shocks like conflicts and an economic slowdown could set things back, at least temporarily. As Warren Buffet once said: “It’s never paid to bet against America. We come through things, but it’s not aways a smooth ride.”
R&I: Who is your mentor and why?
I’ve had teachers who taught me the importance of a good education and managers, particularly at GE, who taught me great leadership skills and to have the courage to stretch myself and try new things.
Also my father, who was legally blind but accomplished many things in his life, taught me to never give up and to find joy in life. Finally, my husband and partner who’s been enormously supportive of me and my careeer.
R&I: What have you accomplished that you are proudest of?
In my 36-year career I have successfully navigated several economic cycles and have been able to mentor many young women, all while achieving a balance between my professional and personal lives.
R&I: How many emails do you get in a day?
More than I would like.
R&I: How many do you answer?
The important ones.
R&I: What’s your favorite book?
“Personal History,” the autobiography of former “Washington Post” publisher Katharine Graham. The book provides a great example of courage and doing things she never thought possible. I had the good fortune of meeting Ben Bradlee, the former editor of the “Washington Post” under her leadership, and he gave me additional insight into the extraordinary person that she was.
R&I: What’s the best restaurant you’ve ever eaten at?
It’s called Rock House on Harbour Island in the Bahamas.
R&I: What is your favorite drink?
Champagne. It’s right for every occasion.
R&I: What is the most interesting place you have ever visited?
My great-grandfather on my father’s side emigrated from Luxembourg in the late 1800s. After my father died a few years ago, I traveled to Luxembourg to meet my father’s second cousin.
He introduced me to my whole extended family and brought me to the town where my great-grandfather was born and to the church where he was baptized. It was very special.
R&I: What is the riskiest activity you ever engaged in?
I once skied with my colleagues down a double Black Diamond slope as only a novice skier — and I survived.
R&I: If the world has a modern hero, who is it and why?
Nelson Mandela. He is an inspiration on the healing power of forgiveness and of strong leadership.
Spotlight on Employee Theft
Fraud costs the typical organization about 5 percent in revenue each year, and the median loss from employee theft overall is about $280,000. That amount is roughly equivalent to what a small company (less than 500 employees) earns in net profit.
“For these smaller employers, [employee theft] has the potential to knock them out,” said Doug Karpp, senior vice president and national underwriting leader, crime and fidelity, at Hiscox.
And smaller employers are the most likely targets, according to a report recently released by the specialty insurer, “A Snapshot of Employee Theft in the U.S.”
An analysis of federal actions involving employee theft in 2014 showed that 72 percent of cases occurred at companies with fewer than 500 employees. Within that subset, 80 percent of incidents occurred at organizations with fewer than 100 employees, and more than half of those had fewer than 25 on staff.
“Smaller companies just don’t have the resources to have robust internal controls,” Karpp said. “They run lean. Losses tend to be more devastating to them.”
Fifty-eight percent of the cases surveyed for this report recovered none of their losses.
That finding isn’t surprising, but even larger entities with more protections in place are not immune. The financial services sector, for example, constituted 21 percent of employee theft incidences. The second-most targeted industry was real estate and construction at 13 percent.
Despite reporting the largest share of employee thefts, however, the median loss for financial services institutions was less than the overall median at $271,000.
“The financial services sector has more resources to detect and deter fraud,” Karpp said.
While the retail industry suffered only 5 percent of total fraud cases, it sustained the highest median loss of $606,012. That may partially be due to “idiosyncrasies with the way the study was done,” Karpp said.
Federal Court Cases Studied
The report examined only federal court cases, and retailers may very likely encounter many smaller thefts — especially outright theft of funds — that are handled at a local level and thus would not be counted in this study. Those that do get federal attention are more likely to be very large, more complicated losses.
The most common types of theft were outright funds theft (38 percent of losses) and check fraud (34 percent) — when a fraudster alters, forges or makes checks payable to himself.
Or rather, herself. Women were the perpetrators in more than 60 percent of cases, especially outright funds theft and payroll fraud. However, the median loss from schemes carried out by women was about $243,447 — 30 percent less than their male counterparts, who typically committed vendor fraud. Hiscox’s report defines vendor fraud as “a perpetrator diverting employer funds through the creation and submission of false invoices issued by fictitious companies.”
The typical thief was also around 50 years of age and worked in a senior level position in an accounting or finance role, typically with a long tenure.
Many employers miss signs of fraud because they believe their employees to be content in their jobs and generally trustworthy. In fact, according to Karpp, upticks in fraud — or at least its discovery — tend to happen during poor economic times, which may drive employees to divert extra funds to themselves, and also motivate employers to look more closely at their accounting processes
“One goal of the report is to raise awareness of fraud prevention techniques” during good times and bad, Karpp said, explaining that even companies with tight margins can adopt simple practices to mitigate the risk of employee theft.
Best practices include keeping certain tasks separate, such as record-keeping, issuing checks and reconciling bank accounts; no individual employee should be in charge of an accounting process from start to finish. Any checks written or wire transfers should receive approval from two senior managers or executives before completed.
Small business owners can also have all statements sent to their homes to be personally reviewed before any accounts are reconciled.
Many companies also wrongfully assume that traditional business and property policies cover internal theft. Fifty-eight percent of the cases surveyed for this report recovered none of their losses.
Having a crime policy in place that includes coverage for losses caused by through cyber deception, social engineering, vendor theft, funds transfer fraud, computer fraud, telephone toll fraud and other types of theft is the best way to ensure that road to recovery exists.
