Reform We Can Agree On: Fighting Fraud and Abuse in the Healthcare Industry
By DOUGLAS MOELLER, M.D., medical director at McKesson > Health Solutions who serves as clinical expert for < McKesson InvestiClaim product and services
In 2009, U.S. healthcare spending is expected to reach $2.5 trillion, or nearly 18 percent of GDP, according to the Centers for Medicare and Medicaid Services. The sheer size of this spending, combined with the complexity of the payment system, provides fertile ground for a wide range of fraudulent and abusive activity.
The National Health Care Anti-Fraud Association (NHCAA) estimates that 3 percent to 10 percent of total healthcare expense is for fraudulent or abusive claims--or an estimated $75 billion to $250 billion in a single year.If healthcare costs are to be controlled, driving out fraud and abuse needs to be a prominent part of the reform debate.
Healthcare fraud and abuse affects everybody. For commercial and government health plans, the impact hits home: lost benefit dollars, unproductive recovery efforts, added administrative work, plus the risk of poor patient care due to nondelivery or overutilization of services. For consumers, the enormous costs translate into higher premiums and out-of-pocket expenses as well as reduced benefits or coverage.
Of course, taxpayers also pay the price: with approximately half of healthcare expense paid for by the government (federal, state and local), according to the Department of Health and Human Services, the impact of fraud and abuse on public spending is substantial.
The Health Insurance Portability and Accountability Act of 1996 (HIPAA) established healthcare fraud as a criminal offense with stiff penalties.4 U.S. code stipulates that healthcare fraud occurs when someone ?knowingly and willfully executes, or attempts to execute, a scheme or artifice--(1) to defraud any healthcare 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.?
Prompt-pay laws, with deadlines for payment and stiff penalties for noncompliance, compel health insurers to pay claims quickly and tend to allow questionable claims to go unchecked.
The difference between abuse and what crosses the line to outright fraud is often gray. For example, some providers may have upcoded a certain procedure for so long that they truly believe their approach is correct. Other providers may deliver medically unnecessary care to avoid malpractice claims. Still others systematically abuse the coding system by unbundling claims so that each step of a procedure is billed as if it were a separate procedure. The main difference is that in cases of abuse, one cannot prove that fraud was intended.
But be sure the amount of money is so vast and the opportunities so lucrative that a small percentage of dishonest providers are constantly cooking up new schemes to defeat detection and prosecution. But the problem is even bigger than that; accumulating evidence suggests that organized crime has entered the picture, filing claims with health plans from phantom providers (and post office boxes) and sending requests to patients for additional payments based on stolen patient lists and claims submissions.
As the government implements various healthcare reform programs, dishonest providers and others will be looking closely for loopholes to exploit. Ironically, some elements in the reform agenda may have the unintended consequence of increasing fraud and abuse or introducing additional opportunities for fraudulent activity. For example, if more services are bundled into "episodes-of-care" as proposed, more opportunities to creatively unbundle the same global service or submit duplicate charges may be created. Now more than ever, insurance companies and plan providers need to be vigilant and have an effective strategy in place.
Payor organizations are well aware that reducing healthcare fraud and abuse is essential to driving out inefficiencies and unnecessary cost so that more dollars can go to needed healthcare services. The challenge is how to sift through massive volumes of claims data to distinguish between legitimate claims and those that indicate potential fraud or abuse while meeting payment deadlines and remaining cost-effective.
Historically, healthcare payors have focused on after-the-fact cost control and recovery versus inappropriate payment prevention. In most cases, it is a ?pay and chase? scenario--that is, unwarranted claims are paid in time to meet prompt pay regulations and then fraud detection measures are applied after the claim is paid.
In this post-pay scenario, average collection is just 4 cents to 18 cents on the dollar spent for inappropriate payments and detection/recovery.Furthermore, as special investigation units are primarily comprised of former law enforcement officers, the emphasis is on prosecution not prevention, further perpetuating the inefficiency of current efforts.
Healthcare organizations need the ability to recognize potential fraud and abuse when a claim is processed, not just after the fact. This is a tall order, requiring the ability to analyze a tremendous volume of electronic data, track patterns, identify outliers and alert fraud and abuse professionals--all within the normal flow of claims processing.
One promising development involves technology that has been very successful in reducing fraud in the credit card industry. Software exists today that analyzes every card transaction in the context of other purchases and can also anticipate new patterns of potentially dishonest behavior. The solution is credited with enabling the U.S. credit card industry to reduce fraud losses by two-thirds between 1993 and 2003, and is now used in 65 percent of the world?s credit card transactions.
Similar analytic solutions are now being introduced into the medical claims area, where they have great potential to reduce the 3 percent to 10 percent of total spending drained away by fraud and abuse. (By comparison, credit card fraud is estimated at less than 0.3 percent of revenue for MasterCard and Visa.)
The technology can work hand in hand with tools that answer the call for the best care, not just more care--a key goal of any reform effort.
So, despite the uncertainty that is part of any reform effort, there are grounds for optimism in one of the areas where change is needed most. Private insurers as well as public programs will have new weapons to identify fraud and abuse as claims are processed, a much more efficient approach than traditional ?pay and chase?. Change is on the way, promising to significantly reduce the billions of dollars in overpayments each year and greatly increase the efficiency and quality of U.S. healthcare.
October 1, 2009
Copyright 2009© LRP Publications