It’s all in the Code: Five Essential Characteristics of HCPCS that Influence Outcomes
Payers are no stranger to codes. Claim and policy administration systems are filled with them. Moreover, whether designating claim type, feature, branch office, policy term, type of injury, or another classification, their use facilitates consistency and understanding. Codes also guide clinical and financial decision-making. At the foundation of medical cost management are three code sets. The International Statistical Classification of Diseases and Related Health Problems (ICD) diagnostic and procedure codes, ICD-10-CM and ICD-10-PCS respectively, are used to classify diseases, disorders, injuries, infections, and symptoms. National Drug Codes (NDCs) help ensure claimants received the correct strength, dosage form, and type of medication. Their use also helps pharmacists recognize the difference between products that may look or sound alike. Yet another useful code set is the Healthcare Common Procedure Coding System (HCPCS) created to identify services, products, and procedures rendered for the condition. It is on this code set we will focus.
When processing ancillary benefits in workers’ compensation and auto no-fault, HCPCS can determine whether the item is considered medically necessary and therefore, available to the claimant and otherwise related to the compensable condition. Codes can also affect the reimbursement amount. Thus, if a coding error is made, there can be significant adverse impacts to payers and claimants alike. For example, the vendor could stop supplying the item based on insufficient reimbursement, or the payer could deny the product or service completely. Both are detrimental to the claimant or overall claim outcomes. Coding errors may also result in claim leakage if applied incorrectly or misunderstood in the review process. It is therefore essential that payers be mindful of five essential characteristics of HCPCS.
#1 – HCPCS are generic
Like pharmaceuticals, there are many different providers and manufacturers of similar durable medical equipment (DME) items. However, HCPCS are not specific to brand and usually hundreds of different products can fall under the same HCPCS. In addition, some codes include certain services, such as evaluations and fitting fees, whereas some codes do not. For example, some health HCPCS rarely indicate the actual services being provided in the home, such as wound care or home infusion, but instead simply indicate an RN or LPN visit.
#2 – Unit of measure influences coding
Some supply codes have very specific units of measure, which can result in HCPCS quantities that are not whole numbers and can result in mathematical errors or rounding. For example, HCPCS code A4450 has a unit of measure of ‘per 18 square inches’ and is assigned to a roll of tape that is 2 inches by 5.4 yards, equaling 388.8 square inches. The quantity for this HCPCS code would therefore be 21.6. Additionally, some HCPCS codes specify ‘per pair’ or ‘each,’ so understanding the actual supply is important to determine the appropriate quantity.
# 3 – Sometimes, there is not a specific code
Centers for Medicare and Medicaid Services (CMS) has created a number of miscellaneous codes that have generic definitions and can be used when no other CPT or HCPCS code matches the description of the product or service provided. Miscellaneous codes can be easily abused either unintentionally due to lack of time and knowledge, or intentionally by a provider seeking a higher reimbursement rate. This is because miscellaneous codes typically do not carry a fee schedule due to their versatility and, therefore, may be reimbursed at higher amounts than a non-miscellaneous code. For example, K0108 defines a ‘wheelchair component or accessory, not otherwise specified;’ however, most wheelchair parts have a specific code outside of this one which could be more appropriate while also carrying a lower allowable amount.
#4 – Supplemental modifiers are useful
A supplemental modifier or identifier is a billing value that further clarifies the HCPCS/CPT code by telling the payer more about the billed product or service. Their application influences reimbursement because fee schedules largely differ depending on which modifier is reported. A rental (RR) for example, does not warrant the same reimbursement as a purchase (NU) yet both a purchase and rental of the same product carry the same HCPCS. Consider the following codes, K0001 = ‘STANDARD WHEELCHAIR’, K0001 RR = ‘STANDARD WHEELCHAIR’ that has been rented, and K0001 NU = ‘STANDARD WHEELCHAIR’ that has been purchased. Depending on the fee schedule, reimbursement could be $45 or $500.
Modifiers are also useful because they can define the unit of measure. By default, a HCPCS with a modifier of ‘RR’ is a rental per month. However, in some cases a provider may bill for a device daily and therefore interpret the fee schedule as daily rather than monthly. In this scenario, the provider may bill with a daily unit of measure, billing a quantity of 30 instead of the allowable amount of one. For devices that are rented daily, such as a negative pressure wound therapy device or continuous passive motion device, it is important to understand the unit of measure being used (monthly or daily) and be mindful that the daily billing exceeds the monthly allowable.
# 5 – The diagnosis influences allowable amounts
Some HCPCS change based on the diagnosis of the injured person and therefore, the allowable amount may fluctuate. For example, depth-inlay shoes are coded as an Orthotic (L – code) if the patient does not have a diabetic diagnosis and is using the shoes for orthopedic reasons. The same depth-inlay shoe may be used for a diabetic patient, but it would warrant an A-code, which can have a higher reimbursement level.
The use of coding assists claims professionals in compensability decisions, guides clinical decision-making, informs point-of-sale utilization controls, influences claim handling policies and procedures, and provides a valuable data point in statistical and analytics models. Moreover, their use facilitates better clinical and financial claim management in terms of payments that are more accurate, greater processing efficiency and consistency, and improved clinical management as a result of better understanding the medical condition(s) associated with the claim and the various therapies in use. Remaining mindful of the aforementioned five essential characteristics of HCPCS can therefore not only mitigate claim leakage but also achieve a better outcome.